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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

(Mark One)

    REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2023

OR

    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

    SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report . . . . . . . . . . . . . . . . . . .

For the transition period from                       to

Commission file number: 001-40238

Hywin Holdings Ltd.

(Exact name of Registrant as specified in its charter)

Cayman Islands

(Jurisdiction of incorporation or organization)

F3, Hywin Financial Centre
8 Yincheng Mid. Road
Pudong New District, Shanghai 200120
People’s Republic of China

(Address of principal executive offices)

Wai LOK, Chief Financial Officer

Telephone: +86 21 80133992

Email: IR@hywinwealth.com
F3, Hywin Financial Centre
8 Yincheng Mid. Road
Pudong New District, Shanghai 200120
People’s Republic of China

(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

American depositary shares

(each ADS represents two of our ordinary shares, par value US$0.0001 per share)

HYW

Nasdaq Global Market

Ordinary shares, par value US$0.0001 per share*

Nasdaq Global Market

*

Not for trading, but only in connection with the listing on the Nasdaq Global Market of American depositary shares.

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

47,750,000 ordinary shares (excluding 8,250,000 ordinary shares issued to the depositary for bulk issuance of ADSs, par value US$0.0001 per share, as of June 30, 2023).

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes   No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes   No

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Emerging growth company 

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. 

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP

International Financial Reporting Standards as issued
by the International Accounting Standards Board

Other

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17   Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes No

TABLE OF CONTENTS

Page

PART I

5

ITEM 1.

IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS.

5

ITEM 2.

OFFER STATISTICS AND EXPECTED TIMETABLE

5

ITEM 3.

KEY INFORMATION

5

ITEM 4.

INFORMATION ON THE COMPANY

64

ITEM 4A.

UNRESOLVED STAFF COMMENTS

103

ITEM 5.

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

103

ITEM 6.

DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

120

ITEM 7.

MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

129

ITEM 8.

FINANCIAL INFORMATION

130

ITEM 9.

THE OFFER AND LISTING

131

ITEM 10.

ADDITIONAL INFORMATION

131

ITEM 11.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

146

ITEM 12.

DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

147

PART II

150

ITEM 13.

DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

150

ITEM 14.

MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

150

ITEM 15.

CONTROLS AND PROCEDURES

150

ITEM 16A.

AUDIT COMMITTEE FINANCIAL EXPERT

151

ITEM 16B.

CODE OF ETHICS

152

ITEM 16C.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

152

ITEM 16D.

EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

152

ITEM 16E.

PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

152

ITEM 16F.

CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT

152

ITEM 16G.

CORPORATE GOVERNANCE

153

ITEM 16H.

MINE SAFETY DISCLOSURE

153

ITEM 16I.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

153

ITEM 16J.

INSIDER TRADING POLICIES

153

PART III

154

ITEM 17.

FINANCIAL STATEMENTS

154

ITEM 18.

FINANCIAL STATEMENTS

154

ITEM 19.

EXHIBITS

154

i

INTRODUCTION

Except where the context otherwise requires and for purposes of this annual report only:

“ADSs” refers to our American depositary shares, each of which represents two ordinary shares;
“AMAC” refers to the Asset Management Association of China;
“AUM” refers to assets under management, which represent a) the amount of capital contributions made by investors to asset management products that we manage as investment manager or investment advisor, for which we are entitled to receive recurring service fees calculated as a function of defined fee rates and the value of the asset management products, if the value of such products is not marked to market; and b) the net asset value of funds or discretionary mandates or advisory mandates that we manage, for which we are entitled to receive recurring service fees calculated as a function of defined fee rates and the value of the funds or mandates, if the value of such funds or mandates is marked to market;
“CAGR” refers to compound annual growth rate;
“China” or the “PRC” refers to the People’s Republic of China, including the Hong Kong Special Administrative Region and the Macau Special Administrative Region, except when referencing specific laws and regulations adopted by the PRC and other legal and tax matters applicable only to the PRC, and excluding, for the purpose of this annual report only, Taiwan; the legal and operational risks associated with operating in the PRC also apply to our operations in Hong Kong;
“EIT” refers to PRC enterprise income tax;
“HNWIs” refers to high net worth individuals with investable assets over US$1.0 million;
“Hywin,” “we,” “us,” “the Company,” “our company,” “the Group” and “our” refer to Hywin Holdings Ltd., an exempted company incorporated in the Cayman Islands, and its subsidiaries and, only in the context of describing our consolidated financial information, business operations and operating data, the VIEs, which are domestic PRC companies in which we do not have any equity ownership but whose financial results have been consolidated into our consolidated financial statements based solely on contractual arrangements in accordance with U.S. GAAP;
“Hywin Consulting” refers to Hywin Enterprise Management Consulting (Shanghai) Co., Ltd.;
“MOFCOM” refers to the Ministry of Commerce of the PRC;
“RMB” and “Renminbi” refer to the legal currency of China;
“SAFE” refers to the State Administration of Foreign Exchange;
“transaction value” refers to the aggregate value of the financial products we distribute through our wealth management business during a given period;
“US$,” “U.S. dollars,” “$” and “dollars” refer to the legal currency of the United States; and
“VIE” refers to variable interest entity.

1

Our reporting currency is Renminbi because the majority of our business is conducted in China and the majority of our revenues are denominated in Renminbi. This annual report contains translations of Renminbi amounts into U.S. dollars at specific rates solely for the convenience of the reader. The conversion of Renminbi into U.S. dollars in this annual report is based on the exchange rate published by the People’s Bank of China (“PBOC”). Unless otherwise noted, all translations from Renminbi to U.S. dollars and from U.S. dollars to Renminbi in this annual report were made at a rate of RMB 7.2258 to US$1.00 for figures on the balance sheet as of June 30, 2023, the exchange rate on June 30, 2023 published by the PBOC. We make no representation that any Renminbi or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or Renminbi, as the case may be, at any particular rate, the rates stated below, or at all. The PRC government imposes control over its foreign currency reserves in part through direct regulation of the conversion of Renminbi into foreign exchange and through restrictions on foreign trade. In addition, unless the context indicates otherwise, all information in this annual report assumes no exercise by the underwriters of their over-allotment option.

Hywin Holdings Ltd. is a Cayman Islands holding company primarily operating in China through its subsidiaries and contractual arrangements with the variable interest entities (“VIEs”), namely, Hywin Wealth Management Co., Ltd. (“Hywin Wealth Management”), Shanghai Hywin Network Technology Co., Ltd. (“Shanghai Hywin Network Technology”), and Shenzhen Panying Asset Management Co., Ltd. (“Shenzhen Panying”). Hywin does not own any equity interest in the VIEs. PRC laws, regulations, and rules restrict and impose conditions on direct foreign investment in certain types of business, and we therefore operate these businesses in China through the VIEs. For a summary of these contractual arrangements, see “Item 4. Information on the Company—C. Organizational Structure—Contractual Arrangements.” Investors in the ADSs thus are not purchasing, and may never directly hold, equity interests in the VIEs. As used in this annual report, “we”, “us”, or “our” refers to Hywin, its subsidiaries and the VIEs.

Our corporate structure is subject to risks relating to our contractual arrangements with the VIEs and their shareholders. If the PRC government finds these contractual arrangements non-compliant with the restrictions on direct foreign investment in relevant industries, or if the relevant PRC laws, regulations, and rules or the interpretation thereof change in the future, we could be subject to severe penalties or be forced to relinquish our interests in the VIEs or forfeit our rights under the contractual arrangements. Hywin and investors in the ADSs face uncertainty about potential future actions by the PRC government, which could affect the enforceability of our contractual arrangements with the VIEs and, consequently, significantly affect the financial condition and results of operations of the VIEs. If we are unable to claim our right to control the assets of the VIEs, the ADSs may decline in value or become worthless. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure.”

We face various legal and operational risks and uncertainties relating to doing business in China. We operate our business primarily in China, and are subject to complex and evolving PRC laws and regulations. For example, we face risks relating to regulatory approvals on overseas listings and oversight on cybersecurity and data privacy. Uncertainties in the PRC legal system and the interpretation and enforcement of PRC laws and regulations could limit the legal protection available to you and us, hinder our ability to offer or continue to offer the ADSs, result in a material adverse effect on our business operations, and damage our reputation, which might further cause the ADSs to significantly decline in value or become worthless. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in Mainland China and Hong Kong.”

2

FORWARD-LOOKING INFORMATION

This annual report contains forward-looking statements that involve risks and uncertainties. All statements other than statements of current or historical facts are forward-looking statements. These forward-looking statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements.

You can identify these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “likely to” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, but are not limited to, statements about:

our business strategies, plans, goals and objectives;
our future business development, financial condition and results of operations;
the expected growth of Mainland China’s wealth management services market and asset management services market and Hong Kong’s asset management market and insurance brokerage market;
our expectations regarding demand for and market acceptance of our existing and future products and services;
projections of revenue, earnings, capital structure and other financial items;
the capabilities of our business operations;
expected future economic performance;
our expectation regarding the use of proceeds from our financing activities;
relevant government policies and regulations relating to the industries in which we operate;
the impact of the COVID-19 outbreak and other public health crises or natural disasters;
competition in the wealth management services industry, asset management services industry and the insurance brokerage industry; and
general economic and business conditions in the markets in which we operate.

3

You should read this annual report and the documents that we refer to in this annual report with the understanding that our actual future results may be materially different from and worse than what we expect. Other sections of this annual report include additional factors which could adversely impact our business and financial performance. Moreover, we operate in an evolving environment. New risk factors and uncertainties emerge from time to time and it is not possible for our management to predict all risk factors and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements.

This annual report also contains statistical data and estimates that we obtained from government and private publications. Although we have not independently verified the data, we believe that the publications and reports are reliable. The market data contained in this annual report involves a number of assumptions, estimates and limitations. The wealth management market and related markets in China and elsewhere may not grow at the rates projected by market data, or at all. The failure of these markets to grow at the projected rates may have a material adverse effect on our business and the market price of our ADSs. If any one or more of the assumptions underlying the market data turns out to be incorrect, actual results may differ from the projections based on these assumptions. In addition, projections, assumptions and estimates of our future performance and the future performance of the industry in which we operate are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Item 3. Key Information—D. Risk Factors” and elsewhere in this annual report. You should not place undue reliance on these forward-looking statements.

4

PART I

Item 1.        Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2.        Offer Statistics and Expected Timetable

Not applicable.

Item 3.        Key Information

Our Corporate Structure and Contractual Arrangements with the VIEs and Their Shareholders

Hywin is not a Chinese operating company but a Cayman Islands holding company primarily operating in China through (i) its PRC subsidiaries, including Hywin Consulting (“WFOE”), in which we hold equity ownership interests, and (ii) the VIEs, namely Hywin Wealth Management Co., Ltd. (“Hywin Wealth Management”), Shanghai Hywin Network Technology Co., Ltd. (“Shanghai Hywin Network Technology”), and Shenzhen Panying Asset Management Co., Ltd. (“Shenzhen Panying”). We have control over the VIEs through our WFOE. Our WFOE entered into a series of contractual arrangements with the VIEs and their shareholders, allowing us to exercise effective control over the VIEs. These agreements or their forms include: (i) Exclusive Technical Consultation and Service Agreements, which enable us to receive substantially all of the economic benefits of the VIEs, (ii) Voting Rights Proxy and Financial Supporting Agreements and Equity Pledge Agreements, which provide us with effective control over the VIEs, and (iii) Equity Option Agreements, which provide us with the option to purchase all of the equity interests in the VIEs. However, control through these contractual arrangements is not equivalent to an equity ownership in the business of the VIEs, and we could face heightened risks and costs in enforcing these contractual arrangements. Any reference to control or benefits that accrue to us because of these contractual arrangement with the VIEs are limited to and subject to conditions that we have satisfied for consolidation of the VIEs under U.S. GAAP. Hywin Holdings Ltd. consolidates the operations and financial results of the VIEs in its financial statements as the primary beneficiary for accounting purposes. Investors in our ADSs thus are not purchasing equity interests in the VIEs that have substantial business operations in China, but instead are purchasing equity interests of a Cayman Islands holding company. Investors who are non-PRC residents may not directly hold equity interests in the VIEs under current PRC laws and regulations. The VIEs are consolidated for accounting purposes only and the Company does not own equity interests in the VIEs nor does the Company operate business through the VIEs.

