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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
December 31, 2021.

or

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

For the transition period from to

or

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

 

Date of event requiring this shell company report:

Commission file number: 001-38328

 

LexinFintech Holdings Ltd.

(Exact name of registrant as specified in its charter)

N/A

(Translation of Registrant’s name into English)

Cayman Islands

(Jurisdiction of incorporation or organization)

27/F CES Tower

No. 3099 Keyuan South Road

Nanshan District, Shenzhen 518057

The People’s Republic of China

(Address of principal executive offices)

Sunny Rui Sun, Chief Financial Officer

Telephone: +86 755 3637 8888

Email: IR@lexin.com

27/F CES Tower

No. 3099 Keyuan South Road

Nanshan District, Shenzhen 518057

The 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 (one American depositary share representing two Class A ordinary shares, par value US$0.0001 per share)

 

LX

 

The Nasdaq Stock Market LLC

(The Nasdaq Global Select Market)

Class A ordinary shares, par value US$0.0001 per share*

 

 

 

The Nasdaq Stock Market LLC

(The Nasdaq Global Select Market)

* Not for trading, but only in connection with the listing on The Nasdaq Global Select 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.

As of December 31, 2021, there were 367,735,793 ordinary shares issued and outstanding, consisting of 273,270,100 Class A ordinary shares (excluding the 13,160,846 Class A ordinary shares issued to the depositary bank for bulk issuance of ADSs reserved for future issuances upon the

 


 

exercise or vesting of awards granted under the Share Incentive Plan and the 2017 Share Incentive Plan), par value US$0.0001 per share, and 94,465,693 Class B ordinary shares, par value US$0.0001 per share.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

☐ Yes ☒ No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

☐ Yes ☒ No

Note — Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See 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.

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

 

 

 

 

 

INTRODUCTION

1

 

 

FORWARD-LOOKING INFORMATION

3

 

 

PART I

4

 

 

 

Item 1.

Identity of Directors, Senior Management and Advisers

4

Item 2.

Offer Statistics and Expected Timetable

4

Item 3.

Key Information

4

Item 4.

Information on the Company

69

Item 4A.

Unresolved Staff Comments

112

Item 5.

Operating and Financial Review and Prospects

112

Item 6.

Directors, Senior Management and Employees

142

Item 7.

Major Shareholders and Related Party Transactions

153

Item 8.

Financial Information

155

Item 9.

The Offer and Listing

156

Item 10.

Additional Information

157

Item 11.

Quantitative and Qualitative Disclosures about Market Risk

168

Item 12.

Description of Securities Other Than Equity Securities

169

 

 

PART II

171

 

 

 

Item 13.

Defaults, Dividend Arrearages and Delinquencies

171

Item 14.

Material Modifications to the Rights of Security Holders and Use of Proceeds

171

Item 15.

Controls and Procedures

171

Item 16A.

Audit Committee Financial Expert

172

Item 16B.

Code of Ethics

172

Item 16C.

Principal Accountant Fees and Services

172

Item 16D.

Exemptions from the Listing Standards for Audit Committees

172

Item 16E.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

173

Item 16F.

Change in Registrants Certifying Accountant

173

Item 16G.

Corporate Governance

173

Item 16H.

Mine Safety Disclosure

173

Item 16I.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

173

 

 

PART III

174

 

 

 

Item 17.

Financial Statements

174

Item 18.

Financial Statements

174

Item 19.

