ONECONNECT FINANCIAL TECHNOLOGY CO., LTD. [OCFT] Filings

20-F 1 ocft-20221231x20f.htm FORM 20-F

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, 2022.

	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: 001-39147

OneConnect Financial Technology Co., Ltd.

(Exact name of Registrant as specified in its charter)

N/A

(Translation of Registrant’s name into English)

Cayman Islands

(Jurisdiction of incorporation)

10-14F, Block A, Platinum Towers, No.1 Tairan 7th Road
Futian District, Shenzhen, Guangdong, 518000, The People’s Republic of China

(Address of principal executive offices)

Mr. Yongtao Luo, Chief Financial Officer
Telephone: +(852) 3757 9718
Email: OCFT_IR@ocft.com
10-14F, Block A, Platinum Towers, No.1 Tairan 7th Road
Futian District. Shenzhen. Guangdong. The People’s Republic of China

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

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

Title of each class

Trading Symbol

Name of each exchange on which registered

American depositary shares, each ADS represents thirty ordinary shares, par value USS0.00001 per share

Ordinary shares, par value USS0.00001 per share

OCFT

6638

The New York Stock Exchange

The Stock Exchange of Hong Kong Limited

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 issued and outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report 1,169,980,653 Ordinary Shares

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

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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 (§ 232A05 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(6)) 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

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TABLE OF CONTENTS


	Page
PART I	1

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS	1

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE	1

ITEM 3. KEY INFORMATION	1

ITEM 4. INFORMATION ON THE COMPANY	71

ITEM 4A. UNRESOLVED STAFF COMMENTS	115

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS	115

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	145

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	157

ITEM 8. FINANCIAL INFORMATION	159

ITEM 9. THE OFFER AND LISTING	160

ITEM 10. ADDITIONAL INFORMATION	160

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	175

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	176

PART II	180

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	180

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	180

ITEM 15. CONTROLS AND PROCEDURES	180

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT	181

ITEM 16B. CODE OF ETHICS	181

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES	182

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES	182

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS	183

ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT	183

ITEM 16G. CORPORATE GOVERNANCE	184

ITEM 16H. MINE SAFETY DISCLOSURE	184

ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS	184

PART III	185

ITEM 17. FINANCIAL STATEMENTS	185

ITEM 18. FINANCIAL STATEMENTS	185

ITEM 19. EXHIBITS	185

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CONVENTIONS THAT APPLY TO THIS ANNUAL REPORT ON FORM 20-F

Unless otherwise indicated or the context otherwise requires, and for purposes of this annual report on Form 20-F only:

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“ADRs” refer to the American depositary receipts that evidence our ADSs;

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“ADSs” refer to our American depositary shares, each of which represents thirty ordinary shares;

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“AI” refers to artificial intelligence;

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“basic customers” refer to our customers that contribute annual revenue of less than RMB100,000;

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“CAGR” refers to compound annual growth rate;

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“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;

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“Hong Kong” or “HK” refers to the Hong Kong Special Administrative Region of the People’s Republic of China;

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“Hong Kong dollars” or “HK$” refers to the legal currency of Hong Kong;

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“Hong Kong Listing Rules” refers to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, as amended or supplemented from time to time;

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“Hong Kong Stock Exchange” refers to The Stock Exchange of Hong Kong Limited;

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“IaaS” refers to infrastructure-as-a-service;

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“IFRS” refers to International Financial Reporting Standards as issued by the International Accounting Standards Board;

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“IT” refers to information technology;

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“net expansion rate” is a numerical representation of the expansion of our customer relationships on a year-on-year basis, calculated as a fraction, the denominator of which is the revenue contribution from a particular group of customers in one year and the numerator of which is the contribution from the same group of customers in the following year, expressed as a percentage;

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“OCR” refers to optical character recognition;

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“OneConnect,” “we,” “us,” “our company” and “our” refer to OneConnect Financial Technology Co., Ltd., a Cayman Islands exempted company, and its subsidiaries and, in the context of describing our operations and consolidated financial information, also include the VIEs and their subsidiaries;

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“PaaS” refers to platform-as-a-service;

