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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE

13a-16 OR 15d-16 UNDER

THE SECURITIES EXCHANGE ACT OF 1934

For the month of November 2022

Commission File Number 001-38752

360 DigiTech, Inc.

(Translation of registrant’s name into English)

7/F Lujiazui Finance Plaza

No. 1217 Dongfang Road

Pudong New Area, Shanghai 200122

People’s Republic of China

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. Form 20-F Form 40-F

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Table of Contents

Exhibit Index

Exhibit 99.1—Audited consolidated financial statements of 360 DigiTech Inc. as of and for the six months ended June 30, 2022

Exhibit 99.2—Unaudited interim condensed consolidated financial statements of 360 DigiTech Inc. as of and for the nine months ended September 30, 2022

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

360 DigiTech, Inc.

By:

/s/ Alex Xu

Name:

Alex Xu

Title:

Director and Chief Financial Officer

Date: November 14, 2022

28950870002159337000http://fasb.org/us-gaap/2021-01-31#OtherAssetsNoncurrenthttp://fasb.org/us-gaap/2021-01-31#AccruedLiabilitiesAndOtherLiabilitieshttp://fasb.org/us-gaap/2021-01-31#OtherLiabilitiesNoncurrentP12M7066790000.0300000P3Yhttp://fasb.org/us-gaap/2021-01-31#OtherAssetsNoncurrenthttp://fasb.org/us-gaap/2021-01-31#AccruedLiabilitiesAndOtherLiabilitieshttp://fasb.org/us-gaap/2021-01-31#OtherLiabilitiesNoncurrent

Exhibit 99.1

360 DIGITECH, INC.

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)

except for number of shares and per share data, or otherwise noted)

As of December 31, 

As of June 30,

    

2021

    

2022

RMB

RMB

USD

(Note 2)

ASSETS

 

  

 

  

 

  

Current assets:

 

  

 

  

 

  

Cash and cash equivalents

 

6,116,360

6,965,238

1,039,883

Restricted cash (including RMB 657,075 and RMB 1,420,864 from the consolidated trusts as of December 31, 2021 and June 30, 2022, respectively)

 

2,643,587

3,764,988

562,098

Security deposit prepaid to third-party guarantee companies

874,886

698,478

104,280

Funds receivable from third party payment service providers

 

153,151

312,447

46,647

Accounts receivable and contract assets, net (net of allowance of RMB 287,538 and RMB 295,934 as of December 31, 2021 and June 30, 2022, respectively)

3,097,254

3,499,385

522,444

Financial assets receivable, net (net of allowance of RMB 432,658 and RMB 455,181 as of December 31, 2021 and June 30, 2022, respectively)

 

3,806,243

3,618,560

540,237

Amounts due from related parties (net of allowance of RMB 99,962 and RMB 117,339 as of December 31, 2021 and June 30, 2022, respectively)

 

837,324

733,386

109,492

Loans receivable, net (including RMB 8,646,950 and RMB 9,545,367 from the consolidated trusts as of December 31, 2021 and June 30, 2022, respectively)

 

9,844,481

10,850,458

1,619,931

Prepaid expenses and other assets (including RMB 104,515 and RMB 104,515 from the consolidated trusts as of December 31, 2021 and June 30, 2022, respectively)

 

383,937

364,908

54,479

Total current assets

 

27,757,223

30,807,848

4,599,491

Non-current assets:

 

 

 

Accounts receivable and contract assets, net-noncurrent (net of allowance of RMB 28,374 and RMB 28,779 as of December 31, 2021 and June 30, 2022, respectively)

223,474

291,908

43,581

Financial assets receivable, net-noncurrent (net of allowance of RMB 60,988 and RMB 64,382 as of December 31, 2021 and June 30, 2022, respectively)

597,965

683,078

101,981

Amounts due from related parties (net of allowance of RMB 22,055 and RMB 7,837 as of December 31, 2021 and June 30, 2022,respectively)

140,851

55,136

8,231

Loans receivable, net-noncurrent (including RMB 1,829,804 and 1,023,231 from the consolidated trusts as of December 31, 2021 and June 30, 2022, respectively)

2,859,349

3,657,879

546,107

Property and equipment, net

 

24,941

20,487

3,059

Land use rights, net

1,018,908

1,008,548

150,572

Intangible assets, net

 

4,961

5,231

781

Deferred tax assets

 

834,717

1,059,963

158,248

Other non-current assets

42,606

76,030

11,351

Total non-current assets

 

5,747,772

6,858,260

1,023,911

TOTAL ASSETS

 

33,504,995

37,666,108

5,623,402

LIABILITIES AND EQUITY

 

  

 

  

 

  

LIABILITIES

Liabilities including amounts of the consolidated VIEs and trusts without recourse to the Company (Note 2):

 

  

 

  

 

  

Current liabilities:

 

  

 

  

 

  

Payable to investors of the consolidated trusts-current

 

2,304,518

5,224,973

 