Exhibits

174

 

 

SIGNATURES

178

 

 

 

 

 

 

 


 

INTRODUCTION

Unless otherwise indicated or the context otherwise requires, all information in this annual report reflects the following:

“ABS” refers to asset-backed securities;
“active users” refer to, for a specified period, users who made at least one transaction during that period through our platform or through our third-party partners’ platforms using credit line granted by us;
“ADSs” refer to our American depositary shares, each of which represents two Class A ordinary shares, par value US$0.0001 per share;
“APR” in relation to a loan refers to the annualized percentage rate of all-in interest costs and fees charged to a borrower over the net proceeds received by the borrower; “nominal APR” refers to all-in interest costs and fees to the borrower over the net proceeds received by the borrower as a percentage of the total loan originations of both on- and off-balance sheet loans;
“China” or the “PRC” refers to the People’s Republic of China, excluding, for the purposes of this annual report only, Hong Kong, Macau and Taiwan;
“delinquency ratio” refers to outstanding principal balance of loans that were past due (for certain calendar days, if specified) as a percentage of the total outstanding principal balance of the loans on our platform as of a specific date; for example, “30 days+ delinquency ratio” and “90 days+ delinquency ratio” refers to outstanding principal balance of loans that was over 30 and 90 calendar days past due as the total outstanding principal loans on our platform as of a specific date;
“Fenqile” or “our platform” refers to our online consumer finance platform;
“institutional funding partners” refer to third-party commercial banks, consumer finance companies and other licensed financial institutions as well as consolidated trusts and investors of our asset-backed securitized debts, and our microcredit company who fund the loans originated to our users on our platform.
“New City Youth” refer to the young working population in cities;
Maiya” refers to our buy-now and pay-later service that allows shoppers to buy products and pay for them over time;
“originations” refer to the total principal amount of the loans we originate during the relevant period. The amount borrowed by users using flexible repayment options to finance the repayment of certain principal amount of an original loan is calculated as a new loan principal amount. We treat off-balance sheet loans as part of our originations;
“RMB” or “Renminbi” refers to the legal currency of China;
“shares” or “ordinary shares” refers to our ordinary shares, which include both Class A ordinary shares and Class B ordinary shares, par value US$0.0001 per share;
“the variable interest entities” or “VIEs” refer to Shenzhen Xinjie Investment Co., Ltd., or Shenzhen Xinjie, Shenzhen Fenqile Network Technology Co., Ltd., or Shenzhen Fenqile, Beijing Lejiaxin Network Technology Co., Ltd., or Beijing Lejiaxin, Shenzhen Qianhai Dingsheng Data Technology Co., Ltd., or Qianhai Dingsheng, Shenzhen Mengtian Technology Co., Ltd., or Mengtian Technology, and Beihai Super Egg E-Commerce Co., Ltd., or Beihai Super Egg, and others, collectively;
“users” refer to users with an approved credit line on our online consumer finance platform and shoppers on our Maiya and e-commerce platforms;
“U.S. GAAP” refers to generally accepted accounting principles in the United States;
“US$,” “U.S. dollars,” “$,” or “dollars” refers to the legal currency of the United States;
“Vintage charge-off rate” refers to, with respect to on- and off-balance sheet loans originated during a specified time period, which we refer to as a vintage, the total outstanding principal balance of the loans that are charged off or assumed charged off during a specified period divided by the total initial principal of the loans originated in such vintage; and
“we,” “us,” “our company,” “our,” or “Lexin” refers to LexinFintech Holdings Ltd., its subsidiaries, and, in the context of describing our operations and consolidated financial information, the variable interest entities and their subsidiaries in China.

1


 

Our reporting currency is Renminbi, or RMB. Unless otherwise noted, all translations from RMB to U.S. dollars and from U.S. dollars to RMB in this annual report are made at a rate of US$1.00=RMB6.3726, the exchange rate in effect as of December 30, 2021 as set forth in the H.10 statistical release of The Board of Governors of the Federal Reserve System. We make no representation that any RMB or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or RMB, as the case may be, at any particular rate, or at all

2


 

FORWARD-LOOKING INFORMATION

This annual report on Form 20-F contains forward-looking statements that reflect our current expectations and views of future events. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by terminology such as “may,” “will,” “expect,” “anticipate,” “future,” “intend,” “plan,” “believe,” “estimate,” “is/are likely to” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, but are not limited to:

our goals and strategies;
our future business development, financial condition and results of operations;
the expected growth of the online and offline consumption market in China;
our expectations regarding demand for and market acceptance of our products and services;
our expectations regarding our relationships with users, funding sources, third-party guarantee companies and other business partners;
competition in our industry;
general economic and business conditions in China and elsewhere;
relevant government policies, laws and regulations relating to our industry; and
the outcome of any current and future legal or administrative proceedings.

