Highest Performances Holdings (HPH) Risk Analysis

We conduct our insurance intermediary business primarily through AIX, its subsidiaries, its consolidated VIEs, and their subsidiaries in China. As of the date of this annual report, AIX's subsidiaries, its consolidated VIEs, and their subsidiaries in China have obtained the requisite licenses and permits from the PRC government authorities that are material for operating insurance intermediary business in China, including, among others, the business license, insurance distribution licenses, insurance broker licenses, insurance claims adjusting licenses, and value-added telecommunication business operation permits for ICP services, or ICP licenses. The business license is a permit issued by China's SAMR that allows a company to conduct specific business within the government's geographical jurisdiction. Insurance distribution licenses, insurance broker licenses and insurance claims adjusting licenses are issued by the National Financial Regulatory Administration or NFRA or its predecessor or by Hong Kong Insurance Authority, allowing enterprises to engage in insurance agency, brokerage or claims adjusting services, respectively. ICP licenses are issued by the Ministry of Industry and Information Technology for operating value-added telecommunication business including internet-based information processing services. Theses licenses are the only permissions and approvals that our PRC subsidiaries are required to obtain to conduct insurance intermediary business or internet-based insurance distribution business in China. However, there can be no assurance that we will be able to obtain, renew and/or convert all of the approvals, licenses, and permits required for our existing business operations upon their expiration in a timely manner or duly complete necessary registration or filings with the relevant governmental authorities for any of our new business. China's wealth management marketplace is a relatively new and evolving industry, and the laws and regulations governing our services are still developing. There are substantial uncertainties as to the legal system and the interpretation and implementation of the PRC laws and regulations applicable to the wealth management industry. The PRC government has adopted a unified regulatory framework governing the distribution and management of fund products. Under the Measures for the Supervision and Administration of Distributors of Publicly Raised Securities Investment Funds which was promulgated by the China Securities Regulatory Commission (the "CSRC") on August 28, 2020 and effective on October 1, 2020 (the "Distributor Measures"), a license is required for the distribution of standardized products, including publicly raised fund products and privately raised securities investment fund products. See "Item 4. K Information on the Company - B. Business Overview - Regulations". Fanhua Puyi has obtained a fund distribution license from the CSRC and we entered into a majority of fund distribution agreements with fund managers through this subsidiary. In addition, fund managers managing privately raised funds are required to register with the Asset Management Association of China (the "AMAC"); unregistered individuals or institutions are not permitted to conduct securities investment activities under the names of "funds" or "fund management". To comply with PRC laws, we currently collaborate with licensed fund managers and structure our fund management services as providing services to them. Neither the fund management services under service agreements with fund managers, nor our service fees generated from such agreements are prohibited by the applicable laws and regulations. However, we cannot assure you that the relevant PRC government will agree with our interpretation of the relevant laws and regulations. If the PRC government interprets the relevant rules differently and deems our role in such arrangements as requiring the fund management license, it may order us to cease our provision of fund management services until we acquire the fund management license. We cannot assure you that we will be able to obtain the fund management license promptly, if at all, and any failure to do so would require us to permanently cease such services, which may materially and adversely affect our business. On November 1, 2021, certain local offices of CSRC issued Circular on Pilot Implementation of Investment Consulting Business of the Publicly Raised Securities Investment Funds (the "Circular") with immediate effect and, on June 9, 2023, the CSRC promulgated Administrative Measures on Investment Consulting Business of Publicly Raised Securities Investment Fund (Draft for Comments, the "Draft"). The Circular and the Draft provide that portfolios of publicly raised funds are required to be distributed through institutions with qualified investment consulting licenses; institutions without qualified investment consulting licenses are not permitted to conduct distribution of portfolios of publicly raised funds under the names "portfolios." To comply with PRC laws, we currently collaborate with licensed institutions to distribute portfolios of publicly raised funds and structure our selection of portfolios as providing services to them. Neither collaboration with licensed institutions for distribution of portfolios of publicly raised funds nor our service fees generated from such arrangement are prohibited by the applicable laws and regulations. However, we cannot assure you that the relevant PRC government will agree to our interpretation of the relevant laws and regulations. If the PRC government interprets the relevant rules differently and deems our role in such arrangement as those distributors requiring the qualified investment consulting license, it may order us to cease our distribution of portfolios of publicly raised funds until we acquire the qualified investment consulting license. If so ordered, we cannot assure you that we will be able to obtain the qualified investment consulting license in a timely manner, or at all, and any failure to do so would require us to permanently cease the distribution of portfolios of publicly raised funds, which may materially and adversely affect our business, results of operations and prospects. As the wealth management services industry in China is at an early stage of development, new laws and regulations applicable to our business may be adopted to address new issues that arise from time to time or to require additional licenses and permits for distribution of products other than funds, such as asset management plans issued by security companies or insurance companies. As a result, substantial uncertainties exist regarding the evolution of the regulatory system and the interpretation and implementation of current and any future Chinese laws and regulations applicable to the wealth management services industry. We cannot assure you that we will be able to maintain our existing licenses and permits, renew any of them when their current term expires or obtain additional licenses required for our future business expansion. If we are unable to maintain and renew one or more of our current licenses and permits, or obtain such renewals or additional licenses required for our future business expansion on commercially reasonable terms, our operations and prospects could be materially disrupted. Moreover, new PRC regulations promulgated in the future may require that we obtain additional licenses or permits in order to continue to conduct our business operations and we cannot assure you that we would be able to obtain such licenses or permits in a timely fashion, or at all. If any of the foregoing were to occur, our business, financial condition and prospects would be materially and adversely affected.