Our corporate structure is subject to risks associated with our contractual arrangements with the VIEs. The PRC government could disallow the VIE structure, which would likely result in a material change in our operations and/or value of our securities, including that it could cause our securities to significantly decline in value or become worthless. If the PRC government deems that our contractual arrangements do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations change or are interpreted differently in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations. This would result in the VIEs being deconsolidated. A significant part of our assets, including the necessary licenses to conduct business in China, are held by the VIEs. A significant part of our revenues is generated by the VIEs. An event that results in the deconsolidation of the VIEs would have a material effect on our operations and result in the value of our securities diminishing substantially or even becoming worthless. Hywin Holdings Ltd., our WFOE, the VIEs, and investors of Hywin Holdings Ltd. face uncertainty about potential future actions by the PRC government that could affect the enforceability of the contractual arrangements with the VIEs and, consequently, significantly affect the financial performance of the VIEs and our company as a whole. Our ADSs may decline in value or become worthless if we are unable to consolidate the VIEs’ operations and financial results in our financial statements in accordance with U.S. GAAP, since the VIEs conduct a significant part of our operations. In addition, the VIE agreements under the contractual arrangements have never been tested in a court of law in China. For a detailed description of the risks associated with our corporate structure, please refer to risks disclosed under “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure.”

5

The following diagram illustrates our corporate structure, including our significant subsidiaries and the VIEs, as of the date of this annual report:

Graphic

_________________

Notes:

(1)Mr. HAN Hongwei holds 99% equity interest and Ms. HAN Yu, daughter of Mr. Han, holds the remaining 1% equity interest, respectively.

Because all of our operations in China are conducted through our WFOE and the VIEs, the Chinese government may exercise significant oversight and discretion over the conduct of our business and may intervene in or influence our operations at any time, which could result in a material change in our operations and/or a decline in the value of our ordinary shares.

6

Recent statements by the Chinese government have indicated an intent to exert more oversight and control over offerings that are conducted overseas and/or foreign investments in China-based issuers. Any future action by the Chinese government expanding the categories of industries and companies whose foreign securities offerings are subject to government review could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and could cause the value of such securities to significantly decline or be worthless.

Recently, the PRC government initiated a series of regulatory actions and made a number of public statements on the regulation of business operations in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas using a variable interest entity structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding efforts in anti-monopoly enforcement. Because these statements and regulatory actions are quite recent, it is highly uncertain how soon legislative or administrative regulation making bodies in China will respond to them, or what existing or new laws or regulations will be modified or promulgated, if any, or the potential impact such modified or new laws and regulations will have on our daily business operations or our ability to accept foreign investments and list on an U.S. exchange.

Transfer of Funds and Other Assets Between Us, Our Subsidiaries and the VIEs

The typical structure of cash flows through our organization is as follows: (i) our WFOE, Hywin Enterprise Management Consulting (Shanghai) Co., Ltd., receives funds from Hywin Holdings Ltd. through either capital contributions or loans; (ii) our WFOE makes loans to the VIEs and their subsidiaries; (iii) the VIEs and their subsidiaries receive funds generated from products and/or services provided to clients; and (iv) the VIEs and their subsidiaries pay service fees to our WFOE pursuant to Exclusive Technical Consultation and Services Agreement, and our WFOE transfers funds to Hywin Wealth International Limited, which in turn transfers funds to Hywin Wealth Global Limited, and finally to Hywin Holdings Ltd., all through dividends and distributions. As of the date of this annual report, none of our subsidiaries and the VIEs has declared or paid any dividends or made any distributions to their respective holding companies, including Hywin Holdings Ltd., nor does any of them have intention to do so. As of the date of this annual report, Hywin Holdings Ltd. has not declared any dividend and does not have a plan to declare a dividend to its shareholders. No cash have been transferred to our investors. We currently do not have cash management policies that dictate how funds are transferred between us, our subsidiaries and the VIEs. For details regarding the cash transfer between us, our subsidiaries and the consolidated VIEs, see “—Financial Information Related to the VIEs” and “Item 4. Information on the Company—C. Organizational Structure—Cash Transfers Between VIE Entities and our Company and its Subsidiaries.”

There are limitations on our ability to transfer cash between us, our subsidiaries and the VIEs, and there is no assurance that the PRC government will not intervene or impose restrictions on the ability of us, our subsidiaries and the VIEs to transfer cash. Most of our cash is in Renminbi, and the PRC government could prevent cash generated from operations from leaving the PRC, restrict deployment of cash into the businesses of us, our subsidiaries and the VIEs, and restrict the ability of us, our subsidiaries and the VIEs to pay dividends. For details regarding the restrictions on our ability to transfer cash between us, our subsidiaries and the VIEs, see “—D. Risk Factors—Risks Related to Doing Business in Mainland China and Hong Kong—Governmental control of conversion of Renminbi into foreign currencies may limit our ability to utilize our revenues effectively and affect the value of your investment.”

Financial Information Related to the VIEs

The following tables present the selected condensed consolidating schedules depicting the balance sheets, results of operations and cash flows for us, the VIEs, the WFOE and an aggregation of other entities, eliminating intercompany amounts and consolidated totals as of and for the years ended June 30, 2021, 2022 and 2023.

In these tables, “Parent” refers to Hywin Holdings Ltd., which is incorporated in the Cayman Islands. “VIEs” refer to Hywin Wealth Management Co., Ltd., Shenzhen Panying Asset Management Co., Ltd. and Shanghai Hywin Network Technology Co., Ltd., and their subsidiaries. “WFOE” refers to Hywin Holdings Ltd.’s wholly foreign-owned subsidiary, Hywin Enterprise Management Consulting (Shanghai) Co., Ltd. “Other subsidiaries” refer to Hywin Wealth Global Limited, which is a BVI company wholly owned by Hywin Holdings Ltd., and Hywin Wealth International Limited, which is a Hong Kong company wholly owned by Hywin Wealth Global Limited.

7

Selected Condensed Consolidating Schedule of Balance Sheets

    

As of June 30, 2023

    

    

    

    

Other

    

Eliminating

    

Consolidated

Parent

VIEs

WFOE

subsidiaries

adjustments

totals

(RMB in thousands)

Cash and cash equivalents

948

 

768,739

 

18,496

 

80,725

 

 

868,908

Restricted cash

 

76,975

 

 

 

 

76,975

Accounts receivable, net

 

415,134

 

 

 

 

415,134

Amounts due from related parties

192,011

 

 

 

 

(192,011)

 

Deposits, prepayments and other current assets

36

 

45,498

 

826

 

32

 

 

46,392

Term deposit

 

 

 

28,903

 

 

28,903

Contract assets

 

33,491

 

 

 

 

33,491

Property and equipment, net

 

349,685

 

 

 

 

349,685

Long-term investment

 

1,000

 

 

 

 

1,000

Intangible assets, net

 

98,603

 

 

 

 

98,603

Goodwill

 

257,712

 

 

 

 

257,712

Long-term prepayments

 

9,657

 

 

 

 

9,657

Deferred tax assets, net

 

725

 

 

 

 

725

Operating lease right-of-use assets, net

 

186,307

 

 

 

 

186,307

Total assets

192,995

 

2,243,526

 

19,322

 

109,660

 

(192,011)

 

2,373,492

Commission payable

 

172,456

 

 

 

 

172,456

Accounts payable

 

3,332

 

 

 

 

3,332

Advance from customers

 

39,812

 

 

 

 

39,812

Investors’ deposit

 

70,934

 

 

 

 

70,934

Income tax payable

 

167,798

 

 

 

 

167,798

Amounts due to related parties

 

91,528

 

30,415

 

108,141

 

(192,011)

 

38,073

Other payables and accrued liabilities

 

433,197

 

20

 

 

 

433,217

Operating lease liabilities

 

83,573

 

 

 

 

83,573

Commission payable-long term

 

526

 

 

 

 

526

Deferred tax liabilities

 

20,028

 

 

 

 

20,028

Operating lease liabilities, non-current

 

100,521

 

 

 

 

100,521

Total liabilities

 

1,183,705

 

30,435

 

108,141

 

(192,011)

 

1,130,270

Total mezzanine equity

 

30,600

 

 

 

 

30,600

Total noncontrolling interest

 

100,931

 

 

 

 

100,931

Total shareholders’ equity

192,995

 

928,290

 

(11,113)

 

1,519

 

 

1,111,691

Total liabilities, mezzanine equity, and shareholders’ equity

192,995

 

2,243,526

 

19,322

 

109,660

 

(192,011)

 

2,373,492

8

    

As of June 30, 2022

    

    

    

    

Other

    

Eliminating

    

Consolidated

Parent

VIEs

WFOE

subsidiaries

adjustments

totals

(RMB in thousands)

Cash and cash equivalents

791

 

377,558

 

46,250

 

100,537

 

 

525,136

Restricted cash

 

135,242

 

 

 

 

135,242

Accounts receivable, net

 

564,374

 

 

 

 

564,374

Amounts due from related parties

187,706

 

66,103

 

 

 

(187,706)

 

66,103

Deposits, prepayments and other current assets

34

 

51,159

 

3,065

 

 

(3,054)

 

51,204

Property and equipment, net

 

325,112

 

 

 

 

325,112

Long-term investment

 

1,000

 

 

 

 

1,000

Intangible assets, net

 

33,548

 

 

 

 

33,548

Goodwill

 

75,194

 

 

 

 

75,194

Long-term prepayments

 

5,774

 

 

 

 

5,774

Deferred tax assets, net

 

725

 

 

 

 

725

Total assets

188,531

 

1,635,789

 

49,315

 

100,537

 

(190,760)

 

1,783,412

Commission payable

 

83,205

 

 

 

 

83,205

Investors’ deposit

 

132,154

 

 

 

 

132,154

Income tax payable

 

120,151

 

 

 

 

120,151

Amounts due to related parties

 

72,747

 

53,727

 

100,458

 

(190,760)

 

36,172

Borrowings

 

2,000

 

 

 

 

2,000

Other payables and accrued liabilities

 

409,182

 

(3,054)

 

 

 

406,128

Commission payable-long term

 

1,289

 

 

 

 

1,289

Deferred tax liabilities

 

3,400

 

 

 

 

3,400

Total liabilities

 

824,128

 

50,673

 

100,458

 

(190,760)

 

784,499

Total mezzanine equity

 

30,600

 

 

 

 

30,600

Total shareholders’ equity

188,531

 

781,061

 

(1,358)

 

79

 

 

968,313

Total liabilities, mezzanine equity, and shareholders’ equity

188,531

 

1,635,789

 

49,315

 

100,537

 