We would like to caution you not to place undue reliance on these forward-looking statements and you should read these statements in conjunction with the risk factors disclosed in “Item 3. Key Information—D. Risk Factors.” Those risks are not exhaustive. We operate in a rapidly evolving environment.

New risks emerge from time to time and it is impossible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ from those contained in any forward-looking statement. We do not undertake any obligation to update or revise the forward-looking statements except as required under applicable law. You should read this annual report, including the documents incorporated by reference herein, completely, and with the understanding that our actual future results may be materially different from what we expect.

3


 

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

A. Selected financial data

Our Holding Company Structure and Contractual Arrangements with the Variable Interest Entities and Their Shareholders

LexinFintech Holdings Ltd. is not a Chinese operating company but a Cayman Islands holding company with no equity ownership in its variable interest entities and their subsidiaries. We conduct our operations in China through (i) our PRC subsidiaries, and (ii) the variable interest entities, with which we have maintained contractual arrangements, and their subsidiaries. PRC laws and regulations restrict and impose conditions on foreign investment in value-added telecommunication service and certain other businesses. Accordingly, we operate these businesses in China through the variable interest entities, and rely on contractual arrangements among our PRC subsidiaries, the variable interest entities and their nominee shareholders to control the business operations of the variable interest entities. Revenues contributed by the variable interest entities accounted for 100%, 99.4% and 97.5% of our total revenues in 2019, 2020 and 2021, respectively. As used in this annual report, “we,” “us,” “our company,” “our,” or “Lexin” refers to LexinFintech Holdings Ltd., its subsidiaries, and, in the context of describing our operations and consolidated financial information, the variable interest entities and their subsidiaries in China, including Shenzhen Xinjie Investment Co., Ltd., or Shenzhen Xinjie, Shenzhen Fenqile Network Technology Co., Ltd., or Shenzhen Fenqile, Beijing Lejiaxin Network Technology Co., Ltd., or Beijing Lejiaxin, Shenzhen Qianhai Dingsheng Data Technology Co., Ltd., or Qianhai Dingsheng, Shenzhen Mengtian Technology Co., Ltd., or Mengtian Technology, and Beihai Super Egg E-Commerce Co., Ltd., or Beihai Super Egg, and others. Investors in our ADSs are not purchasing equity interest in the variable interest entities in China but instead are purchasing equity interest in a holding company incorporated in the Cayman Islands.

A series of contractual agreements have been entered into by and among our subsidiaries, the variable interest entities and their respective shareholders, which include exclusive option agreements, power of attorney, exclusive business cooperation agreements, loan agreements and equity pledge agreements. Terms contained in each set of contractual arrangements with the variable interest entities and their respective shareholders are substantially similar. For more details of these contractual arrangements, see “Item 4. Information on the Company—C. Organizational Structure—Contractual Arrangements with the Variable Interest Entities.”

However, the contractual arrangements may not be as effective as direct ownership in providing us with control over the variable interest entities and we may incur substantial costs to enforce the terms of the arrangements. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure—We rely on contractual arrangements with the variable interest entities and their shareholders, for a significant portion of our business operations, which may not be as effective as direct ownership in providing operational control” and “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure—Any failure by the variable interest entities or their respective shareholders to perform their obligations under our contractual arrangements with them would have a material adverse effect on our business.”

There are also substantial uncertainties regarding the interpretation and application of current and future PRC laws, regulations and rules regarding the status of the rights of our Cayman Islands holding company with respect to its contractual arrangements with the variable interest entities and its nominee shareholders. It is uncertain whether any new PRC laws or regulations relating to variable interest entity structures will be adopted or if adopted, what they would provide. If we or any of the variable interest entities is found to be in violation of any existing or future PRC laws or regulations, or fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities would have broad discretion to take action in dealing with such violations or failures. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure—If the PRC government deems that the contractual arrangements in relation to the variable interest entities and their subsidiaries do not comply with PRC regulatory restrictions on foreign investment in the relevant industries,

4


 

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,” and “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to us.”