On August 8, 2006, MOFCOM, joined by the CSRC, the State-owned Assets Supervision and Administration Commission of the State Council, the SAT, the State Administration for Industry and Commerce, and SAFE, jointly promulgated regulations entitled the Provisions Regarding Mergers and Acquisitions of Domestic Entities by Foreign Investors (the "M&A Rules"), which took effect as of September 8, 2006, and as amended on June 22, 2009. On September 21, 2006, the CSRC published on its official website a notice specifying the documents and materials that are required to be submitted for obtaining CSRC approval. The M&A Rules requires an overseas special purpose vehicle formed for listing purposes through acquisitions of mainland China domestic companies and controlled by mainland China 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. The interpretation and application of the regulations remain unclear, and our offshore offerings may ultimately require approval of the CSRC. If the CSRC approval is required, it is uncertain whether we can or how long it will take us to obtain the approval and, even if we obtain such CSRC approval, the approval could be rescinded. Any failure to obtain or delay in obtaining the CSRC approval for any of our offshore offerings, or a rescission of such approval is obtained by us, would subject us to sanctions imposed by the CSRC or other PRC regulatory authorities, which could include fines and penalties on our operations in mainland China, and other forms of sanctions that may materially and adversely affect our business, financial condition, and results of operations. The new rules for the filing-based administration of overseas securities offerings and listings by Chinese domestic companies released on February 17, 2023, or New Filing Rules, establish a new filing-based regime to regulate overseas offerings and listings by domestic companies. According to the New Filing Rules, (i) an overseas offering and listing by a domestic company, whether directly or indirectly, shall be filed with the CSRC; and (ii) the issuer or its affiliated domestic company, as the case may be, shall file with the CSRC for its initial public offering, follow-on offering, issuance of convertible bonds, offshore relisting after go-private transactions and other equivalent offing activities. In addition, after a domestic company has offered and listed securities in an overseas market, it is required to file a report to the CSRC after the occurrence and public disclosure of certain material corporate events, including but not limited to, change of control and voluntary or mandatory delisting. According to the New Filing Rules, the Company shall be deemed to be a domestic enterprise indirectly listed overseas. However, from March 31, 2023, enterprises that have been listed overseas shall constitute existing enterprises and are not required to conduct the overseas listing filing procedure immediately, but shall carry out filing procedures as required if they conduct future offshore offerings or capital raising activities or are involved in other circumstances that require filing with the CSRC. On February 24, 2023, the CSRC, together with other relevant government authorities, issued the Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies, or the Archives Rules, which became effective on March 31, 2023. According to the Archives Rules, domestic mainland China companies, whether offering and listing securities overseas directly or indirectly, must strictly abide the applicable laws and regulations when providing or publicly disclosing, either directly or through their overseas listed entities, documents and materials to securities services providers such as securities companies and accounting firms or overseas regulators in the process of their overseas offering and listing. If such documents or materials contain any state secrets or government authorities work secrets, domestic companies must obtain the approval from competent governmental authorities according to the applicable laws, and file with the secrecy administrative department at the same level with the approving governmental authority. Furthermore, the Archives Rules also provides that securities companies and securities service providers shall also fulfill the applicable legal procedures when providing overseas regulatory institutions and other relevant institutions and individuals with documents or materials containing any state secrets or government authorities work secrets or other documents or materials that, if divulged, will jeopardize national security or public interest. For more details of the New Filing Rules, please refer to "Item 4. Information on the Company-B. Business Overview-Regulations-Regulations Relating to Overseas Listing." In addition, we cannot assure you that any new rules or regulations promulgated in the future will not impose additional requirements on us. If it is determined in the future that approval and filing from the CSRC or other regulatory authorities or other procedures, are required for our offshore offerings or capital raising activities, 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. In addition, there are uncertainties with regard to whether any report filed with the CSRC after the occurrence of certain material corporate events will be subject to any further action from the CSRC. Any failure to obtain or delay in obtaining such approval or completing such filing procedures for our offshore, offerings, capital raising activities or certain material corporate events, 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 for failure to seek CSRC approval or filing or other government authorization for our offshore offerings, capital raising activities or certain material corporate events. These regulatory authorities may impose fines and penalties on our operations in mainland China, limit our operating privileges in mainland China, delay or restrict the repatriation of the proceeds from our offshore offerings into mainland 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 or capital raising activities before settlement and delivery and further actions of the shares offered or take any actions regarding our material corporate events. 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, delivery and further actions 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 or capital raising activities, 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.

