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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="font-size: 1pt; border-top: Black 2pt solid; border-bottom: Black 1pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">UNITED STATES</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">SECURITIES AND EXCHANGE COMMISSION</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Washington, D.C. 20549</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Rule-Page --><div style="margin: 0pt auto; width: 25%"><div style="font-size: 1pt; border-top: Black 1.5pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>FORM <ix:nonNumeric contextRef="c0" name="dei:DocumentType">20-F</ix:nonNumeric></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Mark One)<span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:DocumentRegistrationStatement">&#9744;</ix:nonNumeric>
</b></span><b><span style="font-size: 10pt">REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF
1934</span></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 10pt"><b>OR</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><ix:nonNumeric contextRef="c0" format="ixt:fixed-true" name="dei:DocumentAnnualReport">&#9746;</ix:nonNumeric>
</b></span><b><span style="font-size: 10pt">ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</span></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 10pt"><b>For the fiscal
year ended <ix:nonNumeric contextRef="c0" format="ixt:date-monthname-day-year-en" name="dei:DocumentPeriodEndDate"><ix:nonNumeric contextRef="c0" format="ixt:date-monthname-day-en" name="dei:CurrentFiscalYearEndDate">December 31</ix:nonNumeric>, <ix:nonNumeric contextRef="c0" name="dei:DocumentFiscalYearFocus">2022</ix:nonNumeric></ix:nonNumeric>.</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 10pt"><b>OR</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 10pt"><b>&#160;</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:DocumentTransitionReport">&#9744;</ix:nonNumeric>
</b></span><b><span style="font-size: 10pt">TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</span></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>For
the transition period from&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;to&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;.&#160;&#160;&#160;&#160;&#160;&#160;</b></span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 10pt"><b>OR</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:DocumentShellCompanyReport">&#9744;</ix:nonNumeric>
</b></span><b><span style="font-size: 10pt">SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</span></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 10pt"><b>Date of event
requiring this shell company report</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 10pt"><b>For the transition
period from&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;to&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<br/></b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 10pt">Commission file
number: <ix:nonNumeric contextRef="c0" name="dei:EntityFileNumber">001-38726</ix:nonNumeric><br/></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><ix:nonNumeric contextRef="c0" name="dei:EntityRegistrantName"><span style="font-size: 14pt"><b>CNFinance Holdings
Limited</b></span></ix:nonNumeric></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 10pt">(Exact name of Registrant
as specified in its charter)<br/></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 10pt">N/A</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 10pt">(Translation of
Registrant&#8217;s name into English)</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><ix:nonNumeric contextRef="c0" format="ixt-sec:edgarprovcountryen" name="dei:EntityIncorporationStateCountryCode"><span style="font-size: 10pt"><b>Cayman Islands</b></span></ix:nonNumeric></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 10pt">(Jurisdiction of
incorporation or organization)</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 10pt"><b><ix:nonNumeric contextRef="c1" name="dei:EntityAddressAddressLine1"><ix:nonNumeric contextRef="c0" name="dei:EntityAddressAddressLine1">44/F, Tower G</ix:nonNumeric></ix:nonNumeric>,
<ix:nonNumeric contextRef="c0" name="dei:EntityAddressAddressLine2">No. 16 Zhujiang Dong Road</ix:nonNumeric><br/>
<ix:nonNumeric contextRef="c0" name="dei:EntityAddressAddressLine3">Tianhe District</ix:nonNumeric>, <ix:nonNumeric contextRef="c1" name="dei:EntityAddressCityOrTown"><ix:nonNumeric contextRef="c0" name="dei:EntityAddressCityOrTown">Guangzhou City</ix:nonNumeric></ix:nonNumeric>, Guangdong Province <ix:nonNumeric contextRef="c1" name="dei:EntityAddressPostalZipCode"><ix:nonNumeric contextRef="c0" name="dei:EntityAddressPostalZipCode">510620</ix:nonNumeric></ix:nonNumeric><br/>
People&#8217;s Republic of <ix:nonNumeric contextRef="c1" format="ixt-sec:countrynameen" name="dei:EntityAddressCountry"><ix:nonNumeric contextRef="c0" format="ixt-sec:countrynameen" name="dei:EntityAddressCountry">China</ix:nonNumeric></ix:nonNumeric>&#160;</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 10pt">(Address of principal
executive offices)</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 10pt"><b><ix:nonNumeric contextRef="c1" name="dei:ContactPersonnelName">Bin Zhai, Chief
Executive Officer and Chairman</ix:nonNumeric><br/>
Tel: <ix:nonNumeric contextRef="c1" name="dei:CityAreaCode">+86</ix:nonNumeric>-<ix:nonNumeric contextRef="c1" name="dei:LocalPhoneNumber">20-62316688</ix:nonNumeric><br/>
E-mail: <ix:nonNumeric contextRef="c1" name="dei:ContactPersonnelEmailAddress">ir@cashchina.cn</ix:nonNumeric><br/>
At the address of the Company set forth above</b></span><b><span style="font-size: 6pt">&#160;</span></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 10pt">(Name, Telephone,
E-mail and/or Facsimile number and Address of Company Contact Person)</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 10pt">Securities registered
or to be registered pursuant to Section 12(b) of the Act:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 6pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: top"> <td style="border-bottom: Black 1.5pt solid; text-align: center; width: 32%; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Title of each class </b></span></td> <td style="padding-bottom: 1.5pt; text-align: center; width: 2%; vertical-align: bottom">&#160;</td> <td style="border-bottom: Black 1.5pt solid; text-align: center; width: 32%; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Trading Symbol</b></span></td> <td style="padding-bottom: 1.5pt; text-align: center; width: 2%; vertical-align: bottom">&#160;</td> <td style="border-bottom: Black 1.5pt solid; text-align: center; width: 32%; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Name of each exchange on which registered &#160;</b></span></td></tr> <tr style="vertical-align: top; background-color: rgb(204,238,255)"> <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">American depositary shares, each ADS representing 20 ordinary shares, par value &#160;US$0.0001 per share</span></td> <td>&#160;</td> <td style="text-align: center"><ix:nonNumeric contextRef="c0" name="dei:TradingSymbol"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">CNF</span></ix:nonNumeric></td> <td>&#160;</td> <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The <ix:nonNumeric contextRef="c0" format="ixt-sec:exchnameen" name="dei:SecurityExchangeName">New York Stock Exchange</ix:nonNumeric></span></td></tr> <tr style="vertical-align: top; background-color: White"> <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c0" name="dei:Security12bTitle">Ordinary shares, par value US$0.0001 &#160;per share</ix:nonNumeric>*</span></td> <td>&#160;</td> <td style="text-align: center">&#160;</td> <td>&#160;</td> <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The New York Stock Exchange</span></td></tr> </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-size: 6pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left">*</td><td style="text-align: justify">Not for trading, but only in connection with the listing
                                            on the New York Stock Exchange of American depositary shares.</td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Securities registered or to be registered pursuant to Section 12(g)
of the Act:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>None</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Title of Class)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Securities for which there is a reporting obligation pursuant to Section
15(d) of the Act:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><b>None</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><b>(Title of Class)<span style="font-size: 6pt">&#160;</span></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><b><span style="font-size: 6pt">&#160;</span></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="margin: 0pt">&#160;</p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Indicate the number of outstanding shares of each of the issuer&#8217;s
classes of capital or common stock as of the close of the period covered by the annual report.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><ix:nonFraction contextRef="c2" decimals="INF" format="ixt:num-dot-decimal" name="dei:EntityCommonStockSharesOutstanding" scale="0" unitRef="shares">1,371,643,240</ix:nonFraction> ordinary shares, par value US$0.0001 per share, as of
December 31, 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Yes <span style="font-family: Times New Roman, Times, Serif">&#9744;
</span><ix:nonNumeric contextRef="c0" name="dei:EntityWellKnownSeasonedIssuer">No</ix:nonNumeric> <span style="font-family: Times New Roman, Times, Serif">&#9746;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Yes <span style="font-family: Times New Roman, Times, Serif">&#9744;
</span><ix:nonNumeric contextRef="c0" name="dei:EntityVoluntaryFilers">No</ix:nonNumeric> <span style="font-family: Times New Roman, Times, Serif">&#9746;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Note &#8211; Checking the box above will not relieve any registrant
required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><ix:nonNumeric contextRef="c0" name="dei:EntityCurrentReportingStatus">Yes</ix:nonNumeric> <span style="font-family: Times New Roman, Times, Serif">&#9746;
</span>No <span style="font-family: Times New Roman, Times, Serif">&#9744;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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 (&#167;232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit such files).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><ix:nonNumeric contextRef="c0" name="dei:EntityInteractiveDataCurrent">Yes</ix:nonNumeric> <span style="font-family: Times New Roman, Times, Serif">&#9746;
</span>No <span style="font-family: Times New Roman, Times, Serif">&#9744;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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 definition of &#8220;large accelerated filer,&#8221;
&#8220;accelerated filer,&#8221; and &#8220;emerging growth company&#8221; in Rule 12b-2 of the Exchange Act.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-size: 6pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: top"> <td style="width: 25%"><span style="font-size: 10pt">Large Accelerated Filer <span style="font-family: Times New Roman, Times, Serif">&#9744;</span></span></td> <td style="width: 25%"><span style="font-size: 10pt"><ix:nonNumeric contextRef="c0" name="dei:EntityFilerCategory">Accelerated Filer</ix:nonNumeric> <span style="font-family: Times New Roman, Times, Serif"><b>&#9746;</b></span></span></td> <td style="width: 25%"><span style="font-size: 10pt">Non-accelerated Filer <span style="font-family: Times New Roman, Times, Serif">&#9744;</span></span></td> <td style="width: 25%"><span style="font-size: 10pt">Emerging growth company <ix:nonNumeric contextRef="c0" format="ixt:fixed-true" name="dei:EntityEmergingGrowthCompany"><span style="font-family: Times New Roman, Times, Serif">&#9746;</span></ix:nonNumeric></span></td></tr> </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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&#8224; provided pursuant to Section 13(a) of the Exchange Act. <ix:nonNumeric contextRef="c0" format="ixt:fixed-true" name="dei:EntityExTransitionPeriod"><span style="font-family: Times New Roman, Times, Serif">&#9746;</span></ix:nonNumeric></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Indicate by check mark whether the registrant has filed a report on
and attestation to its management&#8217;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.
<ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:IcfrAuditorAttestationFlag"><span style="font-family: Times New Roman, Times, Serif">&#9744;</span></ix:nonNumeric></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">If securities are registered pursuant to Section 12(b) of the Act,
indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to
previously issued financial statements. <span style="font-family: Times New Roman, Times, Serif">&#9744;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Indicate by check mark whether any of those error corrections are
restatements that required a recovery analysis of incentive-based compensation received by any of the registrant&#8217;s executive officers
during the relevant recovery period pursuant to &#167; 240.10D-1(b). <span style="font-family: Times New Roman, Times, Serif">&#9744;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Indicate by check mark which basis of accounting the registrant has
used to prepare the financial statements included in this filing:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-size: 6pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#9746;</span></td><td style="text-align: justify"><span style="-sec-ix-hidden: hidden-fact-0">U.S. GAAP</span></td>
</tr></table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#9744;</span></td><td style="text-align: justify">International
                                            Financial Reporting Standards as issued by the International Accounting Standards Board</td>
</tr></table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#9744;</span></td><td style="text-align: justify">Other</td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 27pt"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">If &#8220;Other&#8221; has been checked in response to the previous
question, indicate by check mark which financial statement item the registrant has elected to follow.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif">&#9744;
</span>Item 17 <span style="font-family: Times New Roman, Times, Serif">&#9744;</span> Item 18</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Yes <span style="font-family: Times New Roman, Times, Serif">&#9744;
</span>No <ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:EntityShellCompany"><span style="font-family: Times New Roman, Times, Serif">&#9746;</span></ix:nonNumeric></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING
THE PAST FIVE YEARS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Yes <span style="font-family: Times New Roman, Times, Serif">&#9744;
</span>No <span style="font-family: Times New Roman, Times, Serif">&#9744;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#8224; The term &#8220;new or revised financial accounting standard&#8221;
refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="font-size: 1pt; border-top: Black 1pt solid; border-bottom: Black 2pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 2 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="margin: 0pt">&#160;</p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>




</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">TABLE OF CONTENTS</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%">
  <tr style="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif">
    <td style="padding-bottom: 1.5pt; text-align: left">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: center">Page</td></tr>
  <tr style="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif">
    <td style="text-align: left">&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 90%; text-align: left"><a href="#a_001">INTRODUCTION</a></td>
    <td style="width: 10%; text-align: center">iii</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: White">
    <td style="text-align: left"><a href="#a_002">FORWARD-LOOKING INFORMATION</a></td>
    <td style="text-align: center">v</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left"><a href="#a_003">PART I</a></td>
    <td style="text-align: center">1</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; text-align: left"><a href="#a_004">ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS</a></td>
    <td style="text-align: center">1</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-align: left"><a href="#a_005">ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE</a></td>
    <td style="text-align: center">1</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; text-align: left"><a href="#a_006">ITEM 3. KEY INFORMATION</a></td>
    <td style="text-align: center">1</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_007">3.A. [Reserved]</a></td>
    <td style="text-align: center">4</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_008">3.B. Capitalization and Indebtedness</a></td>
    <td style="text-align: center">4</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_009">3.C. Reason for the Offer and Use of Proceeds</a></td>
    <td style="text-align: center">4</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_010">3.D. Risk Factors</a></td>
    <td style="text-align: center">5</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-align: left"><a href="#a_011">ITEM 4. INFORMATION ON THE COMPANY</a></td>
    <td style="text-align: center">46</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_012">4.A. History and Development of the Company</a></td>
    <td style="text-align: center">46</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_013">4.B. Business Overview</a></td>
    <td style="text-align: center">46</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_014">4.C. Organizational Structure</a></td>
    <td style="text-align: center">82</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_015">4.D. Property, Plant and Equipment</a></td>
    <td style="text-align: center">83</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; text-align: left"><a href="#a_016">ITEM 4A. UNRESOLVED STAFF COMMENTS</a></td>
    <td style="text-align: center">83</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-align: left"><a href="#a_017">ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS</a></td>
    <td style="text-align: center">83</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_018">5.A. Operating Results</a></td>
    <td style="text-align: center">83</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_019">5.B. Liquidity and Capital Resources</a></td>
    <td style="text-align: center">106</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_020">5.C. Research and Development</a></td>
    <td style="text-align: center">111</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_021">5.D. Trend Information</a></td>
    <td style="text-align: center">112</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_022">5.E. Critical Accounting Estimates</a></td>
    <td style="text-align: center">112</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-align: left"><a href="#a_023">ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES</a></td>
    <td style="text-align: center">113</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_024">6.A. Directors and Senior Management</a></td>
    <td style="text-align: center">113</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_025">6.B. Compensation</a></td>
    <td style="text-align: center">114</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_026">6.C. Board Practices</a></td>
    <td style="text-align: center">117</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_027">6.D. Employees</a></td>
    <td style="text-align: center">120</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_028">6.E. Share Ownership</a></td>
    <td style="text-align: center">120</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_029">6.F. Disclosure of a Registrant's
Action to Recover Erroneously Awarded Compensation</a></td>
    <td style="text-align: center">121</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; text-align: left"><a href="#a_030">ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS</a></td>
    <td style="text-align: center">122</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_031">7.A. Major Shareholders</a></td>
    <td style="text-align: center">122</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_032">7.B. Related Party Transactions</a></td>
    <td style="text-align: center">122</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_033">7.C. Interests of Experts and Counsel</a></td>
    <td style="text-align: center">122</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; text-align: left"><a href="#a_034">ITEM 8. FINANCIAL INFORMATION</a></td>
    <td style="text-align: center">122</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_035">8.A. Consolidated Statements and Other Financial Information</a></td>
    <td style="text-align: center">122</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_036">8.B. Significant Changes</a></td>
    <td style="text-align: center">123</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-align: left"><a href="#a_037">ITEM 9. THE OFFER AND LISTING</a></td>
    <td style="text-align: center">123</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_038">9.A. Offering and Listing Details</a></td>
    <td style="text-align: center">123</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_039">9.B. Plan of Distribution</a></td>
    <td style="text-align: center">123</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_040">9.C. Markets</a></td>
    <td style="text-align: center">123</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_041">9.D. Selling Shareholders</a></td>
    <td style="text-align: center">123</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_042">9.E. Dilution</a></td>
    <td style="text-align: center">123</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_043">9.F. Expenses of the Issue</a></td>
    <td style="text-align: center">123</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; text-align: left"><a href="#a_044">ITEM 10. ADDITIONAL INFORMATION</a></td>
    <td style="text-align: center">124</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_045">10.A. Share Capital</a></td>
    <td style="text-align: center">124</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_046">10.B. Memorandum and Articles of Association</a></td>
    <td style="text-align: center">124</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_047">10.C. Material Contracts</a></td>
    <td style="text-align: center">124</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_048">10.D. Exchange Controls</a></td>
    <td style="text-align: center">124</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_049">10.E. Taxation</a></td>
    <td style="text-align: center">124</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_050">10.F. Dividends and Paying Agents</a></td>
    <td style="text-align: center">130</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_051">10.G. Statement by Experts</a></td>
    <td style="text-align: center">130</td></tr>
</table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="margin: 0"></p><div>

</div><!-- Field: Page; Sequence: 3; Options: NewSection; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: LowerRoman; Name: PageNo -->i<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="margin: 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%">
  <tr style="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-align: left; width: 90%"><a href="#a_052">10.H. Documents on Display</a></td>
    <td style="text-align: center; width: 10%">130</td></tr>
  <tr style="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="padding-left: 0.25in; text-align: left"><a href="#e10i">10.I. Subsidiary information</a></td>
    <td style="text-align: center">130</td></tr>
  <tr style="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-align: left"><a href="#e10j">10.J. Annual Report to Security Holders</a></td>
    <td style="text-align: center">130</td></tr>
  <tr style="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="padding-left: 0.125in; text-align: left"><a href="#a_053">ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</a></td>
    <td style="text-align: center">131</td></tr>
  <tr style="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-align: left"><a href="#a_054">ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES</a></td>
    <td style="text-align: center">131</td></tr>
  <tr style="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_055">12.A. Debt Securities</a></td>
    <td style="text-align: center">131</td></tr>
  <tr style="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_056">12.B. Warrants and Rights</a></td>
    <td style="text-align: center">131</td></tr>
  <tr style="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_057">12.C. Other Securities</a></td>
    <td style="text-align: center">131</td></tr>
  <tr style="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_058">12.D. American Depositary Shares</a></td>
    <td style="text-align: center">132</td></tr>
  <tr style="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="padding-left: 0in; text-align: left"><a href="#a_059">PART II</a></td>
    <td style="text-align: center">134</td></tr>
  <tr style="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-align: left"><a href="#a_060">ITEM 13. ITEM DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES</a></td>
    <td style="text-align: center">134</td></tr>
  <tr style="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="text-indent: -0.125in; padding-left: 0.25in; text-align: left"><a href="#a_061">ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY
    HOLDERS AND USE OF PROCEEDS</a></td>
    <td style="text-align: center">134</td></tr>
  <tr style="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_062">14.A.-14.D. Material Modifications to the Rights of Security Holders</a></td>
    <td style="text-align: center">134</td></tr>
  <tr style="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_063">14.E. Use of Proceeds</a></td>
    <td style="text-align: center">134</td></tr>
  <tr style="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-align: left"><a href="#a_064">ITEM 15. CONTROLS AND PROCEDURES</a></td>
    <td style="text-align: center">134</td></tr>
  <tr style="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="padding-left: 0.125in; text-align: left"><a href="#a_065">ITEM 16. [Reserved]</a></td>
    <td style="text-align: center">135</td></tr>
  <tr style="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_066">16.A. Audit Committee Financial Expert</a></td>
    <td style="text-align: center">135</td></tr>
  <tr style="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_067">16.B. Code of Ethics</a></td>
    <td style="text-align: center">136</td></tr>
  <tr style="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_068">16.C. Principal Accountant Fees and Services</a></td>
    <td style="text-align: center">136</td></tr>
  <tr style="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_069">16.D. Exemptions from the Listing Standards for Audit Committees</a></td>
    <td style="text-align: center">136</td></tr>
  <tr style="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_070">16.E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers</a></td>
    <td style="text-align: center">137</td></tr>
  <tr style="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_071">16.F. Change in Registrant&#8217;s Certifying Accountant</a></td>
    <td style="text-align: center">137</td></tr>
  <tr style="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_072">16.G. Corporate Governance</a></td>
    <td style="text-align: center">137</td></tr>
  <tr style="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_073">16.H. Mine Safety Disclosure</a></td>
    <td style="text-align: center">138</td></tr>
  <tr style="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_074">16.I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections</a></td>
    <td style="text-align: center">138</td></tr>
  <tr style="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="padding-left: 0.25in; text-align: left"><a href="#a_075">16.J. Insider trading policies</a></td>
    <td style="text-align: center">138</td></tr>
  <tr style="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="text-align: left"><a href="#a_076">PART III</a></td>
    <td style="text-align: center">139</td></tr>
  <tr style="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="padding-left: 0.125in; text-align: left"><a href="#a_077">ITEM 17. FINANCIAL STATEMENTS</a></td>
    <td style="text-align: center">139</td></tr>
  <tr style="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-align: left"><a href="#a_078">ITEM 18. FINANCIAL STATEMENTS</a></td>
    <td style="text-align: center">139</td></tr>
  <tr style="text-align: left; vertical-align: bottom; font: 10pt Times New Roman, Times, Serif; background-color: White">
    <td style="padding-left: 0.125in; text-align: left"><a href="#a_079">ITEM 19. EXHIBITS</a></td>
    <td style="text-align: center">139</td></tr>
</table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: LowerRoman; Name: PageNo -->ii<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_001"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">INTRODUCTION</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Except where the context otherwise indicates and for the purpose of
this annual report only:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>&#8220;ADSs&#8221; refers to the American depositary shares,
                                            each representing 20 of our ordinary shares&#894;</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>&#8220;allowance ratio&#8221; of a particular date refers to
                                            amount of allowance for loan principal, interest and financing service fee receivables as
                                            a percentage of the outstanding loan principal, interest and financing service fee receivables
                                            as of the date&#894;</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>&#8220;China&#8221; or &#8220;the PRC&#8221; refers to the People&#8217;s
                                            Republic of China, including Hong Kong and Macau and, only for the purpose of this annual
                                            report, excluding Taiwan; the only instances in which &#8220;China&#8221; or &#8220;the PRC&#8221;
                                            do not include Hong Kong or Macau are when used in the case of laws and regulations, including,
                                            among others, tax matters, adopted by the People&#8217;s Republic of China; the legal and
                                            operational risks associated with operating in China also apply to our operations in Hong
                                            Kong;</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>&#8220;contractual interest rate&#8221; refers to the interest
                                            rate prescribed under loan agreements&#894;</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>&#8220;CNFinance&#8221; refers to CNFinance Holdings Limited,
                                            a Cayman Islands exempted company with limited liability&#894;</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>&#8220;Credit Risk Mitigation Position&#8221; or &#8220;CRMP&#8221;
                                            refers to the amount contributed by the sales partners equal to 10% to 25% of the loans issued
                                            to the borrowers introduced by the sales partners to share the credit risk with the Company&#894;</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>&#8220;delinquency ratio&#8221; of a particular date refers
                                            to total balance of outstanding loan principal for which any installment payment is one or
                                            more days past-due as a percentage of the outstanding loan principal as of the date&#894;</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>&#8220;effective interest rate&#8221; refers to the annualized
                                            internal rate of return based on initial outlay of loan principal, initial inflow of financing
                                            service fees (if applicable) and expected monthly inflow of repayments&#894;</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>&#8220;effective sales partners&#8221; refers to the sales partners
                                            who have introduced at least one borrower to us that was approved by our trust company partners
                                            for loan facilitation&#894;</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>&#8220;leverage ratio&#8221; refers to the ratio of total assets
                                            to total shareholders&#8217; equity&#894;</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>&#8220;charge-off ratio&#8221; refers to the ratio of charge-offs
                                            during a period over the average beginning and ending balances of outstanding loan principal
                                            of the same period&#894;</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>&#8220;loan-to-value ratio&#8221; or &#8220;LTV ratio&#8221;
                                            refers to the ratio of loan amount to the value of asset collateral&#894; the loan amount
                                            is calculated as the amount of all outstanding loans to be secured by the collateral&#894;</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>&#8220;NPL&#8221; refers to a loan being delinquent for over
                                            90 days&#894;</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>&#8220;NPL provision coverage ratio&#8221; of a particular date
                                            refers to amount of allowance for loan principal, interest and financing service fee receivables
                                            as a percentage of the outstanding balance of NPL principal as of the date&#894;</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>&#8220;NPL ratio&#8221; as of a particular date represents total
                                            balance of outstanding loan principal for which any installment payment is over 90 calendar
                                            days past-due as a percentage of the outstanding loan principal as of the date&#894;</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>&#8220;ordinary shares&#8221; refers to our ordinary shares
                                            of par value US$0.0001 per share&#894;</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>&#8220;Pearl River Delta region&#8221; refers to Dongguan, Zhongshan,
                                            Foshan, Guangzhou, Huizhou, Jiangmen, Shenzhen, Zhuhai and Zhaoqing&#894;</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>&#8220;quick disposal plans&#8221; refers to the mechanisms
                                            that we utilize to quickly dispose of delinquent loans or collateral to recover potential
                                            losses, including selling the delinquent loans to third parties or disposal of collateral
                                            without going through judicial proceedings&#894;</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>&#8220;RMB&#8221; or &#8220;Renminbi&#8221; refers to the legal
                                            currency of the People&#8217;s Republic of China&#894;</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>&#8220;senior units&#8221; refers to the senior units and intermediate
                                            units, if applicable, in a trust plan&#894;</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>&#8220;structural leverage ratio&#8221; refers to the ratio
                                            of the total amount of senior units and subordinated units&#894; intermediate units are included
                                            as senior units for the purpose of calculation&#894;</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>&#8220;Tier 1 cities&#8221; refers to Beijing, Shanghai, Shenzhen
                                            and Guangzhou&#894;</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>&#8220;Tier 2 cities&#8221; refers to Dongguan, Foshan, Nanjing,
                                            Nanchang, Nantong, Xiamen, Hefei, Dalian, Tianjin, Changzhou, Xuzhou, Huizhou, Chengdu, Wuxi,
                                            Kunming, Hangzhou, Wuhan, Ji&#8217;nan, Zhuhai, Shijiazhuang, Fuzhou, Suzhou, Xi&#8217;an,
                                            Zhengzhou, Chongqing, Changsha, Qingdao, Shaoxing, Ningbo, Wuxi, Harbin, Changchun, Nanning,
                                            Wenzhou, Quanzhou, Guiyang, Taiyuan, Jinhua, Yantai, Jiaxing, Taizhou, Zhongshan, Baoding,
                                            Lanzhou and Langfang&#894;</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>&#8220;total operating income&#8221; refers to the sum of (i)
                                            net interest and fees income after collaboration cost and (ii) total non-interest income&#894;</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>&#8220;US$,&#8221; &#8220;dollars&#8221; or &#8220;U.S. dollars&#8221;
                                            refers to the legal currency of the United States&#894;</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>&#8220;we,&#8221; &#8220;us,&#8221; &#8220;our company,&#8221;
                                            &#8220;the Company,&#8221; &#8220;the Group,&#8221; and &#8220;our&#8221; refer to CNFinance
                                            Holdings Limited, a Cayman Islands exempted company with limited liability and its subsidiaries
                                            and consolidated affiliated entities, including but not limited to Shenzhen Fanhua United
                                            Investment Group Co., Ltd. and Guangzhou Heze Information Technology Co., Ltd., as a group&#894;
                                            and</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>&#8220;Yangtze River Delta region&#8221; refers to Shanghai,
                                            Nanjing, Nantong, Hefei, Yixing, Changzhou, Yangzhou, Wuxi, Hangzhou, Jiangyin, Taizhou,
                                            Shaoxing, Suzhou, Jiaxing and Zhenjiang.</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We present our financial results in RMB. We make no representation
that any RMB or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or RMB, as the case may be, at any particular
rate, or at all. The PRC government imposes control over its foreign currency reserves in part through direct regulation of the conversion
of RMB into foreign exchange and through restrictions on foreign trade. This annual report contains translations of certain foreign currency
amounts into U.S. dollars for the convenience of the reader. Unless otherwise stated, all translations of Renminbi into U.S. dollars
were made at the rate at RMB6.8972 to US$1.00, the exchange rate as set forth in the H.10 statistical release of the Board of Governors
of the Federal Reserve System in effect as of December 30, 2022. On April 21, 2023, the noon buying rate for Renminbi was RMB6.8920
to US$1.00.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_002"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">FORWARD-LOOKING
INFORMATION</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">This annual report on Form 20-F contains forward-looking statements
that reflect our current expectations and views of future events. All statements other than statements of historical facts are forward-looking
statements. These forward-looking statements are made under the &#8220;safe harbor&#8221; provision under Section 21E of the Securities
Exchange Act of 1934, as amended, or the Exchange Act, and as defined in the Private Securities Litigation Reform Act of 1995. These
statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements
to be materially different from those expressed or implied by the forward-looking statements. In some cases, you can identify these forward-looking
statements by terminology such as &#8220;may,&#8221; &#8220;will,&#8221; &#8220;expect,&#8221; &#8220;anticipate,&#8221; &#8220;aim,&#8221;
&#8220;estimate,&#8221; &#8220;intend,&#8221; &#8220;plan,&#8221; &#8220;believe,&#8221; &#8220;is/are likely to,&#8221; &#8220;potential,&#8221;
&#8220;continue&#8221; 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:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>our goals and growth strategies&#894;</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>our future business development, results of operations and financial
                                            condition&#894;</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>relevant government policies and regulations relating to our
                                            business and industry&#894;</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>status of the COVID-19 pandemic and its impact on our business
                                            and industry&#894;</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>general economic and business conditions in China&#894; and</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>assumptions underlying or related to any of the foregoing.</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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 &#8220;Item 3. Key
Information&#8212;D. Risk Factors&#8221; of this annual report and other risks outlined in our other filings with the Securities and
Exchange Commission, or the SEC. Those risks are not exhaustive. We operate in an 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 qualify all of our forward-looking statements by these cautionary statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">You should not rely upon forward-looking statements as predictions
of future events. We do not undertake any obligation to update or revise the forward-looking statements except as required under applicable
law. You should read this annual report and the documents that we reference in this annual report completely and with the understanding
that our actual future results may be materially different from what we expect.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>




</div><div><a id="a_003"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">PART I</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">&#160;</p><div>

</div><div><a id="a_004"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_005"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_006"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">ITEM 3. KEY INFORMATION</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Risks Associated with Being Based in or Having the Majority of
the Operations in China</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We are exposed to legal and operational risks associated with our
operations in China. The PRC government has significant authority to exert influence on the ability of a company with operations in China,
including us, to conduct its business. Changes in China&#8217;s economic, political or social conditions or government policies could
materially and adversely affect our business and results of operations. We are subject to risks due to the uncertainty of the interpretation
and the application of the PRC laws and regulations, including but not limited to the risks of uncertainty about any future actions of
the PRC government on U.S. listed companies. We may also be subject to sanctions imposed by PRC regulatory agencies, including the China
Securities Regulatory Commission (&#8220;CSRC&#8221;), if we fail to comply with their rules and regulations. Any actions by the PRC
government to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in companies having
operations in China, including us, could significantly limit or completely hinder our ability to offer or continue to offer securities
to investors, and cause the value of our securities to significantly decline or become worthless. These China-related risks could result
in a material change in our operations and/or the value of our securities, or could significantly limit or completely hinder our ability
to offer securities to investors in the future and cause the value of such securities to significantly decline or become worthless.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Regulations on Mergers and Acquisitions of Domestic Enterprises
by Foreign Investors, or the M&amp;A Rules, require 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 China Securities Regulatory Commission
(&#8220;CSRC&#8221;) prior to the listing and trading of such special purpose vehicle&#8217;s securities on an overseas stock exchange.
However, the application of the M&amp;A Rules remains unclear. If CSRC approval is required, it is uncertain whether it would be possible
for us to obtain the approval, and any failure to obtain or delay in obtaining CSRC approval for future offerings of securities overseas
or to maintain the listing status of our ADSs would subject us to sanctions imposed by the CSRC and other PRC regulatory agencies.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On July 6, 2021, certain PRC regulatory authorities
issued Opinions on Strictly Cracking Down on Illegal Securities Activities in Accordance with the Law. These opinions call for strengthened
regulation over illegal securities activities and supervision on overseas listings by China-based companies and propose 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. On February 17, 2023, the CSRC, promulgated the Trial Administrative Measures of Overseas Securities Offering
and Listing by Domestic Companies (the &#8220;Overseas Listing Trial Measures&#8221;), and five supporting guidelines, which became effective
on March 31, 2023. The Overseas Listing Trial Measures will comprehensively improve and reform the existing regulatory regime for overseas
offering and listing of PRC domestic companies&#8217; securities and will regulate both direct and indirect overseas offering and listing
of PRC domestic companies&#8217; securities by adopting a filing-based regulatory regime. According to the Overseas Listing Trial Measures,
PRC domestic companies that seek to offer and list securities in overseas markets, either in direct or indirect means, are required to
fulfill the filing procedure with the CSRC and report relevant information. If a company fails to complete the filing procedure or conceals
any material fact or falsifies any major content in its filing documents, it may be subject to administrative penalties, such as order
to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable
persons may also be subject to administrative penalties, such as warnings and fines. The Overseas Listing Trial Measures also provide
that a company in mainland China must file with the CSRC within three business days for its follow-on offering of securities after it
is listed in an overseas market. On February 17, 2023, the CSRC also issued the Notice on Administration of the Filing of Overseas Offering
and Listing by Domestic Companies and held a press conference for the release of the Overseas Listing Trial Measures, which, among others,
clarified that the companies in mainland China that have been listed overseas before March 31, 2023 are not required to file with the
CSRC immediately, but these companies should complete filing with the CSRC for their financing activities in accordance with the Overseas
Listing Trial Measures. Based on the foregoing, as an issuer that has been listed overseas before the effective date of the Overseas
Listing Trial Measures, we are not required to complete filing with the CSRC for our prior offshore offerings at this stage, but we may
be subject to the filing requirements for our future capital raising activities under the Overseas Listing Trial Measures.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In addition, the Data Security Law was promulgated
on June 10, 2021 and became effective in September 2021. The Personal Information Protection Law was promulgated on August 20, 2021 and
officially implemented on November 1, 2021. The Data Security Law stipulates that the data handling activities that affect or may affect
the national security should undergo national security review, and the Personal Information Protection Law stipulates that critical information
infrastructure (&#8220;CII&#8221;) operators, or personal information processors whose processing of personal information reaches the
threshold amount prescribed by the national cyberspace authority, shall store the personal information collected or generated by them
within the territory of the PRC. If it is necessary to provide the data overseas, the organization is required to pass the security assessment
organized by the national cyberspace authority. The Measures for Cyber Security Review published by Cyberspace Administration of China
(CAC) in December 2021 provides that a network platform operator that has the personal information of more than one million users must
apply to the Cybersecurity Review Office (the &#8220;CRO&#8221;) for a cybersecurity review when it seeks to list overseas. Also, a CII
operator, when procuring a network product or service, shall predict any national security risk that may arise after the use of such
product or service. If national security will be affected or may be affected, the CII operator shall apply to the CRO for a cybersecurity
review.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Although we do not believe we are a CII operator or a network platform
operator, the PRC authorities could interpret such term broadly. If our company is deemed to be a CII operator or a network platform
operator under such rules, we could be subject to cybersecurity review by the CAC and other relevant PRC regulatory authorities and be
required to change our existing practices in data privacy and cybersecurity matters at substantial costs. During such cybersecurity review,
we may be required to stop providing services to our customers. If the CSRC or other PRC regulatory body subsequently determines that
we need to obtain the CSRC&#8217;s approval for future offerings of securities overseas or to maintain the listing status of our ADSs
or if the CSRC or any other PRC government authorities promulgates any interpretation or implements rules before our listing that would
require us to obtain CSRC or other governmental approvals for future offerings of securities overseas or to maintain the listing status
of our ADSs, we may not be able to proceed with future offerings of securities overseas or to the listing of our ADSs on the New York
Stock Exchange, face adverse actions or sanctions by the CSRC or other PRC regulatory agencies. In any such event, these regulatory agencies
may impose fines and penalties on our operations in China, limit our operating privileges in China, delay or restrict the repatriation
of the proceeds from future offerings of securities overseas into the PRC or take other actions that could have a material adverse effect
on our business, financial condition, results of operations, reputation and prospects, as well as our ability to complete future offerings
of securities overseas or to maintain the listing status of our ADSs. We also cannot rule out the possibility that certain of our customers
may be deemed as CII operators, in which case our products or services or data processing activities, if being deemed as related to national
security, will need to be submitted for cybersecurity review before we can enter into agreements with such customers, and before the
conclusion of such procedure, the customers will not be allowed to use our products or services. If the reviewing authority considers
that the use of our services by certain of our customers involves risk of disruption, is vulnerable to external attacks, or may negatively
affect, compromise, or weaken the protection of national security, we may not be able to provide our products or services to such customers,
which could have a material adverse effect on our results of operations and prospects. Uncertainties also exist regarding the interpretation
and implementation of the newly enacted PRC Foreign Investment Law and how it may impact the viability of our current corporate structure
and the viability of business operation. On March 15, 2019, the National People&#8217;s Congress approved the Foreign Investment Law
of the People&#8217;s Republic of China (&#8220;PRC Foreign Investment Law&#8221;), and the State Council promulgated the Implementing
Regulations to the PRC Foreign Investment Law (&#8220;Implementing Regulations&#8221;) on December 26, 2019, both of which came into
effect on January 1, 2020. The PRC Foreign Investment Law and its Implementing Regulations replaced the trio of previous laws regulating
foreign investment in China, namely, the Law of the People&#8217;s Republic of China on Chinese-foreign Equity Joint Ventures, the Law
of the People&#8217;s Republic of China on Chinese-foreign Cooperative Joint Ventures, and the Law of the People&#8217;s Republic of
China on Wholly Foreign-Owned Enterprises, together with their implementation rules and ancillary regulations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">PRC Foreign Investment Law and its Implementing Regulations specify
that foreign investments shall be conducted in line with the negative list issued by or approved to be issued by the State Council. If
a foreign investment enterprise (the &#8220;FIE&#8221;) proposes to conduct business in an industry subject to foreign investment &#8220;restrictions&#8221;
in the negative list, the FIE must meet certain conditions under the negative list before being established. If an FIE proposes to conduct
business in an industry subject to foreign investment &#8220;prohibitions&#8221; in the &#8220;negative list,&#8221; it must not engage
in the business. Investments made in Mainland China by investors from the Hong Kong Special Administrative Region and the Macao Special
Administrative Region shall be governed by the PRC Foreign Investment Law and its Implementing Regulations. On December 27, 2021, the
NDRC and the MOFCOM promulgated the Special Administrative Measures (Negative List) for Access of Foreign Investments (2021 Edition),
as came into effect on January 1, 2022, according to which the industry of loan service has not been subject to foreign investment &#8220;restrictions&#8221;
or &#8220;prohibitions&#8221; in the Negative List. Our PRC legal advisor, Merits &amp; Tree Law Offices, advises us that according to
the PRC Foreign Investment Law and the Implementing Regulations, the PRC regulatory agencies shall, considering the needs for further
foreign opening and economic and social development, adjust the Negative List where appropriate. Therefore, if the industry of loan service
is subject to the foreign investment restrictions or prohibitions under the negative list issued subsequently, our failure to take timely
and appropriate measures to cope with any of these or similar regulatory compliance challenges could materially and adversely affect
our current corporate structure, corporate governance, and business operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As there are still uncertainties regarding these new laws and regulations
as well as the amendment, interpretation and implementation of the existing laws and regulations related to cybersecurity and data protection,
we cannot assure you that we will be able to comply with these laws and regulations in all respects. The regulatory authorities may deem
our activities or services non-compliant and therefore require us to suspend or terminate its business. We may also be subject to fines,
legal or administrative sanctions and other adverse consequences, and may not be able to become in compliance with relevant laws and
regulations in a timely manner, or at all. These may materially and adversely affect its business, financial condition, results of operations
and reputation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Since these statements and regulatory actions are new, it is highly
uncertain how soon legislative or administrative regulation making bodies will respond and what existing or new laws or regulations or
detailed implementations and interpretations will be modified or promulgated, if any, and the potential impact such modified or new laws
and regulations will have on our daily business operation, our ability to accept foreign investments and conduct follow-on offerings,
and listing or continuing listing on a U.S. or other foreign exchanges. In addition, the PRC government has recently published new policies
that significantly affected certain industries such as the real estate, education and internet industries, and we cannot rule out the
possibility that it will in the future release regulations or policies regarding any other industry including the industry in which we
operate, which could adversely affect our business, financial condition and results of operations. See &#8220;Item 3. Key Information&#8212;D.
Risk Factors&#8212;Risk Factors&#8212;Risks Related to Doing Business in China&#8221; for more details.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Risks Associated with Our Corporate Structure</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">CNFinance Holdings Limited is a holding company with no operations
of its own. It conducts substantially all of its operations in China primarily through its subsidiaries in China, in particular Shenzhen
Fanhua United Investment Group Co., Ltd., Guangzhou Heze Information Technology Co., Ltd., and their subsidiaries and consolidated affiliated
entities, and substantially all of its assets and operations are located in China. With a holding company structure, we principally rely
on dividends from our PRC subsidiaries for our cash requirements, including any payment of dividends to our shareholders. If these subsidiaries
or any newly formed subsidiaries incur debt on their own behalf in the future, the instruments governing their debt may restrict their
ability to pay dividends to us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In 2020, 2021 and 2022, CNFinance has not transferred any cash proceeds
to any of its PRC subsidiaries. For instance, cash proceeds raised from overseas financing activities, may be transferred by CNFinance
through China Financial Services Group Limited, our Hong Kong subsidiary, to Fanhua Chuangli Information Technology (Shenzhen) Company
Limited (&#8220;Fanhua Chuangli&#8221;), a PRC subsidiary, via capital contribution and shareholder loans, as the case may be. Fanhua
Chuangli then will transfer funds to its subsidiaries to meet the capital needs of business operations. None of our PRC subsidiaries
have issued any dividends or distributions to respective holding companies, including CNFinance, or any investors as of the date of this
annual report. Our subsidiaries in the PRC generate and retain cash generated from operating activities and re-invest it in business
operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In this annual report, &#8220;we,&#8221; &#8220;us,&#8221; &#8220;our
company,&#8221; and &#8220;our&#8221; refer to CNFinance Holdings Limited, a Cayman Islands exempted company with limited liability and
its subsidiaries and consolidated affiliated entities, including but not limited to Shenzhen Fanhua United Investment Group Co., Ltd.
and Guangzhou Heze Information Technology Co., Ltd., as a group.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Financial Information Related to the Consolidated Affiliated
Entities</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Loans that we facilitate are granted to borrowers through structured
funds set up by our trust company partners, such as the series of FOTIC Jinghua structured funds. Each structured trust fund has a separate
bank account, and the assets of the structured funds can only be used to settle obligations under the respective structured fund. Under
most trust plan agreements, we subscribe to all of the subordinated units of each structured trust plan and provide credit strengthening
services as the subordinated unit holder. This requires us to ensure sufficient capital to repay the principal amount and the agreed
financing costs for the senior unit holders. We are designated as the service provider to assist our trust company partners acquire and
screen borrowers and perform credit assessment pursuant to collaboration agreements with our trust company partners. We provide loan
facilitation and post-loan management services for service fees charged directly to the trust plans. As a result, we are deemed as the
primary beneficiary of the funds from the accounting perspective as we have the power to direct the activities of the structured funds
and have obligation to absorb losses of the funds or right to receive benefits. Under Accounting Standards Codification (ASC) Topic 810,
the structured funds are considered as variable interest entities (VIEs) which need to be consolidated on our balance sheet. However,
as advised by our PRC counsel, such structured funds are not considered as separate legal entities or VIEs under the Notice on Relevant
Issues Concerning Foreign Exchange Administration for Domestic Residents&#8217; Financing and Roundtrip Investment Through Offshore Special
Purpose Vehicles, or SAFE Circular 75. We subscribe to the subordinated units and act as the service provider under the trust plans through
our wholly-owned subsidiaries.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Risks Associated with the Holding Foreign Companies Accountable
Act</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In recent years, U.S. regulatory authorities have continued to express
their concerns about challenges in their oversight of financial statement audits of U.S.-listed companies with significant operations
in China. More recently, as part of a continued regulatory focus in the United States on access to audit and other information currently
protected by national law, in particular China&#8217;s, the United States enacted the Holding Foreign Companies Accountable Act, or the
HFCAA, in December 2020. Trading in our securities on U.S. markets, including the NYSE, may be prohibited under the HFCAA if the PCAOB
determines that it is unable to inspect or investigate completely our auditor for two consecutive years. On December 16, 2021, the PCAOB
issued the HFCAA Determination Report to notify the SEC of its determinations that the PCAOB was unable to inspect or investigate completely
registered public accounting firms headquartered in mainland China and Hong Kong, or the 2021 Determinations, including our auditor.
On May 26, 2022, we were conclusively identified by the SEC under the HFCAA as having filed audit reports issued by a registered public
accounting firm that cannot be inspected or investigated completely by the PCAOB in connection with the filing of our 2021 Form 20-F.
On December 15, 2022, the PCAOB announced that it was able to conduct inspections and investigations completely of PCAOB-registered public
accounting firms headquartered in mainland China and Hong Kong in 2022. The PCAOB vacated its previous 2021 Determinations accordingly.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">However, whether the PCAOB will continue to conduct inspections and
investigations completely to its satisfaction of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong
is subject to uncertainty and depends on a number of factors out of our, and our auditor&#8217;s, control, including positions taken
by authorities of the PRC. The PCAOB is required under the HFCAA to make its determination on an annual basis with regards to its ability
to inspect and investigate completely accounting firms based in the mainland China and Hong Kong. The possibility of being a Commission-Identified
Issuer and risk of delisting could continue to adversely affect the trading price of our securities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For the details of the risks associated with the enactment of the
HFCAA, see &#8220;Item 3. Key Information&#8212;D. Risk Factors&#8212;Risks Related to Doing Business in China&#8212;Our auditor, like
other independent registered public accounting firms operating in China, was historically not permitted to be subject to inspection by
the PCAOB, and consequently, investors were deprived of the benefits of such inspection in the past. Trading in our securities may be
prohibited under the HFCAA if the PCAOB determines that it is unable to inspect or investigate completely our auditor, and as a result,
U.S. national securities exchanges, such as the NYSE, may determine to delist our securities.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_007"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">3.A. [Reserved]</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_008"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">3.B. Capitalization and Indebtedness</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_009"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">3.C. Reason for the Offer and Use of Proceeds</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><div><a id="a_010"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">3.D. Risk Factors</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The PRC government has significant authority to exert influence on
the ability of a company based in China, such as ours, to conduct its business, accept foreign investments or list on U.S. or other foreign
exchanges. We face risks associated with regulatory approvals of overseas offerings, anti-monopoly regulatory actions, oversight on cybersecurity
and data privacy. For example, in recent years, regulatory actions undertaken by China&#8217;s government<i>, </i>including the enactment
of China&#8217;s new Data Security Law, amended Cybersecurity Review Measures, Personal Information Protection Law, and any other future
laws and regulations may require us to incur significant expenses and could materially affect our ability to conduct our business, accept
foreign investments or list on a U.S. or foreign exchange. The PRC government also has significant oversight and discretion over the
conduct of our business and as such may influence our operations at any time, which could result in a material adverse effect on our
operations. The PRC government has 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 regarding the industry where we operate, which could adversely
affect our business, financial condition and results of operations. For example, the PRC anti-monopoly enforcement agencies have in recent
years strengthened enforcement under the anti-monopoly law. Although we do not believe the current antimonopoly laws and regulations
have a material adverse impact on our business and results of operations, any failure or perceived failure by us to comply with the relevant
anti-monopoly laws and regulations may result in governmental investigations, enforcement actions or lawsuits and could have an adverse
impact on our business and results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Furthermore, the PRC government has recently indicated an intent to
exert more oversight and control over overseas securities offerings and other capital markets activities and foreign investment in China-based
companies like ours. These risks could result in a material change in our operations and the value of our ordinary shares or the ADSs,
or could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value
of such securities to significantly decline or become worthless.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Additionally, trading in our securities on U.S. markets, including
the NYSE, may be prohibited under the HFCAA if the PCAOB determines that it is unable to inspect or investigate completely our auditor
for two consecutive years. On December 16, 2021, the PCAOB issued the HFCAA Determination Report to notify the SEC of its determinations
that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and
Hong Kong (the &#8220;2021 Determinations&#8221;), including our auditor. On May 26, 2022, we were conclusively identified by the SEC
under the HFCAA as having filed audit reports issued by a registered public accounting firm that cannot be inspected or investigated
completely by the PCAOB in connection with the filing of our 2021 Form 20-F. The inability of the PCAOB to conduct inspections in the
past also deprived our investors of the benefits of such inspections. On December 15, 2022, the PCAOB announced that it was able to conduct
inspections and investigations completely of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong in
2022. The PCAOB vacated its previous 2021 Determinations accordingly. As a result, we do not expect to be identified as a Commission-Identified
Issuer under the HFCAA for the fiscal year ended December 31, 2022 after we file our annual report on Form 20-F for such fiscal year.
However, whether the PCAOB will continue to conduct inspections and investigations completely to its satisfaction of PCAOB-registered
public accounting firms headquartered in mainland China and Hong Kong is subject to uncertainty and depends on a number of factors out
of our, and our auditor&#8217;s, control, including positions taken by authorities of the PRC. The PCAOB is expected to continue to demand
complete access to inspections and investigations against accounting firms headquartered in mainland China and Hong Kong in the future
and states that it has already made plans to resume regular inspections in early 2023 and beyond. The PCAOB is required under the HFCAA
to make its determination on an annual basis with regards to its ability to inspect and investigate completely accounting firms based
in the mainland China and Hong Kong. The possibility of being a Commission-Identified Issuer and risk of delisting could continue to
adversely affect the trading price of our securities. If the PCAOB determines in the future that it no longer has full access to inspect
and investigate accounting firms headquartered in mainland China and Hong Kong and we continue to use such accounting firm to conduct
audit work, we would be identified as a Commission-Identified Issuer under the HFCAA following the filing of the annual report for the
relevant fiscal year, and if we were so identified for two consecutive years, trading in our securities on U.S. markets would be prohibited.
Such risk could result in a material change in our operations and/or the value of the ADSs or could significantly limit or completely
hinder our ability to offer or continue to offer ADSs and/or other securities to investors and cause the value of such securities to
significantly decline or be worthless. See &#8220;Item 3. Key Information&#8212;D. Risk Factors&#8212;Risks Related to Doing Business
in China&#8212;Our auditor, like other independent registered public accounting firms operating in China, was historically not permitted
to be subject to inspection by the PCAOB, and consequently, investors were deprived of the benefits of such inspection in the past. Trading
in our securities may be prohibited under the HFCAA if the PCAOB determines that it is unable to inspect or investigate completely our
auditor, and as a result, U.S. national securities exchanges, such as the NYSE, may determine to delist our securities.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">You should carefully consider all of the information in this annual
report before making an investment in the ADSs. Below please find a summary of the principal risks and uncertainties we face, organized
under relevant headings. In particular, as we are a China-based company incorporated in the Cayman Islands, you should pay special attention
to subsections headed &#8220;Item 3. Key Information&#8212;3.D. Risk Factors&#8212;Risks Related to Doing Business in China.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Below please find a summary of the principal risks we face, organized
under relevant headings.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Risks Related to Doing Business in China</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td><i>Changes in China&#8217;s economic, political or social conditions
                                            or government policies could have a material adverse effect on our business and operations.</i></td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td><i>Uncertainties with respect to the PRC legal system, including
                                            uncertainties regarding the enforcement of laws, and unexpected changes in laws and regulations
                                            in China could adversely affect us and limit the legal protections available to you and us.</i></td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td><i>The PRC government has significant oversight over the conduct
                                            of our business and as such may influence our operations, which may potentially result in
                                            a material adverse effect on our operations.</i></td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td><i>The oversight of the China Securities Regulatory Commission,
                                            Cybersecurity Administration of China or other governmental authorities may adversely affect
                                            our business and their approval may be required in connection with future offerings of securities
                                            overseas or to maintain the listing status of our ADSs, and, if required, we cannot predict
                                            whether we will be able to obtain such approval.</i></td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td><i>We may rely on dividends and other distributions on equity
                                            paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and
                                            any limitation on the ability of our PRC subsidiaries to make payments to us could have a
                                            material and adverse effect on our ability to conduct our business.</i></td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td><i>PRC regulations of loans to and direct investment in PRC
                                            entities by offshore holding companies and governmental control of currency conversion may
                                            delay us from using the proceeds of our public offering to make loans or additional capital
                                            contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity
                                            and our ability to fund and expand our business.</i></td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td><i>The collaboration model we have in place with our sales partners
                                            to acquire borrowers might be regarded as financial marketing and might face compliance risks.</i></td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td><i>Our auditor, like other independent registered public accounting
                                            firms operating in China, was historically not permitted to be subject to inspection by the
                                            PCAOB, and consequently, investors were deprived of the benefits of such inspection in the
                                            past. Trading in our securities may be prohibited under the HFCAA if the PCAOB determines
                                            that it is unable to inspect or investigate completely our auditor, and as a result, U.S.
                                            national securities exchanges, such as the NYSE, may determine to delist our securities.</i></td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Risks Related to Our Business</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td><i>We have a limited operating history and our business practice
                                            continues to evolve, which makes it difficult to evaluate our future prospects.</i></td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td><i>Our credit strengthening services to the trust plans as the
                                            subordinated unit holder might be subject to challenges by relevant regulatory authorities,
                                            and we may potentially be required to obtain licenses.</i></td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td><i>Our trust company partners operate in a strictly regulated
                                            industry. If the practice of our trust company partners, including the cooperation arrangements
                                            with us, is challenged under any PRC laws and regulations, our business, financial condition
                                            and results of operations would be materially and adversely affected.</i></td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td><i>Our business may be adversely affected if we are unable to
                                            secure funding on terms acceptable to us or our borrowers, or at all.</i></td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td><i>We face risks related to natural disasters, health epidemics
                                            and other outbreaks of contagious diseases.</i></td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td><i>Our collaboration model with our sales partners might be
                                            subject to challenges by relevant regulatory authorities.</i></td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td><i>Some of our funding sources are highly regulated and are
                                            subject to the changing regulatory environment. If any of the funding sources is deemed to
                                            violate the PRC laws and regulations, we may need to secure new funding-failure of which
                                            may result in material and adverse impact on our business, financial condition, results of
                                            operations and prospects.</i></td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td><i>Our high leverage ratio may expose us to liquidity risk and
                                            we may not have sufficient capital reserve to manage losses.</i></td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td><i>Our business depends on our ability to collect payment on
                                            and service the transactions we facilitate.</i></td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td><i>The foreclosure action and enforcement process may be time-consuming,
                                            difficult and uncertain for legal and practicable reasons, which could adversely affect our
                                            liquidity, business, financial condition and results of operations.</i></td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td><i>Credit and other information that we or our trust company
                                            partners or our commercial bank partners receive from prospective borrowers and third parties
                                            about a borrower and the collateral may not accurately reflect the borrower&#8217;s creditworthiness
                                            or the collateral&#8217;s fair/recoverable value, which may compromise the accuracy of our
                                            and our trust company partners&#8217; credit assessment.</i></td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td><i>We primarily rely on our trust company partners and our commercial
                                            bank partners to fund loans to borrowers, which may constitute provision of intermediary
                                            service, and our agreements with these partners and borrowers may be deemed as intermediation
                                            contracts under the Civil Code of the People&#8217;s Republic of China (the &#8220;Civil Code&#8221;).
                                            </i></td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Risks Related to Our American Depositary Shares</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td><i>The trading price of our ADSs may be volatile, which could
                                            result in substantial losses to investors.</i></td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td><i>If securities or industry analysts do not publish research
                                            or reports about our business, or if they adversely change their recommendations regarding
                                            the ADSs, the market price for the ADSs and trading volume could decline.</i></td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td><i>Substantial future sales or perceived potential sales of
                                            our ADSs in the public market could cause the price of our ADSs to decline.</i></td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td><i>Although the matter is not entirely clear, we were likely
                                            a passive foreign investment company (a &#8220;PFIC&#8221;) for our 2023 taxable year, and
                                            we will likely be a PFIC for 2023 and our future taxable years, which could result in adverse
                                            U.S. federal income tax consequences to U.S. taxpayers. </i></td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Risks Related to Doing Business in China</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Changes in China&#8217;s economic, political or social
conditions or government policies could have a material adverse effect on our business and operations.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Substantially all of our assets and operations are located in China.
Accordingly, our business, financial condition, results of operations and prospects may be influenced to a significant degree by political,
economic and social conditions in China generally. The Chinese economy differs from the economies of most developed countries in many
respects, including the level of government involvement, level of development, growth rate, control of foreign exchange and allocation
of resources. Although the Chinese 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 government. In addition, the Chinese government continues to
play a significant role in regulating industry development by imposing industrial policies. The Chinese government also exercises significant
control over China&#8217;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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">While the Chinese economy has experienced significant growth over
past decades, growth has been uneven, both geographically and among various sectors of the economy. Any adverse changes in economic conditions
in China, in the policies of the Chinese government or in the laws and regulations in China could have a material adverse effect on the
overall economic growth of China. Such developments could adversely affect our business and operating results, lead to a reduction in
demand for our services and adversely affect our competitive position. The Chinese government has implemented various measures to encourage
economic growth and guide the allocation of resources. Some of these 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. In addition, in the past, the Chinese government has implemented certain measures,
including interest rate adjustment, to control the pace of economic growth. These measures may cause decreased economic activity in China,
which may adversely affect our business and operating results. Recent international trade tensions, or a severe or prolonged downturn
in the Chinese or global economy in general, could materially and adversely affect our business and financial condition.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Any prolonged slowdown in the Chinese or global economy may have a
negative impact on our business, results of operations and financial condition. In particular, general economic factors and conditions
in China or worldwide, including the general interest rate environment and unemployment rates, may affect micro- and small-enterprise
owners&#8217; willingness to seek credit and our partners&#8217; ability and desire to invest in loans. Economic conditions in China
are sensitive to global economic conditions. The global financial markets have experienced significant disruptions in the past, including
the recent international trade disputes and tariff actions announced by the United States, the PRC and certain other countries, as well
as the recent banking turmoil in the United States and European Union. For instance, the U.S. administration has imposed significant
amount of tariffs on Chinese goods, and the PRC government has imposed tariffs on certain goods manufactured in the United States. There
is no assurance that the list of goods impacted by additional tariffs will not be expanded or the tariffs will not be increased materially.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">There is considerable uncertainty over the long-term effects of the
expansionary monetary and fiscal policies adopted by the central banks and financial authorities of some of the world&#8217;s leading
economies, including the United States and China. There have also been concerns over unrest in the Middle East and Africa, which have
resulted in volatility in financial and other markets. There have also been concerns about the economic effect of the tensions in the
relationship between China and surrounding Asian countries. Recently, the Russia-Ukraine war has caused, and continues to intensify,
significant geopolitical tensions in Europe and across the globe. The resulting sanctions are expected to have significant impacts on
the economic conditions of the targeted countries and markets. If present Chinese and global economic uncertainties persist, we may have
difficulty in obtaining funding sources to fund the credit utilized by borrowers. Adverse economic conditions could also reduce the number
of quality micro- and small-enterprise owners seeking credit from us, as well as their ability to make payments. Should any of these
situations occur, the amount of loans facilitated to borrowers and, therefore, our operating income will decline, and our business and
financial condition will be negatively impacted. Additionally, continued turbulence in the international markets may adversely affect
our ability to access the capital markets to meet liquidity needs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The recent regulatory development has also imposed challenges to our
future business and operations. On August 20, 2020, the Supreme People&#8217;s Court announced an amendment to the judicial interpretation
of China&#8217;s private lending, which reduces the maximum annual interest rate allowed on private lending to four times of the latest
one-year loan prime rate (LPR) (the &#8220;Amendment&#8221;). Although we do not believe we are regulated by the Amendment as a loan
facilitator in collaboration with licensed trust company partners, our trust company partners have voluntarily adjusted the interest
rates on some loan products we facilitate to comply with the new standards under the Amendment with some trust company partners to prevent
the compliance risks due to the uncertainty of regulatory enforcement. As a result, our profit margin, results of operations and financial
position were adversely impacted in 2022, and may continue to be adversely impacted.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Uncertainties with respect to the PRC legal system, including
uncertainties regarding the enforcement of laws, and unexpected changes in laws and regulations in China could adversely affect us and
limit the legal protections available to you and us.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our operations in China are governed by the PRC laws and regulations.
The PRC legal system is a civil law system based on written statutes. Prior court decisions under the civil law system may be cited for
reference but have limited precedential value. The overall effect of legislation over the past four decades has significantly enhanced
the protections afforded to various forms of foreign investments in China. However, recently enacted laws and regulations may not sufficiently
cover all aspects of economic activities in China. Since these laws and regulations are relatively new and may be amended from time to
time, and the PRC legal system continues to rapidly evolve, the interpretations of many laws and regulations are not always uniform and
enforcement of these laws and regulations involves uncertainties. In addition, any new PRC laws or changes in PRC laws and regulations
related to, among other things, foreign investment and business activities in China could have a material adverse effect on our business
and our ability to operate our business in China.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">From time to time, we may have to resort to administrative and court
proceedings to enforce our legal rights. Any administrative and court proceedings in China may be protracted, resulting in substantial
costs and diversion of resources and management attention. Since PRC administrative and court authorities have significant discretion
in interpreting and implementing statutory provisions and contractual terms, it may be difficult to evaluate the outcome of administrative
and court proceedings and the level of legal protection we enjoy. These uncertainties may impede our ability to enforce contracts in
China and could materially and adversely affect our business and results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Furthermore, the PRC legal system is based in part on government policies
and internal rules, some of which are not published on a timely basis, or at all, and may have retroactive effect. As a result, we may
not be aware of our violation of any of these policies and rules until sometime after the violation. Such uncertainty towards the scope
and effect of our contractual, property (including intellectual property) and procedural rights and any failure to quickly respond to
changes in the regulatory environment in the PRC could adversely affect our business, and impede our ability to continue our operations
and proceed with our future business plans.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">The PRC government has significant oversight over the
conduct of our business and as such may influence our operations, which may potentially result in a material adverse effect on our operations.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The PRC government has exercised and continues to exercise substantial
control over the Chinese economy through regulation and state ownership. Our ability to operate in China may be harmed by changes in
its laws and regulations, including those relating to taxation, environmental regulations, land use rights, property and other matters.
The central or local PRC governments of may impose new, stricter regulations or interpretations of existing regulations that would require
additional expenditures and efforts on our part to ensure our compliance with such regulations or interpretations. Accordingly, government
actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrally planned
economy or regional or local variations in the implementation of economic policies, could have a significant effect on economic conditions
in China or specific regions thereof, and could require us to divest ourselves of any interest we then hold in Chinese properties. The
PRC government has recently published new policies that significantly affected certain industries such as real estate and credit industries,
and we cannot rule out the possibility that it will in the future release regulations or policies regarding our industry that could adversely
affect our business, financial condition and results of operations. For example, on November 1, 2021, the Personal Information Protection
Law came into effect. Although we do not believe the current personal information protection laws and regulations have a material adverse
impact on our business and results of operations, any failure or perceived failure by us to comply with the relevant personal information
protection laws and regulations may result in governmental investigations, enforcement actions or lawsuits and could have an adverse
impact on our business and results of operations. Furthermore, the PRC government has recently indicated an intent to exert more oversight
and control over securities offerings and other capital markets activities that are conducted overseas and foreign investment in China-based
companies like us. Any such intervention in or influence on our business operations or action to exert more oversight and control over
securities offerings and other capital markets activities, once taken by the PRC government, could adversely affect our business, financial
condition and results of operations and the value of our ordinary shares or the ADSs, or significantly limit or completely hinder our
ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or in extreme
cases, become worthless.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->8<!-- Field: /Sequence --></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">The approval of and/or filing with the CSRC or other PRC
government authorities may be required in connection with our issuance of securities overseas or maintenance of the listing status of
our ADRs, and, if required, we cannot predict whether we will be able to obtain such approval or complete such filing.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Regulations on Mergers and Acquisitions of Domestic Enterprises
by Foreign Investors, or the M&amp;A Rules, require 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&#8217;s securities on an overseas stock exchange. However, the application of the M&amp;A Rules
remains unclear. If CSRC approval is required, it is uncertain whether it would be possible for us to obtain the approval, and any failure
to obtain or delay in obtaining CSRC approval for future offerings of securities overseas or maintenance of the listing status of our
ADSs would subject us to sanctions imposed by the CSRC and other PRC regulatory agencies.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On July 6, 2021, certain PRC regulatory authorities issued Opinions
on Strictly Cracking Down on Illegal Securities Activities in Accordance with the Law. These opinions call for strengthened regulation
over illegal securities activities and supervision on overseas listings by China-based companies and propose 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. On February 17, 2023, the China Securities Regulatory Commission promulgated the Overseas Listing Trial Measures, and five
supporting guidelines, which became effective on March 31, 2023. According to the Overseas Listing Trial Measures, PRC domestic companies
that seek to offer and list securities in overseas markets, either in direct or indirect means, are required to fulfill the filing procedure
with the CSRC and report relevant information. If a company fails to complete the filing procedure or conceals any material fact or falsifies
any major content in its filing documents, it may be subject to administrative penalties, such as order to rectify, warnings, fines,
and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons may also be subject
to administrative penalties, such as warnings and fines. The Overseas Listing Trial Measures also provide that a company in mainland
China must file with the CSRC within three business days for its follow-on offering of securities after it is listed in an overseas market.
On February 17, 2023, the CSRC also issued the Notice on Administration of the Filing of Overseas Offering and Listing by Domestic Companies
and held a press conference for the release of the Overseas Listing Trial Measures, which, among others, clarified that the companies
in mainland China that have been listed overseas before March 31, 2023 are not required to file with the CSRC immediately, but these
companies should complete filing with the CSRC for their financing activities in accordance with the Overseas Listing Trial Measures.
Based on the foregoing, as an issuer that has been listed overseas before the effective date of the Overseas Listing Trial Measures,
we are not required to complete filing with the CSRC for our offshore offerings prior to the effective date of the Overseas Listing Trial
Measures, but we may be subject to the filing requirements for our financing activities under the Overseas Listing Trial Measures. Any
securities offerings and listings outside of mainland China by our Company after the effective date of the Overseas Listing Trial Measures,
including but not limited to follow on offerings, secondary listings, and going private transactions, will be subject to the filing requirements
with the CSRC under the Overseas Listing Trial Measures, and we cannot assure you that we will be able to comply with such filing requirements
in a timely manner, or at all. Since the Overseas Listing Trial Measures was newly promulgated, the interpretation, application and enforcement
of the Overseas Listing Trial Measures remain unclear. We cannot assure you that we will be able to complete such filing in a timely
manner and fully comply with such rules to maintain the listing status of our ADSs and/or other securities, or to conduct any securities
offerings in the future.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of the date of this annual report, we have not received any inquiry,
notice, warning, sanctions or regulatory objection from the CSRC in connection with requirements of obtaining prior approval for the
listing of our ADSs. However, since the Overseas Listing Trial Measures was newly promulgated, the interpretation, application and enforcement
of the Overseas Listing Trial Measures remain unclear. We cannot assure you that we will be able to complete any required filing in a
timely manner and fully comply with such rules to maintain the listing status of our ADSs and/or other securities, or to conduct any
securities offerings in the future.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On April 2, 2022, the CSRC released the revised Provisions on Strengthening
Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments) ,
or the Draft Archives Rules. On February 24, 2023, the CSRC, jointly with other relevant governmental authorities, issued the Provisions
on Strengthening the Confidentiality and Archive Management Work Relating to the Overseas Securities Offering and Listing by Domestic
Companies (the &#8220;Confidentiality Provisions&#8221;), which became effective on March 31, 2023. The Confidentiality Provisions requires,
among others, that companies based in mainland China seeking to offer securities in overseas markets, either directly or indirectly,
shall establish the confidentiality and archives system, and shall complete approval and filing procedures with competent authorities,
if such companies or their overseas listing entities provide or publicly disclose documents or materials involving state secrets and
work secrets of PRC government agencies to relevant securities companies, securities service institutions, overseas regulatory agencies
and other entities and individuals. It further stipulates that providing or publicly disclosing documents and materials which may adversely
affect national security or public interests, and accounting files or copies shall be subject to corresponding procedures in accordance
with relevant laws and regulations. Given the Confidentiality Provisions were recently promulgated, there remain substantial uncertainties
about how these provisions will be interpreted, or implemented and how it will affect our operations or future securities offerings.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of the date of this annual report, we have not provided files or
copies of files outside China that involve national secrets, national security, vital interests, or have important preservation value
to the nation and society. However, we cannot guarantee that relevant government agencies of China, including the CSRC, will share the
same opinion as ours.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The interpretation and implementation of these opinions and new rules
remain unclear at this stage. We cannot assure you that we will not be required to obtain the approval of or file with the CSRC or other
regulatory authorities to maintain the listing status of our ADSs on NYSE or to conduct offerings of securities in the future. If such
approvals are required, it is uncertain whether we can or how long it will take us to obtain such approval 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 approval or completing
such filing procedures for our overseas 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 business,
financial condition, results of operations, and prospects, as well as the trading price of our listed securities. 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 settlement and delivery, they do so at the risk that 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 approval requirements, if and
when procedures are established to obtain such a waiver. Any uncertainties or negative publicity regarding such approval requirement
could materially and adversely affect our business, prospects, financial condition, reputation, and the trading price of our listed securities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our PRC legal advisor, Merits &amp; Tree Law Offices, 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 overseas offerings and maintaining the listing status of the ADSs on the New York Stock Exchange,
given that: (i) the CSRC currently has not issued any definitive rule or interpretation concerning whether any offering such as offerings
completed or contemplated by our company is subject to the M&amp;A Rules; and (ii) our PRC subsidiaries were either incorporated as wholly
foreign-owned enterprises by means of direct investment or by merger or acquisition of equity interest or assets of a PRC domestic company
not subject to the M&amp;A Rules. However, there can be no assurance that the relevant PRC government agencies, including the CSRC, would
reach the same conclusion as our PRC legal advisor. 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Uncertainties exist with respect to the interpretation
and implementation of cybersecurity related regulations and cybersecurity review as well as any impact these may have on our business
operations.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Data Security Law was promulgated on June 10, 2021 and became
effective in September 2021, which stipulates that the data handling activities that affect or may affect the national security should
undergo national security review. The Personal Information Protection Law was promulgated on August 20, 2021 and officially implemented
on November 1, 2021, which stipulates that critical information infrastructure (&#8220;CII&#8221;) operators, or personal information
processors whose processing of personal information reaches the threshold amount prescribed by the national cyberspace authority, shall
store the personal information collected or generated by them within the territory of the PRC. If it is necessary to provide the data
overseas, the organization is required to pass the security assessment organized by the national cyberspace authority.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On August 17, 2021, the State Council issued the Regulations on the
Security Protection of Critical Information Infrastructures, which took effect on September 1, 2021. The regulations stipulate that the
departments responsible for the security protection of critical information infrastructure (hereinafter referred to as the security protection
departments) shall formulate rules for the identification of critical information infrastructure based on the actual situation of the
industry and field, and report it to the public security department of the State Council for record. The following factors shall be considered
in the formulation of identification rules: (1) the degree of importance of the network facilities and information systems to the core
businesses of the industry and area concerned&#894; (2) the degree of damage that may be caused if the network facilities and information
systems are under destruction, loss of function or data leakage&#894; and (3) the correlative impact on other industries and areas. The
security protection departments shall be responsible for organizing the identification of critical information infrastructure in their
respective industries and areas in accordance with the identification rules, timely notify the identification results to the operators
and report such results to the public security department under the State Council.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In December 2021, the CAC published the amended Cybersecurity Review
Measures, or the new measures, which provides that a network platform operator that has the personal information of more than one million
users must apply to the Cybersecurity Review Office (the &#8220;CRO&#8221;) for a cybersecurity review when it seeks to list overseas.
Also, a CII operator, when procuring a network product or service, shall predict any national security risk that may arise after the
use of such product or service. If national security will be affected or may be affected, the CII operator shall apply to the CRO for
a cybersecurity review.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Given the nature of our business and as advised by our PRC legal advisor,
Merits &amp; Tree Law Offices, we do not believe that our company is either a &#8220;CII operator&#8221; or a &#8220;network platform
operator&#8221; who possesses personal information of more than one million users, and therefore are not required to file for a cybersecurity
review under the new measures, although we cannot guarantee that the relevant PRC regulatory authority will agree with such conclusion
reached. If our company is deemed to be a CII operator or a network platform operator under such rules, we could be subject to cybersecurity
review by the CAC and other relevant PRC regulatory authorities and be required to change our existing practices in data privacy and
cybersecurity matters at substantial costs. During such cybersecurity review, we may be required to stop providing services to our customers.
If the CSRC or other PRC regulatory body subsequently determines that we need to obtain the CSRC&#8217;s approval for future offerings
of securities overseas or to maintain the listing status of our ADSs or if the CSRC or any other PRC government authorities promulgates
any interpretation or implements rules before our listing that would require us to obtain CSRC or other governmental approvals for future
offerings of securities overseas or to maintain the listing status of our ADSs, we may not be able to proceed with future offerings of
securities overseas or to the listing of our ADSs on the New York Stock Exchange and face adverse actions or sanctions by the CSRC or
other PRC regulatory agencies. In any such event, these regulatory agencies may impose fines and penalties on our operations in China,
limit our operating privileges in China, delay or restrict the repatriation of the proceeds from future offerings of securities overseas
into the PRC or take other actions that could have a material adverse effect on our business, financial condition, results of operations,
reputation and prospects, as well as our ability to complete future offerings of securities overseas or to maintain the listing status
of our ADSs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We also cannot rule out the possibility that certain of our customers
may be deemed as CII operators, in which case our products or services or data processing activities, if being deemed as related to national
security, will need to be submitted for cybersecurity review before we can enter into agreements with such customers, and before the
conclusion of such procedure, the customers will not be allowed to use our products or services. If the reviewing authority considers
that the use of our services by certain of our customers involves risk of disruption, is vulnerable to external attacks, or may negatively
affect, compromise, or weaken the protection of national security, we may not be able to provide our products or services to such customers,
which could have a material adverse effect on our results of operations and prospects.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of the date of this annual report, we have not been informed or
involved in any investigations or become subject to a cybersecurity review initiated by the CAC based on the new measures, and we have
not received any inquiry, notice, warning, sanctions in such respect or any regulatory objections to our current NYSE listing status
from the CAC as of the date of this annual report. As there are still uncertainties regarding the enactment of these new laws and regulations
as well as the amendment, interpretation and implementation of existing laws and regulations, we cannot assure you that we will be able
to comply with such laws and regulations in all respects, and we may be ordered to rectify, suspend or terminate any activities or services
that are deemed illegal or non-compliant by the regulatory authorities and become subject to fines and/or other penalties. If we fail
to address such issue in a timely manner, or at all, we may be required to suspend or terminate our related businesses or face other
penalties. This may materially and adversely affect our business, financial condition, results of operations and prospects.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">You may experience difficulties in effecting service of
legal process, enforcing foreign judgments or bringing actions in China against us or our management named in the annual report based
on foreign laws.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">CNFinance Holdings Limited is an exempted company incorporated under
the laws of the Cayman Islands. We conduct substantially all of our operations in China, and substantially all of our assets are located
in China. In addition, all of our executive officers are located in China. All of our directors who are not our executive officers are
located in China, except for one independent director who resides in the United States. Service of court documents on a Cayman Islands
company can be effected by serving the documents at the Company&#8217;s registered office and it may be possible to enforce foreign judgments
in the Cayman Islands against a Cayman Islands company, subject to some exceptions. However, if investors wish to serve documents on
and/or enforce foreign judgments against our directors and officers, they will need to ensure that they comply with the rules of the
jurisdiction where the directors and officers are located. As a result, it may be difficult for our shareholders to effect service of
process upon us or those persons inside China. In addition, China does not have treaties providing for the reciprocal recognition and
enforcement of judgments of courts with the Cayman Islands and many other countries and regions. Therefore, recognition and enforcement
in China of judgments of a court in any of these non-PRC jurisdictions in relation to any matter not subject to a binding arbitration
provision may be difficult or impossible.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">We may rely on dividends and other distributions on equity
paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries
to make payments to us could have a material and adverse effect on our ability to conduct our business.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">With a holding company structure, we rely principally on dividends
and other distributions on equity from our PRC subsidiaries for our cash requirements, including for services of any debt we may incur.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our PRC subsidiary&#8217;s ability to distribute dividends is based
upon its distributable earnings. Current PRC regulations permit our PRC subsidiaries to pay dividends to its respective shareholders
only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, each
of our PRC subsidiaries is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve
until such reserve reaches 50% of its registered capital. Each of our PRC subsidiaries, as a foreign invested enterprise, or FIE, is
also required to further set aside a portion of its after-tax profits to fund the employee welfare fund, although the amount to be set
aside, if any, is determined at its discretion. These reserves are not distributable as cash dividends. 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. Any limitation on the ability of our PRC subsidiaries to distribute dividends or other payments to their respective shareholders
could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our businesses,
pay dividends or otherwise fund and conduct our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In addition, the Enterprise Income Tax Law and its implementation
rules provide that a withholding tax rate of up to 15% will be applicable to dividends payable by Chinese companies to non-PRC-resident
enterprises unless otherwise exempted or reduced according to treaties or arrangements between the PRC central government and governments
of other countries or regions where the non-PRC resident enterprises are incorporated.</p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">PRC regulations of loans to and direct investment in PRC
entities by offshore holding companies and governmental control of currency conversion may delay us from using the proceeds of our public
offering to make loans or additional capital contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity
and our ability to fund and expand our business.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Any funds we transfer to our PRC subsidiaries, either as a shareholder
loan or as an increase in registered capital, are subject to approval by or registration with relevant governmental authorities in China.
According to the relevant PRC regulations on FIEs in China, capital contributions to our PRC subsidiaries are subject to the approval
of or filing with the MOFCOM or its local branches and registration with a local bank authorized by SAFE. In addition, (i) any foreign
loan procured by our PRC subsidiaries is required to be registered with SAFE or its local branches and (ii) any of our PRC subsidiaries
may not procure loans which exceed the difference between its total investment amount and registered capital or, as an alternative, only
procure loans subject to the calculation approach and limitation as provided in the Notice of the People&#8217;s Bank of China on Matters
concerning the Macro-Prudential Management of Full-Covered Cross-Border Financing. For the restriction and limitation on the amount of
loans, please refer to &#8220;Item 4. Information on the Company&#8212;B. Business Overview&#8212;Regulation&#8212;Regulations on Foreign
Exchange&#8212;Regulations on Foreign Exchange Registration of Overseas Investment by PRC Residents&#8221;. We may not be able to complete
such registrations on a timely basis, with respect to future capital contributions or foreign loans by us to our PRC subsidiaries. If
we fail to complete such registrations, our ability to use the proceeds of our public offerings, and our ability to capitalize our PRC
operations may be negatively affected, which could adversely affect our liquidity and our ability to fund and expand our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On March 30, 2015, SAFE promulgated the Circular on Reforming the
Management Approach Regarding the Foreign Exchange Capital Settlement of Foreign-Invested Enterprises, or SAFE Circular 19, which took
effect as of June 1, 2015 and was amended on December 30, 2019. SAFE Circular 19 launched a nationwide reform of the administration of
the settlement of the foreign exchange capitals of FIEs and allows FIEs to settle their foreign exchange capital at their discretion,
but continues to prohibit FIEs from using the Renminbi fund converted from their foreign exchange capital for expenditure beyond their
business scopes, providing entrusted loans or repaying loans between nonfinancial enterprises. SAFE issued the Circular on Reforming
and Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts, or SAFE Circular 16, effective in June 2016.
Pursuant to SAFE Circular 16, enterprises registered in China may also convert their foreign debts from foreign currency to Renminbi
on a self-discretionary basis. SAFE Circular 16 provides an integrated standard for conversion of foreign exchange under capital account
items (including but not limited to foreign currency capital and foreign debts) on a self-discretionary basis which applies to all enterprises
registered in China. SAFE Circular 16 reiterates the principle that Renminbi converted from foreign currency-denominated capital of a
company may not be directly or indirectly used for purposes beyond its business scope or prohibited by PRC laws or regulations, while
such converted Renminbi shall not be provided as loans to its nonaffiliated entities. As this circular is relatively new, there remains
uncertainty as to its interpretation and application and any other future foreign exchange-related rules. Violations of these circulars
could result in severe monetary or other penalties. SAFE Circular 19 and SAFE Circular 16 may significantly limit our ability to use
Renminbi converted from the net proceeds of our public offerings to fund the establishment of new entities in China or their subsidiaries,
to invest in or acquire any other PRC companies through our PRC subsidiaries, or to establish variable interest entities in China, which
may adversely affect our business, financial condition and results of operations.</p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Fluctuations in the value of the Renminbi could have a
material and adverse effect on your investment.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The change in value of the Renminbi against the U.S. dollar and other
currencies is affected by various factors such as changes in political and economic conditions in the PRC. In July 2005, the PRC government
changed its decades-old policy of pegging the value of the RMB to the U.S. dollar, and the RMB appreciated more than 20% against the
U.S. dollar over the following three years. Between July 2008 and June 2010, this appreciation halted and the exchange rate between the
RMB and the U.S. dollar remained within a narrow band. Since June 2010, the RMB has fluctuated against the U.S. dollar, at times significantly
and unpredictably. On November 30, 2015, the Executive Board of the International Monetary Fund (IMF) completed the regular five-year
review of the basket of currencies that make up the Special Drawing Right, or the SDR, and decided that with effect from October 1, 2016,
RMB is determined to be a freely usable currency and will be included in the SDR basket as a fifth currency, along with the U.S. dollar,
the euro, the Japanese yen and the British pound. In the fourth quarter of 2016, the RMB has depreciated significantly in the backdrop
of a surging U.S. dollar and persistent capital outflows of China. While appreciating approximately by 7% against the U.S. dollar in
2017, the Renminbi in 2018 depreciated approximately by 5% against the U.S. dollar. With the development of the foreign exchange market
and progress towards interest rate liberalization and RMB internationalization, the PRC government may in the future announce further
changes to the exchange rate system, and we cannot assure you that the RMB will not appreciate or depreciate significantly in value against
the U.S. dollar in the future. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange
rate between the Renminbi and the U.S. dollar in the future.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Any significant appreciation or revaluation of the Renminbi may have
a material adverse effect on the value of, and any dividends payable on, our ADSs in foreign currency terms. More specifically, if we
decide to convert our Renminbi into U.S. dollars, appreciation of the U.S. dollar against the Renminbi would have a negative effect on
the U.S. dollar amount available to us. To the extent that we need to convert U.S. dollars we receive from our initial public offering
into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount
we would receive from the conversion. In addition, appreciation or depreciation in the exchange rate of the Renminbi to the U.S. dollar
could materially and adversely affect the price of our ADSs in U.S. dollars without giving effect to any underlying change in our business
or results of operations.</p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Governmental control of currency conversion may limit
our ability to utilize our operating income effectively and affect the value of your investment.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The PRC government imposes controls on the convertibility of the Renminbi
into foreign currencies and, in certain cases, the remittance of currency out of China. We receive substantially all of our operating
income in Renminbi. Under our current corporate structure, our Cayman Islands incorporated holding company primarily relies on dividend
payments from our PRC subsidiaries to fund any cash and financing requirements we may have. Under existing PRC foreign exchange regulations,
payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions,
can be made in foreign currencies without prior approval of SAFE by complying with certain procedural requirements. Specifically, under
the existing exchange restrictions, without prior approval of SAFE, cash generated from the operations of our PRC subsidiaries in China
may be used to pay dividends to our company. However, approval from or registration with appropriate government authorities is required
where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans
denominated in foreign currencies. As a result, we need to obtain SAFE approval to use cash generated from the operations of our PRC
subsidiaries to pay off their respective debt in a currency other than Renminbi owed to entities outside China, or to make other capital
expenditure payments outside China in a currency other than Renminbi. The PRC government may at its discretion restrict access to foreign
currencies for current account transactions in the future. If the foreign exchange control system prevents us from obtaining sufficient
foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders,
including holders of our ADSs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Certain PRC regulations may make it more difficult for
us to pursue growth through acquisitions.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Among other things, the Regulations on Mergers and Acquisitions of
Domestic Enterprises by Foreign Investors, or the M&amp;A Rules, adopted by six PRC regulatory agencies in 2006 and amended in 2009,
established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time-consuming
and complex. Such regulation stipulates that if a foreign investor acquires a domestic enterprise and obtains actual control, and if
it involves key industries, or has factors that affect or may affect national economic security, or causes the transfer of actual control
of domestic enterprises with well-known trademarks or Chinese time-honored brands, the parties concerned shall report to MOFCOM. Moreover,
the Anti-Monopoly Law promulgated by the Standing Committee of the NPC which became effective in 2008 requires that transactions which
are deemed concentrations and involve parties with specified turnover thresholds must be cleared by the MOFCOM before they can be completed.
In addition, according to the Measures for the Security Review of Foreign Investment, which has been effective since January 28, 2021,
a foreign investor or a party concerned in China (hereinafter collectively referred to as &#8220;party concerned&#8221;) shall take the
initiative to make a declaration to the working mechanism office prior to making one of the following investments and the working mechanism
office shall be entitled to require the party concerned to make a declaration thereof: (i) investment in any of such fields as the military
industry and military-supporting industry that concern state defense and security, as well as military facilities and areas surrounding
industrial military facilities&#894; and (ii) investment in any important agricultural product, important energy and resources, major
equipment manufacturing, important infrastructure, important transportation services, important cultural products and services, important
information technologies and internet products and services, important financial services, key technologies and other important fields
that concern state security while obtaining the actual control over the enterprises invested in. We may pursue potential strategic acquisitions
that are complementary to our business and operations. Complying with the requirements of these regulations to complete such transactions
could be time-consuming, and any required approval processes, including obtaining approval or clearance from the MOFCOM, may delay or
inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">PRC regulations relating to the establishment of offshore
special purpose companies by PRC residents may subject our PRC resident beneficial owners or our PRC subsidiary to liability or penalties,
limit our ability to inject capital into our PRC subsidiary, limit our PRC subsidiary&#8217;s ability to increase their registered capital
or distribute profits to us, or may otherwise adversely affect us.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In July 2014, SAFE promulgated the Circular on Relevant Issues Concerning
Foreign Exchange Control on Domestic Residents&#8217; Offshore Investment and Financing and Roundtrip Investment Through Special Purpose
Vehicles, or SAFE Circular 37, to replace the Notice on Relevant Issues Concerning Foreign Exchange Administration for Domestic Residents&#8217;
Financing and Roundtrip Investment Through Offshore Special Purpose Vehicles, or SAFE Circular 75, which ceased to be effective upon
the promulgation of SAFE Circular 37. SAFE Circular 37 requires PRC residents (including PRC individuals and PRC corporate entities)
to register with SAFE or its local branches in connection with their direct or indirect offshore investment activities. SAFE Circular
37 is applicable to our shareholders who are PRC residents and may be applicable to any offshore acquisitions that we make in the future.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Under SAFE Circular 37, PRC residents who make, or have prior to the
implementation of SAFE Circular 37 made, direct or indirect investments in offshore special purpose vehicles, or SPVs, will be required
to register such investments with SAFE or its local branches. In addition, any PRC resident who is a direct or indirect shareholder of
an SPV is required to update its filed registration with the local branch of SAFE with respect to that SPV, to reflect any material change.
Moreover, any subsidiary of such SPV in China is required to urge the PRC resident shareholders to update their registration with the
local branch of SAFE. If any PRC shareholder of such SPV fails to make the required registration or to update the previously filed registration,
the subsidiary of such SPV in China may be prohibited from distributing its profits or the proceeds from any capital reduction, share
transfer or liquidation to the SPV, and the SPV may also be prohibited from making additional capital contributions into its subsidiary
in China. On February 13, 2015, the SAFE promulgated a Notice on Further Simplifying and Improving Foreign Exchange Administration Policy
on Direct Investment, or SAFE Notice 13, which became effective on June 1, 2015 and was amended in 2019. Under SAFE Notice 13, applications
for foreign exchange registration of inbound foreign direct investments and outbound overseas direct investments, including those required
under SAFE Circular 37, will be filed with qualified banks instead of SAFE. The qualified banks will directly examine the applications
and accept registrations under the supervision of SAFE.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Several of our shareholders that we are aware of are subject to SAFE
regulations, and all of these shareholders have completed all necessary registrations with the local SAFE branch or qualified banks as
required by SAFE Circular 37. We cannot assure you, however, that all of these individuals may continue to make required filings or updates
on a timely manner, or at all. We can provide no assurance that we are or will in the future continue to be informed of identities of
all PRC residents holding direct or indirect interest in our company. Any failure or inability by such individuals to comply with SAFE
regulations may subject us to fines or legal sanctions, such as restrictions on our cross-border investment activities or our PRC subsidiary&#8217;s
ability to distribute dividends to, or obtain foreign exchange-denominated loans from, our company or prevent us from making distributions
or paying dividends. As a result, our business operations and our ability to make distributions to you could be materially and adversely
affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Furthermore, as the interpretation and implementation of these foreign
exchange regulations have been constantly evolving, it is unclear how these regulations, and any future regulation concerning offshore
or cross-border transactions, will be interpreted, amended and implemented by the relevant government authorities. 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, we cannot assure you that we or the owners of such company, as the case may be, will
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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Uncertainties exist regarding the interpretation and implementation
of the newly enacted PRC Foreign Investment Law and how it may impact the viability of our current corporate structure and the viability
of business operation.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On March 15, 2019, the National People&#8217;s Congress approved the
Foreign Investment Law of the People&#8217;s Republic of China (&#8220;PRC Foreign Investment Law&#8221;),and the State Council promulgated
the Implementing Regulations to the PRC Foreign Investment Law (&#8220;Implementing Regulations&#8221;) on December 26, 2019, both of
which came into effect on January 1, 2020. The PRC Foreign Investment Law and its Implementing Regulations replaced the trio of previous
laws regulating foreign investment in China, namely, the Law of the People&#8217;s Republic of China on Chinese-foreign Equity Joint
Ventures, the Law of the People&#8217;s Republic of China on Chinese-foreign Cooperative Joint Ventures and the Law of the People&#8217;s
Republic of China on Wholly Foreign-Owned Enterprises, together with their implementation rules and ancillary regulations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">PRC Foreign Investment Law and its Implementing Regulations specify
that foreign investments shall be conducted in line with the negative list issued by or approved to be issued by the State Council. If
a foreign investment enterprise (the &#8220;FIE&#8221;) proposes to conduct business in an industry subject to foreign investment &#8220;restrictions&#8221;
in the negative list, the FIE must meet certain conditions under the negative list before being established. If an FIE proposes to conduct
business in an industry subject to foreign investment &#8220;prohibitions&#8221; in the &#8220;negative list,&#8221; it must not engage
in the business. Investments made in Mainland China by investors from the Hong Kong Special Administrative Region and the Macao Special
Administrative Region shall be governed by the PRC Foreign Investment Law and its Implementing Regulations. On December 27, 2021, the
NDRC and the MOFCOM promulgated the Special Administrative Measures (Negative List) for Access of Foreign Investments (2021 Edition),
as came into effect on January 1, 2022, according to which the industry of loan service has not been subject to foreign investment &#8220;restrictions&#8221;
or &#8220;prohibitions&#8221; in the Negative List. Our PRC legal advisor, Merits &amp; Tree Law Offices, advises us that according to
the PRC Foreign Investment Law and the Implementing Regulations, the PRC regulatory agencies shall, considering the needs for further
foreign opening and economic and social development, adjust the Negative List where appropriate. Therefore, if the industry of loan service
is subject to the foreign investment restrictions or prohibitions under the negative list issued subsequently, our failure to take timely
and appropriate measures to cope with any of these or similar regulatory compliance challenges could materially and adversely affect
our current corporate structure, corporate governance, and business operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Any failure to comply with PRC regulations regarding the
registration requirements for employee stock incentive plans may subject the PRC plan participants or us to fines and other legal or
administrative sanctions.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In February 2012, SAFE promulgated the Notices on Issues Concerning
the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas Publicly Listed Company,
replacing earlier rules promulgated in 2007. Pursuant to these rules, PRC citizens and non-PRC citizens who reside in China for a continuous
period of not less than one year who participate in any stock incentive plan of an overseas publicly listed company, subject to a few
exceptions, are required to register with SAFE through a domestic qualified agent, which could be the PRC subsidiaries of such overseas-listed
company, and complete certain other procedures. In addition, an overseas-entrusted institution must be retained to handle matters in
connection with the exercise or sale of stock options and the purchase or sale of shares and interests. We and our executive officers
and other employees who are PRC citizens or who reside in the PRC for a continuous period of not less than one year and who have been
granted options are subject to these regulations after our company becomes an overseas-listed company upon the completion of our initial
public offering. Failure to complete the SAFE registrations may subject us or them to fines and legal sanctions, there may be additional
restrictions on the ability of us or them to exercise stock options or remit proceeds gained from sale of stock into the PRC. We also
face regulatory uncertainties that could restrict our ability to adopt additional incentive plans for our directors, executive officers
and employees under PRC law. See &#8220;Item 4. Information on the Company&#8212;B. Business Overview&#8212;Regulation&#8212;Regulations
on Foreign Exchange&#8212;Regulations on Stock Incentive Plans.&#8221;</p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">If we are classified as a PRC resident enterprise for
PRC enterprise income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders
and ADS holders.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Under the PRC Enterprise Income Tax Law and its implementation rules,
an enterprise established outside of the PRC with its &#8220;de facto management body&#8221; within the PRC is considered a &#8220;resident
enterprise&#8221; and will be subject to the enterprise income tax on its global income at the rate of 25%. The implementation rules
define the term &#8220;de facto management body&#8221; as the body that exercises full and substantial control and overall management
over the business, productions, personnel, accounts and properties of an enterprise. In 2009, the State Administration of Taxation, or
SAT, issued a circular-the Circular of the State Administration of Taxation on Issues Concerning the Identification of Chinese-Controlled
Overseas Registered Enterprises as Resident Enterprises in Accordance With the Actual Standards of Organizational Management (SAT Circular
82), which was amended on December 29,2017 and provides certain specific criteria for determining whether the &#8220;de facto management
body&#8221; of a PRC-controlled enterprise that is incorporated offshore is located in China. Although this circular only applies to
offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners, the
criteria set forth in the circular may reflect the SAT&#8217;s general position on how the &#8220;de facto management body&#8221; test
should be applied in determining the tax resident status of all offshore enterprises. According to SAT Circular 82, an offshore incorporated
enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its &#8220;de
facto management body&#8221; in China, and will be subject to PRC enterprise income tax on its global income only if all of the following
conditions are met: (i) the primary location of the day-to-day operational management is in the PRC&#894; (ii) decisions relating to
the enterprise&#8217;s financial and human resource matters are made or are subject to approval by organizations or personnel in the
PRC&#894; (iii) the enterprise&#8217;s primary assets, accounting books and records, company seals, and board and shareholder resolutions
are located or maintained in the PRC&#894; and (iv) at least 50% of voting board members or senior executives habitually reside in the
PRC.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We believe our company is not a PRC resident enterprise for PRC tax
purposes. However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties
remain with respect to the interpretation of the term &#8220;de facto management body.&#8221; If the PRC tax authorities determine that
our company is a PRC resident enterprise for enterprise income tax purposes, we will be subject to PRC enterprise income on our worldwide
income at the rate of 25%. Furthermore, we will be required to withhold a 10% withholding tax from dividends we pay to our shareholders
that are nonresident enterprises, including the holders of our ADSs. In addition, nonresident enterprise shareholders (including our
ADS holders) may be subject to PRC tax at a rate of 10% on gains realized on the sale or other disposition of ADSs or ordinary shares,
if such income is treated as sourced from within the PRC. Furthermore, if we are deemed a PRC resident enterprise, dividends paid to
our non-PRC individual shareholders (including our ADS holders) and any gain realized on the transfer of ADSs or ordinary shares by such
shareholders may be subject to PRC tax at a rate of 20% (which, in the case of dividends, may be withheld at source). These rates may
be reduced by an applicable tax treaty, but it is unclear whether non-PRC shareholders of our company would be able to obtain the benefits
of any tax treaties between their country of tax residence and the PRC in the event that we are treated as a PRC resident enterprise.
Any such PRC tax may reduce the returns on your investment in the ADSs or ordinary shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">We face uncertainty with respect to indirect transfers
of equity interests in PRC resident enterprises by their non-PRC holding companies.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On February 3, 2015, the SAT issued the Public Notice Regarding Certain
Corporate Income Tax Matters on Indirect Transfer of Properties by Non-Tax Resident Enterprises, or SAT Bulletin 7, which was amended
on December 1 and December 29, 2017. SAT Bulletin 7 extends its tax jurisdiction to transactions involving the transfer of taxable assets
through offshore transfer of a foreign intermediate holding company. In addition, SAT Bulletin 7 has introduced safe harbors for internal
group restructurings and the purchase and sale of equity securities through a public securities market. SAT Bulletin 7 also brings challenges
to both foreign transferor and transferee (or other person who is obligated to pay for the transfer) of taxable assets.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On October 17, 2017, the SAT issued the Announcement of the State
Administration of Taxation on Issues Concerning the Withholding of Nonresident Enterprise Income Tax at Source, or SAT Bulletin 37, which
came into effect on December 1, 2017 and was later amended on June 15, 2018. The SAT Bulletin 37 further clarifies the practice and procedure
of the withholding of nonresident enterprise income tax.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Where a nonresident enterprise transfers taxable assets indirectly
by disposing of the equity interests of an overseas holding company, which is an Indirect Transfer, the nonresident enterprise as either
transferor or transferee, or the PRC entity that directly owns the taxable assets, may report such Indirect Transfer to the relevant
tax authority. Using a &#8220;substance over form&#8221; principle, the PRC tax authority may disregard the existence of the overseas
holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding or deferring PRC
tax. As a result, gains derived from such Indirect Transfer may be subject to PRC enterprise income tax, and the transferee or other
person who is obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at a rate of 10% for the transfer
of equity interests in a PRC resident enterprise. Both the transferor and the transferee may be subject to penalties under PRC tax laws
if the transferee fails to withhold the taxes and the transferor fails to pay the taxes.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We face uncertainties as to the reporting and other implications of
certain past and future transactions where PRC taxable assets are involved, such as offshore restructuring, sale of the shares in our
offshore subsidiaries and investments. Our company may be subject to filing obligations or taxed if our company is transferor in such
transactions, and may be subject to withholding obligations if our company is transferee in such transactions, under SAT Bulletin 7 and/or
SAT Bulletin 37. For transfer of shares in our company by investors who are non-PRC resident enterprises, our PRC subsidiaries may be
requested to assist in the filing under SAT Bulletin 7 and/or SAT Bulletin 37. As a result, we may be required to expend valuable resources
to comply with SAT Bulletin 7 and/or SAT Bulletin 37 or to request the relevant transferors from whom we purchase taxable assets to comply
with these circulars, or to establish that our company should not be taxed under these circulars, which may have a material adverse effect
on our financial condition and results of operations.</p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our auditor, like other independent registered public
accounting firms operating in China, was historically not permitted to be subject to inspection by the PCAOB, and consequently, investors
were deprived of the benefits of such inspection in the past. Trading in our securities may be prohibited under the HFCAA if the PCAOB
determines that it is unable to inspect or investigate completely our auditor, and as a result, U.S. national securities exchanges, such
as the NYSE, may determine to delist our securities.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our independent registered public accounting firm that issues the
audit report included 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 required by the laws of the United States to undergo regular inspections by the PCAOB to assess its compliance with
the laws of the United States and professional standards. Our auditor is located in China, a jurisdiction where the PCAOB was historically
unable to conduct inspections and investigations completely, without the approval of the Chinese authorities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The inability of the PCAOB to conduct inspections of auditors in China
in the past has made it more difficult to evaluate the effectiveness of our independent registered public accounting firm&#8217;s audit
procedures or quality control procedures as compared to auditors outside of China that are subject to the PCAOB inspections. As a result,
investors were deprived of the benefits of such PCAOB inspections.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In recent years, U.S. regulatory authorities have continued to express
their concerns about challenges in their oversight of financial statement audits of U.S.-listed companies with significant operations
in China. More recently, as part of a continued regulatory focus in the United States on access to audit and other information currently
protected by national law, in particular China&#8217;s, the United States enacted the Holding Foreign Companies Accountable Act, or the
HFCAA, in December 2020. Trading in our securities on U.S. markets, including the NYSE, may be prohibited under the HFCAA if the PCAOB
determines that it is unable to inspect or investigate completely our auditor for two consecutive years. On December 16, 2021, the PCAOB
issued the HFCAA Determination Report to notify the SEC of its determinations that the PCAOB was unable to inspect or investigate completely
registered public accounting firms headquartered in mainland China and Hong Kong, or the 2021 Determinations, including our auditor.
On May 26, 2022, we were conclusively identified by the SEC under the HFCAA as having filed audit reports issued by a registered public
accounting firm that cannot be inspected or investigated completely by the PCAOB in connection with the filing of our 2021 Form 20-F.
The inability of the PCAOB to conduct inspections in the past also deprived our investors of the benefits of such inspections. On December
15, 2022, the PCAOB announced that it was able to conduct inspections and investigations completely of PCAOB-registered public accounting
firms headquartered in mainland China and Hong Kong in 2022. The PCAOB vacated its previous 2021 Determinations accordingly. As a result,
we do not expect to be identified as a Commission-Identified Issuer under the HFCAA for the fiscal year ended December 31, 2022 after
we file our annual report on Form 20-F for such fiscal year.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">However, whether the PCAOB will continue to conduct inspections and
investigations completely to its satisfaction of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong
is subject to uncertainty and depends on a number of factors out of our, and our auditor&#8217;s, control, including positions taken
by authorities of the PRC. The PCAOB is expected to continue to demand complete access to inspections and investigations against accounting
firms headquartered in mainland China and Hong Kong in the future and states that it has already made plans to resume regular inspections
in early 2023 and beyond. The PCAOB is required under the HFCAA to make its determination on an annual basis with regards to its ability
to inspect and investigate completely accounting firms based in the mainland China and Hong Kong. The possibility of being a Commission-Identified
Issuer and risk of delisting could continue to adversely affect the trading price of our securities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">If the PCAOB determines in the future that it no longer has full access
to inspect and investigate accounting firms headquartered in mainland China and Hong Kong and we continue to use such accounting firm
to conduct audit work, we would be identified as a Commission-Identified Issuer under the HFCAA following the filing of the annual report
for the relevant fiscal year. If we were so identified for two consecutive years, trading in our securities on U.S. markets would be
prohibited. This would substantially impair your ability to sell or purchase the ADSs when you wish to do so. Furthermore, such trading
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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Proceedings instituted by the SEC against Chinese affiliates
of the &#8220;big four&#8221; accounting firms, including our independent registered public accounting firm, could result in financial
statements being determined to not be in compliance with the requirements of the Exchange Act.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Starting in 2011, the Chinese affiliates of the &#8220;big four&#8221;
accounting firms, including our independent registered public accounting firm, were affected by a conflict between U.S. and Chinese law.
Specifically, for certain U.S.-listed companies operating and audited in mainland China, the SEC and the PCAOB sought to obtain from
the Chinese firms access to their audit work papers and related documents. The firms were, however, advised and directed that under Chinese
law, they could not respond directly to the U.S. regulators on those requests, and that requests by foreign regulators for access to
such papers in China had to be channeled through the CSRC.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In late 2012, this impasse led the SEC to commence administrative
proceedings under Rule 102E of its Rules of Practice and also under the Sarbanes-Oxley Act of 2002 against the Chinese accounting firms,
including our independent registered public accounting firm. A first instance trial of the proceedings in July 2013 in the SEC&#8217;s
internal administrative court resulted in an adverse judgment against the firms. The administrative law judge proposed penalties on the
firms, including a temporary suspension of their right to practice before the SEC, although that proposed penalty did not take effect
pending review by the Commissioners of the SEC. On February 6, 2015, before a review by the Commissioner had taken place, the firms reached
a settlement with the SEC. Under the settlement, the SEC accepts that future requests by the SEC for the production of documents will
normally be made to the CSRC. The firms will receive matching Section 106 requests, and are required to abide by a detailed set of procedures
with respect to such requests, which in substance require them to facilitate production via the CSRC. If they fail to meet specified
criteria, the SEC retains authority to impose a variety of additional remedial measures on the firms depending on the nature of the failure.
Remedies for any future noncompliance could include, as appropriate, an automatic six-month bar on a single firm&#8217;s performance
of certain audit work, commencement of a new proceeding against a firm, or, in extreme cases, the resumption of the current proceeding
against all four firms. If additional remedial measures are imposed on the Chinese affiliates of the &#8220;big four&#8221; accounting
firms, including our independent registered public accounting firm, in administrative proceedings brought by the SEC alleging the firms&#8217;
failure to meet specific criteria set by the SEC with respect to requests for the production of documents, we could be unable to timely
file future financial statements in compliance with the requirements of the Exchange Act.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In the event that the SEC restarts the administrative proceedings,
depending upon the final outcome, listed companies in the United States with major PRC operations may find it difficult or impossible
to retain auditors in respect of their operations in the PRC, which could result in financial statements being determined to not be in
compliance with the requirements of the Exchange Act, including possible delisting. Moreover, any negative news about any such future
proceedings against these audit firms may cause investor uncertainty regarding China-based, U.S.-listed companies, and the market price
of our common stock may be adversely affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">If our independent registered public accounting firm was denied, even
temporarily, the ability to practice before the SEC and we were unable to timely find another registered public accounting firm to audit
and issue an opinion on our financial statements, our financial statements could be determined not to be in compliance with the requirements
of the Exchange Act. Such a determination could ultimately lead to the delisting of our ADSs from the New York Stock Exchange or deregistration
from the SEC, or both, which would substantially reduce or effectively terminate the trading of our ADSs in the United States.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Regulation and censorship of information disseminated
over the internet in China may adversely affect our business and reputation and subject us to liability for information displayed on
our website.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The PRC government has adopted regulations governing internet access
and the distribution of news and other 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 is reactionary, obscene, superstitious, fraudulent or defamatory. Failure to comply with these
requirements may result in the revocation of licenses to provide internet content and other licenses, and the closure of the concerned
websites. The website operator may also be held liable for such censored information displayed on or linked to the websites. If our website
is found to be in violation of any such requirements, we may be penalized by relevant authorities, and our operations or reputation could
be adversely affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>You may have difficulty enforcing judgments in Hong Kong.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our PRC subsidiaries are wholly owned by our subsidiary incorporated
in Hong Kong. You may have difficulties in enforcing court judgments obtained in United States courts against our Hong Kong subsidiary,
including judgments relating to the federal securities laws of the United States. There is also doubt as to whether courts in Hong Kong
will enforce judgments of United States courts based only upon the civil liability provisions of the federal securities laws of the United
States, or the securities laws of any state of the United States.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Risks Related to Our Business</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have a limited operating history and our business practice
continues to evolve, which makes it difficult to evaluate our future prospects.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We commenced our loan service business in 2006 and adopted our previous
business model in 2014, and introduced our collaboration model in December 2018. We have a limited operating history in the home equity
loan market, especially in some aspects of our business operations, such as loan facilitation service and collateral management service,
credit analysis and the development of cooperative relationships with funding partners and other business partners. Our ability to continuously
attract borrowers and funding sources is critical to our business. We may from time to time introduce new loan services and products,
make adjustments to our existing loan facilitation services and products and our risk management system, or make adjustments to our business
operations in general.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The regulatory framework and market condition for China&#8217;s home
equity loan market is evolving and may remain uncertain for the foreseeable future. If our business practices or the business practices
of our trust company partners are challenged under any PRC laws or regulations, our business, financial condition, results of operations
and prospects would be materially and adversely affected. From time to time we may refine existing commercial arrangements in our business
operations to comply with changing regulatory focuses. For example, FOTIC, one of our primary trust company partners, amended its loan
agreements in 2017 with certain borrowers to add an option for FOTIC to demand payment of outstanding loan principal and interests before
the maturity of the underlying trust funding. Starting in March 2018, we have been working with FOTIC to implement a performance-based
service fee structure (the &#8220;2018 FOTIC Service Fee Structure&#8221;). For details, please refer to &#8220;Item 4. Information on
the Company&#8212;B. Business Overview&#8212;Our Products&#8212;Credit Strengthening Services.&#8221; We have also been exploring new
business model to broaden our prospective borrower bases. Since December 2018, we have sought to collaborate with limited partnerships
and certain well-established corporations, where limited partners in such limited partnerships and the established corporations work
as our sales partners to introduce prospective borrowers to us. For details, please refer to &#8220;Item 4. Information on the Company&#8212;B.
Business Overview&#8212;Our Products&#8212;Collaboration Model.&#8221; In order to expand our financing channels, we launched a new funding
model in 2021 in collaboration with commercial banks, under which our commercial bank partners are responsible for reviewing and approving
the loan while we charge a service fee for our loan facilitation services. For details, please refer to &#8220;Item 4. Information on
the Company&#8212;B. Business Overview&#8212;Our Products&#8212;Commercial Bank Partnership.&#8221; Unfavorable reception of the new
business arrangements and new collaboration and funding model by potential borrowers could have a material adverse impact on our business,
results of operations, financial condition and cash flows. We may face the risk of increased borrower complaints, potential supervision,
examinations or enforcement actions by regulatory agencies and/or penalties for violation of financial regulations and other applicable
laws and regulations. We may not be able to successfully address the risks and difficulties associated with the new business arrangement
and new funding model, which could materially harm our business and operating results. The modifications to our business arrangements
and business model may also increase the complexity of our business and may present new and significant challenges, as well as strains
on our management, personnel, operations, systems, technical performance and financial resources. As a result, past performance of our
practice does not necessarily indicate our future prospects and performance. Such past performance may or may not be sustained in the
future.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">You should consider our business and prospects in light of the risks
and challenges we encounter or may encounter given the rapidly evolving market in which we operate and our limited operating history
in this particular market. These risks and challenges include, among other things, our ability to:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>offer customized and competitive loan services and products&#894;</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>increase the utilization of our loan services by existing borrowers
                                            as well as new borrowers&#894;</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>maintain low delinquency ratio of loans originated by us&#894;</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>achieve an effective and efficient collection and foreclosure
                                            process to assist our trust company partners to recover delinquent loans in the event of
                                            loan default&#894;</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>develop sufficient, diversified, cost-efficient and reputable
                                            funding sources&#894;</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>broaden our prospective borrower base&#894;</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>navigate through a complex and evolving regulatory environment&#894;</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>improve our operational efficiency&#894;</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>promote standardized and disciplined operational procedures
                                            in local offices&#894;</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>attract, retain and motivate talented employees to support our
                                            business growth&#894;</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>maintain and enhance relationships with our business partners&#894;</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>enhance our technology infrastructure to support the growth
                                            of our business and maintain the security of our system and the confidentiality of the information
                                            provided and utilized across our system&#894;</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>navigate economic condition and fluctuation&#894; and</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">&#9679;</td><td>defend ourselves against legal and regulatory actions.</td></tr></table><div>

</div><p style="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our credit strengthening services to the trust plans as
the subordinated unit holder might be subject to challenges by relevant regulatory authorities, and we may potentially be required to
obtain licenses.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Guiding Opinion on Regulating the Asset Management Business of
Financial Institutions (the &#8220;Guiding Opinion&#8221;) was issued by PBOC, together with China Banking and Insurance Regulatory Commission
(&#8220;CBIRC&#8221;), China Securities Regulatory Commission (&#8220;CSRC&#8221;) and State Administration of Foreign Exchange on April
27, 2018. The Guiding Opinion prohibits direct or indirect guarantee for the principal and expected investment return of the senior unit
holders of structural asset management products. The Guiding Opinion provides a grace period by the end of 2020. During the grace period,
existing products not in compliance with the Guiding Opinion shall be gradually phased out. After the grace period, financial institutions
shall not issue or renew any asset management products not in compliance with the Guiding Opinion.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our credit strengthening arrangements may be deemed as indirectly
guaranteeing senior unit holders&#8217; principal and expected investment return on the investments. As such, we may be required to further
modify such arrangements with the trust plans, which could materially and adversely affect our business. As of the date of this annual
report, we have not received any notice or been made aware of any issues or concerns raised by regulatory authorities on our credit strengthening
arrangements. We cannot guarantee you, however, that the regulatory authorities will hold the opinion that our credit strengthening arrangements
are in compliance with the relevant regulations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our trust company partners operate in a strictly regulated
industry. If the practice of our trust company partners, including the cooperation arrangements with us, is challenged under any PRC
laws and regulations, our business, financial condition and results of operations would be materially and adversely affected.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We provide home equity loan service to borrowers primarily through
collaboration with our trust company partners. Our trust company partners operate in a highly regulated industry and, as a result, are
required to comply with a wide array of laws and regulations that are continually evolving. If our collaboration arrangement is deemed
to violate any of these laws and regulations, we may be required to make significant changes to our business arrangements. These changes
may have a material adverse impact on our business, results of operations and financial condition and may not be implemented successfully.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For example, according to the Measures for the Administration of Trust
Companies&#8217; Trust Plans of Assembled Funds issued by the CBRC, trust companies may not provide loans in excess of 30% of the paid-in
balance of all the trust plans under its management. It is our trust company partners&#8217; responsibility to comply with these regulations
and we have no specific knowledge as to whether our trust company partners are in compliance. We cannot assure you that our trust company
partners have been in compliance at all times. We cannot assure you that relevant regulatory authorities will not impose additional restrictions
on our trust company partners&#8217; businesses. This regulation may limit our access to funding from our trust company partners in the
future, which may have a material adverse impact on our source of funding and results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">While we believe we currently are in compliance with existing PRC
regulations, in all material aspects, we cannot assure you that the PRC government authorities would agree with our interpretation of
the relevant regulations. It is also possible that new laws and regulations may be adopted which, along with any possible changes needed
to fully comply with any existing or newly released regulations, could require us to further modify our business or operations. The cost
to comply with such laws or regulations would increase our operating expenses, and modifications of our business may have a material
and adverse impact on our business, financial condition and results of operations. If any of our trust company partners are deemed to
violate any laws, regulations and rules, they may face, among other things, regulatory warning, correction order, condemnation, fines,
suspension of business license and criminal liability, which may have a material adverse impact on our funding source and results of
operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our business may be adversely affected if we are unable
to secure funding on terms acceptable to us or our borrowers, or at all.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We fund most of the loans we originate through our trust company partners.
Loans funded by our trust company partners are disbursed to borrowers directly through trust plans. 100.0%, 99.8% and 82.7% of our home
equity loan origination volume was originated under trust lending model in 2020, 2021 and 2022, respectively.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The availability of funding from our trust company partners depends
on many factors, such as the availability of investors on their platforms, general economic conditions, change of regulatory requirements,
actual and expected delinquency ratio compared to alternative opportunities, some of which are out of our control. Our trust company
partners may seek to acquire borrowers independently or through other third parties. In addition, our trust company partners may not
be able to adapt their compliance practices with the evolving financial institution licensing and other regulations in the PRC. As a
result, our ability to cooperate with our existing trust company partners may be subject to regulatory or other limitations. See &#8220;Item
3. Key Information&#8212;D. Risk Factors&#8212;Risks Related to Our Business&#8212;Some of our funding sources are highly regulated and
are subject to the changing regulatory environment. If any of the funding sources is deemed to violate the PRC laws and regulations,
we may need to secure new funding, failure of which may result in material and adverse impact on our business, financial condition, results
of operations and prospects.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As our business grows, we may need to obtain new funding sources or
require current funding partners to increase the amount of funding provided. If there is a sudden or unexpected shortage of funds from
our trust company partners or if we fail to maintain or develop relationships with our existing trust company partners or new funding
partners, we may not be able to maintain necessary levels of funding without agreeing to less favorable terms, or at all. We may not
be able to arrange additional, new or alternative methods of funding on favorable terms, or at all, or ensure that our cooperation with
new funding partners will meet our expectations and the expectations of borrowers.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Additionally, if there is an unexpected scale of decrease in subordinated
units due to a higher NPL ratio, we may not be able to arrange additional capital to increase our subordinated units contribution to
satisfy the contractual structural leverage ratio as required by the subordinated units subscription agreement. If we are unable to secure
sufficient funding on terms acceptable to us and our borrowers, or at all, we may not be able to provide attractive products and services
to our borrowers, and our business, financial condition and results of operations may be materially and adversely affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">We face risks related to natural disasters, health epidemics
and other outbreaks of contagious diseases.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our business could be adversely affected by natural disasters or outbreaks
of epidemics. These natural disasters, outbreaks of contagious diseases, and other adverse public health developments in China or any
other market in which we operate and conduct business could severely disrupt our business operations by damaging our network infrastructure
or information technology system or affecting the productivity of our workforce. The outbreak of any severe epidemic disease, such as
avian flu, H1N1 flu, SARS or coronavirus, may disrupt our operations, which could negatively affect our financial condition and business
prospects.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our headquarters are located in Guangzhou, where most of our directors
and management and a large majority of our employees currently reside. Consequently, we are highly susceptible to factors adversely affecting
Guangzhou. If any of the abovementioned natural disasters, health epidemics or other outbreaks were to occur in Guangzhou, our operation
may experience material disruptions, such as temporary closure of our offices and suspension of services, which may materially and adversely
affect our business, financial condition and results of operations. The outbreak of the COVID-19 pandemic and subsequent outbreaks driven
by new variants of COVID-19 have brought uncertainties and interruptions to China&#8217;s macroeconomics and the global economy and may have
adverse effects on our operations. After the initial outbreak of COVID-19, from time to time, some instances of COVID-19 or its variants
infections have emerged, such as the infections caused by the Omicron variants emerged in late 2021 and spread across the globe including
in China in early 2022. The Chinese government as well as many other countries in the world have taken various measures to constrain
the outbreak. The COVID-19 pandemic has caused, and may continue to cause, companies in China, including us, to implement temporary adjustment
of work schemes allowing employees to work from home and other measures that may impact our operation. We prioritize the health and safety
of our employees, and have taken various preventative and quarantine measures across the Company soon after the outbreak. Results of
operations for MSEs, whose owners are our primary customer group, were and may continue to be materially and adversely impacted, which
will in turn have a material adverse effect on our financial performance and results of operations. As a result of the COVID-19 outbreak
and its continued influence, our business involving on-site and offline activities were and may continue to be materially and adversely
impacted, including and not limited to inspection of real properties&#894; visits to borrowers in both the risk assessment and the collection
and foreclosure process&#894; and developing of prospective borrowers.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The COVID-19 outbreak had and may also continue to have a material
adverse effect on China&#8217;s real estate market, which may increase the risks of the loans we facilitate. While various measures that
the Chinese government implemented to constrain the COVID-19 outbreak have been relaxed since the beginning of 2023, many aspects of
daily business operations in China gradually returned to a normal routine. However, the situation in China and other countries and regions
is still evolving, bringing with it unprecedented levels of macroeconomic disruption and uncertainties across the globe. The extent to
which COVID-19 and its variants impact our results will depend on future developments, which are highly uncertain and cannot be predicted,
including the possibility of a resurgence of the COVID-19 outbreak in China, the duration and severity of the pandemic, the actions taken
to contain the virus or treat its impact, the development and efficiency of vaccines and other actions taken by governments, companies
and individuals in response to the virus and resulting economic disruption. We will continue to closely monitor the impacts of COVID-19
pandemic on us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our trust company partners may need to lower the structural
leverage ratio of the trust plans which could materially and adversely affect our business.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Guiding Opinion sets a limit on the contractual structural leverage
ratio which is calculated as the total amount of senior units divided by subordinated units, and intermediate units shall be included
as senior units for the purpose of this calculation. For a fixed-income product, the structural leverage ratio shall not exceed 3:1.
The contractual structural leverage ratio of the trust plans or products set up by our trust company partners is determined pursuant
to our collaboration agreements with them, which set the upper limit to such ratio at a range of 3:1 to 9:1. As of the date of this annual
report, the actual structural leverage ratio of our trust plans is in compliance with the Guiding Opinion. For details, please refer
to &#8220;Item 4. Information on the Company&#8212;B. Business Overview&#8212;Our Products&#8212;Terms of the Trust Plans&#8221; and
&#8220;Item 4. Information on the Company&#8212;B. Business Overview&#8212;Our Products&#8212;Trust Lending&#8212;Funding Partners.&#8221;
We cannot assure you, however, that the actual structural leverage ratio of our trust plans are always in compliance and in the future,
we may need to contribute additional funding to maintain a lower structural leverage ratio and our overall cost of funding may increase,
which could materially and adversely affect our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our concentration of funding provided by our trust company
partners and our concentration of borrowers introduced by one sales partner may have a material adverse effect on our financial condition,
liquidity and results of operations, if we lose any of our trust company partners or such sales partner either as a result of its decision
to acquire services from our competitors or otherwise.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">100.0%, 99.8% and 82.7% of our total home equity loan origination
volume was originated under trust lending model in 2020, 2021 and 2022, respectively. Among the loans originated through our trust lending
model, 69.3%, 62.1% and 62.3%, were funded through FOTIC trust plans in 2020, 2021 and 2022, respectively. We generally acquire borrowers
through the collaboration model where we collaborate with sales partners who introduce borrowers and receive incentives. See &#8220;Item
4. Information on the Company&#8212;B. Business Overview&#8212;Our Products&#8212;Collaboration Model.&#8221; In 2022, we started to
collaborate with a sales partner and the balance of outstanding loan principal of the loans issued to borrowers introducted by such sales
partner accounted for 19.4% of our total balance of outstanding loan principal as of December 31, 2022. Although we have long-standing
relationship with our trust company partners and such sales partner, there is no guarantee as to the continuation of the relationships
between our trust company partners, such sales partner and us. We endeavor to diversify our funding source and borrower acquisition channel,
but there is no assurance that we will be successful. The loss of any of our trust company partners, in particular FOTIC, or the afore-mentioned
sales partner, whether as a result of its decision to acquire services from our competitors, or otherwise, would have a material adverse
effect on our financial condition, liquidity and results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our collaboration model with our sales partners might
be subject to challenges by relevant regulatory authorities.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Under the collaboration model, sales partners contribute an amount
equal to 10% to 25% of the loans issued to the borrowers introduced by them (such contribution, the &#8220;Credit Risk Mitigation Position,&#8221;
or &#8220;CRMP&#8221;) and will receive incentive fees upon a pre-agreed schedule and other conditions.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">According to the Judicial Interpretations to Issues Concerning Applications
of Laws for Trial of Criminal Cases on Illegal Fundraising, promulgated by the Supreme People&#8217;s Court, whoever meets the following
four conditions, may be deemed as &#8220;absorbing public savings illegally or in disguised form&#8221; as prescribed in Article 176
of the Criminal Law, except as otherwise provided for by the Criminal Law: (i) taking in funds without license of the relevant authority
or under the disguise of lawful business operations&#894; (ii) publicizing by means of internet, media, recommendation fairs, leaflets
or mobile phone text messages, or other means&#894; (iii) promising to repay the principal and interests or make payments in forms such
as currency, real objects or equities, within a certain time limit&#894; and (iv) absorbing funds from the general public, namely unspecified
people. According to Regulations on Preventing and Dealing with Illegal Fund-raising, illegal fundraising involves collecting funds from
non-specific targets with promised principal and interest or other investment returns, without lawful permission from the State Council&#8217;s
financial management departments or in violation of China&#8217;s financial management rules. The definition above stipulates the three
features of illegal fundraising, which are illegal, with pecuniary interest, and targeting unspecified audiences.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">It is unclear whether the CRMP we received would be deemed as absorbing
funds illegally under PRC laws and regulations. As of the date of this annual report, we have not been subject to any fines or penalties
under the aforementioned regulations with respect to our collaboration model with sales partners. If we are deemed to be absorbing public
savings illegally or in disguised form, we may be subject to fines up to the amount of fund absorbed and criminal penalties, which could
materially and adversely affect our business. We are in the process of refining the collaboration model with the sales partnerships under
which sales partners will be restricted to qualified persons only. In addition, we have not made any commitments of making repayments
within a certain time limit. We also require the sales partners to use their own funds as the source of the CRMP and prohibit collection
of public funds from unspecified people. While we believe we are in compliance with the abovementioned laws and regulations, in all material
aspects, we cannot assure you that the relevant authorities would agree with our interpretation of the relevant regulations. Our business
and results of operations will be materially and adversely affected if our collaboration model with sales partners are deemed as absorbing
public savings illegally or in disguised form.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">According to the Administrative Measures on Assembled Funds Trust
Schemes of Trust Companies, which was amended on February 2009, the trustor shall use legitimate funds of its own to subscribe to the
trust units, and shall not participate in the trust scheme by illegally pooling funds from any other person. In addition, according to
the Guiding Opinions on Regulating Asset Management Business of Financial Institutions, which were promulgated on April 2018, investors
may not use loans or funds from third parties raised by issuing bonds to invest in asset management products. As of the date of this
annual report, we have not been subject to any fines or penalties under the aforementioned regulations with respect to our collaboration
model with sales partners. If the fund we subscribe for the subordinated units of the trust plan is identified as originated from CRMP,
we may be subject to fines up to the amount of fund so identified and criminal and administrative penalties, which could materially and
adversely affect our business. Our PRC legal advisor, Merits &amp; Tree Law Offices, advises us that the CRMP from sales partners is
for the purpose of reducing our own risk exposure, not for the purpose of illegally and publicly absorbing other people&#8217;s funds&#894;
in addition, the CRMP does not belong to the loans or funds raised by issuing bonds as described in the abovementioned regulations. While
we believe we are in compliance with the abovementioned laws and regulations, in all material aspects, we cannot assure you that the
relevant authorities would agree with our interpretation of the relevant regulations. Our business and results of operations will be
materially and adversely affected if the funds we subscribe for the subordinated units of the trust plan is identified as originating
from CRMP.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In addition, under our collaboration model, the CRMP paid by the sales
partners either through direct contribution or through contribution to limited partnerships may be seen as investment in trust plans
which may be identified by PRC regulatory authorities as disguised loans granted by sales partners. According to the Regulation on Private
Lending and Maintaining the Economic and Financial Order, which was promulgated on April 2018, no entity or individual may set up an
agency that conducts or mainly conducts the granting of loans, or takes the granting of loans as the daily business activities, without
the approval of the competent authority in accordance with the law. If the CRMP paid by sales partners either directly or to limited
partnerships is identified by PRC regulatory authorities as disguised loans granted by sales partners, they may be subject to fines up
to the amount of fund so identified and criminal and administrative penalties. Our PRC legal advisor, Merits &amp; Tree Law Offices,
advises us that under the collaboration model, the main business of the sales partners we cooperate with are to introduce real estate
mortgage loan projects to third parties, rather than providing loans. Our sales partners do not engage in issuance of loans and have
not entered into any loan agreements with us. If the CRMP paid by sales partners either directly or to limited partnerships is identified
by PRC regulatory authorities as disguised loans granted by sales partners, our business and results of operations will be materially
and adversely affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Any lack of requisite approvals, licenses or permits applicable
to our business may have a material and adverse impact on our business, financial condition and results of operations.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our business is subject to governmental supervision and regulation
by the relevant PRC government authorities. Together, these government authorities promulgate and enforce regulations that cover many
aspects of the operation of the home equity loan and finance industries. For details, please refer to &#8220;Item 4. Information on the
Company&#8212;B. Business Overview&#8212;Regulation.&#8221; Our PRC legal advisor, Merits &amp; Tree Law Offices, advises us that our
businesses do not need special approvals or licenses, other than our small loan business and subject to &#8220;Item 3. Key Information&#8212;D.
Risk Factors&#8212;Risks Related to Our Business&#8212;Our credit strengthening services to the trust plans as the subordinated unit
holder might be subject to challenges by relevant regulatory authorities, and we may potentially be required to obtain licenses.&#8221;
We are further advised that these opinions are subject to uncertainties and the regulatory authorities may hold a different view.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of the date of this annual report, all of our small loan subsidiaries
have obtained such approvals or licenses.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Some of our funding sources are highly regulated and are
subject to the changing regulatory environment. If any of the finding sources is deemed to violate the PRC laws and regulations, we may
need to secure new funding failure of which may result in a material and adverse impact on our business, financial condition, results
of operations and prospects.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have multiple funding sources to support our business model, including
funding sources that are highly regulated. Although we may or may not be subject to any direct material fines or penalties from the relevant
regulatory authorities, if our funding sources are deemed to violate any relevant regulations in collaboration with us directly or indirectly,
our business, financial condition, results of operations and prospects would be materially and adversely affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We subscribe to the subordinated units and therefore have rights to
the residual earnings under such trust plans. We historically acquire certain funding for the subordinated units by transferring our
right to earnings with a repurchase arrangement to private equity funds. According to the regulations on private equity funds, private
equity funds shall no longer engage in loan business and starting from April 1, 2020, the Asset Management Association of China (AMAC)
will no longer accept new product filings which are not within the permitted investment scope of private equity funds. Private equity
funds filed before April 1, 2020 may continue to invest in loan business. Our private equity funding sources&#8217; filing of products
in collaboration with us were all accepted before April 1, 2020. Our PRC legal advisor, Merits &amp; Tree Law Offices, advises that the
instructions shall come into force as of the date of promulgation. In case of any discrepancy between the self-discipline rules and Q&amp;A
issued by the AMAC and the Instructions, the latter shall prevail. To ensure the smooth transition, according to the principle of &#8220;separating
the existing applications from new ones&#8221;, the AMAC shall no longer handle any new and in-process record-filing applications that
fail to meet the requirements of the Instructions from April 1, 2020. If a private investment fund which has completed record-filing
formalities before April 1, 2020 engages in activities which do not comply with the essence of &#8220;fund&#8221; in Article 2 of the
Instructions, such private investment fund shall not increase its scale of fundraising or its investment after September 1, 2020, and
shall be liquidated upon maturity, and shall not be renewed in principle. We are further advised that these opinions are subject to uncertainties
and the regulatory authorities may hold a different view. We cannot assure you that the registered channels can satisfy our financing
needs, or that such regulations will not impose material restrictions on our future business operations as we continue to grow our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">According to Measures for the Supervision and Administration of the
Wealth Management Business of Commercial Banks promulgated in September 2018 (the &#8220;Wealth Management Measures&#8221;), a commercial
bank is subject to certain investment threshold of nonstandardized debt assets. A transition period, starting from the effective date
until the end of 2020, will be set for the Wealth Management Measures. During the transition period, new wealth management products introduced
by commercial banks shall comply with the Wealth Management Measures. Commercial banks may continue to offer existing products for the
undue assets invested in by existing wealth management products, but shall strictly control them within the overall scale of existing
products and decrease them progressively in an orderly manner. Neither our trust company partners nor we have specific knowledge on whether
a commercial bank investing in the senior units is in compliance with the Wealth Management Measures. As of the date of this annual report,
we are not aware of noncompliance by commercial banks as senior unit holders. We cannot assure you, however, that commercial banks as
senior unit holders will continue to comply in the future. If commercial banks as senior unit holders violate the Wealth Management Measures,
such violation will have a material adverse effect on our trust company partners&#8217; funding sources and our business operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of the date of this annual report, we are not aware of any material
fines or other penalties under any PRC laws or regulations with respect to the aforesaid funding resources. If our practice, or the practice
of our funding partners in collaboration with us, is deemed to violate any laws, regulations and rules, we may face, among other things,
regulatory warning, correction order, condemnation, fines, suspension of business license and criminal liability. If such situations
occur, our business, financial condition, results of operations and prospects would be materially and adversely affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">We lack product and business diversification. Accordingly,
our future operating income and earnings are more susceptible to fluctuations than a more diversified company.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Currently, our primary business activities include facilitating home
equity loans and providing loan management services to borrowers and trust company partners and to a lesser extent, direct lending through
our small loan subsidiaries. If we are unable to maintain and grow the operating income from our current business or develop additional
revenue streams, our future operating income and earnings are not likely to grow and could decline. Our lack of product and business
diversification could inhibit the opportunities for growth of our business and results of operations.</p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">To maintain and increase the amount of loans we originate, we must
continue to engage our existing borrowers and attract new borrowers, either by ourselves or through sales partners under our collaboration
model, both of which may be affected by several factors, including interest rates of loans we originate, our brand recognition and reputation,
our loan services and products offered, our operating efficiency and ability in engaging prospective borrowers, the effectiveness of
our credit analysis system, our ability to secure sufficient and cost-efficient funding, service fees we charge to trust plans, our borrower
experience and the PRC regulatory environment. In addition, we have also entered into agreements with our sales partners to utilize the
offline network they operate to engage some of our prospective borrowers. If these sales partners could not effectively or efficiently
introduce borrowers as anticipated, or if we are unable to expand the scale of our sales partners, we may not be able to acquire or engage
new and existing borrowers efficiently. In addition, we may also impose more stringent control over borrower qualifications to ensure
the quality of the loans we facilitate, which may negatively affect the amount of loans we facilitate. If we are unable to attract borrowers
or if borrowers do not continue to use our services, we may be unable to increase our loan origination volume and corresponding income,
and our business and results of operations may be materially and adversely affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As a result of the COVID-19 pandemic, our normal work schedule and
results of operations were adversely impacted in 2022 and may continue to be adversely impacted in the future, which may negatively impact
our ability to maintain or increase the amount of loans we facilitate. For example, we may not be able to conduct borrower site visits,
and the processing time for each loan may be prolonged. For details, see &#8220;Item 3. Key Information&#8212;D. Risk Factors&#8212;Risks
Related to Our Business&#8212;We face risks related to natural disasters, health epidemics and other outbreaks of contagious diseases.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our concentration in loans secured by real properties
may increase our credit losses in times of deterioration in local or national property markets, which would negatively affect our financial
results.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The home equity loans we facilitate are secured by residential or
commercial properties in our market areas. A significant decrease of property values will cause an increase in LTV ratio, resulting in
borrowers having little or negative equity in their property, which may reduce new loan originations and provide incentive to borrowers
to strategically default on their loans. Risk of loan defaults and foreclosures are unavoidable in the home equity loan industry.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">If we are unable to achieve low delinquency ratio for
loans originated by us, our business and results of operations may be materially and adversely affected.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We may not be able to achieve low delinquency ratio for loans originated
by us, or such delinquency ratios may be significantly affected by economic downturns or general economic conditions beyond our control
and beyond the control of individual borrowers. The outstanding principal of home equity loans (including loans held for sale) originated
by us was RMB9,816 million, RMB10,705 million and RMB11,123 million (US$1,745 million) as of December 31, 2020, 2021 and 2022. The delinquency
ratio for loans originated by us increased from 23.70% as of December 31, 2020 to 26.22% as of December 31, 2021, and further increased
to 33.22% as of December 31, 2022. Our NPL ratio decreased from 12.89% to 11.93%, and increased to 16.95% as of the same respective dates.
The delinquency ratio in 2022 is higher than that in 2021, mainly because the fact that the borrowers&#8217; ability to service their
debts was negatively affected in 2022 due to the COVID-19 pandemic. The NPL ratio in 2022 is higher than that in 2021, mainly attributable
to the fact that the pandemic prevention and control measures taken in 2022 has negatively impacted the efficiency of bad debt collection
and legal proceedings against borrowers at default, and therefore has caused the Company&#8217;s NPL ratio to increase. In order to diversify
our financing channels to better serve the demands of MSE owners with credible funding sources, we started to collaborate with commercial
banks in 2021, under which model we provide guarantees against the potential defaults and such contractual guarantee arrangement is underwritten
by the guarantor company to which we provide back-to-back guarantee at request. For details, please refer to &#8220;Item 4. Information
on the Company&#8212;B. Business Overview&#8212;Our Products&#8212;Commercial Bank Partnership.&#8221; Accordingly, our results of operations,
financial position and liquidity could be materially and adversely affected if we cannot achieve low delinquency ratio for the loans
generated under such new funding model. Furthermore, our borrower base continues to expand with the growth of our business operations,
which may include loan applicants with lower creditworthiness. We may not be able to achieve low delinquency ratio for loans originated
by us in the future, or return to the low delinquency ratio or NPL ratio we achieved in the past.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our high leverage ratio may expose us to liquidity risk
and we may not have sufficient capital reserve to manage losses.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As part of the collaboration we have with our trust company partners,
we subscribe to subordinated units in trust plans through our subsidiaries and fund those units with (i) our own funds and (ii) funding
from transferring our right to earnings in subordinated units to third parties. We transfer our right to earnings in subordinated units
to third parties with a repurchase arrangement, which requires us to repurchase the right to earnings in subordinated units. For details
of our repurchase agreements with third parties under the trust lending model, please refer to &#8220;Item 4. Information on the Company&#8212;B.
Business Overview&#8212;Our Products&#8212;Funding Sources.&#8221; In 2020, 2021 and 2022, we transferred our right of earnings in subordinated
units to a certain private equity fund and to a certain third party. Our financing costs under such repurchase arrangement ranged from
10.5% to 13.8% per annum of the transfer prices in 2020, 2021 and 2022. We are required to consolidate all of the results under trust
plans on our consolidated financial statements, including those of the senior units. This consolidation is necessary as our trust lending
model creates exposure to variability of returns from the activities of the trust plans.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We historically operated a small direct lending business through our
small loan subsidiaries, financed with our own funds or funds we received from third parties by transferring our rights in the loans
together with a repurchase arrangement.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As a result of our funding model, we may be exposed to high leverage
ratio. Our leverage ratio was 3.3 times, 3.8 times and 3.7 times as of December 31, 2020, 2021 and 2022, respectively. Our high level
of borrowings and leverage ratio may adversely affect our liquidity and business operations, including but not limited to increasing
our vulnerability under adverse economic condition, potentially limiting our ability to raise more debt and increasing our exposure to
interest rate fluctuation. Our business and results of operations also depend on our ability to secure cost-effective financing. The
third parties to whom we transfer our right to earnings or small rights to earnings in loans principal, interest and financing service
fee receivables may not continue to provide funding at rates acceptable to us, and we may not find alternative financing at similar rates,
or at all.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">If we continue to have a high leverage ratio, our exposure to liquidity
risk may restrict our ability to make necessary capital expenditures or develop business opportunities in the future. For the credit
strengthening services we provide, we may also be required to provide additional funding when there is an NPL in the loan portfolio.
Due to this arrangement and our high leverage ratio, we may not have sufficient capital reserve to manage potential losses in the future,
which may adversely affect our results of operations and financial positions. In addition, although we are not currently subject to any
capital reserve requirement, we cannot assure you that the regulatory authority will not impose such requirements in the future, which
may have a material adverse impact on our results of operations and financial positions due to our high leverage ratio.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">If our or our trust company partners&#8217; or our commercial
bank partners&#8217; risk management system fails to perform effectively, such failure may materially and adversely impact our operating
results.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Credit assessment of the borrowers we facilitate is conducted by our
risk management system, and subject to final risk assessment by our trust company partners or commercial bank partners under different
funding models. Our risk management system uses credit analysis and data from prospective borrowers and multiple external sources and
might not be effective as we continue to increase the amount of transactions, expand the borrower base and broaden our borrower engagement
efforts through different channels in the future. If our system or our trust company partners&#8217; or commercial bank partners&#8217;
system is ineffective or if the credit analysis and data we or our trust company partners or our commercial bank partners obtained are
incorrect or outdated, the relevant risk management abilities could be negatively affected, resulting in incorrect recommendations or
denials of loan applications or mispriced loan products, or eventually loan default. If we are unable to effectively and accurately assess
the credit risks of borrowers or price loan products appropriately, we may be unable to offer quality services to our trust company partners,
commercial bank partners or borrowers. Our risk and credit assessment may not be able to provide more predictive assessments of future
borrower behavior or result in better evaluation of our borrower base when compared to our competitors. Pursuant to the terms of our
collaboration agreements with trust company partners and commercial bank partners, trust company partners or commercial bank partners
are independently responsible for credit assessment and approving the loans applications and we are not subject to any penalties for
inaccurate risk assessment or mispriced loan products. However, we ultimately bear credit risk on loans we facilitate as we have payment
obligations under our credit strengthening arrangements or the new funding model with commercial bank partners. For details, please refer
to &#8220;Item 4. Information on the Company&#8212;B. Business Overview&#8212;Our Products&#8212;Credit Strengthening Services.&#8221;
In addition, our performance-based service fee and return under the subordinated units may be reduced as a result of increased NPLs.
If our or our trust company partners&#8217; or commercial bank partners&#8217; risk management system fails to perform effectively, our
business and results of operations may be materially and adversely affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As a result of the COVID-19 pandemic, our normal work schedule were
adversely impacted and may continue to be adversely impacted in the future. Specifically, we may not be able to conduct site visits,
which is an important component of our credit assessment process. For details, see &#8220;Item 3. Key Information&#8212;D. Risk Factors&#8212;Risks
Related to Our Business&#8212;We face risks related to natural disasters, health epidemics and other outbreaks of contagious diseases.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our business depends on our ability to collect payment
on and service the transactions we facilitate.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We offer post-loan management services to our trust company partners.
We have implemented payment and collection policies and practices designed to optimize compliant repayment, while also providing superior
borrower experience. Our collection process is divided into distinct stages based on the days of delinquency, which dictate the level
of collection steps taken. For example, automatic reminders through text, voice and instant messages are sent to a delinquent borrower
as soon as the collections process commences. Our collection team will also make phone calls to borrowers following the first missed
payment and periodically thereafter. We may also resort to arbitration or litigation to recover delinquent loans or assign those loans
to a third party and collect proceeds upfront. Despite our servicing and collection efforts, we cannot assure you that we will be able
to collect payments on the transactions we facilitate as expected. As we are exposed to credit risks as the subordinated unit holder
and also as a result of credit strengthening services we provide, our failure to collect payment on the transactions will have a material
adverse effect on our business operations and financial positions. In addition, our collection team may not possess adequate resource
and manpower to collect payment on and service the loans we facilitated. If we fail to adequately collect amounts delinquent or due,
then our service fees charged to trust plans may be delayed or reduced and our results of operations will be adversely affected. As the
amount of transactions facilitated by us increases in the future, we may devote additional resources into our collection efforts. However,
there can be no assurance that we would be able to utilize such additional resources in a cost-efficient manner.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Moreover, Circular 141 provides that all types of institutions or
entrusted third-party institutions shall not collect loans through violence, intimidation, insult, slander, harassment, etc. Furthermore,
according to the Notice on Further Regulating the Personal Trust Loan Business of Trust Companies issued by Beijing Bureau of the China
Banking and Insurance Regulatory Commission in August 2020, trust companies within the Beijing jurisdiction shall clarify the list of
prohibited behaviors with the institutions they collaborate with and their staff, and must not collect loans through violence, intimidation,
insult, slander, harassment, etc. The Amendment XI to the Criminal Law of the People&#8217;s Republic of China, which was issued on December
2020 and became effective in March 2021, stipulates that whoever falls under any of the following circumstances when collecting any illegal
debts generated from offering loans with high interest shall, if the circumstances are serious, be sentenced to fixed-term imprisonment
of no more than three years, criminal detention or public surveillance and shall also, or shall only, be fined: (1) using violence or
coercive methods&#894; (2) restricting another person&#8217;s personal freedom of movement or trespass to another person&#8217;s dwelling&#894;
or (3) threatening, stalking, or harassing another person.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Although we aim to ensure our collection efforts comply with the relevant
laws and regulations in the PRC and we have established strict internal policies that our collections personnel shall not engage in aggressive
practices, we cannot assure you that such personnel will not engage in any misconduct as part of their collection efforts. Any such misconduct
by our collection personnel or the perception that our collection practices are considered to be aggressive and not compliant with the
relevant laws and regulations in the PRC may result in harm to our reputation and business, which could further reduce our ability to
collect payments from borrowers, lead to decrease in the willingness of prospective borrowers to apply for the home equity loans we facilitate,
or fines and penalties imposed by the relevant regulatory authorities, any of which may have a material adverse effect on our results
of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As a result of the COVID-19 pandemic, our collection efforts were
delayed and may continue to be delayed in the future, which may have a material adverse impact on our results of operations. For details,
see &#8220;Item 3. Key Information&#8212;D. Risk Factors&#8212;Risks Related to Our Business&#8212;We face risks related to natural disasters,
health epidemics and other outbreaks of contagious diseases.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">If our allowance for loan losses is not sufficient to
cover actual loan losses, our results of operations would be negatively affected.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our business is subject to fluctuations based on local economic conditions.
These fluctuations are neither predictable nor within our control and may have a material adverse impact on our operations and financial
condition. In determining the amount of the allowance for loan losses, we analyze our loss and delinquency experience by loan categories
and we consider the effect of existing economic conditions. In addition, we make various assumptions and judgments about the collectability
of loan portfolios, including the creditworthiness of borrowers and the value of real properties serving as collateral for the repayment
loans. If the actual results are different from our estimates, or our analysis is incorrect, our allowance for loan losses may not be
sufficient to cover losses inherent in a loan portfolio, which would require additions to allowance and would decrease our net income.
Our emphasis on loan growth and on increasing portfolio, as well as any future loan deterioration, will require us to increase our allowance
further in the future. Any increase in our allowance for loan losses or loan charge-offs as required by regulatory authorities may have
a material adverse effect on our results of operations and financial condition.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Increases in market interest rates could negatively affect
the amount of loans facilitated by us and cost of funds provided to borrowers.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Borrowers&#8217; costs of borrowing mainly consist of interest expenses.
An increase in prevailing interest rates could result in an increase in the interest rates of loans we facilitate, and borrowers may
be less likely to accept such adjusted terms. If borrowers decide not to use the products or services we offer because of such increase
in market interest rates, our ability to retain existing borrowers and engage prospective borrowers as well as our competitive position
may be severely impaired. If we are unable to effectively manage such market interest rate risk, our business, profitability, results
of operations and financial condition could be materially and adversely affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our overall funding costs may fluctuate with market interest rates
while the interest rates for existing loans are fixed during the terms of the loans. As a result, an increase in the market interest
rates may negatively impact the availability and cost of our funding, which may have a material adverse impact on our profitability and
results of operations.</p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">We are involved in legal proceedings in the ordinary course
of our business from time to time. If the outcomes of these proceedings are adverse to us, it could have a material adverse effect on
our business, results of operations and financial condition.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We are involved in various legal proceedings in the ordinary course
of business from time to time. In our opinion, based on the facts known at this time, the ultimate resolution of these ordinary course
legal proceedings will not have a material adverse effect on our financial position or results of operations as a whole. However, no
assurances can be given as to the outcome of any pending legal proceedings, which could have a material adverse effect on our business,
results of operations and financial condition. For debt collection purposes, we initiate legal proceedings against borrowers to recover
payments that are delinquent for 30 days if we cannot reach agreement with the default borrowers by then. As of December 31, 2022, we
had 5,076 collection legal proceedings pending before courts and arbitration tribunals with amounts in dispute of RMB2,827.1 million,
where our trust company partners either directly or with our help sued borrowers of such delinquent loans. We may not be able to obtain
or enforce favorable judgments or arbitration awards, or recover the amounts in dispute in full or at all. Furthermore, claims arising
out of actual or alleged violations of law could be asserted against us by individuals, governmental or other entities in civil, administrative
or criminal investigations and proceedings. These claims could be asserted under a variety of laws and regulations, including but not
limited to contract laws, online or private lending laws or regulations, consumer protection laws or regulations, intellectual property
laws, information security and privacy laws, and labor and employment laws. For further details, see the section headed &#8220;Item 8.
Financial Information&#8212;A. Consolidated Statements and Other Financial Information&#8212;Legal and Administrative Proceedings.&#8221;
These actions could expose us to adverse publicity and to monetary damages, fines and penalties, as well as suspension or revocation
of licenses or permits to conduct business. Even if we eventually prevail in these matters, we could incur significant legal fees or
suffer reputational harm, which could have a material adverse effect on our business and results of operations as well as our future
growth and prospects.</p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">The foreclosure action and enforcement process may be
time-consuming, difficult and uncertain for legal and practicable reasons, which could adversely affect our liquidity, business, financial
condition and results of operations.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The home equity loans we facilitate are secured by collateral, normally
residential or commercial real properties owned by borrowers. In the event that a borrower is in default and the payment is past due
for over 30 days or upon the incurrence of unusual situations (such as forfeiture of the collateral), we may need to help our trust company
partners initiate judicial or arbitration proceedings against the defaulting borrower and foreclose the real property collateral. Historically,
we were able to help our trust company partners enforce their rights to the collaterals through a power of attorney that was signed by
the borrower and notarized by a notary public before loan disbursement. This allowed the trust company partners to quickly dispose of
the collaterals without having to involve the borrower. Due to recent regulatory development, we have ceased this practice. As a result,
we may need to resort to judicial or arbitration proceedings more frequently to help our trust company partners foreclose on the collateral.
The judicial or arbitration proceedings may be time-consuming and may not ultimately be possible. In addition, the enforcement process
may be difficult in practice. Furthermore, the defaulting borrowers may have concealed, transferred or disposed of their assets beforehand,
which make it difficult or impossible for us to apply for attachment. Moreover, if the attached assets are found to be subject to prior
mortgage or other third parties&#8217; rights during proceedings, our interests will be ranked lower than these prior parties, thereby
limiting or even preventing us from full coverage by the collateral. As a result, in case of defaults we may not be able to recover the
full amount of loans and outstanding interests or at all, and in turn our liquidity, business, financial condition and results of operations
could be adversely affected.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In 2019, courts in certain regions of PRC issued regulations on banning
the filings and executions in &#8220;trap loans&#8221; cases. While we believe our business does not fall into &#8220;trap loans&#8221;
and such regulations are not be applicable to us, the interpretations of such regulations may vary among different courts. We cannot
guarantee that the regulatory authority will agree with our interpretation. In 2019, certain court proceedings relating to the loans
we facilitated were delayed or suspended due to such regulations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As a result of the COVID-19 pandemic, court proceeding, foreclosure
action and enforcement process were delayed and may continue to be delayed in the future, which may have a material adverse impact on
our results of operations. For details, see &#8220;Item 3. Key Information&#8212;D. Risk Factors&#8212;Risks Related to Our Business&#8212;We
face risks related to natural disasters, health epidemics and other outbreaks of contagious diseases.&#8221;</p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Credit and other information that we or our trust company
partners or our commercial bank partners receive from prospective borrowers and third parties about a borrower and the collateral may
not accurately reflect the borrower&#8217;s creditworthiness or the collateral&#8217;s fair/recoverable value, which may compromise the
accuracy of our and our trust company partners&#8217; or our commercial bank partners&#8217; credit assessment.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For the purposes of credit risk assessment, we and our trust company
partners or our commercial bank partners obtain from prospective borrowers and third parties certain information of the prospective borrowers
or the prospective real property collateral, which may not be complete, accurate or reliable. A credit report on a borrower or prospective
collateral generated by our third-party sources or our trust company partners&#8217; or our commercial bank partners&#8217; own credit
assessment system may not reflect that particular borrower&#8217;s actual creditworthiness or the prospective collateral&#8217;s actual
market value because it may be based on outdated, incomplete or inaccurate information. Additionally, once we and our trust company partners
or our commercial bank partners have obtained a borrower&#8217;s information, the borrower may subsequently (i) become delinquent in
the payment of an outstanding obligation&#894; (ii) default on a preexisting debt obligation&#894; (iii) take on additional debt&#894;
or (iv) sustain other adverse financial events, making the information we have previously obtained inaccurate. Such inaccurate or incomplete
borrower information could compromise the accuracy of our or our trust company partners&#8217; or our commercial bank partners&#8217;
credit assessment and adversely affect the effectiveness of our risk management, which could in turn harm our reputation, lower our service
fees charged to trust plans, and as a result, our business and results of operations could be materially and adversely affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We currently determine the preliminary market value of the prospective
real property collateral using external databases at the time borrowers submit their loan applications. We also conduct site visits to
cross-check conditions and verify information of the prospective real property collateral. In addition, we compare the preliminary third-party
appraiser report with quotes on an anonymous basis from local real estate agencies in the same neighborhood. However, there is no assurance
that we have complete and accurate information relating to the prospective real property collateral. In addition, our trust company partners
or our commercial bank partners perform their own independent credit assessment and make the decision on loan grants based on their credit
assessment results. If we or our trust company partners or our commercial bank partners overestimate market value of the real property
collateral, the loans we facilitate may not be fully secured, which could affect the accuracy of our or our trust company partners&#8217;
or our commercial bank partners&#8217; credit assessment and the effectiveness of our or our trust company partners&#8217; or our commercial
bank partners&#8217; risk management. Therefore, our reputation, and as a result, our business and results of operations could be materially
and adversely affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our business operations may be negatively impacted if
borrowers use loan proceeds to engage in activities prohibited or not encouraged by regulators.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Borrowers supply a variety of information that is included in the
standardized loan applications prepared by us, including intended use of proceeds. We verify such information by conducting site visits
and informal interviews. As our business continues to grow and our borrower base continues to expand, we might not have enough resources
to continuously verify or monitor the information provided by the borrowers, such as intended use of loan proceeds. The loan agreements
our borrowers enter into limit the use of proceeds to business operation purposes, not purchase of real property or consumption. The
trust companies have the right to require early payment if proceeds were not used for business operation purposes. However, we cannot
guarantee and may not effectively monitor that the loan is strictly used for business operating purposes. The borrower may use loan proceeds
for other purposes with increased risk than as originally provided or use loan proceeds to engage in activities prohibited or discouraged
by regulators. Such activities may harm our reputation and negatively impact our business operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Fraudulent activity could negatively impact our operating
results, brand and reputation and cause the use of our loan facilitation services to decrease.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We are subject to the risk of fraudulent activity associated with
borrowers, our trust company partners and third parties handling borrower information. Our resources, technologies and fraud detection
tools may be insufficient to accurately detect and prevent fraud. Significant increases in fraudulent activity could negatively impact
our brand and reputation, reduce the volume of loan transactions facilitated through us and lead us to take additional steps to reduce
fraud risk, which could increase our costs. High-profile fraudulent activity could even lead to regulatory intervention, and may divert
our management&#8217;s attention and cause us to incur additional expenses and costs. Although we have not experienced any material business
or reputational harm as a result of fraudulent activities in the past, we cannot rule out the possibility that any of the foregoing may
occur, causing harm to our business or reputation in the future. If any of the foregoing were to occur, our results of operations and
financial condition could be materially and adversely affected.</p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">We are subject to credit cycle and the risk of deterioration
of credit profiles of borrowers.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our business is subject to the credit cycle associated with the volatility
of the general economy. If economic conditions deteriorate, we may face increased risk of default or delinquency of borrowers, which
will result in lower returns or losses. In the event that the creditworthiness of borrowers deteriorates or we cannot track the deterioration
of their creditworthiness, the criteria we use for the analysis of borrower credit profiles may be rendered inaccurate, and our or our
trust company partners&#8217; risk management system may be subsequently rendered ineffective. This in turn may lead to higher delinquency
ratio and adverse impacts on our reputation, business, results of operations and financial positions.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our current business model has a relatively large exposure
to second lien mortgage.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In 2021 and 2022, loans secured by second lien interest accounted
for 60.5% and 59.8% of our loan origination volume of home equity loans, respectively. For loans secured by second lien interests, our
rights over the collateral will be subordinated to other secured creditors with higher priority. If the borrowers default, we may not
be able to collect the full amount of our security interests in the collateral due to lien subordination. There is no assurance that
we will be able to realize the value of the collateral as we anticipated in a timely manner, or at all. As a result, our business, financial
condition, results of operations and prospects may be adversely affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">We primarily rely on our trust company partners and our
commercial bank partners to fund loans to borrowers, which may constitute provision of intermediary service, and our agreements with
these partners and borrowers may be deemed as intermediation contracts under the Civil Code of the People&#8217;s Republic of China (the
&#8220;Civil Code&#8221;).</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Under the Civil Code, if an intermediary intentionally conceals any
material fact or provides false information in connection with the conclusion of the proposed contract, which results in harm to the
client&#8217;s interests, the intermediary may not claim for service fees and shall be liable for the damages caused. Therefore, if we
intentionally conceal material information or provide false information to our trust company partners and our commercial bank partners
and are found at fault, or if we fail to identify false information received from borrowers or others and in turn provide such information
to our trust company partners and our commercial bank partners, we could be held liable for damages caused to our trust company partners
and our commercial bank partners as an intermediary pursuant to the Civil Code. On the other hand, we do not assume any liability solely
on the basis of failure to correctly assign a credit limit or pricing to a particular borrower in the process of facilitating a loan
transaction, as long as we do not intentionally conceal any material fact intentionally or provide false information, and are not found
to be at fault otherwise. However, due to the lack of detailed regulations and guidance in the area of home equity loans and the possibility
that the PRC government authority may promulgate new laws and regulations regulating home equity loans in the future, there are substantial
uncertainties regarding the interpretation and application of current or future PRC laws and regulations for the home equity loan industry,
and there can be no assurance that the PRC government authority will ultimately take a view that is consistent with ours.</p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">The personal data and other confidential information of
borrowers and our partners which we collect or are provided access to may subject us to liabilities imposed by relevant governmental
regulations or expose us to risks of cyberattacks, computer viruses, physical or electronic break-ins or similar disruptions.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We receive, transmit and store a large volume of personally identifiable
information and other confidential data from borrowers and our partners. There are numerous laws regarding privacy and the storing, sharing,
use, disclosure and protection of personally identifiable information and user data. Specifically, personally identifiable and other
confidential information is increasingly subject to legislation and regulations in numerous domestic and international jurisdictions,
the intent of which is to protect the privacy of personal information that is collected, processed and transmitted in or from the governing
jurisdiction. On November 28, 2019, the Secretary Bureau of the Cyberspace Administration of China, the General Office of the Ministry
of Industry and Information Technology, the General Office of the Ministry of Public Security and the General Office of the State Administration
for Market Regulation promulgated the Identification Method of Illegal Collection and Use of Personal Information Through App, which
provides guidance for the regulatory authorities to identify the illegal collection and use of personal information through mobile apps,
and for the app operators to conduct self-examination and self-correction and for other participants to voluntarily monitor compliance.
Personal Information Protection Law stipulates that personal information shall be processed in accordance with the principles of lawfulness,
legitimacy, necessity and good faith, and not in any manner that is misleading, fraudulent or coercive. Collection of personal information
shall be limited to the minimum scope necessary for achieving the purpose of processing and shall not be excessive. In addition, personal
information processing rules should be disclosed to personal information subjects, and the purpose, method and scope of processing should
be clearly stated. While we strive to comply with all applicable data protection laws and regulations, as well as our own privacy policies,
this regulatory framework for privacy issues in China and worldwide is currently evolving and is likely to remain uncertain for the foreseeable
future. We could be adversely affected if legislation or regulations are expanded to require changes in business practices or privacy
policies, or if governing jurisdictions interpret or implement their legislation or regulations in ways that negatively affect our business,
financial condition and results of operations. In addition to laws, regulations and other applicable rules regarding privacy and privacy
advocacy, industry groups or other private parties may propose new and different privacy standards. Because the interpretation and application
of privacy and data protection laws and privacy standards are still uncertain, it is possible that these laws or privacy standards may
be interpreted and applied in a manner that is inconsistent with our practices. Any inability to adequately address privacy concerns,
even if unfounded, or to comply with applicable privacy or data protection laws, regulations and privacy standards, could result in additional
cost and liability for us, damage our reputation, inhibit the use of our platform and harm our business. In addition, the data we possess
may make us an attractive target for and potentially vulnerable to, cyberattacks, computer viruses, physical or electronic break-ins
or similar disruptions. Furthermore, some of the data we possess is stored on our servers, which are hosted by third parties. While we
and our third-party hosting facilities have taken steps to protect confidential information to which we have access and we store our
data in encrypted form, our security measures may be breached in the future. Any accidental or willful security breaches or other unauthorized
access to our database could cause confidential borrower, partner information to be stolen and used for criminal purposes. Security breaches
or unauthorized access to confidential information could also expose us to liability related to the loss of the information, time-consuming
and expensive litigation and negative publicity. If our security measures are breached because of third-party action, employee error,
malfeasance or otherwise, or if design flaws in our software are exposed and exploited, our reputation, business and results of operations
may be materially and adversely impacted.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Because techniques used to sabotage or obtain unauthorized access
to systems change frequently and generally are not recognized until they are launched against a target, we and our third-party hosting
facilities may be unable to anticipate these techniques or implement adequate preventative measures. In addition, the Administrative
Measures for the Security of the International Network of Computer Information Network, effective on December 30, 1997 and amended on
January 8, 2011, require us to report any data or security breaches to the local offices of the PRC Ministry of Public Security within
24 hours of any such breach. Any security breach, whether actual or perceived, would harm our reputation, and could cause us to lose
borrowers and partners and adversely affect our business and results of operations. We do not have cybersecurity insurance in case of
security breach. As of the date of this annual report, we have not experienced any material incidents of security breach.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Any failure by us or our third-party service providers
to comply with applicable anti-money laundering laws and regulations could damage our reputation.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In cooperation with our trust company partners, we have adopted various
policies and procedures, including internal controls, &#8220;know-your-customer&#8221; procedures, customer due diligence and customer
screening procedures, for anti-money laundering purposes. In addition, we rely on and may in the future, rely on other third-party service
providers, in particular the custody banks and payment agents that handle the transfer of funds between borrowers and lenders, to have
their own appropriate anti-money laundering policies and procedures. Custody banks and payment agents are subject to anti-money laundering
obligations under applicable anti-money laundering laws and regulations and are regulated in that respect by the PBOC. If any of our
third-party service providers fail to comply with applicable anti-money laundering laws and regulations, our reputation could suffer
and we could become subject to regulatory intervention, which could have a material adverse effect on our business, financial condition
and results of operations. Any negative perception of the industry, such as that arising from any failure of other home equity loan service
providers to detect or prevent money laundering activities, even if factually incorrect or based on isolated incidents, could compromise
our image or undermine the trust and credibility we have established.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The PRC Anti-money Laundering Law, which became effective in January
2007, sets forth the principal anti-money laundering requirements applicable to financial institutions as well as nonfinancial institutions
with anti-money laundering obligations, including the adoption of precautionary and supervisory measures, establishment of various systems
for client identification, retention of clients&#8217; identification information and records and reports on large transactions and suspicious
transactions. Measures for the Supervision and Administration of Combating Money Laundering and Financing of Terrorism by Financial Institutions,
effective in August 2021, provides that a financial institution shall, according to the provisions, establish and improve the internal
control system for combating money laundering and financing of terrorism, assess risks of money laundering and financing of terrorism,
establish a risk management mechanism commensurate with the risk status and business scale, build an information system for combating
money laundering, and establish or designate a department and appoint corresponding personnel to effectively perform the obligations
of combating money laundering and financing of terrorism.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">However, as the detailed anti-money laundering regulations of home
equity loan facilitators have not been published, there is uncertainty as to how the anti-money laundering requirements will be interpreted
and implemented, and whether home equity loan service providers like us must abide by the rules and procedures set forth in the PRC Anti-money
Laundering Law that are applicable to nonfinancial institutions with anti-money laundering obligations. We cannot assure you that the
anti-money laundering policies and procedures we have adopted will be effective in protecting our business from being exploited for money
laundering purposes or will be deemed to be following applicable anti-money laundering implementing rules if and when adopted.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">The collaboration model we have in place with our sales
partners to acquire borrowers might be regarded as financial marketing and might face compliance risks.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The People&#8217;s Bank of China, the China Banking Insurance Regulatory
Commission, the China Securities Regulatory Commission, and the State Administration of Foreign Exchange have issued notice on further
regulating financial marketing and publicity activities on December 20, 2019, which took effect on January 25, 2020. It is stipulated
that financial marketing and publicity activities refer to the activities of financial product or financial service providers using various
publicity tools or methods to publicize and promote financial products or financial services, and it is illegal to engage in financial
business without a business license or beyond the permitted business scope, and market entities that fail to obtain relevant financial
business qualifications shall not conduct marketing and publicity activities relating to the financial business, except that information
release platforms and media entrusted by relevant financial business qualifications may carry out financial marketing and publicity activities
for them.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We currently collaborate with our sales partners on the promotion
of real estate mortgage loan projects, and we introduce borrowers to the trust companies. As the above notice is broad in regulatory
scope and still evolving, we cannot guarantee you that the marketing activities of us or our sales partners will not be regarded as financial
marketing and publicity activities. If the marketing activities of us or our sales partners are found to be in violation of the above
notice, we may be penalized by relevant authorities and our marketing activities may be suspended, which could adversely affect our business
operations.</p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
collecting, storing and sharing of information among us, our sales partners and the trust companies might face compliance risks.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
PBOC and the National Financial Standardization Technical Committee released the Personal Financial Information Protection Technical
Specifications (&#8220;Specifications&#8221;) on February 13, 2020, according to which financial institutions shall not entrust or authorize
other institutions, without the qualification for financial business, to collect information such as bank account information, personal
identification number, mobile phone number, KYC information, home address and other information that is linked to the identity of a specific
individual. Financial institutions shall also forbid outsourcing service agencies and external service agencies through agreements or
contracts to store such information.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
26, December, 2022, China Banking and Insurance Regulatory Commission (&#8220;CBIRC&#8221;) issued the Administrative Measures for the
Protection of Consumer Rights and Interests by Banking and Insurance Institutions. According to such Administrative Measures, banking
institutions shall establish a management mechanism for the list of cooperating institutions and strengthen the ongoing management of
cooperating institutions, and set entry and exit criteria for cooperating institutions on matters involving consumer rights and interests,
such as the security of consumers' personal information.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of the date hereof, there is no such terms or provisions that we are entrusted or authorized to collect such information from the borrower
by the trust companies and commercial banks in the agreements between us and the trust companies and commercial banks. We have collected
information from the borrowers with the borrowers&#8217; express consent. Although the Specifications are a recommended industry standard
and have no mandatory legal force, but they might still be referred to by regulatory agencies. Therefore, if our collecting, storing
and sharing of the borrower&#8217;s above-mentioned information are found to be in violation of the laws, it could have an adverse impact
on our business model and adversely affect our business operations, especially in terms of our collaboration model with commercial bank
partners.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Administrative Measures for Credit Reporting Business may have a certain negative impact on our business, and we may face challenges
from the regulatory authorities.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Administrative Measures for Credit Reporting Business, which were adopted on September 17, 2021, are promulgated for implementation as
of January 1, 2022. For the purpose of the measures, credit reporting business refers to activities in which credit information on enterprises
and individuals is collected, arranged, preserved, processed, and provided to users&#894; Credit information refers to basic information,
loan information, and other relevant information collected in accordance with the law and used to identify and judge the credit status
of enterprises and individuals when providing services for financial and other activities, as well as analysis and evaluation information
formed based on the foregoing information. Also, an applicant shall obtain the permission for a personal credit reporting agency from
the People&#8217;s Bank of China in accordance with the law to engage in personal credit reporting business&#894; handle the record-filing
of a corporate credit reporting agency in accordance with the law to engage in corporate credit reporting business&#894; or handle the
record-filing of a credit rating agency in accordance with the law to engage in credit rating business. Financial institutions, including
but not limited to commercial banks and trust companies, shall not carry out commercial cooperation with market institutions that have
not obtained the lawful qualifications for credit reporting business in accessing credit information.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
we are in the process of loan facilitation for trust companies or commercial banks, we may involve the collection and provision of borrowers&#8217;
information. Our PRC legal advisor, Merits &amp; Tree Law Offices, believes that we have not arranged or processed the borrower&#8217;s
credit information while conducting business, and we are not engaged in personal credit investigation business. However, since the measures
are relatively new and the relevant interpretation is uncertain, we are not sure whether the regulatory authorities would take our business
as credit investigation service, or would require us to obtain relevant licenses, to cooperate with third-party credit investigation
agencies. As of the date of this annual report, we have not received warnings, penalties, or objections to our business. However, if
the business we carry out is regarded as credit investigation business by the regulatory authorities, we may be required to adjust our
existing business model within certain period to comply with the authorities&#8217; regulations, which may increase our operating cost.
If the adjustments and the rectification cannot be completed within the prescribed period, we may face administrative penalties such
as being banned in accordance with the law, confiscation of illegal gains, fines, etc.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
we are unable to maintain relationships with our third-party service providers, our business will suffer.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
rely on third-party service providers to operate various aspects of our business. For instance, third parties supply us with external
data including real property valuation, borrowers&#8217; credit histories, government data and blacklists. Furthermore, we engage third-party
service providers to maintain our security systems, ensuring confidentiality of data and preventing malicious attacks.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
relationships with various third parties are integral to the smooth operation of our business. Most of our agreements with third-party
service providers are nonexclusive and do not prohibit third-party service providers from working with our competitors. If our relationships
with third-party service providers deteriorate or third-party service providers decide to terminate our respective business relationships
for any reason, such as to work with our competitors on more exclusive or more favorable terms, our operations may be disrupted. In addition,
our third-party service providers may not uphold the standard we expect under our agreements. If any of these were to happen, our business
operations could be materially impaired and our results of operations would suffer.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Misconduct,
fraud, errors and failure to function by our employees or third-party service providers could harm our business and reputation</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are exposed to the risk of misconduct, fraud and errors by our employees and third-party service providers with whom we collaborate.
In addition, we rely on our employees for debt collection. We aim to ensure that our collection efforts comply with the relevant laws
and regulations in the PRC and we have established strict policies that our employees should not engage in aggressive practices while
performing debt collection. Nevertheless, we do not have full control over our employees. Misconduct and errors by our employees could
result in violations of law by us, regulatory sanctions and/or serious reputational or financial harm. We cannot always deter misconduct
and errors by our employees, and the precautions we take to prevent and detect these activities may not be effective in all cases. There
cannot be any assurance that misconduct and errors by our employees will not lead to a material adverse effect on our business. Any of
these occurrences could result in our diminished ability to operate our business, potential liability to third parties, inability to
attract borrowers and funding sources, reputational damage, regulatory intervention and financial harm, which could negatively impact
our business, financial condition and results of operations.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Misconduct
and errors by our trust company partners, commercial bank partners, sales partners and other parties with whom we collaborate with could
harm our business and reputation.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are exposed to the risk of misconduct and errors by our trust company partners, commercial bank partners, sales partners and other business
partners with whom we collaborate. We rely on our sales partners for borrower acquisition and we do not have full control over sales
partners&#8217; conduct or conduct of their respective acquisition channels while sourcing borrowers. We could be materially and adversely
affected if personal information was disclosed to unintended recipients or if an operational breakdown or failure in the processing of
transactions occurred, whether as a result of human error, purposeful sabotage or fraudulent manipulation of our operations or systems.
Financial products and financial institutions are heavily regulated in China. We are not regulated as a financial institution, but we
may be indirectly subject to PRC financial regulations as a result of cooperation with financial institutions as our funding source partners.
If any financial product designed by us and our funding partners is deemed to violate any PRC laws or regulations, we may be jointly
liable due to the service we provide, or we may have to terminate the relationship with our funding partners. It is not always possible
to identify and deter misconduct or errors by our trust company partners, commercial bank partners, sales partners and other business
partners, and the precautions we take to detect and prevent such activities may not be effective in controlling unknown or unmanageable
risks or losses. If any of our funding partners, sales partners and other business partners misuse or misappropriate funds, commit fraud
or other misconduct, or fail to follow our rules and procedures when interacting with our borrowers, we could be liable for damages and
subject to regulatory actions and penalties. We could also be perceived to have facilitated or participated in the illegal misappropriation
of funds, documents or data, and therefore be subject to civil or criminal liability. Any of these occurrences could result in our diminished
ability to operate our business, potential liability to third parties, inability to attract third parties, reputational damage, regulatory
intervention or financial harm, which could negatively impact our business, financial condition and results of operations.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
we do not compete effectively in our target markets, our operating results could be harmed.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
PRC&#8217;s home equity loan market is rapidly evolving. We compete with financial products and companies that attract potential borrowers
or funding sources, or both. Particularly, we compete with other financial service companies that facilitate home equity loans.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Some
of our current or potential competitors have significantly more financial, technical, marketing and other resources than we do and may
be able to devote greater resources to the development, promotion, sale and support of their platforms and distribution channels. Their
business models may also ultimately prove more successful or more adaptable to new regulatory, technological and other developments.
Our current or potential competitors may also have longer operating histories, a more extensive borrower base, more data and distribution
channels, greater brand recognition and brand loyalty and broader partnership relationships than we have. For example, established internet
companies, including social media companies that possess large, existing borrower bases, substantial financial resources and established
distribution channels, may enter the market. Traditional financial institutions may also focus on the MSE market, which may have a material
adverse impact on our business and results of operations as we may not necessarily have competitive advantage. Our competitors may be
better at developing new products, responding quickly to new technologies and undertaking more extensive marketing campaigns. If we are
unable to compete with such companies or meet the need for innovation in our industry, the demand for our services could stagnate or
substantially decline and we could experience reduced operating income, any of which could harm our business.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">When
new competitors seek to enter our target market, or when existing market participants seek to increase their market share, they sometimes
undercut the pricing and/or terms common in that market, which could adversely affect our market share or ability to exploit new market
opportunities. In addition, since the home equity loan lending industry is a relatively recent development in China, potential partners
and borrowers may not fully understand how our business works and may not be able to fully appreciate the features that we have invested
in and adopted on our business as compared to other home equity loan service providers. Our pricing and terms could deteriorate if we
fail to act to meet these competitive challenges. Further, to the extent that our competitors are able to offer more attractive terms
to our trust company partners, such trust companies may choose to terminate their relationships with us. All of the foregoing could adversely
affect our business, results of operations, financial condition and future growth.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
negative publicity arises with respect to us or the home equity loan lending industry in general, our employees, our third-party service
providers or our trust company partners, our business and operating results could be adversely affected.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
negative publicity arises about the home equity loan lending industry or the secured lending industry in general in China or our company,
including the quality, effectiveness and reliability of our business, our ability to effectively manage and resolve borrower complaints,
privacy and security practices, litigation, regulatory challenges and the experience of borrowers with our services, even if inaccurate,
could adversely affect our reputation and the confidence in, and the use of, our services, which could harm our business and operating
results. The PRC government has recently instituted general regulations and specific rules, including the Guiding Opinion, to develop
a more transparent regulatory environment for assets management products. See &#8220;Item 3. Key Information&#8212;D. Risk Factors&#8212;Risks
Related to Our Business&#8212;Our business may be adversely affected if we are unable to secure funding on terms acceptable to us or
our borrowers, or at all.&#8221; Many companies in China&#8217;s home equity loan lending industry have not been fully compliant with
these regulations, which prevents these companies from providing home equity loans. To the extent that borrowers associate our company
with these failed companies, they may be less willing to use our services. Harm to our reputation can also arise from many other sources,
including employee misconduct, misconduct by our partners, or third-party service providers, failure by us, our partners or third-party
service providers to meet minimum standards of service and quality, inadequate protection of borrower and partner information and compliance
failures and claims. Additionally, negative publicity with respect to our partners or service providers could also affect our business
and operating results to the extent that we rely on these partners or if borrowers associate our company with these partners.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
we fail to promote and maintain our brand in an effective and cost-efficient way, our business and results of operations may be harmed.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
brand and reputation are integral to our acquisition of borrowers and funding sources, and we intend to invest in marketing and brand
promoting efforts. The success of our marketing efforts and borrowing experience with our services are integral to our ability to attract
new and retain repeat borrowers. Our marketing channels include traditional media such as telephone marketing and direct sales conducted
by sales partners, and marketing campaigns, as well as online media, search engine optimization and search engine marketing. If our current
marketing efforts and channels are less effective or inaccessible to us, or if the cost of such channels significantly increases or we
cannot penetrate the market with new channels, we may not be able to promote and maintain our brand and reputation to maintain or grow
the existing borrower base. If we are unable to promote and maintain our brand and reputation in a cost-efficient manner, our market
share could diminish or we could experience a lower growth rate than we anticipated, which would harm our business, financial condition
and results of operations.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Any
failure to protect our own intellectual property rights could impair our brand, negatively impact our business or both.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
success and ability to compete also depend in part on protecting our own intellectual property. We rely on a combination of copyright,
trade secret, trademark and other rights, as well as confidentiality procedures and contractual provisions to protect our proprietary
technology, processes and other intellectual property. However, the steps we take to protect our intellectual property rights may be
inadequate. Third parties may seek to challenge, invalidate or circumvent our copyright, trade secret, trademark and other rights or
applications for any of the foregoing. In order to protect our intellectual property rights, we may be required to spend significant
resources. Litigation brought to protect and enforce our intellectual property rights could be costly, time-consuming and distracting
to management. Our failure to secure, protect and enforce our intellectual property rights could seriously adversely affect our brand
and adversely impact our business.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
may be sued by third parties for alleged infringement of their proprietary rights, which could harm our business.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
competitors, as well as a number of other entities and individuals, may own or claim to own intellectual property relating to our industry.
From time to time, third parties may claim that we are infringing on their intellectual property rights. We may, however, be unaware
of the intellectual property rights that others may claim cover some or all of our applications, technology or services. Any claims or
litigation could cause us to incur significant expenses and, if successfully asserted against us, could require that we pay substantial
damages or ongoing royalty payments, restrict us from conducting our business or require that we comply with other unfavorable terms.
We may also be obligated to indemnify parties or pay substantial settlement costs, including royalty payments, in connection with any
such claim or litigation and to obtain licenses, modify applications or refund fees, which could be costly. Even if we were to prevail
in such a dispute, any litigation regarding our intellectual property could be costly and time-consuming and divert the attention of
our management from our business operations.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have existing debts and may incur more in the future, which may adversely affect our financial condition and negatively impact our operations.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have substantial existing debts and we may incur more in the future. The incurrence of debt could have a variety of negative effects,
including:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">default
                                            and foreclosure on our assets if our operating income is insufficient to repay debt obligations&#894;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">acceleration
                                            of obligations to repay the indebtedness (or other outstanding indebtedness), even if we
                                            make all principal and interest payments when due, if we breach any covenants that require
                                            the maintenance of certain financial ratios or reserves without a waiver or renegotiation
                                            of that covenant&#894;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">our
                                            inability to obtain necessary additional financing if the debt security contains covenants
                                            restricting our ability to obtain such financing while the debt security is outstanding&#894;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">diverting
                                            a substantial portion of cash flow to pay principal and interest on such debt, which would
                                            reduce the funds available for expenses, capital expenditures, acquisitions and other general
                                            corporate purposes&#894; and</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">creating
                                            potential limitations on our flexibility in planning for and reacting to changes in our business
                                            and in the industry in which we operate.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
occurrence of any of these risks could adversely affect our operations or financial condition.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
business depends on the continued efforts of our senior management. If one or more of our key executives were unable or unwilling to
continue in their present positions, our business may be severely disrupted.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
business operations depend on the continued services of our senior management, particularly the executive officers named in this annual
report. While we have provided different incentives to our management, we cannot assure you that we can continue to retain their services.
If one or more of our key executives were unable or unwilling to continue in their present positions, we may not be able to replace them
easily or at all, our future growth may be constrained, our business may be severely disrupted and our financial condition and results
of operations may be materially and adversely affected, and we may incur additional expenses to recruit, train and retain qualified personnel.
In addition, although we have entered into confidentiality and noncompetition agreements with our management, there is no assurance that
any member of our management team will not join our competitors or form a competing business. If any dispute arises between our current
or former officers and us, we may have to incur substantial costs and expenses in order to enforce such agreements in China or we may
be unable to enforce them at all.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
may have exposure to greater than anticipated tax liabilities.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are subject to enterprise income tax, value-added tax, and other taxes in each province and city in China where we have operations. Our
tax structure is subject to review by various local tax authorities. The determination of our provision for income tax and other tax
liabilities requires significant judgment. In the ordinary course of our business, there are many transactions and calculations where
the ultimate tax determination is uncertain. Although we believe our estimates are reasonable, the ultimate decisions by the relevant
tax authorities may differ from the amounts recorded in our financial statements and may materially affect our financial results in the
period or periods for which such determination is made.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Certain
of our leased properties may have defective titles and we may be forced to relocate operations affected by such defects, which could
cause disruption to our business and have a negative impact on our business operations and financial condition.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of December 31, 2022, we operated our businesses primarily in over 50 leased properties in Shenzhen, Guangzhou, Chongqing, Beijing and
other cities in China. We have not signed lease contracts or not renewed expired lease contracts with respect to a small portion of such
leased properties, and we may be forced to relocate if the lessors request us to leave the premises. With respect to a small portion
of such leased properties, the lessors failed to provide title certificates evidencing property ownership of these lessors. According
to PRC laws and regulations, where a landlord lacks title evidence or rights to lease, the relevant lease contracts may be void or unenforceable
under PRC laws and regulations, and may also be subject to challenge by third parties. Moreover, a small portion of the leased properties
are mortgaged by the lessors. In case the mortgagees enforce the mortgage, we may not be able to continue using our leased properties.
In addition, a small portion of our lease contracts have not been registered with the relevant regulatory authorities. According to PRC
laws and regulations, failure to register lease contracts will not affect the effectiveness. However, landlords and tenants may be subject
to administrative fines for such failure.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of the date of this annual report, we are not aware of any action, claim or investigation being conducted or threatened by the relevant
regulatory authorities with respect to defects in our leased contracts or leased properties. However, we cannot assure you that such
defects will be cured in a timely manner, or at all. Our business may be interrupted and additional relocation costs may be incurred
if we are required to relocate operations affected by such defects. Moreover, if our lease contracts are challenged by third parties,
it could result in diversion of management attention and cause us to incur costs associated with defending such actions, even if such
challenges are ultimately determined in our favor.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Competition
for employees is intense, and we may not be able to attract and retain the qualified and skilled employees needed to support our business.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
believe our success depends on the efforts and talent of our employees, including risk management, software engineering, financial and
marketing personnel. Our future success depends on our continued ability to attract, develop, motivate and retain qualified and skilled
employees. Competition for highly skilled technical, risk management and financial personnel is extremely intense. We may not be able
to hire and retain these personnel at compensation levels consistent with our existing compensation and salary structure. Some of the
companies with which we compete for experienced employees have greater resources than we have and may be able to offer more attractive
terms of employment. In addition, we invest significant time and expenses in training our employees, which increases their value to competitors
who may seek to recruit them. If we fail to retain our employees, we could incur significant expenses in hiring and training new employees,
and the quality of our services and our ability to serve borrowers and our partner funding sources could diminish, resulting in a material
adverse effect to our business.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Increases
in labor costs in the PRC may adversely affect our business and results of operations.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
economy in China has experienced increases in inflation and labor costs in recent years. As a result, average wages in the PRC are expected
to continue to increase. In addition, we are required by PRC laws and regulations to pay various statutory employee benefits, including
pension, housing fund, medical insurance, work-related injury insurance, unemployment insurance and maternity insurance to designated
government agencies for the benefit of our employees. We expect that our labor costs, including wages and employee benefits, will continue
to increase. Unless we are able to control our labor costs or pass on these increased labor costs to borrowers by increasing the fees
of our services, our financial condition and results of operations may be adversely affected.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
we cannot maintain our corporate culture as we grow, we could lose the innovation, collaboration and focus that contribute to our business.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
believe that a critical component of our success is our corporate culture, which we believe fosters innovation, encourages teamwork and
cultivates creativity. As we develop the infrastructure of a public company and continue to grow, we may find it difficult to maintain
these valuable aspects of our corporate culture. Any failure to preserve our culture could negatively impact our future success, including
our ability to attract and retain employees, encourage innovation and teamwork and effectively focus on and pursue our corporate objectives.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
do not have any business insurance coverage.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Insurance
companies in China currently do not offer as extensive an array of insurance products as insurance companies in more developed economies.
Currently, we do not have any business liability or disruption insurance to cover our operations. We have determined that the costs of
insuring for these risks and the difficulties associated with acquiring such insurance on commercially reasonable terms make it impractical
for us to have such insurance. Any uninsured business disruptions may result in our incurring substantial costs and the diversion of
resources, which could have an adverse effect on our results of operations and financial condition.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
we fail to implement and maintain an effective system of internal controls, we may be unable to accurately or timely report our results
of operations or prevent fraud, and investor confidence and the market price of our ADSs may be materially and adversely affected.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Since
the completion of our initial public offering, we have become a public company in the United States subject to the Sarbanes-Oxley Act
of 2002. Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, requires that we include a report from management on our internal
control over financial reporting in our annual report on Form 20-F beginning with this annual report for the fiscal year ending December
31, 2022. In addition, once we cease to be an &#8220;emerging growth company&#8221; as such term is defined in the JOBS Act, our independent
registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting. Our
management may conclude that our internal control over financial reporting is not effective. Moreover, even if our management concludes
that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting
its own independent testing, may issue a report that is qualified if it is not satisfied with our internal controls or the level at which
our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. In addition,
since we have become a public company, our reporting obligations may place a significant strain on our management, operational and financial
resources and systems for the foreseeable future. We may be unable to timely complete our evaluation testing and any required remediation.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">During
the course of documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404, we may identify
weaknesses and deficiencies in our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our
internal control over financial reporting, as these standards are modified, supplemented or amended from time to time, we may not be
able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404.
Generally speaking, if we fail to achieve and maintain an effective internal control environment, we could suffer material misstatements
in our financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our
reported financial information. This could, in turn, limit our access to capital markets, harm our results of operations and lead to
a decline in the trading price of our ADSs. Additionally, ineffective internal control over financial reporting could expose us to increased
risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory
investigations and civil or criminal sanctions.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
identified a material weakness in our internal control over financial reporting as part of management&#8217;s assessment, and if we are
unable to remediate and improve our internal controls, we may not be able to accurately or timely report our future financial results.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
the course of preparing our consolidated financial statements in the prior years, we identified one material weakness which has not been
remediated in our internal control over financial reporting. A &#8220;material weakness&#8221; is a deficiency, or a combination of deficiencies,
in internal control, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements
will not be prevented or detected on a timely basis. The material weakness that was identified related to our lack of sufficient financial
reporting and accounting personnel with appropriate experience of U.S. GAAP and SEC reporting requirements and our failure to establish
and clearly communicate acceptable policies regarding U.S. GAAP financial reporting. We are in the process of implementing a number of
measures to address the material weakness that has been identified, including hiring more qualified internal auditors to strengthen our
overall governance, and providing relevant training to our accounting personnel. We have been taking other steps to strengthen our internal
control over financial reporting, including (i) refining and setting more control points for our main business processes, namely the
trust lending process and commercial bank partnership process, (ii) establishing effective oversight and clear reporting requirements
for complex transactions, specifically for the personnel in the Finance and Capital Market Departments, and (iii) formalizing a set of
comprehensive U.S. GAAP accounting manuals and upgrading our financial reporting system to streamline monthly and year-end closings and
integrate financial and operating reporting systems. Although we plan to implement these measures to address the material weakness, implementation
of these measures may not fully remediate the material weakness in a timely manner, and there is no assurance that we will not have material
weaknesses or significant deficiencies in the future.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
will continue to incur increased costs as a result of being a public company, particularly after we cease to qualify as an &#8220;emerging
growth company.&#8221;</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Since
the completion of our initial public offering, we have become a public company and have incurred significant legal, accounting and other
expenses that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the
SEC and the New York Stock Exchange, impose various requirements on the corporate governance practices of public companies. As a company
with less than US$1.07 billion in revenues for our last fiscal year, we qualify as an &#8220;emerging growth company&#8221; pursuant
to the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise
applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404
of the Sarbanes-Oxley Act of 2002, or Section 404, in the assessment of the emerging growth company&#8217;s internal control over financial
reporting. The JOBS Act also permits an emerging growth company to delay adopting new or revised accounting standards until such time
as those standards apply to private companies. However, we have elected to &#8220;opt out&#8221; of this provision and, as a result,
we will comply with new or revised accounting standards as required when they are adopted for public companies. This decision to opt
out of the extended transition period under the JOBS Act is irrevocable.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
expect these rules and regulations to increase our legal and financial compliance costs and to make some corporate activities more time-consuming
and costly. After we are no longer an &#8220;emerging growth company,&#8221; we expect to incur significant expenses and devote substantial
management effort toward ensuring compliance with the requirements of Section 404 and the other rules and regulations of the SEC. For
example, as a result of becoming a public company, we will need to increase the number of independent directors and adopt policies regarding
internal controls and disclosure controls and procedures. We also expect that operating as a public company will make it more difficult
and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits
and coverage or incur substantially higher costs to obtain the same or similar coverage. In addition, we will incur additional costs
associated with our public company reporting requirements. It may also be more difficult for us to find qualified persons to serve on
our Board of Directors or as executive officers. We are currently evaluating and monitoring developments with respect to these rules
and regulations, and we cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing
of such costs.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have granted, and may continue to grant, share incentives, which may result in increased share-based compensation expenses.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
adopted an equity incentive plan in 2018, or the 2018 Plan, for the purpose of granting share-based compensation awards to employees,
officers, directors and consultants to incentivize their performance and promote the success of our business.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
account for compensation costs for all share-based awards using a fair-value-based method and recognize expenses in our consolidated
statements of comprehensive income in accordance with U.S. GAAP. Under the 2018 Plan, we are authorized to grant options, restricted
stock units and other types of awards the administrator of the 2018 Plan decides. Under the 2018 Plan, the maximum aggregate number of
shares which may be issued pursuant to all awards is 307,608,500 shares. As of the date of this annual report, options to purchase a
total of 307,608,500 ordinary shares were outstanding under the 2018 Plan. We believe the granting of share-based awards is of significant
importance to our ability to attract and retain key personnel and employees, and we will continue to grant share-based awards in the
future. As a result, our expenses associated with share-based compensation may increase, which may have an adverse effect on our results
of operations.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Certain
of our existing shareholders have substantial influence over our company, and their interests may not be aligned with the interests of
our other stockholders.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Kylin
Investment Holdings Limited, a company incorporated in the British Virgin Islands, holds 17.8% of our ordinary shares. As a result, each
shareholder has significant influence over our business, including decisions regarding mergers, consolidations, liquidations and the
sale of all or substantially all of our assets, election of directors and other significant corporate actions. This concentration of
ownership may also have the effect of discouraging, delaying or preventing a future change of control, which could deprive our stockholders
of an opportunity to receive a premium for their shares as part of a sale of our company, and might reduce the price of our ADSs.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Failure
to make adequate contributions to various employee benefits plans as required by PRC regulations may subject us to penalties.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Companies
operating in China are required to participate in various government-sponsored employee benefit plans, including social insurance plans,
unemployment insurance, medical insurance, work-related injury insurance, maternity insurance, housing provident fund and other welfare-oriented
payment obligations, and contribute to the plans in amounts equal to certain percentages of salaries, including bonuses and allowances,
of employees up to a maximum amount specified by the local government from time to time at locations where our employees are based. The
requirement of employee benefit plans has not been implemented consistently by the local governments in China given the different levels
of economic development in different locations. Our failure in making adequate contributions to various employee benefit plans and in
complying with applicable PRC labor-related laws may subject us to late payment penalties, and we could be required to make up the contributions
for these plans as well as to pay late fees and fines. If we are subject to late fees or fines in relation to the underpaid employee
benefits, our financial condition and results of operations may be adversely affected.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
branches have not made full contributions to the social insurance plans and the housing provident fund for employees as required by the
relevant PRC laws and regulations. As of the date of this annual report, we are not aware of any notice from regulatory authorities or
any claim or request from these employees in this regard. However, we cannot assure you that the relevant regulatory authorities will
not require us to pay outstanding amounts and impose late payment penalties or fines on us, which may materially and adversely affect
our business, financial condition and results of operations.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
inconsistency of domicile and place of business of our PRC subsidiaries may have a material adverse effect on our business and operations.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Substantially
all of our assets and operations are located in China. We have developed a network of 87 branches and sub-branches in over 50 cities
in China. According to the PRC laws and regulations, the domicile and the place of business of our PRC subsidiaries should be the same.
As our business grows rapidly, we may change the place of business according to market development strategy. We cannot assure you that
the domicile of all the PRC subsidiaries, branches and sub-branches are consistent with the place of their business. In the event that
our PRC subsidiaries, branches and sub-branches cannot be reached by relevant regulatory authorities at the domicile or place of business
they provided, such subsidiaries, branches or sub-branches may be included in the unusual operation enterprise list, and may be required
to rectify or may be imposed with penalties, which may adversely affect our business and results of operations.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">From
time to time we may evaluate and enter into strategic alliances, which could divert significant management attention and resources, disrupt
our business and adversely affect our financial results.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
may from time to time evaluate and enter into strategic alliances with various third parties. Strategic alliances with third parties
could subject us to a number of risks, including the potential failure to achieve the expected benefits of the alliance, risks associated
with potential leakage of proprietary information, nonperformance by the counterparty and an increase in expenses incurred in establishing
new strategic alliances, any of which may materially and adversely affect our business. Strategic alliances will also divert the management&#8217;s
time and resources from our normal operations and we may have to incur unexpected liabilities or expenses.</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Risks
Related to Our American Depositary Shares</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
trading price of our ADSs may be volatile, which could result in substantial losses to investors.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
trading price of our ADSs have been, and is likely to continue to be, volatile and could fluctuate widely due to factors beyond our control.
This may happen because of broad market and industry factors, including 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. 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:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">variations
                                            in our earnings and cash flows&#894;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">announcements
                                            of new investments, acquisitions, strategic partnerships or joint ventures by us or our competitors&#894;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">announcements
                                            of new offerings, solutions and expansions by us or our competitors&#894;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">changes
                                            in financial estimates by securities analysts&#894;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">detrimental
                                            adverse publicity about us, our services or our industry&#894;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">announcements
                                            of new regulations, rules or policies relevant for our business&#894;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">additions
                                            or departures of key personnel&#894;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">our
                                            share repurchase program&#894;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">release
                                            of lockup or other transfer restrictions on our outstanding equity securities or sales of
                                            additional equity securities&#894; and</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">potential
                                            litigation or regulatory investigations.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Any
of these factors may result in large and sudden changes in the volume and price at which our ADSs will trade. In particular, since the
COVID-19 outbreaks, concerns over the economic slowdown resulting from the COVID-19 have led to a significant decrease in the major indices
of the U.S. capital markets and an increase in market volatility, which have adversely affected, and may continue to, adversely affect,
the market price of our ADSs. For risks related to the COVID-19, see &#8220;Item 3. Key Information&#8212;D. Risk Factors&#8212;Risks
Related to Our Business&#8212;We face risks related to natural disasters, health epidemics and other outbreaks of contagious diseases.&#8221;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
the past, shareholders of public companies have often brought securities class action suits against those companies following periods
of instability in the market price of their securities. If we were involved in a class action suit, it could divert a significant amount
of our management&#8217;s attention and other resources from our business and operations and require us to incur significant expenses
to defend the suit, which could harm our results of operations. 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 adverse effect on our financial condition and results of operations.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
securities or industry analysts do not publish research or reports about our business, or if they adversely change their recommendations
regarding the ADSs, the market price for the ADSs and trading volume could decline.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
trading market for the ADSs will be influenced by research or reports that industry or securities analysts publish about our business.
If one or more analysts who cover us downgrade the ADSs, the market price for the ADSs would likely 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 the ADSs to decline.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Substantial
future sales or perceived potential sales of our ADSs in the public market could cause the price of our ADSs to decline.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Sales
of our ADSs in the public market, or the perception that these sales could occur, could cause the market price of our ADSs to decline
significantly. As of December 31, 2022, we had 1,371,643,240 ordinary shares outstanding. Among these shares, 288,485,480 ordinary shares
are in the form of ADSs. All of our ADSs sold in our initial public offering will be freely transferable by persons other than our &#8220;affiliates&#8221;
without restriction or additional registration under the U.S. Securities Act of 1933, as amended, or the Securities Act. All of the other
ordinary shares outstanding will be available for sale, upon the expiration of the lock-up periods described elsewhere in this annual
report beginning from May 5, 2019 (if applicable to such holder), subject to volume and other restrictions as applicable under Rules
144 and 701 under the Securities Act. Any or all of these ordinary shares may be released prior to the expiration of the applicable lock-up
period at the discretion of the designated representatives. To the extent shares are released before the expiration of the applicable
lock-up period and sold into the market, the market price of our ADSs could decline significantly.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Certain
major holders of our ordinary shares have the right to cause us to register under the Securities Act the sale of their shares, subject
to the applicable lock-up periods in connection with our initial public offering. Registration of these shares under the Securities Act
would result in ADSs representing 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 form of ADSs in the public market could cause the price
of our ADSs to decline significantly. We adopted an equity incentive plan in 2018, or the 2018 Plan, under which we have the discretion
to grant a broad range of equity-based awards to eligible participants. See &#8220;Item 6. Directors, Senior Management and Employees&#8212;B.
Compensation&#8212;Share Incentive Plan.&#8221; We have registered certain ordinary shares that we may issue under our share incentive
plans and intend to register all ordinary shares that we may issue under our share incentive plans. Once we register these ordinary shares,
they can be freely sold in the public market in the form of ADSs upon issuance, subject to volume limitations applicable to affiliates
and relevant lock-up agreements. If a large number of our ordinary shares or securities convertible into our ordinary shares are sold
in the public market in the form of ADSs after they become eligible for sale, the sales could reduce the trading price of our ADSs and
impede our ability to raise future capital. In addition, any ordinary shares that we issue under our share incentive plans would dilute
the percentage ownership held by the investors who purchased ADSs.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
cannot guarantee that any share repurchase program will be fully consummated or that any share repurchase program will enhance long-term
shareholder value, and share repurchases could increase the volatility of the price of our ordinary shares and/or ADSs and could diminish
our cash reserves.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
March 16, 2022, our board of directors authorized a share repurchase program whereby our company was authorized a share repurchase program
under which the Company may repurchase up to US$20.0 million of its ordinary shares in the form of ADSs during a period of up to 12 months
commencing on March 16, 2022. As of the date of this annual report, our Company had repurchased a total of 5.6 million ADSs at an aggregate
amount of US$14.0 million.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
board of directors also has the discretion to authorize additional share repurchase programs in the future. The share repurchase programs
do not obligate us to repurchase any specific dollar amount or to acquire any specific number of ADSs and/or shares. We cannot guarantee
that any share repurchase program will enhance long-term shareholder value. The share repurchase programs could affect the price of our
listed securities and increase volatility and may be suspended or terminated at any time, which may result in a decrease in the trading
price of our ordinary shares and/or ADSs. Furthermore, share repurchases could increase the volatility of the price of our ordinary and/or
ADSs could diminish our cash reserves.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Techniques
employed by short sellers may drive down the market price of the ADSs.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Short
selling is the practice of selling securities that the seller does not own but rather has borrowed from a third party with the intention
of buying identical securities back at a later date to return to the lender. The short seller hopes to profit from a decline in the value
of the securities between the sale of the borrowed securities and the purchase of the replacement shares, as the short seller expects
to pay less in that purchase than it received in the sale. As it is in the short seller&#8217;s interest for the price of the security
to decline, many short sellers publish, or arrange for the publication of, negative opinions regarding the relevant issuer and its business
prospects in order to create negative market momentum and generate profits for themselves after selling a security short. These short
attacks have, in the past, led to selling of shares in the market.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Public
companies that have substantially all of their operations in China have been the subject of short selling. Much of the scrutiny and negative
publicity has centered on allegations of a lack of effective internal control over financial reporting resulting in financial and accounting
irregularities and mistakes, inadequate corporate governance policies or a lack of adherence thereto, and, in many cases, allegations
of fraud. As a result, many of these companies are now conducting internal and external investigations into the allegations and, in the
interim, are subject to shareholder lawsuits and/or SEC enforcement actions.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">It
is not clear what effect such negative publicity could have on us. If we were to become the subject of any unfavorable allegations, whether
such allegations are proven to be true or untrue, we could have to expend a significant amount of resources to investigate such allegations
and/or defend ourselves. While we would strongly defend against any such short seller attacks, we may be constrained in the manner in
which we can proceed against the relevant short seller by principles of freedom of speech, applicable state law or issues of commercial
confidentiality. Such a situation could be costly and time-consuming, and could distract our management from growing our business. Even
if such allegations are ultimately proven to be groundless, allegations against us could severely impact our business operations, and
any investment in the ADSs could be greatly reduced or even rendered worthless.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Because
we do not expect to pay dividends in the foreseeable future, you must rely on a price appreciation of the ADSs for a return on your investment.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
currently intend to retain most, if not all, of our available funds and any future earnings to fund the development and growth of our
business. As a result, we do not expect to pay any cash dividends in the foreseeable future. Therefore, you should not rely on an investment
in the ADSs as a source for any future dividend income.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
Board of Directors has complete discretion as to whether to distribute dividends, subject to certain requirements of Cayman Islands law.
In addition, our shareholders may, subject to the provisions of our amended and restated memorandum and articles of association, by ordinary
resolution, declare a dividend, but no dividend may exceed the amount recommended by our directors. Under Cayman Islands law, a Cayman
Islands company may pay a dividend out of either profit or share premium account, provided that in no circumstances may a dividend be
paid if this would result in our being unable to pay its debts as they fall due in the ordinary course of business. Even if our Board
of Directors decides to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on our future
results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any, received by us from our
subsidiaries, our financial condition, contractual restrictions and other factors deemed relevant by our Board of Directors. Accordingly,
the return on your investment in the ADSs will likely depend entirely upon any future price appreciation of the ADSs. There is no guarantee
that the ADSs will appreciate in value or even maintain the price at which you purchased the ADSs. You may not realize a return on your
investment in our ADSs and you may even lose your entire investment in the ADSs.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">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.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are an exempted company with limited liability incorporated under the laws of the Cayman Islands. Our corporate affairs are governed
by our amended and restated memorandum and articles of association, the Companies Act (as amended) of the Cayman Islands and the common
law of the Cayman Islands. The rights of shareholders to take action against our directors, actions by our minority shareholders and
the fiduciary duties of our directors to us under Cayman Islands law are governed by our amended and restated memorandum and articles
of association, the Companies Act (as amended) of the Cayman Islands and 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 compared to U.S. law) as well
as from the common law of England. The decisions of the English courts are of highly persuasive authority, but are not binding, on a
court in the Cayman Islands (except for those decisions handed down from Judicial Committee of the Privy Council to the extent that these
have been appealed from the Cayman Islands courts. The rights of our shareholders and the fiduciary duties of our directors under Cayman
Islands law are broadly similar to those in other common law jurisdictions, but there may be differences in the statutes or judicial
precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws
than the United States. Some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate
law than the Cayman Islands. In addition, if shareholders want to proceed against the Company outside of the Cayman Islands, they will
need to demonstrate that they have standing to initiate a shareholders derivative action in a federal court of the United States.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Shareholders
of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect corporate records or to obtain
copies of lists of shareholders of these companies save for some exceptions. Our directors have discretion under our amended and restated
memorandum and articles of association to determine whether or not, and under what conditions, our corporate records may be inspected
by our shareholders, but are not obliged to make them available to our shareholders. This may make it more difficult for you to obtain
the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection
with a proxy contest.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Your
rights to pursue claims against the depositary as a holder of ADSs are limited by the terms of the deposit agreement.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
the deposit agreement, any action or proceeding against or involving the depositary, arising out of or based upon the deposit agreement
or the transactions contemplated thereby or by virtue of owning the ADSs may only be instituted in a state or federal court in New York,
New York, and you, as a holder of our ADSs, will have irrevocably waived any objection which you may have to the laying of venue of any
such proceeding, and irrevocably submitted to the exclusive jurisdiction of such courts in any such action or proceeding. Notwithstanding
the foregoing, the depositary may, in its sole discretion, elect to institute any action, controversy, claim or dispute directly or indirectly
based on, arising out of or relating to the deposit agreement or the ADRs or the transactions contemplated thereby in any competent court
in the Cayman Islands, Hong Kong, the People&#8217;s Republic of China and/or the United States, or, by having such disputes referred
to and finally resolved by an arbitration either in New York, New York or in Hong Kong, subject to certain exceptions solely related
to the aspects of such claims that are related to U.S. federal securities law, in which case the resolution of such aspects may, at the
option of such registered holder of the ADSs, remain in state or federal court in New York, New York. Also, we may amend or terminate
the deposit agreement without your consent. If you continue to hold your ADSs after an amendment to the deposit agreement, you agree
to be bound by the deposit agreement as amended. See &#8220;Item 12. Description of Securities Other Than Equity Securities-American
Depositary Shares&#8221; for more information.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ADSs
holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable
outcomes to the plaintiff(s) in any such action.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
deposit agreement governing the ADSs representing our ordinary shares provides that, to the fullest extent permitted by applicable law,
ADSs holders waive the right to a jury trial of any claim they may have against us or the depositary arising out of or relating to our
shares, the ADSs or the deposit agreement, including any claim under the U.S. federal securities laws. The waiver to right to a jury
trial of the deposit agreement is not intended to be deemed a waiver by any holder or beneficial owner of ADSs of our or the depositary&#8217;s
compliance with the U.S. federal securities laws and the rules and regulations promulgated thereunder.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
we or the depositary opposed a jury trial demand based on the waiver, the court would determine whether the waiver was enforceable based
on the facts and circumstances of that case in accordance with the applicable state and federal law. The enforceability of a contractual
predispute jury trial waiver in connection with claims arising under the federal securities laws has not been finally adjudicated by
the United States Supreme Court. However, we believe that a contractual pre-dispute jury trial waiver provision is generally enforceable,
including under the laws of the State of New York, which govern the deposit agreement. In determining whether to enforce a contractual
pre-dispute jury trial waiver provision, courts will generally consider whether a party knowingly, intelligently and voluntarily waived
the right to a jury trial. We believe that this is the case with respect to the deposit agreement and the ADSs. It is advisable that
you consult legal counsel regarding the jury waiver provision before investing in the ADSs.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
you or any other holders or beneficial owners of ADSs bring a claim against us or the depositary in connection with matters arising under
the deposit agreement or the ADSs, including claims under federal securities laws, you or such other holder or beneficial owner may not
be entitled to a jury trial with respect to such claims, which may have the effect of limiting and discouraging lawsuits against us and/or
the depositary. If a lawsuit is brought against us and/or the depositary under the deposit agreement, it may be heard only by a judge
or justice of the applicable trial court, which would be conducted according to different civil procedures and may result in a different
outcome than a trial by jury would have had, including results that could be less favorable to the plaintiff(s) in any such action.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Certain
judgments obtained against us by our shareholders may not be enforceable.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are a Cayman Islands exempted company with limited liability and substantially all of our assets are located outside of the United States.
Substantially all of our current operations are conducted in China. In addition, most of our current directors and 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. Further, our directors and officers are located outside of the Cayman Islands. Service of court documents on a Cayman Islands
company can be effected by serving the documents at the Company&#8217;s registered office and it may be possible to enforce foreign judgments
in the Cayman Islands against a Cayman Islands company, subject to some exceptions. However, if investors wish to serve documents on
and/or enforce foreign judgments against our directors and officers, they will need to ensure that they comply with the rules of the
jurisdiction where the directors and officers are located. 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 U.S. federal securities laws or otherwise. Even if you are successful in bringing an action 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, depending
on where the directors and officers are located.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Walkers
(Hong Kong), our counsel as to Cayman Islands law, has informed us that there is no guarantee that the courts of the Cayman Islands will
automatically allow shareholders of our company to originate actions in the Cayman Islands based upon securities laws of the United States.
In addition, there is no guarantee with regard to Cayman Islands law that a judgment obtained from the U.S. courts under civil liability
provisions of U.S. securities laws will be determined by the courts of the Cayman Islands as penal or punitive in nature. If such a determination
is made, the courts of the Cayman Islands will not recognize or enforce a judgment predicated upon the civil liability provisions of
the federal securities laws of the United States or any state, so far as the liabilities imposed by those provisions are taxes, fines
or penal in nature, or otherwise contrary to public policy, including punitive damages. Walkers (Hong Kong) has further informed us that
although there is no statutory enforcement in the Cayman Islands of judgments obtained in the federal or state courts of the United States
(and the Cayman Islands are not a party to any treaties for the reciprocal enforcement or recognition of such judgments), a judgment
obtained in such jurisdiction will be recognized and enforced in the courts of the Cayman Islands at common law, without any reexamination
of the merits of the underlying dispute, by an action commenced on the foreign judgment debt in the Grand Court of the Cayman Islands,
provided such judgment (a) is given by a foreign court of competent jurisdiction, (b) imposes on the judgment debtor a liability to pay
a liquidated sum for which the judgment has been given, (c) is final, (d) is not in respect of taxes, a fine or a penalty, and was not
obtained in a manner and is not of a kind the enforcement of which is contrary to natural justice or the public policy of the Cayman
Islands.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
PRC legal advisor, Merits &amp; Tree Law Offices, advises us that there is uncertainty as to whether the courts of the PRC would enforce
judgments of United States courts or Cayman courts obtained against us or these persons predicated upon the civil liability provisions
of the United States federal and state securities laws. Our PRC legal advisor further advises us that the recognition and enforcement
of foreign judgments are provided for under PRC Civil Procedures Law. PRC courts may recognize and enforce foreign judgments in accordance
with the requirements of PRC Civil Procedures Law based either on treaties between China and the country where the judgment is made or
on reciprocity between jurisdictions. China does not have any treaties or other form of reciprocity with the United States or the Cayman
Islands that provides for the reciprocal recognition and enforcement of foreign judgments. In addition, according to the PRC Civil Procedures
Law, courts in the PRC will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment
violates the basic principles of PRC law or national sovereignty, security or public interest. As a result, it is uncertain whether and
on what basis a PRC court would enforce a judgment rendered by a court in the United States or in the Cayman Islands.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
voting rights of holders of ADSs are limited by the terms of the deposit agreement, and you may not be able to exercise your right to
direct the voting of your ordinary shares underling your ADSs.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Holders
of ADSs do not have the same rights as our registered shareholders. As a holder of our ADSs, you will not have any direct right to attend
general meetings of our shareholders or to cast any votes at such meetings. You will only be able to exercise the voting rights which
attach to the ordinary shares underlying your ADSs indirectly by giving voting instructions to the depositary in accordance with the
provisions of the deposit agreement. Under the deposit agreement, you may vote only by giving voting instructions to the depositary,
as holder of the ordinary shares underlying your ADSs. Upon receipt of your voting instructions, the depositary may try to vote the ordinary
shares underlying your ADSs in accordance with your instructions. If we ask for your instructions, then upon receipt of your voting instructions,
the depositary will try to vote the underlying ordinary shares in accordance with those instructions. If we do not instruct the depositary
to ask for your instructions, the depositary may still vote in accordance with instructions you give, but it is not required to do so.
You will not be able to directly exercise any right to vote with respect to the underlying ordinary shares unless you withdraw the shares
and become the registered holder of such shares prior to the record date for the general meeting. When a general meeting is convened,
you may not receive sufficient advance notice of the meeting to enable you to withdraw the shares underlying your ADSs and become the
registered holder of such shares prior to the record date for the general meeting to allow you to attend the general meeting and to vote
directly with respect to any specific matter or resolution to be considered and voted upon at the general meeting. In addition, under
our post-offering articles of association, for the purposes of determining those shareholders who are entitled to attend and vote at
any general meeting, our directors may close our register of members and/or fix in advance a record date for such meeting, and such closure
of our register of members or the setting of such a record date may prevent you from withdrawing the ordinary shares underlying your
ADSs and becoming the registered holder of such shares prior to the record date, so that you would not be able to attend the general
meeting or to vote directly. Where any matter is to be put to a vote at a general meeting, the depositary will notify you of the upcoming
vote and to deliver our voting materials to you. We cannot assure you that you will receive the voting material in time to ensure you
can direct the depositary to vote your 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 your voting instructions. This means that you may not be able to exercise your
right to direct how the shares underlying your ADSs are voted and you may have no legal remedy if the shares underlying your ADSs are
not voted as you requested.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">You
may experience dilution of your holdings due to the inability to participate in rights offerings.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">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 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.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">You
may be subject to limitations on the transfer of your ADSs.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Your
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 it expedient in connection with the performance of its duties. The depositary may 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.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are an &#8220;emerging growth company,&#8221; as defined in the JOBS Act, and we may take advantage of certain exemptions from requirements
applicable to other public companies that are not emerging growth companies, including, most significantly, not being required to comply
with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 for so long as we remain an emerging growth
company. As a result, if we elect not to comply with such auditor attestation requirements, our investors may not have access to certain
information they may deem important.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions
applicable to U.S. domestic public companies.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">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:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">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&#894;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations
                                            in respect of a security registered under the Exchange Act&#894;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            sections of the Exchange Act requiring insiders to file public reports of their stock ownership
                                            and trading activities and liability for insiders who profit from trades made in a short
                                            period of time&#894; and</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            selective disclosure rules by issuers of material nonpublic information under Regulation
                                            FD.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
will be required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we intend to publish
our results on a quarterly basis as press releases, distributed pursuant to the rules and regulations of the NYSE. Press releases relating
to financial results and material events will also be furnished to the SEC on Form 6-K. However, the information we are required to file
with or furnish to the SEC will be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic
issuers. As a result, you may not be afforded the same protections or information that would be made available to you were you investing
in a U.S. domestic issuer.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
an exempted company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate
governance matters that differ significantly from the New York Stock Exchange corporate governance listing standards. These practices
may afford less protection to shareholders than they would enjoy if we complied fully with the New York Stock Exchange corporate governance
listing standards.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
a Cayman Islands exempted company listed on the New York Stock Exchange, we are subject to New York Stock Exchange corporate governance
listing standards. However, New York Stock Exchange 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, which is our home country, may differ significantly
from the New York Stock Exchange corporate governance listing standards. To the extent we choose to follow home country practice in the
future, our shareholders may be afforded less protection than they otherwise would enjoy under New York Stock Exchange corporate governance
listing standards applicable to U.S. domestic issuers.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Although
the matter is not entirely clear, we were likely a passive foreign investment company (a &#8220;PFIC&#8221;) for our 2022 taxable year,
and we will likely be a PFIC for 2023 and our future taxable years, which could result in adverse U.S. federal income tax consequences
to U.S. taxpayers.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
general, a non-U.S. corporation will be a PFIC for U.S. federal income tax purposes for any taxable year in which (i) 75% or more of
its gross income consists of passive income or (ii) 50% or more of the average value of its assets (generally determined on a quarterly
basis) consists of assets that produce, or are held for the production of, passive income. For purposes of the above calculations, a
non-U.S. corporation that directly or indirectly owns at least 25% by value of the equity interests of another corporation or partnership
is treated as if it held its proportionate share of the assets of the other corporation or partnership and received directly its proportionate
share of the income of the other corporation of partnership. Passive income generally includes interest, income equivalent to interest,
rents, dividends, royalties and gains from financial investments.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">It
is not entirely clear how the PFIC rules should apply to a company with a business such as ours. For example, although the loans issued
through our trust plans are shown in their entirety as our assets on our consolidated balance sheet, it is not clear whether for purposes
of the PFIC rules we should be treated as owning only our subordinated interests in the trusts plans, and earning only the portion of
the trust plans&#8217; interest income attributable thereto. If we are treated as owning only the subordinated units and the portion
of the trust plans&#8217; loans attributable thereto, our PFIC status for any taxable year may depend on the relative values of the loans
we are treated as owning and our other passive assets on the one hand, and the value of our goodwill (to the extent attributable to the
services we provide) and fee receivables on the other hand. The extent to which our goodwill should be treated as an active asset is
not entirely clear. Moreover, the value of our goodwill may be determined by reference to our market capitalization, which has been,
and may continue to be, volatile. In addition, we provide loan facilitation, loan administration and other services in connection with
the loans issued by our trust plans and we charge our trust plans service fees that are eliminated in, and therefore not shown on, our
consolidated income statement. Therefore, our PFIC status for any taxable year may depend on the relative amounts of our fee and interest
income (which may be less than the amount of interest income shown on our income statement, if we are treated as owning only a portion
of the trusts&#8217; loans). Furthermore, it is not entirely clear whether a portion of the interest income earned by the trust plans
could be treated as payable in part for services to the borrowers. Although our PFIC status for any taxable year is not entirely clear,
based on the composition of our income and assets and the manner in which we currently operate our business, we were likely a PFIC for
our 2022 and prior taxable years, and will likely be a PFIC for our 2023 taxable year and future taxable years, subject to the discussion
in the subsequent paragraph regarding the Active Financing Exception, as defined below. U.S. taxpayers should consult their tax advisors
regarding the proper application of the PFIC rules to us and our PFIC status for any taxable year.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
purposes of the PFIC rules &#8220;passive income&#8221; is defined by way of a cross-reference to Section 954(c) of the Internal Revenue
Code of 1986, as amended (the &#8220;Code&#8221;), which applies for purposes of the Code&#8217;s &#8220;controlled foreign corporation&#8221;(&#8220;CFC&#8221;)
rules. A different provision under the CFC rules (namely Section 954(h) of the Code) sets forth an exception for interest income derived
by &#8220;eligible CFCs&#8221; that are &#8220;predominantly engaged&#8221; in the active conduct of a financing or similar business
(the &#8220;Active Financing Exception&#8221;). Because the Active Financing Exception addresses eligible CFCs, there has been uncertainty
as to whether it could apply to determine the PFIC status of companies that are not CFCs, such as our company. Proposed Treasury regulations
promulgated in 2019 (the &#8220;2019 Proposed Regulations&#8221;) provided that the Active Financing Exception could apply to determine
the PFIC status of such companies. However, in 2020 these regulations were finalized (the &#8220;2020 Final Regulations&#8221;) without
addressing the Active Financing Exception. Although the 2020 Final Regulations are silent on the availability of the Active Financing
Exception to companies like us, in the preamble to the 2020 Final Regulations Treasury expressed its position that under current law
the Active Financing Exception does not apply in determining the PFIC status of a company that is neither a CFC nor a bank. The 2020
Final Regulations apply to taxable years of shareholders beginning on or after January 14, 2021. Treasury indicated in the preamble to
the 2020 Final Regulations that taxpayers can rely on the 2019 Proposed Regulations to apply the Active Financing Exception for any open
taxable year ending on or before December 31, 2020. Concurrently with the issuance of the 2020 Final Regulations, Treasury issued proposed
regulations (the &#8220;2020 Proposed Regulations&#8221;) that would state explicitly that the Active Financing Exception is available
only if the tested non-U.S. corporation is a bank. The 2020 Proposed Regulations have not been finalized yet. Based on the foregoing,
our ADS holders and shareholders (i) generally are permitted to apply the Active Financing Exception for a taxable year ending on or
before December 31, 2020 (provided that we in fact satisfied the exception&#8217;s conditions for the relevant year), (ii) should expect
that the Internal Revenue Service will not agree with a return positon that applies the Active Financing Exception for any subsequent
taxable year, and (iii) should be aware that if the 2020 Proposed Regulations are finalized in their current form they will not be able
to take the position that the Active Financing Exception applies for any taxable year to which the regulations will apply. If we were
&#8220;predominantly engaged&#8221; in the active conduct of a financing or similar business (as defined for purposes of the Active Financing
Exception) and met all of the exception&#8217;s requirements then we would not be a PFIC for any taxable year with respect to which taxpayers
validly applied the Active Financing Exception, if applicable. U.S. owners of our ADSs or ordinary shares should be aware that we have
not determined whether these requirements were in fact satisfied. Moreover, if any of our trust plans is treated as a partnership for
U.S. federal income tax purposes, and if such trust&#8217;s senior unit holders are treated as owning interests in such partnership other
than as creditors, the characterization of our interest income as active under the Active Financing Exception may also depend, in part,
on whether we owned 25% or more of the value of such trust for the relevant taxable years. U.S. owners of our ADSs or ordinary shares
should consult their tax advisers as to whether the Active Financing Exception could apply to us with respect to any taxable year prior
to the finalization of the 2020 Proposed Regulations, and whether it is advisable to take this position in light of Treasury&#8217;s
views, as described above.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A
U.S. taxpayer that owns our ADSs or ordinary shares during any year in which we are a PFIC will generally be subject to adverse U.S.
federal income tax consequences. See &#8220;Item 10. Additional Information&#8212;E. Taxation&#8212;Material U.S. Federal Income Tax
Considerations&#8212;Passive Foreign Investment Company&#8221; in this annual report. U.S. taxpayers should consult their tax advisers
regarding our PFIC status for any taxable year and the tax considerations relevant to owning shares or ADSs of a PFIC.</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_011"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM
4. INFORMATION ON THE COMPANY</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_012"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.A.
History and Development of the Company</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
started our operations in 1999 through Fanhua Chuang Li Information Technology (Shenzhen) Co., Ltd., which became our onshore holding
company of the main operating subsidiaries in the PRC. In 2000, we formed our wholly owned Hong Kong subsidiary, China Financial Services
Group Limited (&#8220;CFSGL&#8221;), as the offshore holding company of our PRC subsidiaries. In 2006, we were spun off from Fanhua Inc.,
a company listed on NASDAQ (symbol: FANH), and formed Sincere Fame International Limited (&#8220;SFIL&#8221;) under the laws of British
Virgin Islands as the holding company of CFSGL. In January 2014, CNFinance Holdings Limited was incorporated under the laws of Cayman
Islands. CNFinance Holdings Limited became our holding company through share exchanges with the shareholders of SFIL in March 2018. We
conduct our business in the PRC primarily through Shenzhen Fanhua United Investment Group Co., Ltd., Guangzhou Heze Information Technology
Co., Ltd., and their subsidiaries and consolidated affiliated entities.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
November 2018, we completed an initial public offering of 7,060,460 ADSs (including the ADSs sold upon the exercise of the over-allotment
option granted to the underwriters), representing 141,209,200 of our ordinary shares. On November 7, 2018, our ADSs were listed on the
New York Stock Exchange under the symbol &#8220;CNF.&#8221;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
principal executive offices of our main operations are located 44/F, Tower G, No. 16 Zhujiang Dong Road, Tianhe District, Guangzhou City,
Guangdong Province 510620, People&#8217;s Republic of China. Our telephone number at this address is +86 (020) 6231-6688. Our registered
office in the Cayman Islands is located at the offices of Walkers Corporate Limited, 190 Elgin Avenue, George Town, Grand Cayman KY1-9008,
Cayman Islands. SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding
issuers that file electronically with the SEC on www.sec.gov. You can also find information on our website, http://ir.cashchina.cn/.</span></p><div>