780,068

Accrued expenses and other current liabilities

 

2,258,329

2,117,357

 

316,113

Amounts due to related parties

 

214,057

178,687

 

26,677

Short term loans

397,576

611,164

91,244

Guarantee liabilities-stand ready

 

4,818,144

4,538,963

 

677,649

Guarantee liabilities-contingent

3,285,081

3,320,414

495,725

Income tax payable

 

624,112

654,347

 

97,691

Other tax payable

 

241,369

177,611

 

26,517

Total current liabilities

 

14,143,186

16,823,516

 

2,511,684

Non-current liabilities:

Deferred tax liabilities

121,426

173,777

25,944

Payable to investors of the consolidated trusts-noncurrent

4,010,597

3,613,690

539,510

Other long-term liabilities

13,177

34,147

5,099

Total non-current liabilities

4,145,200

3,821,614

570,553

TOTAL LIABILITIES

 

18,288,386

 

20,645,130

3,082,237

Commitments and Contingencies (Note 17)

 

 

 

SHAREHOLDERS’ EQUITY

 

  

 

  

 

  

Ordinary shares ($0.00001 par value per share 5,000,000,000 shares authorized, 315,433,018 shares issued and 310,486,975 shares outstanding as of December 31, 2021, and 315,433,018 shares issued and 312,459,711 shares outstanding as of June 30, 2022, respectively)

22

22

3

Additional paid-in capital

5,672,267

5,771,100

861,603

Retained earnings

 

9,642,506

11,314,746

 

1,689,247

Other comprehensive loss

(110,932)

(67,612)

(10,094)

TOTAL 360 DIGITECH, INC. EQUITY

15,203,863

17,018,256

2,540,759

Non-controlling interests

12,746

2,722

406

TOTAL EQUITY

 

15,216,609

17,020,978

2,541,165

TOTAL LIABILITIES AND EQUITY

 

33,504,995

37,666,108

5,623,402

The accompanying notes are an integral part of these consolidated financial statements.

F-1

360 DIGITECH, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)

except for number of shares and per share data, or otherwise noted)

Six months ended June 30,

2021

2022

    

RMB

    

RMB

    

USD

(unaudited)

(Note 2)

Revenue, net of value-added tax and related surcharges:

 

  

 

  

Credit driven services

4,856,038

5,868,397

876,129

Loan facilitation and servicing fees-capital heavy (including revenue from related parties of RMB 93 (unaudited) and RMB 1,515 for the six months ended June 30, 2021 and 2022, respectively)

1,265,047

1,141,771

170,462

Financing income

897,528

1,608,820

240,191

Revenue from releasing of guarantee liabilities

2,647,734

3,074,515

459,013

Other services fees

45,729

43,291

6,463

Platform services

2,744,729

2,634,849

393,373

Loan facilitation and servicing fees-capital light (including revenue from related parties of RMB 1,036,893 (unaudited) and RMB 656,203 for the six months ended June 30, 2021 and 2022,respectively)

2,392,602

2,128,955

317,845

Referral services fees (including revenue from related parties of RMB nil (unaudited) and RMB 108,757 for the Six months ended June 30, 2021 and 2022, respectively)

286,594

382,650

57,128

Other services fees (including revenue from related parties of RMB 13,050 (unaudited) and RMB 20,526 for the six months ended June 30, 2021 and 2022, respectively)

65,533

123,244

18,400

Total net revenue

7,600,767

 

8,503,246

1,269,502

Operating costs and expenses:

 

 

Facilitation, origination and servicing (including costs charged by related parties of RMB 57,639 (unaudited) and RMB 63,448 for the six months ended June 30, 2021 and 2022 respectively)

1,035,735

 

1,170,561

 

174,760

Funding costs

162,242

227,630

33,984

Sales and marketing (including expenses charged by related parties of RMB 113,988 (unaudited) and RMB 246,546 for the six months ended June 30, 2021 and 2022, respectively)

884,946

 

1,167,657

 

174,327

General and administrative (including expenses charged by related parties of RMB 6,451 (unaudited) and RMB 8,252 for the six months ended June 30, 2021 and 2022, respectively)

243,774

 

216,148

 

32,270

Provision for loans receivable

381,887

 

907,317

 

135,459

Provision for financial assets receivable (including provision generated from related parties of RMB 807 (unaudited) and RMB 342 for the six months ended June 30, 2021 and 2022, respectively)

103,576

164,217

24,517

Provision for accounts receivable and contract assets (including provision charged by related parties of RMB 78,542 (unaudited) and RMB 13,400 for the six months ended June 30, 2021 and 2022, respectively)

157,116

117,025

17,471

Provision for contingent liabilities

1,220,586

2,162,638

322,873

Total operating costs and expenses

4,189,862

 

6,133,193

 

915,661

Income from operations

3,410,905

 

2,370,053

 

353,841

Interest income, net

82,875

 

68,188

 

10,180

Foreign exchange gain (loss)

13,895

(86,658)

(12,938)

Other income, net

50,811

203,458

30,375

Investment loss

 

(8,996)

 

(1,343)

Income before income tax expense

3,558,486

 

2,546,045

 

380,115

Income tax expense

(663,357)

 

(396,732)

 

(59,231)

Net income

2,895,129

 

2,149,313

 

320,884

Net (income) loss attributable to non-controlling interests

(42)

10,024

1,497

Deemed dividend

Net income attributable to ordinary shareholders of the Company

2,895,087

 

2,159,337

 

322,381

Net income per ordinary share attributable to ordinary shareholders of 360 DigiTech, Inc.