Insurance industry in China is highly regulated. The laws and regulations applicable to us and our insurance operating subsidiaries are evolving and may change rapidly. Some of such changes and the further development of regulations applicable to us may result in additional restrictions on our activities, more intensive competition in this industry, or disruption in our product supply, which may adversely affect our business operations. For example, in recent years, against the backdrop of declining interest rate in China, China's insurance regulator has been implementing rules to adjust the pricing rate of life insurance products in order to protect insurance companies from interest spread loss. As a result, the pricing rate of traditional life insurance products has been adjusted downwards from 4.025% to 3.5% in January 2019, subsequently from to 3.5% to 3.0% in August 2023. In June 2024, as part of their efforts to control solvency risks, some insurance companies in PRC, including several of our major insurance product suppliers, have voluntarily determined to cease the sales of certain mainstream life insurance products with assumed interests rate of 3.0% by June 30, 2024 and instead started to introduce new products with an assumed interest rate of 2.75%, which has helped slightly boost our sales volume month-over-month in June 2024, followed by a sequential drop in sales in July 2024. On August 2, 2024, the National Financial Regulatory Administration, or the NFRA, which has replaced the CBIRC to become the regulatory body overseeing China's banking and insurance markets in May 2023, issued a Notice on the Improvement of the Pricing Mechanism for Life Insurance Products, or the Notice. Effective September 1, 2024, the expected interest rate cap for newly filed ordinary insurance products will be 2.5%. Starting October 1, 2024, the cap for participating insurance products will be 2%, and the minimum guaranteed interest rate for universal insurance products will be 1.5%. Therefore, our insurance company partners have gradually discontinued sales of products exceeding these limits by August 30, 2024. As a result, the Company has recorded a month-over-month sales spike in August 2024, only with new business falling back down afterwards. Implementation of similar requirements in the future could severely disrupt our product supply and caused huge fluctuations in our business operations and materially affect our financial results. If we cannot adapt to the changes effectively, our business could be adversely affected. On September 20, 2023, the NFRA promulgated Measures for the Supervision of Insurance Sales Behavior, effective on March 1, 2024, which provides for a comprehensive management on the pre-sale, mid-sale and after-sale behaviors of insurance distribution of insurance companies, insurance intermediaries and insurance salespeople, with requirements focusing on, among others, (i) retrospective management for insurance product sales activities through methods such as audio recording, video recording, sales page management, and recording operational traces; (ii) establishment of a tiered management mechanism for insurance sales practitioners based on their qualifications, sales abilities, integrity and ethics level; (iii) classification of life insurance products by product types, complexity, risk level and affordability; and (iv) restriction on compulsory bundled-sales of insurance products with healthcare and elderly-care services. The implementation of such requirements may significantly increase our compliance cost and failure to comply with the requirements may result in penalties and damage our reputations which may adversely affect our financial results. Some of the requirements such as the retrospective management have been previously implemented in certain regions in China which have adversely affected our sales activities in those regions as the double-recording process could be complicated and time-consuming. Strict enforcement of such requirement nationwide could further impact customers' willingness to purchase insurance and as a result affected our business results. On August 22, 2023, the NFRA issued the Notice of Regulating the Insurance Products Sold Through Bancassurance Channel. This notice mandates that actual expenses, such as commissions paid to bancassurance channel agents by insurance companies, must align with the cost structure and commission ceiling reported in the filed documents. Essentially, this imposes a cap on the commission rates paid by insurance companies to the bancassurance channel. The strict implementation of this requirement has led to a significant reduction in commission rates within the bancassurance channel. On August 2, 2024, the NFRA issued the Notice on Enhancing the Pricing Mechanism for Life Insurance Products, reiterating the alignment of actual expenses with filed expense structure. According to this Notice, each company must specify sales channels in their product filing or approval materials. Additionally, they are required to outline the additional expense ratio (i.e., the total expense level) and the expense structure. Many insurance companies, including our business partners, have started to lower commission rates for life insurance products sold through independent agency and broker channels since late March 2024, prior to the issuance of this Notice. This reduction has significantly decreased our commission income and revenues, adversely affecting our overall financial results. In response, we have adjusted our commission structure and taken proactive measures to adapt to these changes. These measures include diversifying our product and service offerings to increase agents' sources of income, and leveraging technology to improve operational efficiency and reduce cost. Despite these efforts, there is significant uncertainty regarding our ability to effectively implement these measures. If we are unable to successfully adapt to the new regulatory environment and mitigate the impact of reduced commission rates, our financial performance and competitive position may be adversely affected. On March 14, 2024, the China Insurance Industry Association completed the draft Personal Insurance Personnel Sales Capabilities Qualification Standard (For Life Insurance Sales) and started to solicit comments from relevant insurance companies. According to the proposed Standards, insurance sales personnel will be classified into four levels, from low to high: Level 4, Level 3, Level 2, and Level 1. Each level has different skill and knowledge requirements, and the range of products that sales personnel at each level are authorized to sell will also vary. Specifically, Level 4 sales personnel will be authorized to sell products with low complexity and low risk, such as accidental injury insurance, health insurance, standard life insurance, and standard annuity insurance. Level 3 sales personnel will be authorized to sell additional products, including participating insurance, universal life insurance, and exclusive commercial pension insurance. Level 2 sales personnel will be authorized to sell more complex and higher-risk products, such as investment-linked insurance and variable annuity insurance. Level 1 sales personnel will be authorized to sell all life insurance products. The new requirements may necessitate significant investments in training and development to ensure our sales personnel meet the higher qualification standards. Additionally, the limitation on the range of products that lower-level sales personnel can sell may impact our product distribution and sales strategies. If our sales personnel are unable to attain the necessary qualifications, our ability to sell higher-complexity and higher-margin products may be restricted, potentially leading to a decline in revenues and profitability. Furthermore, the administrative burden and costs associated with compliance and the reclassification of our sales force could negatively affect our operational efficiency and financial results. There is also uncertainty about how quickly and effectively we can adapt to these new regulatory requirements, which may pose additional risks to our business performance and market position. In exercising its authority, the NFRA is given wide discretion, and the administration, interpretation and enforcement of the laws and regulations applicable to us involve uncertainties that could materially and adversely affect our business and results of operations. Not only may the laws and regulations applicable to us change rapidly, but it may also sometimes be unclear how they apply to our business. Any failure of our products or services to comply with these laws and regulations could result in substantial civil or criminal liability, adversely affect demand for our services, invalidate all or a portion of our customer contracts, require us to change or terminate some of our businesses, require us to refund a portion of our services fees, or cause us to be disqualified from serving customers, and therefore could have a material and adverse effect on our business. Although we have not had any material violations to date, we cannot assure you that our operations will always comply with the interpretation and enforcement of the laws and regulations implemented by the NFRA. Any determination by a provincial or national government authority that our activities or those of our vendors or customers violate any of these laws could subject us to civil or criminal penalties, require us to change or terminate some of our operations or business, or disqualify us from providing services to insurance companies or other customers; and, thus have a materially adverse effect on our business.

On July 4, 2014, the SAFE promulgated the Circular on Relevant Issues Relating to Foreign Exchange Administration for Overseas Investments and Financing and Round-trip Investments by Domestic Residents through Special Purpose Vehicles, or the SAFE Circular 37, which came into effect as of July 4, 2014. According to the SAFE Circular 37, prior registration with the local SAFE branch is required for PRC residents, including PRC individuals and PRC corporate entities as well as foreign individuals that are deemed as PRC residents for foreign exchange administration purpose, in connection with their direct or indirect contribution of domestic assets or interests to offshore companies, known as SPVs. The SAFE Circular 37 further requires amendment to the SAFE registrations in the event of any changes with respect to the basic information of the offshore special purpose vehicle, such as change of a PRC individual shareholder, name and operation term, or any significant changes with respect to the offshore special purpose vehicle, such as increase or decrease of capital contribution, share transfer or exchange, or mergers or divisions. The 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. In February 2015, the SAFE promulgated a Circular on Further Simplifying and Improving Foreign Exchange Administration Policies on Direct Investment, or the SAFE Circular 13, effective June 1, 2015. Under the SAFE Circular 13, applications for foreign exchange registration of inbound foreign direct investments and outbound overseas direct investments, including those required under the SAFE Circular 37, will be filed with qualified banks instead of the SAFE. The qualified banks will directly examine the applications and accept registrations under the supervision of the SAFE. In addition to the SAFE Circular 37 and the SAFE Circular 13, our ability to conduct foreign exchange activities in China may be subject to the interpretation and enforcement of the Implementation Rules of the Administrative Measures for Individual Foreign Exchange promulgated by the SAFE in January 2007 (as amended and supplemented, the "Individual Foreign Exchange Rules"). Under the Individual Foreign Exchange Rules, any PRC individual seeking to make a direct investment overseas or engage in the issuance or trading of negotiable securities or derivatives overseas must make the appropriate registrations in accordance with the SAFE provisions, the failure of which may subject such PRC individual to warnings, fines or other liabilities. We have requested our beneficial owners who to our best knowledge are PRC residents to make the necessary applications, filings and amendments as required under SAFE Circular 37 and other related rules. We attempt to comply, and attempt to ensure that our beneficial owners who are subject to these rules comply with the relevant requirements. However, we may not be informed of the identities of all the PRC residents holding direct or indirect interest in our group, and we have no control over any of our beneficial owners. Thus, we cannot provide any assurance that our current or future PRC resident beneficial owners will comply with our request to make or obtain any applicable registrations or continuously comply with all registration procedures set forth in these SAFE regulations. Such failure or inability of our PRC residents beneficial owners to comply with these SAFE regulations may subject us or our PRC residents beneficial owners to fines and legal sanctions, restrict our cross-border investment activities, or limit our PRC subsidiaries' ability to distribute dividends to, or obtain foreign-exchange-dominated loans from, our group, or prevent us from being able to make distributions or pay dividends, as a result of which our business operations and our ability to distribute profits to you could be materially and adversely affected.