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</div><div><a id="a_013"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.B.
Business Overview</span></p><div>

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</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Overview</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are a leading home equity loan service provider in China. We, through our operating subsidiaries in China, conduct business by
connecting demands and supplies through collaborating with sales partners and trust companies under the trust lending model, and
local channel partners and commercial banks under the commercial bank partnership model. Our sales partners and local channel
partners are responsible for recommending micro- and small-enterprise (&#8220;MSE&#8221;) owners with financing needs to us and we
introduce eligible borrowers to licensed financial institutions with sufficient funding sources including trust companies and
commercial banks who will then conduct their own risk assessments and make credit decisions. We have established a national network
of 87 branches and sub-branches in over 50 cities in China. In 2020 and 2021, we originated home equity loans with an aggregate
principal amount of RMB8.8 billion and RMB12.8 billion, respectively, representing an increase of 45.2%. In 2022, we facilitated
loans of RMB14.7 billion, representing an increase of 14.8% as compared to 2021.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
primary target borrower segment is MSE owners who own real properties in Tier 1 and Tier 2 and other major cities in China. We originated
home equity loans for 17,703, 22,060 and 23,923 (including 3,891 under the commercial bank partnership model) borrowers in 2020, 2021
and 2022, respectively. These MSE owners typically have quick cash flow turnover from their business operations with high demand for
working capital. Their financing needs are often unpredictable, time-sensitive and frequent. We believe our target borrowers are underserved
by traditional financial institutions due to various reasons. Traditional financial institutions often impose stringent and inflexible
loan application requirements designed for large corporations, making it difficult for MSE owners to meet such requirements. In addition,
time-consuming and cumbersome requirements often limit MSE owners&#8217; ability to meet their imminent financing needs. Moreover, unlike
in the United States where home equity loans commonly serve as a financing alternative, traditional lenders in China, such as banks,
typically do not grant loans secured by second lien interests and are generally less incentivized to introduce innovative home equity
loan products.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
aim to serve our target borrowers by facilitating home equity loans and providing tailored services. Our standardized and integrated
online and offline credit application and assessment process shorten the time of loan disbursement, providing expeditious financing solutions
to MSE owners. We offer home equity loans to MSE owners that allow them to repay only the interests by installments and repay the full
principal amount when due. In addition, we also facilitate home equity loans to MSE owners in the form of installment loans with a tenor
typically ranging from one to three years, assisting borrowers&#8217; short-term and long-term business planning. In 2020, 2021 and 2022,
the average tenor of the home equity loans we originated was 24, 15 and 12 months with the weighted average effective interest rate (inclusive
of interests and financing service fees, if applicable, payable by the borrowers) of 17.3% , 16.5% and 17.2% per annum, respectively.
Such loan products are secured by first or second lien interests on real properties. 56.3%, 60.5% and 59.8%, of our total home equity
loan origination volume in 2020, 2021 and 2022, respectively, was secured by second lien interests. Depending on the value of the collateral
and the creditworthiness of the borrower, we offer flexible loan principal typically ranging from RMB100,000 to RMB5,000,000.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
risk mitigation mechanism is embedded in the design of our loan products, supported by an integrated online and offline process focusing
on risks of both borrowers and collateral and further enhanced by effective post-loan management procedures. Our business infrastructure
supports our operations by providing various offline services, such as on-site visits, interaction with local real property bureau and
debt collection. Collateral for loans we facilitate is geographically dispersed in Tier 1 and Tier 2 and other major cities in China.
We offer home equity loan products that allow borrowers to repay only the interests by installments and repay the full principal amount
when due. In addition, we also provide home equity loan products that require monthly payments comprising principal and interests repayments,
which permits us to assist our trust company partners to monitor borrowers&#8217; credit status. Our practical risk assessment focuses
on both credit risks of borrowers and quality of the collateral. We have also established strict guidelines on the characteristics and
quality of collateral, including, among others, an LTV ratio capped at 70%.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Through
trust lending model we collaborate with our trust company partners, who are well-established trust funds in China with sufficient funding
sources and have licenses to engage in lending business nationwide. This structure provides us with stable funding sources. Under the
trust lending model, our trust company partners set up trust plans and acquire funding from their investors. Trust plans are typical
investment vehicles in which investors participate by subscribing to trust units and receive a return as set out in subscription agreements.
Each trust plan issues multiple trust products which are funded with senior and subordinated units at a pre-determined ratio with a term
of one to three years. The loans funded by the trust products, however, have terms typically ranging from one to three years. For details
of matching our funding sources and loans we facilitate, please refer to &#8220;Item 4. Information on the Company&#8212;B. Business
Overview&#8212;Our Products&#8212;Matching of Terms of Funding Sources and Loans.&#8221; The contractual ratio of the senior units and
subordinated units of trust plans or products is determined pursuant to our collaboration agreements with our trust company partners,
which set the upper limit to such ratio at a range of no higher than 3:1. For details, please refer to &#8220;Item 4. Information on
the Company&#8212;B. Business Overview&#8212;Our Products&#8212;Terms of the Trust Plans&#8221; and &#8220;Item 4. Information on the
Company&#8212;B. Business Overview&#8212;Our Products&#8212;Trust Lending&#8212;Funding Partners.&#8221; As part of the collaboration
we have with our trust company partners, we are required to subscribe to all of the subordinated units under most trust plans. By subscribing
to subordinated units, we are entitled to the residual value from trust plans after certain payments to senior unit holders, trust company
partners and third-party service providers. Payments to senior unit holders consist of expected investment returns which are usually
paid quarterly and principal amounts which are repaid upon borrowers&#8217; payments of underlying loans. We as subordinated unit holders
are paid each quarter after the quarterly payment of interest returns to senior unit holders and upon maturity after the payment of principal
amounts to senior unit holders. Our financing costs for the senior units, excluding the trust administrative fees, ranged from 6.0% to
11.5% per annum of the issuance number of senior units in 2022, and our financing costs for subordinated units under repurchase arrangements
with financial institutions was 10.5% to 13.8% per annum of the transfer prices for such subordinated units in 2022. Our cost of the
subordinated units as measured by the investment amount was RMB3,045.2 million, RMB2,919.4 million and RMB2,627.4 million (US$380.9 million),
as of December 31, 2020, 2021 and 2022, respectively. Our investment return from the subordinated units was RMB658.8 million, RMB578.7
million and RMB381.3 million (US$55.3 million) in 2020, 2021 and 2022, respectively. We are designated as the service provider and provide
post-loan services such as payment monitoring, debt collection and release of collateral as the need arises. We receive a performance-based
service fee up to 7% per annum of the size of the trust plan charged to the trust plans for the services we provide.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
December 2018, we introduced our collaboration model to optimize our collaboration with trust companies. Sales partners recommend borrowers
to us by direct cooperation with us or joining limited partnerships. By contributing an amount equal to 10% to 25% of the loans issued
to the borrowers introduced by them, sales partners receive incentive fees upon a pre-agreed schedule and other conditions. For details,
please refer to &#8220;Item 4. Information on the Company&#8212;B. Business Overview&#8212;Our Products&#8212;Collaboration Model.&#8221;
As of the date of this annual report, we have around 1,978 contracted sales partners in total, among which around 1,284 are effective
sales partners.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
order to diversify our financing channels to better serve the demands of MSE owners with credible funding sources, we started to collaborate
with commercial banks in 2021. Under this commercial bank partnership model, we recommend borrowers to commercial banks who are responsible
for reviewing and approving the loan.We provide loan facilitation services including introducing borrowers, initial credit assessment,
facilitating loans from the banks to borrowers, and providing technical assistance, and assist commercial banks with post-loan managements.
We charge a service fee equal to a pre-agreed percentage of each loan we introduce for our afore-mentioned loan facilitation services.
We provide guarantees against the potential defaults and such contractual guarantee arrangement is underwritten by the guarantor company
to which we provide back-to-back guarantee at request. For details, please refer to &#8220;Item 4. Information on the Company&#8212;B.
Business Overview&#8212;Our Products&#8212;Commercial Bank Partnership.&#8221;</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
acquire our borrowers primarily through our sales partners under the trust lending model, and local channel partners including corporate
and individual offline channels and telemarketing companies under the commercial bank partnership model. Through our sales partners,
local channel partners and our established network and branch offices, we reach prospective MSE borrowers and assess their creditworthiness
and value of collaterals, and if these borrowers meet our requirements, we refer them to our trust company and commercial bank partners
who make their own independent credit assessment and decisions before directly lending to qualified borrowers. We help trust companies
and commercial banks sign loan agreements with borrowers directly, and assist borrowers in pledging collateral for the benefit of trust
companies and commercial banks.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
2020, 2021 and 2022, over 99.5% of our borrowers were introduced to us by our sales partners under the collaboration model. For details,
please refer to &#8220;Item 4. Information on the Company&#8212;B. Business Overview&#8212;Our Products&#8212;Collaboration Model.&#8221;
In 2022, 100.0% of borrowers introduced to commercial banks were acquired through local channel partners including corporate and individual
offline channels and telemarketing companies.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
a lesser extent, we also had a direct lending model through which we lend directly under our small loan licenses to borrowers with our
own funding or funding we acquire from transfer of rights to earnings in loans principal, interest and financing service fee receivables
to third parties with a repurchase arrangement.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
details of our repurchase agreements with third parties under both the trust lending and direct lending models, please refer to &#8220;Item
4. Information on the Company&#8212;B. Business Overview&#8212;Our Products&#8212;Funding Sources&#8221; and &#8220;Item 4. Information
on the Company&#8212;B. Business Overview&#8212;OurProducts&#8212;Small Loan Direct Lending.&#8221; We generally rely on and will continue
to rely primarily on our trust lending model and commercial bank partnership model, which are supplemented with our direct lending model.</span></p><div>

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</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
Borrowers</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Borrower
Base</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
strategically target MSE owners who own properties in Tier 1 and Tier 2 and other major cities in China. These MSE owners typically have
quick cash flow turnover from their business operations with high demand for working capital. MSE owners often also have financing needs
that are unpredictable, time-sensitive and frequent. We believe target borrowers are underserved by traditional financial institutions,
whose often stringent and inflexible loan application requirements that are designed for large corporations make it difficult for MSE
owners to fulfill. In addition, time-consuming and cumbersome requirements often limit MSE owners&#8217; ability to meet their imminent
financing need.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
addition, unlike in the United States where home equity loans serve as a common financing alternative, traditional lenders in China such
as banks typically do not grant loans secured by second lien interests. Providing second lien home equity loans or title loans is limited
for commercial banks in China, given the high level of regulatory supervision from relevant regulatory authorities. These products have
instead been developed by non-traditional financial institutions like us to fulfill the unserved demand.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
originated home equity loans for 17,703, 22,060 and 23,923(including 3,891 under the commercial bank partnership) borrowers in 2020,
2021 and 2022, respectively. Our borrowers have presence in over 70 Tier 1 and Tier 2 and other major cities in China and are geographically
dispersed.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Borrower
Acquisition</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
the Collaboration Model, we acquire our borrowers primarily through our sales partners. In 2020, 2021 and 2022, over 99.5% of our borrowers
were introduced to us by our sales partners under the collaboration model. For details, please refer to &#8220;Item 4. Information on
the Company&#8212;B. Business Overview&#8212;Our Products&#8212;&#8212;Collaboration Model.&#8221;</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
our partnership with commercial banks, we have diversified our borrowers&#8217; profiles with more competeitve pricing and efficiency.
Borrowers are engaged through our local offices and word-of-mouth marketing. Our local staff works with various local channel partners
including corporate and individual offline channels and telemarketing companies. We align the incentive of our local staff by offering
a commission equal to a pre-determined fixed rate of the loan origination amount.</span></p><div>

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</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
Products</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
home equity loans we facilitate permit borrowers to borrow relatively large amounts up to 70% LTV ratio. Our weighted average LTV ratio
was 54.6%, 58.5% and 60.0%, for home equity loans originated in 2020, 2021 and 2022, respectively. In 2020, 2021 and 2022, we originated
home equity loans for trust companies of RMB8.8 billion, RMB12.8 billion and RMB12.2 billion (US$1.8 million), respectively. And we introduced
loans of RMB2.5 billion to commercial banks in 2022.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
home equity loans we facilitate are typically secured by apartments, houses or commercial properties owned by borrowers. Unlike most
traditional financial institutions, the home equity loans we facilitate can be secured with second lien interests on top of the first
lien interests with banks, offering additional financing to MSE owners not otherwise readily available to them.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
facilitate home equity loans with flexible tenors typically ranging from one to three years enabling borrowers&#8217; short-term and
long-term business planning. In 2020, 2021 and 2022, the average tenor of the home equity loans we originated was 24, 15 and 12 months,
respectively. The shorter average tenor of outstanding loans in 2021 than that of 2020 is mainly due to the fact that the majority of
loans we facilitated in 2021 were short-term loans with a one-year maturity. The shorter average tenor of outstanding loans in 2022 than
that of 2021 is mainly attributable to the fact that the majority of loans we facilitated in 2022 were short-term loans with a one-year
maturity. The difference in tenor of home equity loans originated over the past three years was mainly driven by the reasons described
above and not driven by type of collateral, type of borrower, credit quality or some other factors.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
home equity loans we originate under trust lending model are also competitively priced, with a weighted average effective interest rate
of 17.3% 16.5% and 17.2% per annum in 2020, 2021 and 2022, respectively. The interest rates of our loan product under commercial bank
partnership model ranged from 9.0% to 15.5%, which had attracted more borrowers with higher credit record. We offer home equity loan
products that allow borrowers to repay only the interests by installments and repay the full principal amount when due. In addition,
we also provide home equity loan products that require monthly payments comprising principal and interests repayments, making it easier
for borrowers to manage their cash flow and for us to timely monitor borrowers&#8217; creditworthiness. Borrowers are obligated to pay
directly to the trust plans in full the principal amount plus interest when due. We offer a flexible repayment schedule for installment
loans, including but not limited to (i) an equal monthly installment comprising principal and interests evenly distributed throughout
the life of the loan, (ii) a monthly installment comprising principal and interests in accordance with a pre-agreed step-down schedule,
where a borrower starts with a higher equal monthly installment that decreases after a defined period and (iii) a monthly installment
of interests only and full repayment of loan principal when due.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
foster our home equity loan business, we also provide bridge loan products, which are generally unsecured short-term loans, to pay off
borrowers&#8217; existing loans secured by real property. As a result, such real property will be released from existing loans and can
be used as collateral for the home equity loans we facilitate. Once borrowers obtain home equity loans facilitated by us, the bridge
loans granted by us will be repaid in full. We granted bridge loans of RMB86.4 million, RMB71.4 million and RMB99.64million(US$14.5 million)
in 2020, 2021 and 2022, respectively. We may continue to originate bridge loans going forward as the need arises.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Trust
Lending</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
July 2014, we began cooperating with trust companies to fund loans to borrowers through trust plans established in collaboration with
these trust companies. In December 2018, we have started to explore the collaboration model under which we collaborate with sales partners
who introduce borrowers and receive incentives.</span></p><div>

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</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Terms
of the Trust Plans</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pursuant
to our collaboration agreements, our trust company partners establish long-term trust plans which issue multiple trust products, ranging
from one to three years. Investors in these trust plans can subscribe to the trust units, which provides them with returns as provided
in the subscription agreements. Once borrowers&#8217; loan applications submitted through us are approved by trust company partners,
they enter into loan agreements with borrowers and trust plans disburse loan proceeds to borrowers directly. Borrowers are required to
repay the principal, interest and other fees, if applicable, directly to the account of the trust plan, and the trust company partner
as trustee of the trust plan distributes the funds to unit holders according to the trust agreements. We are designated as the service
provider for these trust plans, and in this role we assist our trust company partners acquire and screen borrowers and perform credit
assessment pursuant to collaboration agreements with our trust company partners. We are also responsible for providing loan facilitation
and post-loan management services for service fees charged directly to the trust plans.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Each
trust product issued under the long-term trust plan is funded with senior and subordinated units at a predetermined contractual structural
leverage ratio with the upper limit of no higher than 3:1. For details, please refer to &#8220;Item 4. Information on the Company&#8212;B.
Business Overview&#8212;Our Products&#8212;Trust Lending&#8212;Funding Partners.&#8221;</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
part of the collaboration we have with our trust company partners, we are required to subscribe to all of the subordinated units of each
trust product issued under most long-term trust plans. Our cost of the subordinated units as measured by the investment amount was RMB3,045.2
million, RMB2,919.4 million and RMB2,627.4 million (US$380.9 million), as of December 31, 2020, 2021 and 2022, respectively. The trust
plans typically pay senior unit holders an amount that equals (i) an expected rate of investment return, which is usually paid quarterly,
plus (ii) the principal amount invested, which is the prompt repayment to trust companies after borrowers made payments for the underlying
loans. The expected rate of investment return is provided in the subscription agreements of the senior units, to which we are not a party.
Such rate of investment return is usually determined by our trust company partners based on market conditions and presented as an estimate.
If the expected rate of investment return is not met, our trust company partners are not under any contractual obligation to top up for
any shortfalls while we as the subordinated unit holders are required to manage the underlying NPLs to make up the shortfalls pursuant
to our credit strengthening services. For details, please refer to &#8220;Item 4. Information on the Company&#8212;B. Business Overview&#8212;Our
Products&#8212;Credit Strengthening Services.&#8221; We as subordinated unit holders are paid each quarter after the quarterly payment
of investment returns to senior unit holders and upon maturity after the payment of principal amounts to senior unit holders. The trust
company partner is responsible for administering the trust plan and is paid a trust administrative fee.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are responsible for maintaining the asset quality and receive a performance-based service fee of up to 7% per annum of the size of the
trust plan for the services we provide, which decreases with the growth of percentage of NPLs in the amount of loans we facilitated.
We as the subordinated unit holder also retain any residual value in trust plans after deducting (i) repayment of principal amount invested
by senior unit holders, (ii) financing costs for the senior units, which primarily consist of the expected rate of return to the senior
unit holders, (iii) administrative fee payments to trust companies and certain fee payments to third-party service providers (mainly
depositary fees charged by the banks) and (iv) a performance-based service fee to us as service provider of up to 7% per annum of the
size of the trust plan. Our financing costs for the senior units, excluding the trust administrative fees, ranged from 6.0% to 11.5%
per annum of the issuance number of senior units in 2022.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
received performance-based fee payments of RMB505.9 million, RMB440.1 million and RMB446.0 million (US$64.7 million), in 2020, 2021 and
2022, respectively. Our investment return from the subordinated units was RMB658.8 million, RMB578.7 million and RMB381.3 million (US$55.3
million) for the same periods.</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

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</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Credit
Strengthening Services</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have been working with FOTIC to implement the 2018 FOTIC Funding Arrangements and implementing our credit strengthening services since
2018. Under the 2018 FOTIC Funding Arrangements, when there is an NPL under a trust product, we, as the subordinated unit holder, are
required to adopt one of the following measures to ensure sufficient capital to repay the principal amount and the agreed financing costs
for the senior units, which primarily consist of expected rate of investment return to the senior unit holders:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">purchase
                                            NPLs funded with senior units in an amount equal to the outstanding loan principal and interests;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">purchase
                                            additional subordinated units in an amount sufficient to cover the outstanding loan principal
                                            and interests of the NPLs; or</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">replace
                                            such NPLs with non-delinquent loans or equal amount funded with our subordinated units.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
the 2018 FOTIC Service Fee Structure, our service fee charged to a trust plan is performance-based and up to 7% per annum of the size
of the trust plan decreases with the growth of the NPLs in the loans we facilitated.</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Funding
Partners</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of the date of this annual report, we have formed partnerships with well-established trust companies under our trust lending model, including
FOTIC, Zhonghai Trust, Zhongyuan Trust, Bairui Trust, Hunan Chasing Trust, Shaanxi International Trust, Bohai Trust, Everbright Trust,
Shaanxi International Trust and National Trust. Through these collaborative partnerships, we have access to flexible funding of RMB7.7
billion sourced from the senior unit holders as of December 31, 2022. 69.3%, 62.1% and 62.3%, of the loans we originated in 2020, 2021
and 2022, respectively, were funded through FOTIC, mainly due to our familiarity and long-standing relationship with FOTIC. We also work
with other leading trust partners to diversify our funding sources.</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Funding
Sources</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
trust company partners have developed various trust plans to provide home equity loans to borrowers we acquire and recommend. For the
years ended December 31, 2020, 2021 and 2022, home equity loans we facilitated under the trust lending model amounted to RMB8.8 billion,
RMB12.8 billion and RMB12.2 billion (US$1.8 billion), respectively. Each trust plan issues multiple trust products which are funded with
senior and subordinated units at a predetermined ratio. The trust company partners may also transfer the underlying loans of trust products
with repurchase arrangements to third parties at a specified annual rate of return when the original trust products become due. We subscribe
to subordinated units in the trust plans through our wholly owned subsidiaries. Our financing costs for the senior units, excluding the
trust administrative fees, ranged from 6.0% to 11.5% per annum of the issuance number of senior units in 2022.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Each
trust plan sets a predetermined contractual structural leverage ratio between senior units and subordinated units. We may be required
to subscribe to additional subordinated units upon request of the trustee to maintain the contractual structural leverage ratio. To date,
we have not been obligated to purchase additional subordinated units under this requirement. Other than our obligation to maintain the
contractual structural leverage ratio or provide credit strengthening services, which is discussed in more details under &#8220;Item
4. Information on the Company&#8212;B. Business Overview&#8212;Our Products&#8212;Credit Strengthening Services,&#8221; we are not contractually
obligated to provide additional funding. There are no exceptions or reliefs available to the aforementioned additional funding obligation.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
fund our subscription of the subordinated units with (i) cash on hand and (ii) proceeds received through repurchase agreements with third
parties with respect to subordinated units. Pursuant to such agreements, we transfer to third parties our rights to earnings in subordinated
units up to an agreed investment return for a transfer price and are obligated to repurchase such right at a fixed repurchase price.
Under such agreements, we continue to bear the risk of loss on the subordinated units and enjoy the upside on any return above the agreed
investment return. The terms of our repurchase agreements may vary, such as obligating us to pay an expected investment return each quarter
and the principal amount on or before the maturity date or requiring us to pay a lump sum amount within a specified period of time (generally
within 360 days). In 2020, 2021 and 2022, we transferred our rights to earnings in subordinated units to a private equity fund and to
certain third parties.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
utilize multiple funding sources to support our business, some of which may be subject to challenges by regulatory authorities from time
to time under the evolving legal environment. For details, please refer to &#8220;Item 3. Key Information&#8212;D. Risk Factors&#8212;Risks
Related to Our Business&#8212;Some of our funding sources are highly regulated and are subject to the changing regulatory environment.
If any of the funding sources is deemed to violate the PRC laws and regulations, we may need to secure new funding, failure of which
may result in a material and adverse impact on our business, financial condition, results of operations and prospects.&#8221;</span></p><div>

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</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Matching
of Terms of Funding Sources and Loans</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
forecast our cash flows each month to determine our use and need of cash for the next month and take into account the amount of loans
becoming due, amount of trust products becoming due and target size of loan products to be facilitated. When our monthly cash flow forecasts
indicate a need for additional funding to ensure the matching of terms of funding sources and loans, we coordinate with our trust company
partners to acquire additional funding through the transfer of loans with repurchase arrangements or through other permitted means, such
as bridge loans. Under our trust lending model, once a trust product matures, the trustee strives to repay the expected rate of investment
return and principal to the senior unit holders. Under our previous credit strengthening services, we were required to make up for any
shortfalls if the proceeds from loans were less than the principal amount invested by the senior unit holders and the agreed financing
costs for the senior units, which primarily consist of the expected rate of investment return to the senior unit holders. We ceased to
provide such credit strengthening services since March 2018. The trust products set up under long-term trust plans usually have a term
of one to three years. The loans we facilitate have tenors typically ranging from one to three years. Historically, majority of the loans
we facilitated were repaid within the first two years.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
trust company partners have also implemented the pass-through repayment method in certain of the trust plans to help avoid the duration
mismatch. Under the pass-through repayment method, loan repayment proceeds are usually distributed to the senior unit holders on a monthly
basis to repay both the financing costs for the senior units and the principal amount invested by the senior unit holders after deducting
relevant fees. Under the pass-through repayment method, the principal amount invested in the trust products is repaid as the underlying
loans are repaid. As a result, terms of the underlying trust funding matched tenor of all loans we facilitated in 2020, 2021 and 2022.</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Collaboration
Model</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have switched to a collaboration business model to optimize the trust lending model since December 2018 to broaden our prospective borrower
bases. Under the collaboration model, we generally require sales partners to contribute from a range of 10% to 25% of the loan principal
they introduced (such contribution, the &#8220;CRMP&#8221;). The percentage of loan principal as the CRMP charged to sales partners is
mainly determined based on the sales partner&#8217;s business scale, risk control capabilities and liquidity of funds investigated by
us through market research and multiple negotiations with the local loan practitioners&#8217; association in various cities in China,
including four Tier 1 cities, key cities in the Pearl River Delta and the Yangtze River Delta. As of the date of this annual report,
we have 1,978 contracted sales partners in total, among which around 1,284 are effective sales partners. Under such collaboration model,
we will pay incentive fees, or collaboration cost, to each sales partner upon a pre-agreed schedule and conditions, which will be re-distributed
to the sales partners. The collaboration cost we pay to sales partners is an agreed percentage of the loan principal amount, calculated
by subtracting the project cost from interest and fees income received from borrowers. For each loan, the project cost is agreed between
us and sales partners. The project cost is typically between 10.0%-15.8% of the loan principal, and the percentage varies based on different
collaboration model types and the terms of the loan. The project cost in the loan agreement will not change once determined. The collaboration
cost is settled monthly as agreed in the collaboration agreement. We only pay the incentive fee to the sales partner according to the
pre-agreed schedule when the borrower repays the loan on time, in which case the sales partner is not obligated to return such incentive
fee, and the collaboration costs are not subject to reimbursement. The following chart illustrates a typical arrangement among sales
partners, borrowers, trust plans, trust plan investors and us.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><img alt="" src="image_001.jpg"/></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
provide a convenient and user-friendly transaction process, which is implemented through our standardized home equity loan application
procedures across our local offices. Our standardized transaction process under trust lending model is illustrated as below.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><img alt="" src="image_002.jpg"/><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Step
1: Sales partners recommend borrowers for loan application</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
transaction process begins with the submission of a loan application by a prospective borrower introduced by a sales partner either online
or at one of our local offices. The application asks for information such as the borrower&#8217;s identity card information, contact,
business and prospective collateral. The applicant typically also consents to access to his or her credit report generated by third parties
while submitting the application.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Step
2: Risk assessment</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">After
an application is submitted, our proprietary risk management system collects credit and valuation data from a number of internal and
external sources. We and our sales partners then proceed with our risk assessment involving both online and offline processes focusing
on both the creditworthiness of borrowers and quality of collateral. For details, please refer to &#8220;Item 4. Information of the Company&#8212;B.
Business Overview&#8212;Risk Management&#8212;Dual&#8212;factor risk assessment with integrated online and offline processes.&#8221;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Step
3: Credit decision</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Once
we have performed rigorous risk assessments on both applicant and collateral, we recommend qualified applicants with suggested loan principal
amount to our trust company partners who proactively conduct their own independent credit assessment and make credit decisions on the
loan applications we recommend. Specifically, our trust company partners are independently responsible for, reviewing loan applications
and verifying applicants&#8217; personal, business and collateral information collected by us through various procedures. Our trust company
partners are responsible for approving the loan application.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Step
4: Credit extension</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
trust company partners will make the credit decision based on its own credit assessment. We will notify the applicants once we receive
approvals from our trust company partners. We then assist the borrowers in signing loan agreements with the trust companies.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Step
5: Collateral pledge and CRMP collection</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
part of our services, we help the trust companies set up security interests on the collateral by assisting with relevant documentation
and registering security interests with local real property bureau. Once the process of collateral pledge is completed, sales partners
will need to submit CRMP for underlying loans.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Step
6: Loan disbursement</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
trust company partners sign loan agreements and confirm receipt of relevant title documents and perfected security interests before disbursement
of loan proceeds to the borrowers&#8217; bank accounts. Funding occurs promptly after the documentary conditions precedent to the settlement
are fulfilled.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Step
7: Post-loan management process</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are also designated as the service provider and provide post-loan management services to our trust company partners, including assisting
them in monitoring repayment activities and collateral status and performing debt collection in an event of default on behalf of the
trust companies. For details, please refer to &#8220;Item 4. Information of the Company&#8212;B. Business Overview&#8212;Risk Management&#8212;Effective
post-loan management procedures.&#8221; Once the loans are fully paid off, we assist the trust company partners release the collateral.</span></p><div>

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</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Sales
Partners</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
the event of loans issued to the borrowers acquired under such collaboration model are in default, the respective sales partners who
introduced such borrowers will share the credit risks with us by choosing from the following options, including (i)(1) full repayment
to us for the total unpaid principal and accrued and overdue interests under the respective loan agreement and acquiring respective credit
rights, (i)(2) repayment in installments to us for the total unpaid principal and accrued and overdue interests under the respective
loan agreement, and a payment of fund possession fee to us following a pre-determined schedule and acquiring respective credit rights
under each installments&#894; (ii) repayment to us for the unpaid principal and accrued and overdue interests under the respective loan
agreement on behalf of the borrower, and if the borrower pays the payments under the loan agreement, the repayment by the sales partner
on behalf of the borrower will be refunded to the sales partner&#894; or (iii) relinquishing the respective CRMPs for such loan. Upon
relinquishing its CRMPs, the sales partner is deemed to be released from its repayment obligations under the collaboration agreement.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">When
a loan defaults, we will inform the sales partner the overdue status of the loan through the mobile app and require the sales partners
to choose among the above-mentioned options to perform its repayment obligations within an agreed time table. When the sales partner
selects option (i)(1), we receive the payment for purchasing the outstanding defaulted loan including all outstanding principal and the
accrued and overdue interests, and we will refund the outstanding CRMPs to the sales partner. When the sales partner selects option (i)(2),
it repurchases the delinquent loan by installments with the purpose to repurchase the entire outstanding principal and the accrued and
overdue interests in the future. CRMPs will be refunded after entire amount of the overdue loan principal and interests are settled.
When the sales partner selects option (ii), it repays the overdue loan principal and interests for the borrower according to the borrower&#8217;s
repayment schedule. If borrower repays in the subsequent period, we need to return the payment from borrower to the sales partner according
to the collaboration agreement. If the sales partner chooses to fulfill the repayment obligation according to option (i)(1), (i)(2) or
(ii) above, it still maintains the rights to claim the collaboration cost (incentive fees) for the current period.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">When
the sales partner refuses to fulfill its repayment obligation according to option (i)(1), (i)(2) or (ii) above, and selects option (iii),
CRMPs related to the defaulted loan (or all CRMPs related to the specific sales partner if the CRMPs it provides can be shared in all
loans introduced under the collaboration agreement as described below) are surrendered to us. Upon the confiscation of CRMPs, the sales
partner is deemed to be released from its repayment obligations under the collaboration agreement, and the sales partner can no longer
claim the outstanding collaboration cost (incentive fees) of the referred loan.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
described above, the percentage of loan principal as the CRMP charged to sales partners is mainly determined based on the sales partner&#8217;s
business scale, risk control capabilities and liquidity of funds, as elaborated below.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Sales
partners who pay 10% of the loan principal as the CRMP are mainly loan service providers with strong risk control and management capabilities
in Tier 1 and Tier 2 cities. The sales partners are required to pay a minimum CRMP upfront and the CRMP put up by these sales partners
can be shared in all loans introduced, meaning that the CRMP can be used to offset all defaulting loans introduced by the sales partner.
In third- and lower-tier cities, the percentage of loan principal as the CRMP charged to this type of sales partners will be raised to
15%.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Sales
partners who pay 20% of the loan principal as the CRMP are mainly individual and smaller-scale loan service providers in Tier 1 and Tier
2 cities. Each CRMP put up by these sales partners can only be used to offset a specific loan in default. In third- and lower-tier cities,
the percentage of loan principal as the CRMP charged to this type of sales partners will be raised to 25%.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Sales
partners enter into strategic cooperation directly with us and contribute the CRMP directly to a designated account, which is fully refundable
upon repayment of the loan that the CRMP is associated with. If at any time the balance of CRMP provided by sales partners is lower than
the agreed percentage of the principal amount of the loans it introduced, the sales partner is required to make up the balance reach
the agreed CRMP percentage.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of December 31, 2022, the percentage of options (i)(1), (i)(2), (ii) and (iii) selected by the sales partners on defaulting loans accounted
for 8.3%, 73.9%, 3.7% and 14.1% respectively. As of December 31, 2021, the percentage of options (i)(1), (i)(2), (ii) and (iii) selected
by the sales partners on defaulting loans accounted for 19.0%, 59.8%, 15.2% and 6.0% respectively. The percentage of the option selected
is calculated based on the total loans principal amount (excluding any accrued interests) under each option selected by the sales partners
divided by the total loans principal amount (excluding any accrued interests) under all options selected by the sales partners. The percentage
of loans on which sales partner refused to fulfill its repayment obligation accounted for only 1.2% and 1.6% of the outstanding loan
principal including loans held for sale as of December 31, 2021 and 2022 respectively.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
believe such collaboration model will decrease our risk exposure. Since in the event that loans issued under the collaboration model
are in default, the respective sales partners will share the credit risks with us by choosing from the above-mentioned options. Besides,
the CRMPs from sales partners, by their nature, will also mitigate our exposure to credit losses.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Commercial
Bank Partnership</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
order to diversify our financing channels to better serve the demands of MSE owners with credible funding sources, we started to collaborate
with commercial banks in 2021, under which our commercial bank partners are responsible for reviewing and approving the loan while we
charge a service fee for loan facilitation services including introducing borrowers, initial credit assessment, facilitating loans from
the banks to borrowers, and providing technical assistance, and assist commercial banks with post-loan managements. Under this commercial
bank partnership model, we work with a guarantor company and provide matching services to our commercial bank partners for small and
micro enterprises borrowers who seek business loans in exchange for real estate properties as collateral. The borrowers are obliged to
mortgage their real estate properties to the commercial bank partner as collateral, while the guarantor is obliged to provide the guarantee
deposit and assist us with preliminary review of the borrower, other pre-loan inspections and forward transfer services of past due loans
as credit strengthing. Before making any decision, each of our commercial bank partner, the guarantor and ourselves will conduct a risk
assessment of the borrower and the commercial bank partner holds the ultimate power to approve or reject a borrower. Once the loan is
successfully granted by the commercial bank, we will receive a service fee and the guarantor company will receive a guarantee fee based
on a pre-determined schedule. We provide guarantees against the potential defaults and such contractual guarantee arrangement is underwritten
by the guarantor company to which we provide back-to-back guarantee at request. See &#8220;Item 3. Key Information&#8212;D. Risk Factors&#8212;Risks
Related to Our Business&#8212;If we are unable to achieve low delinquency ratio for loans originated by us, our business and results
of operations may be materially and adversely affected.&#8221; and &#8220;Item 3. Key Information&#8212;D. Risk Factors&#8212;Risks Related
to Our Business&#8212;If our or our trust company partners&#8217; or our commercial bank partners&#8217; risk management system fails
to perform effectively, such failure may materially and adversely impact our operating results.&#8221;</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
loan origination volume in 2022 under the commercial bank partnership model was RMB2,533.3 million and the outstanding loan principal
at the end of 2022 was RMB2,469.6 million. The Company offers loan facilitation services to the borrowers who have credit needs and the
commercial banks who originate loans directly, with the Company continuing to provide post-origination services to the borrowers over
the term of the loan agreement. As the Company is not the legal lender or borrower in the loan origination and repayment process, we
do not record loans principal, interest and financing service fee receivables arising from these loans nor interest-bearing borrowings
to the third-party commercial banks.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
standardized transaction process under the commercial bank partnership model is illustrated below.</span></p><div>

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</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Step
1: Borrower assessment</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">After
obtaining the list of qualified borrowers, we first perform due diligence on such borrowers and then share those customers&#8217; information
with the guarantor company we work with for its own risk assessment.</span></p><div>

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</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Step
2: Loan application referral</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">After
passing the guarantor&#8217;s risk assessment, the borrower will be introduced to our commercial bank partner. Such commercial bank partner
will perform its own risk assessment and the borrower may be rejected even if the borrower passed the previous risk assessment by the
guarantor.</span></p><div>

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</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Step
3: Credit decision</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
commercial bank will inform the guarantor and us whether the loan recommended is approved or rejected for further actions and services.</span></p><div>

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</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Step
4: Guarantee Agreement</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
the commercial bank partner decides to grant a loan, it will inform the guarantor to issue a guarantee agreement indicating that the
guarantor is obliged to provide post-origination services and take legal responsibilities of any accidents that may happen relating to
the borrower, including default risks. Additionally, for security purposes, the guarantor is obliged to provide a guarantee deposit as
illustrated in Step 7 below.</span></p><div>

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</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Step
5: Pledging collaterals</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Before
releasing the loan to the borrower, the commercial bank partner entrusts the guarantor to assist the borrower completing the process
of mortgaging their real estate properties, notarizing the loan contracts and obtaining encumbrance certificates. The guarantor is then
obliged to send these documents directly back to the commercial bank partner.</span></p><div>

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</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Step
6: Loan agreement</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">After
receiving the documents mentioned in Step 5, the commercial bank partner will proceed to the contract-signing process with the borrower.</span></p><div>

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</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Step
7: Guarantee deposit</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">After
receiving all the required legal documents and signing the loan agreement, the commercial bank partner releases the loan to the borrower.
For security purposes, the guarantor is obliged to pay a fixed percentage of total remaining loan balance as guarantee deposit to the
commercial bank partner. We provide back-to-back guarantee to the guarantor at request.</span></p><div>

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</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Step
8: Service fee</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
will receive facilitation service fee for our loan facilitation services. Under different collaboration arrangements, the borrower could
pay such service fee directly to us on the due date of each installment or submit both the service fee and installment to the commercial
bank and the commercial bank will disburse such service fee to us.</span></p><div>

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</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt"></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt"></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Step
9: Repayment of loan principal and interest</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
borrower repays all principal and interest directly to the commercial bank partner. After the borrower settles the principal and interest
of the loan in advance or at maturity, the commercial bank partner will issue a settlement report, and the borrower can apply for collateral
release with the assistance from the guarantor. The guarantor can confirm this information with the commercial bank partner and the commercial
bank partner will issue the required documents to release the collateral. These legal documents will be delivered to us within 3 business
days from the date when the borrower applies to release the collateral, and the guarantor and we are responsible for the releasing process.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->56<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Small
Loan Direct Lending</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Historically,
we supplemented our trust lending model with direct lending by our small loan subsidiaries in Beijing, Shenzhen and Chongqing. Our subsidiaries
typically entered into loan agreements that are secured by real property and had similar terms to home equity loans we facilitate under
the trust lending model. We entered into loan agreements with borrowers directly. We financed our direct lending business with our own
funds or funds we received from third parties by transferring our rights in the loans together with a repurchase arrangement.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Small
loan direct lending business in China requires a license granted by local regulatory authorities and is subject to leverage constraints.
Our three small loan subsidiaries in Beijing, Shenzhen and Chongqing have relevant licenses to conduct direct lending business since
2012, 2012 and 2011, respectively. Subject to various regulations, some of our direct lending business is limited to certain regions
for which we have a license to engage in such business. Due to regulatory financing/net capital ratio constraints and for liquidity reasons,
we expect that direct lending will remain a fairly limited and immaterial part of our business in the near future. For the years ended
December 31, 2020, 2021 and 2022, our loan origination volume through direct lending was RMB22 million, RMB17 million and RMB15 million,
respectively. The balances of the borrowings that were funded by third parties for the small loan direct lending business were RMB9.3
million, nil and nil, as of December 31, 2020, 2021 and 2022, respectively.</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
Funding Model</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have explored various funding sources and have focused on collaboration with our trust company partners starting in 2014. To a lesser
extent, we historically utilized a direct lending model through our small loan subsidiaries. In 2021, we launched a new funding model
in cooperation with commercial banks to expand our financing channels. In 2020, 2021 and 2022, 100.0% 99.8% and 82.7% of the total home
equity loan origination volume was originated under the trust lending model , respectively. In 2022, loan origination volume originated
under the commercial bank partnership accounted for 17.2% of our total loan origination volume.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following table illustrates the breakdown of the home equity loan origination volume by funding sources in the periods indicated.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="text-indent: -0.125in; padding-left: 0.125in; font-weight: bold; text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="padding-bottom: 1.5pt; text-indent: -0.125in; padding-left: 0.125in; font-weight: bold; text-align: center">&#160;</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -0.25in; padding-left: 0.25in">Direct lending</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->57<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following table illustrates our funding capital from different sources as of December 31, 2020, 2021 and 2022, respectively.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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    <td style="border-bottom: Black 4pt double; text-align: left"><b>&#160;</b></td><td style="border-bottom: Black 4pt double; text-align: right"><b>100.0</b></td><td style="padding-bottom: 4pt; text-align: left"><b>%</b></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Business
Infrastructure</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Since
our inception, we have strategically developed a network of branches and sub-branches in over 50 cities in China. Specifically, we have
carefully selected the geographic location of our offices with 22 branches and sub-branches in the Pearl River Delta region, 18 branches
and subbranches in the Yangtze River Delta region, and 47 branches and sub-branches in other areas. We prioritize expanding into cities
that have stable housing market synergetic to our established network.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
practice, regulatory regime on property-backed loans and mortgages may differ from region to region. Experiences of interacting with
regulatory authorities in different regions need to be acquired through long-time business practice. Under the current regulatory framework,
it is crucial for home equity loan service providers to have local knowledge and resources. Benefiting from our extensive network, we
have developed deep local knowledge and resources throughout the loan service process from loan origination to security interest perfection,
and to debt collection. Our local team works closely with local authorities and has gained recognition for our business operations and
established good working relationships with them.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have also developed a cooperative relationship with our experienced sales partners who work with local real estate brokers and banks
who cannot accommodate second lien collateral to acquire high-quality borrowers.</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Risk
Management</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
a core component of our sustainable business model, we have developed a rigorous and robust risk management system. We focus on assessing
both credit risks of borrowers and quality of collateral with our integrated online and offline processes. We refer borrowers who match
the target profiles of trust companies and commercial banks, and share our risk assessment results before they perform their own independent
credit assessment and make credit decisions. As of December 31, 2022, we had 532 employees in our risk management team. We impose strict
guidelines on loan approvals and separation of loan approval and risk management. The loans we originated are divided into different
categories by amount and are reviewed by various levels of seniority.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
risk management is based on our institutional knowledge and is well tested and evidenced by historical performance and based on our product
design, dual-factor risk assessment and effective post-loan management procedures.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Credit
risk mitigation embedded in product design</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
home equity loans we facilitate primarily take real properties located in Tier 1 and Tier 2 and other major cities as collateral. Our
loan portfolio spreads over 70 cities across China. We believe that such geographic diversification better protects us against deterioration
of local housing and economic conditions. To further limit credit risk, we devoted to control home equity loans up to 70% LTV ratio with
weighted average LTV ratio of 54.6%, 58.5% and 60.0%, for home equity loans originated in 2020, 2021 and 2022, respectively, to ensure
recovery in the event of borrower default. The LTV ratio varies for different types of real properties and is also adjusted pursuant
to a borrower&#8217;s credit history and quality of the collateral and may be lowered in the event of a past default.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 65; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->58<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
offer home equity loan products that allow borrowers to repay only the interests by installments and repay the full principal amount
when due.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
addition, we also provide home equity loan products that require monthly payments comprising principal and interests repayments. This
strategic design allows us to timely monitor borrowers&#8217; creditworthiness and initiate collection process at an early stage. We
review a borrower&#8217;s monthly cash flow to determine the tenor of the loan. Borrowers with stronger cash flow will have the option
of shorter tenors, which may require larger payment on each installment. Borrowers with weaker cash flow are usually encouraged to take
loans of longer tenor, so as to lower the amount of each installment. We may also require deposit payment for borrowers with past default.
In addition, the maximum tenor of the loan is determined by the term of the relevant trust plan.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Dual-factor
risk assessment with integrated online and offline process</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
perform rigorous risk assessment on prospective borrowers and collateral in the following order:</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Step
1: Collecting data on loan applicants</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
first step of our borrower risk assessment process is to collect data on applicants upon approval by the borrower. This is typically
done through information directly provided by applicants in our standardized application package, and information we aggregate from a
number of sources, including various databases and the Credit Reference Center of the People&#8217;s Bank of China.</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Step
2: Verification of information collected on loan applicants</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
second step of our borrower risk assessment process is to verify the information collected in Step 1. This is done through our offline
identity authentication procedures conducted by local office staff together with corresponding sales partners, which typically consist
of site visits to applicants&#8217; residences and business premises.</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Step
3: Valuation of proposed collateral</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
also perform risk assessment on the proposed real property collateral. The proposed real property collateral is appraised by independent
leading online property appraisers and refined by us on specifics such as liquidity value, location, neighborhood, type, facing direction,
floor plan and size.</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Step
4: Verification of collateral condition</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
also take measures to verify the condition of proposed collateral. Local office staff together with sales partners visit the property
that a loan applicant intends to pledge. As part of the collateral assessment, we cross-check the preliminary valuation provided by our
appraisal company partners with local real estate agents and bank mortgage documents.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">After
obtaining the authorization from the loan applicant, we check its credit report and determine its outstanding first lien loan amount
and the identity of lender to the first lien loan.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
our verification procedure on either a loan applicant or collateral reveals significant discrepancies from the information provided by
such applicant, we will not recommend such applicant to our trust company partners.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
determine the loan amount permitted to grant the loan applicant based on the applicant&#8217;s credit status and collateral value. If
both our trust partner and the loan applicant agree to the loan amount we advised, we will facilitate the signing of loan agreements
and pledge agreement between them.</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Step
5: Perfection of collateral</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
last step of our collateral risk assessment process is to register the pledge over real properties under the names of trust company partners
with the local real property bureau.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Immediately
before the pledge of collateral is processed, we conduct a final lien search on the property to confirm if its lien status remains the
same as previously reviewed. In the case that the lien status has not changed, we assist the borrower to pledge the collateral under
the trust partner&#8217;s name. A representative from our company submits both the loan agreement and the pledge agreement to the local
Housing Administration Bureau for the collateral pledge, specifying that such collateral is exclusively pledged for protection of such
loan. The Housing Administration Bureau will issue a warrant that clearly states the lender and the amount of the mortgage.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">After
successfully receiving the &#8220;deposit receipt&#8221; issued by the Housing Administration Bureau, we transfer the receipt to our
trust partner and inform the trust partner to release the loan to the borrower. Borrowers are obligated to return loan proceeds if the
pledge is not successfully registered under extreme circumstances.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Judicial
foreclosure of the collateral</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
usually suggest our trust partners pursue foreclosure for loans more than 90 days past due. In 2020, 2021 and 2022, 7.4%, 3.3% and 0.4%,
of the delinquent loans the Company facilitated entered into foreclosure process, respectively. The amount where the foreclosure was
ultimately concluded was RMB114.5 million, RMB108.2 million and RMB12.1 million (US$1.8 million), in 2020, 2021 and 2022, respectively,
among which RMB6.1 million, RMB4.1 million and nil, had additional losses beyond what was already recorded in the allowance for credit
losses in 2020, 2021 and 2022, respectively. The amount of such additional losses was RMB1.9 million, RMB1.5 million and nil, in 2020,
2021 and 2022, respectively.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
2022, the total loan amount disposed through judicial foreclosures was RMB12.1 million, including RMB9.3million of first lien loans and
RMB2.8 million of second lien loans. We recovered a total loan amount of RMB15.0 million through judicial foreclosures in 2022, including
first lien amount of RMB11.9 million and second lien amount of RMB3.1 million. The corresponding allowances in 2022 by first lien and
second lien were RMB3.1 million and RMB1.2 million, respectively.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">According
to the loan agreement, when a loan defaults, our trust partner are entitled to the full recovery of the delinquent principal, delinquent
interest and penalties if any. If the proceeds from judicial disposal of the collateral are sufficient to cover the aforementioned full
recovery amounts, we will obtain the amount of which may exceed the principal of the delinquent loan.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">When
calculating the impairment loss, we consider various expenses that may be incurred during the debt collection process, such as litigation
fees, attorney fees, and other costs directly related to the collection process. The collection process to settle a past due loan generally
takes one and a half to two years.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
2022, the amount of loans where the Company abandoned the foreclosure process was RMB12.2 million. We abandon foreclosure when the defaulting
borrower has regenerated ability to repay its debt by financing efforts or selling the collateral on its own and seeks to settle with
the Company.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Effective
post-loan management procedures</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
the agreements with our trust company partners, we are responsible for assisting our trust company partners in monitoring collection
of overdue principal and interest, and are authorized by our trust company partners to oversee the collection process.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Monitoring
repayments</i>. We help our trust company partners closely monitor loan repayments, and help our sales partners closely monitor the realtime
repayment status by posting them on the mobile app. Our system generates automatic payment reminders through SMSs one week before the
due date. Collaborating with multiple sources of credit reference agencies, we help our trust company partners closely monitor if borrowers
are involved in any new litigations.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Monitoring
collateral status</i>. We help our trust company partners selectively conduct searches against real property collateral depending on
principal amount outstanding and nature and location of collateral. Such searches are supplemented with online revaluation of collateral
through our appraisal company partners and the search results will be shared real-time with sales partners through the mobile app.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Debt
collection</i>. In an event of default, we help our trust company partners utilize different collection measures with our integrated
online and offline process, and with the assistance of our sales partners.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Within
                                            three to five business days past due, we and our sales partners will contact defaulting borrowers
                                            through SMSs or by phone to understand reasons for the nonpayment and inform them of past-due
                                            penalties.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">After
                                            a loan is past due for over six days, we and our sales partners will arrange a site visit
                                            to further assess the situation. If agreeable with the defaulting borrower, we will arrange
                                            for quick disposal plans, or disposal of collateral voluntarily by the borrower and repay
                                            the defaulted loans with the proceeds. Meanwhile, we will conduct an online judgment search
                                            against the defaulting borrowers and a lien search against the collateral. Once payment is
                                            20 days past due, we will assist the trust partner to start preparing documents and materials
                                            for arbitration. Once payment is 30 days past due, we will assist the trust partner to initiate
                                            judicial proceedings against the defaulting borrower and inform the relevant sales partners
                                            of the situation. Once payment is 30 to 90 days past due, we and our sales partners will
                                            continue the collecting efforts, including initiating private negotiations with the borrower
                                            and requesting the borrower to repay the loan through self-raising of money or voluntary
                                            sale of the collateral, transferring the defaulted loans to the third parties, and move forward
                                            with the arbitration process.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Typically,
                                            when payment is over 60 days past due, we will keep the sales partners informed and the sales
                                            partners shall choose from the following options, including (i)(1) full repayment to us for
                                            the total unpaid principal and accrued and overdue interests under the respective loan agreement
                                            on behalf of the borrower and acquiring respective credit rights, (i)(2) repayment in installments
                                            to us for the total unpaid principal and accrued and overdue interests under the respective
                                            loan agreement on behalf of the borrower and acquiring respective credit rights under each
                                            installments (this option was introduced since the first quarter in 2020 recognizing the
                                            fact that the sales partners&#8217; cash flow may be affected by the COVID-19 pandemic and
                                            may need to make repayment to us in installments); (ii) repayment to us for the unpaid principal
                                            and accrued and overdue interests under the respective loan agreement on behalf of the borrower,
                                            and if the borrower pays the payments under the loan agreement, the repayment by the sales
                                            partner on behalf of the borrower will be refunded to the sales partner; or (iii) relinquishing
                                            the respective CRMPs for such loan. If the sales partners do not choose to fully repay us
                                            as mentioned in (i) and (ii) above, we will confiscate the CRMP corresponding to the loan
                                            in default. Meanwhile, we will continue the collecting efforts and move forward with the
                                            judicial process or quick disposal plans. As of December 31, 2022, for all of the loans with
                                            payment over 60 days past due, our sales partners have either fulfilled or are in the process
                                            of fulfilling their obligations under our agreements with them.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have implemented detailed debt collection guidance and code of conduct for our local staff to ensure our debt collection methods are
ethical and in compliance with laws and regulations, and we share such materials with our sales partners for them to adjust their debt
collection procedures accordingly. We recovered loan principal, interest and penalties which equal to 102.4%, 83.3% and 105.2%, of the
actual outstanding loan principal of these delinquent loans in 2020, 2021 and 2022, respectively.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Transferring
default loans to third parties is one of our loan recovery methods. If sales partners choose to fulfill their obligations to provide
guarantee for the loans they introduced by repurchasing the delinquent loans according to the collaboration agreements signed between
us and the sales partners, we would assist the trust partner to fully transfer the outstanding loan and related rights to the collateral
to the sales partners at current market fair value. Under the circumstances of selling delinquent loans to local investment asset management
companies, experienced law firms or other entities, our post-loan department conducts a final check to determine the probability of recovering
those loans by other collecting methods in shorter time before making the final decision on whether to sell those loans to a third party.</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Collateral</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
borrowers pledge their real properties to our trust company partners in the case of trust lending and to our small loan subsidiaries
in case of direct lending. We have developed detailed guidelines for real property collateral. The LTV ratios are also adjusted based
on the type of property (residential or commercial), floor plan, age and credit history of property owners. As of December 31, 2022,
the updated LTV as of the most recent balance sheet date was 59.4%, with 49.4% for the first lien loans and 61.9% for the second lien
loans, which is calculated by the percentage of outstanding loan principal of the re-appraised collateral value as of December 31, 2022.
In the circumstances where we are facilitating the second lien loans, we have to obtain a prior authorization from the borrower before
it checks the borrower&#8217;s credit status for the updated first lien balance, which is not practical in daily operation. Therefore,
we use outstanding first lien balance at origination in the above calculation.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following table illustrates the weighted average LTV ratio of on-balance sheet home equity loans (excluding loans held for sale) under
trust lending model we originated for the periods or as of the dates indicated, and a breakdown by collateral type</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="text-indent: -0.125in; padding-left: 0.125in; font-weight: bold; text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="10" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">For the Year Ended December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="text-indent: -0.125in; padding-left: 0.125in; font-weight: bold; text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="text-indent: -0.125in; padding-left: 0.125in"><b>Weighted average LTV ratio by collateral type</b></td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td></tr>
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    <td style="text-indent: -0.125in; padding-left: 0.125in"><b>First lien</b></td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 64%; text-indent: -0.25in; padding-left: 0.25in">Apartment</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">54.7</td><td style="width: 1%; text-align: left">%</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">55.6</td><td style="width: 1%; text-align: left">%</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">56.6</td><td style="width: 1%; text-align: left">%</td></tr>
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    <td style="text-indent: -0.25in; padding-left: 0.25in">House</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">44.4</td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">44.1</td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">41.0</td><td style="text-align: left">%</td></tr>
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    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -0.25in; padding-left: 0.25in">Commercial property</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">36.6</td><td style="padding-bottom: 1.5pt; text-align: left">%</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="text-indent: -0.25in; padding-left: 0.25in"><b>Total</b></td><td><b>&#160;</b></td>
    <td style="text-align: left"><b>&#160;</b></td><td style="text-align: right"><b>53.8</b></td><td style="text-align: left"><b>%</b></td><td><b>&#160;</b></td>
    <td style="text-align: left"><b>&#160;</b></td><td style="text-align: right"><b>54.9</b></td><td style="text-align: left"><b>%</b></td><td><b>&#160;</b></td>
    <td style="text-align: left"><b>&#160;</b></td><td style="text-align: right"><b>55.5</b></td><td style="text-align: left"><b>%</b></td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -0.25in; padding-left: 0.25in"><b>Second lien</b></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -0.25in; padding-left: 0.25in">Apartment</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">59.8</td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">61.4</td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">63.6</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 68; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->61<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On-
and off-Balance Sheet Loans</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
loans disbursed indirectly through trusts plans per the request of our funding partners, we have determined that we are the primary beneficiary
of the trusts plans. We therefore consolidate the trusts plans and record the loans funded through these trusts plans on our balance
sheet. On-balance-sheet loans are recorded at amortized costs. Revenues from these loans are accounted as interest income, and we recorded
allowance for loan loss.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Off-balance
sheet loans refer to loans funded and disbursed directly by commercial banks and not consolidated on our balance sheet. For the off-balance-sheet
loans, we provide loan facilitation and post-facilitation services and also guarantee the repayment through third-party guarantee company.
As a result, we incur guarantee liabilities and take credit risks. Services provided in connection with this portion of loans are categorized
under commercial bank partnership model.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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in millions)</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; text-indent: -0.125in; padding-left: 0.125in"><b>Off-balance sheet loan</b></td><td><b>&#160;</b></td>
    <td style="text-align: left"><b>&#160;</b></td><td style="text-align: right"><b>-</b></td><td style="text-align: left"><b>&#160;</b></td><td><b>&#160;</b></td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following table illustrates distribution of our outstanding on-balance sheet loan principal (excluding loans held for sale) by city tier
as of December 31, 2020, 2021 and 2022, respectively.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="text-indent: -0.125in; padding-left: 0.125in; font-weight: bold; text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td style="text-indent: -0.125in; padding-left: 0.125in; font-weight: bold; text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 69; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->62<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
process for updating collateral values during the period the loan is held includes the following: (i) regular review and reappraisal
of collateral value based on the data from multiple external online appraisal firms; (ii) if the difference between the reappraised value
and the value at origination exceeds 20%, we will determine whether such difference is due to regional market fluctuations and accept
such reappraised value if the difference is determined to result from regional market fluctuations, and (iii) if the value difference
is determined to be isolated from regional market fluctuations, we will check with recognized housing agent companies for the latest
market sales price for properties with similar conditions such as locations, floorplans and ages, and use the average value of such similar
properties as the ultimate reappraised value of the collateral.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following table illustrates the breakdown of our home equity loan origination volume under trust lending model originated by first lien
and second lien in the periods indicated.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="text-indent: -0.125in; padding-left: 0.125in; font-weight: bold; text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td style="text-indent: -0.125in; padding-left: 0.125in; font-weight: bold; text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td style="text-indent: -0.125in; padding-left: 0.125in; font-weight: bold; text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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of total</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Amount</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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of total</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 28%; text-align: left; text-indent: -0.25in; padding-left: 0.25in">First lien</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -0.25in; padding-left: 0.25in">Second lien</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">4,982</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">7,287</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 4pt; text-indent: -0.25in; padding-left: 0.25in"><b>Total</b></td><td style="padding-bottom: 4pt"><b>&#160;</b></td>
    <td style="border-bottom: Black 4pt double; text-align: left"><b>&#160;</b></td><td style="border-bottom: Black 4pt double; text-align: right"><b>8,846</b></td><td style="padding-bottom: 4pt; text-align: left"><b>&#160;</b></td><td style="padding-bottom: 4pt"><b>&#160;</b></td>
    <td style="border-bottom: Black 4pt double; text-align: left"><b>&#160;</b></td><td style="border-bottom: Black 4pt double; text-align: right"><b>100.0</b></td><td style="padding-bottom: 4pt; text-align: left"><b>%</b></td><td style="padding-bottom: 4pt"><b>&#160;</b></td>
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  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following table illustrates distribution of our outstanding on-balance sheet loan principal (excluding loans held for sale) generated
by first lien and second lien in the periods indicated.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="text-indent: -0.125in; padding-left: 0.125in; font-weight: bold; text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td style="text-indent: -0.125in; padding-left: 0.125in; font-weight: bold; text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="text-indent: -0.125in; padding-left: 0.125in">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-indent: -0.25in; padding-left: 0.25in">Total</td><td style="font-weight: bold">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold; text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="border-bottom: Black 4pt double; text-align: left"><b>&#160;</b></td><td style="border-bottom: Black 4pt double; text-align: right"><b>1,715,324</b></td><td style="padding-bottom: 4pt; text-align: left"><b>&#160;</b></td><td style="padding-bottom: 4pt"><b>&#160;</b></td>
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  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Technology</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
technology departments is composed of 39 employees as of December 31, 2022. We utilize our home equity loan information technology system
to support our standardized credit application process. Through our information technology system, we are able to connect with third-party
service providers&#8217; systems, including credit risk evaluation systems and leading property appraisers, to automatically collect
data generated from their systems. In addition, our local staff uploads information collected during the due diligence process on a timely
basis to supplement external credit data and ensure efficient approval process. Furthermore, we exchange loan application and approval
information through our information technology system with our trust company partners&#8217; systems. Our sales partners could acquire
borrowers, upload due diligence files, track risk assessment processes and check their incentives online using this system.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
collect and store user personal information, including names, phone numbers, addresses, identification information and financial information
for the sole purpose of individual credit assessment. We retrieve such information with consent and have safeguards designed to protect
such information. We store our data in encrypted form, which offers an additional layer of protection. We also verify data interchange
with our funding partners using digital signatures, which enhances the security of such interchange. We also limit employees&#8217; access
to such information and monitor authorized access.</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->64<!-- Field: /Sequence --></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Sales
and Marketing</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
acquire borrowers primarily through our sales partners. In 2020, 2021 and 2022, over 99.5% of our borrowers were introduced to us by
our sales partners under the collaboration model. In 2022, 100.0% of borrowers introduced to commercial banks were acquired through local
channel partners including corporate and individual offline channels and telemarketing companies. For details, please refer to &#8220;Item
4. Information on the Company&#8212;B. Business Overview&#8212;Our Borrower&#8212;Borrower Acquisition.&#8221;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Intellectual
Property</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
rely on a combination of patent, copyright, trademark and trade secret laws and restrictions on disclosure to protect our intellectual
property rights. We have registered 17 software copyrights in China, including our proprietary loan management software and financial
data analytics software. We have registered our domain name, cashchina.cn. As of December 31, 2022, we had 44 registered trademarks,
including our &#8220;CNFH&#8221; and company logo.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Despite
our efforts to protect our intellectual property rights, unauthorized parties may attempt to obtain and use our intellectual property.
Monitoring unauthorized use of our intellectual property is difficult and costly, and we cannot be certain that the steps we have taken
will prevent misappropriation of our intellectual property. From time to time, we may have to resort to litigation to enforce our intellectual
property rights, which could result in substantial costs and diversion of our resources. In addition, third parties may initiate litigation
against us alleging infringement of their proprietary rights or declaring their non-infringement of our intellectual property rights.
In the event of a successful claim of infringement and our failure or inability to develop non-infringing technology or license the infringed
or similar technology on a timely basis, our business could be harmed. Even if we are able to license the infringed or similar technology,
license fees could be substantial and may adversely affect our results of operations. See &#8220;Item 3. Key Information&#8212;D. Risk
Factors&#8212;Risks Related to Our Business&#8212;Any failure to protect our own intellectual property rights could impair our brand,
negatively impact our business or both&#8221; and &#8220;Item 3. Key Information&#8212;D. Risk Factors&#8212;Risks Related to Our Business&#8212;We
may be sued by third parties for alleged infringement of their proprietary rights, which could harm our business.&#8221;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Data
Policy</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have adopted a strict internal data policy relating to confidential information of our borrowers and business partners, as well as our
own confidential information. This policy establishes day-to-day data protection and use requirements, data and information classification,
backup requirements, approval procedures and user control. This policy also specifies the manner in which data must be stored. We require
each of our employees to agree in writing to abide by the data policy and protect the confidentiality of our data.</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Competition</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
a leader in China&#8217;s home equity loan service industry, we face competition from other national or regional home equity loan providers
and home equity loan service providers, as well as from commercial banks and other traditional financial institutions. As our business
continues to grow, we also face significant competition for highly skilled personnel, including management, marketing team and risk management
personnel. The success of our growth strategy depends in part on our ability to retain existing personnel and recruit additional highly
skilled employees.</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Insurance</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
provide social security insurance including pension insurance, unemployment insurance, work-related injury insurance and medical insurance
for our employees. We also purchased employer&#8217;s liability insurance and additional commercial health insurance to increase insurance
coverage of our employees. We do not maintain property insurance to protect our equipment and other properties essential to our business
operation against risks and unexpected events. We do not maintain business interruption insurance or general third-party liability insurance,
nor do we maintain product liability insurance or key-man insurance. We consider our insurance coverage sufficient and in line with market
practice for our business operations in China.</span></p><div>

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</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Regulation</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">This
section sets forth a summary of the most significant rules and regulations affecting our business that we operate in China.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
a home equity loan service provider, we facilitate loans by connecting borrowers with our trust company partners, and, to a lesser extent,
we also lend directly to borrowers through our small loan subsidiaries. We have established three small loan subsidiaries in Beijing,
Chongqing and Shenzhen that are permitted to operate small loan businesses.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Regulations
Relating to Foreign Investment</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
establishment, operation and management of companies in China is governed by the PRC Company Law, as amended in 2005, 2013, and 2018.
According to the PRC Company Law, companies established in the PRC are either limited liability companies or joint stock limited liability
companies. The establishment procedures, organizational form, organizational structure and rules of conduct of a wholly foreign-owned
enterprise are subject to PRC Foreign Investment Law and its Implementing Regulations, that came into effect on January 1, 2020, which
provide that foreign investors shall not invest in the fields or industries prohibited for foreign investment access listed in the negative
list, and shall comply with the conditions or requirements when investing in the restricted fields listed in the negative list, and foreign
investors investing in the fields and industries not listed in the negative list are treated equally with the domestic investors. The
organizational form, organizational structure, and rules of conduct of foreign-invested enterprises shall be governed by the PRC Company
Law, the PRC Partnership Enterprise Law and other applicable laws.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
December 24, 2021, the Standing Committee of the 13th National People&#8217;s Congress (the &#8220;Congress&#8221;) issued the draft
Amendment to the PRC Company Law, and on December 30, 2022, the Congress issued the second draft Amendment to the PRC Company Law, which
expands the scope of capital contributions to include equity and creditor&#8217;s rights. The draft improves the provisions of duties
of loyalty and diligence for directors, supervisors, and senior managers, and tighten their responsibilities to maintain the Company&#8217;s
capital. The draft increases the reporting obligations of related party transactions and expands the scope of related parties to include
family relatives of directors, senior management and supervisors as well as units or individuals associated with them.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
December 30, 2019, the MOFCOM and the State Administration for Market Regulation (&#8220;SAMR&#8221;) jointly issued the Measures for
the Reporting of Foreign Investment Information (&#8220;Measures&#8221;), which came into effect on January 1, 2020, replacing the Interim
Measures for the Administration of the Establishment and Change of Foreign-Invested Enterprises. The Measures provides that in terms
of investing directly or indirectly in the PRC, foreign investors or foreign-invested enterprises shall submit investment information
to the competent commercial authority in accordance with the Measures. The competent commercial authority shall supervise and inspect
the fulfillment of information reporting obligations of foreign investors and foreign-invested enterprises. If investment information
is not filed in accordance with the Measures, foreign-invested enterprises may be required to make corrections or be subject to fines.</span></p><div>

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</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Special
Administrative Measures for Access of Foreign Investment (Negative List) (2021 Version)</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Negative List uniformly lists special administrative measures on foreign investment access such as requirements on equity interest and
management. Foreign investors investing in the fields and industries not listed in the negative list are treated equally with the domestic
investors. The Negative List lists the transitional period for removing or relaxing access restrictions in certain fields and industries.
After the transitional period, the investment access restrictions will be cancelled or relaxed. Our business is currently not listed
in the Negative List (2021 Version). According to Measures for Security Review of Foreign Investment, which was promulgated by the NDRC
and the Ministry of Commerce in December 2020 and has been come into effect in January 2021, the Foreign Investment Security Review Mechanism,
or the Security Review mechanism, in charge of organization, coordination and guidance of foreign investment security review is thereunder
established. A working mechanism office shall be established under the NDRC and led by the NDRC and the Ministry of Commerce to undertake
routine work on the security review of foreign investment. According to the Security Review Mechanism, foreign investment activities
falling in the scope such as important cultural products and services, important information technologies and internet products and services,
important financial services, key technologies and other important fields that concern state security while obtaining the actual control
over the enterprises invested in, a foreign investor or a party concerned in the PRC shall take the initiative to make a declaration
to the working mechanism office prior to making the investment.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Regulations
Relating to Small Loan</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
the Guiding Opinions of the CBRC and the PBOC on the Pilot Operation of Small Loan Companies which was promulgated by the CBRC and the
PBOC on May 4, 2008, or the Guiding Opinions on Small Loan Companies, a small loan company is a company that specializes in operating
a small loan business with investments from natural persons, legal entities or other social organizations, and which does not accept
public deposits. The establishment of a small loan company is subject to the approval of the competent government authority at the provincial
level. The major sources of funds for a small loan company are limited to capital paid by shareholders, donated capital and capital borrowed
from up to two financial institutions. Furthermore, the balance of the capital borrowed by a small loan company from financial institutions
must not exceed 50% of the net capital of such small loan company, and the interest rate and term of the borrowed capital are required
to be determined by us with the banking financial institutions upon consultation, and the interest rate on the borrowed capital must
be determined by using the Shanghai Interbank Offered Rate as the base rate. With respect to the grant of credit, small loan companies
are required to adhere to the principle of &#8220;small sum and decentralization.&#8221; The outstanding balance of the loans granted
by a small loan company to one borrower cannot exceed 5% of the net capital of such company. The interest ceiling used by a small loan
company may be determined by such companies, but in no circumstance shall it exceed the restrictions prescribed by the judicatory authority,
and the interest floor is 0.9 times the base interest rate published by the PBOC. Small loan companies have the flexibility to determine
the specific interest rate within the range depending on market conditions. In addition, according to the Guiding Opinions on Small Loan
Companies, small loan companies are required to establish and improve their corporate governance structures, the loan management systems,
the financial accounting systems, the asset classification systems, the provision systems for accurate asset classification and their
information disclosure systems, and such companies are required to make adequate provision for impairment losses and are required to
accept public scrutiny supervision and are prohibited from carrying out illegal fund-raising in any form.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
September 7, 2020, China Banking and Insurance Regulatory Commission issued the Circular of General Office of the China Banking and Insurance
Regulatory Commission on Strengthening the Supervision and Administration of Micro-loan Companies, namely the Circular on Microloan Companies.
Circular on Micro-loan Companies aims to promote the regulated and healthy development of micro-loan industry, and notifies the relevant
matters as follows: (1) regulating business operations and improving service capabilities, (2) improving business management and promoting
healthy development, (3) strengthening supervision and administration and rectifying the order of the industry, and (4) increasing support
and creating a good environment. Accordingly, micro-loan companies are required to adhere to the principle of small amounts and dispersion,
monitor the loan purposes, standardizing debt collection, etc. Furthermore, Circular on Micro-loan Companies endows the regulatory authorities
the power to increase penalties upon violations of relevant laws and regulations. If the relevant laws and regulations do not contain
penalty provisions or the micro-loan company in violation of laws and regulations does not reach the penalty standards, the regulatory
authorities may take such regulatory measures as conducting a regulatory interview, issuing a warning letter, ordering the Company to
make rectifications, circulating a notice of criticism, and recording the violations of laws and regulations into the information database
of illegal business behavior. Circular 141 outlines general requirements on the &#8220;cash loan&#8221; business conducted by network
small loan companies, banking financial institutions and online lending information intermediaries. Circular 141 requires network small
loan companies to cautiously manage their funding sources and shall not (1) engage in any illegal fundraising or absorbing public deposits,
(2) sell, transfer or substantively transfer its credit assets through internet platform or any kind of local financial exchange, and
(3) raise any funds through the Peer-to-Peer Lending Information Intermediaries.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Funds
raised by the transferring of credit assets and asset securitization shall be calculated in a consolidation manner within the balance
sheet, and the ratio of total amount of fundraising and net capital shall be executed temporarily according to the local ratio. The local
authorities shall not further relax the ratio of fundraising by the small loan companies.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Any
violation of Circular 141 may result in penalties, including but not limited to suspension of operation, orders to make rectification,
condemnation, revocation of license, order to cease business operation and criminal liabilities.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
small loan subsidiaries are not network small loan companies, and we are not subject to the restrictions under the aforesaid regulation.
But whether the relevant regulatory authorities will have a more limited explanation or make further restrictions on small loan businesses
remains uncertain at this stage.</span></p><div>

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</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Implementary
Measures of Small Loan Companies in Beijing</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Implementary Measures of the Pilot Small Loan Companies in Beijing was issued by the People&#8217;s Government of Beijing Municipality
on January 4, 2009. The Interim Measures of Supervisal Regulations on Pilot Small Loan Companies of Beijing was issued by the Finance
Bureau of Beijing Municipality on May 31, 2011. The key regulations of small loan companies in Beijing are as follows:</span></p><div>

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</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">no
                                            single largest shareholder (including its affiliates) may hold shares that exceed 30% of
                                            total registered capital of the small loan company; any other single shareholder and its
                                            affiliates may hold shares that exceed 1% but no more than 20% of total registered capital
                                            of the small loan company; and the shareholders of the small loan company shall be natural
                                            persons, legal entities and other social organizations in China, among others. The largest
                                            shareholder shall be a local natural person, legal entity or other social organization on
                                            a county basis;</span></td></tr></table><div>

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</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">if
                                            a small loan company is a limited liability company, its registered capital must be at least
                                            RMB50 million; and if it is a company limited by shares, its registered capital must be at
                                            least RMB100 million. All registered capital shall be valid and legal, paid in cash and paid
                                            in full by the contributors or promoters at one time; and</span></td></tr></table><div>

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</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            funds of a small loan company mainly come from the capital contributed and funds donated
                                            by shareholders as well as funds raised from no more than two banking financial institutions
                                            and other fund resources approved by the relevant authorities, and the balance of funds obtained
                                            by a small loan company from banking financial institutions may not exceed 50% of its net
                                            capital.</span></td></tr></table><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Interim
Administrative Measures of Small Loan Companies in Shenzhen</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Interim Administrative Measures of the Pilot Small Loan Companies of Shenzhen was issued by the People&#8217;s Government of Shenzhen
Municipality on September 3, 2011. The Notice on Further Reinforcement and Regulation on Interim Guidance on Pilot Entry and Approval
of the Small Loan Companies was issued by the Finance Development Service Office of Shenzhen Municipality on April 3, 2013. The Notice
on the Pilot Business of Financing Innovation for Small Loan Companies in Shenzhen was issued by the People&#8217;s Government of Shenzhen
Municipality Financing Development Service Office on February 20, 2014. The key regulations of small loan companies in Shenzhen are as
follows:</span></p><div>

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</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">if
                                            a small loan company is a limited liability company, its registered capital must be at least
                                            RMB300 million; if it is a company limited by shares, its registered capital must be at least
                                            RMB400 million;</span></td></tr></table><div>

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</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            balance of funds obtained by a small loan company from external legitimate channels may not
                                            exceed 200% of its net capital the previous year;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            main promoter of a small loan company shall (1) have net assets no less than RMB200 million
                                            and an asset-liability ratio of no more than 65%, and, in principle, the long-term investment
                                            amount after investing in this project shall be no more than 60% of net assets (on a consolidated
                                            financial statements basis); and (2) have continuous positive earnings for three years with
                                            a total net profit of no less than RMB60 million, and the total tax contribution shall be
                                            no less than RMB18 million (on a consolidated financial statements basis);</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">enterprise,
                                            social organization or economic organization as other contributors shall be divided into
                                            two categories: (1) if the ratio of investments is 30% or more, it shall be subject to the
                                            approval process as the main promoter; and (2) if the ratio of investments is no more than
                                            30%, it shall be subject to the following conditions: having been incorporated for more than
                                            three years with net assets no less than RMB100 million and an asset-liability ratio no more
                                            than 65%, and, in principle, the long-term investment amount after investing on this project
                                            shall be no more than 60% of net assets, having continuous positive earnings for two years
                                            with a total net profit of no less than RMB20 million, and the total tax contribution shall
                                            be no less than RMB6 million (on a consolidated financial statement basis);</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">if
                                            a foreign financial institution or small loan credit company (or other similar entity) is
                                            the main promoter, it shall be subject to the following conditions: (1) having total assets
                                            no less than RMB2 billion (on a consolidated financial statement basis); (2) having been
                                            engaged in financial business and continuously operating for no less than 10 years with sufficient
                                            analysis and research on the small loan market in China; and (3) shall obtain the approval
                                            of the financial regulation authorities as a bank financing institution;</span></td></tr></table><div>

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</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            key management personnel may hold no more than 5% of shares of the small loan company, and,
                                            as a temporary restriction, no other social natural person may contribute to the small loan
                                            company;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            main promoter shall contribute no less than 30% of the total registered capital and shall
                                            control the Company relatively, other contribution by other entities shall be no less than
                                            5% of the total registered capital; and</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            equity interests of a small loan company may be transferred, but no transfer or pledge is
                                            allowed in the first three years following the incorporation of the small loan company. Equity
                                            interests held by the directors or senior managers of the small loan company shall not be
                                            transferred during the term of office. As the time expires, the transferee shall have qualifications
                                            as the transferor, and the transferee shall not transfer its shares within three years following
                                            the date of change of registration of shares.</span></td></tr></table><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Guidance
on Small Loan Companies in Chongqing</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Guidance
on Chongqing&#8217;s Promotion of Pilot Operation of Small Loan Companies was issued by the People&#8217;s Government of Chongqing Municipality
on August 1, 2008. The Notice on Issues Concerning the Adjustment of Interim Measures of Chongqing Municipality for the Administration
of Pilot Operation of Small Loan Companies was issued by the People&#8217;s Government of Chongqing Municipality on April 27, 2009. The
Notice on Further Promoting the Development of Small Loan Companies was issued by the People&#8217;s Government of Chongqing Municipality
on April 12, 2011. The Notice on Interim Supervision Regulations on Chongqing Small Loan Companies Financing Supervision was issued by
Chongqing Financing Business Office on June 4, 2012. The Guidelines for the Supervision of the Establishment and Change of Chongqing
Small Loan Company (Trial Implementation) was issued by the Chongqing Finance Office, and implemented on July 1st, 2013. The Notice on
Adjusting Regulations of Chongqing Small Loan Company was issued by the Chongqing Finance Office on October 27, 2016. On November 15,
2019, Chongqing Local Financial Supervision Administration (CQLFSA) issued the Guideline for Disclosure of Service Information of Chongqing
Small Loan Companies. On November 26, 2019, CQLFSA issued the Notice on Guiding Small Loan Companies to Reduce Loan Interest Rates. On
February 17, 2020, CQLFSA issued the Notice on Guiding Small Loan Companies to Support Epidemic Prevention and Control to Provide Financial
Services for the Real Economy, which was effective until June 30, 2020. The key regulations of small loan companies in Chongqing are
as follows:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">if
                                            a small loan company is a foreign investment company, its registered capital must be at least
                                            US$30 million, and the shareholding of the foreign investor must be more than 50%;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">for
                                            small loan companies with sound corporate management and strong risk management ability,
                                            the balance of the capital borrowed from banking financial institutions can be 100% of its
                                            net capital;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            balance of loans granted to a single borrower by a small loan company must not exceed 10%
                                            of the net capital of the Company and the balance of credit limit granted to a single client
                                            as a group enterprise must not exceed 15% of the net capital of the small loan company;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">support
                                            qualified small loan companies to increase their capital and shares, as well as mergers and
                                            acquisitions to enhance their capital strength; and</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">support
                                            small loan companies to list on domestic and overseas capital markets, and make good use
                                            of cross-border financing channels such as cross-border loans and overseas bond issuance
                                            under the China-Singapore (Chongqing) Strategic Interconnection Demonstration Project to
                                            obtain low-cost and long-term overseas funds.</span></td></tr></table><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Regulations
Relating to Loan Facilitator</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Circular
141 imposes several requirements on financial institutions engaged in the &#8220;cash loan&#8221; business. With respect to the loan
business conducted in cooperation with third-party entities, such financial institutions must not outsource their core business
function (including credit assessment and risk control) and must not accept any credit enhancement services, whether or not in a
disguised form (including the commitment to taking default risks) provided by any third-party entities that lack the qualification
to provide guarantee services. Such financial institutions must require and ensure that such third-party entities do not charge any
interest or fees from the borrowers. We historically provided credit enhancement to our trust company partners, but all the
remaining loans under such arrangement had been transferred in 2021 and substantially all of such remaining loans had been paid off
in 2022. We historically charged a financing service fee from the borrower under our trust lending model and small loan direct
lending model, but we ceased charging such financing service fee starting from August 2017.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Regulations
Relating to Loans and the Interest Rate</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Part
III Contracts of Civil Code of People&#8217;s Republic of China, which became effective in January 2021, or the Contract Part, governs
the formation, validity, performance, enforcement and assignment of contracts. The Contract Part requires that the interest rates charged
under a loan agreement must not violate the applicable provisions of the PRC laws and regulations. In accordance with the Decision of
the Supreme People&#8217;s Court on Revising the Provisions on Several Issues concerning the Application of Law in the Trial of Private
Lending Cases (2nd Revisions in the year of 2020) issued by the PRC Supreme People&#8217;s Court in December 2020 and effective since
January 2021, or the Revised Private Lending Judicial Interpretations, private lending refers to the act of financing among natural persons,
legal persons and unincorporated organizations.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
revised Private Lending Judicial Interpretations required to reduce the maximum annual interest rate allowed on private lending to four
times of the one-year loan prime rate (LPR). The one-year LPR refers to the one-year loan market quoted interest rate issued by the National
Bank Interbank Funding Center, which was authorized by the PBOC, on the 20th of each month since August 20, 2019.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">According
to the Official Reply of the Supreme People&#8217;s Court to the Issues concerning the Scope of Application of the New Judicial Interpretation
on Private Lending, The Revised Private Lending Judicial Interpretations on private lending shall not apply to disputes arising from
engagement in relevant financial business by small loan companies.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Regulations
Relating to Financing Guarantee</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
March 2010, CBRC, NDRC, MIIT, MOFCOM, PBOC, SAIC and the Ministry of Finance of PRC promulgated the Tentative Administrative Measures
for Financing Guarantee Companies. The Tentative Administrative Measures for Financing Guarantee Companies requires an entity or individual
to obtain a prior approval from the relevant regulatory body to engage in the financing guarantee business and defines &#8220;financing
guarantee&#8221; as an activity whereby the guarantor and the creditor, such as a financial institution in the banking sector, agree
that the guarantor shall bear the guarantee obligations in the event that the secured party fails to perform its financing debt owed
to the creditor.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
August 2017, the State Council promulgated the Regulations on the Supervision and Administration of Financing Guarantee Companies, or
the Financing Guarantee Regulations, which became effective on October 1, 2017. The Financing Guarantee Regulations define &#8220;financing
guarantee&#8221; as a guarantee provided for debt financing (including but not limited to the extension of loans or issuance of bonds)
and set out that the establishment of a financing guarantee company or engagement in the financing guarantee business without approval
may result in several penalties, including but not limited to banning, an order to cease business operation, confiscation of illegal
gains, fines of up to RMB1,000,000 and criminal liabilities. The Financing Guarantee Regulations also set forth that the outstanding
guarantee liabilities of a financing guarantee company shall not exceed 10 times its net assets and that the outstanding guarantee liabilities
of a financing guarantee compacities of the same guaranteed party shall not exceed 10% of the net assets of the financing guarantee company,
while the outstanding guarantee liabilities of a financing guarantee company in respect of the same guaranteed party and its affiliated
parties shall not exceed 15% of its net assets.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Supplementary Provisions stipulate that any institution, which provides services such as customer recommendation and credit evaluation
for different kinds of lending institutions, shall not provide any financing guarantee services directly or in a disguised way, without
approval. As for an institution which has no business license for financing guarantee business but actually engages in the financing
guarantee business, the competent supervision and administration department shall ban it in accordance with the Regulation on Financing
Guarantee Companies and order it to properly settle the stock business. If the institution intends to continue to engage in the financing
guarantee business, it shall establish a financing guarantee company pursuant to the Regulation on Financing Guarantee Companies.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Circular of the China Banking and Insurance Regulatory Commission on Issuing the Procedures for the Off-site Supervision of Financing
Guarantee Companies (the Off-site Supervision Circular) was promulgated on July 14, 2020 and took effect on September 1, 2020. The Off-site
Supervision Circular stipulates that financing guarantee companies should establish and implement an off-site supervision information
filing system, and file the off-site supervision data and non-data information according to the requirement of regulatory authorities
in time. If the financing guarantee companies do not comply with the requirement of regulatory authorities, regulatory authorities can
exert penalties in compliance with relevant laws and regulations.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><p style="margin: 0">&#160;</p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Regulations Relating to Illegal Fundraising</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Raising funds by entities or individuals from the general public must
be conducted in strict compliance with applicable PRC laws and regulations to avoid administrative and criminal liabilities. The Notice
on Relevant Issues Concerning the Penalty on Illegal Fundraising issued by the General Office of the State Council in July 2007 explicitly
prohibit illegal public fundraising. The main features of illegal public fundraising include: (i) illegally soliciting and raising funds
from the general public by means of issuing stocks, bonds, lotteries or other securities without obtaining the approval of relevant authorities,
(ii) promising a return of interest or profits or investment returns in cash, properties or other forms within a specified period of
time and (iii) using a legitimate form to disguise an unlawful purpose.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">To further clarify the criminal charges and punishments relating to
illegal public fundraising, the Supreme People&#8217;s Court promulgated the Judicial Interpretations to Issues Concerning Applications
of Laws for Trial of Criminal Cases on Illegal Fundraising, or the Illegal Fundraising Judicial Interpretations, which came into force
in January 2011. Decision of the Supreme People&#8217;s Court on Revising the Interpretations of the Supreme People&#8217;s Court on
Certain Issues Concerning the Specific Application of Law in the Trial of Criminal Cases Involving Illegal Fund Raising came into force
on March 1, 2022. The Illegal Fundraising Judicial Interpretations provides that a public fundraising will constitute a criminal offense
related to &#8220;illegally soliciting deposits from the public&#8221; under the PRC Criminal Law if it meets all the following four
criteria: (i) taking in funds without license of the relevant authority or under the disguise of lawful business operations; (ii) publicizing
by means of Internet, media, recommendation fairs, leaflets or mobile phone text messages, or other means; (iii) promising to repay the
principal and interests or make payments in forms such as currency, real objects or equities, within a certain time limit; and (iv) absorbing
funds from the general public, namely unspecified people. An illegal fundraising activity can incur a fine or prosecution in the event
it constitutes a criminal offense. Pursuant to the Illegal Fundraising Judicial Interpretations, an offender that is an entity will be
subject to criminal liabilities if it illegally solicits deposits from the general public or illegally solicits deposits in disguised
form (i) with the amount of deposits involved exceeding RMB1,000,000, (ii) with over 150 fundraising targets involved, (iii) with direct
economic loss caused to fundraising targets exceeding RMB500,000, or (iv) the illegal fundraising activities have caused baneful influences
to the public or have led to other severe consequences. In addition, any entity that, while knowingly aware that another party deceptively
issues securities, illegally accepts deposits from the general public, issues stocks and corporate bonds without permission, practice
fund-raising fraud, or carry out fund-raising criminal activities such as organizing and leading pyramid sales activities, provides publicity
such as advertising to such party, shall be convicted and punished as an accomplice for committing the relevant crime. In accordance
with the Opinions of the Supreme People&#8217;s Court, the Supreme People&#8217;s Procurator and the Ministry of Public Security on Several
Issues concerning the Application of Law in the Illegal Fundraising Criminal Cases, the administrative proceeding for determining the
nature of illegal fundraising activities is not a prerequisite procedure for the initiation of criminal proceedings concerning the crime
of illegal fundraising, and the administrative departments&#8217; failure in determining the nature of illegal fundraising activities
does not affect the investigation, prosecution and trial of cases concerning the crime of illegal fundraising. According to &#8220;the
Notice of the Supreme People&#8217;s Court, the Supreme People&#8217;s Procuratorate and the Ministry of Public Security on the Promulgation
of Opinions on Several Issues in Handling Criminal Cases of Illegal Fundraising&#8221; issued in January 2019, the determination of the
&#8220;illegality&#8221; of fundraising shall be based on the laws and regulations of the national financial management. If there are
only general stipulations in the laws and regulations of the national financial management, the &#8220;illegality&#8221; could be determined
in accordance with the spirit of laws and regulations and the provisions on regulatory documents such as regulations, measures, and implementation
rules of the People&#8217;s Bank of China, the China Insurance Regulatory Commission, the China Securities Regulatory Commission.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">According to Regulations on Preventing and Dealing with Illegal Fundraising,
which came into effect in May 2021, illegal fundraising involves collecting funds from non-specific targets with promised principal and
interest or other investment returns, without lawful permission from the State Council&#8217;s financial management departments or in
violation of China&#8217;s financial management rules. Provincial-level governments should have overall responsibility for anti-illegal
fundraising efforts within their respective administrative regions, and local governments should build necessary work mechanisms. Financial
and non-banking payment institutions should report large-value and suspicious transactions as required, and analyze and identify related
accounts having suspected association with illegal fundraising.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Regulations Relating to Mortgage</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The principal regulations governing mortgage include the Part II Property
Rights (including Security Rights) of Civil Code of the PRC and their respective Interpretations of the Supreme People&#8217;s Court.
Under these laws and regulations, in order to create a legal and executable mortgage, the parties concerned shall conclude a written
mortgage contract and complete the mortgage registration formalities with applicable real estate registration authorities. Mortgage interests
shall be created at the time of registration.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Under the Part II Property Rights of Civil Code of the PRC, a mortgage
contract shall include, amongst others, the following terms: (1) type and amount of the secured debt; (2) term for performance of debt
obligations by the debtor; (3) mortgaged property&#8217;s description, quality, quantity, condition, location, ownership or ownership
of the right to use the mortgaged property; and (4) scope of the guarantee. In March 2019, the PRC Ministry of Land and Resources revised
the Implementation Regulations for the Provisional Regulations on Real Estate Registration, according to which the mortgage contract
is one of the required registration materials to be submitted to the real estate registration authorities.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Anti-money Laundering Regulations</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The PRC Anti-money Laundering Law, which became effective in January
2007, sets forth the principal anti-money laundering requirements applicable to financial institutions as well as nonfinancial institutions
with anti-money laundering obligations, including the adoption of precautionary and supervisory measures, establishment of various systems
for client identification, retention of clients&#8217; identification information and records and reports on large transactions and suspicious
transactions.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In June, 2021, the PBOC issued the draft revision of the PRC Anti-Money
Laundering Law (draft) for public comments. According to the draft of Anti-money Laundering Law, predicate acts of money laundering include
not only criminal activities, but also newly include illegal activities. The draft of Anti-money Laundering Law also includes in the
scope of Anti-money Laundering monitoring activities that conceal the nature of the proceeds of illegal activities and the source of
their proceeds.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Measures for Supervision and Administration of Anti-Money Laundering
and Anti-Terrorism Financing of Financial Institutions, or the Anti-Money Laundering Measures for Financial Institutions, which became
effective in April 2021, clarified that the following financial institutions duly established within the PRC territory are subjected
to fulfill anti-money laundering related obligations: (a) developmental financial institution, policy banks, commercial banks, rural
cooperative banks, rural credit cooperatives and village/township banks; (b) securities companies, futures companies and fund management
companies; (c) insurance companies and insurance asset management companies; (d) trust companies, financial asset management companies,
finance companies of enterprise groups, financial leasing companies, auto finance companies, consumer finance companies, currency brokerage
companies and wealth management subsidiaries of commercial banks; and (e) other financial institutions. Besides, such obligations also
apply to the non-bank payment institutions, banks card organization, fund clearing center, microcredit companies engaging in the internet
microcredit lending business and the institutions engaging exchange business, funds sales business, insurance agency and brokers business.
The PBOC and its branches shall carry out the supervision and administration of the financial institutions&#8217; work with regard to
the antimoney laundering and anti-terrorism financing pursuant to the relevant laws and regulations. The Anti-Money Laundering Measures
for Financial Institutions require the financial institutions to draft and improve the anti-money laundering and anti-terrorism financing
internal control policy, evaluate the anti-money laundering and anti-terrorism financing risks, establish the risks management mechanism
according to its risks conditions and operation scale, construct anti-money laundering information system, and set up or appoint institutions
equipped with qualified staff, to perform its anti-money laundering and anti-terrorism financing obligations.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Regulations Relating to Internet Information Security
and Privacy Protection</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Internet content in China is regulated and restricted from a state
security standpoint. On December 28, 2000, the Standing Committee of the PRC National People&#8217;s Congress introduced and enacted
the Decisions on Maintaining Internet Security, which was amended on August 27, 2009 and may subject violators to criminal punishment
in China for any effort to: (i) use the internet to market fake and substandard products or carry out false publicity for any commodity
or service; (ii) use the internet for the purpose of damaging the commercial goodwill and product reputation of any other person; (iii)
use the internet for the purpose of infringing on the intellectual property of any person; (iv) use the internet for the purpose of fabricating
and spreading false information that affects the trading of securities and futures or otherwise jeopardizes the financial order; or (v)
create any pornographic website or webpage on the internet, providing links to pornographic websites, or disseminating pornographic books
and magazines, movies, audiovisual products or images. The Ministry of Public Security has promulgated measures that prohibit use of
the internet in ways which, among other things, result in a leakage of state secrets or a spread of socially destabilizing content and
require internet service providers to take proper measures, including anti-virus, data backup and other related measures, and keep records
of certain information about the users (including user registration information, log-in and log-out time, IP address, content and time
of posts by users) for at least 60 days, and detect illegal information, stop transmission of such information and keep relevant records.
If an internet information service provider violates these measures, the Ministry of Public Security and the local security bureaus may
revoke its operating license and shut down its websites.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">PRC government authorities have enacted laws and regulations on internet
use to protect personal information from any unauthorized disclosure. In December 2012, the Standing Committee of the PRC National People&#8217;s
Congress promulgated the Decision on Strengthening Network Information Protection to enhance the legal protection of information security
and privacy on the internet. 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&#8217; personal information in the provision of telecommunication services
and internet information services in China. Telecommunication business operators and internet service providers are required to establish
their own rules for collecting and use of users&#8217; information and cannot collect or use users&#8217; information without their consent.
Telecommunication business operators and internet service providers are prohibited from disclosing, tampering with, damaging, selling
or illegally providing others with, collected personal information.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On November 7, 2016, the Standing Committee of the PRC National People&#8217;s
Congress published Cyber Security Law of the PRC, which took effect on June 1, 2017 and requires network operators to perform certain
functions related to cybersecurity protection and the strengthening of network information management. For instance, under the Cyber
Security Law, network operators of key information infrastructures shall store within the territory of the PRC all the personal information
and important data collected and produced within the territory of the PRC, and their purchase of network products and services that may
affect national securities shall be subject to national cybersecurity review. On 14 September, 2022, the Cyberspace Administration of
China released the Draft Amendment of the Cyber Security Law for public consultation. The Draft Amendments have significantly increased
penalties for breaches, introducing a fine up to 5% of its annual turnover in the previous year. The draft also applies with the individuals
directly liable subject to a fine up to RMB1 million and/or a ban on taking on managerial positions in China.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On April 13, 2020, the Cyberspace Administration of China issued Measures
for Cybersecurity Review, which took effect on June 1, 2020, to provide more detailed rules regarding cybersecurity review requirements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In addition, the Guidelines to Promote the Health Growth of the Internet
Finance, or the Internet Finance Guidelines, requires internet finance service providers, including online finance platforms, among other
things, to improve technology security standards and safeguard customer and transaction information. The State Council, the PBOC and
other relevant regulatory authorities will jointly adopt the implementing rules and technology security standards.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On November 28, 2019, the Secretary Bureau of the State Internet Information
Office, the General Office of the MIIT, the General Office of the Ministry of Public Security, and the General Office of the SAMR issued
the Identification Methods for Collection and Use of Personal Information in Violation of Laws by Applications, which enumerates the
conducts to be including those with no published rules, no explicit purpose, method and scope when collecting and using personal information,
collection and use of personal information without user consent, violation of &#8220;necessary principle&#8221;, collection of personal
information unrelated to the services provided, and provision of personal information to others without consent, failure to provide the
function of deleting or correcting personal information as required by law, or no published information for complaints and reporting
methods.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On May 28, 2020, the National People&#8217;s Congress adopted the
Civil Code, which came into effect on January 1, 2021. According to the Civil Code, the personal information of a natural person shall
be protected by the law. Any organization or individual shall legally obtain such personal information of others when necessary and ensure
the safety of such information, and shall not illegally collect, use, process or transmit personal information of others, or illegally
purchase or sell, provide, or disclose personal information of others.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On June 10, 2021, the Standing Committee of the National People&#8217;s
Congress adopted the Data Security Law, which took effect on September 1, 2021. The Data Security Law mainly sets forth specific provisions
regarding establishing basic systems for data security management, including data classification management system, risk assessment system,
monitoring and early warning system, and emergency disposal system. In addition, the Data Security Law clarifies the data security protection
obligations of organizations and individuals carrying out data-related activities and implementing data security protection responsibility.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In August 2021, The Personal Information Protection Law was passed
by the Standing Committee of the National People&#8217;s Congress and was effective from 1 November 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Personal Information Protection Law is the first piece of legislation
in China dedicated to the protection of personal information. It establishes individuals&#8217; consents as the principal legal basis
for processing personal information. It requires that the processing of personal information shall abide by the principles of legality,
fairness, good faith, minimum necessity, openness, and transparency. There shall also be specific and reasonable purposes of processing.
Individuals shall have the right to access and obtain a copy of their personal information from the processors of personal information.
Individuals can also request the processors of personal information to rectify or delete their personal information, as well as to provide
them with means to transfer their personal information to other processors. Processors of personal information which need to transfer
personal information out of the Mainland China shall obtain separate consent from individuals, and meet certain requirements, such as
passing the security assessment made by the state cyberspace authorities, obtaining the required certification, or entering into a standard
contract as prescribed by the state cyberspace authorities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Personal Information Protection Law contains provisions on extraterritorial
application. Foreign organizations which process personal information of individuals in PRC for the purposes of offering products or
services to them, or analyzing and assessing their behaviors, shall be subject to this law. These foreign organizations shall also establish
designated agencies or appoint representatives in PRC. A processor of personal information which contravenes the requirements under the
Personal Information Protection Law is liable to a maximum fine of RMB50,000,000 or 5% of its annual turnover of the preceding year.
Other penalties may include suspension of operation for rectification, cancellation of business permits or licenses, etc.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On November 14, 2021, the Cyberspace Administration of China (CAC)
released the draft of Regulations on Network Data Security Management for public comments. It clarifies how network data should be categorized
and provides illustrations of what would constitute important data. It requires that processors of important data (including those processing
personal data of more than 1 million individuals) to comply with special obligations, which includes conducting an annual security assessment
(either through a self-assessment, or by a qualified third party), and submitting the annual assessment report to the local CAC by January
31 of the following year. It requires obtaining consent from the local supervising authority for the industry concerned or the local
CAC before engaging in the sharing, trading, or processing through third parties of important data. The Regulations on Network Data Security
Management clarify the conditions that trigger a cybersecurity review required by the CSL, including data processing activities that
affect or could affect national security.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Regulations Relating to Credit Reporting Business</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Measures for Credit Reporting Business (&#8220;Measures&#8221;)
was issued by the PBOC in September 2021 and was promulgated in January 2022. The Measures define &#8220;credit information&#8221; as
information that &#8220;serves the financial and other activities and is used to determine individuals and enterprises credit status,
and information originated from analysis and evaluation of individuals and enterprises&#8217; credit status based on the foregoing information&#8221;.
It applies to entities that carry out credit reporting business and &#8220;activities relating to credit reporting business&#8221; in
China as well as such activities carried out outside China but targeting Chinese residents. It provides rules on credit reporting business
and credit reporting agencies, requiring that any institution shall obtain the permission for a personal credit reporting agency from
the People&#8217;s Bank of China in accordance with the law to engage in personal credit reporting business; handle the record-filing
of a corporate credit reporting agency in accordance with the law to engage in corporate credit reporting business; or handle the record-filing
of a credit rating agency in accordance with the law to engage in credit rating business. The Measures require financial institutions
to be prohibited from cooperating with unauthorized institutions. If relevant institutions have already cooperated with unauthorized
institutions, they should complete compliance rectification within 18 months from January 1, 2022.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Regulations on Intellectual Property Rights</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The PRC has adopted comprehensive legislation governing intellectual
property rights, including copyrights, patents, trademarks and domain names.</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">&#160;</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">Copyright and Software Products</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The National People&#8217;s Congress adopted the Copyright Law in
1990 and amended it in 2001, 2010 and 2020 respectively. The amended Copyright Law extends copyright protection to internet activities,
products disseminated over the internet and software products. In addition, there is a voluntary registration system administered by
the China Copyright Protection Center.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In order to further implement the Computer Software Protection Regulations
promulgated by the State Council on December 20, 2001 and amended on January 30, 2013, the State Copyright Bureau issued the Computer
Software Copyright Registration Procedures on February 20, 2002, which applies to software copyright registration, license contract registration
and transfer contract registration.</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">&#160;</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt"></p><div>

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</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">&#160;</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">Trademarks</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Trademarks are protected by the PRC Trademark Law adopted in 1982
and subsequently amended in 1993, 2001, 2013, and 2019 as well as the Implementation Regulation of the PRC Trademark Law adopted by the
State Council in 2002 and amended on April 29, 2014. The Trademark Office under the SAIC handles trademark registrations and grants a
term of 10 years to registered trademarks and another 10 years if requested upon expiry of the first or any renewed 10-year term. Trademark
license agreements must be filed with the Trademark Office for record. The PRC Trademark Law has adopted a &#8220;first-to-file&#8221;
principle with respect to trademark registrations. Any malicious application for trademark registration not for the purpose of use shall
be rejected. Where a trademark for which a registration has been made is identical or similar to another trademark which has already
been registered or been subject to a preliminary examination and approval for use on the same kind of or similar commodities or services,
the application for registration of such trademark may be rejected. Any person applying for the registration of a trademark may not prejudice
the existing right first obtained by others nor may any person register in advance a trademark that has already been used by another
party and has already gained a &#8220;sufficient degree of reputation&#8221; through such party&#8217;s use. Trademark license agreements
should be filed with the Trademark Office or its regional offices.</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">&#160;</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">Domain Names</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Internet domain name registration and related matters are primarily
regulated by the Measures on the Administration of Domain Names for the Chinese Internet, issued by the MIIT on November 5, 2004 and
effective as of December 20, 2004, which was replaced by the Measures on Administration of Internet Domain Names issued by the MIIT as
of November 1, 2017 and the Implementing Rules on Registration of National Toplevel Domain Names issued by China Internet Network Information
Center in June, 2019. Domain name registrations are handled through domain name service agencies established under the relevant regulations,
and the applicants become domain name holders upon successful registration. As of December 31, 2021, we had eight registered trademarks
with the Trademark Office under the State Administration for Industry and Commerce.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have 17 registered Copyright of Software Products and one registered
Domain Name.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Regulations Relating to Employment</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Pursuant to the Labor Law of PRC, promulgated by the NPC in July 1994,
and most recently amended on December 29, 2018, or the Labor Law, and the Labor Contract Law of PRC, promulgated by the Standing Committee
of the NPC in June 2007 and amended in December 2012, or the Labor Contract Law, employers must execute written employment contracts
with full-time 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 must rectify the situation by entering into a written employment
contract with the employee and pay the employee twice the employee&#8217;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.
All employers must compensate their employees with wages equal to at least the local minimum wage standards. Violations of the PRC Labor
Law and the Labor Contract Law may result in the imposition of fines and other administrative sanctions, and serious violations may result
in criminal liabilities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Enterprises in China are required by the Social Insurance Law of PRC
promulgated by the Standing Committee of the NPC in October 2010, which became effective in July 2011, as most recently amended on December
29, 2018, or the Social Insurance Law, the Regulations on Management of Housing Provident Fund released by the State Council in March
2002, and most recently amended on March 24, 2019 and other related rules 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 and 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. Failure to make adequate contributions to various
employee benefit plans may be subject to fines and other administrative sanctions. According to the Social Insurance Law, an employer
that fails to make social insurance contributions may be ordered to rectify the noncompliance and pay the required contributions within
a stipulated deadline and be subject to a late fee of 0.05% per day, as the case may be. If the employer still fails to rectify the failure
to make social insurance contributions within the deadline, it may be subject to a fine ranging from one to three times the amount overdue.
According to the Regulations on Management of Housing Fund, an enterprise that fails to make housing fund contributions may be ordered
to rectify the noncompliance and pay the required contributions within a stipulated deadline; otherwise, an application may be made to
a local court for compulsory enforcement.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have not made adequate contributions to employee benefit plans
as required by applicable PRC laws and regulations. See &#8220;Item 3. Key Information&#8212;D. Risk Factors&#8212;Risks Related to Doing
Business in China&#8212;Failure to make adequate contributions to various employee benefit plans as required by PRC regulations may subject
us to penalties.&#8221;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Regulations Relating to Tax</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">&#160;</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">Enterprise Income Tax</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">PRC enterprise income tax is calculated based on taxable income, which
is determined under (i) the PRC Enterprise Income Tax Law, or the EIT Law, promulgated by the NPC and implemented in January 2008, and
most recently amended on December 29, 2018, and (ii) the implementation rules to the EIT Law promulgated by the State Council and implemented
in January 2008, and most recently amended on April 23, 2019. The EIT Law imposes a uniform enterprise income tax rate of 25% on all
resident enterprises in the PRC, including foreign-invested enterprises and domestic enterprises, unless they are qualified for certain
exceptions. According to the EIT Law and its implementation rules, the income tax rate of an enterprise that has been determined to be
a high and new technology enterprise may be reduced to 15% with the approval of relevant tax authorities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In addition, according to the EIT Law, enterprises registered in countries
or regions outside the PRC but have their &#8220;de facto management bodies&#8221; located within China may be considered as PRC resident
enterprises and are therefore subject to PRC enterprise income tax at the rate of 25% on their worldwide income. Though the implementation
rules of the EIT Law define &#8220;de facto management bodies&#8221; as &#8220;establishments that carry out substantial and overall
management and control over the manufacturing and business operations, personnel, accounting, properties, etc., of an enterprise,&#8221;
the only detailed guidance currently available for the definition of &#8220;de facto management body&#8221; as well as the determination
and administration of tax residency status of offshore incorporated enterprises are set forth in the Notice Regarding the Determination
of Chinese-Controlled Overseas Incorporated Enterprises as PRC Tax Resident Enterprises on the Basis of De Facto Management Bodies, or
the Circular 82, promulgated by the State Administration of Taxation (the &#8220;SAT&#8221;) in April 2009, and the Administrative Measures
for Enterprise Income Tax of Chinese-Controlled Overseas Incorporated Resident Enterprises (Trial Version) issued by the SAT in July
2011, or Bulletin No. 45, which provides guidance on the administration as well as the determination of the tax residency status of a
Chinese-controlled offshore incorporated enterprise, defined as an enterprise that is incorporated under the law of a foreign country
or territory and that has a PRC company or PRC corporate group as its primary controlling shareholder.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">According to Circular 82, a Chinese-controlled offshore-incorporated
enterprise will be regarded as a PRC resident enterprise by virtue of having its &#8220;de facto management body&#8221; in China and
will be subject to PRC enterprise income tax on its global income o<span style="font-family: Times New Roman, Times, Serif">nly if all
of the following conditions are met:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif">the
                                            primary location of the day-to-day operational management and the places where they perform
                                            their duties are in the PRC;</span></td></tr><tr style="vertical-align: top">
<td><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td></tr>
                                                                                                                                                                                                                                                         </table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif">decisions
                                            relating to the enterprise&#8217;s financial and human resource matters are made or are subject
                                            to approval of organizations or personnel in the PRC;</span></td></tr><tr style="vertical-align: top">
<td><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td></tr>
                                  </table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif">the
                                            enterprise&#8217;s primary assets, accounting books and records, company seals and board
                                            and shareholder resolutions are located or maintained in the PRC; and</span></td></tr><tr style="vertical-align: top">
<td><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td><td><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td></tr>
                                       </table><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif">50%
                                            or more of voting board members or senior executives habitually reside in the PRC.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif">Bulletin
No. 45 further clarifies certain issues related to the determination of tax resident status and competent tax authorities. It also specifies
that when provided with a copy of Recognition of Residential Status from a resident Chinese-controlled offshore incorpor</span>ated enterprise,
a payer does not need to withhold income tax when paying certain PRC-sourced income such as dividends, interest and royalties to such
Chinese-controlled offshore-incorporated enterprise.</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">&#160;</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">Value-Added Tax and Business Tax</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">According to the Provisional Regulations on Value-added Tax (&#8220;Provisional
Regulations&#8221;), which was promulgated by the PRC State Council on December 13, 1993 and amended in November 2008, February 2016
and November 2017, and the Implementing Rules of the Provisional Regulations on Value-added Tax, which were promulgated by the MOF on
December 18, 2008 and subsequently amended by the MOF and the SAT on October 28, 2011, all taxpayers selling goods, providing processing,
repairing or replacement services or importing goods within the PRC must pay value-added tax.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Since January 1, 2012, the MOF and the SAT have implemented the VAT
Pilot Plan, which imposes VAT in lieu of business tax for certain &#8220;modern service industries.&#8221; According to the implementation
circulars released by the MOF and the SAT on the VAT Pilot Plan, the &#8220;modern service industries&#8221; include research, development
and technology services, information technology services, cultural innovation services, logistics support, lease of corporeal properties,
attestation and consulting services. According to the Notice of the Ministry of Finance and the SAT on Implementing the Pilot Program
of Replacing Business Tax with Value-Added Tax in an All-round Manner which became effective on May 1, 2016, as subsequently amended
on March 20 2019, entities and individuals engaged in the sale of services, intangible assets or fixed assets within the PRC territory
are required to pay value-added tax instead of business tax. Following the implementation of the VAT Pilot Plan, most of our PRC subsidiaries
and affiliates have been subject to VAT, instead of business tax. From April 1, 2019, according to &#8220;The Notice on Policies for
Deepening the Value-Added Tax Reform&#8221; issued by the Ministry of Finance and the State Taxation Administration and the General Administration
of Customs in March 2019 and &#8220;The Notice on Adjusting the Value-Added Tax Rate&#8221; issued by the Ministry of Finance and the
State Taxation Administration in April 2018, most of our Chinese companies and subsidiaries used to pay a Value-Added Tax rate of 3%
or 6%. Under the impact of COVID-19 pandemic, the Ministry of Finance and the State Taxation Administration issued &#8220;Announcement
on the Value-added Tax Policy in Support of Resumption of Work and Business among Individual Businesses&#8221; in February 2020 and &#8220;Announcement
on Extending the Applicable Period of the Value-added Tax Reduction and Exemption Policy for Small-scale Taxpayers&#8221; in April 2020
to reduce the Value-Added Tax rate from 3% to 1% and start to implement such policy from March 1, 2020. In March 2021, the Ministry of
Finance and the State Taxation Administration further issued &#8220;Announcement on Continuously Implementing Some Tax Preferential Policies
in Response to COVID-19 Epidemic&#8221; to extend the implementation of &#8220;1% Value-added Tax rate&#8221; policy to December 31,
2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On 30, December, 2022, the Standing Committee of the 13th National
People's Congress issued the draft of Value-Added Tax Law of the People's Republic of China (&#8220;Draft&#8221;) for public comment,
which will elevate the Provisional Regulations on and related policy provisions into law. The Draft emphasizes the principle of correlation
between sales and input tax in the VAT levy and deduction provisions.</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">&#160;</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">Stamp Tax</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As regulated in the Stamp Tax Law, which will come into effect on
July 1, 2022, the taxable items include contracts, documents of transfer of property rights, and business account books, and the transfer
of stocks and depositary receipts issued based on stocks that are traded on stock exchanges legally formed and other national securities
trading venues approved by the State Council. The effect of this law will have an impact on our tax situation.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Regulations Relating to Foreign Exchange</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">&#160;</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">Regulation on Foreign Currency Exchange</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The principal regulations governing foreign currency exchange in China
are the Foreign Exchange Administration Regulations, most recently amended in August 2008. Under the 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 SAFE by complying with certain procedural requirements. By contrast, approval
from or registration with appropriate 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. On February 13, 2015, the SAFE promulgated the Notice on Further Simplifying
and Improving the Administration of the Foreign Exchange Concerning Direct Investment, or SAFE Notice 13. After SAFE Notice 13 became
effective on June 1, 2015, instead of applying for approvals regarding foreign exchange registrations of foreign direct investment and
overseas direct investment from SAFE, entities and individuals will be required to apply for such foreign exchange registrations from
qualified banks. The qualified banks, under the supervision of the SAFE, will directly examine the applications and conduct the registration.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In August 2008, SAFE issued the Circular on the Relevant Operating
Issues Concerning the Improvement of the Administration of the Payment and Settlement of Foreign Currency Capital of Foreign-Invested
Enterprises, or SAFE Circular 142, regulating the conversion by a foreign-invested enterprise of foreign currency-registered capital
into RMB by restricting how the converted RMB may be used. SAFE Circular 142 provides that the RMB 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 may not be used for equity investments within the PRC. In addition, SAFE strengthened its oversight of the flow and use
of the RMB capital converted from foreign currency-registered capital of foreign-invested enterprises. The use of such RMB capital may
not be changed without SAFE&#8217;s approval, and such RMB capital may not in any case be used to repay RMB loans if the proceeds of
such loans have not been used. Violations may result in severe monetary or other penalties.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->77<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In November 2012, SAFE promulgated the Circular of Further Improving
and Adjusting Foreign Exchange Administration Policies on Foreign Direct Investment, which substantially amends and simplifies the current
foreign exchange procedure. Pursuant to this circular, 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
requires the approval or verification of SAFE, and multiple capital accounts for the same entity may be opened in different provinces,
which was not possible previously. In addition, SAFE promulgated another circular of the State Administration of Foreign Exchange on
Printing and Distributing the Administrative Provisions on Foreign Exchange in Domestic Direct Investment by Foreign Investors and Relevant
Supporting Documents in May 2013, which specifies that the administration by SAFE or its local branches over direct investment 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. On June 9, 2016, the SAFE promulgated
Circular of the State Administration of Foreign Exchange on Reforming and Regulating Policies on the Control over Foreign Exchange Settlement
of Capital Accounts, or Circular 16, which expands the application scope from only the capital of the foreign-invested enterprises to
the capital, the foreign debt fund and the fund from overseas public offerings. Circular 16 allows that the discretionary settlement
of foreign exchange receipts under capital accounts refers to the case in which the foreign exchange receipts under capital accounts
(including foreign exchange capital, foreign debts, and repatriated funds raised through overseas listing) subject to discretionary settlement
as expressly prescribed in the relevant policies may be settled with banks according to the actual need of domestic institutions for
business operations. Where the current regulations contain any restrictive provisions on the foreign exchange settlement of foreign exchange
receipts under capital accounts of domestic institutions, such provisions shall prevail. Domestic institutions may, at their discretion,
settle up to 100% of foreign exchange receipts under capital accounts for the time being. The SAFE may adjust the above proportion in
due time according to balance of payments. In addition, Circular 16 specifies the use of foreign exchange receipts under capital accounts
of a domestic institution and the RMB funds obtained thereby from foreign exchange settlement shall be subject to the following provisions:
(i) they shall not, directly or indirectly, be used for expenditure beyond the enterprise&#8217;s business scope or expenditure prohibited
by laws and regulations of the State; (ii) unless otherwise specified, they shall not, directly or indirectly, be used for investments
in securities or other investment than banks&#8217; principal-secured products; (iii) they shall not be used for the granting of loans
to non-affiliated enterprises, except where it is expressly permitted in the business license; and (iv) they shall not be used for the
construction or purchase of real estate for purposes other than self-use (except for real estate enterprises). Where there is any contractual
stipulation on the use scope of revenue under capital accounts between a domestic institution and other parties concerned, the relevant
funds shall not be used beyond such scope. Unless otherwise specified, such stipulation shall not conflict with this Circular. Moreover,
Circular 16 allows the enterprises to use their foreign exchange capitals under capital accounts allowed by the relevant laws and regulations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In January 2017, the 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 profit from domestic entities to offshore entities, including (i)
under the principle of genuine transaction, banks shall check board resolutions regarding profit distribution, the original version of
tax filing records and audited financial statements; and (ii) domestic entities shall hold income to account for previous years&#8217;
losses before remitting profits. Moreover, pursuant to Circular 3, domestic entities shall make detailed explanations of the sources
of capital and utilization arrangements, and provide board resolutions, contracts and other proof when completing the registration procedures
in connection with an outbound investment.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On October 23, 2019, SAFE issued the Circular on Further Promoting
Cross-border Trade and Investment Facilitation, or SAFE Circular 28. Among others, SAFE Circular 28 relaxes the prior restrictions and
allows the foreign-invested enterprises without equity investment as in their approved business scope to use their capital obtained from
foreign exchange settlement to make domestic equity investment as long as the investments are real and in compliance with the foreign
investment-related laws and regulations. In addition, SAFE Circular 28 stipulates that qualified enterprises in certain pilot areas may
use their capital income from registered capital, foreign debt and overseas listing, for the purpose of domestic payments without providing
authenticity certifications to the relevant banks in advance for those domestic payments. According to the Circular on Optimizing the
Administration of Foreign Exchange to Support the Development of Foreign-related Business issued by the SAFE on April 10, 2020, eligible
enterprises are allowed to make domestic payments using the income under their capital accounts generated from their capital, foreign
debt and overseas listing, without providing materials for each transaction evidencing the authenticity in advance, provided that the
capital usage is authentic and compliant with the current capital account income usage management regulations.</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">&#160;</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->78<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">&#160;</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">Regulations on Foreign Exchange Registration of
Overseas Investment by PRC Residents</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The SAFE issued the SAFE Circular on Relevant Issues Relating to Domestic
Resident&#8217;s Investment and Financing and Round Trip Investment through Special Purpose Vehicles, or SAFE Circular 37, that became
effective in July 2014, replacing the previous SAFE Circular 75. SAFE Circular 37 regulates foreign exchange matters in relation to the
use of special purpose vehicles, or SPVs, by PRC residents or entities to seek offshore investment and financing or conduct round trip
investment in China. Under SAFE Circular 37, an SPV refers to an offshore entity established or controlled, directly or indirectly, by
PRC residents or entities for the purpose of seeking offshore financing or making offshore investment, using legitimate onshore or offshore
assets or interests, while &#8220;round trip investment&#8221; refers to direct investment in China by PRC residents or entities through
SPVs, namely, establishing foreign-invested enterprises to obtain the ownership, control rights and management rights. SAFE Circular
37 provides that, before making contributions into an SPV, PRC residents or entities are required to complete the foreign exchange registration
with the SAFE or its local branch.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">PRC residents or entities who had contributed legitimate onshore or
offshore interests or assets to SPVs but had not obtained registration as required before the implementation of the SAFE Circular 37
must register their ownership interests or control in the SPVs with qualified banks. An amendment to the registration is required if
there is a material change with respect to the SPV registered, such as any change of basic information (including change of the PRC residents,
name and operation term), increases or decreases in investment amount, transfers or exchanges of shares, and mergers or divisions. Failure
to comply with the registration procedures set forth in SAFE Circular 37 and the subsequent notice, or making misrepresentation on or
failure to disclose controllers of the foreign-invested enterprise that is established through roundtrip investment, may result in restrictions
being imposed on the foreign exchange activities of the relevant foreign-invested enterprise, including payment of dividends and other
distributions, such as proceeds from any reduction in capital, share transfer or liquidation, to its offshore parent or affiliate, and
the capital inflow from the offshore parent, and may also subject relevant PRC residents or entities to penalties under PRC foreign exchange
administration regulations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In February 2015, the SAFE released the Notice of the State Administration
of Foreign Exchange on Further Simplifying and Improving the Policies of Foreign Exchange Administration Applicable to Direct Investment,
or Circular 13, which has amended Circular 37 by requiring PRC residents or entities to register with qualified banks rather than the
SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas
investment or financing.</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">&#160;</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">Share Option Rules</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Pursuant to Circular 37, PRC residents who participate in share incentive
plans in overseas non-publicly listed companies may submit applications to the SAFE or its local branches for the foreign exchange registration
with respect to offshore special purpose companies. In addition, under the Notice of the State Administration of Foreign Exchange on
Issues Related to Foreign Exchange Administration in Domestic Individuals&#8217; Participation in Equity Incentive Plans of Companies
Listed Abroad issued by SAFE in February 2012, or the Share Option Rules, PRC residents who are granted shares or share options by companies
listed on overseas stock exchanges under share incentive plans are required to (i) register with the SAFE or its local branches, (ii)
retain a qualified PRC agent, which may be a PRC subsidiary of the overseas listed company or another qualified institution selected
by the PRC subsidiary, to conduct SAFE registration and other procedures with respect to the share incentive plans on behalf of the participants,
and (iii) retain an overseas institution to handle matters in connection with their exercise of share options, purchase and sale of shares
or interests and funds transfers.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Regulations on Dividend Distribution</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Under our current corporate structure, our Cayman Islands holding
company may rely on dividend payments from our PRC subsidiaries, which are wholly foreign-owned enterprises incorporated in China, to
fund any cash and financing requirements we may have. The principal laws and regulations governing the distribution of dividends of foreign-invested
enterprises include the PRC Foreign Investment Law and its Implementing Regulations, both of which came into effect on January 1, 2020,
and other applicable laws, according to which a foreign investor may, in accordance with the law, freely transfer into or out of the
PRC its contributions, profits, capital earnings, income from asset disposal, intellectual property rights royalties acquired, compensation
or indemnity legally obtained, income from liquidation, etc., made or derived within the territory of the PRC in RMB or any foreign currency,
subject to no illegal restriction by any entity or individual in terms of the currency, amount, frequency of such transfer into or out
of the PRC, etc.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Regulations on Overseas Listing</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On August 8, 2006, six PRC regulatory agencies, including the CSRC,
adopted the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (the &#8220;M&amp;A Rules&#8221;), which
became effective on September 8, 2006 and were amended on June 22, 2009. Foreign investors shall comply with the M&amp;A Rules when they
purchase equity interests of a domestic company or subscribe to the increased capital of a domestic company and thus change the nature
of the domestic company into a foreign-invested enterprise; or when the foreign investors establish a foreign-invested enterprise in
the PRC, purchase the assets of a domestic company and operate the assets; or when the foreign investors purchase the assets of a domestic
company, establish a foreign-invested enterprise by injecting such assets and operate the assets. The M&amp;A Rules purport, among other
things, to require offshore special purpose vehicles formed for overseas listing purposes through acquisitions of PRC domestic companies
and controlled by PRC companies or individuals, to obtain approval from the CSRC prior to publicly listing their securities on an overseas
stock exchange.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On March 1, 2020, Securities Law of the People&#8217;s Republic of
China (Revised in 2019) became effective. It stipulates that any securities issuance and trading activities outside the People&#8217;s
Republic of China that disrupt the domestic market order in the PRC and damage the legitimate rights and interests of domestic investors
shall be investigated for legal liability in accordance with the relevant laws. This gives the China Securities Regulatory Commission,
public security organs and judicial organs &#8220;long-arm jurisdiction&#8221; over overseas securities market activities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On July 6, 2021, the General Office of the State Council and General
Office of the Central Committee of the Communist Party of China issued Opinions on Strictly Cracking Down Illegal Securities Activities
in Accordance with the Law. The 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 24, 2021,
the CSRC published the draft Administrative Provisions of the State Council on the Overseas Issuance and Listing of Securities by Domestic
Companies (Draft for Comments), or the Administrative Provisions and the draft Measures for the Overseas Issuance and Listing of Securities
Record-filings by Domestic companies (Draft for Comments), or the Draft Measures for public comments. Pursuant to these drafts, PRC domestic
companies that directly or indirectly offer or list their securities in an overseas market, including a PRC company limited by shares
and an offshore company whose main business operations are in China and intends to offer shares or be listed in an overseas market based
on its onshore equities, assets or similar interests, are required to file with the CSRC within three business days after submitting
their listing application documents to the regulator in the place of intended listing. Failure to complete the filing under the Administrative
Provisions may subject the domestic enterprise to a warning or a fine of one to ten million RMB. If the circumstances are serious, the
domestic enterprise may be ordered to suspend its business or suspend its business pending rectification, or its permits or businesses
license may be revoked. The Draft Measures also provide that a PRC domestic company must file with the CSRC within three business days
for its follow on offering of securities or issue of securities to purchase assets after it is listed in an overseas market. However,
there is no timetable as to when these drafts will be enacted.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On July 6, 2021, certain PRC regulatory authorities issued Opinions
on Strictly Cracking Down on Illegal Securities Activities in Accordance with the Law. These opinions call for strengthened regulation
over illegal securities activities and supervision on overseas listings by China-based companies and propose 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. On February 17, 2023, the China Securities Regulatory Commission promulgated the Overseas Listing Trial Measures, and five
supporting guidelines, which became effective on March 31, 2023. According to the Overseas Listing Trial Measures, PRC domestic companies
that seek to offer and list securities in overseas markets, either in direct or indirect means, are required to fulfill the filing procedure
with the CSRC and report relevant information. If a company fails to complete the filing procedure or conceals any material fact or falsifies
any major content in its filing documents, it may be subject to administrative penalties, such as order to rectify, warnings, fines,
and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons may also be subject
to administrative penalties, such as warnings and fines. The Overseas Listing Trial Measures also provide that a company in mainland
China must file with the CSRC within three business days for its follow-on offering of securities after it is listed in an overseas market.
On February 17, 2023, the CSRC also issued the Notice on Administration of the Filing of Overseas Offering and Listing by Domestic Companies
and held a press conference for the release of the Overseas Listing Trial Measures, which, among others, clarified that the companies
in mainland China that have been listed overseas before March 31, 2023 are not required to file with the CSRC immediately, but these
companies should complete filing with the CSRC for their financing activities in accordance with the Overseas Listing Trial Measures.
Based on the foregoing, as an issuer that has been listed overseas before the effective date of the Overseas Listing Trial Measures,
we are not required to complete filing with the CSRC for our offshore offerings prior to the effective date of the Overseas Listing Trial
Measures, but we may be subject to the filing requirements for our financing activities under the Overseas Listing Trial Measures. Any
securities offerings and listings outside of mainland China by our Company after the effective date of the Overseas Listing Trial Measures,
including but not limited to follow on offerings, secondary listings, and going private transactions, will be subject to the filing requirements
with the CSRC under the Overseas Listing Trial Measures, and we cannot assure you that we will be able to comply with such filing requirements
in a timely manner, or at all. Since the Overseas Listing Trial Measures was newly promulgated, the interpretation, application and enforcement
of the Overseas Listing Trial Measures remain unclear. We cannot assure you that we will be able to complete such filing in a timely
manner and fully comply with such rules to maintain the listing status of our ADSs and/or other securities, or to conduct any securities
offerings in the future.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of the date of this annual report, we have not received any inquiry,
notice, warning, sanctions or regulatory objection from the CSRC in connection with requirements of obtaining prior approval for the
listing of our ADSs. However, since the Overseas Listing Trial Measures was newly promulgated, the interpretation, application and enforcement
of the Overseas Listing Trial Measures remain unclear. We cannot assure you that we will be able to complete any required filing in a
timely manner and fully comply with such rules to maintain the listing status of our ADSs and/or other securities, or to conduct any
securities offerings in the future.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On April 2, 2022, the CSRC released the revised Provisions on Strengthening
Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments) ,
or the Draft Archives Rules. On February 24, 2023, the CSRC, jointly with other relevant governmental authorities, issued the Provisions
on Strengthening the Confidentiality and Archive Management Work Relating to the Overseas Securities Offering and Listing by Domestic
Companies (the &#8220;Confidentiality Provisions&#8221;), which became effective on March 31, 2023. The Confidentiality Provisions requires,
among others, that companies based in mainland China seeking to offer securities in overseas markets, either directly or indirectly,
shall establish the confidentiality and archives system, and shall complete approval and filing procedures with competent authorities,
if such companies or their overseas listing entities provide or publicly disclose documents or materials involving state secrets and
work secrets of PRC government agencies to relevant securities companies, securities service institutions, overseas regulatory agencies
and other entities and individuals. It further stipulates that providing or publicly disclosing documents and materials which may adversely
affect national security or public interests, and accounting files or copies shall be subject to corresponding procedures in accordance
with relevant laws and regulations. Given the Confidentiality Provisions were recently promulgated, there remain substantial uncertainties
about how these provisions will be interpreted, or implemented and how it will affect our operations or future securities offerings.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of the date of this annual report, we have not provided files or
copies of files outside China that involve national secrets, national security, vital interests, or have important preservation value
to the nation and society. However, we cannot guarantee that relevant government agencies of China, including the CSRC, will share the
same opinion as ours.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Summaries of the National Conference for the Work of Courts
in the Trial of Civil and Commercial Cases</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Summaries of the National Conference for the Work of Courts in the
Trial of Civil and Commercial Cases circulated by the Supreme People&#8217;s Court On November 8, 2019 (&#8220;Summaries&#8221;), provides
that, in the trust documents and relevant contracts, the beneficiaries are divided into different categories, such as preferential beneficiaries
and inferior beneficiaries, and it is stipulated that the preferential beneficiaries will subscribe for trust plan shares with their
asset, and after the trust expires, the inferior beneficiaries bear the obligation to make up the difference between the benefit obtained
from the trust property by the preferential beneficiaries plus its investment principal and the agreed proceeds. The people&#8217;s court
shall legally support preferential beneficiaries&#8217; claims for the liability borne by inferior beneficiaries as agreed. The agreement
on the rights and obligations of different types of beneficiaries in the trust documents will not affect the determination of the legal
trust relationship between the beneficiary and the trustee. In addition, the Summaries provided for the nature of credit enhancement
documents, i.e., where any party which are not parties to the trust contract provides similar commitment documents such as making up
differences by this third party, fulfillment of the repurchase obligations at maturity instead, and liquidity support as credit enhancement
measures, the contents of which comply with the provisions of the law on guarantees, the people&#8217;s court shall determine that a
guarantee contractual relationship is established among the parties. If the contents do not comply with the provisions of the law on
guarantees, the corresponding rights and obligations shall be determined according to the specific content of the commitment document,
and the corresponding civil liability shall be determined according to the facts of the case.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Notice on Further Regulating Financial Marketing and Publicity
Activities</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The People&#8217;s Bank of China, the China Banking Insurance Regulatory
Commission, the China Securities Regulatory Commission, and the State Administration of Foreign Exchange have issued notices on further
regulating financial marketing and publicity activities on December 20, 2019, which took effect on January 25, 2020. It is stipulated
it is illegal to engage in financial business without a business license or beyond the permitted business scope, and market entities
that fail to obtain relevant financial business qualifications shall not conduct marketing and publicity activities relating to the financial
business, except that information release platforms and media entrusted by relevant financial business qualifications carry out financial
marketing and publicity activities for them.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As this notice is relatively new, in the cooperation agreements we
signed with the trust companies, there is no specific agreement on the marketing and publicity activities of financial products. At present,
we have started to communicate with the trust partners on financial product marketing and publicity issues. We will improve the cooperation
model to ensure that marketing activities and those of our sales partners are legal and in compliance.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Administrative Measures for Online Marketing of Financial
Products (Draft for Comment)</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The &#8220;Administrative Measures for Online Marketing of Financial
Products (Draft for Comment)&#8221; was published on December 31, 2021, requiring financial institutions to conduct online marketing
of financial products on their own or entrust Internet platform companies to conduct online marketing of financial products within the
scope of business permitted by the financial regulatory authorities. Any institution or individual is prohibited from providing online
marketing for illegal financial activities such as illegal fundraising.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_014"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">4.C. Organizational Structure</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following diagram illustrates our corporate structure with material
subsidiaries as of the date of this annual report. For a complete list of our subsidiaries, please refer to note 1 to our consolidated
financial statements as of and for the years ended December 31, 2020, 2021 and 2022 included elsewhere in this annual report. We subscribe
to the subordinated units of the trust products issued under long-term trust plans through three of our wholly owned subsidiaries, Guangzhou
Heze Information Technology Co., Ltd., Guangzhou Chengze Information Technology Co., Ltd., and Shenzhen Fanhua United Investment Group
Co., Ltd. From an accounting perspective, we are exposed to the risk and variability of returns from activities of the trust plans and
are therefore required to consolidate the financial results of the trust plans, including the results related to the senior units. Financial
data of a trust plan is consolidated as if the trust plan is a subsidiary. Income and expenses of the trust plans are consolidated on
our consolidated statements of comprehensive income while assets and liabilities of the trust plans are consolidated on our consolidated
balance sheet. We do not, however, have ownership interest in the trust plans from a legal perspective other than in the subordinated
units that account for only a portion of the total outstanding amount of the trust plans. For details of the contractual structural leverage
ratio of each trust plan, please refer to &#8220;Item 4. Information of the Company&#8212;B. Business Overview&#8212;Our Funding Model.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><img alt="" src="image_003.jpg" style="height: 367px; width: 632px"/></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>