Basic

9.46

 

6.94

 

1.04

Diluted

9.02

 

6.74

 

1.01

Net income per ADS attributable to ordinary shareholders of 360 DigiTech, Inc. (1)

 

 

Basic

18.92

 

13.88

 

2.08

Diluted

18.04

 

13.48

 

2.02

Weighted average shares used in calculating net income per ordinary share

Basic

305,886,883

311,109,257

311,109,257

Diluted

320,958,192

320,251,194

320,251,194

(1)Based on ADS ratio of 1 ADS to 2 ordinary shares.

The accompanying notes are an integral part of these consolidated financial statements.

F-2

360 DIGITECH, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME OR LOSS

(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)

except for number of shares and per share data, or otherwise noted)

Six months ended June 30,

2021

2022

    

RMB

    

RMB

    

USD

(unaudited)

(Note 2)

Net income

 

2,895,129

2,149,313

 

320,884

Other comprehensive income, net of tax of nil:

Foreign currency translation adjustment

(15,792)

43,320

6,468

Other comprehensive income(loss)

 

(15,792)

43,320

 

6,468

Total comprehensive income

 

2,879,337

2,192,633

 

327,352

Comprehensive loss (income) attributable to non-controlling interests

(42)

10,024

1,497

Comprehensive income attributable to ordinary shareholders

 

2,879,295

2,202,657

 

328,849

The accompanying notes are an integral part of these consolidated financial statements.

F-3

360 DIGITECH, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)

except for number of shares and per share data, or otherwise noted)

Additional

Other

Non-

Number

Ordinary

Paid-in

Retained

Comprehensive

controlling

Total 

of shares

shares

capital

earnings

Loss

interests

equity

(unaudited)

    

    

RMB

    

RMB

    

RMB

    

RMB

    

RMB

    

RMB

Balance as of December 31, 2020

304,453,780

21

5,417,406

4,137,542

(74,391)

512

9,481,090

Issuance of ordinary shares

3,310,860

Share-based compensation

126,830

126,830

Other comprehensive loss

(15,792)

(15,792)

Net income

2,895,087

42

2,895,129

Balance as of June 30, 2021

307,764,640

21

5,544,236

7,032,629

(90,183)

554

12,487,257

    

    

    

    

    

Additional

    

    

Other

    

Non-

    

    

Number

Ordinary

Paid-in

Retained

Comprehensive

controlling

Total

of shares

shares

capital

earnings

Income (loss)

interests

equity

    

    

RMB

    

RMB

    

RMB

    

RMB

    

RMB

    

RMB

Balance as of December 31, 2021

 

310,486,975

 

22

 

5,672,267

9,642,506

 

(110,932)

 

12,746

 

15,216,609

Issuance of ordinary shares

 

1,972,736

 

 

 

 

 

Share-based compensation

 

 

 

98,833

 

 

 

98,833

Dividends to shareholders

 

 

 

(487,097)

 

 

 

(487,097)

Other comprehensive income

 

 

 

 

43,320

 

 

43,320

Net income (loss)

 

 

 

2,159,337

 

 

(10,024)

 

2,149,313

Balance as of June 30, 2022

 

312,459,711

 

22

 

5,771,100

11,314,746

 

(67,612)

 

2,722

 

17,020,978

The accompanying notes are an integral part of these consolidated financial statements.

F-4

360 DIGITECH, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)

except for number of shares and per share data, or otherwise noted)

Six months ended June 30,

2021

2022

    

RMB

    

RMB

    

USD

(unaudited)

(Note 2)

Cash Flows from Operating Activities:

 

  

 

  

Net income

 

2,895,129

2,149,313

320,884

Adjustments to reconcile net income to net cash provided by operating activities:

 

Depreciation, amortization and reduction in right-of-use assets

 

23,761

39,650

5,920

Share-based compensation

126,830

98,833

14,755

Investment loss

 

8,996

1,343

Provision for loans receivable, financial assets receivable and accounts receivable and contract assets

642,579

1,188,559

177,447

Provision for contingent liabilities

1,220,586

2,162,638

322,873

Foreign exchange (gain) loss

 

(13,895)

86,658

12,938

Changes in operating assets and liabilities

 

Funds receivable from third party payment service providers

24,034

(159,295)

(23,782)

Accounts receivable and contract assets

 

152,151

(574,191)

(85,724)

Financial assets receivable

 

(534,353)