Our corporate structure is subject to risks associated with our contractual arrangements with the variable interest entities. If the PRC government deems that our contractual arrangements with the variable interest entities 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. Our holding company, our PRC subsidiaries and variable interest entities, 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 variable interest entities and, consequently, significantly affect the financial performance of the variable interest entities and our company as a whole. 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.”

We face various risks and uncertainties related to doing business in China. Our business operations are primarily conducted in China, and we are subject to complex and evolving PRC laws and regulations. For example, we face risks associated with regulatory approvals on offshore offerings, anti-monopoly regulatory actions, and oversight on cybersecurity and data privacy, as well as the lack of inspection by the Public Company Accounting Oversight Board, or the PCAOB, on our auditors, which may impact our ability to conduct certain businesses, accept foreign investments, or list on a stock exchange in the United States or other foreign country. These risks could result in a material adverse change in our operations and the value of our ADSs, significantly limit or completely hinder our ability to continue to offer securities to investors, or cause the value of such securities to significantly decline or become worthless. For a detailed description of risks related to doing business in China, “Item 3.D. Key Information—Risk Factors—Risks Related to Doing Business in China.”

PRC government’s significant authority in regulating our operations and its oversight and control over offerings conducted overseas by, and foreign investment in, China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer securities to investors. Implementation of industry-wide regulations in this nature may cause the value of such securities to significantly decline. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—The PRC government’s significant oversight and discretion over our business operation could result in a material adverse change in our operations and the value of our ADSs.”

Risks and uncertainties arising from the legal system in China, including risks and uncertainties regarding the enforcement of laws and quickly evolving rules and regulations in China, could result in a material adverse change in our operations and the value of our ADSs. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us.”

The Holding Foreign Companies Accountable Act

The Holding Foreign Companies Accountable Act, or the HFCAA, was enacted on December 18, 2020. The HFCAA states that if the SEC determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspection by the PCAOB for three consecutive years beginning in 2021, the SEC should prohibit our shares or ADSs from being traded on a national securities exchange or in the over-the-counter market in the United States. Since our auditor is located in China, a jurisdiction where the PCAOB has been unable to conduct inspections without the approval of the Chinese authorities, our auditor is not currently inspected by the PCAOB, which may impact our ability to remain listed on a stock exchange in the United States. The related risks and uncertainties could cause the value of our ADSs to significantly decline. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Relating to Our Business and Industry—The PCAOB is currently unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections over our auditor deprives our investors with the benefits of such inspections” and “Item 3. Key Information—D. Risk Factors—Risks Relating to Our Business and Industry—Our ADSs will be prohibited from trading in the United States under the HFCAA in 2024 if the PCAOB is unable to inspect or fully investigate auditors located in China, or in 2023 if proposed changes to the law are enacted. The delisting of our ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment.”

5


 

Permissions Required from the PRC Authorities for Our Operations

We conduct our business primarily through our subsidiaries, the variable interest entities and their subsidiaries in China. Our operations in China are governed by PRC laws and regulations. As of the date of this annual report, our PRC subsidiaries and variable interest entities have obtained the requisite licenses and permits from the PRC government authorities that are material for the business operations of our holding company, the variable interest entities in China, including, among others, certain value-added telecommunications service license for the operation of domestic call center service and content service (excluding internet content service), value-added telecommunications service license for online data processing and transaction processing, value-added telecommunications service license for the operations of internet content service, network microcredit license and financing guarantee business permit. Given the uncertainties of interpretation and implementation of relevant laws and regulations and the enforcement practice by relevant government authorities, we may be required to obtain additional licenses, permits, filings or approvals for the functions and services of our platform in the future. For more detailed information, see “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—Any lack of requisite approvals, licenses or permits applicable to our business may have a material and adverse impact on our business, financial condition and results of operations.”