</div><p style="margin: 0; text-align: left"> Notes:</p><div>

</div><p style="margin: 0; text-align: left">&#160;</p><div>



</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 0.25in">(1)</td><td style="text-align: left">Guangzhou Chengze Information Technology Co., Ltd. is one of the entities
                                            through which we subscribe to subordinated units of trust products.</td></tr></table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 0.25in">(2)</td><td>Shenzhen Fanhua United Investment Group Co., Ltd. operates our loan services
                                            business through various subsidiaries in the PRC and operates our small loan business through
                                            Beijing Fanhua Micro-credit Company Limited and Shenzhen Fanhua Micro-credit Co., Ltd.</td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_015"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">4.D. Property, Plant and Equipment</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our corporate headquarters are located in Guangzhou, China, where
we lease 1,855 square meters of office space pursuant to a lease expiring in September 2022. We also maintain leased properties ranging
from 5 square meters to 1,855 square meters in over 50 cities. The lease term varies from three months to five years. We believe that
our existing facilities are generally adequate to meet our current needs, but we expect to seek additional funding as needed to accommodate
future growth.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_016"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">ITEM 4A. UNRESOLVED STAFF COMMENTS</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">None.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_017"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">You should read the following discussion and analysis of our financial
condition and results of operations in conjunction with our consolidated financial statements and the related notes included elsewhere
in this annual report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results and
the timing of events could differ materially from those anticipated in these forward-looking statements as a result of various factors,
including those we describe under &#8220;Item 3.D. Risk Factors&#8221; and elsewhere in this annual report.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_018"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">5.A. Operating Results</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Overview</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We are a leading home equity loan service provider in China. We facilitate
loans by connecting MSE owners with our funding partners. Our primary target borrower segment is MSE owners who own real properties in
Tier 1 and Tier 2 and other major cities in China.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have established a national network of 87 branches and sub-branches
in over 50 cities in China. We acquire our borrowers primarily through our sales partners under trust lending model. In 2020, 2021 and
2022, over 99.5% of our borrowers who obtained loans from trust companies were introduced to us by our sales partners under the collaboration
model. For details, please refer to &#8220;Item 4. Information on the Company&#8212;B. Business Overview&#8212;Our Products&#8212;Collaboration
Model.&#8221; Under trust lending model, we originated home equity loans with an aggregate principal amount of RMB8.8 billion, RMB12.8
billion and RMB 12.2 billion in 2020, 2021 and 2022, respectively. The loan origination volume in 2022 under the commercial bank partnership
was RMB2,533.3 million and the outstanding loan principal was RMB2,469.6 million as of December 31, 2022. We originated home equity loans
for 17,703 and 22,060 borrowers in 2020 and 2021, respectively, representing an increase of 24.6%. In 2022, we originated home equity
loans for 23,923 (including 3,891 under the commercial bank partnership) borrowers, representing an increase of 8.4% from 2021. In 2020,
2021 and 2022, the average tenor of the home equity loans we originated was 24, 15 and 12 months with the weighted average effective
interest rate (inclusive of interests and financing service fees, if applicable, payable by the borrowers) of 17.3%, 16.5% and 17.2%
per annum, respectively. The interest rates of our loan products under commercial bank partnership ranged from 9.0% to 15.5%</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our practical risk assessment procedure focuses on both credit risks
of borrowers and quality of the collateral. We have also established guidelines on characteristics and quality of collateral, including,
among others, an LTV ratio capped at 70%. The weighted average LTV ratio of the home equity loan origination volume was 54.6%, 58.5% and
60.0% in 2020, 2021 and 2022, respectively. As of December 31, 2020, 2021 and 2022, our NPL ratio was 12.89%, 11.93% and 16.95%, respectively.
Charge-off ratio in 2020, 2021 and 2022 was 4.06%, 0.85% and 0.43%, respectively.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our total operating income decreased from RMB687.7 million in 2020
to RMB176.2 million in 2021, representing a decrease of 74.4%, and increased to RMB749.2 million in 2022, representing an increase of
325.2%. Our net income decreased from RMB114.9 million in 2020, representing a decrease of 43.2% to RMB65.2 million in 2021, and increased
to RMB135.3 million in 2022, representing an increase of 107.5%.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Under the contractual arrangements with our trust company partners,
we subscribe to subordinated units of trust plans and provide services to trust plans. As a result, we are entitled to (i) the investment
return payable to us as subordinated unit holder and (ii) a performance-based service fee up to 7% per annum of the size of trust plans
payable to us for our services provided to trust plans. Our cost of the subordinated units as measured by the investment amount was RMB3,045.2
million, RMB2,919.4 million and RMB2,627.4 million (US$380.9 million) as of December 31, 2020, 2021 and 2022, respectively. Our investment
return from the subordinated units was RMB658.8 million, RMB578.7 million and RMB381.3 million (US$55.3 million) in 2020, 2021 and 2022,
respectively.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As a subordinated unit holder, we are exposed to variability of returns
from activities of trust plans and are therefore required to consolidate the financial results of trust plans on our consolidated financial
statements, including those of the senior units. Therefore, the service fee charged to trust plans is considered inter-company transaction
and is eliminated together with management service expenses of trust plans for accounting purposes. In 2020, 2021 and 2022, we generated
service fees charged to trust plans of RMB505.9 million, RMB440.1 million and RMB446.0 million (US$ 64.7 million), respectively.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Key Factors Affecting Our Results of Operations</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Ability to maintain and expand borrower base</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Due to the nature of our business, our ability to increase our loan
origination volume largely depends on our ability to acquire new borrowers for the loans we facilitate. Since December 2018, we have
been acquiring borrowers primarily through our sales partners under the collaboration model. For details, please refer to &#8220;Item
4. Information on the Company&#8212;B. Business Overview&#8212;Our Products&#8212;Collaboration Model.&#8221; Our sales partners are
typically local loan facilitators who have their own sales and marketing teams, they use such teams to reach to qualified candidates
and recommend them to our platform. In 2020, 2021 and 2022, over 99.5% of our borrowers were introduced to us by our sales partners under
the collaboration model. We originated home equity loans for 17,703, 22,060 and 23,923 (including 3,891 under the commercial bank partnership)
borrowers in 2020, 2021 and 2022, respectively. Our results of operations and ability to sustain and increase loan volumes will depend
on our ability to maintain and expand borrower base.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Effective risk management</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our operating income and profitability are largely affected by our
and our trust company partners&#8217; risk management capabilities. We are exposed to credit risks under the trust lending model as a
result of subscription of subordinated units and credit strengthening services and being a lender under the direct lending model. As
such, the ability of us and our trust company partners to accurately assess default risks through our and our trust company partners&#8217;
credit analysis system directly affects our loan delinquency ratios and profitability. Any significant weakness in our or our trust company
partners&#8217; risk management system will directly or indirectly result in an increase in delinquency of loans originated by us or
a failure of our loan servicing to recover losses. For a detailed discussion of our risk management, please refer to &#8220;Item 4. Information
of the Company&#8212;B. Business Overview&#8212;Risk Management.&#8221;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Relationship with our funding partners</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our collaborative relationships with our funding partners are critical
to our operations. We mainly collaborate with our trust company partners through trust lending model. In 2020, 2021 and 2022, 100%, 99.8%
and 82.7%of our total home equity loan origination volume was originated under trust lending model, respectively. The availability of
funds from our funding partners affects our liquidity and the amount of loan transactions that we can facilitate, which directly affects
our profitability. Terms of our collaboration agreements with our funding partners generally set the financing costs of our home equity
loan business. Our financing costs for senior units excluding the trust administrative fees, ranged from 6.0% to 11.5% per annum of the
issuance number of senior units in 2022. The interest charged by trust company partners to our borrowers affects our profitability. If
we fail to maintain or deepen our existing relationships with our trust company partners, our liquidity and profitability may be adversely
affected. A general deterioration of our relationships with our funding partners will result in a significant decrease in liquidity or
in our service fees charged to trust plans, and we may not be able to secure alternative financing on terms acceptable to us or our borrowers,
or at all. This may result in a decrease in the volume of loans we facilitate, which has a material adverse impact on our business and
results of operations. For detailed discussion relating to our relationship with our funding partners, please refer to &#8220;Item 4.
Information on the Company&#8212;B. Business Overview&#8212;Our Funding Model.&#8221;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">China&#8217;s macroeconomic environment</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our business depends on the growth of MSE owners&#8217; demand for
home equity loan financing, which in turn depends on China&#8217;s macroeconomic environment. General economic factors, including the
real estate prices, credit environment for MSEs, interest rate environment and unemployment rates, may affect borrowers&#8217; willingness
to seek home equity loans and/or repayment capability. For example, significant increase in interest rates could cause prospective borrowers
to defer obtaining loans as they wait for interest rates to decrease. Additionally, a slowdown in the economy, resulting in a rise in
the unemployment rate and/or a decrease in real income, may affect MSEs&#8217; revenue. All these factors may affect borrowers&#8217;
repayment capability and their willingness to seek loans, which may potentially affect delinquency ratios. Further, the COVID-19 outbreak
had and may continue to have a negative impact on China&#8217;s macroeconomic environment which may continue to result in a material
negative impact on our business and results of operations. For details, please see &#8220;Item 3.D. Key Information&#8212;Risk Factors&#8212;Risks
Related to Our Business&#8212;We face risks related to natural disasters, health epidemics and other outbreaks of contagious diseases.&#8221;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Government regulations and policies</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The regulatory environment for China&#8217;s financial market is developing
and evolving, creating both challenges and opportunities that could affect our financial performance. We must adapt to developments in
regulations and policies and may have to adjust our business practices, funding structures and product offerings from time to time. For
an overview of applicable laws and regulations and risks relating to our business, see the sections headed &#8220;Item 4. Information
of the Company&#8212;B. Business Overview&#8212;Regulation&#8221; and &#8220;Item 3. Key Information&#8212;D. Risk Factors.&#8221;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Loan Performance Data and Trend Analysis</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our operating results and financial condition are directly affected
by the performance of the loans we originate. We focus mainly on the NPL ratio as home equity loans over 90 days past-due are more difficult
and time-consuming to recover.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="font: bold 10pt Times New Roman, Times, Serif; text-align: center">&#160;</td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="font-size: 10pt; text-align: left">&#160;</td><td style="font-size: 10pt; text-align: right">16.95</td><td style="font-size: 10pt; text-align: left">%</td></tr>
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  <tr style="vertical-align: bottom; background-color: White">
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  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="font-size: 10pt; font-weight: bold; text-align: center">&#160;</td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="10" style="border-bottom: Black 1.5pt solid; font: bold 10pt Times New Roman, Times, Serif; text-align: center">As of
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December 31,</td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt">&#160;</td></tr>
  <tr style="vertical-align: bottom">
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    <td colspan="2" style="border-bottom: Black 1.5pt solid; font: bold 10pt Times New Roman, Times, Serif; text-align: center">2020</td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt">&#160;</td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-size: 10pt; text-align: left">NPL ratio <sup>(2)</sup></td><td style="font-size: 10pt">&#160;</td>
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    <td style="font-size: 10pt; text-align: left">&#160;</td><td style="font-size: 10pt; text-align: right">10.36</td><td style="font-size: 10pt; text-align: left">%</td><td style="font-size: 10pt">&#160;</td>
    <td style="font-size: 10pt; text-align: left">&#160;</td><td style="font-size: 10pt; text-align: right">8.22</td><td style="font-size: 10pt; text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-size: 10pt; text-align: left">NPL provision coverage ratio <sup>(4)</sup></td><td style="font-size: 10pt">&#160;</td>
    <td style="font-size: 10pt; text-align: left">&#160;</td><td style="font-size: 10pt; text-align: right">110.68</td><td style="font-size: 10pt; text-align: left">%</td><td style="font-size: 10pt">&#160;</td>
    <td style="font-size: 10pt; text-align: left">&#160;</td><td style="font-size: 10pt; text-align: right">487.21</td><td style="font-size: 10pt; text-align: left">%</td><td style="font-size: 10pt">&#160;</td>
    <td style="font-size: 10pt; text-align: left">&#160;</td><td style="font-size: 10pt; text-align: right">720.38</td><td style="font-size: 10pt; text-align: left">%</td></tr>
  </table><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 25%"><div style="border-top: Black 1.5pt solid; font-size: 1pt">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Notes:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 0.25in">(1)</td><td>Delinquency ratio represents total balance of outstanding loan principal
                                            for which any installment payment is one or more days past-due as a percentage of the outstanding
                                            loan principal as of the date.</td></tr></table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 0.25in">(2)</td><td>NPL ratio represents total balance of outstanding loan principal for
                                            which any installment payment is over 90 calendar days past-due as a percentage of the outstanding
                                            loan principal as of the date.</td></tr></table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 0.25in">(3)</td><td>Allowance ratio represents amount of allowance for loan principal, interest
                                            and financing service fee receivables as a percentage of the outstanding loan principal,
                                            interest and financing service fee receivables as of the date.</td></tr></table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 0.25in">(4)</td><td>NPL provision coverage ratio represents amount of allowance for loan
                                            principal, interest and financing service fee receivables as a percentage of the outstanding
                                            balance of NPL principal as of the date.</td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left">*</td><td style="text-align: justify">Certain December 31, 2020
                                            and 2021 amounts in loans held-for-sale have been corrected for an immaterial error identified.
                                            Please refer to Note 2(w) to Consolitated Financial Statement on page F-31.</td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 92; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->85<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our delinquency ratio has increased from 23.70% as of December 31,
2020 to 26.22% as of December 31, 2021, and further increased to 33.22% as of December 31, 2022. The increase in the delinquency ratio
from December 31, 2021 to December 31, 2022 was due to the fact that the borrowers&#8217; ability to service their debts was negatively
affected in 2022 due to strict prevention and control policies taken to contain the COVID-19 pandemic.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our NPL ratio had decreased from 12.89% as of December 31, 2020 to
11.93% as of December 31, 2021, and increased to 16.95% as of December 31, 2022. The increase of NPL ratio from December 31, 2021 to
December 31, 2022 was primarily attributable to the fact that the pandemic prevention and control measures taken in 2022 has negatively
impacted the efficiency of bad debt collection and legal proceedings against borrowers at default.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our allowance ratio has increased from 7.06% as of December 31, 2020
to 10.98% as of December 31, 2021, and decreased to 9.23% as of December 31, 2022, while our NPL provision coverage ratio has increased
from 54.76% to 92.03% and decreased to 52.27% as of the same dates. Decreases in allowance ratio and NPL provision coverage ratio from
December 31, 2021 to December 31, 2022 were primarily attributable to the decrease in the amount of loans charged off resulting form
an increase in the amount of loans held-for-sale.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In 2020, the Company revised its charge-off policy. Upon the revision,
the Company considers loans principal, interest and financial service fee receivables of loans that are 180 days past due uncollectable
and the balance shall be charged down to net realizable value (fair value of collaterals, less estimated cost to sell), unless such loans
are well-secured and already in the process of re-collection. The tables below illustrate the delinquency and NPL ratios for loans introduced
under the collaboration model and the loans under the traditional facilitation model by first lien and second lien as of December 2020,
2021 and 2022, respectively, presented based on the revised charge-off policy.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: center">&#160;</td><td style="font: bold 10pt Times New Roman, Times, Serif; text-align: center; padding-bottom: 1.5pt">&#160;</td>
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 traditional<br/>

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  <tr style="vertical-align: bottom">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="font-size: 10pt">&#160;</td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left">*</td><td style="text-align: left">Certain December 31, 2021
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 93; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->86<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left">*</td><td style="text-align: justify">Certain December 31, 2020
                                            amounts in loans held-for-sale have been corrected for an immaterial error identified. Please
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</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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 traditional<br/>

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 model</td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt">&#160;</td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have ceased facilitating loans under the traditional facilitation
model starting from December of 2018 and started to transfer loans under the traditional facilitation model to third parties in bulk
in 2021, which has caused the delinquency ratio and NPL ratio of loans under the traditional facilitation model to rise from 2020 to
2022. As of December 31, 2022, loans under the traditional facilitation model are all transfered by third parties in installment and
classified as loans held for sale. The balance of outstanding loan principal under the traditional facilitation model was relatively
small and constitue an immaterial proportion to the overall loan portfolio. We believe such ratios do not accurately reflect the loan
performance and could no longer be used as a measure of our risk assessment and post-loan management abilities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following tables illustrate the amount of loans (excluding loans
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cost to sell and the related allowance for credit losses for each applicable collateral category as of December 31, 2020, 2021 and 2022,
respectively.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Increases in allowance ratio from December 31, 2020 to December 31,
2021 were primarily attributable to the current expected credit loss (CECL) model that took into account the COVID-19 pandemic&#8217;s
continuous impact on the repayment abilities of borrowers. Decreases in allowance ratio from December 31, 2021 to December 31, 2022 were
primarily attributable to the increase of delinquent loans that were repurchased by sales partners by installment.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We incur losses and charge-off loans when we determine that the loan
is uncollectable. We consider loans principal, interest and financing service fee receivables meeting any of the following conditions
as uncollectible and the balance shall be written down to net realizable value (fair value of collaterals, less estimated cost sell):</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">(i)</td><td>death of the borrower;</td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">(ii)</td><td>identification of fraud, and the fraud is officially reported to and
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">(iii)</td><td>sales of loans to third parties;</td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">(iv)</td><td>settlement with the borrower, where the Company releases irrecoverable
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">(v)</td><td>disposal through legal proceedings, including but not limited to online
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in">(vi)</td><td>loans are 180 days past due unless both well-secured and in the process
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table sets forth our charge-off ratio for the periods
indicated.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
    <td style="font-size: 10pt; font-weight: bold; text-align: center">&#160;</td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our charge-off ratio was 4.06%, 0.85% and 0.43% in 2020, 2021 and
2022. The increase of charge-off ratio in 2020 was mainly attributable to the revision of the Company&#8217;s charge-off policy in 2020
as mentioned above. We continue to dispose of collateral through judicial or arbitration proceedings and utilize other quick disposal
plans available to manage NPLs. Meanwhile, we also transfer loans to third parties in exchange for proceeds upfront to quickly recover
overdue loans, and the related gains or losses from such sale will be accounted for as other gains/(losses) in our consolidated statements
of comprehensive income.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The tables below set forth the amortized cost of the loans (including
loans held for sale) that were resolved by the different charge-off scenario above, the allowances recorded on those loans at the time
of charge-off, additional provision for loan losses recorded at the time of the time of the scenario, in addition to the charge-off amounts
as of December 31, 2020, 2021 and 2022:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%">
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  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 25%"><div style="border-top: Black 1.5pt solid; font-size: 1pt">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Notes:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left">*</td><td style="text-align: left">Certain December 31, 2020
                                            and 2021 amounts in loans held-for-sale have been corrected for an immaterial error identified.
                                            Please refer to Note 2(w) to Consolitated Financial Statement on page F-31.</td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 0.25in">(1)</td><td>Additional provisions refer to the total amount of additional losses
                                            of individual loans, which is beyond what was already recorded in the allowance for credit
                                            losses at the point of charge-off in different scenarios.</td></tr></table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 0.25in">(2)</td><td>The loans sold to third parties are generally the ones that are over
                                            90 days past due, which we have made a commercially reasonable effort to collect. In order
                                            to efficiently allocate resources and timely collect funds on impaired loans, we believe
                                            it is effective and efficient to sell certain loans that are over 90 days past due to third
                                            parties as we can save relevant costs that may occur during the time-consuming collection
                                            process. The delinquent loans are generally sold in bulk. The purchasers are all third parties
                                            and consist of (i) sales partners who choose to repurchase the delinquent loans they introduced
                                            according to their agreements signed with us, and (ii) local investment asset management
                                            companies, experienced law firms or other entities with legal, collection and disposal teams
                                            to handle delinquent loans and relevant collaterals. We have two approaches for the sale
                                            of loans to third parties, including (i) the sale that we do not retain any rights or obligations
                                            and such loans will be charged off from our balance sheet at the point of the sale and (ii)
                                            the sale that we retain certain rights or obligations such as an obligation to repurchase
                                            the loans after a certain period, and such loans sold are recorded as borrowings under agreements
                                            to repurchase in our balance sheet.</td></tr></table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 0.25in">(3)</td><td>In 2020, the Company revised its charge-off policy. Upon the revision,
                                            the Company considers loans principal, interest and financial service fee receivables of
                                            loans that are 180 days past due uncollectable and the balance shall be charged down to net
                                            realizable value (fair value of collaterals, less estimated cost to sell), unless such loans
                                            are well-secured and already in the process of recollection.</td></tr></table><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 96; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->89<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Selected Income Statement Items</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Total operating income</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our total operating income represents the sum of (i) net interest
and fees income after collaboration cost and (ii) total non-interest income. Net interest and fees income after collaboration cost represents
total interest and fees income netting of total interest and fees expenses and collaboration cost for sales partners. In 2020, 2021 and
2022, we generated net interest and fees income after collaboration cost of RMB708.4 million, RMB614.6 million and RMB683.3 million (US$99.1
million), respectively. Total non-interest income/(losses) comprises net gains/(losses) on sales of loans, net realized gains on sales
of investments and other gains, net. In 2020, 2021 and 2022, we generated total non-interest income of RMB206.9 million, non-interest
losses of RMB438.4 million and non-interest income of RMB65.9 million (US$9.6 million), respectively.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Under the contractual arrangements with our trust company partners,
we subscribe to subordinated units of the trust plans and also provide services to trust plans. As a result, we are entitled to (i) the
investment return payable to us as subordinated holder and (ii) a performance-based service fee of up to 7% per annum of the size of
trust plans payable to us for our services provided to trust plans. As subordinated unit holder, we are exposed to variability of returns
from activities of trust plans and are therefore required to consolidate the financial results of trust plans. Therefore, the service
fee charged to trust plans is considered inter-company transaction and is eliminated together with service expenses of trust plans for
accounting purposes. As a result, the total payments to us under our trust lending model, together with the interest spread under our
small loan direct lending model and certain non-interest income, is reflected on our consolidated financial statements as total operating
income. The following table sets forth a breakdown of our total operating income for the periods indicated.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="padding-bottom: 1.5pt; text-align: center; font-size: 10pt">&#160;</td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt; text-align: center">&#160;</td>
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 52%; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Interest
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    <td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: left">&#160;</td><td style="font: 10pt Times New Roman, Times, Serif; width: 9%; text-align: right">1,854,823,409</td><td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: left">&#160;</td><td style="font: 10pt Times New Roman, Times, Serif; width: 1%">&#160;</td>
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    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left">&#160;</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">(775,565,615</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">)</td><td style="font: 10pt Times New Roman, Times, Serif">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Net
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    <td style="font-size: 10pt; text-align: left">&#160;</td><td style="font-size: 10pt; text-align: right">&#160;</td><td style="font-size: 10pt; text-align: left">&#160;</td><td style="font-size: 10pt">&#160;</td>
    <td style="font-size: 10pt; text-align: left">&#160;</td><td style="font-size: 10pt; text-align: right">&#160;</td><td style="font-size: 10pt; text-align: left">&#160;</td><td style="font-size: 10pt">&#160;</td>
    <td style="font-size: 10pt; text-align: left">&#160;</td><td style="font-size: 10pt; text-align: right">&#160;</td><td style="font-size: 10pt; text-align: left">&#160;</td><td style="font-size: 10pt">&#160;</td>
    <td style="font-size: 10pt; text-align: left">&#160;</td><td style="font-size: 10pt; text-align: right">&#160;</td><td style="font-size: 10pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="font-size: 10pt; text-align: left">&#160;</td><td style="font-size: 10pt; text-align: right">&#160;</td><td style="font-size: 10pt; text-align: left">&#160;</td><td style="font-size: 10pt">&#160;</td>
    <td style="font-size: 10pt; text-align: left">&#160;</td><td style="font-size: 10pt; text-align: right">&#160;</td><td style="font-size: 10pt; text-align: left">&#160;</td><td style="font-size: 10pt">&#160;</td>
    <td style="font-size: 10pt; text-align: left">&#160;</td><td style="font-size: 10pt; text-align: right">&#160;</td><td style="font-size: 10pt; text-align: left">&#160;</td></tr>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 4pt; text-align: left">Total operating income</td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; font: bold 10pt Times New Roman, Times, Serif; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; font: bold 10pt Times New Roman, Times, Serif; text-align: right">687,711,260</td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 4pt; text-align: left">&#160;</td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 4pt">&#160;</td>
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    <td style="border-bottom: Black 4pt double; font: bold 10pt Times New Roman, Times, Serif; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; font: bold 10pt Times New Roman, Times, Serif; text-align: right">108,627,596</td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 4pt; text-align: left">&#160;</td></tr>
  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 25%"><div style="border-top: Black 1.5pt solid; font-size: 1pt">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-style: normal; font-weight: normal">Note:</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-style: normal; font-weight: normal">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: italic 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-style: normal; font-weight: normal">*</span></td><td style="text-align: left"><span style="font-style: normal; font-weight: normal">We
                                            have identified an immaterial error and corrected the amounts of loans held-for-sale, guaranteed
                                            assets, provision for credit losses and net gains on sales of loans in the comparative period
                                            presentation. For details, see Note 2(w) to Consolitated Financial Statements on page F-31.</span></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0; text-indent: 0in"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0in"></td><td style="width: 0.25in; text-align: left">(1)</td><td style="text-align: left">Interest and fees income
                                            include (i) interest and financing service fees on loans, (ii) interest income on debt securities,
                                            (iii) interest income charged to sales partners, and (iv) interest on deposits with banks.
                                            The interest income charged to sales partners in 2020 and 2021 was immaterial and was previously
                                            presented as &#8220;fund possession fee&#8221; under &#8220;other gains/(losses), net&#8221;.
                                            The interest income on debt securities was nil in 2020 and 2021.</td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0; text-indent: 0in"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0in"></td><td style="width: 0.25in; text-align: left">(2)</td><td style="text-align: left">Interest and fees expenses
                                            refer to interest expenses on interest-bearing borrowings.</td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0; text-indent: 0in"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0in"></td><td style="width: 0.25in; text-align: left">(3)</td><td style="text-align: left">The Company has started
                                            to collaborate with commercial banks since 2021 and such collaboration grew and scaled in
                                            the second half of 2022.</td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0; text-indent: 0in"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="text-align: left; width: 0in"></td><td style="width: 0.25in; text-align: left">(4)</td><td style="text-align: left">Certain provision for
                                            guarantee liabilities in 2021 was immaterial and presented under &#8220;other gains, net&#8221;.
                                            Provision for guarantee liabilities has been reclassified from &#8220;other gains, net&#8221;
                                            to &#8220;provision for credit losses&#8221; in 2022.</td>
</tr></table><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 97; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->90<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Interest and fees income</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">&#160;</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">Interest and financing service fees on loans</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our interest and financing service fees on loans represents interest
payment from borrowers under our trust lending model and direct lending model, and historical financing service fee charged on borrowers
for the loan services we provide. Financing service fee is deferred and amortized over the average life of the related loans using the
effective interest method. Due to recent regulatory changes, we ceased charging such financing service fee starting from August 2017.</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">&#160;</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">Interest income on debt securities</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Interest income on debt securities is calculated by applying the effective
interest rate to the gross carrying amount of debt securities to unrelated companies plus any interest received from corporate debt securities.</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">&#160;</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">Interest income charged to sales partners</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In the event of a loan defaults and the sales partner chooses to repurchase
such loan in installments, the Company charges certain percentage of the loan as the interest income charged to sales partners. Interest
income charged to sales partners refers to the cost of and interest on the partner's 40% repayment and instalment repurchase options
under collaboration model.</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">&#160;</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">Interest on deposits with banks</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our interest on deposits with banks represents interest generated
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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Interest and fees expenses</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We recorded interest and fees expenses of RMB731.3 million, RMB775.6
million and RMB784.8 million (US$113.8 million) in 2020, 2021 and 2022, respectively.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our interest and fees expenses consists of interest expenses on interest-bearing
borrowings and interest expenses paid to related parties. In 2020, 2021 and 2022, the interest expenses on interest-bearing borrowings
was RMB731.3 million, RMB775.6 million and RMB784.8 million (US$113.8 million), accounting for 100%, 100% and 100%, respectively, of
our total interest and fees expenses for the same periods.</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">&#160;</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">Interest expenses on interest-bearing borrowings</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Interest expenses on interest-bearing borrowings consists primarily
of financing costs payable to (i) senior unit holders, (ii) third parties to whom we transferred rights to earnings in certain of our
subordinated units in trust plans with a repurchase arrangement, and (iii) third parties to whom we transferred certain rights to earnings
in loans principal, interest and financing service fee receivables with a repurchase arrangement.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Net revenue under the commercial bank partnership model</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Net revenue under the commercial bank partnership model represents
fees charged to commercial banks for services including introducing borrowers, initial credit assessment, facilitating loans from the
banks to the borrower and providing technical assistance to the borrower and banks, net of fees paid to third-party insurance company.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Revenues from loan facilitation services (covering matching of commercial
banks to borrowers and facilitating the execution of loan agreement between commercial banks and borrowers) are recognized at the time
a loan is originated, at which time the facilitation service is considered completed. Revenues from post-origination services (covering
cash processing services and collection services) are recognized on a straight-line basis over the term of the underlying loans as the
services are provided.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Group provided guarantee services for its off-balance sheet loans
under the commercial bank partnership model. As a result, at inception of the guarantee, the Group recognized a stand-ready guarantee
liability under ASC 460 at fair value with an associated guarantee receivable. Subsequently, the stand-ready guarantee is released into
gains from guarantee liabilities on a straight-line basis over the term of the guarantee.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">See Note 20 in our Consolidated Financial Statements for more details.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Collaboration cost for sales partners</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Collaboration cost for sales partners represents sales incentives
paid to sales partners. It has decreased from RMB425.7 million in 2021 to RMB320.8 million (US$46.5 million) in 2022, primarily due to
a lower average fee rate the Company paid to sales partners in the fiscal year of 2022 as compared to the same period of 2021. The fee
rate under collaboration model varies based on different collaboration model types and the terms of the loan.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 98; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->91<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Non-interest income/(losses)</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">&#160;</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">Realized gains on sales of investments</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Realized gains on sales of investments consist of realized gains and
losses from the disposal of investment securities, presented on a net basis.</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">&#160;</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">Net gains/(losses) on sales of loans</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Net gains/(losses) on sales of loans refer to any gains and losses
from the disposal of loans.</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">&#160;</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">Other gains, net</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Other gains, net mainly consists of gains of confiscating CRMPs. Particularly,
in the event of a loan defaults and the sales partner chooses to repurchase such loan in installments, the Company charges certain percentage
of the loan as the interest income charged to sales partners. The interest income charged to sales partners was previously presented
as &#8220;fund possession fee&#8221; under &#8220;other gains/(losses), net&#8221;, and is separately listed as &#8220;interest income
charged to sales partners&#8221; since third quarter of 2022 due to an increase in its absolute amount.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Operating expenses</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our operating expenses consist of employee compensation and benefits,
share-based compensation expenses, taxes and surcharges, operating lease cost, offering expenses and other expenses.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table sets forth our operating expenses, in absolute
amounts and as percentages of total operating income, for the periods indicated.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>


</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
    <td style="padding-bottom: 1.5pt; padding-left: 0.125in; text-indent: -0.125in; text-align: center; font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td><td style="padding-bottom: 1.5pt; text-align: center; font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
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<tr style="font-size: 10pt; vertical-align: bottom">
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<tr style="font-size: 10pt; vertical-align: bottom">
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<tr style="font-size: 10pt; vertical-align: bottom">
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    <td colspan="2" style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
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  <tr style="font-size: 10pt; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-size: 10pt; width: 23%; text-align: left; text-indent: -9.35pt; padding-left: 9.35pt"><span style="font-size: 10pt">Employee compensation
    and benefits</span></td><td style="font-size: 10pt; width: 1%"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; width: 1%; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; width: 8%; text-align: right"><span style="font-size: 10pt">190,374,014</span></td><td style="font-size: 10pt; width: 1%; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; width: 1%"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; width: 1%; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; width: 8%; text-align: right"><span style="font-size: 10pt">27.7</span></td><td style="font-size: 10pt; width: 1%; text-align: left"><span style="font-size: 10pt">%</span></td><td style="font-size: 10pt; width: 1%"><span style="font-size: 10pt">&#160;</span></td>
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    <td style="font-size: 10pt; width: 1%; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; width: 8%; text-align: right"><span style="font-size: 10pt">28,567,516</span></td><td style="font-size: 10pt; width: 1%; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; width: 1%"><span style="font-size: 10pt">&#160;</span></td>
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  <tr style="font-size: 10pt; vertical-align: bottom; background-color: White">
    <td style="font-size: 10pt; text-align: left; text-indent: -9.35pt; padding-left: 9.35pt"><span style="font-size: 10pt">Share-based compensation expenses</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
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  <tr style="font-size: 10pt; vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="font-size: 10pt; vertical-align: bottom; background-color: White">
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    <td style="font-size: 10pt; text-align: left; padding-bottom: 1.5pt; text-indent: -9.35pt; padding-left: 9.35pt"><span style="font-size: 10pt">Other
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    <td style="font-size: 10pt; border-bottom: Black 1.5pt solid; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; border-bottom: Black 1.5pt solid; text-align: right"><span style="font-size: 10pt">57.0</span></td><td style="font-size: 10pt; padding-bottom: 1.5pt; text-align: left"><span style="font-size: 10pt">%</span></td><td style="font-size: 10pt; padding-bottom: 1.5pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; border-bottom: Black 1.5pt solid; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; border-bottom: Black 1.5pt solid; text-align: right"><span style="font-size: 10pt">85,889,497</span></td><td style="font-size: 10pt; padding-bottom: 1.5pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; padding-bottom: 1.5pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; border-bottom: Black 1.5pt solid; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; border-bottom: Black 1.5pt solid; text-align: right"><span style="font-size: 10pt">12,452,807</span></td><td style="font-size: 10pt; padding-bottom: 1.5pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; padding-bottom: 1.5pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; border-bottom: Black 1.5pt solid; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; border-bottom: Black 1.5pt solid; text-align: right"><span style="font-size: 10pt">11.5</span></td><td style="font-size: 10pt; padding-bottom: 1.5pt; text-align: left"><span style="font-size: 10pt">%</span></td></tr>
  <tr style="font-size: 10pt; vertical-align: bottom; background-color: White">
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    operating expenses</span></td><td style="font-size: 10pt; padding-bottom: 4pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; border-bottom: Black 4pt double; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; border-bottom: Black 4pt double; text-align: right"><span style="font-size: 10pt">447,661,214</span></td><td style="font-size: 10pt; padding-bottom: 4pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; padding-bottom: 4pt"><span style="font-size: 10pt">&#160;</span></td>
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    <td style="font-size: 10pt; border-bottom: Black 4pt double; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; border-bottom: Black 4pt double; text-align: right"><span style="font-size: 10pt">380,928,739</span></td><td style="font-size: 10pt; padding-bottom: 4pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; padding-bottom: 4pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; border-bottom: Black 4pt double; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; border-bottom: Black 4pt double; text-align: right"><span style="font-size: 10pt">216.2</span></td><td style="font-size: 10pt; padding-bottom: 4pt; text-align: left"><span style="font-size: 10pt">%</span></td><td style="font-size: 10pt; padding-bottom: 4pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; border-bottom: Black 4pt double; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; border-bottom: Black 4pt double; text-align: right"><span style="font-size: 10pt">338,557,339</span></td><td style="font-size: 10pt; padding-bottom: 4pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; padding-bottom: 4pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; border-bottom: Black 4pt double; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; border-bottom: Black 4pt double; text-align: right"><span style="font-size: 10pt">49,086,200</span></td><td style="font-size: 10pt; padding-bottom: 4pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; padding-bottom: 4pt"><span style="font-size: 10pt">&#160;</span></td>
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  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Other expenses primarily consist of (i) advertising and promotion
expenses; (ii) litigation fees; (iii) consulting fees; (iv)&#160;research and development expenses; (v) office and commute expenses,
which mainly include expenses relating to office renovation, office facility expansion and daily commute; (vi) attorney fees and (vii)
entertainment and traveling expenses.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table sets forth breakdown of other expenses in absolute
amounts and as percentages of total operating income, for the periods indicated.</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
    <td style="padding-bottom: 1.5pt; padding-left: 0.25in; text-indent: -0.25in; text-align: center; font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td><td style="padding-bottom: 1.5pt; text-align: center; font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
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<tr style="font-size: 10pt; vertical-align: bottom">
    <td style="padding-bottom: 1.5pt; padding-left: 0.25in; text-indent: -0.25in; text-align: center; font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt; text-align: center"><span style="font-size: 10pt">&#160;</span></td>
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<tr style="font-size: 10pt; vertical-align: bottom">
    <td style="padding-bottom: 1.5pt; padding-left: 0.25in; text-indent: -0.25in; text-align: center; font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt; text-align: center"><span style="font-size: 10pt">&#160;</span></td>
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    <td colspan="2" style="border-bottom: Black 1.5pt solid; font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt; text-align: center"><span style="font-size: 10pt">%</span></td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt; text-align: center"><span style="font-size: 10pt">&#160;</span></td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt; text-align: center"><span style="font-size: 10pt">&#160;</span></td>
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<tr style="font-size: 10pt; vertical-align: bottom">
    <td style="font: bold 10pt Times New Roman, Times, Serif; padding-left: 0.25in; text-indent: -0.25in; text-align: left"><span style="font-size: 10pt">Other
    expenses</span></td><td style="text-align: center; font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td colspan="2" style="text-align: center; font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td><td style="text-align: center; font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td><td style="text-align: center; font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
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    <td colspan="2" style="text-align: center; font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td><td style="text-align: center; font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td><td style="text-align: center; font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td colspan="2" style="text-align: center; font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td><td style="text-align: center; font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td><td style="text-align: center; font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td colspan="2" style="text-align: center; font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td><td style="text-align: center; font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td></tr>

<tr style="font-size: 10pt; vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="font-size: 10pt; width: 1%; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; width: 8%; text-align: right"><span style="font-size: 10pt">30,471,983</span></td><td style="font-size: 10pt; width: 1%; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; width: 1%"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; width: 1%; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; width: 8%; text-align: right"><span style="font-size: 10pt">4.4</span></td><td style="font-size: 10pt; width: 1%; text-align: left"><span style="font-size: 10pt">%</span></td><td style="font-size: 10pt; width: 1%"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; width: 1%; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; width: 8%; text-align: right"><span style="font-size: 10pt">29,171,942</span></td><td style="font-size: 10pt; width: 1%; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; width: 1%"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; width: 1%; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; width: 8%; text-align: right"><span style="font-size: 10pt">16.6</span></td><td style="font-size: 10pt; width: 1%; text-align: left"><span style="font-size: 10pt">%</span></td><td style="font-size: 10pt; width: 1%"><span style="font-size: 10pt">&#160;</span></td>
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    <td style="font-size: 10pt; width: 1%; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; width: 8%; text-align: right"><span style="font-size: 10pt">4,699,404</span></td><td style="font-size: 10pt; width: 1%; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; width: 1%"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; width: 1%; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; width: 8%; text-align: right"><span style="font-size: 10pt">4.3</span></td><td style="font-size: 10pt; width: 1%; text-align: left"><span style="font-size: 10pt">%</span></td></tr>
  <tr style="font-size: 10pt; vertical-align: bottom; background-color: White">
    <td style="font-size: 10pt; text-align: left; text-indent: 0in; padding-left: 0.125in"><span style="font-size: 10pt">Litigation fees</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">24,764,412</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">3.6</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">%</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">12,019,673</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">6.8</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">%</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">6,291,273</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">912,149</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">0.8</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">%</span></td></tr>
  <tr style="font-size: 10pt; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; font-size: 10pt; text-align: left; text-indent: -0.125in"><span style="font-size: 10pt">Entertainment and traveling expenses</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">7,010,704</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">1.0</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">%</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">10,793,089</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">6.1</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">%</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">9,740,873</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">1,412,294</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">1.3</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">%</span></td></tr>
  <tr style="font-size: 10pt; vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; font-size: 10pt; text-align: left; text-indent: -0.125in"><span style="font-size: 10pt">Office and commute expenses</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">9,120,261</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">1.3</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">%</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">10,711,801</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">6.1</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">%</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">7,791,694</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">1,129,689</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">1.0</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">%</span></td></tr>
  <tr style="font-size: 10pt; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-size: 10pt; text-align: left; text-indent: 0in; padding-left: 0.125in"><span style="font-size: 10pt">Consulting fees</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">14,486,656</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">2.1</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">%</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">9,330,732</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">5.3</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">%</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">12,016,260</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">1,742,194</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">1.6</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">%</span></td></tr>
  <tr style="font-size: 10pt; vertical-align: bottom; background-color: White">
    <td style="font-size: 10pt; text-align: left; text-indent: 0in; padding-left: 0.125in"><span style="font-size: 10pt">Attorney fees</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">8,503,270</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">1.2</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">%</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">6,678,111</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">3.8</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">%</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">1,389,360</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">201,438</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">0.2</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">%</span></td></tr>
  <tr style="font-size: 10pt; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; font-size: 10pt; text-align: left; text-indent: -0.125in"><span style="font-size: 10pt">Communication expenses</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">2,495,071</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">0.4</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">%</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">3,861,529</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">2.2</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">%</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">2,424,242</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">351,482</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">0.3</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">%</span></td></tr>
  <tr style="font-size: 10pt; vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; font-size: 10pt; text-align: left; text-indent: -0.125in"><span style="font-size: 10pt">Depreciation and amortization</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">6,047,226</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">0.9</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">%</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">3,821,788</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">2.2</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">%</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">2,244,279</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">325,390</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">0.3</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">%</span></td></tr>
  <tr style="font-size: 10pt; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; font-size: 10pt; text-align: left; text-indent: -0.125in"><span style="font-size: 10pt">Directors and officers liability insurance</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">4,232,722</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">0.6</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">%</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">3,545,117</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">2.0</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">%</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">3,474,151</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">503,705</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">0.5</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">%</span></td></tr>
  <tr style="font-size: 10pt; vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; font-size: 10pt; text-align: left; text-indent: -0.125in"><span style="font-size: 10pt">Research and development expenses</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">9,960,607</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
    <td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">&#160;</span></td><td style="font-size: 10pt; text-align: right"><span style="font-size: 10pt">1.4</span></td><td style="font-size: 10pt; text-align: left"><span style="font-size: 10pt">%</span></td><td style="font-size: 10pt"><span style="font-size: 10pt">&#160;</span></td>
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  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Taxation</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Cayman Islands</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We are incorporated in the Cayman Islands. Under the current law 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.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">British Virgin Islands</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Under the current laws of the British Virgin Islands, our company
is not subject to tax on income or capital gains. In addition, upon payments of dividends by our British Virgin Islands subsidiaries
to their shareholders, no British Virgin Islands withholding tax will be imposed.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Hong Kong</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our wholly owned subsidiary, China Financial Services Group Limited,
is subject to Hong Kong profits tax on their activities conducted in Hong Kong at a uniform tax rate of 16.5%. Payments of dividends
by our subsidiaries to us are not subject to withholding tax in Hong Kong.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">PRC</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our subsidiaries and their subsidiaries in China are companies incorporated
under PRC law and, as such, are subject to PRC enterprise income tax on their taxable income in accordance with the relevant PRC income
tax laws. Pursuant to the PRC Enterprise Income Tax Law (the &#8220;EIT Law&#8221;), which became effective on January 1, 2008, and most
recently amended on December 29, 2018, a uniform 25% enterprise income tax rate is generally applicable to both foreign-invested enterprises
and domestic enterprises, except where a special preferential rate applies. For example, enterprises qualified as &#8220;High and New
Technology Enterprises&#8221; are entitled to a 15% enterprise income tax rate rather than the 25% uniform statutory tax rate. The enterprise
income tax is calculated based on the entity&#8217;s global income as determined under PRC tax laws and accounting standards. According
to the Notice of the Ministry of Finance and the SAT on Implementing the Pilot Program of Replacing Business Tax with Value-Added Tax
in an All-round Manner, which became effective on May 1, 2016, as amende on March 20, 2019, entities and individuals engaged in the sale
of services, intangible assets or fixed assets within the PRC territory are required to pay value-added tax instead of business tax.
Following the implementation of the Pilot Plan for Imposition of Value-Added Tax to Replace Business Tax, or the VAT Pilot Plan, most
of our PRC subsidiaries and affiliates have been subject to VAT, at a rate of 1% (pursuant to the regulatory development in 2020 in response
to the COVID-19 pandemic), 3% or 6%, instead of business tax.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As a Cayman Islands holding company, we may receive dividends from
our PRC subsidiaries through China Financial Services Group Limited. The PRC EIT Law and its implementing rules provide that dividends
paid by a PRC entity to a nonresident enterprise for income tax purposes is subject to PRC withholding tax at a rate of 10%, subject
to reduction by an applicable tax treaty with China. Pursuant to the Arrangement between Mainland China and the Hong Kong Special Administrative
Region for the Avoidance of Double Taxation and Tax Evasion on Income, or the Hong Kong Tax Treaty, the withholding tax rate in respect
to the payment of dividends by a PRC enterprise to a Hong Kong enterprise may be reduced to 5% from a standard rate of 10% if the Hong
Kong enterprise directly holds at least 25% of the PRC enterprise. Pursuant to the Notice of the State Administration of Taxation on
the Issues concerning the Application of the Dividend Clauses of Tax Agreements, or SAT Circular 81, a Hong Kong resident enterprise
must meet the following conditions, among others, in order to apply the reduced withholding tax rate: (i) it must be a company; (ii)
it must directly own the required percentage of equity interests and voting rights in the PRC resident enterprise; and (iii) it must
have directly owned such required percentage in the PRC resident enterprise throughout the 12 months prior to receiving the dividends.
On January 1, 2020, the State Administration of Taxation issued the Announcement of the State Taxation Administration on Issuing the
Administrative Measures for Entitlement to Treaty Benefits for Non-resident Taxpayers, which replaced the Administrative Measures for
Nonresident Taxpayers to Enjoy Treatment under Tax Treaties, or SAT Circular 60. The Announcement changed the reporting requirement into
collecting, gathering and retaining relevant materials for future reference in accordance with the provisions of these Measures in order
to accept the follow-up administration of tax authorities. At the same time, the Announcement adjusts the definition of non-resident
taxpayer to make it more accurate, which refers to taxpayers who shall be tax residents of the other contracting party in accordance
with the provisions of the clauses on residents of the tax treaties. The SAT promulgated the Announcement on Certain Issues Concerning
the Beneficial Owner in a Tax Agreement, or Circular 9, on February 3, 2018, effective as April 1, 2018, which provides guidance for
determining whether a resident of a tax treaty country is the &#8220;beneficial owner&#8221; of income under China&#8217;s tax treaties
and similar arrangements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">China Financial Services Group Limited may be able to benefit from
the 5% withholding tax rate for the dividends it receives from our PRC subsidiaries if it satisfies the conditions prescribed under SAT
Circular 81 and other relevant tax rules and regulations. However, according to SAT Circular 81, if the relevant tax authorities consider
the transactions or arrangements we have are for the primary purpose of enjoying a favorable tax treatment, the relevant tax authorities
may adjust the favorable withholding tax in the future. In addition, according to Circular 9, a beneficial owner shall generally engage
in substantial business activities, and an agent shall not be considered a beneficial owner and, therefore, shall not qualify for those
benefits. It is possible, however, under Circular 9, China Financial Services Group Limited would not be considered the &#8220;beneficial
owner&#8221; of any such dividends, and that such dividends would as a result be subject to withholding tax at the rate of 10% rather
than the favorable 5% rate applicable under the Hong Kong Tax Treaty.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">If our holding company in the Cayman Islands or any of our subsidiaries
outside China were deemed to be a &#8220;resident enterprise&#8221; under the PRC EIT Law, it would be subject to enterprise income tax
on its worldwide income at a rate of 25%. See &#8220;Item 3. Key Information&#8212;D. Risk Factors&#8212;Risks Related to Doing Business
in China&#8212;If we are classified as a PRC resident enterprise for PRC enterprise income tax purposes, such classification could result
in unfavorable tax consequences to us and our non-PRC shareholders and ADS holders.&#8221;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Critical Accounting Policies, Judgments and Estimates</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We prepare our financial statements in accordance with U.S. GAAP,
which requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures
of contingent assets and liabilities at the balance sheet dates and the reported amounts of revenues and expenses during the reporting
periods. We continually evaluate these judgments and estimates based on our own historical experience, knowledge and assessment of current
business and other conditions, our expectations regarding the future based on available information and assumptions that we believe to
be reasonable, which together form our basis for making judgments about matters that are not readily apparent from other sources. Since
the use of estimates is an integral component of the financial reporting process, our actual results could differ from those estimates.
Some of our accounting policies require a higher degree of judgment than others in their application.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The selection of critical accounting policies, the judgments and other
uncertainties affecting application of those policies and the sensitivity of reported results to changes in conditions and assumptions
are factors that should be considered when reviewing our financial statements. We believe the following accounting policies involve the
most significant judgments and estimates used in the preparation of our financial statements. You should read the following description
of critical accounting policies, judgments and estimates in conjunction with our consolidated financial statements and other disclosures
included in this annual report.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our consolidated financial statements include the results of the trust
plans as the trust lending model creates exposure to variability of returns from the activities of the trust plans. All intercompany
transactions and balances, including payment of service fees from trust plans to us, are eliminated in consolidation.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Revenue recognition</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Interest and financing service fees on loans which
are amortized over the contractual life of the related loans are recognized in consolidated statements of comprehensive income in accordance
with Accounting Standard Codification (&#8220;ASC&#8221;) 310 using the effective interest method. In accordance with the relevant guidance
in ASC Topic 606, the amounts associated with guarantee services under commercial bank partnership model is within the scope of ASC Topic
460 and should be accounted for in accordance with the provisions of that Topic. The services not within the scope of other Topics should
be accounted for in accordance with the remaining provisions of ASC Topic 606 and the applicable revenue recognition guidance. Also,
mortgage agency service revenue, asset management revenue and revenue from rendering of services are recognized in accordance with ASC
606 when following conditions are met: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the
contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract and
(v) recognize revenue when (or as) the entity satisfies a performance obligation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The criteria of revenue recognition as they relate to each of the
following major revenue generating activities are described below:</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">&#160;</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">Interest and financing service fees on loans</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Interest and financing service fees on loans, which include financing
service fees on loans, are collected from borrowers for loans and related services.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Interest and financing service fees on loans includes the amortization
of any discount or premium or differences between the initial carrying amount of an interest-bearing asset and its amount at maturity
calculated using the effective interest basis.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The effective interest method is a method of calculating the amortized
cost of a financial asset and of allocating the interest and financing service fees on loans over the years. The effective interest rate
is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument.
When calculating the effective interest rate, we estimate cash flows considering all contractual terms of the financial instrument but
do not consider future credit losses. Interest on the impaired assets is recognized using the rate of interest used to discount future
cash flows.</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">&#160;</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt"></p><div>

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</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">&#160;</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">Interest income on debt investment</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Interest income on debt securities is calculated by applying the effective
interest rate to the gross carrying amount of debt securities to unrelated companies plus any interest received from corporate debt securities.</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">&#160;</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">Revenue under commercial bank partnership model</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">In accordance with the relevant guidance in ASC
Topic 606, the amounts associated with guarantee services under commercial bank partnership model is within the scope of ASC Topic 460
and should be accounted for in accordance with the provisions of that Topic. The services not within the scope of other Topics should
be accounted for in accordance with the remaining provisions of ASC Topic 606 and the applicable revenue recognition guidance.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">The Group considers loan facilitation services under
commercial bank partnership model (covering matching of commercial banks to borrowers and facilitating the execution of loan agreement
between commercial banks and borrowers) and post-facilitation services under commercial bank partnership model (covering cash processing
services and collection services) as two distinctive performance obligations in accordance with ASC Topic 606. The transaction price
is first allocated to guarantee services under commercial bank partnership model, if any, which is recorded at fair value and recognized
amortized during the guarantee term in accordance with ASC Topic 460.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Then the remaining considerations are allocated
to the loan facilitation under commercial bank partnership model and post-facilitation services under commercial bank partnership model
using their relative standalone selling prices. When estimating total consideration, the Group considers early termination scenarios
based on historical early payment and other termination scenarios as the Group can not receive the full contractual service fee amount
under early termination, given the service fee is collected on a pro-rata basis upon early loan termination. Such service fee is determined
to be variable consideration that meets the &#8220;probable of not reversing&#8221; threshold. As such, the Group recognizes revenue
related to early termination based on its best estimate and true up adjustments are made from time to time. The Group does not have observable
standalone selling price for the loan facilitation services or post-facilitation services because it does not provide loan facilitation
services or post-facilitation services on a standalone basis in similar circumstances to similar customers. There is no direct observable
standalone selling price for similar services in the market that is reasonably available to the Group.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">As a result, the estimation of standalone selling
price involves significant judgment. The Group uses an expected cost plus margin approach to estimate the standalone selling prices of
loan facilitation services and post facilitation services as the basis of revenue allocation. When estimating the selling prices, the
Group considers the cost related to such services, profit margin, customer demand, effect of competition on services, and other market
factors, among which estimates of the cost of providing the services is the most significant.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">The transaction price allocated to loan facilitation
services is recognized as revenue upon execution of loan agreements between commercial banks and borrowers; the consideration allocated
to post-facilitation services is recognized over the period of the loan on a straight-line method, which approximates the pattern of
when the underlying services are performed.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Remaining performance obligations represents the
amount of the transaction price for which services have not been performed under post-facilitation services. The Group collects service
fees monthly. The aggregate amounts of the transaction price allocated to performance obligations that are unsatisfied pertaining to
post-origination services were RMB67.08 million as of December 31, 2022, among which 64.6% of the remaining performance obligations will
be recognized over the following 12 months, and with the remainder recognized thereafter.</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">&#160;</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">Mortgage agency service revenue</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We earn mortgage agency service revenue from providing mortgage agency
services to borrowers applying for a bank loan. Mortgage agency service fee is often received immediately or shortly after establishing
contracts with customers. This kind of revenue is recognized at the time when loan is granted as that is the point of time we fulfill
the customer&#8217;s request, and is then recognized on an accrual basis in accordance with the terms of the relevant agreements.</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">&#160;</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">Realized gains/(losses) on sales of investments</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Realized gains/(losses) consist of realized gains and losses from
the sale of investment securities, presented on a net basis.</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">&#160;</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt"></p><div>

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</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">&#160;</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">Net gains/(losses) on sales of loans</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Net gains/(losses) on sales of loans refer to any gains and losses
from the disposal of loans which is accounted for as a sale under ASC 860.</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">&#160;</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">Gains on confiscation of CRMPs</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Gains on confiscation of CRMPs are recognized to the extent confiscated
CRMPs exceed previously recognized allowance for loan losses and guarantee asset when sales partners surrender the CRMPs and the obligation
of refunding the CRMPs is released.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Loans</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(i) On-balance sheet loans</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Loans are reported at their outstanding principal balances net of
any unearned income and unamortized deferred fees and costs. Loan origination fees and certain direct origination costs are generally
deferred and recognized as adjustments to income over the lives of the related loans.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We facilitate credit to borrowers through structured funds which
are considered as consolidated VIEs and we evaluated VIEs for consolidation in accordance with ASC 810. Although we have ceased
providing credit enhancement and top-up arrangements since March 2018 and all the remaining loans under such arrangement had been
transferred in 2021 and substantially all of such remaining loans had been paid off in 2022, we, as the subordinated unit holder,
still provide credit strengthening services and are responsible to ensure sufficient capital to repay the principal amount and the
agreed financing costs for the senior units, we also act as the manager of the structured funds, those are the two key factors to
determine whether we should consolidate the structured funds. As a result, the loan principal remains on our consolidated balance
sheets, whilst the funds received from senior tranches holders are recorded as Other Borrowings in our consolidated balance
sheets.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Non-accrual policies</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Loans principal, interest and financing service fee receivables are
placed on non-accrual status when payments are 90 days contractually past due. When a loan principal, interest and financing service
fee receivable is placed on non-accrual status, interest and financing service fees accrual ceases. If the loan is non-accrual, the cost
recovery method is used and cash collected is applied to first reduce the carrying value of the loan. Otherwise, interest income may
be recognized to the extent cash is received. Loans principal, interest and financing service fee receivables may be returned to accrual
status when all of the borrower&#8217;s delinquent balances of loans principal, interest and financing service fees have been settled
and the borrower continues to perform in accordance with the loan terms for a period of at least six months.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Charge-off policies</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For the years ended December 31, 2018 and 2019, the Group considered
loans principal, interest and financing service fee receivables meeting any of the following conditions as uncollectible charged off:
(i) death of the borrower; (ii) identification of fraud, and the fraud is officially reported to and filed with relevant law enforcement
departments or (iii) the Group concludes that it has exhausted its collection efforts.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In order to align the Group&#8217;s charge-off policies with ASC 326-20-35-8
(superseded ASC 310-10-35-41), the Group revised its charge-off policies to (1) provide additional information as to the collection efforts
which must be exhausted before a charge-off is recorded and (2) charge down loans that are 180 days past due to net realizable value
(fair value of collaterals, less estimated costs to sell) unless both well-secured and in the process of collection. The revised charge-off
policies are presented as follows:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Loans principal, interest and financing service fee receivables are
charged down to net realizable value (fair value of collaterals, less estimated costs to sell) when the Group has determined the remaining
balance is uncollectable after exhausting all collection efforts. In order to comply with ASC 310 and ASC 326, the Group considers loans
principal, interest and financing service fee receivables meeting any of the following conditions as uncollectable and charged-off: (i)
death of the borrower; (ii) identification of fraud, and the fraud is officially reported to and filed with relevant law enforcement
departments; (iii) sales of loans to third parties; (iv) settlement with the borrower, where the Group releases irrecoverable loans through
private negotiations with the borrower where the borrower cannot repay the loan in full through self-funding or voluntary sale of the
collateral; (v) disposal through legal proceedings, including but not limited to online arbitrations, judicial auctions and court enforcements;
or (vi) loans are 180 days past due unless both well-secured and in the process of collection.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Allowance for credit losses</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Allowance for credit losses represents management&#8217;s best estimate
of probable losses inherent in the portfolio.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Commencing January 1, 2020, CNFinance adopted ASC 326, &#8220;Financial
Instruments&#8212;Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments&#8221;, which replaced the incurred
loss methodology for determining the provision for credit losses and allowance for credit losses (&#8220;ACL&#8221;) with an expected
loss methodology that is referred to as the current expected credit loss (&#8220;CECL&#8221;) model. ASC 326 defines the ACL as a valuation
account that is deducted from the amortized cost of a financial asset to present the net amount that management expects to collect on
the financial asset over its expected life. All financial assets carried at amortized cost are in the scope of ASC 326, while assets
measured at fair value are excluded. The allowance for credit losses is adjusted each period for changes in expected lifetime credit
losses.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The allowance for credit losses includes an asset-specific component
and a statistically based component. The Company aggregate loans sharing similar risk characteristics into pools for purposes of measuring
expected credit losses. Pools are reassessed periodically to confirm that all loans within each pool continue to share similar risk characteristics.
Expected credit losses for loans that do not share similar risk characteristics with other financial assets are measured individually.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Estimation of CECLs requires CNFinance to make assumptions regarding
the likelihood and severity of credit loss events and their impact on expected cash flows, which drive the probability of default (PD),
loss given default (LGD) and exposure at default (EAD) models. In its loss forecasting framework, ECL is determined primarily by utilizing
models for the borrowers&#8217; PD, LGD and EAD and the Company incorporates forward-looking information through the use of macroeconomic
scenarios applied over the forecasted life of the assets. These macroeconomic scenarios include variables that have historically been
key drivers of increases and decreases in credit losses. These variables include, but are not limited to, gross-domestic product rates,
interest rates and consumer price indexes.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The ACL for financial assets held at amortized cost is a valuation
account that is deducted from, or added to, the amortized cost basis of the financial assets to present the net amount expected to be
collected. When credit expectations change, the valuation account is adjusted with changes reported in provision for credit losses. If
amounts previously charged off are subsequently expected to be collected, we may recognize a negative allowance, which is limited to
the amount that was previously charged off.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The asset-specific component is calculated under ASC 310-10-35, on
an individual basis for the loans whose payments are contractually past due more than 90 days or which are considered impaired. A financial
asset is collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially
through the sale or operation of the collateral. When a collateral-dependent financial asset is probable of foreclosure, we will measure
the ACL based on the fair value of the collateral and we will measure the ACL based on the collateral&#8217;s net realizable value (fair
value of collateral, less estimated costs to sell).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Under the collaboration model, when the Group grants loans through
Trust Plan, the loan is with the borrower and guarantee is entered into with a separate counterparty (the sales partner). As such, under
the definition of ASC 326-20-20, the guarantee arrangement and lending arrangement would be considered freestanding arrangements. As
sale partners will provide guarantee of the entire loan to the Group, collection for loss is probable and estimable when a loss on an
insured loan is incurred and recognized. In this case, the Group will recognize guarantee loss recoverable asset in the amount that the
Group determines is probable to receive from the guarantor with an offsetting entry to &#8220;provision for credit losses&#8221; when
the Group concludes that the loss recovery is collectible. However, potential recovery that exceeds the recognized loss, if any, (gain
contingency) will not be recognized until cash is received. Therefore, the amounts estimated to be recoverable from the proceeds of guarantees
will be reported as a separate asset (guarantee asset) in the balance sheet. The increase in guaranteed recoverable assets are included
in the income statement as a reduction of the &#8220;provision for credit losses,&#8221; separate disclosure of the increase in guaranteed
recoverable assets will be included in the rollforward of the &#8220;allowance for credit losses.&#8221; The income statement caption
will be modified as &#8220;Provision for credit losses, net of increase in increase in guaranteed recoverable assets.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Loans held-for-sale</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Loans held-for-sale are measured at the lower of cost or fair value,
with valuation changes recorded in noninterest revenue. The valuation is performed on an individual loan basis. Loan origination fees
or costs and purchase price discounts or premiums are deferred in a contra loan account until the related loan is sold. The deferred
fees or costs and discounts or premiums are an adjustment to the basis of the loan and therefore are included in the periodic determination
of the lower of cost or fair value adjustments.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The loan is derecognized if the Group does not retain any risk and
rewards after transferring the loan. Such transfer would be recorded as sales according to ASC 860-10-40-5. At the time of derecognition,
any related loan loss allowance is released. Gains and losses on loans transfer as a sale are recognized in the non-interest income.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(ii) Off-balance sheet loans</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For loans funded by the proceeds from third-party commercial banks,
each underlying loan and borrower has to be approved by the third-party commercial banks individually. Once the loan is approved by and
originated by the third-party commercial bank, the fund is provided by the third-party commercial bank to the borrower and a lending
relationship between the borrower and the third-party commercial bank is established through a loan agreement. Effectively, the Group
offers loan facilitation services to the borrowers who have credit needs and the commercial banks who originate loans directly to borrowers
referred by the Group. The Group continues to provide post-origination services to the borrowers over the term of the loan agreement.
Under this scenario, the Group determines that it is not the legal lender or borrower in the loan origination and repayment process.
Accordingly, the Group does not record loans principal, interest and financing service fee receivables arising from these loans nor interest-bearing
borrowings to the third-party commercial banks.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Income tax</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Income tax is accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry
forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the enactment date. We recognize the effect of income tax positions
only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount
that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change
in judgment occurs. We classify interest and penalties recognized on the liability for unrecognized tax benefits as income tax expense.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Share-based compensation expenses</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We measure the cost of employee services received in exchange for
an award of equity instruments based on the grant-date fair value of the award and recognize the cost over the period the employee is
required to provide service in exchange for the award, which generally is the vesting period. We recognize compensation cost using a
front-loading approach for an award with only service conditions that has a graded vesting schedule over the requisite service period
for the entire award, net of estimated forfeitures, provided that the cumulative amount of compensation cost recognized at any date at
least equals the portion of the grant-date value of such award that is vested at that date. Forfeiture rates are estimated based on historical
and future expectations of employee turnover rates.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In January 2017, SFIL adopted the 2017 SFIL Share Incentive Plan,
or the 2017 Plan. Under the 2017 Plan, SFIL granted 187,933,720 options to its certain management members and employees to purchase up
to 187,933,720 ordinary shares. The term of the options will not exceed ten years from the date of the grant. Accordingly, 60%, 20% and
20% of the award options shall vest on December 31 of each of the years 2017 to 2019, respectively. Unless terminated earlier, the 2017
Plan will terminate automatically in 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On August 27, 2018, we adopted our 2018 CNFinance Holdings Limit Share
Incentive Plan, or the 2018 Plan to replace the 2017 Plan and granted 187,933,720 options to certain management members and employees
to purchase up to 187,933,720 of our ordinary shares under this 2018 Plan to replace the granted and outstanding options under the 2017
Plan.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On December 31, 2019, we granted up to 119,674,780 options to certain
management members and employees to purchase up to 119,674,780 of our ordinary shares under the 2018 Plan. Such options will be considered
vested as to 50%, 30%, 20% on each of December 31, 2020, December 31, 2021 and December 31, 2022, respectively, but will only be distributed
to the applicable grantees based on their performance scores on December 31, 2022, subject to continued employment through such date.
As of the date hereof, the options may be allocated to up to 42 employees. Vested options will expire five years from the date of vesting.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Share-based payment transactions with employees, such as share options
are measured based on the grant date fair value of the equity instrument. We recognize the compensation costs net of estimated forfeitures
over the applicable vesting period. The estimate of forfeitures will be adjusted over the requisite service period to the extent that
actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures will be recognized through
a cumulative catchup adjustment in the period of change and will also impact the amount of stock compensation expense to be recognized
in future periods. There were no market conditions associated with the share option grants.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The fair value of options granted to employees is determined based
on a number of factors including valuations. In determining the fair value of our equity instruments, we referred to valuation reports
prepared by an independent third-party appraisal firm, based on data we provided. The valuation reports provided us with guidelines in
determining the fair value of the equity instruments, but we are ultimately responsible for the determination of all amounts related
to share-based compensation recorded in the financial statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Excluding the options containing service vesting conditions, we calculated
the estimated fair value of the options on the respective grant dates using a binomial option pricing model with assistance from independent
valuation firms, with the following assumptions:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="font: bold 10pt Times New Roman, Times, Serif; text-align: center">&#160;</td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt">&#160;</td>
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 granted on<br/>
 January 3, 2017<br/> (&#8220;2018<br/>
 Option&#8221;)</td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt">&#160;</td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt">&#160;</td>
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 December&#160;31, <br/>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The contractual life of the share option is used as an input into
the binomial option pricing model. Exercise multiple and post-vesting forfeit are incorporated into the model. When the options of the
2018 Option were issued, our shares had not been publicly traded at the time the options were issued and our shares were rarely traded
privately, expected volatility for the shares underlying such options is estimated based on the average historical volatility of comparable
entities with publicly traded shares for the period before the date of grant with length commensurate to contractual life of the options.
The risk-free rate for the expected term of the option is based on the yield to maturity of China&#8217;s six-year government bond at
the date of grant. When the options of the 2019 Option were issued, our shares were already publicly traded. Since the shares have only
been publicly traded for just over a year, the expected volatility for the shares underlying such options is estimated based on the historical
volatility of comparable entities with publicly traded shares for the period before the date of grant with length commensurate to contractual
life of the options. The contractual life of the options is 6 years, 7 years and 8 years, respectively. Therefore, the risk-free rate
for the expected term of the options is determined based on the yield to maturity of China 5-year, 7-year and 10-year government bond,
using interpolation method, at the date of grant. We have not declared or paid any cash dividends on our capital stock, and do not anticipate
any dividend payments on our ordinary shares in the foreseeable future.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">If any of the assumptions used in the binomial option pricing model
changes significantly, share-based compensation expenses for future awards may differ materially compared with the awards granted previously.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table sets forth the fair value of options and ordinary
shares estimated at the dates of option grants indicated below with the assistance from an independent valuation firm.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</table><div>

</div><p style="margin: 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
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 option</td><td style="padding-bottom: 1.5pt; text-align: center; font-weight: bold">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: center; font-weight: bold">Fair value of ordinary shares</td></tr>

<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->99<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For the option granted on January 3, 2017, the Group recognized compensation
expenses of RMB39,715,168 and RMB15,886,067 in year 2018 and 2019, respectively. There was no income tax benefit recognized associated
with the share-based compensation expenses. As of December 31, 2019, the expenses in relation to the 2018 Option have been fully recognized.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For the 2019 Option, the Group recognized compensation expenses of
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with the share-based compensation expenses. As of December 31, 2022, the expenses in relation to the 2019 Option have been fully recognized.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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our operating results and for financial and operational decision-making purposes. We believe that adjusted net income helps identify
underlying trends in our business by excluding the impact of share-based compensation expense, which are non-cash charges. We believe
that adjusted net income provides useful information about our operating results, enhances the overall understanding of our past performance
and future prospects and allows for greater visibility with respect to key metrics used by our management in its financial and operational
decision-making.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="font: bold 10pt Times New Roman, Times, Serif; text-align: center">&#160;</td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Adjusted net income is not defined under U.S. GAAP and is not presented
in accordance with U.S. GAAP. This non-GAAP financial measure should not be considered in isolation from, or as a substitute for, its
most directly comparable financial measure prepared in accordance with U.S. GAAP. A reconciliation of the historical non-GAAP financial
measure to its most directly comparable GAAP measure has been provided in the tables included below. Investors are encouraged to review
the reconciliation of the historical non-GAAP financial measure to its most directly comparable GAAP financial measure. As adjusted net
income has material limitations as an analytical metric and may not be calculated in the same manner by all companies, it may not be
comparable to other similarly titled measures used by other companies. In light of the foregoing limitations, you should not consider
adjusted net income as a substitute for, or superior to, net revenues prepared in accordance with U.S. GAAP. We encourage investors and
others to review our financial information in its entirety and not rely on a single financial measure.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table reconciles our adjusted net income for the periods
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 107; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->100<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Results of Operations</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table sets forth a summary of our consolidated statements
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and related notes included elsewhere in this annual report. The results in any period are not necessarily indicative of our future trends.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%">
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    <td style="font-size: 10pt; text-align: left">&#160;</td><td style="font-size: 10pt; text-align: right">&#160;</td><td style="font-size: 10pt; text-align: left">&#160;</td><td style="font-size: 10pt">&#160;</td>
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    <td style="font-size: 10pt; text-align: left">&#160;</td><td style="font-size: 10pt; text-align: right">&#160;</td><td style="font-size: 10pt; text-align: left">&#160;</td></tr>
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  </table><div>

</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left">*:</td><td style="text-align: left">We have identified an immaterial error and corrected the amounts
of loans held-for-sale, guaranteed assets, provision for credit losses and net gains on sales of loans in the comparative period presentation.
For details, see Note 2(w) to Consolitated Financial Statements on page F-31.</td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Year Ended December 31, 2022 Compared to Year Ended December
31, 2021</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Interest and fees income</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Total interest and fees income&#160;for fiscal year 2022 decreased
by 4.6% to RMB1,731.4 million (US$251.0 million) as compared to RMB1,815.8 million for the same period of 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt"><i>Interest and financing service fees on loans</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Interest and financing service fees on loans&#160;</i>decreased
by 11.1% to RMB1,574.7 million (US$228.3 million) for the fiscal year of 2022 as compared to RMB1,770.4 million for the same period of
2021, primarily attributable to a decrease in the balance of average daily outstanding loan principal. Such decrease was mainly as a
result of the Company&#8217;s transferal of loans under the traditional facilitation model to third parties in bulk during the fourth
quarter of 2021 along with the impact of strict pandemic prevention and control measures taken from January to November 2022, which was
partially offset by an increase in the total outstanding loan principal under the collaboration model.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt"><i>Interest income charged to sales partners</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Interest income charged to sales partners,</i>&#160;representing
fee charged to sales partners who choose to repurchase default loans in installments, increased by 265.3% to RMB122.0 million (US$17.7
million) for the fiscal year of 2022 from RMB33.4 million in the same period of 2021, primarily attributable to an increase in the delinquent
loans that were repurchased by the sales partners in installments.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt"><i>Interest income on debt securities</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt; text-indent: -9.35pt"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt; text-indent: -9.35pt"><i>Interest income on debt securities</i>
increased to RMB21.6 million (US$3.1 million) in 2022 from nil in 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt; text-indent: -9.35pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt"><i>Interest on deposit with banks</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Interest on deposits with banks</i>&#160;increased by 9.2% to RMB13.1
million (US$1.9 million) for the fiscal year of 2022 as compared to RMB12.0 million for the same period of 2021, primarily due to the
higher daily average amount of time deposits.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Interest and fees expenses</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Total interest and fees expenses refer to interest expenses on interest-bearing
borrowings and&#160;increased by 1.2% to RMB784.8 million (US$113.8 million) for the fiscal year of 2022 as compared to RMB775.6 million
for the same period of 2021, primarily due to an increase in daily average outstanding principal of other borrowings.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Net interest and fees income<span style="font-weight: normal">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As a result of the foregoing, net interest and fees income&#160;decreased
by 9.0% to RMB946.6 million (US$137.2 million) for the fiscal year of 2022 as compared to RMB1,040.2 million for the same period of 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Net revenue under the commercial bank partnership model</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Net revenue under the commercial bank partnership
model,&#160;representing fees charged to commercial banks for introducing borrowers, initial credit assessment, facilitating loans from
the banks to the borrower and providing technical assistance to the borrower and banks, net of fees paid to third-party insurance company,
was RMB57.6 million (US$8.3 million) for the fiscal year of 2022 as compared to RMB0.1 million in 2021. The Company has started to collaborate
with commercial banks since 2021 and such collaboration grew and scaled in the second half of 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Collaboration cost for sales partners</i></b><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Collaboration cost for sales partners&#160;representing sales incentives
paid to sales partners decreased to RMB320.8 million (US$46.5 million) for the fiscal year of 2022 as compared to RMB425.7 million for
the same period of 2021, primarily attributable to a lower average fee rate the Company paid to sales partners in the fiscal year of
2022 as compared to the same period of 2021. The fee rate under collaboration model varies based on different collaboration model types
and the terms of the loan.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Net interest and fees income after collaboration cost</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Net interest and fees income after collaboration cost&#160;was RMB683.4
million (US$99.1 million) for the fiscal year of 2022, representing an increase of 11.2% as compared to RMB614.6 million for the same
period of 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 109; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->102<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Provision for credit losses</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Provision for credit losses&#160;represents the provision for
credit losses under the trust lending model and the expected credit losses of guarantee under the commercial bank partnership model
in relation to certain financial guarantee arrangements the Company entered into with a third-party guarantor, who provides
guarantee services to commercial bank partners. Our provision for credit losses was RMB238.1 million (US$34.5 million) for the
fiscal year of 2022 as compared to a reversal of RMB298.5 million<span style="font-family: Times New Roman, Times, Serif"><sup>1</sup></span> for the same period of 2021. The reversal in 2021 was primarily due to the fact that the Company transferred loans
under the traditional facilitation model to third parties in bulk during the fourth quarter of 2021 and the allowance of such loans
was reversed. The increase in provision for credit losses in the fiscal year of 2022 was mainly due to economic uncertainty caused
by COVID-19 pandemic and the relevant prevention measures, as well as the downward pressure faced by China&#8217;s real estate
market during 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Net losses on sales of loans</i></b><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Net losses on sales of loans&#160;was RMB44.6 million (US$6.5 million)
for the fiscal year of 2022 as compared to RMB479.6 million in the same period of 2021, primarily attributable to the fact that the Company
transferred loans under the traditional facilitation model to third parties in bulk during the fourth quarter of 2021. Such loans were
all facilitated prior to 2019, and the majority of them were long past due.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Other gains, net</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Other gains, net&#160;was RMB89.9 million (US$13.0 million) for the
fiscal year of 2022, compared with RMB22.1 million<sup>1 </sup>in the same period of 2021, primarily attributable to the increase of
Credit Risk Mitigation Position forfeited by the sales partners.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Total operating expenses</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our total operating expenses&#160;decreased by 11.1% to RMB338.6 million
(US$49.1 million) for the fiscal year of 2022 as compared to RMB381.0 million for the same period of 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt"><i>Employee compensation and benefits</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Employee compensation and benefits&#160;</i>decreased by 6.7% to
RMB197.0 million (US$28.6 million) for the fiscal year of 2022 as compared to RMB211.2 million for the same period of 2021, primarily
due to a decrease in compensation associated with decreased operational headcounts.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">&#160;<i>Share-based compensation expenses</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Share-based compensation expenses</i>&#160;decreased by 69.1% to
RMB5.8 million (US$0.8 million) for the fiscal year of 2022 as compared to RMB18.8 million for the same period of 2021. According to
the Company&#8217;s share option plan adopted on December 31, 2019, 50%, 30% and 20% of the option granted will be vested on December
31, 2020, 2021 and 2022, respectively. Related compensation cost of the option grants will be recognized over the requisite period.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt"><i>Taxes and surcharges</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Taxes and surcharges</i>&#160;increased by 0.6 % to RMB35.9 million
(US$5.2 million) for the fiscal year of 2022 as compared to RMB35.7 million for the same period of 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt"><i>Operating lease cost</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Operating lease cost</i>&#160;decreased by 5.4% to RMB14.0 million
(US$2.0 million) for the fiscal year of 2022 as compared to RMB14.8 million for the same period of 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt"><i>Other expenses</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0"><i>Other expenses</i>&#160;decreased by 14.5% to RMB85.9 million (US$12.5
million) for the fiscal year of 2022 as compared to RMB100.5 million for the same period of 2021, primarily due to a decrease in attorney&#8217;s
fees associated with legal proceedings mainly as a result of the Company&#8217;s business transition to collaboration model, under which
relevant attorney fees are borne by sales partners.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 25%"><div style="border-top: Black 1.5pt solid; font-size: 1pt">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><sup>1</sup></td><td style="text-align: justify">Provision for guarantee liabilities was re-classified from &#8220;other
gains, net&#8221; to &#8220;provision for credit losses&#8221; in 2022.</td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 110; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->103<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Income tax expenses</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our Income tax expenses&#160;increased by 30.1% to RMB37.2 million
(US$5.4 million) for the fiscal year of 2022 as compared to RMB28.6 million for the same period of 2021, primarily due to an increase
in the amount of taxable income. Our Effective tax rate&#160;decreased to 21.57% for the fiscal year of 2022 from 30.46% in the same
period of 2021, primarily due to the combined effect of (a) the non-deductible share-based compensation expenses which decreased to RMB5.8
million (US$0.8 million) for the fiscal year of 2022 from RMB18.8 million in the same period of 2021; and (b) one subsidiary turned losses
into incomes during the fourth quarter in 2022, resulting in reversal of the full valuation allowance of the deferred tax asset.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Net income</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Net income&#160;increased by 107.7% to RMB135.4 million (US$19.6 million)
for the fiscal year of 2022 as compared to RMB65.2 million for the same period of 2021.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Year Ended December 31, 2021 Compared to Year Ended December
31, 2020</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-style: normal; font-weight: normal">&#160;</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-style: normal; font-weight: normal">Interest
and fees income</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">&#160;</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">Interest and financing service fees on loans</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our interest and financing service fees on loans decreased by 3.2%
from RMB1,828.7 million in 2020 to RMB1,770.4 million in 2021, primarily due to the lowered interest rate on loans facilitated in an
effort to comply with rules and regulations issued by relevant PRC regulatory authorities, including the Decisions of the Supreme People&#8217;s
Court to Amend the Provisions on Several Issues concerning the Application of Law in the Trial of Private Lending Cases issued in August
2020.</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">&#160;</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">Interest income charged to sales partners</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Interest on deposits with banks increased by 234.0% from RMB10.0 million
in 2020 to RMB33.4 million in 2021, primarily due to the increase in the delinquent loans that were repurchased by the sales partners
in installments.</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">&#160;</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">Interest on deposits with banks</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Interest on deposits with banks decreased by 25.5% from RMB16.1 million in 2020 to RMB12.0 million in 2021, primarily due to the smaller
daily average amount of time deposits in 2021 as compared to 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Interest and fees expenses</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Interest and fees expenses increased by 6.1% from RMB731.3 million
in 2020 to RMB775.6 million in 2021, primarily due to the increase in the principals of other borrowings as well as the funding cost
from trust companies.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Net interest and fees income</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As a result of the foregoing, our net interest and fees income decreased
by 7.4% from RMB1,123.5 million in 2020 to RMB1,040.2 million in 2021.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Collaboration cost for sales partners</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Collaboration cost for sales partners represents sales incentives
paid to sales partners, was RMB425.7 million for the fiscal year of 2021, and was RMB415.1 million in 2020, primarily due to the increase
in average daily outstanding loan principal under the collaboration model as compared to the same period of 2020.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Net interest and fees income after collaboration cost</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Net interest and fees income after collaboration cost was RMB614.6
million in 2021, representing a decrease of 13.2% as compared to RMB708.4 million in 2020.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 111; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->104<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Provision for credit losses</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Provision for credit losses recorded a reversal of RMB298.5 million
in 2021 as compared to provision of RMB77.3 million in 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The reversal was mainly attributable to the fact that (a) the Company
transferred loans under the traditional facilitation model to third parties in bulk during the fourth quarter of 2021 and the allowance
of such loans was reversed; partially offset by the fact that (b) the current expected credit loss (CECL) model took into account the
deterioration in the economic outlook caused by the COVID-19 pandemic.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Net losses on sales of loans</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Net losses on sales of loans was RMB479.6 million in 2021 as compared
to RMB50.6 million in 2020, primarily attributable to the fact that the Company transferred loans under the traditional facilitation
model to third parties in bulk at market price during the fourth quarter of 2021. Such loans were all facilitated prior to 2019, and
the majority of them were long past due.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Other gains, net</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Other gains, net was RMB22.1 million in 2021, compared with RMB9.8
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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Operating expenses</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our total operating expenses decreased by 14.9% from RMB447.7 million
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</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">&#160;</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">Employee compensation and benefits</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">&#160;</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">Share-based compensation expenses</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Expenses related to issuance of shares under our employee share incentive
plan decreased by 69.7% from RMB62.1 million in 2020 to RMB18.8 million in 2021. According to the Company&#8217;s share option plan adopted
on December 31, 2019, 50%, 30% and 20% of the option granted will be vested on December 31, 2020, 2021 and 2022, respectively. Related
compensation cost of the option grants will be recognized over the requisite period.</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">&#160;</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">Taxes and surcharges</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Taxes and surcharges decreased by 27.9 % to RMB35.7 million in 2021
as compared to RMB49.5 million in 2020, primarily attributable to a decrease in the non-deductible value added tax (&#8220;VAT&#8221;).
The decrease in VAT was attributable to the characterization of certain amounts as &#8220;service fees charged to trust plans&#8221;
which are a non-deductible item. According to PRC tax regulations, &#8220;service fees charged to trust plans&#8221; incur a 6% VAT on
the subsidiary level, but are not recorded as an input VAT on a consolidated trust plan level. &#8220;Service fees charged to trust plans&#8221;
were significantly decreased in the fiscal year of 2021 compared to the same period of 2020 due to maturity of some trust plans.</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">&#160;</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">Operating lease cost</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Operating lease cost decreased by 31.8 % from RMB21.7 million in 2020
to RMB14.8 million in 2021, primarily due to the continued development of the collaboration model that allowed the Company to further
reduce the office leasing costs which was used to rent offices to accommodate sales staff.</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">&#160;</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9.35pt">Other expenses</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Other expenses decreased by 19.0% from RMB124.0 million in 2020 to
RMB100.5 million in 2021, primarily due to (a) a decrease in the litigation and attorney&#8217;s fees during the ordinary course of business
resulted from smaller amount of NPLs disposed through judicial procedure because the Company chose to transfer more NPLs to third party
purchasers to accelerate recovery of cash; (b) a decrease in consulting fee; and (c) a decrease in the IT R&amp;D and outsourcing service
fees.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->105<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Income tax expense</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our income tax expense decreased by 40.2% from RMB47.8 million in
2020 to RMB28.6 million in 2021, primarily due to the decrease in the amount of taxable income. Our effective tax rate increased to 30.5%
in fiscal year 2021 from 29.4% in fiscal year 2020, primarily due to the combined effect of (a) the non-deductible share-based compensation
expenses which decreased to RMB18.8 million for the fiscal year of 2021 from RMB62.1 million in the same period of 2020; and (b) the
proceeds of RMB39.9 million tax-free dividends from equity investment funds in 2021.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Net income</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As a result of the foregoing, our net income decreased by 43.2% from
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</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_019"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">5.B. Liquidity and Capital Resources</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Cash Flows and Working Capital</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our principal sources of liquidity have been cash generated from financing,
operating and investing activities. As of December 31, 2022, we had cash and cash equivalents of RMB1.8 billion (US$256.9 million), as
compared to cash and cash equivalents of RMB2.2 billion as of December 31, 2021, substantially all of which were held by our PRC subsidiaries.
Our cash and cash equivalents consist primarily of bank deposits and are primarily denominated in Renminbi. We believe that our current
cash and anticipated cash flow from financing activities will be sufficient to meet our anticipated cash needs, including our cash needs
for working capital and capital expenditures for at least the next 12 months.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We intend to finance our future working capital requirements and capital
expenditures from funds provided by operating activities and raised from financing activities. We may, however, require additional cash
due to changing business conditions or other future developments, including any investments or acquisitions we may decide to pursue.
If our existing cash is insufficient to meet our requirements, we may seek to issue debt or equity securities or obtain additional credit
facilities. Financing may be unavailable in the amounts we need or on terms acceptable to us, if at all. Issuance of additional equity
securities, including convertible debt securities, would dilute our earnings per share. The incurrence of debt would divert cash for
working capital and capital expenditures to service debt obligations and could result in operating and financial covenants that restrict
our operations and our ability to pay dividends to our shareholders. If we are unable to obtain additional equity or debt financing as
required, our business operations and prospects may suffer.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As a holding company with no material operations of our own, we conduct
our operations primarily through our PRC subsidiaries in China. We are permitted under PRC laws and regulations to provide funding to
our PRC subsidiaries in China through capital contributions or loans, subject to the approval of government authorities and limits on
the amount of capital contributions and loans. The ability of our subsidiaries in China to make dividends or other cash payments to us
is subject to various restrictions under PRC laws and regulations. For details, please refer to &#8220;Item 5. Operating and Financial
Review and Prospects&#8212;B. Liquidity and Capital Resources&#8212;Holding Company Structure.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table sets forth a summary of our cash flows for the
periods indicated.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%">
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    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left">&#160;</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">1,932,580,262</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">&#160;</td><td style="font: 10pt Times New Roman, Times, Serif">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 113; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Operating Activities</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Net cash provided by operating activities in 2022 was RMB919.3 million
(US$133.3 million) due to net income of RMB135.4 million (US$19.6 million), mainly adjusted for (i) provision for credit losses of RMB238.1
million, (ii) share-based compensation expenses of RMB5.8 million, (iii) depreciation and amortization of RMB2.2 million, (iv) losses
on sale of loans of RMB44.6 million, (v) the utilized of loans held-for-sale for originations and purchase was RMB585.4 million and (vi)
the increase of proceeds from sales and paydowns of loans originally classified as held for sale was RMB1,550.0 million. Adjustment for
changes in operating assets and liabilities consisted of (i) a decrease in other operating liabilities of RMB12.5 million, (ii) an increase
in other operating assets of RMB167.2 million, (iii) an decrease in deposits of RMB11.9 million, (iv) an increase of CRMP of RMB6.2 million
and (v) an increase in deposits of RMB168.8 million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Net cash provided by operating activities in 2021 was RMB689.7 million
(US$108.2 million) due to net income of RMB65.2 million (US$10.2 million), mainly adjusted for (i) reversal of provision for credit losses
of RMB298.5 million, (ii) share-based compensation expenses of RMB18.8 million, (iii) depreciation and amortization of RMB3.8 million,
(iv) losses on sale of loans of RMB479.6 million, (v) the utilized of loans held-for-sale for originations and purchase was RMB453.9 million
and (vi) the increase of proceeds from sales and paydowns of loans originally classified as held for sale was RMB1,006.9 million. Adjustment
for changes in operating assets and liabilities consisted of (i) a increase in other operating liabilities of RMB69.1million, (ii) an
increase in other operating assets of RMB30.9 million, (iii) an increase in deposits of RMB42.9 million, (iv) an increase of CRMP of RMB138.7
million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-size: 10pt">Net cash used in operating activities
in 2020 was RMB1,119.6 million due to net income of RMB114.9 million, mainly adjusted for (i) provision for credit losses of RMB77.3
million, (ii) share-based compensation expenses of RMB62.1 million, (iii) depreciation and amortization of RMB6.0 million, (iv) losses
on sale of loans of RMB50.6 million, (v) the utilized of loans held-for-sale for originations and purchase was RMB152.1 million and (vi)
the increase of proceeds from sales and paydowns of loans originally classified as held for sale was RMB637.7 million. Adjustment for
changes in operating assets and liabilities consisted of (i) an increase in other operating liabilities of RMB140.1million, (ii) an increase
in other operating assets of RMB28.4 million, (iii) a decrease in deposits of RMB19.5 million, (iv) an increase of CRMP of RMB281.0 million.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Investing Activities</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Net cash used in investing activities was RMB1,098.2 million (US$159.2
million) in 2022, which was attributable to (i)&#160;purchase of investment securities of RMB8,567.3 million, (ii) purchases of property,
equipment and intangible assets of RMB89.9 million, (iii) loans originated, net of principal collected of RMB2,556.9 million, and (iv)
purchases of non-marketable equity securities of RMB25.0 million offset by (i) proceeds from sales of investment securities of RMB9,002.2
million, (ii) proceeds from disposal of property, equipment and intangible assets of RMB0.3 million, and (iii) proceeds from sales of
loans of RMB1,088.4 million. and.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Net cash used in investing activities was RMB2,350.6 million (US$368.9
million) in 2021, which was attributable to (i)&#160;purchase of investment securities of RMB9,496.3 million, (ii) purchases of property,
equipment and intangible assets of RMB3.8 million, (iii) loans originated, net of principal collected of RMB2,839.5 million, offset by
(i) proceeds from sales of investment securities of RMB8,956.5 million, (i) proceeds from disposal of property, equipment and intangible
assets of RMB0.6 million, (iii) proceeds from sales of loans of RMB1,022.0 million, and (iv) proceeds from disposal of non-marketable
equity securities of RMB10.0 million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Net cash provided by investing activities was RMB524.1 million in
2020, which was attributable to i) proceeds from sales of investment securities of RMB7,187.5 million, (i) proceeds from disposal of
property, equipment and intangible assets of RMB2.2 million, and (iii) proceeds from sales of loans of RMB378.3 million, offset by (i)
purchase of investment securities of RMB6,951.5 million, (ii) purchases of property, equipment and intangible assets of RMB3.2 million,
and (iii) loans originated, net of principal collected of RMB89.2 million.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Financing Activities</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Net cash used in financing activities was RMB288.2 million (US$41.8
million) in 2022, which was attributable to (i) repayment of interest-bearing borrowings of RMB6,333.6 million, and (ii) repurchase of
ordinary shares of RMB87.6 million, partially offset by (i) proceeds from interest-bearing borrowings of RMB6,082.3 million and (ii)
proceeds from contributions from non-controlling shareholders of RMB50.8 million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Net cash used in financing activities in 2021 was RMB1,932.6 million,
which was attributable to repayment of interest-bearing borrowings of RMB7,068.0 million, offset by proceeds from interest-bearing borrowings
of RMB5,135.4 million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-weight: normal">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-weight: normal">Net cash used in financing activities
in 2020 was RMB1,367.1 million, which was attributable to repayment of interest-bearing borrowings of RMB7,382.1 million, offset by proceeds
from interest-bearing borrowings of RMB6,015.0 million.</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 114; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->107<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Capital Expenditures</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our capital expenditures represent purchases of property, equipment
and intangible assets necessary to support our operations. Our capital expenditures were RMB3.2 million, RMB3.8 million and RMB89,9 million
(US$13.0 million) in 2020, 2021 and 2022, respectively. The increase in capital expenditures in 2022 was primarily due to our purchase
of new office building in Guangzhou, China.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Off-Balance Sheet Commitments and Arrangements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We launched in 2021 a new funding model in cooperation with commercial
banks, under which our commercial bank partners are responsible for reviewing and approving the loan while we charge a service fee for
our loan facilitation services. For loans funded by the proceeds from third-party commercial banks as our commercial bank partners, each
underlying loan and borrower has to be approved by the third-party commercial banks individually. Once the loan is approved by and originated
by the third-party commercial bank, the fund is provided by the third-party commercial bank to the borrower and a lending relationship
between the borrower and the third-party commercial bank is established through a loan agreement. Effectively, we offer loan facilitation
services to the borrowers who have credit needs and the commercial banks who originate loans directly to borrowers referred by us. We
continue to provide post-origination services to the borrowers over the term of the loan agreement. As we are not the legal lender or
borrower in the loan origination and repayment process, we do not record loans principal, interest and financing service fee receivables
arising from these loans nor interest-bearing borrowings to the third-party commercial banks.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Apart from the above, we have not entered into any derivative contracts
that are indexed to our shares and classified as shareholders&#8217; equity, or that are not reflected in our consolidated financial
statements. 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. Moreover, 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 product development services
with us.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Contractual Obligations</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We lease multiple office spaces which are contracted under various
non-cancelable operating leases, most of which provide extension or early termination options and are generally expired in one to four
years. We do not enter into any finance leases or leases where the Group is a lessor. Moreover, the existing operating lease agreements
do not contain any residual value guarantees or material restrictive covenants.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Management determines if an arrangement is a lease at inception and
records the leases in the financial statements upon lease commencement, which is the date when the underlying office space is made available
for use by the lessor. The incremental borrowing rates determined forcomputing the lease liabilities are based on the People&#8217;s
Bank of China (PBOC) Benchmark Rates for terms of loans ranging from zero (exclusive) to five years and above.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following tables present the operating lease cost and other supplemental
information.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="font-size: 10pt">&#160;</td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="10" style="border-bottom: Black 1.5pt solid; font: bold 10pt Times New Roman, Times, Serif; text-align: center">Year ended December 31,</td><td style="padding-bottom: 1.5pt; font-size: 1pt">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="font-size: 10pt">&#160;</td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font: bold 10pt Times New Roman, Times, Serif; text-align: center">2020</td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt">&#160;</td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font: bold 10pt Times New Roman, Times, Serif; text-align: center">2021</td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt">&#160;</td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font: bold 10pt Times New Roman, Times, Serif; text-align: center">2022</td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="font-size: 10pt">&#160;</td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 64%; text-align: left; text-indent: -9.35pt; padding-left: 9.35pt">Operating lease cost(1)</td><td style="font: 10pt Times New Roman, Times, Serif; width: 1%">&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: left">&#160;</td><td style="font: 10pt Times New Roman, Times, Serif; width: 9%; text-align: right">21,719,042</td><td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: left">&#160;</td><td style="font: 10pt Times New Roman, Times, Serif; width: 1%">&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: left">&#160;</td><td style="font: 10pt Times New Roman, Times, Serif; width: 9%; text-align: right">14,764,364</td><td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: left">&#160;</td><td style="font: 10pt Times New Roman, Times, Serif; width: 1%">&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: left">&#160;</td><td style="font: 10pt Times New Roman, Times, Serif; width: 9%; text-align: right">13,966,943</td><td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: left">&#160;</td></tr>
  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 25%"><div style="border-top: Black 1.5pt solid; font-size: 1pt">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>



</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 0.25in">(1)</td><td>Amounts include short-term leases that are immaterial.</td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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    <td colspan="2" style="border-bottom: Black 1.5pt solid; font: bold 10pt Times New Roman, Times, Serif; white-space: nowrap; text-align: center">December&#160;31, <br/>
2022</td><td style="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt; text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left">Weighted-average remaining lease term</td><td style="font: 10pt Times New Roman, Times, Serif">&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left">&#160;</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">3.59 Year</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 88%; text-align: left">Weighted-average discount rate</td><td style="font: 10pt Times New Roman, Times, Serif; width: 1%">&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: left">&#160;</td><td style="font: 10pt Times New Roman, Times, Serif; width: 9%; text-align: right">4.75</td><td style="font: 10pt Times New Roman, Times, Serif; width: 1%; text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left">Cash paid for amounts included in the measurement of lease liabilities under operating cash flows</td><td style="font: 10pt Times New Roman, Times, Serif">&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left">&#160;</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">15,101,145</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left">ROU assets obtained in exchange for new operating lease liabilities</td><td style="font: 10pt Times New Roman, Times, Serif">&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left">&#160;</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right">29,777,357</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left">&#160;</td></tr>
  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 115; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->108<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following represents the Group&#8217;s future undiscounted cash
flows for each of the next five years and thereafter and reconciliation to the lease liabilities (excluding short-term operating leases)
as of December 31, 2022:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Holding Company Structure</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">CNFinance Holdings Limited is a holding company with no operations
of its own. It conducts substantially all of its operations in China primarily through its subsidiaries in China, in particular Shenzhen
Fanhua United Investment Group Co., Ltd., Guangzhou Heze Information Technology Co., Ltd., and their subsidiaries and consolidated affiliated
entities, and substantially all of its assets and operations are located in China. With a holding company structure, we principally rely
on dividends from our PRC subsidiaries for our cash requirements, including any payment of dividends to our shareholders. If these subsidiaries
or any newly formed subsidiaries incur debt on their own behalf in the future, the instruments governing their debt may restrict their
ability to pay dividends to us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In 2020, 2021 and 2022, CNFinance has not transferred any cash proceeds
to any of its PRC subsidiaries. For instance, cash proceeds raised from overseas financing activities, may be transferred by CNFinance
through China Financial Services Group Limited, our Hong Kong subsidiary, to Fanhua Chuangli Information Technology (Shenzhen) Company
Limited (&#8220;Fanhua Chuangli&#8221;), a PRC subsidiary, via capital contribution and shareholder loans, as the case may be. Fanhua
Chuangli then will transfer funds to its subsidiaries to meet the capital needs of business operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">None of our PRC subsidiaries have issued any dividends or distributions
to respective holding companies, including CNFinance, or any investors as of the date of this annual report. Our subsidiaries in the
PRC generate and retain cash generated from operating activities and re-invest it in business operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In addition, our subsidiaries in the PRC are only permitted to pay
dividends only out of their retained earnings, if any, as determined in accordance with the Accounting Standards for Business Enterprise
as promulgated by the Ministry of Finance of the PRC, or PRC GAAP. The aggregate retained earnings for our PRC subsidiaries as determined
under the PRC GAAP were RMB2,742.2 million, RMB2,853.7 million and RMB2,990.3 million (US$433.6 million), as of December 31, 2020, 2021
and 2022, respectively.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Pursuant to the law applicable to foreign investment enterprises,
our subsidiaries that are foreign investment enterprises in the PRC are required to draw 10% of their profits as the companies&#8217;
statutory common reserve, provided that companies with aggregate common reserve of more than 50% of the companies registered capital
may elect not to draw any statutory common reserve any more. The appropriation to the general reserve fund must be at least 10% of the
after-tax profits calculated in accordance with PRC GAAP. Appropriation is not required if the reserve fund has reached 50% of the registered
capital of our subsidiary. Appropriation to the other two reserve funds are at our subsidiary&#8217;s discretion. See &#8220;Item&#160;3.
Key Information&#8212;D. Risk Factors&#8212;Risks Related to Doing Business in China&#8212;We may rely on dividends and other distributions
on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of
our PRC subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct our business&#8221; and
&#8220;Item 3. Key Information&#8212;D. Risk Factors&#8212;Risks Related to Doing Business in China&#8212;If we are classified as a PRC
resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC
shareholders or ADS holders.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of the date of this annual report, the majority of our PRC subsidiaries
are still required to contribute to general reserve fund and these contributions are not expected to cease in the near term. Appropriation
to the other two reserve funds are at our subsidiaries&#8217; discretion. Our PRC subsidiaries did not make any contributions to the enterprise
expansion fund or the staff and bonus welfare fund during each period presented. The restricted amounts of our PRC subsidiaries totaled
RMB420.5 million, RMB423.3 million and RMB428.4 million (US$62.1 million) as of December 31, 2020, 2021 and 2022, respectively. In addition,
ADS holders may potentially be subject to PRC taxes on dividends paid by CNFinance in the event it is deemed as a PRC resident enterprise
for PRC tax purposes.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">An offshore holding company is permitted under PRC laws and regulations
to provide funding from the proceeds of offshore fund raising activities to its PRC subsidiaries through loans or capital contributions,
and to its consolidated affiliated entities only through loans, in each case subject to the satisfaction of the applicable government
registration and approval requirements. As a result, there is uncertainty with respect to our ability to provide prompt financial support
to our PRC subsidiaries when needed. For details about the applicable PRC rules that limit transfer of funds from overseas to our PRC
subsidiaries, see &#8220;Risk Factors&#8212;Risks Related to Doing Business in China&#8212;PRC regulations of loans to and direct investment
in PRC entities by offshore holding companies and governmental control of currency conversion may delay us from using the proceeds of
our public offerings to make loans or additional capital contributions to our PRC subsidiaries, which could materially and adversely affect
our liquidity and our ability to fund and expand our business.&#8221; Notwithstanding the foregoing, our PRC subsidiaries may use their
own retained earnings (rather than Renminbi converted from foreign currency denominated capital) to provide financial support to our consolidated
affiliated entities either through entrustment loans from our PRC subsidiaries or direct loans to such consolidated affiliated entities&#8217;
nominee shareholders, which would be contributed to the consolidated affiliated entities as capital injections. Such direct loans to the
nominee shareholders would be eliminated in our consolidated financial statements against the consolidated affiliated entities&#8217;
share capital.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Furthermore, if certain procedural requirements are satisfied, the
payment of current account items, including profit distributions and trade and service related foreign exchange transactions, can be made
in foreign currencies without prior approval from State Administration of Foreign Exchange (&#8220;SAFE&#8221;) or its local branches.
However, where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses, such as the repayment of
loans denominated in foreign currencies, approval from or registration with competent government authorities or its authorized banks is
required. The PRC government may take measures at its discretion from time to time to restrict access to foreign currencies for current
account or capital account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies
to satisfy our foreign currency demands, our PRC subsidiaries may not be able to pay dividends in foreign currencies to our offshore intermediary
holding companies or ultimate parent company, and therefore, our shareholders or investors in the ADSs. In addition, we cannot assure
you that new regulations or policies will not be promulgated in the future, which may further restrict the remittance of RMB into or out
of the PRC. We cannot assure you, in light of the restrictions in place, or any amendment to be made from time to time, that our current
or future PRC subsidiaries will be able to satisfy their respective payment obligations that are denominated in foreign currencies, including
the remittance of dividends out of the PRC.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Recent Accounting Pronouncements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On January 1, 2020, we adopted the new accounting standard. Our lifetime
expected credit losses are determined using macroeconomic forecast assumptions and management judgments applicable to and through the
expected life of the loan portfolios, and are net of expected recoveries on loans that were previously charged off. The standard also
expands credit quality disclosures beginning in the first quarter of 2020. While the standard changes the measurement of the allowance
for credit losses, it does not change our credit risk of its lending portfolios or the ultimate losses in those portfolios.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Prior to the adoption, we used the roll rate-based model for the measurement
of credit losses and the management had been working through the implementation of the new standard. In that regard, we (1) formed a cross-functional
working group under the direction of the risk management department, (2) evaluated data sources and made process updates to capture additional
relevant data, and (3) identified a service provider to perform the calculation. The working group was comprised of individuals from various
functional areas including credit, risk management, finance and information technology. The implementation plan included, but was not
limited to, an assessment of processes, portfolio segmentation, model development, system requirements and the identification of data
and resource needs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 117; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->110<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement
(Topic 820): Disclosure Framework (Topic 842) &#8211; Changes to the Disclosure Requirements for Fair Value Measurement, which modify
the disclosure requirements on fair value measurement by removing, modifying, or adding certain disclosures. The amendments improve the
effectiveness of disclosures in the notes to financial statements modify the disclosure requirements on fair value measurements in Topic
820. This ASU requires disclosure of the changes in unrealized gains or losses included in OCI for Level 3 assets or liabilities held
at the end of the period and the range and weighted-average of the significant unobservable inputs used in determining the fair value
of Level 3 assets and liabilities. The amendments also remove the requirement to disclose the transfers between Level 1 and Level 2 of
the fair value hierarchy, timing of transfers between levels, and the valuation process for determining Level 3 fair value measurements.
The amendments in this update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning
after December 15, 2019. We adopted the standard on January 1, 2020. We have not historically recorded material amounts of Level 3 assets
and liabilities or material transfers of assets or liabilities between levels within the fair value hierarchy and therefore do not anticipate
the adoption to have any material impact on our financial statement disclosures.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In January 2020, the FASB issued ASU No. 2020-01, Investments-Equity
Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815), which clarifies
the interaction of the accounting for equity securities under Topic 321, the accounting for equity method investments in Topic 323, and
the accounting for certain forward contracts and purchased options in Topic 815. For public business entities, the amendments in this
Update are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years, with early adoption
permitted. The ASU is currently not expected to have a material impact on the Group&#8217;s consolidated financial statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In March 2020, the FASB issued ASU 2020-3, Codification Improvements
to Financial Instruments, which revised a wide variety of topics in the Codification with the intent to make the Codification easier to
understand and apply by eliminating inconsistencies and providing clarifications. ASU 2020-3 was effective immediately upon its release
in March 2020 and did not have a material impact on the Group&#8217;s consolidated financial statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In August 2021, the FASB issued ASU No. 2021-06, Presentation of Financial
Statements (Topic 205), Financial Services-Depository and Lending (Topic 942), and Financial Services-Investment Companies (Topic 946),
which amended certain paragraphs for better presentation of codifications. This Update was effective immediately upon its release in August
2021 and did not have a material impact on the Group&#8217;s consolidated financial statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">The ASU 2022-02 is to be adopted on a prospective
basis and will be effective for the Group on January 1, 2023, although early adoption is permitted. The Amendment eliminates the accounting
guidance for troubled debt restructurings (TDRs) by creditors and introduces new required disclosures for loan modifications made to borrowers
experiencing financial difficulty. The Amendment also sets the guidance for vintage disclosures to require disclosure of current period
gross charge-offs by year of origination. Adoption of the accounting standard is not expected to have an impact on the Group&#8217;s operating
results or financial position, as the Group does not involve in the activity of debt restructurings.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">The ASU 2022-03 is to be adopted on a prospective
basis and will be effective for the Group on January 1, 2024, although early adoption is permitted. The Amendment clarifies that <span style="background-color: white">a
contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and also
states that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. The Update also requires
a few more disclosures on equity securities subject to contractual sale restrictions.</span> Adoption of the accounting standard is not
expected to have an impact on the Group&#8217;s operating results or financial position, as the Group excludes such restrictions when
valuing equity securities.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_020"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">5.C. Research and Development</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have focused on and will continue to invest in our technology system,
which supports all key aspects of our platform and is designed to optimize for scalability and flexibility.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our research and development expenses which was reported in other expenses
of the consolidated statements of comprehensive income were RMB10.0 million, RMB1.6 million and RMB0.8 million (US$0.1 million) in 2020,
2021 and 2022, respectively.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 118; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->111<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_021"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">5.D. Trend Information</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Other than as disclosed elsewhere in this annual report, we are not
aware of any trends, uncertainties, demands, commitments or events for the year ended December 31, 2022 that are reasonably likely to
have a material and adverse effect on our 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 condition.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_022"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">5.E. Critical Accounting Estimates</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We prepare our financial statements in conformity with U.S. GAAP, which
requires us to make estimates and assumptions that affect out reporting of, among other things, assets and liabilities, contingent assets
and liabilities and total revenues and expenses. On an on-going basis, we evaluate out estimates based on historical experience and on
various other assumptions that from other sources. Since our financial reporting process inherently relies on the use of estimates and
assumptions, our actual results could differ from what we expect.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 from period to period or use of different estimates that we reasonably could
have used n the current period, would have a material impact on our financial condition or results of operations. Such critical estimates
are discussed below. For further information on our other significant accounting estimates, see Note 2 to our consolidated financial statements
included elsewhere in this annual report.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Allowance for credit loss and guaranteed liabilities</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Commencing January 1, 2020, we adopted ASC 326, which replaced the
incurred loss methodology for determining the provision for credit losses and allowance for credit losses with an expected loss methodology
that is referred to as the CECL model. Allowance for credit losses represents our estimate of probable losses inherent in the portfolio,
and the guaranteed liabilities represents our estimate of probable losses of providing financial guarantee services for the off-sheet
loans under the commercial bank partnership model. Estimation of CECLs requires us to make assumptions regarding the likelihood and severity
of credit loss events and their impact on expected cash flows, which drive the probability of default (PD), loss given default (LGD) and
exposure at default (EAD) models. we incorporate forward-looking information through the use of macroeconomic scenarios applied over the
forecasted life of the assets. These variables include, but are not limited to, gross-domestic product rates and consumer price indexes.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Standalone selling prices</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We use an expected costs plus margin approach to estimate the standalone
selling prices of loan facilitation services and post facilitation services under commercial bank partnership model as the basis of revenue
allocation under ASC 606 in 2022. when estimating the selling prices, we consider the cost related to such services, profit margin, customer
demand, effect of competition on services, and other market factors, among which estimates of the cost of providing the services is the
most significant. Also, We consider early termination scenarios based on historical early payment and other termination scenarios as we
cannot receive the full contractual service fee amount under early termination, given the service fee is collected on a pro-rata basis
upon early loan termination.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Valuation allowance of deferred tax assets</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We record a valuation allowance to reduce our deferred tax assets to
the amount that is more likely than not to be realized. Significant judgement is required in determining the valuation allowance. In assessing
the need for a valuation allowance, we consider all sources of taxable income, including projected future taxable income, reversing taxable
temporary differences and ongoing tax planning strategies. If it is determined that we are able to realize deferred tax assets in excess
of the net carrying value or to the extent we are unable to realize a deferred tax asset, we would adjust the valuation allowance in the
period in which such a determination is made, with a corresponding increase or decrease to earnings.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_023"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_024"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">6.A. Directors and Senior Management</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table sets forth information regarding our executive
officers and directors as of the date of this annual report. The business address of our directors and executive officers except for Mr.
Fengyong Gao, Mr. Lin Xu, Mr. Xi Wang and Mr. Ge Yang is 44/F Tower G, No. 16 Zhujiang Dong Road, Tianhe District, Guangzhou City, Guangdong,
People&#8217;s Republic of China. The business address for Mr. Fengyong Gao is Room 702A, No.1518 Minsheng Road, Pudong New District,
Shanghai. The business address for Mr. Lin Xu is No.1405, Building 4, No.3 Courtyard, Sanlihe Yiqu, Xicheng District, Beijing. The business
address for Mr. Xi Wang is No.66 Xingang Xi Road, Guangzhou, Guangdong Province. The business address for Mr. Ge Yang is 32 Crabtree Ln
Tenafly, NJ 07670, the U.S.A.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top; background-color: white">
    <td style="border-bottom: Black 1.5pt solid; width: 32%">

    <p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"></p>
    <p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Directors and Executive Officers</p>
</td>
    <td style="padding-bottom: 1.5pt; width: 2%">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; width: 10%">
    <p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Age</p></td>
    <td style="padding-bottom: 1.5pt; width: 2%">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; width: 54%">
    <p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Position/Title</p></td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify">Bin Zhai</td>
    <td>&#160;</td>
    <td style="text-align: center">53</td>
    <td>&#160;</td>
    <td>Chairman, Director, Chief Executive Officer</td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td style="text-align: justify">Jun Qian</td>
    <td>&#160;</td>
    <td style="text-align: center">50</td>
    <td>&#160;</td>
    <td>Director and Vice President</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify">Fengyong Gao</td>
    <td>&#160;</td>
    <td style="text-align: center">53</td>
    <td>&#160;</td>
    <td>Independent Director</td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td style="text-align: justify">Lin Xu</td>
    <td>&#160;</td>
    <td style="text-align: center">61</td>
    <td>&#160;</td>
    <td>Independent Director</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify">Xi Wang</td>
    <td>&#160;</td>
    <td style="text-align: center">54</td>
    <td>&#160;</td>
    <td>Independent Director</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: justify">Ge Yang</td>
    <td>&#160;</td>
    <td style="text-align: center">52</td>
    <td>&#160;</td>
    <td>Independent Director</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td>Zehui Zhang</td>
    <td>&#160;</td>
    <td style="text-align: center">50</td>
    <td>&#160;</td>
    <td>Vice President</td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td>Huiling Jiang</td>
    <td>&#160;</td>
    <td style="text-align: center">43</td>
    <td>&#160;</td>
    <td>Vice President</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td>Jing Li</td>
    <td>&#160;</td>
    <td style="text-align: center">42</td>
    <td>&#160;</td>
    <td>Acting Chief Financial Officer</td></tr>
  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Bin Zhai</i> has served as our Chairman of the Board of Directors
since 2017 and our Chief Executive Officer since 2010. He joined our company in 2006 as executive director of Shenzhen Nanfeng Mortgage
Advisory Co., Ltd., a subsidiary of Fanhua Inc. Prior to joining us, Mr. Zhai served as account manager of Bank of Communications Tianjin
Branch from 1991 to 1993, investment manager at China Ministry of Agriculture Shenzhen Office from 1993 to 1998 and general manager at
Shenzhen Modern Warehouse Building Material Co., Ltd. from 1998 to 2006. Mr. Zhai received his bachelor&#8217;s degree in insurance from
Nankai University in China.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Jun Qian</i> joined the Company in 2001 and has served as our Vice
President since 2010. Mr. Qian has over 20 years of experience in China&#8217;s loan industry and has served in the Company&#8217;s senior
management team for more than 15 years. Mr. Qian received his bachelor&#8217;s degree in international trade from Hohai University and
his second bachelor&#8217;s degree in accounting from Guilin University of Electronic Technology.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Fengyong Gao</i> has served as our Independent Director since our
initial public offering. Mr. Gao is the founder, partner and chief executive director of Leading Capital Co., Ltd. and the founder, partner
and chairman of the board of Shanghai Blue Ocean Capital. Mr. Gao previously served as the general manager of the trust department and
subsequently as the vice president of Bridge Trust Co., Ltd. from 2003 to 2007. Mr. Gao currently also serves as the independent director
of China Haisum Engineering Co., Ltd. and Great Wall Movie and Television Co. Ltd. Mr. Gao received both his bachelor&#8217;s degree and
master&#8217;s degree in finance from Nankai University in China.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Lin Xu</i> has served as our Independent Director since our initial
public offering. Mr. Xu currently serves as the director general of China Center for Urban Development of NDRC and the chairman of the
board of U.S.-China Green Fund. Prior to that, Mr. Xu served as the director general of Development Planning Department of NDRC from 2012
to 2017. Mr. Xu also served as the director general of Fiscal and Financial Affairs Department of NDRC from 2006 to 2012 and as the deputy
director general of Development Planning Department of NDRC from 2002 to 2006. Mr. Xu received his bachelor&#8217;s degree in mathematics
from Hunan Shaoyang Normal College, his first master&#8217;s degree in economics from Nankai University and his second master&#8217;s
degree of public administration from the Lee Kuan Yew School of Public Policy at National University of Singapore.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Xi Wang</i> has served as our Independent Director since March 2019.
Dr. Wang is currently a professor at Lingnan (University) College, as well as the director of China Institute for Economic Transformation
and Opening of Sun Yat-sen University (&#8220;SYSU&#8221;). He specializes in economics and his research area includes banking and monetary
policy, international finance (exchange rates and balance of payments), and China&#8217;s economy among other subjects. Dr. Wang received
his master&#8217;s degree and Ph.D in economics from SYSU and has been a professor at SYSU since 2004. He is a contributor of multiple
business journals, such as the Economic Research Journal, China Economic Quarterly, Finance Research, and Journal of World Economy. Dr.
Wang also serves as an independent director at various companies including Palm Eco-Town Development Co., Ltd., a company listed on the
Shenzhen Stock Exchange since May 2014, Zhuhai Rural Commercial Bank Co., Ltd. since July 2014, Guangdong Electric Power Development Co.,
Ltd., a company listed on the Shenzhen Stock Exchange since June 2016, Guangzhou Public Transport Group Co., Ltd. since August 2018, and
Guangzhou Yuexiu Financial Holdings Group Co., Ltd., a company listed on the Shenzhen Stock Exchange since January 2019.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Ge Yang </i>has served as our Independent Director since November
2022. Mr. Yang has over 30 years of experiences in corporate finance, non-bank financial institution, and wealth and asset management,
having worked with public companies both in China and in the U.S. He currently serves as financial controller in Noah Gopher Capital Advisors
LLC in charge of asser management. Prior to that, he held the positions of vice president and chief financial officer in Minmetals Inc.
from 2003 to 2019. Mr. Yang received his bachelor&#8217;s degree in international finance from Nankai University, his MBA degree from
Tsinghua University, and a second master&#8217;s degree in Accounting from Seton Hall University.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Zehui Zhang</i> has served as our Vice President since 2010. He
joined Fanhua Inc. in 2001 and served as general manager of Guangdong Nanfeng Insurance Agency Co., Ltd., a subsidiary of Fanhua Inc.
from 2002 to 2009. Mr. Zhang has over 15 years of experience in finance business. He received his diploma in accounting at Guangdong Polytechnic
Normal University, formerly known as Guangdong Commercial Management College, in China.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Huiling Jiang</i> has served as our Vice President since 2021. She
joined the Company in 2008, and served successively as the Manager of Operation Management Department, the Manager of Risk Management
Department, the General Manager of Guangzhou Branch, the Manager of Retail Financing Department, the President of Structural Funding Department
and the Assistant President of the Company.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Jing Li</i> has served as our Acting Chief Financial Officer, Assistant
President of the Company and the Head of Department of Finance and Internal Control since the fourth quarter of 2021. Ms. Li has 20 years
of experience in the financial industry and holds the certificate of ACCA and IPA. Prior to joining CNFinance Holdings Limited in 2008,
she worked for Deloitte Touche Tohmatsu Certified Public Accountants LLP and Fanhua Inc. Ms. Li received her bachelor&#8217;s degree in
financial management from Guangdong University of Foreign Studies and her MPAcc degree from Sun Yat-Sen University.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_025"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">6.B. Compensation</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Compensation</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For the fiscal year ended December 31, 2022, we paid an aggregate of
RMB 4.4 million (US$0.6 million) in cash to our executive officers (including our executive directors), and we did not pay any cash compensation
to our non-executive directors. For the fiscal year ended December 31, 2022, we paid for our executive officers (including our executive
directors) an aggregate of RMB442,334 (US$64,132) of social insurance plans and housing provident funds required by PRC law. We did not
pay such insurance or housing fund for our non-executive directors. For share incentive grants to our directors and executive officers,
please refer to &#8220;Item 6. Directors, Senior Management and Employees&#8212;B. Compensation&#8212;Share Incentive Plan.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Employment Agreements and Indemnification Agreements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have entered into employment agreements with each of our executive
officers. Each of our executive officers is employed for a specified time period, which can be renewed upon both parties&#8217; agreement
before the end of the current employment term. We may terminate an executive officer&#8217;s employment for cause at any time without
advance notice in the event of, among other things, (i) commitments by such executive officer of any serious breach of the terms and conditions
of his or her employment and our internal rules and procedures, (ii) conviction of a criminal offense, or (iii) severe neglect of his
or her duties or embezzlement to our detriment. We may also terminate an executive officer&#8217;s employment by giving a 30 days&#8217;
prior written notice or by paying a compensation of an amount equal to one month&#8217;s wages of such executive officer. An executive
officer may terminate his or her employment at any time by giving a 30 days&#8217; prior written notice.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Each executive officer has agreed to hold, unless expressly consented
to by us, at all times during and after the termination of his or her employment agreement, in strict confidence and not to use, any of
our confidential information or the confidential information of our customers and suppliers. In addition, each executive officer has agreed
to be bound by certain non-competition and non-solicitation restrictions during the term of his or her employment and for two years following
the last date of employment. Specifically, each executive officer has agreed not to (i) carry out or otherwise be concerned or interested,
directly or indirectly, in certain businesses in direct or indirect competition with us; (ii) assume employment with or provide services
to certain of our competitors or engage, whether as principal, partner, licensor or otherwise, with such competitors; or (iii) seek directly
or indirectly, by the offer of alternative employment or other inducement whatsoever, to solicit the services of any of our employees,
agents or consultants who are employed or engaged by us at any time in the one year preceding the last date of his or her employment.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have entered into indemnification agreements with each of our directors
and executive officers. Under these agreements, we may agree to indemnify our directors and executive officers against certain liabilities
and expenses incurred by such persons in connection with claims made by reason of their being a director or officer of our company.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Share Incentive Plan</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">2017 SFIL Share Incentive Plan</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In January 2017, SFIL adopted the 2017 SFIL Share Incentive Plan, or
the 2017 Plan. Under the 2017 Plan, SFIL granted 187,933,720 options to its certain management members and employees to purchase up to
187,933,720 ordinary shares. The term of the options will not exceed ten years from the date of the grant.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">2018 CNFinance Holdings Limited Share Incentive Plan</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On August 27, 2018, we adopted the 2018 CNFinance Holdings Limited
Share Incentive Plan, or the 2018 Plan, to replace the 2017 Plan and granted 187,933,720 options to certain management members and employees
to purchase up to 187,933,720 of our ordinary shares under this 2018 Plan to replace the granted and outstanding options under the 2017
Plan. Pursuant to the terms of the 2018 Plan, 60%, 20% and 20% of the award options shall vest on December 31 of each of the years 2017,
2018 and 2019, respectively.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On December 31, 2019, we granted 119,674,780 options to certain management
members and employees to purchase up to 119,674,780 of our ordinary shares under the 2018 Plan. Pursuant to the terms of 2018 Plan, 50%,
30% and 20% of the award options shall vest on December 31 of each of the years of 2021, 2022 and 2023, respectively.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The purpose of the 2018 Plan is to promote the success and enhance
the value of the Company by linking the personal interests of the members of the board of directors, employees and consultants to those
of the Company shareholders and by providing such individuals with an incentive for outstanding performance to generate superior returns
to the Company shareholders. The 2018 Plan is further intended to provide flexibility to the Company in its ability to motivate, attract
and retain the services of member of the board of director, employees and consultants upon whose judgment, interest and special effort
the successful conduct of the Company&#8217;s operation is largely dependent. The 2018 Plan provides for the issuance of up to an aggregate
of 307,608,500 of our ordinary shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following paragraphs summarize the terms of the 2018 Plan.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Types of Awards</i></b><i>.</i> The 2018 Plan permits the awards
of options, restricted shares and restricted share units and other rights or benefits under the 2018 Plan.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Plan Administration</i></b><i>.</i> The 2018 Plan shall be administered
by the board of directors; provided, however, that the board of directors may delegate to a committee of one or more members of the board
of the directors the authority to grant or amend Awards to grantee other than Independent Directors and executive officers of the Company.
The committee shall consist of at least two individuals, each of whom qualifies as a non-employee director.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Eligibility</i></b><i>.</i> Employees, consultants of the Company
or its affiliate and member of the board of directors are eligible to participate in the 2018 Plan. An employee or consultant who has
been granted an award may, if he or she is otherwise eligible, be granted additional awards.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->115<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Designation of Award</i></b><i>.</i> Each award under the 2018
Plan is designated in an award agreement, which is a written agreement evidencing the grant of an award executed by the company and the
grantee, including any amendments thereto.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Conditions of Award</i></b><i>.</i> The board of directors or
any entity appointed by the board of directors to administer the 2018 Plan shall determine the provisions, terms, and conditions of each
award including, but not limited to, the award vesting schedule, repurchase provisions, rights of first refusal, forfeiture provisions,
and form of payment upon settlement of the award.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Terms of Award</i></b><i>.</i> The term of each award is stated
in the award agreement between the Company and the grantee of such award.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Amendment, Modification, Suspension or Termination of the 2018
Plan</i></b><i>.</i> The administrator of the 2018 Plan may amend, alter, suspend, discontinue or terminate this 2018 Plan, or any Award
Agreement hereunder or any portion hereof or thereof at any time; provided, however, that (a) to the extent necessary and desirable to
comply with applicable laws defined therein, or stock exchange rules, the Company shall obtain shareholder approval of any Plan amendment
in such a manner and to such a degree as required, and (b) shareholder approval is required for any amendment to the 2018 Plan that (i)
increases the number of shares available under the 2018 Plan (other than any adjustment as provided by Article 8 of the 2018 Plan), (ii)
permits the Committee to extend the term of the 2018 Plan or the exercise period for an option beyond ten years from the date of grant,
or (iii) results in a material increase in benefits or a change in eligibility requirements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table summarizes, as of the date of this annual report,
the outstanding equity awards granted to our directors and executive officers under the 2018 Plan, which replaced the 2017 Plan.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="border-bottom: Black 1.5pt solid; text-indent: -0.125in; padding-left: 0.125in; font-weight: bold; text-align: left">Name</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Number of Options Outstanding&#160;(1)</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Ordinary Shares Underlying Equity Awards Granted&#160;(1)</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Exercise Price (Per share)&#160;(1)</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Date of <br/>
Grant&#160;(1)</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Date of Expiration</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.125in; width: 32%; text-align: left">Bin Zhai</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">40,000,000</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">40,000,000</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 11%; text-align: center">RMB0.5</td><td style="width: 1%">&#160;</td>
    <td style="width: 15%; text-align: center">January 3, 2017</td><td style="width: 1%">&#160;</td>
    <td style="width: 15%; text-align: center">December 31,2022</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -0.125in; padding-left: 0.125in; text-align: left">Ning Li</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">30,000,000</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">30,000,000</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: center">RMB0.5</td><td>&#160;</td>
    <td style="text-align: center">January 3, 2017</td><td>&#160;</td>
    <td style="text-align: center">December 31,2022</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.125in">Jun Qian</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">20,000,000</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">20,000,000</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: center">RMB0.5</td><td>&#160;</td>
    <td style="text-align: center">January 3, 2017</td><td>&#160;</td>
    <td style="text-align: center">December 31,2022</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -0.125in; padding-left: 0.125in; text-align: left">Zehui Zhang</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">20,000,000</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">20,000,000</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: center">RMB0.5</td><td>&#160;</td>
    <td style="text-align: center">January 3, 2017</td><td>&#160;</td>
    <td style="text-align: center">December 31,2022</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.125in; font-weight: bold; text-align: left">All directors and executive officers as a group</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">110,000,000</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">110,000,000</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: center">RMB0.5</td><td>&#160;</td>
    <td style="text-align: center">January 3, 2017</td><td>&#160;</td>
    <td style="text-align: center">December 31,2022</td></tr>
  </table><div>


</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>

</div><p style="margin-top: 0; margin-bottom: 0"></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 25%"><div style="border-top: Black 1.5pt solid; font-size: 1pt">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="margin-top: 0; margin-bottom: 0"></p><div>

</div><p style="margin: 0"> Notes:</p><div>

</div><p style="margin: 0">&#160;</p><div>



</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in">(1)</td><td>Does not include 35,902,434 options to purchase up to 35,902,434 of our ordinary shares granted under the 2018 Plan on December 31,
2019, with an exercise price of RMB1.0 per share. Such options will be considered vested as to 50%, 30%, 20% on each of December 31, 2020,
December 31, 2021 and December 31, 2022, respectively, but will only be distributed to the applicable grantees based on their performance
scores on December 31, 2022, subject to continued employment through such date.</td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of the date of this annual report, our other employees as a group
held options to purchase up to 161,706,076 of our ordinary shares. For the options granted on January 3, 2017, our other employees as
a group held options to purchase up to 77,933,730 of our ordinary shares, with an exercise price of RMB0.5 per share. For the option granted
on December 31, 2019, our other employees as a group held options to purchase up to 83,772,346 of our ordinary shares, with an exercise
price of RMB1.0 per share.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For discussions of our accounting policies and estimates for awards
granted pursuant to the 2018 Plan, see &#8220;Item 5. Operating and Financial Review and Prospects&#8212;A. Operating Results&#8212;Critical
Accounting Policies, Judgments and Estimates&#8212;Share-based compensation expenses.&#8221;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 123; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->116<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_026"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">6.C. Board Practices</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Board of Directors</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our Board of Directors consists of six directors, including three independent
directors. A director is not required to hold any shares in our company to qualify to serve as a director. The Corporate Governance Rules
of the NYSE generally require that a majority of an issuer&#8217;s board of directors must consist of independent directors. However,
the Corporate Governance Rules of the NYSE permit foreign private issuers like us to follow &#8220;home country practice&#8221; in certain
corporate governance matters. We rely on this &#8220;home country practice&#8221; exception and do not have a majority of independent
directors serving on our Board of Directors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">A director who is in any way, whether directly or indirectly, interested
in a contract or proposed contract with our company is required to declare the nature of his or her interest at a meeting of our directors.
A general notice given to the directors by any director to the effect that he or she is a member, shareholder, director, partner, officer
or employee of any specified company or firm and is to be regarded as interested in any contract or transaction with that company or firm
shall be deemed a sufficient declaration of interest for the purposes of voting on a resolution in respect to a contract or transaction
in which he/she has an interest, and after such general notice it shall not be necessary to give special notice relating to any particular
transaction. A director may vote in respect of any contract or proposed contract or arrangement notwithstanding that he/she may be interested
therein and if he/she does so, his/her vote shall be counted and he/she may be counted in the quorum at any meeting of the directors at
which any such contract or proposed contract or arrangement is considered. Our board of directors may exercise all of the powers of our
company to borrow money, to mortgage or charge its undertaking, property and uncalled capital, or any part thereof, and to issue debentures,
debenture stock or other securities whenever money is borrowed or as security for any debt, liability or obligation of our company or
of any third party. None of our directors has a service contract with us that provides for benefits upon termination of service as a director.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_026a"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Committees of the Board of Directors</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our Board of Directors has established an audit committee, a compensation
committee and a nominating and corporate governance committee under our Board of Directors. We have adopted a charter for each of the
three committees. Each committee&#8217;s members and functions are described below.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Audit Committee</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our audit committee consists of Mr. Fengyong Gao, Mr. Lin Xu and Mr.
Xi Wang, and is chaired by Mr. Fengyong Gao. We have determined that Mr. Fengyong Gao, Mr. Lin Xu and Mr. Xi Wang satisfy the requirements
of Section 303A of the Corporate Governance Rules of the NYSE and meet the independence standards under Rule 10A-3 under the Securities
Exchange Act of 1934, as amended. We have determined that Mr. Fengyong Gao qualifies as an &#8220;audit committee financial expert.&#8221;
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:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">reviewing
                                            and recommending to our board for approval, the appointment, re-appointment or removal of
                                            the independent auditor, after considering its annual performance evaluation of the independent
                                            auditor;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">approving
                                            the remuneration and terms of engagement of the independent auditor and pre-approving all
                                            auditing and non-auditing services permitted to be performed by our independent auditors
                                            at least annually;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">obtaining
                                            a written report from our independent auditor describing matters relating to its independence
                                            and quality control procedures;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">reviewing
                                            with the independent registered public accounting firm any audit problems or difficulties
                                            and management&#8217;s response;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">discussing
                                            with our independent auditor, among other things, the audits of the financial statements,
                                            including whether any material information should be disclosed, issues regarding accounting
                                            and auditing principles and practices;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">reviewing
                                            and approving all proposed related party transactions, as defined in Item 404 of Regulation
                                            S-K under the Securities Act;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">reviewing
                                            and recommending the financial statements for inclusion within our quarterly earnings releases
                                            and to our board for inclusion in our annual reports;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"></p><div>

</div><!-- Field: Page; Sequence: 124; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->117<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">discussing
                                            the annual audited financial statements with management and the independent registered public
                                            accounting firm;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">reviewing
                                            the adequacy and effectiveness of our accounting and internal control policies and procedures
                                            and any special steps taken to monitor and control major financial risk exposures;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">at
                                            least annually, reviewing and reassessing the adequacy of the committee charter;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">approving
                                            annual audit plans, and undertaking an annual performance evaluation of the internal audit
                                            function;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">establishing
                                            and overseeing procedures for the handling of complaints and whistleblowing;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">meeting
                                            separately and periodically with management and the independent registered public accounting
                                            firm;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">monitoring
                                            compliance with our code of business conduct and ethics, including reviewing the adequacy
                                            and effectiveness of our procedures to ensure proper compliance; and</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">reporting
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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Compensation Committee</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our compensation committee consists of Mr. Bin Zhai, Mr. Jun Qian and
Mr. Fengyong Gao and is chaired by Mr. Bin Zhai. We have determined that Mr. Fengyong Gao satisfies the &#8220;independence&#8221; requirements
of Section 303A of the Corporate Governance Rules of the NYSE. 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 committee meeting during which his or her compensation is deliberated upon. The compensation committee
is responsible for, among other things:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">overseeing
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">at
                                            least annually, reviewing and approving, or recommending to the board for its approval, the
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">at
                                            least annually, reviewing and recommending to the board for determination with respect to
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">at
                                            least annually, reviewing periodically and approving any incentive compensation or equity
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">reviewing
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">overseeing
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">at
                                            least annually, reviewing and reassessing the adequacy of the committee charter;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">selecting
                                            compensation consultant, legal counsel or other adviser only after taking into consideration
                                            all factors relevant to that person&#8217;s independence from management; and</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">reporting
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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Nominating and Corporate Governance Committee</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our nominating and corporate governance committee consists of Mr. Bin
Zhai, Mr. Jun Qian and Mr. Xi Wang, and is chaired by Mr. Bin Zhai. We have determined that Mr. Xi Wang satisfies the &#8220;independence&#8221;
requirements of Section 303A of the Corporate Governance Rules of the NYSE. 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:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">recommending
                                            nominees to the board for election or re-election to the board, or for appointment to fill
                                            any vacancy on the board;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">reviewing
                                            annually with the board the current composition of the board with regards to characteristics
                                            such as independence, knowledge, skills, experience, expertise, diversity and availability
                                            of service to us;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">developing
                                            and recommending to our board such policies and procedures with respect to nomination or
                                            appointment of members of our board and chairs and members of its committees or other corporate
                                            governance matters as may be required pursuant to any SEC or NYSE rules, or otherwise considered
                                            desirable and appropriate;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">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;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">at
                                            least annually, reviewing and reassessing the adequacy of the committee charter;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">developing
                                            and reviewing at least annually 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</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">evaluating
                                            the performance and effectiveness of the board as a whole.</span></td></tr></table><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Duties and Functions of Directors</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Under Cayman Islands law, our directors owe fiduciary duties to our
company, including a duty of loyalty, a duty to act honestly and a duty to act in what they consider in good faith to be in our best interests.
Our directors must also exercise their powers only for a proper purpose. Our directors also owe to our company a duty to exercise the
skill they actually possess and such care and diligence that a reasonable prudent person would exercise in comparable circumstances. It
was previously considered that a director need not exhibit in the performance of his duties a greater degree of skill than may reasonably
be expected from a person of his 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. In fulfilling their
duty of care to us, our directors must ensure compliance with our amended and restated memorandum and articles of association, as amended
and restated from time to time. Our company has the right to seek damages if a duty owed by our directors is breached. In limited exceptional
circumstances, a shareholder may have the right to seek damages in our name if a duty owed by our directors is breached. The functions
and powers of our Board of Directors include, among others, (i) convening shareholders&#8217; annual general meetings and reporting its
work to shareholders at such meetings, (ii) declaring dividends, (iii) appointing officers and determining their terms of offices and
responsibilities, and (iv) approving the transfer of shares of our company, including the registering of such shares in our share register.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Terms of Directors and Officers</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our officers are elected by and serve at the discretion of the board.
Each director is not subject to a term of office and holds office until such time as his successor takes office or until the earlier of
his death, resignation or removal from office by special resolution or the unanimous written resolution of all shareholders. A director
will be removed from office automatically if, among other things, the director (i) becomes bankrupt or makes any arrangement or composition
with his creditors; (ii) dies or is found by our company to be of unsound mind; (iii) resigns by notice in writing to our company; (iv)
without special leave of absence from our Board of Directors, is absent from three consecutive meetings of the board and the board resolves
that his office be vacated; (v) is prohibited by law from being a director; or (vi) is removed from office pursuant to any other provisions
of our post-offering amended and restated memorandum and articles of association.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->119<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Interested Transactions</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">A director may, subject to approval of the chairman of the relevant
board meeting and under applicable law or applicable NYSE rules, vote in respect of any contract or transaction in which he or she is
interested, provided that the nature of the interest of any directors in such contract or transaction is disclosed by him or her at or
prior to its consideration and any vote in that matter.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_027"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">6.D. Employees</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We had 930 employees as of December 31, 2022. Our employees are based
in our headquarters in Guangzhou, Guangdong province and various local offices over 50 cities across China.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table sets forth the breakdown of our employees by function
as of December 31, 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold; text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">As of December 31, 2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
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    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Number</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="width: 76%; text-align: left">Risk Management</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">532</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">57.2</td><td style="width: 1%; text-align: left">%</td></tr>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">18.7</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">99</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">10.6</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td>Finance</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">65</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">7.0</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 1.5pt">Others</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">60</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">6.5</td><td style="padding-bottom: 1.5pt; text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-bottom: 4pt">Total</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; text-align: right">930</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; text-align: right">100.0</td><td style="padding-bottom: 4pt; text-align: left">%</td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As required by laws and regulations in China, we participate in various
employee social security plans that are organized by municipal and provincial governments, including, among other things, housing, pension,
medical insurance and unemployment insurance.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We typically enter into standard employment, confidentiality and non-compete
agreements with our senior management. These contracts include a standard non-compete covenant that prohibits any employee from competing
with us, directly or indirectly, during his or her employment and for two years after the termination of employment, provided that we
pay monthly compensation equal to 30% of his or her previous average monthly salary during the restriction period.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We believe that we maintain a good working relationship with our employees,
and we have not experienced any labor disputes. None of our employees are represented by labor unions.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_028"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">6.E. Share Ownership</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table sets forth information concerning the beneficial
ownership of our ordinary shares, as of March 31, 2023, by:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">each
                                            of our directors and executive officers; and</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">each
                                            person known to us to beneficially own more than 5% of our ordinary shares.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The calculations in the table below are based on 1,371,643,240 ordinary
shares issued and outstanding as of the date of March 31, 2023.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 127; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->120<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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.</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold; text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Ordinary Shares Beneficially<br/> Owned as of March 31, 2023</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">Functions</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Number</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; padding-bottom: 1.5pt; font-weight: bold; text-align: center">%*</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold">Directors and Executive Officers:&#8224;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%">Bin Zhai<sup>(1)</sup></td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">283,949,380</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">20.1</td><td style="width: 1%; text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td>Jun Qian<sup>(2)</sup></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">20,000,000</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">1.4</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Zehui Zhang<sup>(3)</sup></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">20,000,000</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">1.4</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Huiling Jiang</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Jing Li</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Fengyong Gao</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Lin Xu</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Xi Wang</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Ge Yang</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left">Principal Shareholders:</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Kylin Investment Holdings Limited<sup>(4)</sup></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">243,949,380</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">17.8</td><td style="text-align: left">%</td></tr>
  </table><div>


</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>

</div><p style="margin-top: 0; margin-bottom: 0"></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 25%"><div style="border-top: Black 1.5pt solid; font-size: 1pt">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="margin-top: 0; margin-bottom: 0"></p><div>

</div><p style="margin: 0"> Notes:</p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 0.25in">*</td><td>For each person and group included in this table, percentage ownership is calculated by dividing the number of shares beneficially
owned by such person or group by the sum of (i) 1,371,643,240, being the number of ordinary shares as of March 31, 2023 and (ii) the number
of ordinary shares underlying share options held by such person or group that are exercisable within 60 days after March 31, 2023.</td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 0.25in">&#8224;</td><td>The business address of our directors and executive officers except for Mr. Fengyong Gao, Mr. Lin Xu, Mr. Xi Wang and Mr. Ge Yang
is 44/F Tower G, No. 16 Zhujiang Dong Road, Tianhe District, Guangzhou City, Guangdong, People&#8217;s Republic of China. The business
address for Mr. Fengyong Gao is Room 702A, No.1518 Minsheng Road, Pudong New District, Shanghai. The business address for Mr. Lin Xu is
No.1405, Building 4, No.3 Courtyard, Sanlihe Yiqu, Xicheng District, Beijing. The business address for Mr. Xi Wang is No.66 Xingang Xi
Road, Guangzhou, Guangdong Province. The business address for Mr. Ge Yang is 32 Crabtree Ln Tenafly, NJ 07670, the U.S.A.</td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left">(1)</td><td style="text-align: left">Includes (i) options we granted to Mr. Bin Zhai under the 2018
Plan to purchase up to 40,000,000 of our ordinary shares that are immediately exercisable; and (ii) the equity interest held by Mr. Bin
Zhai through Kylin Investment Holdings Limited, or Kylin Investment, as set forth in note (4) below.</td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 0.25in">(2)</td><td>Includes options we granted to Mr. Jun Qian under the 2018 Plan to purchase up to 20,000,000 of our ordinary shares that are immediately
exercisable. This does not include the equity interest held by Mr. Jun Qian through Kylin Investment, as set forth in note (4) below.</td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 0.25in">(3)</td><td>Includes options we granted to Mr. Zehui Zhang under the 2018 Plan to purchase up to 20,000,000 of our ordinary shares that are immediately
exercisable. This does not include the equity interest held by Mr. Zehui Zhang through Kylin Investment, as set forth in note (4) below.</td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 0.25in">(4<span style="font-family: Times New Roman, Times, Serif">)</span></td><td>Represents 243,949,380 ordinary shares of our company held by Kylin Investment Holdings Limited, or Kylin Investment, a company incorporated
in the British Virgin Islands. 50% of the total outstanding shares of Kylin Investment are held by Mr. Bin Zhai, our chairman and chief
executive officer. 30% of the total outstanding shares of Kylin Investment are held by Mr. Ning Li, our former executive director and
former chief financial officer. 10% of the total outstanding shares of Kylin Investment are held by Mr. Jun Qian, one of our officers
and 10% of the total outstanding shares of Kylin Investment are held by Mr. Zehui Zhang, one of our officers. Mr. Bin Zhai may be deemed
to have the power to direct voting and disposition of the 243,949,380 of our ordinary shares held by Kylin Investment. The business address
of Kylin Investment Holdings Limited is Floor 44, Building G, Winter Square, Gaode Land, Guangzhou, Guangdong Province, People&#8217;s
Republic of China.</td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in"></p><div><a id="a_029"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in"><b>6.F. Disclosure of a Registrant's
Action to Recover Erroneously Awarded Compensation</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in">Not applicable</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in"></p><div>

</div><!-- Field: Page; Sequence: 128; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->121<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in">&#160;</p><div>

</div><div><a id="a_030"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_031"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">7.A. Major Shareholders</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Please refer to &#8220;Item 6. Directors, Senior Management and Employees&#8212;E.
Share Ownership.&#8221;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_032"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">7.B. Related Party Transactions</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Employment Agreements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">See &#8220;Item 6. Directors, Senior Management and Employees&#8212;6.B.
Compensation&#8212;Employment Agreements and Indemnification Agreements&#8221; for a description of the employment agreements we have
entered into with our senior executive officers.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Share Incentives</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">See &#8220;Item 6. Directors, Senior Management and Employees&#8212;6.B.
Compensation&#8212;Share Incentive Plan&#8221; for a description of share options we have granted to our directors, officers and other
individuals as a group.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Other Related Party Transactions</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Group did not have any other related party transactions in the
year ended December 31, 2022.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_033"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">7.C. Interests of Experts and Counsel</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Not applicable.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_034"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">ITEM 8. FINANCIAL INFORMATION</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_035"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">8.A. Consolidated Statements and Other Financial Information</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have appended consolidated financial statements filed as part of
this annual report.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Legal and Administrative Proceedings</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We are currently not a party to any material legal or administrative
proceedings. We may from time to time be subject to various legal or administrative claims and proceedings arising in the ordinary course
of business. Litigation or any other legal or administrative proceeding, regardless of the outcome, is likely to result in a substantial
cost and diversion to our resources, including our management&#8217;s time and attention. For risks relating to legal and administrative
proceedings against us, please see &#8220;Item 3. Key Information&#8212;D. Risk Factors&#8212;Risks Related to Our Business&#8212;We are
involved in legal proceedings in the ordinary course of our business from time to time. If the outcomes of these proceedings are adverse
to us, it could have a material adverse effect on our business, results of operations and financial condition.&#8221;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Dividend Policy</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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 the ADSs representing our ordinary shares. We currently intend
to retain most, if not all, of our available funds and any future earnings to operate and expand our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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 &#8220;Item 3. Key Information&#8212;D. Risk
Factors&#8212;Risks Related to Doing Business in China&#8212;We may rely on dividends and other distributions on equity paid by our PRC
subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to make
payments to us could have a material and adverse effect on our ability to conduct our business&#8221; and &#8220;Item 4. Information of
the Company&#8212;B. Business Overview&#8212;Regulation&#8212;Regulations on Dividend Distribution.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our Board of Directors has discretion as to whether to distribute dividends,
subject to certain requirements of Cayman Islands law. In addition, subject to the provisions in our amended and restated memorandum and
articles of association, our shareholders may by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended
by our Board of Directors. Under Cayman Islands law, a Cayman Islands company may pay a dividend out of either profit or share premium
account, provided that in no circumstances may a dividend be paid if this would result in the company being unable to pay its debts as
they fall due in the ordinary course of business. 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 the board of directors may deem relevant. If we pay any dividends on our ordinary shares, we will pay those dividends
which are payable in respect of the ordinary shares underlying the ADSs to the depositary, as the registered holder of such ordinary shares,
and the depositary then will pay such amounts to the ADS holders in proportion to the ordinary shares underlying the ADSs held by such
ADS holders, subject to the terms of the deposit agreement, including the fees and expenses payable thereunder. See &#8220;Item 12. Description
of Securities Other Than Equity Securities&#8212;American Depositary Shares.&#8221;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_036"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">8.B. Significant Changes</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Except as otherwise disclosed in this report, we have not experienced
any significant changes since the date of the annual financial statements included herein.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_037"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">ITEM 9. THE OFFER AND LISTING</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_038"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">9.A. Offering and Listing Details</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our ADSs have been listed on the New York Stock Exchange since November
7, 2018 under the symbol &#8220;CNF.&#8221; Each ADS represents 20 ordinary shares, par value US$0.0001 per share.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_039"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">9.B. Plan of Distribution</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Not applicable.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_040"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">9.C. Markets</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our ADSs have been listed on the New York Stock Exchange since November
7, 2018 under the symbol &#8220;CNF.&#8221;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_041"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">9.D. Selling Shareholders</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Not applicable.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_042"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">9.E. Dilution</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Not applicable.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_043"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">9.F. Expenses of the Issue</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Not applicable.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_044"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">ITEM 10. ADDITIONAL INFORMATION</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_045"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">10.A. Share Capital</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Not applicable.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_046"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">10.B. Memorandum and Articles of Association</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We incorporate by reference into this annual report our amended and
restated memorandum and articles of association, the form of which was filed as Exhibit 3.2 to our registration statement on Form F-1
(File Number 333-226126), as amended, filed with the Securities and Exchange Commission on July 31,2018. Our members adopted our amended
and restated memorandum and articles of association by a special resolution on July 11, 2018, which became effective immediately prior
to completion of our initial public offering of ADSs representing our ordinary shares.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_047"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">10.C. Material Contracts</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have not entered into any material contracts other than in the ordinary
course of business and other than those described in this annual report.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_048"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">10.D. Exchange Controls</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Cayman Islands currently has no exchange control regulations or
currency restrictions. For exchange control regulations or currency restrictions in China, see &#8220;Item 4. Information of the Company&#8212;B.
Business Overview&#8212;Regulation&#8212;Regulations Relating to Foreign Exchange.&#8221;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_049"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">10.E. Taxation</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Cayman Islands Taxation</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">According to Walkers (Hong Kong), our Cayman counsel, 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 likely to be material to us or holders of our ADSs or ordinary
shares levied by the government of the Cayman Islands, except for stamp duties which may be applicable on instruments executed in, or
after execution brought within the jurisdiction of the Cayman Islands. The Cayman Islands is not party to any double tax treaties that
are applicable to any payments made to or by our company. There are no exchange control regulations or currency restrictions in the Cayman
Islands.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Payments of dividends and capital in respect of the ADSs or ordinary
shares will not be subject to taxation in the Cayman Islands and no withholding will be required on the payment of a dividend or capital
to any holder of the ADSs or ordinary shares, nor will gains derived from the disposal of the ADSs or ordinary shares be subject to Cayman
Islands income or corporation tax.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our Company has been incorporated under the laws of the Cayman Islands
as an exempted company with limited liability and, as such, has obtained an undertaking from the Government of the Cayman Islands as to
tax concessions under the Tax Concessions Act (as amended). In accordance with the provision of Section 6 of the Tax Concession Act (as
amended), the Governor in Cabinet undertakes with our company:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">that
                                            no law which is hereafter enacted in the Cayman Islands imposing any tax to be levied on
                                            profits, income, gains or appreciation shall apply to our company or its operations; and</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">in
                                            addition, that no tax to be levied on profits, income, gains or appreciations or which is
                                            in the nature of estate duty or inheritance tax shall be payable:</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(i)</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">on
                                            or in respect of the shares or other obligations of our company; or</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(ii)</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">by
                                            way of the withholding, in whole or part, of any relevant payment as defined in Section 6(3)
                                            of the Tax Concessions Law (as amended).</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">These concessions shall be for a period of 20 years from January 28,
2014.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">PRC Taxation</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Under the PRC EIT Law, which became effective on January 1, 2008 and
was lastly amended on December 29, 2018, an enterprise established outside the PRC with &#8220;de facto management bodies&#8221; within
the PRC is considered a &#8220;resident enterprise&#8221; 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 PRC EIT Law, a &#8220;de facto management
body&#8221; 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In addition, the SAT Circular 82 issued by the SAT in April 2009 and
as amended on December 29, 2017, specifies that certain offshore incorporated enterprises controlled by PRC enterprises or PRC enterprise
groups will be classified as PRC resident enterprises if the following are located or resident in the PRC: (a) senior management personnel
and departments that are responsible for daily production, operation and management; (b) financial and personnel decision-making bodies;
(c) key properties, accounting books, company seal, minutes of board meetings and shareholders&#8217; meetings; and (d) half or more of
the senior management or directors having voting rights. Further to SAT Circular 82, the SAT issued the SAT Bulletin 45, which took effect
in September 2011, to provide more guidance on the implementation of SAT Circular 82. SAT Bulletin 45 provides for procedures and administration
details of determination on resident status and administration on post-determination matters. Our company is a company incorporated outside
the PRC. As a holding company, its key assets are its ownership interests in its subsidiaries, and its key assets are located, and its
records (including the resolutions of its board of directors and the resolutions of its shareholders) are maintained, outside the PRC.
As such, we do not believe that our company meets all of the conditions above or is a PRC resident enterprise for PRC tax purposes. For
the same reasons, we believe our other entities outside China are not PRC resident enterprises either. However, the tax resident status
of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of
the term &#8220;de facto management body.&#8221; There can be no assurance that the PRC government will ultimately take a view that is
consistent with us. If the PRC tax authorities determine that our Cayman Islands holding company is a PRC resident enterprise for PRC
enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. For example, a 10% withholding tax would be
imposed on dividends we pay to our non-PRC enterprise shareholders (including our ADS holders). In addition, nonresident enterprise shareholders
(including our ADS holders) may be subject to PRC tax at a rate of 10% gains realized on the sale or other disposition of ADSs or ordinary
shares, if such income is treated as sourced from within the PRC. Furthermore, if we are deemed a PRC resident enterprise, dividends paid
to our non-PRC individual shareholders (including our ADS holders) and any gain realized on the transfer of ADSs or ordinary shares by
such shareholders may be subject to PRC tax at a rate of 20% (which, in the case of dividends, may be withheld at source by us). These
rates may be reduced by an applicable tax treaty, but it is unclear whether non-PRC shareholders of our company would be able to obtain
the benefits of any tax treaties between their country of tax residence and the PRC in the event that we are treated as a PRC resident
enterprise. See &#8220;Item 3. Key Information&#8212;D. Risk Factors&#8212;Risks Related to Doing Business in China&#8212;If we are classified
as a PRC resident enterprise for PRC enterprise income tax purposes, such classification could result in unfavorable tax consequences
to us and our non-PRC shareholders and ADS holders.&#8221;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Material U.S. Federal Income Tax Considerations</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following are material U.S. federal income tax consequences to
the U.S. Holders described below of the ownership and disposition of the ADSs or ordinary shares, but this discussion does not purport
to be a comprehensive description of all tax considerations that may be relevant to a particular person&#8217;s decision to hold such
ADSs or ordinary shares. This discussion applies only to a U.S. Holder that holds the ADSs or ordinary shares as capital assets for U.
S. federal income tax purposes. In addition, it does not describe all of the tax consequences that may be relevant in light of a U.S.
Holder&#8217;s particular circumstances, including the alternative minimum tax, the Medicare contribution tax on net investment income
and tax consequences applicable to U.S. Holders subject to special rules, such as:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">certain
                                            financial institutions;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">dealers
                                            or traders in securities that use a mark-to-market method of tax accounting;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">persons
                                            holding ADSs or ordinary shares as part of a straddle, conversion transaction or similar
                                            transaction;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">persons
                                            whose functional currency for U.S. federal income tax purposes is not the U.S. dollar;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">entities
                                            classified as partnerships for U.S. federal income tax purposes;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">tax-exempt
                                            entities, &#8220;individual retirement accounts&#8221; or &#8220;Roth IRAs&#8221;;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">persons
                                            who acquired our ADSs or ordinary shares pursuant to the exercise of an employee stock option
                                            or otherwise as compensation;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">persons
                                            that own or are deemed to own 10% or more of the Company&#8217;s stock by vote or value;
                                            or</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">persons
                                            holding ADSs or ordinary shares in connection with a trade or business conducted outside
                                            the United States.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">If an entity that is classified as a partnership for U.S. federal income
tax purposes owns ADSs or ordinary shares, the U.S. federal income tax treatment of a partner will generally depend on the status of the
partner and the activities of the partnership. Partnerships owning ADSs or ordinary shares and partners in such partnerships should consult
their tax advisers as to the particular U.S. federal income tax consequences of owning and disposing of ADSs and ordinary shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">This discussion is based on the Internal Revenue Code of 1986, as amended
(the &#8220;Code&#8221;) administrative pronouncements, judicial decisions, final, temporary and proposed Treasury regulations, and the
income tax treaty between the United States and the PRC (the &#8220;Treaty&#8221;), all as of the date hereof, any of which is subject
to change, possibly with retroactive effect. This discussion assumes that each obligation under the deposit agreement will be performed
in accordance with its terms.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As used herein, a &#8220;U.S. Holder&#8221; is a person eligible for
Treaty benefits that is, for U.S. federal income tax purposes is a beneficial owner of the Company&#8217;s ADSs or ordinary shares and
is:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">a
                                            citizen or individual resident of the United States;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">a
                                            corporation, or other entity taxable as a corporation, created or organized in or under the
                                            laws of the United States, any state therein or the District of Columbia; or</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">an
                                            estate or trust the income of which is subject to U.S. federal income taxation regardless
                                            of its source.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In general, a U.S. Holder that owns ADSs will be treated as the owner
of the underlying ordinary shares represented by those ADSs for U.S. federal income tax purposes. Accordingly, no gain or loss will be
recognized if a U.S. Holder exchanges ADSs for the underlying ordinary shares represented by those ADSs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">This discussion does not address the effects of any state, local or
non-U.S. tax laws, or any U.S. federal taxes other than income taxes (such as U.S. federal estate or gift tax consequences). U.S. Holders
should consult their tax advisers concerning the U.S. federal, state, local and non-U.S. tax consequences of owning and disposing of ADSs
or ordinary shares in their particular circumstances.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Passive Foreign Investment Company</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In general, a non-U.S. corporation will be a PFIC for U.S. federal
income tax purposes for any taxable year in which (i) 75% or more of its gross income consists of passive income or (ii) 50% or more of
the average value of its assets (generally determined on a quarterly basis) consists of assets that produce, or are held for the production
of, passive income. For purposes of the above calculations, a non-U.S. corporation that directly or indirectly owns at least 25% by value
of the equity interests of another corporation or partnership is treated as if it held its proportionate share of the assets of the other
corporation or partnership and received directly its proportionate share of the income of the other corporation of partnership. Passive
income generally includes interest, income equivalent to interest, rents, dividends, royalties and gains from financial investments.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">It is not entirely clear how the PFIC rules should apply to a company
with a business such as ours. For example, although the loans issued through our trust plans are shown in their entirety as our assets
on our consolidated balance sheet, it is not clear whether for purposes of the PFIC rules we should be treated as owning only our subordinated
interests in the trust plans, and earning only the portion of the trust plans&#8217; interest income attributable thereto. If we are treated
as owning only the subordinated units and the portion of the trust plans&#8217; loans attributable thereto, our PFIC status for any taxable
year may depend on the relative values of the loans we are treated as owning and our other passive assets on the one hand, and the value
of our goodwill (to the extent attributable to the services we provide) and fee receivables on the other hand. The extent to which our
goodwill should be treated as an active asset is not entirely clear. Moreover, the value of our goodwill may be determined by reference
to our market capitalization, which has been, and may continue to be, volatile. In addition, we provide loan facilitation, loan administration
and other services in connection with the loans issued by our trust plans and we charge our trust plans service fees that are eliminated
in, and therefore not shown on, our consolidated income statement. Therefore, our PFIC status for any taxable year may depend on the relative
amounts of our fee and interest income (which may be less than the amount of interest income shown on our income statement, if we are
treated as owning only a portion of the trusts&#8217; loans). Furthermore, it is not entirely clear whether a portion of the interest
income earned by the trust plans could be treated as payable in part for services to the borrowers. Although our PFIC status for any taxable
year is not entirely clear, based on the composition of our income and assets and the manner in which we currently operate our business,
we were likely a PFIC for our 2022 and prior taxable years, and will likely be a PFIC for our 2023 taxable year and future taxable years,
subject to the discussion in the subsequent paragraph regarding the Active Financing Exception, as defined below. U.S. Holders should
consult their tax advisors regarding the proper application of the PFIC rules to us and our PFIC status for any taxable year.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For purposes of the PFIC rules &#8220;passive income&#8221; is defined
by way of a cross-reference to Section 954(c) of the Code, which applies for purposes of the Code&#8217;s &#8220;controlled foreign corporation&#8221;(&#8220;CFC&#8221;)
rules. A different provision under the CFC rules (namely Section 954(h) of the Code) sets forth an exception for interest income derived
by &#8220;eligible CFCs&#8221; that are &#8220;predominantly engaged&#8221; in the active conduct of a financing or similar business (the
&#8220;Active Financing Exception&#8221;). Because the Active Financing Exception addresses eligible CFCs, there has been uncertainty
as to whether it could apply to determine the PFIC status of companies that are not CFCs, such as our company. Proposed Treasury regulations
promulgated in 2019 (the &#8220;2019 Proposed Regulations&#8221;) provided that the Active Financing Exception could apply to determine
the PFIC status of such companies. However, in 2020 these regulations were finalized (the &#8220;2020 Final Regulations&#8221;) without
addressing the Active Financing Exception. Although the 2020 Final Regulations are silent on the availability of the Active Financing
Exception to companies like us, in the preamble to the 2020 Final Regulations Treasury expressed its position that under current law the
Active Financing Exception does not apply in determining the PFIC status of a company that is neither a CFC nor a bank. The 2020 Final
Regulations apply to taxable years of shareholders beginning on or after January 14, 2021. Treasury indicated in the preamble to the 2020
Final Regulations that taxpayers can rely on the 2019 Proposed Regulations to apply the Active Financing Exception for any open taxable
year ending on or before December 31, 2020. Concurrently with the issuance of the 2020 Final Regulations, Treasury issued proposed regulations
(the &#8220;2020 Proposed Regulations&#8221;) that would state explicitly that the Active Financing Exception is available only if the
tested non-U.S. corporation is a bank. The 2020 Proposed Regulations have not been finalized yet. Based on the foregoing<b>, </b>U.S.
Holders (i) generally are permitted to apply the Active Financing Exception for a taxable year ending on or before December 31, 2020 (provided
that we in fact satisfied the exception&#8217;s conditions for the relevant year), (ii) should expect that the Internal Revenue Service
(the &#8220;IRS&#8221;) will not agree with a return position that applies the Active Financing Exception for any subsequent taxable year,
and (iii) should be aware that if the 2020 Proposed Regulations are finalized in their current form they will not be able to take the
position that the Active Financing Exception applies for any taxable year to which the regulations apply. If we were &#8220;predominantly
engaged&#8221; in the active conduct of a financing or similar business (as defined for purposes of the Active Financing Exception) and
met all of the exception&#8217;s requirements then we would not be a PFIC for any taxable year with respect to which taxpayers validly
applied the Active Financing Exception, if applicable. U.S. Holders should be aware that we have not determined whether these requirements
were in fact satisfied. Moreover, if any of our trust plans is treated as a partnership for U.S. federal income tax purposes, and if such
trust&#8217;s senior unit holders are treated as owning interests in such partnership other than as creditors, the characterization of
our interest income as active under the Active Financing Exception may also depend, in part, on whether we owned 25% or more of the value
of such trust for the relevant taxable years. U.S. Holders should consult their tax advisers as to whether the Active Financing Exception
could apply to us with respect to any taxable year prior to the finalization of the 2020 Proposed Regulations, and whether it is advisable
to take this position in light of Treasury&#8217;s views, as described above.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our company may also hold, directly or indirectly, equity interests
in subsidiaries and other entities which are PFICs (collectively &#8220;Lower-tier PFICs&#8221;). Under attribution rules, if we are a
PFIC, U.S. Holders will be deemed to own their proportionate share of the equity interests in each Lower-tier PFICs and will be subject
to U.S. federal income tax according to the PFIC rules described below on (i) certain distributions by a Lower-tier PFIC and (ii) a disposition
of equity interests of a Lower-tier PFIC, in each case as if the U.S. Holder held such interests directly, even though the U.S. Holders
will not receive the proceeds of those distributions or dispositions directly.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">A U.S. Holder that owns our company&#8217;s ADSs or ordinary shares
(or as discussed above is deemed to own equity interests of any Lower-tier PFIC) during any taxable year in which we are a PFIC will generally
be subject to adverse tax treatment. In general, gain recognized on a disposition (including, under certain circumstances, a pledge) of
ADSs or ordinary shares by the U.S. Holder (or on an indirect disposition of equity interests of any Lower-tier PFIC) will be allocated
ratably over the U.S. Holder&#8217;s holding period for the ADSs or ordinary shares. The amounts allocated to the taxable year of disposition
and to any year before we (or, a Lower-tier PFIC, as the case may be) became a PFIC, will be taxed as ordinary income. The amounts allocated
to each other taxable year will be subject to tax at the highest rate in effect for that taxable year for individuals or corporations,
as appropriate, and an interest charge will be imposed on the resulting tax liability for each taxable year. Any loss recognized upon
disposition of ADSs or ordinary shares will be capital loss and will be long-term capital loss if the U.S. Holder held the ADSs or ordinary
shares for more than one year. The deductibility of capital losses is subject to limitations. The total amount of gain (before the imposition
of interest charges described above) or loss will equal the difference between the U.S. Holder&#8217;s tax basis in the ADSs or ordinary
shares disposed of and the amount realized on disposition, in each case as determined in U.S dollars.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Furthermore, to the extent that distributions received in a taxable
year by a U.S. Holder on its ADSs or ordinary shares (or a distribution by any Lower-tier PFIC that is deemed to be received by a U.S.
Holder) exceed 125% of the average of the annual distributions received (or deemed received) during the preceding three taxable years
or the U.S. Holder&#8217;s holding period, whichever is shorter, the distributions will be subject to taxation in the same manner.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">If we are a PFIC for any year during which a U.S. Holder holds ADSs
or ordinary shares, we will generally continue to be treated as a PFIC with respect to such ADSs or ordinary shares held by the U.S. Holder
for all succeeding years during which the U.S. Holder holds such ADSs or ordinary shares, even if we cease to be a PFIC, unless the U.S.
Holder makes a &#8220;deemed sale&#8221; election, which would allow the U.S. Holder to eliminate the continuing PFIC status under certain
circumstances but would require the U.S. Holder to recognize gain taxed under the general PFIC rules described above.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">If the ADSs are &#8220;regularly traded&#8221; on a &#8220;qualified
exchange,&#8221; a U.S. Holder of ADSs may make a mark-to-market election that would result in tax treatment different from the general
tax treatment for PFICs described above. The ADSs will be treated as &#8220;regularly traded&#8221; in any calendar year in which more
than a de minimis quantity of the ADSs are traded on a qualified exchange on at least 15 days during each calendar quarter. The New York
Stock Exchange on which the ADSs are listed is a qualified exchange for this purpose. If a U.S. Holder makes the mark-to-market election,
the U.S. Holder generally will recognize as ordinary income any excess of the fair market value of the ADSs at the end of each taxable
year over their adjusted tax basis, and will recognize an ordinary loss in respect of any excess of the adjusted tax basis of the ADSs
over their fair market value at the end of the taxable year (but only to the extent of the net amount of income previously included as
a result of the mark-to-market election). If a U.S. Holder makes the election, the U.S. Holder&#8217;s tax basis in the ADSs will be adjusted
to reflect the income or loss amounts recognized. Any gain recognized on the sale or other disposition of ADSs in a year when the Company
is a PFIC will be treated as ordinary income and any loss will be treated as an ordinary loss (but only to the extent of the net amount
of income previously included as a result of the mark-to-market election, with any excess loss treated as a capital loss). Distributions
paid on ADSs will be treated as discussed below under &#8220;Item 10. Additional Information&#8212;E. Taxation&#8212;Material U.S. Federal
Income Tax Considerations&#8212;Taxation of Distributions.&#8221; U.S. Holders should consult their tax advisers regarding the availability
and advisability of making a mark-to-market election in their particular circumstances. In particular, U.S. Holders should consider carefully
the impact of a mark-to-market election with respect to their ADSs given that we may have Lower-tier PFICs and that there is no provision
in the Code, Treasury regulations or any administrative guidance that would permit making a mark-to-market election with respect to any
Lower-tier PFIC the shares of which are not &#8220;regularly traded&#8221; as described above.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">If we are a PFIC (or with respect to a particular U.S. Holder are treated
as a PFIC) for a taxable year in which we pay a dividend or for the prior taxable year, the favorable tax rate applicable to &#8220;qualified
dividend income&#8221; paid to certain non-corporate U.S. Holders will not apply.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We do not intend to provide U.S. Holders with the information necessary
to make a qualified electing fund election, which if available would result in an alternative treatment of the ADSs and ordinary shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">If a U.S. Holder owns ADSs or ordinary shares during any year in which
we are PFIC, the U.S. Holder generally must file annual reports on an IRS form 8621 with respect to us and any Lower-tier PFIC, generally
with the U.S. Holder&#8217;s federal income tax return for that year.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The application of the PFIC rules to an investment in our ADSs or ordinary
shares is complex. U.S. Holders should consult their tax advisers concerning our PFIC status for any taxable year and the application
of the PFIC rules in their particular circumstances.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Taxation of Distributions</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following discussion is subject to the discussion under <i>&#8220;Item
10. Additional Information&#8212;E. Taxation&#8212;Material U.S. Federal Income Tax Considerations&#8212;Passive Foreign Investment Company&#8221;</i>
above. Distributions paid on the Company&#8217;s ADSs or ordinary shares (other than certain <i>pro rata</i> distributions of ordinary
shares) will be treated as dividends to the extent paid out of our company&#8217;s current or accumulated earnings and profits (as determined
under U.S. federal income tax principles). Because we do not calculate our earnings and profits under U.S. federal income tax principles,
it is expected that distributions generally will be reported to U.S. Holders as dividends. Dividends will not be eligible for the dividends-received
deduction generally available to U.S. corporations under the Code. In light of the discussion in <i>&#8220;Item 10. Additional Information&#8212;E.
Taxation&#8212;Material U.S. Federal Income Tax Considerations&#8212;Passive Foreign Investment Company&#8221;</i> above, non-corporate
U.S. Holders should expect that dividends, if any, will likely not be eligible for preferential tax rates.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Dividends will be included in a U.S. Holder&#8217;s income on the date
of the U.S. Holder&#8217;s, or in the case of ADSs, the depositary&#8217;s, receipt. The amount of any dividend income paid in foreign
currency will be the U.S. dollar amount calculated by reference to the spot rate in effect on the date of receipt, regardless of whether
the payment is in fact converted into U.S. dollars on such date. If the dividend is converted into U.S. dollars on the date of receipt,
a U.S. Holder generally should not be required to recognize foreign currency gain or loss in respect of the amount received. A U.S. Holder
may have foreign currency gain or loss if the dividend is converted into U.S. dollars after the date of receipt.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Dividends will be treated as foreign-source income for foreign tax
credit purposes. As described in &#8220;Item 10. Additional Information&#8212;E. Taxation&#8212;PRC Taxation,&#8221; dividends paid by
the Company may be subject to PRC withholding tax. For U.S. federal income tax purposes, the amount of the dividend income will include
any amounts withheld in respect of PRC withholding tax. Subject to applicable limitations, which vary depending upon the U.S. Holder&#8217;s
circumstances and the discussion below regarding certain Treasury regulations, PRC taxes withheld from dividend payments (at a rate not
exceeding the applicable rate provided in the Treaty if a U.S. Holder is eligible for Treaty Benefits) generally will be creditable against
a U.S. Holder&#8217;s U.S. federal income tax liability. The rules governing foreign tax credits are complex and U.S. Holders generally
should consult their tax advisers regarding the creditability of PRC taxes in their particular circumstances. For example, Treasury regulations
provide that, in the absence of an election to apply the benefits of an applicable income tax treaty, in order for non-U.S. income taxes
to be creditable, the relevant non-U.S. income tax rules must be consistent with certain U.S. federal income tax principles, and we have
not determined whether the PRC income tax system meets this requirement. In lieu of claiming a credit, a U.S. Holder may elect to deduct
any creditable PRC taxes in computing its taxable income, subject to applicable limitations. An election to deduct foreign taxes instead
of claiming foreign tax credits applies to all creditable foreign taxes paid or accrued in the taxable year.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Sale or Other Taxable Disposition of ADSs or Ordinary Shares</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following discussion is subject to the discussion under <i>&#8220;Item
10. Additional Information&#8212;E. Taxation&#8212;Material U.S. Federal Income Tax Considerations&#8212;Passive Foreign Investment Company&#8221;</i>
above. A U.S. Holder will generally recognize gain or loss on a sale or other taxable disposition of ADSs or ordinary shares in an amount
equal to the difference between the amount realized on the sale or disposition and the U.S. Holder&#8217;s tax basis in the ADSs or ordinary
shares disposed of, in each case as determined in U.S. dollars. Such gain or loss will be long-term capital gain or loss if, at the time
of the sale or disposition, the U.S. Holder has owned the ADSs or ordinary shares for more than one year, and we are not a PFIC (or treated
as a PFIC with respect to the U.S. Holder). Long-term capital gains recognized by noncorporate U.S. Holders are subject to tax rates that
are lower than those applicable to ordinary income. In light of the discussion under <i>&#8220;Item 10. Additional Information&#8212;E.
Taxation&#8212;Material U.S. Federal Income Tax Considerations&#8212;Passive Foreign Investment Company&#8221;</i> above, U.S. Holders
should expect that any gain recognized on a sale or other taxable disposition of the ADSs or ordinary shares after the end of 2022 will
likely not be treated as long-term capital gain. The deductibility of capital losses is subject to limitations.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Foreign tax credit for PRC taxes imposed on disposition
of ADSs or ordinary shares</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As described in &#8220;Item 10. Additional Information&#8212;E. Taxation&#8212;PRC
Taxation,&#8221; gain on the sale of ADSs or ordinary shares may be subject to PRC taxes if the Company is considered a PRC resident enterprise
for PRC enterprise income tax purposes. Under the Code, capital gains of U.S. persons are generally treated as U.S. source income. However,
a U.S. Holder may be able to elect to treat the gain as foreign-source income under the Treaty and claim foreign tax credit in respect
of any PRC tax on dispositions. The foreign tax credit rules generally preclude a U.S. Holder from claiming a foreign tax credit with
respect to PRC income taxes on gains from dispositions of ADSs or Class A ordinary shares if the U.S. Holder does not elect to apply the
benefits of the Treaty. However, in that case it is possible that any PRC taxes on disposition gains may either be deductible or reduce
the amount realized on the disposition. The rules governing foreign tax credits and deductibility of foreign taxes are complex. U.S. Holders
should consult their tax advisers regarding the consequences of the imposition of any PRC tax on disposition gains, including the Treaty&#8217;s
resourcing rule, any reporting requirements with respect to a Treaty-based return position and the creditability or deductibility of the
PRC tax on disposition gains in their particular circumstances (including any applicable limitations).</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->129<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Information Reporting and Backup Withholding</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Payments of dividends and sales proceeds that are made within the United
States or through certain U.S.-related financial intermediaries may be subject to information reporting and backup withholding, unless
(i) the U.S. Holder is a corporation or other exempt recipient (and if required, establishes its status as such) or (ii) in the case of
backup withholding, the U.S. Holder provides a correct taxpayer identification number and certifies that it is not subject to backup withholding.
The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a credit against the U.S. Holder&#8217;s U.S.
federal income tax liability and may entitle it to a refund, provided that the required information is timely furnished to the IRS.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Certain U.S. Holders who are individuals (or certain specified entities)
may be required to report information relating to their ownership of ADSs or ordinary shares or non-U.S. financial accounts through which
they are held. U.S. Holders should consult their tax advisers regarding their reporting obligations with respect to the ADSs or ordinary
shares.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_050"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">10.F. Dividends and Paying Agents</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Not applicable.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_051"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">10.G. Statement by Experts</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Not applicable.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_052"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">10.H. Documents on Display</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have filed this annual report on Form 20-F, including exhibits,
with the SEC. As allowed by the SEC, in Item 19 of this annual report, we incorporate by reference certain information we filed with the
SEC. This means that we can disclose important information to you by referring you to another document filed separately with the SEC.
The information incorporated by reference is considered to be part of this annual report. We have also filed a registration statement
on Form F-6 (Registration No. 333-228089), a registration statement on Form S-8 (Registration No. 333230955), and a registration statement
on Form 8-A (Registration No. 001-38726), including relevant exhibits and schedules under the Securities Act, covering the ordinary shares
represented by the ADSs, as well as the ADSs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">You may read and copy this annual report, including the exhibits incorporated
by reference in this annual report, at the SEC&#8217;s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549 and at the
SEC&#8217;s regional offices in New York, New York and Chicago, Illinois. You also can request copies of this annual report, including
the exhibits incorporated by reference in this annual report, upon payment of a duplicating fee, by writing information on the operation
of the SEC&#8217;s Public Reference Room.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The SEC also maintains a website at www.sec.gov that contains reports,
proxy statements and other information regarding registrants that file electronically with the SEC. Our annual report and some of the
other information submitted by us to the SEC may be accessed through this website. 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. 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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&#8217; 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&#8217; meeting received by the depositary
from us.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="e10i"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">10.I. Subsidiary information</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: normal 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-style: normal; font-weight: normal">Not applicable.</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="e10j"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">10.J. Annual Report to Security Holders</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: normal 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-style: normal; font-weight: normal">Not applicable.</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->130<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_053"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Interest rate risk</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our exposure to interest rate risk relates to the interest income and
financing service fee on loans and interest on deposits with banks. Borrowers&#8217; cost of borrowing mainly consist of interest rates
charged under trust plans. An increase in prevailing interest rates could result in an increase in the interest rates of loans we facilitate,
and borrowers may be less likely to accept such adjusted terms. If borrowers decide not to use the products or services we offer because
of such an increase in market interest rates, our ability to retain existing borrowers and engage prospective borrowers as well as our
competitive position may be severely impaired.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Foreign exchange risk</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Substantially all of our revenues are denominated in Renminbi. The
functional currency of our company is the Hong Kong dollar. The functional currency of SFIL, which is incorporated in British Virgin Islands,
is the U.S. dollar. The functional currency of our subsidiary in the PRC is the Renminbi. We use Renminbi as our reporting currency. Monetary
assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at the
rates of exchange ruling at the balance sheet date. Transactions in currencies other than the functional currency during the year are
converted into functional currency at the applicable rates of exchange prevailing when the transactions occurred. Due to foreign currency
translation adjustments, we recognized a foreign exchange loss of RMB16,166,094 in 2020, a foreign exchange loss of RMB6,936,969 in 2021,
and a foreign exchange gain of RMB15,181,518 (US$2,201,113) in 2022, respectively.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Renminbi is not freely convertible into foreign currencies for
capital account transactions. The value of the Renminbi against the U.S. dollar and other currencies is affected by, among other things,
changes in China&#8217;s political and economic conditions and China&#8217;s foreign exchange policies. On July 21,2005, the PRC government
changed its decade-old policy of pegging the value of the RMB to the U.S. dollar, and the Renminbi appreciated more than 20% against the
U.S. dollar over the following three years. Between July 2008 and June 2010, this appreciation halted and the exchange rate between the
Renminbi and the U.S. dollar remained within a narrow band. Since June 2010, the RMB 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 the Renminbi and the U.S. dollar in the future.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">To date, we have not entered into any hedging transactions in an effort
to reduce our exposure to foreign currency exchange risk. 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 Renminbi amount we receive from the conversion.
Conversely, if we decide to convert Renminbi into U.S. dollars for the purpose of making payments for dividends on our ordinary shares
or ADSs or for other business purposes, appreciation of the U. S. dollar against the Renminbi would have a negative effect on the U.S.
dollar amounts available to us.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Inflation risk</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Since our inception, inflation in China has not materially
impacted 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 2020, 2021 and 2022 were increases of 0.2%, 1.5% and 1.8% respectively. Although we have not
in the past been materially affected by inflation since our inception, we can provide no assurance that we will not be affected in
the future by higher rates of inflation in China.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_054"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_055"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">12.A. Debt Securities</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Not applicable.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_056"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">12.B. Warrants and Rights</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Not applicable.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_057"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">12.C. Other Securities</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Not applicable.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->131<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_058"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">12.D. American Depositary Shares</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Fees and Expenses</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Pursuant to the terms of the deposit agreement, 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, $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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following additional charges shall be incurred by the ADR holders,
by any party depositing or withdrawing shares or by any party surrendering ADSs and/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:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">a
                                            fee of US$1.50 per ADR or ADRs for transfers of certificated or direct registration ADRs;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">a
                                            fee of up to US$0.05 per ADS for any cash distribution made pursuant to the deposit agreement;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">an
                                            aggregate 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);</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">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&#8217;s or its custodian&#8217;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);</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">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 $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;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">stock
                                            transfer or other taxes and other governmental charges;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">cable,
                                            telex and facsimile transmission and delivery charges incurred at your request in connection
                                            with the deposit or delivery of shares, ADRs or deposited securities;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">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;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">in
                                            connection with the conversion of foreign currency into U.S. dollars, JPMorgan shall deduct
                                            out of such foreign currency the fees, expenses and other charges charged by it and/or its
                                            agent (which may be a division, branch or affiliate) so appointed in connection with such
                                            conversion; and</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">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.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->132<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The fees and charges described above may be amended from time to time
by agreement between us and the depositary.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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 the increase in any such fees and charges.</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Payments by Depositary</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In March 2019, excluding withholding tax, we received a US$0.4 million
cash payment from JPMorgan Chase Bank, N.A., the depositary bank for our ADR program.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>