(61,305)

(9,153)

Prepaid expenses and other assets

86,702

15,698

2,344

Security deposit prepaid to third-party guarantee companies

 

(45,848)

176,407

26,337

Deferred tax

432,815

(172,895)

(25,813)

Other non-current assets

 

(9,659)

(54,068)

(8,072)

Amounts due to (from) related parties

 

(752,106)

140,542

20,982

Guarantee liabilities

 

(1,171,421)

(2,406,485)

(359,279)

Income tax payable

 

(350,383)

30,234

4,514

Other tax payable

 

(5,749)

(63,758)

(9,519)

Land use rights, net

(1,036,178)

Accrued expenses and other current liabilities

360,563

(93,959)

(14,028)

Other long-term liabilities

 

(2,369)

20,969

3,131

Interest receivable/ payable

 

(41,550)

5,370

802

Net cash provided by operating activities

 

2,001,639

2,537,911

378,900

Cash Flows from Investing Activities:

 

Purchase of property and equipment and intangible assets

 

(9,807)

(4,476)

(668)

Investment in loans receivable

 

(17,336,499)

(24,707,860)

(3,688,786)

Collection of investment in loans receivable

 

15,108,308

22,023,551

3,288,030

Loans provided to related parties

(50,000)

Capital injection to an investee entity

(8,996)

(1,343)

Disposal of subsidiaries and other business units, net of cash received

 

3,349

500

Net cash used in by investing activities

(2,287,998)

(2,694,432)

(402,267)

Cash Flows from Financing Activities:

 

 

Proceeds from short term loans

150,327

190,179

28,393

Repayment of short term loans

Cash received from investors of the consolidated trusts

3,015,273

4,514,320

673,970

Cash paid to investors of the consolidated trusts

(2,442,693)

(2,023,656)

(302,124)

Contribution from non-controlling interests

 

Dividend to shareholders

 

(551,666)

(82,362)

Loan received from non-controlling interests

344,487

Loan payment to non-controlling interests

(30,168)

Cash received from a related party for investment

344,487

Cash repayment to a related party

 

(30,168)

Net cash provided by financing activities

 

1,351,545

2,129,177

317,877

Effect of foreign exchange rate changes

 

(2,752)

(2,377)

(355)

Net increase in cash and cash equivalents

1,062,434

1,970,279

294,155

Cash, cash equivalents, and restricted cash, beginning of period

6,774,266

8,759,947

1,307,826

Cash, cash equivalents, and restricted cash, end of period

7,836,700

10,730,226

1,601,981

Supplemental disclosures of cash flow information:

Income taxes paid

(580,879)

(539,393)

(80,529)

Interest paid (not including interest paid to investors of consolidated trusts)

 

(6,727)

(3,941)

(588)

Supplemental disclosure of significant non-cash investing and financing activities:

Payables for dividends:

230,095

34,352

Reconciliation to amounts on consolidated balance sheet:

Cash and cash equivalents

 

5,191,999

6,965,238

1,039,883

Restricted cash

 

2,644,701

3,764,988

562,098

Total cash, cash equivalents, and restricted cash

7,836,700

10,730,226

1,601,981

The accompanying notes are an integral part of these consolidated financial statements.

F-5

360 DIGITECH, INC.

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)

except for number of shares and per share data, or otherwise noted)

1.           ORGANIZATION AND PRINCIPAL ACTIVITIES

360 DigiTech, Inc. (the “Company”, previously known as “360 Finance, Inc. ”) was incorporated in Cayman Islands with limited liability on April 27, 2018. The Company and its subsidiaries (together, the “Group”) are engaged in matching borrowers with credit demand to a diversified pool of financial institutions with credit to supply through a financial technology platform.

The Company’s significant subsidiaries and its consolidated Variable Interest Entities (“VIEs”) as of June 30, 2022 are as follows:

    

Date of

    

Place of

Incorporation

Incorporation

Subsidiaries

HK Qirui International Technology Company Limited (“HK Qirui”)

 

June 14, 2018

 

Hong Kong

Shanghai Qiyue Information & Technology Co., Ltd. (“Qiyue”)

 

August 7, 2018

 

PRC

Shanghai Qidi Information Technology Co., Ltd. (“Qidi”)

June 27, 2019

PRC

Beihai Qicheng Information & Technology Co., Ltd. (“Qicheng”)

August 6, 2019

PRC

VIEs and VIEs Subsidiaries

 

  

 

  

Shanghai Qiyu Information & Technology Co., Ltd. (“Qiyu”)

 

July 25, 2016

 

PRC

Fuzhou 360 Online Microcredit Co., Ltd. (“Fuzhou Microcredit”)

 

March 30, 2017

 

PRC

Fuzhou 360 Financing Guarantee Co., Ltd. (“Fuzhou Guarantee”)

 

June 29, 2018

 

PRC

Shanghai Qiyaoxin Technology Co., Ltd. (formerly known as “Shanghai 360 Financing Guarantee Co., Ltd.”, “Shanghai Financing Guarantee”)

May 20, 2019

PRC

History of the Group and reorganization under identical common ownership

The Group started its business in 2016 through Qiyu, a limited liability company in the People’s Republic of China (“PRC”). In 2018, the Company undertook a series of transactions to redomicile its business from the PRC to the Cayman Islands and established intermediary companies of HK Qirui and Qiyue (“WFOE”) for the purpose of establishing a VIE structure of the Group. The WFOE entered into VIE agreements which effectively provided control to the WFOE over the operations of the VIEs.