(190,760)

 

1,783,412

9

    

As of June 30, 2021

    

    

    

    

Other

    

Eliminating

    

Consolidated

Parent

VIEs

WFOE

subsidiaries

adjustments

totals

(RMB in thousands)

Cash and cash equivalents

 

258,609

 

 

180,678

 

 

439,287

Restricted cash

 

266,023

 

 

 

 

266,023

Accounts receivable, net

 

594,061

 

 

 

 

594,061

Amounts due from related parties

180,710

 

126,103

 

 

 

(180,710)

 

126,103

Deposits, prepayments and other current assets

 

51,540

 

 

 

 

51,540

Property and equipment, net

 

21,104

 

 

 

 

21,104

Intangible assets, net

 

24,225

 

 

 

 

24,225

Long-term prepayments

 

7,427

 

 

 

 

7,427

Deferred tax assets, net

 

649

 

 

 

 

649

Total assets

180,710

 

1,349,741

 

 

180,678

 

(180,710)

 

1,530,419

Commission payable

 

127,194

 

 

 

 

127,194

Investors’ deposit

 

248,277

 

 

 

 

248,277

Income tax payable

 

116,897

 

 

 

 

116,897

Amounts due to related parties

 

24,799

 

 

180,710

 

(180,710)

 

24,799

Other payables and accrued liabilities

 

278,697

 

 

 

 

278,697

Commission payable-long term

 

10,080

 

 

 

 

10,080

Deferred tax liabilities

 

3,548

 

 

 

 

3,548

Total liabilities

 

809,492

 

 

180,710

 

(180,710)

 

809,492

Total shareholders’ equity

180,710

 

540,249

 

 

(32)

 

 

720,927

Total liabilities, mezzanine equity, and shareholders’ equity

180,710

 

1,349,741

 

 

180,678

 

(180,710)

 

1,530,419

Selected Condensed Consolidating Schedule of Results of Operations

    

For the year ended June 30, 2023

    

    

    

    

Other

    

Eliminating

    

Consolidated

Parent

VIEs

WFOE

subsidiaries

adjustments

totals

(RMB in thousands)

Net revenues

 

2,091,757

 

21,174

 

 

(21,174)

 

2,091,757

Operating costs and expenses

5,207

 

1,888,541

 

21,284

 

 

(20,660)

 

1,894,372

Income/(loss) from operations

(5,207)

 

203,216

 

(110)

 

 

(514)

 

197,385

Interest income/(expenses), net

93

 

(159)

 

36

 

1,378

 

 

1,348

Other expenses, net

 

(455)

 

(6,628)

 

 

 

(7,083)

Income/(loss) before income tax expense

(5,114)

 

202,602

 

(6,702)

 

1,378

 

(514)

 

191,650

Income tax expense

 

(71,380)

 

 

 

 

(71,380)

Net income/(loss)

(5,114)

 

131,222

 

(6,702)

 

1,378

 

(514)

 

120,270

    

For the year ended June 30, 2022

    

    

    

    

Other

    

Eliminating

    

Consolidated

Parent

VIEs

WFOE

subsidiaries

adjustments

totals

(RMB in thousands)

Net revenues

 

1,942,113

 

19,338

 

 

(19,338)

 

1,942,113

Operating costs and expenses

7,339

 

1,648,278

 

19,629

 

 

(59,823)

 

1,615,423

Income/(loss) from operations

(7,339)

 

293,835

 

(291)

 

 

40,485

 

326,690

Interest income, net

761

 

554

 

107

 

76

 

 

1,498

Other income/(expenses), net

 

487

 

(4,228)

 

 

 

(3,741)

Income/(loss) before income tax expense

(6,578)

 

294,876

 

(4,412)

 

76

 

40,485

 

324,447

Income tax expense

 

(88,578)

 

 

 

 

(88,578)

Net income/(loss)

(6,578)

 

206,298

 

(4,412)

 

76

 

40,485

 

235,869

    

For the year ended June 30, 2021

10

    

    

    

    

Other

    

Eliminating

    

Consolidated

Parent

VIEs

WFOE

subsidiaries

adjustments

totals

(RMB in thousands)

Net revenues

 

1,834,422

 

 

 

 

1,834,422

Operating costs and expenses

21,948

 

1,530,863

 

 

5

 

 

1,552,816

Income/(loss) from operations

(21,948)

 

303,559

 

 

(5)

 

 

281,606

Interest income, net

 

1,537

 

 

 

 

1,537

Other income, net

 

12,608

 

 

 

 

12,608

Income/(loss) before income tax expense

(21,948)

 

317,704

 

 

(5)

 

 

295,751

Income tax expense

 

(88,094)

 

 

 

 

(88,094)

Net income/(loss)

(21,948)

 

229,610

 

 

(5)

 

 

207,657

Selected Condensed Consolidating Schedule of Cash Flows

    

For the year ended June 30, 2023

    

    

    

    

Other

    

Eliminating

    

Consolidated

Parent

VIEs

WFOE

subsidiaries

adjustments

totals

(RMB in thousands)

Net cash provided by operating activities

93

 

525,229

 

 

 

 

525,322

Net cash used in investing activities

 

(201,099)

 

(47,566)

 

(19,812)

 

19,812

 

(248,665)

Net cash used in financing activities

 

1,568

 

19,812

 

 

(19,812)

 

1,568

Effect of exchange rate changes

64

 

7,216

 

 

 

 

7,280

Net increase in cash, cash equivalents, and restricted cash

157

 

332,914

 

(27,754)

 

(19,812)

 

 

285,505

Cash and cash equivalents at beginning of the year

791

 

377,558

 

46,250

 

100,537

 

 

525,136

Cash and cash equivalents at end of the year

948

 

768,739

 

18,496

 

80,725

 

 

868,908

Restricted cash at beginning of the year

 

135,242

 

 

 

 

135,242

Restricted cash at the end of the year

 

76,975

 

 

 

 

76,975

    

For the year ended June 30, 2022

    

    

    

    

Other

    

Eliminating

    

Consolidated

Parent

VIEs

WFOE

subsidiaries

adjustments

totals

(RMB in thousands)

Net cash provided by operating activities

 

238,751

 

 

 

 

238,751

Net cash provided by/(used in) investing activities

761

 

(253,367)

 

(33,891)

 

(80,141)

 

80,141

 

(286,497)

Net cash (used in)/provided by financing activities

 

(1,000)

 

80,141

 

 

(80,141)

 

(1,000)

Effect of exchange rate changes

30

 

3,784

 

 

 

 

3,814

Net increase/(decrease) in cash, cash equivalents, and restricted cash

791

 

(11,832)

 

46,250

 

(80,141)

 

 

(44,932)

Cash and cash equivalents at beginning of the year

 

258,609

 

 

180,678

 

 

439,287

Cash and cash equivalents at end of the year

791

 

377,558

 

46,250

 

100,537

 

 

525,136

Restricted cash at beginning of the year

 

266,023

 

 

 

 

266,023

Restricted cash at the end of the year

 

135,242

 

 

 

 

135,242

11

    

For the year ended June 30, 2021

    

    

    

    

Other

    

Eliminating

    

Consolidated

Parent

VIEs

WFOE

subsidiaries

adjustments

totals

(RMB in thousands)

Net cash provided by operating activities

 

334,033

 

 

 

 

334,033

Net cash used in investing activities

(180,677)

 

(14,631)

 

 

 

180,677

 

(14,631)

Net cash provided by financing activities

180,677

 

4,929

 

 

180,677

 

(180,677)

 

185,606

Effect of exchange rate changes

 

11,917

 

 

 

 

11,917

Net increase in cash, cash equivalents, and restricted cash

 

336,248

 

 

180,677

 

 

516,925

Cash and cash equivalents at beginning of the year

 

108,358

 

 

 

 

108,358

Cash and cash equivalents at end of the year

 

258,610

 

 

180,677

 

 

439,287

Restricted cash at beginning of the year

 

80,027

 

 

 

 

80,027

Restricted cash at the end of the year

 

266,023

 

 

 

 

266,023

A.[Reserved]

B.Capitalization and Indebtedness

Not applicable.

C.Reasons for the Offer and Use of Proceeds

Not applicable.

D.Risk Factors

Summary of Risk Factors

Hywin Holdings Ltd. is a Cayman Islands holding company primarily operating in China through its subsidiaries and contractual arrangements with the variable interest entities (“VIEs”), namely, Hywin Wealth Management, Shanghai Hywin Network Technology, and Shenzhen Panying. Our company and Hywin Consulting are considered as foreign investors and foreign invested enterprises, respectively, under PRC laws. We, through the VIEs, primarily provide wealth management services, asset management services, and health management services in China. PRC laws and regulations impose certain qualification requirements, restrictions, and prohibitions on foreign ownership of companies that engage in these types of services.

To comply with PRC laws and regulations, we conduct our business in China through the VIEs by way of a series of contractual arrangements. A series of contractual agreements, including Equity Pledge Agreements, Exclusive Technical Consultation and Service Agreements, Equity Option Agreements, and Voting Rights Proxy and Financial Support Agreements have been entered into by and among us, the VIEs, and their shareholders. These contractual arrangements enable us to exercise effective control over Hywin Wealth Management, Shanghai Hywin Network Technology, and Shenzhen Panying and consolidate their financial results as the VIEs. Investors of our ADSs are not purchasing equity interest in the VIEs in China but instead are purchasing equity interest in a Cayman Islands holding company with no direct equity ownership of the VIEs. For more details of these contractual arrangements, see “Item 4. Information on the Company—C. Organizational Structure—Contractual Arrangements.”

Risks associated with our business primarily arise from the various types of products that we distribute, including wealth management products and asset management products. These products might encounter a drop in investment performance, a decline in value, a decrease in sales, or even become restricted or prohibited from being traded, which could adversely affect our revenues and profitability. In addition, any adverse change to or negative impact on our health management business could also materially and adversely affect our results of operations. Furthermore, our business might also be adversely affected if we are unable to comply with laws and regulations applicable to our business and services, particularly laws and regulations relating to the VIEs, health management industry, data and cyber security, and intellectual property. Moreover, if we fail to enhance our brand recognition, if we cannot retain or expand our client base, if we endure adverse changes in our relationships with providers and customers of our financial products, or if we suffer from misconduct by or complaint against our management team or employees, then our reputation, client relationships,

12

operations, and prospects may be negatively impacted. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business.”

Our corporate structure is subject to risks associated with the contractual arrangements with the VIEs. The contractual arrangements may not be as effective as direct ownership in providing us with control over the VIEs and we may incur substantial costs to enforce the terms of the arrangements. Additionally, there are substantial uncertainties regarding the interpretation and application of current and future PRC laws and regulations. It is uncertain whether any new PRC laws or regulations relating to the contractual arrangements will be adopted or if adopted, what they would provide. If our corporate structure and the contractual arrangements are deemed by relevant regulatory authority or court to be illegal or invalid, either in whole or in part, we may lose control of the VIEs and have to modify such structure to comply with regulatory requirements. Further, if our corporate structure and the contractual arrangements are found to be in violation of any existing or future PRC laws or regulations, the relevant regulatory authority would have broad discretion to take action in dealing with the violation or failure, in which case, we could be subject to severe penalties, including being prohibited from continuing the VIEs’ operations or unwinding the contractual arrangements. Since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory provisions and contractual terms, it may be difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy. Our Cayman Islands holding company, our subsidiaries, the VIEs, and investors of our company face uncertainty about potential future actions by the PRC government that could affect the enforceability of the contractual arrangements with the VIEs and, consequently, significantly affect the financial performance of the VIEs and our company as a whole. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure.”