</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->133<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><div><a id="a_059"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">PART II</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_060"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">ITEM 13. ITEM DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">None.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_061"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS
AND USE OF PROCEEDS</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_062"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">14.A.-14.D. Material Modifications to the Rights of Security Holders</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">See &#8220;Item 10. Additional Information&#8221; for a description
of the rights of shareholders, which remain unchanged.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_063"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">14.E. Use of Proceeds</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following &#8220;Use of Proceeds&#8221; information relates to
the registration statement on Form F-1, as amended (File No. 333-226126) in relation to our initial public offering, which was declared
effective by the SEC on November 6, 2018. In November 2018, we completed our initial public offering in which we issued and sold an aggregate
of 7,060,460 ADSs, representing 141,209,200 ordinary shares, resulting in net proceeds to us ofUS$45.7 million, net of the underwriting
discounts and commissions and other fees paid or payable by us in connection with the offering.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of December 31, 2022, we had used a portion of the net proceeds
received from our initial public offering for share repurchase and other general corporate purposes.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_064"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">ITEM 15. CONTROLS AND PROCEDURES</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Disclosure Controls and Procedures</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our management, with the participation of our Group Chief Executive
Officer and Group Acting Chief Financial Officer, has performed an evaluation of the effectiveness of our disclosure controls and procedures
(as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report, as required by Rule 13a-15(b)
under the Exchange Act.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Disclosure controls and procedures are controls and procedures that
are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act is
recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission&#8217;s rules
and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information
required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our principal
executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Based upon that evaluation, our management has concluded that, as of
December 31, 2022, our existing disclosure controls and procedures were ineffective, solely due to the material weakness in internal control
over financial reporting identified below.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Internal Control Over Financial Reporting</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In the course of preparing our consolidated financial statements in
the prior years, we identified one material weakness which has not been remedied in our internal control over financial reporting, as
defined in the standards established by the Public Company Accounting Oversight Board of the United States. A material weakness is a deficiency,
or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material
misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The material weakness that was identified related to our lack of sufficient
financial reporting and accounting personnel with appropriate experience of U.S. GAAP and SEC reporting requirements and our failure to
establish and clearly communicate acceptable policies regarding U.S. GAAP financial reporting.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->134<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">To remediate our identified material weakness, we have implemented
and will continuously use the following measures to improve our financial reporting process. For the specific material weakness, we are
in the process of (i) hiring more qualified accounting personnel with relevant U.S. GAAP and SEC reporting experience and qualifications
to strengthen the financial reporting function; (ii) holding regular U.S.GAAP trainings for employees in the Finance and Capital Market
Departments (on a quarterly or monthly basis) and record the results of these trainings. For internal controls over financial reporting,
we involve external consultants (Deloitte Touche Tohmatsu Certified Public Accountants LLP) to assist the Group improving their internal
controls under the Sarbanes-Oxley (SOX) Audit Requirements, particularly for the Group&#8217;s two main business processes: trust lending
process and commercial bank partnership process. This internal control optimization process is yet to be completed, but the efforts attempted
by the Group can be summarized as (i) refining and setting more control points for the above main business processes; (ii) establishing
effective oversight and clear reporting requirements for complex transactions, specifically for the personnel in the Finance and Capital
Market Departments; and (iii) updating the Accounting Policy Manual (APM) of CNFinance timely. However, we cannot assure you that these
measures will be sufficient to remediate our material weakness in time, or at all. See &#8220;Item 3. Key Information&#8212;D. Risk factors&#8212;Risks
Related to Our Business&#8212;If we fail to implement and maintain an effective system of internal controls, we may be unable to accurately
or timely report our results of operations or prevent fraud, and investor confidence and the market price of our ADSs may be materially
and adversely affected.&#8221;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Management&#8217;s Annual Report on Internal Control Over Financial
Reporting</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our management is responsible for establishing and maintaining adequate
internal control over financial reporting, as defined in Rule 13a-15 (f) and 15d-15(f) under the Exchange Act. Our management evaluated
the effectiveness of our internal control over financial reporting, as required by Rule 13a-15(c) of the Exchange Act, based on criteria
established in the framework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on this evaluation, our management has concluded that our internal control over financial reporting was ineffective
as of December 31, 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness of our internal control
over financial reporting 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 and procedures may deteriorate.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Attestation Report of the Registered Public Accounting Firm</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">This annual report on Form 20-F does not include an attestation report
of our registered public accounting firm due to a transition period established by rules of the SEC for newly public companies.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Changes in Internal Control Over Financial Reporting</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">There were two changes in our internal control over financial reporting
during the period covered by this annual report on Form 20-F that have materially affected, or that are reasonably likely to materially
affect, our internal control over financial reporting. Such changes include (i) refining and setting more control points for our main
business processes, namely the trust lending process and commercial bank partnership process; (b) establishing effective oversight and
clear reporting requirements for complex transactions, specifically for the personnel in the Finance and Capital Market Departments.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_065"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">ITEM 16. [Reserved]</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_066"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">16.A. Audit Committee Financial Expert</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our Board of Directors has determined that Mr. Fengyong Gao, an independent
director and the chairperson of our audit committee, qualifies as an &#8220;audit committee financial expert&#8221; within the meaning
of the SEC rules and possesses financial sophistication within the meaning of Listing Rules of the New York Stock Exchange. Mr. Fengyong
Gao satisfies the &#8220;independence&#8221; requirements of Rule 10A-3 under the Securities Exchange Act of 1934, as amended, and Section
303A of the Corporate Governance Rules of the NYSE.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->135<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_067"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">16.B. Code of Ethics</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our Board of Directors has adopted a code of business conduct and ethics
that applies to all of our directors, officers, employees, including certain provisions that specifically apply to our principal executive
officer, principal financial officer, principal accounting officer or controller and any other persons who perform similar functions for
us. We have filed our code of business conduct and ethics as Exhibit 99.1 of our registration statement on Form F-1 (file No. 333-226126),
as amended, filed with the SEC on July 31, 2018 and posted a copy of our code of business conduct and ethics on our website at ir.cashchina.cn.
We hereby undertake to provide to any person without charge, a copy of our code of business conduct and ethics within ten working days
after we receive such person&#8217;s written request.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_068"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">16.C. Principal Accountant Fees and Services</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Auditor Fees</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table sets forth the aggregate fees by categories specified
below in connection with certain professional services rendered by KPMG</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Huazhen LLP, our independent registered public accounting firm, for
the periods indicated.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold; text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left"></td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">Services</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">6,585</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">7,353</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">6,620</td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Audit-Related Fees <sup>(2)</sup></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Tax Fees <sup>(3)</sup></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1.5pt">Other Fees <sup>(4)</sup></td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#8212;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#8212;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 4pt">Total</td><td style="padding-bottom: 4pt">&#160;</td>
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    <td style="border-bottom: Black 4pt double; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; text-align: right">7,353</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; text-align: right">6,720</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td></tr>
  </table><div>


</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>

</div><p style="margin-top: 0; margin-bottom: 0"></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 25%"><div style="border-top: Black 1.5pt solid; font-size: 1pt">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="margin-top: 0; margin-bottom: 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 0.25in">(1)</td><td><i>Audit Fees.</i> Audit fees mean the aggregate fees billed in each of the fiscal periods listed for professional services rendered
by our principal auditors for the audit of our annual consolidated financial statements and assistance with and review of documents filed
with the SEC.</td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 0.25in">(2)</td><td><i>Audit-related Fees.</i> Audit-related fees mean the aggregate fees billed for professional services rendered by our principal auditors
for the assurance and related services, which were not included under Audit Fees above.</td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 0.25in">(3)</td><td><i>Tax Fees.</i> Tax fees mean fees incurred from professional services related to tax compliance.</td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 0.25in">(4)</td><td><i>Other Fees.</i> Other fees mean fees incurred from professional services related to training, advisory and assurance for corporate
and social responsibility reporting and professional services related to tax advice.</td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The policy of our audit committee is to pre-approve all audit and non-audit
services provided by KPMG Huazhen LLP, our independent registered public accounting firm, including audit services and audit-related 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.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_069"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">16.D. Exemptions from the Listing Standards for Audit Committees</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Not applicable.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 143; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->136<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_070"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">16.E. Purchases of Equity Securities by the Issuer and Affiliated
Purchasers</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On March 16, 2022, our board of directors authorized a share repurchase
program whereby our company was authorized a share repurchase program under which the Company may repurchase up to US$20.0 million of
its ordinary shares in the form of American depositary shares during a period of up to 12 months commencing on March 16, 2022 (the &#8220;Share
Repurchase Program&#8221;). The Company&#8217;s share repurchases may be made from time to time on the open market at prevailing market
prices, in open-market transactions, privately negotiated transactions or block trades, and/or through other legally permissible means,
depending on market conditions and in accordance with the applicable rules and regulations. The timing and conditions of the share repurchases
will be subject to various factors including the requirements under Rule 10b-18 and Rule 10b5-1 of the Exchange Act. Our board of directors
will review the share repurchase program periodically and may authorize adjustments to its terms and size or suspend or discontinue the
program.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Neither we nor any &#8220;affiliated purchaser,&#8221; as defined in
Rule 10b-18(a)(3) of the Exchange Act, purchased any of our equity securities during the period covered by this annual report.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_071"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">16.F. Change in Registrant&#8217;s Certifying Accountant</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Not applicable.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_072"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">16.G. Corporate Governance</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We are a &#8220;foreign private issuer&#8221; (as such term is defined
in Rule 3b-4 under the Exchange Act), and our ADSs, each representing twenty ordinary shares, are listed on the New York Stock Exchange.
Under Section 303A of the New York Stock Exchange Listed Company Manual, New York Stock Exchange listed companies that are foreign private
issuers are permitted to follow home country practice in lieu of the corporate governance provisions specified by the New York Stock Exchange
with limited exceptions. The following summarizes some significant ways in which our corporate governance practices differ from those
followed by domestic companies under the listing standards of the New York Stock Exchange.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Director independence</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The NYSE Standards require a majority of the membership of NYSE-listed
company boards to be composed of independent directors, which is not required under Cayman Islands law, the law of our country of incorporation.
Our Board of Directors currently consists of six members, three of whom are independent directors.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Non-management directors&#8217; executive sessions</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The NYSE Standards require non-management directors of NYSE-listed
companies to meet at regularly scheduled executive sessions without management. We are not subject to this requirement under the Cayman
Islands law.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Committee member composition</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The NYSE Standards require NYSE-listed companies to have a nominating/corporate
governance committee and a compensation committee that are composed entirely of independent directors. Cayman Islands law does not impose
similar requirements. We do not have a nominating/corporate governance committee. Currently, our compensation committee is composed of
three members, only one of whom is an independent director. Our corporate governance and nominating committee is composed of three members,
only one of whom is an independent director.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Shareholder Approval</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The NYSE Standards require shareholder approval in connection with
(i) equity-compensation plans and material revisions thereto; and (ii) issuance of shares under certain circumstances, including in connection
with a transaction involving the issuance or potential issuance by the Company of common stock (or their equivalent) equal to 20% or more
of the common stock or 20% voting power outstanding before the issuance. We are not subject to such shareholder approval requirements
under the Cayman Islands law nor in our amendment and restated memorandum and articles of association.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 144; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->137<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_073"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">16.H. Mine Safety Disclosure</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Not applicable.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_074"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">16.I. Disclosure Regarding Foreign Jurisdictions that Prevent
Inspections</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For the immediately preceding annual financial statement period, our
auditor, which is a registered public accounting firm that the PCAOB was unable to inspect or investigate completely because of a position
taken by the PRC government, issued our audit report that was included in our Form 20-F for the fiscal year of 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of the date of this annual report and to our best knowledge:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">i)</td><td style="text-align: left">none of our shares are owned by governmental entities in the
jurisdiction in which we are in corporated or otherwise organized;</td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">ii)</td><td style="text-align: left">none of the governmental entities in the applicable foreign
jurisdiction with respect to our registered public accounting firm have a controlling financial interest in us;</td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">iii)</td><td style="text-align: left">none of the members of our board of directors or the board of
directors of our operating entity is an official of the Chinese Communist Party; and</td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">iv)</td><td style="text-align: left">our amended and restated memorandum and articles of association
does not contain any charter of the Chinese Communist Party.</td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><div><a id="a_075"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>ITEM 16.J. INSIDER TRADING POLICIES</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 145; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->138<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_076"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">PART III</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_077"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">ITEM 17. FINANCIAL STATEMENTS</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have elected to provide financial statements pursuant to Item 18.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_078"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">ITEM 18. FINANCIAL STATEMENTS</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our consolidated financial statements are included at the end of this
annual report.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_079"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">ITEM 19. EXHIBITS</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: bottom">
    <td style="border-bottom: Black 1.5pt solid; width: 9%"><b>Exhibit Number</b></td>
    <td style="padding-bottom: 1.5pt; width: 1%">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: center; width: 90%"><b>Description of Document</b></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td>1.1</td>
    <td>&#160;</td>
    <td><a href="https://www.sec.gov/Archives/edgar/data/1733868/000119312518233328/d544187dex32.htm">Amended and Restated Memorandum and Articles of Association (incorporated by reference to Exhibit 3.2 from our registration statement on Form F-1 (File No. 333-226126), as amended, initially filed publicly with the SEC on July 11, 2018)</a></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td>2.1</td>
    <td>&#160;</td>
    <td><a href="http://www.sec.gov/Archives/edgar/data/1733868/000119312518314099/d544187dex43.htm">Form of Registrant&#8217;s Specimen American Depositary Receipt (incorporated by reference to Exhibit 4.1 from our registration statement on Form F-1 (File No. 333-226126). as amended, initially filed publicly with the SEC on July 11, 2018)</a></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td>2.2</td>
    <td>&#160;</td>
    <td><a href="http://www.sec.gov/Archives/edgar/data/1733868/000119312518314099/d544187dex42.htm">Registrant&#8217;s Specimen Certificate for Ordinary Shares (incorporated by reference to Exhibit 4.2 from our registration statement on Form F-1 (File No. 333-226126), as amended, initially filed publicly with the SEC on July 11, 2018)</a></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td>2.3</td>
    <td>&#160;</td>
    <td><a href="http://www.sec.gov/Archives/edgar/data/1733868/000119312518314099/d544187dex43.htm">Form of Deposit Agreement (incorporated by reference to Exhibit 4.3 from our registration statement on Form F-1 (File No. 333-226126), as amended, initially filed publicly with the SEC on July 11, 2018)</a></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td>2.4*</td>
    <td>&#160;</td>
    <td><a href="f20f2022ex2-4_cnfinance.htm">Description of Securities registered under Section 12 of the Exchange Act</a></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td>4.1</td>
    <td>&#160;</td>
    <td><a href="https://www.sec.gov/Archives/edgar/data/1733868/000119312518233328/d544187dex101.htm">Form of Indemnification Agreement with the Registrant&#8217;s directors (incorporated by reference to Exhibit 10.1 from our registration statement on Form F-1 (File No. 333-226126), as amended, initially filed publicly with the SEC on July 11, 2018)</a></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td>4.2</td>
    <td>&#160;</td>
    <td><a href="https://www.sec.gov/Archives/edgar/data/1733868/000119312518233328/d544187dex102.htm">Form of Employment Agreement between the Registrant and the executive officers of the Registrant (incorporated by reference to Exhibit 10.2 from our registration statement Form F-1 (File No. 333-226126), as amended, initially filed publicly with the SEC on July 11, 2018)</a></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td>4.3</td>
    <td>&#160;</td>
    <td><a href="http://www.sec.gov/Archives/edgar/data/1733868/000119312518314099/d544187dex103.htm">2018 CNFinance Holdings Limited Share Incentive Plan (incorporated by reference to Exhibit 10.3 from our registration statement Form F-1 (File No. 333-226126), as amended, initially filed publicly with the SEC on July 11, 2018)</a></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td>4.4</td>
    <td>&#160;</td>
    <td><a href="https://www.sec.gov/Archives/edgar/data/1733868/000119312518216099/d544187dex104.htm">English translation of Cooperative Service and Management Agreement between Shenzhen Fanhua United Investment Group Co., Ltd, and FOTIC, dated March 15, 2018 (incorporated by reference to Exhibit 10.4 from our registration statement Form F-1 (File No. 333-226126), as amended, initially filed publicly with the SEC on July 11, 2018)</a></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td>4.5</td>
    <td>&#160;</td>
    <td><a href="https://www.sec.gov/Archives/edgar/data/1733868/000119312518216099/d544187dex105.htm">English translation of FOTIC Jinghua No. 5 Project Service Agreement between the Company and China Foreign Economy and Trade Trust Co., Ltd. (&#8220;FOTIC&#8221;), dated December 19, 2014 (incorporated by reference to Exhibit 10.5 from our registration statement Form F-1 (File No. 333-226126), as amended, initially filed publicly with the SEC on July 11, 2018)</a></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td>4.6</td>
    <td>&#160;</td>
    <td><a href="https://www.sec.gov/Archives/edgar/data/1733868/000119312518216099/d544187dex106.htm">English translation of FOTIC Jinghua Structure Fund 5 Trust Plan-Structure Funds Trust Contract (Subordinated Level) between the Company and FOTIC, dated December 19, 2014 (incorporated by reference to Exhibit 10.6 from our registration statement Form F-1 (File No. 333-226126), as amended, initially filed publicly with the SEC on July 11, 2018)</a></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td>8.1*</td>
    <td>&#160;</td>
    <td><a href="f20f2022ex8-1_cnfinance.htm">List of subsidiaries of the Registrant</a></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td>11.1</td>
    <td>&#160;</td>
    <td><a href="https://www.sec.gov/Archives/edgar/data/1733868/000119312518233328/d544187dex991.htm">Code of Business Conduct and Ethics of the Registrant (incorporated by reference to Exhibit 99.1 from our registration statement Form F-1 (File No. 333-226126), as amended, initially filed publicly with the SEC on July 11, 2018)</a></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td>12.1*</td>
    <td>&#160;</td>
    <td><a href="f20f2022ex12-1_cnfinance.htm">Certification by Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002</a></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td>12.2*</td>
    <td>&#160;</td>
    <td><a href="f20f2022ex12-2_cnfinance.htm">Certification by Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002</a></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td>13.1**</td>
    <td>&#160;</td>
    <td><a href="f20f2022ex13-1_cnfinance.htm">Certification by Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002</a></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td>13.2**</td>
    <td>&#160;</td>
    <td><a href="f20f2022ex13-2_cnfinance.htm">Certification by Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002</a></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td>15.1*</td>
    <td>&#160;</td>
    <td><a href="f20f2022ex15-1_cnfinance.htm">Consent of Merits &amp; Tree Law Offices</a></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td>15.2*</td>
    <td>&#160;</td>
    <td><a href="f20f2022ex15-2_cnfinance.htm">Consent of Walkers (Hong Kong)</a></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td>15.3*</td>
    <td>&#160;</td>
    <td><a href="f20f2022ex15-3_cnfinance.htm">Consent of KPMG Huazhen LLP, Independent Registered Public Accounting Firm</a></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td>15.4**</td>
    <td>&#160;</td>
    <td><a href="f20f2022ex15-4_cnfinance.htm">Submisssion under Item16I(a) of Form 20-f in relation to the Holding Foreign Companies Accountable Act</a></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td>101.INS*</td>
    <td>&#160;</td>
    <td>Inline XBRL Instance Document</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td>101.SCH*</td>
    <td>&#160;</td>
    <td>Inline XBRL Taxonomy Extension Schema Document</td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td>101.CAL*</td>
    <td>&#160;</td>
    <td>Inline XBRL Taxonomy Extension Calculation Linkbase Document</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td>101.DEF*</td>
    <td>&#160;</td>
    <td>Inline XBRL Taxonomy Extension Definition Linkbase Document</td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td>101.LAB*</td>
    <td>&#160;</td>
    <td>Inline XBRL Taxonomy Extension Label Linkbase Document</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td>101.PRE*</td>
    <td>&#160;</td>
    <td>Inline XBRL Taxonomy Extension Presentation Linkbase Document</td></tr>
  </table><div>
</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in"></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 25%"><div style="border-top: Black 1.5pt solid; font-size: 1pt">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left">*</td><td style="text-align: justify">Filed herewith</td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left">**</td><td style="text-align: justify">Furnished herewith</td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in"></p><div>




</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">SIGNATURES</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Date:
    April 25, 2023</span></p></td>
    <td colspan="3" style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">CNFinance Holdings Limited</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td colspan="3">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">By:</span></td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">/s/ Bin Zhai</span></td></tr>
  <tr style="vertical-align: top">
    <td style="width: 60%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="width: 4%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="width: 5%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Name:&#160;</span></td>
    <td style="width: 31%">Bin Zhai</td></tr>
  <tr style="vertical-align: top">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Title:</span></td>
    <td>Chief Executive
    Officer and Chairman</td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"></p><div>



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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

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</div><p style="font: 18pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 12pt"><b>CNFINANCE HOLDINGS LIMITED</b></span></p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt">Consolidated Financial Statements</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt">December 31, 2020, 2021 and 2022</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt">(With Independent Registered Public Accounting Firm&#8217;s Report Thereon)</span></p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p><div>

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    </div><div style="border-bottom: Black 1.5pt solid; margin-top: 12pt; margin-bottom: 6pt"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->1<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><b>CNFINANCE HOLDINGS
LIMITED </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><b>INDEX TO CONSOLIDATED
FINANCIAL STATEMENT</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td style="border-bottom: Black 1.5pt solid; text-indent: 0pt; padding-left: 0pt; font-size: 10pt; width: 90%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>CONTENTS</b></span></td> <td style="padding-bottom: 1.5pt; font-size: 10pt; width: 1%">&#160;</td> <td style="border-bottom: Black 1.5pt solid; text-align: center; font-size: 10pt; width: 9%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>PAGE(S)</b></span></td></tr> <tr style="background-color: rgb(204,238,255)"> <td style="text-indent: -0.125in; padding-left: 0.125in; vertical-align: top; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#fin_001">REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM&#160;(PCAOB ID: <ix:nonNumeric contextRef="c0" name="dei:AuditorFirmId">1186</ix:nonNumeric>)</a></span></td> <td style="vertical-align: top">&#160;</td> <td style="vertical-align: bottom; text-align: center; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-3</span></td></tr> <tr style="background-color: White"> <td style="text-indent: -0.125in; padding-left: 0.125in; vertical-align: top; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#fin_002">CONSOLIDATED BALANCE SHEETS AS OF DECEMBER&#160;31, 2020 AND 2021</a></span></td> <td style="vertical-align: top">&#160;</td> <td style="vertical-align: bottom; text-align: center; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-4 &#8211; F-5</span></td></tr> <tr style="background-color: rgb(204,238,255)"> <td style="text-indent: -0.125in; padding-left: 0.125in; vertical-align: top; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#fin_003">CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE&#160;YEARS ENDED DECEMBER&#160;31, 2020, 2021 AND 2022</a></span></td> <td style="vertical-align: top">&#160;</td> <td style="vertical-align: bottom; text-align: center; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-6</span></td></tr> <tr style="background-color: White"> <td style="text-indent: -0.125in; padding-left: 0.125in; vertical-align: top; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#fin_004">CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER&#8217;S EQUITY FOR THE&#160;YEARS ENDED DECEMBER&#160;31, 2020, 2021 AND 2022</a></span></td> <td style="vertical-align: top">&#160;</td> <td style="vertical-align: bottom; text-align: center; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-7</span></td></tr> <tr style="background-color: rgb(204,238,255)"> <td style="text-indent: -0.125in; padding-left: 0.125in; vertical-align: top; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#fin_005">CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE&#160;YEARS ENDED DECEMBER&#160;31, 2020, 2021 AND 2022</a></span></td> <td style="vertical-align: top">&#160;</td> <td style="vertical-align: bottom; text-align: center; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-8 &#8211; F-9</span></td></tr> <tr style="background-color: White"> <td style="text-indent: -0.125in; padding-left: 0.125in; vertical-align: top; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#fin_006">NOTES&#160;TO THE CONSOLIDATED FINANCIAL STATEMENTS</a></span></td> <td style="vertical-align: top">&#160;</td> <td style="vertical-align: bottom; text-align: center; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-10 &#8211; F-68</span></td></tr> </table><div>
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</div><div><a id="fin_001"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center">Report of Independent Registered Public Accounting
Firm</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt">To the Shareholders and Board of Directors<br/>
CNFinance Holdings Limited:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt">&#160;</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt">Opinion on the Consolidated Financial Statements</p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt">We have audited the accompanying consolidated balance sheets of CNFinance
Holdings Limited (CNFinance) , its subsidiaries and variable interest entities (the Company) as of December&#160;31, 2022 and 2021, the
related consolidated statements of comprehensive income, changes in shareholders&#8217; equity and cash flows for each of the years in
the three-year period ended December&#160;31, 2022, and the related notes (collectively, the consolidated financial statements). In our
opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December
31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December&#160;31,
2022, in conformity with U.S.&#160;generally accepted accounting principles.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><i>Change in Accounting Principle</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt">As discussed in Note 2 to the consolidated financial statements, the
Company has changed its method of accounting for the recognition and measurement of credit losses as of January 1, 2020 due to the adoption
of ASU 2016-13, Financial Instruments &#8211; Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (CECL).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><i>Basis for Opinion</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt">These consolidated financial statements are the responsibility of the
Company&#8217;s management. Our responsibility is to express an opinion on these consolidated financial statements 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt">We conducted our audits in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform,
an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal
control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company&#8217;s internal
control over financial reporting. Accordingly, we express no such opinion.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt">Our audits 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. We believe that our audits provide a reasonable basis for
our opinion.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt">/s/ <ix:nonNumeric contextRef="c0" name="dei:AuditorName">KPMG Huazhen LLP</ix:nonNumeric></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt">We have served as the Company&#8217;s auditor since 2013.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt"><ix:nonNumeric contextRef="c0" name="dei:AuditorLocation">Guangzhou, China</ix:nonNumeric><br/>
April 25, 2023</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p><div>


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</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: center; text-indent: 0in">&#160;</p><div>

</div><div><a id="fin_002"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: center; text-indent: 0in">CNFINANCE HOLDINGS LIMITED</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: center; text-indent: 0in">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: center; text-indent: 0in">Consolidated balance sheets</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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    <td style="border-bottom: Black 1.5pt solid; font-style: italic; text-align: center"><b>Note</b></td><td style="font-weight: bold; font-style: italic; padding-bottom: 1.5pt"><b>&#160;</b></td>
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    <td style="text-indent: -0.125in; padding-left: 0.125in">&#160;</td><td style="font-style: italic">&#160;</td>
    <td style="font-style: italic; text-align: center">&#160;</td><td>&#160;</td>
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    <td style="font-style: italic; text-align: center">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="font-style: italic; text-align: center">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">The accompanying notes are an integral part of these consolidated
financial statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: center; text-indent: 0in">CNFINANCE HOLDINGS LIMITED</p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: center; text-indent: 0in">Consolidated balance sheets
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">The accompanying notes are an integral part of these consolidated financial
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</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>


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</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: center; text-indent: 0in">&#160;</p><div>

</div><div><a id="fin_003"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: center; text-indent: 0in">CNFINANCE HOLDINGS LIMITED</p><div>



</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: center; text-indent: 0in">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: center; text-indent: 0in">Consolidated statements
of comprehensive income</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: center; text-indent: 0in">&#160;</p><div>

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    <td style="font-style: italic; text-align: center">&#160;</td><td style="font-style: italic">&#160;</td>
    <td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic; text-align: right">&#160;</td><td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic">&#160;</td>
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    <td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic; text-align: right">&#160;</td><td style="font-style: italic; text-align: left">&#160;</td></tr>
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    <td style="font-style: italic; text-align: center">&#160;</td><td style="font-style: italic">&#160;</td>
    <td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic; text-align: right">&#160;</td><td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="font-style: italic; text-align: center">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="font-style: italic; text-align: center">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="font-style: normal; text-align: center">23</td><td style="font-style: normal">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -0.125in; text-align: left; padding-left: 0.125in">&#160;</td><td style="font-style: normal">&#160;</td>
    <td style="font-style: normal; text-align: center">&#160;</td><td style="font-style: normal">&#160;</td>
    <td style="font-style: normal; text-align: left">&#160;</td><td style="font-style: normal; text-align: right">&#160;</td><td style="font-style: normal; text-align: left">&#160;</td><td style="font-style: normal">&#160;</td>
    <td style="font-style: normal; text-align: left">&#160;</td><td style="font-style: normal; text-align: right">&#160;</td><td style="font-style: normal; text-align: left">&#160;</td><td style="font-style: normal">&#160;</td>
    <td style="font-style: normal; text-align: left">&#160;</td><td style="font-style: normal; text-align: right">&#160;</td><td style="font-style: normal; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -0.125in; padding-left: 0.125in">&#160;</td><td style="font-style: italic">&#160;</td>
    <td style="font-style: italic; text-align: center">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="font-style: italic; text-align: center">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="font-style: italic; text-align: center">&#160;</td><td style="font-style: normal">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="font-style: normal; text-align: center">29</td><td style="font-style: normal">&#160;</td>
    <td style="font-style: normal; text-align: left">&#160;</td><td style="font-style: normal; text-align: right">(<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ShareBasedCompensation" scale="0" unitRef="cny">62,073,367</ix:nonFraction></td><td style="font-style: normal; text-align: left">)</td><td style="font-style: normal">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -0.125in; text-align: left; padding-left: 0.125in">Taxes and surcharges</td><td style="font-style: italic">&#160;</td>
    <td style="font-style: italic; text-align: center">&#160;</td><td style="font-style: normal">&#160;</td>
    <td style="font-style: normal; text-align: left">&#160;</td><td style="font-style: normal; text-align: right">(<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:TaxesExcludingIncomeAndExciseTaxes" scale="0" unitRef="cny">49,452,609</ix:nonFraction></td><td style="font-style: normal; text-align: left">)</td><td style="font-style: normal">&#160;</td>
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    <td style="font-style: normal; text-align: left">&#160;</td><td style="font-style: normal; text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:TaxesExcludingIncomeAndExciseTaxes" scale="0" unitRef="cny">35,890,761</ix:nonFraction></td><td style="font-style: normal; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; text-align: left; padding-left: 0.125in">Operating lease cost</td><td style="font-style: normal">&#160;</td>
    <td style="font-style: normal; text-align: center">30</td><td style="font-style: normal">&#160;</td>
    <td style="font-style: normal; text-align: left">&#160;</td><td style="font-style: normal; text-align: right">(<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OperatingLeaseCost" scale="0" unitRef="cny">21,719,042</ix:nonFraction></td><td style="font-style: normal; text-align: left">)</td><td style="font-style: normal">&#160;</td>
    <td style="font-style: normal; text-align: left">&#160;</td><td style="font-style: normal; text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OperatingLeaseCost" scale="0" unitRef="cny">14,764,364</ix:nonFraction></td><td style="font-style: normal; text-align: left">)</td><td style="font-style: normal">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -0.125in; text-align: left; padding-bottom: 1.5pt; padding-left: 0.125in">Other expenses</td><td style="font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="font-style: normal; text-align: center; padding-bottom: 1.5pt">26</td><td style="font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-style: normal; text-align: right">(<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OtherExpenses" scale="0" unitRef="cny">124,042,182</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-style: normal; text-align: left">)</td><td style="font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-style: normal; text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OtherExpenses" scale="0" unitRef="cny">100,500,388</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-style: normal; text-align: left">)</td><td style="font-style: normal; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.125in">&#160;</td><td style="font-style: italic">&#160;</td>
    <td style="font-style: italic; text-align: center">&#160;</td><td style="font-style: italic">&#160;</td>
    <td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic; text-align: right">&#160;</td><td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic">&#160;</td>
    <td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic; text-align: right">&#160;</td><td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic">&#160;</td>
    <td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic; text-align: right">&#160;</td><td style="font-style: italic; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="font-style: italic; text-align: center">&#160;</td><td style="font-weight: bold; font-style: normal">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.125in">&#160;</td><td style="font-style: italic">&#160;</td>
    <td style="font-style: italic; text-align: center">&#160;</td><td style="font-style: italic">&#160;</td>
    <td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic; text-align: right">&#160;</td><td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic">&#160;</td>
    <td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic; text-align: right">&#160;</td><td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic">&#160;</td>
    <td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic; text-align: right">&#160;</td><td style="font-style: italic; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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    <td style="text-indent: -0.125in; padding-left: 0.125in">&#160;</td><td style="font-style: italic">&#160;</td>
    <td style="font-style: italic; text-align: center">&#160;</td><td style="font-style: italic">&#160;</td>
    <td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic; text-align: right">&#160;</td><td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic">&#160;</td>
    <td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic; text-align: right">&#160;</td><td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic">&#160;</td>
    <td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic; text-align: right">&#160;</td><td style="font-style: italic; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="font-style: italic; text-align: center">&#160;</td><td style="font-style: italic">&#160;</td>
    <td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic; text-align: right">&#160;</td><td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic">&#160;</td>
    <td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic; text-align: right">&#160;</td><td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic">&#160;</td>
    <td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic; text-align: right">&#160;</td><td style="font-style: italic; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; text-align: left; padding-bottom: 1.5pt; padding-left: 0.125in">Foreign currency translation adjustment</td><td style="font-style: italic; padding-bottom: 1.5pt">&#160;</td>
    <td style="font-style: italic; text-align: center; padding-bottom: 1.5pt">&#160;</td><td style="font-style: normal; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-style: normal; text-align: right">(<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OtherComprehensiveIncomeForeignCurrencyTransactionAndTranslationAdjustmentNetOfTaxPortionAttributableToParent" scale="0" sign="-" unitRef="cny">16,166,094</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-style: normal; text-align: left">)</td><td style="font-style: normal; padding-bottom: 1.5pt">&#160;</td>
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    <td style="text-indent: -0.125in; padding-left: 0.125in">&#160;</td><td style="font-style: italic">&#160;</td>
    <td style="font-style: italic; text-align: center">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="font-style: italic; text-align: center; padding-bottom: 4pt">&#160;</td><td style="font-weight: bold; font-style: normal; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; font-weight: bold; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; font-weight: bold; font-style: normal; text-align: right"><ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ComprehensiveIncomeNetOfTax" scale="0" unitRef="cny">98,515,392</ix:nonFraction></td><td style="padding-bottom: 4pt; font-weight: bold; font-style: normal; text-align: left">&#160;</td><td style="font-weight: bold; font-style: normal; padding-bottom: 4pt">&#160;</td>
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    <td style="text-indent: -0.125in; padding-left: 0.125in">&#160;</td><td style="font-style: italic">&#160;</td>
    <td style="font-style: italic; text-align: center">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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    <td style="text-indent: -0.125in; padding-left: 0.125in">&#160;</td><td style="font-style: italic">&#160;</td>
    <td style="font-style: italic; text-align: center">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><p style="margin: 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">The accompanying notes are an integral part of these consolidated financial
statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p><div>


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</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: center; text-indent: 0in">&#160;</p><div>

</div><div><a id="fin_004"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: center; text-indent: 0in">CNFINANCE HOLDINGS LIMITED</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: center; text-indent: 0in">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: center; text-indent: 0in">Consolidated statements
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</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: center; text-indent: 0in">&#160;</p><div>

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</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>
</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left">(1)</td><td><ix:footnote id="ix_0_footnote" xml:lang="en-US">We adopted CECL effective January 1, 2020. For additional information,
see Note 2 (Summary of Significant Accounting Policies) for more information.</ix:footnote></td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">The accompanying notes are an integral part of these consolidated financial
statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: center">&#160;</p><div>

</div><div><a id="fin_005"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>Consolidated statements of cash flows</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: center">&#160;</p><div>

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  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Provision for credit losses</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Share-based compensation expenses</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ShareBasedCompensation" scale="0" unitRef="cny">62,073,367</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:GainOrLossOnSaleOfStockInSubsidiary" scale="0" sign="-" unitRef="cny">2,868</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Foreign exchange losses/(gains)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Deferred tax benefit</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredIncomeTaxExpenseBenefit" scale="0" sign="-" unitRef="cny">94,389,779</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Net losses on sale of loans</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:GainLossOnSalesOfLoansNet" scale="0" sign="-" unitRef="cny">50,606,487</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:GainLossOnSalesOfLoansNet" scale="0" sign="-" unitRef="cny">479,584,775</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Profit and loss arising from fair value changes</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:UnrealizedGainLossOnDerivatives" scale="0" unitRef="cny">56,773</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Loans held-for-sale:</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Originations and purchases</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:PaymentsForOriginationAndPurchasesOfLoansHeldForSale" scale="0" unitRef="cny">152,062,194</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:PaymentsForOriginationAndPurchasesOfLoansHeldForSale" scale="0" unitRef="cny">453,880,066</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:PaymentsForOriginationAndPurchasesOfLoansHeldForSale" scale="0" unitRef="cny">585,434,771</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Proceeds from sales and paydowns of loans originally classified as held-for-sale</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromSaleAndCollectionOfLoansHeldforsale" scale="0" unitRef="cny">637,716,580</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromSaleAndCollectionOfLoansHeldforsale" scale="0" unitRef="cny">1,006,876,340</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromSaleAndCollectionOfLoansHeldforsale" scale="0" unitRef="cny">1,549,993,492</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Changes in operating assets and liabilities:</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in">Deposits</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInDepositsOutstanding" scale="0" sign="-" unitRef="cny">19,461,259</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInDepositsOutstanding" scale="0" unitRef="cny">42,902,327</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInDepositsOutstanding" scale="0" sign="-" unitRef="cny">11,860,799</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Guarantee deposits</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-70">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="cnf:IncreaseDecreaseInGuaranteeOutstanding" scale="0" unitRef="cny">74,680,000</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="cnf:IncreaseDecreaseInGuaranteeOutstanding" scale="0" unitRef="cny">168,790,845</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Credit risk mitigation position</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInRiskManagementAssetsAndLiabilities" scale="0" sign="-" unitRef="cny">281,027,037</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInRiskManagementAssetsAndLiabilities" scale="0" sign="-" unitRef="cny">138,720,288</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInRiskManagementAssetsAndLiabilities" scale="0" sign="-" unitRef="cny">6,203,644</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Other operating assets</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInOtherOperatingAssets" scale="0" unitRef="cny">28,446,434</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInOtherOperatingAssets" scale="0" unitRef="cny">30,875,632</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInOtherOperatingAssets" scale="0" unitRef="cny">167,193,614</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  </table><div>





</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">The accompanying notes are an integral part of these consolidated financial
statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>


</div><!-- Field: Page; Sequence: 8; Value: 1 --><div>
    </div><div style="border-bottom: Black 1.5pt solid; margin-top: 12pt; margin-bottom: 6pt"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->8<!-- Field: /Sequence --></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: center; text-indent: 0in">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">CNFINANCE HOLDINGS LIMITED</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: center; text-indent: 0in">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">Consolidated statements
of cash flows (continued)</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: center; text-indent: 0in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">The accompanying notes are an integral part of these consolidated financial
statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"></p><div>

</div><!-- Field: Page; Sequence: 9; Value: 1 --><div>
    </div><div style="border-bottom: Black 1.5pt solid; margin-top: 12pt; margin-bottom: 6pt"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->9<!-- Field: /Sequence --></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="margin: 0">&#160;</p><div>

</div><div><a id="fin_006"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>




</div><p style="margin: 0">&#160;</p><div>


</div><ix:nonNumeric contextRef="c0" continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_1" escape="true" name="us-gaap:BusinessDescriptionAndBasisOfPresentationTextBlock"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in; text-align: left">1.</td><td style="text-align: justify">DESCRIPTION OF BUSINESS, ORGANIZATION, AND BASIS OF PRESENTATION</td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_2" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">CNFinance Holdings Limited (&#8220;CNFinance&#8221;), through its controlled
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Republic of China (&#8220;PRC&#8221;), primarily provides micro credit loan services for micro and small-enterprise (&#8220;MSE&#8221;)
owners, loan facilitation and post-facilitation and guarantee services for the commercial bank, and loan lending agency service for financial
institutions.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_3" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The Group&#8217;s main funding resources are equity and borrowings
from third parties. The loans are granted through its licensed micro credit subsidiaries in Beijing, Shenzhen and Chongqing directly,
or the structured funds funded with the Group as general partners. Through the Group&#8217;s network of sales team and branch offices,
prospective MSE borrowers are referred to the licensed micro credit subsidiaries or the structured funds (&#8220;the traditional facilitation
model&#8221;). Home equity loans were secured by residential or commercial real estate as of December 31, 2022.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_4" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">In December 2018, the Group began to explore a new collaboration model
to mitigate credit risks (&#8220;collaboration model&#8221;) and started to record the business under this model. The collaboration model
is different from the traditional facilitation model by adding a collaboration relationship, which involves sales partners for introducing
borrowers and providing a certain level of guarantee of repayment for loans recommended. Under such model, the Group is able to develop
a financial services platform that matches various parties to lend resources at competitive rates. Those parties include sales partners
who introduce borrowers from particular jurisdictions, trust companies that administer funds, and the loan borrowers who has financial
needs for their business operations. The sales partners are nationwide mid-or-small companies that have local risk assessment capabilities.
The collaboration model requires the sales partners to place a security deposit called credit risk mitigation positions which could be
confiscated by the Group when loans are defaulted. The loan borrowers who are introduced by the sales partners are MSE owners who have
properties that can be used as collateral.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_5" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Under the collaboration model, in the event of loans issued to the
borrowers acquired under such collaboration model are in default, the respective sales partners who introduced such borrowers will share
the credit risks with the Group by choosing from the following options, including (i)(1) full repayment to the Group for the total unpaid
principal and accrued and overdue interests under the respective loan agreement on behalf of the borrower and acquiring respective credit
rights, (i)(2) repayment in instalments to the Group for the total unpaid principal and accrued and overdue interests under the respective
loan agreement on behalf of the borrower and acquiring respective credit rights under each instalments; (ii) repayment to the Group for
the unpaid principal and accrued and overdue interests under the respective loan agreement on behalf of the borrower, and if the borrower
pays the payments under the loan agreement, the repayment by the sales partner on behalf of the borrower will be refunded to the sales
partner; or (iii) relinquishing the respective credit risk mitigation positions (&#8220;CRMPs&#8221;) for such loan.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_6" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The Group has started to collaborate with commercial banks since 2021
and such collaboration grew and scaled in the second half of 2022. Under the commercial bank partnership model, the Group provides loan
facilitation services (covering matching of commercial banks to borrowers and facilitating the execution of loan agreement between commercial
banks and borrowers) and post-facilitation services (covering cash processing services and collection services), and guarantee services
for the off&#8211;balance sheet loans.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><b><i>&#160;</i></b></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_7" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><b><i>Basis of preparation</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_8" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The consolidated financial statements are prepared in accordance with
U.S. Generally Accepted Accounting Principles (&#8220;U.S. GAAP&#8221;).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 10; Value: 1 --><div>
    </div><div style="border-bottom: Black 1.5pt solid; margin-top: 12pt; margin-bottom: 6pt"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->10<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="margin: 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>




</div><p style="margin: 0">&#160;</p><div>


</div><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">1.</td><td>DESCRIPTION OF BUSINESS, ORGANIZATION, AND BASIS OF PRESENTATION (CONTINUED)</td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_9" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Investment in significant subsidiaries for the year ended December
31, 2022</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation><div>

</div><div>

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    <td><span style="font-size: 8pt">&#160;</span></td>
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  <tr style="vertical-align: bottom; background-color: white">
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    <td><span style="font-size: 8pt">&#160;</span></td>
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    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-size: 8pt">&#160;</span></td>
    <td><span style="font-size: 8pt">&#160;</span></td>
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  <tr style="vertical-align: bottom; background-color: #CCEEFF">
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  <tr style="vertical-align: bottom; background-color: white">
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    <td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-size: 8pt">&#160;</span></td>
    <td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-size: 8pt">&#160;</span></td>
    <td><span style="font-size: 8pt">&#160;</span></td>
    <td><span style="font-size: 8pt">&#160;</span></td>
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  <tr style="vertical-align: bottom; background-color: #CCEEFF">
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    </tr>
  <tr style="vertical-align: bottom; background-color: white">
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    <td><span style="font-size: 8pt">&#160;</span></td>
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    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-size: 8pt">&#160;</span></td>
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    <td><span style="font-size: 8pt">&#160;</span></td>
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    <td><span style="font-size: 8pt">&#160;</span></td>
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  <tr style="vertical-align: bottom; background-color: #CCEEFF">
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    Fengjie Financial Advisory Co., Ltd. <br/>
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  <tr style="vertical-align: bottom; background-color: white">
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    <td><span style="font-size: 8pt">&#160;</span></td>
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    <td><span style="font-size: 8pt">&#160;</span></td>
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    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-size: 8pt">&#160;</span></td>
    <td><span style="font-size: 8pt">&#160;</span></td>
    <td><span style="font-size: 8pt">&#160;</span></td>
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    <td><span style="font-size: 8pt">&#160;</span></td>
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    <td><span style="font-size: 8pt">&#160;</span></td>
    <td><span style="font-size: 8pt">&#160;</span></td>
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  <tr style="vertical-align: bottom; background-color: #CCEEFF">
    <td style="vertical-align: top; padding-left: 9pt; text-indent: -9pt; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 8pt">Guangzhou
    Chengze Information Technology Co., Ltd. <br/>
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    </tr>
  <tr style="vertical-align: bottom; background-color: white">
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    <td><span style="font-size: 8pt">&#160;</span></td>
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    <td><span style="font-size: 8pt">&#160;</span></td>
    <td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-size: 8pt">&#160;</span></td>
    <td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-size: 8pt">&#160;</span></td>
    <td><span style="font-size: 8pt">&#160;</span></td>
    <td><span style="font-size: 8pt">&#160;</span></td>
    <td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-size: 8pt">&#160;</span></td>
    <td><span style="font-size: 8pt">&#160;</span></td>
    <td><span style="font-size: 8pt">&#160;</span></td>
    <td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-size: 8pt">&#160;</span></td>
    <td><span style="font-size: 8pt">&#160;</span></td>
    <td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-size: 8pt">&#160;</span></td>
    </tr>
  <tr style="vertical-align: bottom; background-color: #CCEEFF">
    <td style="vertical-align: top; padding-left: 9pt; text-indent: -9pt; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 8pt">Chongqing
    Liangjiang New Area Fanhua Micro-credit Co., Ltd. <br/>
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    <td style="vertical-align: top; padding-left: 9pt; text-indent: -9pt; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 8pt">Shenzhen
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</div><div>

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</div><p style="margin: 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>




</div><p style="margin: 0">&#160;</p><div>


</div><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">1.</td><td>DESCRIPTION OF BUSINESS, ORGANIZATION, AND BASIS OF PRESENTATION (CONTINUED)</td></tr></table><div>

</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_11" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_10"><ix:continuation continuedAt="cnf_ScheduleOfInvestmentInSignificantSubsidiariesTableTextBlock-c0_cont_2" id="cnf_ScheduleOfInvestmentInSignificantSubsidiariesTableTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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    <td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-size: 8pt">&#160;</span></td>
    <td><span style="font-size: 8pt">&#160;</span></td>
    <td><span style="font-size: 8pt">&#160;</span></td>
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    <td><span style="font-size: 8pt">&#160;</span></td>
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    <td><span style="font-size: 8pt">&#160;</span></td>
    <td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td>
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    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td>
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    <td style="text-align: right"><span style="font-size: 8pt">&#160;</span></td>
    <td><span style="font-size: 8pt">&#160;</span></td>
    <td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td>
    <td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-size: 8pt">&#160;</span></td>
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    <td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-size: 8pt">&#160;</span></td>
    <td><span style="font-size: 8pt">&#160;</span></td>
    <td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td>
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    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="vertical-align: top; text-align: right"><span style="font-size: 8pt">&#160;</span></td>
    <td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-size: 8pt">&#160;</span></td>
    <td><span style="font-size: 8pt">&#160;</span></td>
    <td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td>
    <td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td>
    <td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td>
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    <td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-size: 8pt">&#160;</span></td>
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    <td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-size: 8pt">&#160;</span></td>
    <td><span style="font-size: 8pt">&#160;</span></td>
    <td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td>
    <td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td>
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    <td><span style="font-size: 8pt">&#160;</span></td>
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    <td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-size: 8pt">&#160;</span></td>
    <td><span style="font-size: 8pt">&#160;</span></td>
    <td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td>
    <td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td>
    <td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td>
    <td><span style="font-size: 8pt">&#160;</span></td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td>
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    <td><span style="font-size: 8pt">&#160;</span></td>
    <td style="vertical-align: top; text-align: right"><span style="font-size: 8pt">&#160;</span></td>
    <td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-size: 8pt">&#160;</span></td>
    <td><span style="font-size: 8pt">&#160;</span></td>
    <td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td>
    <td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-size: 8pt">&#160;</span></td>
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</div><div>

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</div><p style="margin: 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>




</div><p style="margin: 0">&#160;</p><div>


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<td style="width: 0"></td><td style="width: 0.5in">1.</td><td>DESCRIPTION OF BUSINESS, ORGANIZATION, AND BASIS OF PRESENTATION (CONTINUED)</td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="vertical-align: top; text-indent: -0.125in; padding-left: 0.125in; text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="vertical-align: top; text-indent: -0.125in; padding-left: 0.125in; text-align: left">&#160;</td><td>&#160;</td>
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Fanhua Financial Advisory Co., Ltd.<br/> &#27784;&#38451;&#24066;&#27867;&#21326;&#36130;&#21153;&#21672;&#35810;<br/>
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    <td style="vertical-align: top; text-align: right"><ix:nonNumeric contextRef="c98" name="cnf:PlaceAndDateOfIncorporationEstablishment"><span style="font-size: 8pt">the PRC<br/> November 18, 2019</span></ix:nonNumeric></td><td><span style="font-size: 8pt">&#160;</span></td>
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    </div><div style="border-bottom: Black 1.5pt solid; margin-top: 12pt; margin-bottom: 6pt"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->13<!-- Field: /Sequence --></p></div><div>
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</div><p style="margin: 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>




</div><p style="margin: 0">&#160;</p><div>


</div><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 0.5in">1.</td><td>DESCRIPTION OF BUSINESS, ORGANIZATION, AND BASIS OF PRESENTATION (CONTINUED)</td></tr></table><div>
</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_13" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_12"><ix:continuation id="cnf_ScheduleOfInvestmentInSignificantSubsidiariesTableTextBlock-c0_cont_3"><table cellpadding="0" cellspacing="0" style="font: 8pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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    <td style="vertical-align: top; font-size: 8pt; text-align: right"><span style="font-size: 8pt">&#160;</span></td><td style="font-size: 8pt"><span style="font-size: 8pt">&#160;</span></td>
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    <td style="font-size: 8pt; text-indent: -0.125in; padding-left: 0.125in; width: 30%; text-align: left"><span style="font-size: 8pt">Haikou Fanhua
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  <tr style="font-size: 8pt; vertical-align: bottom; background-color: White">
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  <tr style="font-size: 8pt; vertical-align: bottom; background-color: White">
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    <td style="vertical-align: top; font-size: 8pt; text-align: right"><span style="font-size: 8pt">&#160;</span></td><td style="font-size: 8pt"><span style="font-size: 8pt">&#160;</span></td>
    <td style="font-size: 8pt; text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="font-size: 8pt; text-align: right"><span style="font-size: 8pt">&#160;</span></td><td style="font-size: 8pt; text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="font-size: 8pt"><span style="font-size: 8pt">&#160;</span></td>
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    <td style="font-size: 8pt; text-align: right"><span style="font-size: 8pt">&#160;</span></td></tr>
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  <tr style="font-size: 8pt; vertical-align: bottom; background-color: White">
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    <td style="vertical-align: top; font-size: 8pt; text-align: right"><span style="font-size: 8pt">&#160;</span></td><td style="font-size: 8pt"><span style="font-size: 8pt">&#160;</span></td>
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  <tr style="font-size: 8pt; vertical-align: bottom; background-color: White">
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    <td style="vertical-align: top; font-size: 8pt; text-align: right"><span style="font-size: 8pt">&#160;</span></td><td style="font-size: 8pt"><span style="font-size: 8pt">&#160;</span></td>
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    <td style="font-size: 8pt; text-align: right"><span style="font-size: 8pt">&#160;</span></td></tr>
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    <td style="font-size: 8pt; text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="font-size: 8pt; text-align: right"><span style="-sec-ix-hidden: hidden-fact-122; font-size: 8pt">-</span></td><td style="font-size: 8pt; text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="font-size: 8pt"><span style="font-size: 8pt">&#160;</span></td>
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</div><div>


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    </div><div style="border-bottom: Black 1.5pt solid; margin-top: 12pt; margin-bottom: 6pt"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->14<!-- Field: /Sequence --></p></div><div>
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</div><p style="margin: 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>




</div><p style="margin: 0">&#160;</p><div>


</div><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in; text-align: left">1.</td><td style="text-align: justify">DESCRIPTION OF BUSINESS, ORGANIZATION, AND BASIS OF PRESENTATION
(CONTINUED)</td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><b>&#160;</b></p><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_14" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_13"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><b>Variable interest entities (&#8220;VIEs&#8221;)</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_15" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_14"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">An entity is a variable interest entity (VIE) if it meets the criteria
outlined in Accounting Standards Codification (ASC) Topic 810, Consolidation, which are (i) the entity has equity that is insufficient
to permit the entity to finance its activities without additional subordinated financial support from other parties; or (ii) the entity
has equity investors that cannot make significant decisions about the entity&#8217;s operations or that do not absorb their proportionate
share of the entity&#8217;s expected losses or expected returns. The Group consolidates a VIE when it has both the power to direct the
activities that most significantly impact the VIE&#8217;s economic performance and a right to receive benefits or the obligation to absorb
losses of the entity that could be potentially significant to the VIE (that is, the Group is the primary beneficiary). In addition to
variable interests held in consolidated VIEs, the Group has variable interests in other VIEs that are not consolidated because the Group
is not the primary beneficiary. However, these VIEs and all other unconsolidated VIEs are monitored by the Group to assess whether any
events have occurred to cause its primary beneficiary status to change. All other entities not deemed to be VIEs with which the Group
has involvement are evaluated for consolidation under other subtopics of ASC 810.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_16" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_15"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">In the normal course of business, the Group engages in a variety of
activities with VIEs. The Group determines whether it is the primary beneficiary of a VIE at the time it becomes involved with the variable
interest entity and reconsiders that conclusion continually. In evaluating whether the Group is the primary beneficiary, the Group evaluates
its economic interests in the entity. If the Group is determined to be the primary beneficiary of a VIE, it must account for the VIE as
a consolidated subsidiary. If the Group is determined not to be the primary beneficiary of a VIE, such VIE is not consolidated.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_17" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_16"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The Group has segregated its involvement with VIEs between those VIEs
which are consolidated and those VIEs which are not consolidated.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_18" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_17"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><b>Consolidated VIEs</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_19" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_18"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Structured funds</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_20" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_19"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The Group grants loans to customers through structured funds set up
by trust companies. The assets of the structured funds can only be used to settle obligations of consolidated VIEs. The cash of structured
funds represents that funds established by the institutional trust companies through segregated bank accounts, including structured funds
that are partially funded by the Group&#8217;s own capital. The cash and cash equivalents of structured funds amounted to RMB<ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="cnf:CashAndCashEquivalentsOfStructuredFunds" scale="0" unitRef="cny">1,515,820,737</ix:nonFraction>
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funds, promising the expected returns for limited partners, and providing credit strengthening on the loans to customers under the funds.
The Group is also the manager of the funds, having the approval role for the loan origination and modification within the structured funds.
The Group is the primary beneficiary of the funds as it has the power to direct the activities that most significantly impact the economic
performance of the funds and it has obligation to absorb losses of the funds that could potentially be significant to the funds or the
right to receive benefits from the funds that could potentially be significant to the funds.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_21" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_20"><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin: 0pt 0 0pt 0.5in">The structured funds are not taxpayers according to PRC tax law. The
Group consolidates the structured funds as it is the primary beneficiary of the funds as of December 31, 2021 and 2022.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"></p><div>

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    </div><!-- Field: /Page --><div>

</div><p style="margin: 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>




</div><p style="margin: 0">&#160;</p><div>


</div><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">1.</td><td>DESCRIPTION OF BUSINESS, ORGANIZATION, AND BASIS OF PRESENTATION (CONTINUED)</td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p><div>

</div><ix:continuation continuedAt="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_22" id="_BusinessDescriptionAndBasisOfPresentationTextBlock-c0_cont_21"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The table sets forth the investments in the consolidated VIEs by the
Group as of December 31, 2022.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"></p><div>

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    <td style="text-align: right; padding-left: 5.4pt; vertical-align: bottom">&#160;</td><td>&#160;</td>
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&#21271;&#20140;&#27867;&#21326;&#23567;&#39069;&#36151;&#27454;&#26377;&#38480;&#20844;&#21496;</td><td>&#160;</td>
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    <td style="text-align: right; padding-left: 5.4pt; vertical-align: bottom">&#160;</td><td>&#160;</td>
    <td style="text-align: right; padding-left: 5.4pt; vertical-align: bottom">&#160;</td></tr>
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    <td style="text-align: left; text-indent: -0.125in; padding-left: 0.125in">Zhonghai Lanhai Structured Fund 1 <br/>
&#20013;&#28023;&#20449;&#25176;&#34013;&#28023;1&#21495;&#38598;&#21512;&#36164;&#37329;&#20449;&#25176;&#35745;&#21010;</td><td>&#160;</td>
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    <td style="text-align: right; padding-left: 5.4pt; vertical-align: bottom">&#160;</td><td>&#160;</td>
    <td style="text-align: right; padding-left: 5.4pt; vertical-align: bottom">&#160;</td></tr>
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&#30334;&#29790;&#24658;&#30410;613&#21495;&#38598;&#21512;&#36164;&#37329;&#20449;&#25176;&#35745;&#21010;</td><td>&#160;</td>
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    <td style="text-indent: -0.125in; padding-left: 0.125in">&#160;</td><td>&#160;</td>
    <td style="text-align: right; padding-left: 5.4pt; vertical-align: bottom">&#160;</td><td>&#160;</td>
    <td style="text-align: right; padding-left: 5.4pt; vertical-align: bottom">&#160;</td></tr>
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    <td style="text-align: left; text-indent: -0.125in; padding-left: 0.125in">Bohai Trust No.1 Huiying Structured Fund <br/>
&#28196;&#28023;&#24800;&#30408;1&#21495;&#38598;&#21512;&#36164;&#37329;&#20449;&#25176;&#35745;&#21010;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -0.125in; padding-left: 0.125in">&#160;</td><td>&#160;</td>
    <td style="text-align: right; padding-left: 5.4pt; vertical-align: bottom">&#160;</td><td>&#160;</td>
    <td style="text-align: right; padding-left: 5.4pt; vertical-align: bottom">&#160;</td></tr>
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    <td style="text-align: right; padding-left: 5.4pt; vertical-align: bottom"><ix:nonNumeric contextRef="c131" name="cnf:PlaceAndDateOfIncorporationEstablishment">the PRC <br/>November 28, 2018</ix:nonNumeric></td><td>&#160;</td>
    <td style="vertical-align: bottom; text-align: right; padding-left: 5.4pt"><ix:nonNumeric contextRef="c131" name="cnf:EntityPrincipalActivities">Micro credit</ix:nonNumeric></td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -0.125in; padding-left: 0.125in">&#160;</td><td>&#160;</td>
    <td style="text-align: right; padding-left: 5.4pt; vertical-align: bottom">&#160;</td><td>&#160;</td>
    <td style="text-align: right; padding-left: 5.4pt; vertical-align: bottom">&#160;</td></tr>
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    <td style="text-indent: -0.125in; padding-left: 0.125in">Jinghua Structured Fund 1 <br/>&#22806;&#36152;&#20449;&#25176;&#33729;&#21326;1&#21495;&#38598;&#21512;&#36164;&#37329;&#20449;&#25176;&#35745;&#21010;</td><td>&#160;</td>
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    <td style="vertical-align: bottom; text-align: right; padding-left: 5.4pt"><ix:nonNumeric contextRef="c132" name="cnf:EntityPrincipalActivities">Micro credit</ix:nonNumeric></td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -0.125in; padding-left: 0.125in">&#160;</td><td>&#160;</td>
    <td style="text-align: right; padding-left: 5.4pt; vertical-align: bottom">&#160;</td><td>&#160;</td>
    <td style="text-align: right; padding-left: 5.4pt; vertical-align: bottom">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -0.125in; padding-left: 0.125in">Zhonghai Lanhai Structured Fund 1-2 <br/>&#20013;&#28023;&#20449;&#25176;-&#34013;&#28023;1-2&#21495;&#38598;&#21512;&#36164;&#37329;&#20449;&#25176;&#35745;&#21010;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: right; padding-left: 5.4pt; vertical-align: bottom">&#160;</td><td>&#160;</td>
    <td style="text-align: right; padding-left: 5.4pt; vertical-align: bottom">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -0.125in; padding-left: 0.125in">Zhonghai Lanhai Structured Fund 1-3 <br/>&#20013;&#28023;&#20449;&#25176;-&#34013;&#28023;1-3&#21495;&#38598;&#21512;&#36164;&#37329;&#20449;&#25176;&#35745;&#21010;</td><td>&#160;</td>
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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"></p><div>

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</div><p style="margin: 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>




</div><p style="margin: 0">&#160;</p><div>


</div><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 0.5in">1.</td><td>DESCRIPTION OF BUSINESS, ORGANIZATION, AND BASIS OF PRESENTATION (CONTINUED)</td></tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"></p><div>

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    <td style="text-align: right; padding-left: 5.4pt; vertical-align: bottom">&#160;</td><td>&#160;</td>
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    <td style="text-align: right; padding-left: 5.4pt; vertical-align: bottom">&#160;</td><td>&#160;</td>
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    <td style="text-indent: -0.125in; padding-left: 0.125in; text-align: left">Zhonghai Lanhai Structured Fund 1-1 <br/>&#20013;&#28023;&#20449;&#25176;-&#34013;&#28023;1-1&#21495;&#38598;&#21512;&#36164;&#37329;&#20449;&#25176;&#35745;&#21010;</td><td>&#160;</td>
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    <td style="text-indent: -0.125in; padding-left: 0.125in">&#160;</td><td>&#160;</td>
    <td style="text-align: right; padding-left: 5.4pt; vertical-align: bottom">&#160;</td><td>&#160;</td>
    <td style="text-align: right; padding-left: 5.4pt; vertical-align: bottom">&#160;</td></tr>
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    <td style="text-indent: -0.125in; padding-left: 0.125in; text-align: left">Shaanxi International Xinglong Structured Fund 22-1 <br/>&#38485;&#22269;&#25237;&#183;&#20852;&#38534;22-1&#21495;&#38598;&#21512;&#36164;&#37329;&#20449;&#25176;&#35745;&#21010;</td><td>&#160;</td>
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    <td style="text-indent: -0.125in; padding-left: 0.125in">&#160;</td><td>&#160;</td>
    <td style="text-align: right; padding-left: 5.4pt; vertical-align: bottom">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.125in; text-align: left">Zhonghai Lanhai Structured Fund 1-7 <br/>&#20013;&#28023;&#20449;&#25176;-&#34013;&#28023;1-7&#21495;&#38598;&#21512;&#36164;&#37329;&#20449;&#25176;&#35745;&#21010;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -0.125in; padding-left: 0.125in">&#160;</td><td>&#160;</td>
    <td style="text-align: right; padding-left: 5.4pt; vertical-align: bottom">&#160;</td><td>&#160;</td>
    <td style="text-align: right; padding-left: 5.4pt; vertical-align: bottom">&#160;</td></tr>
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    <td style="text-indent: -0.125in; padding-left: 0.125in; text-align: left">No. 74 Jinghua Structured Fund <br/>&#22806;&#36152;&#20449;&#25176;&#33729;&#21326;74&#21495;&#36164;&#31649;&#35745;&#21010;</td><td>&#160;</td>
    <td style="text-align: right; padding-left: 5.4pt; vertical-align: bottom"><ix:nonNumeric contextRef="c149" name="cnf:PlaceAndDateOfIncorporationEstablishment">the PRC <br/>November 26, 2020</ix:nonNumeric></td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -0.125in; padding-left: 0.125in">&#160;</td><td>&#160;</td>
    <td style="text-align: right; padding-left: 5.4pt; vertical-align: bottom">&#160;</td><td>&#160;</td>
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    <td style="text-indent: -0.125in; padding-left: 0.125in">Hunan Structured Fund 2020-1 <br/>&#28246;&#21335;&#20449;&#25176;2020-1&#38598;&#21512;&#36164;&#37329;&#20449;&#25176;&#35745;&#21010;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -0.125in; padding-left: 0.125in">&#160;</td><td>&#160;</td>
    <td style="text-align: right; padding-left: 5.4pt; vertical-align: bottom">&#160;</td><td>&#160;</td>
    <td style="text-align: right; padding-left: 5.4pt; vertical-align: bottom">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.125in; text-align: left">Shaanxi International Xinglong Structured Fund 2-2 <br/>&#38485;&#22269;&#25237;&#183;&#20852;&#38534;2-2&#21495;&#38598;&#21512;&#36164;&#37329;&#20449;&#25176;&#35745;&#21010;</td><td>&#160;</td>
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    <td style="text-align: right; padding-left: 5.4pt; vertical-align: bottom">&#160;</td><td>&#160;</td>
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    <td style="text-indent: -0.125in; padding-left: 0.125in">No.103 Jinghua Structured Fund <br/>&#22806;&#36152;&#20449;&#25176;&#33729;&#21326;103&#21495;&#36164;&#31649;&#35745;&#21010;</td><td>&#160;</td>
    <td style="text-align: right; padding-left: 5.4pt; vertical-align: bottom"><ix:nonNumeric contextRef="c152" name="cnf:PlaceAndDateOfIncorporationEstablishment">the PRC <br/>March 23, 2021</ix:nonNumeric></td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.125in; text-align: left">Zhonghai Lanhai Structured Fund 30-X <br/>&#20013;&#28023;&#20449;&#25176;-&#34013;&#28023;30-X&#21495;&#38598;&#21512;&#36164;&#37329;&#20449;&#25176;&#35745;&#21010;</td><td>&#160;</td>
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    <td style="text-indent: -0.125in; padding-left: 0.125in; text-align: left">Bohai Trust 2020 Pucheng No. 75 <br/>&#28196;&#28023;&#20449;&#25176;&#183;2020&#26222;&#35802;75&#21495;&#38598;&#21512;&#36164;&#37329;&#20449;&#25176;&#35745;&#21010;</td><td>&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>




</div><p style="margin: 0">&#160;</p><div>


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<td style="width: 0"></td><td style="width: 0.5in">1.</td><td>DESCRIPTION OF BUSINESS, ORGANIZATION, AND BASIS OF PRESENTATION (CONTINUED)</td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"></p><div>

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    <td style="text-align: right; padding-left: 5.4pt; vertical-align: bottom">&#160;</td><td>&#160;</td>
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    <td style="text-indent: -0.125in; padding-left: 0.125in; text-align: left">Zhongrong Yuanshuo No.1 Structured Fund <br/>&#20013;&#34701;-&#20803;&#28865;1&#21495;&#38598;&#21512;&#36164;&#37329;&#20449;&#25176;&#35745;&#21010;</td><td>&#160;</td>
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    <td style="text-indent: -0.125in; padding-left: 0.125in">&#160;</td><td>&#160;</td>
    <td style="text-align: right; padding-left: 5.4pt; vertical-align: bottom">&#160;</td><td>&#160;</td>
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    <td style="text-indent: -0.125in; padding-left: 0.125in; text-align: left">Tianjin Baihua Economic Information Advisory Partnership (Limited Partnership) <br/>&#22825;&#27941;&#26575;&#21326;&#32463;&#27982;&#20449;&#24687;&#21672;&#35810;&#21512;&#20249;&#20225;&#19994;&#65288;&#26377;&#38480;&#21512;&#20249;&#65289;</td><td>&#160;</td>
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    <td style="text-indent: -0.125in; padding-left: 0.125in">&#160;</td><td>&#160;</td>
    <td style="text-align: right; padding-left: 5.4pt; vertical-align: bottom">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.125in; text-align: left">Zhongrong Yuanshuo No.2 Structured Fund <br/>&#20013;&#34701;-&#20803;&#28865;2&#21495;&#38598;&#21512;&#36164;&#37329;&#20449;&#25176;&#35745;&#21010;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -0.125in; padding-left: 0.125in">&#160;</td><td>&#160;</td>
    <td style="text-align: right; padding-left: 5.4pt; vertical-align: bottom">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: right; padding-left: 5.4pt; vertical-align: bottom">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.125in; text-align: left">Zhongliang Hongrui No.1 Structured Fund <br/>&#20013;&#31918;&#20449;&#25176;-&#24344;&#29790;&#26222;&#24800;1&#21495;&#38598;&#21512;&#36164;&#37329;&#20449;&#25176;&#35745;&#21010;</td><td>&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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<td style="width: 0.5in">1.</td><td>DESCRIPTION OF BUSINESS, ORGANIZATION, AND BASIS OF PRESENTATION (CONTINUED)</td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 19; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>




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<td style="width: 0.5in">2.</td><td>SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</td></tr></table><p style="font: bold 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_2" id="_SignificantAccountingPoliciesTextBlock-c0_cont_1"><ix:nonNumeric contextRef="c0" continuedAt="_ConsolidationPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:ConsolidationPolicyTextBlock"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">(a)</td><td>Principles of consolidation</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

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over which it has significant influence but not a controlling financial interest using the equity method of accounting.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_4" id="_SignificantAccountingPoliciesTextBlock-c0_cont_3"><ix:continuation continuedAt="_ConsolidationPolicyTextBlock-c0_cont_3" id="_ConsolidationPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><b>Non-controlling interests</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_5" id="_SignificantAccountingPoliciesTextBlock-c0_cont_4"><ix:continuation id="_ConsolidationPolicyTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">Non-controlling interests are recognized to reflect the portion of
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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_6" id="_SignificantAccountingPoliciesTextBlock-c0_cont_5"><ix:nonNumeric contextRef="c0" continuedAt="_ForeignCurrencyTransactionsAndTranslationsPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:ForeignCurrencyTransactionsAndTranslationsPolicyTextBlock"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">(b)</td><td>Currency translation for financial statements presentation</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_7" id="_SignificantAccountingPoliciesTextBlock-c0_cont_6"><ix:continuation continuedAt="_ForeignCurrencyTransactionsAndTranslationsPolicyTextBlock-c0_cont_2" id="_ForeignCurrencyTransactionsAndTranslationsPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">The Group uses Renminbi (&#8220;RMB&#8221;) as its reporting currency.
The United States Dollar (&#8220;USD&#8221;) is the functional currency of the Company incorporated in Cayman and the Group&#8217;s subsidiary
Sincere Fame incorporated in British Virgin Islands, and the Hong Kong Dollar (&#8220;HKD&#8221;) is the functional currency of the Group&#8217;s
subsidiary China Financial Services Group Limited incorporated in Hong Kong and the RMB is the functional currency of the Group&#8217;s
PRC subsidiaries.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_8" id="_SignificantAccountingPoliciesTextBlock-c0_cont_7"><ix:continuation id="_ForeignCurrencyTransactionsAndTranslationsPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">The financial statements of the Group are translated from the functional
currency to the reporting currency, RMB. Assets and liabilities of the subsidiaries are translated into RMB using the exchange rate in
effect at each balance sheet date. Income and expenses items are generally translated at the average exchange rates prevailing during
the fiscal year. Foreign currency translation adjustments arising from these are accumulated as a separate component of shareholders&#8217;
deficit on the consolidated financial statements. The resulting exchange differences are recorded in the consolidated statements of comprehensive
income/(losses).</p><p style="font: bold 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_9" id="_SignificantAccountingPoliciesTextBlock-c0_cont_8"><ix:nonNumeric contextRef="c0" continuedAt="_UseOfEstimates-c0_cont_1" escape="true" name="us-gaap:UseOfEstimates"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
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</div><div>

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with 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 at the date of the consolidated financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions
include, allowance for loans principal, interest and financing service fee receivables, debt securities, guarantee assets, the valuation
allowance for deferred tax assets, unrecognized tax benefits, the indefinite reinvestment assertion and the fair value of equity securities
and share-based compensation.</p><p style="font: bold 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_11" id="_SignificantAccountingPoliciesTextBlock-c0_cont_10"><ix:nonNumeric contextRef="c0" continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:RevenueRecognitionPolicyTextBlock"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
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</div><div>

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the contractual life of the related loans are recognized in consolidated statements of comprehensive income in accordance with ASC 310
using the effective interest method.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left"></p><div>

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    </div><div style="border-bottom: Black 1.5pt solid; margin-top: 12pt; margin-bottom: 6pt"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->20<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">&#160;</p><div>




</div><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">2.</td><td>SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)</td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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arrangements for its guarantee services provided for its off-balance sheet loans under commercial bank partnership model are out of scope
of ASC 606, Revenue from Contracts with Customers. Therefore, &#8220;Gains/losses from guarantee liabilities&#8221; included in &#8220;Net
revenue under commercial bank partnership model&#8221; on the Consolidated Statements of Comprehensive income should be accounted for
in accordance with ASC 460, Guarantees. The other revenue streams under commercial bank partnership model are accounted for in accordance
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</div><div>

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major revenue generating activities are described below:</p><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_15" id="_SignificantAccountingPoliciesTextBlock-c0_cont_14"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_5" id="_RevenueRecognitionPolicyTextBlock-c0_cont_4"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">(i)</td><td>Interest and financing service fees on loans</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_16" id="_SignificantAccountingPoliciesTextBlock-c0_cont_15"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_6" id="_RevenueRecognitionPolicyTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">Interest and financing service fees on loans, which include financing
service fees on loans, are collected from borrowers for loans and related services.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_17" id="_SignificantAccountingPoliciesTextBlock-c0_cont_16"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_7" id="_RevenueRecognitionPolicyTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">Interest and financing service fees on loans include the amortization
of any discount or premium or differences between the initial carrying amount of an interest-bearing asset and its amount at maturity
calculated using the effective interest basis.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_18" id="_SignificantAccountingPoliciesTextBlock-c0_cont_17"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_8" id="_RevenueRecognitionPolicyTextBlock-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">The effective interest method is a method of calculating the amortized
cost of a financial asset and of allocating the interest and financing service fees on loans over the years. The effective interest rate
is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument. When
calculating the effective interest rate, the Group estimates cash flows considering all contractual terms of the financial instrument
but does not consider future credit losses. Interest on the impaired assets is recognized using the rate of interest used to discount
future cash flows.</p><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_19" id="_SignificantAccountingPoliciesTextBlock-c0_cont_18"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_9" id="_RevenueRecognitionPolicyTextBlock-c0_cont_8"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">(ii)</td><td>Interest income on debt securities</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_20" id="_SignificantAccountingPoliciesTextBlock-c0_cont_19"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_10" id="_RevenueRecognitionPolicyTextBlock-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">Interest income on debt securities is calculated by applying the effective
interest rate to the gross carrying amount of debt securities to unrelated companies plus any interest received from corporate debt securities.</p><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_21" id="_SignificantAccountingPoliciesTextBlock-c0_cont_20"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_11" id="_RevenueRecognitionPolicyTextBlock-c0_cont_10"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">(iii)</td><td>Revenue under commercial bank partnership model</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_22" id="_SignificantAccountingPoliciesTextBlock-c0_cont_21"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_12" id="_RevenueRecognitionPolicyTextBlock-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">In accordance with the relevant guidance in ASC Topic 606, the amounts
associated with guarantee services under commercial bank partnership model is within the scope of ASC Topic 460 and should be accounted
for in accordance with the provisions of that Topic. The services not within the scope of other Topics should be accounted for in accordance
with the remaining provisions of ASC Topic 606 and the applicable revenue recognition guidance.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_23" id="_SignificantAccountingPoliciesTextBlock-c0_cont_22"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_13" id="_RevenueRecognitionPolicyTextBlock-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">The Group considers loan facilitation services under commercial bank
partnership model (covering matching of commercial banks to borrowers and facilitating the execution of loan agreement between commercial
banks and borrowers) and post-facilitation services under commercial bank partnership model (covering cash processing services and collection
services) as two distinctive performance obligations in accordance with ASC Topic 606. The transaction price is first allocated to guarantee
services under commercial bank partnership model, if any, which is recorded at fair value and recognized amortized during the guarantee
term in accordance with ASC Topic 460.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 21; Value: 1 --><div>
    </div><div style="border-bottom: Black 1.5pt solid; margin-top: 12pt; margin-bottom: 6pt"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->21<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>




</div><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">2.</td><td>SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)</td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_24" id="_SignificantAccountingPoliciesTextBlock-c0_cont_23"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_14" id="_RevenueRecognitionPolicyTextBlock-c0_cont_13"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">Then the remaining considerations are allocated to the loan facilitation
under commercial bank partnership model and post-facilitation services under commercial bank partnership model using their relative standalone
selling prices. When estimating total consideration, the Group considers early termination scenarios based on historical early payment
and other termination scenarios as the Group can not receive the full contractual service fee amount under early termination, given the
service fee is collected on a pro-rata basis upon early loan termination. Such service fee is determined to be variable consideration
that meets the &#8220;probable of not reversing&#8221; threshold. As such, the Group recognizes revenue related to early termination based
on its best estimate and true up adjustments are made from time to time. The Group does not have observable standalone selling price for
the loan facilitation services or post-facilitation services because it does not provide loan facilitation services or post-facilitation
services on a standalone basis in similar circumstances to similar customers. There is no direct observable standalone selling price for
similar services in the market that is reasonably available to the Group.</p><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_25" id="_SignificantAccountingPoliciesTextBlock-c0_cont_24"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_15" id="_RevenueRecognitionPolicyTextBlock-c0_cont_14"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">As a result, the estimation of standalone selling price involves significant
judgment. The Group uses an expected cost plus margin approach to estimate the standalone selling prices of loan facilitation services
and post facilitation services as the basis of revenue allocation. When estimating the selling prices, the Group considers the cost related
to such services, profit margin, customer demand, effect of competition on services, and other market factors, among which estimates of
the cost of providing the services is the most significant.</p><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_26" id="_SignificantAccountingPoliciesTextBlock-c0_cont_25"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_16" id="_RevenueRecognitionPolicyTextBlock-c0_cont_15"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">The transaction price allocated to loan facilitation services is recognized
as revenue upon execution of loan agreements between commercial banks and borrowers; the consideration allocated to post-facilitation
services is recognized over the period of the loan on a straight-line method, which approximates the pattern of when the underlying services
are performed.</p><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_27" id="_SignificantAccountingPoliciesTextBlock-c0_cont_26"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_17" id="_RevenueRecognitionPolicyTextBlock-c0_cont_16"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">Remaining performance obligations represents the amount of the transaction
price for which services have not been performed under post-facilitation services. The Group collects service fees monthly. The aggregate
amounts of the transaction price allocated to performance obligations that are unsatisfied pertaining to post-origination services were
RMB67.08million as of December 31, 2022, among which approximately 64.6% of the remaining performance obligations will be recognized over
the following 12 months, and with the remainder recognized thereafter.</p><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_28" id="_SignificantAccountingPoliciesTextBlock-c0_cont_27"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_18" id="_RevenueRecognitionPolicyTextBlock-c0_cont_17"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">(iv)</td><td>Mortgage agency service revenue</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_29" id="_SignificantAccountingPoliciesTextBlock-c0_cont_28"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_19" id="_RevenueRecognitionPolicyTextBlock-c0_cont_18"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">The Group earns mortgage agency service revenue from providing mortgage
agency services to borrowers applying for a bank loan. Mortgage agency service fee is often received immediately or shortly after establishing
contracts with customers. This kind of revenue is recognized at the time when loan is granted as that is the point of time the Group fulfils
the customer&#8217;s request, and is then recognized on an accrual basis in accordance with the terms of the relevant agreements.</p><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_30" id="_SignificantAccountingPoliciesTextBlock-c0_cont_29"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_20" id="_RevenueRecognitionPolicyTextBlock-c0_cont_19"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">(v)</td><td>Realized gains/(losses) on sales of investments</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_31" id="_SignificantAccountingPoliciesTextBlock-c0_cont_30"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_21" id="_RevenueRecognitionPolicyTextBlock-c0_cont_20"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">Realized gains/(losses) consist of realized gains and losses from the
sale of investment securities, presented on a net basis.</p><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_32" id="_SignificantAccountingPoliciesTextBlock-c0_cont_31"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_22" id="_RevenueRecognitionPolicyTextBlock-c0_cont_21"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">(vi)</td><td>Net gains/(losses) on sales of loans</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_33" id="_SignificantAccountingPoliciesTextBlock-c0_cont_32"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_23" id="_RevenueRecognitionPolicyTextBlock-c0_cont_22"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">Net gains/(losses) on sales of loans refer to any gains and losses
from the disposal of loans which is accounted for as a sale under ASC 860.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 22; Value: 1 --><div>
    </div><div style="border-bottom: Black 1.5pt solid; margin-top: 12pt; margin-bottom: 6pt"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->22<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">2.</td><td>SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)</td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_34" id="_SignificantAccountingPoliciesTextBlock-c0_cont_33"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_24" id="_RevenueRecognitionPolicyTextBlock-c0_cont_23"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">(vii)</td><td>Gains on confiscation of CRMPs</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_35" id="_SignificantAccountingPoliciesTextBlock-c0_cont_34"><ix:continuation id="_RevenueRecognitionPolicyTextBlock-c0_cont_24"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">Gains on confiscation of credit risk mitigation positions are recognized
to the extent confiscated CRMPs exceed previously recognized allowance for loan losses and guarantee asset when sales partners surrender
the CRMPs and the obligation of refunding the CRMPs is released.</p><p style="font: bold 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_36" id="_SignificantAccountingPoliciesTextBlock-c0_cont_35"><ix:nonNumeric contextRef="c0" continuedAt="_FinanceLoansAndLeasesReceivablePolicy-c0_cont_1" escape="true" name="us-gaap:FinanceLoansAndLeasesReceivablePolicy"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">(e)</td><td>Loans</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_37" id="_SignificantAccountingPoliciesTextBlock-c0_cont_36"><ix:continuation continuedAt="_FinanceLoansAndLeasesReceivablePolicy-c0_cont_2" id="_FinanceLoansAndLeasesReceivablePolicy-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">(i)</td><td>On-balance sheet loans</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_38" id="_SignificantAccountingPoliciesTextBlock-c0_cont_37"><ix:continuation continuedAt="_FinanceLoansAndLeasesReceivablePolicy-c0_cont_3" id="_FinanceLoansAndLeasesReceivablePolicy-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">Loans are reported at their outstanding principal balances net of any
unearned income and unamortized deferred fees and costs. Loan origination fees and certain direct origination costs are generally deferred
and recognized as adjustments to income over the lives of the related loans.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_39" id="_SignificantAccountingPoliciesTextBlock-c0_cont_38"><ix:continuation continuedAt="_FinanceLoansAndLeasesReceivablePolicy-c0_cont_4" id="_FinanceLoansAndLeasesReceivablePolicy-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">The Group facilitates credit to borrowers through structured funds
which are considered as consolidated VIEs and the Group evaluated VIEs for consolidation in accordance with ASC 810 in the Consolidated
VIEs Section of Note 1. Providing credit strengthening arrangement since March 2018 for the loans to customers under the funds is one
of the key factors to determine that the Group should consolidate the structured funds as it is the primary beneficiary of the funds.
As a result, the loan principal remains on the Group&#8217;s consolidated balance sheets, whilst the funds received from senior tranches
holders are recorded as Other Borrowings in the Group&#8217;s consolidated balance sheets as disclosed in Note 12(b)(i).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_40" id="_SignificantAccountingPoliciesTextBlock-c0_cont_39"><ix:continuation continuedAt="_FinanceLoansAndLeasesReceivablePolicy-c0_cont_5" id="_FinanceLoansAndLeasesReceivablePolicy-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left"><b><span style="text-decoration:underline">Non-accrual policies</span></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_41" id="_SignificantAccountingPoliciesTextBlock-c0_cont_40"><ix:continuation continuedAt="_FinanceLoansAndLeasesReceivablePolicy-c0_cont_6" id="_FinanceLoansAndLeasesReceivablePolicy-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">Loans principal, interest and financing service fee receivables are
placed on non-accrual status when payments are 90 days contractually past due. When a loan principal, interest and financing service fee
receivable is placed on non-accrual status, interest and financing service fees accrual cease. If the loan is non-accrual, the cost recovery
method is used and cash collected is applied to first reduce the carrying value of the loan. Otherwise, interest income may be recognized
to the extent cash is received. Loans principal, interest and financing service fee receivables may be returned to accrual status when
all of the borrower&#8217;s delinquent balances of loans principal, interest and financing service fee have been settled and the borrower
continue to perform in accordance with the loan terms for a period of at least six months.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_42" id="_SignificantAccountingPoliciesTextBlock-c0_cont_41"><ix:continuation continuedAt="_FinanceLoansAndLeasesReceivablePolicy-c0_cont_7" id="_FinanceLoansAndLeasesReceivablePolicy-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left"><b><span style="text-decoration:underline">Charge-off policies</span></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_43" id="_SignificantAccountingPoliciesTextBlock-c0_cont_42"><ix:continuation continuedAt="_FinanceLoansAndLeasesReceivablePolicy-c0_cont_8" id="_FinanceLoansAndLeasesReceivablePolicy-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">For the years ended December 31, 2021 and 2022, the Group considered
loans principal, interest and financing service fee receivables meeting any of the following conditions as uncollectible charged off:
(i) death of the borrower; (ii) identification of fraud, and the fraud is officially reported to and filed with relevant law enforcement
departments or (iii) the Group concludes that it has exhausted its collection efforts.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">2.</td><td>SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)</td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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(superseded ASC 310-10-35-41), the Group revised its charge-off policies to (1) provide additional information as to the collection efforts
which must be exhausted before a charge-off is recorded and (2) charge down loans that are 180 days past due to net realizable value (fair
value of collaterals, less estimated costs to sell) unless both well-secured and in the process of collection. The revised charge-off
policies are presented as follows:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_45" id="_SignificantAccountingPoliciesTextBlock-c0_cont_44"><ix:continuation continuedAt="_FinanceLoansAndLeasesReceivablePolicy-c0_cont_10" id="_FinanceLoansAndLeasesReceivablePolicy-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">principal, interest and financing service fee receivables are charged
down to net realizable value (fair value of collaterals, less estimated costs to sell) when the Group has determined the remaining balance
is uncollectable after exhausting all collection efforts. In order to comply with ASC 310 and ASC 326, the Group considers loans principal,
interest and financing service fee receivables meeting any of the following conditions as uncollectable and charged-off: (i) death of
the borrower; (ii) identification of fraud, and the fraud is officially reported to and filed with relevant law enforcement departments;
(iii) sales of loans to third parties; (iv) settlement with the borrower, where the Group releases irrecoverable loans through private
negotiations with the borrower where the borrower cannot repay the loan in full through self-funding or voluntary sale of the collateral;
(v) disposal through legal proceedings, including but not limited to online arbitrations, judicial auctions and court enforcements; or
(vi) loans are 180 days past due unless both well-secured and in the process of collection.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_46" id="_SignificantAccountingPoliciesTextBlock-c0_cont_45"><ix:continuation continuedAt="_FinanceLoansAndLeasesReceivablePolicy-c0_cont_11" id="_FinanceLoansAndLeasesReceivablePolicy-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><b><span style="text-decoration:underline">Allowance for credit losses</span></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_47" id="_SignificantAccountingPoliciesTextBlock-c0_cont_46"><ix:continuation continuedAt="_FinanceLoansAndLeasesReceivablePolicy-c0_cont_12" id="_FinanceLoansAndLeasesReceivablePolicy-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">Allowance for credit losses represents management&#8217;s best estimate
of probable losses inherent in the portfolio.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_48" id="_SignificantAccountingPoliciesTextBlock-c0_cont_47"><ix:continuation continuedAt="_FinanceLoansAndLeasesReceivablePolicy-c0_cont_13" id="_FinanceLoansAndLeasesReceivablePolicy-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">Commencing January 1, 2020, CNFinance adopted ASC 326, &#8220;Financial
Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments&#8221;, which replaced the incurred loss
methodology for determining the provision for credit losses and allowance for credit losses (&#8220;ACL&#8221;) with an expected loss methodology
that is referred to as the current expected credit loss (&#8220;CECL&#8221;) model. ASC 326 defines the ACL as a valuation account that
is deducted from the amortized cost of a financial asset to present the net amount that management expects to collect on the financial
asset over its expected life. All financial assets carried at amortized cost are in the scope of ASC 326, while assets measured at fair
value are excluded. The allowance for credit losses is adjusted each period for changes in expected lifetime credit losses.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_49" id="_SignificantAccountingPoliciesTextBlock-c0_cont_48"><ix:continuation continuedAt="_FinanceLoansAndLeasesReceivablePolicy-c0_cont_14" id="_FinanceLoansAndLeasesReceivablePolicy-c0_cont_13"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">The allowance for credit losses includes an asset-specific component
and a statistically based component. The Group aggregates loans sharing similar risk characteristics into pools for purposes of measuring
expected credit losses. Pools are reassessed periodically to confirm that all loans within each pool continue to share similar risk characteristics.
Expected credit losses for loans that do not share similar risk characteristics with other financial assets are measured individually.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_50" id="_SignificantAccountingPoliciesTextBlock-c0_cont_49"><ix:continuation continuedAt="_FinanceLoansAndLeasesReceivablePolicy-c0_cont_15" id="_FinanceLoansAndLeasesReceivablePolicy-c0_cont_14"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">Estimation of CECLs requires CNFinance to make assumptions regarding
the likelihood and severity of credit loss events and their impact on expected cash flows, which drive the probability of default (PD),
loss given default (LGD) and exposure at default (EAD) models. In its loss forecasting framework, ECL is determined primarily by utilizing
models for the borrowers&#8217; PD, LGD and EAD and the Group incorporates forward-looking information through the use of macroeconomic
scenarios applied over the forecasted life of the assets. These macroeconomic scenarios include variables that have historically been
key drivers of increases and decreases in credit losses. These variables include, but are not limited to, gross-domestic product rates,
interest rates and consumer price indexes.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_51" id="_SignificantAccountingPoliciesTextBlock-c0_cont_50"><ix:continuation continuedAt="_FinanceLoansAndLeasesReceivablePolicy-c0_cont_16" id="_FinanceLoansAndLeasesReceivablePolicy-c0_cont_15"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">The ACL for financial assets held at amortized cost is a valuation
account that is deducted from, or added to, the amortized cost basis of the financial assets to present the net amount expected to be
collected. When credit expectations change, the valuation account is adjusted with changes reported in provision for credit losses. If
amounts previously charged off are subsequently expected to be collected, the Group may recognize a negative allowance, which is limited
to the amount that was previously charged off.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_52" id="_SignificantAccountingPoliciesTextBlock-c0_cont_51"><ix:continuation continuedAt="_FinanceLoansAndLeasesReceivablePolicy-c0_cont_17" id="_FinanceLoansAndLeasesReceivablePolicy-c0_cont_16"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">The asset-specific component is calculated under ASC 310-10-35, on
an individual basis for the loans whose payments are contractually past due more than 90 days or which are considered impaired. A financial
asset is collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially
through the sale or operation of the collateral. When a collateral-dependent financial asset is probable of foreclosure, the Group will
measure the ACL based on the fair value of the collateral and we will measure the ACL based on the collateral&#8217;s net realizable value
(fair value of collateral, less estimated costs to sell).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="border-bottom: Black 1.5pt solid; margin-top: 12pt; margin-bottom: 6pt"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->24<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">2.</td><td>SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)</td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_53" id="_SignificantAccountingPoliciesTextBlock-c0_cont_52"><ix:continuation continuedAt="_FinanceLoansAndLeasesReceivablePolicy-c0_cont_18" id="_FinanceLoansAndLeasesReceivablePolicy-c0_cont_17"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">Under the collaboration model, when the Group grants a loan through
a trust plan, the loan is with the borrower and guarantee is entered into with a separate counterparty (the sales partner). As such, under
the definition of ASC 326-20-20, the guarantee arrangement and lending arrangement would be considered freestanding arrangements. As sale
partners will provide guarantee of the entire loan to the Group, collection for loss is probable and estimable when a loss on an insured
loan is incurred and recognized. In this case, the Group will recognize guarantee loss recoverable asset in the amount that the Group
determines is probable to receive from the guarantor with an offsetting entry to &#8220;provision for credit losses&#8221; when the Group
concludes that the loss recovery is collectible. However, potential recovery that exceeds the recognized loss, if any, (gain contingency)
will not be recognized until cash is received. Therefore, the amounts estimated to be recoverable from the proceeds of guarantees will
be reported as a separate asset (guarantee asset) in the balance sheet. The increase in guaranteed recoverable assets are included in
the income statement as a reduction of the &#8220;provision for credit losses&#8221;, separate disclosure of the increase in guaranteed
recoverable assets will be included in the rollforward of the &#8220;allowance for credit losses&#8221;. The income statement caption
will be modified as &#8220;Provision for credit losses, net of increase in increase in guaranteed recoverable assets&#8221;.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_54" id="_SignificantAccountingPoliciesTextBlock-c0_cont_53"><ix:continuation continuedAt="_FinanceLoansAndLeasesReceivablePolicy-c0_cont_19" id="_FinanceLoansAndLeasesReceivablePolicy-c0_cont_18"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left"><b><span style="text-decoration:underline">Loans held-for-sale</span></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_55" id="_SignificantAccountingPoliciesTextBlock-c0_cont_54"><ix:continuation continuedAt="_FinanceLoansAndLeasesReceivablePolicy-c0_cont_20" id="_FinanceLoansAndLeasesReceivablePolicy-c0_cont_19"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">Loans held-for-sale are measured at the lower of cost or fair value,
with valuation changes recorded in noninterest revenue. The valuation is performed on an individual loan basis. Loan origination fees
or costs and purchase price discounts or premiums are deferred in a contra loan account until the related loan is sold. The deferred fees
or costs and discounts or premiums are adjustments to the basis of the loan and therefore are included in the periodic determination of
the lower of cost or fair value adjustments.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_56" id="_SignificantAccountingPoliciesTextBlock-c0_cont_55"><ix:continuation continuedAt="_FinanceLoansAndLeasesReceivablePolicy-c0_cont_21" id="_FinanceLoansAndLeasesReceivablePolicy-c0_cont_20"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">The loan is derecognized if the Group does not retain any risk and
rewards after transferring the loan. Such transfer would be recorded as sales according to ASC 860-10-40-5. At the time of derecognition,
any related loan loss allowance is released. Gains and losses on loans transfer as a sale are recognized in the non-interest income.</p><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_57" id="_SignificantAccountingPoliciesTextBlock-c0_cont_56"><ix:continuation continuedAt="_FinanceLoansAndLeasesReceivablePolicy-c0_cont_22" id="_FinanceLoansAndLeasesReceivablePolicy-c0_cont_21"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">(ii)</td><td>Off-balance sheet loans</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_58" id="_SignificantAccountingPoliciesTextBlock-c0_cont_57"><ix:continuation id="_FinanceLoansAndLeasesReceivablePolicy-c0_cont_22"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">For loans funded by the proceeds from third-party commercial banks,
each underlying loan and borrower has to be approved by the third-party commercial banks individually. Once the loan is approved by and
originated by the third-party commercial bank, the fund is provided by the third-party commercial bank to the borrower and a lending relationship
between the borrower and the third-party commercial bank is established through a loan agreement. Effectively, the Group offers loan facilitation
and matching services to the borrowers who have credit needs and the commercial banks who originate loans directly to borrowers referred
by the Group. The Group continues to provide post-origination services to the borrowers over the term of the loan agreement. Under this
scenario, the Group determines that it is not the legal lender or borrower in the loan origination and repayment process. Accordingly,
the Group does not record loans principal, interest and financing service fee receivables arising from these loans nor interest-bearing
borrowings to the third-party commercial banks.</p><p style="font: bold 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_59" id="_SignificantAccountingPoliciesTextBlock-c0_cont_58"><ix:nonNumeric contextRef="c0" continuedAt="_CashAndCashEquivalentsPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:CashAndCashEquivalentsPolicyTextBlock"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">(f)</td><td>Cash, cash equivalents and restricted cash</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_60" id="_SignificantAccountingPoliciesTextBlock-c0_cont_59"><ix:continuation continuedAt="_CashAndCashEquivalentsPolicyTextBlock-c0_cont_2" id="_CashAndCashEquivalentsPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">Cash and cash equivalents primarily consist of cash, deposits which
are highly liquid and all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The
Group considers highly liquid investments that are readily convertible to known amounts of cash.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_61" id="_SignificantAccountingPoliciesTextBlock-c0_cont_60"><ix:continuation id="_CashAndCashEquivalentsPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">Restricted cash are cash and cash equivalents that are not readily
available for normal disbursement and mainly represents cash and cash equivalents from structured funds. Such restricted cash is not available
to fund the general liquidity needs of the Group and could only be used to grant new loans and activities as mentioned in Note 1.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">&#160;</p><div>




</div><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">2.</td><td>SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)</td></tr></table><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_62" id="_SignificantAccountingPoliciesTextBlock-c0_cont_61"><ix:nonNumeric contextRef="c0" continuedAt="_InvestmentPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:InvestmentPolicyTextBlock"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">(g)</td><td>Investment securities</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p></ix:nonNumeric></ix:continuation><div>

</div><div>

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</div><div>

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are recorded at fair value and included in the profit and loss of changes in fair value. Realized gains and losses from the sale of investment
securities are determined on a specific identification basis and are recorded as realized gains/(losses) on sales of investments. Interest
and investment income are recognized when earned.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_65" id="_SignificantAccountingPoliciesTextBlock-c0_cont_64"><ix:continuation continuedAt="_InvestmentPolicyTextBlock-c0_cont_4" id="_InvestmentPolicyTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left"><b><span style="text-decoration:underline">Debt securities</span></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_66" id="_SignificantAccountingPoliciesTextBlock-c0_cont_65"><ix:continuation continuedAt="_InvestmentPolicyTextBlock-c0_cont_5" id="_InvestmentPolicyTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">Debt securities consist of held-to-maturity debt securities that the
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</div><div>

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for impairment periodically, recognizing an allowance, if any, by applying an estimated loss rate. The Group considers available quantitative
and qualitative evidence in evaluating the potential impairment of its investments in held-to-maturity debt securities. The allowance
for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net carrying
value at the amount expected to be collected on the held-to-maturity debt securities.</p><p style="font: bold 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_68" id="_SignificantAccountingPoliciesTextBlock-c0_cont_67"><ix:nonNumeric contextRef="c0" continuedAt="_PropertyPlantAndEquipmentPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:PropertyPlantAndEquipmentPolicyTextBlock"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
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</div><div>

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shorter of the economic useful life of the improvement or the term of the lease. The estimated useful life of office and other equipment
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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 26; Value: 1 --><div>
    </div><div style="border-bottom: Black 1.5pt solid; margin-top: 12pt; margin-bottom: 6pt"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->26<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">2.</td><td>SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)</td></tr></table><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_71" id="_SignificantAccountingPoliciesTextBlock-c0_cont_70"><ix:continuation continuedAt="_GoodwillAndIntangibleAssetsGoodwillPolicy-c0_cont_2" id="_GoodwillAndIntangibleAssetsGoodwillPolicy-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">Goodwill is an asset representing the future economic benefits arising
from other assets acquired in a business combination that are not individually identified and separately recognized.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_72" id="_SignificantAccountingPoliciesTextBlock-c0_cont_71"><ix:continuation continuedAt="_GoodwillAndIntangibleAssetsGoodwillPolicy-c0_cont_3" id="_GoodwillAndIntangibleAssetsGoodwillPolicy-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left"><b><span style="text-decoration:underline">Impairment tests for cash-generating units containing goodwill</span></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_73" id="_SignificantAccountingPoliciesTextBlock-c0_cont_72"><ix:continuation continuedAt="_GoodwillAndIntangibleAssetsGoodwillPolicy-c0_cont_4" id="_GoodwillAndIntangibleAssetsGoodwillPolicy-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">The Group assesses goodwill for impairment at the reporting unit level
at least annually and more frequently upon the occurrence of certain events. The Group has the option to assess qualitative factors first
to determine whether it is necessary to perform the two-step test. If the Group believes, as a result of the qualitative assessment, that
it is more-likely-than-not that the fair value of the reporting unit is less than its carrying amount, the two-step quantitative impairment
test described above is required. Otherwise, no further testing is required. In the qualitative assessment, the Group considers primary
factors such as industry and market considerations, overall financial performance of the reporting unit, and other specific information
related to the operations. In performing the two-step quantitative impairment test, the first step compares the carrying amount of the
reporting unit to the fair value of the reporting unit based on either quoted market prices of the ordinary shares or estimated fair value
using a combination of the income approach and the market approach. If the fair value of the reporting unit exceeds the carrying value
of the reporting unit, goodwill is not impaired and the Group is not required to perform further testing. If the carrying value of the
reporting unit exceeds the fair value of the reporting unit, then the Group must perform the second step of the impairment test in order
to determine the implied fair value of the reporting unit&#8217;s goodwill. The fair value of the reporting unit is allocated to its assets
and liabilities in a manner similar to a purchase price allocation in order to determine the implied fair value of the reporting unit
goodwill. If the carrying amount of the goodwill is greater than its implied fair value, the excess is recognized as an impairment loss.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_74" id="_SignificantAccountingPoliciesTextBlock-c0_cont_73"><ix:continuation id="_GoodwillAndIntangibleAssetsGoodwillPolicy-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">Goodwill is related to the <span style="background-color: white">acquisition
of Guangzhou Anyu Mortgage Consulting Co., Limited (&#8220;Guangzhou Anyu&#8221;)</span>. In 2016, the key management of Guangzhou Anyu
has left the company. Guangzhou Anyu&#8217;s business model has changed from providing loans to referring micro credit business to other
entities of the Group, resulting in an expected reduction in the operating profits and cash flows in the future. Therefore, the Group
recognized a goodwill impairment loss of RMB20,279,026. The goodwill was fully impaired in 2016.</p><p style="font: bold 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_75" id="_SignificantAccountingPoliciesTextBlock-c0_cont_74"><ix:nonNumeric contextRef="c0" continuedAt="_GoodwillAndIntangibleAssetsIntangibleAssetsPolicy-c0_cont_1" escape="true" name="us-gaap:GoodwillAndIntangibleAssetsIntangibleAssetsPolicy"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">(j)</td><td>Intangible assets</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_76" id="_SignificantAccountingPoliciesTextBlock-c0_cont_75"><ix:continuation continuedAt="_GoodwillAndIntangibleAssetsIntangibleAssetsPolicy-c0_cont_2" id="_GoodwillAndIntangibleAssetsIntangibleAssetsPolicy-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">Indefinite-lived intangible assets are assets that are not amortized
because there is no foreseeable limit to cash flows generated from them. Intangible assets with finite useful lives are amortized on a
straight-line basis over their estimated useful lives.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_77" id="_SignificantAccountingPoliciesTextBlock-c0_cont_76"><ix:continuation continuedAt="_GoodwillAndIntangibleAssetsIntangibleAssetsPolicy-c0_cont_3" id="_GoodwillAndIntangibleAssetsIntangibleAssetsPolicy-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">The Group categorizes trademarks as indefinite-lived intangible assets,
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carrying value exceeds the fair value as an impairment expense. The Group performed its annual impairment review of indefinite-lived intangible
assets on December 31, 2021 and 2022 and determined that it is more likely than not that the carrying value was less than the fair value.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_78" id="_SignificantAccountingPoliciesTextBlock-c0_cont_77"><ix:continuation id="_GoodwillAndIntangibleAssetsIntangibleAssetsPolicy-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">Intangible assets with finite useful lives represent software and cooperation
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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 27; Value: 1 --><div>
    </div><div style="border-bottom: Black 1.5pt solid; margin-top: 12pt; margin-bottom: 6pt"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->27<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">2.</td><td>SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)</td></tr></table><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_79" id="_SignificantAccountingPoliciesTextBlock-c0_cont_78"><ix:nonNumeric contextRef="c0" continuedAt="_IncomeTaxPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:IncomeTaxPolicyTextBlock"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">(k)</td><td>Income taxes</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_80" id="_SignificantAccountingPoliciesTextBlock-c0_cont_79"><ix:continuation id="_IncomeTaxPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases and for operating loss and tax credit carry forwards.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the
deferred tax assets or liabilities are expected to be realized or settled. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the enactment date. The Group recognizes the effect of income tax positions
only if those positions are more likely than not of being sustained. Recognized income tax positions are measured as the largest amount
that is greater than <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EffectiveIncomeTaxRateContinuingOperations" scale="-2" unitRef="pure">50</ix:nonFraction> percent likely of being realized. Changes in recognition or measurement are reflected in the period in which the
change in judgment occurs. The Group classifies interest and penalties related to the liability for unrecognized tax benefits as income
tax expense.</p><p style="font: bold 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_81" id="_SignificantAccountingPoliciesTextBlock-c0_cont_80"><ix:nonNumeric contextRef="c0" continuedAt="_PostemploymentBenefitPlansPolicy-c0_cont_1" escape="true" name="us-gaap:PostemploymentBenefitPlansPolicy"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">(l)</td><td>Employee benefit plans</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_82" id="_SignificantAccountingPoliciesTextBlock-c0_cont_81"><ix:continuation id="_PostemploymentBenefitPlansPolicy-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">Pursuant to relevant PRC regulations, the Group is required to make
contributions to various employee benefit plans organized by municipal and provincial PRC governments. The contributions are made for
each PRC employee at statutory rates as determined by local social security bureau. Contributions to the employee benefit plans are charged
to the consolidated statements of income. The Group has no obligations for payment of pension benefits associated with the plans beyond
the amount it is required to contribute.</p><p style="font: bold 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_83" id="_SignificantAccountingPoliciesTextBlock-c0_cont_82"><ix:nonNumeric contextRef="c0" continuedAt="_ImpairmentOrDisposalOfLongLivedAssetsPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:ImpairmentOrDisposalOfLongLivedAssetsPolicyTextBlock"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">(m)</td><td>Long-lived assets</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

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assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, the
Group first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying amount. If the carrying
amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the
extent that the carrying amount exceeds its fair value. Fair value is determined through various valuation techniques including discounted
cash flow models, quoted market value and third-party independent appraisals, as considered necessary.</p><p style="font: bold 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_85" id="_SignificantAccountingPoliciesTextBlock-c0_cont_84"><ix:nonNumeric contextRef="c0" continuedAt="_ShareBasedCompensationOptionAndIncentivePlansPolicy-c0_cont_1" escape="true" name="us-gaap:ShareBasedCompensationOptionAndIncentivePlansPolicy"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">(n)</td><td>Share-based compensation</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_86" id="_SignificantAccountingPoliciesTextBlock-c0_cont_85"><ix:continuation id="_ShareBasedCompensationOptionAndIncentivePlansPolicy-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">The Group measures the cost of employee services received in exchange
for an award of equity instruments based on the grant-date fair value of the award and recognizes the cost over the period the employee
is required to provide service in exchange for the award, which generally is the vesting period. The Group recognizes compensation cost
using a front-loading approach for an award with only service conditions that have a graded vesting schedule over the requisite service
period for the entire award, net of estimated forfeitures, provided that the cumulative amount of compensation cost recognized at any
date at least equals the portion of the grant-date value of such award that is vested at that date. Forfeiture rates are estimated based
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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>




</div><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">2.</td><td>SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)</td></tr></table><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

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</div><div>

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of future operating lease payments, discounted using the incremental borrowing rate. Right of use asset is measured at the amount of lease
liabilities plus prepaid rent and direct costs, less any lease incentives. The operating lease expense is recognized on a straight-line
basis over the lease term. Certain of the operating lease agreements contain rent holidays, which are considered in determining the straight-line
operating lease expense to be recorded over the lease term.</p><p style="font: bold 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_89" id="_SignificantAccountingPoliciesTextBlock-c0_cont_88"><ix:nonNumeric contextRef="c0" continuedAt="cnf_DisclosureOfGuaranteeLiabilitiessPolicyTextBlock-c0_cont_1" escape="true" name="cnf:DisclosureOfGuaranteeLiabilitiessPolicyTextBlock"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
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</div><div>

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guarantee companies that directly provides guarantee services to commercial banks. According to relevant financial guarantee arrangements,
third-party guarantee companies will fulfil its obligations to purchase defaulted loans. However, the Group is required to provide deposits
and replenish such deposits from time to time to third-party guarantee companies for its obligations of purchasing defaulted loans. Effectively,
the Group provides back-to-back guarantee to third-party guarantee companies and takes on all of the credit risk of the borrowers. These
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</div><div>

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model, the Group will recognize both a stand-ready guarantee liability under ASC 460 with an associated guarantee receivable, and a contingent
guarantee liability with an allowance for credit losses of the underlying loans under Current expected credit loss (&#8220;CECL&#8221;)
model. Subsequent to the initial recognition, the ASC 460 stand-ready guarantee is released into gains from guarantee liabilities on a
straight-line basis over the term of the guarantee, while the contingent guarantee is reduced by the pay-outs made by the Group to compensate
the investors upon borrowers&#8217; default.	</p><p style="font: bold 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

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<td style="width: 0.5in">(q)</td><td>Repurchase agreements</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_93" id="_SignificantAccountingPoliciesTextBlock-c0_cont_92"><ix:continuation id="_RepurchaseAndResaleAgreementsPolicy-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">Financial assets sold under agreements to repurchase do not constitute
a sale of the underlying financial assets for accounting purposes and are treated as collateralized financing transactions. Financial
assets sold under agreements to repurchase are recorded at the amount of cash received plus accrued interest. Interest paid on agreements
to repurchase is recorded in interest expense at the contractually specified rate.</p><p style="font: bold 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

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</div><div>

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can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>




</div><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">2.</td><td>SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)</td></tr></table><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

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<td style="width: 0.5in">(s)</td><td>Fair value measurements</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

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inputs and minimize the use of unobservable inputs to the extent possible. The Group determines fair value based on assumptions that market
participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant
assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which
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</div><div>

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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_99" id="_SignificantAccountingPoliciesTextBlock-c0_cont_98"><ix:continuation continuedAt="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_4" id="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_3"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td>Level 2 Inputs: Other than quoted prices included in Level
1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset
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</div><div>

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used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is
little, if any, market activity for the asset or liability at measurement date.</td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

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in its entirety falls is based on the lowest level input that is significant to the fair value measurement in its entirety. In situations
where there is little, if any, market activity for the asset or liability at the measurement date, the fair value measurement reflects
management&#8217;s own judgments about the assumptions that market participants would use in pricing the asset or liability. Those judgments
are developed by management based on the best information available in the circumstances.</p><p style="font: bold 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_102" id="_SignificantAccountingPoliciesTextBlock-c0_cont_101"><ix:nonNumeric contextRef="c0" continuedAt="_EarningsPerSharePolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:EarningsPerSharePolicyTextBlock"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_103" id="_SignificantAccountingPoliciesTextBlock-c0_cont_102"><ix:continuation continuedAt="_EarningsPerSharePolicyTextBlock-c0_cont_2" id="_EarningsPerSharePolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">Basic earnings per share is computed by dividing net income attributable
to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share is
calculated by dividing net income attributable to ordinary shareholders by the weighted average number of ordinary and dilutive ordinary
equivalent shares outstanding during the period.</p><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_104" id="_SignificantAccountingPoliciesTextBlock-c0_cont_103"><ix:continuation id="_EarningsPerSharePolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">Ordinary equivalent shares are not included in the denominator of the
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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_105" id="_SignificantAccountingPoliciesTextBlock-c0_cont_104"><ix:nonNumeric contextRef="c0" continuedAt="_SegmentReportingPolicyPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:SegmentReportingPolicyPolicyTextBlock"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
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</div><div>

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decisions about the allocation of resources to and the assessment of the performance of the segments of the Group, therefore the management
has determined that the Group has one operating segment. All of the Group&#8217;s operations and customers are located in the PRC. Consequently,
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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 30; Value: 1 --><div>
    </div><div style="border-bottom: Black 1.5pt solid; margin-top: 12pt; margin-bottom: 6pt"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->30<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>




</div><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">2.</td><td>SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)</td></tr></table><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_107" id="_SignificantAccountingPoliciesTextBlock-c0_cont_106"><ix:nonNumeric contextRef="c0" continuedAt="cnf_RecentlyIssuedAccountingStandardsPolicyTextBlock-c0_cont_1" escape="true" name="cnf:RecentlyIssuedAccountingStandardsPolicyTextBlock"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
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</div><div>

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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_109" id="_SignificantAccountingPoliciesTextBlock-c0_cont_108"><ix:continuation continuedAt="cnf_RecentlyIssuedAccountingStandardsPolicyTextBlock-c0_cont_3" id="cnf_RecentlyIssuedAccountingStandardsPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left"><i><span style="text-decoration:underline">ASU 2022-02 - Financial Instruments - Credit Losses (Topic 326):
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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_110" id="_SignificantAccountingPoliciesTextBlock-c0_cont_109"><ix:continuation continuedAt="cnf_RecentlyIssuedAccountingStandardsPolicyTextBlock-c0_cont_4" id="cnf_RecentlyIssuedAccountingStandardsPolicyTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">The ASU 2022-02 is to be adopted on a prospective basis and will be
effective for the Group on January 1, 2023, although early adoption is permitted. The Amendment eliminates the accounting guidance for
troubled debt restructurings (TDRs) by creditors and introduces new required disclosures for loan modifications made to borrowers experiencing
financial difficulty. The Amendment also sets the guidance for vintage disclosures to require disclosure of current period gross charge-offs
by year of origination. Adoption of the accounting standard is not expected to have an impact on the Group&#8217;s operating results or
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</div><div>

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</div><div>

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effective for the Group on January 1, 2024, although early adoption is permitted. The Amendment clarifies that <span style="background-color: white">a
contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and also
states that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. The Update also requires
few more disclosures on equity securities subject to contractual sale restrictions.</span> Adoption of the accounting standard is not
expected to have an impact on the Group&#8217;s operating results or financial position, as the Group excludes such restrictions when
valuing equity securities.</p><p style="font: bold 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_113" id="_SignificantAccountingPoliciesTextBlock-c0_cont_112"><ix:nonNumeric contextRef="c0" continuedAt="cnf_RevisionOfImmaterialErrorPolicyTextBlock-c0_cont_1" escape="true" name="cnf:RevisionOfImmaterialErrorPolicyTextBlock"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">(w)</td><td>Revision of immaterial error</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

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held-for-sale loans and derecognition of loans in previous years, leading to overstatement in guaranteed assets and net gains/(losses)
on sales of loans as well as understatement in held-for-sale loans and provision for credit losses, which did not affect total asset,
net income, cash and cash equivalent, or other subtotal on the accompanying consolidated financial statements. The Group evaluated the
materiality of the previously described error from a qualitative and quantitative perspective. Based on such evaluation, the Group concluded
that the error was not material to any individual current or prior periods, nor did it have an effect on the Group&#8217;s trend of financial
result. Although the effect of the error was not material to the current or previously issued financial statements, guaranteed assets
and held-for-sale loans in the consolidated balance sheets as well as net gains/(losses) on sales of loans and provision for credit losses
in the consolidated statements of comprehensive income for year 2020 and 2021 have been revised accordingly to reflect the immaterial
error. Consequently, this had the following impact on certain 2020 and 2021 financial statements&#8217; captions: increases in held-for-sale
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">&#160;</p><div>




</div><ix:nonNumeric contextRef="c0" continuedAt="_FairValueDisclosuresTextBlock-c0_cont_1" escape="true" name="us-gaap:FairValueDisclosuresTextBlock"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">3</td><td>Fair value measurements</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>

</div><div>

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</div><div>

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fair value, and establishes a hierarchy of fair value inputs. Fair value is 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. A fair value measurement assumes
that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the
absence of a principal market, the most advantageous market. Valuation techniques that are consistent with the market, income or cost
approach, as specified by FASB ASC 820, are used to measure fair value.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_FairValueDisclosuresTextBlock-c0_cont_4" id="_FairValueDisclosuresTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">Assets recorded at fair value on a recurring basis mainly include marketable
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typically involve application of LOCOM accounting, write-downs of individual assets or application of the measurement alternative for
nonmarketable equity securities.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

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</div><div>

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</div><div>

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with reasonable levels of price transparency. Where quoted prices are available in an active market, the Group classifies the assets and
liabilities within Level 1 of the valuation hierarchy. If quoted market prices are not available, fair value is primarily determined using
pricing models using observable trade data, market data, quoted prices of securities with similar characteristics or discounted cash flows.
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</div><div>

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</div><div>

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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="border-bottom: Black 1.5pt solid; margin-top: 12pt; margin-bottom: 6pt"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->32<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>




</div><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">3</td><td>Fair value measurements (continued)</td></tr></table><div>

</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>

</div><ix:continuation continuedAt="_FairValueDisclosuresTextBlock-c0_cont_10" id="_FairValueDisclosuresTextBlock-c0_cont_9"><ix:continuation id="_ScheduleOfFairValueAssetsAndLiabilitiesMeasuredOnRecurringBasisTableTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold">&#160;</td>
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</div><div>

</div><ix:continuation continuedAt="_FairValueDisclosuresTextBlock-c0_cont_11" id="_FairValueDisclosuresTextBlock-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">The following table presents the Group&#8217;s fair value hierarchy for those
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</div><div>

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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 1.5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Guarantee liabilities<sup>(4)</sup></span></td><td style="padding-bottom: 1.5pt">&#160;</td>
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</div><div>

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  <tr style="vertical-align: bottom">
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    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 52%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Loans<sup>(1)</sup></span></td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>




</div><div>

</div><ix:continuation continuedAt="_FairValueDisclosuresTextBlock-c0_cont_14" id="_FairValueDisclosuresTextBlock-c0_cont_13"><ix:continuation continuedAt="_FairValueLiabilitiesMeasuredOnRecurringAndNonrecurringBasisTableTextBlock-c0_cont_3" id="_FairValueLiabilitiesMeasuredOnRecurringAndNonrecurringBasisTableTextBlock-c0_cont_2"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left">(1)</td><td><ix:footnote id="ix_1_footnote" xml:lang="en-US">Loans are recorded at amortized cost, while the Group records
nonrecurring fair value adjustments to reflect partial write-downs that are based on the observable market price of the loan or current
appraised value of the collateral.</ix:footnote></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_FairValueDisclosuresTextBlock-c0_cont_15" id="_FairValueDisclosuresTextBlock-c0_cont_14"><ix:continuation continuedAt="_FairValueLiabilitiesMeasuredOnRecurringAndNonrecurringBasisTableTextBlock-c0_cont_4" id="_FairValueLiabilitiesMeasuredOnRecurringAndNonrecurringBasisTableTextBlock-c0_cont_3"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="width: 0in"></td><td style="width: 0.25in">(2)</td><td><ix:footnote id="ix_2_footnote" xml:lang="en-US">Loans held-for-sale are held at LOCOM (the lower of cost or fair value) which may be written down to fair value on a nonrecurring
basis.</ix:footnote></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_FairValueDisclosuresTextBlock-c0_cont_16" id="_FairValueDisclosuresTextBlock-c0_cont_15"><ix:continuation continuedAt="_FairValueLiabilitiesMeasuredOnRecurringAndNonrecurringBasisTableTextBlock-c0_cont_5" id="_FairValueLiabilitiesMeasuredOnRecurringAndNonrecurringBasisTableTextBlock-c0_cont_4"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="width: 0in"></td><td style="width: 0.25in">(3)</td><td><ix:footnote id="ix_3_footnote" xml:lang="en-US">Nonmarketable equity securities are accounted for using the measurement alternative and can be subject to nonrecurring fair value
adjustments to record impairment.</ix:footnote></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_FairValueDisclosuresTextBlock-c0_cont_17" id="_FairValueDisclosuresTextBlock-c0_cont_16"><ix:continuation id="_FairValueLiabilitiesMeasuredOnRecurringAndNonrecurringBasisTableTextBlock-c0_cont_5"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="width: 0in"></td><td style="width: 0.25in">(4)</td><td><ix:footnote id="ix_4_footnote" xml:lang="en-US">Guarantee liabilities are accounted for stand-ready guarantee liabilities of the Group&#8217;s guarantee services for its off-balance
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</div><div>

</div><ix:continuation id="_FairValueDisclosuresTextBlock-c0_cont_17"><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin-top: 0pt; margin-right: 0; margin-bottom: 0pt">During the years ended December 31, 2021 and 2022, there were no transfers
between instruments in Level 1 and Level 2.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 33; Value: 1 --><div>
    </div><div style="border-bottom: Black 1.5pt solid; margin-top: 12pt; margin-bottom: 6pt"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->33<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_CashAndCashEquivalentsDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:CashAndCashEquivalentsDisclosureTextBlock"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">4</td><td>Cash, cash equivalents and restricted cash</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_CashAndCashEquivalentsDisclosureTextBlock-c0_cont_2" id="_CashAndCashEquivalentsDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left">Cash and cash equivalents represent cash on hand and bank deposits.
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</div><div>

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</div><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

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</div><div>

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    <td style="padding-bottom: 1.5pt; text-align: center">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
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    <td style="font-style: italic; text-align: center">&#160;</td><td style="font-weight: bold">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: center">&#160;</td><td>&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 66%; font-weight: bold; text-align: left; text-indent: -0.125in; padding-left: 0.125in">Home equity loans:</td><td style="width: 1%">&#160;</td>
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    <td style="text-align: left; text-indent: -0.125in; padding-left: 0.125in">Loans principal, interest and financing service fee receivables</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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    <td style="text-indent: -0.125in; padding-left: 0.125in">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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    <td style="text-align: center">(i)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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    <td style="text-align: left; text-indent: -0.125in; padding-left: 0.125in">- Individually assessed</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 34; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">5</td><td>Loans principal, interest and financing service fee receivables (continued)</td></tr></table><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

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<td style="width: 0.5in">(a)</td><td>Home equity loans</td></tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation><div>

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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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</div><div>

</div><ix:continuation continuedAt="_FinancingReceivablesTextBlock-c0_cont_5" id="_FinancingReceivablesTextBlock-c0_cont_4"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">(i)</td><td>Allowance for credit losses</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_FinancingReceivablesTextBlock-c0_cont_6" id="_FinancingReceivablesTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The table below presents the components of allowances for loans principal,
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</div><div>

</div><ix:continuation continuedAt="_FinancingReceivablesTextBlock-c0_cont_7" id="_FinancingReceivablesTextBlock-c0_cont_6"><ix:nonNumeric contextRef="c0" continuedAt="_AllowanceForCreditLossesOnFinancingReceivablesTableTextBlock-c0_cont_1" escape="true" name="us-gaap:AllowanceForCreditLossesOnFinancingReceivablesTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 35; Value: 1 --><div>
    </div><div style="border-bottom: Black 1.5pt solid; margin-top: 12pt; margin-bottom: 6pt"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->35<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>




</div><p style="margin: 0">&#160;</p><div>





</div><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">5</td><td>Loans principal, interest and financing service fee receivables (continued)</td></tr></table><div>

</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>

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    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td style="font-weight: bold; font-style: italic; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><div>

</div><ix:continuation continuedAt="_FinancingReceivablesTextBlock-c0_cont_9" id="_FinancingReceivablesTextBlock-c0_cont_8"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0"></td><td style="width: 28.35pt">(1)</td><td>Effective January 1, 2020, the Group adopted accounting guidance which changed impairment recognition of financial instruments to
a model that is based on expected losses rather than incurred losses.</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_FinancingReceivablesTextBlock-c0_cont_10" id="_FinancingReceivablesTextBlock-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The Group charges off loans principal, interest and financing service
fee receivables if the remaining balance is considered uncollectable. Recovery of loans principal, interest and financing service fee
receivables previously charged off would be recorded when received.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_FinancingReceivablesTextBlock-c0_cont_11" id="_FinancingReceivablesTextBlock-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">For the description of the Group&#8217;s related accounting policies of allowance
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</div><div>

</div><ix:continuation continuedAt="_FinancingReceivablesTextBlock-c0_cont_12" id="_FinancingReceivablesTextBlock-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The following tables present the aging of allowance for credit losses
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</div><div>

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  <tr style="vertical-align: bottom">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>




</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 36; Value: 1 --><div>
    </div><div style="border-bottom: Black 1.5pt solid; margin-top: 12pt; margin-bottom: 6pt"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->36<!-- Field: /Sequence --></p></div><div>
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</div><p style="margin: 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>




</div><p style="margin: 0">&#160;</p><div>





</div><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">5</td><td>Loans principal, interest and financing service fee receivables (continued)</td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><div>

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  <tr style="vertical-align: bottom">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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</div><div>

</div><ix:continuation continuedAt="_FinancingReceivablesTextBlock-c0_cont_16" id="_FinancingReceivablesTextBlock-c0_cont_15"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">(b)</td><td>Loan delinquency and non-accrual details</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_FinancingReceivablesTextBlock-c0_cont_17" id="_FinancingReceivablesTextBlock-c0_cont_16"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The following tables present the aging of past-due loan principal and
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</div><div>

</div><ix:continuation continuedAt="_FinancingReceivablesTextBlock-c0_cont_18" id="_FinancingReceivablesTextBlock-c0_cont_17"><ix:nonNumeric contextRef="c0" continuedAt="_PastDueFinancingReceivablesTableTextBlock-c0_cont_1" escape="true" name="us-gaap:PastDueFinancingReceivablesTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>




</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 37; Value: 1 --><div>
    </div><div style="border-bottom: Black 1.5pt solid; margin-top: 12pt; margin-bottom: 6pt"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->37<!-- Field: /Sequence --></p></div><div>
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</div><p style="margin: 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>




</div><p style="margin: 0">&#160;</p><div>





</div><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">5</td><td>Loans principal, interest and financing service fee receivables (continued)</td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:continuation continuedAt="_FinancingReceivablesTextBlock-c0_cont_19" id="_FinancingReceivablesTextBlock-c0_cont_18"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The following tables present the aging of past-due loan principal and
financing service fee receivables as of December 31, 2021.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_FinancingReceivablesTextBlock-c0_cont_20" id="_FinancingReceivablesTextBlock-c0_cont_19"><ix:continuation id="_PastDueFinancingReceivablesTableTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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</div><div>

</div><ix:continuation continuedAt="_FinancingReceivablesTextBlock-c0_cont_21" id="_FinancingReceivablesTextBlock-c0_cont_20"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Loans principal, interest and financing service fee receivables are
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</div><div>

</div><ix:continuation continuedAt="_FinancingReceivablesTextBlock-c0_cont_22" id="_FinancingReceivablesTextBlock-c0_cont_21"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Any interest accrued on non-accrual loans is reversed at 90 days and
charged against current earnings, and interest is thereafter included in earnings only to the extent actually received in cash. When there
is doubt regarding the ultimate collectability of principal, all cash receipts are thereafter applied to reduce the recorded investment
in the loan.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>


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    </div><div style="border-bottom: Black 1.5pt solid; margin-top: 12pt; margin-bottom: 6pt"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->38<!-- Field: /Sequence --></p></div><div>
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</div><p style="margin: 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>




</div><p style="margin: 0">&#160;</p><div>


</div><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">5</td><td>Loans principal, interest and financing service fee receivables (continued)</td></tr></table><div>

</div><p style="margin-left: 0.25in; margin-top: 0; margin-bottom: 0">&#160;</p><div>

</div><ix:continuation continuedAt="_FinancingReceivablesTextBlock-c0_cont_23" id="_FinancingReceivablesTextBlock-c0_cont_22"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">(c)</td><td>Impaired loans</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

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<td style="width: 0.5in">(1)</td><td>Impaired loans summary</td></tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation><div>

</div><div>

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</div><div>

</div><ix:continuation continuedAt="_FinancingReceivablesTextBlock-c0_cont_26" id="_FinancingReceivablesTextBlock-c0_cont_25"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">In accordance with ASC 310-10-35-16 and 17, impaired loans are those
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of the loan will not be collected. All amounts due according to the contractual terms means that both the contractual interest payments
and the contractual principal payments of a loan will be collected as scheduled in the loan agreement. Impaired loans without an allowance
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</div><div>

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</div><div>

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</div><div>

</div><ix:continuation continuedAt="_FinancingReceivablesTextBlock-c0_cont_29" id="_FinancingReceivablesTextBlock-c0_cont_28"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0%"></td><td style="width: 0.5in">(i)</td><td>Average recorded investment represents ending balance for the last four quarters and does not include the related allowance for credit
losses.</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 28.35pt; text-indent: -28.35pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_FinancingReceivablesTextBlock-c0_cont_30" id="_FinancingReceivablesTextBlock-c0_cont_29"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0%"></td><td style="width: 0.5in">(ii)</td><td>The interest and fees income recognized are those interest and financing service fees recognized related to impaired loans. All the
amounts are recognized on cash basis.</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 39; Value: 1 --><div>
    </div><div style="border-bottom: Black 1.5pt solid; margin-top: 12pt; margin-bottom: 6pt"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->39<!-- Field: /Sequence --></p></div><div>
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</div><p style="margin: 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>




</div><p style="margin: 0">&#160;</p><div>





</div><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">5</td><td>Loans principal, interest and financing service fee receivables (continued)</td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:continuation continuedAt="_FinancingReceivablesTextBlock-c0_cont_31" id="_FinancingReceivablesTextBlock-c0_cont_30"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">No debt restructuring in which contractual terms of loans are modified,
has occurred during 2021 and 2022.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_FinancingReceivablesTextBlock-c0_cont_32" id="_FinancingReceivablesTextBlock-c0_cont_31"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The Group transferred loans with carrying amounts of RMB<ix:nonFraction contextRef="c232" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:LoansAndLeasesReceivableGrossCarryingAmountCovered" scale="0" unitRef="cny">2,466,160</ix:nonFraction>,820and
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December 31, 2021 and 2022, respectively.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_FinancingReceivablesTextBlock-c0_cont_33" id="_FinancingReceivablesTextBlock-c0_cont_32"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The Group carries out pre-approval, review and credit approval of loans
by professionals for credit risk arising from micro credit business. During the post-transaction monitoring process, the Group conducts
a visit of customers regularly after disbursement of loans and conducts on-site inspection when the Group considers it is necessary. The
review focuses on the status of the collateral.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_FinancingReceivablesTextBlock-c0_cont_34" id="_FinancingReceivablesTextBlock-c0_cont_33"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The Group adopts a loan risk classification approach to manage the
loan portfolio risk. Loans are classified as non-impaired and impaired based on the different risk level. When one or more events demonstrates
there is objective evidence of impairment and causes losses, corresponding loans are considered to be classified as impaired. The asset-specific
component is calculated under ASC 310-10-35, on an individual basis for the loans whose payments are contractually past due more than
90 days or which are considered impaired.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_FinancingReceivablesTextBlock-c0_cont_35" id="_FinancingReceivablesTextBlock-c0_cont_34"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The Group applies a series of criteria in determining the classification
of loans. The loan classification criteria focus on a number of factors, including (i) the borrower&#8217;s ability to repay the loan;
(ii) the borrower&#8217;s repayment history; (iii) the borrower&#8217;s willingness to repay; (iv) the net realizable value of any collateral;
and (v) the prospect for the support from any financially responsible guarantor. The Group also takes into account the length of time
for which payments of principal and interest on a loan are overdue.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_FinancingReceivablesTextBlock-c0_cont_36" id="_FinancingReceivablesTextBlock-c0_cont_35"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">(d)</td><td>Loans held-for-sale</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

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</div><div>

</div><ix:continuation continuedAt="_FinancingReceivablesTextBlock-c0_cont_38" id="_FinancingReceivablesTextBlock-c0_cont_37"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">(e)</td><td>Corporate loans</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_FinancingReceivablesTextBlock-c0_cont_38"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Corporate loans are unsecured loans granted to unrelated entities in
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 40; Value: 1 --><div>
    </div><div style="border-bottom: Black 1.5pt solid; margin-top: 12pt; margin-bottom: 6pt"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->40<!-- Field: /Sequence --></p></div><div>
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</div><p style="margin: 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>




</div><p style="margin: 0">&#160;</p><div>


</div><ix:nonNumeric contextRef="c0" continuedAt="_InvestmentsInDebtAndMarketableEquitySecuritiesAndCertainTradingAssetsDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:InvestmentsInDebtAndMarketableEquitySecuritiesAndCertainTradingAssetsDisclosureTextBlock"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">6</td><td>Investment securities</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_InvestmentsInDebtAndMarketableEquitySecuritiesAndCertainTradingAssetsDisclosureTextBlock-c0_cont_2" id="_InvestmentsInDebtAndMarketableEquitySecuritiesAndCertainTradingAssetsDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Investment securities consist of equity securities and debt securities.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_InvestmentsInDebtAndMarketableEquitySecuritiesAndCertainTradingAssetsDisclosureTextBlock-c0_cont_3" id="_InvestmentsInDebtAndMarketableEquitySecuritiesAndCertainTradingAssetsDisclosureTextBlock-c0_cont_2"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">(a)</td><td>Equity securities</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_InvestmentsInDebtAndMarketableEquitySecuritiesAndCertainTradingAssetsDisclosureTextBlock-c0_cont_4" id="_InvestmentsInDebtAndMarketableEquitySecuritiesAndCertainTradingAssetsDisclosureTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The carrying amount and fair value of the investment securities by
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</div><div>

</div><ix:continuation continuedAt="_InvestmentsInDebtAndMarketableEquitySecuritiesAndCertainTradingAssetsDisclosureTextBlock-c0_cont_5" id="_InvestmentsInDebtAndMarketableEquitySecuritiesAndCertainTradingAssetsDisclosureTextBlock-c0_cont_4"><ix:nonNumeric contextRef="c0" continuedAt="_DebtSecuritiesAvailableForSaleTableTextBlock-c0_cont_1" escape="true" name="us-gaap:DebtSecuritiesAvailableForSaleTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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    <td>&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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</div><div>

</div><ix:continuation continuedAt="_InvestmentsInDebtAndMarketableEquitySecuritiesAndCertainTradingAssetsDisclosureTextBlock-c0_cont_6" id="_InvestmentsInDebtAndMarketableEquitySecuritiesAndCertainTradingAssetsDisclosureTextBlock-c0_cont_5"><ix:continuation id="_DebtSecuritiesAvailableForSaleTableTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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    <td>&#160;</td><td style="font-weight: bold; font-style: normal">&#160;</td>
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    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td></tr>
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  <tr style="vertical-align: bottom; background-color: White">
    <td>&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AvailableForSaleDebtSecuritiesAmortizedCostBasis" scale="0" unitRef="cny">845,888,854</ix:nonFraction></td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>



</div><div>

</div><ix:continuation continuedAt="_InvestmentsInDebtAndMarketableEquitySecuritiesAndCertainTradingAssetsDisclosureTextBlock-c0_cont_7" id="_InvestmentsInDebtAndMarketableEquitySecuritiesAndCertainTradingAssetsDisclosureTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Wealth management products are investment products issued by commercial
banks and other financial institutions in China. The wealth management products invest in a pool of liquid financial assets in the interbank
market or exchange, including debt securities, asset backed securities, interbank lending, reverse repurchase agreements and bank deposits.
The products can be redeemed on weekdays on demand.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 41; Value: 1 --><div>
    </div><div style="border-bottom: Black 1.5pt solid; margin-top: 12pt; margin-bottom: 6pt"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->41<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="margin: 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>




</div><p style="margin: 0">&#160;</p><div>


</div><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">6</td><td>Investment securities(continued)</td></tr><tr style="vertical-align: top">
<td>&#160;</td><td>&#160;</td></tr>
                                                                             </table><div>

</div><ix:continuation continuedAt="_InvestmentsInDebtAndMarketableEquitySecuritiesAndCertainTradingAssetsDisclosureTextBlock-c0_cont_8" id="_InvestmentsInDebtAndMarketableEquitySecuritiesAndCertainTradingAssetsDisclosureTextBlock-c0_cont_7"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">(b)</td><td>Debt securities</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_InvestmentsInDebtAndMarketableEquitySecuritiesAndCertainTradingAssetsDisclosureTextBlock-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The debt securities are in the form of an investment in partnership,
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to the Group quarterly, along with an <ix:nonFraction contextRef="c2" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:AccountsPayableInterestBearingInterestRate" scale="-2" unitRef="pure">8</ix:nonFraction>% interest. The principle and interests are required to be fully repaid within <ix:nonNumeric contextRef="c2" format="ixt-sec:duryear" name="us-gaap:LongTermDebtTerm">3</ix:nonNumeric> years. As of December
31, 2022, the investment has an amortized cost of RMB<ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ServicingAssetAtAmortizedValue" scale="0" unitRef="cny">286,077,339</ix:nonFraction> with an allowance for credit loss of RMB<ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="cnf:FinancingReceivableAllowanceForCreditLosses1" scale="0" unitRef="cny">15,248,938</ix:nonFraction>, and the held-to-maturity
debt securities have an amortized cost of RMB<ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:HeldToMaturitySecuritiesDebtMaturitiesSingleMaturityDateAmortizedCostBasis" scale="0" unitRef="cny">4,198,055</ix:nonFraction> with an allowance for credit loss of RMB<ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:HeldtomaturitySecuritiesDebtMaturitiesRollingYearTwoThroughFiveAmortizedCost" scale="0" unitRef="cny">719,622</ix:nonFraction>. The Group has the intent and ability
to hold the investments to maturity or payoff.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_PropertyPlantAndEquipmentDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:PropertyPlantAndEquipmentDisclosureTextBlock"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.5in; text-align: left">7</td><td style="text-align: left">Property and equipment</td>
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</div><div>

</div><ix:continuation continuedAt="_PropertyPlantAndEquipmentDisclosureTextBlock-c0_cont_2" id="_PropertyPlantAndEquipmentDisclosureTextBlock-c0_cont_1"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:PropertyPlantAndEquipmentTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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    <td style="text-indent: -7.1pt; padding-left: 7.1pt">&#160;</td><td>&#160;</td>
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</div><div>

</div><ix:continuation id="_PropertyPlantAndEquipmentDisclosureTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Total depreciation expense for the years ended December 31, 2021 and
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_GoodwillAndIntangibleAssetsDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:GoodwillAndIntangibleAssetsDisclosureTextBlock"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">8</td><td>Intangible assets and goodwill</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_GoodwillAndIntangibleAssetsDisclosureTextBlock-c0_cont_2" id="_GoodwillAndIntangibleAssetsDisclosureTextBlock-c0_cont_1"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfIntangibleAssetsAndGoodwillTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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    <td>&#160;</td><td style="font-weight: bold">&#160;</td>
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<td style="width: 0.5in">(a)</td><td>Intangible assets</td></tr></table><p style="margin: 0">&#160;</p></ix:continuation><div>

</div><div>

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    <td colspan="2" style="font-weight: bold; text-align: center">RMB</td><td style="font-weight: bold">&#160;</td><td style="font-weight: bold">&#160;</td>
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    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt; text-align: right">&#160;</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td></tr>
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</div><div>


</div><!-- Field: Page; Sequence: 42; Value: 1 --><div>
    </div><div style="border-bottom: Black 1.5pt solid; margin-top: 12pt; margin-bottom: 6pt"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->42<!-- Field: /Sequence --></p></div><div>
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</div><p style="margin: 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>




</div><p style="margin: 0">&#160;</p><div>


</div><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">8</td><td>Intangible assets and goodwill (continued)</td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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assets. The Group based its projections of amortization expense shown below on existing asset balances as of December 31, 2022. Future
amortization expense may vary from these projections.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_GoodwillAndIntangibleAssetsDisclosureTextBlock-c0_cont_5"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:FiniteLivedIntangibleAssetsAmortizationExpenseTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom">
    <td style="text-align: left">&#160;</td><td style="font-weight: bold; font-style: normal">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-181">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-182">-</div></td><td style="text-align: left">&#160;</td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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<td style="width: 0.5in">9</td><td>Deposits</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>

</div><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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<td style="width: 0.5in">10</td><td>Guaranteed assets</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>

</div><div>

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if the loan increase in guaranteed recoverable assets guaranteed by the CRMPs is probable and estimable. If the increase in guaranteed
recoverable assets is probable and estimable, the amount guaranteed by the CRMPs is recognized as guaranteed assets.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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<td style="width: 0.5in">11</td><td>Other assets</td></tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:nonNumeric><div>

</div><div>

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    <td style="white-space: nowrap"><b>&#160;</b></td><td style="white-space: nowrap; font-style: italic; padding-bottom: 1.5pt"><b>&#160;</b></td>
    <td style="border-bottom: Black 1.5pt solid; white-space: nowrap; font-style: italic; text-align: center"><b>Note</b></td><td style="white-space: nowrap; font-weight: bold; font-style: italic; padding-bottom: 1.5pt"><b>&#160;</b></td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="font-style: italic; text-align: center">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="font-style: italic; text-align: center">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-185">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="font-style: italic; text-align: center; padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -7.1pt; padding-left: 7.1pt">&#160;</td><td style="font-style: italic">&#160;</td>
    <td style="font-style: italic; text-align: center">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="font-style: italic; text-align: center; padding-bottom: 4pt">&#160;</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OtherReceivablesNetCurrent" scale="0" unitRef="cny">404,826,131</ix:nonFraction></td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OtherReceivablesNetCurrent" scale="0" unitRef="cny">669,888,900</ix:nonFraction></td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">&#160;</td></tr>
  </table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:nonNumeric></ix:continuation><div>






</div><div>

</div><ix:continuation continuedAt="_OtherAssetsDisclosureTextBlock-c0_cont_3" id="_OtherAssetsDisclosureTextBlock-c0_cont_2"><ix:continuation continuedAt="_ScheduleOfOtherAssetsTableTextBlock-c0_cont_2" id="_ScheduleOfOtherAssetsTableTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left">(i)</td><td><ix:footnote id="ix_5_footnote" xml:lang="en-US">As mentioned in Note 5, the Group transferred the delinquent
loans to third parties so that the Group could collect the payment more quickly than to simply dispose the collaterals through litigation.
The transferred loans have been isolated from the Group. There is no constrain on the transferee&#8217;s rights to pledge or exchange.
The Group does not maintain effective control of transferred loans and loan transfers accounted for as sales are the transfer transactions
without repurchase agreements. In 2021, the Group transferred loans under traditional facilitation model with balances amounting to RMB<ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:LoansPayable" scale="0" unitRef="cny">990,485,783</ix:nonFraction>
to Guangzhou Minghui Capital Management Co., Ltd. (&#8220;Guangzhou Minghui&#8221;) for transfer price of RMB<ix:nonFraction contextRef="c392" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:LoansPayable" scale="0" unitRef="cny">350,783,000</ix:nonFraction>. As of December
31, 2022, the amount due from Guangzhou Minghui for such transfer is RMB<ix:nonFraction contextRef="c393" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:LoansPayable" scale="0" unitRef="cny">27,769,074</ix:nonFraction>.</ix:footnote></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="margin: 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>




</div><p style="margin: 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">11</td><td>Other Assets (continued)</td></tr></table><div>
</div><p style="margin: 0">&#160;</p><div>


</div><ix:continuation continuedAt="_OtherAssetsDisclosureTextBlock-c0_cont_4" id="_OtherAssetsDisclosureTextBlock-c0_cont_3"><ix:continuation continuedAt="_ScheduleOfOtherAssetsTableTextBlock-c0_cont_3" id="_ScheduleOfOtherAssetsTableTextBlock-c0_cont_2"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left">(ii)</td><td style="text-align: left"><ix:footnote id="ix_6_footnote" xml:lang="en-US">Guarantee deposits are deposits that the Group provided, through
Guangdong Nanfeng Financial Guarantee Group Co., Ltd (&#8220;Guangzhou Nanfeng&#8221;), which holds a financial guarantee license, for
loans granted (a) under its consolidated VIE Zhonghai Lanhai Structured Fund 30-X, which is not structured in a stratified way and requires
guarantee from a third party, and (b) under the cooperation with commercial banks for introduction of borrowers and provision of post-origination
services, refer to Note 2(e)(ii) Off-balance sheet loans.</ix:footnote></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OtherAssetsDisclosureTextBlock-c0_cont_5" id="_OtherAssetsDisclosureTextBlock-c0_cont_4"><ix:continuation continuedAt="_ScheduleOfOtherAssetsTableTextBlock-c0_cont_4" id="_ScheduleOfOtherAssetsTableTextBlock-c0_cont_3"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left">(iii)</td><td style="text-align: left"><ix:footnote id="ix_7_footnote" xml:lang="en-US">The Group disposed of one of its wholly-owned subsidiaries
Ningbo Lianjia Enterprise Management Advisory Co., Ltd. to an unrelated third party in 2021 and relevant consideration was received in
January 2022.</ix:footnote></td>
</tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OtherAssetsDisclosureTextBlock-c0_cont_6" id="_OtherAssetsDisclosureTextBlock-c0_cont_5"><ix:continuation continuedAt="_ScheduleOfOtherAssetsTableTextBlock-c0_cont_5" id="_ScheduleOfOtherAssetsTableTextBlock-c0_cont_4"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left">(iv)</td><td style="text-align: left">In June 2016, the Group invested <ix:nonFraction contextRef="c394" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:StockRepurchaseProgramNumberOfSharesAuthorizedToBeRepurchased" scale="0" unitRef="shares">10,003,334</ix:nonFraction> shares at RMB<ix:nonFraction contextRef="c395" decimals="2" format="ixt:num-dot-decimal" name="cnf:GroupInvested" scale="0" unitRef="cnyPershares">3.00</ix:nonFraction>
per share, which represents <ix:nonFraction contextRef="c394" decimals="4" format="ixt:num-dot-decimal" name="cnf:PercentageOfPaidUpCapitalInvested" scale="-2" unitRef="pure">2.14</ix:nonFraction>% of the paid-in capital in Guangdong Qingyuan Rural Commercial Bank (&#8220;Qingyuan Rural&#8221;).
The Group transferred <ix:nonFraction contextRef="c396" decimals="-6" format="ixt:num-dot-decimal" name="cnf:UnrelatedThirdPartyShares" scale="6" unitRef="shares">2</ix:nonFraction> million shares to an unrelated third party at RMB<ix:nonFraction contextRef="c397" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:CostMethodInvestments" scale="0" unitRef="cny">3.00</ix:nonFraction> per share that is same as the investment cost on September
18, 2019. As of December 31, 2021 and 2022, the Group invested <ix:nonFraction contextRef="c3" decimals="4" format="ixt:num-dot-decimal" name="cnf:PercentageOfPaidUpCapitalInvested" scale="-2" unitRef="pure"><ix:nonFraction contextRef="c2" decimals="4" format="ixt:num-dot-decimal" name="cnf:PercentageOfPaidUpCapitalInvested" scale="-2" unitRef="pure">1.72</ix:nonFraction></ix:nonFraction>% of the paid-in capital in Qingyuan Rural. Qingyuan Rural has paid-in
capital of RMB<ix:nonFraction contextRef="c398" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AdditionalPaidInCapital" scale="0" unitRef="cny">1,400,000,000</ix:nonFraction>, and the Group has invested RMB<ix:nonFraction contextRef="c398" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:InvestmentOwnedAtFairValue" scale="0" unitRef="cny">24,010,000</ix:nonFraction> in Qingyuan Rural.</td>
</tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OtherAssetsDisclosureTextBlock-c0_cont_7" id="_OtherAssetsDisclosureTextBlock-c0_cont_6"><ix:continuation continuedAt="_ScheduleOfOtherAssetsTableTextBlock-c0_cont_6" id="_ScheduleOfOtherAssetsTableTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in">In January 2022, the Group and Guangzhou Minghui set up Guangzhou
Mingfeng Partnership (&#8220;Guangzhou Mingfeng&#8221;). The total paid-in capital was RMB<ix:nonFraction contextRef="c399" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:InvestmentOwnedAtFairValue" scale="0" unitRef="cny">40,000,000</ix:nonFraction> and the Group has invested RMB<ix:nonFraction contextRef="c400" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:InvestmentOwnedAtFairValue" scale="0" unitRef="cny">25,000,000</ix:nonFraction>
in Guangzhou Mingfeng.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OtherAssetsDisclosureTextBlock-c0_cont_8" id="_OtherAssetsDisclosureTextBlock-c0_cont_7"><ix:continuation continuedAt="_ScheduleOfOtherAssetsTableTextBlock-c0_cont_7" id="_ScheduleOfOtherAssetsTableTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in">The measurement alternative is selected for the above non-marketable
equity securities. Under the measurement alternative, the equity securities without readily determinable fair value are measured at cost
minus impairment and adjusted for changes in observable prices. No change in observable price has been identified and no impairment has
been recorded for the two years of 2021 and 2022.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.75in">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OtherAssetsDisclosureTextBlock-c0_cont_9" id="_OtherAssetsDisclosureTextBlock-c0_cont_8"><ix:continuation continuedAt="_ScheduleOfOtherAssetsTableTextBlock-c0_cont_8" id="_ScheduleOfOtherAssetsTableTextBlock-c0_cont_7"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left">(v)</td><td style="text-align: left"><ix:footnote id="ix_9_footnote" xml:lang="en-US">Amounts due from employees mainly include temporary advances
to employees for payments of collateral evaluation fee, mortgage handling fee, payments for office supplies, etc. on behalf of the Group.</ix:footnote></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation id="_OtherAssetsDisclosureTextBlock-c0_cont_9"><ix:continuation id="_ScheduleOfOtherAssetsTableTextBlock-c0_cont_8"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left">(vi)</td><td style="text-align: left"><ix:footnote id="ix_10_footnote" xml:lang="en-US">the receivables for realization of collaterals under traditional
model is RMB<ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ReceivablesFromCustomers" scale="0" unitRef="cny">238,616</ix:nonFraction> and the receivables for realization of collaterals under commercial bank partnership model is RMB<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AverageCollectedCashBalancesWithCommercialBanksFederalHomeLoanBank" scale="0" unitRef="cny">30,784,359</ix:nonFraction>.</ix:footnote></td>
</tr></table></ix:continuation></ix:continuation><div>




</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="margin: 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

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</div><p style="margin: 0">&#160;</p><div>


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<td>&#160;</td><td>&#160;</td></tr>
                                                                         </table></ix:nonNumeric><div>

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</div><div>

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</div><div>

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</div><div>

</div><ix:continuation continuedAt="_DebtDisclosureTextBlock-c0_cont_5" id="_DebtDisclosureTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><b>Funds obtained from financial institutions</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

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</div><div>

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</div><div>


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</div><p style="margin: 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>




</div><p style="margin: 0">&#160;</p><div>


</div><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">12</td><td>Interest-bearing borrowings (continued)</td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><div>

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</div><div>

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</div><div>




</div><p style="margin-top: 0; margin-bottom: 0"></p><div>

</div><!-- Field: Page; Sequence: 46; Value: 1 --><div>
    </div><div style="border-bottom: Black 1.5pt solid; margin-top: 12pt; margin-bottom: 6pt"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->46<!-- Field: /Sequence --></p></div><div>
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</div><p style="margin: 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>




</div><p style="margin: 0">&#160;</p><div>


</div><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">12</td><td>Interest-bearing borrowings (continued)</td></tr><tr style="vertical-align: top">
<td>&#160;</td><td>&#160;</td></tr>
                                                                                     </table><div>

</div><ix:continuation continuedAt="_DebtDisclosureTextBlock-c0_cont_12" id="_DebtDisclosureTextBlock-c0_cont_11"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">(b)</td><td>Other borrowings</td></tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation><div>

</div><div>

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  <tr style="vertical-align: bottom">
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    <td style="text-align: right; text-indent: 0in; padding-left: 7.1pt">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><div>

</div><ix:continuation continuedAt="_DebtDisclosureTextBlock-c0_cont_14" id="_DebtDisclosureTextBlock-c0_cont_13"><ix:continuation id="_ScheduleOfDebtTableTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
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</div><div>

</div><ix:continuation continuedAt="_DebtDisclosureTextBlock-c0_cont_15" id="_DebtDisclosureTextBlock-c0_cont_14"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Aggregate annual maturities of long-term borrowing obligations (based
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</div><div>

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    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 7%; text-align: right">&#160;</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 47; Value: 1 --><div>
    </div><div style="border-bottom: Black 1.5pt solid; margin-top: 12pt; margin-bottom: 6pt"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->47<!-- Field: /Sequence --></p></div><div>
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</div><p style="margin: 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>




</div><p style="margin: 0">&#160;</p><div>


</div><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">12</td><td>Interest-bearing borrowings (continued)</td></tr><tr style="vertical-align: top">
<td>&#160;</td><td>&#160;</td></tr>
                                                                                     </table><div>

</div><ix:continuation continuedAt="_DebtDisclosureTextBlock-c0_cont_17" id="_DebtDisclosureTextBlock-c0_cont_16"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">(c)</td><td>Pledged assets</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DebtDisclosureTextBlock-c0_cont_18" id="_DebtDisclosureTextBlock-c0_cont_17"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The Group pledges certain assets to secure borrowings under agreements
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</div><div>

</div><ix:continuation id="_DebtDisclosureTextBlock-c0_cont_18"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfFinancialInstrumentsOwnedAndPledgedAsCollateralTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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    <td style="padding-bottom: 1.5pt; white-space: nowrap">&#160;</td><td style="padding-bottom: 1.5pt; white-space: nowrap; font-weight: bold; font-style: italic">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; font-style: normal">&#160;</td>
    <td colspan="2" style="font-weight: bold; font-style: normal; text-align: center">RMB</td><td style="font-weight: bold; font-style: normal">&#160;</td><td style="font-weight: bold; font-style: normal">&#160;</td>
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    <td style="width: 80%; text-indent: -7.1pt; padding-left: 7.1pt">&#160;</td><td style="width: 1%">&#160;</td>
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    <td style="font-weight: bold; padding-bottom: 4pt; text-indent: -7.1pt; padding-left: 7.1pt">Total</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
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  </table></ix:nonNumeric></ix:continuation><div>





</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_ConcentrationRiskDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:ConcentrationRiskDisclosureTextBlock"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">13</td><td>Credit risk mitigation position</td></tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_ConcentrationRiskDisclosureTextBlock-c0_cont_2" id="_ConcentrationRiskDisclosureTextBlock-c0_cont_1"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfCededCreditRiskByReinsurerTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; font-style: italic; text-align: center">December 31,<br/> 2022</td><td style="padding-bottom: 1.5pt; font-weight: bold; font-style: italic">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; font-style: normal">&#160;</td>
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>



</div><div>

</div><ix:continuation id="_ConcentrationRiskDisclosureTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Under the collaboration model, the Group collaborates with sales partners
who are dedicated to introduce the Group&#8217;s loan services to prospective borrowers. The sales partners need to place security deposits
ranging from <ix:nonFraction contextRef="c447" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:PercentageOfInterestBearingDomesticDepositsToDeposits" scale="-2" unitRef="pure">10</ix:nonFraction>%-<ix:nonFraction contextRef="c448" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:PercentageOfInterestBearingDomesticDepositsToDeposits" scale="-2" unitRef="pure">25</ix:nonFraction>% of the loans issued to the borrowers introduced by them (such contribution, the &#8220;credit risk mitigation position&#8221;)
to the Group. The credit risk mitigation position will be transferred into an account designated by the Group and is fully refundable
upon repayment of the loan the credit risk mitigation position is associated with.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 48; Value: 1 --><div>
    </div><div style="border-bottom: Black 1.5pt solid; margin-top: 12pt; margin-bottom: 6pt"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->48<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="margin: 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>




</div><p style="margin: 0">&#160;</p><div>





</div><ix:nonNumeric contextRef="c0" continuedAt="_OtherLiabilitiesDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:OtherLiabilitiesDisclosureTextBlock"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">14</td><td>Other liabilities</td></tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_OtherLiabilitiesDisclosureTextBlock-c0_cont_2" id="_OtherLiabilitiesDisclosureTextBlock-c0_cont_1"><ix:nonNumeric contextRef="c0" continuedAt="_OtherLiabilitiesTableTextBlock-c0_cont_1" escape="true" name="us-gaap:OtherLiabilitiesTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td><b>&#160;</b></td><td style="font-style: italic; padding-bottom: 1.5pt"><b>&#160;</b></td>
    <td style="border-bottom: Black 1.5pt solid; font-style: italic; text-align: center"><b>Note</b></td><td style="font-weight: bold; font-style: italic; padding-bottom: 1.5pt"><b>&#160;</b></td>
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    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; font-style: italic; text-align: center"><b>December&#160;31,<br/>
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-style: italic">&#160;</td>
    <td style="font-style: italic; text-align: center">&#160;</td><td style="font-weight: bold; font-style: normal">&#160;</td>
    <td colspan="2" style="font-weight: bold; font-style: normal; text-align: center">RMB</td><td style="font-weight: bold; font-style: normal">&#160;</td><td style="font-weight: bold; font-style: normal">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-style: italic">&#160;</td>
    <td style="font-style: italic; text-align: center">&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="font-style: normal; text-align: center">(i)</td><td>&#160;</td>
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    <td style="width: 9%; font-style: normal; text-align: center; padding-left: 5.4pt">(ii)</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -7.1pt; padding-left: 7.1pt">Settlement and clearing accounts</td><td style="font-style: normal">&#160;</td>
    <td style="font-style: normal; text-align: center; padding-left: 5.4pt">(iii)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" id="ix_43_fact" name="cnf:SettlementAndClearingAccounts" scale="0" unitRef="cny">74,255,253</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" id="ix_44_fact" name="cnf:SettlementAndClearingAccounts" scale="0" unitRef="cny">135,652,186</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; text-indent: -7.1pt; padding-left: 7.1pt">Other tax payables</td><td style="font-style: normal">&#160;</td>
    <td style="font-style: normal; text-align: center; padding-left: 5.4pt">(iv)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" id="ix_45_fact" name="us-gaap:SalesAndExciseTaxPayableCurrentAndNoncurrent" scale="0" unitRef="cny">70,756,236</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" id="ix_46_fact" name="us-gaap:SalesAndExciseTaxPayableCurrentAndNoncurrent" scale="0" unitRef="cny">74,985,486</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -7.1pt; padding-left: 7.1pt">Collaboration cost payable</td><td style="font-style: normal">&#160;</td>
    <td style="font-style: normal; text-align: center; padding-left: 5.4pt">(v)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" id="ix_49_fact" name="cnf:CollaborationCostPayable" scale="0" unitRef="cny">59,554,661</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" id="ix_50_fact" name="cnf:CollaborationCostPayable" scale="0" unitRef="cny">50,393,275</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; text-indent: -7.1pt; padding-left: 7.1pt">Customer pledged deposits</td><td style="font-style: normal">&#160;</td>
    <td style="font-style: normal; text-align: center; padding-left: 5.4pt">(vi)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" id="ix_51_fact" name="us-gaap:ProceedsFromDepositsFromCustomers" scale="0" unitRef="cny">40,363,129</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" id="ix_52_fact" name="us-gaap:ProceedsFromDepositsFromCustomers" scale="0" unitRef="cny">39,296,162</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -7.1pt; padding-left: 7.1pt">Receipt in advance</td><td style="font-style: normal">&#160;</td>
    <td style="font-style: normal; text-align: center; padding-left: 5.4pt">(vii)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" id="ix_53_fact" name="cnf:ReceiptInAdvance" scale="0" unitRef="cny">53,125,074</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" id="ix_54_fact" name="cnf:ReceiptInAdvance" scale="0" unitRef="cny">35,645,384</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; text-indent: -7.1pt; padding-left: 7.1pt">Amounts due to third parties</td><td style="font-style: italic">&#160;</td>
    <td style="font-style: italic; text-align: center; padding-left: 5.4pt">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DepositLiabilityCurrent" scale="0" unitRef="cny">216,526,655</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -7.1pt; padding-left: 7.1pt">Accrued expenses</td><td style="font-style: normal">&#160;</td>
    <td style="font-style: normal; text-align: center; padding-left: 5.4pt">(viii)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="font-style: normal; text-align: center; padding-bottom: 1.5pt; padding-left: 5.4pt">(ix)</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -7.1pt; padding-left: 7.1pt">&#160;</td><td style="font-style: italic">&#160;</td>
    <td style="font-style: italic; text-align: center; padding-left: 5.4pt">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-bottom: 4pt; font-weight: bold; text-indent: -7.1pt; padding-left: 7.1pt">Total</td><td style="padding-bottom: 4pt; font-style: italic">&#160;</td>
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</div><div>

</div><ix:continuation continuedAt="_OtherLiabilitiesDisclosureTextBlock-c0_cont_3" id="_OtherLiabilitiesDisclosureTextBlock-c0_cont_2"><ix:continuation continuedAt="_OtherLiabilitiesTableTextBlock-c0_cont_2" id="_OtherLiabilitiesTableTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left">(i)</td><td><ix:footnote id="ix_12_footnote" xml:lang="en-US">Under the collaboration model, sales partners are required
to provide a certain level of guarantee of repayment for loans recommended. Guarantee repayments from sales partner mainly consist of
repayments collected from sales partners who exercise the guarantee, and those repayments will be returned to trust company. In accordance
with the Company&#8217;s PRC subsidiaries&#8217; articles of associate, the subsidiaries are required to appropriate <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:ParticipatingPolicyPercentageOfPremiumIncome" scale="-2" unitRef="pure">10</ix:nonFraction>% of their net
incomes, upon approval by board of directors.</ix:footnote></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OtherLiabilitiesDisclosureTextBlock-c0_cont_4" id="_OtherLiabilitiesDisclosureTextBlock-c0_cont_3"><ix:continuation continuedAt="_OtherLiabilitiesTableTextBlock-c0_cont_3" id="_OtherLiabilitiesTableTextBlock-c0_cont_2"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left">(ii)</td><td style="text-align: left">In 2021, the Group started to cooperate with a third-party
guarantee company, Guangzhou Nanfeng, that directly provides guarantee services to commercial banks. According to relevant financial
guarantee arrangements, Guangzhou Nanfeng will fulfil its obligations to purchase defaulted loans. However, the Group is required to
provide deposits and replenish such deposits from time to time to Guangzhou Nanfeng for its obligations of purchasing defaulted loans.
Effectively, the Group provides back-to-back guarantee to Guangzhou Nanfeng and takes on all of the credit risk of the borrowers. These
financial guarantee contracts are accounted for as guarantee liabilities under ASC 460, Guarantees.</td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

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</div><div>

</div><ix:continuation continuedAt="_OtherLiabilitiesDisclosureTextBlock-c0_cont_6" id="_OtherLiabilitiesDisclosureTextBlock-c0_cont_5"><ix:continuation continuedAt="_OtherLiabilitiesTableTextBlock-c0_cont_5" id="_OtherLiabilitiesTableTextBlock-c0_cont_4"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left">(iii)</td><td style="text-align: left"><ix:footnote id="ix_14_footnote" xml:lang="en-US">The Group transferred loans to third party investors and recorded
these transactions as sales in Note 5(c). After the transfer, the contract terms related to payment proceeds from the loans remain the
same: The Group collects payments of loans and then disburses the proceeds from the relevant loans to third-party transferees.</ix:footnote></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OtherLiabilitiesDisclosureTextBlock-c0_cont_7" id="_OtherLiabilitiesDisclosureTextBlock-c0_cont_6"><ix:continuation continuedAt="_OtherLiabilitiesTableTextBlock-c0_cont_6" id="_OtherLiabilitiesTableTextBlock-c0_cont_5"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left">(iv)</td><td style="text-align: left"><ix:footnote id="ix_15_footnote" xml:lang="en-US">Other tax payables mainly represent value-added tax and surcharges
payables.</ix:footnote></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OtherLiabilitiesDisclosureTextBlock-c0_cont_8" id="_OtherLiabilitiesDisclosureTextBlock-c0_cont_7"><ix:continuation continuedAt="_OtherLiabilitiesTableTextBlock-c0_cont_7" id="_OtherLiabilitiesTableTextBlock-c0_cont_6"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left">(v)</td><td style="text-align: left"><ix:footnote id="ix_17_footnote" xml:lang="en-US">As mentioned in Note 21, the Group will pay collaboration
cost to the sales partners who introduce prospective borrowers to the Group. The collaboration cost for sales partners is a fixed percentage
of the loan principal amount and is calculated by subtracting the project cost from interest and fees income received from borrowers.</ix:footnote></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OtherLiabilitiesDisclosureTextBlock-c0_cont_9" id="_OtherLiabilitiesDisclosureTextBlock-c0_cont_8"><ix:continuation continuedAt="_OtherLiabilitiesTableTextBlock-c0_cont_8" id="_OtherLiabilitiesTableTextBlock-c0_cont_7"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left">(vi)</td><td style="text-align: left"><ix:footnote id="ix_18_footnote" xml:lang="en-US">Customer pledged deposits mainly consist of the deposits collected
from certain customers to reduce the risk of failure to make payments on schedule.</ix:footnote></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OtherLiabilitiesDisclosureTextBlock-c0_cont_10" id="_OtherLiabilitiesDisclosureTextBlock-c0_cont_9"><ix:continuation continuedAt="_OtherLiabilitiesTableTextBlock-c0_cont_9" id="_OtherLiabilitiesTableTextBlock-c0_cont_8"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left">(vii)</td><td style="text-align: left"><ix:footnote id="ix_19_footnote" xml:lang="en-US">Receipt in advance consists of advance for interest and financing
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</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OtherLiabilitiesDisclosureTextBlock-c0_cont_11" id="_OtherLiabilitiesDisclosureTextBlock-c0_cont_10"><ix:continuation continuedAt="_OtherLiabilitiesTableTextBlock-c0_cont_10" id="_OtherLiabilitiesTableTextBlock-c0_cont_9"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left">(viii)</td><td style="text-align: left"><ix:footnote id="ix_20_footnote" xml:lang="en-US">Accrued expenses mainly consist of promotional costs relating
to building the collaboration model and expenses payable to consultants such as the auditor and lawyer.</ix:footnote></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation id="_OtherLiabilitiesDisclosureTextBlock-c0_cont_11"><ix:continuation id="_OtherLiabilitiesTableTextBlock-c0_cont_10"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left">(ix)</td><td style="text-align: left"><ix:nonNumeric contextRef="c0" name="cnf:OtherLiabilitiesDescription"><ix:footnote id="ix_16_footnote" xml:lang="en-US">Other liabilities are expected to be settled or recognized
as income within one year or are repayable on demand.</ix:footnote></ix:nonNumeric></td>
</tr></table></ix:continuation></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 28.35pt; text-indent: -28.35pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="margin: 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>




</div><p style="margin: 0">&#160;</p><div>


</div><ix:nonNumeric contextRef="c0" continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:StockholdersEquityNoteDisclosureTextBlock"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">15</td><td>Ordinary shares</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_2" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">On January 8, 2014, the Company was incorporated in the Cayman Islands
with authorized share capital of HKD<ix:nonFraction contextRef="c451" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CapitalUnits" scale="0" unitRef="hkd">380,000</ix:nonFraction> divided into <ix:nonFraction contextRef="c451" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CapitalUnitsAuthorized" scale="0" unitRef="shares">3,800,000,000</ix:nonFraction> shares of a nominal or par value of HKD0<ix:nonFraction contextRef="c451" decimals="4" name="us-gaap:SharePrice" scale="0" unitRef="hkdPershares">.0001</ix:nonFraction> each. Upon the incorporation
of the Company, one subscriber&#8217;s share was allotted and issued to Kevin Butler at a consideration of HKD0<ix:nonFraction contextRef="c451" decimals="4" name="us-gaap:SaleOfStockPricePerShare" scale="0" unitRef="usdPershares">.0001</ix:nonFraction>, representing <ix:nonFraction contextRef="c452" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:SaleOfStockPercentageOfOwnershipAfterTransaction" scale="-2" unitRef="pure">100</ix:nonFraction>%
of the entire ordinary share of the Company. On the same date, such share was transferred to Complete Joy Investments Limited (&#8220;Complete
Joy&#8221;) at nil consideration. As a result, Complete Joy was the sole owner of the Company.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_3" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">On July 11, 2018, the Company repurchased of a total of <ix:nonFraction contextRef="c453" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:StockRepurchasedDuringPeriodShares" scale="0" unitRef="shares">1,230,434,041</ix:nonFraction>
shares of HKD0.<ix:nonFraction contextRef="c454" decimals="0" name="us-gaap:SharePrice" scale="0" unitRef="usdPershares">0001</ix:nonFraction> each share, following by issuing a total of <ix:nonFraction contextRef="c453" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:StockIssuedDuringPeriodSharesNewIssues" scale="0" unitRef="shares">1,230,434,040</ix:nonFraction> shares of USD0.0001 each share. <ix:nonNumeric contextRef="c453" name="cnf:RedenominationDescription">As the result of the above
redenomination, the par value of the Company&#8217;s shares has been changed from HKD0.0001 to USD0.0001, and its authorized share capital
has been increased to USD380,000 divided into 3,800,000,000 shares of USD0.0001 each.</ix:nonNumeric></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_4" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Upon the IPO on November 7, 2018 and exercise of the green shoes options,
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November 21, 2018, priced at USD7<ix:nonFraction contextRef="c457" decimals="1" name="cnf:SharesPricePerADS" scale="0" unitRef="usdPershares">.5</ix:nonFraction> per ADS.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">As disclosed in Note 27, on July 19, 2021, <ix:nonFraction contextRef="c458" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:TemporaryEquitySharesIssued" scale="0" unitRef="shares">187,933,720</ix:nonFraction> ordinary shares
were issued to JPMorgan Chase Bank N.A. (the &#8220;Depositary&#8221;) as a reserve pool for future issuances upon the exercise of share
options granted under the 2018 Option to the Group&#8217;s management members and employees. All shareholder rights of these <ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:TemporaryEquitySharesIssued" scale="0" unitRef="shares">187,933,720</ix:nonFraction>
ordinary shares including but not limited to voting rights and dividend rights are unconditionally waived until the corresponding shares
are exercised. While the ordinary shares were legally issued to the Depositary, the Depositary does not have any of the rights associated
with the ordinary shares, as such the Group accounted for these shares as issued but not outstanding until the waiver is released by the
Group, which occur when the share options are exercised and ordinary shares are transferred to the management members and employees.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="border-bottom: Black 1.5pt solid; margin-top: 12pt; margin-bottom: 6pt"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->50<!-- Field: /Sequence --></p></div><div>
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</div><p style="margin: 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>




</div><p style="margin: 0">&#160;</p><div>


</div><ix:nonNumeric contextRef="c0" continuedAt="cnf_AdditionalPaidInCapitalDisclosureTextBlock-c0_cont_1" escape="true" name="cnf:AdditionalPaidInCapitalDisclosureTextBlock"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.5in; text-align: left">16</td><td style="text-align: left">Additional paid-in capital</td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>