Furthermore, in connection with our issuance of securities to foreign investors, under current PRC laws, regulations, and rules, as of the date of this annual report, we, our PRC subsidiaries and the variable interest entities, (i) are not required to obtain permissions from the China Securities Regulatory Commission, or the CSRC, (ii) are not required to go through cybersecurity review by the Cyberspace Administration of China, or the CAC, and (iii) have not been asked to obtain or denied such permissions by any PRC authority.

In addition, the PRC government has recently indicated an intent to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers. For more detailed information, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—The approval of the CSRC or other PRC government authorities may be required in connection with our offshore offerings under PRC law, and, if required, we cannot predict whether or for how long we will be able to obtain such approval.”

Cash and Asset Flows through Our Organization

LexinFintech Holdings Ltd. is a holding company with no operations of its own. We conduct our operations in China primarily through our subsidiaries and the variable interest entities in China. As a result, although other means are available for us to obtain financing at the holding company level, LexinFintech Holding Ltd.'s ability to pay dividends to the shareholders and to service any debt it may incur may depend upon dividends paid by our PRC subsidiaries and service fees paid by the variable interest entities. If any of our subsidiaries incurs debt on its own behalf, the instruments governing such debt may restrict its ability to pay dividends to LexinFintech Holdings Ltd. In addition, our PRC subsidiaries are permitted to pay dividends to LexinFintech Holdings Ltd. only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Further, our PRC subsidiaries and variable interest entities are required to make appropriations to certain statutory reserve funds or may make appropriations to certain discretionary funds, which are not distributable as cash dividends except in the event of a solvent liquidation of the companies. For more details, see “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Holding Company Structure.”

Under PRC laws and regulations, our PRC subsidiaries and variable interest entities and their subsidiaries are subject to certain restrictions with respect to payment of dividends or otherwise transfers of any of their net assets to us. Remittance of dividends by a wholly foreign-owned enterprise out of China is also subject to examination by the banks designated by the PRC State Administration of Foreign Exchange, or SAFE. These restrictions are benchmarked against the paid-up capital and the statutory reserve funds of our PRC subsidiaries and the net assets of the variable interest entities in which we have no legal ownership. As of December 31, 2019, 2020 and 2021, the total amount of such restriction to which our PRC subsidiaries and variable interest entities and their subsidiaries are subject was RMB3,493 million, RMB3,772 million, and RMB4,190 million (US$657 million), respectively. For risks relating to the fund flows of our operations in China, see “Item 3. Key Information—Risk Factors—Risks Related to Doing Business in China—We rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material adverse effect on our ability to conduct our business.”

Under PRC laws, LexinFintech Holdings Ltd. may fund our PRC subsidiaries only through capital contributions or loans, and fund the variable interest entities or their subsidiaries only through loans, subject to satisfaction of applicable government registration and approval requirements. As of December 31, 2020 and 2021, the aggregate amount of capital

6


 

contribution by LexinFintech Holdings Ltd. to our intermediate holding companies and PRC subsidiaries was RMB3,428 million and RMB3,354 million (US$526 million), respectively.

As of December 31, 2020 and 2021, the outstanding balance of amounts due from Group companies of the variable interest entities and their subsidiaries was RMB219.8 million and RMB58.1 million (US$9.1 million), respectively. As of December 31, 2020 and 2021, the outstanding balance of amounts due to Group companies of the variable interest entities and their subsidiaries was RMB4.9 billion, and RMB6.5 billion (US$1.0 billion), respectively. The consolidated VIEs may transfer cash to the relevant WFOE by paying service fees according to the business cooperation agreements. For the years ended December 31, 2019, 2020 and 2021, the total amount of service fees that the VIEs paid to the relevant WFOE under the technical services agreements was RMB1,140 million, RMB2,422 million and RMB4,140 million, respectively.