The VIE arrangement

PRC laws and regulations prohibit or restrict foreign control of companies involved in provision of internet content and certain finance business. To comply with these foreign ownership restrictions, the Company operates substantially all of its service through its VIEs in the PRC.

The VIEs hold leases and other assets necessary to provide services and generate the majority of the Company’s revenues. To provide the Company effective control over the VIEs and the ability to receive substantially all of the economic benefits of the VIEs, a series of contractual arrangements were entered into amongst Qiyue (“WFOE”), VIEs and their beneficial shareholders. In June 2022, the set of VIE agreements were terminated and replaced by a set of new VIE agreements signed by the same parties, with no material changes to the major terms.

F-6

360 DIGITECH, INC.

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)

except for number of shares and per share data, or otherwise noted)

1.           ORGANIZATION AND PRINCIPAL ACTIVITIES - continued

The VIE arrangement - continued

Agreements that were entered to provide the Company effective control over the VIEs

Voting Proxy Agreement

Pursuant to the voting proxy agreement entered into among WFOE, Qiyu and Shanghai Qibutianxia Information Technology Co., Ltd. (formerly known as Beijing Qibutianxia Technology Co., Ltd. “Qibutianxia”), Qibutianxia would irrevocably authorize the WFOE or any person designated by the WFOE to act as its attorney-in-fact to exercise all of its rights as a shareholder of Qiyu, including, but not limited to: (i) to convene and participate in shareholders’ meeting pursuant to the constitutional documents of Qiyu in the capacity of a proxy of Qibutianxia; (ii) to exercise the voting rights pursuant to the relevant PRC laws and regulations and the articles of Qiyu, on behalf of Qibutianxia, and adopt resolutions, including but not limited to dividend rights, sale or transfer or pledge or disposal of part or all of Qiyu’s equity; (iii) to nominate, designate or appoint and remove the legal representative, directors, supervisors and other senior management of Qiyu pursuant to the constitutional documents of Qiyu.

The Voting Proxy Agreement has an indefinite term and will be terminated in the event that (i) it is unilaterally terminated by the WFOE, or (ii) it is legally permissible for the WFOE, the Company or any of the subsidiaries to hold equity interests directly or indirectly in Qiyu and the WFOE or its designated person is registered to be the sole shareholder of Qiyu.

Exclusive Option Agreement

Pursuant to the exclusive option agreement entered into among WFOE, Qiyu and Qibutianxia, the sole Registered Shareholder of Qiyu. Qibutianxia irrevocably grants the WFOE an exclusive option to purchase or designate one or more persons to purchase, all or part of its equity interests in Qiyu, and Qiyu irrevocably grants the WFOE an exclusive option to purchase all or part of its assets, subject to applicable PRC laws. The WFOE or its designated person may exercise such options at the lowest price permitted under applicable PRC laws. Qibutianxia and Qiyu will undertake that, among other things, without the WFOE’s prior written consent, including but not limited to: (i) they shall not in any manner supplement, change or amend the constitutional documents of Qiyu, increase or decrease their registered capital, or change the structure of their registered capital in other manner; (ii) they shall not at any time following the signing of the Exclusive Option Agreement, sell, transfer, pledge or dispose of in any manner any assets of Qiyu or interest in the business or revenues of Qiyu, or allow the encumbrance thereon of any security interest; (iii) they shall not cause or permit Qiyu to merge, consolidate with, acquire or invest in any person. In addition, Qibutianxia will undertake that, without the WFOE’s prior written consent, it will not, among other things including, but not limited to, sell, transfer, pledge or dispose of in any other manner the legal or beneficial interest in Qiyu, or allow the encumbrance thereon of any security interest, except for the equity pledge under Qiyu’s equity interests pursuant to the Equity Interest Pledge Agreement.

The Exclusive Option Agreement has an indefinite term commencing from its date of signing unless and until all the equity interests and assets subject to the agreement have been transferred to the WFOE and/or its designated person and the WFOE and its subsidiaries or affiliates can legally operate the business of Qiyu, whereby the exclusive option agreement shall terminate. WFOE is entitled to unilaterally terminate the Exclusive Option Agreement while other parties to the Exclusive Option Agreement may not terminate the Exclusive Option Agreement unilaterally, unless otherwise provided under PRC laws.