</div><div>

</div><ix:continuation id="cnf_AdditionalPaidInCapitalDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Additional paid-in capital represents (1) the difference between the
nominal value of share capital and the paid-up capital of the Group; (2) the difference between the purchase price and the proportionate
share of the identifiable net assets of Guangzhou Anyu when the Group acquired its remaining shares to take full ownership; (3) the portion
of the grant date fair value of unexercised share options granted to employees of the Group that has been recognized.</p></ix:continuation><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: -28.35pt">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="cnf_RetainedEarningsDisclosureTextBlock-c0_cont_1" escape="true" name="cnf:RetainedEarningsDisclosureTextBlock"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">17</td><td>Retained earnings</td></tr></table><p style="margin: 0">&#160;</p></ix:nonNumeric><div>


</div><div>

</div><ix:continuation continuedAt="cnf_RetainedEarningsDisclosureTextBlock-c0_cont_2" id="cnf_RetainedEarningsDisclosureTextBlock-c0_cont_1"><ix:nonNumeric contextRef="c0" continuedAt="cnf_ScheduleOfRetainedEarningsTableTextBlock-c0_cont_1" escape="true" name="cnf:ScheduleOfRetainedEarningsTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-style: italic; text-align: center"><b>Note</b></td><td style="padding-bottom: 1.5pt; font-style: italic"><b>&#160;</b></td><td style="font-weight: bold; font-style: italic; padding-bottom: 1.5pt"><b>&#160;</b></td>
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</div><div>

</div><ix:continuation continuedAt="cnf_RetainedEarningsDisclosureTextBlock-c0_cont_3" id="cnf_RetainedEarningsDisclosureTextBlock-c0_cont_2"><ix:continuation continuedAt="cnf_ScheduleOfRetainedEarningsTableTextBlock-c0_cont_2" id="cnf_ScheduleOfRetainedEarningsTableTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
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</div><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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<td style="width: 0in"></td><td style="width: 0.5in; text-align: left">18</td><td style="text-align: left">Accumulated other comprehensive losses</td>
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</div><div>



</div><ix:continuation continuedAt="_ComprehensiveIncomeNoteTextBlock-c0_cont_2" id="_ComprehensiveIncomeNoteTextBlock-c0_cont_1"><ix:nonNumeric contextRef="c0" continuedAt="_ScheduleOfAccumulatedOtherComprehensiveIncomeLossTableTextBlock-c0_cont_1" escape="true" name="us-gaap:ScheduleOfAccumulatedOtherComprehensiveIncomeLossTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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</div><div>

</div><ix:continuation id="_ComprehensiveIncomeNoteTextBlock-c0_cont_2"><ix:continuation id="_ScheduleOfAccumulatedOtherComprehensiveIncomeLossTableTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; font-style: normal">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td></tr>
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    <td style="border-bottom: Black 1.5pt solid; width: 1%; text-align: left"></td><td style="border-bottom: Black 1.5pt solid; width: 9%; text-align: right">(<ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AccumulatedOtherComprehensiveIncomeLossFinancialLiabilityFairValueOptionAfterTax" scale="0" sign="-" unitRef="cny">25,393,515</ix:nonFraction></td><td style="padding-bottom: 1.5pt; width: 1%; text-align: left">)</td><td style="padding-bottom: 1.5pt; width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&#160;</p><div>

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</div><p style="margin: 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>




</div><p style="margin: 0">&#160;</p><div>


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<td style="width: 0in"></td><td style="width: 0.5in; text-align: left">19</td><td style="text-align: left">Interest and fees income</td>
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</div><div>



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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><div>

</div><ix:continuation continuedAt="cnf_InterestAndFinancingServiceFeeOnLoansTextBlock-c0_cont_3" id="cnf_InterestAndFinancingServiceFeeOnLoansTextBlock-c0_cont_2"><ix:continuation continuedAt="_InterestAndOtherIncomeTableTextBlock-c0_cont_2" id="_InterestAndOtherIncomeTableTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.35in">(i)</td><td><ix:footnote id="ix_23_footnote" xml:lang="en-US">Interest and financing service fees on loans, which include financing service fees on loans, are recognized in the consolidated statements
of comprehensive income using the effective interest method. Financing service fees on loans, are deferred and amortized over the contractual
life of the related loans utilizing the effective interest method.</ix:footnote></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="cnf_InterestAndFinancingServiceFeeOnLoansTextBlock-c0_cont_4" id="cnf_InterestAndFinancingServiceFeeOnLoansTextBlock-c0_cont_3"><ix:continuation continuedAt="_InterestAndOtherIncomeTableTextBlock-c0_cont_3" id="_InterestAndOtherIncomeTableTextBlock-c0_cont_2"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.35in">(ii)</td><td><ix:footnote id="ix_24_footnote" xml:lang="en-US">Interest income charged to sales partners refers to the cost of and interest on the partner&#8217;s instalment repurchase options under
collaboration model.</ix:footnote></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation id="cnf_InterestAndFinancingServiceFeeOnLoansTextBlock-c0_cont_4"><ix:continuation id="_InterestAndOtherIncomeTableTextBlock-c0_cont_3"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.35in">(iii)</td><td><ix:footnote id="ix_25_footnote" xml:lang="en-US">Interest income on debt securities in forms of partnership investment and corporate debt securities. Please refer to note 6(b).</ix:footnote></td></tr></table></ix:continuation></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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<td style="width: 0in"></td><td style="width: 0.5in; text-align: left">20</td><td style="text-align: left">Net revenue under the commercial bank partnership model</td>
</tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:nonNumeric><div>



</div><div>

</div><ix:continuation continuedAt="_AdditionalFinancialInformationDisclosureTextBlock-c0_cont_2" id="_AdditionalFinancialInformationDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The Group has started to collaborate with commercial banks since 2021
and such collaboration grew and scaled in the second half of 2022. Net revenue under the commercial bank partnership model representing
fees charged to commercial banks for services including introducing borrowers, initial credit assessment, facilitating loans from the
banks to the borrower and providing technical assistance to the borrower and banks, net of fees paid to third-party insurance company.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_AdditionalFinancialInformationDisclosureTextBlock-c0_cont_3" id="_AdditionalFinancialInformationDisclosureTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Revenues from loan facilitation services are recognized at the time
a loan is originated, at which time the facilitation service is considered completed. Revenues from loan facilitation services, covering
matching of commercial banks to borrowers and facilitating the execution of loan agreement between commercial banks and borrowers was
RMB<ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OtherBorrowings" scale="0" unitRef="cny">48,352,866</ix:nonFraction> in 2022.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_AdditionalFinancialInformationDisclosureTextBlock-c0_cont_4" id="_AdditionalFinancialInformationDisclosureTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Revenues from post-origination services are recognized on a straight-line
basis over the term of the underlying loans as the services are provided. Revenues from post-facilitation services, covering cash processing
services and collection services was RMB<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CostOfServicesCatering" scale="0" unitRef="cny">6,226,524</ix:nonFraction> in 2022.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="border-bottom: Black 1.5pt solid; margin-top: 12pt; margin-bottom: 6pt"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->52<!-- Field: /Sequence --></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="margin: 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>




</div><p style="margin: 0">&#160;</p><div>


</div><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.5in; text-align: left">20</td><td style="text-align: left">Net revenue under the commercial bank partnership model (continued)</td>
</tr></table><div>



</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>

</div><ix:continuation continuedAt="_AdditionalFinancialInformationDisclosureTextBlock-c0_cont_5" id="_AdditionalFinancialInformationDisclosureTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Refer to Note 19, the Group provided guarantee services for its off-balance
sheet loans under the commercial bank partnership model. As a result, at inception of the guarantee, the Group recognized a stand-ready
guarantee liability under ASC 460 at fair value with an associated guarantee receivable of RMB<ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:FinancialGuaranteeInsuranceContractsPremiumReceivable" scale="0" unitRef="cny">97,552,160</ix:nonFraction>. Subsequently, the stand-ready
guarantee is released into gains from guarantee liabilities on a straight-line basis over the term of the guarantee. Gains from guarantee
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</div><div>

</div><ix:continuation id="_AdditionalFinancialInformationDisclosureTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The total amount of net fees paid to third-party insurance company
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="cnf_CollaborationCostForSalesPartnersTextBlock-c0_cont_1" escape="true" name="cnf:CollaborationCostForSalesPartnersTextBlock"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.5in; text-align: left">21</td><td style="text-align: left">Collaboration cost for sales partners</td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>



</div><div>

</div><ix:continuation id="cnf_CollaborationCostForSalesPartnersTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The Group started to develop a new collaboration model in December
2018. Under such model, the Group collaborates with sales partners who are dedicated to introduce the Group and its loan services to prospective
borrowers. The unique feature of this collaboration model is that the sales partners will be required to deposit an amount equal to <ix:nonFraction contextRef="c460" decimals="2" format="ixt:num-dot-decimal" name="cnf:loansIssuedToTheBorrowersPercentages" scale="-2" unitRef="pure">10</ix:nonFraction>%
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the sales partners.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_AllowanceForCreditLossesTextBlock-c0_cont_1" escape="true" name="us-gaap:AllowanceForCreditLossesTextBlock"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.5in; text-align: left">22</td><td style="text-align: left">Provision for credit losses</td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>



</div><div>

</div><ix:continuation id="_AllowanceForCreditLossesTextBlock-c0_cont_1"><ix:nonNumeric contextRef="c0" escape="true" name="cnf:ScheduleOfProvisionForCreditLossesTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="padding-bottom: 1.5pt; text-align: center"><b><i>&#160;</i></b></td><td style="padding-bottom: 1.5pt; text-align: center"><b><i>&#160;</i></b></td>
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  <tr style="vertical-align: bottom">
    <td style="padding-bottom: 1.5pt; text-align: center">&#160;</td><td style="padding-bottom: 1.5pt; text-align: center; font-weight: bold; font-style: italic">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="text-align: center; font-weight: bold; font-style: normal">&#160;</td>
    <td colspan="2" style="font-weight: bold; font-style: normal; text-align: center">RMB</td><td style="text-align: center; font-weight: bold; font-style: normal">&#160;</td><td style="text-align: center; font-weight: bold; font-style: normal">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-style: italic">&#160;</td>
    <td colspan="2" style="font-style: italic; text-align: center">&#160;</td><td style="font-style: italic">&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 64%; text-align: left">Home equity loans</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">(<ix:nonFraction contextRef="c462" decimals="0" format="ixt:num-dot-decimal" name="cnf:ProvisionForCreditLosses" scale="0" sign="-" unitRef="cny">58,216,554</ix:nonFraction></td><td style="width: 1%; text-align: left">)</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c463" decimals="0" format="ixt:num-dot-decimal" name="cnf:ProvisionForCreditLosses" scale="0" unitRef="cny">257,624,013</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Corporate loans</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-198">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-199">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c467" decimals="0" format="ixt:num-dot-decimal" name="cnf:ProvisionForCreditLosses" scale="0" sign="-" unitRef="cny">24,693,114</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Debt securities</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-200">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c469" decimals="0" format="ixt:num-dot-decimal" name="cnf:ProvisionForCreditLosses" scale="0" sign="-" unitRef="cny">5,403,084</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c470" decimals="0" format="ixt:num-dot-decimal" name="cnf:ProvisionForCreditLosses" scale="0" sign="-" unitRef="cny">10,565,475</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Guarantee liabilities</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-201">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c472" decimals="0" format="ixt:num-dot-decimal" name="cnf:ProvisionForCreditLosses" scale="0" sign="-" unitRef="cny">3,182,958</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c473" decimals="0" format="ixt:num-dot-decimal" name="cnf:ProvisionForCreditLosses" scale="0" sign="-" unitRef="cny">155,017,657</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 1.5pt; text-align: left">Trade and other receivables</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c474" decimals="0" format="ixt:num-dot-decimal" name="cnf:ProvisionForCreditLosses" scale="0" sign="-" unitRef="cny">19,131,926</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c475" decimals="0" format="ixt:num-dot-decimal" name="cnf:ProvisionForCreditLosses" scale="0" unitRef="cny">49,429,922</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c476" decimals="0" format="ixt:num-dot-decimal" name="cnf:ProvisionForCreditLosses" scale="0" unitRef="cny">7,947,030</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-bottom: 4pt; font-weight: bold">Total</td><td style="padding-bottom: 4pt; font-weight: bold; font-style: normal">&#160;</td>
    <td style="border-bottom: Black 4pt double; font-weight: bold; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; font-weight: bold; font-style: normal; text-align: right">(<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="cnf:ProvisionForCreditLosses" scale="0" sign="-" unitRef="cny">77,348,480</ix:nonFraction></td><td style="padding-bottom: 4pt; font-weight: bold; font-style: normal; text-align: left">)</td><td style="padding-bottom: 4pt; font-weight: bold">&#160;</td>
    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="cnf:ProvisionForCreditLosses" scale="0" unitRef="cny">298,467,893</ix:nonFraction></td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">&#160;</td><td style="padding-bottom: 4pt; font-weight: bold">&#160;</td>
    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="cnf:ProvisionForCreditLosses" scale="0" sign="-" unitRef="cny">238,084,863</ix:nonFraction></td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">)</td></tr>
  </table></ix:nonNumeric></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="cnf_RealizedGainsLossesOnSalesOfInvestmentsNetTextBlock-c0_cont_1" escape="true" name="cnf:RealizedGainsLossesOnSalesOfInvestmentsNetTextBlock"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.5in; text-align: left">23</td><td style="text-align: left">Realized gains on sales of investments, net</td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>



</div><div>

</div><ix:continuation id="cnf_RealizedGainsLossesOnSalesOfInvestmentsNetTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The gross realized gains on sales of investments are RMB<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:GainOnSaleOfInvestments" scale="0" unitRef="cny">70,611,492</ix:nonFraction>,
RMB<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:GainOnSaleOfInvestments" scale="0" unitRef="cny">57,368,616</ix:nonFraction> and RMB<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:GainOnSaleOfInvestments" scale="0" unitRef="cny">28,330,375</ix:nonFraction> for the years ended December 31, 2020, 2021 and 2022, respectively. The gross realized losses on sales
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 53; Value: 1 --><div>
    </div><div style="border-bottom: Black 1.5pt solid; margin-top: 12pt; margin-bottom: 6pt"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->53<!-- Field: /Sequence --></p></div><div>
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</div><p style="margin: 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>




</div><p style="margin: 0">&#160;</p><div>





</div><ix:nonNumeric contextRef="c0" continuedAt="cnf_NetlossesgainsOnSalesOfLoansTextBlock-c0_cont_1" escape="true" name="cnf:NetlossesgainsOnSalesOfLoansTextBlock"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.5in; text-align: left">24</td><td style="text-align: left">Net losses on sales of loans</td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>



</div><div>

</div><ix:continuation id="cnf_NetlossesgainsOnSalesOfLoansTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">As mentioned in Note 5(c), the Group transferred the delinquent loans
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and RMB<ix:nonFraction contextRef="c479" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:GainLossOnSalesOfLoansNet" scale="0" unitRef="cny">44,554,948</ix:nonFraction> for the years ended December 31, 2020, 2021 and 2022, respectively.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="cnf_OtherRevenueDisclosureTextBlock-c0_cont_1" escape="true" name="cnf:OtherRevenueDisclosureTextBlock"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.5in; text-align: left">25</td><td style="text-align: left">Other gains, net</td>
</tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:nonNumeric><div>



</div><div>

</div><ix:continuation continuedAt="cnf_OtherRevenueDisclosureTextBlock-c0_cont_2" id="cnf_OtherRevenueDisclosureTextBlock-c0_cont_1"><ix:nonNumeric contextRef="c0" continuedAt="cnf_ScheduleOfOtherGainsNetTableTextBlock-c0_cont_1" escape="true" name="cnf:ScheduleOfOtherGainsNetTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="padding-bottom: 1.5pt; text-align: center"><b>&#160;</b></td><td style="padding-bottom: 1.5pt; text-align: center; font-style: italic"><b>&#160;</b></td>
    <td colspan="2" style="padding-bottom: 1.5pt; font-style: italic; text-align: center"><b>&#160;</b></td><td style="padding-bottom: 1.5pt; text-align: center; font-style: italic"><b>&#160;</b></td><td style="padding-bottom: 1.5pt; text-align: center; font-style: italic"><b>&#160;</b></td>
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  <tr style="vertical-align: bottom">
    <td style="padding-bottom: 1.5pt; text-align: center"><b>&#160;</b></td><td style="padding-bottom: 1.5pt; text-align: center; font-style: italic"><b>&#160;</b></td>
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="padding-bottom: 4pt; font-style: italic; text-align: left">&#160;</td><td style="padding-bottom: 4pt; font-style: italic; text-align: center">&#160;</td><td style="padding-bottom: 4pt; font-style: italic; text-align: left">&#160;</td><td style="padding-bottom: 4pt; font-weight: bold; font-style: normal">&#160;</td>
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="cnf_OtherRevenueDisclosureTextBlock-c0_cont_3" id="cnf_OtherRevenueDisclosureTextBlock-c0_cont_2"><ix:continuation continuedAt="cnf_ScheduleOfOtherGainsNetTableTextBlock-c0_cont_2" id="cnf_ScheduleOfOtherGainsNetTableTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.35in">(i)</td><td><ix:footnote id="ix_26_footnote" xml:lang="en-US">Sales partners provide CRMPs as security deposits. Pursuant to the collaboration agreements if the debtor&#8217;s loan principal repayments
or accrued interests are past due or the loan is in default, sales partners are obliged to fulfill their guaranteed responsibility by
selecting among different approaches, otherwise the CRMPs deposited by sales partners are confiscated by the Group, refer to Note 1</ix:footnote></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="cnf_OtherRevenueDisclosureTextBlock-c0_cont_4" id="cnf_OtherRevenueDisclosureTextBlock-c0_cont_3"><ix:continuation continuedAt="cnf_ScheduleOfOtherGainsNetTableTextBlock-c0_cont_3" id="cnf_ScheduleOfOtherGainsNetTableTextBlock-c0_cont_2"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.35in">(ii)</td><td><ix:footnote id="ix_27_footnote" xml:lang="en-US">Profits/(losses) from fair value changes refers to gains or losses resulting from changes in the fair value of investment securities.</ix:footnote></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation id="cnf_OtherRevenueDisclosureTextBlock-c0_cont_4"><ix:continuation id="cnf_ScheduleOfOtherGainsNetTableTextBlock-c0_cont_3"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.35in">(iii)</td><td><ix:footnote id="ix_28_footnote" xml:lang="en-US">The changes of foreign exchange gain/(loss) are mainly due to exchange rate changes in cash and cash equivalents held by the Group,
including US dollar account and Hong Kong dollar account. The Group recorded a foreign exchange gain as RMB<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="cnf:ForeignExchangeLossGain" scale="0" unitRef="cny">7,355,135</ix:nonFraction> in 2022, an increase
of RMB<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="cnf:ForeignExchangeLossGain" scale="0" unitRef="cny">6,569,055</ix:nonFraction> compared with that in 2021. The gain is mainly due to the increase of the exchange rate between Hong Kong dollar and RMB
and the US dollar against RMB.</ix:footnote></td></tr></table></ix:continuation></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="border-bottom: Black 1.5pt solid; margin-top: 12pt; margin-bottom: 6pt"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->54<!-- Field: /Sequence --></p></div><div>
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</div><p style="margin: 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>




</div><p style="margin: 0">&#160;</p><div>





</div><ix:nonNumeric contextRef="c0" continuedAt="cnf_OtherExpensesTextBlock-c0_cont_1" escape="true" name="cnf:OtherExpensesTextBlock"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.5in; text-align: left">26</td><td style="text-align: left">Other expenses</td>
</tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:nonNumeric><div>



</div><div>

</div><ix:continuation id="cnf_OtherExpensesTextBlock-c0_cont_1"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfOtherOperatingCostAndExpenseByComponentTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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    <td style="padding-bottom: 1.5pt; text-align: center">&#160;</td><td style="padding-bottom: 1.5pt; text-align: center; font-style: italic">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td style="padding-bottom: 1.5pt; text-align: center">&#160;</td><td style="padding-bottom: 1.5pt; text-align: center; font-weight: bold; font-style: italic">&#160;</td>
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  </table></ix:nonNumeric></ix:continuation><div>

</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:IncomeTaxDisclosureTextBlock"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.5in; text-align: left">27</td><td style="text-align: left">Income tax expense</td>
</tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:nonNumeric><div>



</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_2" id="_IncomeTaxDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Cayman Islands</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_3" id="_IncomeTaxDisclosureTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Under the current laws of the Cayman Islands, the Company is not subject
to tax on income or capital gains.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_4" id="_IncomeTaxDisclosureTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">British Virgin Islands (BVI)</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_5" id="_IncomeTaxDisclosureTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Pursuant to the rules and regulations of the British Virgin Islands,
the Group is not subject to any income tax in the British Virgin Islands.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_6" id="_IncomeTaxDisclosureTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Hong Kong</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_7" id="_IncomeTaxDisclosureTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">No provision for Hong Kong Profits Tax has been made for the subsidiary
located in Hong Kong as the subsidiary has not derived any income subject to Hong Kong Profits Tax during the years.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_8" id="_IncomeTaxDisclosureTextBlock-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Peoples Republic of China (PRC)</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_9" id="_IncomeTaxDisclosureTextBlock-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">According to the PRC Corporate Income Tax (&#8220;CIT&#8221;) Law,
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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="border-bottom: Black 1.5pt solid; margin-top: 12pt; margin-bottom: 6pt"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->55<!-- Field: /Sequence --></p></div><div>
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</div><p style="margin: 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>




</div><p style="margin: 0">&#160;</p><div>





</div><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0.5in; text-align: left">27</td><td style="text-align: left">Income tax expense (continued)</td>
</tr></table><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_11" id="_IncomeTaxDisclosureTextBlock-c0_cont_10"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfComponentsOfIncomeTaxExpenseBenefitTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>


</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_12" id="_IncomeTaxDisclosureTextBlock-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The principal components of the deferred tax assets and liabilities
are as follows:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_13" id="_IncomeTaxDisclosureTextBlock-c0_cont_12"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfDeferredTaxAssetsAndLiabilitiesTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; font-style: italic; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="border-bottom: Black 1.5pt solid; font-weight: bold; font-style: italic; text-align: center">Year ended December 31</td><td style="padding-bottom: 1.5pt; font-weight: bold; font-style: italic">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; font-style: italic; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; font-style: normal">&#160;</td>
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  <tr style="vertical-align: bottom">
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    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="cnf:DeferredTaxAssetsAllowanceForInterestAndFinancingFeeReceivables" scale="0" unitRef="cny">444,036,207</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="cnf:OtherDeferredTaxAssets" scale="0" unitRef="cny">669,876</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:TaxCreditCarryforwardValuationAllowance" scale="0" unitRef="cny">15,226,575</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:TaxCreditCarryforwardValuationAllowance" scale="0" unitRef="cny">9,116,290</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxAssetsLiabilitiesNet" scale="0" unitRef="cny">450,196,212</ix:nonFraction></td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxAssetsLiabilitiesNet" scale="0" unitRef="cny">365,673,283</ix:nonFraction></td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left">Net deferred tax assets</td><td style="font-weight: bold">&#160;</td>
    <td style="font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; text-align: right"><ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxAssetsNet" scale="0" unitRef="cny">21,068,094</ix:nonFraction></td><td style="font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left">Deferred tax liabilities:</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxLiabilitiesGoodwillAndIntangibleAssetsIntangibleAssets" scale="0" unitRef="cny">742,500</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxLiabilitiesGoodwillAndIntangibleAssetsIntangibleAssets" scale="0" unitRef="cny">742,500</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Equity securities</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxLiabilitiesInvestments" scale="0" unitRef="cny">289,610</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxLiabilitiesInvestments" scale="0" unitRef="cny">171,864</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Right-of-use assets</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxLiabilitiesLeasingArrangements" scale="0" unitRef="cny">4,049,202</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxLiabilitiesLeasingArrangements" scale="0" unitRef="cny">7,444,339</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Intercompany receivables</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxLiabilitiesPrepaidExpenses" scale="0" unitRef="cny">45,849,201</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxLiabilitiesPrepaidExpenses" scale="0" unitRef="cny">41,988,923</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Guarantee assets</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="cnf:DeferredTaxLiabilitiesGuaranteeAssets" scale="0" sign="-" unitRef="cny">322,437,865</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="cnf:DeferredTaxLiabilitiesGuaranteeAssets" scale="0" sign="-" unitRef="cny">181,602,700</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1.5pt">Undistributed earnings from structured funds</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="cnf:DeferredTaxLiabilitiesUndistributedEarningsFromStructuredFunds" scale="0" unitRef="cny">207,588,600</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="cnf:DeferredTaxLiabilitiesUndistributedEarningsFromStructuredFunds" scale="0" unitRef="cny">130,570,272</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left; padding-bottom: 4pt">Total deferred tax liabilities</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>


</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 56; Value: 1 --><div>
    </div><div style="border-bottom: Black 1.5pt solid; margin-top: 12pt; margin-bottom: 6pt"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->56<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="margin: 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>




</div><p style="margin: 0">&#160;</p><div>





</div><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.5in; text-align: left">27</td><td style="text-align: left">Income tax expense (continued)</td>
</tr></table><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_14" id="_IncomeTaxDisclosureTextBlock-c0_cont_13"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Movement of valuation allowance:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_15" id="_IncomeTaxDisclosureTextBlock-c0_cont_14"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:SummaryOfValuationAllowanceTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td></tr>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="padding-bottom: 1.5pt; text-align: left; text-indent: -7.1pt; padding-left: 7.1pt">Net change in the valuation allowance</td><td style="padding-bottom: 1.5pt; font-style: normal">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-bottom: 4pt; font-weight: bold; text-align: left; text-indent: -7.1pt; padding-left: 7.1pt">At the end of year</td><td style="padding-bottom: 4pt; font-weight: bold; font-style: normal">&#160;</td>
    <td style="border-bottom: Black 4pt double; font-weight: bold; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; font-weight: bold; font-style: normal; text-align: right"><ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxAssetsValuationAllowance" scale="0" unitRef="cny">15,226,575</ix:nonFraction></td><td style="padding-bottom: 4pt; font-weight: bold; font-style: normal; text-align: left">&#160;</td><td style="padding-bottom: 4pt; font-weight: bold; font-style: normal">&#160;</td>
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_16" id="_IncomeTaxDisclosureTextBlock-c0_cont_15"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">In assessing the recoverability of its deferred tax assets, management
considers whether some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets
is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management
considers reversing taxable temporary differences, carryback availability, projected future income and tax-planning strategies in making
this assessment. Recovery of a substantial majority of the Group&#8217;s deferred tax assets is supported by reversing taxable temporary
differences.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_17" id="_IncomeTaxDisclosureTextBlock-c0_cont_16"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Based upon the level of historical taxable income and projections for
future taxable income over the periods in which the deferred tax assets are recoverable, management believes that it is more likely than
not that the Group will realize the benefits of its deferred tax assets, net of valuation allowance, as of December 31, 2021 and 2022.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_18" id="_IncomeTaxDisclosureTextBlock-c0_cont_17"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Valuation allowances have been provided for certain deferred tax assets
due to the uncertainty surrounding their realization. As of December 31,2021 and 2022, the valuation allowance on deferred tax assets,
mainly arising from operating loss carryforwards, were provided because it was more likely than not that the Group will not be able to
utilize the operating loss carryforwards generated by certain unprofitable subsidiaries.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_19" id="_IncomeTaxDisclosureTextBlock-c0_cont_18"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The Group operates through its subsidiaries and VIEs. Since each entity
files a separate tax return, the valuation allowance is considered on an individual entity basis.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_20" id="_IncomeTaxDisclosureTextBlock-c0_cont_19"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">As of December 31, 2022, the Group had net operating loss carryforwards
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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 57; Value: 1 --><div>
    </div><div style="border-bottom: Black 1.5pt solid; margin-top: 12pt; margin-bottom: 6pt"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->57<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="margin: 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>




</div><p style="margin: 0">&#160;</p><div>





</div><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.5in; text-align: left">27</td><td style="text-align: left">Income tax expense (continued)</td>
</tr></table><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_21" id="_IncomeTaxDisclosureTextBlock-c0_cont_20"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Management intends to indefinitely reinvest the undistributed earnings
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as of December 31, 2022. Upon repatriation of the subsidiaries&#8217; and the VIE&#8217;s earnings, in the form of dividends or otherwise,
the Group would be subject to <ix:nonFraction contextRef="c2" decimals="2" format="ixt:num-dot-decimal" name="cnf:PercentageOfWithholdingIncomeTax" scale="-2" unitRef="pure">10</ix:nonFraction>% PRC withholding income tax when making distribution to foreign parent companies. However, the Group
was not subject to withholding income tax in 2022 because the Group did not make any distribution to foreign parent companies. The related
unrecognized deferred tax liabilities were RMB<ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxLiabilityNotRecognizedAmountOfUnrecognizedDeferredTaxLiabilityUndistributedEarningsOfDomesticSubsidiaries" scale="0" unitRef="cny">256,078,202</ix:nonFraction>.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_22" id="_IncomeTaxDisclosureTextBlock-c0_cont_21"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Income before income tax expense is as follows:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_23" id="_IncomeTaxDisclosureTextBlock-c0_cont_22"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfIncomeBeforeIncomeTaxDomesticAndForeignTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="padding-bottom: 1.5pt; text-align: center">&#160;</td><td style="padding-bottom: 1.5pt; text-align: center; font-style: italic">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td style="padding-bottom: 1.5pt; text-align: center">&#160;</td><td style="padding-bottom: 1.5pt; text-align: center; font-weight: bold; font-style: italic">&#160;</td>
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -7.1pt; padding-left: 7.1pt">Hong Kong</td><td style="font-style: normal">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 4pt; text-indent: -7.1pt; padding-left: 7.1pt">Total</td><td style="padding-bottom: 4pt; font-style: normal">&#160;</td>
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_24" id="_IncomeTaxDisclosureTextBlock-c0_cont_23"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The reconciliation of the PRC statutory income tax rate of <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EffectiveIncomeTaxRateReconciliationAtFederalStatutoryIncomeTaxRate" scale="-2" unitRef="pure">25</ix:nonFraction>%, the
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</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_25" id="_IncomeTaxDisclosureTextBlock-c0_cont_24"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfEffectiveIncomeTaxRateReconciliationTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="padding-bottom: 1.5pt; text-align: center">&#160;</td><td style="padding-bottom: 1.5pt; text-align: center; font-style: italic">&#160;</td>
    <td colspan="10" style="border-bottom: Black 1.5pt solid; font-style: italic; text-align: center"><b>Year ended December 31</b></td><td style="padding-bottom: 1.5pt; text-align: center; font-style: italic">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="padding-bottom: 1.5pt; text-align: center">&#160;</td><td style="padding-bottom: 1.5pt; text-align: center; font-weight: bold; font-style: italic">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="text-align: center; font-weight: bold; font-style: normal">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic; text-align: right">&#160;</td><td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic">&#160;</td>
    <td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic; text-align: right">&#160;</td><td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic">&#160;</td>
    <td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic; text-align: right">&#160;</td><td style="font-style: italic; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic; text-align: right">&#160;</td><td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic">&#160;</td>
    <td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic; text-align: right">&#160;</td><td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic">&#160;</td>
    <td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic; text-align: right">&#160;</td><td style="font-style: italic; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
    <td>&#160;</td><td style="font-style: italic">&#160;</td>
    <td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic; text-align: right">&#160;</td><td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic">&#160;</td>
    <td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic; text-align: right">&#160;</td><td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic">&#160;</td>
    <td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic; text-align: right">&#160;</td><td style="font-style: italic; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_26" id="_IncomeTaxDisclosureTextBlock-c0_cont_25"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The Group&#8217;s only major jurisdiction is China where tax returns
generally remain open and subject to examination by tax authorities for tax years 1999 onwards.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_IncomeTaxDisclosureTextBlock-c0_cont_26"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The Group did not have any significant unrecognized tax benefits, and
no interest and penalty expenses related to income taxes were recorded for the years ended December 31, 2020, 2021 and 2022.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 58; Value: 1 --><div>
    </div><div style="border-bottom: Black 1.5pt solid; margin-top: 12pt; margin-bottom: 6pt"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->58<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="margin: 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>




</div><p style="margin: 0">&#160;</p><div>





</div><ix:nonNumeric contextRef="c0" continuedAt="_EarningsPerShareTextBlock-c0_cont_1" escape="true" name="us-gaap:EarningsPerShareTextBlock"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.5in; text-align: left">28</td><td style="text-align: left">Earnings per share</td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>



</div><div>

</div><ix:continuation continuedAt="_EarningsPerShareTextBlock-c0_cont_2" id="_EarningsPerShareTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The following table sets forth the computation of basic and diluted
earnings per share for the years ended December 31, 2020, 2021 and 2022:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_EarningsPerShareTextBlock-c0_cont_3" id="_EarningsPerShareTextBlock-c0_cont_2"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfEarningsPerShareBasicAndDilutedTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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    <td style="padding-bottom: 1.5pt; text-align: center">&#160;</td><td style="padding-bottom: 1.5pt; text-align: center; font-style: italic">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td style="padding-bottom: 1.5pt; text-align: center">&#160;</td><td style="padding-bottom: 1.5pt; text-align: center; font-weight: bold; font-style: italic">&#160;</td>
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    <td style="text-align: center">&#160;</td><td style="text-align: center; font-weight: bold; font-style: normal">&#160;</td>
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    <td>&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Effect of dilutive share options</td><td style="font-style: normal">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td>Dilutive weighted average number of ordinary shares</td><td style="font-style: normal">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Basic earnings per share</td><td style="font-style: normal">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td>Diluted earnings per share</td><td style="font-style: normal">&#160;</td>
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</div><div>

</div><ix:continuation id="_EarningsPerShareTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">In 2020, the Group issued <ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="cnf:OrdinarySharesIssuedToTheDepositary" scale="0" unitRef="shares">187,933,720</ix:nonFraction> ordinary shares to the Depositary.
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the computation of earnings per share.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_1" escape="true" name="us-gaap:DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.5in; text-align: left">29</td><td style="text-align: left">Share-based compensation expenses</td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>



</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_2" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">(a)</td><td>Description of share-based compensation arrangements</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_3" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">On January 3, 2017, the Group adopted a new share incentive plan, or
the 2017 Share Incentive Plan. Options to purchase <ix:nonFraction contextRef="c493" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardSharesPurchasedForAward" scale="0" unitRef="shares">187,933,720</ix:nonFraction> ordinary shares pursuant to the 2017 Share Incentive Plan were issued to
certain management and employees. Accordingly, <ix:nonFraction contextRef="c494" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:SharebasedCompensationArrangementBySharebasedPaymentAwardAwardVestingRightsPercentage" scale="-2" unitRef="pure">60</ix:nonFraction>%, <ix:nonFraction contextRef="c495" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:SharebasedCompensationArrangementBySharebasedPaymentAwardAwardVestingRightsPercentage" scale="-2" unitRef="pure">20</ix:nonFraction>% and <ix:nonFraction contextRef="c496" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:SharebasedCompensationArrangementBySharebasedPaymentAwardAwardVestingRightsPercentage" scale="-2" unitRef="pure">20</ix:nonFraction>% of the award options shall vest on December 31, each of the years 2017
to 2019, respectively. Unless terminated earlier, the 2017 Share Incentive Plan will terminate automatically in 2022.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_4" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">On August 27, 2018, 2018 Share Incentive Plan (the &#8220;2018 Option&#8221;)
for granting shares award of CNFinance to certain management members and employees of the Group was issued to concurrently replace the
2017 Share Incentive Plan which granted Sincere Fame&#8217;s share. Except for the aforementioned change of grantor and the extension
of the termination year by one to December 31<sup>st</sup>, 2023, all terms of the 2017 Share Incentive Plan and the 2018 Share Incentive
Plan were the same. No change in the fair value, vesting conditions or the classification of the 2017 Share Incentive Plan and the 2018
Share Incentive Plan. In connection with the 2018 Option, <ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ExcessStockSharesIssued" scale="0" unitRef="shares">187,933,720</ix:nonFraction> ordinary shares were issued to the Depositary as a reserve pool
for future issuances upon the exercise of share options granted under the 2018 Option to the Group&#8217;s management members and employees.
All shareholder rights of these <ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="cnf:StockIssuedDuringPeriodShareStockOptionsExercised" scale="0" unitRef="shares">187,933,720</ix:nonFraction> ordinary shares including but not limited to voting rights and dividend rights are unconditionally
waived until the corresponding shares are exercised.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_5" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">On December 31, 2019, the Group granted options to certain management
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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="margin: 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>




</div><p style="margin: 0">&#160;</p><div>





</div><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.5in; text-align: left">29</td><td style="text-align: left">Share-based compensation expenses (continued)</td>
</tr></table><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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are measured based on the grant date fair value of the equity instrument. The Group recognizes the compensation costs net of estimated
forfeitures over the applicable vesting period. The estimate of forfeitures will be adjusted over the requisite service period to the
extent that actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures will be recognized
through a cumulative catch-up adjustment in the period of change and will also impact the amount of stock compensation expenses to be
recognized in future periods. There were no market conditions associated with the share option grants.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_7" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_6"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.5in">(b)</td><td>Fair value of share options and assumptions</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

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on a number of factors including valuations. In determining the fair value of equity instruments, the Group referred to valuation reports
prepared by an independent third-party appraisal firm, based on data the Group provided. The valuation reports provided the Group with
guidelines in determining the fair value of the equity instruments, but the Group is ultimately responsible for the determination of all
amounts related to share-based compensation recorded in the financial statements.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_9" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Excluding the options containing service vesting conditions, the Group
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_10" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_9"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfShareBasedPaymentAwardStockOptionsValuationAssumptionsTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic; text-align: right"><ix:nonNumeric contextRef="c503" format="ixt-sec:duryear" name="us-gaap:SharebasedCompensationArrangementBySharebasedPaymentAwardFairValueAssumptionsExpectedTerm1">5</ix:nonNumeric></td><td style="font-style: italic; text-align: left">&#160;</td><td style="font-style: italic">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_11" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The contractual life of the share option is used as an input into the
binomial option pricing model. Exercise multiple and post-vesting forfeit are incorporated into the model as well.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_12" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><i><span style="text-decoration:underline">2018 Option</span></i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><i>&#160;</i></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_13" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">When the options of the 2018 Option were issued, the Group&#8217;s
shares had not been publicly traded and its shares were rarely traded privately. Therefore, the expected volatility is estimated based
on the historical volatility of comparable entities with publicly traded shares for the period before the date of grant with length commensurate
to contractual life of the options. Since the contractual life of the options is <ix:nonNumeric contextRef="c501" format="ixt-sec:duryear" name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardAwardVestingPeriod1">6</ix:nonNumeric> years, the risk-free rate for the expected term of
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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 60; Value: 1 --><div>
    </div><div style="border-bottom: Black 1.5pt solid; margin-top: 12pt; margin-bottom: 6pt"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->60<!-- Field: /Sequence --></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="margin: 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>




</div><p style="margin: 0">&#160;</p><div>





</div><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.5in; text-align: left">29</td><td style="text-align: left">Share-based compensation expenses (continued)</td>
</tr></table><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_14" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_13"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><i><span style="text-decoration:underline">2019 Option</span></i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><i>&#160;</i></p></ix:continuation><div>

</div><div>

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shares were already publicly traded. Since the shares have only been publicly traded for just over a year, the expected volatility is
estimated based on the historical volatility of comparable entities with publicly traded shares for the period before the date of grant
with length commensurate to contractual life of the options. <ix:nonNumeric contextRef="c502" name="cnf:ContractualLifeTerm">The contractual life of the options is 6 years, 7 years and 8 years, respectively.
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_16" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_15"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The Group has not declared or paid any cash dividends on its capital
stock and does not anticipate any dividend payments on its ordinary shares in the foreseeable future.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_17" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_16"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">If any of the assumptions used in the binomial option pricing model
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_18" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_17"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">A summary of share option activity under the 2018 Option is as follows:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_19" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_18"><ix:nonNumeric contextRef="c0" continuedAt="_ScheduleOfShareBasedCompensationActivityTableTextBlock-c0_cont_1" escape="true" name="us-gaap:ScheduleOfShareBasedCompensationActivityTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td>Balance, December 31, 2017</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c507" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsOutstandingNumber" scale="0" unitRef="shares">187,933,720</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-219">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c507" decimals="2" format="ixt:num-dot-decimal" name="cnf:ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsOutstandingWeightedAverageGrantDateFairValue" scale="0" unitRef="cnyPershares">1.27</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Granted</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-220">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-221">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-222">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td>Exercised</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-223">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-224">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-225">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 1.5pt">Surrendered</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-226">-</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-227">-</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-228">-</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Balance, December 31, 2018</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c509" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsOutstandingNumber" scale="0" unitRef="shares">187,933,720</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-229">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c509" decimals="2" format="ixt:num-dot-decimal" name="cnf:ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsOutstandingWeightedAverageGrantDateFairValue" scale="0" unitRef="cnyPershares">1.27</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td>Exercisable, December 31, 2018</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c509" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsExercisableNumber" scale="0" unitRef="shares">150,346,976</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c509" decimals="2" format="ixt:num-dot-decimal" name="cnf:ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsExercisableWeightedAverageGrantDateFairValue" scale="0" unitRef="cnyPershares">1.27</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Expected to vest, December 31, 2018</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c509" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsVestedAndExpectedToVestOutstandingNumber" scale="0" unitRef="shares">37,586,744</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-231">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c509" decimals="2" format="ixt:num-dot-decimal" name="cnf:ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsExpectedToVestWeightedAverageGrantDateFairValue" scale="0" unitRef="cnyPershares">1.27</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Balance, December 31, 2018</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c509" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsOutstandingNumber" scale="0" unitRef="shares">187,933,720</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-232">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c509" decimals="2" format="ixt:num-dot-decimal" name="cnf:ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsOutstandingWeightedAverageGrantDateFairValue" scale="0" unitRef="cnyPershares">1.27</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td>Granted</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-233">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-234">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-235">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Exercised</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-236">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-237">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-238">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-bottom: 1.5pt">Surrendered</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-239">-</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-240">-</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-241">-</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td>Balance, December 31, 2019</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c510" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsOutstandingNumber" scale="0" unitRef="shares">187,933,720</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c510" decimals="2" format="ixt:num-dot-decimal" name="cnf:ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsOutstandingWeightedAverageGrantDateFairValue" scale="0" unitRef="cnyPershares">1.27</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Exercisable, December 31, 2019</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-245">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-246">-</div></td><td style="text-align: left">&#160;</td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 61; Value: 1 --><div>
    </div><div style="border-bottom: Black 1.5pt solid; margin-top: 12pt; margin-bottom: 6pt"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->61<!-- Field: /Sequence --></p></div><div>
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</div><p style="margin: 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>




</div><p style="margin: 0">&#160;</p><div>





</div><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.5in; text-align: left">29</td><td style="text-align: left">Share-based compensation expenses (continued)</td>
</tr></table><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_20" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_19"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">A summary of share option activity under the 2019 Option is as follows:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_21" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_20"><ix:continuation id="_ScheduleOfShareBasedCompensationActivityTableTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td colspan="2" style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-248">-</div></td><td>&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Exercised</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-252">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-253">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-255">-</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-256">-</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Exercisable, December 31, 2019</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-258">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-259">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-260">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c514" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsVestedAndExpectedToVestOutstandingNumber" scale="0" unitRef="shares">119,674,780</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td>Balance, December 31, 2019</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c514" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsOutstandingNumber" scale="0" unitRef="shares">119,674,780</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="font-size: 10pt"><ix:nonFraction contextRef="c514" decimals="2" format="ixt:num-dot-decimal" name="cnf:ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsOutstandingWeightedAverageGrantDateFairValue" scale="0" unitRef="cnyPershares">0.72</ix:nonFraction></span></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Granted</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-263">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-264">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-265">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td>Exercised</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-266">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-267">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-268">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 1.5pt">Surrendered</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-269">-</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-270">-</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-271">-</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Balance, December 31, 2020</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-272">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td>Exercisable, December 31, 2020</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c517" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsExercisableNumber" scale="0" unitRef="shares">59,837,390</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-274">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Balance, December 31, 2020</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Expected to vest, December 31, 2022</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-302">-</div></td><td style="text-align: left">&#160;</td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 62; Value: 1 --><div>
    </div><div style="border-bottom: Black 1.5pt solid; margin-top: 12pt; margin-bottom: 6pt"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->62<!-- Field: /Sequence --></p></div><div>
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</div><p style="margin: 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>




</div><p style="margin: 0">&#160;</p><div>





</div><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.5in; text-align: left">29</td><td style="text-align: left">Share-based compensation expenses (continued)</td>
</tr></table><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_22" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_21"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The following table sets forth the fair value of options and ordinary
shares estimated at the dates of option grants indicated below with the assistance from an independent valuation firm.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_23" id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_22"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsGrantsInPeriodWeightedAverageGrantDateFairValueTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>December 31, 2019</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td>December 31, 2019</td><td>&#160;</td>
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</div><div>

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benefit recognized associated with the share-based compensation expenses. As of December 31, 2019, the expenses in relation to the 2018
Option have been fully recognized.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation><div>

</div><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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<td style="width: 0in"></td><td style="width: 0.5in; text-align: left">30</td><td style="text-align: left">Material related party transactions</td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>



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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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<td style="width: 0in"></td><td style="width: 0.5in; text-align: left">31</td><td style="text-align: left">Operating leases</td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>



</div><div>

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4 years. The Group does not enter into any finance leases or leases where the Group is a lessor. Moreover, the existing operating lease
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</div><div>

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for use by the lessor. The incremental borrowing rates determined for computing the lease liabilities are based on the People&#8217;s
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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="margin: 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>




</div><p style="margin: 0">&#160;</p><div>





</div><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.5in; text-align: left">31</td><td style="text-align: left">Operating leases (continued)</td>
</tr></table><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><div>

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</div><div>

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<td style="width: 0.35in">(1)</td><td><ix:footnote id="ix_29_footnote" xml:lang="en-US">Amounts include short-term leases that are immaterial.</ix:footnote></td></tr></table><p style="margin-top: 0; margin-bottom: 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

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  <tr style="vertical-align: bottom; background-color: White">
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</div><div>

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as of December 31, 2022:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_LeasesOfLesseeDisclosureTextBlock-c0_cont_8"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:LesseeOperatingLeaseLiabilityMaturityTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="border-bottom: Black 1.5pt solid; margin-top: 12pt; margin-bottom: 6pt"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->64<!-- Field: /Sequence --></p></div><div>
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</div><p style="margin: 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>




</div><p style="margin: 0">&#160;</p><div>





</div><ix:nonNumeric contextRef="c0" continuedAt="_CondensedFinancialInformationOfParentCompanyOnlyDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:CondensedFinancialInformationOfParentCompanyOnlyDisclosureTextBlock"><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.5in; text-align: left">32</td><td style="text-align: left">Condensed financial information of the parent company</td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>



</div><div>

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ability to transfer a portion of their net assets to the Group. The payment of dividends by entities organized in China is subject to
limitations, procedures and formalities. Regulations in the PRC currently permit payment of dividends only out of accumulated profits
as determined in accordance with accounting standards and regulations in China. The Group&#8217;s subsidiaries are also required to set
aside at least <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="cnf:PercentageOfNetIncome" scale="-2" unitRef="pure">10</ix:nonFraction>% of its net income based on PRC accounting standards each year to its statutory reserves account until the accumulative
amount of such reserves reaches <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="cnf:RegisteredCapitalPercentage" scale="-2" unitRef="pure">50</ix:nonFraction>% of its respective registered capital. The aforementioned reserves can only be used for specific purposes
and are not distributable as cash dividends.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_CondensedFinancialInformationOfParentCompanyOnlyDisclosureTextBlock-c0_cont_3" id="_CondensedFinancialInformationOfParentCompanyOnlyDisclosureTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">In addition, the Group&#8217;s operations and revenues are conducted
and generated in China, all of the Group&#8217;s revenues being earned and currency received are denominated in RMB. RMB is subject to
the foreign exchange control regulation in China, and, as a result, the Group may be unable to distribute any dividends outside of China
due to PRC foreign exchange control regulations that restrict the Group&#8217;s ability to convert RMB into US Dollars.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation><div>

</div><div>

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shall be filed when the restricted net assets of consolidated subsidiaries exceed <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="cnf:ConsolidatedNetAssetsPercentage" scale="-2" unitRef="pure">25</ix:nonFraction> percent of consolidated net assets as of the end
of the most recently completed fiscal year. For purposes of the above test, restricted net assets of consolidated subsidiaries shall mean
that amount of the registrant&#8217;s proportionate share of net assets of consolidated subsidiaries (after intercompany eliminations)
which as of the end of the most recent fiscal year may not be transferred to the parent company by subsidiaries in the form of loans,
advances or cash dividends without the consent of a third party. The condensed parent company financial statements have been prepared
in accordance with Rule 12-04, Schedule I of Regulation S-X as the restricted net assets of the Group&#8217;s PRC subsidiary and VIE exceed
<ix:nonFraction contextRef="c530" decimals="2" format="ixt:num-dot-decimal" name="cnf:ConsolidatedNetAssetsPercentage" scale="-2" unitRef="pure">25</ix:nonFraction>% of the consolidated net assets of the Group.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation><div>

</div><div>

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prepared in accordance with SEC Regulation S-X Rule 5-04 and Rule 12-04, using the same accounting policies as set out in the Group&#8217;s
consolidated financial statements, except that the Group uses the equity method to account for investments in its subsidiaries. The footnote
disclosures generally included in financial statements prepared in accordance with U.S. GAAP have been condensed and omitted. The footnote
disclosures contain supplemental information relating to the operations of the Group, as such, these statements are not the general-purpose
financial statements of the reporting entity and should be read in conjunction with the notes to the consolidated financial statements
of the Group.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation><div>

</div><div>

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with one subscriber&#8217;s share allotted and issued at par value of HKD0.0001, representing 100% of the entire ordinary share of the
Group.</ix:nonNumeric> The shareholder as well as shareholder&#8217;s equity remained the same until the reorganization with Sincere Fame.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="margin: 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>




</div><p style="margin: 0">&#160;</p><div>





</div><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.5in; text-align: left">32</td><td style="text-align: left">Condensed financial information of the parent company (continued)</td>
</tr></table><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><div>

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    <td style="text-indent: -0.125in; padding-left: 0.125in; padding-bottom: 1.5pt; text-align: center">&#160;</td><td style="padding-bottom: 1.5pt; text-align: center; font-weight: bold; font-style: italic">&#160;</td>
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
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    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="text-indent: -0.125in; padding-left: 0.125in">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right"><div style="-sec-ix-hidden: hidden-fact-304">-</div></td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
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    <td style="text-indent: -0.125in; padding-left: 0.125in; text-align: left">investment securities</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-indent: -0.125in; padding-left: 0.125in">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="border-bottom: Black 1.5pt solid; margin-top: 12pt; margin-bottom: 6pt"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->66<!-- Field: /Sequence --></p></div><div>
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</div><p style="margin: 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>




</div><p style="margin: 0">&#160;</p><div>





</div><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.5in; text-align: left">32</td><td style="text-align: left">Condensed financial information of the parent company (continued)</td>
</tr></table><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:continuation continuedAt="_CondensedFinancialInformationOfParentCompanyOnlyDisclosureTextBlock-c0_cont_9" id="_CondensedFinancialInformationOfParentCompanyOnlyDisclosureTextBlock-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><b><i>Condensed statements of comprehensive income</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_CondensedFinancialInformationOfParentCompanyOnlyDisclosureTextBlock-c0_cont_10" id="_CondensedFinancialInformationOfParentCompanyOnlyDisclosureTextBlock-c0_cont_9"><ix:nonNumeric contextRef="c0" escape="true" name="srt:CondensedStatementOfComprehensiveIncomeTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c534" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncomeTaxExpenseBenefit" scale="0" unitRef="cny">189,507</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">)</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c534" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ComprehensiveIncomeNetOfTax" scale="0" sign="-" unitRef="cny">7,159,792</ix:nonFraction></td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">)</td><td style="padding-bottom: 4pt; font-weight: bold">&#160;</td>
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CNFINANCE HOLDINGS LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Notes to the consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Expressed in Renminbi unless otherwise stated)</p><div>




</div><p style="margin: 0">&#160;</p><div>





</div><table cellpadding="0" cellspacing="0" style="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: left">
<td style="width: 0in"></td><td style="width: 0.5in; text-align: left">32</td><td style="text-align: left">Condensed financial information of the parent company (continued)</td>
</tr></table><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:continuation continuedAt="_CondensedFinancialInformationOfParentCompanyOnlyDisclosureTextBlock-c0_cont_11" id="_CondensedFinancialInformationOfParentCompanyOnlyDisclosureTextBlock-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><b><i>Condensed statements of cash flows</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_CondensedFinancialInformationOfParentCompanyOnlyDisclosureTextBlock-c0_cont_11"><ix:nonNumeric contextRef="c0" escape="true" name="srt:ScheduleOfCondensedCashFlowStatementTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom">
    <td style="padding-bottom: 1.5pt; text-align: center">&#160;</td><td style="padding-bottom: 1.5pt; text-align: center; font-weight: bold; font-style: italic">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="text-align: center; font-weight: bold; font-style: normal">&#160;</td>
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td>&#160;</td>
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    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%; text-align: left">Net losses</td><td style="width: 1%; font-style: normal">&#160;</td>
    <td style="width: 1%; font-style: normal; text-align: left">&#160;</td><td style="width: 9%; font-style: normal; text-align: right">(<ix:nonFraction contextRef="c534" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:NetIncomeLoss" scale="0" sign="-" unitRef="cny">189,507</ix:nonFraction></td><td style="width: 1%; font-style: normal; text-align: left">)</td><td style="width: 1%; font-style: normal">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Other operating assets</td><td style="font-style: normal">&#160;</td>
    <td style="font-style: normal; text-align: left">&#160;</td><td style="font-style: normal; text-align: right"><ix:nonFraction contextRef="c534" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInOtherOperatingAssets" scale="0" unitRef="cny">483,825</ix:nonFraction></td><td style="font-style: normal; text-align: left">&#160;</td><td style="font-style: normal">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 1.5pt; text-align: left">Other operating liabilities</td><td style="padding-bottom: 1.5pt; font-style: normal">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-style: normal; text-align: right">(<ix:nonFraction contextRef="c534" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInOtherOperatingLiabilities" scale="0" sign="-" unitRef="cny">3,609,478</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-style: normal; text-align: left">)</td><td style="padding-bottom: 1.5pt; font-style: normal">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-style: normal; text-align: right"><ix:nonFraction contextRef="c535" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInOtherOperatingLiabilities" scale="0" unitRef="cny">1,751,140</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-style: normal; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-bottom: 4pt; font-weight: bold; text-align: left">Net cash (used in)/provided by operating activities</td><td style="padding-bottom: 4pt; font-weight: bold; font-style: normal">&#160;</td>
    <td style="border-bottom: Black 4pt double; font-weight: bold; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; font-weight: bold; font-style: normal; text-align: right">(<ix:nonFraction contextRef="c534" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CashProvidedByUsedInOperatingActivitiesDiscontinuedOperations" scale="0" sign="-" unitRef="cny">3,315,160</ix:nonFraction></td><td style="padding-bottom: 4pt; font-weight: bold; font-style: normal; text-align: left">)</td><td style="padding-bottom: 4pt; font-weight: bold; font-style: normal">&#160;</td>
    <td style="border-bottom: Black 4pt double; font-weight: bold; font-style: normal; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; font-weight: bold; font-style: normal; text-align: right"><ix:nonFraction contextRef="c535" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CashProvidedByUsedInOperatingActivitiesDiscontinuedOperations" scale="0" unitRef="cny">68,774,459</ix:nonFraction></td><td style="padding-bottom: 4pt; font-weight: bold; font-style: normal; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><b>Cash flows from financing activities:</b></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-bottom: 1.5pt">Repurchase of ordinary shares</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-310">-</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c535" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:PaymentsForRepurchaseOfCommonStock" scale="0" unitRef="cny">87,631,475</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 4pt; font-weight: bold; text-align: left">Net cash used in financing activities</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; text-align: right"><div style="-sec-ix-hidden: hidden-fact-311">-</div></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt; font-weight: bold">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left">Net decrease in cash and cash equivalents</td><td style="font-weight: bold">&#160;</td>
    <td style="font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c534" decimals="0" format="ixt:num-dot-decimal" name="cnf:NetIncreasedecreaseInCashAndCashEquivalents" scale="0" unitRef="cny">3,315,160</ix:nonFraction></td><td style="font-weight: bold; text-align: left">)</td><td style="font-weight: bold">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Cash and cash equivalents at the beginning of year</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-bottom: 1.5pt; text-align: left">Effect of exchange rate change on cash and cash equivalents</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right"><div style="-sec-ix-hidden: hidden-fact-314">-</div></td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">&#160;</td><td style="padding-bottom: 4pt; font-weight: bold">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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<td style="width: 0in"></td><td style="width: 0.5in; text-align: left">33</td><td style="text-align: left">Commitments and contingencies</td>
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</div><ix:continuation continuedAt="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_2" id="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">In 2022, CNFinance entered into a contract with a third-party company
for the purchase of commercial properties as office buildings for its own use. As of December 31, 2022, the Group has paid RMB <ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RevenueRemainingPerformanceObligation" scale="0" unitRef="cny">88,574,103</ix:nonFraction>
as agreed in the contract and this amount is being recognized in the account prepaid. The remaining amount of RMB <ix:nonFraction contextRef="c537" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:FinanceLeaseInterestPaymentOnLiability" scale="0" unitRef="cny">88,450,000</ix:nonFraction> will be paid
by December 30, 2023, and the delivery of the building will be made by February 28, 2024, as the Group completing the payment in full.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p></ix:continuation><div>

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</div><ix:continuation id="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">In addition, the Group has not entered into any derivative contracts
that are indexed to the Group&#8217;s shares and classified as shareholders&#8217; equity, or that are not reflected in the Group&#8217;s
consolidated financial statements. Furthermore, the Group does 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. Moreover, the Group does not have any variable
interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to the Group or engages in leasing,
hedging or product development services with the Group.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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<td style="width: 0in"></td><td style="width: 0.5in; text-align: left">34</td><td style="text-align: left">Subsequent events</td>
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</div><ix:continuation id="_SubsequentEventsTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">The Group has considered subsequent events through April 27, 2022,
which was the date of these consolidated financial statements were issued, and has determined none of these events were required to be
recognized or disclosed in the consolidated financial statements and related notes.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-68</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="border-top: Black 1.5pt solid; font-size: 1pt">&#160;</div></div><!-- Field: /Rule-Page --><div>