In 2019, 2020, and 2021, no assets other than cash were transferred through our organization.

Taxation on Dividends or Distributions

LexinFintech Holdings Ltd. has not declared or paid any cash dividends, nor does it have any present plan to pay any cash dividends on our ordinary shares in the foreseeable future. We intend to indefinitely reinvest all the undistributed earnings of our subsidiaries and the consolidated VIEs in China to operate and expand our business. See “Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Dividend Policy.” For PRC and United States federal income tax considerations of an investment in our ADSs, see “Item 10. Additional Information—E. Taxation.”

Under the current laws of the Cayman Islands, LexinFintech Holdings Ltd. is not subject to tax on income or capital gains. Upon payments of dividends to our shareholders, no Cayman Islands withholding tax will be imposed. For purposes of illustration, the following discussion reflects the hypothetical taxes that might be required to be paid in Mainland China and Hong Kong, assuming that: (i) we have taxable earnings in the VIE, and (ii) we determine to pay a dividend in the future:
 

 

 

Tax calculation (1)

Hypothetical pre-tax earnings (2)

 

100.0%

Tax on earnings at statutory rate of 25%(3)

 

(25.0)%

Net earnings available for distribution

 

75.0%

Withholding tax at standard rate of 10%(4)

 

(7.5)%

Net distribution to Parent/Shareholders

 

67.5%

 

(1)
For purposes of this example, the tax calculation has been simplified. The hypothetical book pre-tax earnings amount is assumed to equal Chinese taxable income;
(2)
Certain of our subsidiaries and the VIE qualifies for a 15% preferential income tax rate in China. However, such rate is subject to qualification, is temporary in nature, and may not be available in a future period when distributions are paid. For purposes of this hypothetical example, the table above reflects a maximum tax scenario under which the full statutory rate would be effective;
(3)
China’s Enterprise Income Tax Law imposes a withholding income tax of 10% on dividends distributed by a Foreign Invested Enterprise to its immediate holding company outside of Mainland China. A lower withholding income tax rate of 5% is applied if the Foreign Invested Enterprise’s immediate holding company is registered in Hong Kong or other jurisdictions that have a tax treaty arrangement with Mainland China, subject to a qualification review at the time of the distribution. There is no incremental tax at Hong Kong level for any dividend distribution to LexinFintech Holdings;
(4)
If a 10% withholding income tax rate is imposed, the withholding tax will be 7.5% and the amount to be distributed as dividend at Hong Kong level and net distribution to LexinFintech Holdings will be 67.5%.


 

The table above has been prepared under the assumption that all profits of the consolidated VIEs will be distributed as fees to our PRC subsidiaries under tax neutral contractual arrangements. If, in the future, the accumulated earnings of the consolidated VIEs exceed the service fees paid to our PRC subsidiaries (or if the current and contemplated fee structure between the inter-group entities is determined to be non substantive and disallowed by Chinese tax authorities), the consolidated VIEs could make a non-deductible transfer to our PRC subsidiaries for the amounts of the stranded cash in the consolidated VIEs. This would result in such transfer being non-deductible expenses for the consolidated VIEs but still taxable income for the PRC subsidiaries. Such a transfer and the related tax burdens would reduce our after-tax income to

7


 

approximately 50.6% of the pre-tax income. Our management believes that there is only a remote possibility that this scenario would happen.


 

Financial Information Related to the Consolidated Variable Interest Entities

The following table presents the condensed consolidating schedule of financial position for the consolidated variable interest entities and other entities as of the dates presented. The financial information of the consolidated trusts and asset-backed securities (ABS”) were included in the financial position for VIEs and the VIEs' subsidiaries, as the consolidated VIE companies are considered the primary beneficiary of these trusts and ABS plans.