F-7

360 DIGITECH, INC.

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)

except for number of shares and per share data, or otherwise noted)

1.           ORGANIZATION AND PRINCIPAL ACTIVITIES - continued

The VIE arrangement - continued

Agreements that were entered to transfer economic benefits to the Company

Exclusive Business Cooperation Agreement

Pursuant to the exclusive business cooperation agreement between the WFOE and Qiyu, Qiyu agreed to engage the WFOE as its exclusive service provider of, among other things, consulting and technical services required by Qiyu’s business. Qiyu will agree to pay the WFOE service fee at the amount which is adjusted at the WFOE’s sole discretion taking into account factors including but not limited to: (i) the management and technical difficulty and the complexity of the management, technical consulting and other services provided by the WFOE; (ii) the time required by relevant personnel of the WFOE in providing such management and technical consulting and other services; (iii) the exact content and business value of the management, technical consulting and other services; (iv) the exact content and business value of intellectual property license and lease provided by the WFOE; and (v) the market price of services of similar types. In addition, absent the prior written consent of the WFOE, during the term of the Exclusive Business Cooperation Agreement, with respect to the services subject to the Exclusive Business Cooperation Agreement and other matters, Qiyu and its subsidiaries shall not accept the same or any similar services provided by any third party and shall not establish cooperation relationships similar to that formed by the exclusive business cooperation agreement with any third party. The WFOE would have the exclusive ownership of all the intellectual property rights created as a result of the performance of the Exclusive Business Cooperation Agreement to the extent permitted by applicable PRC laws. The Company considers that the arrangement will ensure the economic benefits generated from the operations of the consolidated affiliated entities flow to the WFOE and hence, the Group as a whole.

The Exclusive Business Cooperation Agreement has an indefinite term. The Exclusive Business Cooperation Agreement may be terminated by the WFOE: (i) when Qiyu becomes insolvent, bankrupt or subject to liquidation or dissolution procedures; (ii) upon the transfer of the entire equity interests in and the transfer of all assets of Qiyu to the WFOE or its designated person pursuant to the exclusive option agreement entered into between the WFOE, Qiyu and Qibutianxia; (iii) when it is legally permissible for the WFOE to hold equity interests directly or indirectly in Qiyu and the WFOE or its designated person is registered to be the shareholder of Qiyu; (iv) when relevant government authorities refuse to renew the expired operating period of Qiyu or the WFOE; (v) by giving Qiyu a 30 days’ prior written notice of termination; or (vi) Qiyu breaches the Exclusive Business Cooperation Agreement. Qiyu is not contractually entitled to unilaterally terminate the Exclusive Business Cooperation Agreement with the WFOE.

Loan Agreement

Pursuant to the loan agreement among the WFOE, Qiyu and Qibutianxia, the WFOE is entitled to provide interest-free loans, to the extent permitted by laws, regulations and industry policies of the PRC from time to time at such time and amount as it deems appropriate to Qibutianxia for the purpose of Qiyu’s business operation and development, including but not limited to directly injecting such funds to the registered capital of Qiyu. Each of the loans made under this loan agreement has no fixed term, and unless otherwise agreed, the WFOE shall unilaterally decide when to withdraw the loans, provided that the WFOE shall notify Qibutianxia in writing one month in advance. The loan agreement shall remain in effect during Qiyu’s term (and any renewable term provided by the PRC law), and shall automatically terminate after the WFOE and/or other entities designated by the WFOE fully exercise all their rights under the exclusive option agreement.

F-8

360 DIGITECH, INC.

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)

except for number of shares and per share data, or otherwise noted)

1.           ORGANIZATION AND PRINCIPAL ACTIVITIES – continued

The VIE arrangement – continued

Equity Interest Pledge Agreement

Pursuant to the equity pledge agreement, Qibutianxia agreed to pledge all of its equity interests in Qiyu to the WFOE as a security interest to guarantee the performance of contractual obligations and the payment of outstanding debts under the VIE arrangements. In the event of a breach by Qiyu or Qibutianxia of contractual obligations under the VIE arrangements, the WFOE, as pledgee, will have the right to dispose of the pledged equity interests in Qiyu. Qibutianxia has undertaken to the WFOE, among other things, not to transfer its equity interests in Qiyu and not to create or allow any pledge thereon that may affect the rights and interest of the WFOE without its prior written consent.

The Company also has some other sets of VIE contractual arrangements. The arrangements with its significant VIEs include 1) the arrangement among the WFOE, Fuzhou Guarantee and Qibutianxia, and 2) the arrangement among the WFOE, Shanghai Financing Guarantee and two fully owned subsidiaries of Qibutianxia. These sets of the contractual agreements are substantially similar to the set with Qiyu as described above.

In April 2021, the contractual arrangements amongst WFOE, Fuzhou Microcredit and Qibutianxia were terminated and Qibutianxia transferred all of its equity interest in Fuzhou Microcredit to Qiyu. As a result, Fuzhou Microcredit became a wholly-owned subsidiary of Qiyu. This transaction had no impact to the consolidated financial statements.