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<ix:footnote id="ix_8_footnote" xml:lang="en-US">In June 2016, the Group invested 10,003,334 shares at RMB3.00 per share, which represents 2.14% of the paid-in capital in Guangdong Qingyuan Rural Commercial Bank (&#8220;Qingyuan Rural&#8221;). The Group transferred 2 million shares to an unrelated third party at RMB3.00 per share that is same as the investment cost on September 18, 2019. As of December 31, 2021 and 2022, the Group invested 1.72% of the paid-in capital in Qingyuan Rural. Qingyuan Rural has paid-in capital of RMB1,400,000,000, and the Group has invested RMB24,010,000 in Qingyuan Rural.In January 2022, the Group and Guangzhou Minghui set up Guangzhou Mingfeng Partnership (&#8220;Guangzhou Mingfeng&#8221;). The total paid-in capital was RMB40,000,000 and the Group has invested RMB25,000,000 in Guangzhou Mingfeng.The measurement alternative is selected for the above non-marketable equity securities. Under the measurement alternative, the equity securities without readily determinable fair value are measured at cost minus impairment and adjusted for changes in observable prices. No change in observable price has been identified and no impairment has been recorded for the two years of 2021 and 2022.</ix:footnote><!--Text not found in footnote sections assigned to Schedule of other assets-->
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<ix:nonFraction contextRef="c446" id="hidden-fact-193" name="us-gaap:LongTermDebtMaturitiesRepaymentsOfPrincipalInNextTwelveMonths" unitRef="cny" xsi:nil="true"></ix:nonFraction>
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<ix:footnote id="ix_13_footnote" xml:lang="en-US">In 2021, the Group started to cooperate with a third-party guarantee company, Guangzhou Nanfeng, that directly provides guarantee services to commercial banks. According to relevant financial guarantee arrangements, Guangzhou Nanfeng will fulfil its obligations to purchase defaulted loans. However, the Group is required to provide deposits and replenish such deposits from time to time to Guangzhou Nanfeng for its obligations of purchasing defaulted loans. Effectively, the Group provides back-to-back guarantee to Guangzhou Nanfeng and takes on all of the credit risk of the borrowers. These financial guarantee contracts are accounted for as guarantee liabilities under ASC 460, Guarantees.As of December 31, 2022, maximum potential undiscounted future payment that the Group would be required to make was RMB2,450.37 million. The initial term of the guarantee liabilities is the same as the term of loans facilitated under the arrangements with commercial banks, which ranges from 1 year to 10 years, as of December 31, 2022. The remaining term of the guarantee liabilities range from 1 year to 10 years as of December 31, 2022.</ix:footnote><!--Text not found in footnote sections assigned to Schedule of other liabilities-->
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<ix:nonFraction contextRef="c507" id="hidden-fact-216" name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsOutstandingWeightedAverageExercisePrice" unitRef="cnyPershares" xsi:nil="true"></ix:nonFraction>
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<ix:nonFraction contextRef="c508" id="hidden-fact-220" name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsGrantsInPeriodGross" unitRef="shares" xsi:nil="true"></ix:nonFraction>
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<ix:nonFraction contextRef="c508" id="hidden-fact-227" name="us-gaap:ShareBasedCompensationArrangementsByShareBasedPaymentAwardOptionsForfeituresInPeriodWeightedAverageExercisePrice" unitRef="cnyPershares" xsi:nil="true"></ix:nonFraction>
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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
,
2022
.
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the transition period from          to          .
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:
001-38726
CNFinance Holdings
Limited
(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)
44/F, Tower G
,
No. 16 Zhujiang Dong Road
Tianhe District
,
Guangzhou City
, Guangdong Province
510620
People's Republic of
China
(Address of principal
executive offices)
Bin Zhai, Chief
Executive Officer and Chairman
Tel:
+86
-
20-62316688
E-mail:
ir@cashchina.cn
At the address of the Company set forth above
(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
Trading Symbol
Name of each exchange on which registered
American depositary shares, each ADS representing 20 ordinary shares, par value  US$0.0001 per share
CNF
The
New York Stock Exchange
Ordinary shares, par value US$0.0001  per share
*
The New York Stock Exchange
*
Not for trading, but only in connection with the listing
                                            on the New York Stock Exchange of American depositary shares.
Securities registered or to be registered pursuant to Section 12(g)
of the Act:
None
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section
15(d) of the Act:
None
(Title of Class)
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.
1,371,643,240
ordinary shares, par value US$0.0001 per share, as of
December 31, 2022.
Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act.
Yes
☐
No
☒
If this report is an annual or transition report, indicate by check
mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yes
☐
No
☒
Note – Checking the box above will not relieve any registrant
required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 definition of "large accelerated filer,"
"accelerated filer," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
☐
Accelerated Filer
☒
Non-accelerated Filer
☐
Emerging growth company
☒
If an emerging growth company that prepares its financial statements
in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.
☒
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.
☐
If securities are registered pursuant to Section 12(b) of the Act,
indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to
previously issued financial statements.
☐
Indicate by check mark whether any of those error corrections are
restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers
during the relevant recovery period pursuant to § 240.10D-1(b).
☐
Indicate by check mark which basis of accounting the registrant has
used to prepare the financial statements included in this filing:
☒
U.S. GAAP
☐
International
                                            Financial Reporting Standards as issued by the International Accounting Standards Board
☐
Other
If "Other" has been checked in response to the previous
question, indicate by check mark which financial statement item the registrant has elected to follow.
☐
Item 17
☐
Item 18
If this is an annual report, indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act).
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 Section 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
☐
† 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.
TABLE OF CONTENTS
Page
INTRODUCTION
iii
FORWARD-LOOKING INFORMATION
v
PART I
1
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
1
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
1
ITEM 3. KEY INFORMATION
1
3.A. [Reserved]
4
3.B. Capitalization and Indebtedness
4
3.C. Reason for the Offer and Use of Proceeds
4
3.D. Risk Factors
5
ITEM 4. INFORMATION ON THE COMPANY
46
4.A. History and Development of the Company
46
4.B. Business Overview
46
4.C. Organizational Structure
82
4.D. Property, Plant and Equipment
83
ITEM 4A. UNRESOLVED STAFF COMMENTS
83
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
83
5.A. Operating Results
83
5.B. Liquidity and Capital Resources
106
5.C. Research and Development
111
5.D. Trend Information
112
5.E. Critical Accounting Estimates
112
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
113
6.A. Directors and Senior Management
113
6.B. Compensation
114
6.C. Board Practices
117
6.D. Employees
120
6.E. Share Ownership
120
6.F. Disclosure of a Registrant's
Action to Recover Erroneously Awarded Compensation
121
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
122
7.A. Major Shareholders
122
7.B. Related Party Transactions
122
7.C. Interests of Experts and Counsel
122
ITEM 8. FINANCIAL INFORMATION
122
8.A. Consolidated Statements and Other Financial Information
122
8.B. Significant Changes
123
ITEM 9. THE OFFER AND LISTING
123
9.A. Offering and Listing Details
123
9.B. Plan of Distribution
123
9.C. Markets
123
9.D. Selling Shareholders
123
9.E. Dilution
123
9.F. Expenses of the Issue
123
ITEM 10. ADDITIONAL INFORMATION
124
10.A. Share Capital
124
10.B. Memorandum and Articles of Association
124
10.C. Material Contracts
124
10.D. Exchange Controls
124
10.E. Taxation
124
10.F. Dividends and Paying Agents
130
10.G. Statement by Experts
130
i
10.H. Documents on Display
130
10.I. Subsidiary information
130
10.J. Annual Report to Security Holders
130
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
131
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
131
12.A. Debt Securities
131
12.B. Warrants and Rights
131
12.C. Other Securities
131
12.D. American Depositary Shares
132
PART II
134
ITEM 13. ITEM DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
134
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY
    HOLDERS AND USE OF PROCEEDS
134
14.A.-14.D. Material Modifications to the Rights of Security Holders
134
14.E. Use of Proceeds
134
ITEM 15. CONTROLS AND PROCEDURES
134
ITEM 16. [Reserved]
135
16.A. Audit Committee Financial Expert
135
16.B. Code of Ethics
136
16.C. Principal Accountant Fees and Services
136
16.D. Exemptions from the Listing Standards for Audit Committees
136
16.E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
137
16.F. Change in Registrant's Certifying Accountant
137
16.G. Corporate Governance
137
16.H. Mine Safety Disclosure
138
16.I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
138
16.J. Insider trading policies
138
PART III
139
ITEM 17. FINANCIAL STATEMENTS
139
ITEM 18. FINANCIAL STATEMENTS
139
ITEM 19. EXHIBITS
139
ii
INTRODUCTION
Except where the context otherwise indicates and for the purpose of
this annual report only:
●
"ADSs" refers to the American depositary shares,
                                            each representing 20 of our ordinary shares;
●
"allowance ratio" of a particular date refers to
                                            amount of allowance for loan principal, interest and financing service fee receivables as
                                            a percentage of the outstanding loan principal, interest and financing service fee receivables
                                            as of the date;
●
"China" or "the PRC" refers to the People's
                                            Republic of China, including Hong Kong and Macau and, only for the purpose of this annual
                                            report, excluding Taiwan; the only instances in which "China" or "the PRC"
                                            do not include Hong Kong or Macau are when used in the case of laws and regulations, including,
                                            among others, tax matters, adopted by the People's Republic of China; the legal and
                                            operational risks associated with operating in China also apply to our operations in Hong
                                            Kong;
●
"contractual interest rate" refers to the interest
                                            rate prescribed under loan agreements;
●
"CNFinance" refers to CNFinance Holdings Limited,
                                            a Cayman Islands exempted company with limited liability;
●
"Credit Risk Mitigation Position" or "CRMP"
                                            refers to the amount contributed by the sales partners equal to 10% to 25% of the loans issued
                                            to the borrowers introduced by the sales partners to share the credit risk with the Company;
●
"delinquency ratio" of a particular date refers
                                            to total balance of outstanding loan principal for which any installment payment is one or
                                            more days past-due as a percentage of the outstanding loan principal as of the date;
●
"effective interest rate" refers to the annualized
                                            internal rate of return based on initial outlay of loan principal, initial inflow of financing
                                            service fees (if applicable) and expected monthly inflow of repayments;
●
"effective sales partners" refers to the sales partners
                                            who have introduced at least one borrower to us that was approved by our trust company partners
                                            for loan facilitation;
●
"leverage ratio" refers to the ratio of total assets
                                            to total shareholders' equity;
●
"charge-off ratio" refers to the ratio of charge-offs
                                            during a period over the average beginning and ending balances of outstanding loan principal
                                            of the same period;
●
"loan-to-value ratio" or "LTV ratio"
                                            refers to the ratio of loan amount to the value of asset collateral; the loan amount
                                            is calculated as the amount of all outstanding loans to be secured by the collateral;
●
"NPL" refers to a loan being delinquent for over
                                            90 days;
●
"NPL provision coverage ratio" of a particular date
                                            refers to amount of allowance for loan principal, interest and financing service fee receivables
                                            as a percentage of the outstanding balance of NPL principal as of the date;
●
"NPL ratio" as of a particular date represents total
                                            balance of outstanding loan principal for which any installment payment is over 90 calendar
                                            days past-due as a percentage of the outstanding loan principal as of the date;
●
"ordinary shares" refers to our ordinary shares
                                            of par value US$0.0001 per share;
●
"Pearl River Delta region" refers to Dongguan, Zhongshan,
                                            Foshan, Guangzhou, Huizhou, Jiangmen, Shenzhen, Zhuhai and Zhaoqing;
●
"quick disposal plans" refers to the mechanisms
                                            that we utilize to quickly dispose of delinquent loans or collateral to recover potential
                                            losses, including selling the delinquent loans to third parties or disposal of collateral
                                            without going through judicial proceedings;
●
"RMB" or "Renminbi" refers to the legal
                                            currency of the People's Republic of China;
iii
●
"senior units" refers to the senior units and intermediate
                                            units, if applicable, in a trust plan;
●
"structural leverage ratio" refers to the ratio
                                            of the total amount of senior units and subordinated units; intermediate units are included
                                            as senior units for the purpose of calculation;
●
"Tier 1 cities" refers to Beijing, Shanghai, Shenzhen
                                            and Guangzhou;
●
"Tier 2 cities" refers to Dongguan, Foshan, Nanjing,
                                            Nanchang, Nantong, Xiamen, Hefei, Dalian, Tianjin, Changzhou, Xuzhou, Huizhou, Chengdu, Wuxi,
                                            Kunming, Hangzhou, Wuhan, Ji'nan, Zhuhai, Shijiazhuang, Fuzhou, Suzhou, Xi'an,
                                            Zhengzhou, Chongqing, Changsha, Qingdao, Shaoxing, Ningbo, Wuxi, Harbin, Changchun, Nanning,
                                            Wenzhou, Quanzhou, Guiyang, Taiyuan, Jinhua, Yantai, Jiaxing, Taizhou, Zhongshan, Baoding,
                                            Lanzhou and Langfang;
●
"total operating income" refers to the sum of (i)
                                            net interest and fees income after collaboration cost and (ii) total non-interest income;
●
"US$," "dollars" or "U.S. dollars"
                                            refers to the legal currency of the United States;
●
"we," "us," "our company,"
                                            "the Company," "the Group," and "our" refer to CNFinance
                                            Holdings Limited, a Cayman Islands exempted company with limited liability and its subsidiaries
                                            and consolidated affiliated entities, including but not limited to Shenzhen Fanhua United
                                            Investment Group Co., Ltd. and Guangzhou Heze Information Technology Co., Ltd., as a group;
                                            and
●
"Yangtze River Delta region" refers to Shanghai,
                                            Nanjing, Nantong, Hefei, Yixing, Changzhou, Yangzhou, Wuxi, Hangzhou, Jiangyin, Taizhou,
                                            Shaoxing, Suzhou, Jiaxing and Zhenjiang.
We present our financial results in RMB. We make no representation
that any RMB or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or RMB, as the case may be, at any particular
rate, or at all. The PRC government imposes control over its foreign currency reserves in part through direct regulation of the conversion
of RMB into foreign exchange and through restrictions on foreign trade. This annual report contains translations of certain foreign currency
amounts into U.S. dollars for the convenience of the reader. Unless otherwise stated, all translations of Renminbi into U.S. dollars
were made at the rate at RMB6.8972 to US$1.00, the exchange rate as set forth in the H.10 statistical release of the Board of Governors
of the Federal Reserve System in effect as of December 30, 2022. On April 21, 2023, the noon buying rate for Renminbi was RMB6.8920
to US$1.00.
iv
FORWARD-LOOKING
INFORMATION
This annual report on Form 20-F contains forward-looking statements
that reflect our current expectations and views of future events. All statements other than statements of historical facts are forward-looking
statements. These forward-looking statements are made under the "safe harbor" provision under Section 21E of the Securities
Exchange Act of 1934, as amended, or the Exchange Act, and as defined in the Private Securities Litigation Reform Act of 1995. These
statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements
to be materially different from those expressed or implied by the forward-looking statements. In some cases, you can identify these forward-looking
statements by terminology such as "may," "will," "expect," "anticipate," "aim,"
"estimate," "intend," "plan," "believe," "is/are likely to," "potential,"
"continue" or other similar expressions. We have based these forward-looking statements largely on our current expectations
and projections about future events 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 growth strategies;
●
our future business development, results of operations and financial
                                            condition;
●
relevant government policies and regulations relating to our
                                            business and industry;
●
status of the COVID-19 pandemic and its impact on our business
                                            and industry;
●
general economic and business conditions in China; 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" of this annual report and other risks outlined in our other filings with the Securities and
Exchange Commission, or the SEC. Those risks are not exhaustive. We operate in an 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 qualify all of our forward-looking statements by these cautionary statements.
You should not rely upon forward-looking statements as predictions
of future events. We do not undertake any obligation to update or revise the forward-looking statements except as required under applicable
law. You should read this annual report and the documents that we reference in this annual report completely and with the understanding
that our actual future results may be materially different from what we expect.
v
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
Risks Associated with Being Based in or Having the Majority of
the Operations in China
We are exposed to legal and operational risks associated with our
operations in China. The PRC government has significant authority to exert influence on the ability of a company with operations in China,
including us, to conduct its business. Changes in China's economic, political or social conditions or government policies could
materially and adversely affect our business and results of operations. We are subject to risks due to the uncertainty of the interpretation
and the application of the PRC laws and regulations, including but not limited to the risks of uncertainty about any future actions of
the PRC government on U.S. listed companies. We may also be subject to sanctions imposed by PRC regulatory agencies, including the China
Securities Regulatory Commission ("CSRC"), if we fail to comply with their rules and regulations. Any actions by the PRC
government to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in companies having
operations in China, including us, could significantly limit or completely hinder our ability to offer or continue to offer securities
to investors, and cause the value of our securities to significantly decline or become worthless. These China-related risks could result
in a material change in our operations and/or the value of our securities, or could significantly limit or completely hinder our ability
to offer securities to investors in the future and cause the value of such securities to significantly decline or become worthless.
The Regulations on Mergers and Acquisitions of Domestic Enterprises
by Foreign Investors, or the M&A Rules, require 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 China Securities Regulatory Commission
("CSRC") prior to the listing and trading of such special purpose vehicle's securities on an overseas stock exchange.
However, the application of the M&A Rules remains unclear. If CSRC approval is required, it is uncertain whether it would be possible
for us to obtain the approval, and any failure to obtain or delay in obtaining CSRC approval for future offerings of securities overseas
or to maintain the listing status of our ADSs would subject us to sanctions imposed by the CSRC and other PRC regulatory agencies.
On July 6, 2021, certain PRC regulatory authorities
issued Opinions on Strictly Cracking Down on Illegal Securities Activities in Accordance with the Law. These opinions call for strengthened
regulation over illegal securities activities and supervision on overseas listings by China-based companies and propose 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. On February 17, 2023, the CSRC, promulgated the Trial Administrative Measures of Overseas Securities Offering
and Listing by Domestic Companies (the "Overseas Listing Trial Measures"), and five supporting guidelines, which became effective
on March 31, 2023. The Overseas Listing Trial Measures will comprehensively improve and reform the existing regulatory regime for overseas
offering and listing of PRC domestic companies' securities and will regulate both direct and indirect overseas offering and listing
of PRC domestic companies' securities by adopting a filing-based regulatory regime. According to the Overseas Listing Trial Measures,
PRC domestic companies that seek to offer and list securities in overseas markets, either in direct or indirect means, are required to
fulfill the filing procedure with the CSRC and report relevant information. If a company fails to complete the filing procedure or conceals
any material fact or falsifies any major content in its filing documents, it may be subject to administrative penalties, such as order
to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable
persons may also be subject to administrative penalties, such as warnings and fines. The Overseas Listing Trial Measures also provide
that a company in mainland China must file with the CSRC within three business days for its follow-on offering of securities after it
is listed in an overseas market. On February 17, 2023, the CSRC also issued the Notice on Administration of the Filing of Overseas Offering
and Listing by Domestic Companies and held a press conference for the release of the Overseas Listing Trial Measures, which, among others,
clarified that the companies in mainland China that have been listed overseas before March 31, 2023 are not required to file with the
CSRC immediately, but these companies should complete filing with the CSRC for their financing activities in accordance with the Overseas
Listing Trial Measures. Based on the foregoing, as an issuer that has been listed overseas before the effective date of the Overseas
Listing Trial Measures, we are not required to complete filing with the CSRC for our prior offshore offerings at this stage, but we may
be subject to the filing requirements for our future capital raising activities under the Overseas Listing Trial Measures.
1
In addition, the Data Security Law was promulgated
on June 10, 2021 and became effective in September 2021. The Personal Information Protection Law was promulgated on August 20, 2021 and
officially implemented on November 1, 2021. The Data Security Law stipulates that the data handling activities that affect or may affect
the national security should undergo national security review, and the Personal Information Protection Law stipulates that critical information
infrastructure ("CII") operators, or personal information processors whose processing of personal information reaches the
threshold amount prescribed by the national cyberspace authority, shall store the personal information collected or generated by them
within the territory of the PRC. If it is necessary to provide the data overseas, the organization is required to pass the security assessment
organized by the national cyberspace authority. The Measures for Cyber Security Review published by Cyberspace Administration of China
(CAC) in December 2021 provides that a network platform operator that has the personal information of more than one million users must
apply to the Cybersecurity Review Office (the "CRO") for a cybersecurity review when it seeks to list overseas. Also, a CII
operator, when procuring a network product or service, shall predict any national security risk that may arise after the use of such
product or service. If national security will be affected or may be affected, the CII operator shall apply to the CRO for a cybersecurity
review.
Although we do not believe we are a CII operator or a network platform
operator, the PRC authorities could interpret such term broadly. If our company is deemed to be a CII operator or a network platform
operator under such rules, we could be subject to cybersecurity review by the CAC and other relevant PRC regulatory authorities and be
required to change our existing practices in data privacy and cybersecurity matters at substantial costs. During such cybersecurity review,
we may be required to stop providing services to our customers. If the CSRC or other PRC regulatory body subsequently determines that
we need to obtain the CSRC's approval for future offerings of securities overseas or to maintain the listing status of our ADSs
or if the CSRC or any other PRC government authorities promulgates any interpretation or implements rules before our listing that would
require us to obtain CSRC or other governmental approvals for future offerings of securities overseas or to maintain the listing status
of our ADSs, we may not be able to proceed with future offerings of securities overseas or to the listing of our ADSs on the New York
Stock Exchange, face adverse actions or sanctions by the CSRC or other PRC regulatory agencies. In any such event, these regulatory agencies
may impose fines and penalties on our operations in China, limit our operating privileges in China, delay or restrict the repatriation
of the proceeds from future offerings of securities overseas into the PRC or take other actions that could have a material adverse effect
on our business, financial condition, results of operations, reputation and prospects, as well as our ability to complete future offerings
of securities overseas or to maintain the listing status of our ADSs. We also cannot rule out the possibility that certain of our customers
may be deemed as CII operators, in which case our products or services or data processing activities, if being deemed as related to national
security, will need to be submitted for cybersecurity review before we can enter into agreements with such customers, and before the
conclusion of such procedure, the customers will not be allowed to use our products or services. If the reviewing authority considers
that the use of our services by certain of our customers involves risk of disruption, is vulnerable to external attacks, or may negatively
affect, compromise, or weaken the protection of national security, we may not be able to provide our products or services to such customers,
which could have a material adverse effect on our results of operations and prospects. Uncertainties also exist regarding the interpretation
and implementation of the newly enacted PRC Foreign Investment Law and how it may impact the viability of our current corporate structure
and the viability of business operation. On March 15, 2019, the National People's Congress approved the Foreign Investment Law
of the People's Republic of China ("PRC Foreign Investment Law"), and the State Council promulgated the Implementing
Regulations to the PRC Foreign Investment Law ("Implementing Regulations") on December 26, 2019, both of which came into
effect on January 1, 2020. The PRC Foreign Investment Law and its Implementing Regulations replaced the trio of previous laws regulating
foreign investment in China, namely, the Law of the People's Republic of China on Chinese-foreign Equity Joint Ventures, the Law
of the People's Republic of China on Chinese-foreign Cooperative Joint Ventures, and the Law of the People's Republic of
China on Wholly Foreign-Owned Enterprises, together with their implementation rules and ancillary regulations.
2
PRC Foreign Investment Law and its Implementing Regulations specify
that foreign investments shall be conducted in line with the negative list issued by or approved to be issued by the State Council. If
a foreign investment enterprise (the "FIE") proposes to conduct business in an industry subject to foreign investment "restrictions"
in the negative list, the FIE must meet certain conditions under the negative list before being established. If an FIE proposes to conduct
business in an industry subject to foreign investment "prohibitions" in the "negative list," it must not engage
in the business. Investments made in Mainland China by investors from the Hong Kong Special Administrative Region and the Macao Special
Administrative Region shall be governed by the PRC Foreign Investment Law and its Implementing Regulations. On December 27, 2021, the
NDRC and the MOFCOM promulgated the Special Administrative Measures (Negative List) for Access of Foreign Investments (2021 Edition),
as came into effect on January 1, 2022, according to which the industry of loan service has not been subject to foreign investment "restrictions"
or "prohibitions" in the Negative List. Our PRC legal advisor, Merits & Tree Law Offices, advises us that according to
the PRC Foreign Investment Law and the Implementing Regulations, the PRC regulatory agencies shall, considering the needs for further
foreign opening and economic and social development, adjust the Negative List where appropriate. Therefore, if the industry of loan service
is subject to the foreign investment restrictions or prohibitions under the negative list issued subsequently, our failure to take timely
and appropriate measures to cope with any of these or similar regulatory compliance challenges could materially and adversely affect
our current corporate structure, corporate governance, and business operations.
As there are still uncertainties regarding these new laws and regulations
as well as the amendment, interpretation and implementation of the existing laws and regulations related to cybersecurity and data protection,
we cannot assure you that we will be able to comply with these laws and regulations in all respects. The regulatory authorities may deem
our activities or services non-compliant and therefore require us to suspend or terminate its business. We may also be subject to fines,
legal or administrative sanctions and other adverse consequences, and may not be able to become in compliance with relevant laws and
regulations in a timely manner, or at all. These may materially and adversely affect its business, financial condition, results of operations
and reputation.
Since these statements and regulatory actions are new, it is highly
uncertain how soon legislative or administrative regulation making bodies will respond and what existing or new laws or regulations or
detailed implementations and interpretations will be modified or promulgated, if any, and the potential impact such modified or new laws
and regulations will have on our daily business operation, our ability to accept foreign investments and conduct follow-on offerings,
and listing or continuing listing on a U.S. or other foreign exchanges. In addition, the PRC government has recently published new policies
that significantly affected certain industries such as the real estate, education and internet industries, and we cannot rule out the
possibility that it will in the future release regulations or policies regarding any other industry including the industry in which we
operate, which could adversely affect our business, financial condition and results of operations. See "Item 3. Key Information—D.
Risk Factors—Risk Factors—Risks Related to Doing Business in China" for more details.
Risks Associated with Our Corporate Structure
CNFinance Holdings Limited is a holding company with no operations
of its own. It conducts substantially all of its operations in China primarily through its subsidiaries in China, in particular Shenzhen
Fanhua United Investment Group Co., Ltd., Guangzhou Heze Information Technology Co., Ltd., and their subsidiaries and consolidated affiliated
entities, and substantially all of its assets and operations are located in China. With a holding company structure, we principally rely
on dividends from our PRC subsidiaries for our cash requirements, including any payment of dividends to our shareholders. If these subsidiaries
or any newly formed 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 2020, 2021 and 2022, CNFinance has not transferred any cash proceeds
to any of its PRC subsidiaries. For instance, cash proceeds raised from overseas financing activities, may be transferred by CNFinance
through China Financial Services Group Limited, our Hong Kong subsidiary, to Fanhua Chuangli Information Technology (Shenzhen) Company
Limited ("Fanhua Chuangli"), a PRC subsidiary, via capital contribution and shareholder loans, as the case may be. Fanhua
Chuangli then will transfer funds to its subsidiaries to meet the capital needs of business operations. None of our PRC subsidiaries
have issued any dividends or distributions to respective holding companies, including CNFinance, or any investors as of the date of this
annual report. Our subsidiaries in the PRC generate and retain cash generated from operating activities and re-invest it in business
operations.
In this annual report, "we," "us," "our
company," and "our" refer to CNFinance Holdings Limited, a Cayman Islands exempted company with limited liability and
its subsidiaries and consolidated affiliated entities, including but not limited to Shenzhen Fanhua United Investment Group Co., Ltd.
and Guangzhou Heze Information Technology Co., Ltd., as a group.
3
Financial Information Related to the Consolidated Affiliated
Entities
Loans that we facilitate are granted to borrowers through structured
funds set up by our trust company partners, such as the series of FOTIC Jinghua structured funds. Each structured trust fund has a separate
bank account, and the assets of the structured funds can only be used to settle obligations under the respective structured fund. Under
most trust plan agreements, we subscribe to all of the subordinated units of each structured trust plan and provide credit strengthening
services as the subordinated unit holder. This requires us to ensure sufficient capital to repay the principal amount and the agreed
financing costs for the senior unit holders. We are designated as the service provider to assist our trust company partners acquire and
screen borrowers and perform credit assessment pursuant to collaboration agreements with our trust company partners. We provide loan
facilitation and post-loan management services for service fees charged directly to the trust plans. As a result, we are deemed as the
primary beneficiary of the funds from the accounting perspective as we have the power to direct the activities of the structured funds
and have obligation to absorb losses of the funds or right to receive benefits. Under Accounting Standards Codification (ASC) Topic 810,
the structured funds are considered as variable interest entities (VIEs) which need to be consolidated on our balance sheet. However,
as advised by our PRC counsel, such structured funds are not considered as separate legal entities or VIEs under the Notice on Relevant
Issues Concerning Foreign Exchange Administration for Domestic Residents' Financing and Roundtrip Investment Through Offshore Special
Purpose Vehicles, or SAFE Circular 75. We subscribe to the subordinated units and act as the service provider under the trust plans through
our wholly-owned subsidiaries.
Risks Associated with the Holding Foreign Companies Accountable
Act
In recent years, U.S. regulatory authorities have continued to express
their concerns about challenges in their oversight of financial statement audits of U.S.-listed companies with significant operations
in China. More recently, as part of a continued regulatory focus in the United States on access to audit and other information currently
protected by national law, in particular China's, the United States enacted the Holding Foreign Companies Accountable Act, or the
HFCAA, in December 2020. Trading in our securities on U.S. markets, including the NYSE, may be prohibited under the HFCAA if the PCAOB
determines that it is unable to inspect or investigate completely our auditor for two consecutive years. On December 16, 2021, the PCAOB
issued the HFCAA Determination Report to notify the SEC of its determinations that the PCAOB was unable to inspect or investigate completely
registered public accounting firms headquartered in mainland China and Hong Kong, or the 2021 Determinations, including our auditor.
On May 26, 2022, we were conclusively identified by the SEC under the HFCAA as having filed audit reports issued by a registered public
accounting firm that cannot be inspected or investigated completely by the PCAOB in connection with the filing of our 2021 Form 20-F.
On December 15, 2022, the PCAOB announced that it was able to conduct inspections and investigations completely of PCAOB-registered public
accounting firms headquartered in mainland China and Hong Kong in 2022. The PCAOB vacated its previous 2021 Determinations accordingly.
However, whether the PCAOB will continue to conduct inspections and
investigations completely to its satisfaction of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong
is subject to uncertainty and depends on a number of factors out of our, and our auditor's, control, including positions taken
by authorities of the PRC. The PCAOB is required under the HFCAA to make its determination on an annual basis with regards to its ability
to inspect and investigate completely accounting firms based in the mainland China and Hong Kong. The possibility of being a Commission-Identified
Issuer and risk of delisting could continue to adversely affect the trading price of our securities.
For the details of the risks associated with the enactment of the
HFCAA, see "Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—Our auditor, like
other independent registered public accounting firms operating in China, was historically not permitted to be subject to inspection by
the PCAOB, and consequently, investors were deprived of the benefits of such inspection in the past. Trading in our securities may be
prohibited under the HFCAA if the PCAOB determines that it is unable to inspect or investigate completely our auditor, and as a result,
U.S. national securities exchanges, such as the NYSE, may determine to delist our securities."
3.A. [Reserved]
3.B. Capitalization and Indebtedness
Not applicable.
3.C. Reason for the Offer and Use of Proceeds
Not applicable.
4
3.D. Risk Factors
The PRC government has significant authority to exert influence on
the ability of a company based in China, such as ours, to conduct its business, accept foreign investments or list on U.S. or other foreign
exchanges. We face risks associated with regulatory approvals of overseas offerings, anti-monopoly regulatory actions, oversight on cybersecurity
and data privacy. For example, in recent years, regulatory actions undertaken by China's government
,
including the enactment
of China's new Data Security Law, amended Cybersecurity Review Measures, Personal Information Protection Law, and any other future
laws and regulations may require us to incur significant expenses and could materially affect our ability to conduct our business, accept
foreign investments or list on a U.S. or foreign exchange. The PRC government also has significant oversight and discretion over the
conduct of our business and as such may influence our operations at any time, which could result in a material adverse effect on our
operations. The PRC government has 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 regarding the industry where we operate, which could adversely
affect our business, financial condition and results of operations. For example, the PRC anti-monopoly enforcement agencies have in recent
years strengthened enforcement under the anti-monopoly law. Although we do not believe the current antimonopoly laws and regulations
have a material adverse impact on our business and results of operations, any failure or perceived failure by us to comply with the relevant
anti-monopoly laws and regulations may result in governmental investigations, enforcement actions or lawsuits and could have an adverse
impact on our business and results of operations.
Furthermore, the PRC government has recently indicated an intent to
exert more oversight and control over overseas securities offerings and other capital markets activities and foreign investment in China-based
companies like ours. These risks could result in a material change in our operations and the value of our ordinary shares or the ADSs,
or could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value
of such securities to significantly decline or become worthless.
Additionally, trading in our securities on U.S. markets, including
the NYSE, may be prohibited under the HFCAA if the PCAOB determines that it is unable to inspect or investigate completely our auditor
for two consecutive years. On December 16, 2021, the PCAOB issued the HFCAA Determination Report to notify the SEC of its determinations
that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and
Hong Kong (the "2021 Determinations"), including our auditor. On May 26, 2022, we were conclusively identified by the SEC
under the HFCAA as having filed audit reports issued by a registered public accounting firm that cannot be inspected or investigated
completely by the PCAOB in connection with the filing of our 2021 Form 20-F. The inability of the PCAOB to conduct inspections in the
past also deprived our investors of the benefits of such inspections. On December 15, 2022, the PCAOB announced that it was able to conduct
inspections and investigations completely of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong in
2022. The PCAOB vacated its previous 2021 Determinations accordingly. As a result, we do not expect to be identified as a Commission-Identified
Issuer under the HFCAA for the fiscal year ended December 31, 2022 after we file our annual report on Form 20-F for such fiscal year.
However, whether the PCAOB will continue to conduct inspections and investigations completely to its satisfaction of PCAOB-registered
public accounting firms headquartered in mainland China and Hong Kong is subject to uncertainty and depends on a number of factors out
of our, and our auditor's, control, including positions taken by authorities of the PRC. The PCAOB is expected to continue to demand
complete access to inspections and investigations against accounting firms headquartered in mainland China and Hong Kong in the future
and states that it has already made plans to resume regular inspections in early 2023 and beyond. The PCAOB is required under the HFCAA
to make its determination on an annual basis with regards to its ability to inspect and investigate completely accounting firms based
in the mainland China and Hong Kong. The possibility of being a Commission-Identified Issuer and risk of delisting could continue to
adversely affect the trading price of our securities. If the PCAOB determines in the future that it no longer has full access to inspect
and investigate accounting firms headquartered in mainland China and Hong Kong and we continue to use such accounting firm to conduct
audit work, we would be identified as a Commission-Identified Issuer under the HFCAA following the filing of the annual report for the
relevant fiscal year, and if we were so identified for two consecutive years, trading in our securities on U.S. markets would be prohibited.
Such risk could result in a material change in our operations and/or the value of the ADSs or could significantly limit or completely
hinder our ability to offer or continue to offer ADSs and/or other securities to investors and cause the value of such securities to
significantly decline or be worthless. See "Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business
in China—Our auditor, like other independent registered public accounting firms operating in China, was historically not permitted
to be subject to inspection by the PCAOB, and consequently, investors were deprived of the benefits of such inspection in the past. Trading
in our securities may be prohibited under the HFCAA if the PCAOB determines that it is unable to inspect or investigate completely our
auditor, and as a result, U.S. national securities exchanges, such as the NYSE, may determine to delist our securities."
You should carefully consider all of the information in this annual
report before making an investment in the ADSs. Below please find a summary of the principal risks and uncertainties we face, organized
under relevant headings. In particular, as we are a China-based company incorporated in the Cayman Islands, you should pay special attention
to subsections headed "Item 3. Key Information—3.D. Risk Factors—Risks Related to Doing Business in China."
Below please find a summary of the principal risks we face, organized
under relevant headings.
5
Risks Related to Doing Business in China
●
Changes in China's economic, political or social conditions
                                            or government policies could have a material adverse effect on our business and operations.
●
Uncertainties with respect to the PRC legal system, including
                                            uncertainties regarding the enforcement of laws, and unexpected changes in laws and regulations
                                            in China could adversely affect us and limit the legal protections available to you and us.
●
The PRC government has significant oversight over the conduct
                                            of our business and as such may influence our operations, which may potentially result in
                                            a material adverse effect on our operations.
●
The oversight of the China Securities Regulatory Commission,
                                            Cybersecurity Administration of China or other governmental authorities may adversely affect
                                            our business and their approval may be required in connection with future offerings of securities
                                            overseas or to maintain the listing status of our ADSs, and, if required, we cannot predict
                                            whether we will be able to obtain such approval.
●
We may rely on dividends and other distributions on equity
                                            paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and
                                            any limitation on the ability of our PRC subsidiaries to make payments to us could have a
                                            material and adverse effect on our ability to conduct our business.
●
PRC regulations of loans to and direct investment in PRC
                                            entities by offshore holding companies and governmental control of currency conversion may
                                            delay us from using the proceeds of our public offering to make loans or additional capital
                                            contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity
                                            and our ability to fund and expand our business.
●
The collaboration model we have in place with our sales partners
                                            to acquire borrowers might be regarded as financial marketing and might face compliance risks.
●
Our auditor, like other independent registered public accounting
                                            firms operating in China, was historically not permitted to be subject to inspection by the
                                            PCAOB, and consequently, investors were deprived of the benefits of such inspection in the
                                            past. Trading in our securities may be prohibited under the HFCAA if the PCAOB determines
                                            that it is unable to inspect or investigate completely our auditor, and as a result, U.S.
                                            national securities exchanges, such as the NYSE, may determine to delist our securities.
Risks Related to Our Business
●
We have a limited operating history and our business practice
                                            continues to evolve, which makes it difficult to evaluate our future prospects.
●
Our credit strengthening services to the trust plans as the
                                            subordinated unit holder might be subject to challenges by relevant regulatory authorities,
                                            and we may potentially be required to obtain licenses.
●
Our trust company partners operate in a strictly regulated
                                            industry. If the practice of our trust company partners, including the cooperation arrangements
                                            with us, is challenged under any PRC laws and regulations, our business, financial condition
                                            and results of operations would be materially and adversely affected.
●
Our business may be adversely affected if we are unable to
                                            secure funding on terms acceptable to us or our borrowers, or at all.
●
We face risks related to natural disasters, health epidemics
                                            and other outbreaks of contagious diseases.
●
Our collaboration model with our sales partners might be
                                            subject to challenges by relevant regulatory authorities.
●
Some of our funding sources are highly regulated and are
                                            subject to the changing regulatory environment. If any of the funding sources is deemed to
                                            violate the PRC laws and regulations, we may need to secure new funding-failure of which
                                            may result in material and adverse impact on our business, financial condition, results of
                                            operations and prospects.
●
Our high leverage ratio may expose us to liquidity risk and
                                            we may not have sufficient capital reserve to manage losses.
6
●
Our business depends on our ability to collect payment on
                                            and service the transactions we facilitate.
●
The foreclosure action and enforcement process may be time-consuming,
                                            difficult and uncertain for legal and practicable reasons, which could adversely affect our
                                            liquidity, business, financial condition and results of operations.
●
Credit and other information that we or our trust company
                                            partners or our commercial bank partners receive from prospective borrowers and third parties
                                            about a borrower and the collateral may not accurately reflect the borrower's creditworthiness
                                            or the collateral's fair/recoverable value, which may compromise the accuracy of our
                                            and our trust company partners' credit assessment.
●
We primarily rely on our trust company partners and our commercial
                                            bank partners to fund loans to borrowers, which may constitute provision of intermediary
                                            service, and our agreements with these partners and borrowers may be deemed as intermediation
                                            contracts under the Civil Code of the People's Republic of China (the "Civil Code").
Risks Related to Our American Depositary Shares
●
The trading price of our ADSs may be volatile, which could
                                            result in substantial losses to investors.
●
If securities or industry analysts do not publish research
                                            or reports about our business, or if they adversely change their recommendations regarding
                                            the ADSs, the market price for the ADSs and trading volume could decline.
●
Substantial future sales or perceived potential sales of
                                            our ADSs in the public market could cause the price of our ADSs to decline.
●
Although the matter is not entirely clear, we were likely
                                            a passive foreign investment company (a "PFIC") for our 2023 taxable year, and
                                            we will likely be a PFIC for 2023 and our future taxable years, which could result in adverse
                                            U.S. federal income tax consequences to U.S. taxpayers.
Risks Related to Doing Business in China
Changes in China's economic, political or social
conditions or government policies could have a material adverse effect on our business and operations.
Substantially all of our assets and operations are located in China.
Accordingly, our business, financial condition, results of operations and prospects may be influenced to a significant degree by political,
economic and social conditions in China generally. The Chinese economy differs from the economies of most developed countries in many
respects, including the level of government involvement, level of development, growth rate, control of foreign exchange and allocation
of resources. Although the Chinese 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 government. In addition, the Chinese government continues to
play a significant role in regulating industry development by imposing industrial policies. The Chinese 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
past decades, growth has been uneven, both geographically and among various sectors of the economy. Any adverse changes in economic conditions
in China, in the policies of the Chinese government or in the laws and regulations in China could have a material adverse effect on the
overall economic growth of China. Such developments could adversely affect our business and operating results, lead to a reduction in
demand for our services and adversely affect our competitive position. The Chinese government has implemented various measures to encourage
economic growth and guide the allocation of resources. Some of these 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. In addition, in the past, the Chinese government has implemented certain measures,
including interest rate adjustment, to control the pace of economic growth. These measures may cause decreased economic activity in China,
which may adversely affect our business and operating results. Recent international trade tensions, or a severe or prolonged downturn
in the Chinese or global economy in general, could materially and adversely affect our business and financial condition.
Any prolonged slowdown in the Chinese or global economy may have a
negative impact on our business, results of operations and financial condition. In particular, general economic factors and conditions
in China or worldwide, including the general interest rate environment and unemployment rates, may affect micro- and small-enterprise
owners' willingness to seek credit and our partners' ability and desire to invest in loans. Economic conditions in China
are sensitive to global economic conditions. The global financial markets have experienced significant disruptions in the past, including
the recent international trade disputes and tariff actions announced by the United States, the PRC and certain other countries, as well
as the recent banking turmoil in the United States and European Union. For instance, the U.S. administration has imposed significant
amount of tariffs on Chinese goods, and the PRC government has imposed tariffs on certain goods manufactured in the United States. There
is no assurance that the list of goods impacted by additional tariffs will not be expanded or the tariffs will not be increased materially.
7
There is considerable uncertainty over the long-term effects of the
expansionary monetary and fiscal policies adopted by the central banks and financial authorities of some of the world's leading
economies, including the United States and China. There have also been concerns over unrest in the Middle East and Africa, which have
resulted in volatility in financial and other markets. There have also been concerns about the economic effect of the tensions in the
relationship between China and surrounding Asian countries. Recently, the Russia-Ukraine war has caused, and continues to intensify,
significant geopolitical tensions in Europe and across the globe. The resulting sanctions are expected to have significant impacts on
the economic conditions of the targeted countries and markets. If present Chinese and global economic uncertainties persist, we may have
difficulty in obtaining funding sources to fund the credit utilized by borrowers. Adverse economic conditions could also reduce the number
of quality micro- and small-enterprise owners seeking credit from us, as well as their ability to make payments. Should any of these
situations occur, the amount of loans facilitated to borrowers and, therefore, our operating income will decline, and our business and
financial condition will be negatively impacted. Additionally, continued turbulence in the international markets may adversely affect
our ability to access the capital markets to meet liquidity needs.
The recent regulatory development has also imposed challenges to our
future business and operations. On August 20, 2020, the Supreme People's Court announced an amendment to the judicial interpretation
of China's private lending, which reduces the maximum annual interest rate allowed on private lending to four times of the latest
one-year loan prime rate (LPR) (the "Amendment"). Although we do not believe we are regulated by the Amendment as a loan
facilitator in collaboration with licensed trust company partners, our trust company partners have voluntarily adjusted the interest
rates on some loan products we facilitate to comply with the new standards under the Amendment with some trust company partners to prevent
the compliance risks due to the uncertainty of regulatory enforcement. As a result, our profit margin, results of operations and financial
position were adversely impacted in 2022, and may continue to be adversely impacted.
Uncertainties with respect to the PRC legal system, including
uncertainties regarding the enforcement of laws, and unexpected changes in laws and regulations in China could adversely affect us and
limit the legal protections available to you and us.
Our operations in China are governed by the PRC laws and regulations.
The PRC legal system is a civil law system based on written statutes. Prior court decisions under the civil law system may be cited for
reference but have limited precedential value. The overall effect of legislation over the past four decades has significantly enhanced
the protections afforded to various forms of foreign investments in China. However, recently enacted laws and regulations may not sufficiently
cover all aspects of economic activities in China. Since these laws and regulations are relatively new and may be amended from time to
time, and the PRC legal system continues to rapidly evolve, the interpretations of many laws and regulations are not always uniform and
enforcement of these laws and regulations involves uncertainties. In addition, any new PRC laws or changes in PRC laws and regulations
related to, among other things, foreign investment and business activities in China could have a material adverse effect on our business
and our ability to operate our business in China.
From time to time, we may have to resort to administrative and court
proceedings to enforce our legal rights. Any administrative and court proceedings in China may be protracted, resulting in substantial
costs and diversion of resources and management attention. Since PRC administrative and court authorities have significant discretion
in interpreting and implementing statutory provisions and contractual terms, it may be difficult to evaluate the outcome of administrative
and court proceedings and the level of legal protection we enjoy. These uncertainties may impede our ability to enforce contracts in
China and could materially and adversely affect our business and results of operations.
Furthermore, the PRC legal system is based in part on government policies
and internal rules, some of which are not published on a timely basis, or at all, and may have retroactive effect. As a result, we may
not be aware of our violation of any of these policies and rules until sometime after the violation. Such uncertainty towards the scope
and effect of our contractual, property (including intellectual property) and procedural rights and any failure to quickly respond to
changes in the regulatory environment in the PRC could adversely affect our business, and impede our ability to continue our operations
and proceed with our future business plans.
The PRC government has significant oversight over the
conduct of our business and as such may influence our operations, which may potentially result in a material adverse effect on our operations.
The PRC government has exercised and continues to exercise substantial
control over the Chinese economy through regulation and state ownership. Our ability to operate in China may be harmed by changes in
its laws and regulations, including those relating to taxation, environmental regulations, land use rights, property and other matters.
The central or local PRC governments of may impose new, stricter regulations or interpretations of existing regulations that would require
additional expenditures and efforts on our part to ensure our compliance with such regulations or interpretations. Accordingly, government
actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrally planned
economy or regional or local variations in the implementation of economic policies, could have a significant effect on economic conditions
in China or specific regions thereof, and could require us to divest ourselves of any interest we then hold in Chinese properties. The
PRC government has recently published new policies that significantly affected certain industries such as real estate and credit industries,
and we cannot rule out the possibility that it will in the future release regulations or policies regarding our industry that could adversely
affect our business, financial condition and results of operations. For example, on November 1, 2021, the Personal Information Protection
Law came into effect. Although we do not believe the current personal information protection laws and regulations have a material adverse
impact on our business and results of operations, any failure or perceived failure by us to comply with the relevant personal information
protection laws and regulations may result in governmental investigations, enforcement actions or lawsuits and could have an adverse
impact on our business and results of operations. Furthermore, the PRC government has recently indicated an intent to exert more oversight
and control over securities offerings and other capital markets activities that are conducted overseas and foreign investment in China-based
companies like us. Any such intervention in or influence on our business operations or action to exert more oversight and control over
securities offerings and other capital markets activities, once taken by the PRC government, could adversely affect our business, financial
condition and results of operations and the value of our ordinary shares or the ADSs, or significantly limit or completely hinder our
ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or in extreme
cases, become worthless.
8
The approval of and/or filing with the CSRC or other PRC
government authorities may be required in connection with our issuance of securities overseas or maintenance of the listing status of
our ADRs, and, if required, we cannot predict whether 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, require 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 application of the M&A Rules
remains unclear. If CSRC approval is required, it is uncertain whether it would be possible for us to obtain the approval, and any failure
to obtain or delay in obtaining CSRC approval for future offerings of securities overseas or maintenance of the listing status of our
ADSs would subject us to sanctions imposed by the CSRC and other PRC regulatory agencies.
On July 6, 2021, certain PRC regulatory authorities issued Opinions
on Strictly Cracking Down on Illegal Securities Activities in Accordance with the Law. These opinions call for strengthened regulation
over illegal securities activities and supervision on overseas listings by China-based companies and propose 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. On February 17, 2023, the China Securities Regulatory Commission promulgated the Overseas Listing Trial Measures, and five
supporting guidelines, which became effective on March 31, 2023. According to the Overseas Listing Trial Measures, PRC domestic companies
that seek to offer and list securities in overseas markets, either in direct or indirect means, are required to fulfill the filing procedure
with the CSRC and report relevant information. If a company fails to complete the filing procedure or conceals any material fact or falsifies
any major content in its filing documents, it may be subject to administrative penalties, such as order to rectify, warnings, fines,
and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons may also be subject
to administrative penalties, such as warnings and fines. The Overseas Listing Trial Measures also provide that a company in mainland
China must file with the CSRC within three business days for its follow-on offering of securities after it is listed in an overseas market.
On February 17, 2023, the CSRC also issued the Notice on Administration of the Filing of Overseas Offering and Listing by Domestic Companies
and held a press conference for the release of the Overseas Listing Trial Measures, which, among others, clarified that the companies
in mainland China that have been listed overseas before March 31, 2023 are not required to file with the CSRC immediately, but these
companies should complete filing with the CSRC for their financing activities in accordance with the Overseas Listing Trial Measures.
Based on the foregoing, as an issuer that has been listed overseas before the effective date of the Overseas Listing Trial Measures,
we are not required to complete filing with the CSRC for our offshore offerings prior to the effective date of the Overseas Listing Trial
Measures, but we may be subject to the filing requirements for our financing activities under the Overseas Listing Trial Measures. Any
securities offerings and listings outside of mainland China by our Company after the effective date of the Overseas Listing Trial Measures,
including but not limited to follow on offerings, secondary listings, and going private transactions, will be subject to the filing requirements
with the CSRC under the Overseas Listing Trial Measures, and we cannot assure you that we will be able to comply with such filing requirements
in a timely manner, or at all. Since the Overseas Listing Trial Measures was newly promulgated, the interpretation, application and enforcement
of the Overseas Listing Trial Measures remain unclear. We cannot assure you that we will be able to complete such filing in a timely
manner and fully comply with such rules to maintain the listing status of our ADSs and/or other securities, or to conduct any securities
offerings in the future.
As of the date of this annual report, we have not received any inquiry,
notice, warning, sanctions or regulatory objection from the CSRC in connection with requirements of obtaining prior approval for the
listing of our ADSs. However, since the Overseas Listing Trial Measures was newly promulgated, the interpretation, application and enforcement
of the Overseas Listing Trial Measures remain unclear. We cannot assure you that we will be able to complete any required filing in a
timely manner and fully comply with such rules to maintain the listing status of our ADSs and/or other securities, or to conduct any
securities offerings in the future.
On April 2, 2022, the CSRC released the revised Provisions on Strengthening
Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments) ,
or the Draft Archives Rules. On February 24, 2023, the CSRC, jointly with other relevant governmental authorities, issued the Provisions
on Strengthening the Confidentiality and Archive Management Work Relating to the Overseas Securities Offering and Listing by Domestic
Companies (the "Confidentiality Provisions"), which became effective on March 31, 2023. The Confidentiality Provisions requires,
among others, that companies based in mainland China seeking to offer securities in overseas markets, either directly or indirectly,
shall establish the confidentiality and archives system, and shall complete approval and filing procedures with competent authorities,
if such companies or their overseas listing entities provide or publicly disclose documents or materials involving state secrets and
work secrets of PRC government agencies to relevant securities companies, securities service institutions, overseas regulatory agencies
and other entities and individuals. It further stipulates that providing or publicly disclosing documents and materials which may adversely
affect national security or public interests, and accounting files or copies shall be subject to corresponding procedures in accordance
with relevant laws and regulations. Given the Confidentiality Provisions were recently promulgated, there remain substantial uncertainties
about how these provisions will be interpreted, or implemented and how it will affect our operations or future securities offerings.
9
As of the date of this annual report, we have not provided files or
copies of files outside China that involve national secrets, national security, vital interests, or have important preservation value
to the nation and society. However, we cannot guarantee that relevant government agencies of China, including the CSRC, will share the
same opinion as ours.
The interpretation and implementation of these opinions and new rules
remain unclear at this stage. We cannot assure you that we will not be required to obtain the approval of or file with the CSRC or other
regulatory authorities to maintain the listing status of our ADSs on NYSE or to conduct offerings of securities in the future. If such
approvals are required, it is uncertain whether we can or how long it will take us to obtain such approval 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 approval or completing
such filing procedures for our overseas 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 business,
financial condition, results of operations, and prospects, as well as the trading price of our listed securities. 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 settlement and delivery, they do so at the risk that 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 approval requirements, if and
when procedures are established to obtain such a waiver. Any uncertainties or negative publicity regarding such approval requirement
could materially and adversely affect our business, prospects, financial condition, reputation, and the trading price of our listed securities.
Our PRC legal advisor, Merits & Tree Law Offices, 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 overseas offerings and maintaining the listing status of the ADSs on the New York Stock Exchange,
given that: (i) the CSRC currently has not issued any definitive rule or interpretation concerning whether any offering such as offerings
completed or contemplated by our company is subject to the M&A Rules; and (ii) our PRC subsidiaries were either incorporated as wholly
foreign-owned enterprises by means of direct investment or by merger or acquisition of equity interest or assets of a PRC domestic company
not subject to the M&A Rules. However, there can be no assurance that the relevant PRC government agencies, including the CSRC, would
reach the same conclusion as our PRC legal advisor. 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.
Uncertainties exist with respect to the interpretation
and implementation of cybersecurity related regulations and cybersecurity review as well as any impact these may have on our business
operations.
The Data Security Law was promulgated on June 10, 2021 and became
effective in September 2021, which stipulates that the data handling activities that affect or may affect the national security should
undergo national security review. The Personal Information Protection Law was promulgated on August 20, 2021 and officially implemented
on November 1, 2021, which stipulates that critical information infrastructure ("CII") operators, or personal information
processors whose processing of personal information reaches the threshold amount prescribed by the national cyberspace authority, shall
store the personal information collected or generated by them within the territory of the PRC. If it is necessary to provide the data
overseas, the organization is required to pass the security assessment organized by the national cyberspace authority.
On August 17, 2021, the State Council issued the Regulations on the
Security Protection of Critical Information Infrastructures, which took effect on September 1, 2021. The regulations stipulate that the
departments responsible for the security protection of critical information infrastructure (hereinafter referred to as the security protection
departments) shall formulate rules for the identification of critical information infrastructure based on the actual situation of the
industry and field, and report it to the public security department of the State Council for record. The following factors shall be considered
in the formulation of identification rules: (1) the degree of importance of the network facilities and information systems to the core
businesses of the industry and area concerned; (2) the degree of damage that may be caused if the network facilities and information
systems are under destruction, loss of function or data leakage; and (3) the correlative impact on other industries and areas. The
security protection departments shall be responsible for organizing the identification of critical information infrastructure in their
respective industries and areas in accordance with the identification rules, timely notify the identification results to the operators
and report such results to the public security department under the State Council.
In December 2021, the CAC published the amended Cybersecurity Review
Measures, or the new measures, which provides that a network platform operator that has the personal information of more than one million
users must apply to the Cybersecurity Review Office (the "CRO") for a cybersecurity review when it seeks to list overseas.
Also, a CII operator, when procuring a network product or service, shall predict any national security risk that may arise after the
use of such product or service. If national security will be affected or may be affected, the CII operator shall apply to the CRO for
a cybersecurity review.
10
Given the nature of our business and as advised by our PRC legal advisor,
Merits & Tree Law Offices, we do not believe that our company is either a "CII operator" or a "network platform
operator" who possesses personal information of more than one million users, and therefore are not required to file for a cybersecurity
review under the new measures, although we cannot guarantee that the relevant PRC regulatory authority will agree with such conclusion
reached. If our company is deemed to be a CII operator or a network platform operator under such rules, we could be subject to cybersecurity
review by the CAC and other relevant PRC regulatory authorities and be required to change our existing practices in data privacy and
cybersecurity matters at substantial costs. During such cybersecurity review, we may be required to stop providing services to our customers.
If the CSRC or other PRC regulatory body subsequently determines that we need to obtain the CSRC's approval for future offerings
of securities overseas or to maintain the listing status of our ADSs or if the CSRC or any other PRC government authorities promulgates
any interpretation or implements rules before our listing that would require us to obtain CSRC or other governmental approvals for future
offerings of securities overseas or to maintain the listing status of our ADSs, we may not be able to proceed with future offerings of
securities overseas or to the listing of our ADSs on the New York Stock Exchange and face adverse actions or sanctions by the CSRC or
other PRC regulatory agencies. In any such event, these regulatory agencies may impose fines and penalties on our operations in China,
limit our operating privileges in China, delay or restrict the repatriation of the proceeds from future offerings of securities overseas
into the PRC or take other actions that could have a material adverse effect on our business, financial condition, results of operations,
reputation and prospects, as well as our ability to complete future offerings of securities overseas or to maintain the listing status
of our ADSs.
We also cannot rule out the possibility that certain of our customers
may be deemed as CII operators, in which case our products or services or data processing activities, if being deemed as related to national
security, will need to be submitted for cybersecurity review before we can enter into agreements with such customers, and before the
conclusion of such procedure, the customers will not be allowed to use our products or services. If the reviewing authority considers
that the use of our services by certain of our customers involves risk of disruption, is vulnerable to external attacks, or may negatively
affect, compromise, or weaken the protection of national security, we may not be able to provide our products or services to such customers,
which could have a material adverse effect on our results of operations and prospects.
As of the date of this annual report, we have not been informed or
involved in any investigations or become subject to a cybersecurity review initiated by the CAC based on the new measures, and we have
not received any inquiry, notice, warning, sanctions in such respect or any regulatory objections to our current NYSE listing status
from the CAC as of the date of this annual report. As there are still uncertainties regarding the enactment of these new laws and regulations
as well as the amendment, interpretation and implementation of existing laws and regulations, we cannot assure you that we will be able
to comply with such laws and regulations in all respects, and we may be ordered to rectify, suspend or terminate any activities or services
that are deemed illegal or non-compliant by the regulatory authorities and become subject to fines and/or other penalties. If we fail
to address such issue in a timely manner, or at all, we may be required to suspend or terminate our related businesses or face other
penalties. This may materially and adversely affect our business, financial condition, results of operations and prospects.
You may experience difficulties in effecting service of
legal process, enforcing foreign judgments or bringing actions in China against us or our management named in the annual report based
on foreign laws.
CNFinance Holdings Limited is an exempted company incorporated under
the laws of the Cayman Islands. We conduct substantially all of our operations in China, and substantially all of our assets are located
in China. In addition, all of our executive officers are located in China. All of our directors who are not our executive officers are
located in China, except for one independent director who resides in the United States. Service of court documents on a Cayman Islands
company can be effected by serving the documents at the Company's registered office and it may be possible to enforce foreign judgments
in the Cayman Islands against a Cayman Islands company, subject to some exceptions. However, if investors wish to serve documents on
and/or enforce foreign judgments against our directors and officers, they will need to ensure that they comply with the rules of the
jurisdiction where the directors and officers are located. As a result, it may be difficult for our shareholders to effect service of
process upon us or those persons inside China. In addition, China does not have treaties providing for the reciprocal recognition and
enforcement of judgments of courts with the Cayman Islands and many other countries and regions. Therefore, recognition and enforcement
in China of judgments of a court in any of these non-PRC jurisdictions in relation to any matter not subject to a binding arbitration
provision may be difficult or impossible.
We may rely on dividends and other distributions on equity
paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries
to make payments to us could have a material and adverse effect on our ability to conduct our business.
With a holding company structure, we rely principally on dividends
and other distributions on equity from our PRC subsidiaries for our cash requirements, including for services of any debt we may incur.
Our PRC subsidiary's ability to distribute dividends is based
upon its distributable earnings. Current PRC regulations permit our PRC subsidiaries to pay dividends to its respective shareholders
only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, each
of our PRC subsidiaries is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve
until such reserve reaches 50% of its registered capital. Each of our PRC subsidiaries, as a foreign invested enterprise, or FIE, is
also required to further set aside a portion of its after-tax profits to fund the employee welfare fund, although the amount to be set
aside, if any, is determined at its discretion. These reserves are not distributable as cash dividends. 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. Any limitation on the ability of our PRC subsidiaries to distribute dividends or other payments to their respective shareholders
could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our businesses,
pay dividends or otherwise fund and conduct our business.
In addition, the Enterprise Income Tax Law and its implementation
rules provide that a withholding tax rate of up to 15% will be applicable to dividends payable by Chinese companies to non-PRC-resident
enterprises unless otherwise exempted or reduced according to treaties or arrangements between the PRC central government and governments
of other countries or regions where the non-PRC resident enterprises are incorporated.
11
PRC regulations of loans to and direct investment in PRC
entities by offshore holding companies and governmental control of currency conversion may delay us from using the proceeds of our public
offering to make loans or additional capital contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity
and our ability to fund and expand our business.
Any funds we transfer to our PRC subsidiaries, either as a shareholder
loan or as an increase in registered capital, are subject to approval by or registration with relevant governmental authorities in China.
According to the relevant PRC regulations on FIEs in China, capital contributions to our PRC subsidiaries are subject to the approval
of or filing with the MOFCOM or its local branches and registration with a local bank authorized by SAFE. In addition, (i) any foreign
loan procured by our PRC subsidiaries is required to be registered with SAFE or its local branches and (ii) any of our PRC subsidiaries
may not procure loans which exceed the difference between its total investment amount and registered capital or, as an alternative, only
procure loans subject to the calculation approach and limitation as provided in the Notice of the People's Bank of China on Matters
concerning the Macro-Prudential Management of Full-Covered Cross-Border Financing. For the restriction and limitation on the amount of
loans, please refer to "Item 4. Information on the Company—B. Business Overview—Regulation—Regulations on Foreign
Exchange—Regulations on Foreign Exchange Registration of Overseas Investment by PRC Residents". We may not be able to complete
such registrations on a timely basis, with respect to future capital contributions or foreign loans by us to our PRC subsidiaries. If
we fail to complete such registrations, our ability to use the proceeds of our public offerings, and our ability to capitalize our PRC
operations may be negatively affected, which could adversely affect our liquidity and our ability to fund and expand our business.
On March 30, 2015, SAFE promulgated the Circular on Reforming the
Management Approach Regarding the Foreign Exchange Capital Settlement of Foreign-Invested Enterprises, or SAFE Circular 19, which took
effect as of June 1, 2015 and was amended on December 30, 2019. SAFE Circular 19 launched a nationwide reform of the administration of
the settlement of the foreign exchange capitals of FIEs and allows FIEs to settle their foreign exchange capital at their discretion,
but continues to prohibit FIEs from using the Renminbi fund converted from their foreign exchange capital for expenditure beyond their
business scopes, providing entrusted loans or repaying loans between nonfinancial enterprises. SAFE issued the Circular on Reforming
and Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts, or SAFE Circular 16, effective in June 2016.
Pursuant to SAFE Circular 16, enterprises registered in China may also convert their foreign debts from foreign currency to Renminbi
on a self-discretionary basis. SAFE Circular 16 provides an integrated standard for conversion of foreign exchange under capital account
items (including but not limited to foreign currency capital and foreign debts) on a self-discretionary basis which applies to all enterprises
registered in China. SAFE Circular 16 reiterates the principle that Renminbi converted from foreign currency-denominated capital of a
company may not be directly or indirectly used for purposes beyond its business scope or prohibited by PRC laws or regulations, while
such converted Renminbi shall not be provided as loans to its nonaffiliated entities. As this circular is relatively new, there remains
uncertainty as to its interpretation and application and any other future foreign exchange-related rules. Violations of these circulars
could result in severe monetary or other penalties. SAFE Circular 19 and SAFE Circular 16 may significantly limit our ability to use
Renminbi converted from the net proceeds of our public offerings to fund the establishment of new entities in China or their subsidiaries,
to invest in or acquire any other PRC companies through our PRC subsidiaries, or to establish variable interest entities in China, which
may adversely affect our business, financial condition and results of operations.
Fluctuations in the value of the Renminbi could have a
material and adverse effect on your investment.
The change in value of the Renminbi against the U.S. dollar and other
currencies is affected by various factors such as changes in political and economic conditions in the PRC. In July 2005, the PRC government
changed its decades-old policy of pegging the value of the RMB to the U.S. dollar, and the RMB appreciated more than 20% against the
U.S. dollar over the following three years. Between July 2008 and June 2010, this appreciation halted and the exchange rate between the
RMB and the U.S. dollar remained within a narrow band. Since June 2010, the RMB has fluctuated against the U.S. dollar, at times significantly
and unpredictably. On November 30, 2015, the Executive Board of the International Monetary Fund (IMF) completed the regular five-year
review of the basket of currencies that make up the Special Drawing Right, or the SDR, and decided that with effect from October 1, 2016,
RMB is determined to be a freely usable currency and will be included in the SDR basket as a fifth currency, along with the U.S. dollar,
the euro, the Japanese yen and the British pound. In the fourth quarter of 2016, the RMB has depreciated significantly in the backdrop
of a surging U.S. dollar and persistent capital outflows of China. While appreciating approximately by 7% against the U.S. dollar in
2017, the Renminbi in 2018 depreciated approximately by 5% against the U.S. dollar. With the development of the foreign exchange market
and progress towards interest rate liberalization and RMB internationalization, the PRC government may in the future announce further
changes to the exchange rate system, and we cannot assure you that the RMB will not appreciate or depreciate significantly in value against
the U.S. dollar in the future. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange
rate between the Renminbi and the U.S. dollar in the future.
Any significant appreciation or revaluation of the Renminbi may have
a material adverse effect on the value of, and any dividends payable on, our ADSs in foreign currency terms. More specifically, if we
decide to convert our Renminbi into U.S. dollars, appreciation of the U.S. dollar against the Renminbi would have a negative effect on
the U.S. dollar amount available to us. To the extent that we need to convert U.S. dollars we receive from our initial public offering
into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount
we would receive from the conversion. In addition, appreciation or depreciation in the exchange rate of the Renminbi to the U.S. dollar
could materially and adversely affect the price of our ADSs in U.S. dollars without giving effect to any underlying change in our business
or results of operations.
12
Governmental control of currency conversion may limit
our ability to utilize our operating income effectively and affect the value of your investment.
The PRC government imposes controls on the convertibility of the Renminbi
into foreign currencies and, in certain cases, the remittance of currency out of China. We receive substantially all of our operating
income in Renminbi. Under our current corporate structure, our Cayman Islands incorporated holding company primarily relies on dividend
payments from our PRC subsidiaries to fund any cash and financing requirements we may have. Under existing PRC foreign exchange regulations,
payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions,
can be made in foreign currencies without prior approval of SAFE by complying with certain procedural requirements. Specifically, under
the existing exchange restrictions, without prior approval of SAFE, cash generated from the operations of our PRC subsidiaries in China
may be used to pay dividends to our company. However, approval from or registration with appropriate government authorities is required
where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans
denominated in foreign currencies. As a result, we need to obtain SAFE approval to use cash generated from the operations of our PRC
subsidiaries to pay off their respective debt in a currency other than Renminbi owed to entities outside China, or to make other capital
expenditure payments outside China in a currency other than Renminbi. The PRC government may at its discretion restrict access to foreign
currencies for current account transactions in the future. If the foreign exchange control system prevents us from obtaining sufficient
foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders,
including holders of our ADSs.
Certain PRC regulations may make it more difficult for
us to pursue growth through acquisitions.
Among other things, 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,
established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time-consuming
and complex. Such regulation stipulates that if a foreign investor acquires a domestic enterprise and obtains actual control, and if
it involves key industries, or has factors that affect or may affect national economic security, or causes the transfer of actual control
of domestic enterprises with well-known trademarks or Chinese time-honored brands, the parties concerned shall report to MOFCOM. Moreover,
the Anti-Monopoly Law promulgated by the Standing Committee of the NPC which became effective in 2008 requires that transactions which
are deemed concentrations and involve parties with specified turnover thresholds must be cleared by the MOFCOM before they can be completed.
In addition, according to the Measures for the Security Review of Foreign Investment, which has been effective since January 28, 2021,
a foreign investor or a party concerned in China (hereinafter collectively referred to as "party concerned") shall take the
initiative to make a declaration to the working mechanism office prior to making one of the following investments and the working mechanism
office shall be entitled to require the party concerned to make a declaration thereof: (i) investment in any of such fields as the military
industry and military-supporting industry that concern state defense and security, as well as military facilities and areas surrounding
industrial military facilities; and (ii) investment in any important agricultural product, important energy and resources, major
equipment manufacturing, important infrastructure, important transportation services, important cultural products and services, important
information technologies and internet products and services, important financial services, key technologies and other important fields
that concern state security while obtaining the actual control over the enterprises invested in. We may pursue potential strategic acquisitions
that are complementary to our business and operations. Complying with the requirements of these regulations to complete such transactions
could be time-consuming, and any required approval processes, including obtaining approval or clearance from the MOFCOM, may delay or
inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.
PRC regulations relating to the establishment of offshore
special purpose companies by PRC residents may subject our PRC resident beneficial owners or our PRC subsidiary to liability or penalties,
limit our ability to inject capital into our PRC subsidiary, limit our PRC subsidiary's ability to increase their registered capital
or distribute profits to us, or may otherwise adversely affect us.
In July 2014, 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, to replace the Notice on Relevant Issues Concerning Foreign Exchange Administration for Domestic Residents'
Financing and Roundtrip Investment Through Offshore Special Purpose Vehicles, or SAFE Circular 75, which ceased to be effective upon
the promulgation of SAFE Circular 37. SAFE Circular 37 requires PRC residents (including PRC individuals and PRC corporate entities)
to register with SAFE or its local branches in connection with their direct or indirect offshore investment activities. SAFE Circular
37 is applicable to our shareholders who are PRC residents and may be applicable to any offshore acquisitions that we make in the future.
Under SAFE Circular 37, PRC residents who make, or have prior to the
implementation of SAFE Circular 37 made, direct or indirect investments in offshore special purpose vehicles, or SPVs, will be required
to register such investments with SAFE or its local branches. In addition, any PRC resident who is a direct or indirect shareholder of
an SPV is required to update its filed registration with the local branch of SAFE with respect to that SPV, to reflect any material change.
Moreover, any subsidiary of such SPV in China is required to urge the PRC resident shareholders to update their registration with the
local branch of SAFE. If any PRC shareholder of such SPV fails to make the required registration or to update the previously filed registration,
the subsidiary of such SPV in China may be prohibited from distributing its profits or the proceeds from any capital reduction, share
transfer or liquidation to the SPV, and the SPV may also be prohibited from making additional capital contributions into its subsidiary
in China. On February 13, 2015, the SAFE promulgated a Notice on Further Simplifying and Improving Foreign Exchange Administration Policy
on Direct Investment, or SAFE Notice 13, which became effective on June 1, 2015 and was amended in 2019. Under SAFE Notice 13, applications
for foreign exchange registration of inbound foreign direct investments and outbound overseas direct investments, including those required
under SAFE Circular 37, will be filed with qualified banks instead of SAFE. The qualified banks will directly examine the applications
and accept registrations under the supervision of SAFE.
13
Several of our shareholders that we are aware of are subject to SAFE
regulations, and all of these shareholders have completed all necessary registrations with the local SAFE branch or qualified banks as
required by SAFE Circular 37. We cannot assure you, however, that all of these individuals may continue to make required filings or updates
on a timely manner, or at all. We can provide no assurance that we are or will in the future continue to be informed of identities of
all PRC residents holding direct or indirect interest in our company. Any failure or inability by such individuals to comply with SAFE
regulations may subject us to fines or legal sanctions, such as restrictions on our cross-border investment activities or our PRC subsidiary's
ability to distribute dividends to, or obtain foreign exchange-denominated loans from, our company or prevent us from making distributions
or paying dividends. As a result, our business operations and our ability to make distributions to you could be materially and adversely
affected.
Furthermore, as the interpretation and implementation of these foreign
exchange regulations have been constantly evolving, it is unclear how these regulations, and any future regulation concerning offshore
or cross-border transactions, will be interpreted, amended and implemented by the relevant government authorities. 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, we cannot assure you that we or the owners of such company, as the case may be, will
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.
Uncertainties exist regarding the interpretation and implementation
of the newly enacted PRC Foreign Investment Law and how it may impact the viability of our current corporate structure and the viability
of business operation.
On March 15, 2019, the National People's Congress approved the
Foreign Investment Law of the People's Republic of China ("PRC Foreign Investment Law"),and the State Council promulgated
the Implementing Regulations to the PRC Foreign Investment Law ("Implementing Regulations") on December 26, 2019, both of
which came into effect on January 1, 2020. The PRC Foreign Investment Law and its Implementing Regulations replaced the trio of previous
laws regulating foreign investment in China, namely, the Law of the People's Republic of China on Chinese-foreign Equity Joint
Ventures, the Law of the People's Republic of China on Chinese-foreign Cooperative Joint Ventures and the Law of the People's
Republic of China on Wholly Foreign-Owned Enterprises, together with their implementation rules and ancillary regulations.
PRC Foreign Investment Law and its Implementing Regulations specify
that foreign investments shall be conducted in line with the negative list issued by or approved to be issued by the State Council. If
a foreign investment enterprise (the "FIE") proposes to conduct business in an industry subject to foreign investment "restrictions"
in the negative list, the FIE must meet certain conditions under the negative list before being established. If an FIE proposes to conduct
business in an industry subject to foreign investment "prohibitions" in the "negative list," it must not engage
in the business. Investments made in Mainland China by investors from the Hong Kong Special Administrative Region and the Macao Special
Administrative Region shall be governed by the PRC Foreign Investment Law and its Implementing Regulations. On December 27, 2021, the
NDRC and the MOFCOM promulgated the Special Administrative Measures (Negative List) for Access of Foreign Investments (2021 Edition),
as came into effect on January 1, 2022, according to which the industry of loan service has not been subject to foreign investment "restrictions"
or "prohibitions" in the Negative List. Our PRC legal advisor, Merits & Tree Law Offices, advises us that according to
the PRC Foreign Investment Law and the Implementing Regulations, the PRC regulatory agencies shall, considering the needs for further
foreign opening and economic and social development, adjust the Negative List where appropriate. Therefore, if the industry of loan service
is subject to the foreign investment restrictions or prohibitions under the negative list issued subsequently, our failure to take timely
and appropriate measures to cope with any of these or similar regulatory compliance challenges could materially and adversely affect
our current corporate structure, corporate governance, and business operations.
Any failure to comply with PRC regulations regarding the
registration requirements for employee stock incentive 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 Plan of Overseas Publicly Listed Company,
replacing earlier rules promulgated in 2007. Pursuant to these rules, PRC citizens and non-PRC citizens who reside in China for a continuous
period of not less than one year who participate in any stock incentive plan of an overseas publicly listed company, subject to a few
exceptions, are required to register with SAFE through a domestic qualified agent, which could be the PRC subsidiaries of such overseas-listed
company, and complete certain other procedures. In addition, an overseas-entrusted institution must be retained to handle matters in
connection with the exercise or sale of stock options and the purchase or sale of shares and interests. We and our executive officers
and other employees who are PRC citizens or who reside in the PRC for a continuous period of not less than one year and who have been
granted options are subject to these regulations after our company becomes an overseas-listed company upon the completion of our initial
public offering. Failure to complete the SAFE registrations may subject us or them to fines and legal sanctions, there may be additional
restrictions on the ability of us or them to exercise stock options or remit proceeds gained from sale of stock into the PRC. We also
face regulatory uncertainties that could restrict our ability to adopt additional incentive plans for our directors, executive officers
and employees under PRC law. See "Item 4. Information on the Company—B. Business Overview—Regulation—Regulations
on Foreign Exchange—Regulations on Stock Incentive Plans."
14
If we are classified as a PRC resident enterprise for
PRC enterprise income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders
and ADS holders.
Under the PRC Enterprise Income Tax Law and its implementation rules,
an enterprise established outside of the PRC with its "de facto management body" within the PRC is considered a "resident
enterprise" and will be subject to the enterprise income tax on its global income at the rate of 25%. The implementation rules
define the term "de facto management body" as the body that exercises full and substantial control and overall management
over the business, productions, personnel, accounts and properties of an enterprise. In 2009, the State Administration of Taxation, or
SAT, issued a circular-the Circular of the State Administration of Taxation on Issues Concerning the Identification of Chinese-Controlled
Overseas Registered Enterprises as Resident Enterprises in Accordance With the Actual Standards of Organizational Management (SAT Circular
82), which was amended on December 29,2017 and provides certain specific criteria for determining whether the "de facto management
body" of a PRC-controlled enterprise that is incorporated offshore is located in China. Although this circular only applies to
offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners, the
criteria set forth in the circular may reflect the SAT's general position on how the "de facto management body" test
should be applied in determining the tax resident status of all offshore enterprises. According to SAT Circular 82, an offshore incorporated
enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its "de
facto management body" in China, and will be subject to PRC enterprise income tax on its global income only if all of the following
conditions are met: (i) the primary location of the day-to-day operational management is in the PRC; (ii) decisions relating to
the enterprise's financial and human resource matters are made or are subject to approval by organizations or personnel in the
PRC; (iii) the enterprise's primary assets, accounting books and records, company seals, and board and shareholder resolutions
are located or maintained in the PRC; and (iv) at least 50% of voting board members or senior executives habitually reside in the
PRC.
We believe our company is not a PRC resident enterprise for PRC tax
purposes. However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties
remain with respect to the interpretation of the term "de facto management body." If the PRC tax authorities determine that
our company is a PRC resident enterprise for enterprise income tax purposes, we will be subject to PRC enterprise income on our worldwide
income at the rate of 25%. Furthermore, we will be required to withhold a 10% withholding tax from dividends we pay to our shareholders
that are nonresident enterprises, including the holders of our ADSs. In addition, nonresident enterprise shareholders (including our
ADS holders) may be subject to PRC tax at a rate of 10% on gains realized on the sale or other disposition of ADSs or ordinary shares,
if such income is treated as sourced from within the PRC. Furthermore, if we are deemed a PRC resident enterprise, dividends paid to
our non-PRC individual shareholders (including our ADS holders) and any gain realized on the transfer of ADSs or ordinary shares by such
shareholders may be subject to PRC tax at a rate of 20% (which, in the case of dividends, may be withheld at source). These rates may
be reduced by an applicable tax treaty, but it is unclear whether non-PRC shareholders of our company would be able to obtain the benefits
of any tax treaties between their country of tax residence and the PRC in the event that we are treated as a PRC resident enterprise.
Any such PRC tax may reduce the returns on your investment in the ADSs or ordinary shares.
We face uncertainty with respect to indirect transfers
of equity interests in PRC resident enterprises by their non-PRC holding companies.
On February 3, 2015, the SAT issued the Public Notice Regarding Certain
Corporate Income Tax Matters on Indirect Transfer of Properties by Non-Tax Resident Enterprises, or SAT Bulletin 7, which was amended
on December 1 and December 29, 2017. SAT Bulletin 7 extends its tax jurisdiction to transactions involving the transfer of taxable assets
through offshore transfer of a foreign intermediate holding company. In addition, SAT Bulletin 7 has introduced safe harbors for internal
group restructurings and the purchase and sale of equity securities through a public securities market. SAT Bulletin 7 also brings challenges
to both foreign transferor and transferee (or other person who is obligated to pay for the transfer) of taxable assets.
On October 17, 2017, the SAT issued the Announcement of the State
Administration of Taxation on Issues Concerning the Withholding of Nonresident Enterprise Income Tax at Source, or SAT Bulletin 37, which
came into effect on December 1, 2017 and was later amended on June 15, 2018. The SAT Bulletin 37 further clarifies the practice and procedure
of the withholding of nonresident enterprise income tax.
Where a nonresident enterprise transfers taxable assets indirectly
by disposing of the equity interests of an overseas holding company, which is an Indirect Transfer, the nonresident enterprise as either
transferor or transferee, or the PRC entity that directly owns the taxable assets, may report such Indirect Transfer to the relevant
tax authority. Using a "substance over form" principle, the PRC tax authority may disregard the existence of the overseas
holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding or deferring PRC
tax. As a result, gains derived from such Indirect Transfer may be subject to PRC enterprise income tax, and the transferee or other
person who is obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at a rate of 10% for the transfer
of equity interests in a PRC resident enterprise. Both the transferor and the transferee may be subject to penalties under PRC tax laws
if the transferee fails to withhold the taxes and the transferor fails to pay the taxes.
We face uncertainties as to the reporting and other implications of
certain past and future transactions where PRC taxable assets are involved, such as offshore restructuring, sale of the shares in our
offshore subsidiaries and investments. Our company may be subject to filing obligations or taxed if our company is transferor in such
transactions, and may be subject to withholding obligations if our company is transferee in such transactions, under SAT Bulletin 7 and/or
SAT Bulletin 37. For transfer of shares in our company by investors who are non-PRC resident enterprises, our PRC subsidiaries may be
requested to assist in the filing under SAT Bulletin 7 and/or SAT Bulletin 37. As a result, we may be required to expend valuable resources
to comply with SAT Bulletin 7 and/or SAT Bulletin 37 or to request the relevant transferors from whom we purchase taxable assets to comply
with these circulars, or to establish that our company should not be taxed under these circulars, which may have a material adverse effect
on our financial condition and results of operations.
15
Our auditor, like other independent registered public
accounting firms operating in China, was historically not permitted to be subject to inspection by the PCAOB, and consequently, investors
were deprived of the benefits of such inspection in the past. Trading in our securities may be prohibited under the HFCAA if the PCAOB
determines that it is unable to inspect or investigate completely our auditor, and as a result, U.S. national securities exchanges, such
as the NYSE, may determine to delist our securities.
Our independent registered public accounting firm that issues the
audit report included 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 required by the laws of the United States to undergo regular inspections by the PCAOB to assess its compliance with
the laws of the United States and professional standards. Our auditor is located in China, a jurisdiction where the PCAOB was historically
unable to conduct inspections and investigations completely, without the approval of the Chinese authorities.
The inability of the PCAOB to conduct inspections of auditors in China
in the past has made 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. As a result,
investors were deprived of the benefits of such PCAOB inspections.
In recent years, U.S. regulatory authorities have continued to express
their concerns about challenges in their oversight of financial statement audits of U.S.-listed companies with significant operations
in China. More recently, as part of a continued regulatory focus in the United States on access to audit and other information currently
protected by national law, in particular China's, the United States enacted the Holding Foreign Companies Accountable Act, or the
HFCAA, in December 2020. Trading in our securities on U.S. markets, including the NYSE, may be prohibited under the HFCAA if the PCAOB
determines that it is unable to inspect or investigate completely our auditor for two consecutive years. On December 16, 2021, the PCAOB
issued the HFCAA Determination Report to notify the SEC of its determinations that the PCAOB was unable to inspect or investigate completely
registered public accounting firms headquartered in mainland China and Hong Kong, or the 2021 Determinations, including our auditor.
On May 26, 2022, we were conclusively identified by the SEC under the HFCAA as having filed audit reports issued by a registered public
accounting firm that cannot be inspected or investigated completely by the PCAOB in connection with the filing of our 2021 Form 20-F.
The inability of the PCAOB to conduct inspections in the past also deprived our investors of the benefits of such inspections. On December
15, 2022, the PCAOB announced that it was able to conduct inspections and investigations completely of PCAOB-registered public accounting
firms headquartered in mainland China and Hong Kong in 2022. The PCAOB vacated its previous 2021 Determinations accordingly. As a result,
we do not expect to be identified as a Commission-Identified Issuer under the HFCAA for the fiscal year ended December 31, 2022 after
we file our annual report on Form 20-F for such fiscal year.
However, whether the PCAOB will continue to conduct inspections and
investigations completely to its satisfaction of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong
is subject to uncertainty and depends on a number of factors out of our, and our auditor's, control, including positions taken
by authorities of the PRC. The PCAOB is expected to continue to demand complete access to inspections and investigations against accounting
firms headquartered in mainland China and Hong Kong in the future and states that it has already made plans to resume regular inspections
in early 2023 and beyond. The PCAOB is required under the HFCAA to make its determination on an annual basis with regards to its ability
to inspect and investigate completely accounting firms based in the mainland China and Hong Kong. The possibility of being a Commission-Identified
Issuer and risk of delisting could continue to adversely affect the trading price of our securities.
If the PCAOB determines in the future that it no longer has full access
to inspect and investigate accounting firms headquartered in mainland China and Hong Kong and we continue to use such accounting firm
to conduct audit work, we would be identified as a Commission-Identified Issuer under the HFCAA following the filing of the annual report
for the relevant fiscal year. If we were so identified for two consecutive years, trading in our securities on U.S. markets would be
prohibited. This would substantially impair your ability to sell or purchase the ADSs when you wish to do so. Furthermore, such trading
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.
16
Proceedings instituted by the SEC against Chinese affiliates
of the "big four" accounting firms, including our independent registered public accounting firm, could result in financial
statements being determined to not be in compliance with the requirements of the Exchange Act.
Starting in 2011, the Chinese affiliates of the "big four"
accounting firms, including our independent registered public accounting firm, were affected by a conflict between U.S. and Chinese law.
Specifically, for certain U.S.-listed companies operating and audited in mainland China, the SEC and the PCAOB sought to obtain from
the Chinese firms access to their audit work papers and related documents. The firms were, however, advised and directed that under Chinese
law, they could not respond directly to the U.S. regulators on those requests, and that requests by foreign regulators for access to
such papers in China had to be channeled through the CSRC.
In late 2012, this impasse led the SEC to commence administrative
proceedings under Rule 102E of its Rules of Practice and also under the Sarbanes-Oxley Act of 2002 against the Chinese accounting firms,
including our independent registered public accounting firm. A first instance trial of the proceedings in July 2013 in the SEC's
internal administrative court resulted in an adverse judgment against the firms. The administrative law judge proposed penalties on the
firms, including a temporary suspension of their right to practice before the SEC, although that proposed penalty did not take effect
pending review by the Commissioners of the SEC. On February 6, 2015, before a review by the Commissioner had taken place, the firms reached
a settlement with the SEC. Under the settlement, the SEC accepts that future requests by the SEC for the production of documents will
normally be made to the CSRC. The firms will receive matching Section 106 requests, and are required to abide by a detailed set of procedures
with respect to such requests, which in substance require them to facilitate production via the CSRC. If they fail to meet specified
criteria, the SEC retains authority to impose a variety of additional remedial measures on the firms depending on the nature of the failure.
Remedies for any future noncompliance could include, as appropriate, an automatic six-month bar on a single firm's performance
of certain audit work, commencement of a new proceeding against a firm, or, in extreme cases, the resumption of the current proceeding
against all four firms. If additional remedial measures are imposed on the Chinese affiliates of the "big four" accounting
firms, including our independent registered public accounting firm, in administrative proceedings brought by the SEC alleging the firms'
failure to meet specific criteria set by the SEC with respect to requests for the production of documents, we could be unable to timely
file future financial statements in compliance with the requirements of the Exchange Act.
In the event that the SEC restarts the administrative proceedings,
depending upon the final outcome, listed companies in the United States with major PRC operations may find it difficult or impossible
to retain auditors in respect of their operations in the PRC, which could result in financial statements being determined to not be in
compliance with the requirements of the Exchange Act, including possible delisting. Moreover, any negative news about any such future
proceedings against these audit firms may cause investor uncertainty regarding China-based, U.S.-listed companies, and the market price
of our common stock may be adversely affected.
If our independent registered public accounting firm was denied, even
temporarily, the ability to practice before the SEC and we were unable to timely find another registered public accounting firm to audit
and issue an opinion on our financial statements, our financial statements could be determined not to be in compliance with the requirements
of the Exchange Act. Such a determination could ultimately lead to the delisting of our ADSs from the New York Stock Exchange or deregistration
from the SEC, or both, which would substantially reduce or effectively terminate the trading of our ADSs in the United States.
Regulation and censorship of information disseminated
over the internet in China may adversely affect our business and reputation and subject us to liability for information displayed on
our website.
The PRC government has adopted regulations governing internet access
and the distribution of news and other 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 is reactionary, obscene, superstitious, fraudulent or defamatory. Failure to comply with these
requirements may result in the revocation of licenses to provide internet content and other licenses, and the closure of the concerned
websites. The website operator may also be held liable for such censored information displayed on or linked to the websites. If our website
is found to be in violation of any such requirements, we may be penalized by relevant authorities, and our operations or reputation could
be adversely affected.
You may have difficulty enforcing judgments in Hong Kong.
Our PRC subsidiaries are wholly owned by our subsidiary incorporated
in Hong Kong. You may have difficulties in enforcing court judgments obtained in United States courts against our Hong Kong subsidiary,
including judgments relating to the federal securities laws of the United States. There is also doubt as to whether courts in Hong Kong
will enforce judgments of United States courts based only upon the civil liability provisions of the federal securities laws of the United
States, or the securities laws of any state of the United States.
17
Risks Related to Our Business
We have a limited operating history and our business practice
continues to evolve, which makes it difficult to evaluate our future prospects.
We commenced our loan service business in 2006 and adopted our previous
business model in 2014, and introduced our collaboration model in December 2018. We have a limited operating history in the home equity
loan market, especially in some aspects of our business operations, such as loan facilitation service and collateral management service,
credit analysis and the development of cooperative relationships with funding partners and other business partners. Our ability to continuously
attract borrowers and funding sources is critical to our business. We may from time to time introduce new loan services and products,
make adjustments to our existing loan facilitation services and products and our risk management system, or make adjustments to our business
operations in general.
The regulatory framework and market condition for China's home
equity loan market is evolving and may remain uncertain for the foreseeable future. If our business practices or the business practices
of our trust company partners are challenged under any PRC laws or regulations, our business, financial condition, results of operations
and prospects would be materially and adversely affected. From time to time we may refine existing commercial arrangements in our business
operations to comply with changing regulatory focuses. For example, FOTIC, one of our primary trust company partners, amended its loan
agreements in 2017 with certain borrowers to add an option for FOTIC to demand payment of outstanding loan principal and interests before
the maturity of the underlying trust funding. Starting in March 2018, we have been working with FOTIC to implement a performance-based
service fee structure (the "2018 FOTIC Service Fee Structure"). For details, please refer to "Item 4. Information on
the Company—B. Business Overview—Our Products—Credit Strengthening Services." We have also been exploring new
business model to broaden our prospective borrower bases. Since December 2018, we have sought to collaborate with limited partnerships
and certain well-established corporations, where limited partners in such limited partnerships and the established corporations work
as our sales partners to introduce prospective borrowers to us. For details, please refer to "Item 4. Information on the Company—B.
Business Overview—Our Products—Collaboration Model." In order to expand our financing channels, we launched a new funding
model in 2021 in collaboration with commercial banks, under which our commercial bank partners are responsible for reviewing and approving
the loan while we charge a service fee for our loan facilitation services. For details, please refer to "Item 4. Information on
the Company—B. Business Overview—Our Products—Commercial Bank Partnership." Unfavorable reception of the new
business arrangements and new collaboration and funding model by potential borrowers could have a material adverse impact on our business,
results of operations, financial condition and cash flows. We may face the risk of increased borrower complaints, potential supervision,
examinations or enforcement actions by regulatory agencies and/or penalties for violation of financial regulations and other applicable
laws and regulations. We may not be able to successfully address the risks and difficulties associated with the new business arrangement
and new funding model, which could materially harm our business and operating results. The modifications to our business arrangements
and business model may also increase the complexity of our business and may present new and significant challenges, as well as strains
on our management, personnel, operations, systems, technical performance and financial resources. As a result, past performance of our
practice does not necessarily indicate our future prospects and performance. Such past performance may or may not be sustained in the
future.
You should consider our business and prospects in light of the risks
and challenges we encounter or may encounter given the rapidly evolving market in which we operate and our limited operating history
in this particular market. These risks and challenges include, among other things, our ability to:
●
offer customized and competitive loan services and products;
●
increase the utilization of our loan services by existing borrowers
                                            as well as new borrowers;
●
maintain low delinquency ratio of loans originated by us;
●
achieve an effective and efficient collection and foreclosure
                                            process to assist our trust company partners to recover delinquent loans in the event of
                                            loan default;
●
develop sufficient, diversified, cost-efficient and reputable
                                            funding sources;
●
broaden our prospective borrower base;
●
navigate through a complex and evolving regulatory environment;
●
improve our operational efficiency;
●
promote standardized and disciplined operational procedures
                                            in local offices;
●
attract, retain and motivate talented employees to support our
                                            business growth;
●
maintain and enhance relationships with our business partners;
●
enhance our technology infrastructure to support the growth
                                            of our business and maintain the security of our system and the confidentiality of the information
                                            provided and utilized across our system;
●
navigate economic condition and fluctuation; and
●
defend ourselves against legal and regulatory actions.
18
Our credit strengthening services to the trust plans as
the subordinated unit holder might be subject to challenges by relevant regulatory authorities, and we may potentially be required to
obtain licenses.
The Guiding Opinion on Regulating the Asset Management Business of
Financial Institutions (the "Guiding Opinion") was issued by PBOC, together with China Banking and Insurance Regulatory Commission
("CBIRC"), China Securities Regulatory Commission ("CSRC") and State Administration of Foreign Exchange on April
27, 2018. The Guiding Opinion prohibits direct or indirect guarantee for the principal and expected investment return of the senior unit
holders of structural asset management products. The Guiding Opinion provides a grace period by the end of 2020. During the grace period,
existing products not in compliance with the Guiding Opinion shall be gradually phased out. After the grace period, financial institutions
shall not issue or renew any asset management products not in compliance with the Guiding Opinion.
Our credit strengthening arrangements may be deemed as indirectly
guaranteeing senior unit holders' principal and expected investment return on the investments. As such, we may be required to further
modify such arrangements with the trust plans, which could materially and adversely affect our business. As of the date of this annual
report, we have not received any notice or been made aware of any issues or concerns raised by regulatory authorities on our credit strengthening
arrangements. We cannot guarantee you, however, that the regulatory authorities will hold the opinion that our credit strengthening arrangements
are in compliance with the relevant regulations.
Our trust company partners operate in a strictly regulated
industry. If the practice of our trust company partners, including the cooperation arrangements with us, is challenged under any PRC
laws and regulations, our business, financial condition and results of operations would be materially and adversely affected.
We provide home equity loan service to borrowers primarily through
collaboration with our trust company partners. Our trust company partners operate in a highly regulated industry and, as a result, are
required to comply with a wide array of laws and regulations that are continually evolving. If our collaboration arrangement is deemed
to violate any of these laws and regulations, we may be required to make significant changes to our business arrangements. These changes
may have a material adverse impact on our business, results of operations and financial condition and may not be implemented successfully.
For example, according to the Measures for the Administration of Trust
Companies' Trust Plans of Assembled Funds issued by the CBRC, trust companies may not provide loans in excess of 30% of the paid-in
balance of all the trust plans under its management. It is our trust company partners' responsibility to comply with these regulations
and we have no specific knowledge as to whether our trust company partners are in compliance. We cannot assure you that our trust company
partners have been in compliance at all times. We cannot assure you that relevant regulatory authorities will not impose additional restrictions
on our trust company partners' businesses. This regulation may limit our access to funding from our trust company partners in the
future, which may have a material adverse impact on our source of funding and results of operations.
While we believe we currently are in compliance with existing PRC
regulations, in all material aspects, we cannot assure you that the PRC government authorities would agree with our interpretation of
the relevant regulations. It is also possible that new laws and regulations may be adopted which, along with any possible changes needed
to fully comply with any existing or newly released regulations, could require us to further modify our business or operations. The cost
to comply with such laws or regulations would increase our operating expenses, and modifications of our business may have a material
and adverse impact on our business, financial condition and results of operations. If any of our trust company partners are deemed to
violate any laws, regulations and rules, they may face, among other things, regulatory warning, correction order, condemnation, fines,
suspension of business license and criminal liability, which may have a material adverse impact on our funding source and results of
operations.
Our business may be adversely affected if we are unable
to secure funding on terms acceptable to us or our borrowers, or at all.
We fund most of the loans we originate through our trust company partners.
Loans funded by our trust company partners are disbursed to borrowers directly through trust plans. 100.0%, 99.8% and 82.7% of our home
equity loan origination volume was originated under trust lending model in 2020, 2021 and 2022, respectively.
The availability of funding from our trust company partners depends
on many factors, such as the availability of investors on their platforms, general economic conditions, change of regulatory requirements,
actual and expected delinquency ratio compared to alternative opportunities, some of which are out of our control. Our trust company
partners may seek to acquire borrowers independently or through other third parties. In addition, our trust company partners may not
be able to adapt their compliance practices with the evolving financial institution licensing and other regulations in the PRC. As a
result, our ability to cooperate with our existing trust company partners may be subject to regulatory or other limitations. See "Item
3. Key Information—D. Risk Factors—Risks Related to Our Business—Some of our funding sources are highly regulated and
are subject to the changing regulatory environment. If any of the funding sources is deemed to violate the PRC laws and regulations,
we may need to secure new funding, failure of which may result in material and adverse impact on our business, financial condition, results
of operations and prospects."
19
As our business grows, we may need to obtain new funding sources or
require current funding partners to increase the amount of funding provided. If there is a sudden or unexpected shortage of funds from
our trust company partners or if we fail to maintain or develop relationships with our existing trust company partners or new funding
partners, we may not be able to maintain necessary levels of funding without agreeing to less favorable terms, or at all. We may not
be able to arrange additional, new or alternative methods of funding on favorable terms, or at all, or ensure that our cooperation with
new funding partners will meet our expectations and the expectations of borrowers.
Additionally, if there is an unexpected scale of decrease in subordinated
units due to a higher NPL ratio, we may not be able to arrange additional capital to increase our subordinated units contribution to
satisfy the contractual structural leverage ratio as required by the subordinated units subscription agreement. If we are unable to secure
sufficient funding on terms acceptable to us and our borrowers, or at all, we may not be able to provide attractive products and services
to our borrowers, and our business, financial condition and results of operations may be materially and adversely affected.
We face risks related to natural disasters, health epidemics
and other outbreaks of contagious diseases.
Our business could be adversely affected by natural disasters or outbreaks
of epidemics. These natural disasters, outbreaks of contagious diseases, and other adverse public health developments in China or any
other market in which we operate and conduct business could severely disrupt our business operations by damaging our network infrastructure
or information technology system or affecting the productivity of our workforce. The outbreak of any severe epidemic disease, such as
avian flu, H1N1 flu, SARS or coronavirus, may disrupt our operations, which could negatively affect our financial condition and business
prospects.
Our headquarters are located in Guangzhou, where most of our directors
and management and a large majority of our employees currently reside. Consequently, we are highly susceptible to factors adversely affecting
Guangzhou. If any of the abovementioned natural disasters, health epidemics or other outbreaks were to occur in Guangzhou, our operation
may experience material disruptions, such as temporary closure of our offices and suspension of services, which may materially and adversely
affect our business, financial condition and results of operations. The outbreak of the COVID-19 pandemic and subsequent outbreaks driven
by new variants of COVID-19 have brought uncertainties and interruptions to China's macroeconomics and the global economy and may have
adverse effects on our operations. After the initial outbreak of COVID-19, from time to time, some instances of COVID-19 or its variants
infections have emerged, such as the infections caused by the Omicron variants emerged in late 2021 and spread across the globe including
in China in early 2022. The Chinese government as well as many other countries in the world have taken various measures to constrain
the outbreak. The COVID-19 pandemic has caused, and may continue to cause, companies in China, including us, to implement temporary adjustment
of work schemes allowing employees to work from home and other measures that may impact our operation. We prioritize the health and safety
of our employees, and have taken various preventative and quarantine measures across the Company soon after the outbreak. Results of
operations for MSEs, whose owners are our primary customer group, were and may continue to be materially and adversely impacted, which
will in turn have a material adverse effect on our financial performance and results of operations. As a result of the COVID-19 outbreak
and its continued influence, our business involving on-site and offline activities were and may continue to be materially and adversely
impacted, including and not limited to inspection of real properties; visits to borrowers in both the risk assessment and the collection
and foreclosure process; and developing of prospective borrowers.
The COVID-19 outbreak had and may also continue to have a material
adverse effect on China's real estate market, which may increase the risks of the loans we facilitate. While various measures that
the Chinese government implemented to constrain the COVID-19 outbreak have been relaxed since the beginning of 2023, many aspects of
daily business operations in China gradually returned to a normal routine. However, the situation in China and other countries and regions
is still evolving, bringing with it unprecedented levels of macroeconomic disruption and uncertainties across the globe. The extent to
which COVID-19 and its variants impact our results will depend on future developments, which are highly uncertain and cannot be predicted,
including the possibility of a resurgence of the COVID-19 outbreak in China, the duration and severity of the pandemic, the actions taken
to contain the virus or treat its impact, the development and efficiency of vaccines and other actions taken by governments, companies
and individuals in response to the virus and resulting economic disruption. We will continue to closely monitor the impacts of COVID-19
pandemic on us.
Our trust company partners may need to lower the structural
leverage ratio of the trust plans which could materially and adversely affect our business.
The Guiding Opinion sets a limit on the contractual structural leverage
ratio which is calculated as the total amount of senior units divided by subordinated units, and intermediate units shall be included
as senior units for the purpose of this calculation. For a fixed-income product, the structural leverage ratio shall not exceed 3:1.
The contractual structural leverage ratio of the trust plans or products set up by our trust company partners is determined pursuant
to our collaboration agreements with them, which set the upper limit to such ratio at a range of 3:1 to 9:1. As of the date of this annual
report, the actual structural leverage ratio of our trust plans is in compliance with the Guiding Opinion. For details, please refer
to "Item 4. Information on the Company—B. Business Overview—Our Products—Terms of the Trust Plans" and
"Item 4. Information on the Company—B. Business Overview—Our Products—Trust Lending—Funding Partners."
We cannot assure you, however, that the actual structural leverage ratio of our trust plans are always in compliance and in the future,
we may need to contribute additional funding to maintain a lower structural leverage ratio and our overall cost of funding may increase,
which could materially and adversely affect our business.
20
Our concentration of funding provided by our trust company
partners and our concentration of borrowers introduced by one sales partner may have a material adverse effect on our financial condition,
liquidity and results of operations, if we lose any of our trust company partners or such sales partner either as a result of its decision
to acquire services from our competitors or otherwise.
100.0%, 99.8% and 82.7% of our total home equity loan origination
volume was originated under trust lending model in 2020, 2021 and 2022, respectively. Among the loans originated through our trust lending
model, 69.3%, 62.1% and 62.3%, were funded through FOTIC trust plans in 2020, 2021 and 2022, respectively. We generally acquire borrowers
through the collaboration model where we collaborate with sales partners who introduce borrowers and receive incentives. See "Item
4. Information on the Company—B. Business Overview—Our Products—Collaboration Model." In 2022, we started to
collaborate with a sales partner and the balance of outstanding loan principal of the loans issued to borrowers introducted by such sales
partner accounted for 19.4% of our total balance of outstanding loan principal as of December 31, 2022. Although we have long-standing
relationship with our trust company partners and such sales partner, there is no guarantee as to the continuation of the relationships
between our trust company partners, such sales partner and us. We endeavor to diversify our funding source and borrower acquisition channel,
but there is no assurance that we will be successful. The loss of any of our trust company partners, in particular FOTIC, or the afore-mentioned
sales partner, whether as a result of its decision to acquire services from our competitors, or otherwise, would have a material adverse
effect on our financial condition, liquidity and results of operations.
Our collaboration model with our sales partners might
be subject to challenges by relevant regulatory authorities.
Under the collaboration model, sales partners contribute an amount
equal to 10% to 25% of the loans issued to the borrowers introduced by them (such contribution, the "Credit Risk Mitigation Position,"
or "CRMP") and will receive incentive fees upon a pre-agreed schedule and other conditions.
According to the Judicial Interpretations to Issues Concerning Applications
of Laws for Trial of Criminal Cases on Illegal Fundraising, promulgated by the Supreme People's Court, whoever meets the following
four conditions, may be deemed as "absorbing public savings illegally or in disguised form" as prescribed in Article 176
of the Criminal Law, except as otherwise provided for by the Criminal Law: (i) taking in funds without license of the relevant authority
or under the disguise of lawful business operations; (ii) publicizing by means of internet, media, recommendation fairs, leaflets
or mobile phone text messages, or other means; (iii) promising to repay the principal and interests or make payments in forms such
as currency, real objects or equities, within a certain time limit; and (iv) absorbing funds from the general public, namely unspecified
people. According to Regulations on Preventing and Dealing with Illegal Fund-raising, illegal fundraising involves collecting funds from
non-specific targets with promised principal and interest or other investment returns, without lawful permission from the State Council's
financial management departments or in violation of China's financial management rules. The definition above stipulates the three
features of illegal fundraising, which are illegal, with pecuniary interest, and targeting unspecified audiences.
It is unclear whether the CRMP we received would be deemed as absorbing
funds illegally under PRC laws and regulations. As of the date of this annual report, we have not been subject to any fines or penalties
under the aforementioned regulations with respect to our collaboration model with sales partners. If we are deemed to be absorbing public
savings illegally or in disguised form, we may be subject to fines up to the amount of fund absorbed and criminal penalties, which could
materially and adversely affect our business. We are in the process of refining the collaboration model with the sales partnerships under
which sales partners will be restricted to qualified persons only. In addition, we have not made any commitments of making repayments
within a certain time limit. We also require the sales partners to use their own funds as the source of the CRMP and prohibit collection
of public funds from unspecified people. While we believe we are in compliance with the abovementioned laws and regulations, in all material
aspects, we cannot assure you that the relevant authorities would agree with our interpretation of the relevant regulations. Our business
and results of operations will be materially and adversely affected if our collaboration model with sales partners are deemed as absorbing
public savings illegally or in disguised form.
According to the Administrative Measures on Assembled Funds Trust
Schemes of Trust Companies, which was amended on February 2009, the trustor shall use legitimate funds of its own to subscribe to the
trust units, and shall not participate in the trust scheme by illegally pooling funds from any other person. In addition, according to
the Guiding Opinions on Regulating Asset Management Business of Financial Institutions, which were promulgated on April 2018, investors
may not use loans or funds from third parties raised by issuing bonds to invest in asset management products. As of the date of this
annual report, we have not been subject to any fines or penalties under the aforementioned regulations with respect to our collaboration
model with sales partners. If the fund we subscribe for the subordinated units of the trust plan is identified as originated from CRMP,
we may be subject to fines up to the amount of fund so identified and criminal and administrative penalties, which could materially and
adversely affect our business. Our PRC legal advisor, Merits & Tree Law Offices, advises us that the CRMP from sales partners is
for the purpose of reducing our own risk exposure, not for the purpose of illegally and publicly absorbing other people's funds;
in addition, the CRMP does not belong to the loans or funds raised by issuing bonds as described in the abovementioned regulations. While
we believe we are in compliance with the abovementioned laws and regulations, in all material aspects, we cannot assure you that the
relevant authorities would agree with our interpretation of the relevant regulations. Our business and results of operations will be
materially and adversely affected if the funds we subscribe for the subordinated units of the trust plan is identified as originating
from CRMP.
21
In addition, under our collaboration model, the CRMP paid by the sales
partners either through direct contribution or through contribution to limited partnerships may be seen as investment in trust plans
which may be identified by PRC regulatory authorities as disguised loans granted by sales partners. According to the Regulation on Private
Lending and Maintaining the Economic and Financial Order, which was promulgated on April 2018, no entity or individual may set up an
agency that conducts or mainly conducts the granting of loans, or takes the granting of loans as the daily business activities, without
the approval of the competent authority in accordance with the law. If the CRMP paid by sales partners either directly or to limited
partnerships is identified by PRC regulatory authorities as disguised loans granted by sales partners, they may be subject to fines up
to the amount of fund so identified and criminal and administrative penalties. Our PRC legal advisor, Merits & Tree Law Offices,
advises us that under the collaboration model, the main business of the sales partners we cooperate with are to introduce real estate
mortgage loan projects to third parties, rather than providing loans. Our sales partners do not engage in issuance of loans and have
not entered into any loan agreements with us. If the CRMP paid by sales partners either directly or to limited partnerships is identified
by PRC regulatory authorities as disguised loans granted by sales partners, our business and results of operations will be materially
and adversely affected.
Any lack of requisite approvals, licenses or permits applicable
to our business may have a material and adverse impact on our business, financial condition and results of operations.
Our business is subject to governmental supervision and regulation
by the relevant PRC government authorities. Together, these government authorities promulgate and enforce regulations that cover many
aspects of the operation of the home equity loan and finance industries. For details, please refer to "Item 4. Information on the
Company—B. Business Overview—Regulation." Our PRC legal advisor, Merits & Tree Law Offices, advises us that our
businesses do not need special approvals or licenses, other than our small loan business and subject to "Item 3. Key Information—D.
Risk Factors—Risks Related to Our Business—Our credit strengthening services to the trust plans as the subordinated unit
holder might be subject to challenges by relevant regulatory authorities, and we may potentially be required to obtain licenses."
We are further advised that these opinions are subject to uncertainties and the regulatory authorities may hold a different view.
As of the date of this annual report, all of our small loan subsidiaries
have obtained such approvals or licenses.
Some of our funding sources are highly regulated and are
subject to the changing regulatory environment. If any of the finding sources is deemed to violate the PRC laws and regulations, we may
need to secure new funding failure of which may result in a material and adverse impact on our business, financial condition, results
of operations and prospects.
We have multiple funding sources to support our business model, including
funding sources that are highly regulated. Although we may or may not be subject to any direct material fines or penalties from the relevant
regulatory authorities, if our funding sources are deemed to violate any relevant regulations in collaboration with us directly or indirectly,
our business, financial condition, results of operations and prospects would be materially and adversely affected.
We subscribe to the subordinated units and therefore have rights to
the residual earnings under such trust plans. We historically acquire certain funding for the subordinated units by transferring our
right to earnings with a repurchase arrangement to private equity funds. According to the regulations on private equity funds, private
equity funds shall no longer engage in loan business and starting from April 1, 2020, the Asset Management Association of China (AMAC)
will no longer accept new product filings which are not within the permitted investment scope of private equity funds. Private equity
funds filed before April 1, 2020 may continue to invest in loan business. Our private equity funding sources' filing of products
in collaboration with us were all accepted before April 1, 2020. Our PRC legal advisor, Merits & Tree Law Offices, advises that the
instructions shall come into force as of the date of promulgation. In case of any discrepancy between the self-discipline rules and Q&A
issued by the AMAC and the Instructions, the latter shall prevail. To ensure the smooth transition, according to the principle of "separating
the existing applications from new ones", the AMAC shall no longer handle any new and in-process record-filing applications that
fail to meet the requirements of the Instructions from April 1, 2020. If a private investment fund which has completed record-filing
formalities before April 1, 2020 engages in activities which do not comply with the essence of "fund" in Article 2 of the
Instructions, such private investment fund shall not increase its scale of fundraising or its investment after September 1, 2020, and
shall be liquidated upon maturity, and shall not be renewed in principle. We are further advised that these opinions are subject to uncertainties
and the regulatory authorities may hold a different view. We cannot assure you that the registered channels can satisfy our financing
needs, or that such regulations will not impose material restrictions on our future business operations as we continue to grow our business.
According to Measures for the Supervision and Administration of the
Wealth Management Business of Commercial Banks promulgated in September 2018 (the "Wealth Management Measures"), a commercial
bank is subject to certain investment threshold of nonstandardized debt assets. A transition period, starting from the effective date
until the end of 2020, will be set for the Wealth Management Measures. During the transition period, new wealth management products introduced
by commercial banks shall comply with the Wealth Management Measures. Commercial banks may continue to offer existing products for the
undue assets invested in by existing wealth management products, but shall strictly control them within the overall scale of existing
products and decrease them progressively in an orderly manner. Neither our trust company partners nor we have specific knowledge on whether
a commercial bank investing in the senior units is in compliance with the Wealth Management Measures. As of the date of this annual report,
we are not aware of noncompliance by commercial banks as senior unit holders. We cannot assure you, however, that commercial banks as
senior unit holders will continue to comply in the future. If commercial banks as senior unit holders violate the Wealth Management Measures,
such violation will have a material adverse effect on our trust company partners' funding sources and our business operations.
As of the date of this annual report, we are not aware of any material
fines or other penalties under any PRC laws or regulations with respect to the aforesaid funding resources. If our practice, or the practice
of our funding partners in collaboration with us, is deemed to violate any laws, regulations and rules, we may face, among other things,
regulatory warning, correction order, condemnation, fines, suspension of business license and criminal liability. If such situations
occur, our business, financial condition, results of operations and prospects would be materially and adversely affected.
22
We lack product and business diversification. Accordingly,
our future operating income and earnings are more susceptible to fluctuations than a more diversified company.
Currently, our primary business activities include facilitating home
equity loans and providing loan management services to borrowers and trust company partners and to a lesser extent, direct lending through
our small loan subsidiaries. If we are unable to maintain and grow the operating income from our current business or develop additional
revenue streams, our future operating income and earnings are not likely to grow and could decline. Our lack of product and business
diversification could inhibit the opportunities for growth of our business and results of operations.
To maintain and increase the amount of loans we originate, we must
continue to engage our existing borrowers and attract new borrowers, either by ourselves or through sales partners under our collaboration
model, both of which may be affected by several factors, including interest rates of loans we originate, our brand recognition and reputation,
our loan services and products offered, our operating efficiency and ability in engaging prospective borrowers, the effectiveness of
our credit analysis system, our ability to secure sufficient and cost-efficient funding, service fees we charge to trust plans, our borrower
experience and the PRC regulatory environment. In addition, we have also entered into agreements with our sales partners to utilize the
offline network they operate to engage some of our prospective borrowers. If these sales partners could not effectively or efficiently
introduce borrowers as anticipated, or if we are unable to expand the scale of our sales partners, we may not be able to acquire or engage
new and existing borrowers efficiently. In addition, we may also impose more stringent control over borrower qualifications to ensure
the quality of the loans we facilitate, which may negatively affect the amount of loans we facilitate. If we are unable to attract borrowers
or if borrowers do not continue to use our services, we may be unable to increase our loan origination volume and corresponding income,
and our business and results of operations may be materially and adversely affected.
As a result of the COVID-19 pandemic, our normal work schedule and
results of operations were adversely impacted in 2022 and may continue to be adversely impacted in the future, which may negatively impact
our ability to maintain or increase the amount of loans we facilitate. For example, we may not be able to conduct borrower site visits,
and the processing time for each loan may be prolonged. For details, see "Item 3. Key Information—D. Risk Factors—Risks
Related to Our Business—We face risks related to natural disasters, health epidemics and other outbreaks of contagious diseases."
Our concentration in loans secured by real properties
may increase our credit losses in times of deterioration in local or national property markets, which would negatively affect our financial
results.
The home equity loans we facilitate are secured by residential or
commercial properties in our market areas. A significant decrease of property values will cause an increase in LTV ratio, resulting in
borrowers having little or negative equity in their property, which may reduce new loan originations and provide incentive to borrowers
to strategically default on their loans. Risk of loan defaults and foreclosures are unavoidable in the home equity loan industry.
If we are unable to achieve low delinquency ratio for
loans originated by us, our business and results of operations may be materially and adversely affected.
We may not be able to achieve low delinquency ratio for loans originated
by us, or such delinquency ratios may be significantly affected by economic downturns or general economic conditions beyond our control
and beyond the control of individual borrowers. The outstanding principal of home equity loans (including loans held for sale) originated
by us was RMB9,816 million, RMB10,705 million and RMB11,123 million (US$1,745 million) as of December 31, 2020, 2021 and 2022. The delinquency
ratio for loans originated by us increased from 23.70% as of December 31, 2020 to 26.22% as of December 31, 2021, and further increased
to 33.22% as of December 31, 2022. Our NPL ratio decreased from 12.89% to 11.93%, and increased to 16.95% as of the same respective dates.
The delinquency ratio in 2022 is higher than that in 2021, mainly because the fact that the borrowers' ability to service their
debts was negatively affected in 2022 due to the COVID-19 pandemic. The NPL ratio in 2022 is higher than that in 2021, mainly attributable
to the fact that the pandemic prevention and control measures taken in 2022 has negatively impacted the efficiency of bad debt collection
and legal proceedings against borrowers at default, and therefore has caused the Company's NPL ratio to increase. In order to diversify
our financing channels to better serve the demands of MSE owners with credible funding sources, we started to collaborate with commercial
banks in 2021, under which model we provide guarantees against the potential defaults and such contractual guarantee arrangement is underwritten
by the guarantor company to which we provide back-to-back guarantee at request. For details, please refer to "Item 4. Information
on the Company—B. Business Overview—Our Products—Commercial Bank Partnership." Accordingly, our results of operations,
financial position and liquidity could be materially and adversely affected if we cannot achieve low delinquency ratio for the loans
generated under such new funding model. Furthermore, our borrower base continues to expand with the growth of our business operations,
which may include loan applicants with lower creditworthiness. We may not be able to achieve low delinquency ratio for loans originated
by us in the future, or return to the low delinquency ratio or NPL ratio we achieved in the past.
Our high leverage ratio may expose us to liquidity risk
and we may not have sufficient capital reserve to manage losses.
As part of the collaboration we have with our trust company partners,
we subscribe to subordinated units in trust plans through our subsidiaries and fund those units with (i) our own funds and (ii) funding
from transferring our right to earnings in subordinated units to third parties. We transfer our right to earnings in subordinated units
to third parties with a repurchase arrangement, which requires us to repurchase the right to earnings in subordinated units. For details
of our repurchase agreements with third parties under the trust lending model, please refer to "Item 4. Information on the Company—B.
Business Overview—Our Products—Funding Sources." In 2020, 2021 and 2022, we transferred our right of earnings in subordinated
units to a certain private equity fund and to a certain third party. Our financing costs under such repurchase arrangement ranged from
10.5% to 13.8% per annum of the transfer prices in 2020, 2021 and 2022. We are required to consolidate all of the results under trust
plans on our consolidated financial statements, including those of the senior units. This consolidation is necessary as our trust lending
model creates exposure to variability of returns from the activities of the trust plans.
23
We historically operated a small direct lending business through our
small loan subsidiaries, financed with our own funds or funds we received from third parties by transferring our rights in the loans
together with a repurchase arrangement.
As a result of our funding model, we may be exposed to high leverage
ratio. Our leverage ratio was 3.3 times, 3.8 times and 3.7 times as of December 31, 2020, 2021 and 2022, respectively. Our high level
of borrowings and leverage ratio may adversely affect our liquidity and business operations, including but not limited to increasing
our vulnerability under adverse economic condition, potentially limiting our ability to raise more debt and increasing our exposure to
interest rate fluctuation. Our business and results of operations also depend on our ability to secure cost-effective financing. The
third parties to whom we transfer our right to earnings or small rights to earnings in loans principal, interest and financing service
fee receivables may not continue to provide funding at rates acceptable to us, and we may not find alternative financing at similar rates,
or at all.
If we continue to have a high leverage ratio, our exposure to liquidity
risk may restrict our ability to make necessary capital expenditures or develop business opportunities in the future. For the credit
strengthening services we provide, we may also be required to provide additional funding when there is an NPL in the loan portfolio.
Due to this arrangement and our high leverage ratio, we may not have sufficient capital reserve to manage potential losses in the future,
which may adversely affect our results of operations and financial positions. In addition, although we are not currently subject to any
capital reserve requirement, we cannot assure you that the regulatory authority will not impose such requirements in the future, which
may have a material adverse impact on our results of operations and financial positions due to our high leverage ratio.
If our or our trust company partners' or our commercial
bank partners' risk management system fails to perform effectively, such failure may materially and adversely impact our operating
results.
Credit assessment of the borrowers we facilitate is conducted by our
risk management system, and subject to final risk assessment by our trust company partners or commercial bank partners under different
funding models. Our risk management system uses credit analysis and data from prospective borrowers and multiple external sources and
might not be effective as we continue to increase the amount of transactions, expand the borrower base and broaden our borrower engagement
efforts through different channels in the future. If our system or our trust company partners' or commercial bank partners'
system is ineffective or if the credit analysis and data we or our trust company partners or our commercial bank partners obtained are
incorrect or outdated, the relevant risk management abilities could be negatively affected, resulting in incorrect recommendations or
denials of loan applications or mispriced loan products, or eventually loan default. If we are unable to effectively and accurately assess
the credit risks of borrowers or price loan products appropriately, we may be unable to offer quality services to our trust company partners,
commercial bank partners or borrowers. Our risk and credit assessment may not be able to provide more predictive assessments of future
borrower behavior or result in better evaluation of our borrower base when compared to our competitors. Pursuant to the terms of our
collaboration agreements with trust company partners and commercial bank partners, trust company partners or commercial bank partners
are independently responsible for credit assessment and approving the loans applications and we are not subject to any penalties for
inaccurate risk assessment or mispriced loan products. However, we ultimately bear credit risk on loans we facilitate as we have payment
obligations under our credit strengthening arrangements or the new funding model with commercial bank partners. For details, please refer
to "Item 4. Information on the Company—B. Business Overview—Our Products—Credit Strengthening Services."
In addition, our performance-based service fee and return under the subordinated units may be reduced as a result of increased NPLs.
If our or our trust company partners' or commercial bank partners' risk management system fails to perform effectively, our
business and results of operations may be materially and adversely affected.
As a result of the COVID-19 pandemic, our normal work schedule were
adversely impacted and may continue to be adversely impacted in the future. Specifically, we may not be able to conduct site visits,
which is an important component of our credit assessment process. For details, see "Item 3. Key Information—D. Risk Factors—Risks
Related to Our Business—We face risks related to natural disasters, health epidemics and other outbreaks of contagious diseases."
Our business depends on our ability to collect payment
on and service the transactions we facilitate.
We offer post-loan management services to our trust company partners.
We have implemented payment and collection policies and practices designed to optimize compliant repayment, while also providing superior
borrower experience. Our collection process is divided into distinct stages based on the days of delinquency, which dictate the level
of collection steps taken. For example, automatic reminders through text, voice and instant messages are sent to a delinquent borrower
as soon as the collections process commences. Our collection team will also make phone calls to borrowers following the first missed
payment and periodically thereafter. We may also resort to arbitration or litigation to recover delinquent loans or assign those loans
to a third party and collect proceeds upfront. Despite our servicing and collection efforts, we cannot assure you that we will be able
to collect payments on the transactions we facilitate as expected. As we are exposed to credit risks as the subordinated unit holder
and also as a result of credit strengthening services we provide, our failure to collect payment on the transactions will have a material
adverse effect on our business operations and financial positions. In addition, our collection team may not possess adequate resource
and manpower to collect payment on and service the loans we facilitated. If we fail to adequately collect amounts delinquent or due,
then our service fees charged to trust plans may be delayed or reduced and our results of operations will be adversely affected. As the
amount of transactions facilitated by us increases in the future, we may devote additional resources into our collection efforts. However,
there can be no assurance that we would be able to utilize such additional resources in a cost-efficient manner.
24
Moreover, Circular 141 provides that all types of institutions or
entrusted third-party institutions shall not collect loans through violence, intimidation, insult, slander, harassment, etc. Furthermore,
according to the Notice on Further Regulating the Personal Trust Loan Business of Trust Companies issued by Beijing Bureau of the China
Banking and Insurance Regulatory Commission in August 2020, trust companies within the Beijing jurisdiction shall clarify the list of
prohibited behaviors with the institutions they collaborate with and their staff, and must not collect loans through violence, intimidation,
insult, slander, harassment, etc. The Amendment XI to the Criminal Law of the People's Republic of China, which was issued on December
2020 and became effective in March 2021, stipulates that whoever falls under any of the following circumstances when collecting any illegal
debts generated from offering loans with high interest shall, if the circumstances are serious, be sentenced to fixed-term imprisonment
of no more than three years, criminal detention or public surveillance and shall also, or shall only, be fined: (1) using violence or
coercive methods; (2) restricting another person's personal freedom of movement or trespass to another person's dwelling;
or (3) threatening, stalking, or harassing another person.
Although we aim to ensure our collection efforts comply with the relevant
laws and regulations in the PRC and we have established strict internal policies that our collections personnel shall not engage in aggressive
practices, we cannot assure you that such personnel will not engage in any misconduct as part of their collection efforts. Any such misconduct
by our collection personnel or the perception that our collection practices are considered to be aggressive and not compliant with the
relevant laws and regulations in the PRC may result in harm to our reputation and business, which could further reduce our ability to
collect payments from borrowers, lead to decrease in the willingness of prospective borrowers to apply for the home equity loans we facilitate,
or fines and penalties imposed by the relevant regulatory authorities, any of which may have a material adverse effect on our results
of operations.
As a result of the COVID-19 pandemic, our collection efforts were
delayed and may continue to be delayed in the future, which may have a material adverse impact on our results of operations. For details,
see "Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—We face risks related to natural disasters,
health epidemics and other outbreaks of contagious diseases."
If our allowance for loan losses is not sufficient to
cover actual loan losses, our results of operations would be negatively affected.
Our business is subject to fluctuations based on local economic conditions.
These fluctuations are neither predictable nor within our control and may have a material adverse impact on our operations and financial
condition. In determining the amount of the allowance for loan losses, we analyze our loss and delinquency experience by loan categories
and we consider the effect of existing economic conditions. In addition, we make various assumptions and judgments about the collectability
of loan portfolios, including the creditworthiness of borrowers and the value of real properties serving as collateral for the repayment
loans. If the actual results are different from our estimates, or our analysis is incorrect, our allowance for loan losses may not be
sufficient to cover losses inherent in a loan portfolio, which would require additions to allowance and would decrease our net income.
Our emphasis on loan growth and on increasing portfolio, as well as any future loan deterioration, will require us to increase our allowance
further in the future. Any increase in our allowance for loan losses or loan charge-offs as required by regulatory authorities may have
a material adverse effect on our results of operations and financial condition.
Increases in market interest rates could negatively affect
the amount of loans facilitated by us and cost of funds provided to borrowers.
Borrowers' costs of borrowing mainly consist of interest expenses.
An increase in prevailing interest rates could result in an increase in the interest rates of loans we facilitate, and borrowers may
be less likely to accept such adjusted terms. If borrowers decide not to use the products or services we offer because of such increase
in market interest rates, our ability to retain existing borrowers and engage prospective borrowers as well as our competitive position
may be severely impaired. If we are unable to effectively manage such market interest rate risk, our business, profitability, results
of operations and financial condition could be materially and adversely affected.
Our overall funding costs may fluctuate with market interest rates
while the interest rates for existing loans are fixed during the terms of the loans. As a result, an increase in the market interest
rates may negatively impact the availability and cost of our funding, which may have a material adverse impact on our profitability and
results of operations.
25
We are involved in legal proceedings in the ordinary course
of our business from time to time. If the outcomes of these proceedings are adverse to us, it could have a material adverse effect on
our business, results of operations and financial condition.
We are involved in various legal proceedings in the ordinary course
of business from time to time. In our opinion, based on the facts known at this time, the ultimate resolution of these ordinary course
legal proceedings will not have a material adverse effect on our financial position or results of operations as a whole. However, no
assurances can be given as to the outcome of any pending legal proceedings, which could have a material adverse effect on our business,
results of operations and financial condition. For debt collection purposes, we initiate legal proceedings against borrowers to recover
payments that are delinquent for 30 days if we cannot reach agreement with the default borrowers by then. As of December 31, 2022, we
had 5,076 collection legal proceedings pending before courts and arbitration tribunals with amounts in dispute of RMB2,827.1 million,
where our trust company partners either directly or with our help sued borrowers of such delinquent loans. We may not be able to obtain
or enforce favorable judgments or arbitration awards, or recover the amounts in dispute in full or at all. Furthermore, claims arising
out of actual or alleged violations of law could be asserted against us by individuals, governmental or other entities in civil, administrative
or criminal investigations and proceedings. These claims could be asserted under a variety of laws and regulations, including but not
limited to contract laws, online or private lending laws or regulations, consumer protection laws or regulations, intellectual property
laws, information security and privacy laws, and labor and employment laws. For further details, see the section headed "Item 8.
Financial Information—A. Consolidated Statements and Other Financial Information—Legal and Administrative Proceedings."
These actions could expose us to adverse publicity and to monetary damages, fines and penalties, as well as suspension or revocation
of licenses or permits to conduct business. Even if we eventually prevail in these matters, we could incur significant legal fees or
suffer reputational harm, which could have a material adverse effect on our business and results of operations as well as our future
growth and prospects.
The foreclosure action and enforcement process may be
time-consuming, difficult and uncertain for legal and practicable reasons, which could adversely affect our liquidity, business, financial
condition and results of operations.
The home equity loans we facilitate are secured by collateral, normally
residential or commercial real properties owned by borrowers. In the event that a borrower is in default and the payment is past due
for over 30 days or upon the incurrence of unusual situations (such as forfeiture of the collateral), we may need to help our trust company
partners initiate judicial or arbitration proceedings against the defaulting borrower and foreclose the real property collateral. Historically,
we were able to help our trust company partners enforce their rights to the collaterals through a power of attorney that was signed by
the borrower and notarized by a notary public before loan disbursement. This allowed the trust company partners to quickly dispose of
the collaterals without having to involve the borrower. Due to recent regulatory development, we have ceased this practice. As a result,
we may need to resort to judicial or arbitration proceedings more frequently to help our trust company partners foreclose on the collateral.
The judicial or arbitration proceedings may be time-consuming and may not ultimately be possible. In addition, the enforcement process
may be difficult in practice. Furthermore, the defaulting borrowers may have concealed, transferred or disposed of their assets beforehand,
which make it difficult or impossible for us to apply for attachment. Moreover, if the attached assets are found to be subject to prior
mortgage or other third parties' rights during proceedings, our interests will be ranked lower than these prior parties, thereby
limiting or even preventing us from full coverage by the collateral. As a result, in case of defaults we may not be able to recover the
full amount of loans and outstanding interests or at all, and in turn our liquidity, business, financial condition and results of operations
could be adversely affected.
In 2019, courts in certain regions of PRC issued regulations on banning
the filings and executions in "trap loans" cases. While we believe our business does not fall into "trap loans"
and such regulations are not be applicable to us, the interpretations of such regulations may vary among different courts. We cannot
guarantee that the regulatory authority will agree with our interpretation. In 2019, certain court proceedings relating to the loans
we facilitated were delayed or suspended due to such regulations.
As a result of the COVID-19 pandemic, court proceeding, foreclosure
action and enforcement process were delayed and may continue to be delayed in the future, which may have a material adverse impact on
our results of operations. For details, see "Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—We
face risks related to natural disasters, health epidemics and other outbreaks of contagious diseases."
26
Credit and other information that we or our trust company
partners or our commercial bank partners receive from prospective borrowers and third parties about a borrower and the collateral may
not accurately reflect the borrower's creditworthiness or the collateral's fair/recoverable value, which may compromise the
accuracy of our and our trust company partners' or our commercial bank partners' credit assessment.
For the purposes of credit risk assessment, we and our trust company
partners or our commercial bank partners obtain from prospective borrowers and third parties certain information of the prospective borrowers
or the prospective real property collateral, which may not be complete, accurate or reliable. A credit report on a borrower or prospective
collateral generated by our third-party sources or our trust company partners' or our commercial bank partners' own credit
assessment system may not reflect that particular borrower's actual creditworthiness or the prospective collateral's actual
market value because it may be based on outdated, incomplete or inaccurate information. Additionally, once we and our trust company partners
or our commercial bank partners have obtained a borrower's information, the borrower may subsequently (i) become delinquent in
the payment of an outstanding obligation; (ii) default on a preexisting debt obligation; (iii) take on additional debt;
or (iv) sustain other adverse financial events, making the information we have previously obtained inaccurate. Such inaccurate or incomplete
borrower information could compromise the accuracy of our or our trust company partners' or our commercial bank partners'
credit assessment and adversely affect the effectiveness of our risk management, which could in turn harm our reputation, lower our service
fees charged to trust plans, and as a result, our business and results of operations could be materially and adversely affected.
We currently determine the preliminary market value of the prospective
real property collateral using external databases at the time borrowers submit their loan applications. We also conduct site visits to
cross-check conditions and verify information of the prospective real property collateral. In addition, we compare the preliminary third-party
appraiser report with quotes on an anonymous basis from local real estate agencies in the same neighborhood. However, there is no assurance
that we have complete and accurate information relating to the prospective real property collateral. In addition, our trust company partners
or our commercial bank partners perform their own independent credit assessment and make the decision on loan grants based on their credit
assessment results. If we or our trust company partners or our commercial bank partners overestimate market value of the real property
collateral, the loans we facilitate may not be fully secured, which could affect the accuracy of our or our trust company partners'
or our commercial bank partners' credit assessment and the effectiveness of our or our trust company partners' or our commercial
bank partners' risk management. Therefore, our reputation, and as a result, our business and results of operations could be materially
and adversely affected.
Our business operations may be negatively impacted if
borrowers use loan proceeds to engage in activities prohibited or not encouraged by regulators.
Borrowers supply a variety of information that is included in the
standardized loan applications prepared by us, including intended use of proceeds. We verify such information by conducting site visits
and informal interviews. As our business continues to grow and our borrower base continues to expand, we might not have enough resources
to continuously verify or monitor the information provided by the borrowers, such as intended use of loan proceeds. The loan agreements
our borrowers enter into limit the use of proceeds to business operation purposes, not purchase of real property or consumption. The
trust companies have the right to require early payment if proceeds were not used for business operation purposes. However, we cannot
guarantee and may not effectively monitor that the loan is strictly used for business operating purposes. The borrower may use loan proceeds
for other purposes with increased risk than as originally provided or use loan proceeds to engage in activities prohibited or discouraged
by regulators. Such activities may harm our reputation and negatively impact our business operations.
Fraudulent activity could negatively impact our operating
results, brand and reputation and cause the use of our loan facilitation services to decrease.
We are subject to the risk of fraudulent activity associated with
borrowers, our trust company partners and third parties handling borrower information. Our resources, technologies and fraud detection
tools may be insufficient to accurately detect and prevent fraud. Significant increases in fraudulent activity could negatively impact
our brand and reputation, reduce the volume of loan transactions facilitated through us and lead us to take additional steps to reduce
fraud risk, which could increase our costs. High-profile fraudulent activity could even lead to regulatory intervention, and may divert
our management's attention and cause us to incur additional expenses and costs. Although we have not experienced any material business
or reputational harm as a result of fraudulent activities in the past, we cannot rule out the possibility that any of the foregoing may
occur, causing harm to our business or reputation in the future. If any of the foregoing were to occur, our results of operations and
financial condition could be materially and adversely affected.
27
We are subject to credit cycle and the risk of deterioration
of credit profiles of borrowers.
Our business is subject to the credit cycle associated with the volatility
of the general economy. If economic conditions deteriorate, we may face increased risk of default or delinquency of borrowers, which
will result in lower returns or losses. In the event that the creditworthiness of borrowers deteriorates or we cannot track the deterioration
of their creditworthiness, the criteria we use for the analysis of borrower credit profiles may be rendered inaccurate, and our or our
trust company partners' risk management system may be subsequently rendered ineffective. This in turn may lead to higher delinquency
ratio and adverse impacts on our reputation, business, results of operations and financial positions.
Our current business model has a relatively large exposure
to second lien mortgage.
In 2021 and 2022, loans secured by second lien interest accounted
for 60.5% and 59.8% of our loan origination volume of home equity loans, respectively. For loans secured by second lien interests, our
rights over the collateral will be subordinated to other secured creditors with higher priority. If the borrowers default, we may not
be able to collect the full amount of our security interests in the collateral due to lien subordination. There is no assurance that
we will be able to realize the value of the collateral as we anticipated in a timely manner, or at all. As a result, our business, financial
condition, results of operations and prospects may be adversely affected.
We primarily rely on our trust company partners and our
commercial bank partners to fund loans to borrowers, which may constitute provision of intermediary service, and our agreements with
these partners and borrowers may be deemed as intermediation contracts under the Civil Code of the People's Republic of China (the
"Civil Code").
Under the Civil Code, if an intermediary intentionally conceals any
material fact or provides false information in connection with the conclusion of the proposed contract, which results in harm to the
client's interests, the intermediary may not claim for service fees and shall be liable for the damages caused. Therefore, if we
intentionally conceal material information or provide false information to our trust company partners and our commercial bank partners
and are found at fault, or if we fail to identify false information received from borrowers or others and in turn provide such information
to our trust company partners and our commercial bank partners, we could be held liable for damages caused to our trust company partners
and our commercial bank partners as an intermediary pursuant to the Civil Code. On the other hand, we do not assume any liability solely
on the basis of failure to correctly assign a credit limit or pricing to a particular borrower in the process of facilitating a loan
transaction, as long as we do not intentionally conceal any material fact intentionally or provide false information, and are not found
to be at fault otherwise. However, due to the lack of detailed regulations and guidance in the area of home equity loans and the possibility
that the PRC government authority may promulgate new laws and regulations regulating home equity loans in the future, there are substantial
uncertainties regarding the interpretation and application of current or future PRC laws and regulations for the home equity loan industry,
and there can be no assurance that the PRC government authority will ultimately take a view that is consistent with ours.
28
The personal data and other confidential information of
borrowers and our partners which we collect or are provided access to may subject us to liabilities imposed by relevant governmental
regulations or expose us to risks of cyberattacks, computer viruses, physical or electronic break-ins or similar disruptions.
We receive, transmit and store a large volume of personally identifiable
information and other confidential data from borrowers and our partners. There are numerous laws regarding privacy and the storing, sharing,
use, disclosure and protection of personally identifiable information and user data. Specifically, personally identifiable and other
confidential information is increasingly subject to legislation and regulations in numerous domestic and international jurisdictions,
the intent of which is to protect the privacy of personal information that is collected, processed and transmitted in or from the governing
jurisdiction. On November 28, 2019, the Secretary Bureau of the Cyberspace Administration of China, the General Office of the Ministry
of Industry and Information Technology, the General Office of the Ministry of Public Security and the General Office of the State Administration
for Market Regulation promulgated the Identification Method of Illegal Collection and Use of Personal Information Through App, which
provides guidance for the regulatory authorities to identify the illegal collection and use of personal information through mobile apps,
and for the app operators to conduct self-examination and self-correction and for other participants to voluntarily monitor compliance.
Personal Information Protection Law stipulates that personal information shall be processed in accordance with the principles of lawfulness,
legitimacy, necessity and good faith, and not in any manner that is misleading, fraudulent or coercive. Collection of personal information
shall be limited to the minimum scope necessary for achieving the purpose of processing and shall not be excessive. In addition, personal
information processing rules should be disclosed to personal information subjects, and the purpose, method and scope of processing should
be clearly stated. While we strive to comply with all applicable data protection laws and regulations, as well as our own privacy policies,
this regulatory framework for privacy issues in China and worldwide is currently evolving and is likely to remain uncertain for the foreseeable
future. We could be adversely affected if legislation or regulations are expanded to require changes in business practices or privacy
policies, or if governing jurisdictions interpret or implement their legislation or regulations in ways that negatively affect our business,
financial condition and results of operations. In addition to laws, regulations and other applicable rules regarding privacy and privacy
advocacy, industry groups or other private parties may propose new and different privacy standards. Because the interpretation and application
of privacy and data protection laws and privacy standards are still uncertain, it is possible that these laws or privacy standards may
be interpreted and applied in a manner that is inconsistent with our practices. Any inability to adequately address privacy concerns,
even if unfounded, or to comply with applicable privacy or data protection laws, regulations and privacy standards, could result in additional
cost and liability for us, damage our reputation, inhibit the use of our platform and harm our business. In addition, the data we possess
may make us an attractive target for and potentially vulnerable to, cyberattacks, computer viruses, physical or electronic break-ins
or similar disruptions. Furthermore, some of the data we possess is stored on our servers, which are hosted by third parties. While we
and our third-party hosting facilities have taken steps to protect confidential information to which we have access and we store our
data in encrypted form, our security measures may be breached in the future. Any accidental or willful security breaches or other unauthorized
access to our database could cause confidential borrower, partner information to be stolen and used for criminal purposes. Security breaches
or unauthorized access to confidential information could also expose us to liability related to the loss of the information, time-consuming
and expensive litigation and negative publicity. If our security measures are breached because of third-party action, employee error,
malfeasance or otherwise, or if design flaws in our software are exposed and exploited, our reputation, business and results of operations
may be materially and adversely impacted.
Because techniques used to sabotage or obtain unauthorized access
to systems change frequently and generally are not recognized until they are launched against a target, we and our third-party hosting
facilities may be unable to anticipate these techniques or implement adequate preventative measures. In addition, the Administrative
Measures for the Security of the International Network of Computer Information Network, effective on December 30, 1997 and amended on
January 8, 2011, require us to report any data or security breaches to the local offices of the PRC Ministry of Public Security within
24 hours of any such breach. Any security breach, whether actual or perceived, would harm our reputation, and could cause us to lose
borrowers and partners and adversely affect our business and results of operations. We do not have cybersecurity insurance in case of
security breach. As of the date of this annual report, we have not experienced any material incidents of security breach.
Any failure by us or our third-party service providers
to comply with applicable anti-money laundering laws and regulations could damage our reputation.
In cooperation with our trust company partners, we have adopted various
policies and procedures, including internal controls, "know-your-customer" procedures, customer due diligence and customer
screening procedures, for anti-money laundering purposes. In addition, we rely on and may in the future, rely on other third-party service
providers, in particular the custody banks and payment agents that handle the transfer of funds between borrowers and lenders, to have
their own appropriate anti-money laundering policies and procedures. Custody banks and payment agents are subject to anti-money laundering
obligations under applicable anti-money laundering laws and regulations and are regulated in that respect by the PBOC. If any of our
third-party service providers fail to comply with applicable anti-money laundering laws and regulations, our reputation could suffer
and we could become subject to regulatory intervention, which could have a material adverse effect on our business, financial condition
and results of operations. Any negative perception of the industry, such as that arising from any failure of other home equity loan service
providers to detect or prevent money laundering activities, even if factually incorrect or based on isolated incidents, could compromise
our image or undermine the trust and credibility we have established.
29
The PRC Anti-money Laundering Law, which became effective in January
2007, sets forth the principal anti-money laundering requirements applicable to financial institutions as well as nonfinancial institutions
with anti-money laundering obligations, including the adoption of precautionary and supervisory measures, establishment of various systems
for client identification, retention of clients' identification information and records and reports on large transactions and suspicious
transactions. Measures for the Supervision and Administration of Combating Money Laundering and Financing of Terrorism by Financial Institutions,
effective in August 2021, provides that a financial institution shall, according to the provisions, establish and improve the internal
control system for combating money laundering and financing of terrorism, assess risks of money laundering and financing of terrorism,
establish a risk management mechanism commensurate with the risk status and business scale, build an information system for combating
money laundering, and establish or designate a department and appoint corresponding personnel to effectively perform the obligations
of combating money laundering and financing of terrorism.
However, as the detailed anti-money laundering regulations of home
equity loan facilitators have not been published, there is uncertainty as to how the anti-money laundering requirements will be interpreted
and implemented, and whether home equity loan service providers like us must abide by the rules and procedures set forth in the PRC Anti-money
Laundering Law that are applicable to nonfinancial institutions with anti-money laundering obligations. We cannot assure you that the
anti-money laundering policies and procedures we have adopted will be effective in protecting our business from being exploited for money
laundering purposes or will be deemed to be following applicable anti-money laundering implementing rules if and when adopted.
The collaboration model we have in place with our sales
partners to acquire borrowers might be regarded as financial marketing and might face compliance risks.
The People's Bank of China, the China Banking Insurance Regulatory
Commission, the China Securities Regulatory Commission, and the State Administration of Foreign Exchange have issued notice on further
regulating financial marketing and publicity activities on December 20, 2019, which took effect on January 25, 2020. It is stipulated
that financial marketing and publicity activities refer to the activities of financial product or financial service providers using various
publicity tools or methods to publicize and promote financial products or financial services, and it is illegal to engage in financial
business without a business license or beyond the permitted business scope, and market entities that fail to obtain relevant financial
business qualifications shall not conduct marketing and publicity activities relating to the financial business, except that information
release platforms and media entrusted by relevant financial business qualifications may carry out financial marketing and publicity activities
for them.
We currently collaborate with our sales partners on the promotion
of real estate mortgage loan projects, and we introduce borrowers to the trust companies. As the above notice is broad in regulatory
scope and still evolving, we cannot guarantee you that the marketing activities of us or our sales partners will not be regarded as financial
marketing and publicity activities. If the marketing activities of us or our sales partners are found to be in violation of the above
notice, we may be penalized by relevant authorities and our marketing activities may be suspended, which could adversely affect our business
operations.
30
The
collecting, storing and sharing of information among us, our sales partners and the trust companies might face compliance risks.
The
PBOC and the National Financial Standardization Technical Committee released the Personal Financial Information Protection Technical
Specifications ("Specifications") on February 13, 2020, according to which financial institutions shall not entrust or authorize
other institutions, without the qualification for financial business, to collect information such as bank account information, personal
identification number, mobile phone number, KYC information, home address and other information that is linked to the identity of a specific
individual. Financial institutions shall also forbid outsourcing service agencies and external service agencies through agreements or
contracts to store such information.
On
26, December, 2022, China Banking and Insurance Regulatory Commission ("CBIRC") issued the Administrative Measures for the
Protection of Consumer Rights and Interests by Banking and Insurance Institutions. According to such Administrative Measures, banking
institutions shall establish a management mechanism for the list of cooperating institutions and strengthen the ongoing management of
cooperating institutions, and set entry and exit criteria for cooperating institutions on matters involving consumer rights and interests,
such as the security of consumers' personal information.
As
of the date hereof, there is no such terms or provisions that we are entrusted or authorized to collect such information from the borrower
by the trust companies and commercial banks in the agreements between us and the trust companies and commercial banks. We have collected
information from the borrowers with the borrowers' express consent. Although the Specifications are a recommended industry standard
and have no mandatory legal force, but they might still be referred to by regulatory agencies. Therefore, if our collecting, storing
and sharing of the borrower's above-mentioned information are found to be in violation of the laws, it could have an adverse impact
on our business model and adversely affect our business operations, especially in terms of our collaboration model with commercial bank
partners.
The
Administrative Measures for Credit Reporting Business may have a certain negative impact on our business, and we may face challenges
from the regulatory authorities.
The
Administrative Measures for Credit Reporting Business, which were adopted on September 17, 2021, are promulgated for implementation as
of January 1, 2022. For the purpose of the measures, credit reporting business refers to activities in which credit information on enterprises
and individuals is collected, arranged, preserved, processed, and provided to users; Credit information refers to basic information,
loan information, and other relevant information collected in accordance with the law and used to identify and judge the credit status
of enterprises and individuals when providing services for financial and other activities, as well as analysis and evaluation information
formed based on the foregoing information. Also, an applicant shall obtain the permission for a personal credit reporting agency from
the People's Bank of China in accordance with the law to engage in personal credit reporting business; handle the record-filing
of a corporate credit reporting agency in accordance with the law to engage in corporate credit reporting business; or handle the
record-filing of a credit rating agency in accordance with the law to engage in credit rating business. Financial institutions, including
but not limited to commercial banks and trust companies, shall not carry out commercial cooperation with market institutions that have
not obtained the lawful qualifications for credit reporting business in accessing credit information.
As
we are in the process of loan facilitation for trust companies or commercial banks, we may involve the collection and provision of borrowers'
information. Our PRC legal advisor, Merits & Tree Law Offices, believes that we have not arranged or processed the borrower's
credit information while conducting business, and we are not engaged in personal credit investigation business. However, since the measures
are relatively new and the relevant interpretation is uncertain, we are not sure whether the regulatory authorities would take our business
as credit investigation service, or would require us to obtain relevant licenses, to cooperate with third-party credit investigation
agencies. As of the date of this annual report, we have not received warnings, penalties, or objections to our business. However, if
the business we carry out is regarded as credit investigation business by the regulatory authorities, we may be required to adjust our
existing business model within certain period to comply with the authorities' regulations, which may increase our operating cost.
If the adjustments and the rectification cannot be completed within the prescribed period, we may face administrative penalties such
as being banned in accordance with the law, confiscation of illegal gains, fines, etc.
If
we are unable to maintain relationships with our third-party service providers, our business will suffer.
We
rely on third-party service providers to operate various aspects of our business. For instance, third parties supply us with external
data including real property valuation, borrowers' credit histories, government data and blacklists. Furthermore, we engage third-party
service providers to maintain our security systems, ensuring confidentiality of data and preventing malicious attacks.
31
Our
relationships with various third parties are integral to the smooth operation of our business. Most of our agreements with third-party
service providers are nonexclusive and do not prohibit third-party service providers from working with our competitors. If our relationships
with third-party service providers deteriorate or third-party service providers decide to terminate our respective business relationships
for any reason, such as to work with our competitors on more exclusive or more favorable terms, our operations may be disrupted. In addition,
our third-party service providers may not uphold the standard we expect under our agreements. If any of these were to happen, our business
operations could be materially impaired and our results of operations would suffer.
Misconduct,
fraud, errors and failure to function by our employees or third-party service providers could harm our business and reputation
We
are exposed to the risk of misconduct, fraud and errors by our employees and third-party service providers with whom we collaborate.
In addition, we rely on our employees for debt collection. We aim to ensure that our collection efforts comply with the relevant laws
and regulations in the PRC and we have established strict policies that our employees should not engage in aggressive practices while
performing debt collection. Nevertheless, we do not have full control over our employees. Misconduct and errors by our employees could
result in violations of law by us, regulatory sanctions and/or serious reputational or financial harm. We cannot always deter misconduct
and errors by our employees, and the precautions we take to prevent and detect these activities may not be effective in all cases. There
cannot be any assurance that misconduct and errors by our employees will not lead to a material adverse effect on our business. Any of
these occurrences could result in our diminished ability to operate our business, potential liability to third parties, inability to
attract borrowers and funding sources, reputational damage, regulatory intervention and financial harm, which could negatively impact
our business, financial condition and results of operations.
Misconduct
and errors by our trust company partners, commercial bank partners, sales partners and other parties with whom we collaborate with could
harm our business and reputation.
We
are exposed to the risk of misconduct and errors by our trust company partners, commercial bank partners, sales partners and other business
partners with whom we collaborate. We rely on our sales partners for borrower acquisition and we do not have full control over sales
partners' conduct or conduct of their respective acquisition channels while sourcing borrowers. We could be materially and adversely
affected if personal information was disclosed to unintended recipients or if an operational breakdown or failure in the processing of
transactions occurred, whether as a result of human error, purposeful sabotage or fraudulent manipulation of our operations or systems.
Financial products and financial institutions are heavily regulated in China. We are not regulated as a financial institution, but we
may be indirectly subject to PRC financial regulations as a result of cooperation with financial institutions as our funding source partners.
If any financial product designed by us and our funding partners is deemed to violate any PRC laws or regulations, we may be jointly
liable due to the service we provide, or we may have to terminate the relationship with our funding partners. It is not always possible
to identify and deter misconduct or errors by our trust company partners, commercial bank partners, sales partners and other business
partners, and the precautions we take to detect and prevent such activities may not be effective in controlling unknown or unmanageable
risks or losses. If any of our funding partners, sales partners and other business partners misuse or misappropriate funds, commit fraud
or other misconduct, or fail to follow our rules and procedures when interacting with our borrowers, we could be liable for damages and
subject to regulatory actions and penalties. We could also be perceived to have facilitated or participated in the illegal misappropriation
of funds, documents or data, and therefore be subject to civil or criminal liability. Any of these occurrences could result in our diminished
ability to operate our business, potential liability to third parties, inability to attract third parties, reputational damage, regulatory
intervention or financial harm, which could negatively impact our business, financial condition and results of operations.
If
we do not compete effectively in our target markets, our operating results could be harmed.
The
PRC's home equity loan market is rapidly evolving. We compete with financial products and companies that attract potential borrowers
or funding sources, or both. Particularly, we compete with other financial service companies that facilitate home equity loans.
Some
of our current or potential competitors have significantly more financial, technical, marketing and other resources than we do and may
be able to devote greater resources to the development, promotion, sale and support of their platforms and distribution channels. Their
business models may also ultimately prove more successful or more adaptable to new regulatory, technological and other developments.
Our current or potential competitors may also have longer operating histories, a more extensive borrower base, more data and distribution
channels, greater brand recognition and brand loyalty and broader partnership relationships than we have. For example, established internet
companies, including social media companies that possess large, existing borrower bases, substantial financial resources and established
distribution channels, may enter the market. Traditional financial institutions may also focus on the MSE market, which may have a material
adverse impact on our business and results of operations as we may not necessarily have competitive advantage. Our competitors may be
better at developing new products, responding quickly to new technologies and undertaking more extensive marketing campaigns. If we are
unable to compete with such companies or meet the need for innovation in our industry, the demand for our services could stagnate or
substantially decline and we could experience reduced operating income, any of which could harm our business.
32
When
new competitors seek to enter our target market, or when existing market participants seek to increase their market share, they sometimes
undercut the pricing and/or terms common in that market, which could adversely affect our market share or ability to exploit new market
opportunities. In addition, since the home equity loan lending industry is a relatively recent development in China, potential partners
and borrowers may not fully understand how our business works and may not be able to fully appreciate the features that we have invested
in and adopted on our business as compared to other home equity loan service providers. Our pricing and terms could deteriorate if we
fail to act to meet these competitive challenges. Further, to the extent that our competitors are able to offer more attractive terms
to our trust company partners, such trust companies may choose to terminate their relationships with us. All of the foregoing could adversely
affect our business, results of operations, financial condition and future growth.
If
negative publicity arises with respect to us or the home equity loan lending industry in general, our employees, our third-party service
providers or our trust company partners, our business and operating results could be adversely affected.
If
negative publicity arises about the home equity loan lending industry or the secured lending industry in general in China or our company,
including the quality, effectiveness and reliability of our business, our ability to effectively manage and resolve borrower complaints,
privacy and security practices, litigation, regulatory challenges and the experience of borrowers with our services, even if inaccurate,
could adversely affect our reputation and the confidence in, and the use of, our services, which could harm our business and operating
results. The PRC government has recently instituted general regulations and specific rules, including the Guiding Opinion, to develop
a more transparent regulatory environment for assets management products. See "Item 3. Key Information—D. Risk Factors—Risks
Related to Our Business—Our business may be adversely affected if we are unable to secure funding on terms acceptable to us or
our borrowers, or at all." Many companies in China's home equity loan lending industry have not been fully compliant with
these regulations, which prevents these companies from providing home equity loans. To the extent that borrowers associate our company
with these failed companies, they may be less willing to use our services. Harm to our reputation can also arise from many other sources,
including employee misconduct, misconduct by our partners, or third-party service providers, failure by us, our partners or third-party
service providers to meet minimum standards of service and quality, inadequate protection of borrower and partner information and compliance
failures and claims. Additionally, negative publicity with respect to our partners or service providers could also affect our business
and operating results to the extent that we rely on these partners or if borrowers associate our company with these partners.
If
we fail to promote and maintain our brand in an effective and cost-efficient way, our business and results of operations may be harmed.
Our
brand and reputation are integral to our acquisition of borrowers and funding sources, and we intend to invest in marketing and brand
promoting efforts. The success of our marketing efforts and borrowing experience with our services are integral to our ability to attract
new and retain repeat borrowers. Our marketing channels include traditional media such as telephone marketing and direct sales conducted
by sales partners, and marketing campaigns, as well as online media, search engine optimization and search engine marketing. If our current
marketing efforts and channels are less effective or inaccessible to us, or if the cost of such channels significantly increases or we
cannot penetrate the market with new channels, we may not be able to promote and maintain our brand and reputation to maintain or grow
the existing borrower base. If we are unable to promote and maintain our brand and reputation in a cost-efficient manner, our market
share could diminish or we could experience a lower growth rate than we anticipated, which would harm our business, financial condition
and results of operations.
Any
failure to protect our own intellectual property rights could impair our brand, negatively impact our business or both.
Our
success and ability to compete also depend in part on protecting our own intellectual property. We rely on a combination of copyright,
trade secret, trademark and other rights, as well as confidentiality procedures and contractual provisions to protect our proprietary
technology, processes and other intellectual property. However, the steps we take to protect our intellectual property rights may be
inadequate. Third parties may seek to challenge, invalidate or circumvent our copyright, trade secret, trademark and other rights or
applications for any of the foregoing. In order to protect our intellectual property rights, we may be required to spend significant
resources. Litigation brought to protect and enforce our intellectual property rights could be costly, time-consuming and distracting
to management. Our failure to secure, protect and enforce our intellectual property rights could seriously adversely affect our brand
and adversely impact our business.
33
We
may be sued by third parties for alleged infringement of their proprietary rights, which could harm our business.
Our
competitors, as well as a number of other entities and individuals, may own or claim to own intellectual property relating to our industry.
From time to time, third parties may claim that we are infringing on their intellectual property rights. We may, however, be unaware
of the intellectual property rights that others may claim cover some or all of our applications, technology or services. Any claims or
litigation could cause us to incur significant expenses and, if successfully asserted against us, could require that we pay substantial
damages or ongoing royalty payments, restrict us from conducting our business or require that we comply with other unfavorable terms.
We may also be obligated to indemnify parties or pay substantial settlement costs, including royalty payments, in connection with any
such claim or litigation and to obtain licenses, modify applications or refund fees, which could be costly. Even if we were to prevail
in such a dispute, any litigation regarding our intellectual property could be costly and time-consuming and divert the attention of
our management from our business operations.
We
have existing debts and may incur more in the future, which may adversely affect our financial condition and negatively impact our operations.
We
have substantial existing debts and we may incur more in the future. The incurrence of debt could have a variety of negative effects,
including:
●
default
                                            and foreclosure on our assets if our operating income is insufficient to repay debt obligations;
●
acceleration
                                            of obligations to repay the indebtedness (or other outstanding indebtedness), even if we
                                            make all principal and interest payments when due, if we breach any covenants that require
                                            the maintenance of certain financial ratios or reserves without a waiver or renegotiation
                                            of that covenant;
●
our
                                            inability to obtain necessary additional financing if the debt security contains covenants
                                            restricting our ability to obtain such financing while the debt security is outstanding;
●
diverting
                                            a substantial portion of cash flow to pay principal and interest on such debt, which would
                                            reduce the funds available for expenses, capital expenditures, acquisitions and other general
                                            corporate purposes; and
●
creating
                                            potential limitations on our flexibility in planning for and reacting to changes in our business
                                            and in the industry in which we operate.
The
occurrence of any of these risks could adversely affect our operations or financial condition.
Our
business depends on the continued efforts of our senior management. If one or more of our key executives were unable or unwilling to
continue in their present positions, our business may be severely disrupted.
Our
business operations depend on the continued services of our senior management, particularly the executive officers named in this annual
report. While we have provided different incentives to our management, we cannot assure you that we can continue to retain their services.
If one or more of our key executives were unable or unwilling to continue in their present positions, we may not be able to replace them
easily or at all, our future growth may be constrained, our business may be severely disrupted and our financial condition and results
of operations may be materially and adversely affected, and we may incur additional expenses to recruit, train and retain qualified personnel.
In addition, although we have entered into confidentiality and noncompetition agreements with our management, there is no assurance that
any member of our management team will not join our competitors or form a competing business. If any dispute arises between our current
or former officers and us, we may have to incur substantial costs and expenses in order to enforce such agreements in China or we may
be unable to enforce them at all.
34
We
may have exposure to greater than anticipated tax liabilities.
We
are subject to enterprise income tax, value-added tax, and other taxes in each province and city in China where we have operations. Our
tax structure is subject to review by various local tax authorities. The determination of our provision for income tax and other tax
liabilities requires significant judgment. In the ordinary course of our business, there are many transactions and calculations where
the ultimate tax determination is uncertain. Although we believe our estimates are reasonable, the ultimate decisions by the relevant
tax authorities may differ from the amounts recorded in our financial statements and may materially affect our financial results in the
period or periods for which such determination is made.
Certain
of our leased properties may have defective titles and we may be forced to relocate operations affected by such defects, which could
cause disruption to our business and have a negative impact on our business operations and financial condition.
As
of December 31, 2022, we operated our businesses primarily in over 50 leased properties in Shenzhen, Guangzhou, Chongqing, Beijing and
other cities in China. We have not signed lease contracts or not renewed expired lease contracts with respect to a small portion of such
leased properties, and we may be forced to relocate if the lessors request us to leave the premises. With respect to a small portion
of such leased properties, the lessors failed to provide title certificates evidencing property ownership of these lessors. According
to PRC laws and regulations, where a landlord lacks title evidence or rights to lease, the relevant lease contracts may be void or unenforceable
under PRC laws and regulations, and may also be subject to challenge by third parties. Moreover, a small portion of the leased properties
are mortgaged by the lessors. In case the mortgagees enforce the mortgage, we may not be able to continue using our leased properties.
In addition, a small portion of our lease contracts have not been registered with the relevant regulatory authorities. According to PRC
laws and regulations, failure to register lease contracts will not affect the effectiveness. However, landlords and tenants may be subject
to administrative fines for such failure.
As
of the date of this annual report, we are not aware of any action, claim or investigation being conducted or threatened by the relevant
regulatory authorities with respect to defects in our leased contracts or leased properties. However, we cannot assure you that such
defects will be cured in a timely manner, or at all. Our business may be interrupted and additional relocation costs may be incurred
if we are required to relocate operations affected by such defects. Moreover, if our lease contracts are challenged by third parties,
it could result in diversion of management attention and cause us to incur costs associated with defending such actions, even if such
challenges are ultimately determined in our favor.
Competition
for employees is intense, and we may not be able to attract and retain the qualified and skilled employees needed to support our business.
We
believe our success depends on the efforts and talent of our employees, including risk management, software engineering, financial and
marketing personnel. Our future success depends on our continued ability to attract, develop, motivate and retain qualified and skilled
employees. Competition for highly skilled technical, risk management and financial personnel is extremely intense. We may not be able
to hire and retain these personnel at compensation levels consistent with our existing compensation and salary structure. Some of the
companies with which we compete for experienced employees have greater resources than we have and may be able to offer more attractive
terms of employment. In addition, we invest significant time and expenses in training our employees, which increases their value to competitors
who may seek to recruit them. If we fail to retain our employees, we could incur significant expenses in hiring and training new employees,
and the quality of our services and our ability to serve borrowers and our partner funding sources could diminish, resulting in a material
adverse effect to our business.
Increases
in labor costs in the PRC may adversely affect our business and results of operations.
The
economy in China has experienced increases in inflation and labor costs in recent years. As a result, average wages in the PRC are expected
to continue to increase. In addition, we are required by PRC laws and regulations to pay various statutory employee benefits, including
pension, housing fund, medical insurance, work-related injury insurance, unemployment insurance and maternity insurance to designated
government agencies for the benefit of our employees. We expect that our labor costs, including wages and employee benefits, will continue
to increase. Unless we are able to control our labor costs or pass on these increased labor costs to borrowers by increasing the fees
of our services, our financial condition and results of operations may be adversely affected.
35
If
we cannot maintain our corporate culture as we grow, we could lose the innovation, collaboration and focus that contribute to our business.
We
believe that a critical component of our success is our corporate culture, which we believe fosters innovation, encourages teamwork and
cultivates creativity. As we develop the infrastructure of a public company and continue to grow, we may find it difficult to maintain
these valuable aspects of our corporate culture. Any failure to preserve our culture could negatively impact our future success, including
our ability to attract and retain employees, encourage innovation and teamwork and effectively focus on and pursue our corporate objectives.
We
do not have any business insurance coverage.
Insurance
companies in China currently do not offer as extensive an array of insurance products as insurance companies in more developed economies.
Currently, we do not have any business liability or disruption insurance to cover our operations. We have determined that the costs of
insuring for these risks and the difficulties associated with acquiring such insurance on commercially reasonable terms make it impractical
for us to have such insurance. Any uninsured business disruptions may result in our incurring substantial costs and the diversion of
resources, which could have an adverse effect on our results of operations and financial condition.
If
we fail to implement and maintain an effective system of internal controls, we may be unable to accurately or timely report our results
of operations or prevent fraud, and investor confidence and the market price of our ADSs may be materially and adversely affected.
Since
the completion of our initial public offering, we have become a public company in the United States subject to the Sarbanes-Oxley Act
of 2002. Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, requires that we include a report from management on our internal
control over financial reporting in our annual report on Form 20-F beginning with this annual report for the fiscal year ending December
31, 2022. In addition, once we cease to be an "emerging growth company" as such term is defined in the JOBS Act, our independent
registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting. Our
management may conclude that our internal control over financial reporting is not effective. Moreover, even if our management concludes
that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting
its own independent testing, may issue a report that is qualified if it is not satisfied with our internal controls or the level at which
our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. In addition,
since we have become a public company, our reporting obligations may place a significant strain on our management, operational and financial
resources and systems for the foreseeable future. We may be unable to timely complete our evaluation testing and any required remediation.
During
the course of documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404, we may identify
weaknesses and deficiencies in our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our
internal control over financial reporting, as these standards are modified, supplemented or amended from time to time, we may not be
able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404.
Generally speaking, if we fail to achieve and maintain an effective internal control environment, we could suffer material misstatements
in our financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our
reported financial information. This could, in turn, limit our access to capital markets, harm our results of operations and lead to
a decline in the trading price of our ADSs. Additionally, ineffective internal control over financial reporting could expose us to increased
risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory
investigations and civil or criminal sanctions.
We
identified a material weakness in our internal control over financial reporting as part of management's assessment, and if we are
unable to remediate and improve our internal controls, we may not be able to accurately or timely report our future financial results.
In
the course of preparing our consolidated financial statements in the prior years, we identified one material weakness which has not been
remediated in our internal control over financial reporting. A "material weakness" is a deficiency, or a combination of deficiencies,
in internal control, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements
will not be prevented or detected on a timely basis. The material weakness that was identified related to our lack of sufficient financial
reporting and accounting personnel with appropriate experience of U.S. GAAP and SEC reporting requirements and our failure to establish
and clearly communicate acceptable policies regarding U.S. GAAP financial reporting. We are in the process of implementing a number of
measures to address the material weakness that has been identified, including hiring more qualified internal auditors to strengthen our
overall governance, and providing relevant training to our accounting personnel. We have been taking other steps to strengthen our internal
control over financial reporting, including (i) refining and setting more control points for our main business processes, namely the
trust lending process and commercial bank partnership process, (ii) establishing effective oversight and clear reporting requirements
for complex transactions, specifically for the personnel in the Finance and Capital Market Departments, and (iii) formalizing a set of
comprehensive U.S. GAAP accounting manuals and upgrading our financial reporting system to streamline monthly and year-end closings and
integrate financial and operating reporting systems. Although we plan to implement these measures to address the material weakness, implementation
of these measures may not fully remediate the material weakness in a timely manner, and there is no assurance that we will not have material
weaknesses or significant deficiencies in the future.
36
We
will continue to incur increased costs as a result of being a public company, particularly after we cease to qualify as an "emerging
growth company."
Since
the completion of our initial public offering, we have become a public company and have incurred significant legal, accounting and other
expenses that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the
SEC and the New York Stock Exchange, impose various requirements on the corporate governance practices of public companies. As a company
with less than US$1.07 billion in revenues for our last fiscal year, we qualify as an "emerging growth company" pursuant
to the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise
applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404
of the Sarbanes-Oxley Act of 2002, or Section 404, in the assessment of the emerging growth company's internal control over financial
reporting. The JOBS Act also permits an emerging growth company to delay adopting new or revised accounting standards until such time
as those standards apply to private companies. However, we have elected to "opt out" of this provision and, as a result,
we will comply with new or revised accounting standards as required when they are adopted for public companies. This decision to opt
out of the extended transition period under the JOBS Act is irrevocable.
We
expect these rules and regulations to increase our legal and financial compliance costs and to make some corporate activities more time-consuming
and costly. After we are no longer an "emerging growth company," we expect to incur significant expenses and devote substantial
management effort toward ensuring compliance with the requirements of Section 404 and the other rules and regulations of the SEC. For
example, as a result of becoming a public company, we will need to increase the number of independent directors and adopt policies regarding
internal controls and disclosure controls and procedures. We also expect that operating as a public company will make it more difficult
and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits
and coverage or incur substantially higher costs to obtain the same or similar coverage. In addition, we will incur additional costs
associated with our public company reporting requirements. It may also be more difficult for us to find qualified persons to serve on
our Board of Directors or as executive officers. We are currently evaluating and monitoring developments with respect to these rules
and regulations, and we cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing
of such costs.
We
have granted, and may continue to grant, share incentives, which may result in increased share-based compensation expenses.
We
adopted an equity incentive plan in 2018, or the 2018 Plan, for the purpose of granting share-based compensation awards to employees,
officers, directors and consultants to incentivize their performance and promote the success of our business.
We
account for compensation costs for all share-based awards using a fair-value-based method and recognize expenses in our consolidated
statements of comprehensive income in accordance with U.S. GAAP. Under the 2018 Plan, we are authorized to grant options, restricted
stock units and other types of awards the administrator of the 2018 Plan decides. Under the 2018 Plan, the maximum aggregate number of
shares which may be issued pursuant to all awards is 307,608,500 shares. As of the date of this annual report, options to purchase a
total of 307,608,500 ordinary shares were outstanding under the 2018 Plan. We believe the granting of share-based awards is of significant
importance to our ability to attract and retain key personnel and employees, and we will continue to grant share-based awards in the
future. As a result, our expenses associated with share-based compensation may increase, which may have an adverse effect on our results
of operations.
37
Certain
of our existing shareholders have substantial influence over our company, and their interests may not be aligned with the interests of
our other stockholders.
Kylin
Investment Holdings Limited, a company incorporated in the British Virgin Islands, holds 17.8% of our ordinary shares. As a result, each
shareholder has significant influence over our business, including decisions regarding mergers, consolidations, liquidations and the
sale of all or substantially all of our assets, election of directors and other significant corporate actions. This concentration of
ownership may also have the effect of discouraging, delaying or preventing a future change of control, which could deprive our stockholders
of an opportunity to receive a premium for their shares as part of a sale of our company, and might reduce the price of our ADSs.
Failure
to make adequate contributions to various employee benefits plans as required by PRC regulations may subject us to penalties.
Companies
operating in China are required to participate in various government-sponsored employee benefit plans, including social insurance plans,
unemployment insurance, medical insurance, work-related injury insurance, maternity insurance, housing provident fund and other welfare-oriented
payment obligations, and contribute to the plans in amounts equal to certain percentages of salaries, including bonuses and allowances,
of employees up to a maximum amount specified by the local government from time to time at locations where our employees are based. The
requirement of employee benefit plans has not been implemented consistently by the local governments in China given the different levels
of economic development in different locations. Our failure in making adequate contributions to various employee benefit plans and in
complying with applicable PRC labor-related laws may subject us to late payment penalties, and we could be required to make up the contributions
for these plans as well as to pay late fees and fines. If we are subject to late fees or fines in relation to the underpaid employee
benefits, our financial condition and results of operations may be adversely affected.
Our
branches have not made full contributions to the social insurance plans and the housing provident fund for employees as required by the
relevant PRC laws and regulations. As of the date of this annual report, we are not aware of any notice from regulatory authorities or
any claim or request from these employees in this regard. However, we cannot assure you that the relevant regulatory authorities will
not require us to pay outstanding amounts and impose late payment penalties or fines on us, which may materially and adversely affect
our business, financial condition and results of operations.
The
inconsistency of domicile and place of business of our PRC subsidiaries may have a material adverse effect on our business and operations.
Substantially
all of our assets and operations are located in China. We have developed a network of 87 branches and sub-branches in over 50 cities
in China. According to the PRC laws and regulations, the domicile and the place of business of our PRC subsidiaries should be the same.
As our business grows rapidly, we may change the place of business according to market development strategy. We cannot assure you that
the domicile of all the PRC subsidiaries, branches and sub-branches are consistent with the place of their business. In the event that
our PRC subsidiaries, branches and sub-branches cannot be reached by relevant regulatory authorities at the domicile or place of business
they provided, such subsidiaries, branches or sub-branches may be included in the unusual operation enterprise list, and may be required
to rectify or may be imposed with penalties, which may adversely affect our business and results of operations.
From
time to time we may evaluate and enter into strategic alliances, which could divert significant management attention and resources, disrupt
our business and adversely affect our financial results.
We
may from time to time evaluate and enter into strategic alliances with various third parties. Strategic alliances with third parties
could subject us to a number of risks, including the potential failure to achieve the expected benefits of the alliance, risks associated
with potential leakage of proprietary information, nonperformance by the counterparty and an increase in expenses incurred in establishing
new strategic alliances, any of which may materially and adversely affect our business. Strategic alliances will also divert the management's
time and resources from our normal operations and we may have to incur unexpected liabilities or expenses.
38
Risks
Related to Our American Depositary Shares
The
trading price of our ADSs may be volatile, which could result in substantial losses to investors.
The
trading price of our ADSs have been, and is likely to continue to be, volatile and could fluctuate widely due to factors beyond our control.
This may happen because of broad market and industry factors, including 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. 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:
●
variations
                                            in our earnings and cash flows;
●
announcements
                                            of new investments, acquisitions, strategic partnerships or joint ventures by us or our competitors;
●
announcements
                                            of new offerings, solutions and expansions by us or our competitors;
●
changes
                                            in financial estimates by securities analysts;
●
detrimental
                                            adverse publicity about us, our services or our industry;
●
announcements
                                            of new regulations, rules or policies relevant for our business;
●
additions
                                            or departures of key personnel;
●
our
                                            share repurchase program;
●
release
                                            of lockup or other transfer restrictions on our outstanding equity securities or sales of
                                            additional equity securities; and
●
potential
                                            litigation or regulatory investigations.
Any
of these factors may result in large and sudden changes in the volume and price at which our ADSs will trade. In particular, since the
COVID-19 outbreaks, concerns over the economic slowdown resulting from the COVID-19 have led to a significant decrease in the major indices
of the U.S. capital markets and an increase in market volatility, which have adversely affected, and may continue to, adversely affect,
the market price of our ADSs. For risks related to the COVID-19, see "Item 3. Key Information—D. Risk Factors—Risks
Related to Our Business—We face risks related to natural disasters, health epidemics and other outbreaks of contagious diseases."
In
the past, shareholders of public companies have often brought securities class action suits against those companies following periods
of instability in the market price of their 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 and require us to incur significant expenses
to defend the suit, which could harm our results of operations. 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 adverse effect on our financial condition and results of operations.
If
securities or industry analysts do not publish research or reports about our business, or if they adversely change their recommendations
regarding the ADSs, the market price for the ADSs and trading volume could decline.
The
trading market for the ADSs will be influenced by research or reports that industry or securities analysts publish about our business.
If one or more analysts who cover us downgrade the ADSs, the market price for the ADSs would likely 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 the ADSs to decline.
39
Substantial
future sales or perceived potential sales of our ADSs in the public market could cause the price of our ADSs to decline.
Sales
of our ADSs in the public market, or the perception that these sales could occur, could cause the market price of our ADSs to decline
significantly. As of December 31, 2022, we had 1,371,643,240 ordinary shares outstanding. Among these shares, 288,485,480 ordinary shares
are in the form of ADSs. All of our ADSs sold in our initial public offering will be freely transferable by persons other than our "affiliates"
without restriction or additional registration under the U.S. Securities Act of 1933, as amended, or the Securities Act. All of the other
ordinary shares outstanding will be available for sale, upon the expiration of the lock-up periods described elsewhere in this annual
report beginning from May 5, 2019 (if applicable to such holder), subject to volume and other restrictions as applicable under Rules
144 and 701 under the Securities Act. Any or all of these ordinary shares may be released prior to the expiration of the applicable lock-up
period at the discretion of the designated representatives. To the extent shares are released before the expiration of the applicable
lock-up period and sold into the market, the market price of our ADSs could decline significantly.
Certain
major holders of our ordinary shares have the right to cause us to register under the Securities Act the sale of their shares, subject
to the applicable lock-up periods in connection with our initial public offering. Registration of these shares under the Securities Act
would result in ADSs representing 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 form of ADSs in the public market could cause the price
of our ADSs to decline significantly. We adopted an equity incentive plan in 2018, or the 2018 Plan, under which we have the discretion
to grant a broad range of equity-based awards to eligible participants. See "Item 6. Directors, Senior Management and Employees—B.
Compensation—Share Incentive Plan." We have registered certain ordinary shares that we may issue under our share incentive
plans and intend to register all ordinary shares that we may issue under our share incentive plans. Once we register these ordinary shares,
they can be freely sold in the public market in the form of ADSs upon issuance, subject to volume limitations applicable to affiliates
and relevant lock-up agreements. If a large number of our ordinary shares or securities convertible into our ordinary shares are sold
in the public market in the form of ADSs after they become eligible for sale, the sales could reduce the trading price of our ADSs and
impede our ability to raise future capital. In addition, any ordinary shares that we issue under our share incentive plans would dilute
the percentage ownership held by the investors who purchased ADSs.
We
cannot guarantee that any share repurchase program will be fully consummated or that any share repurchase program will enhance long-term
shareholder value, and share repurchases could increase the volatility of the price of our ordinary shares and/or ADSs and could diminish
our cash reserves.
On
March 16, 2022, our board of directors authorized a share repurchase program whereby our company was authorized a share repurchase program
under which the Company may repurchase up to US$20.0 million of its ordinary shares in the form of ADSs during a period of up to 12 months
commencing on March 16, 2022. As of the date of this annual report, our Company had repurchased a total of 5.6 million ADSs at an aggregate
amount of US$14.0 million.
Our
board of directors also has the discretion to authorize additional share repurchase programs in the future. The share repurchase programs
do not obligate us to repurchase any specific dollar amount or to acquire any specific number of ADSs and/or shares. We cannot guarantee
that any share repurchase program will enhance long-term shareholder value. The share repurchase programs could affect the price of our
listed securities and increase volatility and may be suspended or terminated at any time, which may result in a decrease in the trading
price of our ordinary shares and/or ADSs. Furthermore, share repurchases could increase the volatility of the price of our ordinary and/or
ADSs could diminish our cash reserves.
Techniques
employed by short sellers may drive down the market price of the ADSs.
Short
selling is the practice of selling securities that the seller does not own but rather has borrowed from a third party with the intention
of buying identical securities back at a later date to return to the lender. The short seller hopes to profit from a decline in the value
of the securities between the sale of the borrowed securities and the purchase of the replacement shares, as the short seller expects
to pay less in that purchase than it received in the sale. As it is in the short seller's interest for the price of the security
to decline, many short sellers publish, or arrange for the publication of, negative opinions regarding the relevant issuer and its business
prospects in order to create negative market momentum and generate profits for themselves after selling a security short. These short
attacks have, in the past, led to selling of shares in the market.
Public
companies that have substantially all of their operations in China have been the subject of short selling. Much of the scrutiny and negative
publicity has centered on allegations of a lack of effective internal control over financial reporting resulting in financial and accounting
irregularities and mistakes, inadequate corporate governance policies or a lack of adherence thereto, and, in many cases, allegations
of fraud. As a result, many of these companies are now conducting internal and external investigations into the allegations and, in the
interim, are subject to shareholder lawsuits and/or SEC enforcement actions.
It
is not clear what effect such negative publicity could have on us. If we were to become the subject of any unfavorable allegations, whether
such allegations are proven to be true or untrue, we could have to expend a significant amount of resources to investigate such allegations
and/or defend ourselves. While we would strongly defend against any such short seller attacks, we may be constrained in the manner in
which we can proceed against the relevant short seller by principles of freedom of speech, applicable state law or issues of commercial
confidentiality. Such a situation could be costly and time-consuming, and could distract our management from growing our business. Even
if such allegations are ultimately proven to be groundless, allegations against us could severely impact our business operations, and
any investment in the ADSs could be greatly reduced or even rendered worthless.
40
Because
we do not expect to pay dividends in the foreseeable future, you must rely on a price appreciation of the ADSs for a return on your investment.
We
currently intend to retain most, if not all, of our available funds and any future earnings to fund the development and growth of our
business. As a result, we do not expect to pay any cash dividends in the foreseeable future. Therefore, you should not rely on an investment
in the ADSs as a source for any future dividend income.
Our
Board of Directors has complete discretion as to whether to distribute dividends, subject to certain requirements of Cayman Islands law.
In addition, our shareholders may, subject to the provisions of our amended and restated memorandum and articles of association, by ordinary
resolution, declare a dividend, but no dividend may exceed the amount recommended by our directors. Under Cayman Islands law, a Cayman
Islands company may pay a dividend out of either profit or share premium account, provided that in no circumstances may a dividend be
paid if this would result in our being unable to pay its debts as they fall due in the ordinary course of business. Even if our Board
of Directors decides to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on our future
results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any, received by us from our
subsidiaries, our financial condition, contractual restrictions and other factors deemed relevant by our Board of Directors. Accordingly,
the return on your investment in the ADSs will likely depend entirely upon any future price appreciation of the ADSs. There is no guarantee
that the ADSs will appreciate in value or even maintain the price at which you purchased the ADSs. You may not realize a return on your
investment in our ADSs and you may even lose your entire investment in the ADSs.
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 with limited liability incorporated under the laws of the Cayman Islands. Our corporate affairs are governed
by our amended and restated memorandum and articles of association, the Companies Act (as amended) of the Cayman Islands and the common
law of the Cayman Islands. The rights of shareholders to take action against our directors, actions by our minority shareholders and
the fiduciary duties of our directors to us under Cayman Islands law are governed by our amended and restated memorandum and articles
of association, the Companies Act (as amended) of the Cayman Islands and 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 compared to U.S. law) as well
as from the common law of England. The decisions of the English courts are of highly persuasive authority, but are not binding, on a
court in the Cayman Islands (except for those decisions handed down from Judicial Committee of the Privy Council to the extent that these
have been appealed from the Cayman Islands courts. The rights of our shareholders and the fiduciary duties of our directors under Cayman
Islands law are broadly similar to those in other common law jurisdictions, but there may be differences in the statutes or judicial
precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws
than the United States. Some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate
law than the Cayman Islands. In addition, if shareholders want to proceed against the Company outside of the Cayman Islands, they will
need to demonstrate that they have standing to initiate a shareholders derivative action in a federal court of the United States.
Shareholders
of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect corporate records or to obtain
copies of lists of shareholders of these companies save for some exceptions. Our directors have discretion under our amended and restated
memorandum and articles of association to determine whether or not, and under what conditions, our corporate records may be inspected
by our shareholders, but are not obliged to make them available to our shareholders. This may make it more difficult for you to obtain
the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection
with a proxy contest.
Your
rights to pursue claims against the depositary as a holder of ADSs are limited by the terms of the deposit agreement.
Under
the deposit agreement, any action or proceeding against or involving the depositary, arising out of or based upon the deposit agreement
or the transactions contemplated thereby or by virtue of owning the ADSs may only be instituted in a state or federal court in New York,
New York, and you, as a holder of our ADSs, will have irrevocably waived any objection which you may have to the laying of venue of any
such proceeding, and irrevocably submitted to the exclusive jurisdiction of such courts in any such action or proceeding. Notwithstanding
the foregoing, the depositary may, in its sole discretion, elect to institute any action, controversy, claim or dispute directly or indirectly
based on, arising out of or relating to the deposit agreement or the ADRs or the transactions contemplated thereby in any competent court
in the Cayman Islands, Hong Kong, the People's Republic of China and/or the United States, or, by having such disputes referred
to and finally resolved by an arbitration either in New York, New York or in Hong Kong, subject to certain exceptions solely related
to the aspects of such claims that are related to U.S. federal securities law, in which case the resolution of such aspects may, at the
option of such registered holder of the ADSs, remain in state or federal court in New York, New York. Also, we may amend or terminate
the deposit agreement without your consent. If you continue to hold your ADSs after an amendment to the deposit agreement, you agree
to be bound by the deposit agreement as amended. See "Item 12. Description of Securities Other Than Equity Securities-American
Depositary Shares" for more information.
41
ADSs
holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable
outcomes to the plaintiff(s) in any such action.
The
deposit agreement governing the ADSs representing our ordinary shares provides that, to the fullest extent permitted by applicable law,
ADSs holders waive the right to a jury trial of any claim they may have against us or the depositary arising out of or relating to our
shares, the ADSs or the deposit agreement, including any claim under the U.S. federal securities laws. The waiver to right to a jury
trial of the deposit agreement is not intended to be deemed a waiver by any holder or beneficial owner of ADSs of our or the depositary's
compliance with the U.S. federal securities laws and the rules and regulations promulgated thereunder.
If
we or the depositary opposed a jury trial demand based on the waiver, the court would determine whether the waiver was enforceable based
on the facts and circumstances of that case in accordance with the applicable state and federal law. The enforceability of a contractual
predispute jury trial waiver in connection with claims arising under the federal securities laws has not been finally adjudicated by
the United States Supreme Court. However, we believe that a contractual pre-dispute jury trial waiver provision is generally enforceable,
including under the laws of the State of New York, which govern the deposit agreement. In determining whether to enforce a contractual
pre-dispute jury trial waiver provision, courts will generally consider whether a party knowingly, intelligently and voluntarily waived
the right to a jury trial. We believe that this is the case with respect to the deposit agreement and the ADSs. It is advisable that
you consult legal counsel regarding the jury waiver provision before investing in the ADSs.
If
you or any other holders or beneficial owners of ADSs bring a claim against us or the depositary in connection with matters arising under
the deposit agreement or the ADSs, including claims under federal securities laws, you or such other holder or beneficial owner may not
be entitled to a jury trial with respect to such claims, which may have the effect of limiting and discouraging lawsuits against us and/or
the depositary. If a lawsuit is brought against us and/or the depositary under the deposit agreement, it may be heard only by a judge
or justice of the applicable trial court, which would be conducted according to different civil procedures and may result in a different
outcome than a trial by jury would have had, including results that could be less favorable to the plaintiff(s) in any such action.
Certain
judgments obtained against us by our shareholders may not be enforceable.
We
are a Cayman Islands exempted company with limited liability and substantially all of our assets are located outside of the United States.
Substantially all of our current operations are conducted in China. In addition, most of our current directors and 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. Further, our directors and officers are located outside of the Cayman Islands. Service of court documents on a Cayman Islands
company can be effected by serving the documents at the Company's registered office and it may be possible to enforce foreign judgments
in the Cayman Islands against a Cayman Islands company, subject to some exceptions. However, if investors wish to serve documents on
and/or enforce foreign judgments against our directors and officers, they will need to ensure that they comply with the rules of the
jurisdiction where the directors and officers are located. 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 U.S. federal securities laws or otherwise. Even if you are successful in bringing an action 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, depending
on where the directors and officers are located.
Walkers
(Hong Kong), our counsel as to Cayman Islands law, has informed us that there is no guarantee that the courts of the Cayman Islands will
automatically allow shareholders of our company to originate actions in the Cayman Islands based upon securities laws of the United States.
In addition, there is no guarantee with regard to Cayman Islands law that a judgment obtained from the U.S. courts under civil liability
provisions of U.S. securities laws will be determined by the courts of the Cayman Islands as penal or punitive in nature. If such a determination
is made, the courts of the Cayman Islands will not recognize or enforce a judgment predicated upon the civil liability provisions of
the federal securities laws of the United States or any state, so far as the liabilities imposed by those provisions are taxes, fines
or penal in nature, or otherwise contrary to public policy, including punitive damages. Walkers (Hong Kong) has further informed us that
although there is no statutory enforcement in the Cayman Islands of judgments obtained in the federal or state courts of the United States
(and the Cayman Islands are not a party to any treaties for the reciprocal enforcement or recognition of such judgments), a judgment
obtained in such jurisdiction will be recognized and enforced in the courts of the Cayman Islands at common law, without any reexamination
of the merits of the underlying dispute, by an action commenced on the foreign judgment debt in the Grand Court of the Cayman Islands,
provided such judgment (a) is given by a foreign court of competent jurisdiction, (b) imposes on the judgment debtor a liability to pay
a liquidated sum for which the judgment has been given, (c) is final, (d) is not in respect of taxes, a fine or a penalty, and was not
obtained in a manner and is not of a kind the enforcement of which is contrary to natural justice or the public policy of the Cayman
Islands.
42
Our
PRC legal advisor, Merits & Tree Law Offices, advises us that there is uncertainty as to whether the courts of the PRC would enforce
judgments of United States courts or Cayman courts obtained against us or these persons predicated upon the civil liability provisions
of the United States federal and state securities laws. Our PRC legal advisor further advises us that the recognition and enforcement
of foreign judgments are provided for under PRC Civil Procedures Law. PRC courts may recognize and enforce foreign judgments in accordance
with the requirements of PRC Civil Procedures Law based either on treaties between China and the country where the judgment is made or
on reciprocity between jurisdictions. China does not have any treaties or other form of reciprocity with the United States or the Cayman
Islands that provides for the reciprocal recognition and enforcement of foreign judgments. In addition, according to the PRC Civil Procedures
Law, courts in the PRC will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment
violates the basic principles of PRC law or national sovereignty, security or public interest. As a result, it is uncertain whether and
on what basis a PRC court would enforce a judgment rendered by a court in the United States or in the Cayman Islands.
The
voting rights of holders of ADSs are limited by the terms of the deposit agreement, and you may not be able to exercise your right to
direct the voting of your ordinary shares underling your ADSs.
Holders
of ADSs do not have the same rights as our registered shareholders. As a holder of our ADSs, you will not have any direct right to attend
general meetings of our shareholders or to cast any votes at such meetings. You will only be able to exercise the voting rights which
attach to the ordinary shares underlying your ADSs indirectly by giving voting instructions to the depositary in accordance with the
provisions of the deposit agreement. Under the deposit agreement, you may vote only by giving voting instructions to the depositary,
as holder of the ordinary shares underlying your ADSs. Upon receipt of your voting instructions, the depositary may try to vote the ordinary
shares underlying your ADSs in accordance with your instructions. If we ask for your instructions, then upon receipt of your voting instructions,
the depositary will try to vote the underlying ordinary shares in accordance with those instructions. If we do not instruct the depositary
to ask for your instructions, the depositary may still vote in accordance with instructions you give, but it is not required to do so.
You will not be able to directly exercise any right to vote with respect to the underlying ordinary shares unless you withdraw the shares
and become the registered holder of such shares prior to the record date for the general meeting. When a general meeting is convened,
you may not receive sufficient advance notice of the meeting to enable you to withdraw the shares underlying your ADSs and become the
registered holder of such shares prior to the record date for the general meeting to allow you to attend the general meeting and to vote
directly with respect to any specific matter or resolution to be considered and voted upon at the general meeting. In addition, under
our post-offering articles of association, for the purposes of determining those shareholders who are entitled to attend and vote at
any general meeting, our directors may close our register of members and/or fix in advance a record date for such meeting, and such closure
of our register of members or the setting of such a record date may prevent you from withdrawing the ordinary shares underlying your
ADSs and becoming the registered holder of such shares prior to the record date, so that you would not be able to attend the general
meeting or to vote directly. Where any matter is to be put to a vote at a general meeting, the depositary will notify you of the upcoming
vote and to deliver our voting materials to you. We cannot assure you that you will receive the voting material in time to ensure you
can direct the depositary to vote your 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 your voting instructions. This means that you may not be able to exercise your
right to direct how the shares underlying your ADSs are voted and you may have no legal remedy if the shares underlying your ADSs are
not voted as you requested.
You
may experience dilution of your holdings due to the inability to participate in rights offerings.
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 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.
43
You
may be subject to limitations on the transfer of your ADSs.
Your
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 it expedient in connection with the performance of its duties. The depositary may 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
are an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements.
We
are an "emerging growth company," as defined in the JOBS Act, and we may take advantage of certain exemptions from requirements
applicable to other public companies that are not emerging growth companies, including, most significantly, not being required to comply
with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 for so long as we remain an emerging growth
company. As a result, if we elect not to comply with such auditor attestation requirements, our investors may not have access to certain
information they may deem important.
We
are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions
applicable to U.S. domestic public companies.
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;
●
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 stock 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
will be required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we intend to publish
our results on a quarterly basis as press releases, distributed pursuant to the rules and regulations of the NYSE. Press releases relating
to financial results and material events will also be furnished to the SEC on Form 6-K. However, the information we are required to file
with or furnish to the SEC will be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic
issuers. As a result, you may not be afforded the same protections or information that would be made available to you were you investing
in a U.S. domestic issuer.
As
an exempted company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate
governance matters that differ significantly from the New York Stock Exchange corporate governance listing standards. These practices
may afford less protection to shareholders than they would enjoy if we complied fully with the New York Stock Exchange corporate governance
listing standards.
As
a Cayman Islands exempted company listed on the New York Stock Exchange, we are subject to New York Stock Exchange corporate governance
listing standards. However, New York Stock Exchange 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, which is our home country, may differ significantly
from the New York Stock Exchange corporate governance listing standards. To the extent we choose to follow home country practice in the
future, our shareholders may be afforded less protection than they otherwise would enjoy under New York Stock Exchange corporate governance
listing standards applicable to U.S. domestic issuers.
44
Although
the matter is not entirely clear, we were likely a passive foreign investment company (a "PFIC") for our 2022 taxable year,
and we will likely be a PFIC for 2023 and our future taxable years, which could result in adverse U.S. federal income tax consequences
to U.S. taxpayers.
In
general, a non-U.S. corporation will be a PFIC for U.S. federal income tax purposes for any taxable year in which (i) 75% or more of
its gross income consists of passive income or (ii) 50% or more of the average value of its assets (generally determined on a quarterly
basis) consists of assets that produce, or are held for the production of, passive income. For purposes of the above calculations, a
non-U.S. corporation that directly or indirectly owns at least 25% by value of the equity interests of another corporation or partnership
is treated as if it held its proportionate share of the assets of the other corporation or partnership and received directly its proportionate
share of the income of the other corporation of partnership. Passive income generally includes interest, income equivalent to interest,
rents, dividends, royalties and gains from financial investments.
It
is not entirely clear how the PFIC rules should apply to a company with a business such as ours. For example, although the loans issued
through our trust plans are shown in their entirety as our assets on our consolidated balance sheet, it is not clear whether for purposes
of the PFIC rules we should be treated as owning only our subordinated interests in the trusts plans, and earning only the portion of
the trust plans' interest income attributable thereto. If we are treated as owning only the subordinated units and the portion
of the trust plans' loans attributable thereto, our PFIC status for any taxable year may depend on the relative values of the loans
we are treated as owning and our other passive assets on the one hand, and the value of our goodwill (to the extent attributable to the
services we provide) and fee receivables on the other hand. The extent to which our goodwill should be treated as an active asset is
not entirely clear. Moreover, the value of our goodwill may be determined by reference to our market capitalization, which has been,
and may continue to be, volatile. In addition, we provide loan facilitation, loan administration and other services in connection with
the loans issued by our trust plans and we charge our trust plans service fees that are eliminated in, and therefore not shown on, our
consolidated income statement. Therefore, our PFIC status for any taxable year may depend on the relative amounts of our fee and interest
income (which may be less than the amount of interest income shown on our income statement, if we are treated as owning only a portion
of the trusts' loans). Furthermore, it is not entirely clear whether a portion of the interest income earned by the trust plans
could be treated as payable in part for services to the borrowers. Although our PFIC status for any taxable year is not entirely clear,
based on the composition of our income and assets and the manner in which we currently operate our business, we were likely a PFIC for
our 2022 and prior taxable years, and will likely be a PFIC for our 2023 taxable year and future taxable years, subject to the discussion
in the subsequent paragraph regarding the Active Financing Exception, as defined below. U.S. taxpayers should consult their tax advisors
regarding the proper application of the PFIC rules to us and our PFIC status for any taxable year.
For
purposes of the PFIC rules "passive income" is defined by way of a cross-reference to Section 954(c) of the Internal Revenue
Code of 1986, as amended (the "Code"), which applies for purposes of the Code's "controlled foreign corporation"("CFC")
rules. A different provision under the CFC rules (namely Section 954(h) of the Code) sets forth an exception for interest income derived
by "eligible CFCs" that are "predominantly engaged" in the active conduct of a financing or similar business
(the "Active Financing Exception"). Because the Active Financing Exception addresses eligible CFCs, there has been uncertainty