Selected Condensed Consolidated Statements of Income Information

 

 

 

For the Year Ended December 31, 2021

 

 

 

Parent

 

 

Other Subsidiaries

 

 

Primary Beneficiary
of the VIEs

 

 

The VIEs and the
VIEs' subsidiaries

 

 

Eliminating
adjustments

 

 

Consolidated
totals

 

 

 

(RMB in thousands)

 

Condensed Consolidating Schedule of Results of Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Third-party revenues

 

 

 

 

 

1,527

 

 

 

287,020

 

 

 

11,091,978

 

 

 

 

 

 

11,380,525

 

Inter-group revenues (1)

 

 

 

 

 

68,500

 

 

 

2,980,763

 

 

 

11,429

 

 

 

(3,060,692

)

 

 

 

Total Operating revenue

 

 

 

 

 

70,027

 

 

 

3,267,783

 

 

 

11,103,407

 

 

 

(3,060,692

)

 

 

11,380,525

 

Operating cost:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Third-party costs

 

 

 

 

 

1,945

 

 

 

(112,202

)

 

 

(5,520,994

)

 

 

 

 

 

(5,631,251

)

Inter-group costs (1)

 

 

 

 

 

 

 

 

 

 

 

(1,636

)

 

 

1,636

 

 

 

 

Total operating cost

 

 

 

 

 

1,945

 

 

 

(112,202

)

 

 

(5,522,630

)

 

 

1,636

 

 

 

(5,631,251

)

Gross profit

 

 

 

 

 

71,972

 

 

 

3,155,581

 

 

 

5,580,777

 

 

 

(3,059,056

)

 

 

5,749,274

 

Operating expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Third-party expenses

 

 

(19,109

)

 

 

(40,298

)

 

 

(930,293

)

 

 

(1,689,151

)

 

 

 

 

 

(2,678,851

)

Inter-group expenses (1)

 

 

 

 

 

 

 

 

(11,429

)

 

 

(3,047,627

)

 

 

3,059,056

 

 

 

 

Total operating expenses

 

 

(19,109

)

 

 

(40,298

)

 

 

(941,722

)

 

 

(4,736,778

)

 

 

3,059,056

 

 

 

(2,678,851

)

Income from subsidiaries and the VIEs (2)

 

 

2,395,789

 

 

 

2,333,912

 

 

 

332,405

 

 

 

 

 

 

(5,062,106

)

 

 

 

Others

 

 

(35,606

)

 

 

38,281

 

 

 

65,636

 

 

 

(369,200

)

 

 

 

 

 

(300,889

)

Income before income tax

 

 

2,341,074

 

 

 

2,403,867

 

 

 

2,611,900

 

 

 

474,799

 

 

 

(5,062,106

)

 

 

2,769,534

 

Income tax expenses

 

 

(7,151

)

 

 

(8,078

)

 

 

(277,988

)

 

 

(142,201

)

 

 

 

 

 

(435,418

)

Net income

 

 

2,333,923

 

 

 

2,395,789

 

 

 

2,333,912

 

 

 

332,598

 

 

 

(5,062,106

)

 

 

2,334,116

 

Less: net income attributable to non-controlling interests

 

 

 

 

 

 

 

 

 

 

 

193

 

 

 

 

 

 

193

 

Net income attributable to ordinary shareholders

 

 

2,333,923

 

 

 

2,395,789

 

 

 

2,333,912

 

 

 

332,405

 

 

 

(5,062,106

)

 

 

2,333,923

 

 

 

 

For the Year Ended December 31, 2020

 

 

 

Parent

 

 

Other Subsidiaries

 

 

Primary Beneficiary
of the VIEs

 

 

The VIEs and the
VIEs' subsidiaries

 

 

Eliminating
adjustments

 

 

Consolidated
totals

 

 

 

(RMB in thousands)

 

Condensed Consolidating Schedule of Results of Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Third-party revenues

 

 

 

 

 

1,440

 

 

 

63,823

 

 

 

11,579,992

 

 

 

 

 

 

11,645,255

 

Inter-group revenues (1)

 

 

 

 

 

 

 

 

2,408,993

 

 

 

449

 

 

 

(2,409,442

)

 

 

 