We are an offshore holding company conducting our operations in China through our PRC subsidiaries and the consolidated VIEs through contractual arrangements. We may make loans to our PRC subsidiaries and the VIEs, or we may make additional capital contributions to our PRC subsidiaries. Any loans to our PRC subsidiaries, which is treated as a foreign invested enterprise under PRC law, are subject to PRC regulations and foreign exchange loan registrations. For example, loans by us to our PRC subsidiaries to finance its activities cannot exceed statutory limits and must be registered with the local counterpart of the SAFE. We may also decide to finance our PRC subsidiaries by means of capital contributions, which must be approved by MOFCOM or its local counterpart. We can use our capital funds to make domestic equity investments when the following conditions are met: (i) we shall not violate the current special management measures for the access of foreign investment (the Negative List); and (ii) domestic investment projects are true and compliant with the PRC laws and regulations. To be compliant, our capital funds shall not be used for the following purposes: (i) directly or indirectly used for payment beyond the business scope of the enterprises or prohibited by relevant laws and regulations; (ii) directly or indirectly used for investment in securities or investments other than banks' principal-secured products unless otherwise permitted by relevant laws and regulations; (iii) the granting of loans to non-affiliated enterprises, except where it is expressly permitted in the business license; and (iv) payment for the purchase of real estate that is not for self-use (except for the foreign-invested real estate enterprises). The funds raised under the VIE structure can only be used in the business activities of domestic operating entities after the settlement of foreign exchange is made under the above conditions. Due to the restrictions imposed on loans in foreign currencies extended to any PRC domestic companies, we are not likely to directly make such loans to the consolidated VIEs, a PRC domestic company. Meanwhile, we are not likely to finance the activities of the consolidated VIEs by means of capital contributions because that would result in the consolidated VIEs being converted into a foreign invested company, while foreign invested companies engaged in fund management industry are subject to more stringent requirements than PRC domestic enterprises. In addition, any transfer of funds by HPH to our PRC subsidiaries, either as a shareholder loan or as an increase in the registered capital, is subject to a series of procedural requirements with SAFE or its local counterpart. In light of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis, if at all, with respect to future loans by us to our PRC subsidiaries or the consolidated VIEs or with respect to future capital contributions by us to our PRC subsidiaries. If we fail to complete such registrations or obtain such approvals, our ability to use any offshore cash we may have, including the proceeds we receive from any future offshore offering of equity or debts securities, and to capitalize or otherwise fund our PRC operations may be negatively affected, which could materially and adversely affect our liquidity and our ability to fund and expand our business.