We face various legal and operational risks and uncertainties associated with being based in and having our operations primarily in Mainland China and the complex and evolving PRC laws and regulations. The PRC government has significant oversight and discretion over the conduct of our business and as such may intervene in or influence our operations at any time, which could result in a material change in our operations and/or the value of our ADSs. The PRC government has recently published new policies that significantly affected certain industries, and we cannot rule out the possibility that it will release regulations or policies regarding the industry where we operate, which could adversely affect our business, financial condition and results of operations. The PRC government also has significant authority to exert influence on the ability of a China-based company, like us, to conduct its business, accept foreign investments or be listed on an exchange in the United States or other foreign countries outside of China. For example, we face risks associated with regulatory approvals on offerings conducted overseas by and foreign investment in China-based issuers, the use of VIEs, anti-monopoly regulatory actions, and oversight on cybersecurity and data privacy. Also, the PRC governmental authorities have recently indicated an intent to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers. Any such action could result in a material adverse change in our operations and the value of our ADSs, significantly limit or completely hinder our ability to offer or continue to offer securities to investors. In addition, implementation of industry-wide regulations directly targeting our operations could cause the value of our securities to significantly decline. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in Mainland China and Hong Kong.”

You should carefully consider all of the information in this annual report before making an investment in the ADSs. Below please find a summary of the principal risks and uncertainties we face, organized under relevant headings:

Risks Related to Our Business

The products that we distribute involve various risks and our failure to identify or fully appreciate such risks will negatively affect our reputation, client relationships, operations and prospects.
A drop or perceived drop in the investment performance for products we distribute, a decline in the value of the assets under our management or any decline in sales of our other services could adversely affect our revenues and profitability.
Our expansion into the high-end health management business and acquisition of health management centers may not achieve operating results as anticipated, which could materially and adversely affect our results of operations.

13

A significant portion of the wealth management products we distribute have real estate or real estate-related financial products as their underlying assets. Our business may be materially and adversely affected by various fluctuations and uncertainties in China’s real estate industry, including government measures aimed at the industry.
We may fail to maintain or renew existing licenses or to obtain additional licenses and permits necessary to conduct our operations, or fail to comply with laws and regulations applicable to our business and services, and our business may be materially and adversely affected.
If certain categories of products currently traded on local financial assets exchanges become restricted or prohibited, or if local financial assets exchanges are prohibited from listing exchange-administered products, our business, financial condition and prospects would be materially and adversely affected.
We may not be able to continue to retain or expand our HNWI client base or maintain or increase the amount of investments made by our clients in the products we distribute.
Any material decrease in the fee rates of commissions, management fees, and performance-based fees for our services may have an adverse effect on our revenues, cash flows and results of operations.
We may be required to refund medical examination fees and membership fees prepaid by our customers.
We receive a large proportion of our net revenues from a limited number of financial product providers and customers, and any adverse changes in our relationships with such financial product providers and customers or in their business and financial conditions may cause significant fluctuations in our revenue and impact our business.
Our reputation and brand recognition are crucial to our business. Any harm to our reputation or failure to enhance our brand recognition may materially and adversely affect our business, financial condition and results of operations.
We face significant competition in the wealth management and health management service industry, we could lose our market share and our results of operations and financial conditions may be materially and adversely affected.
Non-compliance on the part of third parties with which we conduct business could disrupt our business and adversely affect our results of operations.
We face risks related to outbreaks of health epidemics, natural disasters, and other extraordinary events, which could significantly disrupt our operations and adversely affect our business, financial condition or results of operations.
Our risk management policies and procedures may not be fully effective in identifying or mitigating risk exposure in all market environments or against all types of risk, including the non-compliances with laws and regulations or our internal policies and procedures.
Misconduct of our relationship managers or other employees could harm our reputation or lead to regulatory sanctions or litigation costs.
We may not be able to effectively implement our future business strategies, in which case our business and results of operations may be materially and adversely affected.
We and our directors and/or executive officers may be involved from time to time in legal or administrative proceedings and commercial or contractual disputes, which could have a material adverse effect on our business, results of operations and financial condition.

14

If we breach the contractual obligations under the asset management agreements or fiduciary duties we owe to counterparties in connection with our asset management service business, our results of operations will be adversely impacted.
We have granted, and may continue to grant, share options and other forms of share-based incentive awards, which may result in increased share-based compensation expenses.
Any significant failure in our information technology systems could have a material adverse effect on our business and profitability.
We plan to establish and operate our internet hospital which could be subject to significant risks.
Our business, financial condition, results of operations and prospects may be adversely affected by changes in the aesthetic medical market and unfavorable market perceptions of the overall aesthetic medical industry.
Our future success depends on the continuing efforts to retain our existing management team and other key employees as well as to attract, integrate and retain highly skilled and qualified personnel, and our business may be disrupted if we lose their services.
If our physicians and other medical professionals do not obtain and maintain appropriate licenses, we may be subject to penalties against our medical examination center, which could adversely affect our business.
Our chairman of the board is able to control and exert significance influence over our company, and his interest may be different from or conflict with that of our other shareholders.
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.
It is unclear whether we and the VIEs will be subject to the oversight of the CAC and how such oversight may impact us. Our and the VIEs’ business could be interrupted or we and the VIEs could be subject to liabilities which may materially and adversely affect the results of our and the VIEs’ operation and the value of your investment.
We may not be able to prevent unauthorized use of our intellectual property, which could reduce demand for our products and services, adversely affect our revenues and harm our competitive position.
We may face intellectual property infringement claims that could be time consuming and costly to defend and may result in the loss of significant rights by us.
We may become subject to product liability claims or administrative penalties for counterfeit, substandard or unauthorized products provided in our health management services, which could adversely affect our brand name and reputation and cause us to incur significant expenses and be liable for significant damages.
We may become subject to medical liability claims or administrative penalties for violation of the Regulation on the Administration of Medical Institutions in our health management services, which could cause us to incur significant expenses and be liable for significant damages.
If we are unable to fully comply with PRC laws and regulations on medical advertisement, our brand image, results of operations and financial conditions could suffer significantly.
Confidentiality agreements with employees, product providers and others may not adequately prevent disclosure of our trade secrets and other proprietary information.

15

We have limited insurance coverage.
If we fail to implement and maintain an effective system of internal controls to remediate our material weakness over financial reporting, we may be unable to accurately report our results of operations, meet our reporting obligations or prevent fraud.

Risks Related to Our Corporate Structure

If the PRC government finds that the agreements that establish the structure for operating our businesses in China do not comply with PRC regulations relating to the wealth management or asset management business, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations.
Our business may be deemed as a foreign investment under the Foreign Investment Law, whose interpretation and implementation involve substantial uncertainties which may impact the viability of the current corporate structure, corporate governance, and business operations of our company and the VIEs.
We rely on contractual arrangements with the VIEs and its shareholders for a portion of our China operations, which may not be as effective as direct ownership in providing operational control.
Contractual arrangements in relation to the VIEs may be subject to scrutiny by the PRC tax authorities and they may determine that we, our subsidiaries or the VIEs owe additional taxes, which could negatively affect our financial condition and the value of your investment.
We may lose the ability to use and enjoy assets held by the VIEs that are material to the operation of certain portion of our business if the VIEs go bankrupt or become subject to a dissolution or liquidation proceeding.
We may rely principally on dividends and other distributions on equity paid by our PRC subsidiary to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiary to pay dividends to us could have a material adverse effect on our ability to conduct our business.

Risks Related to Doing Business in Mainland China and Hong Kong

We may be adversely affected by the complexity, uncertainties and changes in PRC regulation of financial services businesses, service providers and financial products we distribute.
The Chinese government may exercise significant oversight and discretion over the conduct of our business and may intervene in or influence our operations at any time, which could result in a material change in our operations and/or the value of our ADSs.
The filing with the CSRC and the approval of other PRC government authorities are required in connection with our future offshore offerings under PRC law, which could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline in value or become worthless.
Uncertainties regarding the interpretation and enforcement of PRC laws, rules and regulations could limit the legal protections available to you and us.
Fluctuations in exchange rates may have a material adverse effect on your investment.
Governmental control of conversion of Renminbi into foreign currencies may limit our ability to utilize our revenues effectively and affect the value of your investment.

16

PRC regulations of loans to, and direct investment in, PRC entities by offshore holding companies and governmental control of currency conversion may restrict or prevent us from using the proceeds of our financing activities to make loans to our PRC subsidiary and the VIEs, or to make additional capital contributions to our PRC subsidiary.
PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident beneficial owners or our PRC subsidiary to liability or penalties, limit our ability to inject capital into our PRC subsidiary, limit our PRC subsidiary’s ability to increase its registered capital or distribute profits to us, or may otherwise adversely affect us.
Failure to comply with PRC regulations regarding the registration requirements for employee stock incentive plans or share option plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions.
If we are classified as a PRC resident enterprise for PRC enterprise income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders and the ADS holders.
We face uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.
The enforcement of the Labor Contract Law and other labor related regulations in the PRC may adversely affect our business and our results of operations.
China’s M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of PRC companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China.
Our PRC subsidiary and consolidated entities are subject to restrictions on paying dividends or making other payments to us, which may restrict our ability to satisfy our liquidity requirements.
Failure to comply with PRC regulations regarding the registration of outbound direct investment may subject us or our actual controller to fines and legal or administrative sanctions.
If the custodians or authorized users of controlling non-tangible assets of our company, including our corporate chops and seals, fail to fulfill their responsibilities, or misappropriate or misuse these assets, our business and operations could be materially and adversely affected.
Our leased property interest may be defective and our right to lease the properties may be challenged, which could cause significant disruption to our business.
Increases in labor costs and enforcement of stricter labor laws and regulations in the PRC may adversely affect our business and our profitability.
If the PCAOB is unable to  adequately inspect or fully investigate our auditor as required under the Holding Foreign Companies Accountable Act, the SEC will prohibit the trading of our ADSs. The delisting of our ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment. Additionally, the inability of the PCAOB to conduct adequate inspections of our auditor would deprive our investors of the benefits of such inspections.
Changes in U.S. and international trade policies, particularly with regard to China, may adversely impact our business and operating results.
It is unclear whether we will be subject to the oversight of the CAC and how such oversight may impact us. Our business could be interrupted or we could be subject to liabilities which may materially and adversely affect the results of our operation and the value of your investment.

17

Risks Related to Our ADSs

The PRC government’s significant oversight and discretion over our business operations could result in a material adverse change in our operations in Mainland China and the value of our ADSs.
The trading price of our ADSs is likely to be volatile, which could result in substantial losses to investors.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, the market price for our ADSs and trading volume could decline.
The sale or availability for sale of substantial amounts of our ADSs could adversely affect their market price.
You may be subject to limitations on the transfer of the ADSs.
The voting rights of holders of the ADSs are limited by the terms of the deposit agreement, and you may not be able to exercise your right to direct the voting of your ordinary shares underlying the ADSs.
You may experience dilution of your holdings due to inability to participate in rights offerings.
Techniques employed by short sellers may drive down the market price of the ADSs.
Our Memorandum and Articles of Association contain anti-takeover provisions that could have a material adverse effect on the rights of holders of our ordinary shares and ADSs.
Certain judgments obtained against us by our shareholders may not be enforceable.
You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under Cayman Islands law.
We incur costs as a result of being a public company, and these will increase after we cease to qualify as an “emerging growth company.”
ADS holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable outcomes to the plaintiff(s) in any such action.
Your rights to pursue claims against the depositary as a holder of ADSs are limited by the terms of the deposit agreement.
We are a foreign private issuer within the meaning of the rules under the Exchange Act and are therefore exempt from certain provisions applicable to U.S. domestic issuers.
As a company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate governance matters in lieu of the corporate governance listing standards applicable to U.S. domestic issuers, which home country practices may afford comparatively less protection to shareholders.
There can be no assurance that we will not be a passive foreign investment company, or PFIC, for our current or future taxable years, which could result in adverse U.S. federal income tax consequences to U.S. investors in our ADSs or ordinary shares.