as to whether it could apply to determine the PFIC status of companies that are not CFCs, such as our company. Proposed Treasury regulations
promulgated in 2019 (the "2019 Proposed Regulations") provided that the Active Financing Exception could apply to determine
the PFIC status of such companies. However, in 2020 these regulations were finalized (the "2020 Final Regulations") without
addressing the Active Financing Exception. Although the 2020 Final Regulations are silent on the availability of the Active Financing
Exception to companies like us, in the preamble to the 2020 Final Regulations Treasury expressed its position that under current law
the Active Financing Exception does not apply in determining the PFIC status of a company that is neither a CFC nor a bank. The 2020
Final Regulations apply to taxable years of shareholders beginning on or after January 14, 2021. Treasury indicated in the preamble to
the 2020 Final Regulations that taxpayers can rely on the 2019 Proposed Regulations to apply the Active Financing Exception for any open
taxable year ending on or before December 31, 2020. Concurrently with the issuance of the 2020 Final Regulations, Treasury issued proposed
regulations (the "2020 Proposed Regulations") that would state explicitly that the Active Financing Exception is available
only if the tested non-U.S. corporation is a bank. The 2020 Proposed Regulations have not been finalized yet. Based on the foregoing,
our ADS holders and shareholders (i) generally are permitted to apply the Active Financing Exception for a taxable year ending on or
before December 31, 2020 (provided that we in fact satisfied the exception's conditions for the relevant year), (ii) should expect
that the Internal Revenue Service will not agree with a return positon that applies the Active Financing Exception for any subsequent
taxable year, and (iii) should be aware that if the 2020 Proposed Regulations are finalized in their current form they will not be able
to take the position that the Active Financing Exception applies for any taxable year to which the regulations will apply. If we were
"predominantly engaged" in the active conduct of a financing or similar business (as defined for purposes of the Active Financing
Exception) and met all of the exception's requirements then we would not be a PFIC for any taxable year with respect to which taxpayers
validly applied the Active Financing Exception, if applicable. U.S. owners of our ADSs or ordinary shares should be aware that we have
not determined whether these requirements were in fact satisfied. Moreover, if any of our trust plans is treated as a partnership for
U.S. federal income tax purposes, and if such trust's senior unit holders are treated as owning interests in such partnership other
than as creditors, the characterization of our interest income as active under the Active Financing Exception may also depend, in part,
on whether we owned 25% or more of the value of such trust for the relevant taxable years. U.S. owners of our ADSs or ordinary shares
should consult their tax advisers as to whether the Active Financing Exception could apply to us with respect to any taxable year prior
to the finalization of the 2020 Proposed Regulations, and whether it is advisable to take this position in light of Treasury's
views, as described above.
45
A
U.S. taxpayer that owns our ADSs or ordinary shares during any year in which we are a PFIC will generally be subject to adverse U.S.
federal income tax consequences. See "Item 10. Additional Information—E. Taxation—Material U.S. Federal Income Tax
Considerations—Passive Foreign Investment Company" in this annual report. U.S. taxpayers should consult their tax advisers
regarding our PFIC status for any taxable year and the tax considerations relevant to owning shares or ADSs of a PFIC.
ITEM
4. INFORMATION ON THE COMPANY
4.A.
History and Development of the Company
We
started our operations in 1999 through Fanhua Chuang Li Information Technology (Shenzhen) Co., Ltd., which became our onshore holding
company of the main operating subsidiaries in the PRC. In 2000, we formed our wholly owned Hong Kong subsidiary, China Financial Services
Group Limited ("CFSGL"), as the offshore holding company of our PRC subsidiaries. In 2006, we were spun off from Fanhua Inc.,
a company listed on NASDAQ (symbol: FANH), and formed Sincere Fame International Limited ("SFIL") under the laws of British
Virgin Islands as the holding company of CFSGL. In January 2014, CNFinance Holdings Limited was incorporated under the laws of Cayman
Islands. CNFinance Holdings Limited became our holding company through share exchanges with the shareholders of SFIL in March 2018. We
conduct our business in the PRC primarily through Shenzhen Fanhua United Investment Group Co., Ltd., Guangzhou Heze Information Technology
Co., Ltd., and their subsidiaries and consolidated affiliated entities.
In
November 2018, we completed an initial public offering of 7,060,460 ADSs (including the ADSs sold upon the exercise of the over-allotment
option granted to the underwriters), representing 141,209,200 of our ordinary shares. On November 7, 2018, our ADSs were listed on the
New York Stock Exchange under the symbol "CNF."
Our
principal executive offices of our main operations are located 44/F, Tower G, No. 16 Zhujiang Dong Road, Tianhe District, Guangzhou City,
Guangdong Province 510620, People's Republic of China. Our telephone number at this address is +86 (020) 6231-6688. Our registered
office in the Cayman Islands is located at the offices of Walkers Corporate Limited, 190 Elgin Avenue, George Town, Grand Cayman KY1-9008,
Cayman Islands. SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding
issuers that file electronically with the SEC on www.sec.gov. You can also find information on our website, http://ir.cashchina.cn/.
4.B.
Business Overview
Overview
We
are a leading home equity loan service provider in China. We, through our operating subsidiaries in China, conduct business by
connecting demands and supplies through collaborating with sales partners and trust companies under the trust lending model, and
local channel partners and commercial banks under the commercial bank partnership model. Our sales partners and local channel
partners are responsible for recommending micro- and small-enterprise ("MSE") owners with financing needs to us and we
introduce eligible borrowers to licensed financial institutions with sufficient funding sources including trust companies and
commercial banks who will then conduct their own risk assessments and make credit decisions. We have established a national network
of 87 branches and sub-branches in over 50 cities in China. In 2020 and 2021, we originated home equity loans with an aggregate
principal amount of RMB8.8 billion and RMB12.8 billion, respectively, representing an increase of 45.2%. In 2022, we facilitated
loans of RMB14.7 billion, representing an increase of 14.8% as compared to 2021.
Our
primary target borrower segment is MSE owners who own real properties in Tier 1 and Tier 2 and other major cities in China. We originated
home equity loans for 17,703, 22,060 and 23,923 (including 3,891 under the commercial bank partnership model) borrowers in 2020, 2021
and 2022, respectively. These MSE owners typically have quick cash flow turnover from their business operations with high demand for
working capital. Their financing needs are often unpredictable, time-sensitive and frequent. We believe our target borrowers are underserved
by traditional financial institutions due to various reasons. Traditional financial institutions often impose stringent and inflexible
loan application requirements designed for large corporations, making it difficult for MSE owners to meet such requirements. In addition,
time-consuming and cumbersome requirements often limit MSE owners' ability to meet their imminent financing needs. Moreover, unlike
in the United States where home equity loans commonly serve as a financing alternative, traditional lenders in China, such as banks,
typically do not grant loans secured by second lien interests and are generally less incentivized to introduce innovative home equity
loan products.
46
We
aim to serve our target borrowers by facilitating home equity loans and providing tailored services. Our standardized and integrated
online and offline credit application and assessment process shorten the time of loan disbursement, providing expeditious financing solutions
to MSE owners. We offer home equity loans to MSE owners that allow them to repay only the interests by installments and repay the full
principal amount when due. In addition, we also facilitate home equity loans to MSE owners in the form of installment loans with a tenor
typically ranging from one to three years, assisting borrowers' short-term and long-term business planning. In 2020, 2021 and 2022,
the average tenor of the home equity loans we originated was 24, 15 and 12 months with the weighted average effective interest rate (inclusive
of interests and financing service fees, if applicable, payable by the borrowers) of 17.3% , 16.5% and 17.2% per annum, respectively.
Such loan products are secured by first or second lien interests on real properties. 56.3%, 60.5% and 59.8%, of our total home equity
loan origination volume in 2020, 2021 and 2022, respectively, was secured by second lien interests. Depending on the value of the collateral
and the creditworthiness of the borrower, we offer flexible loan principal typically ranging from RMB100,000 to RMB5,000,000.
Our
risk mitigation mechanism is embedded in the design of our loan products, supported by an integrated online and offline process focusing
on risks of both borrowers and collateral and further enhanced by effective post-loan management procedures. Our business infrastructure
supports our operations by providing various offline services, such as on-site visits, interaction with local real property bureau and
debt collection. Collateral for loans we facilitate is geographically dispersed in Tier 1 and Tier 2 and other major cities in China.
We offer home equity loan products that allow borrowers to repay only the interests by installments and repay the full principal amount
when due. In addition, we also provide home equity loan products that require monthly payments comprising principal and interests repayments,
which permits us to assist our trust company partners to monitor borrowers' credit status. Our practical risk assessment focuses
on both credit risks of borrowers and quality of the collateral. We have also established strict guidelines on the characteristics and
quality of collateral, including, among others, an LTV ratio capped at 70%.
Through
trust lending model we collaborate with our trust company partners, who are well-established trust funds in China with sufficient funding
sources and have licenses to engage in lending business nationwide. This structure provides us with stable funding sources. Under the
trust lending model, our trust company partners set up trust plans and acquire funding from their investors. Trust plans are typical
investment vehicles in which investors participate by subscribing to trust units and receive a return as set out in subscription agreements.
Each trust plan issues multiple trust products which are funded with senior and subordinated units at a pre-determined ratio with a term
of one to three years. The loans funded by the trust products, however, have terms typically ranging from one to three years. For details
of matching our funding sources and loans we facilitate, please refer to "Item 4. Information on the Company—B. Business
Overview—Our Products—Matching of Terms of Funding Sources and Loans." The contractual ratio of the senior units and
subordinated units of trust plans or products is determined pursuant to our collaboration agreements with our trust company partners,
which set the upper limit to such ratio at a range of no higher than 3:1. For details, please refer to "Item 4. Information on
the Company—B. Business Overview—Our Products—Terms of the Trust Plans" and "Item 4. Information on the
Company—B. Business Overview—Our Products—Trust Lending—Funding Partners." As part of the collaboration
we have with our trust company partners, we are required to subscribe to all of the subordinated units under most trust plans. By subscribing
to subordinated units, we are entitled to the residual value from trust plans after certain payments to senior unit holders, trust company
partners and third-party service providers. Payments to senior unit holders consist of expected investment returns which are usually
paid quarterly and principal amounts which are repaid upon borrowers' payments of underlying loans. We as subordinated unit holders
are paid each quarter after the quarterly payment of interest returns to senior unit holders and upon maturity after the payment of principal
amounts to senior unit holders. Our financing costs for the senior units, excluding the trust administrative fees, ranged from 6.0% to
11.5% per annum of the issuance number of senior units in 2022, and our financing costs for subordinated units under repurchase arrangements
with financial institutions was 10.5% to 13.8% per annum of the transfer prices for such subordinated units in 2022. Our cost of the
subordinated units as measured by the investment amount was RMB3,045.2 million, RMB2,919.4 million and RMB2,627.4 million (US$380.9 million),
as of December 31, 2020, 2021 and 2022, respectively. Our investment return from the subordinated units was RMB658.8 million, RMB578.7
million and RMB381.3 million (US$55.3 million) in 2020, 2021 and 2022, respectively. We are designated as the service provider and provide
post-loan services such as payment monitoring, debt collection and release of collateral as the need arises. We receive a performance-based
service fee up to 7% per annum of the size of the trust plan charged to the trust plans for the services we provide.
47
In
December 2018, we introduced our collaboration model to optimize our collaboration with trust companies. Sales partners recommend borrowers
to us by direct cooperation with us or joining limited partnerships. By contributing an amount equal to 10% to 25% of the loans issued
to the borrowers introduced by them, sales partners receive incentive fees upon a pre-agreed schedule and other conditions. For details,
please refer to "Item 4. Information on the Company—B. Business Overview—Our Products—Collaboration Model."
As of the date of this annual report, we have around 1,978 contracted sales partners in total, among which around 1,284 are effective
sales partners.
In
order to diversify our financing channels to better serve the demands of MSE owners with credible funding sources, we started to collaborate
with commercial banks in 2021. Under this commercial bank partnership model, we recommend borrowers to commercial banks who are responsible
for reviewing and approving the loan.We provide loan facilitation services including introducing borrowers, initial credit assessment,
facilitating loans from the banks to borrowers, and providing technical assistance, and assist commercial banks with post-loan managements.
We charge a service fee equal to a pre-agreed percentage of each loan we introduce for our afore-mentioned loan facilitation services.
We provide guarantees against the potential defaults and such contractual guarantee arrangement is underwritten by the guarantor company
to which we provide back-to-back guarantee at request. For details, please refer to "Item 4. Information on the Company—B.
Business Overview—Our Products—Commercial Bank Partnership."
We
acquire our borrowers primarily through our sales partners under the trust lending model, and local channel partners including corporate
and individual offline channels and telemarketing companies under the commercial bank partnership model. Through our sales partners,
local channel partners and our established network and branch offices, we reach prospective MSE borrowers and assess their creditworthiness
and value of collaterals, and if these borrowers meet our requirements, we refer them to our trust company and commercial bank partners
who make their own independent credit assessment and decisions before directly lending to qualified borrowers. We help trust companies
and commercial banks sign loan agreements with borrowers directly, and assist borrowers in pledging collateral for the benefit of trust
companies and commercial banks.
In
2020, 2021 and 2022, over 99.5% of our borrowers were introduced to us by our sales partners under the collaboration model. For details,
please refer to "Item 4. Information on the Company—B. Business Overview—Our Products—Collaboration Model."
In 2022, 100.0% of borrowers introduced to commercial banks were acquired through local channel partners including corporate and individual
offline channels and telemarketing companies.
To
a lesser extent, we also had a direct lending model through which we lend directly under our small loan licenses to borrowers with our
own funding or funding we acquire from transfer of rights to earnings in loans principal, interest and financing service fee receivables
to third parties with a repurchase arrangement.
For
details of our repurchase agreements with third parties under both the trust lending and direct lending models, please refer to "Item
4. Information on the Company—B. Business Overview—Our Products—Funding Sources" and "Item 4. Information
on the Company—B. Business Overview—OurProducts—Small Loan Direct Lending." We generally rely on and will continue
to rely primarily on our trust lending model and commercial bank partnership model, which are supplemented with our direct lending model.
Our
Borrowers
Borrower
Base
We
strategically target MSE owners who own properties in Tier 1 and Tier 2 and other major cities in China. These MSE owners typically have
quick cash flow turnover from their business operations with high demand for working capital. MSE owners often also have financing needs
that are unpredictable, time-sensitive and frequent. We believe target borrowers are underserved by traditional financial institutions,
whose often stringent and inflexible loan application requirements that are designed for large corporations make it difficult for MSE
owners to fulfill. In addition, time-consuming and cumbersome requirements often limit MSE owners' ability to meet their imminent
financing need.
In
addition, unlike in the United States where home equity loans serve as a common financing alternative, traditional lenders in China such
as banks typically do not grant loans secured by second lien interests. Providing second lien home equity loans or title loans is limited
for commercial banks in China, given the high level of regulatory supervision from relevant regulatory authorities. These products have
instead been developed by non-traditional financial institutions like us to fulfill the unserved demand.
We
originated home equity loans for 17,703, 22,060 and 23,923(including 3,891 under the commercial bank partnership) borrowers in 2020,
2021 and 2022, respectively. Our borrowers have presence in over 70 Tier 1 and Tier 2 and other major cities in China and are geographically
dispersed.
48
Borrower
Acquisition
Under
the Collaboration Model, we acquire our borrowers primarily through our sales partners. In 2020, 2021 and 2022, over 99.5% of our borrowers
were introduced to us by our sales partners under the collaboration model. For details, please refer to "Item 4. Information on
the Company—B. Business Overview—Our Products——Collaboration Model."
Under
our partnership with commercial banks, we have diversified our borrowers' profiles with more competeitve pricing and efficiency.
Borrowers are engaged through our local offices and word-of-mouth marketing. Our local staff works with various local channel partners
including corporate and individual offline channels and telemarketing companies. We align the incentive of our local staff by offering
a commission equal to a pre-determined fixed rate of the loan origination amount.
Our
Products
The
home equity loans we facilitate permit borrowers to borrow relatively large amounts up to 70% LTV ratio. Our weighted average LTV ratio
was 54.6%, 58.5% and 60.0%, for home equity loans originated in 2020, 2021 and 2022, respectively. In 2020, 2021 and 2022, we originated
home equity loans for trust companies of RMB8.8 billion, RMB12.8 billion and RMB12.2 billion (US$1.8 million), respectively. And we introduced
loans of RMB2.5 billion to commercial banks in 2022.
The
home equity loans we facilitate are typically secured by apartments, houses or commercial properties owned by borrowers. Unlike most
traditional financial institutions, the home equity loans we facilitate can be secured with second lien interests on top of the first
lien interests with banks, offering additional financing to MSE owners not otherwise readily available to them.
We
facilitate home equity loans with flexible tenors typically ranging from one to three years enabling borrowers' short-term and
long-term business planning. In 2020, 2021 and 2022, the average tenor of the home equity loans we originated was 24, 15 and 12 months,
respectively. The shorter average tenor of outstanding loans in 2021 than that of 2020 is mainly due to the fact that the majority of
loans we facilitated in 2021 were short-term loans with a one-year maturity. The shorter average tenor of outstanding loans in 2022 than
that of 2021 is mainly attributable to the fact that the majority of loans we facilitated in 2022 were short-term loans with a one-year
maturity. The difference in tenor of home equity loans originated over the past three years was mainly driven by the reasons described
above and not driven by type of collateral, type of borrower, credit quality or some other factors.
The
home equity loans we originate under trust lending model are also competitively priced, with a weighted average effective interest rate
of 17.3% 16.5% and 17.2% per annum in 2020, 2021 and 2022, respectively. The interest rates of our loan product under commercial bank
partnership model ranged from 9.0% to 15.5%, which had attracted more borrowers with higher credit record. We offer home equity loan
products that allow borrowers to repay only the interests by installments and repay the full principal amount when due. In addition,
we also provide home equity loan products that require monthly payments comprising principal and interests repayments, making it easier
for borrowers to manage their cash flow and for us to timely monitor borrowers' creditworthiness. Borrowers are obligated to pay
directly to the trust plans in full the principal amount plus interest when due. We offer a flexible repayment schedule for installment
loans, including but not limited to (i) an equal monthly installment comprising principal and interests evenly distributed throughout
the life of the loan, (ii) a monthly installment comprising principal and interests in accordance with a pre-agreed step-down schedule,
where a borrower starts with a higher equal monthly installment that decreases after a defined period and (iii) a monthly installment
of interests only and full repayment of loan principal when due.
To
foster our home equity loan business, we also provide bridge loan products, which are generally unsecured short-term loans, to pay off
borrowers' existing loans secured by real property. As a result, such real property will be released from existing loans and can
be used as collateral for the home equity loans we facilitate. Once borrowers obtain home equity loans facilitated by us, the bridge
loans granted by us will be repaid in full. We granted bridge loans of RMB86.4 million, RMB71.4 million and RMB99.64million(US$14.5 million)
in 2020, 2021 and 2022, respectively. We may continue to originate bridge loans going forward as the need arises.
49
Trust
Lending
In
July 2014, we began cooperating with trust companies to fund loans to borrowers through trust plans established in collaboration with
these trust companies. In December 2018, we have started to explore the collaboration model under which we collaborate with sales partners
who introduce borrowers and receive incentives.
Terms
of the Trust Plans
Pursuant
to our collaboration agreements, our trust company partners establish long-term trust plans which issue multiple trust products, ranging
from one to three years. Investors in these trust plans can subscribe to the trust units, which provides them with returns as provided
in the subscription agreements. Once borrowers' loan applications submitted through us are approved by trust company partners,
they enter into loan agreements with borrowers and trust plans disburse loan proceeds to borrowers directly. Borrowers are required to
repay the principal, interest and other fees, if applicable, directly to the account of the trust plan, and the trust company partner
as trustee of the trust plan distributes the funds to unit holders according to the trust agreements. We are designated as the service
provider for these trust plans, and in this role we assist our trust company partners acquire and screen borrowers and perform credit
assessment pursuant to collaboration agreements with our trust company partners. We are also responsible for providing loan facilitation
and post-loan management services for service fees charged directly to the trust plans.
Each
trust product issued under the long-term trust plan is funded with senior and subordinated units at a predetermined contractual structural
leverage ratio with the upper limit of no higher than 3:1. For details, please refer to "Item 4. Information on the Company—B.
Business Overview—Our Products—Trust Lending—Funding Partners."
As
part of the collaboration we have with our trust company partners, we are required to subscribe to all of the subordinated units of each
trust product issued under most long-term trust plans. Our cost of the subordinated units as measured by the investment amount was RMB3,045.2
million, RMB2,919.4 million and RMB2,627.4 million (US$380.9 million), as of December 31, 2020, 2021 and 2022, respectively. The trust
plans typically pay senior unit holders an amount that equals (i) an expected rate of investment return, which is usually paid quarterly,
plus (ii) the principal amount invested, which is the prompt repayment to trust companies after borrowers made payments for the underlying
loans. The expected rate of investment return is provided in the subscription agreements of the senior units, to which we are not a party.
Such rate of investment return is usually determined by our trust company partners based on market conditions and presented as an estimate.
If the expected rate of investment return is not met, our trust company partners are not under any contractual obligation to top up for
any shortfalls while we as the subordinated unit holders are required to manage the underlying NPLs to make up the shortfalls pursuant
to our credit strengthening services. For details, please refer to "Item 4. Information on the Company—B. Business Overview—Our
Products—Credit Strengthening Services." We as subordinated unit holders are paid each quarter after the quarterly payment
of investment returns to senior unit holders and upon maturity after the payment of principal amounts to senior unit holders. The trust
company partner is responsible for administering the trust plan and is paid a trust administrative fee.
We
are responsible for maintaining the asset quality and receive a performance-based service fee of up to 7% per annum of the size of the
trust plan for the services we provide, which decreases with the growth of percentage of NPLs in the amount of loans we facilitated.
We as the subordinated unit holder also retain any residual value in trust plans after deducting (i) repayment of principal amount invested
by senior unit holders, (ii) financing costs for the senior units, which primarily consist of the expected rate of return to the senior
unit holders, (iii) administrative fee payments to trust companies and certain fee payments to third-party service providers (mainly
depositary fees charged by the banks) and (iv) a performance-based service fee to us as service provider of up to 7% per annum of the
size of the trust plan. Our financing costs for the senior units, excluding the trust administrative fees, ranged from 6.0% to 11.5%
per annum of the issuance number of senior units in 2022.
We
received performance-based fee payments of RMB505.9 million, RMB440.1 million and RMB446.0 million (US$64.7 million), in 2020, 2021 and
2022, respectively. Our investment return from the subordinated units was RMB658.8 million, RMB578.7 million and RMB381.3 million (US$55.3
million) for the same periods.
50
Credit
Strengthening Services
We
have been working with FOTIC to implement the 2018 FOTIC Funding Arrangements and implementing our credit strengthening services since
2018. Under the 2018 FOTIC Funding Arrangements, when there is an NPL under a trust product, we, as the subordinated unit holder, are
required to adopt one of the following measures to ensure sufficient capital to repay the principal amount and the agreed financing costs
for the senior units, which primarily consist of expected rate of investment return to the senior unit holders:
●
purchase
                                            NPLs funded with senior units in an amount equal to the outstanding loan principal and interests;
●
purchase
                                            additional subordinated units in an amount sufficient to cover the outstanding loan principal
                                            and interests of the NPLs; or
●
replace
                                            such NPLs with non-delinquent loans or equal amount funded with our subordinated units.
Under
the 2018 FOTIC Service Fee Structure, our service fee charged to a trust plan is performance-based and up to 7% per annum of the size
of the trust plan decreases with the growth of the NPLs in the loans we facilitated.
Funding
Partners
As
of the date of this annual report, we have formed partnerships with well-established trust companies under our trust lending model, including
FOTIC, Zhonghai Trust, Zhongyuan Trust, Bairui Trust, Hunan Chasing Trust, Shaanxi International Trust, Bohai Trust, Everbright Trust,
Shaanxi International Trust and National Trust. Through these collaborative partnerships, we have access to flexible funding of RMB7.7
billion sourced from the senior unit holders as of December 31, 2022. 69.3%, 62.1% and 62.3%, of the loans we originated in 2020, 2021
and 2022, respectively, were funded through FOTIC, mainly due to our familiarity and long-standing relationship with FOTIC. We also work
with other leading trust partners to diversify our funding sources.
Funding
Sources
Our
trust company partners have developed various trust plans to provide home equity loans to borrowers we acquire and recommend. For the
years ended December 31, 2020, 2021 and 2022, home equity loans we facilitated under the trust lending model amounted to RMB8.8 billion,
RMB12.8 billion and RMB12.2 billion (US$1.8 billion), respectively. Each trust plan issues multiple trust products which are funded with
senior and subordinated units at a predetermined ratio. The trust company partners may also transfer the underlying loans of trust products
with repurchase arrangements to third parties at a specified annual rate of return when the original trust products become due. We subscribe
to subordinated units in the trust plans through our wholly owned subsidiaries. Our financing costs for the senior units, excluding the
trust administrative fees, ranged from 6.0% to 11.5% per annum of the issuance number of senior units in 2022.
Each
trust plan sets a predetermined contractual structural leverage ratio between senior units and subordinated units. We may be required
to subscribe to additional subordinated units upon request of the trustee to maintain the contractual structural leverage ratio. To date,
we have not been obligated to purchase additional subordinated units under this requirement. Other than our obligation to maintain the
contractual structural leverage ratio or provide credit strengthening services, which is discussed in more details under "Item
4. Information on the Company—B. Business Overview—Our Products—Credit Strengthening Services," we are not contractually
obligated to provide additional funding. There are no exceptions or reliefs available to the aforementioned additional funding obligation.
We
fund our subscription of the subordinated units with (i) cash on hand and (ii) proceeds received through repurchase agreements with third
parties with respect to subordinated units. Pursuant to such agreements, we transfer to third parties our rights to earnings in subordinated
units up to an agreed investment return for a transfer price and are obligated to repurchase such right at a fixed repurchase price.
Under such agreements, we continue to bear the risk of loss on the subordinated units and enjoy the upside on any return above the agreed
investment return. The terms of our repurchase agreements may vary, such as obligating us to pay an expected investment return each quarter
and the principal amount on or before the maturity date or requiring us to pay a lump sum amount within a specified period of time (generally
within 360 days). In 2020, 2021 and 2022, we transferred our rights to earnings in subordinated units to a private equity fund and to
certain third parties.
We
utilize multiple funding sources to support our business, some of which may be subject to challenges by regulatory authorities from time
to time under the evolving legal environment. For details, please refer to "Item 3. Key Information—D. Risk Factors—Risks
Related to Our Business—Some of our funding sources are highly regulated and are subject to the changing regulatory environment.
If any of the funding sources is deemed to violate the PRC laws and regulations, we may need to secure new funding, failure of which
may result in a material and adverse impact on our business, financial condition, results of operations and prospects."
51
Matching
of Terms of Funding Sources and Loans
We
forecast our cash flows each month to determine our use and need of cash for the next month and take into account the amount of loans
becoming due, amount of trust products becoming due and target size of loan products to be facilitated. When our monthly cash flow forecasts
indicate a need for additional funding to ensure the matching of terms of funding sources and loans, we coordinate with our trust company
partners to acquire additional funding through the transfer of loans with repurchase arrangements or through other permitted means, such
as bridge loans. Under our trust lending model, once a trust product matures, the trustee strives to repay the expected rate of investment
return and principal to the senior unit holders. Under our previous credit strengthening services, we were required to make up for any
shortfalls if the proceeds from loans were less than the principal amount invested by the senior unit holders and the agreed financing
costs for the senior units, which primarily consist of the expected rate of investment return to the senior unit holders. We ceased to
provide such credit strengthening services since March 2018. The trust products set up under long-term trust plans usually have a term
of one to three years. The loans we facilitate have tenors typically ranging from one to three years. Historically, majority of the loans
we facilitated were repaid within the first two years.
Our
trust company partners have also implemented the pass-through repayment method in certain of the trust plans to help avoid the duration
mismatch. Under the pass-through repayment method, loan repayment proceeds are usually distributed to the senior unit holders on a monthly
basis to repay both the financing costs for the senior units and the principal amount invested by the senior unit holders after deducting
relevant fees. Under the pass-through repayment method, the principal amount invested in the trust products is repaid as the underlying
loans are repaid. As a result, terms of the underlying trust funding matched tenor of all loans we facilitated in 2020, 2021 and 2022.
Collaboration
Model
We
have switched to a collaboration business model to optimize the trust lending model since December 2018 to broaden our prospective borrower
bases. Under the collaboration model, we generally require sales partners to contribute from a range of 10% to 25% of the loan principal
they introduced (such contribution, the "CRMP"). The percentage of loan principal as the CRMP charged to sales partners is
mainly determined based on the sales partner's business scale, risk control capabilities and liquidity of funds investigated by
us through market research and multiple negotiations with the local loan practitioners' association in various cities in China,
including four Tier 1 cities, key cities in the Pearl River Delta and the Yangtze River Delta. As of the date of this annual report,
we have 1,978 contracted sales partners in total, among which around 1,284 are effective sales partners. Under such collaboration model,
we will pay incentive fees, or collaboration cost, to each sales partner upon a pre-agreed schedule and conditions, which will be re-distributed
to the sales partners. The collaboration cost we pay to sales partners is an agreed percentage of the loan principal amount, calculated
by subtracting the project cost from interest and fees income received from borrowers. For each loan, the project cost is agreed between
us and sales partners. The project cost is typically between 10.0%-15.8% of the loan principal, and the percentage varies based on different
collaboration model types and the terms of the loan. The project cost in the loan agreement will not change once determined. The collaboration
cost is settled monthly as agreed in the collaboration agreement. We only pay the incentive fee to the sales partner according to the
pre-agreed schedule when the borrower repays the loan on time, in which case the sales partner is not obligated to return such incentive
fee, and the collaboration costs are not subject to reimbursement. The following chart illustrates a typical arrangement among sales
partners, borrowers, trust plans, trust plan investors and us.
52
We
provide a convenient and user-friendly transaction process, which is implemented through our standardized home equity loan application
procedures across our local offices. Our standardized transaction process under trust lending model is illustrated as below.
Step
1: Sales partners recommend borrowers for loan application
The
transaction process begins with the submission of a loan application by a prospective borrower introduced by a sales partner either online
or at one of our local offices. The application asks for information such as the borrower's identity card information, contact,
business and prospective collateral. The applicant typically also consents to access to his or her credit report generated by third parties
while submitting the application.
Step
2: Risk assessment
After
an application is submitted, our proprietary risk management system collects credit and valuation data from a number of internal and
external sources. We and our sales partners then proceed with our risk assessment involving both online and offline processes focusing
on both the creditworthiness of borrowers and quality of collateral. For details, please refer to "Item 4. Information of the Company—B.
Business Overview—Risk Management—Dual—factor risk assessment with integrated online and offline processes."
Step
3: Credit decision
Once
we have performed rigorous risk assessments on both applicant and collateral, we recommend qualified applicants with suggested loan principal
amount to our trust company partners who proactively conduct their own independent credit assessment and make credit decisions on the
loan applications we recommend. Specifically, our trust company partners are independently responsible for, reviewing loan applications
and verifying applicants' personal, business and collateral information collected by us through various procedures. Our trust company
partners are responsible for approving the loan application.
53
Step
4: Credit extension
Our
trust company partners will make the credit decision based on its own credit assessment. We will notify the applicants once we receive
approvals from our trust company partners. We then assist the borrowers in signing loan agreements with the trust companies.
Step
5: Collateral pledge and CRMP collection
As
part of our services, we help the trust companies set up security interests on the collateral by assisting with relevant documentation
and registering security interests with local real property bureau. Once the process of collateral pledge is completed, sales partners
will need to submit CRMP for underlying loans.
Step
6: Loan disbursement
Our
trust company partners sign loan agreements and confirm receipt of relevant title documents and perfected security interests before disbursement
of loan proceeds to the borrowers' bank accounts. Funding occurs promptly after the documentary conditions precedent to the settlement
are fulfilled.
Step
7: Post-loan management process
We
are also designated as the service provider and provide post-loan management services to our trust company partners, including assisting
them in monitoring repayment activities and collateral status and performing debt collection in an event of default on behalf of the
trust companies. For details, please refer to "Item 4. Information of the Company—B. Business Overview—Risk Management—Effective
post-loan management procedures." Once the loans are fully paid off, we assist the trust company partners release the collateral.
Sales
Partners
In
the event of loans issued to the borrowers acquired under such collaboration model are in default, the respective sales partners who
introduced such borrowers will share the credit risks with us by choosing from the following options, including (i)(1) full repayment
to us for the total unpaid principal and accrued and overdue interests under the respective loan agreement and acquiring respective credit
rights, (i)(2) repayment in installments to us for the total unpaid principal and accrued and overdue interests under the respective
loan agreement, and a payment of fund possession fee to us following a pre-determined schedule and acquiring respective credit rights
under each installments; (ii) repayment to us for the unpaid principal and accrued and overdue interests under the respective loan
agreement on behalf of the borrower, and if the borrower pays the payments under the loan agreement, the repayment by the sales partner
on behalf of the borrower will be refunded to the sales partner; or (iii) relinquishing the respective CRMPs for such loan. Upon
relinquishing its CRMPs, the sales partner is deemed to be released from its repayment obligations under the collaboration agreement.
When
a loan defaults, we will inform the sales partner the overdue status of the loan through the mobile app and require the sales partners
to choose among the above-mentioned options to perform its repayment obligations within an agreed time table. When the sales partner
selects option (i)(1), we receive the payment for purchasing the outstanding defaulted loan including all outstanding principal and the
accrued and overdue interests, and we will refund the outstanding CRMPs to the sales partner. When the sales partner selects option (i)(2),
it repurchases the delinquent loan by installments with the purpose to repurchase the entire outstanding principal and the accrued and
overdue interests in the future. CRMPs will be refunded after entire amount of the overdue loan principal and interests are settled.
When the sales partner selects option (ii), it repays the overdue loan principal and interests for the borrower according to the borrower's
repayment schedule. If borrower repays in the subsequent period, we need to return the payment from borrower to the sales partner according
to the collaboration agreement. If the sales partner chooses to fulfill the repayment obligation according to option (i)(1), (i)(2) or
(ii) above, it still maintains the rights to claim the collaboration cost (incentive fees) for the current period.
54
When
the sales partner refuses to fulfill its repayment obligation according to option (i)(1), (i)(2) or (ii) above, and selects option (iii),
CRMPs related to the defaulted loan (or all CRMPs related to the specific sales partner if the CRMPs it provides can be shared in all
loans introduced under the collaboration agreement as described below) are surrendered to us. Upon the confiscation of CRMPs, the sales
partner is deemed to be released from its repayment obligations under the collaboration agreement, and the sales partner can no longer
claim the outstanding collaboration cost (incentive fees) of the referred loan.
As
described above, the percentage of loan principal as the CRMP charged to sales partners is mainly determined based on the sales partner's
business scale, risk control capabilities and liquidity of funds, as elaborated below.
Sales
partners who pay 10% of the loan principal as the CRMP are mainly loan service providers with strong risk control and management capabilities
in Tier 1 and Tier 2 cities. The sales partners are required to pay a minimum CRMP upfront and the CRMP put up by these sales partners
can be shared in all loans introduced, meaning that the CRMP can be used to offset all defaulting loans introduced by the sales partner.
In third- and lower-tier cities, the percentage of loan principal as the CRMP charged to this type of sales partners will be raised to
15%.
Sales
partners who pay 20% of the loan principal as the CRMP are mainly individual and smaller-scale loan service providers in Tier 1 and Tier
2 cities. Each CRMP put up by these sales partners can only be used to offset a specific loan in default. In third- and lower-tier cities,
the percentage of loan principal as the CRMP charged to this type of sales partners will be raised to 25%.
Sales
partners enter into strategic cooperation directly with us and contribute the CRMP directly to a designated account, which is fully refundable
upon repayment of the loan that the CRMP is associated with. If at any time the balance of CRMP provided by sales partners is lower than
the agreed percentage of the principal amount of the loans it introduced, the sales partner is required to make up the balance reach
the agreed CRMP percentage.
As
of December 31, 2022, the percentage of options (i)(1), (i)(2), (ii) and (iii) selected by the sales partners on defaulting loans accounted
for 8.3%, 73.9%, 3.7% and 14.1% respectively. As of December 31, 2021, the percentage of options (i)(1), (i)(2), (ii) and (iii) selected
by the sales partners on defaulting loans accounted for 19.0%, 59.8%, 15.2% and 6.0% respectively. The percentage of the option selected
is calculated based on the total loans principal amount (excluding any accrued interests) under each option selected by the sales partners
divided by the total loans principal amount (excluding any accrued interests) under all options selected by the sales partners. The percentage
of loans on which sales partner refused to fulfill its repayment obligation accounted for only 1.2% and 1.6% of the outstanding loan
principal including loans held for sale as of December 31, 2021 and 2022 respectively.
We
believe such collaboration model will decrease our risk exposure. Since in the event that loans issued under the collaboration model
are in default, the respective sales partners will share the credit risks with us by choosing from the above-mentioned options. Besides,
the CRMPs from sales partners, by their nature, will also mitigate our exposure to credit losses.
Commercial
Bank Partnership
In
order to diversify our financing channels to better serve the demands of MSE owners with credible funding sources, we started to collaborate
with commercial banks in 2021, under which our commercial bank partners are responsible for reviewing and approving the loan while we
charge a service fee for loan facilitation services including introducing borrowers, initial credit assessment, facilitating loans from
the banks to borrowers, and providing technical assistance, and assist commercial banks with post-loan managements. Under this commercial
bank partnership model, we work with a guarantor company and provide matching services to our commercial bank partners for small and
micro enterprises borrowers who seek business loans in exchange for real estate properties as collateral. The borrowers are obliged to
mortgage their real estate properties to the commercial bank partner as collateral, while the guarantor is obliged to provide the guarantee
deposit and assist us with preliminary review of the borrower, other pre-loan inspections and forward transfer services of past due loans
as credit strengthing. Before making any decision, each of our commercial bank partner, the guarantor and ourselves will conduct a risk
assessment of the borrower and the commercial bank partner holds the ultimate power to approve or reject a borrower. Once the loan is
successfully granted by the commercial bank, we will receive a service fee and the guarantor company will receive a guarantee fee based
on a pre-determined schedule. We provide guarantees against the potential defaults and such contractual guarantee arrangement is underwritten
by the guarantor company to which we provide back-to-back guarantee at request. See "Item 3. Key Information—D. Risk Factors—Risks
Related to Our Business—If we are unable to achieve low delinquency ratio for loans originated by us, our business and results
of operations may be materially and adversely affected." and "Item 3. Key Information—D. Risk Factors—Risks Related
to Our Business—If our or our trust company partners' or our commercial bank partners' risk management system fails
to perform effectively, such failure may materially and adversely impact our operating results."
55
The
loan origination volume in 2022 under the commercial bank partnership model was RMB2,533.3 million and the outstanding loan principal
at the end of 2022 was RMB2,469.6 million. The Company offers loan facilitation services to the borrowers who have credit needs and the
commercial banks who originate loans directly, with the Company continuing to provide post-origination services to the borrowers over
the term of the loan agreement. As the Company is not the legal lender or borrower in the loan origination and repayment process, we
do not record loans principal, interest and financing service fee receivables arising from these loans nor interest-bearing borrowings
to the third-party commercial banks.
Our
standardized transaction process under the commercial bank partnership model is illustrated below.
Step
1: Borrower assessment
After
obtaining the list of qualified borrowers, we first perform due diligence on such borrowers and then share those customers' information
with the guarantor company we work with for its own risk assessment.
Step
2: Loan application referral
After
passing the guarantor's risk assessment, the borrower will be introduced to our commercial bank partner. Such commercial bank partner
will perform its own risk assessment and the borrower may be rejected even if the borrower passed the previous risk assessment by the
guarantor.
Step
3: Credit decision
The
commercial bank will inform the guarantor and us whether the loan recommended is approved or rejected for further actions and services.
Step
4: Guarantee Agreement
If
the commercial bank partner decides to grant a loan, it will inform the guarantor to issue a guarantee agreement indicating that the
guarantor is obliged to provide post-origination services and take legal responsibilities of any accidents that may happen relating to
the borrower, including default risks. Additionally, for security purposes, the guarantor is obliged to provide a guarantee deposit as
illustrated in Step 7 below.
Step
5: Pledging collaterals
Before
releasing the loan to the borrower, the commercial bank partner entrusts the guarantor to assist the borrower completing the process
of mortgaging their real estate properties, notarizing the loan contracts and obtaining encumbrance certificates. The guarantor is then
obliged to send these documents directly back to the commercial bank partner.
Step
6: Loan agreement
After
receiving the documents mentioned in Step 5, the commercial bank partner will proceed to the contract-signing process with the borrower.
Step
7: Guarantee deposit
After
receiving all the required legal documents and signing the loan agreement, the commercial bank partner releases the loan to the borrower.
For security purposes, the guarantor is obliged to pay a fixed percentage of total remaining loan balance as guarantee deposit to the
commercial bank partner. We provide back-to-back guarantee to the guarantor at request.
Step
8: Service fee
We
will receive facilitation service fee for our loan facilitation services. Under different collaboration arrangements, the borrower could
pay such service fee directly to us on the due date of each installment or submit both the service fee and installment to the commercial
bank and the commercial bank will disburse such service fee to us.
Step
9: Repayment of loan principal and interest
The
borrower repays all principal and interest directly to the commercial bank partner. After the borrower settles the principal and interest
of the loan in advance or at maturity, the commercial bank partner will issue a settlement report, and the borrower can apply for collateral
release with the assistance from the guarantor. The guarantor can confirm this information with the commercial bank partner and the commercial
bank partner will issue the required documents to release the collateral. These legal documents will be delivered to us within 3 business
days from the date when the borrower applies to release the collateral, and the guarantor and we are responsible for the releasing process.
56
Small
Loan Direct Lending
Historically,
we supplemented our trust lending model with direct lending by our small loan subsidiaries in Beijing, Shenzhen and Chongqing. Our subsidiaries
typically entered into loan agreements that are secured by real property and had similar terms to home equity loans we facilitate under
the trust lending model. We entered into loan agreements with borrowers directly. We financed our direct lending business with our own
funds or funds we received from third parties by transferring our rights in the loans together with a repurchase arrangement.
Small
loan direct lending business in China requires a license granted by local regulatory authorities and is subject to leverage constraints.
Our three small loan subsidiaries in Beijing, Shenzhen and Chongqing have relevant licenses to conduct direct lending business since
2012, 2012 and 2011, respectively. Subject to various regulations, some of our direct lending business is limited to certain regions
for which we have a license to engage in such business. Due to regulatory financing/net capital ratio constraints and for liquidity reasons,
we expect that direct lending will remain a fairly limited and immaterial part of our business in the near future. For the years ended
December 31, 2020, 2021 and 2022, our loan origination volume through direct lending was RMB22 million, RMB17 million and RMB15 million,
respectively. The balances of the borrowings that were funded by third parties for the small loan direct lending business were RMB9.3
million, nil and nil, as of December 31, 2020, 2021 and 2022, respectively.
Our
Funding Model
We
have explored various funding sources and have focused on collaboration with our trust company partners starting in 2014. To a lesser
extent, we historically utilized a direct lending model through our small loan subsidiaries. In 2021, we launched a new funding model
in cooperation with commercial banks to expand our financing channels. In 2020, 2021 and 2022, 100.0% 99.8% and 82.7% of the total home
equity loan origination volume was originated under the trust lending model , respectively. In 2022, loan origination volume originated
under the commercial bank partnership accounted for 17.2% of our total loan origination volume.
The
following table illustrates the breakdown of the home equity loan origination volume by funding sources in the periods indicated.
For the Year Ended December 31,
2020
2021
2022
Amount
(RMB in millions)
%
of total
Amount
(RMB in millions)
%
of total
Amount
(RMB in millions)
%
of total
Loan origination volume by funding model
Trust lending
8,846
100.0
%
12,816
99.5
%
12,163
82.7
%
Bank lending
—
—
35
0.3
%
2,533
17.2
%
Direct lending
—
0.0
%
22
0.2
%
15
0.1
%
Total
8,846
100.0
%
12,873
100.0
%
14,712
100.0
%
57
The
following table illustrates our funding capital from different sources as of December 31, 2020, 2021 and 2022, respectively.
As of December 31, 2022
2020
2021
2022
Amount
(RMB
in millions)
%
of total
Amount
(RMB
in millions)
%
of total
Amount
(RMB
in millions)
%
of total
Funding capital by sources
Trust lending
Senior tranche
5,580
63.5
%
7,985
73.0
%
7,667
59.8
%
Subordinated tranche
Own funds
2,645
30.1
%
2,874
26.3
%
2,515
19.5
%
Transferred to third parties
400
4.5
%
45
0.4
%
112
1.0
%
Bank lending
Commercial banks
-
-
35
0.3
%
2,533
19.7
%
Direct lending
Own funds
50
0.6
%
0
0.0
%
0
0.0
%
Transferred to third parties
117
1.3
%
0
0.0
%
0
0.0
%
Total
8,792
100.0
%
10,939
100.0
%
12,827
100.0
%
Business
Infrastructure
Since
our inception, we have strategically developed a network of branches and sub-branches in over 50 cities in China. Specifically, we have
carefully selected the geographic location of our offices with 22 branches and sub-branches in the Pearl River Delta region, 18 branches
and subbranches in the Yangtze River Delta region, and 47 branches and sub-branches in other areas. We prioritize expanding into cities
that have stable housing market synergetic to our established network.
In
practice, regulatory regime on property-backed loans and mortgages may differ from region to region. Experiences of interacting with
regulatory authorities in different regions need to be acquired through long-time business practice. Under the current regulatory framework,
it is crucial for home equity loan service providers to have local knowledge and resources. Benefiting from our extensive network, we
have developed deep local knowledge and resources throughout the loan service process from loan origination to security interest perfection,
and to debt collection. Our local team works closely with local authorities and has gained recognition for our business operations and
established good working relationships with them.
We
have also developed a cooperative relationship with our experienced sales partners who work with local real estate brokers and banks
who cannot accommodate second lien collateral to acquire high-quality borrowers.
Risk
Management
As
a core component of our sustainable business model, we have developed a rigorous and robust risk management system. We focus on assessing
both credit risks of borrowers and quality of collateral with our integrated online and offline processes. We refer borrowers who match
the target profiles of trust companies and commercial banks, and share our risk assessment results before they perform their own independent
credit assessment and make credit decisions. As of December 31, 2022, we had 532 employees in our risk management team. We impose strict
guidelines on loan approvals and separation of loan approval and risk management. The loans we originated are divided into different
categories by amount and are reviewed by various levels of seniority.
Our
risk management is based on our institutional knowledge and is well tested and evidenced by historical performance and based on our product
design, dual-factor risk assessment and effective post-loan management procedures.
Credit
risk mitigation embedded in product design
The
home equity loans we facilitate primarily take real properties located in Tier 1 and Tier 2 and other major cities as collateral. Our
loan portfolio spreads over 70 cities across China. We believe that such geographic diversification better protects us against deterioration
of local housing and economic conditions. To further limit credit risk, we devoted to control home equity loans up to 70% LTV ratio with
weighted average LTV ratio of 54.6%, 58.5% and 60.0%, for home equity loans originated in 2020, 2021 and 2022, respectively, to ensure
recovery in the event of borrower default. The LTV ratio varies for different types of real properties and is also adjusted pursuant
to a borrower's credit history and quality of the collateral and may be lowered in the event of a past default.
58
We
offer home equity loan products that allow borrowers to repay only the interests by installments and repay the full principal amount
when due.
In
addition, we also provide home equity loan products that require monthly payments comprising principal and interests repayments. This
strategic design allows us to timely monitor borrowers' creditworthiness and initiate collection process at an early stage. We
review a borrower's monthly cash flow to determine the tenor of the loan. Borrowers with stronger cash flow will have the option
of shorter tenors, which may require larger payment on each installment. Borrowers with weaker cash flow are usually encouraged to take
loans of longer tenor, so as to lower the amount of each installment. We may also require deposit payment for borrowers with past default.
In addition, the maximum tenor of the loan is determined by the term of the relevant trust plan.
Dual-factor
risk assessment with integrated online and offline process
We
perform rigorous risk assessment on prospective borrowers and collateral in the following order:
Step
1: Collecting data on loan applicants
The
first step of our borrower risk assessment process is to collect data on applicants upon approval by the borrower. This is typically
done through information directly provided by applicants in our standardized application package, and information we aggregate from a
number of sources, including various databases and the Credit Reference Center of the People's Bank of China.
Step
2: Verification of information collected on loan applicants
The
second step of our borrower risk assessment process is to verify the information collected in Step 1. This is done through our offline
identity authentication procedures conducted by local office staff together with corresponding sales partners, which typically consist
of site visits to applicants' residences and business premises.
Step
3: Valuation of proposed collateral
We
also perform risk assessment on the proposed real property collateral. The proposed real property collateral is appraised by independent
leading online property appraisers and refined by us on specifics such as liquidity value, location, neighborhood, type, facing direction,
floor plan and size.
Step
4: Verification of collateral condition
We
also take measures to verify the condition of proposed collateral. Local office staff together with sales partners visit the property
that a loan applicant intends to pledge. As part of the collateral assessment, we cross-check the preliminary valuation provided by our
appraisal company partners with local real estate agents and bank mortgage documents.
After
obtaining the authorization from the loan applicant, we check its credit report and determine its outstanding first lien loan amount
and the identity of lender to the first lien loan.
If
our verification procedure on either a loan applicant or collateral reveals significant discrepancies from the information provided by
such applicant, we will not recommend such applicant to our trust company partners.
We
determine the loan amount permitted to grant the loan applicant based on the applicant's credit status and collateral value. If
both our trust partner and the loan applicant agree to the loan amount we advised, we will facilitate the signing of loan agreements
and pledge agreement between them.
Step
5: Perfection of collateral
The
last step of our collateral risk assessment process is to register the pledge over real properties under the names of trust company partners
with the local real property bureau.
Immediately
before the pledge of collateral is processed, we conduct a final lien search on the property to confirm if its lien status remains the
same as previously reviewed. In the case that the lien status has not changed, we assist the borrower to pledge the collateral under
the trust partner's name. A representative from our company submits both the loan agreement and the pledge agreement to the local
Housing Administration Bureau for the collateral pledge, specifying that such collateral is exclusively pledged for protection of such
loan. The Housing Administration Bureau will issue a warrant that clearly states the lender and the amount of the mortgage.
After
successfully receiving the "deposit receipt" issued by the Housing Administration Bureau, we transfer the receipt to our
trust partner and inform the trust partner to release the loan to the borrower. Borrowers are obligated to return loan proceeds if the
pledge is not successfully registered under extreme circumstances.
59
Judicial
foreclosure of the collateral
We
usually suggest our trust partners pursue foreclosure for loans more than 90 days past due. In 2020, 2021 and 2022, 7.4%, 3.3% and 0.4%,
of the delinquent loans the Company facilitated entered into foreclosure process, respectively. The amount where the foreclosure was
ultimately concluded was RMB114.5 million, RMB108.2 million and RMB12.1 million (US$1.8 million), in 2020, 2021 and 2022, respectively,
among which RMB6.1 million, RMB4.1 million and nil, had additional losses beyond what was already recorded in the allowance for credit
losses in 2020, 2021 and 2022, respectively. The amount of such additional losses was RMB1.9 million, RMB1.5 million and nil, in 2020,
2021 and 2022, respectively.
In
2022, the total loan amount disposed through judicial foreclosures was RMB12.1 million, including RMB9.3million of first lien loans and
RMB2.8 million of second lien loans. We recovered a total loan amount of RMB15.0 million through judicial foreclosures in 2022, including
first lien amount of RMB11.9 million and second lien amount of RMB3.1 million. The corresponding allowances in 2022 by first lien and
second lien were RMB3.1 million and RMB1.2 million, respectively.
According
to the loan agreement, when a loan defaults, our trust partner are entitled to the full recovery of the delinquent principal, delinquent
interest and penalties if any. If the proceeds from judicial disposal of the collateral are sufficient to cover the aforementioned full
recovery amounts, we will obtain the amount of which may exceed the principal of the delinquent loan.
When
calculating the impairment loss, we consider various expenses that may be incurred during the debt collection process, such as litigation
fees, attorney fees, and other costs directly related to the collection process. The collection process to settle a past due loan generally
takes one and a half to two years.
In
2022, the amount of loans where the Company abandoned the foreclosure process was RMB12.2 million. We abandon foreclosure when the defaulting
borrower has regenerated ability to repay its debt by financing efforts or selling the collateral on its own and seeks to settle with
the Company.
Effective
post-loan management procedures
Under
the agreements with our trust company partners, we are responsible for assisting our trust company partners in monitoring collection
of overdue principal and interest, and are authorized by our trust company partners to oversee the collection process.
Monitoring
repayments
. We help our trust company partners closely monitor loan repayments, and help our sales partners closely monitor the realtime
repayment status by posting them on the mobile app. Our system generates automatic payment reminders through SMSs one week before the
due date. Collaborating with multiple sources of credit reference agencies, we help our trust company partners closely monitor if borrowers
are involved in any new litigations.
Monitoring
collateral status
. We help our trust company partners selectively conduct searches against real property collateral depending on
principal amount outstanding and nature and location of collateral. Such searches are supplemented with online revaluation of collateral
through our appraisal company partners and the search results will be shared real-time with sales partners through the mobile app.
Debt
collection
. In an event of default, we help our trust company partners utilize different collection measures with our integrated
online and offline process, and with the assistance of our sales partners.
●
Within
                                            three to five business days past due, we and our sales partners will contact defaulting borrowers
                                            through SMSs or by phone to understand reasons for the nonpayment and inform them of past-due
                                            penalties.
●
After
                                            a loan is past due for over six days, we and our sales partners will arrange a site visit
                                            to further assess the situation. If agreeable with the defaulting borrower, we will arrange
                                            for quick disposal plans, or disposal of collateral voluntarily by the borrower and repay
                                            the defaulted loans with the proceeds. Meanwhile, we will conduct an online judgment search
                                            against the defaulting borrowers and a lien search against the collateral. Once payment is
                                            20 days past due, we will assist the trust partner to start preparing documents and materials
                                            for arbitration. Once payment is 30 days past due, we will assist the trust partner to initiate
                                            judicial proceedings against the defaulting borrower and inform the relevant sales partners
                                            of the situation. Once payment is 30 to 90 days past due, we and our sales partners will
                                            continue the collecting efforts, including initiating private negotiations with the borrower
                                            and requesting the borrower to repay the loan through self-raising of money or voluntary
                                            sale of the collateral, transferring the defaulted loans to the third parties, and move forward
                                            with the arbitration process.
60
●
Typically,
                                            when payment is over 60 days past due, we will keep the sales partners informed and the sales
                                            partners shall choose from the following options, including (i)(1) full repayment to us for
                                            the total unpaid principal and accrued and overdue interests under the respective loan agreement
                                            on behalf of the borrower and acquiring respective credit rights, (i)(2) repayment in installments
                                            to us for the total unpaid principal and accrued and overdue interests under the respective
                                            loan agreement on behalf of the borrower and acquiring respective credit rights under each
                                            installments (this option was introduced since the first quarter in 2020 recognizing the
                                            fact that the sales partners' cash flow may be affected by the COVID-19 pandemic and
                                            may need to make repayment to us in installments); (ii) repayment to us for the unpaid principal
                                            and accrued and overdue interests under the respective loan agreement on behalf of the borrower,
                                            and if the borrower pays the payments under the loan agreement, the repayment by the sales
                                            partner on behalf of the borrower will be refunded to the sales partner; or (iii) relinquishing
                                            the respective CRMPs for such loan. If the sales partners do not choose to fully repay us
                                            as mentioned in (i) and (ii) above, we will confiscate the CRMP corresponding to the loan
                                            in default. Meanwhile, we will continue the collecting efforts and move forward with the
                                            judicial process or quick disposal plans. As of December 31, 2022, for all of the loans with
                                            payment over 60 days past due, our sales partners have either fulfilled or are in the process
                                            of fulfilling their obligations under our agreements with them.
We
have implemented detailed debt collection guidance and code of conduct for our local staff to ensure our debt collection methods are
ethical and in compliance with laws and regulations, and we share such materials with our sales partners for them to adjust their debt
collection procedures accordingly. We recovered loan principal, interest and penalties which equal to 102.4%, 83.3% and 105.2%, of the
actual outstanding loan principal of these delinquent loans in 2020, 2021 and 2022, respectively.
Transferring
default loans to third parties is one of our loan recovery methods. If sales partners choose to fulfill their obligations to provide
guarantee for the loans they introduced by repurchasing the delinquent loans according to the collaboration agreements signed between
us and the sales partners, we would assist the trust partner to fully transfer the outstanding loan and related rights to the collateral
to the sales partners at current market fair value. Under the circumstances of selling delinquent loans to local investment asset management
companies, experienced law firms or other entities, our post-loan department conducts a final check to determine the probability of recovering
those loans by other collecting methods in shorter time before making the final decision on whether to sell those loans to a third party.
Collateral
The
borrowers pledge their real properties to our trust company partners in the case of trust lending and to our small loan subsidiaries
in case of direct lending. We have developed detailed guidelines for real property collateral. The LTV ratios are also adjusted based
on the type of property (residential or commercial), floor plan, age and credit history of property owners. As of December 31, 2022,
the updated LTV as of the most recent balance sheet date was 59.4%, with 49.4% for the first lien loans and 61.9% for the second lien
loans, which is calculated by the percentage of outstanding loan principal of the re-appraised collateral value as of December 31, 2022.
In the circumstances where we are facilitating the second lien loans, we have to obtain a prior authorization from the borrower before
it checks the borrower's credit status for the updated first lien balance, which is not practical in daily operation. Therefore,
we use outstanding first lien balance at origination in the above calculation.
The
following table illustrates the weighted average LTV ratio of on-balance sheet home equity loans (excluding loans held for sale) under
trust lending model we originated for the periods or as of the dates indicated, and a breakdown by collateral type
For the Year Ended December 31,
2020
2021
2022
Weighted average LTV ratio by collateral type
First lien
Apartment
54.7
%
55.6
%
56.6
%
House
44.4
%
44.1
%
41.0
%
Commercial property
40.7
%
36.6
%
21.9
%
Total
53.8
%
54.9
%
55.5
%
Second lien
Apartment
59.8
%
61.4
%
63.6
%
House
45.9
%
48.9
%
48.3
%
Commercial property
50.9
%
49.4
%
28.5
%
Total
58.8
%
60.8
%
62.9
%
Total
54.6
%
58.5
%
60.0
%
61
On-
and off-Balance Sheet Loans
For
loans disbursed indirectly through trusts plans per the request of our funding partners, we have determined that we are the primary beneficiary
of the trusts plans. We therefore consolidate the trusts plans and record the loans funded through these trusts plans on our balance
sheet. On-balance-sheet loans are recorded at amortized costs. Revenues from these loans are accounted as interest income, and we recorded
allowance for loan loss.
Off-balance
sheet loans refer to loans funded and disbursed directly by commercial banks and not consolidated on our balance sheet. For the off-balance-sheet
loans, we provide loan facilitation and post-facilitation services and also guarantee the repayment through third-party guarantee company.
As a result, we incur guarantee liabilities and take credit risks. Services provided in connection with this portion of loans are categorized
under commercial bank partnership model.
As of December 31,
2020
2021
2022
Outstanding loan principal
(RMB
in millions)
%
of total
Outstanding loan principal
(RMB
in millions)
%
of total
Outstanding loan principal
(RMB
in millions)
%
of total
On-balance sheet loan
9,042
100
%
9,408
99.7
%
8,991
78.4
%
Trust lending model
8,992
99.5
%
9,392
99.5
%
8,976
78.3
Direct lending
50
0.5
%
16
0.2
%
15
0.1
%
Off-balance sheet loan
-
-
-
-
2,470
21.6
%
Commercial bank partnership model
-
-
31
0.3
%
2,470
21.6
%
Total
9,042
100.0
%
9,439
100.0
%
11,461
100.0
%
The
following table illustrates distribution of our outstanding on-balance sheet loan principal (excluding loans held for sale) by city tier
as of December 31, 2020, 2021 and 2022, respectively.
As of December 31,
2020
2021
2022
Amount
(RMB
in millions)
%
of total
Amount
(RMB
in millions)
%
of total
Amount
(RMB
in millions)
%
of total
Outstanding loan principal (excluding loans held for sale) by collateral
    city tier
Tier 1
2,202
24.4
%
2,851
30.3
%
3,110
34.6
%
Tier 2
6,080
67.2
%
5,992
63.7
%
5,497
61.1
%
Others
760
8.4
%
565
6.0
%
384
4.3
%
Total
9,042
100.0
%
9,408
100.0
%
8,991
100.0
%
62
The
process for updating collateral values during the period the loan is held includes the following: (i) regular review and reappraisal
of collateral value based on the data from multiple external online appraisal firms; (ii) if the difference between the reappraised value
and the value at origination exceeds 20%, we will determine whether such difference is due to regional market fluctuations and accept
such reappraised value if the difference is determined to result from regional market fluctuations, and (iii) if the value difference
is determined to be isolated from regional market fluctuations, we will check with recognized housing agent companies for the latest
market sales price for properties with similar conditions such as locations, floorplans and ages, and use the average value of such similar
properties as the ultimate reappraised value of the collateral.
The
following table illustrates the breakdown of our home equity loan origination volume under trust lending model originated by first lien
and second lien in the periods indicated.
For the Year Ended December 31,
2020
2021
2022
Amount
%
of total
Amount
%
of total
Amount
%
of total
(RMB in millions)
Loan origination volume by first/second lien
First lien
3,864
43.7
%
5,065
39.5
%
4,892
40.2
%
Second lien
4,982
56.3
%
7,773
60.5
%
7,287
59.8
%
Total
8,846
100.0
%
12,838
100.0
%
12,179
100.0
%
The
following table illustrates distribution of our outstanding on-balance sheet loan principal (excluding loans held for sale) generated
by first lien and second lien in the periods indicated.
As of December 31,
2020
2021
2022
Amount
%
of total
Amount
%
of total
Amount
%
of total
(RMB in millions)
Outstanding loan principal (excluding loans held for sale) by first/second lien
First lien
3,874
42.8
%
3,513
37.3
%
3,360
37.4
%
Second lien
5,168
57.2
%
5,895
62.7
%
5,631
62.6
%
Total
9,042
100.0
%
9,408
100.0
%
8,991
100.0
%
As of December 31, 2022
(RMB in thousands)
Loans principal (excluding loans held for sale)
The
traditional facilitation
model
The collaboration model
Total
First lien
Apartment
5,299
3,220,281
3,225,580
House
-
89,732
89,732
Commercial property
-
44,223
44,223
Total
5,299
3,354,236
3,359,535
Second lien
Apartment
47,334
5,387,583
5,434,918
House
-
164,852
164,852
Commercial property
-
32,146
32,146
Total
47,334
5,584,581
5,631,916
Total
52,633
8,938,817
8,991,451
63
As of December 31, 2021
(RMB in thousands)
Loans principal (excluding loans held for sale)
The
traditional facilitation
model
The
collaboration model
Total
First lien
Apartment
35,250
3,264,112
3,299,362
House
1,552
126,960
128,512
Commercial property
4,550
80,301
84,851
Total
41,352
3,471,373
3,512,725
Second lien
Apartment
34,236
5,569,525
5,603,761
House
4,038
239,387
243,425
Commercial property
1,084
47,348
48,432
Total
39,358
5,856,260
5,895,618
Total
80,710
9,327,633
9,408,343
As of December 31, 2020
(RMB in thousands)
Loans principal (excluding loans held for sale)
The
traditional
facilitation
model
The
collaboration
model
Total
First lien
Apartment
614,819
2,850,699
3,465,518
House
18,172
144,707
162,879
Commercial property
120,283
124,968
245,251
Total
753,274
3,120,374
3,873,648
Second lien
Apartment
872,112
3,964,981
4,837,093
House
56,476
174,230
230,706
Commercial property
33,462
66,601
100,063
Total
962,050
4,205,812
5,167,862
Total
1,715,324
7,326,186
9,041,510
Technology
Our
technology departments is composed of 39 employees as of December 31, 2022. We utilize our home equity loan information technology system
to support our standardized credit application process. Through our information technology system, we are able to connect with third-party
service providers' systems, including credit risk evaluation systems and leading property appraisers, to automatically collect
data generated from their systems. In addition, our local staff uploads information collected during the due diligence process on a timely
basis to supplement external credit data and ensure efficient approval process. Furthermore, we exchange loan application and approval
information through our information technology system with our trust company partners' systems. Our sales partners could acquire
borrowers, upload due diligence files, track risk assessment processes and check their incentives online using this system.
We
collect and store user personal information, including names, phone numbers, addresses, identification information and financial information
for the sole purpose of individual credit assessment. We retrieve such information with consent and have safeguards designed to protect
such information. We store our data in encrypted form, which offers an additional layer of protection. We also verify data interchange
with our funding partners using digital signatures, which enhances the security of such interchange. We also limit employees' access
to such information and monitor authorized access.
64
Sales
and Marketing
We
acquire borrowers primarily through our sales partners. In 2020, 2021 and 2022, over 99.5% of our borrowers were introduced to us by
our sales partners under the collaboration model. In 2022, 100.0% of borrowers introduced to commercial banks were acquired through local
channel partners including corporate and individual offline channels and telemarketing companies. For details, please refer to "Item
4. Information on the Company—B. Business Overview—Our Borrower—Borrower Acquisition."
Intellectual
Property
We
rely on a combination of patent, copyright, trademark and trade secret laws and restrictions on disclosure to protect our intellectual
property rights. We have registered 17 software copyrights in China, including our proprietary loan management software and financial
data analytics software. We have registered our domain name, cashchina.cn. As of December 31, 2022, we had 44 registered trademarks,
including our "CNFH" and company logo.
Despite
our efforts to protect our intellectual property rights, unauthorized parties may attempt to obtain and use our intellectual property.
Monitoring unauthorized use of our intellectual property is difficult and costly, and we cannot be certain that the steps we have taken
will prevent misappropriation of our intellectual property. From time to time, we may have to resort to litigation to enforce our intellectual
property rights, which could result in substantial costs and diversion of our resources. In addition, third parties may initiate litigation
against us alleging infringement of their proprietary rights or declaring their non-infringement of our intellectual property rights.
In the event of a successful claim of infringement and our failure or inability to develop non-infringing technology or license the infringed
or similar technology on a timely basis, our business could be harmed. Even if we are able to license the infringed or similar technology,
license fees could be substantial and may adversely affect our results of operations. See "Item 3. Key Information—D. Risk
Factors—Risks Related to Our Business—Any failure to protect our own intellectual property rights could impair our brand,
negatively impact our business or both" and "Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—We
may be sued by third parties for alleged infringement of their proprietary rights, which could harm our business."
Data
Policy
We
have adopted a strict internal data policy relating to confidential information of our borrowers and business partners, as well as our
own confidential information. This policy establishes day-to-day data protection and use requirements, data and information classification,
backup requirements, approval procedures and user control. This policy also specifies the manner in which data must be stored. We require
each of our employees to agree in writing to abide by the data policy and protect the confidentiality of our data.
Competition
As
a leader in China's home equity loan service industry, we face competition from other national or regional home equity loan providers
and home equity loan service providers, as well as from commercial banks and other traditional financial institutions. As our business
continues to grow, we also face significant competition for highly skilled personnel, including management, marketing team and risk management
personnel. The success of our growth strategy depends in part on our ability to retain existing personnel and recruit additional highly
skilled employees.
Insurance
We
provide social security insurance including pension insurance, unemployment insurance, work-related injury insurance and medical insurance
for our employees. We also purchased employer's liability insurance and additional commercial health insurance to increase insurance
coverage of our employees. We do not maintain property insurance to protect our equipment and other properties essential to our business
operation against risks and unexpected events. We do not maintain business interruption insurance or general third-party liability insurance,
nor do we maintain product liability insurance or key-man insurance. We consider our insurance coverage sufficient and in line with market
practice for our business operations in China.
65
Regulation
This
section sets forth a summary of the most significant rules and regulations affecting our business that we operate in China.
As
a home equity loan service provider, we facilitate loans by connecting borrowers with our trust company partners, and, to a lesser extent,
we also lend directly to borrowers through our small loan subsidiaries. We have established three small loan subsidiaries in Beijing,
Chongqing and Shenzhen that are permitted to operate small loan businesses.
Regulations
Relating to Foreign Investment
The
establishment, operation and management of companies in China is governed by the PRC Company Law, as amended in 2005, 2013, and 2018.
According to the PRC Company Law, companies established in the PRC are either limited liability companies or joint stock limited liability
companies. The establishment procedures, organizational form, organizational structure and rules of conduct of a wholly foreign-owned
enterprise are subject to PRC Foreign Investment Law and its Implementing Regulations, that came into effect on January 1, 2020, which
provide that foreign investors shall not invest in the fields or industries prohibited for foreign investment access listed in the negative
list, and shall comply with the conditions or requirements when investing in the restricted fields listed in the negative list, and foreign
investors investing in the fields and industries not listed in the negative list are treated equally with the domestic investors. The
organizational form, organizational structure, and rules of conduct of foreign-invested enterprises shall be governed by the PRC Company
Law, the PRC Partnership Enterprise Law and other applicable laws.
On
December 24, 2021, the Standing Committee of the 13th National People's Congress (the "Congress") issued the draft
Amendment to the PRC Company Law, and on December 30, 2022, the Congress issued the second draft Amendment to the PRC Company Law, which
expands the scope of capital contributions to include equity and creditor's rights. The draft improves the provisions of duties
of loyalty and diligence for directors, supervisors, and senior managers, and tighten their responsibilities to maintain the Company's
capital. The draft increases the reporting obligations of related party transactions and expands the scope of related parties to include
family relatives of directors, senior management and supervisors as well as units or individuals associated with them.
On
December 30, 2019, the MOFCOM and the State Administration for Market Regulation ("SAMR") jointly issued the Measures for
the Reporting of Foreign Investment Information ("Measures"), which came into effect on January 1, 2020, replacing the Interim
Measures for the Administration of the Establishment and Change of Foreign-Invested Enterprises. The Measures provides that in terms
of investing directly or indirectly in the PRC, foreign investors or foreign-invested enterprises shall submit investment information
to the competent commercial authority in accordance with the Measures. The competent commercial authority shall supervise and inspect
the fulfillment of information reporting obligations of foreign investors and foreign-invested enterprises. If investment information
is not filed in accordance with the Measures, foreign-invested enterprises may be required to make corrections or be subject to fines.
Special
Administrative Measures for Access of Foreign Investment (Negative List) (2021 Version)
The
Negative List uniformly lists special administrative measures on foreign investment access such as requirements on equity interest and
management. Foreign investors investing in the fields and industries not listed in the negative list are treated equally with the domestic
investors. The Negative List lists the transitional period for removing or relaxing access restrictions in certain fields and industries.
After the transitional period, the investment access restrictions will be cancelled or relaxed. Our business is currently not listed
in the Negative List (2021 Version). According to Measures for Security Review of Foreign Investment, which was promulgated by the NDRC
and the Ministry of Commerce in December 2020 and has been come into effect in January 2021, the Foreign Investment Security Review Mechanism,
or the Security Review mechanism, in charge of organization, coordination and guidance of foreign investment security review is thereunder
established. A working mechanism office shall be established under the NDRC and led by the NDRC and the Ministry of Commerce to undertake
routine work on the security review of foreign investment. According to the Security Review Mechanism, foreign investment activities
falling in the scope such as important cultural products and services, important information technologies and internet products and services,
important financial services, key technologies and other important fields that concern state security while obtaining the actual control
over the enterprises invested in, a foreign investor or a party concerned in the PRC shall take the initiative to make a declaration
to the working mechanism office prior to making the investment.
66
Regulations
Relating to Small Loan
Under
the Guiding Opinions of the CBRC and the PBOC on the Pilot Operation of Small Loan Companies which was promulgated by the CBRC and the
PBOC on May 4, 2008, or the Guiding Opinions on Small Loan Companies, a small loan company is a company that specializes in operating
a small loan business with investments from natural persons, legal entities or other social organizations, and which does not accept
public deposits. The establishment of a small loan company is subject to the approval of the competent government authority at the provincial
level. The major sources of funds for a small loan company are limited to capital paid by shareholders, donated capital and capital borrowed
from up to two financial institutions. Furthermore, the balance of the capital borrowed by a small loan company from financial institutions
must not exceed 50% of the net capital of such small loan company, and the interest rate and term of the borrowed capital are required
to be determined by us with the banking financial institutions upon consultation, and the interest rate on the borrowed capital must
be determined by using the Shanghai Interbank Offered Rate as the base rate. With respect to the grant of credit, small loan companies
are required to adhere to the principle of "small sum and decentralization." The outstanding balance of the loans granted
by a small loan company to one borrower cannot exceed 5% of the net capital of such company. The interest ceiling used by a small loan
company may be determined by such companies, but in no circumstance shall it exceed the restrictions prescribed by the judicatory authority,
and the interest floor is 0.9 times the base interest rate published by the PBOC. Small loan companies have the flexibility to determine
the specific interest rate within the range depending on market conditions. In addition, according to the Guiding Opinions on Small Loan
Companies, small loan companies are required to establish and improve their corporate governance structures, the loan management systems,
the financial accounting systems, the asset classification systems, the provision systems for accurate asset classification and their
information disclosure systems, and such companies are required to make adequate provision for impairment losses and are required to
accept public scrutiny supervision and are prohibited from carrying out illegal fund-raising in any form.
On
September 7, 2020, China Banking and Insurance Regulatory Commission issued the Circular of General Office of the China Banking and Insurance
Regulatory Commission on Strengthening the Supervision and Administration of Micro-loan Companies, namely the Circular on Microloan Companies.
Circular on Micro-loan Companies aims to promote the regulated and healthy development of micro-loan industry, and notifies the relevant
matters as follows: (1) regulating business operations and improving service capabilities, (2) improving business management and promoting
healthy development, (3) strengthening supervision and administration and rectifying the order of the industry, and (4) increasing support
and creating a good environment. Accordingly, micro-loan companies are required to adhere to the principle of small amounts and dispersion,
monitor the loan purposes, standardizing debt collection, etc. Furthermore, Circular on Micro-loan Companies endows the regulatory authorities
the power to increase penalties upon violations of relevant laws and regulations. If the relevant laws and regulations do not contain
penalty provisions or the micro-loan company in violation of laws and regulations does not reach the penalty standards, the regulatory
authorities may take such regulatory measures as conducting a regulatory interview, issuing a warning letter, ordering the Company to
make rectifications, circulating a notice of criticism, and recording the violations of laws and regulations into the information database
of illegal business behavior. Circular 141 outlines general requirements on the "cash loan" business conducted by network
small loan companies, banking financial institutions and online lending information intermediaries. Circular 141 requires network small
loan companies to cautiously manage their funding sources and shall not (1) engage in any illegal fundraising or absorbing public deposits,
(2) sell, transfer or substantively transfer its credit assets through internet platform or any kind of local financial exchange, and
(3) raise any funds through the Peer-to-Peer Lending Information Intermediaries.
Funds
raised by the transferring of credit assets and asset securitization shall be calculated in a consolidation manner within the balance
sheet, and the ratio of total amount of fundraising and net capital shall be executed temporarily according to the local ratio. The local
authorities shall not further relax the ratio of fundraising by the small loan companies.
Any
violation of Circular 141 may result in penalties, including but not limited to suspension of operation, orders to make rectification,
condemnation, revocation of license, order to cease business operation and criminal liabilities.
Our
small loan subsidiaries are not network small loan companies, and we are not subject to the restrictions under the aforesaid regulation.
But whether the relevant regulatory authorities will have a more limited explanation or make further restrictions on small loan businesses
remains uncertain at this stage.
67
Implementary
Measures of Small Loan Companies in Beijing
The
Implementary Measures of the Pilot Small Loan Companies in Beijing was issued by the People's Government of Beijing Municipality
on January 4, 2009. The Interim Measures of Supervisal Regulations on Pilot Small Loan Companies of Beijing was issued by the Finance
Bureau of Beijing Municipality on May 31, 2011. The key regulations of small loan companies in Beijing are as follows:
●
no
                                            single largest shareholder (including its affiliates) may hold shares that exceed 30% of
                                            total registered capital of the small loan company; any other single shareholder and its
                                            affiliates may hold shares that exceed 1% but no more than 20% of total registered capital
                                            of the small loan company; and the shareholders of the small loan company shall be natural
                                            persons, legal entities and other social organizations in China, among others. The largest
                                            shareholder shall be a local natural person, legal entity or other social organization on
                                            a county basis;
●
if
                                            a small loan company is a limited liability company, its registered capital must be at least
                                            RMB50 million; and if it is a company limited by shares, its registered capital must be at
                                            least RMB100 million. All registered capital shall be valid and legal, paid in cash and paid
                                            in full by the contributors or promoters at one time; and
●
the
                                            funds of a small loan company mainly come from the capital contributed and funds donated
                                            by shareholders as well as funds raised from no more than two banking financial institutions
                                            and other fund resources approved by the relevant authorities, and the balance of funds obtained
                                            by a small loan company from banking financial institutions may not exceed 50% of its net
                                            capital.
Interim
Administrative Measures of Small Loan Companies in Shenzhen
The
Interim Administrative Measures of the Pilot Small Loan Companies of Shenzhen was issued by the People's Government of Shenzhen
Municipality on September 3, 2011. The Notice on Further Reinforcement and Regulation on Interim Guidance on Pilot Entry and Approval
of the Small Loan Companies was issued by the Finance Development Service Office of Shenzhen Municipality on April 3, 2013. The Notice
on the Pilot Business of Financing Innovation for Small Loan Companies in Shenzhen was issued by the People's Government of Shenzhen
Municipality Financing Development Service Office on February 20, 2014. The key regulations of small loan companies in Shenzhen are as
follows:
●
if
                                            a small loan company is a limited liability company, its registered capital must be at least
                                            RMB300 million; if it is a company limited by shares, its registered capital must be at least
                                            RMB400 million;
●
the
                                            balance of funds obtained by a small loan company from external legitimate channels may not
                                            exceed 200% of its net capital the previous year;
●
the
                                            main promoter of a small loan company shall (1) have net assets no less than RMB200 million
                                            and an asset-liability ratio of no more than 65%, and, in principle, the long-term investment
                                            amount after investing in this project shall be no more than 60% of net assets (on a consolidated
                                            financial statements basis); and (2) have continuous positive earnings for three years with
                                            a total net profit of no less than RMB60 million, and the total tax contribution shall be
                                            no less than RMB18 million (on a consolidated financial statements basis);
●
enterprise,
                                            social organization or economic organization as other contributors shall be divided into
                                            two categories: (1) if the ratio of investments is 30% or more, it shall be subject to the
                                            approval process as the main promoter; and (2) if the ratio of investments is no more than
                                            30%, it shall be subject to the following conditions: having been incorporated for more than
                                            three years with net assets no less than RMB100 million and an asset-liability ratio no more
                                            than 65%, and, in principle, the long-term investment amount after investing on this project
                                            shall be no more than 60% of net assets, having continuous positive earnings for two years
                                            with a total net profit of no less than RMB20 million, and the total tax contribution shall
                                            be no less than RMB6 million (on a consolidated financial statement basis);
●
if
                                            a foreign financial institution or small loan credit company (or other similar entity) is
                                            the main promoter, it shall be subject to the following conditions: (1) having total assets
                                            no less than RMB2 billion (on a consolidated financial statement basis); (2) having been
                                            engaged in financial business and continuously operating for no less than 10 years with sufficient
                                            analysis and research on the small loan market in China; and (3) shall obtain the approval
                                            of the financial regulation authorities as a bank financing institution;
68
●
the
                                            key management personnel may hold no more than 5% of shares of the small loan company, and,
                                            as a temporary restriction, no other social natural person may contribute to the small loan
                                            company;
●
the
                                            main promoter shall contribute no less than 30% of the total registered capital and shall
                                            control the Company relatively, other contribution by other entities shall be no less than
                                            5% of the total registered capital; and
●
the
                                            equity interests of a small loan company may be transferred, but no transfer or pledge is
                                            allowed in the first three years following the incorporation of the small loan company. Equity
                                            interests held by the directors or senior managers of the small loan company shall not be
                                            transferred during the term of office. As the time expires, the transferee shall have qualifications
                                            as the transferor, and the transferee shall not transfer its shares within three years following
                                            the date of change of registration of shares.
Guidance
on Small Loan Companies in Chongqing
Guidance
on Chongqing's Promotion of Pilot Operation of Small Loan Companies was issued by the People's Government of Chongqing Municipality
on August 1, 2008. The Notice on Issues Concerning the Adjustment of Interim Measures of Chongqing Municipality for the Administration
of Pilot Operation of Small Loan Companies was issued by the People's Government of Chongqing Municipality on April 27, 2009. The
Notice on Further Promoting the Development of Small Loan Companies was issued by the People's Government of Chongqing Municipality
on April 12, 2011. The Notice on Interim Supervision Regulations on Chongqing Small Loan Companies Financing Supervision was issued by
Chongqing Financing Business Office on June 4, 2012. The Guidelines for the Supervision of the Establishment and Change of Chongqing
Small Loan Company (Trial Implementation) was issued by the Chongqing Finance Office, and implemented on July 1st, 2013. The Notice on
Adjusting Regulations of Chongqing Small Loan Company was issued by the Chongqing Finance Office on October 27, 2016. On November 15,
2019, Chongqing Local Financial Supervision Administration (CQLFSA) issued the Guideline for Disclosure of Service Information of Chongqing
Small Loan Companies. On November 26, 2019, CQLFSA issued the Notice on Guiding Small Loan Companies to Reduce Loan Interest Rates. On
February 17, 2020, CQLFSA issued the Notice on Guiding Small Loan Companies to Support Epidemic Prevention and Control to Provide Financial
Services for the Real Economy, which was effective until June 30, 2020. The key regulations of small loan companies in Chongqing are
as follows:
●
if
                                            a small loan company is a foreign investment company, its registered capital must be at least
                                            US$30 million, and the shareholding of the foreign investor must be more than 50%;
●
for
                                            small loan companies with sound corporate management and strong risk management ability,
                                            the balance of the capital borrowed from banking financial institutions can be 100% of its
                                            net capital;
●
the
                                            balance of loans granted to a single borrower by a small loan company must not exceed 10%
                                            of the net capital of the Company and the balance of credit limit granted to a single client
                                            as a group enterprise must not exceed 15% of the net capital of the small loan company;
●
support
                                            qualified small loan companies to increase their capital and shares, as well as mergers and
                                            acquisitions to enhance their capital strength; and
●
support
                                            small loan companies to list on domestic and overseas capital markets, and make good use
                                            of cross-border financing channels such as cross-border loans and overseas bond issuance
                                            under the China-Singapore (Chongqing) Strategic Interconnection Demonstration Project to
                                            obtain low-cost and long-term overseas funds.
Regulations
Relating to Loan Facilitator
Circular
141 imposes several requirements on financial institutions engaged in the "cash loan" business. With respect to the loan
business conducted in cooperation with third-party entities, such financial institutions must not outsource their core business
function (including credit assessment and risk control) and must not accept any credit enhancement services, whether or not in a
disguised form (including the commitment to taking default risks) provided by any third-party entities that lack the qualification
to provide guarantee services. Such financial institutions must require and ensure that such third-party entities do not charge any
interest or fees from the borrowers. We historically provided credit enhancement to our trust company partners, but all the
remaining loans under such arrangement had been transferred in 2021 and substantially all of such remaining loans had been paid off
in 2022. We historically charged a financing service fee from the borrower under our trust lending model and small loan direct
lending model, but we ceased charging such financing service fee starting from August 2017.
69
Regulations
Relating to Loans and the Interest Rate
Part
III Contracts of Civil Code of People's Republic of China, which became effective in January 2021, or the Contract Part, governs
the formation, validity, performance, enforcement and assignment of contracts. The Contract Part requires that the interest rates charged
under a loan agreement must not violate the applicable provisions of the PRC laws and regulations. In accordance with the Decision of
the Supreme People's Court on Revising the Provisions on Several Issues concerning the Application of Law in the Trial of Private
Lending Cases (2nd Revisions in the year of 2020) issued by the PRC Supreme People's Court in December 2020 and effective since
January 2021, or the Revised Private Lending Judicial Interpretations, private lending refers to the act of financing among natural persons,
legal persons and unincorporated organizations.
The
revised Private Lending Judicial Interpretations required to reduce the maximum annual interest rate allowed on private lending to four
times of the one-year loan prime rate (LPR). The one-year LPR refers to the one-year loan market quoted interest rate issued by the National
Bank Interbank Funding Center, which was authorized by the PBOC, on the 20th of each month since August 20, 2019.
According
to the Official Reply of the Supreme People's Court to the Issues concerning the Scope of Application of the New Judicial Interpretation
on Private Lending, The Revised Private Lending Judicial Interpretations on private lending shall not apply to disputes arising from
engagement in relevant financial business by small loan companies.
Regulations
Relating to Financing Guarantee
In
March 2010, CBRC, NDRC, MIIT, MOFCOM, PBOC, SAIC and the Ministry of Finance of PRC promulgated the Tentative Administrative Measures
for Financing Guarantee Companies. The Tentative Administrative Measures for Financing Guarantee Companies requires an entity or individual
to obtain a prior approval from the relevant regulatory body to engage in the financing guarantee business and defines "financing
guarantee" as an activity whereby the guarantor and the creditor, such as a financial institution in the banking sector, agree
that the guarantor shall bear the guarantee obligations in the event that the secured party fails to perform its financing debt owed
to the creditor.
In
August 2017, the State Council promulgated the Regulations on the Supervision and Administration of Financing Guarantee Companies, or
the Financing Guarantee Regulations, which became effective on October 1, 2017. The Financing Guarantee Regulations define "financing
guarantee" as a guarantee provided for debt financing (including but not limited to the extension of loans or issuance of bonds)
and set out that the establishment of a financing guarantee company or engagement in the financing guarantee business without approval
may result in several penalties, including but not limited to banning, an order to cease business operation, confiscation of illegal
gains, fines of up to RMB1,000,000 and criminal liabilities. The Financing Guarantee Regulations also set forth that the outstanding
guarantee liabilities of a financing guarantee company shall not exceed 10 times its net assets and that the outstanding guarantee liabilities
of a financing guarantee compacities of the same guaranteed party shall not exceed 10% of the net assets of the financing guarantee company,
while the outstanding guarantee liabilities of a financing guarantee company in respect of the same guaranteed party and its affiliated
parties shall not exceed 15% of its net assets.
The
Supplementary Provisions stipulate that any institution, which provides services such as customer recommendation and credit evaluation
for different kinds of lending institutions, shall not provide any financing guarantee services directly or in a disguised way, without
approval. As for an institution which has no business license for financing guarantee business but actually engages in the financing
guarantee business, the competent supervision and administration department shall ban it in accordance with the Regulation on Financing
Guarantee Companies and order it to properly settle the stock business. If the institution intends to continue to engage in the financing
guarantee business, it shall establish a financing guarantee company pursuant to the Regulation on Financing Guarantee Companies.
The
Circular of the China Banking and Insurance Regulatory Commission on Issuing the Procedures for the Off-site Supervision of Financing
Guarantee Companies (the Off-site Supervision Circular) was promulgated on July 14, 2020 and took effect on September 1, 2020. The Off-site
Supervision Circular stipulates that financing guarantee companies should establish and implement an off-site supervision information
filing system, and file the off-site supervision data and non-data information according to the requirement of regulatory authorities
in time. If the financing guarantee companies do not comply with the requirement of regulatory authorities, regulatory authorities can
exert penalties in compliance with relevant laws and regulations.
70
Regulations Relating to Illegal Fundraising
Raising funds by entities or individuals from the general public must
be conducted in strict compliance with applicable PRC laws and regulations to avoid administrative and criminal liabilities. The Notice
on Relevant Issues Concerning the Penalty on Illegal Fundraising issued by the General Office of the State Council in July 2007 explicitly
prohibit illegal public fundraising. The main features of illegal public fundraising include: (i) illegally soliciting and raising funds
from the general public by means of issuing stocks, bonds, lotteries or other securities without obtaining the approval of relevant authorities,
(ii) promising a return of interest or profits or investment returns in cash, properties or other forms within a specified period of
time and (iii) using a legitimate form to disguise an unlawful purpose.
To further clarify the criminal charges and punishments relating to
illegal public fundraising, the Supreme People's Court promulgated the Judicial Interpretations to Issues Concerning Applications
of Laws for Trial of Criminal Cases on Illegal Fundraising, or the Illegal Fundraising Judicial Interpretations, which came into force
in January 2011. Decision of the Supreme People's Court on Revising the Interpretations of the Supreme People's Court on
Certain Issues Concerning the Specific Application of Law in the Trial of Criminal Cases Involving Illegal Fund Raising came into force
on March 1, 2022. The Illegal Fundraising Judicial Interpretations provides that a public fundraising will constitute a criminal offense
related to "illegally soliciting deposits from the public" under the PRC Criminal Law if it meets all the following four
criteria: (i) taking in funds without license of the relevant authority or under the disguise of lawful business operations; (ii) publicizing
by means of Internet, media, recommendation fairs, leaflets or mobile phone text messages, or other means; (iii) promising to repay the
principal and interests or make payments in forms such as currency, real objects or equities, within a certain time limit; and (iv) absorbing
funds from the general public, namely unspecified people. An illegal fundraising activity can incur a fine or prosecution in the event
it constitutes a criminal offense. Pursuant to the Illegal Fundraising Judicial Interpretations, an offender that is an entity will be
subject to criminal liabilities if it illegally solicits deposits from the general public or illegally solicits deposits in disguised
form (i) with the amount of deposits involved exceeding RMB1,000,000, (ii) with over 150 fundraising targets involved, (iii) with direct
economic loss caused to fundraising targets exceeding RMB500,000, or (iv) the illegal fundraising activities have caused baneful influences
to the public or have led to other severe consequences. In addition, any entity that, while knowingly aware that another party deceptively
issues securities, illegally accepts deposits from the general public, issues stocks and corporate bonds without permission, practice
fund-raising fraud, or carry out fund-raising criminal activities such as organizing and leading pyramid sales activities, provides publicity
such as advertising to such party, shall be convicted and punished as an accomplice for committing the relevant crime. In accordance
with the Opinions of the Supreme People's Court, the Supreme People's Procurator and the Ministry of Public Security on Several
Issues concerning the Application of Law in the Illegal Fundraising Criminal Cases, the administrative proceeding for determining the
nature of illegal fundraising activities is not a prerequisite procedure for the initiation of criminal proceedings concerning the crime
of illegal fundraising, and the administrative departments' failure in determining the nature of illegal fundraising activities
does not affect the investigation, prosecution and trial of cases concerning the crime of illegal fundraising. According to "the
Notice of the Supreme People's Court, the Supreme People's Procuratorate and the Ministry of Public Security on the Promulgation
of Opinions on Several Issues in Handling Criminal Cases of Illegal Fundraising" issued in January 2019, the determination of the
"illegality" of fundraising shall be based on the laws and regulations of the national financial management. If there are
only general stipulations in the laws and regulations of the national financial management, the "illegality" could be determined
in accordance with the spirit of laws and regulations and the provisions on regulatory documents such as regulations, measures, and implementation
rules of the People's Bank of China, the China Insurance Regulatory Commission, the China Securities Regulatory Commission.
According to Regulations on Preventing and Dealing with Illegal Fundraising,
which came into effect in May 2021, illegal fundraising involves collecting funds from non-specific targets with promised principal and
interest or other investment returns, without lawful permission from the State Council's financial management departments or in
violation of China's financial management rules. Provincial-level governments should have overall responsibility for anti-illegal
fundraising efforts within their respective administrative regions, and local governments should build necessary work mechanisms. Financial
and non-banking payment institutions should report large-value and suspicious transactions as required, and analyze and identify related
accounts having suspected association with illegal fundraising.
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Regulations Relating to Mortgage
The principal regulations governing mortgage include the Part II Property
Rights (including Security Rights) of Civil Code of the PRC and their respective Interpretations of the Supreme People's Court.
Under these laws and regulations, in order to create a legal and executable mortgage, the parties concerned shall conclude a written
mortgage contract and complete the mortgage registration formalities with applicable real estate registration authorities. Mortgage interests
shall be created at the time of registration.
Under the Part II Property Rights of Civil Code of the PRC, a mortgage
contract shall include, amongst others, the following terms: (1) type and amount of the secured debt; (2) term for performance of debt
obligations by the debtor; (3) mortgaged property's description, quality, quantity, condition, location, ownership or ownership
of the right to use the mortgaged property; and (4) scope of the guarantee. In March 2019, the PRC Ministry of Land and Resources revised
the Implementation Regulations for the Provisional Regulations on Real Estate Registration, according to which the mortgage contract
is one of the required registration materials to be submitted to the real estate registration authorities.
Anti-money Laundering Regulations
The PRC Anti-money Laundering Law, which became effective in January
2007, sets forth the principal anti-money laundering requirements applicable to financial institutions as well as nonfinancial institutions
with anti-money laundering obligations, including the adoption of precautionary and supervisory measures, establishment of various systems
for client identification, retention of clients' identification information and records and reports on large transactions and suspicious
transactions.
In June, 2021, the PBOC issued the draft revision of the PRC Anti-Money
Laundering Law (draft) for public comments. According to the draft of Anti-money Laundering Law, predicate acts of money laundering include
not only criminal activities, but also newly include illegal activities. The draft of Anti-money Laundering Law also includes in the
scope of Anti-money Laundering monitoring activities that conceal the nature of the proceeds of illegal activities and the source of
their proceeds.
The Measures for Supervision and Administration of Anti-Money Laundering
and Anti-Terrorism Financing of Financial Institutions, or the Anti-Money Laundering Measures for Financial Institutions, which became
effective in April 2021, clarified that the following financial institutions duly established within the PRC territory are subjected
to fulfill anti-money laundering related obligations: (a) developmental financial institution, policy banks, commercial banks, rural
cooperative banks, rural credit cooperatives and village/township banks; (b) securities companies, futures companies and fund management
companies; (c) insurance companies and insurance asset management companies; (d) trust companies, financial asset management companies,
finance companies of enterprise groups, financial leasing companies, auto finance companies, consumer finance companies, currency brokerage
companies and wealth management subsidiaries of commercial banks; and (e) other financial institutions. Besides, such obligations also
apply to the non-bank payment institutions, banks card organization, fund clearing center, microcredit companies engaging in the internet
microcredit lending business and the institutions engaging exchange business, funds sales business, insurance agency and brokers business.
The PBOC and its branches shall carry out the supervision and administration of the financial institutions' work with regard to
the antimoney laundering and anti-terrorism financing pursuant to the relevant laws and regulations. The Anti-Money Laundering Measures
for Financial Institutions require the financial institutions to draft and improve the anti-money laundering and anti-terrorism financing
internal control policy, evaluate the anti-money laundering and anti-terrorism financing risks, establish the risks management mechanism
according to its risks conditions and operation scale, construct anti-money laundering information system, and set up or appoint institutions
equipped with qualified staff, to perform its anti-money laundering and anti-terrorism financing obligations.
Regulations Relating to Internet Information Security
and Privacy Protection
Internet content in China is regulated and restricted from a state
security standpoint. On December 28, 2000, the Standing Committee of the PRC National People's Congress introduced and enacted
the Decisions on Maintaining Internet Security, which was amended on August 27, 2009 and may subject violators to criminal punishment
in China for any effort to: (i) use the internet to market fake and substandard products or carry out false publicity for any commodity
or service; (ii) use the internet for the purpose of damaging the commercial goodwill and product reputation of any other person; (iii)
use the internet for the purpose of infringing on the intellectual property of any person; (iv) use the internet for the purpose of fabricating
and spreading false information that affects the trading of securities and futures or otherwise jeopardizes the financial order; or (v)
create any pornographic website or webpage on the internet, providing links to pornographic websites, or disseminating pornographic books
and magazines, movies, audiovisual products or images. The Ministry of Public Security has promulgated measures that prohibit use of
the internet in ways which, among other things, result in a leakage of state secrets or a spread of socially destabilizing content and
require internet service providers to take proper measures, including anti-virus, data backup and other related measures, and keep records
of certain information about the users (including user registration information, log-in and log-out time, IP address, content and time
of posts by users) for at least 60 days, and detect illegal information, stop transmission of such information and keep relevant records.
If an internet information service provider violates these measures, the Ministry of Public Security and the local security bureaus may
revoke its operating license and shut down its websites.
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PRC government authorities have enacted laws and regulations on internet
use to protect personal information from any unauthorized disclosure. In December 2012, the Standing Committee of the PRC National People's
Congress promulgated the Decision on Strengthening Network Information Protection to enhance the legal protection of information security
and privacy on the internet. 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 services
and internet information services in China. Telecommunication business operators and internet service providers are required to establish
their own rules for collecting and use of users' information and cannot collect or use users' information without their consent.
Telecommunication business operators and internet service providers are prohibited from disclosing, tampering with, damaging, selling
or illegally providing others with, collected personal information.
On November 7, 2016, the Standing Committee of the PRC National People's
Congress published Cyber Security Law of the PRC, which took effect on June 1, 2017 and requires network operators to perform certain
functions related to cybersecurity protection and the strengthening of network information management. For instance, under the Cyber
Security Law, network operators of key information infrastructures shall store within the territory of the PRC all the personal information
and important data collected and produced within the territory of the PRC, and their purchase of network products and services that may
affect national securities shall be subject to national cybersecurity review. On 14 September, 2022, the Cyberspace Administration of
China released the Draft Amendment of the Cyber Security Law for public consultation. The Draft Amendments have significantly increased
penalties for breaches, introducing a fine up to 5% of its annual turnover in the previous year. The draft also applies with the individuals
directly liable subject to a fine up to RMB1 million and/or a ban on taking on managerial positions in China.
On April 13, 2020, the Cyberspace Administration of China issued Measures
for Cybersecurity Review, which took effect on June 1, 2020, to provide more detailed rules regarding cybersecurity review requirements.
In addition, the Guidelines to Promote the Health Growth of the Internet
Finance, or the Internet Finance Guidelines, requires internet finance service providers, including online finance platforms, among other
things, to improve technology security standards and safeguard customer and transaction information. The State Council, the PBOC and
other relevant regulatory authorities will jointly adopt the implementing rules and technology security standards.
On November 28, 2019, the Secretary Bureau of the State Internet Information
Office, the General Office of the MIIT, the General Office of the Ministry of Public Security, and the General Office of the SAMR issued
the Identification Methods for Collection and Use of Personal Information in Violation of Laws by Applications, which enumerates the
conducts to be including those with no published rules, no explicit purpose, method and scope when collecting and using personal information,
collection and use of personal information without user consent, violation of "necessary principle", collection of personal
information unrelated to the services provided, and provision of personal information to others without consent, failure to provide the
function of deleting or correcting personal information as required by law, or no published information for complaints and reporting
methods.
On May 28, 2020, the National People's Congress adopted the
Civil Code, which came into effect on January 1, 2021. According to the Civil Code, the personal information of a natural person shall
be protected by the law. Any organization or individual shall legally obtain such personal information of others when necessary and ensure
the safety of such information, and shall not illegally collect, use, process or transmit personal information of others, or illegally
purchase or sell, provide, or disclose personal information of others.
On June 10, 2021, the Standing Committee of the National People's
Congress adopted the Data Security Law, which took effect on September 1, 2021. The Data Security Law mainly sets forth specific provisions
regarding establishing basic systems for data security management, including data classification management system, risk assessment system,
monitoring and early warning system, and emergency disposal system. In addition, the Data Security Law clarifies the data security protection
obligations of organizations and individuals carrying out data-related activities and implementing data security protection responsibility.
In August 2021, The Personal Information Protection Law was passed
by the Standing Committee of the National People's Congress and was effective from 1 November 2021.
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The Personal Information Protection Law is the first piece of legislation
in China dedicated to the protection of personal information. It establishes individuals' consents as the principal legal basis
for processing personal information. It requires that the processing of personal information shall abide by the principles of legality,
fairness, good faith, minimum necessity, openness, and transparency. There shall also be specific and reasonable purposes of processing.
Individuals shall have the right to access and obtain a copy of their personal information from the processors of personal information.
Individuals can also request the processors of personal information to rectify or delete their personal information, as well as to provide
them with means to transfer their personal information to other processors. Processors of personal information which need to transfer
personal information out of the Mainland China shall obtain separate consent from individuals, and meet certain requirements, such as
passing the security assessment made by the state cyberspace authorities, obtaining the required certification, or entering into a standard
contract as prescribed by the state cyberspace authorities.
The Personal Information Protection Law contains provisions on extraterritorial
application. Foreign organizations which process personal information of individuals in PRC for the purposes of offering products or
services to them, or analyzing and assessing their behaviors, shall be subject to this law. These foreign organizations shall also establish
designated agencies or appoint representatives in PRC. A processor of personal information which contravenes the requirements under the
Personal Information Protection Law is liable to a maximum fine of RMB50,000,000 or 5% of its annual turnover of the preceding year.
Other penalties may include suspension of operation for rectification, cancellation of business permits or licenses, etc.
On November 14, 2021, the Cyberspace Administration of China (CAC)
released the draft of Regulations on Network Data Security Management for public comments. It clarifies how network data should be categorized
and provides illustrations of what would constitute important data. It requires that processors of important data (including those processing
personal data of more than 1 million individuals) to comply with special obligations, which includes conducting an annual security assessment
(either through a self-assessment, or by a qualified third party), and submitting the annual assessment report to the local CAC by January
31 of the following year. It requires obtaining consent from the local supervising authority for the industry concerned or the local
CAC before engaging in the sharing, trading, or processing through third parties of important data. The Regulations on Network Data Security
Management clarify the conditions that trigger a cybersecurity review required by the CSL, including data processing activities that
affect or could affect national security.
Regulations Relating to Credit Reporting Business
The Measures for Credit Reporting Business ("Measures")
was issued by the PBOC in September 2021 and was promulgated in January 2022. The Measures define "credit information" as
information that "serves the financial and other activities and is used to determine individuals and enterprises credit status,
and information originated from analysis and evaluation of individuals and enterprises' credit status based on the foregoing information".
It applies to entities that carry out credit reporting business and "activities relating to credit reporting business" in
China as well as such activities carried out outside China but targeting Chinese residents. It provides rules on credit reporting business
and credit reporting agencies, requiring that any institution shall obtain the permission for a personal credit reporting agency from
the People's Bank of China in accordance with the law to engage in personal credit reporting business; handle the record-filing
of a corporate credit reporting agency in accordance with the law to engage in corporate credit reporting business; or handle the record-filing
of a credit rating agency in accordance with the law to engage in credit rating business. The Measures require financial institutions
to be prohibited from cooperating with unauthorized institutions. If relevant institutions have already cooperated with unauthorized
institutions, they should complete compliance rectification within 18 months from January 1, 2022.
Regulations on Intellectual Property Rights
The PRC has adopted comprehensive legislation governing intellectual
property rights, including copyrights, patents, trademarks and domain names.
Copyright and Software Products
The National People's Congress adopted the Copyright Law in
1990 and amended it in 2001, 2010 and 2020 respectively. The amended Copyright Law extends copyright protection to internet activities,
products disseminated over the internet and software products. In addition, there is a voluntary registration system administered by
the China Copyright Protection Center.
In order to further implement the Computer Software Protection Regulations
promulgated by the State Council on December 20, 2001 and amended on January 30, 2013, the State Copyright Bureau issued the Computer
Software Copyright Registration Procedures on February 20, 2002, which applies to software copyright registration, license contract registration
and transfer contract registration.
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Trademarks
Trademarks are protected by the PRC Trademark Law adopted in 1982
and subsequently amended in 1993, 2001, 2013, and 2019 as well as the Implementation Regulation of the PRC Trademark Law adopted by the
State Council in 2002 and amended on April 29, 2014. The Trademark Office under the SAIC handles trademark registrations and grants a
term of 10 years to registered trademarks and another 10 years if requested upon expiry of the first or any renewed 10-year term. Trademark
license agreements must be filed with the Trademark Office for record. The PRC Trademark Law has adopted a "first-to-file"
principle with respect to trademark registrations. Any malicious application for trademark registration not for the purpose of use shall
be rejected. Where a trademark for which a registration has been made is identical or similar to another trademark which has already
been registered or been subject to a preliminary examination and approval for use on the same kind of or similar commodities or services,
the application for registration of such trademark may be rejected. Any person applying for the registration of a trademark may not prejudice
the existing right first obtained by others nor may any person register in advance a trademark that has already been used by another
party and has already gained a "sufficient degree of reputation" through such party's use. Trademark license agreements
should be filed with the Trademark Office or its regional offices.
Domain Names
Internet domain name registration and related matters are primarily
regulated by the Measures on the Administration of Domain Names for the Chinese Internet, issued by the MIIT on November 5, 2004 and
effective as of December 20, 2004, which was replaced by the Measures on Administration of Internet Domain Names issued by the MIIT as
of November 1, 2017 and the Implementing Rules on Registration of National Toplevel Domain Names issued by China Internet Network Information
Center in June, 2019. Domain name registrations are handled through domain name service agencies established under the relevant regulations,
and the applicants become domain name holders upon successful registration. As of December 31, 2021, we had eight registered trademarks
with the Trademark Office under the State Administration for Industry and Commerce.
We have 17 registered Copyright of Software Products and one registered
Domain Name.
Regulations Relating to Employment
Pursuant to the Labor Law of PRC, promulgated by the NPC in July 1994,
and most recently amended on December 29, 2018, or the Labor Law, and the Labor Contract Law of PRC, promulgated by the Standing Committee
of the NPC in June 2007 and amended in December 2012, or the Labor Contract Law, employers must execute written employment contracts
with full-time 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 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.
All employers must compensate their employees with wages equal to at least the local minimum wage standards. Violations of the PRC Labor
Law and the Labor Contract Law may result in the imposition of fines and other administrative sanctions, and serious violations may result
in criminal liabilities.
Enterprises in China are required by the Social Insurance Law of PRC
promulgated by the Standing Committee of the NPC in October 2010, which became effective in July 2011, as most recently amended on December
29, 2018, or the Social Insurance Law, the Regulations on Management of Housing Provident Fund released by the State Council in March
2002, and most recently amended on March 24, 2019 and other related rules 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 and 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. Failure to make adequate contributions to various
employee benefit plans may be subject to fines and other administrative sanctions. According to the Social Insurance Law, an employer
that fails to make social insurance contributions may be ordered to rectify the noncompliance and pay the required contributions within
a stipulated deadline and be subject to a late fee of 0.05% per day, as the case may be. If the employer still fails to rectify the failure
to make social insurance contributions within the deadline, it may be subject to a fine ranging from one to three times the amount overdue.
According to the Regulations on Management of Housing Fund, an enterprise that fails to make housing fund contributions may be ordered
to rectify the noncompliance and pay the required contributions within a stipulated deadline; otherwise, an application may be made to
a local court for compulsory enforcement.
We have not made adequate contributions to employee benefit plans
as required by applicable PRC laws and regulations. See "Item 3. Key Information—D. Risk Factors—Risks Related to Doing
Business in China—Failure to make adequate contributions to various employee benefit plans as required by PRC regulations may subject
us to penalties."
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Regulations Relating to Tax
Enterprise Income Tax
PRC enterprise income tax is calculated based on taxable income, which
is determined under (i) the PRC Enterprise Income Tax Law, or the EIT Law, promulgated by the NPC and implemented in January 2008, and
most recently amended on December 29, 2018, and (ii) the implementation rules to the EIT Law promulgated by the State Council and implemented
in January 2008, and most recently amended on April 23, 2019. The EIT Law imposes a uniform enterprise income tax rate of 25% on all
resident enterprises in the PRC, including foreign-invested enterprises and domestic enterprises, unless they are qualified for certain
exceptions. According to the EIT Law and its implementation rules, the income tax rate of an enterprise that has been determined to be
a high and new technology enterprise may be reduced to 15% with the approval of relevant tax authorities.
In addition, according to the EIT Law, enterprises registered in countries
or regions outside the PRC but have their "de facto management bodies" located within China may be considered as PRC resident
enterprises and are therefore subject to PRC enterprise income tax at the rate of 25% on their worldwide income. Though the implementation
rules of the EIT Law define "de facto management bodies" as "establishments that carry out substantial and overall
management and control over the manufacturing and business operations, personnel, accounting, properties, etc., of an enterprise,"
the only detailed guidance currently available for the definition of "de facto management body" as well as the determination
and administration of tax residency status of offshore incorporated enterprises are set forth in the Notice Regarding the Determination
of Chinese-Controlled Overseas Incorporated Enterprises as PRC Tax Resident Enterprises on the Basis of De Facto Management Bodies, or
the Circular 82, promulgated by the State Administration of Taxation (the "SAT") in April 2009, and the Administrative Measures
for Enterprise Income Tax of Chinese-Controlled Overseas Incorporated Resident Enterprises (Trial Version) issued by the SAT in July
2011, or Bulletin No. 45, which provides guidance on the administration as well as the determination of the tax residency status of a
Chinese-controlled offshore incorporated enterprise, defined as an enterprise that is incorporated under the law of a foreign country
or territory and that has a PRC company or PRC corporate group as its primary controlling shareholder.
According to Circular 82, a Chinese-controlled offshore-incorporated
enterprise will be regarded as a PRC resident enterprise by virtue of having its "de facto management body" in China and
will be subject to PRC enterprise income tax on its global income o
nly if all
of the following conditions are met:
●
the
                                            primary location of the day-to-day operational management and the places where they perform
                                            their duties are in the PRC;
●
decisions
                                            relating to the enterprise's financial and human resource matters are made or are subject
                                            to approval of organizations or personnel in the PRC;
●
the
                                            enterprise's primary assets, accounting books and records, company seals and board
                                            and shareholder resolutions are located or maintained in the PRC; and
●
50%
                                            or more of voting board members or senior executives habitually reside in the PRC.
Bulletin
No. 45 further clarifies certain issues related to the determination of tax resident status and competent tax authorities. It also specifies
that when provided with a copy of Recognition of Residential Status from a resident Chinese-controlled offshore incorpor
ated enterprise,
a payer does not need to withhold income tax when paying certain PRC-sourced income such as dividends, interest and royalties to such
Chinese-controlled offshore-incorporated enterprise.
Value-Added Tax and Business Tax
According to the Provisional Regulations on Value-added Tax ("Provisional
Regulations"), which was promulgated by the PRC State Council on December 13, 1993 and amended in November 2008, February 2016
and November 2017, and the Implementing Rules of the Provisional Regulations on Value-added Tax, which were promulgated by the MOF on
December 18, 2008 and subsequently amended by the MOF and the SAT on October 28, 2011, all taxpayers selling goods, providing processing,
repairing or replacement services or importing goods within the PRC must pay value-added tax.
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Since January 1, 2012, the MOF and the SAT have implemented the VAT
Pilot Plan, which imposes VAT in lieu of business tax for certain "modern service industries." According to the implementation
circulars released by the MOF and the SAT on the VAT Pilot Plan, the "modern service industries" include research, development
and technology services, information technology services, cultural innovation services, logistics support, lease of corporeal properties,
attestation and consulting services. According to the Notice of the Ministry of Finance and the SAT on Implementing the Pilot Program
of Replacing Business Tax with Value-Added Tax in an All-round Manner which became effective on May 1, 2016, as subsequently amended
on March 20 2019, entities and individuals engaged in the sale of services, intangible assets or fixed assets within the PRC territory
are required to pay value-added tax instead of business tax. Following the implementation of the VAT Pilot Plan, most of our PRC subsidiaries
and affiliates have been subject to VAT, instead of business tax. From April 1, 2019, according to "The Notice on Policies for
Deepening the Value-Added Tax Reform" issued by the Ministry of Finance and the State Taxation Administration and the General Administration
of Customs in March 2019 and "The Notice on Adjusting the Value-Added Tax Rate" issued by the Ministry of Finance and the
State Taxation Administration in April 2018, most of our Chinese companies and subsidiaries used to pay a Value-Added Tax rate of 3%
or 6%. Under the impact of COVID-19 pandemic, the Ministry of Finance and the State Taxation Administration issued "Announcement
on the Value-added Tax Policy in Support of Resumption of Work and Business among Individual Businesses" in February 2020 and "Announcement
on Extending the Applicable Period of the Value-added Tax Reduction and Exemption Policy for Small-scale Taxpayers" in April 2020
to reduce the Value-Added Tax rate from 3% to 1% and start to implement such policy from March 1, 2020. In March 2021, the Ministry of
Finance and the State Taxation Administration further issued "Announcement on Continuously Implementing Some Tax Preferential Policies
in Response to COVID-19 Epidemic" to extend the implementation of "1% Value-added Tax rate" policy to December 31,
2021.
On 30, December, 2022, the Standing Committee of the 13th National
People's Congress issued the draft of Value-Added Tax Law of the People's Republic of China ("Draft") for public comment,
which will elevate the Provisional Regulations on and related policy provisions into law. The Draft emphasizes the principle of correlation
between sales and input tax in the VAT levy and deduction provisions.
Stamp Tax
As regulated in the Stamp Tax Law, which will come into effect on
July 1, 2022, the taxable items include contracts, documents of transfer of property rights, and business account books, and the transfer
of stocks and depositary receipts issued based on stocks that are traded on stock exchanges legally formed and other national securities
trading venues approved by the State Council. The effect of this law will have an impact on our tax situation.
Regulations Relating to Foreign Exchange
Regulation on Foreign Currency Exchange
The principal regulations governing foreign currency exchange in China
are the Foreign Exchange Administration Regulations, most recently amended in August 2008. Under the 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 SAFE by complying with certain procedural requirements. By contrast, approval
from or registration with appropriate 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. On February 13, 2015, the SAFE promulgated the Notice on Further Simplifying
and Improving the Administration of the Foreign Exchange Concerning Direct Investment, or SAFE Notice 13. After SAFE Notice 13 became
effective on June 1, 2015, instead of applying for approvals regarding foreign exchange registrations of foreign direct investment and
overseas direct investment from SAFE, entities and individuals will be required to apply for such foreign exchange registrations from
qualified banks. The qualified banks, under the supervision of the SAFE, will directly examine the applications and conduct the registration.
In August 2008, SAFE issued the Circular on the Relevant Operating
Issues Concerning the Improvement of the Administration of the Payment and Settlement of Foreign Currency Capital of Foreign-Invested
Enterprises, or SAFE Circular 142, regulating the conversion by a foreign-invested enterprise of foreign currency-registered capital
into RMB by restricting how the converted RMB may be used. SAFE Circular 142 provides that the RMB 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 may not be used for equity investments within the PRC. In addition, SAFE strengthened its oversight of the flow and use
of the RMB capital converted from foreign currency-registered capital of foreign-invested enterprises. The use of such RMB capital may
not be changed without SAFE's approval, and such RMB capital may not in any case be used to repay RMB loans if the proceeds of
such loans have not been used. Violations may result in severe monetary or other penalties.
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In November 2012, SAFE promulgated the Circular of Further Improving
and Adjusting Foreign Exchange Administration Policies on Foreign Direct Investment, which substantially amends and simplifies the current
foreign exchange procedure. Pursuant to this circular, 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
requires the approval or verification of SAFE, and multiple capital accounts for the same entity may be opened in different provinces,
which was not possible previously. In addition, SAFE promulgated another circular of the State Administration of Foreign Exchange on
Printing and Distributing the Administrative Provisions on Foreign Exchange in Domestic Direct Investment by Foreign Investors and Relevant
Supporting Documents in May 2013, which specifies that the administration by SAFE or its local branches over direct investment 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. On June 9, 2016, the SAFE promulgated
Circular of the State Administration of Foreign Exchange on Reforming and Regulating Policies on the Control over Foreign Exchange Settlement
of Capital Accounts, or Circular 16, which expands the application scope from only the capital of the foreign-invested enterprises to
the capital, the foreign debt fund and the fund from overseas public offerings. Circular 16 allows that the discretionary settlement
of foreign exchange receipts under capital accounts refers to the case in which the foreign exchange receipts under capital accounts
(including foreign exchange capital, foreign debts, and repatriated funds raised through overseas listing) subject to discretionary settlement
as expressly prescribed in the relevant policies may be settled with banks according to the actual need of domestic institutions for
business operations. Where the current regulations contain any restrictive provisions on the foreign exchange settlement of foreign exchange
receipts under capital accounts of domestic institutions, such provisions shall prevail. Domestic institutions may, at their discretion,
settle up to 100% of foreign exchange receipts under capital accounts for the time being. The SAFE may adjust the above proportion in
due time according to balance of payments. In addition, Circular 16 specifies the use of foreign exchange receipts under capital accounts
of a domestic institution and the RMB funds obtained thereby from foreign exchange settlement shall be subject to the following provisions:
(i) they shall not, directly or indirectly, be used for expenditure beyond the enterprise's business scope or expenditure prohibited
by laws and regulations of the State; (ii) unless otherwise specified, they shall not, directly or indirectly, be used for investments
in securities or other investment than banks' principal-secured products; (iii) they shall not be used for the granting of loans
to non-affiliated enterprises, except where it is expressly permitted in the business license; and (iv) they shall not be used for the
construction or purchase of real estate for purposes other than self-use (except for real estate enterprises). Where there is any contractual
stipulation on the use scope of revenue under capital accounts between a domestic institution and other parties concerned, the relevant
funds shall not be used beyond such scope. Unless otherwise specified, such stipulation shall not conflict with this Circular. Moreover,
Circular 16 allows the enterprises to use their foreign exchange capitals under capital accounts allowed by the relevant laws and regulations.
In January 2017, the 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 profit from domestic entities to offshore entities, including (i)
under the principle of genuine transaction, banks shall check board resolutions regarding profit distribution, the original version of
tax filing records and audited financial statements; and (ii) domestic entities shall hold income to account for previous years'
losses before remitting profits. Moreover, pursuant to Circular 3, domestic entities shall make detailed explanations of the sources
of capital and utilization arrangements, and provide board resolutions, contracts and other proof when completing the registration procedures
in connection with an outbound investment.
On October 23, 2019, SAFE issued the Circular on Further Promoting
Cross-border Trade and Investment Facilitation, or SAFE Circular 28. Among others, SAFE Circular 28 relaxes the prior restrictions and
allows the foreign-invested enterprises without equity investment as in their approved business scope to use their capital obtained from
foreign exchange settlement to make domestic equity investment as long as the investments are real and in compliance with the foreign
investment-related laws and regulations. In addition, SAFE Circular 28 stipulates that qualified enterprises in certain pilot areas may
use their capital income from registered capital, foreign debt and overseas listing, for the purpose of domestic payments without providing
authenticity certifications to the relevant banks in advance for those domestic payments. According to the Circular on Optimizing the
Administration of Foreign Exchange to Support the Development of Foreign-related Business issued by the SAFE on April 10, 2020, eligible
enterprises are allowed to make domestic payments using the income under their capital accounts generated from their capital, foreign
debt and overseas listing, without providing materials for each transaction evidencing the authenticity in advance, provided that the
capital usage is authentic and compliant with the current capital account income usage management regulations.
78
Regulations on Foreign Exchange Registration of
Overseas Investment by PRC Residents
The SAFE issued the SAFE Circular on Relevant Issues Relating to Domestic
Resident's Investment and Financing and Round Trip Investment through Special Purpose Vehicles, or SAFE Circular 37, that became
effective in July 2014, replacing the previous SAFE Circular 75. SAFE Circular 37 regulates foreign exchange matters in relation to the
use of special purpose vehicles, or SPVs, by PRC residents or entities to seek offshore investment and financing or conduct round trip
investment in China. Under SAFE Circular 37, an SPV refers to an offshore entity established or controlled, directly or indirectly, by
PRC residents or entities for the purpose of seeking offshore financing or making offshore investment, using legitimate onshore or offshore
assets or interests, while "round trip investment" refers to direct investment in China by PRC residents or entities through
SPVs, namely, establishing foreign-invested enterprises to obtain the ownership, control rights and management rights. SAFE Circular
37 provides that, before making contributions into an SPV, PRC residents or entities are required to complete the foreign exchange registration
with the SAFE or its local branch.
PRC residents or entities who had contributed legitimate onshore or
offshore interests or assets to SPVs but had not obtained registration as required before the implementation of the SAFE Circular 37
must register their ownership interests or control in the SPVs with qualified banks. An amendment to the registration is required if
there is a material change with respect to the SPV registered, such as any change of basic information (including change of the PRC residents,
name and operation term), increases or decreases in investment amount, transfers or exchanges of shares, and mergers or divisions. Failure
to comply with the registration procedures set forth in SAFE Circular 37 and the subsequent notice, or making misrepresentation on or
failure to disclose controllers of the foreign-invested enterprise that is established through roundtrip investment, may result in restrictions
being imposed on the foreign exchange activities of the relevant foreign-invested enterprise, including payment of dividends and other
distributions, such as proceeds from any reduction in capital, share transfer or liquidation, to its offshore parent or affiliate, and
the capital inflow from the offshore parent, and may also subject relevant PRC residents or entities to penalties under PRC foreign exchange
administration regulations.
In February 2015, the SAFE released the Notice of the State Administration
of Foreign Exchange on Further Simplifying and Improving the Policies of Foreign Exchange Administration Applicable to Direct Investment,
or Circular 13, which has amended Circular 37 by requiring PRC residents or entities to register with qualified banks rather than the
SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas
investment or financing.
Share Option Rules
Pursuant to Circular 37, PRC residents who participate in share incentive
plans in overseas non-publicly listed companies may submit applications to the SAFE or its local branches for the foreign exchange registration
with respect to offshore special purpose companies. In addition, under the Notice of the State Administration of Foreign Exchange on
Issues Related to Foreign Exchange Administration in Domestic Individuals' Participation in Equity Incentive Plans of Companies
Listed Abroad issued by SAFE in February 2012, or the Share Option Rules, PRC residents who are granted shares or share options by companies
listed on overseas stock exchanges under share incentive plans are required to (i) register with the SAFE or its local branches, (ii)
retain a qualified PRC agent, which may be a PRC subsidiary of the overseas listed company or another qualified institution selected
by the PRC subsidiary, to conduct SAFE registration and other procedures with respect to the share incentive plans on behalf of the participants,
and (iii) retain an overseas institution to handle matters in connection with their exercise of share options, purchase and sale of shares
or interests and funds transfers.
Regulations on Dividend Distribution
Under our current corporate structure, our Cayman Islands holding
company may rely on dividend payments from our PRC subsidiaries, which are wholly foreign-owned enterprises incorporated in China, to
fund any cash and financing requirements we may have. The principal laws and regulations governing the distribution of dividends of foreign-invested
enterprises include the PRC Foreign Investment Law and its Implementing Regulations, both of which came into effect on January 1, 2020,
and other applicable laws, according to which a foreign investor may, in accordance with the law, freely transfer into or out of the
PRC its contributions, profits, capital earnings, income from asset disposal, intellectual property rights royalties acquired, compensation
or indemnity legally obtained, income from liquidation, etc., made or derived within the territory of the PRC in RMB or any foreign currency,
subject to no illegal restriction by any entity or individual in terms of the currency, amount, frequency of such transfer into or out
of the PRC, etc.
79
Regulations on Overseas Listing
On August 8, 2006, six PRC regulatory agencies, including the CSRC,
adopted the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (the "M&A Rules"), which
became effective on September 8, 2006 and were amended on June 22, 2009. Foreign investors shall comply with the M&A Rules when they
purchase equity interests of a domestic company or subscribe to the increased capital of a domestic company and thus change the nature
of the domestic company into a foreign-invested enterprise; or when the foreign investors establish a foreign-invested enterprise in
the PRC, purchase the assets of a domestic company and operate the assets; or when the foreign investors purchase the assets of a domestic
company, establish a foreign-invested enterprise by injecting such assets and operate the assets. The M&A Rules purport, among other
things, to require offshore special purpose vehicles formed for overseas listing purposes through acquisitions of PRC domestic companies
and controlled by PRC companies or individuals, to obtain approval from the CSRC prior to publicly listing their securities on an overseas
stock exchange.
On March 1, 2020, Securities Law of the People's Republic of
China (Revised in 2019) became effective. It stipulates that any securities issuance and trading activities outside the People's
Republic of China that disrupt the domestic market order in the PRC and damage the legitimate rights and interests of domestic investors
shall be investigated for legal liability in accordance with the relevant laws. This gives the China Securities Regulatory Commission,
public security organs and judicial organs "long-arm jurisdiction" over overseas securities market activities.
On July 6, 2021, the General Office of the State Council and General
Office of the Central Committee of the Communist Party of China issued Opinions on Strictly Cracking Down Illegal Securities Activities
in Accordance with the Law. The 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 24, 2021,
the CSRC published the draft Administrative Provisions of the State Council on the Overseas Issuance and Listing of Securities by Domestic
Companies (Draft for Comments), or the Administrative Provisions and the draft Measures for the Overseas Issuance and Listing of Securities
Record-filings by Domestic companies (Draft for Comments), or the Draft Measures for public comments. Pursuant to these drafts, PRC domestic
companies that directly or indirectly offer or list their securities in an overseas market, including a PRC company limited by shares
and an offshore company whose main business operations are in China and intends to offer shares or be listed in an overseas market based
on its onshore equities, assets or similar interests, are required to file with the CSRC within three business days after submitting
their listing application documents to the regulator in the place of intended listing. Failure to complete the filing under the Administrative
Provisions may subject the domestic enterprise to a warning or a fine of one to ten million RMB. If the circumstances are serious, the
domestic enterprise may be ordered to suspend its business or suspend its business pending rectification, or its permits or businesses
license may be revoked. The Draft Measures also provide that a PRC domestic company must file with the CSRC within three business days
for its follow on offering of securities or issue of securities to purchase assets after it is listed in an overseas market. However,
there is no timetable as to when these drafts will be enacted.
On July 6, 2021, certain PRC regulatory authorities issued Opinions
on Strictly Cracking Down on Illegal Securities Activities in Accordance with the Law. These opinions call for strengthened regulation
over illegal securities activities and supervision on overseas listings by China-based companies and propose 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. On February 17, 2023, the China Securities Regulatory Commission promulgated the Overseas Listing Trial Measures, and five
supporting guidelines, which became effective on March 31, 2023. According to the Overseas Listing Trial Measures, PRC domestic companies
that seek to offer and list securities in overseas markets, either in direct or indirect means, are required to fulfill the filing procedure
with the CSRC and report relevant information. If a company fails to complete the filing procedure or conceals any material fact or falsifies
any major content in its filing documents, it may be subject to administrative penalties, such as order to rectify, warnings, fines,
and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons may also be subject
to administrative penalties, such as warnings and fines. The Overseas Listing Trial Measures also provide that a company in mainland
China must file with the CSRC within three business days for its follow-on offering of securities after it is listed in an overseas market.
On February 17, 2023, the CSRC also issued the Notice on Administration of the Filing of Overseas Offering and Listing by Domestic Companies
and held a press conference for the release of the Overseas Listing Trial Measures, which, among others, clarified that the companies
in mainland China that have been listed overseas before March 31, 2023 are not required to file with the CSRC immediately, but these
companies should complete filing with the CSRC for their financing activities in accordance with the Overseas Listing Trial Measures.
Based on the foregoing, as an issuer that has been listed overseas before the effective date of the Overseas Listing Trial Measures,
we are not required to complete filing with the CSRC for our offshore offerings prior to the effective date of the Overseas Listing Trial
Measures, but we may be subject to the filing requirements for our financing activities under the Overseas Listing Trial Measures. Any
securities offerings and listings outside of mainland China by our Company after the effective date of the Overseas Listing Trial Measures,
including but not limited to follow on offerings, secondary listings, and going private transactions, will be subject to the filing requirements
with the CSRC under the Overseas Listing Trial Measures, and we cannot assure you that we will be able to comply with such filing requirements
in a timely manner, or at all. Since the Overseas Listing Trial Measures was newly promulgated, the interpretation, application and enforcement
of the Overseas Listing Trial Measures remain unclear. We cannot assure you that we will be able to complete such filing in a timely
manner and fully comply with such rules to maintain the listing status of our ADSs and/or other securities, or to conduct any securities
offerings in the future.
80
As of the date of this annual report, we have not received any inquiry,
notice, warning, sanctions or regulatory objection from the CSRC in connection with requirements of obtaining prior approval for the
listing of our ADSs. However, since the Overseas Listing Trial Measures was newly promulgated, the interpretation, application and enforcement
of the Overseas Listing Trial Measures remain unclear. We cannot assure you that we will be able to complete any required filing in a
timely manner and fully comply with such rules to maintain the listing status of our ADSs and/or other securities, or to conduct any
securities offerings in the future.
On April 2, 2022, the CSRC released the revised Provisions on Strengthening
Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments) ,
or the Draft Archives Rules. On February 24, 2023, the CSRC, jointly with other relevant governmental authorities, issued the Provisions
on Strengthening the Confidentiality and Archive Management Work Relating to the Overseas Securities Offering and Listing by Domestic
Companies (the "Confidentiality Provisions"), which became effective on March 31, 2023. The Confidentiality Provisions requires,
among others, that companies based in mainland China seeking to offer securities in overseas markets, either directly or indirectly,
shall establish the confidentiality and archives system, and shall complete approval and filing procedures with competent authorities,
if such companies or their overseas listing entities provide or publicly disclose documents or materials involving state secrets and
work secrets of PRC government agencies to relevant securities companies, securities service institutions, overseas regulatory agencies
and other entities and individuals. It further stipulates that providing or publicly disclosing documents and materials which may adversely
affect national security or public interests, and accounting files or copies shall be subject to corresponding procedures in accordance
with relevant laws and regulations. Given the Confidentiality Provisions were recently promulgated, there remain substantial uncertainties
about how these provisions will be interpreted, or implemented and how it will affect our operations or future securities offerings.
As of the date of this annual report, we have not provided files or
copies of files outside China that involve national secrets, national security, vital interests, or have important preservation value
to the nation and society. However, we cannot guarantee that relevant government agencies of China, including the CSRC, will share the
same opinion as ours.
Summaries of the National Conference for the Work of Courts
in the Trial of Civil and Commercial Cases
Summaries of the National Conference for the Work of Courts in the
Trial of Civil and Commercial Cases circulated by the Supreme People's Court On November 8, 2019 ("Summaries"), provides
that, in the trust documents and relevant contracts, the beneficiaries are divided into different categories, such as preferential beneficiaries
and inferior beneficiaries, and it is stipulated that the preferential beneficiaries will subscribe for trust plan shares with their
asset, and after the trust expires, the inferior beneficiaries bear the obligation to make up the difference between the benefit obtained
from the trust property by the preferential beneficiaries plus its investment principal and the agreed proceeds. The people's court
shall legally support preferential beneficiaries' claims for the liability borne by inferior beneficiaries as agreed. The agreement
on the rights and obligations of different types of beneficiaries in the trust documents will not affect the determination of the legal
trust relationship between the beneficiary and the trustee. In addition, the Summaries provided for the nature of credit enhancement
documents, i.e., where any party which are not parties to the trust contract provides similar commitment documents such as making up
differences by this third party, fulfillment of the repurchase obligations at maturity instead, and liquidity support as credit enhancement
measures, the contents of which comply with the provisions of the law on guarantees, the people's court shall determine that a
guarantee contractual relationship is established among the parties. If the contents do not comply with the provisions of the law on
guarantees, the corresponding rights and obligations shall be determined according to the specific content of the commitment document,
and the corresponding civil liability shall be determined according to the facts of the case.
81
Notice on Further Regulating Financial Marketing and Publicity
Activities
The People's Bank of China, the China Banking Insurance Regulatory
Commission, the China Securities Regulatory Commission, and the State Administration of Foreign Exchange have issued notices on further
regulating financial marketing and publicity activities on December 20, 2019, which took effect on January 25, 2020. It is stipulated
it is illegal to engage in financial business without a business license or beyond the permitted business scope, and market entities
that fail to obtain relevant financial business qualifications shall not conduct marketing and publicity activities relating to the financial
business, except that information release platforms and media entrusted by relevant financial business qualifications carry out financial
marketing and publicity activities for them.
As this notice is relatively new, in the cooperation agreements we
signed with the trust companies, there is no specific agreement on the marketing and publicity activities of financial products. At present,
we have started to communicate with the trust partners on financial product marketing and publicity issues. We will improve the cooperation
model to ensure that marketing activities and those of our sales partners are legal and in compliance.
Administrative Measures for Online Marketing of Financial
Products (Draft for Comment)
The "Administrative Measures for Online Marketing of Financial
Products (Draft for Comment)" was published on December 31, 2021, requiring financial institutions to conduct online marketing
of financial products on their own or entrust Internet platform companies to conduct online marketing of financial products within the
scope of business permitted by the financial regulatory authorities. Any institution or individual is prohibited from providing online
marketing for illegal financial activities such as illegal fundraising.
4.C. Organizational Structure
The following diagram illustrates our corporate structure with material
subsidiaries as of the date of this annual report. For a complete list of our subsidiaries, please refer to note 1 to our consolidated
financial statements as of and for the years ended December 31, 2020, 2021 and 2022 included elsewhere in this annual report. We subscribe
to the subordinated units of the trust products issued under long-term trust plans through three of our wholly owned subsidiaries, Guangzhou
Heze Information Technology Co., Ltd., Guangzhou Chengze Information Technology Co., Ltd., and Shenzhen Fanhua United Investment Group
Co., Ltd. From an accounting perspective, we are exposed to the risk and variability of returns from activities of the trust plans and
are therefore required to consolidate the financial results of the trust plans, including the results related to the senior units. Financial
data of a trust plan is consolidated as if the trust plan is a subsidiary. Income and expenses of the trust plans are consolidated on
our consolidated statements of comprehensive income while assets and liabilities of the trust plans are consolidated on our consolidated
balance sheet. We do not, however, have ownership interest in the trust plans from a legal perspective other than in the subordinated
units that account for only a portion of the total outstanding amount of the trust plans. For details of the contractual structural leverage
ratio of each trust plan, please refer to "Item 4. Information of the Company—B. Business Overview—Our Funding Model."
Notes:
(1)
Guangzhou Chengze Information Technology Co., Ltd. is one of the entities
                                            through which we subscribe to subordinated units of trust products.
(2)
Shenzhen Fanhua United Investment Group Co., Ltd. operates our loan services
                                            business through various subsidiaries in the PRC and operates our small loan business through
                                            Beijing Fanhua Micro-credit Company Limited and Shenzhen Fanhua Micro-credit Co., Ltd.
82
4.D. Property, Plant and Equipment
Our corporate headquarters are located in Guangzhou, China, where
we lease 1,855 square meters of office space pursuant to a lease expiring in September 2022. We also maintain leased properties ranging
from 5 square meters to 1,855 square meters in over 50 cities. The lease term varies from three months to five years. We believe that
our existing facilities are generally adequate to meet our current needs, but we expect to seek additional funding as needed to accommodate
future growth.
ITEM 4A. UNRESOLVED STAFF COMMENTS
None.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
You should read the following discussion and analysis of our financial
condition and results of operations in conjunction with our consolidated financial statements and the related notes included elsewhere
in this annual report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results and
the timing of events could differ materially from those anticipated in these forward-looking statements as a result of various factors,
including those we describe under "Item 3.D. Risk Factors" and elsewhere in this annual report.
5.A. Operating Results
Overview
We are a leading home equity loan service provider in China. We facilitate
loans by connecting MSE owners with our funding partners. Our primary target borrower segment is MSE owners who own real properties in
Tier 1 and Tier 2 and other major cities in China.
We have established a national network of 87 branches and sub-branches
in over 50 cities in China. We acquire our borrowers primarily through our sales partners under trust lending model. In 2020, 2021 and
2022, over 99.5% of our borrowers who obtained loans from trust companies were introduced to us by our sales partners under the collaboration
model. For details, please refer to "Item 4. Information on the Company—B. Business Overview—Our Products—Collaboration
Model." Under trust lending model, we originated home equity loans with an aggregate principal amount of RMB8.8 billion, RMB12.8
billion and RMB 12.2 billion in 2020, 2021 and 2022, respectively. The loan origination volume in 2022 under the commercial bank partnership
was RMB2,533.3 million and the outstanding loan principal was RMB2,469.6 million as of December 31, 2022. We originated home equity loans
for 17,703 and 22,060 borrowers in 2020 and 2021, respectively, representing an increase of 24.6%. In 2022, we originated home equity
loans for 23,923 (including 3,891 under the commercial bank partnership) borrowers, representing an increase of 8.4% from 2021. In 2020,
2021 and 2022, the average tenor of the home equity loans we originated was 24, 15 and 12 months with the weighted average effective
interest rate (inclusive of interests and financing service fees, if applicable, payable by the borrowers) of 17.3%, 16.5% and 17.2%
per annum, respectively. The interest rates of our loan products under commercial bank partnership ranged from 9.0% to 15.5%
Our practical risk assessment procedure focuses on both credit risks
of borrowers and quality of the collateral. We have also established guidelines on characteristics and quality of collateral, including,
among others, an LTV ratio capped at 70%. The weighted average LTV ratio of the home equity loan origination volume was 54.6%, 58.5% and
60.0% in 2020, 2021 and 2022, respectively. As of December 31, 2020, 2021 and 2022, our NPL ratio was 12.89%, 11.93% and 16.95%, respectively.
Charge-off ratio in 2020, 2021 and 2022 was 4.06%, 0.85% and 0.43%, respectively.
Our total operating income decreased from RMB687.7 million in 2020
to RMB176.2 million in 2021, representing a decrease of 74.4%, and increased to RMB749.2 million in 2022, representing an increase of
325.2%. Our net income decreased from RMB114.9 million in 2020, representing a decrease of 43.2% to RMB65.2 million in 2021, and increased
to RMB135.3 million in 2022, representing an increase of 107.5%.
83
Under the contractual arrangements with our trust company partners,
we subscribe to subordinated units of trust plans and provide services to trust plans. As a result, we are entitled to (i) the investment
return payable to us as subordinated unit holder and (ii) a performance-based service fee up to 7% per annum of the size of trust plans
payable to us for our services provided to trust plans. Our cost of the subordinated units as measured by the investment amount was RMB3,045.2
million, RMB2,919.4 million and RMB2,627.4 million (US$380.9 million) as of December 31, 2020, 2021 and 2022, respectively. Our investment
return from the subordinated units was RMB658.8 million, RMB578.7 million and RMB381.3 million (US$55.3 million) in 2020, 2021 and 2022,
respectively.
As a subordinated unit holder, we are exposed to variability of returns
from activities of trust plans and are therefore required to consolidate the financial results of trust plans on our consolidated financial
statements, including those of the senior units. Therefore, the service fee charged to trust plans is considered inter-company transaction
and is eliminated together with management service expenses of trust plans for accounting purposes. In 2020, 2021 and 2022, we generated
service fees charged to trust plans of RMB505.9 million, RMB440.1 million and RMB446.0 million (US$ 64.7 million), respectively.
Key Factors Affecting Our Results of Operations
Ability to maintain and expand borrower base
Due to the nature of our business, our ability to increase our loan
origination volume largely depends on our ability to acquire new borrowers for the loans we facilitate. Since December 2018, we have
been acquiring borrowers primarily through our sales partners under the collaboration model. For details, please refer to "Item
4. Information on the Company—B. Business Overview—Our Products—Collaboration Model." Our sales partners are
typically local loan facilitators who have their own sales and marketing teams, they use such teams to reach to qualified candidates
and recommend them to our platform. In 2020, 2021 and 2022, over 99.5% of our borrowers were introduced to us by our sales partners under
the collaboration model. We originated home equity loans for 17,703, 22,060 and 23,923 (including 3,891 under the commercial bank partnership)
borrowers in 2020, 2021 and 2022, respectively. Our results of operations and ability to sustain and increase loan volumes will depend
on our ability to maintain and expand borrower base.
Effective risk management
Our operating income and profitability are largely affected by our
and our trust company partners' risk management capabilities. We are exposed to credit risks under the trust lending model as a
result of subscription of subordinated units and credit strengthening services and being a lender under the direct lending model. As
such, the ability of us and our trust company partners to accurately assess default risks through our and our trust company partners'
credit analysis system directly affects our loan delinquency ratios and profitability. Any significant weakness in our or our trust company
partners' risk management system will directly or indirectly result in an increase in delinquency of loans originated by us or
a failure of our loan servicing to recover losses. For a detailed discussion of our risk management, please refer to "Item 4. Information
of the Company—B. Business Overview—Risk Management."
Relationship with our funding partners
Our collaborative relationships with our funding partners are critical
to our operations. We mainly collaborate with our trust company partners through trust lending model. In 2020, 2021 and 2022, 100%, 99.8%
and 82.7%of our total home equity loan origination volume was originated under trust lending model, respectively. The availability of
funds from our funding partners affects our liquidity and the amount of loan transactions that we can facilitate, which directly affects
our profitability. Terms of our collaboration agreements with our funding partners generally set the financing costs of our home equity
loan business. Our financing costs for senior units excluding the trust administrative fees, ranged from 6.0% to 11.5% per annum of the
issuance number of senior units in 2022. The interest charged by trust company partners to our borrowers affects our profitability. If
we fail to maintain or deepen our existing relationships with our trust company partners, our liquidity and profitability may be adversely
affected. A general deterioration of our relationships with our funding partners will result in a significant decrease in liquidity or
in our service fees charged to trust plans, and we may not be able to secure alternative financing on terms acceptable to us or our borrowers,
or at all. This may result in a decrease in the volume of loans we facilitate, which has a material adverse impact on our business and
results of operations. For detailed discussion relating to our relationship with our funding partners, please refer to "Item 4.
Information on the Company—B. Business Overview—Our Funding Model."
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China's macroeconomic environment
Our business depends on the growth of MSE owners' demand for
home equity loan financing, which in turn depends on China's macroeconomic environment. General economic factors, including the
real estate prices, credit environment for MSEs, interest rate environment and unemployment rates, may affect borrowers' willingness
to seek home equity loans and/or repayment capability. For example, significant increase in interest rates could cause prospective borrowers
to defer obtaining loans as they wait for interest rates to decrease. Additionally, a slowdown in the economy, resulting in a rise in
the unemployment rate and/or a decrease in real income, may affect MSEs' revenue. All these factors may affect borrowers'
repayment capability and their willingness to seek loans, which may potentially affect delinquency ratios. Further, the COVID-19 outbreak
had and may continue to have a negative impact on China's macroeconomic environment which may continue to result in a material
negative impact on our business and results of operations. For details, please see "Item 3.D. Key Information—Risk Factors—Risks
Related to Our Business—We face risks related to natural disasters, health epidemics and other outbreaks of contagious diseases."
Government regulations and policies
The regulatory environment for China's financial market is developing
and evolving, creating both challenges and opportunities that could affect our financial performance. We must adapt to developments in
regulations and policies and may have to adjust our business practices, funding structures and product offerings from time to time. For
an overview of applicable laws and regulations and risks relating to our business, see the sections headed "Item 4. Information
of the Company—B. Business Overview—Regulation" and "Item 3. Key Information—D. Risk Factors."
Loan Performance Data and Trend Analysis
Our operating results and financial condition are directly affected
by the performance of the loans we originate. We focus mainly on the NPL ratio as home equity loans over 90 days past-due are more difficult
and time-consuming to recover.
As of
    and for the Year Ended
December 31,
Loan performance metrics
    (including loans held for sale)*
2020
2021
2022
Delinquency ratio
(1)
23.70
%
26.22
%
33.22
%
NPL ratio
(2)
12.89
%
11.93
%
16.95
%
Allowance ratio
(3)
7.06
%
10.98
%
9.23
%
NPL provision coverage ratio
(4)
54.76
%
92.03
%
52.27
%
As of
    and for the Year Ended
December 31,
Loan performance metrics
    (excluding loans held for sale)
2020
2021
2022
Delinquency ratio
(1)
17.22
%
16.17
%
18.26
%
NPL ratio
(2)
6.06
%
2.13
%
1.12
%
Allowance ratio
(3)
6.71
%
10.36
%
8.22
%
NPL provision coverage ratio
(4)
110.68
%
487.21
%
720.38
%
Notes:
(1)
Delinquency ratio represents total balance of outstanding loan principal
                                            for which any installment payment is one or more days past-due as a percentage of the outstanding
                                            loan principal as of the date.
(2)
NPL ratio represents total balance of outstanding loan principal for
                                            which any installment payment is over 90 calendar days past-due as a percentage of the outstanding
                                            loan principal as of the date.
(3)
Allowance ratio represents amount of allowance for loan principal, interest
                                            and financing service fee receivables as a percentage of the outstanding loan principal,
                                            interest and financing service fee receivables as of the date.
(4)
NPL provision coverage ratio represents amount of allowance for loan
                                            principal, interest and financing service fee receivables as a percentage of the outstanding
                                            balance of NPL principal as of the date.
*
Certain December 31, 2020
                                            and 2021 amounts in loans held-for-sale have been corrected for an immaterial error identified.
                                            Please refer to Note 2(w) to Consolitated Financial Statement on page F-31.
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Our delinquency ratio has increased from 23.70% as of December 31,
2020 to 26.22% as of December 31, 2021, and further increased to 33.22% as of December 31, 2022. The increase in the delinquency ratio
from December 31, 2021 to December 31, 2022 was due to the fact that the borrowers' ability to service their debts was negatively
affected in 2022 due to strict prevention and control policies taken to contain the COVID-19 pandemic.
Our NPL ratio had decreased from 12.89% as of December 31, 2020 to
11.93% as of December 31, 2021, and increased to 16.95% as of December 31, 2022. The increase of NPL ratio from December 31, 2021 to
December 31, 2022 was primarily attributable to the fact that the pandemic prevention and control measures taken in 2022 has negatively
impacted the efficiency of bad debt collection and legal proceedings against borrowers at default.
Our allowance ratio has increased from 7.06% as of December 31, 2020
to 10.98% as of December 31, 2021, and decreased to 9.23% as of December 31, 2022, while our NPL provision coverage ratio has increased
from 54.76% to 92.03% and decreased to 52.27% as of the same dates. Decreases in allowance ratio and NPL provision coverage ratio from
December 31, 2021 to December 31, 2022 were primarily attributable to the decrease in the amount of loans charged off resulting form
an increase in the amount of loans held-for-sale.
In 2020, the Company revised its charge-off policy. Upon the revision,
the Company considers loans principal, interest and financial service fee receivables of loans that are 180 days past due uncollectable
and the balance shall be charged down to net realizable value (fair value of collaterals, less estimated cost to sell), unless such loans
are well-secured and already in the process of re-collection. The tables below illustrate the delinquency and NPL ratios for loans introduced
under the collaboration model and the loans under the traditional facilitation model by first lien and second lien as of December 2020,
2021 and 2022, respectively, presented based on the revised charge-off policy.
As of
    December 31, 2022
(Including loans held
    for sale)
The
traditional
facilitation
model
The
collaboration
model
Total
First lien
Delinquency
    Ratio
94.87
%
39.77
%
40.08
%
NPL Ratio
87.44
%
21.15
%
21.59
%
Second lien
Delinquency Ratio
36.43
%
30.92
%
30.98
%
NPL Ratio
36.41
%
14.86
%
15.09
%
As of
    December 31, 2022
(Excluding loans held
    for sale)
The
traditional
facilitation
model
The
collaboration
model
Total
First lien
Delinquency
    Ratio
71.82
%
21.83
%
21.84
%
NPL Ratio
30.99
%
1.06
%
1.11
%
Second lien
Delinquency Ratio
2.92
%
17.69
%
17.57
%
NPL Ratio
2.89
%
1.14
%
1.16
%
As of
    December 31, 2021
(Including loans held
    for sale)*
The
traditional
facilitation
model
The
collaboration
model
Total
First lien
Delinquency
    Ratio
76.88
%
31.65
%
32.62
%
NPL Ratio
60.67
%
15.62
%
16.59
%
Second lien
Delinquency Ratio
77.87
%
21.23
%
22.07
%
NPL Ratio
67.30
%
8.04
%
8.92
%
*
Certain December 31, 2021
                                            amounts in loans held-for-sale have been corrected for an immaterial error identified. Please
                                            refer to Note 2(w) to Consolitated Financial Statement on page F-31.
86
As of
    December 31, 2021
(Excluding loans held
    for sale)
The
traditional
facilitation
model
The
collaboration
model
Total
First lien
Delinquency Ratio
49.66
%
18.93
%
19.29
%
NPL Ratio
14.39
%
2.96
%
3.10
%
Second lien
Delinquency Ratio
46.04
%
14.09
%
14.31
%
NPL Ratio
20.27
%
1.42
%
1.55
%
As of
    December 31, 2020
(Including loans held
    for sale)*
The
traditional
facilitation
model
The
collaboration
model
Total
First lien
Delinquency Ratio
47.73
%
19.24
%
25.49
%
NPL Ratio
39.01
%
8.12
%
14.90
%
Second lien
Delinquency Ratio
44.26
%
16.61
%
22.33
%
NPL Ratio
32.92
%
5.71
%
11.34
%
*
Certain December 31, 2020
                                            amounts in loans held-for-sale have been corrected for an immaterial error identified. Please
                                            refer to Note 2(w) to Consolitated Financial Statement on page F-31.
As of
    December 31, 2020
(Excluding loans
    held for sale)
The
traditional
facilitation
model
The
collaboration
model
Total
First lien
Delinquency Ratio
35.21
%
14.07
%
18.18
%
NPL Ratio
24.39
%
3.06
%
7.21
%
Second lien
Delinquency Ratio
33.34
%
12.66
%
16.51
%
NPL Ratio
19.82
%
1.86
%
5.20
%
We have ceased facilitating loans under the traditional facilitation
model starting from December of 2018 and started to transfer loans under the traditional facilitation model to third parties in bulk
in 2021, which has caused the delinquency ratio and NPL ratio of loans under the traditional facilitation model to rise from 2020 to
2022. As of December 31, 2022, loans under the traditional facilitation model are all transfered by third parties in installment and
classified as loans held for sale. The balance of outstanding loan principal under the traditional facilitation model was relatively
small and constitue an immaterial proportion to the overall loan portfolio. We believe such ratios do not accurately reflect the loan
performance and could no longer be used as a measure of our risk assessment and post-loan management abilities.
87
The following tables illustrate the amount of loans (excluding loans
held for sale) we facilitate by collateral type for which we have an allowance determined based on the fair value of collateral, less
cost to sell and the related allowance for credit losses for each applicable collateral category as of December 31, 2020, 2021 and 2022,
respectively.
As of
    December 31, 2022
(RMB in thousands)
Loan
Allowance
Allowance
Ratio
Apartment
86,717
12,248
14.1
%
House
-
-
-
Commercial Property
15,847
-
-
Total
102,564
12,248
11.9
%
As of
    December 31, 2021
(RMB in thousands)
Loan
Allowance
Allowance
Ratio
Apartment
193,021
60,308
31.2
%
House
3,824
729
19.1
%
Commercial Property
3,159
443
14.0
%
Total
200,004
61,480
30.7
%
As of
    December 31, 2020
(RMB in thousands)
Loan
Allowance
Allowance
Ratio
Apartment
484,354
64,125
13.2
%
House
18,520
2,866
15.5
%
Commercial Property
45,274
5,007
11.1
%
Total
548,148
71,998
13.1
%
Increases in allowance ratio from December 31, 2020 to December 31,
2021 were primarily attributable to the current expected credit loss (CECL) model that took into account the COVID-19 pandemic's
continuous impact on the repayment abilities of borrowers. Decreases in allowance ratio from December 31, 2021 to December 31, 2022 were
primarily attributable to the increase of delinquent loans that were repurchased by sales partners by installment.
We incur losses and charge-off loans when we determine that the loan
is uncollectable. We consider loans principal, interest and financing service fee receivables meeting any of the following conditions
as uncollectible and the balance shall be written down to net realizable value (fair value of collaterals, less estimated cost sell):
(i)
death of the borrower;
(ii)
identification of fraud, and the fraud is officially reported to and
                                            filed with relevant law enforcement departments;
(iii)
sales of loans to third parties;
(iv)
settlement with the borrower, where the Company releases irrecoverable
                                            loans through private negotiations with the borrower where the borrower cannot repay the
                                            loan in full through self-funding or voluntary sale of the collateral;
(v)
disposal through legal proceedings, including but not limited to online
                                            arbitrations, judicial auctions and court enforcements; or
(vi)
loans are 180 days past due unless both well-secured and in the process
                                            of collection.
The following table sets forth our charge-off ratio for the periods
indicated.
For
    the Year Ended December 31,
2020
2021
2022
Charge-off ratio
4.06
%
0.85
%
0.43
%
Our charge-off ratio was 4.06%, 0.85% and 0.43% in 2020, 2021 and
2022. The increase of charge-off ratio in 2020 was mainly attributable to the revision of the Company's charge-off policy in 2020
as mentioned above. We continue to dispose of collateral through judicial or arbitration proceedings and utilize other quick disposal
plans available to manage NPLs. Meanwhile, we also transfer loans to third parties in exchange for proceeds upfront to quickly recover
overdue loans, and the related gains or losses from such sale will be accounted for as other gains/(losses) in our consolidated statements
of comprehensive income.
88
The tables below set forth the amortized cost of the loans (including
loans held for sale) that were resolved by the different charge-off scenario above, the allowances recorded on those loans at the time
of charge-off, additional provision for loan losses recorded at the time of the time of the scenario, in addition to the charge-off amounts
as of December 31, 2020, 2021 and 2022:
As of
    December 31, 2022
Charge-off
Amortized
cost of the
loans
Allowance
Additional
                                            provision
(1)
RMB in thousands
Sales of loans to third parties
(2)
4,943
12,518
15,208
(3,861
)
Settlement with the borrower
50
83
-
-
Disposal through legal proceedings
7
679
-
-
Death of the borrower
-
-
-
-
Identification of fraud
-
-
-
-
Loans that are 180
    days past due
(3)
41,599
50,879
195,582
(10,106
)
Total
46,600
63,388
211,552
(13,966
)
As of
    December 31, 2021*
Charge-off
Amortized
cost of the
loans
Allowance
Additional
provision
(1)
RMB in thousands
Sales of loans to third parties
(2)
10,610
67,409
26,858
(643
)
Settlement with the borrower
2,827
94,074
16,385
(3,196
)
Disposal through legal proceedings
5,633
53,258
1,732
(1,514
)
Death of the borrower
-
-
-
-
Identification of fraud
-
-
-
-
Loans that are 180
    days past due
(3)
67,615
1,041,370
-
-
Total
86,685
1,256,111
44,975
(5,353
)
As of
    December 31, 2020*
Charge-off
Amortized
cost of the
loans
Allowance
Additional
                                            provision
(1)
RMB in thousands
Sales of loans to third parties
(2)
32,654
44,173
21,081
(2,550
)
Settlement with the borrower
12,017
71,333
24,699
(4,232
)
Disposal through legal proceedings
8,610
17,437
16,170
(1,877
)
Death of the borrower
-
-
-
-
Identification of fraud
-
-
-
-
Loans that are 180
    days past due
(3)
374,798
1,128,557
-
-
Total
428,079
1,261,500
61,950
(8,659
)
Notes:
*
Certain December 31, 2020
                                            and 2021 amounts in loans held-for-sale have been corrected for an immaterial error identified.
                                            Please refer to Note 2(w) to Consolitated Financial Statement on page F-31.
(1)
Additional provisions refer to the total amount of additional losses
                                            of individual loans, which is beyond what was already recorded in the allowance for credit
                                            losses at the point of charge-off in different scenarios.
(2)
The loans sold to third parties are generally the ones that are over
                                            90 days past due, which we have made a commercially reasonable effort to collect. In order
                                            to efficiently allocate resources and timely collect funds on impaired loans, we believe
                                            it is effective and efficient to sell certain loans that are over 90 days past due to third
                                            parties as we can save relevant costs that may occur during the time-consuming collection
                                            process. The delinquent loans are generally sold in bulk. The purchasers are all third parties
                                            and consist of (i) sales partners who choose to repurchase the delinquent loans they introduced
                                            according to their agreements signed with us, and (ii) local investment asset management
                                            companies, experienced law firms or other entities with legal, collection and disposal teams
                                            to handle delinquent loans and relevant collaterals. We have two approaches for the sale
                                            of loans to third parties, including (i) the sale that we do not retain any rights or obligations
                                            and such loans will be charged off from our balance sheet at the point of the sale and (ii)
                                            the sale that we retain certain rights or obligations such as an obligation to repurchase
                                            the loans after a certain period, and such loans sold are recorded as borrowings under agreements
                                            to repurchase in our balance sheet.
(3)
In 2020, the Company revised its charge-off policy. Upon the revision,
                                            the Company considers loans principal, interest and financial service fee receivables of
                                            loans that are 180 days past due uncollectable and the balance shall be charged down to net
                                            realizable value (fair value of collaterals, less estimated cost to sell), unless such loans
                                            are well-secured and already in the process of recollection.
89
Selected Income Statement Items
Total operating income
Our total operating income represents the sum of (i) net interest
and fees income after collaboration cost and (ii) total non-interest income. Net interest and fees income after collaboration cost represents
total interest and fees income netting of total interest and fees expenses and collaboration cost for sales partners. In 2020, 2021 and
2022, we generated net interest and fees income after collaboration cost of RMB708.4 million, RMB614.6 million and RMB683.3 million (US$99.1
million), respectively. Total non-interest income/(losses) comprises net gains/(losses) on sales of loans, net realized gains on sales
of investments and other gains, net. In 2020, 2021 and 2022, we generated total non-interest income of RMB206.9 million, non-interest
losses of RMB438.4 million and non-interest income of RMB65.9 million (US$9.6 million), respectively.
Under the contractual arrangements with our trust company partners,
we subscribe to subordinated units of the trust plans and also provide services to trust plans. As a result, we are entitled to (i) the
investment return payable to us as subordinated holder and (ii) a performance-based service fee of up to 7% per annum of the size of
trust plans payable to us for our services provided to trust plans. As subordinated unit holder, we are exposed to variability of returns
from activities of trust plans and are therefore required to consolidate the financial results of trust plans. Therefore, the service
fee charged to trust plans is considered inter-company transaction and is eliminated together with service expenses of trust plans for
accounting purposes. As a result, the total payments to us under our trust lending model, together with the interest spread under our
small loan direct lending model and certain non-interest income, is reflected on our consolidated financial statements as total operating
income. The following table sets forth a breakdown of our total operating income for the periods indicated.
For
    the Year Ended December 31,
2020*
2021*
2022
RMB
RMB
RMB
US$
Interest
    and fees income
(1)
1,854,823,409
1,815,773,980
1,731,352,575
251,022,527
Interest
    and fees expenses
(2)
(731,315,365
)
(775,565,615
)
(784,776,537
)
(113,781,902
)
Net interest and fees income
1,123,508,044
1,040,208,365
946,576,038
137,240,625
Net
    revenue under the commercial bank partnership model
(3)
-
107,072
57,551,005
8,344,111
Collaboration cost for sales partners
(415,104,428
)
(425,736,650
)
(320,826,549
)
(46,515,477
)
Net interest and fees income after collaboration cost
708,403,616
614,578,787
683,300,494
99,069,259
Non-interest income/(losses)
Realized gains on sales of investments, net
20,153,659
19,170,436
20,566,672
2,981,887
Net losses on sales of loans
(50,606,487
)
(479,584,775
)
(44,554,948
)
(6,459,860
)
Other
    gains, net
(1) (4)
9,760,472
22,061,842
89,914,038
13,036,310
Total non-interest (losses)/income
(20,692,356
)
(438,352,497
)
65,925,762
9,558,337
Total operating income
687,711,260
176,226,290
749,226,256
108,627,596
Note:
*
We
                                            have identified an immaterial error and corrected the amounts of loans held-for-sale, guaranteed
                                            assets, provision for credit losses and net gains on sales of loans in the comparative period
                                            presentation. For details, see Note 2(w) to Consolitated Financial Statements on page F-31.
(1)
Interest and fees income
                                            include (i) interest and financing service fees on loans, (ii) interest income on debt securities,
                                            (iii) interest income charged to sales partners, and (iv) interest on deposits with banks.
                                            The interest income charged to sales partners in 2020 and 2021 was immaterial and was previously
                                            presented as "fund possession fee" under "other gains/(losses), net".
                                            The interest income on debt securities was nil in 2020 and 2021.
(2)
Interest and fees expenses
                                            refer to interest expenses on interest-bearing borrowings.
(3)
The Company has started
                                            to collaborate with commercial banks since 2021 and such collaboration grew and scaled in
                                            the second half of 2022.
(4)
Certain provision for
                                            guarantee liabilities in 2021 was immaterial and presented under "other gains, net".
                                            Provision for guarantee liabilities has been reclassified from "other gains, net"
                                            to "provision for credit losses" in 2022.
90
Interest and fees income
Interest and financing service fees on loans
Our interest and financing service fees on loans represents interest
payment from borrowers under our trust lending model and direct lending model, and historical financing service fee charged on borrowers
for the loan services we provide. Financing service fee is deferred and amortized over the average life of the related loans using the
effective interest method. Due to recent regulatory changes, we ceased charging such financing service fee starting from August 2017.
Interest income on debt securities
Interest income on debt securities is calculated by applying the effective
interest rate to the gross carrying amount of debt securities to unrelated companies plus any interest received from corporate debt securities.
Interest income charged to sales partners
In the event of a loan defaults and the sales partner chooses to repurchase
such loan in installments, the Company charges certain percentage of the loan as the interest income charged to sales partners. Interest
income charged to sales partners refers to the cost of and interest on the partner's 40% repayment and instalment repurchase options
under collaboration model.
Interest on deposits with banks
Our interest on deposits with banks represents interest generated
from our cash deposits with banks.
Interest and fees expenses
We recorded interest and fees expenses of RMB731.3 million, RMB775.6
million and RMB784.8 million (US$113.8 million) in 2020, 2021 and 2022, respectively.
Our interest and fees expenses consists of interest expenses on interest-bearing
borrowings and interest expenses paid to related parties. In 2020, 2021 and 2022, the interest expenses on interest-bearing borrowings
was RMB731.3 million, RMB775.6 million and RMB784.8 million (US$113.8 million), accounting for 100%, 100% and 100%, respectively, of
our total interest and fees expenses for the same periods.
Interest expenses on interest-bearing borrowings
Interest expenses on interest-bearing borrowings consists primarily
of financing costs payable to (i) senior unit holders, (ii) third parties to whom we transferred rights to earnings in certain of our
subordinated units in trust plans with a repurchase arrangement, and (iii) third parties to whom we transferred certain rights to earnings
in loans principal, interest and financing service fee receivables with a repurchase arrangement.
Net revenue under the commercial bank partnership model
Net revenue under the commercial bank partnership model represents
fees charged to commercial banks for services including introducing borrowers, initial credit assessment, facilitating loans from the
banks to the borrower and providing technical assistance to the borrower and banks, net of fees paid to third-party insurance company.
Revenues from loan facilitation services (covering matching of commercial
banks to borrowers and facilitating the execution of loan agreement between commercial banks and borrowers) are recognized at the time
a loan is originated, at which time the facilitation service is considered completed. Revenues from post-origination services (covering
cash processing services and collection services) are recognized on a straight-line basis over the term of the underlying loans as the
services are provided.
The Group provided guarantee services for its off-balance sheet loans
under the commercial bank partnership model. As a result, at inception of the guarantee, the Group recognized a stand-ready guarantee
liability under ASC 460 at fair value with an associated guarantee receivable. Subsequently, the stand-ready guarantee is released into
gains from guarantee liabilities on a straight-line basis over the term of the guarantee.
See Note 20 in our Consolidated Financial Statements for more details.
Collaboration cost for sales partners
Collaboration cost for sales partners represents sales incentives
paid to sales partners. It has decreased from RMB425.7 million in 2021 to RMB320.8 million (US$46.5 million) in 2022, primarily due to
a lower average fee rate the Company paid to sales partners in the fiscal year of 2022 as compared to the same period of 2021. The fee
rate under collaboration model varies based on different collaboration model types and the terms of the loan.
91
Non-interest income/(losses)
Realized gains on sales of investments
Realized gains on sales of investments consist of realized gains and
losses from the disposal of investment securities, presented on a net basis.
Net gains/(losses) on sales of loans
Net gains/(losses) on sales of loans refer to any gains and losses
from the disposal of loans.
Other gains, net
Other gains, net mainly consists of gains of confiscating CRMPs. Particularly,
in the event of a loan defaults and the sales partner chooses to repurchase such loan in installments, the Company charges certain percentage
of the loan as the interest income charged to sales partners. The interest income charged to sales partners was previously presented
as "fund possession fee" under "other gains/(losses), net", and is separately listed as "interest income
charged to sales partners" since third quarter of 2022 due to an increase in its absolute amount.
Operating expenses
Our operating expenses consist of employee compensation and benefits,
share-based compensation expenses, taxes and surcharges, operating lease cost, offering expenses and other expenses.
The following table sets forth our operating expenses, in absolute
amounts and as percentages of total operating income, for the periods indicated.
For
    the Year Ended December 31,
2020
2021
2022
RMB
%
RMB
%
RMB
US$
%
Operating expenses
Employee compensation
    and benefits
190,374,014
27.7
%
211,168,519
119.8
%
197,035,872
28,567,516
26.3
%
Share-based compensation expenses
62,073,367
9.0
%
18,766,367
10.6
%
5,774,266
837,190
0.8
%
Taxes and surcharges
49,452,609
7.2
%
35,729,101
20.3
%
35,890,761
5,203,671
4.8
%
Operating lease cost
21,719,042
3.2
%
14,764,364
8.4
%
13,966,943
2,025,016
1.9
%
Other
    expenses
124,042,182
18.0
%
100,500,388
57.0
%
85,889,497
12,452,807
11.5
%
Total
    operating expenses
447,661,214
65.1
%
380,928,739
216.2
%
338,557,339
49,086,200
45.2
%
Other expenses primarily consist of (i) advertising and promotion
expenses; (ii) litigation fees; (iii) consulting fees; (iv) research and development expenses; (v) office and commute expenses,
which mainly include expenses relating to office renovation, office facility expansion and daily commute; (vi) attorney fees and (vii)
entertainment and traveling expenses.
The following table sets forth breakdown of other expenses in absolute
amounts and as percentages of total operating income, for the periods indicated.
For
    the Year Ended December 31,
2020
2021
2022
RMB
%
RMB
%
RMB
US$
%
Other
    expenses
Advertising and promotion expenses
30,471,983
4.4
%
29,171,942
16.6
%
32,412,727
4,699,404
4.3
%
Litigation fees
24,764,412
3.6
%
12,019,673
6.8
%
6,291,273
912,149
0.8
%
Entertainment and traveling expenses
7,010,704
1.0
%
10,793,089
6.1
%
9,740,873
1,412,294
1.3
%
Office and commute expenses
9,120,261
1.3
%
10,711,801
6.1
%
7,791,694
1,129,689
1.0
%
Consulting fees
14,486,656
2.1
%
9,330,732
5.3
%
12,016,260
1,742,194
1.6
%
Attorney fees
8,503,270
1.2
%
6,678,111
3.8
%
1,389,360
201,438
0.2
%
Communication expenses
2,495,071
0.4
%
3,861,529
2.2
%
2,424,242
351,482
0.3
%
Depreciation and amortization
6,047,226
0.9
%
3,821,788
2.2
%
2,244,279
325,390
0.3
%
Directors and officers liability insurance
4,232,722
0.6
%
3,545,117
2.0
%
3,474,151
503,705
0.5
%
Research and development expenses
9,960,607
1.4
%
1,602,095
0.9
%
760,465
110,257
0.1
%
Others
6,949,270
1.0
%
8,964,511
5.1
%
7,344,173
1,064,805
1.0
%
Total
    other expenses
124,042,182
18.0
%
100,500,388
57.0
%
85,889,497
12,452,807
11.5
%
92
Taxation
Cayman Islands
We are incorporated in the Cayman Islands. Under the current law 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.
British Virgin Islands
Under the current laws of the British Virgin Islands, our company
is not subject to tax on income or capital gains. In addition, upon payments of dividends by our British Virgin Islands subsidiaries
to their shareholders, no British Virgin Islands withholding tax will be imposed.
Hong Kong
Our wholly owned subsidiary, China Financial Services Group Limited,
is subject to Hong Kong profits tax on their activities conducted in Hong Kong at a uniform tax rate of 16.5%. Payments of dividends
by our subsidiaries to us are not subject to withholding tax in Hong Kong.
PRC
Our subsidiaries and their subsidiaries in China are companies incorporated
under PRC law and, as such, are subject to PRC enterprise income tax on their taxable income in accordance with the relevant PRC income
tax laws. Pursuant to the PRC Enterprise Income Tax Law (the "EIT Law"), which became effective on January 1, 2008, and most
recently amended on December 29, 2018, a uniform 25% enterprise income tax rate is generally applicable to both foreign-invested enterprises
and domestic enterprises, except where a special preferential rate applies. For example, enterprises qualified as "High and New
Technology Enterprises" are entitled to a 15% enterprise income tax rate rather than the 25% uniform statutory tax rate. The enterprise
income tax is calculated based on the entity's global income as determined under PRC tax laws and accounting standards. According
to the Notice of the Ministry of Finance and the SAT on Implementing the Pilot Program of Replacing Business Tax with Value-Added Tax
in an All-round Manner, which became effective on May 1, 2016, as amende on March 20, 2019, entities and individuals engaged in the sale
of services, intangible assets or fixed assets within the PRC territory are required to pay value-added tax instead of business tax.
Following the implementation of the Pilot Plan for Imposition of Value-Added Tax to Replace Business Tax, or the VAT Pilot Plan, most
of our PRC subsidiaries and affiliates have been subject to VAT, at a rate of 1% (pursuant to the regulatory development in 2020 in response
to the COVID-19 pandemic), 3% or 6%, instead of business tax.
As a Cayman Islands holding company, we may receive dividends from
our PRC subsidiaries through China Financial Services Group Limited. The PRC EIT Law and its implementing rules provide that dividends
paid by a PRC entity to a nonresident enterprise for income tax purposes is subject to PRC withholding tax at a rate of 10%, subject
to reduction by an applicable tax treaty with China. Pursuant to the Arrangement between Mainland China and the Hong Kong Special Administrative
Region for the Avoidance of Double Taxation and Tax Evasion on Income, or the Hong Kong Tax Treaty, the withholding tax rate in respect
to the payment of dividends by a PRC enterprise to a Hong Kong enterprise may be reduced to 5% from a standard rate of 10% if the Hong
Kong enterprise directly holds at least 25% of the PRC enterprise. Pursuant to the Notice of the State Administration of Taxation on
the Issues concerning the Application of the Dividend Clauses of Tax Agreements, or SAT Circular 81, a Hong Kong resident enterprise
must meet the following conditions, among others, in order to apply the reduced withholding tax rate: (i) it must be a company; (ii)
it must directly own the required percentage of equity interests and voting rights in the PRC resident enterprise; and (iii) it must
have directly owned such required percentage in the PRC resident enterprise throughout the 12 months prior to receiving the dividends.
On January 1, 2020, the State Administration of Taxation issued the Announcement of the State Taxation Administration on Issuing the
Administrative Measures for Entitlement to Treaty Benefits for Non-resident Taxpayers, which replaced the Administrative Measures for
Nonresident Taxpayers to Enjoy Treatment under Tax Treaties, or SAT Circular 60. The Announcement changed the reporting requirement into
collecting, gathering and retaining relevant materials for future reference in accordance with the provisions of these Measures in order
to accept the follow-up administration of tax authorities. At the same time, the Announcement adjusts the definition of non-resident
taxpayer to make it more accurate, which refers to taxpayers who shall be tax residents of the other contracting party in accordance
with the provisions of the clauses on residents of the tax treaties. The SAT promulgated the Announcement on Certain Issues Concerning
the Beneficial Owner in a Tax Agreement, or Circular 9, on February 3, 2018, effective as April 1, 2018, which provides guidance for
determining whether a resident of a tax treaty country is the "beneficial owner" of income under China's tax treaties
and similar arrangements.
93
China Financial Services Group Limited may be able to benefit from
the 5% withholding tax rate for the dividends it receives from our PRC subsidiaries if it satisfies the conditions prescribed under SAT
Circular 81 and other relevant tax rules and regulations. However, according to SAT Circular 81, if the relevant tax authorities consider
the transactions or arrangements we have are for the primary purpose of enjoying a favorable tax treatment, the relevant tax authorities
may adjust the favorable withholding tax in the future. In addition, according to Circular 9, a beneficial owner shall generally engage
in substantial business activities, and an agent shall not be considered a beneficial owner and, therefore, shall not qualify for those
benefits. It is possible, however, under Circular 9, China Financial Services Group Limited would not be considered the "beneficial
owner" of any such dividends, and that such dividends would as a result be subject to withholding tax at the rate of 10% rather
than the favorable 5% rate applicable under the Hong Kong Tax Treaty.
If our holding company in the Cayman Islands or any of our subsidiaries
outside China were deemed to be a "resident enterprise" under the PRC EIT Law, it would be subject to enterprise income tax
on its worldwide income at a rate of 25%. See "Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business
in China—If we are classified as a PRC resident enterprise for PRC enterprise income tax purposes, such classification could result
in unfavorable tax consequences to us and our non-PRC shareholders and ADS holders."
Critical Accounting Policies, Judgments and Estimates
We prepare our financial statements in accordance with U.S. GAAP,
which requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures
of contingent assets and liabilities at the balance sheet dates and the reported amounts of revenues and expenses during the reporting
periods. We continually evaluate these judgments and estimates based on our own historical experience, knowledge and assessment of current
business and other conditions, our expectations regarding the future based on available information and assumptions that we believe to
be reasonable, which together form our basis for making judgments about matters that are not readily apparent from other sources. Since
the use of estimates is an integral component of the financial reporting process, our actual results could differ from those estimates.
Some of our accounting policies require a higher degree of judgment than others in their application.
The selection of critical accounting policies, the judgments and other
uncertainties affecting application of those policies and the sensitivity of reported results to changes in conditions and assumptions
are factors that should be considered when reviewing our financial statements. We believe the following accounting policies involve the
most significant judgments and estimates used in the preparation of our financial statements. You should read the following description
of critical accounting policies, judgments and estimates in conjunction with our consolidated financial statements and other disclosures
included in this annual report.
Our consolidated financial statements include the results of the trust
plans as the trust lending model creates exposure to variability of returns from the activities of the trust plans. All intercompany
transactions and balances, including payment of service fees from trust plans to us, are eliminated in consolidation.
Revenue recognition
Interest and financing service fees on loans which
are amortized over the contractual life of the related loans are recognized in consolidated statements of comprehensive income in accordance
with Accounting Standard Codification ("ASC") 310 using the effective interest method. In accordance with the relevant guidance
in ASC Topic 606, the amounts associated with guarantee services under commercial bank partnership model is within the scope of ASC Topic
460 and should be accounted for in accordance with the provisions of that Topic. The services not within the scope of other Topics should
be accounted for in accordance with the remaining provisions of ASC Topic 606 and the applicable revenue recognition guidance. Also,
mortgage agency service revenue, asset management revenue and revenue from rendering of services are recognized in accordance with ASC
606 when following conditions are met: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the
contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract and
(v) recognize revenue when (or as) the entity satisfies a performance obligation.
The criteria of revenue recognition as they relate to each of the
following major revenue generating activities are described below:
Interest and financing service fees on loans
Interest and financing service fees on loans, which include financing
service fees on loans, are collected from borrowers for loans and related services.
Interest and financing service fees on loans includes the amortization
of any discount or premium or differences between the initial carrying amount of an interest-bearing asset and its amount at maturity
calculated using the effective interest basis.
The effective interest method is a method of calculating the amortized
cost of a financial asset and of allocating the interest and financing service fees on loans over the years. The effective interest rate
is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument.
When calculating the effective interest rate, we estimate cash flows considering all contractual terms of the financial instrument but
do not consider future credit losses. Interest on the impaired assets is recognized using the rate of interest used to discount future
cash flows.
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Interest income on debt investment
Interest income on debt securities is calculated by applying the effective
interest rate to the gross carrying amount of debt securities to unrelated companies plus any interest received from corporate debt securities.
Revenue under commercial bank partnership model
In accordance with the relevant guidance in ASC
Topic 606, the amounts associated with guarantee services under commercial bank partnership model is within the scope of ASC Topic 460
and should be accounted for in accordance with the provisions of that Topic. The services not within the scope of other Topics should
be accounted for in accordance with the remaining provisions of ASC Topic 606 and the applicable revenue recognition guidance.
The Group considers loan facilitation services under
commercial bank partnership model (covering matching of commercial banks to borrowers and facilitating the execution of loan agreement
between commercial banks and borrowers) and post-facilitation services under commercial bank partnership model (covering cash processing
services and collection services) as two distinctive performance obligations in accordance with ASC Topic 606. The transaction price
is first allocated to guarantee services under commercial bank partnership model, if any, which is recorded at fair value and recognized
amortized during the guarantee term in accordance with ASC Topic 460.
Then the remaining considerations are allocated
to the loan facilitation under commercial bank partnership model and post-facilitation services under commercial bank partnership model
using their relative standalone selling prices. When estimating total consideration, the Group considers early termination scenarios
based on historical early payment and other termination scenarios as the Group can not receive the full contractual service fee amount
under early termination, given the service fee is collected on a pro-rata basis upon early loan termination. Such service fee is determined
to be variable consideration that meets the "probable of not reversing" threshold. As such, the Group recognizes revenue
related to early termination based on its best estimate and true up adjustments are made from time to time. The Group does not have observable
standalone selling price for the loan facilitation services or post-facilitation services because it does not provide loan facilitation
services or post-facilitation services on a standalone basis in similar circumstances to similar customers. There is no direct observable
standalone selling price for similar services in the market that is reasonably available to the Group.
As a result, the estimation of standalone selling
price involves significant judgment. The Group uses an expected cost plus margin approach to estimate the standalone selling prices of
loan facilitation services and post facilitation services as the basis of revenue allocation. When estimating the selling prices, the
Group considers the cost related to such services, profit margin, customer demand, effect of competition on services, and other market
factors, among which estimates of the cost of providing the services is the most significant.
The transaction price allocated to loan facilitation
services is recognized as revenue upon execution of loan agreements between commercial banks and borrowers; the consideration allocated
to post-facilitation services is recognized over the period of the loan on a straight-line method, which approximates the pattern of
when the underlying services are performed.
Remaining performance obligations represents the
amount of the transaction price for which services have not been performed under post-facilitation services. The Group collects service
fees monthly. The aggregate amounts of the transaction price allocated to performance obligations that are unsatisfied pertaining to
post-origination services were RMB67.08 million as of December 31, 2022, among which 64.6% of the remaining performance obligations will
be recognized over the following 12 months, and with the remainder recognized thereafter.
Mortgage agency service revenue
We earn mortgage agency service revenue from providing mortgage agency
services to borrowers applying for a bank loan. Mortgage agency service fee is often received immediately or shortly after establishing
contracts with customers. This kind of revenue is recognized at the time when loan is granted as that is the point of time we fulfill
the customer's request, and is then recognized on an accrual basis in accordance with the terms of the relevant agreements.
Realized gains/(losses) on sales of investments
Realized gains/(losses) consist of realized gains and losses from
the sale of investment securities, presented on a net basis.
95
Net gains/(losses) on sales of loans
Net gains/(losses) on sales of loans refer to any gains and losses
from the disposal of loans which is accounted for as a sale under ASC 860.
Gains on confiscation of CRMPs
Gains on confiscation of CRMPs are recognized to the extent confiscated
CRMPs exceed previously recognized allowance for loan losses and guarantee asset when sales partners surrender the CRMPs and the obligation
of refunding the CRMPs is released.
Loans
(i) On-balance sheet loans
Loans are reported at their outstanding principal balances net of
any unearned income and unamortized deferred fees and costs. Loan origination fees and certain direct origination costs are generally
deferred and recognized as adjustments to income over the lives of the related loans.
We facilitate credit to borrowers through structured funds which
are considered as consolidated VIEs and we evaluated VIEs for consolidation in accordance with ASC 810. Although we have ceased
providing credit enhancement and top-up arrangements since March 2018 and all the remaining loans under such arrangement had been
transferred in 2021 and substantially all of such remaining loans had been paid off in 2022, we, as the subordinated unit holder,
still provide credit strengthening services and are responsible to ensure sufficient capital to repay the principal amount and the
agreed financing costs for the senior units, we also act as the manager of the structured funds, those are the two key factors to
determine whether we should consolidate the structured funds. As a result, the loan principal remains on our consolidated balance
sheets, whilst the funds received from senior tranches holders are recorded as Other Borrowings in our consolidated balance
sheets.
Non-accrual policies
Loans principal, interest and financing service fee receivables are
placed on non-accrual status when payments are 90 days contractually past due. When a loan principal, interest and financing service
fee receivable is placed on non-accrual status, interest and financing service fees accrual ceases. If the loan is non-accrual, the cost
recovery method is used and cash collected is applied to first reduce the carrying value of the loan. Otherwise, interest income may
be recognized to the extent cash is received. Loans principal, interest and financing service fee receivables may be returned to accrual
status when all of the borrower's delinquent balances of loans principal, interest and financing service fees have been settled
and the borrower continues to perform in accordance with the loan terms for a period of at least six months.
Charge-off policies
For the years ended December 31, 2018 and 2019, the Group considered
loans principal, interest and financing service fee receivables meeting any of the following conditions as uncollectible charged off:
(i) death of the borrower; (ii) identification of fraud, and the fraud is officially reported to and filed with relevant law enforcement
departments or (iii) the Group concludes that it has exhausted its collection efforts.
In order to align the Group's charge-off policies with ASC 326-20-35-8
(superseded ASC 310-10-35-41), the Group revised its charge-off policies to (1) provide additional information as to the collection efforts
which must be exhausted before a charge-off is recorded and (2) charge down loans that are 180 days past due to net realizable value
(fair value of collaterals, less estimated costs to sell) unless both well-secured and in the process of collection. The revised charge-off
policies are presented as follows:
Loans principal, interest and financing service fee receivables are
charged down to net realizable value (fair value of collaterals, less estimated costs to sell) when the Group has determined the remaining
balance is uncollectable after exhausting all collection efforts. In order to comply with ASC 310 and ASC 326, the Group considers loans
principal, interest and financing service fee receivables meeting any of the following conditions as uncollectable and charged-off: (i)
death of the borrower; (ii) identification of fraud, and the fraud is officially reported to and filed with relevant law enforcement
departments; (iii) sales of loans to third parties; (iv) settlement with the borrower, where the Group releases irrecoverable loans through
private negotiations with the borrower where the borrower cannot repay the loan in full through self-funding or voluntary sale of the
collateral; (v) disposal through legal proceedings, including but not limited to online arbitrations, judicial auctions and court enforcements;
or (vi) loans are 180 days past due unless both well-secured and in the process of collection.
96
Allowance for credit losses
Allowance for credit losses represents management's best estimate
of probable losses inherent in the portfolio.
Commencing January 1, 2020, CNFinance adopted ASC 326, "Financial
Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments", which replaced the incurred
loss methodology for determining the provision for credit losses and allowance for credit losses ("ACL") with an expected
loss methodology that is referred to as the current expected credit loss ("CECL") model. ASC 326 defines the ACL as a valuation
account that is deducted from the amortized cost of a financial asset to present the net amount that management expects to collect on
the financial asset over its expected life. All financial assets carried at amortized cost are in the scope of ASC 326, while assets
measured at fair value are excluded. The allowance for credit losses is adjusted each period for changes in expected lifetime credit
losses.
The allowance for credit losses includes an asset-specific component
and a statistically based component. The Company aggregate loans sharing similar risk characteristics into pools for purposes of measuring
expected credit losses. Pools are reassessed periodically to confirm that all loans within each pool continue to share similar risk characteristics.
Expected credit losses for loans that do not share similar risk characteristics with other financial assets are measured individually.
Estimation of CECLs requires CNFinance to make assumptions regarding
the likelihood and severity of credit loss events and their impact on expected cash flows, which drive the probability of default (PD),
loss given default (LGD) and exposure at default (EAD) models. In its loss forecasting framework, ECL is determined primarily by utilizing
models for the borrowers' PD, LGD and EAD and the Company incorporates forward-looking information through the use of macroeconomic
scenarios applied over the forecasted life of the assets. These macroeconomic scenarios include variables that have historically been
key drivers of increases and decreases in credit losses. These variables include, but are not limited to, gross-domestic product rates,
interest rates and consumer price indexes.
The ACL for financial assets held at amortized cost is a valuation
account that is deducted from, or added to, the amortized cost basis of the financial assets to present the net amount expected to be
collected. When credit expectations change, the valuation account is adjusted with changes reported in provision for credit losses. If
amounts previously charged off are subsequently expected to be collected, we may recognize a negative allowance, which is limited to
the amount that was previously charged off.
The asset-specific component is calculated under ASC 310-10-35, on
an individual basis for the loans whose payments are contractually past due more than 90 days or which are considered impaired. A financial
asset is collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially
through the sale or operation of the collateral. When a collateral-dependent financial asset is probable of foreclosure, we will measure
the ACL based on the fair value of the collateral and we will measure the ACL based on the collateral's net realizable value (fair
value of collateral, less estimated costs to sell).
Under the collaboration model, when the Group grants loans through
Trust Plan, the loan is with the borrower and guarantee is entered into with a separate counterparty (the sales partner). As such, under
the definition of ASC 326-20-20, the guarantee arrangement and lending arrangement would be considered freestanding arrangements. As
sale partners will provide guarantee of the entire loan to the Group, collection for loss is probable and estimable when a loss on an
insured loan is incurred and recognized. In this case, the Group will recognize guarantee loss recoverable asset in the amount that the
Group determines is probable to receive from the guarantor with an offsetting entry to "provision for credit losses" when
the Group concludes that the loss recovery is collectible. However, potential recovery that exceeds the recognized loss, if any, (gain
contingency) will not be recognized until cash is received. Therefore, the amounts estimated to be recoverable from the proceeds of guarantees
will be reported as a separate asset (guarantee asset) in the balance sheet. The increase in guaranteed recoverable assets are included
in the income statement as a reduction of the "provision for credit losses," separate disclosure of the increase in guaranteed
recoverable assets will be included in the rollforward of the "allowance for credit losses." The income statement caption
will be modified as "Provision for credit losses, net of increase in increase in guaranteed recoverable assets.
97
Loans held-for-sale
Loans held-for-sale are measured at the lower of cost or fair value,
with valuation changes recorded in noninterest revenue. The valuation is performed on an individual loan basis. Loan origination fees
or costs and purchase price discounts or premiums are deferred in a contra loan account until the related loan is sold. The deferred
fees or costs and discounts or premiums are an adjustment to the basis of the loan and therefore are included in the periodic determination
of the lower of cost or fair value adjustments.
The loan is derecognized if the Group does not retain any risk and
rewards after transferring the loan. Such transfer would be recorded as sales according to ASC 860-10-40-5. At the time of derecognition,
any related loan loss allowance is released. Gains and losses on loans transfer as a sale are recognized in the non-interest income.
(ii) Off-balance sheet loans
For loans funded by the proceeds from third-party commercial banks,
each underlying loan and borrower has to be approved by the third-party commercial banks individually. Once the loan is approved by and
originated by the third-party commercial bank, the fund is provided by the third-party commercial bank to the borrower and a lending
relationship between the borrower and the third-party commercial bank is established through a loan agreement. Effectively, the Group
offers loan facilitation services to the borrowers who have credit needs and the commercial banks who originate loans directly to borrowers
referred by the Group. The Group continues to provide post-origination services to the borrowers over the term of the loan agreement.
Under this scenario, the Group determines that it is not the legal lender or borrower in the loan origination and repayment process.
Accordingly, the Group does not record loans principal, interest and financing service fee receivables arising from these loans nor interest-bearing
borrowings to the third-party commercial banks.
Income tax
Income tax is accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry
forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the enactment date. We recognize the effect of income tax positions
only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount
that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change
in judgment occurs. We classify interest and penalties recognized on the liability for unrecognized tax benefits as income tax expense.
Share-based compensation expenses
We measure the cost of employee services received in exchange for
an award of equity instruments based on the grant-date fair value of the award and recognize the cost over the period the employee is
required to provide service in exchange for the award, which generally is the vesting period. We recognize compensation cost using a
front-loading approach for an award with only service conditions that has a graded vesting schedule over the requisite service period
for the entire award, net of estimated forfeitures, provided that the cumulative amount of compensation cost recognized at any date at
least equals the portion of the grant-date value of such award that is vested at that date. Forfeiture rates are estimated based on historical
and future expectations of employee turnover rates.
In January 2017, SFIL adopted the 2017 SFIL Share Incentive Plan,
or the 2017 Plan. Under the 2017 Plan, SFIL granted 187,933,720 options to its certain management members and employees to purchase up
to 187,933,720 ordinary shares. The term of the options will not exceed ten years from the date of the grant. Accordingly, 60%, 20% and
20% of the award options shall vest on December 31 of each of the years 2017 to 2019, respectively. Unless terminated earlier, the 2017
Plan will terminate automatically in 2022.
On August 27, 2018, we adopted our 2018 CNFinance Holdings Limit Share
Incentive Plan, or the 2018 Plan to replace the 2017 Plan and granted 187,933,720 options to certain management members and employees
to purchase up to 187,933,720 of our ordinary shares under this 2018 Plan to replace the granted and outstanding options under the 2017
Plan.
98
On December 31, 2019, we granted up to 119,674,780 options to certain
management members and employees to purchase up to 119,674,780 of our ordinary shares under the 2018 Plan. Such options will be considered
vested as to 50%, 30%, 20% on each of December 31, 2020, December 31, 2021 and December 31, 2022, respectively, but will only be distributed
to the applicable grantees based on their performance scores on December 31, 2022, subject to continued employment through such date.
As of the date hereof, the options may be allocated to up to 42 employees. Vested options will expire five years from the date of vesting.
Share-based payment transactions with employees, such as share options
are measured based on the grant date fair value of the equity instrument. We recognize the compensation costs net of estimated forfeitures
over the applicable vesting period. The estimate of forfeitures will be adjusted over the requisite service period to the extent that
actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures will be recognized through
a cumulative catchup adjustment in the period of change and will also impact the amount of stock compensation expense to be recognized
in future periods. There were no market conditions associated with the share option grants.
The fair value of options granted to employees is determined based
on a number of factors including valuations. In determining the fair value of our equity instruments, we referred to valuation reports
prepared by an independent third-party appraisal firm, based on data we provided. The valuation reports provided us with guidelines in
determining the fair value of the equity instruments, but we are ultimately responsible for the determination of all amounts related
to share-based compensation recorded in the financial statements.
Excluding the options containing service vesting conditions, we calculated
the estimated fair value of the options on the respective grant dates using a binomial option pricing model with assistance from independent
valuation firms, with the following assumptions:
Share awards
granted on
January 3, 2017
("2018
Option")
Share awards
granted on
December 31,
2019
("2019
Option")
Expected volatility
40.00
%
41.52
%
Expected dividends
—
—
Risk-free interest rate
3.10
%
3.12
%
Expected term (in years)
5
5
Expected life (in years)
6
8
The contractual life of the share option is used as an input into
the binomial option pricing model. Exercise multiple and post-vesting forfeit are incorporated into the model. When the options of the
2018 Option were issued, our shares had not been publicly traded at the time the options were issued and our shares were rarely traded
privately, expected volatility for the shares underlying such options is estimated based on the average historical volatility of comparable
entities with publicly traded shares for the period before the date of grant with length commensurate to contractual life of the options.
The risk-free rate for the expected term of the option is based on the yield to maturity of China's six-year government bond at
the date of grant. When the options of the 2019 Option were issued, our shares were already publicly traded. Since the shares have only
been publicly traded for just over a year, the expected volatility for the shares underlying such options is estimated based on the historical
volatility of comparable entities with publicly traded shares for the period before the date of grant with length commensurate to contractual
life of the options. The contractual life of the options is 6 years, 7 years and 8 years, respectively. Therefore, the risk-free rate
for the expected term of the options is determined based on the yield to maturity of China 5-year, 7-year and 10-year government bond,
using interpolation method, at the date of grant. We have not declared or paid any cash dividends on our capital stock, and do not anticipate
any dividend payments on our ordinary shares in the foreseeable future.
If any of the assumptions used in the binomial option pricing model
changes significantly, share-based compensation expenses for future awards may differ materially compared with the awards granted previously.
The following table sets forth the fair value of options and ordinary
shares estimated at the dates of option grants indicated below with the assistance from an independent valuation firm.
Date of options grant
Options
granted
Exercise price
Fair value of
option
Fair value of ordinary shares
January 3, 2017
75,173,492
RMB0.50
RMB1.26
RMB1.72
Date of options grant
Options
granted
Exercise price
Fair value of
option
Fair value of ordinary shares
January 3, 2017
112,760,238
RMB0.50
RMB1.27
RMB1.72
December 31, 2019
83,772,346
RMB1.00
RMB0.71
RMB1.40
December 31, 2019
35,902,434
RMB1.00
RMB0.75
RMB1.40
99
For the option granted on January 3, 2017, the Group recognized compensation
expenses of RMB39,715,168 and RMB15,886,067 in year 2018 and 2019, respectively. There was no income tax benefit recognized associated
with the share-based compensation expenses. As of December 31, 2019, the expenses in relation to the 2018 Option have been fully recognized.
For the 2019 Option, the Group recognized compensation expenses of
RMB62,073,367, RMB18,766,367 and RMB5,774,266 in year 2020, 2021 and 2022, respectively. There was no income tax benefit recognized associated
with the share-based compensation expenses. As of December 31, 2022, the expenses in relation to the 2019 Option have been fully recognized.
Non-GAAP Financial Measure
Adjusted Net Income
We use adjusted net income, a non-GAAP financial measure, in evaluating
our operating results and for financial and operational decision-making purposes. We believe that adjusted net income helps identify
underlying trends in our business by excluding the impact of share-based compensation expense, which are non-cash charges. We believe
that adjusted net income provides useful information about our operating results, enhances the overall understanding of our past performance
and future prospects and allows for greater visibility with respect to key metrics used by our management in its financial and operational
decision-making.
For the Year Ended December 31
2018
2019
2020
2021
2022
RMB
RMB
RMB
RMB
RMB
US$
Adjusted net income
900,623,879
550,530,009
176,925,893
83,973,831
141,125,677
20,461,300
Adjusted net income is not defined under U.S. GAAP and is not presented
in accordance with U.S. GAAP. This non-GAAP financial measure should not be considered in isolation from, or as a substitute for, its
most directly comparable financial measure prepared in accordance with U.S. GAAP. A reconciliation of the historical non-GAAP financial
measure to its most directly comparable GAAP measure has been provided in the tables included below. Investors are encouraged to review
the reconciliation of the historical non-GAAP financial measure to its most directly comparable GAAP financial measure. As adjusted net
income has material limitations as an analytical metric and may not be calculated in the same manner by all companies, it may not be
comparable to other similarly titled measures used by other companies. In light of the foregoing limitations, you should not consider
adjusted net income as a substitute for, or superior to, net revenues prepared in accordance with U.S. GAAP. We encourage investors and
others to review our financial information in its entirety and not rely on a single financial measure.
The following table reconciles our adjusted net income for the periods
presented to the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP, which is net income.
For the Year Ended December 31
2018
2019
2020
2021
2022
RMB
RMB
RMB
RMB
RMB
US$
Net Income
860,908,711
534,643,942
114,852,526
65,207,464
135,351,411
19,624,110
Add: share-based compensation expenses
39,715,168
15,886,067
62,073,367
18,766,367
5,774,266
837,190
Adjusted net income
900,623,879
550,530,009
176,925,893
83,973,831
141,125,677
20,461,300
100
Results of Operations
The following table sets forth a summary of our consolidated statements
of comprehensive income for the periods presented. This information should be read together with our consolidated financial statements
and related notes included elsewhere in this annual report. The results in any period are not necessarily indicative of our future trends.
For the Year Ended December 31,
2020
2021
2022
RMB
RMB
RMB
US$
Interest and fees income
1,854,823,409
1,815,773,980
1,731,352,575
251,022,527
Interest and fees expenses
(731,315,365
)
(775,565,615
)
(784,776,537
)
(113,781,902
)
Net interest and fees income
1,123,508,044
1,040,208,365
946,576,038
137,240,625
Net revenue under the commercial bank partnership model
-
107,072
57,551,005
8,344,111
Collaboration cost for sales partners
(415,104,428
)
(425,736,650
)
(320,826,549
)
(46,515,477
)
Net interest and fees income after collaboration cost
708,403,616
614,578,787
683,300,494
99,069,259
Provision for credit losses
(77,348,480
)
298,467,893
(238,084,863
)
(34,519,060
)
Net interest and fees income after collaboration cost and provision for credit losses
631,055,136
913,046,680
445,215,631
64,550,199
Realized gains on sales of investments, net
20,153,659
19,170,436
20,566,672
2,981,887
Net losses on sales of loans
(50,606,487
)
(479,584,775
)
(44,554,948
)
(6,459,860
)
Other gains, net
9,760,472
22,061,842
89,914,038
13,036,310
Total non-interest (losses)/income
(20,692,356
)
(438,352,497
)
65,925,762
9,558,337
Operating expenses
Employee compensation and benefits
(190,374,014
)
(211,168,519
)
(197,035,872
)
(28,567,516
)
Share-based compensation expenses
(62,073,367
)
(18,766,367
)
(5,774,266
)
(837,190
)
Taxes and surcharges
(49,452,609
)
(35,729,101
)
(35,890,761
)
(5,203,671
)
Operating lease cost
(21,719,042
)
(14,764,364
)
(13,966,943
)
(2,025,016
)
Other expenses
(124,042,182
)
(100,500,388
)
(85,889,497
)
(12,452,807
)
Total operating expenses
(447,661,214
)
(380,928,739
)
(338,557,339
)
(49,086,200
)
Income before income tax expense
162,701,566
93,765,444
172,584,054
25,022,336
Income tax expense
(47,849,040
)
(28,557,980
)
(37,232,643
)
(5,398,226
)
Net income
114,852,526
65,207,464
135,531,411
19,624,110
Earnings per share
Basic
0.08
0.05
0.10
0.01
Diluted
0.08
0.05
0.09
0.01
Other comprehensive (losses)/income
Net unrealized losses on investment securities
(171,040
)
-
-
-
Foreign currency translation adjustment
(16,166,094
)
(6,936,969
)
15,181,518
2,201,113
Comprehensive income
98,515,392
58,270,495
150,532,929
21,825,223
Less: net income attributable to non-controlling interests
-
-
970,379
140,692
Total comprehensive income attributable to ordinary shareholders
98,515,392
58,270,495
149,562,550
21,684,531
*:
We have identified an immaterial error and corrected the amounts
of loans held-for-sale, guaranteed assets, provision for credit losses and net gains on sales of loans in the comparative period presentation.
For details, see Note 2(w) to Consolitated Financial Statements on page F-31.
Year Ended December 31, 2022 Compared to Year Ended December
31, 2021
Interest and fees income
Total interest and fees income for fiscal year 2022 decreased
by 4.6% to RMB1,731.4 million (US$251.0 million) as compared to RMB1,815.8 million for the same period of 2021.
Interest and financing service fees on loans
Interest and financing service fees on loans
decreased
by 11.1% to RMB1,574.7 million (US$228.3 million) for the fiscal year of 2022 as compared to RMB1,770.4 million for the same period of
2021, primarily attributable to a decrease in the balance of average daily outstanding loan principal. Such decrease was mainly as a
result of the Company's transferal of loans under the traditional facilitation model to third parties in bulk during the fourth
quarter of 2021 along with the impact of strict pandemic prevention and control measures taken from January to November 2022, which was
partially offset by an increase in the total outstanding loan principal under the collaboration model.
101
Interest income charged to sales partners
Interest income charged to sales partners,
representing
fee charged to sales partners who choose to repurchase default loans in installments, increased by 265.3% to RMB122.0 million (US$17.7
million) for the fiscal year of 2022 from RMB33.4 million in the same period of 2021, primarily attributable to an increase in the delinquent
loans that were repurchased by the sales partners in installments.
Interest income on debt securities
Interest income on debt securities
increased to RMB21.6 million (US$3.1 million) in 2022 from nil in 2021.
Interest on deposit with banks
Interest on deposits with banks
increased by 9.2% to RMB13.1
million (US$1.9 million) for the fiscal year of 2022 as compared to RMB12.0 million for the same period of 2021, primarily due to the
higher daily average amount of time deposits.
Interest and fees expenses
Total interest and fees expenses refer to interest expenses on interest-bearing
borrowings and increased by 1.2% to RMB784.8 million (US$113.8 million) for the fiscal year of 2022 as compared to RMB775.6 million
for the same period of 2021, primarily due to an increase in daily average outstanding principal of other borrowings.
Net interest and fees income
As a result of the foregoing, net interest and fees income decreased
by 9.0% to RMB946.6 million (US$137.2 million) for the fiscal year of 2022 as compared to RMB1,040.2 million for the same period of 2021.
Net revenue under the commercial bank partnership model
Net revenue under the commercial bank partnership
model, representing fees charged to commercial banks for introducing borrowers, initial credit assessment, facilitating loans from
the banks to the borrower and providing technical assistance to the borrower and banks, net of fees paid to third-party insurance company,
was RMB57.6 million (US$8.3 million) for the fiscal year of 2022 as compared to RMB0.1 million in 2021. The Company has started to collaborate
with commercial banks since 2021 and such collaboration grew and scaled in the second half of 2022.
Collaboration cost for sales partners
Collaboration cost for sales partners representing sales incentives
paid to sales partners decreased to RMB320.8 million (US$46.5 million) for the fiscal year of 2022 as compared to RMB425.7 million for
the same period of 2021, primarily attributable to a lower average fee rate the Company paid to sales partners in the fiscal year of
2022 as compared to the same period of 2021. The fee rate under collaboration model varies based on different collaboration model types
and the terms of the loan.
Net interest and fees income after collaboration cost
Net interest and fees income after collaboration cost was RMB683.4
million (US$99.1 million) for the fiscal year of 2022, representing an increase of 11.2% as compared to RMB614.6 million for the same
period of 2021.
102
Provision for credit losses
Provision for credit losses represents the provision for
credit losses under the trust lending model and the expected credit losses of guarantee under the commercial bank partnership model
in relation to certain financial guarantee arrangements the Company entered into with a third-party guarantor, who provides
guarantee services to commercial bank partners. Our provision for credit losses was RMB238.1 million (US$34.5 million) for the
fiscal year of 2022 as compared to a reversal of RMB298.5 million
1
for the same period of 2021. The reversal in 2021 was primarily due to the fact that the Company transferred loans
under the traditional facilitation model to third parties in bulk during the fourth quarter of 2021 and the allowance of such loans
was reversed. The increase in provision for credit losses in the fiscal year of 2022 was mainly due to economic uncertainty caused
by COVID-19 pandemic and the relevant prevention measures, as well as the downward pressure faced by China's real estate
market during 2022.
Net losses on sales of loans
Net losses on sales of loans was RMB44.6 million (US$6.5 million)
for the fiscal year of 2022 as compared to RMB479.6 million in the same period of 2021, primarily attributable to the fact that the Company
transferred loans under the traditional facilitation model to third parties in bulk during the fourth quarter of 2021. Such loans were
all facilitated prior to 2019, and the majority of them were long past due.
Other gains, net
Other gains, net was RMB89.9 million (US$13.0 million) for the
fiscal year of 2022, compared with RMB22.1 million
1
in the same period of 2021, primarily attributable to the increase of
Credit Risk Mitigation Position forfeited by the sales partners.
Total operating expenses
Our total operating expenses decreased by 11.1% to RMB338.6 million
(US$49.1 million) for the fiscal year of 2022 as compared to RMB381.0 million for the same period of 2021.
Employee compensation and benefits
Employee compensation and benefits
decreased by 6.7% to
RMB197.0 million (US$28.6 million) for the fiscal year of 2022 as compared to RMB211.2 million for the same period of 2021, primarily
due to a decrease in compensation associated with decreased operational headcounts.
Share-based compensation expenses
Share-based compensation expenses
decreased by 69.1% to
RMB5.8 million (US$0.8 million) for the fiscal year of 2022 as compared to RMB18.8 million for the same period of 2021. According to
the Company's share option plan adopted on December 31, 2019, 50%, 30% and 20% of the option granted will be vested on December
31, 2020, 2021 and 2022, respectively. Related compensation cost of the option grants will be recognized over the requisite period.
Taxes and surcharges
Taxes and surcharges
increased by 0.6 % to RMB35.9 million
(US$5.2 million) for the fiscal year of 2022 as compared to RMB35.7 million for the same period of 2021.
Operating lease cost
Operating lease cost
decreased by 5.4% to RMB14.0 million
(US$2.0 million) for the fiscal year of 2022 as compared to RMB14.8 million for the same period of 2021.
Other expenses
Other expenses
decreased by 14.5% to RMB85.9 million (US$12.5
million) for the fiscal year of 2022 as compared to RMB100.5 million for the same period of 2021, primarily due to a decrease in attorney's
fees associated with legal proceedings mainly as a result of the Company's business transition to collaboration model, under which
relevant attorney fees are borne by sales partners.
1
Provision for guarantee liabilities was re-classified from "other
gains, net" to "provision for credit losses" in 2022.
103
Income tax expenses
Our Income tax expenses increased by 30.1% to RMB37.2 million
(US$5.4 million) for the fiscal year of 2022 as compared to RMB28.6 million for the same period of 2021, primarily due to an increase
in the amount of taxable income. Our Effective tax rate decreased to 21.57% for the fiscal year of 2022 from 30.46% in the same
period of 2021, primarily due to the combined effect of (a) the non-deductible share-based compensation expenses which decreased to RMB5.8
million (US$0.8 million) for the fiscal year of 2022 from RMB18.8 million in the same period of 2021; and (b) one subsidiary turned losses
into incomes during the fourth quarter in 2022, resulting in reversal of the full valuation allowance of the deferred tax asset.
Net income
Net income increased by 107.7% to RMB135.4 million (US$19.6 million)
for the fiscal year of 2022 as compared to RMB65.2 million for the same period of 2021.
Year Ended December 31, 2021 Compared to Year Ended December
31, 2020
Interest
and fees income
Interest and financing service fees on loans
Our interest and financing service fees on loans decreased by 3.2%
from RMB1,828.7 million in 2020 to RMB1,770.4 million in 2021, primarily due to the lowered interest rate on loans facilitated in an
effort to comply with rules and regulations issued by relevant PRC regulatory authorities, including the Decisions of the Supreme People's
Court to Amend the Provisions on Several Issues concerning the Application of Law in the Trial of Private Lending Cases issued in August
2020.
Interest income charged to sales partners
Interest on deposits with banks increased by 234.0% from RMB10.0 million
in 2020 to RMB33.4 million in 2021, primarily due to the increase in the delinquent loans that were repurchased by the sales partners
in installments.
Interest on deposits with banks
Interest on deposits with banks decreased by 25.5% from RMB16.1 million in 2020 to RMB12.0 million in 2021, primarily due to the smaller
daily average amount of time deposits in 2021 as compared to 2020.
Interest and fees expenses
Interest and fees expenses increased by 6.1% from RMB731.3 million
in 2020 to RMB775.6 million in 2021, primarily due to the increase in the principals of other borrowings as well as the funding cost
from trust companies.
Net interest and fees income
As a result of the foregoing, our net interest and fees income decreased
by 7.4% from RMB1,123.5 million in 2020 to RMB1,040.2 million in 2021.
Collaboration cost for sales partners
Collaboration cost for sales partners represents sales incentives
paid to sales partners, was RMB425.7 million for the fiscal year of 2021, and was RMB415.1 million in 2020, primarily due to the increase
in average daily outstanding loan principal under the collaboration model as compared to the same period of 2020.
Net interest and fees income after collaboration cost
Net interest and fees income after collaboration cost was RMB614.6
million in 2021, representing a decrease of 13.2% as compared to RMB708.4 million in 2020.
104
Provision for credit losses
Provision for credit losses recorded a reversal of RMB298.5 million
in 2021 as compared to provision of RMB77.3 million in 2020.
The reversal was mainly attributable to the fact that (a) the Company
transferred loans under the traditional facilitation model to third parties in bulk during the fourth quarter of 2021 and the allowance
of such loans was reversed; partially offset by the fact that (b) the current expected credit loss (CECL) model took into account the
deterioration in the economic outlook caused by the COVID-19 pandemic.
Net losses on sales of loans
Net losses on sales of loans was RMB479.6 million in 2021 as compared
to RMB50.6 million in 2020, primarily attributable to the fact that the Company transferred loans under the traditional facilitation
model to third parties in bulk at market price during the fourth quarter of 2021. Such loans were all facilitated prior to 2019, and
the majority of them were long past due.
Other gains, net
Other gains, net was RMB22.1 million in 2021, compared with RMB9.8
million in 2020, mainly attributable to an increase in forfeited Credit Risk Mitigation Positions in 2021 as compared to 2020.
Operating expenses
Our total operating expenses decreased by 14.9% from RMB447.7 million
in 2020 to RMB381.0 million in 2021.
Employee compensation and benefits
Employee compensation and benefits increased by 10.9% from RMB190.4
million in 2020 to RMB211.2 million in 2021.
Share-based compensation expenses
Expenses related to issuance of shares under our employee share incentive
plan decreased by 69.7% from RMB62.1 million in 2020 to RMB18.8 million in 2021. According to the Company's share option plan adopted
on December 31, 2019, 50%, 30% and 20% of the option granted will be vested on December 31, 2020, 2021 and 2022, respectively. Related
compensation cost of the option grants will be recognized over the requisite period.
Taxes and surcharges
Taxes and surcharges decreased by 27.9 % to RMB35.7 million in 2021
as compared to RMB49.5 million in 2020, primarily attributable to a decrease in the non-deductible value added tax ("VAT").
The decrease in VAT was attributable to the characterization of certain amounts as "service fees charged to trust plans"
which are a non-deductible item. According to PRC tax regulations, "service fees charged to trust plans" incur a 6% VAT on
the subsidiary level, but are not recorded as an input VAT on a consolidated trust plan level. "Service fees charged to trust plans"
were significantly decreased in the fiscal year of 2021 compared to the same period of 2020 due to maturity of some trust plans.
Operating lease cost
Operating lease cost decreased by 31.8 % from RMB21.7 million in 2020
to RMB14.8 million in 2021, primarily due to the continued development of the collaboration model that allowed the Company to further
reduce the office leasing costs which was used to rent offices to accommodate sales staff.
Other expenses
Other expenses decreased by 19.0% from RMB124.0 million in 2020 to
RMB100.5 million in 2021, primarily due to (a) a decrease in the litigation and attorney's fees during the ordinary course of business
resulted from smaller amount of NPLs disposed through judicial procedure because the Company chose to transfer more NPLs to third party
purchasers to accelerate recovery of cash; (b) a decrease in consulting fee; and (c) a decrease in the IT R&D and outsourcing service
fees.
105
Income tax expense
Our income tax expense decreased by 40.2% from RMB47.8 million in
2020 to RMB28.6 million in 2021, primarily due to the decrease in the amount of taxable income. Our effective tax rate increased to 30.5%
in fiscal year 2021 from 29.4% in fiscal year 2020, primarily due to the combined effect of (a) the non-deductible share-based compensation
expenses which decreased to RMB18.8 million for the fiscal year of 2021 from RMB62.1 million in the same period of 2020; and (b) the
proceeds of RMB39.9 million tax-free dividends from equity investment funds in 2021.
Net income
As a result of the foregoing, our net income decreased by 43.2% from
RMB114.9 million in 2020 to RMB65.2 million in 2021.
5.B. Liquidity and Capital Resources
Cash Flows and Working Capital
Our principal sources of liquidity have been cash generated from financing,
operating and investing activities. As of December 31, 2022, we had cash and cash equivalents of RMB1.8 billion (US$256.9 million), as
compared to cash and cash equivalents of RMB2.2 billion as of December 31, 2021, substantially all of which were held by our PRC subsidiaries.
Our cash and cash equivalents consist primarily of bank deposits and are primarily denominated in Renminbi. We believe that our current
cash and anticipated cash flow from financing activities will be sufficient to meet our anticipated cash needs, including our cash needs
for working capital and capital expenditures for at least the next 12 months.
We intend to finance our future working capital requirements and capital
expenditures from funds provided by operating activities and raised from financing activities. We may, however, require additional cash
due to changing business conditions or other future developments, including any investments or acquisitions we may decide to pursue.
If our existing cash is insufficient to meet our requirements, we may seek to issue debt or equity securities or obtain additional credit
facilities. Financing may be unavailable in the amounts we need or on terms acceptable to us, if at all. Issuance of additional equity
securities, including convertible debt securities, would dilute our earnings per share. The incurrence of debt would divert cash for
working capital and capital expenditures to service debt obligations and could result in operating and financial covenants that restrict
our operations and our ability to pay dividends to our shareholders. If we are unable to obtain additional equity or debt financing as
required, our business operations and prospects may suffer.
As a holding company with no material operations of our own, we conduct
our operations primarily through our PRC subsidiaries in China. We are permitted under PRC laws and regulations to provide funding to
our PRC subsidiaries in China through capital contributions or loans, subject to the approval of government authorities and limits on
the amount of capital contributions and loans. The ability of our subsidiaries in China to make dividends or other cash payments to us
is subject to various restrictions under PRC laws and regulations. For details, please refer to "Item 5. Operating and Financial
Review and Prospects—B. Liquidity and Capital Resources—Holding Company Structure."
The following table sets forth a summary of our cash flows for the
periods indicated.
For the Year Ended December 31,
2020
2021
2022
RMB
RMB
RMB
US$
Net cash provided by operating activities
1,119,576,982
689,692,306
919,253,112
133,279,173
Net cash provided by/(used in) investing activities
524,050,843
(2,350,564,315
)
(1,098,197,823
)
(159,223,717
)
Net cash (used in)/provided by financing activities
(1,367,138,705
)
1,932,580,262
(288,156,250
)
(41,778,729
)
Net (decrease)/increase in cash and cash equivalents
276,489,120
271,708,253
(467,100,961
)
(67,723,273
)
Cash and cash equivalents at beginning of the year
1,705,356,424
1,960,922,758
2,231,437,361