Foreign ownership of certain parts of our businesses including fund management services is subject to restrictions under PRC laws and regulations. In addition, any foreign shareholder of a foreign-invested fund management company focusing on securities investment funds must be a financial institution approved by the national or regional financial regulatory authority where the foreign investor locates, and such national or regional financial regulatory authority must have signed a memorandum of understanding on bilateral regulatory cooperation with the CSRC or its approved institution. Meanwhile, any foreign shareholder of a foreign-invested fund management company must not be punished by any regulatory authority or judicial authority in the last three years. In addition, such foreign-invested fund management company must invest in domestic capital markets. In December 2018, the CSRC announced that it entered into a memorandum of understanding on bilateral regulatory cooperation with the Cayman Islands Monetary Authority ("CIMA"), the principal regulator for the financial services industry of the Cayman Islands. However, as we are not a financial institution approved by the CIMA, we are not eligible to conduct our fund management business by directly establishing a foreign-invested fund management company. To comply with PRC laws and regulations and utilize our ability in providing fund management services, we conduct our wealth management through HPH's Original VIEs, Puyi Bohui, and its subsidiaries. Through our PRC subsidiaries, Puyi Consulting, we entered into a series of contractual arrangements with Puyi Bohui and its shareholders, which (i) enable us to direct the activities of Puyi Bohui, (ii) enable us to receive substantially all of the economic benefits of Puyi Bohui, and (iii) provide us with an exclusive option to purchase all or part of the equity interests and assets in Puyi Bohui when and to the extent permitted by PRC law. As a result of these contractual arrangements, we are the primary beneficiary of Puyi Bohui and, as such, consolidate its and its subsidiaries' financial results into our consolidated financial statements under U.S. GAAP. Puyi Bohui and its subsidiaries hold the licenses, approvals and key assets that are essential for our operations. Similarly, due to restrictions and conditions imposed by PRC laws and regulations on foreign ownership and investment in certain internet-based businesses, AIX, our majority-owned subsidiary, operates these business through its consolidated VIEs, namely Xinbao Investment, and Fanhua RONS Technologies, and their subsidiaries, and rely on contractual arrangements among its PRC subsidiaries, its consolidated VIEs and their respective shareholders to control the business operations of its consolidated VIEs and their subsidiaries. The contractual arrangements among AIX's WFOEs namely Fanhua Group Company and Fanlian Investment, its VIEs and their shareholders enable AIX to: (i) exercise effective control over Xinbao Investment and Fanhua RONS Technologies and their subsidiaries; (ii) have an exclusive option to purchase part or all of the equity interests in Xinbao Investment and Fanhua RONS Technologies when and to the extent permitted by PRC law; and (iii) receive all of the economic benefits from the consolidated VIEs in consideration for the services provided by our subsidiaries in China. The Contractual Arrangements allow us, through our equity interests in AIX, to be the primary beneficiary of the VIEs and to consolidate the VIE's results of operations into AIX and our financial statements. In the opinion of our PRC legal counsel, ETR Law Firm, and AIX's legal counsel, Hai Run Law Firm (unless otherwise specified, Hai Run Law Firm solely represent AIX as its legal counsel, and do not represent that the other members of HPH ) based on their understanding of the relevant PRC laws and regulations, (i) the ownership structures relating to HPH's consolidated VIEs and WFOEs and AIX's consolidated VIEs and WFOEs do not violate applicable PRC laws and regulations currently in effect; and (ii) the contractual arrangements with the consolidated VIEs and the individual shareholders are legitimate, valid, binding and enforceable in accordance with their respective terms and applicable PRC laws. However, our PRC legal counsel and AIX's PRC legal counsel have also advised us that there are substantial uncertainties regarding the interpretation and application of current or future PRC laws and regulations. Accordingly, the PRC regulatory authorities may ultimately take a view contrary to the opinion of our PRC legal counsel and AIX's PRC legal counsel. It is uncertain whether any new PRC laws or regulations relating to variable interest entity structures will be adopted or if adopted, what they would provide. If we or the consolidated VIEs are found to be in violation of any PRC laws or regulations, if the contractual arrangements that establish the structure for operating our and the consolidated VIEs' business in the PRC are determined as illegal or invalid by the PRC court, arbitral tribunal or regulatory authorities, or if we or the consolidated VIEs fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities would have broad discretion to take action in dealing with such violations or failures, including: - revoking the business license and/or operating license that such entities currently have or are to obtain in the future;- discontinuing or placing restrictions or onerous conditions on our operations;- imposing fines, confiscating the income from us or the consolidated VIEs, or imposing other requirements with which we or the consolidated VIEs may not be able to comply;- requiring us to restructure our structure or operations, including by terminating the contractual arrangements with the consolidated VIEs and deregistering the equity pledges of the consolidated VIEs, which in turn would affect our ability to consolidate, derive economic interests from, or exert effective control over the VIEs; or - restricting or prohibiting our use of the proceeds from overseas offerings to finance our business and operations in China. Currently, according to the effective contractual arrangements with the consolidated VIEs, we conduct a portion of our business activities through the consolidated VIEs in China. Investors in our ordinary shares or the ADSs thus are not purchasing, and may never directly hold, any equity interest in the consolidated VIEs in China but instead are purchasing equity interest in a Cayman Islands holding company. There are substantial uncertainties regarding the interpretation and application of current and future PRC laws, regulations, and rules relating to such agreements that establish the VIE structure for the consolidated VIEs' operations in China, including potential future actions by the PRC government, which could affect the enforceability of our contractual arrangements with Puyi Consulting, Xinbao Investment and Fanhua RONS Technologies and, consequently, adversely affect our financial condition and results of operations. If the PRC government deems that our contractual arrangements with the consolidated VIEs do not comply with the relevant PRC regulations, or if these regulations or the interpretations of existing regulations are to change or are interpreted differently in the future, we and the consolidated VIEs could be subject to severe penalties or be forced to relinquish our interests in those operations. Although we believe we, our PRC subsidiaries and the consolidated VIEs, are not in violation of current PRC laws and regulations, we cannot assure you that the PRC government would agree that our contractual arrangements comply with PRC licensing, registration or other regulatory requirements, with existing policies or with requirements or policies that may be adopted in the future. The PRC government has broad discretion in determining rectifiable or punitive measures for non-compliance with or violations of PRC laws and regulations. The PRC government could disallow the VIE structures, which would likely result in a material change in our operations and/or value of our securities, including that it could cause the value of such securities to significantly decline or become worthless. The VIE agreements have never been tested in a court of law in China. If the PRC government determines that we or the consolidated VIEs do not comply with applicable laws, it could revoke the consolidated VIEs' business and operating licenses, require the consolidated VIEs to discontinue or restrict the consolidated VIEs' operations, restrict the consolidated VIEs' right to collect revenues, block the consolidated VIEs' online apps and websites, require the consolidated VIEs to restructure our operations, impose additional conditions or requirements with which the consolidated VIEs may not be able to comply, impose restrictions on the consolidated VIEs' business operations, or take other regulatory or enforcement actions against the consolidated VIEs that could be harmful to their business. Any of these or similar occurrences could significantly disrupt our or the consolidated VIEs' business operations or restrict the consolidated VIEs from conducting a substantial portion of their business operations, which could materially and adversely affect the consolidated VIEs' business, financial condition and results of operations. If any of these occurrences results in our inability to govern the activities of any of the consolidated VIEs that most significantly impact their economic performances, and/or our failure to receive the economic benefits from the consolidated VIEs, we may not be able to consolidate the consolidated VIEs in our consolidated financial statements in accordance with U.S. GAAP. In addition, our securities may decline in value or become worthless if we are unable to consolidate the operations and financial results of the VIEs in our financial statements in accordance with U.S. GAAP as the primary beneficiary since the consolidated VIEs conduct a significant part of our operations. As of the date of this annual report, it is unclear what impact the PRC government's actions would have on us, our ability to consolidate the financial results of the consolidated VIEs in our consolidated financial statements and the value of our securities, if the PRC government authorities were to find our legal structure and contractual arrangements to be in violation of PRC laws and regulations.