18

Risks Related to Our Business

The products that we distribute involve various risks and our failure to identify or fully appreciate such risks will negatively affect our reputation, client relationships, operations and prospects.

We distribute a broad variety of wealth management products, including private market investment products (“Private Market Investment Products”) and public market investment products (“Public Market Investment Products”), from which we generate distribution commissions, recurring fees and performance-based fees. Through our Hong Kong subsidiaries, we also provide asset management products and derive management fees and performance-based fees, and facilitate sales of insurance products and derive one-time commissions. These products often have complex structures and involve various risks, including default risks, interest risks, liquidity risks, market risks, counterparty risks, fraud risks and other risks. In addition, we are subject to risks arising from any potential misconduct or violation of law by the product providers. Any such misconduct or violation of law may adversely affect the performance of the applicable products that we distribute or facilitate to sell and harm our reputation.

Our success depends, in part, on our successful identification and full appreciation of risks associated with such products. Not only must we be cautious about these risks in the design and development of our products and services, we must also accurately describe the risks associated with our products and services to, and evaluate them for, our clients. Our risk management policies and procedures may not be fully effective in mitigating the risk exposure of our clients in all market environments or against all types of risks.

If we fail to identify and fully appreciate the risks associated with the products that we distribute or manage, or fail to disclose such risks to our clients in a sufficiently clear manner, our clients may suffer financial loss or other damages. If that occurs, our reputation, client relationship, business and prospects may be materially and adversely affected.

A drop or perceived drop in the investment performance for products we distribute, a decline in the value of the assets under our management or any decline in sales of our other services could adversely affect our revenues and profitability.

Investment performance is a key competitive factor for products distributed or managed by us. Strong investment performance helps us to retain and expand our client base and generate new sales of products and services. Strong investment performance is therefore an important element to our goals of maximizing the value of products and services provided to our clients or the assets under our management. There can be no assurance that products distributed or assets managed by us will outperform the product portfolios of our competitors or that our historical performance will be indicative of future returns. In addition, fraud and other deceptive practices by third parties in connection with underlying investments may lead to a significant adverse impact on the investment performance of relevant products. Any drop or perceived drop in investment performance as compared to our competitors could adversely affect clients’ confidence in products we distribute and result in a decline in sales of our wealth management services, which in turn may adversely affect our ability to launch new products in connection with our asset management business.

We also engage in asset management services. The profitability of our asset management services depends on fees charged based on the value of assets under management. Any impairment on the value of the assets we manage, whether caused by fluctuations or downturns in the underlying markets or otherwise, will reduce our revenues generated from asset management business, which in turn may materially and adversely affect our overall financial performance and results of operations.

Our expansion into the high-end health management business and acquisition of health management centers may not achieve operating results as anticipated, which could materially and adversely affect our results of operations.

We have recently expanded our business to include high-end health management services through the acquisition of integrated health management service providers in China, namely Grand Doctor Medical Co., Ltd. (“Grand Doctor”), Beijing iLife 3 Technology Co., Ltd. (“Life Infinity”), and Sincerity and Compassion Health Management Center (“SCHMC”). We expect to incur significant costs and expenses such as the rental and purchase amount of the medical equipment and personnel cost before such high-end health management business begin to generate profit. In addition, the high-end preventive healthcare services market has different competitive landscape, consumer preference and discretionary spending patterns from our existing market. We may also need to build brand awareness in this market through greater investments in advertising and promotional activities than we originally planned. Sales in such high-end health management business may take longer than expected to ramp up and reach expected sales and profit levels, thereby affecting our overall profitability.

19

Since our health management services are at the early stage of development with limited operating experience, the medical examination centers and clinics we acquired did not and may not achieve the business or financial performance as we expected and we may not be able to integrate our newly established health management business into our existing business. Indeed, we have incurred net losses in the operation of our health management business, which impacted the profitability of our business as a whole. We may not be able to fully utilize the newly acquired health management service providers as anticipated due to our inability or material delay in obtaining the required approvals, permits or licenses and any substantial increase in costs to ramp up operations and utilization. Furthermore, our online medical platform may not develop as expected. Prospective clients and medical service providers may not be familiar with the development of online medical platforms and may have difficulties distinguishing our services from those of our competitors. Convincing prospective clients and medical service providers of the value of using our services is important to the success of our business. In addition, the operating results generated at the newly established health management services may not be comparable to the operating results generated at our wealth management and asset management services. The health management business may even continue to operate at a loss, which could materially and adversely affect our results of operations. We may elect to dispose of the acquired health management service providers subsequently and recognize losses. Therefore, we cannot assure you that we will be able to generate revenue at a profit for our health management services in the future, if at all, or grow our health management business as planned.

A significant portion of the wealth management products we distribute have real estate or real estate-related financial products as their underlying assets. Our business may be materially and adversely affected by various fluctuations and uncertainties in China’s real estate industry, including government measures aimed at the industry.

To date, a significant portion of the wealth management products that we distribute involves real estate-related financial products as their underlying investments. For the years ended June 30, 2021, 2022 and 2023, the total transaction value of such wealth management products accounted for 58.2%, 37.9% and 28.0%, respectively, of the total transaction value of all the wealth management products we distributed.

The success of such products depends significantly on conditions in China’s real estate industry and more particularly on the volume of new property transactions in China. China’s residential real estate industry is volatile and fluctuated in recent years in terms of housing transaction volume and prices. Fluctuations of China’s real estate industry are caused by economic, social, political and other factors outside our control. Any prolonged slowdown in China’s economy, which leads to a decline or fluctuation in the real estate industry, may materially and adversely affect our business, financial condition and results of operations. In addition, we cannot assure you that there will not be an over-supply of residential properties or an economic downturn in the residential property sectors in the cities in the Yangtze River Delta and other cities and regions of China. Any such over-supply or economic downturn may result in a slow-down in property sales or downward pressure on property prices regionally or nationwide. There have been concerns that the PRC property market has been overheating and may become a property “bubble.” In response, the PRC government has taken measures to prevent the overheating of the PRC property market. Such measures may lead to changes in market conditions, price instability and an imbalance between the supply of and demand for properties in the PRC.

Real estate products are also subject to the risks inherent in the ownership and operation of real estate and real estate-related businesses and assets. These risks include those associated with the burdens of ownership of real property, general and local economic conditions, changes in supply of and demand for competing properties in an area, natural disasters, changes in government regulations, changes in real property tax rates, changes in interest rates, the reduced availability of mortgage funds, which may render the sale or refinancing of properties difficult or impracticable and other factors that are beyond our control.

In particular, the PRC real estate industry is subject to extensive governmental regulation and is susceptible to policy changes. The PRC government exerts considerable direct and indirect influence on the development of the PRC real estate sector by imposing industry policies and other economic measures, which, among other things, control foreign exchange, taxation, foreign investment and the supply of land for property development. Through these policies and measures, the PRC government may raise the benchmark interest rates of commercial banks, place additional limitations on the ability of commercial banks to make loans to property developers and property purchasers, impose additional taxes and levies on property sales, impose foreign exchange restriction on cross-border investment and financing related activities and restrict foreign investment in the PRC property sector and restrict or reduce the supply of land for property development. In the event that we breach any applicable laws, rules, regulations or restrictions, we may be subject to fines or penalties, which may have a material adverse effect on our business, results of operations and financial condition. In addition, we cannot assure you that the PRC government will not adopt new measures in the future that may result in lower growth rates in the real estate industry. Frequent changes in government policies may also create uncertainty that could discourage investment in real estate.

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Since the end of 2021, in response to a slowdown in the real estate industry, the PRC government has made various efforts to stabilize the housing industry and some local government authorities have selectively eased certain restrictions for the purchase of residential properties. Since the second half of 2022, the PRC government also made targeted efforts to promote housing delivery and to resolve financing risks for real estate developers. Efforts include reducing the interest rate on individual housing loans for the purchase of the first residential property by an individual borrower, increasing the availability of individual housing provident fund loans for the purchase of residential properties by certain employees and their family members, and providing tax subsidies for the purchase of residential properties by individuals and families. PRC governmental authorities may continue to adopt new laws, regulations and policies from time to time with an aim to stabilize and support the long-term healthy development of the housing related industry in certain regions in China, which might potentially affect our business.

In addition, the AMAC released the Rules on the Management of Private Asset Management Plan Filing by Securities and Futures Institutions No. 4, or the No. 4 Filing Rules, on February 13, 2017 to regulate investments in real estate by securities and futures institutions. According to the No. 4 Filing Rules, the AMAC will not accept the filing application of private asset management plans or private funds investing into ordinary residential properties in popular cities, including Beijing, Shanghai, Guangzhou, Shenzhen, Xiamen, Hefei, Nanjing, Suzhou, Wuxi, Hangzhou, Tianjin, Fuzhou, Wuhan, Zhengzhou, Jinan and Chengdu, by way of debt investment and other specific ways of investment which are identified in the No. 4 Filing Rules. To comply with the No. 4 Filing Rules, we have adjusted our investment strategies. Furthermore, according to the Notice for Private Fund Registration (“Private Fund Registration New Notice”) issued by AMAC on December 23, 2019, AMAC will not accept the filing application of privately raised funds engaging in regular and commercial lending activities in form of entrustment loans, trust loans or other means. Accordingly, we have strategically distributed real estate products with debt investment nature from provincial- and municipal-level financial assets exchanges approved by respective local governments. Although the local financial assets exchanges with which we currently collaborate do not impose restrictions on underlying investment of the products we source and distribute, we cannot guarantee that they would not implement tightened regulatory requirements in line with the strict national financial supervision system in the future. In addition, we cannot assure you that the PRC government would not promulgate other laws and policies that may affect our business.

If significant fluctuations occur in China’s real estate industry, or the risks inherent in the ownership and operation of real estate assets materialize, the value of the wealth management products we distribute that are linked to (i) real estate or (ii) the construction and development of real estate projects may decline and default risks thereof may increase, resulting in decreased demand for products from our clients. Such products contribute to a significant portion of our revenues. Therefore, our revenues could be adversely affected, which in turn may materially and negatively affect our overall financial condition and results of operations.

We may fail to maintain or renew existing licenses or to obtain additional licenses and permits necessary to conduct our operations, or fail to comply with laws and regulations applicable to our business and services, and our business may be materially and adversely affected.

The laws and regulations governing the financial services industry in China are still evolving. Substantial uncertainties exist regarding the regulatory system and the interpretation and implementation of current and any future PRC laws and regulations applicable to the financial services industry and companies that operate wealth management or asset management businesses. Depending on the type of products and services being offered, the business operation may be subject to the supervision and scrutiny by different authorities. To date, the PRC government has not adopted a unified regulatory framework governing the distribution or management of all types of wealth management products. However, there are laws and regulations governing wealth management products that we currently distribute in China, such as Private Market Investment Products and Public Market Investment Products. In addition, exchange-administered products are also subject to the regulation of the local offices of finance at the provincial and municipal levels.