Risks in relation to VIE structure

The Company believes that the contractual arrangements with Qiyu, Fuzhou Guarantee, Shanghai Financing Guarantee and their shareholders, Qibutianxia, are in compliance with existing PRC laws and regulations and are valid, binding and enforceable and will not result in any violation of PRC laws or regulations and the PRC regulatory authorities may take a contrary view. If the legal structure and contractual arrangements were found to be in violation of any existing PRC laws and regulations, the regulatory authorities may exercise their discretion and:

revoke the business and operating licenses of the Company’s PRC subsidiaries or consolidated affiliated entities;
restrict the rights to collect revenues from any of the Company’s PRC subsidiaries;
discontinue or restrict the operations of any related-party transactions among the Company’s PRC subsidiaries or consolidated affiliated entities;
require the Company’s PRC subsidiaries or consolidated affiliated entities to restructure the relevant ownership structure or operations;
take other regulatory or enforcement action is, including levying fines that could be harmful to the Company’s business; or
impose additional conditions or requirements with which the Company may not be able to comply.

The imposition of any of these penalties may result in a material adverse effect on the Company’s ability to conduct its business. In addition, if the imposition of any of these penalties causes the Company to lose the rights to direct the activities of the VIEs or the right to receive substantially all of their economic benefits, the Company would no longer be able to consolidate the financial results of the VIEs.

F-9

360 DIGITECH, INC.

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)

except for number of shares and per share data, or otherwise noted)

1.

ORGANIZATION AND PRINCIPAL ACTIVITIES - continued

The VIE arrangement – continued

Risks in relation to VIE structure - continued

These contractual arrangements allow the Company to effectively control Qiyu, Fuzhou Guarantee and Shanghai Financing Guarantee, and to derive substantially all of the economic benefits from them. Accordingly, the Company treats Qiyu, Fuzhou Guarantee and Shanghai Financing Guarantee as VIEs. Because the Company is the primary beneficiary, the Company has consolidated the financial results of the VIEs.

The following financial statement amounts and balances of the VIEs were included in the accompanying consolidated financial statements after elimination of intercompany transactions and balances. The table below does not include the financial information of the consolidated trusts (see note 2 “Consolidated Trusts”):

    

December 31, 

    

June 30, 

2021

2022

RMB

RMB

ASSETS

 

  

 

  

Cash and cash equivalents

 

4,605,851

 

6,556,202

Restricted cash

 

1,986,512

 

2,344,124

Funds receivable from third party payment service providers

 

153,151

 

312,447

Accounts receivable and contract assets, net

2,133,477

1,653,349

Financial assets receivable, net

 

3,806,243

 

3,618,560

Security deposit prepaid to third-party guarantee companies

874,886

698,478

Amounts due from related parties

 

608,924

 

384,804

Loans receivable, net

 

1,197,532

 

1,305,091

Prepaid expenses and other assets

 

235,780

 

253,539

Property and equipment, net

 

15,074

 

12,831

Land use rights, net

1,018,908

1,008,548

Intangible assets

 

3,972

 

4,433

Deferred tax assets

 

779,291

 

967,237

Accounts receivable and contract assets, net-non current

217,298

290,528

Financial assets receivable, net-non current

597,965

683,078

Amounts due from related parties, non-current

121,855

49,627

Loans receivable, net-non current

1,029,545

2,634,648

Other non-current assets

27,729

48,602

Total Assets

 

19,413,993

 

22,826,126

LIABILITIES

 

 

Short term loans

150,000

150,000

Guarantee liabilities-stand ready

 

4,818,144

 

4,538,963

Guarantee liabilities-contingent

3,285,081

3,320,414

Accrued expenses and other current liabilities

 

1,820,609

 

1,617,329

Income tax payable

449,553

581,136

Other tax payable

218,017

108,509

Amounts due to related parties

 

94,057

 

82,063

Deferred tax liabilities

65,542

27,328

Other long-term liabilities

10,271

23,958

Total liabilities

 

10,911,274

 

10,449,700

F-10

360 DIGITECH, INC.

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)

except for number of shares and per share data, or otherwise noted)

1.

ORGANIZATION AND PRINCIPAL ACTIVITIES - continued

The VIE arrangement – continued

Risks in relation to VIE structure - continued

Six months ended June 30,

    

2021

    

2022

RMB

RMB

(unaudited)

Net revenue

6,248,574

 

6,713,481

Net income

2,930,834

 

1,566,142

Six months ended June 30,

    

2021

    

2022

RMB

RMB

(unaudited)

Net cash provided by operating activities

1,861,811

 

2,453,285

Net cash (used in) investing activities

(351,780)

 

(2,148,700)

Net cash provided by financing activities

673,400

 

The consolidated VIEs contributed 82% (unaudited) and 79% of the Group’s consolidated revenue for the six months ended June 30, 2021 and 2022, respectively. As of December 31, 2021 and June 30, 2022, the consolidated VIEs accounted for an aggregate of 58% and 61%, respectively, of the consolidated total assets, and 60% and 51%, respectively, of the consolidated total liabilities.