For our wealth management business, we operate three mobile apps; one is "Puyi Fund" (????), which enables our clients to complete transactions online in relation to our fund products; the second is "i Financial Planner" (i???), which provides a one-stop online management tool and empowers financial advisors to provide better services; and the third is "Puyi business school" (?????), which provides investor education. In addition, our subsidiary AIX also operates several mobile apps including "FA App" (formerly known as "Lan Zhanggui"???), which provides end-to-end insurance sales support services to insurance sales agents and "RONS Open Platform" (??????) which we provide digital solutions encompassing technology, products and services, compliance, operations and professional support to various insurance sales organizations, enabling them to digitize and optimize various aspects of the insurance sales process, from customer acquisition to policy issuance and service delivery. Although we have obtained ICP licenses for operating a web-based online insurance distribution platform and for the open platform, we do not hold ICP licenses for the mobile applications. According to the Provisions on the Administration of Mobile Internet Application Information Services, or the App Provisions, issued by Cyberspace Administration of China on June 28, 2016 and as amended on August 1, 2022, any owner or operator providing information services through a mobile internet application, or an "app," must obtain the relevant qualification(s) as required by laws and regulations. The App Provisions, however, do not specify what "relevant qualification(s)" an app owner or operator must obtain. In practice, operational activities of a company conducted through an app is subject to the supervision of the local counterparts of the Information Communications Administration, and often, the local counterparts differentiate the operational activities conducted through websites and through apps. In many cases, standalone apps through which a company provides information services without any web-based online services are not required to obtain ICP licenses. However, the interpretation and enforcement of such laws and regulations are subject to the substantial discretion of the local authorities. As of the date of this annual report, we do not hold an ICP license for two of the three apps, and cannot rule out the possibility that the local counterparts of the Information Communications Administration would take the view that the current primary information services and transaction processing services provided by us through the apps would require an ICP license or that, without such license, we would be prohibited from rendering such services through the apps. If we were required to obtain an ICP license for these two apps, our inability to obtain the license in a timely manner or at all may have a material adverse effect on our business and operations.

On July 6, 2021, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council promulgated the Opinions on Strictly Cracking Down Illegal Securities Activities in accordance with the Law (the "Opinions on Securities Activities"), which announced the plans to take effective measures to enhance the administration over illegal securities activities and the supervision on the offering and listing of PRC domestic companies in an overseas market, including promoting the construction of relevant regulatory systems. On December 24, 2021, the CSRC promulgated the Administrative Provisions of the State Council on Overseas Offering and Listing of Securities by Domestic Enterprises (Draft for Comments), and the Administrative Measures for the Filing of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments), which, if become effective, (i) require a PRC domestic company seeking securities offering and listing in an overseas market, directly or indirectly, to file the required documents with the CSRC within three working days after such application for overseas offering and/or listing is submitted, and (ii) stipulate certain circumstances under which overseas offering and/or listing is prohibited as well as the measures to be taken by the CSRC against a PRC domestic company in any of such circumstances prior to the overseas offering and/or listing, such as postponement or termination of the proposed overseas offering and listing, and canceling the corresponding filing on the conditions that the proposed overseas offering and/or listing or cancellation of the corresponding filing in the event that the proposed overseas offering and/or listing application documents have already been filed. The above regulations have been integrated into the latest Provisional Administrative Measures on Overseas Offering and Listing of Securities by Domestic Enterprises promulgated by CSRC on February 17, 2023, which took effect on March 31, 2023; thereafter, the CSRC promulgated six Guidelines on Application of Regulatory Rules concerning overseas offering and listing of securities, with immediate effect (hereinafter collectively referred to as the "Administrative Measures and Supporting Guidelines on Overseas Offering and Listing"). The aforementioned Administrative Measures and Supporting Guidelines on Overseas Offering and Listing require a PRC domestic company seeking initial public offering and/or listing of securities on an overseas market, directly or indirectly, to file the required documents with the CSRC within three working days after such application for overseas offering and/or listing is submitted overseas. The Administrative Measures and Supporting Guidelines on Overseas Offering and Listing provide for five circumstances under which overseas offering and listing are prohibited; any PRC domestic company falling under any of such circumstances prior to its overseas offering and/or listing shall suspend or terminate its overseas offering and/or listing and report to the CSRC and other competent authorities under the State Council in a timely manner, otherwise it may be subject to penalty imposed by the CSRC. As per the relevant CSRC Answers to Reporter Questions on the official website of the CSRC, we have completed the overseas initial public offering prior to the date on which the Administrative Measures and Supporting Guidelines on Overseas Offering and Listing took effect, hence fall within the ambit of existing enterprises. Existing enterprises are not required to make immediate filing thus far; however, they shall comply with the filing requirements with the CSRC in the event of subsequent re-financing or other activities requiring filing. Therefore, the above filing requirement could significantly limit or completely hinder our future offering of securities to investors. On December 28, 2021, the Revised Cybersecurity Review Measures was released, which stipulates, among others, that the procurement of network products and services by critical information infrastructure operators and the data processing activities conducted by network platform operators which affect or may affect national security shall be subject to cybersecurity review. On August 20, 2021, the Personal Information Protection Law (the "PIPL") was promulgated, effective on November 1, 2021. The PIPL provides for the rights and obligations of personal information processors, with particular emphasis on requirements for cross-border information transfer. See "Item 3. Key Information-D. Risk Factors-Risks Related to Our Business and Industry-Any failure to protect our clients' privacy and confidential information could lead to legal liability, adversely affect our reputation and have a material adverse effect on our business, financial condition or results of operations." As per the Provisional Administrative Measures on Overseas Offering and Listing of Securities by Domestic Enterprises, our future offering of securities overseas and the listing of our ADSs resulting therefrom shall be filed with the CSRC. Furthermore, the PRC governmental authorities may have wide discretion on the interpretations and enforcements of the above regulations, and we cannot assure you that any new rules or regulations promulgated in the future will not impose additional requirements on any of our future proposed offering of securities overseas or the listing of our ADSs. It is uncertain whether we can or how long it will take us to comply with such requirements. Any failure to comply with such requirements may subject us to regulatory actions or other sanctions from the CSRC or other PRC governmental authorities, which may have a material adverse effect on our business, financial conditions or results of operations.