Currently, a license is required for the distribution of fund products (including Public Market Investment Products and Private Market Investment Products) in China. Our subsidiary, Hywin Fund Distribution Co., Ltd., has obtained a fund distribution license from China Securities Regulatory Commission (“CSRC”), and we distribute all the Public Market Investment Products and some Private Market Investment Products through this subsidiary. For the rest of the Private Market Investment Products, we may collect distribution commissions in the form of advisory service fees under advisory service agreements with the product providers, which is not prohibited by the current applicable laws and regulations. We also distribute exchange-administered products sourced from local financial assets exchanges. However, as the wealth management services industry and asset management industry in China are at an early stage of development, there are substantial uncertainties regarding the interpretation and application of the relevant laws and regulations, and new applicable laws and regulations may be adopted to address issues that arise from time to time or to require additional licenses and permits for distribution of fund products, exchange-administered products, and other type of products we may distribute in the future.

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For example, on August 28, 2020, the CSRC issued the Supervision Measures on Publicly Raised Securities Investment Funds Sales Agencies, or the Sales Agency Measure, effective from October 1, 2020, and its implementation rules, pursuant to which, among others, marketing and promoting funds, opening fund transaction accounts for investors, handling the offering, subscription and redemption of fund units as well as providing inquiry about the information on fund transaction accounts, with securities investments are deemed to be fund selling activities, thus requiring a “securities and future operation license”. We currently hold such a license. However, we still need to comply with the Sale Agency Measure and other applicable laws and regulations.

In addition, fund managers managing privately raised funds are required to register with AMAC, and unregistered individuals or institutions are not permitted to conduct securities investment activities under the names of “funds” or “asset management.” To comply with PRC laws, we conduct our asset management business through licensed fund managers. Any violation of CSRC or AMAC regulation would negatively impact our registration with AMAC. We cannot assure you that we will be able to maintain our qualification to distribute fund products. Furthermore, new laws and regulations may impose additional restrictions on our business operations. For example, in December 2019, the AMAC amended the Notice regarding Filing of Private Investment Fund, or the Filing Notice, which provides that, among others, private investment funds should not make debt investments. If the underlying assets of a private investment funds are debt, such private investment funds will not be able to complete the filing with the AMAC. On December 30, 2020, CSRC issued Several Provisions on Strengthening the Regulation of Private Investment Funds, pursuant to which, managers of the private investment funds, private investment fund sales agencies and their practitioners shall not directly or indirectly commit certain specified acts in the course of fund raising.

Moreover, the operation of our medical examination centers, clinics and internet hospitals are subject to various laws and regulations issued by a number of government agencies at the national and local levels. These laws and regulations mainly relate to the licensing and operation of medical institutions and medical professionals, the pricing and procurement of pharmaceuticals and medical devices, the use and safety of medical devices, the quality and pricing of medical services, environmental protection, anti-corruption and anti-bribery, the handling of malpractice and the confidentiality, maintenance and security of patients’ medical records. We cannot assure you that the legal framework and enforcement trends in the healthcare industry will not change, or that we will be successful in responding to such changes. Such changes may result in increased compliance costs, which could materially adversely affect our business, financial condition and results of operations. If we fail to obtain or renew any licenses or permits required for our operations, or are found to be non-compliant with such licenses, permits, or any applicable laws or regulations, we may face penalties, suspension of operations or even revocation of such licenses or permits, depending on the nature of the findings.

We cannot assure you that we will be able to maintain our existing licenses, qualifications or permits, renew any of them when their current term expires or obtain additional licenses necessary 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 requisite for our future business expansion on commercially reasonable terms, our operations and prospects could be materially disrupted. We have engaged in frequent dialogues with relevant regulatory authorities in China in an effort to stay abreast of developments of the regulatory environment. However, if new PRC regulations promulgated in the future require that we obtain additional licenses or permits in order to continue to conduct our business operations, there is no guarantee that we would be able to obtain such licenses or permits in a timely manner, or at all. If any of these occurs, our business, financial condition and prospects may be materially and adversely affected.

If certain categories of products currently traded on local financial assets exchanges become restricted or prohibited, or if local financial assets exchanges are prohibited from listing exchange-administered products, our business, financial condition and prospects may be materially and adversely affected.

The PRC government has not adopted a national regulatory framework governing local exchanges or the listing, trading and distribution of exchange-administered products. The local financial assets exchanges are established upon approval of the local governments, and the exchange-administered products listed and traded on these exchanges are filed with and approved by local financial assets exchanges under the supervision of the offices of finance at the municipal and provincial levels. Pursuant to the Implementation Opinions on Straightening Out and Rectifying Various Types of Trading Venues (“Document 37”), promulgated by the General Office of the State Council on July 12, 2012, the establishment of a new exchange shall be approved by provincial level government except otherwise approved by State Council or the financial administrative department of State Council. Local government issued related laws and regulations for the supervision of local exchanges. If any significant product types are discouraged by the local government authorities, our product portfolio, distribution services and related revenues may be negatively impacted. In addition, we cannot assure you that the government authorities will not issue new laws and regulations restricting the trading of our financial assets products.

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In addition, although the local financial assets exchanges are mainly approved and regulated by the local government subject to certain administrative provisions issued by the State Council, we cannot guarantee that they would not be covered by the tightened national financial supervision system. If they are subject to approval or guidance of any national regulatory bodies, such as the PBOC, China Banking and Insurance Regulatory Commission (“CBIRC”), or the CSRC, these financial assets exchanges may be prohibited from listing certain or all of the products currently traded on such exchanges, or be prohibited from engaging in such listing and trading services. In such circumstances, we may have to cease the distribution of exchange-administered products, and as a result, our business, financial condition and prospects may be materially and adversely affected.

We may not be able to continue to retain or expand our HNWI client base or maintain or increase the amount of investments made by our clients in the products we distribute.

We target China’s HNWIs as our clients. In light of China’s continuously evolving wealth management services for HNWIs, we cannot assure you that we will be able to maintain and increase the number of our clients or that our existing clients will maintain the same level of investment in the wealth management products that we distribute, the asset management products that we manage, or the insurance products we facilitate to sell. As this industry in China is at an early stage of development with a highly fragmented nature and has low barriers to entry, our existing and future competitors may be better equipped to capture market opportunities and grow their client bases faster than us. In addition, the evolving regulatory landscape of China’s financial service industry may not affect us and our competitors proportionately with respect to the ability to maintain or grow our client base. We may lose our competitive positioning if we fail to maintain or further grow our client base at the same pace. A decrease in the number of our clients or a decrease in their investments in the products that we distribute or manage may reduce revenues derived from commissions, service fees, management fees and performance-based fees. If we fail to continue to meet our clients’ expectations on the returns from the products we distribute or funds we manage or if they are no longer satisfied with our services, they may leave us for our competitors and our reputation may be damaged by these clients, affecting our ability to attract new clients, which will in turn adversely affect our financial condition and results of operations.

Any material decrease in the fee rates of commissions, management fees, and performance-based fees for our services may have an adverse effect on our revenues, cash flows and results of operations.

We derive a majority of our revenues from one-time commissions. In addition, we are entitled to receive management fees and performance-based fees from wealth management services and asset management services. The commission, management fee, and performance-based fee rates vary from product to product. Although the fee rates within any given category of the products we distribute remained relatively stable during the applicable periods referenced in this annual report, future commission, management fee, and performance-based fee rates may be subject to change based on the prevailing political, economic, regulatory, taxation and competitive factors that affect product providers. These factors, which are not within our control, include the capacity of product providers to generate 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, the availability of alternative products to clients and the tax deductibility of commissions and fees. Because we do not determine, and cannot predict, the timing or extent of commission and fee rate changes with respect to the wealth management products, asset management products, and insurance products, it is difficult for us to assess the effect of any of these changes on our operations. In order to maintain our relationships with the product providers and to enter into contracts for new products, we may have to accept lower commission rates or other less favorable terms, which could reduce our revenues.

We may be required to refund medical examination fees and membership fees prepaid by our customers.

We issue medical examination cards and membership cards for our health management services, which allow us to collect medical examination fees and membership fees in advance from our customers. Our advance from customers primarily represent advance payments from customers for the provision of health management services. For the year ended June 30, 2023, our advance from customers amounted to RMB39.8 million (US$5.5 million). If our customers decide that they no longer need our health management services, they may require a refund of prepaid medical examination fees and membership fees, which may adversely affect our cash flow and liquidity position and, in turn, our results of operations and financial condition.

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We receive a large proportion of our net revenues from a limited number of financial product providers and customers, and any adverse changes in our relationships with such financial product providers and customers or in their business and financial conditions may cause significant fluctuations in our revenue and impact our business.

Although we endeavor to source wealth management business from a broad coverage of product providers in the market, due to our stringent screening process and rigorous risk management standards, a large proportion of the products distributed by us and the VIEs are sourced from a limited number of product providers, which are treated as our customers for accounting purpose. For the years ended June 30, 2021, 2022 and 2023, our top three customers accounted for 36%, 37% and 56% of our total net revenues, respectively, and our top five customers accounted for 50%, 52% and 66% of our total net revenues, respectively. It is likely that we will continue to be dependent upon a limited number of product providers, including related parties, for a significant proportion of our net revenues for the foreseeable future.

We cannot assure you that our client relationships will continue to develop or if these customers will continue to generate significant revenue for us in the future. Any failure to maintain our existing client relationships or to expand our client base will materially and adversely affect our results of operations and financial condition. If we lose any of our major product providers or any of these product providers significantly reduces its volume of business with us, our net revenues and profitability would be substantially reduced if we are unable obtain alternative product providers on a timely basis with similar or favorable commercial terms, or at all. In addition, our relationships with product providers are governed by distribution agreements or advisory service agreements or brokerage service agreements. These agreements establish, among other things, the scope of our responsibility and our commission rates with respect to the distribution or brokerage of particular products. These agreements typically are entered into on a product-by-product basis and expire at the expiration date of the relevant product. For any new products, new agreements need to be negotiated and entered into. If product providers that in the aggregate account for a significant portion of our business decide not to enter into contracts with us for their financial products, or the terms of our contracts with them become less beneficial to us, our business and results of operations may be materially and adversely affected. In addition, if any of our major product providers fail to make timely payments to us or encounter difficulties or cease to issue fund products we distribute, our business, financial condition and results of operations may be materially and adversely affected.

Our reputation and brand recognition are crucial to our business. Any harm to our reputation or failure to enhance our brand recognition may materially and adversely affect our business, financial condition and results of operations.

Our reputation and brand recognition are critical to the success of our business. We believe a sound reputation and a well-recognized brand are crucial to increasing our client base, which in turn facilitates our effort to monetize our services and enhance our attractiveness to our clients and product providers. Our reputation and brand are vulnerable to many threats that can be difficult or impossible to control, and costly or impossible to remediate.

Regulatory inquiries or investigations, lawsuits initiated by clients or other third parties, employee misconduct, perceptions of conflicts of interest and rumors, complaints from and disputes with our clients, among other things, could substantially damage our reputation, even if they are baseless or satisfactorily addressed. In addition, any perception that the quality of our wealth management and product recommendations and services may not be the same as or better than that of other wealth management service providers or wealth management product distributors can also damage our reputation. Moreover, any negative media publicity about the financial service industry in general or product or service quality problems of other firms in the industry, including our competitors and partners, may also negatively impact our reputation and brand. If we are unable to maintain a good reputation or further enhance our brand recognition, our ability to attract and retain clients, wealth management product providers and key employees could be harmed and, as a result, our business and revenues may be materially and adversely affected.