Total Operating revenue

 

 

 

 

 

1,440

 

 

 

2,472,816

 

 

 

11,580,441

 

 

 

(2,409,442

)

 

 

11,645,255

 

Operating cost:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Third-party costs

 

 

 

 

 

(3,684

)

 

 

(49,408

)

 

 

(7,959,095

)

 

 

 

 

 

(8,012,187

)

Inter-group costs (1)

 

 

 

 

 

 

 

 

 

 

 

(21,817

)

 

 

21,817

 

 

 

 

Total operating cost

 

 

 

 

 

(3,684

)

 

 

(49,408

)

 

 

(7,980,912

)

 

 

21,817

 

 

 

(8,012,187

)

Gross profit

 

 

 

 

 

(2,244

)

 

 

2,423,408

 

 

 

3,599,529

 

 

 

(2,387,625

)

 

 

3,633,068

 

Operating expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Third-party expenses

 

 

(15,707

)

 

 

(14,714

)

 

 

(808,555

)

 

 

(1,360,975

)

 

 

 

 

 

(2,199,951

)

Inter-group expenses (1)

 

 

 

 

 

 

 

 

(449

)

 

 

(2,387,176

)

 

 

2,387,625

 

 

 

 

Total operating expenses

 

 

(15,707

)

 

 

(14,714

)

 

 

(809,004

)

 

 

(3,748,151

)

 

 

2,387,625

 

 

 

(2,199,951

)

Income/(Loss) from subsidiaries and the VIEs (2)

 

 

626,877

 

 

 

584,348

 

 

 

(816,113

)

 

 

 

 

 

(395,112

)

 

 

 

Others

 

 

(16,190

)

 

 

58,329

 

 

 

9,086

 

 

 

(798,733

)

 

 

 

 

 

(747,508

)

Income/(loss) before income tax

 

 

594,980

 

 

 

625,719

 

 

 

807,377

 

 

 

(947,355

)

 

 

(395,112

)

 

 

685,609

 

Income tax benefits/(expenses)

 

 

 

 

 

1,158

 

 

 

(223,029

)

 

 

131,242

 

 

 

 

 

 

(90,629

)

Net income/(loss)

 

 

594,980

 

 

 

626,877

 

 

 

584,348

 

 

 

(816,113

)

 

 

(395,112

)

 

 

594,980

 

 

8


 

 

 

 

For the Year Ended December 31, 2019

 

 

 

Parent

 

 

Other Subsidiaries

 

 

Primary Beneficiary
of the VIEs

 

 

The VIEs and the
VIEs' subsidiaries

 

 

Eliminating
adjustments

 

 

Consolidated
totals

 

 

 

(RMB in thousands)

 

Condensed Consolidating Schedule of Results of Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Third-party revenues

 

 

 

 

 

 

 

 

 

 

 

10,603,507

 

 

 

 

 

 

10,603,507

 

Inter-group revenues (1)

 

 

 

 

 

 

 

 

1,344,196

 

 

 

5,210

 

 

 

(1,349,406

)

 

 

 

Total Operating revenue

 

 

 

 

 

 

 

 

1,344,196

 

 

 

10,608,717

 

 

 

(1,349,406

)

 

 

10,603,507

 

Operating cost:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Third-party costs

 

 

 

 

 

 

 

 

(34,160

)

 

 

(5,575,251

)

 

 

 

 

 

(5,609,411

)

Inter-group costs (1)

 

 

 

 

 

 

 

 

 

 

 

(58,469

)

 

 

58,469

 

 

 

 

Total operating cost

 

 

 

 

 

 

 

 

(34,160

)

 

 

(5,633,720

)

 

 

58,469

 

 

 

(5,609,411

)

Gross profit

 

 

 

 

 

 

 

 

1,310,036

 

 

 

4,974,997

 

 

 

(1,290,937

)

 

 

4,994,096

 

Operating expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Third-party expenses

 

 

(18,514

)

 

 

(7,081

)

 

 

(648,423