We are incorporated in the Cayman Islands, but most of our, our subsidiaries' and the consolidated VIEs' operations are conducted in the PRC and most of our, our subsidiaries' and the consolidated VIEs' assets are located in the PRC. In addition, all of our directors and officers are nationals and/or residents of the PRC, and all or a substantial portion of their assets are located in the PRC. 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 we have violated your rights or have a claim against us, either under United States federal or state 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 not allow you to enforce a judgment against our assets or the assets of our directors and officers. It may also be difficult for our shareholders to effect service of process upon us or those persons inside Mainland China. As advised by our PRC legal counsel, China currently does not have treaties providing for the reciprocal recognition and enforcement of court judgments with the Cayman Islands, United States and many other countries and regions. Therefore, with respect to matters that are not subject to a binding arbitration provision, it may be difficult or impossible to recognize and enforce judgments of any of those non-PRC jurisdictions in a China court.

We conduct our business in China primarily through our PRC subsidiaries in which we hold equity interest and the consolidated VIEs of which we could direct the operational activities in China through contractual arrangements. Our operations in China are governed by PRC laws and regulations. The PRC government has significant oversight over the conduct of our business, and it regulates and may intervene our operations, which could result in a material adverse change in our operations and/or the value of our ADSs. Also, the PRC government has recently exerted more oversight over offerings that are conducted overseas and/or foreign investment in China-based issuers. The Administrative Measures and Supporting Guidelines on Overseas Offering and Listing promulgated by the CSRC have provided expressly that a PRC domestic company applying for subsequent offering and listing securities on the same overseas market or applying for offering and listing securities on another overseas market after its IPO shall comply with the filing requirements with the CSRC within three working days after such application is submitted overseas. According to the Answers to Reporter Questions, we have completed our overseas IPO of ADSs prior to the taking effect of the Administrative Measures and Supporting Guidelines on Overseas Offering and Listing, hence we fall within the ambit of existing enterprises as referenced in the Answers to Reporter Questions and are not required to make immediate filing thus far; however, we shall comply with the filing requirements with the CSRC as required in the event of subsequent re-financing or other activities requiring filing. Meanwhile, it is stated in the Answers to Reporter Questions that the CSRC will accept filing of those enterprises with VIE structure meeting the compliance requirements for overseas listing, to support companies' growth by utilizing two markets and two resources. However, the practice of determining whether a company with VIE structure has met the compliance requirements is yet to be clarified by the CSRC. Therefore, our future offering of securities to investors may be significantly limited or completely hindered. In addition, implementation of industry-wide regulations directly targeting our operations could cause our securities to significantly decline in value or become worthless. Therefore, our investors face potential uncertainty from actions taken by the PRC government affecting our business.

An entity will generally be deemed an "investment company" for purposes of the Investment Company Act of 1940, as amended (the "1940 Act") if: (a) it is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities, or (b) absent an applicable exemption, it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. We believe that we are engaged in the business of providing wealth management services and asset management services and not in the business of investing, reinvesting or trading in securities. We do not propose to engage primarily in the business of investing, reinvesting or trading in securities. Accordingly, we believe that we are not an investment company under Section 3(b)(1) of the Investment Company Act because, among other things, it is primarily engaged in a non-investment company business. If one or more of our operating entities ceased to be deemed as a wholly-owned subsidiary of ours, our interests in those subsidiaries could be deemed an "investment security" for purposes of the 1940 Act. The 1940 Act and the rules thereunder contain detailed parameters for the organization and operation of investment companies. The 1940 Act and the rules thereunder limit or prohibit transactions with affiliates, impose limitations on the issuance of debt and equity securities, generally prohibit the issuance of options and impose certain governance requirements, among other things. We intend to conduct our operations so that HPH will not be deemed an investment company. However, if we were to be deemed an investment company, restrictions imposed by the 1940 Act, including limitations on our capital structure and our ability to transact business with affiliates, could make it impractical for us to continue our business as currently conducted and would have a material adverse effect on our business, financial condition, results of operations and the price of our ordinary shares. In addition, we may be required to limit the amount of investments that we make as a principal or otherwise conduct our business in a manner that does not subject us to the registration and other requirements on the 1940 Act.

We conduct our business primarily through our PRC subsidiaries in which we hold equity interest and the consolidated VIEs and its subsidiaries of which we could direct operation activities in China through the contractual arrangements. Our operations in China are governed by PRC laws and regulations. Our PRC subsidiaries, Puyi Consulting, Fanhua Group Company and Fanlian Investment, are foreign-owned enterprises and are subject to laws and regulations applicable to foreign investment in China and, in particular, laws applicable to foreign-owned enterprises. The PRC legal system is a civil law system based on written statutes. Unlike common law system, prior court decisions may be cited for reference but have limited precedential value. In addition, any new or changes in PRC laws and regulations related to foreign investment in China could affect the business environment and our ability to operate our businesses in China. From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. However, since PRC judicial and administrative authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to predict the outcome of a judicial or administrative proceeding than in more developed legal systems. In addition, 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, that may have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules until some time after the violation. Any administrative and court proceedings in China may be protracted and result in substantial costs and diversion of resources and management attention. However, since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. These uncertainties may also impede our ability to enforce the contracts we have entered into, and as a result, could materially and adversely affect our business and results of operations.