323,528,006
Effect of exchange rate change on cash and cash equivalents
(20,922,786
)
(1,193,650
)
7,847,745
1,137,816
Cash and cash equivalents at end of the year
1,960,922,758
2,231,437,361
1,772,184,145
256,942,549
106
Operating Activities
Net cash provided by operating activities in 2022 was RMB919.3 million
(US$133.3 million) due to net income of RMB135.4 million (US$19.6 million), mainly adjusted for (i) provision for credit losses of RMB238.1
million, (ii) share-based compensation expenses of RMB5.8 million, (iii) depreciation and amortization of RMB2.2 million, (iv) losses
on sale of loans of RMB44.6 million, (v) the utilized of loans held-for-sale for originations and purchase was RMB585.4 million and (vi)
the increase of proceeds from sales and paydowns of loans originally classified as held for sale was RMB1,550.0 million. Adjustment for
changes in operating assets and liabilities consisted of (i) a decrease in other operating liabilities of RMB12.5 million, (ii) an increase
in other operating assets of RMB167.2 million, (iii) an decrease in deposits of RMB11.9 million, (iv) an increase of CRMP of RMB6.2 million
and (v) an increase in deposits of RMB168.8 million.
Net cash provided by operating activities in 2021 was RMB689.7 million
(US$108.2 million) due to net income of RMB65.2 million (US$10.2 million), mainly adjusted for (i) reversal of provision for credit losses
of RMB298.5 million, (ii) share-based compensation expenses of RMB18.8 million, (iii) depreciation and amortization of RMB3.8 million,
(iv) losses on sale of loans of RMB479.6 million, (v) the utilized of loans held-for-sale for originations and purchase was RMB453.9 million
and (vi) the increase of proceeds from sales and paydowns of loans originally classified as held for sale was RMB1,006.9 million. Adjustment
for changes in operating assets and liabilities consisted of (i) a increase in other operating liabilities of RMB69.1million, (ii) an
increase in other operating assets of RMB30.9 million, (iii) an increase in deposits of RMB42.9 million, (iv) an increase of CRMP of RMB138.7
million.
Net cash used in operating activities
in 2020 was RMB1,119.6 million due to net income of RMB114.9 million, mainly adjusted for (i) provision for credit losses of RMB77.3
million, (ii) share-based compensation expenses of RMB62.1 million, (iii) depreciation and amortization of RMB6.0 million, (iv) losses
on sale of loans of RMB50.6 million, (v) the utilized of loans held-for-sale for originations and purchase was RMB152.1 million and (vi)
the increase of proceeds from sales and paydowns of loans originally classified as held for sale was RMB637.7 million. Adjustment for
changes in operating assets and liabilities consisted of (i) an increase in other operating liabilities of RMB140.1million, (ii) an increase
in other operating assets of RMB28.4 million, (iii) a decrease in deposits of RMB19.5 million, (iv) an increase of CRMP of RMB281.0 million.
Investing Activities
Net cash used in investing activities was RMB1,098.2 million (US$159.2
million) in 2022, which was attributable to (i) purchase of investment securities of RMB8,567.3 million, (ii) purchases of property,
equipment and intangible assets of RMB89.9 million, (iii) loans originated, net of principal collected of RMB2,556.9 million, and (iv)
purchases of non-marketable equity securities of RMB25.0 million offset by (i) proceeds from sales of investment securities of RMB9,002.2
million, (ii) proceeds from disposal of property, equipment and intangible assets of RMB0.3 million, and (iii) proceeds from sales of
loans of RMB1,088.4 million. and.
Net cash used in investing activities was RMB2,350.6 million (US$368.9
million) in 2021, which was attributable to (i) purchase of investment securities of RMB9,496.3 million, (ii) purchases of property,
equipment and intangible assets of RMB3.8 million, (iii) loans originated, net of principal collected of RMB2,839.5 million, offset by
(i) proceeds from sales of investment securities of RMB8,956.5 million, (i) proceeds from disposal of property, equipment and intangible
assets of RMB0.6 million, (iii) proceeds from sales of loans of RMB1,022.0 million, and (iv) proceeds from disposal of non-marketable
equity securities of RMB10.0 million.
Net cash provided by investing activities was RMB524.1 million in
2020, which was attributable to i) proceeds from sales of investment securities of RMB7,187.5 million, (i) proceeds from disposal of
property, equipment and intangible assets of RMB2.2 million, and (iii) proceeds from sales of loans of RMB378.3 million, offset by (i)
purchase of investment securities of RMB6,951.5 million, (ii) purchases of property, equipment and intangible assets of RMB3.2 million,
and (iii) loans originated, net of principal collected of RMB89.2 million.
Financing Activities
Net cash used in financing activities was RMB288.2 million (US$41.8
million) in 2022, which was attributable to (i) repayment of interest-bearing borrowings of RMB6,333.6 million, and (ii) repurchase of
ordinary shares of RMB87.6 million, partially offset by (i) proceeds from interest-bearing borrowings of RMB6,082.3 million and (ii)
proceeds from contributions from non-controlling shareholders of RMB50.8 million.
Net cash used in financing activities in 2021 was RMB1,932.6 million,
which was attributable to repayment of interest-bearing borrowings of RMB7,068.0 million, offset by proceeds from interest-bearing borrowings
of RMB5,135.4 million.
Net cash used in financing activities
in 2020 was RMB1,367.1 million, which was attributable to repayment of interest-bearing borrowings of RMB7,382.1 million, offset by proceeds
from interest-bearing borrowings of RMB6,015.0 million.
107
Capital Expenditures
Our capital expenditures represent purchases of property, equipment
and intangible assets necessary to support our operations. Our capital expenditures were RMB3.2 million, RMB3.8 million and RMB89,9 million
(US$13.0 million) in 2020, 2021 and 2022, respectively. The increase in capital expenditures in 2022 was primarily due to our purchase
of new office building in Guangzhou, China.
Off-Balance Sheet Commitments and Arrangements
We launched in 2021 a new funding model in cooperation with commercial
banks, under which our commercial bank partners are responsible for reviewing and approving the loan while we charge a service fee for
our loan facilitation services. For loans funded by the proceeds from third-party commercial banks as our commercial bank partners, each
underlying loan and borrower has to be approved by the third-party commercial banks individually. Once the loan is approved by and originated
by the third-party commercial bank, the fund is provided by the third-party commercial bank to the borrower and a lending relationship
between the borrower and the third-party commercial bank is established through a loan agreement. Effectively, we offer loan facilitation
services to the borrowers who have credit needs and the commercial banks who originate loans directly to borrowers referred by us. We
continue to provide post-origination services to the borrowers over the term of the loan agreement. As we are not the legal lender or
borrower in the loan origination and repayment process, we do not record loans principal, interest and financing service fee receivables
arising from these loans nor interest-bearing borrowings to the third-party commercial banks.
Apart from the above, we have not entered into any derivative contracts
that are indexed to our shares and classified as shareholders' equity, or that are not reflected in our consolidated financial
statements. 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. Moreover, 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 product development services
with us.
Contractual Obligations
We lease multiple office spaces which are contracted under various
non-cancelable operating leases, most of which provide extension or early termination options and are generally expired in one to four
years. We do not enter into any finance leases or leases where the Group is a lessor. Moreover, the existing operating lease agreements
do not contain any residual value guarantees or material restrictive covenants.
Management determines if an arrangement is a lease at inception and
records the leases in the financial statements upon lease commencement, which is the date when the underlying office space is made available
for use by the lessor. The incremental borrowing rates determined forcomputing the lease liabilities are based on the People's
Bank of China (PBOC) Benchmark Rates for terms of loans ranging from zero (exclusive) to five years and above.
The following tables present the operating lease cost and other supplemental
information.
Year ended December 31,
2020
2021
2022
RMB
RMB
RMB
Operating lease cost(1)
21,719,042
14,764,364
13,966,943
(1)
Amounts include short-term leases that are immaterial.
December 31,
2022
RMB
Weighted-average remaining lease term
3.59 Year
Weighted-average discount rate
4.75
%
Cash paid for amounts included in the measurement of lease liabilities under operating cash flows
15,101,145
ROU assets obtained in exchange for new operating lease liabilities
29,777,357
108
The following represents the Group's future undiscounted cash
flows for each of the next five years and thereafter and reconciliation to the lease liabilities (excluding short-term operating leases)
as of December 31, 2022:
Year Ended December 31,
RMB
2023
12,085,870
2024
6,285,367
2025
4,745,037
2026
4,636,293
2027
3,427,888
Thereafter
-
Total future operating lease payments
31,180,455
Less: imputed interest
(2,596,980
)
Total present value of operating lease liabilities
28,583,475
Holding Company Structure
CNFinance Holdings Limited is a holding company with no operations
of its own. It conducts substantially all of its operations in China primarily through its subsidiaries in China, in particular Shenzhen
Fanhua United Investment Group Co., Ltd., Guangzhou Heze Information Technology Co., Ltd., and their subsidiaries and consolidated affiliated
entities, and substantially all of its assets and operations are located in China. With a holding company structure, we principally rely
on dividends from our PRC subsidiaries for our cash requirements, including any payment of dividends to our shareholders. If these subsidiaries
or any newly formed 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 2020, 2021 and 2022, CNFinance has not transferred any cash proceeds
to any of its PRC subsidiaries. For instance, cash proceeds raised from overseas financing activities, may be transferred by CNFinance
through China Financial Services Group Limited, our Hong Kong subsidiary, to Fanhua Chuangli Information Technology (Shenzhen) Company
Limited ("Fanhua Chuangli"), a PRC subsidiary, via capital contribution and shareholder loans, as the case may be. Fanhua
Chuangli then will transfer funds to its subsidiaries to meet the capital needs of business operations.
None of our PRC subsidiaries have issued any dividends or distributions
to respective holding companies, including CNFinance, or any investors as of the date of this annual report. Our subsidiaries in the
PRC generate and retain cash generated from operating activities and re-invest it in business operations.
In addition, our subsidiaries in the PRC are only permitted to pay
dividends only out of their retained earnings, if any, as determined in accordance with the Accounting Standards for Business Enterprise
as promulgated by the Ministry of Finance of the PRC, or PRC GAAP. The aggregate retained earnings for our PRC subsidiaries as determined
under the PRC GAAP were RMB2,742.2 million, RMB2,853.7 million and RMB2,990.3 million (US$433.6 million), as of December 31, 2020, 2021
and 2022, respectively.
Pursuant to the law applicable to foreign investment enterprises,
our subsidiaries that are foreign investment enterprises in the PRC are required to draw 10% of their profits as the companies'
statutory common reserve, provided that companies with aggregate common reserve of more than 50% of the companies registered capital
may elect not to draw any statutory common reserve any more. The appropriation to the general reserve fund must be at least 10% of the
after-tax profits calculated in accordance with PRC GAAP. Appropriation is not required if the reserve fund has reached 50% of the registered
capital of our subsidiary. Appropriation to the other two reserve funds are at our subsidiary's discretion. See "Item 3.
Key Information—D. Risk Factors—Risks Related to Doing Business in China—We may rely on dividends and other distributions
on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of
our PRC subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct our business" and
"Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—If we are classified as a PRC
resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC
shareholders or ADS holders."
109
As of the date of this annual report, the majority of our PRC subsidiaries
are still required to contribute to general reserve fund and these contributions are not expected to cease in the near term. Appropriation
to the other two reserve funds are at our subsidiaries' discretion. Our PRC subsidiaries did not make any contributions to the enterprise
expansion fund or the staff and bonus welfare fund during each period presented. The restricted amounts of our PRC subsidiaries totaled
RMB420.5 million, RMB423.3 million and RMB428.4 million (US$62.1 million) as of December 31, 2020, 2021 and 2022, respectively. In addition,
ADS holders may potentially be subject to PRC taxes on dividends paid by CNFinance in the event it is deemed as a PRC resident enterprise
for PRC tax purposes.
An offshore holding company is permitted under PRC laws and regulations
to provide funding from the proceeds of offshore fund raising activities to its PRC subsidiaries through loans or capital contributions,
and to its consolidated affiliated entities only through loans, in each case subject to the satisfaction of the applicable government
registration and approval requirements. As a result, there is uncertainty with respect to our ability to provide prompt financial support
to our PRC subsidiaries when needed. For details about the applicable PRC rules that limit transfer of funds from overseas to our PRC
subsidiaries, see "Risk Factors—Risks Related to Doing Business in China—PRC regulations of loans to and direct investment
in PRC entities by offshore holding companies and governmental control of currency conversion may delay us from using the proceeds of
our public offerings to make loans or additional capital contributions to our PRC subsidiaries, which could materially and adversely affect
our liquidity and our ability to fund and expand our business." Notwithstanding the foregoing, our PRC subsidiaries may use their
own retained earnings (rather than Renminbi converted from foreign currency denominated capital) to provide financial support to our consolidated
affiliated entities either through entrustment loans from our PRC subsidiaries or direct loans to such consolidated affiliated entities'
nominee shareholders, which would be contributed to the consolidated affiliated entities as capital injections. Such direct loans to the
nominee shareholders would be eliminated in our consolidated financial statements against the consolidated affiliated entities'
share capital.
Furthermore, if certain procedural requirements are satisfied, the
payment of current account items, including profit distributions and trade and service related foreign exchange transactions, can be made
in foreign currencies without prior approval from State Administration of Foreign Exchange ("SAFE") or its local branches.
However, where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses, such as the repayment of
loans denominated in foreign currencies, approval from or registration with competent government authorities or its authorized banks is
required. The PRC government may take measures at its discretion from time to time to restrict access to foreign currencies for current
account or capital account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies
to satisfy our foreign currency demands, our PRC subsidiaries may not be able to pay dividends in foreign currencies to our offshore intermediary
holding companies or ultimate parent company, and therefore, our shareholders or investors in the ADSs. In addition, we cannot assure
you that new regulations or policies will not be promulgated in the future, which may further restrict the remittance of RMB into or out
of the PRC. We cannot assure you, in light of the restrictions in place, or any amendment to be made from time to time, that our current
or future PRC subsidiaries will be able to satisfy their respective payment obligations that are denominated in foreign currencies, including
the remittance of dividends out of the PRC.
Recent Accounting Pronouncements
On January 1, 2020, we adopted the new accounting standard. Our lifetime
expected credit losses are determined using macroeconomic forecast assumptions and management judgments applicable to and through the
expected life of the loan portfolios, and are net of expected recoveries on loans that were previously charged off. The standard also
expands credit quality disclosures beginning in the first quarter of 2020. While the standard changes the measurement of the allowance
for credit losses, it does not change our credit risk of its lending portfolios or the ultimate losses in those portfolios.
Prior to the adoption, we used the roll rate-based model for the measurement
of credit losses and the management had been working through the implementation of the new standard. In that regard, we (1) formed a cross-functional
working group under the direction of the risk management department, (2) evaluated data sources and made process updates to capture additional
relevant data, and (3) identified a service provider to perform the calculation. The working group was comprised of individuals from various
functional areas including credit, risk management, finance and information technology. The implementation plan included, but was not
limited to, an assessment of processes, portfolio segmentation, model development, system requirements and the identification of data
and resource needs.
110
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement
(Topic 820): Disclosure Framework (Topic 842) – Changes to the Disclosure Requirements for Fair Value Measurement, which modify
the disclosure requirements on fair value measurement by removing, modifying, or adding certain disclosures. The amendments improve the
effectiveness of disclosures in the notes to financial statements modify the disclosure requirements on fair value measurements in Topic
820. This ASU requires disclosure of the changes in unrealized gains or losses included in OCI for Level 3 assets or liabilities held
at the end of the period and the range and weighted-average of the significant unobservable inputs used in determining the fair value
of Level 3 assets and liabilities. The amendments also remove the requirement to disclose the transfers between Level 1 and Level 2 of
the fair value hierarchy, timing of transfers between levels, and the valuation process for determining Level 3 fair value measurements.
The amendments in this update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning
after December 15, 2019. We adopted the standard on January 1, 2020. We have not historically recorded material amounts of Level 3 assets
and liabilities or material transfers of assets or liabilities between levels within the fair value hierarchy and therefore do not anticipate
the adoption to have any material impact on our financial statement disclosures.
In January 2020, the FASB issued ASU No. 2020-01, Investments-Equity
Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815), which clarifies
the interaction of the accounting for equity securities under Topic 321, the accounting for equity method investments in Topic 323, and
the accounting for certain forward contracts and purchased options in Topic 815. For public business entities, the amendments in this
Update are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years, with early adoption
permitted. The ASU is currently not expected to have a material impact on the Group's consolidated financial statements.
In March 2020, the FASB issued ASU 2020-3, Codification Improvements
to Financial Instruments, which revised a wide variety of topics in the Codification with the intent to make the Codification easier to
understand and apply by eliminating inconsistencies and providing clarifications. ASU 2020-3 was effective immediately upon its release
in March 2020 and did not have a material impact on the Group's consolidated financial statements.
In August 2021, the FASB issued ASU No. 2021-06, Presentation of Financial
Statements (Topic 205), Financial Services-Depository and Lending (Topic 942), and Financial Services-Investment Companies (Topic 946),
which amended certain paragraphs for better presentation of codifications. This Update was effective immediately upon its release in August
2021 and did not have a material impact on the Group's consolidated financial statements.
The ASU 2022-02 is to be adopted on a prospective
basis and will be effective for the Group on January 1, 2023, although early adoption is permitted. The Amendment eliminates the accounting
guidance for troubled debt restructurings (TDRs) by creditors and introduces new required disclosures for loan modifications made to borrowers
experiencing financial difficulty. The Amendment also sets the guidance for vintage disclosures to require disclosure of current period
gross charge-offs by year of origination. Adoption of the accounting standard is not expected to have an impact on the Group's operating
results or financial position, as the Group does not involve in the activity of debt restructurings.
The ASU 2022-03 is to be adopted on a prospective
basis and will be effective for the Group on January 1, 2024, although early adoption is permitted. The Amendment clarifies that
a
contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and also
states that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. The Update also requires
a few more disclosures on equity securities subject to contractual sale restrictions.
Adoption of the accounting standard is not
expected to have an impact on the Group's operating results or financial position, as the Group excludes such restrictions when
valuing equity securities.
5.C. Research and Development
We have focused on and will continue to invest in our technology system,
which supports all key aspects of our platform and is designed to optimize for scalability and flexibility.
Our research and development expenses which was reported in other expenses
of the consolidated statements of comprehensive income were RMB10.0 million, RMB1.6 million and RMB0.8 million (US$0.1 million) in 2020,
2021 and 2022, respectively.
111
5.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, 2022 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 condition.
5.E. Critical Accounting Estimates
We prepare our financial statements in conformity with U.S. GAAP, which
requires us to make estimates and assumptions that affect out reporting of, among other things, assets and liabilities, contingent assets
and liabilities and total revenues and expenses. On an on-going basis, we evaluate out estimates based on historical experience and on
various other assumptions that from other sources. Since our financial reporting process inherently relies on the use of estimates and
assumptions, our actual results could differ from what we expect.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 from period to period or use of different estimates that we reasonably could
have used n the current period, would have a material impact on our financial condition or results of operations. Such critical estimates
are discussed below. For further information on our other significant accounting estimates, see Note 2 to our consolidated financial statements
included elsewhere in this annual report.
Allowance for credit loss and guaranteed liabilities
Commencing January 1, 2020, we adopted ASC 326, which replaced the
incurred loss methodology for determining the provision for credit losses and allowance for credit losses with an expected loss methodology
that is referred to as the CECL model. Allowance for credit losses represents our estimate of probable losses inherent in the portfolio,
and the guaranteed liabilities represents our estimate of probable losses of providing financial guarantee services for the off-sheet
loans under the commercial bank partnership model. Estimation of CECLs requires us to make assumptions regarding the likelihood and severity
of credit loss events and their impact on expected cash flows, which drive the probability of default (PD), loss given default (LGD) and
exposure at default (EAD) models. we incorporate forward-looking information through the use of macroeconomic scenarios applied over the
forecasted life of the assets. These variables include, but are not limited to, gross-domestic product rates and consumer price indexes.
Standalone selling prices
We use an expected costs plus margin approach to estimate the standalone
selling prices of loan facilitation services and post facilitation services under commercial bank partnership model as the basis of revenue
allocation under ASC 606 in 2022. when estimating the selling prices, we consider the cost related to such services, profit margin, customer
demand, effect of competition on services, and other market factors, among which estimates of the cost of providing the services is the
most significant. Also, We consider early termination scenarios based on historical early payment and other termination scenarios as we
cannot receive the full contractual service fee amount under early termination, given the service fee is collected on a pro-rata basis
upon early loan termination.
Valuation allowance of deferred tax assets
We record a valuation allowance to reduce our deferred tax assets to
the amount that is more likely than not to be realized. Significant judgement is required in determining the valuation allowance. In assessing
the need for a valuation allowance, we consider all sources of taxable income, including projected future taxable income, reversing taxable
temporary differences and ongoing tax planning strategies. If it is determined that we are able to realize deferred tax assets in excess
of the net carrying value or to the extent we are unable to realize a deferred tax asset, we would adjust the valuation allowance in the
period in which such a determination is made, with a corresponding increase or decrease to earnings.
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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
6.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. The business address of our directors and executive officers except for Mr.
Fengyong Gao, Mr. Lin Xu, Mr. Xi Wang and Mr. Ge Yang is 44/F Tower G, No. 16 Zhujiang Dong Road, Tianhe District, Guangzhou City, Guangdong,
People's Republic of China. The business address for Mr. Fengyong Gao is Room 702A, No.1518 Minsheng Road, Pudong New District,
Shanghai. The business address for Mr. Lin Xu is No.1405, Building 4, No.3 Courtyard, Sanlihe Yiqu, Xicheng District, Beijing. The business
address for Mr. Xi Wang is No.66 Xingang Xi Road, Guangzhou, Guangdong Province. The business address for Mr. Ge Yang is 32 Crabtree Ln
Tenafly, NJ 07670, the U.S.A.
Directors and Executive Officers
Age
Position/Title
Bin Zhai
53
Chairman, Director, Chief Executive Officer
Jun Qian
50
Director and Vice President
Fengyong Gao
53
Independent Director
Lin Xu
61
Independent Director
Xi Wang
54
Independent Director
Ge Yang
52
Independent Director
Zehui Zhang
50
Vice President
Huiling Jiang
43
Vice President
Jing Li
42
Acting Chief Financial Officer
Bin Zhai
has served as our Chairman of the Board of Directors
since 2017 and our Chief Executive Officer since 2010. He joined our company in 2006 as executive director of Shenzhen Nanfeng Mortgage
Advisory Co., Ltd., a subsidiary of Fanhua Inc. Prior to joining us, Mr. Zhai served as account manager of Bank of Communications Tianjin
Branch from 1991 to 1993, investment manager at China Ministry of Agriculture Shenzhen Office from 1993 to 1998 and general manager at
Shenzhen Modern Warehouse Building Material Co., Ltd. from 1998 to 2006. Mr. Zhai received his bachelor's degree in insurance from
Nankai University in China.
Jun Qian
joined the Company in 2001 and has served as our Vice
President since 2010. Mr. Qian has over 20 years of experience in China's loan industry and has served in the Company's senior
management team for more than 15 years. Mr. Qian received his bachelor's degree in international trade from Hohai University and
his second bachelor's degree in accounting from Guilin University of Electronic Technology.
Fengyong Gao
has served as our Independent Director since our
initial public offering. Mr. Gao is the founder, partner and chief executive director of Leading Capital Co., Ltd. and the founder, partner
and chairman of the board of Shanghai Blue Ocean Capital. Mr. Gao previously served as the general manager of the trust department and
subsequently as the vice president of Bridge Trust Co., Ltd. from 2003 to 2007. Mr. Gao currently also serves as the independent director
of China Haisum Engineering Co., Ltd. and Great Wall Movie and Television Co. Ltd. Mr. Gao received both his bachelor's degree and
master's degree in finance from Nankai University in China.
Lin Xu
has served as our Independent Director since our initial
public offering. Mr. Xu currently serves as the director general of China Center for Urban Development of NDRC and the chairman of the
board of U.S.-China Green Fund. Prior to that, Mr. Xu served as the director general of Development Planning Department of NDRC from 2012
to 2017. Mr. Xu also served as the director general of Fiscal and Financial Affairs Department of NDRC from 2006 to 2012 and as the deputy
director general of Development Planning Department of NDRC from 2002 to 2006. Mr. Xu received his bachelor's degree in mathematics
from Hunan Shaoyang Normal College, his first master's degree in economics from Nankai University and his second master's
degree of public administration from the Lee Kuan Yew School of Public Policy at National University of Singapore.
113
Xi Wang
has served as our Independent Director since March 2019.
Dr. Wang is currently a professor at Lingnan (University) College, as well as the director of China Institute for Economic Transformation
and Opening of Sun Yat-sen University ("SYSU"). He specializes in economics and his research area includes banking and monetary
policy, international finance (exchange rates and balance of payments), and China's economy among other subjects. Dr. Wang received
his master's degree and Ph.D in economics from SYSU and has been a professor at SYSU since 2004. He is a contributor of multiple
business journals, such as the Economic Research Journal, China Economic Quarterly, Finance Research, and Journal of World Economy. Dr.
Wang also serves as an independent director at various companies including Palm Eco-Town Development Co., Ltd., a company listed on the
Shenzhen Stock Exchange since May 2014, Zhuhai Rural Commercial Bank Co., Ltd. since July 2014, Guangdong Electric Power Development Co.,
Ltd., a company listed on the Shenzhen Stock Exchange since June 2016, Guangzhou Public Transport Group Co., Ltd. since August 2018, and
Guangzhou Yuexiu Financial Holdings Group Co., Ltd., a company listed on the Shenzhen Stock Exchange since January 2019.
Ge Yang
has served as our Independent Director since November
2022. Mr. Yang has over 30 years of experiences in corporate finance, non-bank financial institution, and wealth and asset management,
having worked with public companies both in China and in the U.S. He currently serves as financial controller in Noah Gopher Capital Advisors
LLC in charge of asser management. Prior to that, he held the positions of vice president and chief financial officer in Minmetals Inc.
from 2003 to 2019. Mr. Yang received his bachelor's degree in international finance from Nankai University, his MBA degree from
Tsinghua University, and a second master's degree in Accounting from Seton Hall University.
Zehui Zhang
has served as our Vice President since 2010. He
joined Fanhua Inc. in 2001 and served as general manager of Guangdong Nanfeng Insurance Agency Co., Ltd., a subsidiary of Fanhua Inc.
from 2002 to 2009. Mr. Zhang has over 15 years of experience in finance business. He received his diploma in accounting at Guangdong Polytechnic
Normal University, formerly known as Guangdong Commercial Management College, in China.
Huiling Jiang
has served as our Vice President since 2021. She
joined the Company in 2008, and served successively as the Manager of Operation Management Department, the Manager of Risk Management
Department, the General Manager of Guangzhou Branch, the Manager of Retail Financing Department, the President of Structural Funding Department
and the Assistant President of the Company.
Jing Li
has served as our Acting Chief Financial Officer, Assistant
President of the Company and the Head of Department of Finance and Internal Control since the fourth quarter of 2021. Ms. Li has 20 years
of experience in the financial industry and holds the certificate of ACCA and IPA. Prior to joining CNFinance Holdings Limited in 2008,
she worked for Deloitte Touche Tohmatsu Certified Public Accountants LLP and Fanhua Inc. Ms. Li received her bachelor's degree in
financial management from Guangdong University of Foreign Studies and her MPAcc degree from Sun Yat-Sen University.
6.B. Compensation
Compensation
For the fiscal year ended December 31, 2022, we paid an aggregate of
RMB 4.4 million (US$0.6 million) in cash to our executive officers (including our executive directors), and we did not pay any cash compensation
to our non-executive directors. For the fiscal year ended December 31, 2022, we paid for our executive officers (including our executive
directors) an aggregate of RMB442,334 (US$64,132) of social insurance plans and housing provident funds required by PRC law. We did not
pay such insurance or housing fund for our non-executive directors. For share incentive grants to our directors and executive officers,
please refer to "Item 6. Directors, Senior Management and Employees—B. Compensation—Share Incentive Plan."
Employment Agreements and Indemnification Agreements
We have entered into employment agreements with each of our executive
officers. Each of our executive officers is employed for a specified time period, which can be renewed upon both parties' agreement
before the end of the current employment term. We may terminate an executive officer's employment for cause at any time without
advance notice in the event of, among other things, (i) commitments by such executive officer of any serious breach of the terms and conditions
of his or her employment and our internal rules and procedures, (ii) conviction of a criminal offense, or (iii) severe neglect of his
or her duties or embezzlement to our detriment. We may also terminate an executive officer's employment by giving a 30 days'
prior written notice or by paying a compensation of an amount equal to one month's wages of such executive officer. An executive
officer may terminate his or her employment at any time by giving a 30 days' prior written notice.
114
Each executive officer has agreed to hold, unless expressly consented
to by us, at all times during and after the termination of his or her employment agreement, in strict confidence and not to use, any of
our confidential information or the confidential information of our customers and suppliers. In addition, each executive officer has agreed
to be bound by certain non-competition and non-solicitation restrictions during the term of his or her employment and for two years following
the last date of employment. Specifically, each executive officer has agreed not to (i) carry out or otherwise be concerned or interested,
directly or indirectly, in certain businesses in direct or indirect competition with us; (ii) assume employment with or provide services
to certain of our competitors or engage, whether as principal, partner, licensor or otherwise, with such competitors; or (iii) seek directly
or indirectly, by the offer of alternative employment or other inducement whatsoever, to solicit the services of any of our employees,
agents or consultants who are employed or engaged by us at any time in the one year preceding the last date of his or her employment.
We have entered into indemnification agreements with each of our directors
and executive officers. Under these agreements, we may agree to indemnify our directors and executive officers against certain liabilities
and expenses incurred by such persons in connection with claims made by reason of their being a director or officer of our company.
Share Incentive Plan
2017 SFIL Share Incentive Plan
In January 2017, SFIL adopted the 2017 SFIL Share Incentive Plan, or
the 2017 Plan. Under the 2017 Plan, SFIL granted 187,933,720 options to its certain management members and employees to purchase up to
187,933,720 ordinary shares. The term of the options will not exceed ten years from the date of the grant.
2018 CNFinance Holdings Limited Share Incentive Plan
On August 27, 2018, we adopted the 2018 CNFinance Holdings Limited
Share Incentive Plan, or the 2018 Plan, to replace the 2017 Plan and granted 187,933,720 options to certain management members and employees
to purchase up to 187,933,720 of our ordinary shares under this 2018 Plan to replace the granted and outstanding options under the 2017
Plan. Pursuant to the terms of the 2018 Plan, 60%, 20% and 20% of the award options shall vest on December 31 of each of the years 2017,
2018 and 2019, respectively.
On December 31, 2019, we granted 119,674,780 options to certain management
members and employees to purchase up to 119,674,780 of our ordinary shares under the 2018 Plan. Pursuant to the terms of 2018 Plan, 50%,
30% and 20% of the award options shall vest on December 31 of each of the years of 2021, 2022 and 2023, respectively.
The purpose of the 2018 Plan is to promote the success and enhance
the value of the Company by linking the personal interests of the members of the board of directors, employees and consultants to those
of the Company shareholders and by providing such individuals with an incentive for outstanding performance to generate superior returns
to the Company shareholders. The 2018 Plan is further intended to provide flexibility to the Company in its ability to motivate, attract
and retain the services of member of the board of director, employees and consultants upon whose judgment, interest and special effort
the successful conduct of the Company's operation is largely dependent. The 2018 Plan provides for the issuance of up to an aggregate
of 307,608,500 of our ordinary shares.
The following paragraphs summarize the terms of the 2018 Plan.
Types of Awards
.
The 2018 Plan permits the awards
of options, restricted shares and restricted share units and other rights or benefits under the 2018 Plan.
Plan Administration
.
The 2018 Plan shall be administered
by the board of directors; provided, however, that the board of directors may delegate to a committee of one or more members of the board
of the directors the authority to grant or amend Awards to grantee other than Independent Directors and executive officers of the Company.
The committee shall consist of at least two individuals, each of whom qualifies as a non-employee director.
Eligibility
.
Employees, consultants of the Company
or its affiliate and member of the board of directors are eligible to participate in the 2018 Plan. An employee or consultant who has
been granted an award may, if he or she is otherwise eligible, be granted additional awards.
115
Designation of Award
.
Each award under the 2018
Plan is designated in an award agreement, which is a written agreement evidencing the grant of an award executed by the company and the
grantee, including any amendments thereto.
Conditions of Award
.
The board of directors or
any entity appointed by the board of directors to administer the 2018 Plan shall determine the provisions, terms, and conditions of each
award including, but not limited to, the award vesting schedule, repurchase provisions, rights of first refusal, forfeiture provisions,
and form of payment upon settlement of the award.
Terms of Award
.
The term of each award is stated
in the award agreement between the Company and the grantee of such award.
Amendment, Modification, Suspension or Termination of the 2018
Plan
.
The administrator of the 2018 Plan may amend, alter, suspend, discontinue or terminate this 2018 Plan, or any Award
Agreement hereunder or any portion hereof or thereof at any time; provided, however, that (a) to the extent necessary and desirable to
comply with applicable laws defined therein, or stock exchange rules, the Company shall obtain shareholder approval of any Plan amendment
in such a manner and to such a degree as required, and (b) shareholder approval is required for any amendment to the 2018 Plan that (i)
increases the number of shares available under the 2018 Plan (other than any adjustment as provided by Article 8 of the 2018 Plan), (ii)
permits the Committee to extend the term of the 2018 Plan or the exercise period for an option beyond ten years from the date of grant,
or (iii) results in a material increase in benefits or a change in eligibility requirements.
The following table summarizes, as of the date of this annual report,
the outstanding equity awards granted to our directors and executive officers under the 2018 Plan, which replaced the 2017 Plan.
Name
Number of Options Outstanding (1)
Ordinary Shares Underlying Equity Awards Granted (1)
Exercise Price (Per share) (1)
Date of
Grant (1)
Date of Expiration
Bin Zhai
40,000,000
40,000,000
RMB0.5
January 3, 2017
December 31,2022
Ning Li
30,000,000
30,000,000
RMB0.5
January 3, 2017
December 31,2022
Jun Qian
20,000,000
20,000,000
RMB0.5
January 3, 2017
December 31,2022
Zehui Zhang
20,000,000
20,000,000
RMB0.5
January 3, 2017
December 31,2022
All directors and executive officers as a group
110,000,000
110,000,000
RMB0.5
January 3, 2017
December 31,2022
Notes:
(1)
Does not include 35,902,434 options to purchase up to 35,902,434 of our ordinary shares granted under the 2018 Plan on December 31,
2019, with an exercise price of RMB1.0 per share. Such options will be considered vested as to 50%, 30%, 20% on each of December 31, 2020,
December 31, 2021 and December 31, 2022, respectively, but will only be distributed to the applicable grantees based on their performance
scores on December 31, 2022, subject to continued employment through such date.
As of the date of this annual report, our other employees as a group
held options to purchase up to 161,706,076 of our ordinary shares. For the options granted on January 3, 2017, our other employees as
a group held options to purchase up to 77,933,730 of our ordinary shares, with an exercise price of RMB0.5 per share. For the option granted
on December 31, 2019, our other employees as a group held options to purchase up to 83,772,346 of our ordinary shares, with an exercise
price of RMB1.0 per share.
For discussions of our accounting policies and estimates for awards
granted pursuant to the 2018 Plan, see "Item 5. Operating and Financial Review and Prospects—A. Operating Results—Critical
Accounting Policies, Judgments and Estimates—Share-based compensation expenses."
116
6.C. Board Practices
Board of Directors
Our Board of Directors consists of six directors, including three independent
directors. A director is not required to hold any shares in our company to qualify to serve as a director. The Corporate Governance Rules
of the NYSE generally require that a majority of an issuer's board of directors must consist of independent directors. However,
the Corporate Governance Rules of the NYSE permit foreign private issuers like us to follow "home country practice" in certain
corporate governance matters. We rely on this "home country practice" exception and do not have a majority of independent
directors serving on our Board of Directors.
A director who is in any way, whether directly or indirectly, interested
in a contract or proposed contract with our company is required to declare the nature of his or her interest at a meeting of our directors.
A general notice given to the directors by any director to the effect that he or she is a member, shareholder, director, partner, officer
or employee of any specified company or firm and is to be regarded as interested in any contract or transaction with that company or firm
shall be deemed a sufficient declaration of interest for the purposes of voting on a resolution in respect to a contract or transaction
in which he/she has an interest, and after such general notice it shall not be necessary to give special notice relating to any particular
transaction. A director may vote in respect of any contract or proposed contract or arrangement notwithstanding that he/she may be interested
therein and if he/she does so, his/her vote shall be counted and he/she may be counted in the quorum at any meeting of the directors at
which any such contract or proposed contract or arrangement is considered. Our board of directors may exercise all of the powers of our
company to borrow money, to mortgage or charge its undertaking, property and uncalled capital, or any part thereof, and to issue debentures,
debenture stock or other securities whenever money is borrowed or as security for any debt, liability or obligation of our company or
of any third party. None of our directors has a service contract with us that provides for benefits upon termination of service as a director.
Committees of the Board of Directors
Our Board of Directors has established an audit committee, a compensation
committee and a nominating and corporate governance committee under our 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. Fengyong Gao, Mr. Lin Xu and Mr.
Xi Wang, and is chaired by Mr. Fengyong Gao. We have determined that Mr. Fengyong Gao, Mr. Lin Xu and Mr. Xi Wang satisfy the requirements
of Section 303A of the Corporate Governance Rules of the NYSE and meet the independence standards under Rule 10A-3 under the Securities
Exchange Act of 1934, as amended. We have determined that Mr. Fengyong Gao qualifies as an "audit committee financial expert."
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:
●
reviewing
                                            and recommending to our board for approval, the appointment, re-appointment or removal of
                                            the independent auditor, after considering its annual performance evaluation of the independent
                                            auditor;
●
approving
                                            the remuneration and terms of engagement of the independent auditor and pre-approving all
                                            auditing and non-auditing services permitted to be performed by our independent auditors
                                            at least annually;
●
obtaining
                                            a written report from our independent auditor describing matters relating to its independence
                                            and quality control procedures;
●
reviewing
                                            with the independent registered public accounting firm any audit problems or difficulties
                                            and management's response;
●
discussing
                                            with our independent auditor, among other things, the audits of the financial statements,
                                            including whether any material information should be disclosed, issues regarding accounting
                                            and auditing principles and practices;
●
reviewing
                                            and approving all proposed related party transactions, as defined in Item 404 of Regulation
                                            S-K under the Securities Act;
●
reviewing
                                            and recommending the financial statements for inclusion within our quarterly earnings releases
                                            and to our board for inclusion in our annual reports;
117
●
discussing
                                            the annual audited financial statements with management and the independent registered public
                                            accounting firm;
●
reviewing
                                            the adequacy and effectiveness of our accounting and internal control policies and procedures
                                            and any special steps taken to monitor and control major financial risk exposures;
●
at
                                            least annually, reviewing and reassessing the adequacy of the committee charter;
●
approving
                                            annual audit plans, and undertaking an annual performance evaluation of the internal audit
                                            function;
●
establishing
                                            and overseeing procedures for the handling of complaints and whistleblowing;
●
meeting
                                            separately and periodically with management and the independent registered public accounting
                                            firm;
●
monitoring
                                            compliance with our code of business conduct and ethics, including reviewing the adequacy
                                            and effectiveness of our procedures to ensure proper compliance; and
●
reporting
                                            regularly to the board.
Compensation Committee
Our compensation committee consists of Mr. Bin Zhai, Mr. Jun Qian and
Mr. Fengyong Gao and is chaired by Mr. Bin Zhai. We have determined that Mr. Fengyong Gao satisfies the "independence" requirements
of Section 303A of the Corporate Governance Rules of the NYSE. 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 committee meeting during which his or her compensation is deliberated upon. The compensation committee
is responsible for, among other things:
●
overseeing
                                            the development and implementation of compensation programs in consultation with our management;
●
at
                                            least annually, reviewing and approving, or recommending to the board for its approval, the
                                            compensation for our executive officers;
●
at
                                            least annually, reviewing and recommending to the board for determination with respect to
                                            the compensation of our non-executive directors;
●
at
                                            least annually, reviewing periodically and approving any incentive compensation or equity
                                            plans, programs or other similar arrangements;
●
reviewing
                                            executive officer and director indemnification and insurance matters;
●
overseeing
                                            our regulatory compliance with respect to compensation matters, including our policies on
                                            restrictions on compensation plans and loans to directors and executive officers;
●
at
                                            least annually, reviewing and reassessing the adequacy of the committee charter;
●
selecting
                                            compensation consultant, legal counsel or other adviser only after taking into consideration
                                            all factors relevant to that person's independence from management; and
●
reporting
                                            regularly to the board.
118
Nominating and Corporate Governance Committee
Our nominating and corporate governance committee consists of Mr. Bin
Zhai, Mr. Jun Qian and Mr. Xi Wang, and is chaired by Mr. Bin Zhai. We have determined that Mr. Xi Wang satisfies the "independence"
requirements of Section 303A of the Corporate Governance Rules of the NYSE. 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, knowledge, skills, experience, expertise, diversity and availability
                                            of service to us;
●
developing
                                            and recommending to our board such policies and procedures with respect to nomination or
                                            appointment of members of our board and chairs and members of its committees or other corporate
                                            governance matters as may be required pursuant to any SEC or NYSE rules, or otherwise considered
                                            desirable and appropriate;
●
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;
●
at
                                            least annually, reviewing and reassessing the adequacy of the committee charter;
●
developing
                                            and reviewing at least annually 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.
Duties and Functions of Directors
Under Cayman Islands law, our directors owe fiduciary duties to our
company, including a duty of loyalty, a duty to act honestly and a duty to act in what they consider in good faith to be in our best interests.
Our directors must also exercise their powers only for a proper purpose. Our directors also owe to our company a duty to exercise the
skill they actually possess and such care and diligence that a reasonable prudent person would exercise in comparable circumstances. It
was previously considered that a director need not exhibit in the performance of his duties a greater degree of skill than may reasonably
be expected from a person of his 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. In fulfilling their
duty of care to us, our directors must ensure compliance with our amended and restated memorandum and articles of association, as amended
and restated from time to time. Our company has the right to seek damages if a duty owed by our directors is breached. In limited exceptional
circumstances, a shareholder may have the right to seek damages in our name if a duty owed by our directors is breached. The functions
and powers of our Board of Directors include, among others, (i) convening shareholders' annual general meetings and reporting its
work to shareholders at such meetings, (ii) declaring dividends, (iii) appointing officers and determining their terms of offices and
responsibilities, and (iv) approving the transfer of shares of our company, including the registering of such shares in our share register.
Terms of Directors and Officers
Our officers are elected by and serve at the discretion of the board.
Each director is not subject to a term of office and holds office until such time as his successor takes office or until the earlier of
his death, resignation or removal from office by special resolution or the unanimous written resolution of all shareholders. A director
will be removed from office automatically if, among other things, the director (i) becomes bankrupt or makes any arrangement or composition
with his creditors; (ii) dies or is found by our company to be of unsound mind; (iii) resigns by notice in writing to our company; (iv)
without special leave of absence from our Board of Directors, is absent from three consecutive meetings of the board and the board resolves
that his office be vacated; (v) is prohibited by law from being a director; or (vi) is removed from office pursuant to any other provisions
of our post-offering amended and restated memorandum and articles of association.
119
Interested Transactions
A director may, subject to approval of the chairman of the relevant
board meeting and under applicable law or applicable NYSE rules, vote in respect of any contract or transaction in which he or she is
interested, provided that the nature of the interest of any directors in such contract or transaction is disclosed by him or her at or
prior to its consideration and any vote in that matter.
6.D. Employees
We had 930 employees as of December 31, 2022. Our employees are based
in our headquarters in Guangzhou, Guangdong province and various local offices over 50 cities across China.
The following table sets forth the breakdown of our employees by function
as of December 31, 2022.
As of December 31, 2022
Functions
Number
% of Total Employees
Risk Management
532
57.2
%
Sales and Marketing
174
18.7
%
General and Administration
99
10.6
%
Finance
65
7.0
%
Others
60
6.5
%
Total
930
100.0
%
As required by laws and regulations in China, we participate in various
employee social security plans that are organized by municipal and provincial governments, including, among other things, housing, pension,
medical insurance and unemployment insurance.
We typically enter into standard employment, confidentiality and non-compete
agreements with our senior management. These contracts include a standard non-compete covenant that prohibits any employee from competing
with us, directly or indirectly, during his or her employment and for two years after the termination of employment, provided that we
pay monthly compensation equal to 30% of his or her previous average monthly salary during the restriction period.
We believe that we maintain a good working relationship with our employees,
and we have not experienced any labor disputes. None of our employees are represented by labor unions.
6.E. Share Ownership
The following table sets forth information concerning the beneficial
ownership of our ordinary shares, as of March 31, 2023, by:
●
each
                                            of our directors and executive officers; and
●
each
                                            person known to us to beneficially own more than 5% of our ordinary shares.
The calculations in the table below are based on 1,371,643,240 ordinary
shares issued and outstanding as of the date of March 31, 2023.
120
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.
Ordinary Shares Beneficially
Owned as of March 31, 2023
Functions
Number
%*
Directors and Executive Officers:†
Bin Zhai
(1)
283,949,380
20.1
%
Jun Qian
(2)
20,000,000
1.4
%
Zehui Zhang
(3)
20,000,000
1.4
%
Huiling Jiang
—
—
Jing Li
—
—
Fengyong Gao
—
—
Lin Xu
—
—
Xi Wang
—
—
Ge Yang
—
—
Principal Shareholders:
Kylin Investment Holdings Limited
(4)
243,949,380
17.8
%
Notes:
*
For each person and group included in this table, percentage ownership is calculated by dividing the number of shares beneficially
owned by such person or group by the sum of (i) 1,371,643,240, being the number of ordinary shares as of March 31, 2023 and (ii) the number
of ordinary shares underlying share options held by such person or group that are exercisable within 60 days after March 31, 2023.
†
The business address of our directors and executive officers except for Mr. Fengyong Gao, Mr. Lin Xu, Mr. Xi Wang and Mr. Ge Yang
is 44/F Tower G, No. 16 Zhujiang Dong Road, Tianhe District, Guangzhou City, Guangdong, People's Republic of China. The business
address for Mr. Fengyong Gao is Room 702A, No.1518 Minsheng Road, Pudong New District, Shanghai. The business address for Mr. Lin Xu is
No.1405, Building 4, No.3 Courtyard, Sanlihe Yiqu, Xicheng District, Beijing. The business address for Mr. Xi Wang is No.66 Xingang Xi
Road, Guangzhou, Guangdong Province. The business address for Mr. Ge Yang is 32 Crabtree Ln Tenafly, NJ 07670, the U.S.A.
(1)
Includes (i) options we granted to Mr. Bin Zhai under the 2018
Plan to purchase up to 40,000,000 of our ordinary shares that are immediately exercisable; and (ii) the equity interest held by Mr. Bin
Zhai through Kylin Investment Holdings Limited, or Kylin Investment, as set forth in note (4) below.
(2)
Includes options we granted to Mr. Jun Qian under the 2018 Plan to purchase up to 20,000,000 of our ordinary shares that are immediately
exercisable. This does not include the equity interest held by Mr. Jun Qian through Kylin Investment, as set forth in note (4) below.
(3)
Includes options we granted to Mr. Zehui Zhang under the 2018 Plan to purchase up to 20,000,000 of our ordinary shares that are immediately
exercisable. This does not include the equity interest held by Mr. Zehui Zhang through Kylin Investment, as set forth in note (4) below.
(4
)
Represents 243,949,380 ordinary shares of our company held by Kylin Investment Holdings Limited, or Kylin Investment, a company incorporated
in the British Virgin Islands. 50% of the total outstanding shares of Kylin Investment are held by Mr. Bin Zhai, our chairman and chief
executive officer. 30% of the total outstanding shares of Kylin Investment are held by Mr. Ning Li, our former executive director and
former chief financial officer. 10% of the total outstanding shares of Kylin Investment are held by Mr. Jun Qian, one of our officers
and 10% of the total outstanding shares of Kylin Investment are held by Mr. Zehui Zhang, one of our officers. Mr. Bin Zhai may be deemed
to have the power to direct voting and disposition of the 243,949,380 of our ordinary shares held by Kylin Investment. The business address
of Kylin Investment Holdings Limited is Floor 44, Building G, Winter Square, Gaode Land, Guangzhou, Guangdong Province, People's
Republic of China.
6.F. Disclosure of a Registrant's
Action to Recover Erroneously Awarded Compensation
Not applicable
121
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
7.A. Major Shareholders
Please refer to "Item 6. Directors, Senior Management and Employees—E.
Share Ownership."
7.B. Related Party Transactions
Employment Agreements
See "Item 6. Directors, Senior Management and Employees—6.B.
Compensation—Employment Agreements and Indemnification Agreements" for a description of the employment agreements we have
entered into with our senior executive officers.
Share Incentives
See "Item 6. Directors, Senior Management and Employees—6.B.
Compensation—Share Incentive Plan" for a description of share options we have granted to our directors, officers and other
individuals as a group.
Other Related Party Transactions
The Group did not have any other related party transactions in the
year ended December 31, 2022.
7.C. Interests of Experts and Counsel
Not applicable.
ITEM 8. FINANCIAL INFORMATION
8.A. Consolidated Statements and Other Financial Information
We have appended consolidated financial statements filed as part of
this annual report.
Legal and Administrative Proceedings
We are currently not a party to any material legal or administrative
proceedings. We may from time to time be subject to various legal or administrative claims and proceedings arising in the ordinary course
of business. Litigation or any other legal or administrative proceeding, regardless of the outcome, is likely to result in a substantial
cost and diversion to our resources, including our management's time and attention. For risks relating to legal and administrative
proceedings against us, please see "Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—We are
involved in legal proceedings in the ordinary course of our business from time to time. If the outcomes of these proceedings are adverse
to us, it could have a material adverse effect on our business, results of operations and financial condition."
Dividend Policy
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 the ADSs representing our ordinary shares. We currently intend
to retain most, if not all, of our available funds and any future earnings to operate and expand our business.
122
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 3. Key Information—D. Risk
Factors—Risks Related to Doing Business in China—We may rely on dividends and other distributions on equity paid by our PRC
subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to make
payments to us could have a material and adverse effect on our ability to conduct our business" and "Item 4. Information of
the Company—B. Business Overview—Regulation—Regulations on Dividend Distribution."
Our Board of Directors has discretion as to whether to distribute dividends,
subject to certain requirements of Cayman Islands law. In addition, subject to the provisions in our amended and restated memorandum and
articles of association, our shareholders may by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended
by our Board of Directors. Under Cayman Islands law, a Cayman Islands company may pay a dividend out of either profit or share premium
account, provided that in no circumstances may a dividend be paid if this would result in the company being unable to pay its debts as
they fall due in the ordinary course of business. 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 the board of directors may deem relevant. If we pay any dividends on our ordinary shares, we will pay those dividends
which are payable in respect of the ordinary shares underlying the ADSs to the depositary, as the registered holder of such ordinary shares,
and the depositary then will pay such amounts to the ADS holders in proportion to the ordinary shares underlying the ADSs held by such
ADS holders, 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—American Depositary Shares."
8.B. Significant Changes
Except as otherwise disclosed in this report, we have not experienced
any significant changes since the date of the annual financial statements included herein.
ITEM 9. THE OFFER AND LISTING
9.A. Offering and Listing Details
Our ADSs have been listed on the New York Stock Exchange since November
7, 2018 under the symbol "CNF." Each ADS represents 20 ordinary shares, par value US$0.0001 per share.
9.B. Plan of Distribution
Not applicable.
9.C. Markets
Our ADSs have been listed on the New York Stock Exchange since November
7, 2018 under the symbol "CNF."
9.D. Selling Shareholders
Not applicable.
9.E. Dilution
Not applicable.
9.F. Expenses of the Issue
Not applicable.
123
ITEM 10. ADDITIONAL INFORMATION
10.A. Share Capital
Not applicable.
10.B. Memorandum and Articles of Association
We incorporate by reference into this annual report our amended and
restated memorandum and articles of association, the form of which was filed as Exhibit 3.2 to our registration statement on Form F-1
(File Number 333-226126), as amended, filed with the Securities and Exchange Commission on July 31,2018. Our members adopted our amended
and restated memorandum and articles of association by a special resolution on July 11, 2018, which became effective immediately prior
to completion of our initial public offering of ADSs representing our ordinary shares.
10.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 this annual report.
10.D. Exchange Controls
The Cayman Islands currently has no exchange control regulations or
currency restrictions. For exchange control regulations or currency restrictions in China, see "Item 4. Information of the Company—B.
Business Overview—Regulation—Regulations Relating to Foreign Exchange."
10.E. Taxation
Cayman Islands Taxation
According to Walkers (Hong Kong), our Cayman counsel, 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 likely to be material to us or holders of our ADSs or ordinary
shares levied by the government of the Cayman Islands, except for stamp duties which may be applicable on instruments executed in, or
after execution brought within the jurisdiction of the Cayman Islands. The Cayman Islands is not party to any double tax treaties that
are applicable to any payments made to or by our company. There are no exchange control regulations or currency restrictions in the Cayman
Islands.
Payments of dividends and capital in respect of the ADSs or ordinary
shares will not be subject to taxation in the Cayman Islands and no withholding will be required on the payment of a dividend or capital
to any holder of the ADSs or ordinary shares, nor will gains derived from the disposal of the ADSs or ordinary shares be subject to Cayman
Islands income or corporation tax.
Our Company has been incorporated under the laws of the Cayman Islands
as an exempted company with limited liability and, as such, has obtained an undertaking from the Government of the Cayman Islands as to
tax concessions under the Tax Concessions Act (as amended). In accordance with the provision of Section 6 of the Tax Concession Act (as
amended), the Governor in Cabinet undertakes with our company:
●
that
                                            no law which is hereafter enacted in the Cayman Islands imposing any tax to be levied on
                                            profits, income, gains or appreciation shall apply to our company or its operations; and
●
in
                                            addition, that no tax to be levied on profits, income, gains or appreciations or which is
                                            in the nature of estate duty or inheritance tax shall be payable:
(i)
on
                                            or in respect of the shares or other obligations of our company; or
(ii)
by
                                            way of the withholding, in whole or part, of any relevant payment as defined in Section 6(3)
                                            of the Tax Concessions Law (as amended).
124
These concessions shall be for a period of 20 years from January 28,
2014.
PRC Taxation
Under the PRC EIT Law, which became effective on January 1, 2008 and
was lastly amended on December 29, 2018, an enterprise established outside the PRC with "de facto management bodies" within
the PRC is considered a "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 PRC EIT Law, 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, the SAT Circular 82 issued by the SAT in April 2009 and
as amended on December 29, 2017, specifies that certain offshore incorporated enterprises controlled by PRC enterprises or PRC enterprise
groups will be classified as PRC resident enterprises if the following are located or resident in the PRC: (a) senior management personnel
and departments that are responsible for daily production, operation and management; (b) financial and personnel decision-making bodies;
(c) key properties, accounting books, company seal, minutes of board meetings and shareholders' meetings; and (d) half or more of
the senior management or directors having voting rights. Further to SAT Circular 82, the SAT issued the SAT Bulletin 45, which took effect
in September 2011, to provide more guidance on the implementation of SAT Circular 82. SAT Bulletin 45 provides for procedures and administration
details of determination on resident status and administration on post-determination matters. Our company is a company incorporated outside
the PRC. As a holding company, its key assets are its ownership interests in its subsidiaries, and its key assets are located, and its
records (including the resolutions of its board of directors and the resolutions of its shareholders) are maintained, outside the PRC.
As such, we do not believe that our company meets all of the conditions above or is a PRC resident enterprise for PRC tax purposes. For
the same reasons, we believe our other entities outside China are not PRC resident enterprises either. However, the tax resident status
of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of
the term "de facto management body." There can be no assurance that the PRC government will ultimately take a view that is
consistent with us. If the PRC tax authorities determine that our Cayman Islands holding company is a PRC resident enterprise for PRC
enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. For example, a 10% withholding tax would be
imposed on dividends we pay to our non-PRC enterprise shareholders (including our ADS holders). In addition, nonresident enterprise shareholders
(including our ADS holders) may be subject to PRC tax at a rate of 10% gains realized on the sale or other disposition of ADSs or ordinary
shares, if such income is treated as sourced from within the PRC. Furthermore, if we are deemed a PRC resident enterprise, dividends paid
to our non-PRC individual shareholders (including our ADS holders) and any gain realized on the transfer of ADSs or ordinary shares by
such shareholders may be subject to PRC tax at a rate of 20% (which, in the case of dividends, may be withheld at source by us). These
rates may be reduced by an applicable tax treaty, but it is unclear whether non-PRC shareholders of our company would be able to obtain
the benefits of any tax treaties between their country of tax residence and the PRC in the event that we are treated as a PRC resident
enterprise. See "Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—If we are classified
as a PRC resident enterprise for PRC enterprise income tax purposes, such classification could result in unfavorable tax consequences
to us and our non-PRC shareholders and ADS holders."
Material U.S. Federal Income Tax Considerations
The following are material U.S. federal income tax consequences to
the U.S. Holders described below of the ownership and disposition of the ADSs or ordinary shares, but this discussion does not purport
to be a comprehensive description of all tax considerations that may be relevant to a particular person's decision to hold such
ADSs or ordinary shares. This discussion applies only to a U.S. Holder that holds the ADSs or ordinary shares as capital assets for U.
S. federal income tax purposes. In addition, it does not describe all of the tax consequences that may be relevant in light of a U.S.
Holder's particular circumstances, including the alternative minimum tax, the Medicare contribution tax on net investment income
and tax consequences applicable to U.S. Holders subject to special rules, such as:
●
certain
                                            financial institutions;
●
dealers
                                            or traders in securities that use a mark-to-market method of tax accounting;
●
persons
                                            holding ADSs or ordinary shares as part of a straddle, conversion transaction or similar
                                            transaction;
●
persons
                                            whose functional currency for U.S. federal income tax purposes is not the U.S. dollar;
125
●
entities
                                            classified as partnerships for U.S. federal income tax purposes;
●
tax-exempt
                                            entities, "individual retirement accounts" or "Roth IRAs";
●
persons
                                            who acquired our ADSs or ordinary shares pursuant to the exercise of an employee stock option
                                            or otherwise as compensation;
●
persons
                                            that own or are deemed to own 10% or more of the Company's stock by vote or value;
                                            or
●
persons
                                            holding ADSs or ordinary shares in connection with a trade or business conducted outside
                                            the United States.
If an entity that is classified as a partnership for U.S. federal income
tax purposes owns ADSs or ordinary shares, the U.S. federal income tax treatment of a partner will generally depend on the status of the
partner and the activities of the partnership. Partnerships owning ADSs or ordinary shares and partners in such partnerships should consult
their tax advisers as to the particular U.S. federal income tax consequences of owning and disposing of ADSs and ordinary shares.
This discussion is based on the Internal Revenue Code of 1986, as amended
(the "Code") administrative pronouncements, judicial decisions, final, temporary and proposed Treasury regulations, and the
income tax treaty between the United States and the PRC (the "Treaty"), all as of the date hereof, any of which is subject
to change, possibly with retroactive effect. This discussion assumes that each obligation under the deposit agreement will be performed
in accordance with its terms.
As used herein, a "U.S. Holder" is a person eligible for
Treaty benefits that is, for U.S. federal income tax purposes is a beneficial owner of the Company's ADSs or ordinary shares and
is:
●
a
                                            citizen or individual resident of the United States;
●
a
                                            corporation, or other entity taxable as a corporation, created or organized in or under the
                                            laws of the United States, any state therein or the District of Columbia; or
●
an
                                            estate or trust the income of which is subject to U.S. federal income taxation regardless
                                            of its source.
In general, a U.S. Holder that owns ADSs will be treated as the owner
of the underlying ordinary shares represented by those ADSs for U.S. federal income tax purposes. Accordingly, no gain or loss will be
recognized if a U.S. Holder exchanges ADSs for the underlying ordinary shares represented by those ADSs.
This discussion does not address the effects of any state, local or
non-U.S. tax laws, or any U.S. federal taxes other than income taxes (such as U.S. federal estate or gift tax consequences). U.S. Holders
should consult their tax advisers concerning the U.S. federal, state, local and non-U.S. tax consequences of owning and disposing of ADSs
or ordinary shares in their particular circumstances.
Passive Foreign Investment Company
In general, a non-U.S. corporation will be a PFIC for U.S. federal
income tax purposes for any taxable year in which (i) 75% or more of its gross income consists of passive income or (ii) 50% or more of
the average value of its assets (generally determined on a quarterly basis) consists of assets that produce, or are held for the production
of, passive income. For purposes of the above calculations, a non-U.S. corporation that directly or indirectly owns at least 25% by value
of the equity interests of another corporation or partnership is treated as if it held its proportionate share of the assets of the other
corporation or partnership and received directly its proportionate share of the income of the other corporation of partnership. Passive
income generally includes interest, income equivalent to interest, rents, dividends, royalties and gains from financial investments.
126
It is not entirely clear how the PFIC rules should apply to a company
with a business such as ours. For example, although the loans issued through our trust plans are shown in their entirety as our assets
on our consolidated balance sheet, it is not clear whether for purposes of the PFIC rules we should be treated as owning only our subordinated
interests in the trust plans, and earning only the portion of the trust plans' interest income attributable thereto. If we are treated
as owning only the subordinated units and the portion of the trust plans' loans attributable thereto, our PFIC status for any taxable
year may depend on the relative values of the loans we are treated as owning and our other passive assets on the one hand, and the value
of our goodwill (to the extent attributable to the services we provide) and fee receivables on the other hand. The extent to which our
goodwill should be treated as an active asset is not entirely clear. Moreover, the value of our goodwill may be determined by reference
to our market capitalization, which has been, and may continue to be, volatile. In addition, we provide loan facilitation, loan administration
and other services in connection with the loans issued by our trust plans and we charge our trust plans service fees that are eliminated
in, and therefore not shown on, our consolidated income statement. Therefore, our PFIC status for any taxable year may depend on the relative
amounts of our fee and interest income (which may be less than the amount of interest income shown on our income statement, if we are
treated as owning only a portion of the trusts' loans). Furthermore, it is not entirely clear whether a portion of the interest
income earned by the trust plans could be treated as payable in part for services to the borrowers. Although our PFIC status for any taxable
year is not entirely clear, based on the composition of our income and assets and the manner in which we currently operate our business,
we were likely a PFIC for our 2022 and prior taxable years, and will likely be a PFIC for our 2023 taxable year and future taxable years,
subject to the discussion in the subsequent paragraph regarding the Active Financing Exception, as defined below. U.S. Holders should
consult their tax advisors regarding the proper application of the PFIC rules to us and our PFIC status for any taxable year.
For purposes of the PFIC rules "passive income" is defined
by way of a cross-reference to Section 954(c) of the Code, which applies for purposes of the Code's "controlled foreign corporation"("CFC")
rules. A different provision under the CFC rules (namely Section 954(h) of the Code) sets forth an exception for interest income derived
by "eligible CFCs" that are "predominantly engaged" in the active conduct of a financing or similar business (the
"Active Financing Exception"). Because the Active Financing Exception addresses eligible CFCs, there has been uncertainty
as to whether it could apply to determine the PFIC status of companies that are not CFCs, such as our company. Proposed Treasury regulations
promulgated in 2019 (the "2019 Proposed Regulations") provided that the Active Financing Exception could apply to determine
the PFIC status of such companies. However, in 2020 these regulations were finalized (the "2020 Final Regulations") without
addressing the Active Financing Exception. Although the 2020 Final Regulations are silent on the availability of the Active Financing
Exception to companies like us, in the preamble to the 2020 Final Regulations Treasury expressed its position that under current law the
Active Financing Exception does not apply in determining the PFIC status of a company that is neither a CFC nor a bank. The 2020 Final
Regulations apply to taxable years of shareholders beginning on or after January 14, 2021. Treasury indicated in the preamble to the 2020
Final Regulations that taxpayers can rely on the 2019 Proposed Regulations to apply the Active Financing Exception for any open taxable
year ending on or before December 31, 2020. Concurrently with the issuance of the 2020 Final Regulations, Treasury issued proposed regulations
(the "2020 Proposed Regulations") that would state explicitly that the Active Financing Exception is available only if the
tested non-U.S. corporation is a bank. The 2020 Proposed Regulations have not been finalized yet. Based on the foregoing
,
U.S.
Holders (i) generally are permitted to apply the Active Financing Exception for a taxable year ending on or before December 31, 2020 (provided
that we in fact satisfied the exception's conditions for the relevant year), (ii) should expect that the Internal Revenue Service
(the "IRS") will not agree with a return position that applies the Active Financing Exception for any subsequent taxable year,
and (iii) should be aware that if the 2020 Proposed Regulations are finalized in their current form they will not be able to take the
position that the Active Financing Exception applies for any taxable year to which the regulations apply. If we were "predominantly
engaged" in the active conduct of a financing or similar business (as defined for purposes of the Active Financing Exception) and
met all of the exception's requirements then we would not be a PFIC for any taxable year with respect to which taxpayers validly
applied the Active Financing Exception, if applicable. U.S. Holders should be aware that we have not determined whether these requirements
were in fact satisfied. Moreover, if any of our trust plans is treated as a partnership for U.S. federal income tax purposes, and if such
trust's senior unit holders are treated as owning interests in such partnership other than as creditors, the characterization of
our interest income as active under the Active Financing Exception may also depend, in part, on whether we owned 25% or more of the value
of such trust for the relevant taxable years. U.S. Holders should consult their tax advisers as to whether the Active Financing Exception
could apply to us with respect to any taxable year prior to the finalization of the 2020 Proposed Regulations, and whether it is advisable
to take this position in light of Treasury's views, as described above.
Our company may also hold, directly or indirectly, equity interests
in subsidiaries and other entities which are PFICs (collectively "Lower-tier PFICs"). Under attribution rules, if we are a
PFIC, U.S. Holders will be deemed to own their proportionate share of the equity interests in each Lower-tier PFICs and will be subject
to U.S. federal income tax according to the PFIC rules described below on (i) certain distributions by a Lower-tier PFIC and (ii) a disposition
of equity interests of a Lower-tier PFIC, in each case as if the U.S. Holder held such interests directly, even though the U.S. Holders
will not receive the proceeds of those distributions or dispositions directly.
127
A U.S. Holder that owns our company's ADSs or ordinary shares
(or as discussed above is deemed to own equity interests of any Lower-tier PFIC) during any taxable year in which we are a PFIC will generally
be subject to adverse tax treatment. In general, gain recognized on a disposition (including, under certain circumstances, a pledge) of
ADSs or ordinary shares by the U.S. Holder (or on an indirect disposition of equity interests of any Lower-tier PFIC) will be allocated
ratably over the U.S. Holder's holding period for the ADSs or ordinary shares. The amounts allocated to the taxable year of disposition
and to any year before we (or, a Lower-tier PFIC, as the case may be) became a PFIC, will be taxed as ordinary income. The amounts allocated
to each other taxable year will be subject to tax at the highest rate in effect for that taxable year for individuals or corporations,
as appropriate, and an interest charge will be imposed on the resulting tax liability for each taxable year. Any loss recognized upon
disposition of ADSs or ordinary shares will be capital loss and will be long-term capital loss if the U.S. Holder held the ADSs or ordinary
shares for more than one year. The deductibility of capital losses is subject to limitations. The total amount of gain (before the imposition
of interest charges described above) or loss will equal the difference between the U.S. Holder's tax basis in the ADSs or ordinary
shares disposed of and the amount realized on disposition, in each case as determined in U.S dollars.
Furthermore, to the extent that distributions received in a taxable
year by a U.S. Holder on its ADSs or ordinary shares (or a distribution by any Lower-tier PFIC that is deemed to be received by a U.S.
Holder) exceed 125% of the average of the annual distributions received (or deemed received) during the preceding three taxable years
or the U.S. Holder's holding period, whichever is shorter, the distributions will be subject to taxation in the same manner.
If we are a PFIC for any year during which a U.S. Holder holds ADSs
or ordinary shares, we will generally continue to be treated as a PFIC with respect to such ADSs or ordinary shares held by the U.S. Holder
for all succeeding years during which the U.S. Holder holds such ADSs or ordinary shares, even if we cease to be a PFIC, unless the U.S.
Holder makes a "deemed sale" election, which would allow the U.S. Holder to eliminate the continuing PFIC status under certain
circumstances but would require the U.S. Holder to recognize gain taxed under the general PFIC rules described above.
If the ADSs are "regularly traded" on a "qualified
exchange," a U.S. Holder of ADSs may make a mark-to-market election that would result in tax treatment different from the general
tax treatment for PFICs described above. The ADSs will be treated as "regularly traded" in any calendar year in which more
than a de minimis quantity of the ADSs are traded on a qualified exchange on at least 15 days during each calendar quarter. The New York
Stock Exchange on which the ADSs are listed is a qualified exchange for this purpose. If a U.S. Holder makes the mark-to-market election,
the U.S. Holder generally will recognize as ordinary income any excess of the fair market value of the ADSs at the end of each taxable
year over their adjusted tax basis, and will recognize an ordinary loss in respect of any excess of the adjusted tax basis of the ADSs
over their fair market value at the end of the taxable year (but only to the extent of the net amount of income previously included as
a result of the mark-to-market election). If a U.S. Holder makes the election, the U.S. Holder's tax basis in the ADSs will be adjusted
to reflect the income or loss amounts recognized. Any gain recognized on the sale or other disposition of ADSs in a year when the Company
is a PFIC will be treated as ordinary income and any loss will be treated as an ordinary loss (but only to the extent of the net amount
of income previously included as a result of the mark-to-market election, with any excess loss treated as a capital loss). Distributions
paid on ADSs will be treated as discussed below under "Item 10. Additional Information—E. Taxation—Material U.S. Federal
Income Tax Considerations—Taxation of Distributions." U.S. Holders should consult their tax advisers regarding the availability
and advisability of making a mark-to-market election in their particular circumstances. In particular, U.S. Holders should consider carefully
the impact of a mark-to-market election with respect to their ADSs given that we may have Lower-tier PFICs and that there is no provision
in the Code, Treasury regulations or any administrative guidance that would permit making a mark-to-market election with respect to any
Lower-tier PFIC the shares of which are not "regularly traded" as described above.
If we are a PFIC (or with respect to a particular U.S. Holder are treated
as a PFIC) for a taxable year in which we pay a dividend or for the prior taxable year, the favorable tax rate applicable to "qualified
dividend income" paid to certain non-corporate U.S. Holders will not apply.
We do not intend to provide U.S. Holders with the information necessary
to make a qualified electing fund election, which if available would result in an alternative treatment of the ADSs and ordinary shares.
If a U.S. Holder owns ADSs or ordinary shares during any year in which
we are PFIC, the U.S. Holder generally must file annual reports on an IRS form 8621 with respect to us and any Lower-tier PFIC, generally
with the U.S. Holder's federal income tax return for that year.
The application of the PFIC rules to an investment in our ADSs or ordinary
shares is complex. U.S. Holders should consult their tax advisers concerning our PFIC status for any taxable year and the application
of the PFIC rules in their particular circumstances.
128
Taxation of Distributions
The following discussion is subject to the discussion under
"Item
10. Additional Information—E. Taxation—Material U.S. Federal Income Tax Considerations—Passive Foreign Investment Company"
above. Distributions paid on the Company's ADSs or ordinary shares (other than certain
pro rata
distributions of ordinary
shares) will be treated as dividends to the extent paid out of our company's current or accumulated earnings and profits (as determined
under U.S. federal income tax principles). Because we do not calculate our earnings and profits under U.S. federal income tax principles,
it is expected that distributions generally will be reported to U.S. Holders as dividends. Dividends will not be eligible for the dividends-received
deduction generally available to U.S. corporations under the Code. In light of the discussion in
"Item 10. Additional Information—E.
Taxation—Material U.S. Federal Income Tax Considerations—Passive Foreign Investment Company"
above, non-corporate
U.S. Holders should expect that dividends, if any, will likely not be eligible for preferential tax rates.
Dividends will be included in a U.S. Holder's income on the date
of the U.S. Holder's, or in the case of ADSs, the depositary's, receipt. The amount of any dividend income paid in foreign
currency will be the U.S. dollar amount calculated by reference to the spot rate in effect on the date of receipt, regardless of whether
the payment is in fact converted into U.S. dollars on such date. If the dividend is converted into U.S. dollars on the date of receipt,
a U.S. Holder generally should not be required to recognize foreign currency gain or loss in respect of the amount received. A U.S. Holder
may have foreign currency gain or loss if the dividend is converted into U.S. dollars after the date of receipt.
Dividends will be treated as foreign-source income for foreign tax
credit purposes. As described in "Item 10. Additional Information—E. Taxation—PRC Taxation," dividends paid by
the Company may be subject to PRC withholding tax. For U.S. federal income tax purposes, the amount of the dividend income will include
any amounts withheld in respect of PRC withholding tax. Subject to applicable limitations, which vary depending upon the U.S. Holder's
circumstances and the discussion below regarding certain Treasury regulations, PRC taxes withheld from dividend payments (at a rate not
exceeding the applicable rate provided in the Treaty if a U.S. Holder is eligible for Treaty Benefits) generally will be creditable against
a U.S. Holder's U.S. federal income tax liability. The rules governing foreign tax credits are complex and U.S. Holders generally
should consult their tax advisers regarding the creditability of PRC taxes in their particular circumstances. For example, Treasury regulations
provide that, in the absence of an election to apply the benefits of an applicable income tax treaty, in order for non-U.S. income taxes
to be creditable, the relevant non-U.S. income tax rules must be consistent with certain U.S. federal income tax principles, and we have
not determined whether the PRC income tax system meets this requirement. In lieu of claiming a credit, a U.S. Holder may elect to deduct
any creditable PRC taxes in computing its taxable income, subject to applicable limitations. An election to deduct foreign taxes instead
of claiming foreign tax credits applies to all creditable foreign taxes paid or accrued in the taxable year.
Sale or Other Taxable Disposition of ADSs or Ordinary Shares
The following discussion is subject to the discussion under
"Item
10. Additional Information—E. Taxation—Material U.S. Federal Income Tax Considerations—Passive Foreign Investment Company"
above. A U.S. Holder will generally recognize gain or loss on a sale or other taxable disposition of ADSs or ordinary shares in an amount
equal to the difference between the amount realized on the sale or disposition and the U.S. Holder's tax basis in the ADSs or ordinary
shares disposed of, in each case as determined in U.S. dollars. Such gain or loss will be long-term capital gain or loss if, at the time
of the sale or disposition, the U.S. Holder has owned the ADSs or ordinary shares for more than one year, and we are not a PFIC (or treated
as a PFIC with respect to the U.S. Holder). Long-term capital gains recognized by noncorporate U.S. Holders are subject to tax rates that
are lower than those applicable to ordinary income. In light of the discussion under
"Item 10. Additional Information—E.
Taxation—Material U.S. Federal Income Tax Considerations—Passive Foreign Investment Company"
above, U.S. Holders
should expect that any gain recognized on a sale or other taxable disposition of the ADSs or ordinary shares after the end of 2022 will
likely not be treated as long-term capital gain. The deductibility of capital losses is subject to limitations.
Foreign tax credit for PRC taxes imposed on disposition
of ADSs or ordinary shares
As described in "Item 10. Additional Information—E. Taxation—PRC
Taxation," gain on the sale of ADSs or ordinary shares may be subject to PRC taxes if the Company is considered a PRC resident enterprise
for PRC enterprise income tax purposes. Under the Code, capital gains of U.S. persons are generally treated as U.S. source income. However,
a U.S. Holder may be able to elect to treat the gain as foreign-source income under the Treaty and claim foreign tax credit in respect
of any PRC tax on dispositions. The foreign tax credit rules generally preclude a U.S. Holder from claiming a foreign tax credit with
respect to PRC income taxes on gains from dispositions of ADSs or Class A ordinary shares if the U.S. Holder does not elect to apply the
benefits of the Treaty. However, in that case it is possible that any PRC taxes on disposition gains may either be deductible or reduce
the amount realized on the disposition. The rules governing foreign tax credits and deductibility of foreign taxes are complex. U.S. Holders
should consult their tax advisers regarding the consequences of the imposition of any PRC tax on disposition gains, including the Treaty's
resourcing rule, any reporting requirements with respect to a Treaty-based return position and the creditability or deductibility of the
PRC tax on disposition gains in their particular circumstances (including any applicable limitations).
129
Information Reporting and Backup Withholding
Payments of dividends and sales proceeds that are made within the United
States or through certain U.S.-related financial intermediaries may be subject to information reporting and backup withholding, unless
(i) the U.S. Holder is a corporation or other exempt recipient (and if required, establishes its status as such) or (ii) in the case of
backup withholding, the U.S. Holder provides a correct taxpayer identification number and certifies that it is not subject to backup withholding.
The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a credit against the U.S. Holder's U.S.
federal income tax liability and may entitle it to a refund, provided that the required information is timely furnished to the IRS.
Certain U.S. Holders who are individuals (or certain specified entities)
may be required to report information relating to their ownership of ADSs or ordinary shares or non-U.S. financial accounts through which
they are held. U.S. Holders should consult their tax advisers regarding their reporting obligations with respect to the ADSs or ordinary
shares.
10.F. Dividends and Paying Agents
Not applicable.
10.G. Statement by Experts
Not applicable.
10.H. Documents on Display
We have filed this annual report on Form 20-F, including exhibits,
with the SEC. As allowed by the SEC, in Item 19 of this annual report, we incorporate by reference certain information we filed with the
SEC. This means that we can disclose important information to you by referring you to another document filed separately with the SEC.
The information incorporated by reference is considered to be part of this annual report. We have also filed a registration statement
on Form F-6 (Registration No. 333-228089), a registration statement on Form S-8 (Registration No. 333230955), and a registration statement
on Form 8-A (Registration No. 001-38726), including relevant exhibits and schedules under the Securities Act, covering the ordinary shares
represented by the ADSs, as well as the ADSs.
You may read and copy this annual report, including the exhibits incorporated
by reference in this annual report, at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549 and at the
SEC's regional offices in New York, New York and Chicago, Illinois. You also can request copies of this annual report, including
the exhibits incorporated by reference in this annual report, upon payment of a duplicating fee, by writing information on the operation
of the SEC's Public Reference Room.
The SEC also maintains a website at www.sec.gov that contains reports,
proxy statements and other information regarding registrants that file electronically with the SEC. Our annual report and some of the
other information submitted by us to the SEC may be accessed through this website. 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. 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.
10.I. Subsidiary information
Not applicable.
10.J. Annual Report to Security Holders
Not applicable.
130
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Interest rate risk
Our exposure to interest rate risk relates to the interest income and
financing service fee on loans and interest on deposits with banks. Borrowers' cost of borrowing mainly consist of interest rates
charged under trust plans. An increase in prevailing interest rates could result in an increase in the interest rates of loans we facilitate,
and borrowers may be less likely to accept such adjusted terms. If borrowers decide not to use the products or services we offer because
of such an increase in market interest rates, our ability to retain existing borrowers and engage prospective borrowers as well as our
competitive position may be severely impaired.
Foreign exchange risk
Substantially all of our revenues are denominated in Renminbi. The
functional currency of our company is the Hong Kong dollar. The functional currency of SFIL, which is incorporated in British Virgin Islands,
is the U.S. dollar. The functional currency of our subsidiary in the PRC is the Renminbi. We use Renminbi as our reporting currency. Monetary
assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at the
rates of exchange ruling at the balance sheet date. Transactions in currencies other than the functional currency during the year are
converted into functional currency at the applicable rates of exchange prevailing when the transactions occurred. Due to foreign currency
translation adjustments, we recognized a foreign exchange loss of RMB16,166,094 in 2020, a foreign exchange loss of RMB6,936,969 in 2021,
and a foreign exchange gain of RMB15,181,518 (US$2,201,113) in 2022, respectively.
The Renminbi is not freely convertible into foreign currencies for
capital account transactions. The value of the Renminbi against the U.S. dollar and other currencies is affected by, among other things,
changes in China's political and economic conditions and China's foreign exchange policies. On July 21,2005, the PRC government
changed its decade-old policy of pegging the value of the RMB to the U.S. dollar, and the Renminbi appreciated more than 20% against the
U.S. dollar over the following three years. Between July 2008 and June 2010, this appreciation halted and the exchange rate between the
Renminbi and the U.S. dollar remained within a narrow band. Since June 2010, the RMB 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 the Renminbi and the U.S. dollar in the future.
To date, we have not entered into any hedging transactions in an effort
to reduce our exposure to foreign currency exchange risk. 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 Renminbi amount we receive from the conversion.
Conversely, if we decide to convert Renminbi into U.S. dollars for the purpose of making payments for dividends on our ordinary shares
or ADSs or for other business purposes, appreciation of the U. S. dollar against the Renminbi would have a negative effect on the U.S.
dollar amounts available to us.
Inflation risk
Since our inception, inflation in China has not materially
impacted 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 2020, 2021 and 2022 were increases of 0.2%, 1.5% and 1.8% respectively. Although we have not
in the past been materially affected by inflation since our inception, we can provide no assurance that we will not be affected in
the future by higher rates of inflation in China.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
12.A. Debt Securities
Not applicable.
12.B. Warrants and Rights
Not applicable.
12.C. Other Securities
Not applicable.
131
12.D. American Depositary Shares
Fees and Expenses
Pursuant to the terms of the deposit agreement, 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, $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 and/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 or ADRs 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;
●
an
                                            aggregate 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);
●
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 $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, ADRs or deposited securities;
●
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;
●
in
                                            connection with the conversion of foreign currency into U.S. dollars, JPMorgan shall deduct
                                            out of such foreign currency the fees, expenses and other charges charged by it and/or its
                                            agent (which may be a division, branch or affiliate) so appointed in connection with such
                                            conversion; 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.
132
The fees and charges described above may be amended from time to time
by agreement between us and the depositary.
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.
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 the increase in any such fees and charges.
Payments by Depositary
In March 2019, excluding withholding tax, we received a US$0.4 million
cash payment from JPMorgan Chase Bank, N.A., the depositary bank for our ADR program.
133
PART II
ITEM 13. ITEM DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
None.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS
AND USE OF PROCEEDS
14.A.-14.D. Material Modifications to the Rights of Security Holders
See "Item 10. Additional Information" for a description
of the rights of shareholders, which remain unchanged.
14.E. Use of Proceeds
The following "Use of Proceeds" information relates to
the registration statement on Form F-1, as amended (File No. 333-226126) in relation to our initial public offering, which was declared
effective by the SEC on November 6, 2018. In November 2018, we completed our initial public offering in which we issued and sold an aggregate
of 7,060,460 ADSs, representing 141,209,200 ordinary shares, resulting in net proceeds to us ofUS$45.7 million, net of the underwriting
discounts and commissions and other fees paid or payable by us in connection with the offering.
As of December 31, 2022, we had used a portion of the net proceeds
received from our initial public offering for share repurchase and other general corporate purposes.
ITEM 15. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Our management, with the participation of our Group Chief Executive
Officer and Group Acting Chief Financial Officer, has performed an evaluation of the effectiveness of our disclosure controls and procedures
(as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report, as required by Rule 13a-15(b)
under the Exchange Act.
Disclosure controls and procedures are controls and procedures that
are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act is
recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules
and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information
required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our principal
executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Based upon that evaluation, our management has concluded that, as of
December 31, 2022, our existing disclosure controls and procedures were ineffective, solely due to the material weakness in internal control
over financial reporting identified below.
Internal Control Over Financial Reporting
In the course of preparing our consolidated financial statements in
the prior years, we identified one material weakness which has not been remedied in our internal control over financial reporting, as
defined in the standards established by the Public Company Accounting Oversight Board of the United States. A material weakness is a deficiency,
or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material
misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
The material weakness that was identified related to our lack of sufficient
financial reporting and accounting personnel with appropriate experience of U.S. GAAP and SEC reporting requirements and our failure to
establish and clearly communicate acceptable policies regarding U.S. GAAP financial reporting.
134
To remediate our identified material weakness, we have implemented
and will continuously use the following measures to improve our financial reporting process. For the specific material weakness, we are
in the process of (i) hiring more qualified accounting personnel with relevant U.S. GAAP and SEC reporting experience and qualifications
to strengthen the financial reporting function; (ii) holding regular U.S.GAAP trainings for employees in the Finance and Capital Market
Departments (on a quarterly or monthly basis) and record the results of these trainings. For internal controls over financial reporting,
we involve external consultants (Deloitte Touche Tohmatsu Certified Public Accountants LLP) to assist the Group improving their internal
controls under the Sarbanes-Oxley (SOX) Audit Requirements, particularly for the Group's two main business processes: trust lending
process and commercial bank partnership process. This internal control optimization process is yet to be completed, but the efforts attempted
by the Group can be summarized as (i) refining and setting more control points for the above main business processes; (ii) establishing
effective oversight and clear reporting requirements for complex transactions, specifically for the personnel in the Finance and Capital
Market Departments; and (iii) updating the Accounting Policy Manual (APM) of CNFinance timely. However, we cannot assure you that these
measures will be sufficient to remediate our material weakness in time, or at all. See "Item 3. Key Information—D. Risk factors—Risks
Related to Our Business—If we fail to implement and maintain an effective system of internal controls, we may be unable to accurately
or timely report our results of operations or prevent fraud, and investor confidence and the market price of our ADSs may be materially
and adversely affected."
Management's Annual Report on Internal Control Over Financial
Reporting
Our management is responsible for establishing and maintaining adequate
internal control over financial reporting, as defined in Rule 13a-15 (f) and 15d-15(f) under the Exchange Act. Our management evaluated
the effectiveness of our internal control over financial reporting, as required by Rule 13a-15(c) of the Exchange Act, based on criteria
established in the framework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on this evaluation, our management has concluded that our internal control over financial reporting was ineffective
as of December 31, 2022.
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness of our internal control
over financial reporting 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 and procedures may deteriorate.
Attestation Report of the Registered Public Accounting Firm
This annual report on Form 20-F does not include an attestation report
of our registered public accounting firm due to a transition period established by rules of the SEC for newly public companies.
Changes in Internal Control Over Financial Reporting
There were two changes in our internal control over financial reporting
during the period covered by this annual report on Form 20-F that have materially affected, or that are reasonably likely to materially
affect, our internal control over financial reporting. Such changes include (i) refining and setting more control points for our main
business processes, namely the trust lending process and commercial bank partnership process; (b) establishing effective oversight and
clear reporting requirements for complex transactions, specifically for the personnel in the Finance and Capital Market Departments.
ITEM 16. [Reserved]
16.A. Audit Committee Financial Expert
Our Board of Directors has determined that Mr. Fengyong Gao, an independent
director and the chairperson of our audit committee, qualifies as an "audit committee financial expert" within the meaning
of the SEC rules and possesses financial sophistication within the meaning of Listing Rules of the New York Stock Exchange. Mr. Fengyong
Gao satisfies the "independence" requirements of Rule 10A-3 under the Securities Exchange Act of 1934, as amended, and Section
303A of the Corporate Governance Rules of the NYSE.
135
16.B. Code of Ethics
Our Board of Directors has adopted a code of business conduct and ethics
that applies to all of our directors, officers, employees, including certain provisions that specifically apply to our principal executive
officer, principal financial officer, principal accounting officer or controller and any other persons who perform similar functions for
us. We have filed our code of business conduct and ethics as Exhibit 99.1 of our registration statement on Form F-1 (file No. 333-226126),
as amended, filed with the SEC on July 31, 2018 and posted a copy of our code of business conduct and ethics on our website at ir.cashchina.cn.
We hereby undertake to provide to any person without charge, a copy of our code of business conduct and ethics within ten working days
after we receive such person's written request.
16.C. Principal Accountant Fees and Services
Auditor Fees
The following table sets forth the aggregate fees by categories specified
below in connection with certain professional services rendered by KPMG
Huazhen LLP, our independent registered public accounting firm, for
the periods indicated.
Year Ended December 31,
2020
2021
2022
Services
RMB
RMB
RMB
(in thousands)
Audit Fees
(1)
6,585
7,353
6,620
Audit-Related Fees
(2)
—
—
—
Tax Fees
(3)
—
—
—
Other Fees
(4)
—
—
100
Total
6,585
7,353
6,720
(1)
Audit Fees.
Audit fees mean the aggregate fees billed in each of the fiscal periods listed for professional services rendered
by our principal auditors for the audit of our annual consolidated financial statements and assistance with and review of documents filed
with the SEC.
(2)
Audit-related Fees.
Audit-related fees mean the aggregate fees billed for professional services rendered by our principal auditors
for the assurance and related services, which were not included under Audit Fees above.
(3)
Tax Fees.
Tax fees mean fees incurred from professional services related to tax compliance.
(4)
Other Fees.
Other fees mean fees incurred from professional services related to training, advisory and assurance for corporate
and social responsibility reporting and professional services related to tax advice.
The policy of our audit committee is to pre-approve all audit and non-audit
services provided by KPMG Huazhen LLP, our independent registered public accounting firm, including audit services and audit-related 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.
16.D. Exemptions from the Listing Standards for Audit Committees
Not applicable.
136
16.E. Purchases of Equity Securities by the Issuer and Affiliated
Purchasers
On March 16, 2022, our board of directors authorized a share repurchase
program whereby our company was authorized a share repurchase program under which the Company may repurchase up to US$20.0 million of
its ordinary shares in the form of American depositary shares during a period of up to 12 months commencing on March 16, 2022 (the "Share
Repurchase Program"). The Company's share repurchases may be made from time to time on the open market at prevailing market
prices, in open-market transactions, privately negotiated transactions or block trades, and/or through other legally permissible means,
depending on market conditions and in accordance with the applicable rules and regulations. The timing and conditions of the share repurchases
will be subject to various factors including the requirements under Rule 10b-18 and Rule 10b5-1 of the Exchange Act. Our board of directors
will review the share repurchase program periodically and may authorize adjustments to its terms and size or suspend or discontinue the
program.
Neither we nor any "affiliated purchaser," as defined in
Rule 10b-18(a)(3) of the Exchange Act, purchased any of our equity securities during the period covered by this annual report.
16.F. Change in Registrant's Certifying Accountant
Not applicable.
16.G. Corporate Governance
We are a "foreign private issuer" (as such term is defined
in Rule 3b-4 under the Exchange Act), and our ADSs, each representing twenty ordinary shares, are listed on the New York Stock Exchange.
Under Section 303A of the New York Stock Exchange Listed Company Manual, New York Stock Exchange listed companies that are foreign private
issuers are permitted to follow home country practice in lieu of the corporate governance provisions specified by the New York Stock Exchange
with limited exceptions. The following summarizes some significant ways in which our corporate governance practices differ from those
followed by domestic companies under the listing standards of the New York Stock Exchange.
Director independence
The NYSE Standards require a majority of the membership of NYSE-listed
company boards to be composed of independent directors, which is not required under Cayman Islands law, the law of our country of incorporation.
Our Board of Directors currently consists of six members, three of whom are independent directors.
Non-management directors' executive sessions
The NYSE Standards require non-management directors of NYSE-listed
companies to meet at regularly scheduled executive sessions without management. We are not subject to this requirement under the Cayman
Islands law.
Committee member composition
The NYSE Standards require NYSE-listed companies to have a nominating/corporate
governance committee and a compensation committee that are composed entirely of independent directors. Cayman Islands law does not impose
similar requirements. We do not have a nominating/corporate governance committee. Currently, our compensation committee is composed of
three members, only one of whom is an independent director. Our corporate governance and nominating committee is composed of three members,
only one of whom is an independent director.
Shareholder Approval
The NYSE Standards require shareholder approval in connection with
(i) equity-compensation plans and material revisions thereto; and (ii) issuance of shares under certain circumstances, including in connection
with a transaction involving the issuance or potential issuance by the Company of common stock (or their equivalent) equal to 20% or more
of the common stock or 20% voting power outstanding before the issuance. We are not subject to such shareholder approval requirements
under the Cayman Islands law nor in our amendment and restated memorandum and articles of association.
137
16.H. Mine Safety Disclosure
Not applicable.
16.I. Disclosure Regarding Foreign Jurisdictions that Prevent
Inspections
For the immediately preceding annual financial statement period, our
auditor, which is a registered public accounting firm that the PCAOB was unable to inspect or investigate completely because of a position
taken by the PRC government, issued our audit report that was included in our Form 20-F for the fiscal year of 2021.
As of the date of this annual report and to our best knowledge:
i)
none of our shares are owned by governmental entities in the
jurisdiction in which we are in corporated or otherwise organized;
ii)
none of the governmental entities in the applicable foreign
jurisdiction with respect to our registered public accounting firm have a controlling financial interest in us;
iii)
none of the members of our board of directors or the board of
directors of our operating entity is an official of the Chinese Communist Party; and
iv)
our amended and restated memorandum and articles of association
does not contain any charter of the Chinese Communist Party.
ITEM 16.J. INSIDER TRADING POLICIES
Not applicable.
138
PART III
ITEM 17. FINANCIAL STATEMENTS
We have elected to provide financial statements pursuant to Item 18.
ITEM 18. FINANCIAL STATEMENTS
Our consolidated financial statements are included at the end of this
annual report.
ITEM 19. EXHIBITS
Exhibit Number
Description of Document
1.1
Amended and Restated Memorandum and Articles of Association (incorporated by reference to Exhibit 3.2 from our registration statement on Form F-1 (File No. 333-226126), as amended, initially filed publicly with the SEC on July 11, 2018)
2.1
Form of Registrant's Specimen American Depositary Receipt (incorporated by reference to Exhibit 4.1 from our registration statement on Form F-1 (File No. 333-226126). as amended, initially filed publicly with the SEC on July 11, 2018)
2.2
Registrant's Specimen Certificate for Ordinary Shares (incorporated by reference to Exhibit 4.2 from our registration statement on Form F-1 (File No. 333-226126), as amended, initially filed publicly with the SEC on July 11, 2018)
2.3
Form of Deposit Agreement (incorporated by reference to Exhibit 4.3 from our registration statement on Form F-1 (File No. 333-226126), as amended, initially filed publicly with the SEC on July 11, 2018)
2.4*
Description of Securities registered under Section 12 of the Exchange Act
4.1
Form of Indemnification Agreement with the Registrant's directors (incorporated by reference to Exhibit 10.1 from our registration statement on Form F-1 (File No. 333-226126), as amended, initially filed publicly with the SEC on July 11, 2018)
4.2
Form of Employment Agreement between the Registrant and the executive officers of the Registrant (incorporated by reference to Exhibit 10.2 from our registration statement Form F-1 (File No. 333-226126), as amended, initially filed publicly with the SEC on July 11, 2018)
4.3
2018 CNFinance Holdings Limited Share Incentive Plan (incorporated by reference to Exhibit 10.3 from our registration statement Form F-1 (File No. 333-226126), as amended, initially filed publicly with the SEC on July 11, 2018)
4.4
English translation of Cooperative Service and Management Agreement between Shenzhen Fanhua United Investment Group Co., Ltd, and FOTIC, dated March 15, 2018 (incorporated by reference to Exhibit 10.4 from our registration statement Form F-1 (File No. 333-226126), as amended, initially filed publicly with the SEC on July 11, 2018)
4.5
English translation of FOTIC Jinghua No. 5 Project Service Agreement between the Company and China Foreign Economy and Trade Trust Co., Ltd. ("FOTIC"), dated December 19, 2014 (incorporated by reference to Exhibit 10.5 from our registration statement Form F-1 (File No. 333-226126), as amended, initially filed publicly with the SEC on July 11, 2018)
4.6
English translation of FOTIC Jinghua Structure Fund 5 Trust Plan-Structure Funds Trust Contract (Subordinated Level) between the Company and FOTIC, dated December 19, 2014 (incorporated by reference to Exhibit 10.6 from our registration statement Form F-1 (File No. 333-226126), as amended, initially filed publicly with the SEC on July 11, 2018)
8.1*
List of subsidiaries of the Registrant
11.1
Code of Business Conduct and Ethics of the Registrant (incorporated by reference to Exhibit 99.1 from our registration statement Form F-1 (File No. 333-226126), as amended, initially filed publicly with the SEC on July 11, 2018)
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 Merits & Tree Law Offices
15.2*
Consent of Walkers (Hong Kong)
15.3*
Consent of KPMG Huazhen LLP, Independent Registered Public Accounting Firm
15.4**
Submisssion under Item16I(a) of Form 20-f in relation to the Holding Foreign Companies Accountable Act
101.INS*
Inline XBRL Instance Document
101.SCH*
Inline XBRL Taxonomy Extension Schema 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
*
Filed herewith
**
Furnished herewith
139
SIGNATURES
The registrant hereby certifies that it meets all of the requirements
for filing its annual report on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its
behalf.
Date:
    April 25, 2023
CNFinance Holdings Limited
By:
/s/ Bin Zhai
Name:
Bin Zhai
Title:
Chief Executive
    Officer and Chairman
140
CNFINANCE HOLDINGS LIMITED
Consolidated Financial Statements
December 31, 2020, 2021 and 2022
(With Independent Registered Public Accounting Firm's Report Thereon)
F-
1
CNFINANCE HOLDINGS
LIMITED
INDEX TO CONSOLIDATED
FINANCIAL STATEMENT
CONTENTS
PAGE(S)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID:
1186
)
F-3
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2020 AND 2021
F-4 – F-5
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2020, 2021 AND 2022
F-6
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY FOR THE YEARS ENDED DECEMBER 31, 2020, 2021 AND 2022
F-7
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2020, 2021 AND 2022
F-8 – F-9
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
F-10 – F-68
F-
2
Report of Independent Registered Public Accounting
Firm
To the Shareholders and Board of Directors
CNFinance Holdings Limited:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of CNFinance
Holdings Limited (CNFinance) , its subsidiaries and variable interest entities (the Company) as of December 31, 2022 and 2021, the
related consolidated statements of comprehensive income, changes in shareholders' equity and cash flows for each of the years in
the three-year period ended December 31, 2022, and the related notes (collectively, the consolidated financial statements). In our
opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December
31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31,
2022, in conformity with U.S. generally accepted accounting principles.
Change in Accounting Principle
As discussed in Note 2 to the consolidated financial statements, the
Company has changed its method of accounting for the recognition and measurement of credit losses as of January 1, 2020 due to the adoption
of ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (CECL).
Basis for Opinion
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these consolidated financial statements 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 audit to obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform,
an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal
control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal
control over financial reporting. Accordingly, we express no such opinion.
Our audits 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. We believe that our audits provide a reasonable basis for
our opinion.
/s/
KPMG Huazhen LLP
We have served as the Company's auditor since 2013.
Guangzhou, China
April 25, 2023
F-
3
CNFINANCE HOLDINGS LIMITED
Consolidated balance sheets
Note
December 31,
2021
December 31,
2022
RMB
RMB
Assets
Cash, cash equivalents and restricted cash (including amounts of the consolidated VIEs of RMB
1,516,044,449
and
1,265,876,948
as of December 31, 2021 and 2022, respectively)
4
2,231,437,361
1,772,184,145
Loans principal, interest and financing service fee receivables (including amounts of the consolidated VIEs of RMB
9,352,354,803
and
8,911,163,298
as of December 31, 2021 and 2022, respectively)
5
9,412,717,366
9,456,802,188
Allowance for credit losses (including amounts of the consolidated VIEs of RMB
962,821,917
and
729,743,207
as of December 31, 2021 and 2022, respectively)
975,850,851
763,996,187
Net loans principal, interest and financing service fee receivables (including amounts of the consolidated VIEs of RMB
8,389,532,886
and
8,181,420,091
as of December 31, 2021 and 2022, respectively)
8,436,866,515
8,692,806,001
Loans held-for-sale (including amounts of the consolidated VIEs of RMB
699,730,547
and
1,122,309,299
as of December 31, 2021 and 2022, respectively)
5(d)
1,095,412,086
1,844,438,134
Investment securities (including amounts of the consolidated VIEs of RMB
709,255,924
and
205,711,749
as of December 31, 2021 and 2022, respectively)
6
1,088,044,211
518,644,561
Property and equipment
7
3,041,946
2,284,262
Intangible assets and goodwill
8
4,009,372
3,487,733
Deferred tax assets (including amounts of the consolidated VIEs of RMB
6,903
and nil as of December 31, 2021 and 2022, respectively)
27
21,068,094
76,904,707
Deposits (including amounts of the consolidated VIEs of RMB
152,998,895
and
137,661,130
as of December 31, 2021 and 2022, respectively)
9
156,954,100
145,093,301
Right-of-use assets (including amounts of the consolidated VIEs of RMB
98,238
and
309,531
as of December 31, 2021 and 2022, respectively)
31
16,196,806
29,777,357
Guaranteed assets (including amounts of the consolidated VIEs of RMB
917,426,116
and
716,129,457
as of December 31, 2021 and 2022, respectively)
10
928,314,725
726,410,799
Other assets (including amounts of the consolidated VIEs of RMB
550,145
and
19,878,136
as of December 31, 2021 and 2022, respectively)
11
404,826,131
669,888,900
Total assets
14,386,171,347
14,481,919,900
Liabilities and shareholders' equity
Interest-bearing borrowings
12
Borrowings under agreements to repurchase
45,250,000
112,642,010
Other borrowings (including amounts of the consolidated VIEs of RMB
8,041,816,663
and
7,727,559,337
as of December 31, 2021 and 2022, respectively)
8,041,892,080
7,727,559,337
Accrued employee benefits (including amounts of the consolidated VIEs of RMB
111,980
and
61,602
as of December 31, 2021 and 2022, respectively)
24,223,752
31,644,590
Income taxes payable (including amounts of the consolidated VIEs of RMB
733,159
and
902,734
as of December 31, 2021 and 2022, respectively)
154,957,182
186,901,268
Deferred tax liabilities (including amounts of the consolidated VIEs of nil and RMB
15,863
as of December 31, 2021 and 2022, respectively)
27
151,828,860
73,752,022
Lease liabilities (including amounts of the consolidated VIEs of RMB
98,238
and
246,081
as of December 31, 2021 and 2022, respectively)
31
15,521,022
28,583,475
Credit risk mitigation position
13
1,348,449,426
1,354,653,070
Other liabilities (including amounts of the consolidated VIEs of RMB
125,172,432
and
144,061,166
as of December 31, 2021 and 2022, respectively)
14
785,761,285
1,028,470,668
Total liabilities
10,567,883,607
10,544,206,440
The accompanying notes are an integral part of these consolidated
financial statements.
F-
4
CNFINANCE HOLDINGS LIMITED
Consolidated balance sheets
(continued)
Note
December 31,
2021
December 31,
2022
RMB
RMB
Ordinary shares (USD
0.0001
par value;
3,800,000,000
shares authorized;
1,559,576,960
shares issued and
1,371,643,240
shares outstanding as of December 31, 2021 and December 31, 2022, respectively)
15
916,743
916,743
Treasury stock
-
(
87,631,475
)
Additional paid-in capital
16
1,018,429,249
1,024,203,515
Retained earnings
17
2,824,335,263
2,958,716,295
Accumulated other comprehensive losses
18
(
25,393,515
)
(
10,211,997
)
Total equity attributable to owners of the Company
3,818,287,740
3,885,993,081
Non-controlling interests
-
51,720,379
Total shareholders' equity
3,818,287,740
3,937,713,460
Total liabilities and shareholders' equity
14,386,171,347
14,481,919,900
The accompanying notes are an integral part of these consolidated financial
statements.
F-
5
CNFINANCE HOLDINGS LIMITED
Consolidated statements
of comprehensive income
Year ended December 31
Note
2020
2021
2022
RMB
RMB
RMB
Interest and fees income
19
1,854,823,409
1,815,773,980
1,731,352,575
Interest expenses on interest-bearing borrowings
(
731,315,365
)
(
775,565,615
)
(
784,776,537
)
Net interest and fees income
1,123,508,044
1,040,208,365
946,576,038
Net revenue under the commercial
    bank partnership model
20
-
107,072
57,551,005
Collaboration cost for sales partners
21
(
415,104,428
)
(
425,736,650
)
(
320,826,549
)
Net interest and fees income after collaboration cost
708,403,616
614,578,787
683,300,494
Provision for credit losses
22
(
77,348,480
)
298,467,893
(
238,084,863
)
Net interest and fees income after collaboration cost and provision for credit losses
631,055,136
913,046,680
445,215,631
Realized gains on sales of investments, net
23
20,153,659
19,170,436
20,566,672
Net losses on sales of loans
24
(
50,606,487
)
(
479,584,775
)
(
44,554,948
)
Other gains, net
25
9,760,472
22,061,842
89,914,038
Total non-interest (losses)/income
(
20,692,356
)
(
438,352,497
)
65,925,762
Operating expenses
Employee compensation and benefits
(
190,374,014
)
(
211,168,519
)
(
197,035,872
)
Share-based compensation expenses
29
(
62,073,367
)
(
18,766,367
)
(
5,774,266
)
Taxes and surcharges
(
49,452,609
)
(
35,729,101
)
(
35,890,761
)
Operating lease cost
30
(
21,719,042
)
(
14,764,364
)
(
13,966,943
)
Other expenses
26
(
124,042,182
)
(
100,500,388
)
(
85,889,497
)
Total operating expenses
(
447,661,214
)
(
380,928,739
)
(
338,557,339
)
Income before income tax expense
162,701,566
93,765,444
172,584,054
Income tax expense
27
(
47,849,040
)
(
28,557,980
)
(
37,232,643
)
Net income
114,852,526
65,207,464
135,351,411
Earnings per share
28
Basic
0.08
0.05
0.10
Diluted
0.08
0.05
0.09
Other comprehensive (losses)/income
Net unrealized losses on investment securities
(
171,040
)
-
-
Foreign currency translation adjustment
(
16,166,094
)
(
6,936,969
)
15,181,518
Comprehensive income
98,515,392
58,270,495
150,532,929
Less: net income attributable to non-controlling interests
-
-
970,379
Total comprehensive income attributable to ordinary shareholders
98,515,392
58,270,495
149,562,550
The accompanying notes are an integral part of these consolidated financial
statements.
F-
6
CNFINANCE HOLDINGS LIMITED
Consolidated statements
of changes in shareholders' equity
Note
Ordinary
shares
Treasury
Stock
Additional
paid-in capital
Accumulated
other comprehensive
(losses)/ income
Retained
earnings
Non-controlling
interest
Total
equity
RMB
RMB
RMB
RMB
RMB
RMB
RMB
Balance
    as of January 1, 2020
916,743
-
937,589,515
(
2,119,412
)
2,662,145,649
-
3,598,532,495
Cumulative
    effect from change in accounting policies
(1)
-
-
-
-
(
17,870,376
)
-
(
17,870,376
)
Net
    income
-
-
-
-
114,852,526
-
114,852,526
Foreign
    currency translation adjustment
18
-
-
-
(
16,166,094
)
-
-
(
16,166,094
)
Unrealized
    losses on investment securities
18
-
-
-
(
171,040
)
-
-
(
171,040
)
Share-based
    compensation
29
-
-
62,073,367
-
-
-
62,073,367
Balance
    as of December 31, 2020
916,743
-
999,662,882
(
18,456,546
)
2,759,127,799
-
3,741,250,878
Balance
    as of January 1, 2021
916,743
-
999,662,882
(
18,456,546
)
2,759,127,799
-
3,741,250,878
Net
    income
-
-
-
-
65,207,464
-
65,207,464
Foreign
    currency translation adjustment
18
-
-
-
(
6,936,969
)
-
-
(
6,936,969
)
Share-based
    compensation
29
-
-
18,766,367
-
-
-
18,766,367
Balance
    as of December 31, 2021
916,743
-
1,018,429,249
(
25,393,515
)
2,824,335,263
-
3,818,287,740
Balance
    as of January 1, 2022
916,743
-
1,018,429,249
(
25,393,515
)
2,824,335,263
-
3,818,287,740
Repurchase
    of treasury stock
-
(
87,631,475
)
-
-
-
-
(
87,631,475
)
Net
    income
-
-
-
-
134,381,032
970,379
135,351,411
Foreign
    currency translation adjustment
18
-
-
-
15,181,518
-
-
15,181,518
Share-based
    compensation
29
-
-
5,774,266
-
-
-
5,774,266
Contributions
    from non-controlling interests
2(a)
-
-
-
-
-
50,750,000
50,750,000
Balance
    as of December 31, 2022
916,743
(
87,631,475
)
1,024,203,515
(
10,211,997
)
2,958,716,295
51,720,379
3,937,713,460
(1)
We adopted CECL effective January 1, 2020. For additional information,
see Note 2 (Summary of Significant Accounting Policies) for more information.
The accompanying notes are an integral part of these consolidated financial
statements.
F-
7
CNFINANCE HOLDINGS LIMITED
Consolidated statements of cash flows
Year ended December 31
2020
2021
2022
RMB
RMB
RMB
Cash flows from operating activities:
Net income
114,852,526
65,207,464
135,351,411
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses
77,348,480
(
298,467,893
)
238,084,863
Depreciation and amortization
6,047,226
3,821,788
2,244,279
Share-based compensation expenses
62,073,367
18,766,367
5,774,266
Net losses on disposal of property and equipment
2,868
328,262
30,742
Foreign exchange losses/(gains)
5,345,004
(
786,080
)
(
7,355,135
)
Deferred tax benefit
(
94,389,779
)
(
190,009,905
)
(
133,913,450
)
Net losses on sale of loans
50,606,487
479,584,775
44,554,948
Profit and loss arising from fair value changes
(
56,773
)
(
1,101,669
)
362,855
Loans held-for-sale:
Originations and purchases
(
152,062,194
)
(
453,880,066
)
(
585,434,771
)
Proceeds from sales and paydowns of loans originally classified as held-for-sale
637,716,580
1,006,876,340
1,549,993,492
Changes in operating assets and liabilities:
Deposits
19,461,259
(
42,902,327
)
11,860,799
Guarantee deposits
-
(
74,680,000
)
(
168,790,845
)
Credit risk mitigation position
281,027,037
138,720,288
6,203,644
Other operating assets
(
28,446,434
)
(
30,875,632
)
(
167,193,614
)
Other operating liabilities
140,051,328
69,090,594
(
12,520,372
)
Net cash provided by operating activities
1,119,576,982
689,692,306
919,253,112
Cash flows from investing activities:
Loans originated, net of principal collected
(
89,215,328
)
(
2,839,526,077
)
(
2,556,903,189
)
Proceeds from sales of investment securities
7,187,477,436
8,956,466,358
9,002,171,357
Proceeds from disposal of non-marketable equity securities
-
10,000,000
-
Proceeds from disposal of subsidiaries
-
-
50,000,000
Proceeds from disposal of property and equipment and intangible assets
2,159,345
550,673
319,539
Proceeds from sales of loans
378,308,227
1,022,025,709
1,088,433,960
Purchases of investment securities
(
6,951,457,436
)
(
9,496,275,212
)
(
8,567,330,149
)
Purchases of non-marketable equity securities
-
-
(
25,000,000
)
Purchases of property, equipment and intangible assets
(
3,221,401
)
(
3,805,766
)
(
89,889,341
)
Net cash provided by/(used in) investing activities
524,050,843
(
2,350,564,315
)
(
1,098,197,823
)
The accompanying notes are an integral part of these consolidated financial
statements.
F-
8
CNFINANCE HOLDINGS LIMITED
Consolidated statements
of cash flows (continued)
Year ended December 31
2020
2021
2022
RMB
RMB
RMB
Cash flows from financing activities:
Proceeds from interest-bearing borrowings
6,014,983,918
7,068,023,900
6,082,283,165
Proceeds from contributions from non-controlling shareholders
-
-
50,750,000
Repurchase of ordinary shares
-
-
(
87,631,475
)
Repayment of interest-bearing borrowings
(
7,382,122,623
)
(
5,135,443,638
)
(
6,333,557,940
)
Net cash (used in)/provided by financing activities
(
1,367,138,705
)
1,932,580,262
(
288,156,250
)
Net increase/(decrease) in cash, cash equivalents and restricted cash
276,489,120
271,708,253
(
467,100,961
)
Cash, cash equivalents and restricted cash at the beginning of year
1,705,356,424
1,960,922,758
2,231,437,361
Effect of exchange rate change on cash, cash equivalents and restricted cash
(
20,922,786
)
(
1,193,650
)
7,847,745
Cash, cash equivalents and restricted cash at the end of year
1,960,922,758
2,231,437,361
1,772,184,145
Supplemental disclosures of cash flow information:
Income taxes paid
46,378,568
153,494,369
139,205,940
Interest expense paid
728,846,965
832,735,000
792,794,985
The accompanying notes are an integral part of these consolidated financial
statements.
F-
9
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
1.
DESCRIPTION OF BUSINESS, ORGANIZATION, AND BASIS OF PRESENTATION
CNFinance Holdings Limited ("CNFinance"), through its controlled
subsidiaries and consolidated variable interest entities (collectively, referred to hereinafter as the "Group") in the People's
Republic of China ("PRC"), primarily provides micro credit loan services for micro and small-enterprise ("MSE")
owners, loan facilitation and post-facilitation and guarantee services for the commercial bank, and loan lending agency service for financial
institutions.
The Group's main funding resources are equity and borrowings
from third parties. The loans are granted through its licensed micro credit subsidiaries in Beijing, Shenzhen and Chongqing directly,
or the structured funds funded with the Group as general partners. Through the Group's network of sales team and branch offices,
prospective MSE borrowers are referred to the licensed micro credit subsidiaries or the structured funds ("the traditional facilitation
model"). Home equity loans were secured by residential or commercial real estate as of December 31, 2022.
In December 2018, the Group began to explore a new collaboration model
to mitigate credit risks ("collaboration model") and started to record the business under this model. The collaboration model
is different from the traditional facilitation model by adding a collaboration relationship, which involves sales partners for introducing
borrowers and providing a certain level of guarantee of repayment for loans recommended. Under such model, the Group is able to develop
a financial services platform that matches various parties to lend resources at competitive rates. Those parties include sales partners
who introduce borrowers from particular jurisdictions, trust companies that administer funds, and the loan borrowers who has financial
needs for their business operations. The sales partners are nationwide mid-or-small companies that have local risk assessment capabilities.
The collaboration model requires the sales partners to place a security deposit called credit risk mitigation positions which could be
confiscated by the Group when loans are defaulted. The loan borrowers who are introduced by the sales partners are MSE owners who have
properties that can be used as collateral.
Under the collaboration model, in the event of loans issued to the
borrowers acquired under such collaboration model are in default, the respective sales partners who introduced such borrowers will share
the credit risks with the Group by choosing from the following options, including (i)(1) full repayment to the Group for the total unpaid
principal and accrued and overdue interests under the respective loan agreement on behalf of the borrower and acquiring respective credit
rights, (i)(2) repayment in instalments to the Group for the total unpaid principal and accrued and overdue interests under the respective
loan agreement on behalf of the borrower and acquiring respective credit rights under each instalments; (ii) repayment to the Group for
the unpaid principal and accrued and overdue interests under the respective loan agreement on behalf of the borrower, and if the borrower
pays the payments under the loan agreement, the repayment by the sales partner on behalf of the borrower will be refunded to the sales
partner; or (iii) relinquishing the respective credit risk mitigation positions ("CRMPs") for such loan.
The Group has started to collaborate with commercial banks since 2021
and such collaboration grew and scaled in the second half of 2022. Under the commercial bank partnership model, the Group provides loan
facilitation services (covering matching of commercial banks to borrowers and facilitating the execution of loan agreement between commercial
banks and borrowers) and post-facilitation services (covering cash processing services and collection services), and guarantee services
for the off–balance sheet loans.
Basis of preparation
The consolidated financial statements are prepared in accordance with
U.S. Generally Accepted Accounting Principles ("U.S. GAAP").
F-
10
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
1.
DESCRIPTION OF BUSINESS, ORGANIZATION, AND BASIS OF PRESENTATION (CONTINUED)
Investment in significant subsidiaries for the year ended December
31, 2022
Place and date of incorporation/
Registered
Issued
    and fully
Percentage
    of equity
attributable to the Group
Principal
Name
    of company
establishment
capital
paid up capital
Direct
Indirect
activities
Sincere
    Fame International Limited
诚名国际有限公司
British Virgin Islands
October 6, 2006
USD
1,230,434
USD
1,230,434
100
%
-
Investment Holding
China Financial
    Services
Group Limited
泛华金融服务集团
有限公司
Hong Kong
August 28, 2000
HKD
100,000,000
HKD
100,000,000
-
100
%
Investment Holding
Fanhua
    Chuang Li Information Technology (Shenzhen) Co., Ltd.
泛华创利信息技术 (深圳)
有限公司
the PRC
December 21,
1999
HKD
400,000,000
HKD
400,000,000
-
100
%
Investment Holding
Shenzhen
    Fanhua United Investment Group
Co., Ltd.
深圳泛华联合投资集团
有限公司
the PRC
August 9, 2006
RMB
250,000,000
RMB
250,000,000
-
100
%
Investment Holding
Guangzhou
    Anyu Mortgage Consulting Co., Ltd.
广州安宇按揭咨询
有限公司
the PRC
January 23,2003
RMB
2,220,000
RMB
2,220,000
-
100
%
Micro credit
and mortgage
agency
services
Chongqing
    Fengjie Financial Advisory Co., Ltd.
重庆丰捷财务咨询
有限公司
the PRC
June 13, 2010
RMB
500,000
RMB
500,000
-
100
%
Financial consultancy
Guangzhou
    Chengze Information Technology Co., Ltd.
广州诚泽信息科技
有限公司
the PRC
December 11,
2006
RMB
3,000,000
RMB
3,000,000
-
100
%
Software development and maintenance
Chongqing
    Liangjiang New Area Fanhua Micro-credit Co., Ltd.
重庆市两江新区泛华
小额贷款有限公司
the PRC
December 26,
2011
USD
30,000,000
USD
30,000,000
-
100
%
Micro credit
and mortgage
agency services
Shenzhen
    Fanhua Micro-credit Co., Ltd.
深圳泛华小额贷款
有限公司
the PRC
March 15, 2012
RMB
300,000,000
RMB
300,000,000
-
100
%
Micro credit
and mortgage
agency services
F-
11
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
1.
DESCRIPTION OF BUSINESS, ORGANIZATION, AND BASIS OF PRESENTATION (CONTINUED)
Place and date of incorporation/
Registered
Issued and fully
Percentage of equity
attributable to the Group
Principal
Name of company
establishment
capital
paid up capital
Direct
Indirect
activities
Shenzhen Fanhua
    Fund Management Services
Co., Ltd.
深圳泛华基金
管理服务有限公司
the PRC
June 8, 2012
RMB
5,000,000
RMB
5,000,000
-
100
%
Company register service
Guangzhou Heze Information
    Technology Co., Ltd.
广州和泽信息科技
有限公司
the PRC
September 16,
2010
RMB
20,000,000
RMB
20,000,000
-
100
%
Software development and maintenance
Beijing Lianxin Chuanghui
    Information Technology Co., Ltd.
北京联鑫创辉
信息技术有限公司
the PRC
February 2, 2012
HKD
10,000,000
HKD
10,000,000
-
100
%
Software development and maintenance
Shenzhen Fanlian Investment
    Co., Ltd.
深圳泛联投资有限公司
the PRC
November 26,
2012
RMB
30,000,000
RMB
30,000,000
-
100
%
Investment Holding
Fanhua Financial Leasing
    (Shenzhen) Co., Ltd.
泛华融资租赁
(
深圳
)
有限公司
the PRC
September 4,
2012
USD
10,000,000
USD
10,000,000
-
100
%
Business
Advisory
Shenzhen Fanhua Chengyu Finance
    Service Co., Ltd.
深圳泛华诚誉金融配套
服务有限公司
the PRC
March 15, 2013
RMB
10,000,000
RMB
10,000,000
-
100
%
Labor outsourcing services
Beijing Fanhua Qilin Capital
    Management Co., Ltd.
北京泛华麒麟资本管理
有限公司
the PRC
December 26,
2016
RMB
100,000,000
RMB
10,000,000
-
96
%
Asset Management
Shijiazhuang Fanhua Financial
    Advisory
Co., Ltd.
石家庄泛华财务咨询
有限公司
the PRC
July 27, 2017
RMB
2,000,000
-
-
100
%
Financial Consultancy
Taizhou Fanhua Financial
    Advisory Co., Ltd.
泰州泛华财务咨询服务
有限公司
the PRC
September 28, 2017
RMB
500,000
-
-
100
%
Financial Consultancy
Xuzhou Shenfanlian Enterprise
    Management Co., Ltd.
徐州深泛联企业管理
有限公司
the PRC
December 7,
2017
RMB
10,000,000
-
-
100
%
Enterprise Management
F-
12
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
1.
DESCRIPTION OF BUSINESS, ORGANIZATION, AND BASIS OF PRESENTATION (CONTINUED)
Place
    and date of incorporation/
Registered
Issued
    and fully
Percentage
    of
equity attributable to the Group
Principal
Name
    of company
establishment
capital
paid up capital
Direct
Indirect
activities
Nantong Shenfanlian
    Enterprise Management Co., Ltd.
南通深泛联企业管理
有限公司
the PRC
September 8, 2017
RMB
5,000,000
-
-
100
%
Enterprise Management
Baoding Fanjie Financial
    Advisory Co., Ltd.
保定泛杰财务咨询
有限公司
the PRC
February 9, 2018
RMB
500,000
-
-
100
%
Financial Consultancy
Shenzhen Fancheng Business
    Operation Management Partnership (Limited Partnership)
深圳泛诚商业运营管理合伙企业 (有限合伙)
the PRC
June 22, 2018
RMB
500,000,000
RMB34,550,000
-
100
%
Enterprise Management
Fanxiaoxuan Cultural Media
    (Guangzhou) Co., Ltd.
泛小宣文化传媒 (广州)
有限公司
the PRC
July 16, 2018
RMB
1,000,000
-
-
100
%
Enterprise Management
Guangzhou Fanze Information
    Technology Co., Ltd.
广州泛泽信息科技
有限公司
the PRC
February 27, 2019
RMB
10,000,000
-
-
100
%
Software development and maintenance
Langfang
Fanhua Technology Co., Ltd.
廊坊市泛华科技
有限公司
the PRC
September 9, 2019
RMB
200,000
-
-
100
%
Software development and maintenance
Shenyang
Fanhua Financial Advisory Co., Ltd.
沈阳市泛华财务咨询
有限公司
the PRC
November 18, 2019
RMB
1,000,000
-
-
100
%
Financial consultancy
Luoyang Fanzhan Information
    technology Co., Ltd.
洛阳泛展信息科技有限公司
the PRC
May 13, 2020
RMB
500,000
-
-
100
%
Software development and maintenance
Lanzhou Fanhua Enterprise
    Information Advisory Co., Ltd.
兰州泛华企业信息咨询有限公司
the PRC
May 19, 2020
RMB
200,000
-
-
100
%
Enterprise Management
Yantai Shenzhen Fanlian Financial
    Advisory Co., Ltd.
烟台深泛联财务咨询有限公司
the PRC
June 22, 2020
RMB
1,000,000
-
-
100
%
Financial consultancy
F-
13
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
1.
DESCRIPTION OF BUSINESS, ORGANIZATION, AND BASIS OF PRESENTATION (CONTINUED)
Place and date of incorporation/
Registered
Issued and
fully
Percentage
    of equity attributable to the Group
Principal
Name
    of company
establishment
capital
paid
up capital
Direct
Indirect
activities
Haikou Fanhua
    Financial Advisory Co., Ltd.
海口市泛华财务咨询有限公司
the PRC
June 12, 2020
RMB
1,000,000
-
-
100
%
Financial consultancy
Ganzhou Shenzhen Fanlian
    Financial Advisory Co., Ltd.
赣州深泛联财务咨询有限公司
the PRC
August 8, 2020
RMB
1,000,000
-
-
100
%
Financial consultancy
Fanhua Jinfu (Foshan) Co.,
    Ltd.
泛华金服（佛山）有限公司
the PRC
May 22, 2020
RMB
200,000,000
-
-
100
%
Financial consultancy
Huaian Fanhualian Economic
    Information Advisory Co.,
Ltd淮安泛华联经济信息咨询有限公司
the PRC
February 2, 2021
RMB
1,000,000
-
-
100
%
Financial consultancy
Guangzhou Nansha Weisen Technology
    Co., Ltd
广州南沙区玮森科技有限公司
the PRC
March 30, 2020
RMB
500,000
-
-
100
%
Software development and maintenance
Wuxi Shenzhen Fanlian Enterprise
    Management Co., Ltd.
无锡深泛联企业管理有限公司
the PRC
April 27, 2022
RMB
500,000
-
-
100
%
Enterprise Management
Shenzhen Fanlian (Hangzhou)
    Financial Advisory Co., Ltd.
深泛联（杭州）财务咨询有限公司
the PRC
May 5, 2022
RMB
1,000,000
-
-
100
%
Financial consultancy
Ningbo Lianyi Technological
    Advisory Co., Ltd.
宁波联亿科技咨询有限公司
the PRC
November 24, 2022
RMB
50,000,000
-
-
100
%
Financial consultancy
F-
14
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
1.
DESCRIPTION OF BUSINESS, ORGANIZATION, AND BASIS OF PRESENTATION
(CONTINUED)
Variable interest entities ("VIEs")
An entity is a variable interest entity (VIE) if it meets the criteria
outlined in Accounting Standards Codification (ASC) Topic 810, Consolidation, which are (i) the entity has equity that is insufficient
to permit the entity to finance its activities without additional subordinated financial support from other parties; or (ii) the entity
has equity investors that cannot make significant decisions about the entity's operations or that do not absorb their proportionate
share of the entity's expected losses or expected returns. The Group consolidates a VIE when it has both the power to direct the
activities that most significantly impact the VIE's economic performance and a right to receive benefits or the obligation to absorb
losses of the entity that could be potentially significant to the VIE (that is, the Group is the primary beneficiary). In addition to
variable interests held in consolidated VIEs, the Group has variable interests in other VIEs that are not consolidated because the Group
is not the primary beneficiary. However, these VIEs and all other unconsolidated VIEs are monitored by the Group to assess whether any
events have occurred to cause its primary beneficiary status to change. All other entities not deemed to be VIEs with which the Group
has involvement are evaluated for consolidation under other subtopics of ASC 810.
In the normal course of business, the Group engages in a variety of
activities with VIEs. The Group determines whether it is the primary beneficiary of a VIE at the time it becomes involved with the variable
interest entity and reconsiders that conclusion continually. In evaluating whether the Group is the primary beneficiary, the Group evaluates
its economic interests in the entity. If the Group is determined to be the primary beneficiary of a VIE, it must account for the VIE as
a consolidated subsidiary. If the Group is determined not to be the primary beneficiary of a VIE, such VIE is not consolidated.
The Group has segregated its involvement with VIEs between those VIEs
which are consolidated and those VIEs which are not consolidated.
Consolidated VIEs
Structured funds
The Group grants loans to customers through structured funds set up
by trust companies. The assets of the structured funds can only be used to settle obligations of consolidated VIEs. The cash of structured
funds represents that funds established by the institutional trust companies through segregated bank accounts, including structured funds
that are partially funded by the Group's own capital. The cash and cash equivalents of structured funds amounted to RMB
1,515,820,737
and RMB
1,157,244,687
as of December 31, 2021 and 2022 respectively can only be used to grant loans. The Group is general partner of the
funds, promising the expected returns for limited partners, and providing credit strengthening on the loans to customers under the funds.
The Group is also the manager of the funds, having the approval role for the loan origination and modification within the structured funds.
The Group is the primary beneficiary of the funds as it has the power to direct the activities that most significantly impact the economic
performance of the funds and it has obligation to absorb losses of the funds that could potentially be significant to the funds or the
right to receive benefits from the funds that could potentially be significant to the funds.
The structured funds are not taxpayers according to PRC tax law. The
Group consolidates the structured funds as it is the primary beneficiary of the funds as of December 31, 2021 and 2022.
F-
15
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
1.
DESCRIPTION OF BUSINESS, ORGANIZATION, AND BASIS OF PRESENTATION (CONTINUED)
The table sets forth the investments in the consolidated VIEs by the
Group as of December 31, 2022.
Name
of structured funds
Place
    and
date of
incorporation/
establishment
Principal
activities
Jinghua Structured Fund 6
菁华6号信托计划
the PRC
September 9, 2014
Micro credit
Bohai Trust Shenfanlian Micro Finance Structured Fund
渤海信托深泛联小微金融集合资金信托计划
the PRC
September 14, 2016
Micro credit
Bohai Huihe SME Structured Fund
渤海汇和中小微企业经营贷集合资金信托计划
the PRC
September 29, 2017
Micro credit
Zhongyuan Wealth Anhui Structured Fund 1
中原财富-安惠1期
the PRC
January 20, 2017
Micro credit
Zhongyuan Wealth Anhui Structured Fund 2
中原财富-安惠2期
the PRC
August 18, 2017
Micro credit
Beijing Fanhua Micro-credit Company Limited
北京泛华小额贷款有限公司
the PRC
August 10, 2012
Micro credit
Zhonghai Lanhai Structured Fund 1
中海信托蓝海1号集合资金信托计划
the PRC
July 18, 2018
Micro credit
Bairui Hengyi No.613 Structured Fund
百瑞恒益613号集合资金信托计划
the PRC
July 25, 2018
Micro credit
Bohai Trust No.1 Huiying Structured Fund
渤海惠盈1号集合资金信托计划
the PRC
September 10, 2018
Micro credit
Bohai Trust No.2 Shenzhen Fanhua United Structured Fund
渤海信托-深泛联2号集合资金信托计划
the PRC
November 28, 2018
Micro credit
Jinghua Structured Fund 1
外贸信托菁华1号集合资金信托计划
the PRC
May 8, 2019
Micro credit
Zhonghai Lanhai Structured Fund 1-2
中海信托-蓝海1-2号集合资金信托计划
the PRC
June 28, 2019
Micro credit
Zhonghai Lanhai Structured Fund 1-3
中海信托-蓝海1-3号集合资金信托计划
the PRC
September 11, 2019
Micro credit
Hunan Structured Fund 2019-1
湖南信托2019-1集合资金信托计划
the PRC
September 23, 2019
Micro credit
Hunan Structured Fund 2019-2
湖南信托2019-2集合资金信托计划
the PRC
September 23, 2019
Micro credit
Shaanxi International Xinglong Structured Fund 1-1
陕国投·兴隆1-1号集合资金信托计划
the PRC
November 6, 2019
Micro credit
Shaanxi International Xinglong Structured Fund 2-1
陕国投·兴隆2-1号集合资金信托计划
the PRC
September 24, 2019
Micro credit
Bairui Hengyi No.711 Structured Fund
百瑞恒益711号集合资金信托计划
the PRC
September 20, 2019
Micro credit
F-
16
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
1.
DESCRIPTION OF BUSINESS, ORGANIZATION, AND BASIS OF PRESENTATION (CONTINUED)
Name
    of structured funds
Place
    and
date of
incorporation/
establishment
Principal
    activities
Zhonghai Lanhai Structured Fund 1-4
中海信托-蓝海1-4号集合资金信托计划
the PRC
October 10, 2019
Micro credit
Zhongyuan Wealth Anhui Structured Fund 49
中原信托-安惠49期
the PRC
October 24, 2019
Micro credit
Bairui Hengyi No.724 Structured Fund
百瑞恒益724号集合资金信托计划
the PRC
November 11, 2019
Micro credit
Zhonghai Lanhai Structured Fund 1-5
中海信托-蓝海1-5号集合资金信托计划
the PRC
November 19, 2019
Micro credit
Zhonghai Lanhai Structured Fund 1-6
中海信托-蓝海1-6号集合资金信托计划
the PRC
December 20, 2019
Micro credit
No. 50 Jinghua Structured Fund
外贸信托菁华50号资管计划
the PRC
April 26, 2019
Micro credit
Zhonghai Lanhai Structured Fund 1-1
中海信托-蓝海1-1号集合资金信托计划
the PRC
May 19, 2020
Micro credit
Shaanxi International Xinglong Structured Fund 22-1
陕国投·兴隆22-1号集合资金信托计划
the PRC
June 22, 2020
Micro credit
Zhonghai Lanhai Structured Fund 1-7
中海信托-蓝海1-7号集合资金信托计划
the PRC
August 14, 2020
Micro credit
No. 74 Jinghua Structured Fund
外贸信托菁华74号资管计划
the PRC
November 26, 2020
Micro credit
Hunan Structured Fund 2020-1
湖南信托2020-1集合资金信托计划
the PRC
December 8, 2020
Micro credit
Shaanxi International Xinglong Structured Fund 2-2
陕国投·兴隆2-2号集合资金信托计划
the PRC
January 26, 2021
Micro credit
No.103 Jinghua Structured Fund
外贸信托菁华103号资管计划
the PRC
March 23, 2021
Micro credit
Zhonghai Lanhai Structured Fund 30-X
中海信托-蓝海30-X号集合资金信托计划
the PRC
March 17, 2021
Micro credit
Bohai Trust 2020 Pucheng No. 75
渤海信托·2020普诚75号集合资金信托计划
the PRC
July 15, 2021
Micro credit
Guomin Tianshu Structured Fund 2-1
国民信托·天枢2-1号单一资金信托
the PRC
August 31, 2021
Micro credit
Shenzhen Fanshu Information Technology Advisory Partnership (Limited Partnership).
深圳泛枢信息技术咨询合伙企业（有限合伙）
the PRC
August 27, 2021
Micro credit
Shenzhen Lianshu Economic Information Technology Advisory Partnership (Limited Partnership)
深圳联枢经济信息技术咨询合伙企业（有限合伙）
the PRC
August 27, 2021
Micro credit
Shenzhen Ruishu Economic Information Technology Advisory Partnership (Limited Partnership)
深圳瑞枢经济信息技术咨询合伙企业（有限合伙）
the PRC
September 30, 2021
Micro credit
F-
17
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
1.
DESCRIPTION OF BUSINESS, ORGANIZATION, AND BASIS OF PRESENTATION (CONTINUED)
Name of structured funds
Place
                                            and
date of
incorporation/
establishment
Principal
activities
Tianjin Ninghua Economic Information Advisory Partnership (Limited Partnership)
天津宁华经济信息咨询合伙企业（有限合伙）
the PRC
November 1, 2021
Micro credit
Shenzhen Shengshu Information Technology Advisory Partnership (Limited Partnership)
深圳盛枢信息技术咨询合伙企业（有限合伙）
the PRC
November 2, 2021
Micro credit
Shenzhen Chengshu Information Technology Advisory Partnership (Limited Partnership)
深圳诚枢信息技术咨询合伙企业（有限合伙）
the PRC
November 29, 2021
Micro credit
Shenzhen Xuanshu Information Technology Advisory Partnership (Limited Partnership)
深圳宣枢信息技术咨询合伙企业（有限合伙）
the PRC
November 29, 2021
Micro credit
Tianjin Juehua Economic Information Advisory Partnership (Limited Partnership)
天津珏华经济信息咨询合伙企业（有限合伙）
the PRC
December 20, 2021
Micro credit
Zhongrong Yuanshuo No.1 Structured Fund
中融-元烁1号集合资金信托计划
the PRC
September 29, 2021
Micro credit
Guangzhou Mingsheng Capital Management Partnership (Limited Partnership) 广州明晟资本管理合伙企业（有限合伙）
The PRC January 11, 2022
Micro credit
Tianjin Baihua Economic Information Advisory Partnership (Limited Partnership)
天津柏华经济信息咨询合伙企业（有限合伙）
the PRC
January 19, 2022
Micro credit
Bohai Trust 2021 Pucheng No. 83
渤海信托·2021普诚83号集合资金信托计划
the PRC
January 25, 2022
Micro credit
Zhongrong Yuanshuo No.2 Structured Fund
中融-元烁2号集合资金信托计划
the PRC
February 18, 2022
Micro credit
Shenzhen Huashu Information Technology Advisory Partnership (Limited Partnership)
深圳华枢信息技术咨询合伙企业（有限合伙）
the PRC
February 22, 2022
Micro credit
Shenzhen Leshu Information Technology Advisory Partnership (Limited Partnership)
深圳乐枢信息技术咨询合伙企业（有限合伙）
the PRC
April 7, 2022
Micro credit
Zijin No.3 Business Acceleration Structured Fund
紫金信托·助业3号集合资金信托计划
the PRC
April 25, 2022
Micro credit
Zhongliang Hongrui No.1 Structured Fund
中粮信托-弘瑞普惠1号集合资金信托计划
the PRC
May 19, 2022
Micro credit
Zhongrong Yuanshuo No.3 Structured Fund
中融-元烁3号集合资金信托计划
the PRC
July 26, 2022
Micro credit
Tianjin Pinhua Economic Information Advisory Partnership (Limited Partnership)
天津品华经济信息咨询合伙企业（有限合伙）
the PRC
October 10, 2022
Micro credit
F-
18
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
1.
DESCRIPTION OF BUSINESS, ORGANIZATION, AND BASIS OF PRESENTATION (CONTINUED)
The table sets forth the assets and liabilities of the consolidated
VIEs included in the Group's consolidated balance sheets after elimination of intercompany transactions and balances:
December 31,
2021
December 31,
2022
RMB
RMB
Cash, cash equivalents and restricted cash
1,516,044,449
1,265,876,948
Loans principal, interest and financing service fees receivables
9,089,263,433
9,303,729,390
Investment securities
709,255,924
205,711,749
Deferred tax assets
6,903
-
Other assets
1,071,073,393
873,978,254
Total assets
12,385,644,102
11,649,296,341
Interest-bearing borrowings
8,041,816,663
7,727,559,338
Income taxes payable
733,159
902,734
Deferred tax liabilities
-
15,863
Other liabilities
125,382,650
144,368,848
Total liabilities
8,167,932,472
7,872,846,783
The table sets forth the results of operations of the VIEs included
in the Group's consolidated statements of comprehensive income:
Year
ended December 31
2020
2021
2022
RMB
RMB
RMB
Revenue
1,731,934,459
1,298,055,332
1,437,398,097
Net income
658,400,554
579,742,472
381,273,670
The table sets forth the cash flows of the VIEs included in the Group's
consolidated statements of cash flows:
Year ended December 31
2020
2021
2022
RMB
RMB
RMB
Net cash used in operating activities
(
303,745,231
)
(
1,571,552,463
)
939,802,714
Net cash provided by/(used in) investing activities
692,705,844
(
633,511,824
)
(
812,396,284
)
Net cash (used in)/provided by financing activities
(
429,173,286
)
2,682,931,827
(
377,573,931
)
F-
19
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a)
Principles of consolidation
The accompanying consolidated financial statements include the financial
statements of the Group. All intercompany transactions and balances have been eliminated in consolidation. The Group accounts for investments
over which it has significant influence but not a controlling financial interest using the equity method of accounting.
Non-controlling interests
Non-controlling interests are recognized to reflect the portion of
the equity of majority-owned subsidiaries and VIEs which is not attributable, directly or indirectly, to the controlling shareholder.
(b)
Currency translation for financial statements presentation
The Group uses Renminbi ("RMB") as its reporting currency.
The United States Dollar ("USD") is the functional currency of the Company incorporated in Cayman and the Group's subsidiary
Sincere Fame incorporated in British Virgin Islands, and the Hong Kong Dollar ("HKD") is the functional currency of the Group's
subsidiary China Financial Services Group Limited incorporated in Hong Kong and the RMB is the functional currency of the Group's
PRC subsidiaries.
The financial statements of the Group are translated from the functional
currency to the reporting currency, RMB. Assets and liabilities of the subsidiaries are translated into RMB using the exchange rate in
effect at each balance sheet date. Income and expenses items are generally translated at the average exchange rates prevailing during
the fiscal year. Foreign currency translation adjustments arising from these are accumulated as a separate component of shareholders'
deficit on the consolidated financial statements. The resulting exchange differences are recorded in the consolidated statements of comprehensive
income/(losses).
(c)
Use of estimates
The preparation of consolidated financial statements in conformity
with 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 at the date of the consolidated financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions
include, allowance for loans principal, interest and financing service fee receivables, debt securities, guarantee assets, the valuation
allowance for deferred tax assets, unrecognized tax benefits, the indefinite reinvestment assertion and the fair value of equity securities
and share-based compensation.
(d)
Revenue recognition
Interest and financing service fees on loans which are amortized over
the contractual life of the related loans are recognized in consolidated statements of comprehensive income in accordance with ASC 310
using the effective interest method.
F-
20
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Group considered relevant accounting guidance and concluded that
arrangements for its guarantee services provided for its off-balance sheet loans under commercial bank partnership model are out of scope
of ASC 606, Revenue from Contracts with Customers. Therefore, "Gains/losses from guarantee liabilities" included in "Net
revenue under commercial bank partnership model" on the Consolidated Statements of Comprehensive income should be accounted for
in accordance with ASC 460, Guarantees. The other revenue streams under commercial bank partnership model are accounted for in accordance
with ASC 606.
The criteria of revenue recognition as they relate to each of the following
major revenue generating activities are described below:
(i)
Interest and financing service fees on loans
Interest and financing service fees on loans, which include financing
service fees on loans, are collected from borrowers for loans and related services.
Interest and financing service fees on loans include the amortization
of any discount or premium or differences between the initial carrying amount of an interest-bearing asset and its amount at maturity
calculated using the effective interest basis.
The effective interest method is a method of calculating the amortized
cost of a financial asset and of allocating the interest and financing service fees on loans over the years. The effective interest rate
is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument. When
calculating the effective interest rate, the Group estimates cash flows considering all contractual terms of the financial instrument
but does not consider future credit losses. Interest on the impaired assets is recognized using the rate of interest used to discount
future cash flows.
(ii)
Interest income on debt securities
Interest income on debt securities is calculated by applying the effective
interest rate to the gross carrying amount of debt securities to unrelated companies plus any interest received from corporate debt securities.
(iii)
Revenue under commercial bank partnership model
In accordance with the relevant guidance in ASC Topic 606, the amounts
associated with guarantee services under commercial bank partnership model is within the scope of ASC Topic 460 and should be accounted
for in accordance with the provisions of that Topic. The services not within the scope of other Topics should be accounted for in accordance
with the remaining provisions of ASC Topic 606 and the applicable revenue recognition guidance.
The Group considers loan facilitation services under commercial bank
partnership model (covering matching of commercial banks to borrowers and facilitating the execution of loan agreement between commercial
banks and borrowers) and post-facilitation services under commercial bank partnership model (covering cash processing services and collection
services) as two distinctive performance obligations in accordance with ASC Topic 606. The transaction price is first allocated to guarantee
services under commercial bank partnership model, if any, which is recorded at fair value and recognized amortized during the guarantee
term in accordance with ASC Topic 460.
F-
21
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Then the remaining considerations are allocated to the loan facilitation
under commercial bank partnership model and post-facilitation services under commercial bank partnership model using their relative standalone
selling prices. When estimating total consideration, the Group considers early termination scenarios based on historical early payment
and other termination scenarios as the Group can not receive the full contractual service fee amount under early termination, given the
service fee is collected on a pro-rata basis upon early loan termination. Such service fee is determined to be variable consideration
that meets the "probable of not reversing" threshold. As such, the Group recognizes revenue related to early termination based
on its best estimate and true up adjustments are made from time to time. The Group does not have observable standalone selling price for
the loan facilitation services or post-facilitation services because it does not provide loan facilitation services or post-facilitation
services on a standalone basis in similar circumstances to similar customers. There is no direct observable standalone selling price for
similar services in the market that is reasonably available to the Group.
As a result, the estimation of standalone selling price involves significant
judgment. The Group uses an expected cost plus margin approach to estimate the standalone selling prices of loan facilitation services
and post facilitation services as the basis of revenue allocation. When estimating the selling prices, the Group considers the cost related
to such services, profit margin, customer demand, effect of competition on services, and other market factors, among which estimates of
the cost of providing the services is the most significant.
The transaction price allocated to loan facilitation services is recognized
as revenue upon execution of loan agreements between commercial banks and borrowers; the consideration allocated to post-facilitation
services is recognized over the period of the loan on a straight-line method, which approximates the pattern of when the underlying services
are performed.
Remaining performance obligations represents the amount of the transaction
price for which services have not been performed under post-facilitation services. The Group collects service fees monthly. The aggregate
amounts of the transaction price allocated to performance obligations that are unsatisfied pertaining to post-origination services were
RMB67.08million as of December 31, 2022, among which approximately 64.6% of the remaining performance obligations will be recognized over
the following 12 months, and with the remainder recognized thereafter.
(iv)
Mortgage agency service revenue
The Group earns mortgage agency service revenue from providing mortgage
agency services to borrowers applying for a bank loan. Mortgage agency service fee is often received immediately or shortly after establishing
contracts with customers. This kind of revenue is recognized at the time when loan is granted as that is the point of time the Group fulfils
the customer's request, and is then recognized on an accrual basis in accordance with the terms of the relevant agreements.
(v)
Realized gains/(losses) on sales of investments
Realized gains/(losses) consist of realized gains and losses from the
sale of investment securities, presented on a net basis.
(vi)
Net gains/(losses) on sales of loans
Net gains/(losses) on sales of loans refer to any gains and losses
from the disposal of loans which is accounted for as a sale under ASC 860.
F-
22
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(vii)
Gains on confiscation of CRMPs
Gains on confiscation of credit risk mitigation positions are recognized
to the extent confiscated CRMPs exceed previously recognized allowance for loan losses and guarantee asset when sales partners surrender
the CRMPs and the obligation of refunding the CRMPs is released.
(e)
Loans
(i)
On-balance sheet loans
Loans are reported at their outstanding principal balances net of any
unearned income and unamortized deferred fees and costs. Loan origination fees and certain direct origination costs are generally deferred
and recognized as adjustments to income over the lives of the related loans.
The Group facilitates credit to borrowers through structured funds
which are considered as consolidated VIEs and the Group evaluated VIEs for consolidation in accordance with ASC 810 in the Consolidated
VIEs Section of Note 1. Providing credit strengthening arrangement since March 2018 for the loans to customers under the funds is one
of the key factors to determine that the Group should consolidate the structured funds as it is the primary beneficiary of the funds.
As a result, the loan principal remains on the Group's consolidated balance sheets, whilst the funds received from senior tranches
holders are recorded as Other Borrowings in the Group's consolidated balance sheets as disclosed in Note 12(b)(i).
Non-accrual policies
Loans principal, interest and financing service fee receivables are
placed on non-accrual status when payments are 90 days contractually past due. When a loan principal, interest and financing service fee
receivable is placed on non-accrual status, interest and financing service fees accrual cease. If the loan is non-accrual, the cost recovery
method is used and cash collected is applied to first reduce the carrying value of the loan. Otherwise, interest income may be recognized
to the extent cash is received. Loans principal, interest and financing service fee receivables may be returned to accrual status when
all of the borrower's delinquent balances of loans principal, interest and financing service fee have been settled and the borrower
continue to perform in accordance with the loan terms for a period of at least six months.
Charge-off policies
For the years ended December 31, 2021 and 2022, the Group considered
loans principal, interest and financing service fee receivables meeting any of the following conditions as uncollectible charged off:
(i) death of the borrower; (ii) identification of fraud, and the fraud is officially reported to and filed with relevant law enforcement
departments or (iii) the Group concludes that it has exhausted its collection efforts.
F-
23
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In order to align the Group's charge-off policies with ASC 326-20-35-8
(superseded ASC 310-10-35-41), the Group revised its charge-off policies to (1) provide additional information as to the collection efforts
which must be exhausted before a charge-off is recorded and (2) charge down loans that are 180 days past due to net realizable value (fair
value of collaterals, less estimated costs to sell) unless both well-secured and in the process of collection. The revised charge-off
policies are presented as follows:
principal, interest and financing service fee receivables are charged
down to net realizable value (fair value of collaterals, less estimated costs to sell) when the Group has determined the remaining balance
is uncollectable after exhausting all collection efforts. In order to comply with ASC 310 and ASC 326, the Group considers loans principal,
interest and financing service fee receivables meeting any of the following conditions as uncollectable and charged-off: (i) death of
the borrower; (ii) identification of fraud, and the fraud is officially reported to and filed with relevant law enforcement departments;
(iii) sales of loans to third parties; (iv) settlement with the borrower, where the Group releases irrecoverable loans through private
negotiations with the borrower where the borrower cannot repay the loan in full through self-funding or voluntary sale of the collateral;
(v) disposal through legal proceedings, including but not limited to online arbitrations, judicial auctions and court enforcements; or
(vi) loans are 180 days past due unless both well-secured and in the process of collection.
Allowance for credit losses
Allowance for credit losses represents management's best estimate
of probable losses inherent in the portfolio.
Commencing January 1, 2020, CNFinance adopted ASC 326, "Financial
Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments", which replaced the incurred loss
methodology for determining the provision for credit losses and allowance for credit losses ("ACL") with an expected loss methodology
that is referred to as the current expected credit loss ("CECL") model. ASC 326 defines the ACL as a valuation account that
is deducted from the amortized cost of a financial asset to present the net amount that management expects to collect on the financial
asset over its expected life. All financial assets carried at amortized cost are in the scope of ASC 326, while assets measured at fair
value are excluded. The allowance for credit losses is adjusted each period for changes in expected lifetime credit losses.
The allowance for credit losses includes an asset-specific component
and a statistically based component. The Group aggregates loans sharing similar risk characteristics into pools for purposes of measuring
expected credit losses. Pools are reassessed periodically to confirm that all loans within each pool continue to share similar risk characteristics.
Expected credit losses for loans that do not share similar risk characteristics with other financial assets are measured individually.
Estimation of CECLs requires CNFinance to make assumptions regarding
the likelihood and severity of credit loss events and their impact on expected cash flows, which drive the probability of default (PD),
loss given default (LGD) and exposure at default (EAD) models. In its loss forecasting framework, ECL is determined primarily by utilizing
models for the borrowers' PD, LGD and EAD and the Group incorporates forward-looking information through the use of macroeconomic
scenarios applied over the forecasted life of the assets. These macroeconomic scenarios include variables that have historically been
key drivers of increases and decreases in credit losses. These variables include, but are not limited to, gross-domestic product rates,
interest rates and consumer price indexes.
The ACL for financial assets held at amortized cost is a valuation
account that is deducted from, or added to, the amortized cost basis of the financial assets to present the net amount expected to be
collected. When credit expectations change, the valuation account is adjusted with changes reported in provision for credit losses. If
amounts previously charged off are subsequently expected to be collected, the Group may recognize a negative allowance, which is limited
to the amount that was previously charged off.
The asset-specific component is calculated under ASC 310-10-35, on
an individual basis for the loans whose payments are contractually past due more than 90 days or which are considered impaired. A financial
asset is collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially
through the sale or operation of the collateral. When a collateral-dependent financial asset is probable of foreclosure, the Group will
measure the ACL based on the fair value of the collateral and we will measure the ACL based on the collateral's net realizable value
(fair value of collateral, less estimated costs to sell).
F-
24
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Under the collaboration model, when the Group grants a loan through
a trust plan, the loan is with the borrower and guarantee is entered into with a separate counterparty (the sales partner). As such, under
the definition of ASC 326-20-20, the guarantee arrangement and lending arrangement would be considered freestanding arrangements. As sale
partners will provide guarantee of the entire loan to the Group, collection for loss is probable and estimable when a loss on an insured
loan is incurred and recognized. In this case, the Group will recognize guarantee loss recoverable asset in the amount that the Group
determines is probable to receive from the guarantor with an offsetting entry to "provision for credit losses" when the Group
concludes that the loss recovery is collectible. However, potential recovery that exceeds the recognized loss, if any, (gain contingency)
will not be recognized until cash is received. Therefore, the amounts estimated to be recoverable from the proceeds of guarantees will
be reported as a separate asset (guarantee asset) in the balance sheet. The increase in guaranteed recoverable assets are included in
the income statement as a reduction of the "provision for credit losses", separate disclosure of the increase in guaranteed
recoverable assets will be included in the rollforward of the "allowance for credit losses". The income statement caption
will be modified as "Provision for credit losses, net of increase in increase in guaranteed recoverable assets".
Loans held-for-sale
Loans held-for-sale are measured at the lower of cost or fair value,
with valuation changes recorded in noninterest revenue. The valuation is performed on an individual loan basis. Loan origination fees
or costs and purchase price discounts or premiums are deferred in a contra loan account until the related loan is sold. The deferred fees
or costs and discounts or premiums are adjustments to the basis of the loan and therefore are included in the periodic determination of
the lower of cost or fair value adjustments.
The loan is derecognized if the Group does not retain any risk and
rewards after transferring the loan. Such transfer would be recorded as sales according to ASC 860-10-40-5. At the time of derecognition,
any related loan loss allowance is released. Gains and losses on loans transfer as a sale are recognized in the non-interest income.
(ii)
Off-balance sheet loans
For loans funded by the proceeds from third-party commercial banks,
each underlying loan and borrower has to be approved by the third-party commercial banks individually. Once the loan is approved by and
originated by the third-party commercial bank, the fund is provided by the third-party commercial bank to the borrower and a lending relationship
between the borrower and the third-party commercial bank is established through a loan agreement. Effectively, the Group offers loan facilitation
and matching services to the borrowers who have credit needs and the commercial banks who originate loans directly to borrowers referred
by the Group. The Group continues to provide post-origination services to the borrowers over the term of the loan agreement. Under this
scenario, the Group determines that it is not the legal lender or borrower in the loan origination and repayment process. Accordingly,
the Group does not record loans principal, interest and financing service fee receivables arising from these loans nor interest-bearing
borrowings to the third-party commercial banks.
(f)
Cash, cash equivalents and restricted cash
Cash and cash equivalents primarily consist of cash, deposits which
are highly liquid and all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The
Group considers highly liquid investments that are readily convertible to known amounts of cash.
Restricted cash are cash and cash equivalents that are not readily
available for normal disbursement and mainly represents cash and cash equivalents from structured funds. Such restricted cash is not available
to fund the general liquidity needs of the Group and could only be used to grant new loans and activities as mentioned in Note 1.
F-
25
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(g)
Investment securities
Equity securities
Equity securities consist of wealth management products. Equity securities
are recorded at fair value and included in the profit and loss of changes in fair value. Realized gains and losses from the sale of investment
securities are determined on a specific identification basis and are recorded as realized gains/(losses) on sales of investments. Interest
and investment income are recognized when earned.
Debt securities
Debt securities consist of held-to-maturity debt securities that the
Group has the positive intent and ability to hold the security to maturity, and are recorded at amortized cost.
The Group reviews its investments in held-to-maturity debt securities
for impairment periodically, recognizing an allowance, if any, by applying an estimated loss rate. The Group considers available quantitative
and qualitative evidence in evaluating the potential impairment of its investments in held-to-maturity debt securities. The allowance
for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net carrying
value at the amount expected to be collected on the held-to-maturity debt securities.
(h)
Property and equipment
Property and equipment are stated at cost. Depreciation on equipment
is calculated on the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the
shorter of the economic useful life of the improvement or the term of the lease. The estimated useful life of office and other equipment
range from
1
to
5
years, the estimated useful life of leasehold improvements or the term of the lease range from
1
to
6
years, while the
estimated useful lives of motor vehicles range from
3
to
8
years.
F-
26
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(i)
Goodwill
Goodwill is an asset representing the future economic benefits arising
from other assets acquired in a business combination that are not individually identified and separately recognized.
Impairment tests for cash-generating units containing goodwill
The Group assesses goodwill for impairment at the reporting unit level
at least annually and more frequently upon the occurrence of certain events. The Group has the option to assess qualitative factors first
to determine whether it is necessary to perform the two-step test. If the Group believes, as a result of the qualitative assessment, that
it is more-likely-than-not that the fair value of the reporting unit is less than its carrying amount, the two-step quantitative impairment
test described above is required. Otherwise, no further testing is required. In the qualitative assessment, the Group considers primary
factors such as industry and market considerations, overall financial performance of the reporting unit, and other specific information
related to the operations. In performing the two-step quantitative impairment test, the first step compares the carrying amount of the
reporting unit to the fair value of the reporting unit based on either quoted market prices of the ordinary shares or estimated fair value
using a combination of the income approach and the market approach. If the fair value of the reporting unit exceeds the carrying value
of the reporting unit, goodwill is not impaired and the Group is not required to perform further testing. If the carrying value of the
reporting unit exceeds the fair value of the reporting unit, then the Group must perform the second step of the impairment test in order
to determine the implied fair value of the reporting unit's goodwill. The fair value of the reporting unit is allocated to its assets
and liabilities in a manner similar to a purchase price allocation in order to determine the implied fair value of the reporting unit
goodwill. If the carrying amount of the goodwill is greater than its implied fair value, the excess is recognized as an impairment loss.
Goodwill is related to the
acquisition
of Guangzhou Anyu Mortgage Consulting Co., Limited ("Guangzhou Anyu")
. In 2016, the key management of Guangzhou Anyu
has left the company. Guangzhou Anyu's business model has changed from providing loans to referring micro credit business to other
entities of the Group, resulting in an expected reduction in the operating profits and cash flows in the future. Therefore, the Group
recognized a goodwill impairment loss of RMB20,279,026. The goodwill was fully impaired in 2016.
(j)
Intangible assets
Indefinite-lived intangible assets are assets that are not amortized
because there is no foreseeable limit to cash flows generated from them. Intangible assets with finite useful lives are amortized on a
straight-line basis over their estimated useful lives.
The Group categorizes trademarks as indefinite-lived intangible assets,
whose carrying value is RMB
2.97
million. If it is more likely than not that the asset is impaired, the Group records the amount that the
carrying value exceeds the fair value as an impairment expense. The Group performed its annual impairment review of indefinite-lived intangible
assets on December 31, 2021 and 2022 and determined that it is more likely than not that the carrying value was less than the fair value.
Intangible assets with finite useful lives represent software and cooperation
agreements, the estimated useful lives of which are
1
to
5
years and
5
years, respectively.
F-
27
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(k)
Income taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases and for operating loss and tax credit carry forwards.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the
deferred tax assets or liabilities are expected to be realized or settled. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the enactment date. The Group recognizes the effect of income tax positions
only if those positions are more likely than not of being sustained. Recognized income tax positions are measured as the largest amount
that is greater than
50
percent likely of being realized. Changes in recognition or measurement are reflected in the period in which the
change in judgment occurs. The Group classifies interest and penalties related to the liability for unrecognized tax benefits as income
tax expense.
(l)
Employee benefit plans
Pursuant to relevant PRC regulations, the Group is required to make
contributions to various employee benefit plans organized by municipal and provincial PRC governments. The contributions are made for
each PRC employee at statutory rates as determined by local social security bureau. Contributions to the employee benefit plans are charged
to the consolidated statements of income. The Group has no obligations for payment of pension benefits associated with the plans beyond
the amount it is required to contribute.
(m)
Long-lived assets
Long-lived assets, such as property and equipment, and purchased intangible
assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, the
Group first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying amount. If the carrying
amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the
extent that the carrying amount exceeds its fair value. Fair value is determined through various valuation techniques including discounted
cash flow models, quoted market value and third-party independent appraisals, as considered necessary.
(n)
Share-based compensation
The Group measures the cost of employee services received in exchange
for an award of equity instruments based on the grant-date fair value of the award and recognizes the cost over the period the employee
is required to provide service in exchange for the award, which generally is the vesting period. The Group recognizes compensation cost
using a front-loading approach for an award with only service conditions that have a graded vesting schedule over the requisite service
period for the entire award, net of estimated forfeitures, provided that the cumulative amount of compensation cost recognized at any
date at least equals the portion of the grant-date value of such award that is vested at that date. Forfeiture rates are estimated based
on historical and future expectations of employee turnover rates.
F-
28
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(o)
Operating leases
Leases where substantially all the rewards and risks of ownership of
assets remain with the lessor are accounted for as operating leases. The Group's lease liability is measured at the present value
of future operating lease payments, discounted using the incremental borrowing rate. Right of use asset is measured at the amount of lease
liabilities plus prepaid rent and direct costs, less any lease incentives. The operating lease expense is recognized on a straight-line
basis over the lease term. Certain of the operating lease agreements contain rent holidays, which are considered in determining the straight-line
operating lease expense to be recorded over the lease term.
(p)
Guarantee liabilities
Starting from 2021, the Group started to cooperate with third-party
guarantee companies that directly provides guarantee services to commercial banks. According to relevant financial guarantee arrangements,
third-party guarantee companies will fulfil its obligations to purchase defaulted loans. However, the Group is required to provide deposits
and replenish such deposits from time to time to third-party guarantee companies for its obligations of purchasing defaulted loans. Effectively,
the Group provides back-to-back guarantee to third-party guarantee companies and takes on all of the credit risk of the borrowers. These
financial guarantee contracts are accounted for as guarantee liabilities under ASC 460, Guarantees.
The Group adopted ASC 326, Financial Instruments—Credit Losses,
which requires gross accounting for guarantee liability. As a result, at inception of the guarantee under commercial bank partnership
model, the Group will recognize both a stand-ready guarantee liability under ASC 460 with an associated guarantee receivable, and a contingent
guarantee liability with an allowance for credit losses of the underlying loans under Current expected credit loss ("CECL")
model. Subsequent to the initial recognition, the ASC 460 stand-ready guarantee is released into gains from guarantee liabilities on a
straight-line basis over the term of the guarantee, while the contingent guarantee is reduced by the pay-outs made by the Group to compensate
the investors upon borrowers' default.
(q)
Repurchase agreements
Financial assets sold under agreements to repurchase do not constitute
a sale of the underlying financial assets for accounting purposes and are treated as collateralized financing transactions. Financial
assets sold under agreements to repurchase are recorded at the amount of cash received plus accrued interest. Interest paid on agreements
to repurchase is recorded in interest expense at the contractually specified rate.
(r)
Commitments and contingencies
Liabilities for loss contingencies arising from claims, assessments,
litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount
can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred.
F-
29
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(s)
Fair value measurements
The Group uses valuation approaches that maximize the use of observable
inputs and minimize the use of unobservable inputs to the extent possible. The Group determines fair value based on assumptions that market
participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant
assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which
are categorized in one of the following levels in accordance with ASU 2011-04 (see Note 3 to the consolidated financial statements):
●
Level 1 Inputs: Unadjusted quoted prices in active markets for
identical assets or liabilities accessible to the reporting entity at the measurement date.
●
Level 2 Inputs: Other than quoted prices included in Level
1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset
or liability.
●
Level 3 Inputs: Unobservable inputs for the asset or liability
used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is
little, if any, market activity for the asset or liability at measurement date.
The level in the fair value hierarchy within which a fair value measurement
in its entirety falls is based on the lowest level input that is significant to the fair value measurement in its entirety. In situations
where there is little, if any, market activity for the asset or liability at the measurement date, the fair value measurement reflects
management's own judgments about the assumptions that market participants would use in pricing the asset or liability. Those judgments
are developed by management based on the best information available in the circumstances.
(t)
Earnings per share
Basic earnings per share is computed by dividing net income attributable
to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share is
calculated by dividing net income attributable to ordinary shareholders by the weighted average number of ordinary and dilutive ordinary
equivalent shares outstanding during the period.
Ordinary equivalent shares are not included in the denominator of the
diluted earnings per share calculation when inclusion of such shares would be anti-dilutive.
(u)
Segment reporting
The Group uses the management approach in determining its operating
segments. The management approach considers the internal reporting used by the Group's chief operating decision maker for making
decisions about the allocation of resources to and the assessment of the performance of the segments of the Group, therefore the management
has determined that the Group has one operating segment. All of the Group's operations and customers are located in the PRC. Consequently,
no geographic information is presented.
F-
30
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(v)
Recently adopted accounting standards
In 2022, the Group adopted the following new accounting guidance:
ASU 2022-02 - Financial Instruments - Credit Losses (Topic 326):
Troubled Debt Restructurings and Vintage Disclosures
The ASU 2022-02 is to be adopted on a prospective basis and will be
effective for the Group on January 1, 2023, although early adoption is permitted. The Amendment eliminates the accounting guidance for
troubled debt restructurings (TDRs) by creditors and introduces new required disclosures for loan modifications made to borrowers experiencing
financial difficulty. The Amendment also sets the guidance for vintage disclosures to require disclosure of current period gross charge-offs
by year of origination. Adoption of the accounting standard is not expected to have an impact on the Group's operating results or
financial position, as the Group does not involve in the activity of debt restructurings.
ASU 2022-03 -Accounting Standards Update No. 2022-03—Fair
Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions
The ASU 2022-03 is to be adopted on a prospective basis and will be
effective for the Group on January 1, 2024, although early adoption is permitted. The Amendment clarifies that
a
contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and also
states that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. The Update also requires
few more disclosures on equity securities subject to contractual sale restrictions.
Adoption of the accounting standard is not
expected to have an impact on the Group's operating results or financial position, as the Group excludes such restrictions when
valuing equity securities.
(w)
Revision of immaterial error
In 2022, the Group identified inappropriate initial measurement of
held-for-sale loans and derecognition of loans in previous years, leading to overstatement in guaranteed assets and net gains/(losses)
on sales of loans as well as understatement in held-for-sale loans and provision for credit losses, which did not affect total asset,
net income, cash and cash equivalent, or other subtotal on the accompanying consolidated financial statements. The Group evaluated the
materiality of the previously described error from a qualitative and quantitative perspective. Based on such evaluation, the Group concluded
that the error was not material to any individual current or prior periods, nor did it have an effect on the Group's trend of financial
result. Although the effect of the error was not material to the current or previously issued financial statements, guaranteed assets
and held-for-sale loans in the consolidated balance sheets as well as net gains/(losses) on sales of loans and provision for credit losses
in the consolidated statements of comprehensive income for year 2020 and 2021 have been revised accordingly to reflect the immaterial
error. Consequently, this had the following impact on certain 2020 and 2021 financial statements' captions: increases in held-for-sale
loans of RMB
101.9
million and RMB
361.4
million respectively, decreases in guaranteed assets of RMB
101.9
million and RMB
361.4
million respectively,
increases in provision for credit losses of RMB
200.2
million and RMB
28.9
million respectively and decreases in net gains/(losses) on sales
of loans of RMB
200.2
million and RMB
28.9
million respectively.
F-
31
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
3
Fair value measurements
Fair Value Hierarchy
FASB ASC 820 defines fair value, establishes a framework for measuring
fair value, and establishes a hierarchy of fair value inputs. Fair value is 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. A fair value measurement assumes
that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the
absence of a principal market, the most advantageous market. Valuation techniques that are consistent with the market, income or cost
approach, as specified by FASB ASC 820, are used to measure fair value.
Assets recorded at fair value on a recurring basis mainly include marketable
securities. Additionally, from time to time, the Group records fair value adjustments on a nonrecurring basis. These nonrecurring adjustments
typically involve application of LOCOM accounting, write-downs of individual assets or application of the measurement alternative for
nonmarketable equity securities.
Fair Value Measurements
A description of the valuation techniques applied to the Group's major
categories of assets and liabilities measured at fair value is as follows.
The Group determines fair value primarily based on pricing sources
with reasonable levels of price transparency. Where quoted prices are available in an active market, the Group classifies the assets and
liabilities within Level 1 of the valuation hierarchy. If quoted market prices are not available, fair value is primarily determined using
pricing models using observable trade data, market data, quoted prices of securities with similar characteristics or discounted cash flows.
Such instruments would generally be classified within Level 2 of the valuation hierarchy.
The following table presents the Group's fair value hierarchy for those
assets measured at fair value on a recurring basis as of December 31, 2021 and 2022.
December 31, 2022
Fair value
Level 1
Level 2
Level 3
RMB
RMB
RMB
RMB
Wealth management products
244,337,727
206,304,763
38,032,964
-
Total
244,337,727
206,304,763
38,032,964
-
F-
32
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
3
Fair value measurements (continued)
December 31, 2021
Fair value
Level 1
Level 2
Level 3
RMB
RMB
RMB
RMB
Wealth management products
847,047,295
729,255,924
117,791,371
-
Total
847,047,295
729,255,924
117,791,371
-
The following table presents the Group's fair value hierarchy for those
assets and liabilities measured at fair value on a non-recurring basis as of December 31, 2021 and 2022.
December 31, 2022
Fair value
Level 1
Level 2
Level 3
RMB
RMB
RMB
RMB
Assets
Loans
(1)
61,835,456
-
61,835,456
-
Loans held-for-sale
(2)
1,844,438,134
-
1,844,438,134
-
Equity securities
(3)
49,010,000
-
49,010,000
-
Total Assets
1,955,283,590
-
1,955,283,590
-
Liabilities
Guarantee liabilities
(4)
82,385,089
-
-
82,385,089
Total Liabilities
82,385,089
-
-
82,385,089
December 31, 2021
Fair value
Level 1
Level 2
Level 3
RMB
RMB
RMB
RMB
Assets
Loans
(1)
64,650,818
-
64,650,818
-
Loans held-for-sale
(2)
1,095,412,086
-
1,095,412,086
-
Equity securities
(3)
24,010,000
-
24,010,000
-
Total Assets
1,184,072,904
-
1,184,072,904
-
(1)
Loans are recorded at amortized cost, while the Group records
nonrecurring fair value adjustments to reflect partial write-downs that are based on the observable market price of the loan or current
appraised value of the collateral.
(2)
Loans held-for-sale are held at LOCOM (the lower of cost or fair value) which may be written down to fair value on a nonrecurring
basis.
(3)
Nonmarketable equity securities are accounted for using the measurement alternative and can be subject to nonrecurring fair value
adjustments to record impairment.
(4)
Guarantee liabilities are accounted for stand-ready guarantee liabilities of the Group's guarantee services for its off-balance
sheet loans under the commercial bank partnership model at fair value.
During the years ended December 31, 2021 and 2022, there were no transfers
between instruments in Level 1 and Level 2.
F-
33
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
4
Cash, cash equivalents and restricted cash
Cash and cash equivalents represent cash on hand and bank deposits.
To limit exposure to credit risk relating to bank deposits, the Group primarily places bank deposits with large financial institutions
in the PRC with acceptable credit rating. As of December 31, 2021 and 2022, the Group had
three
PRC individual financial institutions
with cash balances in 2021 and
one
in 2022 respectively, and these institutions held cash balances in excess of
10
% of the Group's total
cash balances. These bank deposits collectively accounted for
76.5
% and
56.4
% of the Group's total cash balances as of December 31, 2021
and 2022, respectively.
The nominal holders of certain bank accounts of the Group are employees
of the Group. The Group has entered into agreements with these employees which stipulate that the funds held in these bank accounts are
owned and managed by the Group. Cash balances of such accounts collectively accounted for
1.34
% and
0.31
% of the Group's total cash
balances as of December 31, 2021 and 2022, respectively.
Restricted cash represents cash and cash equivalents from structured
funds, which are established by the institutional trust companies through segregated bank accounts, including structured funds that are
partially funded by the Group's own capital. Restricted cash amounted to RMB
1,515,820,737
and RMB
1,157,244,687
as of December 31,
2021 and 2022 respectively, which can only be used to grant loans and is not available to fund the general liquidity needs of the Group.
5
Loans principal, interest and financing service fee receivables
Note
December 31,
2021
December 31,
2022
RMB
RMB
Home equity loans:
(a)
9,412,717,366
8,993,547,621
Loans principal, interest and financing service fee receivables
Less: allowance for credit losses
(i)
- Individually assessed
(
61,479,897
)
(
12,247,836
)
- Collectively assessed
(
914,370,954
)
(
727,055,237
)
Subtotal
(
975,850,851
)
(
739,303,073
)
Net loans principal, interest and financing service fee receivables of home equity loan
8,436,866,515
8,254,244,548
Corporate loans:
(e)
Loans principal, interest and financing service fee receivables
-
463,254,567
Less: allowance for credit losses
-
(
24,693,114
)
Net loans principal, interest and financing service fee receivables of corporate loan
-
438,561,453
Net loans principal, interest and financing service fee receivables
8,436,866,515
8,692,806,001
F-
34
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
5
Loans principal, interest and financing service fee receivables (continued)
(a)
Home equity loans
December 31, 2021
December 31, 2022
Note
First lien
Second lien
Subtotal
First lien
Second lien
Subtotal
RMB
RMB
RMB
RMB
RMB
RMB
Loans principal, interest and financing service fee receivables
3,514,373,477
5,898,343,889
9,412,717,366
3,360,094,375
5,633,453,246
8,993,547,621
Less: allowance for credit losses
(a)
- Individually assessed
(
32,968,721
)
(
28,511,176
)
(
61,479,897
)
(
3,836,350
)
(
8,411,486
)
(
12,247,836
)
- Collectively assessed
(
357,239,453
)
(
557,131,501
)
(
914,370,954
)
(
286,300,001
)
(
440,755,236
)
(
727,055,237
)
Subtotal
(
390,208,174
)
(
585,642,677
)
(
975,850,851
)
(
290,136,351
)
(
449,166,722
)
(
739,303,073
)
Net loans principal, interest and financing service fee receivables
3,124,165,303
5,312,701,212
8,436,866,515
3,069,958,024
5,184,286,524
8,254,244,548
(i)
Allowance for credit losses
The table below presents the components of allowances for loans principal,
interest and financing service fee receivables by impairment methodology with the recorded investment as of December 31, 2021 and 2022.
December 31, 2022
Allowance for loans which
are collectively assessed
Allowance for loans which
are individually assessed
First lien
Second lien
Subtotal
First lien
Second lien
Subtotal
Total
RMB
RMB
RMB
RMB
RMB
RMB
RMB
As of January 1
357,239,453
557,131,501
914,370,954
32,968,721
28,511,176
61,479,897
975,850,851
Provision for credit losses
(
8,058,972
)
(
19,852,708
)
(
27,911,680
)
72,834,526
98,794,363
171,628,889
143,717,209
Charge-offs
(
1,318,568
)
-
(
1,318,568
)
(
7,843,977
)
(
44,833,079
)
(
52,677,056
)
(
53,995,624
)
Increase in guaranteed recoverable assets
(
61,561,912
)
(
96,523,557
)
(
158,085,469
)
(
102,009,203
)
(
87,525,498
)
(
189,534,701
)
(
347,620,170
)
Recoveries
-
-
-
7,886,283
13,464,524
21,350,807
21,350,807
As of December 31
286,300,001
440,755,236
727,055,237
3,836,350
8,411,486
12,247,836
739,303,073
Net loans principal, interest and financing service fee receivables
3,036,599,198
5,127,455,016
8,164,054,214
33,358,825
56,831,509
90,190,334
8,254,244,548
Recorded investment
3,322,899,199
5,568,210,252
8,891,109,451
37,195,175
65,242,995
102,438,170
8,993,547,621
F-
35
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
5
Loans principal, interest and financing service fee receivables (continued)
December 31, 2021
Allowance for loans which
are collectively assessed
Allowance for loans which
are individually assessed
First lien
Second lien
Subtotal
First lien
Second lien
Subtotal
Total
RMB
RMB
RMB
RMB
RMB
RMB
RMB
As of January 1
222,034,414
313,932,763
535,967,177
27,176,553
44,821,768
71,998,321
607,965,498
Provision for credit losses
1,184,418
(
6,117,066
)
(
4,932,648
)
(
65,333,841
)
(
137,477,353
)
(
202,811,194
)
(
207,743,842
)
Charge-offs
(
53,919,303
)
(
69,524,088
)
(
123,443,391
)
(
9,950,932
)
(
11,630,112
)
(
21,581,044
)
(
145,024,435
)
Increase in guaranteed recoverable assets
187,939,924
318,839,892
506,779,816
18,633,218
16,504,672
35,137,890
541,917,706
Recoveries
-
-
-
62,443,724
116,292,200
178,735,924
178,735,924
As of December 31
357,239,453
557,131,501
914,370,954
32,968,721
28,511,176
61,479,897
975,850,851
Net loans principal, interest and financing service fee receivables
3,048,382,936
5,249,959,347
8,298,342,283
75,782,367
62,741,865
138,524,232
8,436,866,515
Recorded investment
3,405,622,388
5,807,090,849
9,212,713,237
108,751,089
91,253,040
200,004,129
9,412,717,366
(1)
Effective January 1, 2020, the Group adopted accounting guidance which changed impairment recognition of financial instruments to
a model that is based on expected losses rather than incurred losses.
The Group charges off loans principal, interest and financing service
fee receivables if the remaining balance is considered uncollectable. Recovery of loans principal, interest and financing service fee
receivables previously charged off would be recorded when received.
For the description of the Group's related accounting policies of allowance
for credit losses, see Note 2(e) Loans.
The following tables present the aging of allowance for credit losses
as of December 31, 2022.
Total current
1 - 30 days
past due
31 - 90 days
past due
91 - 180 days
past due
Total loans
RMB
RMB
RMB
RMB
RMB
The collaboration model
First lien
116,930,653
82,019,376
86,848,853
3,836,350
289,635,232
Second lien
214,691,499
118,189,879
105,038,216
8,411,486
446,331,080
Subtotal
331,622,152
200,209,255
191,887,069
12,247,836
735,966,312
The traditional facilitation model
First lien
656
500,463
-
-
501,119
Second lien
2,832,406
3,236
-
-
2,835,642
Subtotal
2,833,062
503,699
-
-
3,336,761
Allowance for credit losses
334,455,214
200,712,954
191,887,069
12,247,836
739,303,073
F-
36
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
5
Loans principal, interest and financing service fee receivables (continued)
The following tables present the aging of allowance for credit losses
as of December 31, 2021.
Total current
1 - 30 days
past due
31 - 90 days
past due
91 - 180 days
    past due
Total loans
RMB
RMB
RMB
RMB
RMB
The collaboration model
First lien
189,814,922
86,537,327
66,784,464
31,394,514
374,531,227
Second lien
340,800,002
124,542,266
80,395,050
26,996,820
572,734,138
Subtotal
530,614,924
211,079,593
147,179,514
58,391,334
947,265,365
The traditional facilitation model
First lien
5,618,913
3,503,613
4,980,213
1,574,208
15,676,947
Second lien
5,491,292
2,285,562
3,617,330
1,514,355
12,908,539
Subtotal
11,110,205
5,789,175
8,597,543
3,088,563
28,585,486
Allowance for credit losses
541,725,129
216,868,768
155,777,057
61,479,897
975,850,851
(b)
Loan delinquency and non-accrual details
The following tables present the aging of past-due loan principal and
financing service fee receivables as of December 31, 2022.
Total current
1 - 30 days
past due
31 - 90 days
past due
91 - 180 days
past due
181 - 270 days
past due
271 - 360 days
past due
361 days
past due
Total loans
Total
non-accrual
RMB
RMB
RMB
RMB
RMB
RMB
RMB
RMB
RMB
The collaboration model
First lien
2,621,922,407
357,338,815
339,856,221
10,753,640
4,686,900
2,446,894
17,790,991
3,354,795,868
35,678,425
Second lien
4,596,435,737
515,052,451
410,753,899
16,756,323
22,661,421
9,951,192
14,507,390
5,586,118,413
63,876,326
Subtotal
7,218,358,144
872,391,266
750,610,120
27,509,963
27,348,321
12,398,086
32,298,381
8,940,914,281
99,554,751
The traditional facilitation model
First lien
1,493,232
2,163,296
-
544,591
-
-
1,097,387
5,298,506
1,641,978
Second lien
45,954,310
13,855
-
-
-
-
1,366,669
47,334,834
1,366,669
Subtotal
47,447,542
2,177,151
-
544,591
-
-
2,464,056
52,633,340
3,008,647
Loans principal, interest and financing service fee receivables
7,265,805,686
874,568,417
750,610,120
28,054,554
27,348,321
12,398,086
34,762,437
8,993,547,621
102,563,398
F-
37
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
5
Loans principal, interest and financing service fee receivables (continued)
The following tables present the aging of past-due loan principal and
financing service fee receivables as of December 31, 2021.
Total current
1 - 30 days
past due
31 - 90 days
past due
91 - 180 days
past due
181 - 269 days
past due
270 - 360 days
past due
361 days
past due
Total loans
Total
non-accrual
RMB
RMB
RMB
RMB
RMB
RMB
RMB
RMB
RMB
The collaboration model
First lien
2,814,226,880
325,090,831
230,622,938
65,080,342
6,979,995
5,972,352
24,768,894
3,472,742,232
102,801,583
Second lien
5,030,913,080
467,836,400
276,784,712
52,043,750
7,455,656
6,468,134
17,308,803
5,858,810,535
83,276,343
Subtotal
7,845,139,960
792,927,231
507,407,650
117,124,092
14,435,651
12,440,486
42,077,697
9,331,552,767
186,077,926
The traditional facilitation model
First lien
20,814,948
6,532,393
8,334,398
4,887,949
285,023
122,845
653,689
41,631,245
5,949,506
Second lien
21,237,555
4,238,098
6,081,004
5,027,879
360,727
673,625
1,914,466
39,533,354
7,976,697
Subtotal
42,052,503
10,770,491
14,415,402
9,915,828
645,750
796,470
2,568,155
81,164,599
13,926,203
Loans principal, interest and financing service fee receivables
7,887,192,463
803,697,722
521,823,052
127,039,920
15,081,401
13,236,956
44,645,852
9,412,717,366
200,004,129
Loans principal, interest and financing service fee receivables are
placed on non-accrual status when payments are 90 days contractually past.
Any interest accrued on non-accrual loans is reversed at 90 days and
charged against current earnings, and interest is thereafter included in earnings only to the extent actually received in cash. When there
is doubt regarding the ultimate collectability of principal, all cash receipts are thereafter applied to reduce the recorded investment
in the loan.
F-
38
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
5
Loans principal, interest and financing service fee receivables (continued)
(c)
Impaired loans
(1)
Impaired loans summary
Recorded investment
Unpaid
principal balance
Impaired loans
Impaired loans with related allowance for credit losses
Impaired loans without related allowance for credit losses
Related allowance for credit losses
RMB
RMB
RMB
RMB
RMB
First lien
32,981,329
37,320,404
8,776,965
28,543,440
3,836,350
Second lien
62,134,501
65,242,994
15,257,298
49,985,695
8,411,486
As of December 31, 2022
95,115,830
102,563,398
24,034,263
78,529,135
12,247,836
First lien
102,914,225
108,751,090
64,871,825
43,879,265
32,968,721
Second lien
88,073,367
91,253,039
50,995,087
40,257,952
28,511,176
As of December 31, 2021
190,987,592
200,004,129
115,866,912
84,137,217
61,479,897
In accordance with ASC 310-10-35-16 and 17, impaired loans are those
loans where the Group, based on current information and events, believes it is probable all amounts due according to the contractual terms
of the loan will not be collected. All amounts due according to the contractual terms means that both the contractual interest payments
and the contractual principal payments of a loan will be collected as scheduled in the loan agreement. Impaired loans without an allowance
generally represent loans that the fair value of the underlying collateral meets or exceeds the loan's amortized cost.
(2)
Average recorded investment in impaired loans
Year
ended
December 31,2021
Year
ended
December 31,2022
Average recorded investment
Interest and fees income recognized
Average recorded investment
Interest and fees income recognized
RMB
RMB
RMB
RMB
First lien
184,523,313
61,453,546
73,035,747
82,191,331
Second lien
176,098,252
61,775,021
78,248,017
83,791,498
Impaired loans
360,621,565
123,228,567
151,283,764
165,982,829
(i)
Average recorded investment represents ending balance for the last four quarters and does not include the related allowance for credit
losses.
(ii)
The interest and fees income recognized are those interest and financing service fees recognized related to impaired loans. All the
amounts are recognized on cash basis.
F-
39
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
5
Loans principal, interest and financing service fee receivables (continued)
No debt restructuring in which contractual terms of loans are modified,
has occurred during 2021 and 2022.
The Group transferred loans with carrying amounts of RMB
2,466,160
,820and
RMB
2,375,645,263
to third party investors and recorded the transfers as sales for the years ended December 31, 2021 and 2022, respectively.
The Group recognized net losses of RMB
479,584,775
and RMB
44,554,948
from transfers accounted for as sales of loans for the years ended
December 31, 2021 and 2022, respectively.
The Group carries out pre-approval, review and credit approval of loans
by professionals for credit risk arising from micro credit business. During the post-transaction monitoring process, the Group conducts
a visit of customers regularly after disbursement of loans and conducts on-site inspection when the Group considers it is necessary. The
review focuses on the status of the collateral.
The Group adopts a loan risk classification approach to manage the
loan portfolio risk. Loans are classified as non-impaired and impaired based on the different risk level. When one or more events demonstrates
there is objective evidence of impairment and causes losses, corresponding loans are considered to be classified as impaired. The asset-specific
component is calculated under ASC 310-10-35, on an individual basis for the loans whose payments are contractually past due more than
90 days or which are considered impaired.
The Group applies a series of criteria in determining the classification
of loans. The loan classification criteria focus on a number of factors, including (i) the borrower's ability to repay the loan;
(ii) the borrower's repayment history; (iii) the borrower's willingness to repay; (iv) the net realizable value of any collateral;
and (v) the prospect for the support from any financially responsible guarantor. The Group also takes into account the length of time
for which payments of principal and interest on a loan are overdue.
(d)
Loans held-for-sale
Loans held-for-sale are measured at the lower of cost or fair value,
with valuation changes recorded in noninterest revenue. The valuation is performed on an individual loan basis. Loans transferred to held-for-sale
category were RMB
1,095,412,086
and RMB
1,844,438,134
as of December 31, 2021 and 2022 respectively.
(e)
Corporate loans
Corporate loans are unsecured loans granted to unrelated entities in
order to fulfil their normal operating and capital requirement. Loans principal, interest and financing service fee receivables of corporate
loan were
nil
and RMB
463,254,567
as of December 31, 2021 and December 31, 2022 and the Allowance for credit losses were RMB
24,693,114
assessed on a collective basis as of December 31, 2022.
F-
40
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
6
Investment securities
Investment securities consist of equity securities and debt securities.
(a)
Equity securities
The carrying amount and fair value of the investment securities by
major security type and class of security as of December 31, 2021 and 2022 was as follows:
Aggregate
cost basis
Profits and
losses from
fair value
changes
Aggregate
fair value
RMB
RMB
RMB
As of December 31, 2022:
Wealth management products
243,542,140
795,587
244,337,727
Total
243,542,140
795,587
244,337,727
Aggregate
cost basis
Profits and
losses from
fair value
changes
Aggregate
fair value
RMB
RMB
RMB
As of December 31, 2021:
Wealth management products
845,888,854
1,158,441
847,047,295
Total
845,888,854
1,158,441
847,047,295
Wealth management products are investment products issued by commercial
banks and other financial institutions in China. The wealth management products invest in a pool of liquid financial assets in the interbank
market or exchange, including debt securities, asset backed securities, interbank lending, reverse repurchase agreements and bank deposits.
The products can be redeemed on weekdays on demand.
F-
41
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
6
Investment securities(continued)
(b)
Debt securities
The debt securities are in the form of an investment in partnership,
made in December 2021 and 2022 and held- to-maturity corporate debt securities purchased in 2022. The partnership will return RMB
10,000,000
to the Group quarterly, along with an
8
% interest. The principle and interests are required to be fully repaid within
3
years. As of December
31, 2022, the investment has an amortized cost of RMB
286,077,339
with an allowance for credit loss of RMB
15,248,938
, and the held-to-maturity
debt securities have an amortized cost of RMB
4,198,055
with an allowance for credit loss of RMB
719,622
. The Group has the intent and ability
to hold the investments to maturity or payoff.
7
Property and equipment
December 31,
2021
December 31,
2022
RMB
RMB
Office and other equipment
18,059,177
18,167,730
Leasehold improvements
17,179,429
16,904,137
Motor vehicles
2,052,245
2,372,413
Less: accumulated depreciation
(
34,248,905
)
(
35,160,018
)
Total
3,041,946
2,284,262
Total depreciation expense for the years ended December 31, 2021 and
2022 was RMB
3,077,154
and
1,722,640
, respectively, which were recorded in other expenses in each year.
8
Intangible assets and goodwill
Note
December
    31,
2021
December
    31,
2022
RMB
RMB
Intangible assets
(a)
4,009,372
3,487,733
(a)
Intangible assets
December 31, 2021
December 31, 2022
Gross carrying
value
Accumulated amortisation
Net carrying value
Gross carrying
value
Accumulated amortisation
Net carrying value
RMB
RMB
RMB
RMB
RMB
RMB
Amortized intangible assets:
Software
10,793,974
(
9,754,602
)
1,039,372
10,793,974
(
10,276,241
)
517,733
Cooperation agreement
5,030,000
(
5,030,000
)
-
5,030,000
(
5,030,000
)
-
Total amortized intangible assets
15,823,974
(
14,784,602
)
1,039,372
15,823,974
(
15,306,241
)
517,733
Unamortized intangible assets:
Trademarks
2,970,000
2,970,000
F-
42
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
8
Intangible assets and goodwill (continued)
As of December 31, 2021 and 2022, accumulated amortization was RMB
14,784,602
and
15,306,241
respectively. Below table provides the current year and estimated future amortization expense for amortized intangible
assets. The Group based its projections of amortization expense shown below on existing asset balances as of December 31, 2022. Future
amortization expense may vary from these projections.
Software
RMB
Year ended December 31, 2022 (actual)
521,639
Estimate for year ended December 31,
2023
517,143
2024
590
2025
-
2026
-
2027
-
9
Deposits
Deposits include security deposits to landlords of rental premises
and deposits to the China Trust Protection Fund. In accordance with relevant rules of the China Trust Protection Fund,
1
% of the size
of trust plans subscribed is deposited in the Fund.
10
Guaranteed assets
As described in Note 13, sales partners submit CRMPs to the Group as
a guarantee for the loans under the collaboration model. When allowance for credit losses is recognized and accrued, the Group will evaluate
if the loan increase in guaranteed recoverable assets guaranteed by the CRMPs is probable and estimable. If the increase in guaranteed
recoverable assets is probable and estimable, the amount guaranteed by the CRMPs is recognized as guaranteed assets.
11
Other assets
Note
December
    31,
2021
December
    31,
2022
RMB
RMB
Receivable from sale of loans
(i)
197,226,882
32,469,152
Guarantee deposits
(ii)
74,680,000
243,470,845
Receivables from disposal of subsidiary
(iii)
50,000,000
-
Prepayments
34,068,479
94,853,194
Non-marketable equity securities
(iv)
24,010,000
49,010,000
Amounts due from employees
(v)
4,606,389
34,269,800
Receivables for realization of collaterals
(vi)
722,603
31,022,975
Receivables from loan facilitation service
-
49,963,322
Receivables of guarantee service
-
97,552,160
Other receivables
19,511,778
37,277,452
Total
404,826,131
669,888,900
(i)
As mentioned in Note 5, the Group transferred the delinquent
loans to third parties so that the Group could collect the payment more quickly than to simply dispose the collaterals through litigation.
The transferred loans have been isolated from the Group. There is no constrain on the transferee's rights to pledge or exchange.
The Group does not maintain effective control of transferred loans and loan transfers accounted for as sales are the transfer transactions
without repurchase agreements. In 2021, the Group transferred loans under traditional facilitation model with balances amounting to RMB
990,485,783
to Guangzhou Minghui Capital Management Co., Ltd. ("Guangzhou Minghui") for transfer price of RMB
350,783,000
. As of December
31, 2022, the amount due from Guangzhou Minghui for such transfer is RMB
27,769,074
.
F-
43
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
11
Other Assets (continued)
(ii)
Guarantee deposits are deposits that the Group provided, through
Guangdong Nanfeng Financial Guarantee Group Co., Ltd ("Guangzhou Nanfeng"), which holds a financial guarantee license, for
loans granted (a) under its consolidated VIE Zhonghai Lanhai Structured Fund 30-X, which is not structured in a stratified way and requires
guarantee from a third party, and (b) under the cooperation with commercial banks for introduction of borrowers and provision of post-origination
services, refer to Note 2(e)(ii) Off-balance sheet loans.
(iii)
The Group disposed of one of its wholly-owned subsidiaries
Ningbo Lianjia Enterprise Management Advisory Co., Ltd. to an unrelated third party in 2021 and relevant consideration was received in
January 2022.
(iv)
In June 2016, the Group invested
10,003,334
shares at RMB
3.00
per share, which represents
2.14
% of the paid-in capital in Guangdong Qingyuan Rural Commercial Bank ("Qingyuan Rural").
The Group transferred
2
million shares to an unrelated third party at RMB
3.00
per share that is same as the investment cost on September
18, 2019. As of December 31, 2021 and 2022, the Group invested
1.72
% of the paid-in capital in Qingyuan Rural. Qingyuan Rural has paid-in
capital of RMB
1,400,000,000
, and the Group has invested RMB
24,010,000
in Qingyuan Rural.
In January 2022, the Group and Guangzhou Minghui set up Guangzhou
Mingfeng Partnership ("Guangzhou Mingfeng"). The total paid-in capital was RMB
40,000,000
and the Group has invested RMB
25,000,000
in Guangzhou Mingfeng.
The measurement alternative is selected for the above non-marketable
equity securities. Under the measurement alternative, the equity securities without readily determinable fair value are measured at cost
minus impairment and adjusted for changes in observable prices. No change in observable price has been identified and no impairment has
been recorded for the two years of 2021 and 2022.
(v)
Amounts due from employees mainly include temporary advances
to employees for payments of collateral evaluation fee, mortgage handling fee, payments for office supplies, etc. on behalf of the Group.
(vi)
the receivables for realization of collaterals under traditional
model is RMB
238,616
and the receivables for realization of collaterals under commercial bank partnership model is RMB
30,784,359
.
F-
44
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
12
Interest-bearing borrowings
(a)
Borrowings under agreements to repurchase
Financial assets sold under agreements to repurchase are effectively
short-term collateralized borrowings. In these transactions, the Group receives cash in exchange for transferring financial assets as
collateral and recognizes an obligation to reacquire the financial assets for cash at the transaction's maturity. These types of transactions
create risks, including (1) fair value of the financial assets transferred may decline below the amount of obligation to reacquire the
financial assets, and therefore create an obligation to pledge additional amounts, or to replace collaterals pledged, and (2) the Group
does not have sufficient liquidity to repurchase the financial assets at the transaction's maturity.
Note
Fixed
    interest rate
per annum
Term
December
    31,
2021
December
    31,
2022
RMB
RMB
Repurchase agreements
Funds obtained from
Financial institutions
(i)
10.5
% to
13.8
%
Within 2 years
45,250,000
111,593,865
Interest payable
Financial institutions
(i)
-
1,048,145
Total repurchase agreements
45,250,000
112,642,010
Funds obtained from financial institutions
On December 2, 2022, the Group transferred loan principals, interests
and financing service fee receivables with carrying amount of RMB
26,420,000
to a third-party transferee, Guangdong Yuehai Asset Management
Co., Ltd. ("Yuehai Asset"), an unrelated third party. However, in accordance with ASC 860, Transfers and Servicing, the right
to earnings is not derecognized upon transfer as the Group is required to repurchase the right to earnings
one year
after the date of
transfer. As of December 31, 2022, the amount of funds obtained from Yuehai Asset and the interest payable are RMB
18,494,000
and RMB
122,365
.
On August 29, 2022, the Group transferred loan principals, interests
and financing service fee receivables swith carrying amount of RMB
5,965,976
to a third-party transferee, Pingan Puhui Lixin Asset Management
Co., Ltd ("Pingan Puhui"), an unrelated third party. However, in accordance with ASC 860, Transfers and Servicing, the right
to earnings is not derecognized upon transfer as the Group is required to repurchase the right to earnings
one year
after the date of
transfer. As of December 31, 2022, the amount of funds obtained from Pingan Puhui and the interest payable are RMB
5,376,724
and RMB
252,149
.
F-
45
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
12
Interest-bearing borrowings (continued)
On November 16, 2022 and December 26, 2022, the Group transferred loan
principals, interests and financing service fee receivables with carrying amount of RMB
86,803,141
to a third-party transferee, China Foreign
Economy and Trade Trust Co.,Ltd ("FOTIC"), an unrelated third party. However, in accordance with ASC 860, Transfers and Servicing,
the right to earnings is not derecognized upon transfer as the Group is required to repurchase the right to earnings
one year
after the
date of transfer. As of December 31, 2022, the amount of funds obtained from FOTIC and the interest payable are RMB
87,723,141
and RMB
673,631
.
December 31,
2021
December 31,
2022
RMB
RMB
Underlying collateral types of gross obligations Repurchase agreements:
Loans principal, interest and financing service fee receivables
45,250,000
111,593,865
Total repurchase agreements
45,250,000
111,593,865
The below table provides the contractual maturities of the gross obligations
under repurchase agreements.
Overnight
Up to 30 days
30 to 90 days
Greater than 90 days
Total gross obligations
RMB
RMB
RMB
RMB
RMB
Repurchase agreements
As of December 31, 2022
-
-
-
111,593,865
111,593,865
As of December 31, 2021
-
-
-
45,250,000
45,250,000
F-
46
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
12
Interest-bearing borrowings (continued)
(b)
Other borrowings
Other borrowings
Note
Fixed interest rate per
    annum
Term
December 31,
2021
December 31,
2022
RMB
RMB
Short-term:
Investors of consolidated VIEs
(i)
6.3
% to
10.5
%
Less than 1 year
4,654,388,213
5,675,480,078
Long-term:
Investors of consolidated VIEs
(i)
7.0
% to
11.5
%
1 - 5 years
3,330,334,482
1,991,623,976
Interest payable to
Investors of consolidated VIEs
(i)
57,169,385
60,455,283
Total
8,041,892,080
7,727,559,337
(i)
The financial liabilities arising from the VIEs with underlying investments in loans to customers are classified as payable in these
consolidated financial statements. It is because the Group has an obligation to pay senior tranches holders upon maturity dates based
on the related terms of those consolidated structured funds. As of December 31, 2022, the borrowings from VIEs have principal RMB
7,667,104,054
,
bearing interests from
6.3
% to
11.5
% per year.
Aggregate annual maturities of long-term borrowing obligations (based
on final maturity dates) are as follows:
December 31, 2022
2023
2024
2025
2026
2027
Thereafter
Total
RMB
RMB
RMB
RMB
RMB
RMB
RMB
Investors of consolidated VIEs
-
1,084,492,735
237,055,841
13,075,400
-
657,000,000
1,991,623,976
F-
47
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
12
Interest-bearing borrowings (continued)
(c)
Pledged assets
The Group pledges certain assets to secure borrowings under agreements
to repurchase and other borrowings. The table provides the total carrying amounts of pledged assets by asset types
.
December 31,
2021
December 31,
2022
RMB
RMB
Loans principal, interest and financing service fee receivables
64,640,192
147,257,249
Total
64,640,192
147,257,249
13
Credit risk mitigation position
December 31,
2021
December 31,
2022
RMB
RMB
Balance at the beginning of the year
1,209,729,138
1,348,449,426
Increase during the year
1,203,458,816
960,663,187
Decrease during the year
(
1,052,004,847
)
(
883,079,007
)
Confiscation during the year
(
12,733,681
)
(
71,380,536
)
Balance at the end of the year
1,348,449,426
1,354,653,070
Under the collaboration model, the Group collaborates with sales partners
who are dedicated to introduce the Group's loan services to prospective borrowers. The sales partners need to place security deposits
ranging from
10
%-
25
% of the loans issued to the borrowers introduced by them (such contribution, the "credit risk mitigation position")
to the Group. The credit risk mitigation position will be transferred into an account designated by the Group and is fully refundable
upon repayment of the loan the credit risk mitigation position is associated with.
F-
48
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
14
Other liabilities
Note
December 31,
2021
December 31,
2022
RMB
RMB
Guarantee repayments from sales partner
(i)
259,439,715
416,698,397
Guarantee liabilities
(ii)
3,182,958
230,867,505
Settlement and clearing accounts
(iii)
74,255,253
135,652,186
Other tax payables
(iv)
70,756,236
74,985,486
Collaboration cost payable
(v)
59,554,661
50,393,275
Customer pledged deposits
(vi)
40,363,129
39,296,162
Receipt in advance
(vii)
53,125,074
35,645,384
Amounts due to third parties
216,526,655
18,591,226
Accrued expenses
(viii)
5,773,392
16,486,002
Others
(ix)
2,784,212
9,855,045
Total
785,761,285
1,028,470,668
(i)
Under the collaboration model, sales partners are required
to provide a certain level of guarantee of repayment for loans recommended. Guarantee repayments from sales partner mainly consist of
repayments collected from sales partners who exercise the guarantee, and those repayments will be returned to trust company. In accordance
with the Company's PRC subsidiaries' articles of associate, the subsidiaries are required to appropriate
10
% of their net
incomes, upon approval by board of directors.
(ii)
In 2021, the Group started to cooperate with a third-party
guarantee company, Guangzhou Nanfeng, that directly provides guarantee services to commercial banks. According to relevant financial
guarantee arrangements, Guangzhou Nanfeng will fulfil its obligations to purchase defaulted loans. However, the Group is required to
provide deposits and replenish such deposits from time to time to Guangzhou Nanfeng for its obligations of purchasing defaulted loans.
Effectively, the Group provides back-to-back guarantee to Guangzhou Nanfeng and takes on all of the credit risk of the borrowers. These
financial guarantee contracts are accounted for as guarantee liabilities under ASC 460, Guarantees.
As of December 31, 2022, maximum potential undiscounted future
payment that the Group would be required to make was RMB
2,450.37
million. The initial term of the guarantee liabilities is the same as
the term of loans facilitated under the arrangements with commercial banks, which ranges from
1
year to
10
years, as of December 31, 2022.
The remaining term of the guarantee liabilities range from
1
year to
10
years as of December 31, 2022.
(iii)
The Group transferred loans to third party investors and recorded
these transactions as sales in Note 5(c). After the transfer, the contract terms related to payment proceeds from the loans remain the
same: The Group collects payments of loans and then disburses the proceeds from the relevant loans to third-party transferees.
(iv)
Other tax payables mainly represent value-added tax and surcharges
payables.
(v)
As mentioned in Note 21, the Group will pay collaboration
cost to the sales partners who introduce prospective borrowers to the Group. The collaboration cost for sales partners is a fixed percentage
of the loan principal amount and is calculated by subtracting the project cost from interest and fees income received from borrowers.
(vi)
Customer pledged deposits mainly consist of the deposits collected
from certain customers to reduce the risk of failure to make payments on schedule.
(vii)
Receipt in advance consists of advance for interest and financing
service fees on loans and down payments of loans held-for-sale by loan transferees.
(viii)
Accrued expenses mainly consist of promotional costs relating
to building the collaboration model and expenses payable to consultants such as the auditor and lawyer.
(ix)
Other liabilities are expected to be settled or recognized
as income within one year or are repayable on demand.
F-
49
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
15
Ordinary shares
On January 8, 2014, the Company was incorporated in the Cayman Islands
with authorized share capital of HKD
380,000
divided into
3,800,000,000
shares of a nominal or par value of HKD0
.0001
each. Upon the incorporation
of the Company, one subscriber's share was allotted and issued to Kevin Butler at a consideration of HKD0
.0001
, representing
100
%
of the entire ordinary share of the Company. On the same date, such share was transferred to Complete Joy Investments Limited ("Complete
Joy") at nil consideration. As a result, Complete Joy was the sole owner of the Company.
On July 11, 2018, the Company repurchased of a total of
1,230,434,041
shares of HKD0.
0001
each share, following by issuing a total of
1,230,434,040
shares of USD0.0001 each share.
As the result of the above
redenomination, the par value of the Company's shares has been changed from HKD0.0001 to USD0.0001, and its authorized share capital
has been increased to USD380,000 divided into 3,800,000,000 shares of USD0.0001 each.
Upon the IPO on November 7, 2018 and exercise of the green shoes options,
the Company issued
130,000,000
and
8,500,000
ordinary shares, equal to
6,500,000
ADSs and
425,000
ADSs, respectively, priced at USD7
.5
per ADS. The Company issued
2,709,200
ordinary shares, equal to
135,460
ADSs, upon a follow-on exercise of the green shoes options on
November 21, 2018, priced at USD7
.5
per ADS.
As disclosed in Note 27, on July 19, 2021,
187,933,720
ordinary shares
were issued to JPMorgan Chase Bank N.A. (the "Depositary") as a reserve pool for future issuances upon the exercise of share
options granted under the 2018 Option to the Group's management members and employees. All shareholder rights of these
187,933,720
ordinary shares including but not limited to voting rights and dividend rights are unconditionally waived until the corresponding shares
are exercised. While the ordinary shares were legally issued to the Depositary, the Depositary does not have any of the rights associated
with the ordinary shares, as such the Group accounted for these shares as issued but not outstanding until the waiver is released by the
Group, which occur when the share options are exercised and ordinary shares are transferred to the management members and employees.
F-
50
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
16
Additional paid-in capital
Additional paid-in capital represents (1) the difference between the
nominal value of share capital and the paid-up capital of the Group; (2) the difference between the purchase price and the proportionate
share of the identifiable net assets of Guangzhou Anyu when the Group acquired its remaining shares to take full ownership; (3) the portion
of the grant date fair value of unexercised share options granted to employees of the Group that has been recognized.
17
Retained earnings
Note
December 31,
2021
December 31,
2022
RMB
RMB
PRC statutory reserves
(i)
258,654,052
258,654,052
PRC surplus reserves
(ii)
164,653,757
169,552,789
Unreserved retained earnings
2,401,027,454
2,530,509,454
Total
2,824,335,263
2,958,716,295
(i)
With effect from July 1, 2012, pursuant to the "Administrative Measures on Accrual of Provisions by Financial Institutions"
issued by the MOF in March 2012, the Group is required, in principle, to set aside a general reserve not lower than
1.5
% of the ending
balance of its gross risk-bearing assets.
(ii)
In accordance with the Company's PRC subsidiaries' articles of associate, the subsidiaries are required to appropriate
10
% of their net incomes, upon approval by board of directors.
18
Accumulated other comprehensive losses
Balance as
    of
January 1, 2021
Other comprehensive
loss, net
Balance as of
    December 31, 2021
RMB
RMB
RMB
Foreign currency translation adjustment
(
18,456,546
)
(
6,936,969
)
(
25,393,515
)
Total
(
18,456,546
)
(
6,936,969
)
(
25,393,515
)
Balance as
    of
January 1, 2022
Other comprehensive
income, net
Balance as of
    December 31, 2022
RMB
RMB
RMB
Foreign currency translation adjustment
(
25,393,515
)
15,181,518
(
10,211,997
)
Total
(
25,393,515
)
15,181,518
(
10,211,997
)
F-
51
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
19
Interest and fees income
Year ended December 31,
Note
2020
2021
2022
RMB
RMB
RMB
Interest and financing service fees on loans
(i)
1,828,687,910
1,770,351,645
1,574,074,534
- Interest income
1,828,687,910
1,759,906,523
1,573,405,364
- Financing service fees
-
10,445,122
669,170
Interest income charged to sales partners
(ii)
10,001,581
33,448,660
122,019,472
Interest income on debt securities
(iii)
-
-
22,195,046
Interest on deposits with banks
16,133,918
11,973,675
13,063,523
Total
1,854,823,409
1,815,773,980
1,731,352,575
(i)
Interest and financing service fees on loans, which include financing service fees on loans, are recognized in the consolidated statements
of comprehensive income using the effective interest method. Financing service fees on loans, are deferred and amortized over the contractual
life of the related loans utilizing the effective interest method.
(ii)
Interest income charged to sales partners refers to the cost of and interest on the partner's instalment repurchase options under
collaboration model.
(iii)
Interest income on debt securities in forms of partnership investment and corporate debt securities. Please refer to note 6(b).
20
Net revenue under the commercial bank partnership model
The Group has started to collaborate with commercial banks since 2021
and such collaboration grew and scaled in the second half of 2022. Net revenue under the commercial bank partnership model representing
fees charged to commercial banks for services including introducing borrowers, initial credit assessment, facilitating loans from the
banks to the borrower and providing technical assistance to the borrower and banks, net of fees paid to third-party insurance company.
Revenues from loan facilitation services are recognized at the time
a loan is originated, at which time the facilitation service is considered completed. Revenues from loan facilitation services, covering
matching of commercial banks to borrowers and facilitating the execution of loan agreement between commercial banks and borrowers was
RMB
48,352,866
in 2022.
Revenues from post-origination services are recognized on a straight-line
basis over the term of the underlying loans as the services are provided. Revenues from post-facilitation services, covering cash processing
services and collection services was RMB
6,226,524
in 2022.
F-
52
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
20
Net revenue under the commercial bank partnership model (continued)
Refer to Note 19, the Group provided guarantee services for its off-balance
sheet loans under the commercial bank partnership model. As a result, at inception of the guarantee, the Group recognized a stand-ready
guarantee liability under ASC 460 at fair value with an associated guarantee receivable of RMB
97,552,160
. Subsequently, the stand-ready
guarantee is released into gains from guarantee liabilities on a straight-line basis over the term of the guarantee. Gains from guarantee
liabilities was RMB
15,167,071
in 2022.
The total amount of net fees paid to third-party insurance company
for providing guarantee services to commercial banks and commission fee to local sales channels was RMB
12,195,456
in 2022.
21
Collaboration cost for sales partners
The Group started to develop a new collaboration model in December
2018. Under such model, the Group collaborates with sales partners who are dedicated to introduce the Group and its loan services to prospective
borrowers. The unique feature of this collaboration model is that the sales partners will be required to deposit an amount equal to
10
%
-
25
% of the loans issued to the borrowers introduced by them. In return, the Group will pay collaboration cost as sales incentives to
the sales partners.
22
Provision for credit losses
Year ended December 31,
2020
2021
2022
RMB
RMB
RMB
Home equity loans
(
58,216,554
)
257,624,013
(
55,755,647
)
Corporate loans
-
-
(
24,693,114
)
Debt securities
-
(
5,403,084
)
(
10,565,475
)
Guarantee liabilities
-
(
3,182,958
)
(
155,017,657
)
Trade and other receivables
(
19,131,926
)
49,429,922
7,947,030
Total
(
77,348,480
)
298,467,893
(
238,084,863
)
23
Realized gains on sales of investments, net
The gross realized gains on sales of investments are RMB
70,611,492
,
RMB
57,368,616
and RMB
28,330,375
for the years ended December 31, 2020, 2021 and 2022, respectively. The gross realized losses on sales
of investments are RMB
50,457,833
, RMB
38,198,180
and RMB
7,763,703
for the years ended December 31, 2020, 2021 and 2022, respectively.
F-
53
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
24
Net losses on sales of loans
As mentioned in Note 5(c), the Group transferred the delinquent loans
to third parties. Net losses on sale of loans which summarizes the received from sales of loans are net losses of RMB
50,606,487
, RMB
479,584,775
and RMB
44,554,948
for the years ended December 31, 2020, 2021 and 2022, respectively.
25
Other gains, net
Year ended December 31,
Note
2020
2021
2022
RMB
RMB
RMB
Net gains on confiscated credit risk mitigation positions
(i)
13,446,619
12,733,681
71,380,536
Profits/(losses) from fair value changes
(ii)
56,773
1,101,669
(
362,855
)
Foreign exchange (losses)/gains
(iii)
(
5,345,004
)
786,080
7,355,135
Net loss on disposal of property and equipment
(
2,868
)
(
328,262
)
(
30,742
)
Mortgage agency service revenue
511,500
-
-
Others
1,093,452
7,768,674
11,571,964
Total
9,760,472
22,061,842
89,914,038
(i)
Sales partners provide CRMPs as security deposits. Pursuant to the collaboration agreements if the debtor's loan principal repayments
or accrued interests are past due or the loan is in default, sales partners are obliged to fulfill their guaranteed responsibility by
selecting among different approaches, otherwise the CRMPs deposited by sales partners are confiscated by the Group, refer to Note 1
(ii)
Profits/(losses) from fair value changes refers to gains or losses resulting from changes in the fair value of investment securities.
(iii)
The changes of foreign exchange gain/(loss) are mainly due to exchange rate changes in cash and cash equivalents held by the Group,
including US dollar account and Hong Kong dollar account. The Group recorded a foreign exchange gain as RMB
7,355,135
in 2022, an increase
of RMB
6,569,055
compared with that in 2021. The gain is mainly due to the increase of the exchange rate between Hong Kong dollar and RMB
and the US dollar against RMB.
F-
54
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
26
Other expenses
Year ended December 31
2020
2021
2022
RMB
RMB
RMB
Advertising and promotion expenses
30,471,983
29,171,942
32,412,727
Litigation and attorney fees
33,267,682
18,697,784
7,680,633
Entertainment and travelling expenses
7,010,704
10,793,089
9,740,873
Office and commute expenses
9,120,261
10,711,801
7,791,694
Consulting fees
14,486,656
9,330,732
12,016,260
Communication expenses
2,495,071
3,861,529
2,424,242
Depreciation and amortization
6,047,226
3,821,788
2,244,279
Directors and officers liability insurance
4,232,722
3,545,117
3,474,151
Research and development expenses
9,960,607
1,602,095
760,465
Others
6,949,270
8,964,511
7,344,173
Total
124,042,182
100,500,388
85,889,497
27
Income tax expense
Cayman Islands
Under the current laws of the Cayman Islands, the Company is not subject
to tax on income or capital gains.
British Virgin Islands (BVI)
Pursuant to the rules and regulations of the British Virgin Islands,
the Group is not subject to any income tax in the British Virgin Islands.
Hong Kong
No provision for Hong Kong Profits Tax has been made for the subsidiary
located in Hong Kong as the subsidiary has not derived any income subject to Hong Kong Profits Tax during the years.
Peoples Republic of China (PRC)
According to the PRC Corporate Income Tax ("CIT") Law,
the Group's PRC subsidiaries are subject to PRC income tax at the statutory tax rate of
25
%, unless otherwise specified.
F-
55
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
27
Income tax expense (continued)
Income tax expense, all of which relates to the PRC, consists of the
following for the years ended December 31, 2020, 2021 and 2022:
Year ended December 31
2020
2021
2022
RMB
RMB
RMB
Current tax expense
142,238,819
218,567,885
171,146,093
Deferred tax benefit
(
94,389,779
)
(
190,009,905
)
(
133,913,450
)
Total income tax expense
47,849,040
28,557,980
37,232,643
The principal components of the deferred tax assets and liabilities
are as follows:
Year ended December 31
2021
2022
RMB
RMB
Deferred tax assets:
Net loans principal, interest and financing service fee receivables
444,036,207
316,744,794
Debt securities
1,350,771
3,992,140
Guarantee liabilities
-
37,120,604
Net operating loss carry-forwards
15,226,575
9,116,290
Lease liabilities
3,880,255
7,145,869
Other deferred tax assets
928,979
669,876
Total deferred tax assets
465,422,787
374,789,573
Valuation allowance
(
15,226,575
)
(
9,116,290
)
Deferred tax assets, net of valuation allowance
450,196,212
365,673,283
Net deferred tax assets
21,068,094
76,904,707
Deferred tax liabilities:
Intangible assets
(
742,500
)
(
742,500
)
Equity securities
(
289,610
)
(
171,864
)
Right-of-use assets
(
4,049,202
)
(
7,444,339
)
Intercompany receivables
(
45,849,201
)
(
41,988,923
)
Guarantee assets
(
322,437,865
)
(
181,602,700
)
Undistributed earnings from structured funds
(
207,588,600
)
(
130,570,272
)
Total deferred tax liabilities
(
580,956,978
)
(
362,520,598
)
Net deferred tax liabilities
(
151,828,860
)
(
73,752,022
)
F-
56
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
27
Income tax expense (continued)
Movement of valuation allowance:
Year ended December 31
2021
2022
RMB
RMB
At the beginning of year
10,443,239
15,226,575
Current year additions
7,238,296
613,314
Current year reversals
(
2,427,869
)
(
6,722,726
)
Current year expiration of carryforwards
(
27,091
)
(
873
)
Net change in the valuation allowance
4,783,336
(
6,110,285
)
At the end of year
15,226,575
9,116,290
In assessing the recoverability of its deferred tax assets, management
considers whether some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets
is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management
considers reversing taxable temporary differences, carryback availability, projected future income and tax-planning strategies in making
this assessment. Recovery of a substantial majority of the Group's deferred tax assets is supported by reversing taxable temporary
differences.
Based upon the level of historical taxable income and projections for
future taxable income over the periods in which the deferred tax assets are recoverable, management believes that it is more likely than
not that the Group will realize the benefits of its deferred tax assets, net of valuation allowance, as of December 31, 2021 and 2022.
Valuation allowances have been provided for certain deferred tax assets
due to the uncertainty surrounding their realization. As of December 31,2021 and 2022, the valuation allowance on deferred tax assets,
mainly arising from operating loss carryforwards, were provided because it was more likely than not that the Group will not be able to
utilize the operating loss carryforwards generated by certain unprofitable subsidiaries.
The Group operates through its subsidiaries and VIEs. Since each entity
files a separate tax return, the valuation allowance is considered on an individual entity basis.
As of December 31, 2022, the Group had net operating loss carryforwards
of
36,465,159
from its subsidiaries registered in the PRC, which can be carried forward to offset future taxable income. The Group had
deferred tax assets related to net operating loss carryforwards of
9,116,290
. Net operating losses of RMB
34,020,989
will expire in year
in 2026, and in 2027, about RMB
2,444,170
will expire, if not utilized.
F-
57
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
27
Income tax expense (continued)
Management intends to indefinitely reinvest the undistributed earnings
of the subsidiaries located in the PRC. The amount of the temporary difference in respect of investments in PRC subsidiaries is RMB
2,560,782,025
as of December 31, 2022. Upon repatriation of the subsidiaries' and the VIE's earnings, in the form of dividends or otherwise,
the Group would be subject to
10
% PRC withholding income tax when making distribution to foreign parent companies. However, the Group
was not subject to withholding income tax in 2022 because the Group did not make any distribution to foreign parent companies. The related
unrecognized deferred tax liabilities were RMB
256,078,202
.
Income before income tax expense is as follows:
Year ended December 31
2020
2021
2022
RMB
RMB
RMB
Cayman Islands
(
2,847,746
)
(
189,507
)
(
477,322
)
BVI
(
22,126
)
(
247
)
(
20,803
)
Hong Kong
3,424,910
(
11,202,740
)
2,773,547
PRC
162,146,528
105,157,938
170,308,632
Total
162,701,566
93,765,444
172,584,054
The reconciliation of the PRC statutory income tax rate of
25
%, the
income tax rate of the jurisdiction where the Group has substantially all of its operations, to the effective income tax rate is as follows:
Year ended December 31
2020
2021
2022
RMB
RMB
RMB
PRC statutory income tax rate
25.00
%
25.00
%
25.00
%
(Decrease)/increase in effective income tax rate resulting from:
Tax-free income
(
8.02
)%
(
10.63
)%
(
1.36
)%
Non-deductible share option expense
9.54
%
5.00
%
0.84
%
Other non-deductible expenses
0.29
%
2.56
%
0.67
%
Zero tax rate in foreign countries
0.44
%
0.05
%
0.07
%
Differential and preferential tax rates
(
0.49
)%
3.05
%
(
1.82
)%
Changes in valuation allowance
2.49
%
5.14
%
(
3.54
)%
Others
0.16
%
0.29
%
1.71
%
Effective income tax rate
29.41
%
30.46
%
21.57
%
The Group's only major jurisdiction is China where tax returns
generally remain open and subject to examination by tax authorities for tax years 1999 onwards.
The Group did not have any significant unrecognized tax benefits, and
no interest and penalty expenses related to income taxes were recorded for the years ended December 31, 2020, 2021 and 2022.
F-
58
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
28
Earnings per share
The following table sets forth the computation of basic and diluted
earnings per share for the years ended December 31, 2020, 2021 and 2022:
Year ended December 31
2020
2021
2022
RMB
RMB
RMB
Net income
114,852,526
65,207,464
135,351,411
Basic weighted average number of common shares outstanding
1,371,643,240
1,371,643,240
1,371,643,240
Effect of dilutive share options
153,589,125
154,246,831
155,453,871
Dilutive weighted average number of ordinary shares
1,525,232,365
1,525,890,071
1,527,097,111
Basic earnings per share
0.08
0.05
0.10
Diluted earnings per share
0.08
0.05
0.09
In 2020, the Group issued
187,933,720
ordinary shares to the Depositary.
No consideration was received by the Group for the issuance. As of December 31, 2022, no share out of the total
187,933,720
ordinary shares
were used to settle share-based compensation. The
187,933,720
ordinary shares are legally issued and not outstanding, and do not affect
the computation of earnings per share.
29
Share-based compensation expenses
(a)
Description of share-based compensation arrangements
On January 3, 2017, the Group adopted a new share incentive plan, or
the 2017 Share Incentive Plan. Options to purchase
187,933,720
ordinary shares pursuant to the 2017 Share Incentive Plan were issued to
certain management and employees. Accordingly,
60
%,
20
% and
20
% of the award options shall vest on December 31, each of the years 2017
to 2019, respectively. Unless terminated earlier, the 2017 Share Incentive Plan will terminate automatically in 2022.
On August 27, 2018, 2018 Share Incentive Plan (the "2018 Option")
for granting shares award of CNFinance to certain management members and employees of the Group was issued to concurrently replace the
2017 Share Incentive Plan which granted Sincere Fame's share. Except for the aforementioned change of grantor and the extension
of the termination year by one to December 31
st
, 2023, all terms of the 2017 Share Incentive Plan and the 2018 Share Incentive
Plan were the same. No change in the fair value, vesting conditions or the classification of the 2017 Share Incentive Plan and the 2018
Share Incentive Plan. In connection with the 2018 Option,
187,933,720
ordinary shares were issued to the Depositary as a reserve pool
for future issuances upon the exercise of share options granted under the 2018 Option to the Group's management members and employees.
All shareholder rights of these
187,933,720
ordinary shares including but not limited to voting rights and dividend rights are unconditionally
waived until the corresponding shares are exercised.
On December 31, 2019, the Group granted options to certain management
and employees to purchase
119,674,780
ordinary shares pursuant to the 2018 Share Incentive Plan (the "2019 Option"). Accordingly,
50
%,
30
% and
20
% of the award options shall vest on December 31, each of the years 2020 to 2022, respectively, with expiration dates on
December 31, each of the years 2025 to 2027.
F-
59
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
29
Share-based compensation expenses (continued)
Share-based payment transactions with employees, such as share options
are measured based on the grant date fair value of the equity instrument. The Group recognizes the compensation costs net of estimated
forfeitures over the applicable vesting period. The estimate of forfeitures will be adjusted over the requisite service period to the
extent that actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures will be recognized
through a cumulative catch-up adjustment in the period of change and will also impact the amount of stock compensation expenses to be
recognized in future periods. There were no market conditions associated with the share option grants.
(b)
Fair value of share options and assumptions
The fair value of options granted to employees is determined based
on a number of factors including valuations. In determining the fair value of equity instruments, the Group referred to valuation reports
prepared by an independent third-party appraisal firm, based on data the Group provided. The valuation reports provided the Group with
guidelines in determining the fair value of the equity instruments, but the Group is ultimately responsible for the determination of all
amounts related to share-based compensation recorded in the financial statements.
Excluding the options containing service vesting conditions, the Group
calculated the estimated fair value of the options on the respective grant dates using a binomial option pricing model with assistance
from independent valuation firms, with the following assumptions:
Share awards
granted on
January 3,
2017 (2018 Option)
Share awards
granted on
December 31,
2019 (2019 Option)
Expected volatility
40.00
%
41.52
%
Expected dividends
-
-
Risk-free interest rate
3.10
%
3.12
%
Expected term (in years)
5
5
Expected life (in years)
6
8
The contractual life of the share option is used as an input into the
binomial option pricing model. Exercise multiple and post-vesting forfeit are incorporated into the model as well.
2018 Option
When the options of the 2018 Option were issued, the Group's
shares had not been publicly traded and its shares were rarely traded privately. Therefore, the expected volatility is estimated based
on the historical volatility of comparable entities with publicly traded shares for the period before the date of grant with length commensurate
to contractual life of the options. Since the contractual life of the options is
6
years, the risk-free rate for the expected term of
the options is determined based on the yield to maturity of China 6-year government bond at the date of grant.
F-
60
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
29
Share-based compensation expenses (continued)
2019 Option
When the options of the 2019 Option were issued, the Group's
shares were already publicly traded. Since the shares have only been publicly traded for just over a year, the expected volatility is
estimated based on the historical volatility of comparable entities with publicly traded shares for the period before the date of grant
with length commensurate to contractual life of the options.
The contractual life of the options is 6 years, 7 years and 8 years, respectively.
Therefore, the risk-free rate for the expected term of the options is determined based on the yield to maturity of China 5-year, 7-year
and 10-year government bond, using interpolation method, at the date of grant.
The Group has not declared or paid any cash dividends on its capital
stock and does not anticipate any dividend payments on its ordinary shares in the foreseeable future.
If any of the assumptions used in the binomial option pricing model
changes significantly, share-based compensation expenses for future awards may differ materially compared with the awards granted previously.
A summary of share option activity under the 2018 Option is as follows:
Number of
shares
Weighted
average
exercise price
Weighted
average grant
date fair value
RMB
RMB
Balance, December 31, 2016
-
-
-
Granted
187,933,720
-
1.27
Exercised
-
-
-
Surrendered
-
-
-
Balance, December 31, 2017
187,933,720
-
1.27
Exercisable, December 31, 2017
112,760,232
-
1.27
Expected to vest, December 31, 2017
75,173,488
-
1.27
Balance, December 31, 2017
187,933,720
-
1.27
Granted
-
-
-
Exercised
-
-
-
Surrendered
-
-
-
Balance, December 31, 2018
187,933,720
-
1.27
Exercisable, December 31, 2018
150,346,976
-
1.27
Expected to vest, December 31, 2018
37,586,744
-
1.27
Balance, December 31, 2018
187,933,720
-
1.27
Granted
-
-
-
Exercised
-
-
-
Surrendered
-
-
-
Balance, December 31, 2019
187,933,720
-
1.27
Exercisable, December 31, 2019
187,933,720
-
1.27
Expected to vest, December 31, 2019
-
-
-
F-
61
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
29
Share-based compensation expenses (continued)
A summary of share option activity under the 2019 Option is as follows:
Number
    of
shares
Weighted
average
exercise price
Weighted
average grant
date fair value
RMB
RMB
Balance, December 31, 2018
-
-
-
Granted
119,674,780
-
0.72
Exercised
-
-
-
Surrendered
-
-
-
Balance, December 31, 2019
119,674,780
-
0.72
Exercisable, December 31, 2019
-
-
-
Expected to vest, December 31, 2019
119,674,780
-
0.72
Balance, December 31, 2019
119,674,780
-
0.72
Granted
-
-
-
Exercised
-
-
-
Surrendered
-
-
-
Balance, December 31, 2020
119,674,780
-
0.72
Exercisable, December 31, 2020
59,837,390
-
0.72
Expected to vest, December 31, 2020
59,837,390
-
0.72
Balance, December 31, 2020
119,674,780
-
0.72
Granted
-
-
-
Exercised
-
-
-
Surrendered
-
-
-
Balance, December 31, 2021
119,674,780
-
0.72
Exercisable, December 31, 2021
95,739,824
-
0.72
Expected to vest, December 31, 2021
23,934,956
-
0.72
Balance, December 31, 2021
119,674,780
-
0.72
Granted
-
-
-
Exercised
-
-
-
Surrendered
-
-
-
Balance, December 31, 2022
119,674,780
-
0.72
Exercisable, December 31, 2022
119,674,780
-
0.72
Expected to vest, December 31, 2022
-
-
-
F-
62
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
29
Share-based compensation expenses (continued)
The following table sets forth the fair value of options and ordinary
shares estimated at the dates of option grants indicated below with the assistance from an independent valuation firm.
Date of options grant
Options
granted
Exercise
price
Fair value
of option
Fair value of
ordinary
shares
January 3, 2017
75,173,492
RMB
0.50
RMB
1.26
RMB
1.72
January 3, 2017
112,760,238
RMB
0.50
RMB
1.27
RMB
1.72
December 31, 2019
83,772,346
RMB
1.00
RMB
0.71
RMB
1.40
December 31, 2019
35,902,434
RMB
1.00
RMB
0.75
RMB
1.40
For the option granted on January 3, 2017, there was no income tax
benefit recognized associated with the share-based compensation expenses. As of December 31, 2019, the expenses in relation to the 2018
Option have been fully recognized.
For the 2019 Option, the Group recognized compensation expenses of
RMB
62,073,367
RMB
18,766,367
and RMB
5,774,266
in year 2020, 2021 and 2022, respectively. There was no income tax benefit recognized associated
with the share-based compensation expenses. As of December 31, 2022, the expenses in relation to the 2019 Option have been fully recognized.
30
Material related party transactions
The Group did not have any related party transactions in the year ended
December 31, 2022.
31
Operating leases
The Group leases multiple office spaces which are contracted under
various non-cancelable operating leases, most of which provide extension or early termination options and are generally expired in 1 to
4 years. The Group does not enter into any finance leases or leases where the Group is a lessor. Moreover, the existing operating lease
agreements do not contain any residual value guarantees or material restrictive covenants.
Management determines if an arrangement is a lease at inception and
record the leases in the financial statements upon lease commencement, which is the date when the underlying office space is made available
for use by the lessor. The incremental borrowing rates determined for computing the lease liabilities are based on the People's
Bank of China (PBOC) Benchmark Rates for terms of loans ranging from zero (exclusive) to 5 years and above.
F-
63
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
31
Operating leases (continued)
The following tables present the operating lease cost and other supplemental
information:
Year ended December 31
2020
2021
2022
RMB
RMB
RMB
Operating lease cost
(1)
21,719,042
14,764,364
13,966,943
(1)
Amounts include short-term leases that are immaterial.
December 31,
2021
December 31,
2022
RMB
RMB
Weighted-average remaining lease term
1
Year
3.59
Years
Weighted-average discount rate
4.73
%
4.75
%
Cash paid for amounts included in the measurement of lease liabilities under operating cash flows
15,478,630
15,101,145
ROU assets obtained in exchange for new operating lease liabilities
16,196,806
29,777,357
The following represents the Group's future undiscounted cash
flows for each of the next five years and thereafter and reconciliation to the lease liabilities (excluding short-term operating leases)
as of December 31, 2022:
Year ended December 31
RMB
2023
12,085,870
2024
6,285,367
2025
4,745,037
2026
4,636,293
2027
3,427,888
Thereafter
-
Total future operating lease payments
31,180,455
Less: imputed interest
(
2,596,980
)
Total present value of operating lease liabilities
28,583,475
F-
64
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
32
Condensed financial information of the parent company
The Group's PRC VIEs and PRC subsidiaries are restricted in their
ability to transfer a portion of their net assets to the Group. The payment of dividends by entities organized in China is subject to
limitations, procedures and formalities. Regulations in the PRC currently permit payment of dividends only out of accumulated profits
as determined in accordance with accounting standards and regulations in China. The Group's subsidiaries are also required to set
aside at least
10
% of its net income based on PRC accounting standards each year to its statutory reserves account until the accumulative
amount of such reserves reaches
50
% of its respective registered capital. The aforementioned reserves can only be used for specific purposes
and are not distributable as cash dividends.
In addition, the Group's operations and revenues are conducted
and generated in China, all of the Group's revenues being earned and currency received are denominated in RMB. RMB is subject to
the foreign exchange control regulation in China, and, as a result, the Group may be unable to distribute any dividends outside of China
due to PRC foreign exchange control regulations that restrict the Group's ability to convert RMB into US Dollars.
Regulation S-X requires the condensed financial information of registrant
shall be filed 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. For purposes of the above test, restricted net assets of consolidated subsidiaries shall mean
that amount of the registrant's proportionate share of net assets of consolidated subsidiaries (after intercompany eliminations)
which as of the end of the most recent fiscal year may not be transferred to the parent company by subsidiaries in the form of loans,
advances or cash dividends without the consent of a third party. The condensed parent company financial statements have been prepared
in accordance with Rule 12-04, Schedule I of Regulation S-X as the restricted net assets of the Group's PRC subsidiary and VIE exceed
25
% of the consolidated net assets of the Group.
The condensed financial information of the parent company has been
prepared in accordance with SEC Regulation S-X Rule 5-04 and Rule 12-04, using the same accounting policies as set out in the Group's
consolidated financial statements, except that the Group uses the equity method to account for investments in its subsidiaries. The footnote
disclosures generally included in financial statements prepared in accordance with U.S. GAAP have been condensed and omitted. The footnote
disclosures contain supplemental information relating to the operations of the Group, as such, these statements are not the general-purpose
financial statements of the reporting entity and should be read in conjunction with the notes to the consolidated financial statements
of the Group.
On January 8, 2014,
the Group was incorporated in the Cayman Islands
with one subscriber's share allotted and issued at par value of HKD0.0001, representing 100% of the entire ordinary share of the
Group.
The shareholder as well as shareholder's equity remained the same until the reorganization with Sincere Fame.
F-
65
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
32
Condensed financial information of the parent company (continued)
Condensed balance sheets
December 31,
2021
December 31,
2022
RMB
RMB
Assets
Cash and cash equivalents
-
5,080,204
investment securities
-
11,320,828
Investments in subsidiaries
392,559,403
392,559,403
Other assets
291,457,560
212,636,091
Total assets
684,016,963
621,596,526
Liabilities and shareholders' equity
Accrued employee benefits
-
620,748
Other operating liabilities
9,697,485
10,827,876
Total liabilities
9,697,485
11,448,624
Ordinary shares (USD
0.0001
par value;
3,800,000,000
shares authorized;
1,559,576,960
shares issued and
1,371,643,240
shares outstanding as of December 31, 2021 and December 31, 2022, respectively)
916,743
916,743
Treasury stock
-
(
87,631,475
)
Additional paid-in capital
705,422,445
705,422,445
Retained earnings
(
7,467,430
)
(
7,944,752
)
Accumulated other comprehensive losses
(
24,552,280
)
(
615,059
)
Total shareholders' equity
674,319,478
610,147,902
Total liabilities and shareholders' equity
684,016,963
621,596,526
F-
66
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
32
Condensed financial information of the parent company (continued)
Condensed statements of comprehensive income
Year ended December 31
2021
2022
RMB
RMB
Interest and fees income
Interest income on debt securities
-
621,472
Interest on deposits with banks
171
20,593
Total interest and fees income
171
642,065
Realized gains on sales of investments, net
-
2,889,427
Other gains, net
481,007
(
22
)
Total non-interest income
481,007
2,889,405
Operating expenses
Employee compensation and benefits
(
580,464
)
(
620,748
)
Other expenses
(
90,221
)
(
3,388,044
)
Total operating expenses
(
670,685
)
(
4,008,792
)
Income before income tax expense
(
189,507
)
(
477,322
)
Net losses
(
189,507
)
(
477,322
)
Other comprehensive (losses)/income
Foreign currency translation adjustment
(
6,970,285
)
23,937,221
Comprehensive (losses)/income
(
7,159,792
)
23,459,899
F-
67
CNFINANCE HOLDINGS LIMITED
Notes to the consolidated financial statements
(Expressed in Renminbi unless otherwise stated)
32
Condensed financial information of the parent company (continued)
Condensed statements of cash flows
Year ended December 31
2021
2022
RMB
RMB
Cash flows from operating activities:
Net losses
(
189,507
)
(
477,322
)
Other operating assets
483,825
67,500,641
Other operating liabilities
(
3,609,478
)
1,751,140
Net cash (used in)/provided by operating activities
(
3,315,160
)
68,774,459
Cash flows from financing activities:
Repurchase of ordinary shares
-
(
87,631,475
)
Net cash used in financing activities
-
(
87,631,475
)
Net decrease in cash and cash equivalents
(
3,315,160
)
(
18,857,016
)
Cash and cash equivalents at the beginning of year
3,315,160
-
Effect of exchange rate change on cash and cash equivalents
-
23,937,220
Cash and cash equivalents at the end of year
-
5,080,204
33
Commitments and contingencies
In 2022, CNFinance entered into a contract with a third-party company
for the purchase of commercial properties as office buildings for its own use. As of December 31, 2022, the Group has paid RMB
88,574,103
as agreed in the contract and this amount is being recognized in the account prepaid. The remaining amount of RMB
88,450,000
will be paid
by December 30, 2023, and the delivery of the building will be made by February 28, 2024, as the Group completing the payment in full.
In addition, the Group has not entered into any derivative contracts
that are indexed to the Group's shares and classified as shareholders' equity, or that are not reflected in the Group's
consolidated financial statements. Furthermore, the Group does 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. Moreover, the Group does not have any variable
interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to the Group or engages in leasing,
hedging or product development services with the Group.
34
Subsequent events
The Group has considered subsequent events through April 27, 2022,
which was the date of these consolidated financial statements were issued, and has determined none of these events were required to be
recognized or disclosed in the consolidated financial statements and related notes.
F-68