There are no assets of the VIEs that are collateral for the obligations of the VIEs and their subsidiaries and can only be used to settle the obligations of the VIEs and their subsidiaries. There are no terms in any arrangements, considering both explicit arrangements and implicit variable interests that require the Company or its subsidiaries to provide financial support to the VIEs. However, if the VIEs ever need financial support, the Company or its subsidiaries may, at its option and subject to statutory limits and restrictions, provide financial support to its VIEs through loans to the shareholder of the VIEs.

Relevant PRC laws and regulations restrict the VIEs from transferring a portion of their net assets, equivalent to the balance of its statutory reserve and its share capital, to the Company in the form of loans and advances or cash dividends. Please refer to Note 14 for disclosure of restricted net assets.

2.           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).

Basis of consolidation

The accompanying consolidated financial statements include the financial statements of the Company, its subsidiaries, and consolidated VIEs. All intercompany transactions and balances have been eliminated.

Consolidated Trusts

Loans funded by the financial institution partners in the Group’s loan facilitation business are typically disbursed to the borrowers directly from such partners. However, in order to diversify the Group’s funding sources, lower the Group’s funding cost and due to the need of certain financial institution partners, loans from such financial institution partners are funded and disbursed indirectly through trusts. Several trusts were formed by third-party trust companies, who administer the trusts.

F-11

360 DIGITECH, INC.

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“USD”)

except for number of shares and per share data, or otherwise noted)

2.           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Consolidated Trusts - continued

The Trusts fund loans facilitated by the Group using the funds received from its beneficiaries to the borrowers. The Trusts provide the returns to its beneficiaries through interest payments made by the borrowers. The borrowers are charged with the interests by the Trusts. For the majority of trust, the Group is either entitled to the residual profit in the Trusts or the Group has provided guarantee to the Trusts by agreeing to repurchase any loans that are delinquent for 30 to 90 days from which the Group absorbs the credit risk of the Trusts resulting from borrowers’ delinquencies. The Group determined that the residual profit or the guarantee represents a variable interest in the Trusts through which the Group has the right to receive benefits or the obligation to absorb losses from the Trusts that could potentially be significant to the Trusts. Since the Trusts only invest in the loans facilitated by the Group and the Group continues to service the loans through a service agreement post origination and has the ability to direct default mitigation activities, the Group has the power to direct the activities of the Trusts that most significantly impact the economic performance of the Trusts. As a result, the Group is considered the primary beneficiary of the Trusts and consolidated the Trusts’ assets, liabilities, results of operations and cash flows.

In 2019, the Group received letter of approval for listing and transferring assets backed securities (“ABS”) on both Shanghai Stock Exchange and Shenzhen Stock Exchange within the issue scale of RMB 5 billion for each, respectively. In 2020, the Group also received letter of approval for listing and transferring assets backed securities (“ABS”) on Shenzhen Stock Exchange within the issue scale of RMB 10 billion. In 2021, the Group also received letter of approval for listing and transferring assets backed securities (“ABS”) on Shanghai Stock Exchange and Shenzhen Stock Exchange within the issue scale of RMB 8 billion and RMB 4 billion, respectively. For some trusts, the trust beneficial rights, or the loans receivable in the trusts, were transferred, as underlying assets, to the asset backed special plans (the “ABS plans”). The beneficial rights and loans receivable of RMB3.1 billion (unaudited) and RMB3.0 billion in trusts were transferred to the ABS plans for the six months ended June 30, 2021 and 2022, respectively. The ABS plans were securitized and listed on Shanghai Stock Exchange and Shenzhen Stock Exchange, with terms of no more than two years. As of June 30, 2022, the Group held the whole subordinated tranche securities to provide credit enhancement. The underlying trusts were continued to be consolidated by the Group. Senior tranche securities held by external financial institution partners were recorded as “payable to investors of the consolidated trusts – current” with the balance of RMB 2,139,063 and RMB 4,019,635 as of December 31, 2021 and June 30, 2022, respectively and “payable to investors of the consolidated trusts – noncurrent” with the balance of RMB 3,903,597 and RMB 3,613,690 as of December 31, 2021 and June 30, 2022, respectively on the consolidated balance sheet.

As of December 31, 2021 and June 30, 2022, the balance of delinquent loans repurchased by the Group from the consolidated trusts are RMB 904,586 and RMB 1,194,155, respectively. As of December 31, 2021 and June 30, 2022, the balance of performing loans upon liquidation of certain consolidated trusts repurchased by the Group from the consolidated trusts per the contracts agreed with the counterparty are RMB 12,686 and RMB 16,081, respectively.

For the years ended December 31, 2021 and six months ended June 30, 2022, the provision for loan losses of RMB 661,402 and RMB 463,750 were charged to the consolidated statements of operations, respectively. There were RMB 1,033,228 and RMB 1,416,707 of loans written off for the years ended December 31, 2021 and six mo