In addition, our reputation and brand recognition may be harmed by adverse news, scandals or other incidents associated with the PRC general healthcare industry. Incidents that cast doubt as to the quality or safety of pharmaceutical products manufactured, distributed or sold and services provided by other participants in the PRC general healthcare industry, particularly the internet healthcare industry, including our competitors, have been, and may continue to be, subject to widespread media attention. Such incidents may damage the reputation of not only the parties involved, but also the general healthcare industry as a whole, even if such parties or incidents have no relation to us, our management, or our employees. Such negative publicity may indirectly and adversely affect our reputation and business operations. Besides, incidents not related to product or service quality, or other negative publicity or scandals implicating us or our employees, regardless of merit, may also have an adverse impact on us and our reputation and brand recognition.

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We face significant competition in the wealth management and health management service industry, we could lose our market share and our results of operations and financial conditions may be materially and adversely affected.

We operate in an increasingly competitive environment and compete for clients on the basis of, among other things, product offering, client services, branch network, reputation and brand name. In the wealth management service industry, we face competition primarily from commercial banks, non-bank traditional financial institutions such as securities firms, asset management firms, trust companies and insurance companies, and non-traditional financial institutions such as other large independent wealth management companies and online wealth management platforms. In addition, there is a risk that we may not successfully identify new product and service opportunities or develop and introduce these opportunities in a timely and cost-effective manner. New competitors that are better adapted to the wealth management services industry may emerge, which could cause us to lose market share in key market segments.

Our competitors may have greater financial and marketing resources than we do. For example, the commercial banks we compete with tend to enjoy significant competitive advantages due to their nationwide distribution network, established brand and credibility, and much larger client base and execution capabilities. Moreover, many of the wealth management product providers with whom we currently have relationships, such as fund managers or securities firms, are also engaged in, or may in the future engage in, the distribution of wealth management products and they may benefit from their vertical integration of manufacturing and distribution.

In addition, as the markets for medical examination, online medical services and medical aesthetic services are relatively new, rapidly evolving and intensely competitive, we expect competition to continue and intensify in the future. We face competition from other medical examination centers, clinics, online medical platforms, medical aesthetic service providers, other integrated health management services providers and general online e-commerce platforms. We expect competition to intensify in the future as current competitors diversify and improve their service offerings and as new participants enter the market. We cannot assure you that we will be able to compete effectively or efficiently with current or future competitors. They may be acquired by, receive investment from or enter into strategic relationships with established and well-financed companies or investors, which would help enhance their competitiveness. Furthermore, the current competitors and new entrants in the health management industry may also seek to develop new service offerings, technologies or capabilities that could render some of the services we offer obsolete or less competitive, and some of them may adopt more aggressive pricing policies or devote greater resources to marketing and promotional campaigns than we do. More specifically, the medical aesthetic service market in Mainland China faces competition from developed markets such as South Korea, Japan, Hong Kong and Taiwan. The failure of service providers in Mainland China to compete effectively against their overseas counterparts may materially and adversely impact our financial results. The occurrence of any of these circumstances may hinder our growth and reduce our market share, and thus our business, results of operations, financial condition and prospects would be materially and adversely affected.

Non-compliance on the part of third parties with which we conduct business could disrupt our business and adversely affect our results of operations.

The product providers or other business counterparties may be subject to regulatory penalties or punishments because of their regulatory compliance failures, which may affect our business activities and reputation and in turn, our results of operations. Although we conduct due diligence on our business counterparties, we cannot be certain whether any such counterparty has infringed or will infringe any third parties’ legal rights or violate any regulatory requirements. We cannot assure you that these counterparties will continue to maintain all applicable permits and approvals, and any non-compliance on the part of these counterparties may cause potential liabilities to us and in turn disrupt our operations.

We face risks related to outbreaks of health epidemics, natural disasters, and other extraordinary events, which could significantly disrupt our operations and adversely affect our business, financial condition or results of operations.

Our business could be and has been affected by public health epidemics, such as the outbreak of avian influenza, severe acute respiratory syndrome, or SARS, Zika virus, Ebola virus, the COVID-19 pandemic or other disease. During the first half of 2022, there was an upsurge of COVID-19 cases in China, especially in the city of Shanghai, which was followed by certain restrictive measures to contain the COVID-19 pandemic. In addition, we and our clients experienced limitations in having face-to-face meetings due to quarantine measures and travel bans imposed by the government to contain the spread of this outbreak. Furthermore, although the World Health Organization has declared that the COVID-19 pandemic is no longer a global health emergency and the PRC government has gradually lifted restrictions and quarantine measures in China due to the fact that the pandemic is being contained, there is still great uncertainty as to the future development of the COVID-19 pandemic, which may still affect our work efficiency and productivity and

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cause delay or cancellation in our offline events, and in turn adversely affect our business. In addition to the impact of the COVID-19 pandemic and other health epidemics, our business could also be materially and adversely affected by natural disasters or other public safety concerns affecting China or elsewhere in the world.

Our risk management policies and procedures may not be fully effective in identifying or mitigating risk exposure in all market environments or against all types of risk, including the non-compliances with laws and regulations or our internal policies and procedures.

We have devoted significant time and resources to developing our risk management policies and procedures and plan to continue to do so. However, our policies and procedures to identify, monitor and manage risks may not be fully effective in mitigating our risk exposure in all market environments or against all types of risk. Many of our risk management policies are based upon observed historical market behaviors, existing market practices or statistics based on historical models. During periods of market volatility or due to unforeseen events, the historically derived correlations upon which these methods are based may not be valid. As a result, these methods may not predict future exposures accurately, which could be significantly greater than what our models indicate. This could cause us to incur investment losses or cause our hedging and other risk management strategies to be ineffective.

Before launching a product, we follow stringent product selection procedures to evaluate important and complex business, financial, tax, accounting and legal issues of product candidates and providers. Nevertheless, when following such procedures and making an assessment regarding product candidates, we rely on the resources available to us, including information provided by the product providers, which may not always be accurate, complete, up-to-date or properly evaluated. Accordingly, we cannot assure you that the due diligence investigations that we carry out with respect to any products will reveal or highlight all relevant facts that may be necessary or helpful in evaluating such products. Instances of fraud, accounting irregularities and other deceptive practices can be difficult to detect.

Although we have established an internal compliance system to supervise service quality and regulation compliance, these risks may be difficult to detect in advance and mitigate, and could harm our business, results of operations or financial performance. Historically, we identified certain deficiencies in tax matter handling and reporting. Specifically, we did not timely pay certain value-added tax and income taxes in full as required by the competent tax authorities in China, and recorded the unpaid taxes as value-added tax and income tax payables as of June 30, 2021, 2022 and 2023.

Additionally, although we perform due diligence on potential clients, we cannot assure you that we will be able to identify all the possible issues based on the information available to us. If certain investors do not meet the relevant qualification requirements under relevant product agreements or under applicable laws, we may also be deemed in default of the obligations required in our contract with the product providers, or be subject to claims raised by other investors in the products. Management of operational, legal and regulatory risks requires, among other things, policies and procedures to properly record and verify a large number of transactions and events, and these policies and procedures may not be fully effective in mitigating our risk exposure in all market environments or against all types of risk.

Furthermore, historically we engaged an independent third party to receive commissions from certain product providers and pay the commissions to our relationship managers on our behalf. All relevant individual income tax withholding responsibility was assumed by the independent third party. We terminated these business arrangements by December 31, 2020. Although the arrangements did not impact our financial results, and all the revenues and expenses were recognized and accounted for in accordance with our accounting estimates, such historical arrangements might have resulted in compliance deficiencies. We cannot assure you whether the tax authorities may decide to take any enforcement actions on the above arrangements or their decisions may adversely affect our compliance liabilities.

Misconduct of our relationship managers or other employees could harm our reputation or lead to regulatory sanctions or litigation costs.

Misconduct of our relationship managers or other employees could result in violations of law by us, regulatory sanctions, litigation or serious reputational or financial harm. Their misconduct could include the following:

negligently or intentionally ignoring facts that are material to assessing and selecting product candidates; engaging in misrepresentation or fraudulent activities when marketing or distributing wealth management products to clients;

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improperly using or disclosing confidential information of our clients, wealth management product providers or other parties;
concealing unauthorized or unsuccessful activities, resulting in unknown and unmanaged risks or losses; or
otherwise not complying with laws and regulations or our internal policies or procedures.

We have established an internal compliance system to supervise service quality and regulation compliance; however, we cannot always deter misconduct of our relationship managers or other employees and the precautions we take to prevent and detect misconduct may not be effective in all cases. We cannot assure you, therefore, that misconduct of our relationship managers or other employees will not lead to a material adverse effect on our business, results of operations or financial conditions.

We may not be able to effectively implement our future business strategies, in which case our business and results of operations may be materially and adversely affected.

We commenced our business in 2006, and have grown and expanded significantly since our inception. We believe that our continued growth will depend on our ability to effectively implement our business strategies and address the above listed factors that may affect us. In order to strengthen our market position in the wealth management industry, we intend to strengthen and expand our product offering, continue to invest in our branch network and expand our international presence, and invest in technology to improve operational efficiency, all of which require us to further expand, train, manage and motivate our workforce and maintain our relationships with our clients, product providers, and other industry players such as financial institutions and asset management companies. Our operational expenses may increase due to establishment of additional offices and wealth service centers so as to increase our market penetration. We anticipate that we will also need to implement a variety of enhanced and upgraded operational and financial systems, procedures and controls, including the improvement of office administration system and other internal management systems. All of these endeavors involve risks and will require substantial management efforts, attention and skills, and significant additional expenditure. We cannot assure you that our current and planned personnel, systems, procedures and controls will be adequate to support our future operations. In addition, we cannot assure you that we will be able to manage our growth or implement our future business strategies effectively, and failure to do so may materially and adversely affect our business and results of operations.

We and our directors and/or executive officers may be involved from time to time in legal or administrative proceedings and commercial or contractual disputes, which could have a material adverse effect on our business, results of operations and financial condition.

From time to time, we and our directors and/or executive officers may be involved in legal or administrative proceedings and commercial disputes. Such proceedings or disputes are typically claims that arise in the ordinary course of business, including, without limitation, commercial or contractual disputes, lawsuits or disputes brought by our clients who have bought wealth management and asset management products based on our recommendations and insurance products for which we facilitated the sales, employment matters and other regulatory compliance matters. There can be no assurance that any proceedings and claims, should they arise, will not have a material adverse effect on our business, results of operations and financial condition.

This risk may be heightened during periods when credit, equity or other financial markets are deteriorating in value or are volatile, or when clients or investors are experiencing losses. Although we are not liable for the loss of our clients arising from their own investments decisions and we do not provide any guarantees of returns with respect to the products, however, we may be involved in legal proceedings, commercial disputes, complaints from and disputes with our clients regardless of its ground. Furthermore, actions brought against us may result in settlements, awards, injunctions, fines, penalties or other results adverse to us including harm to our reputation. The contracts between ourselves and wealth management product providers do not provide for indemnification for our costs, damages or expenses resulting from such lawsuits. Even if we are successful in defending against these actions, the defense of such matters may result in us incurring significant expenses. Predicting the outcome of such matters is inherently difficult, particularly where claimants seek substantial or unspecified damages, or when arbitration or legal proceedings are at an early stage. A substantial judgment, award, settlement, fine, or penalty could be materially adverse to our operating results or cash flows for a particular future period, depending on our results for that period.