Our revenues and profitability are highly sensitive to changes in the commission and fee rates set by our insurance company partners and third-party product providers. For our insurance agency business, we derive revenues primarily from commissions and fees based on the premiums charged by insurance companies. Our commission and fee rates are set by insurance companies and are based on the premiums that the insurance companies charge or the amount recovered by insurance companies. Commission and fee rates and premiums can change based on the prevailing economic, regulatory, taxation-related and competitive factors that affect insurance companies. These factors, which are not within our control, include the ability of insurance companies to place new business, underwriting and non-underwriting profits of insurance companies, consumer demand for insurance products, the availability of comparable products from other insurance companies at a lower cost, the availability of alternative insurance products such as government benefits and self-insurance plans, the tax deductibility of commissions and fees and the consumers themselves as well as regulatory requirements. For example, the recent regulatory guidance on the commission cap has been extended from the bancassurance channel to the independent agency and broker channel. In addition, the pricing rates for certain insurance products, such as the traditional life insurance products has been adjusted downwards by the NFRA from 4.025% to 2.5% in the past four years. Because we do not determine, and cannot predict, the timing or extent of premium or commission and fee rate changes, we cannot predict the effect any of these changes may have on our operations. Any decrease in premiums or commission and fee rates may significantly affect our profitability. In addition, our budget for future acquisitions, capital expenditures and other expenditures may be disrupted by unexpected decreases in revenues caused by decreases in premiums or commission and fee rates, thereby adversely affecting our operations. Similarly, in our wealth management services, we derive a majority of our revenues from distribution commissions and performance-based fees from wealth management services, and management fees and carried interest from the funds that we manage. The relative fee rates are negotiated between us and third-party product providers or the investors and vary from product to product. Future fee rates may be subject to change based on the prevailing political, economic, regulatory, taxation and competitive factors that affect product providers or investors. These factors, which are not within our control, include the capacity of product providers to place new business and realize profits, client demand and preference for wealth management products, the availability of comparable products from other product providers at a lower cost and the availability of alternative wealth management products for clients. In addition, the historical volume of wealth management products that we have distributed or managed may have a significant impact on our bargaining power with third-party wealth management product providers in relation to the fee rates for future products. Because we do not control and cannot predict the timing or extent of changes in premiums, commission, or fee rates, we cannot accurately forecast the impact these changes may have on our operations. Any decrease in these rates could significantly affect our revenues and profitability. Additionally, unexpected decreases in revenues caused by lower premiums or commission and fee rates could disrupt our budget for future acquisitions, capital expenditures, and other expenditures. To maintain our relationships with product providers and secure new contracts, we may have to accept lower distribution commission rates or other less favorable terms, further impacting our revenues. As our asset management business continues to grow, we may face similar risks related to fee rates for these services, potentially affecting our overall business operations and financial performance.

Under applicable PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities. We are not able to determine whether the contractual arrangements that we have entered into among Puyi Consulting, Fanhua Group Company and Fanlian Investment, the consolidated VIEs and their respective shareholder, or any other arrangements and transactions among related parties that we currently have or will have in future will be regarded by the PRC tax authorities as arm's length transactions. We could face material and adverse tax consequences if the PRC tax authorities determine that our current contractual arrangements or any other arrangements and transactions among related parties are not entered into on an arm's-length basis, and therefore constitute favorable transfer pricing. As a result, the PRC tax authorities could require us to adjust our taxable income upward for PRC tax purposes, which could increase the consolidated VIEs' tax expenses, subject us to late payment fees and other penalties for under-payment of taxes, and result in the loss of any preferential tax treatment we may have. As a result, our consolidated net income may be adversely affected.

We derive significant revenue from our important insurance company partners. Among these top five of our insurance company partners, Sinatay accounted for 11.2% of our total net revenues for the fiscal year ended June 30, 2024. As a result, any significant changes to our business relationship with the important insurance company partners could have a material impact on our revenue and profit. As of June 30, 2024, we sourced our wealth management products from high quality third-party global product providers in China, including 118 public fund companies, which have contributed to a majority of our fund products, including approximately 10,911 publicly raised fund products. In addition, we actively seek collaborative opportunities with well-recognized fund managers, which allows us to deliver returns to our clients in a cost-effective manner. As such, our business is heavily dependent on our relationships with these third-party providers and, although we have maintained stable relationships with them, any material deterioration or termination of our relationships with any major product providers or fund managers, or the failure to further expand our network with such third-party products, could inhibit our ability to secure products, which in turn would have a material adverse effect on our business, financial condition and growth prospects. In addition, a decline in the financial condition of one or more of our third-party product providers may expose us to credit losses or defaults, limit our access to liquidity or otherwise disrupt the operations of our businesses. Downgrades in the credit or financial strength ratings assigned to the counterparties with whom we collaborate or other adverse reputational impacts to such counterparties could create the perception that our financial condition will be adversely impacted as a result of potential future defaults by such counterparties, which could have a negative impact on our business and operating performance as well as on our clients' confidence in us and our products.

Our revenues and operating results have fluctuated in the past and may fluctuate from period to period in the future due to a variety of factors, many of which are beyond our control. Factors relating to our business that may contribute to these fluctuations include the following factors, as well as other factors described elsewhere in this annual report: - the level of success we experience in each of the businesses segments we operate and the resulting change in business mix;         - any significant changes to our business relationship with our important product providers;         - changes in the commission and fee rates set by our insurance company partners and third-party product providers;- significant increases in commission rates paid to our sales agents and seed clients;         - the quality and productivity of our sales agents and financial advisors;         - seasonal variations caused by business mix, insurance companies' business practices and consumer demand;         - a decline or slowdown of the growth in the value of wealth management products, which may reduce the value of products we distribute for wealth management product providers and the products provided by us and, in turn, our revenues and cash flows;- negative public perception and reputation of the insurance and wealth management services industry;and - changes in laws or regulatory policies that could impact our ability to provide products and services to our customers. As a result of these and other factors, the results of any prior interim or annual periods should not be relied upon as indications of our future revenues or operating performance.

We rely primarily on a combination of copyright, trade secret, trademark and anti-unfair competition laws and contractual rights to establish and protect our intellectual property rights. We cannot assure you that the steps we have taken or will take in the future to protect our intellectual property or piracy will prove to be sufficient. For example, although we require our employees, wealth management product providers and seed clients to enter into confidentiality agreements in order to protect our trade secrets, other proprietary information and, most importantly, our client information, these agreements might not effectively prevent disclosure of our trade secrets, know-how or other proprietary information and might not provide an adequate remedy in the event of unauthorized disclosure of such confidential information. In addition, other parties may independently discover trade secrets and proprietary information, and in such cases, we could not assert any trade secret rights against such parties. Implementation of intellectual property-related laws in China has historically been lacking, primarily due to ambiguity in the PRC laws and enforcement difficulties. Accordingly, intellectual property rights and confidentiality protection in China may not be as effective as in the United States or other countries. Current or potential competitors may use our intellectual property without our authorization in the development of products and services that are substantially equivalent or superior to ours, which could reduce demand for our products and services, adversely affect our revenues and harm our competitive position. Even if we were to discover evidence of infringement or misappropriation, our recourse against such competitors may be limited or could require us to pursue litigation, which could involve substantial costs and diversion of management's attention from the operation of our business.