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If we breach the contractual obligations under the asset management agreements or fiduciary duties we owe to counterparties in connection with our asset management service business, our results of operations will be adversely impacted.

As we intend to provide asset management service business in PRC, we may be exposed to indemnity or other legal liabilities if we are deemed to have breached our legal obligations as fund managers under the asset management agreements or fund subscription agreements, and are therefore susceptible to legal disputes and potentially significant damages. If we serve as the general partner for the funds that are in the form of a limited partnership, we may be required to manage the funds for the limited partners or the investors. If we are deemed to have breached our fiduciary duty, we may be exposed to risks and losses related to legal disputes. We would bear unlimited joint and several liabilities for the debts of any asset managed by us out of all our assets as general partners. We cannot assure you that our efforts to further develop the asset management business will be successful. If our asset management business fails, our future growth may be materially and adversely affected and our reputation and credibility may be damaged among our target clients.

We have granted, and may continue to grant, share options and other forms of share-based incentive awards, which may result in increased share-based compensation expenses.

On January 1, 2016, 2017 and January 8, 2018, Hywin Wealth Management granted 8,998,465 options to its employees and directors to purchase an aggregate of 8,998,465 shares of Hywin Wealth Management under the original 2018 Plan. In August 2018, Hywin Wealth Management repurchased 1,495,995 options issued and outstanding, following which a total of 7,502,470 options remained outstanding. On September 30, 2019, each grantee of such outstanding options entered into an amended grant letter with Hywin Wealth Management and our company, all parties agreed to replace the outstanding options granted by Hywin Wealth Management by options granted by our company, with each one option granted by our company replacing 10 options granted by Hywin Wealth Management, effective immediately (the “restated 2018 Plan”). As of September 30, 2023, 750,247 options to purchase approximately 1.5% issued ordinary shares of our company before the completion of our public offering were granted and outstanding under the restated 2018 Plan, at exercise prices ranging from US$1.894 per share to US$2.801 per share. Due to the expense recognized in the period, we recognized RMB21.9 million, RMB7.3 million, and RMB5.2 million (US$0.8 million) of share-based compensation expenses for the years ended June 30, 2021, 2022 and 2023, respectively. See “Item 6. Directors, Senior Management and Employees—B. Compensation—Share Incentive Plans” and “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Key Components of Results of Operations—Operating Costs and Expenses—Share-based Compensation Expenses/(Benefits).” We may incur such expenses in future periods under the restated 2018 and 2019 Plans and any future awards under other plans. In addition, we may still grant share options and other share-based incentives in the future, which may record significantly share-based compensation expenses in our profit or loss statement. We account for compensation costs for all stock options using a fair-value based method and recognize expenses in our consolidated statement of income in accordance with the relevant rules in accordance with U.S. GAAP, which may have a material adverse effect on our net income. Any additional securities issued under share-based compensation schemes will adversely affect our results of operations and dilute the ownership interests of our shareholders, including holders of our ADSs. We believe the granting of share-based compensation is of significant importance to our ability to attract and retain key employees and relationship managers, and we will continue to grant share-based compensation to directors, employees or relationship managers in the future.

Any significant failure in our information technology systems could have a material adverse effect on our business and profitability.

Our business is highly dependent on the ability of our information technology systems to timely process a large amount of information of product offering, clients and transactions. The proper functioning of our client transactions and services, sales management, financial control, accounting, and other information technology systems, together with the communication systems between our various wealth service centers and our headquarters in Shanghai, is critical to our business and to our ability to compete effectively. We cannot assure you that our business activities would not be materially disrupted in the event of a partial or complete failure of any of these information technology or communication systems, which could be caused by, among other things, software malfunction, computer virus attacks or conversion errors due to system upgrading. In addition, a prolonged failure of our information technology system could damage our reputation and materially and adversely affect our future prospects and profitability. In addition, as we plan to invest in intelligence client service platform and relationship manager management platform, we cannot assure you that no additional licenses or permits under relevant laws and regulations to own or use such platforms or IT infrastructure would be required, or that we would be able to obtain additional licenses or permits. If we are unable to obtain such licenses or permits, or be forced by governmental authorities to dismantle such infrastructure, we may not be able to recoup our investments and our future prospects and profitability may be materially and adversely affected. In addition, we operate our business primarily in China, and are subject to complex and evolving PRC laws and regulations. For example, we face risks relating to regulatory approvals on overseas listings and

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oversight on cybersecurity and data privacy. Uncertainties in the PRC legal system and the interpretation and enforcement of PRC laws and regulations could limit the legal protection.

We plan to establish and operate our internet hospital which could be subject to significant risks.

We currently provide health management services through digital platforms and the “Life Infinity Plus” marketplace. We plan to expand the service scope and capability of our internet hospital. As this is a new business opportunity with which we have little experience, we may not be able to attract and maintain the patients. The future profitability of our internet hospital relies on our capability of building our brand and improving our services and brand awareness. If our new service offerings do not meet users’ expectation or if we fail to provide superior user experience or maintain users’ trust in our brand, our business and reputation may be adversely affected. Furthermore, the online health management service market is immature and volatile, and if it does not develop, if it develops more slowly than we expect, or if our services do not drive user engagement, the growth of our business will be harmed. In addition, the performance of our internet hospital will rely heavily on our marketing and business developing strategy. The marketing activities of our internet hospital will increase additional operational costs, and we cannot ensure that our marketing activities will achieve the anticipated effect. Any malicious harassment or other unfair competitions will also make our marketing activities less effective.

Furthermore, the Administrative Measures on Internet Information Services, which was promulgated by the PRC State Council on September 25, 2000 and amended on January 8, 2011, set out guidelines on the provision of internet information services. It requires that a commercial operator of internet content provision services must obtain a value-added telecommunications business operating license (“ICP License”) for the provision of internet information services from the appropriate telecommunications authorities. Any failure, or perceived failure, by us to comply with any applicable regulatory requirements or internet information service-related rules, laws and regulations could result in proceedings or actions against us by governmental entities or others. These proceedings or actions may subject us to significant penalties and negative publicity, require us to change our business model or practices, increase our costs and severely disrupt our business.

Our business, financial condition, results of operations and prospects may be adversely affected by changes in the aesthetic medical market and unfavorable market perceptions of the overall aesthetic medical industry.

The aesthetic medical market requires us to closely monitor the trends in the market and the needs of our customers, which may require us to introduce new products, technologies, devices, solutions, service categories and treatment procedures and enhance our existing services and procedures. We have active dialogue and exchange of information with experts from well-respected aesthetic medical institutions overseas such as the United States, Europe, Singapore, Japan and South Korea to learn and adopt aesthetic medical solutions, standards and technologies. We must maintain strong relationships with leading overseas aesthetic medical institutions to ensure that we are accessing the latest technology and quickly and cost-effectively responding to our customers’ changing needs. We may be required to incur development and acquisition costs to keep pace with new technologies, implement technological innovations or to replace obsolete technologies. If we fail to identify, develop and introduce new products, solutions, service categories, features, enhancements and technologies on a timely and cost-effective basis, demand for our services may decrease and we may not be able to compete effectively or attract customers, which may materially and adversely affect our business and results of operations.

In addition, while aesthetic medical services have been gaining popularity in recent years, many consumers remain cautious about the risks inherent in aesthetic medical procedures. Media influences, peer perceptions, research indicating adverse health effects of aesthetic medical procedures or otherwise could lead to deterioration in the market perception of aesthetic medical treatments and to less demand for aesthetic medical services. In addition, if any allegation surfaces in the media or in social media forums of any accident, ineffectiveness of treatment, poor service standards or mishandling of sensitive personal information by any operator of aesthetic medical services, regardless of merit, the entire aesthetic medical industry and any industry participant including us could experience reputational harm. Our business, financial condition, results of operations and prospects may be materially and adversely affected as a result.

Our future success depends on the continuing efforts to retain our existing management team and other key employees as well as to attract, integrate and retain highly skilled and qualified personnel, and our business may be disrupted if we lose their services.

Our future success depends heavily on the continued services of our current executive officers. We also rely on the skills, experience and efforts of other key employees, including management, marketing, support, research and development, technical and services personnel. If one or more of our executive officers or other key employees are unable or unwilling to continue in their present positions, we may not be able to find replacements easily or at all, which may disrupt our business operations. If any of our executive

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officers or other key employees joins a competitor or forms a competing company, we may lose clients, know-how, key professionals and staff members.

We also rely on the skills, experience and efforts of our professionals, including our relationship managers and product development personnel. Our relationship managers mainly recommend wealth management products. The investment performance of products we distribute or assets we manage and the retention of our clients are dependent upon the strategies carried out and performance by such employees.

The market for these talents is extremely competitive and we may face the following risks:

there is no assurance that we can continue to successfully retain high quality relationship managers to support our further growth;
even if we could retain existing relationship managers, we may fail to attract new relationship managers or may have to incur disproportional training and administrative expenses in order to prepare our local recruits for their jobs;
if we are unable to attract, train and retain highly productive relationship managers, our business may be materially and adversely affected; and
competition for relationship managers may also force us to increase the compensation of such employees, which would increase operating cost and reduce our profitability.

Our success in operating our medical examination centers and clinics is, in part, dependent upon the number and quality of the physicians, administrators and other medical personnel working at these facilities and our ability to retain them. As we offer premium, internationally accredited health management services at our medical examination, we are dependent on attracting a certain number of qualified healthcare professionals from abroad, in addition to professionals from China, who may experience cultural challenges working in China and may not be willing or able to remain in China for the extended periods of time which are preferable for physician employment. We believe that the key factors that physicians consider before deciding whether they will work for us include the reputation and culture of our medical examination centers and clinics, the quality of the facilities and supporting staff, the number of patient visits, compensation and location. Our medical examination centers and clinics may not compare favorably with those of our competitors in respect of one or more of these factors which could result in our failure to attract or retain the physicians we desire. The failure to recruit and retain qualified physicians, management, nurses and other medical support personnel, or to control labor costs, could have an adverse effect on our business and results of operations.

If we are unable to attract and retain qualified individuals or our recruiting and retention costs increase significantly, our financial condition and results of operations could be materially and adversely impacted.

If our physicians and other medical professionals do not obtain and maintain appropriate licenses, we may be subject to penalties against our medical examination center, which could adversely affect our business.

Medical practice in China is strictly regulated. Physicians, nurses and medical technicians who practice at medical institutions must hold practicing licenses and may only practice within the scope of their licenses and at the specific medical institutions at which their licenses are registered. See “Item 4. Information on the Company—B. Business Overview—Regulations—Regulations on Health Management Services.” In practice, it takes some time for physicians, nurses and other medical professionals to transfer their licenses from one medical institution to another or add any further service scope or another medical institution to their permitted practicing institutions. From time to time, some of our physicians, nurses and other medical professionals could be required to make such amendments to their licenses due to changes to the location or nature of their work. We cannot assure you that all of our medical professionals have completed the transfer of their licenses and related government procedures in a timely manner or at all. In addition, we cannot assure you that our physicians, nurses and other medical professionals will always strictly follow the requirements and will not practice outside the permitted scope of their respective licenses. Our failure to properly manage the employment of our physicians, nurses and other medical professionals may subject us to administrative penalties against our treatment centers, which could adversely affect our business.

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