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“Ping An Group” refers to Ping An Insurance (Group) Company of China, Ltd. and, unless the context requires otherwise, its subsidiaries;

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“Premium customers” refers to our customers that contribute annual revenue of at least RMB100,000, excluding Ping An Group and its subsidiaries, although this category includes certain customers that we have direct contracts with, and provide direct services to, where payments for these services have been made through contractual arrangements that we have with others, including Ping An Group;

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“Premium plus customers” refers to premium plus customers that contribute annual revenue of at least RMB1,000,000;

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“RMB” or “Renminbi” refers to the legal currency of China;

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“SaaS” refers to software-as-a-service;

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“shares” or “ordinary shares” refer to our ordinary shares, par value US$0.00001 per share;

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“SKU” refers to stock keeping unit;

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“SLA” refers to service level availability;

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“SME” refers to small and medium enterprises;

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“Third-party customer” refers to each customer with revenue contribution of less than 5% of our total revenue in the relevant period; and

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“US$,” “U.S. dollars,” “$,” and “dollars” refer to the legal currency of the United States.

All of our customer numbers in this annual report are exclusive of Ping An Group and its subsidiaries.

Our reporting currency is the Renminbi. This annual report also contains translations of certain foreign currency amounts into U.S. dollars for the convenience of the reader. Unless otherwise stated, all translations from Renminbi to U.S. dollars were made at a rate of RMB6.8972 to US$1.00, the exchange rate set forth in the H.10 statistical release of the Board of Governors of the Federal Reserve System on December 30, 2022. We make no representation that any Renminbi or U.S. dollar amounts referred to in this annual report could have been or could be converted into U.S. dollars or Renminbi, as the case may be, at any particular rate, or at all. On April 14, 2023, 2022, the exchange rate set forth in the H.10 statistical release of the Federal Reserve Board was RMB6.8690 to US$1.00.

In December 2022, we effected an ADS ratio change to adjust our ordinary share to ADS ratio from one (1) ADS representing three (3) ordinary shares to one (1) ADS representing thirty (30) ordinary shares, or the Ratio Change. Except otherwise stated, the Ratio Change has been retrospectively applied for all periods presented in this annual report.

iii

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FORWARD-LOOKING STATEMENTS

This annual report on Form 20-F 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” provision under Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements.

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:

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our vision and strategies;

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our future business development, financial condition and results of operations;

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expected changes in our revenues, costs or expenditures;

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expected growth of technology spending in the financial services industry in China;

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our expectations regarding demand for and market acceptance of our services;

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competition in our industry

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government policies and regulations relating to our industry;

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health epidemics, pandemics and similar outbreaks;

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the status of Sino-U.S. relations and related regulatory and legislative developments; and

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general economic, business and socio-political conditions globally, including recent Russia-Ukraine war.

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—3D. Risk Factors.” Other sections of this annual report include additional factors that could adversely affect 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.

You should not rely upon forward-looking statements as predictions of future events. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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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

Implications of Being a Holding Company

Our investors hold securities of OneConnect Financial Technology Co., Ltd., which is not an operating company but a Cayman Islands holding company with operations primarily conducted by its subsidiaries and through contractual arrangements with its variable interest entities, or VIEs, and their respective subsidiaries based in China. As a holding company, we rely upon dividends paid to us by our subsidiaries in the PRC to pay dividends and to finance any debt we may incur. If our subsidiaries or any newly formed subsidiaries incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us. In addition, our subsidiaries are permitted to pay dividends to us only out of their accumulated profits, if any, as determined in accordance with PRC accounting standards and regulations. Under PRC laws and regulations, each of our Chinese subsidiaries are required to set aside a portion of their net income each year to fund a statutory surplus reserve until such reserve reaches 50% of its registered capital. This reserve is not distributable as dividends. As a result, our Chinese subsidiaries are restricted in their ability to transfer a portion of its net assets to us in the form of dividends, loans or advances. As an offshore holding company, we will be permitted under PRC laws and regulations to provide funding from the proceeds of our offshore fund-raising activities to our subsidiaries in China only through loans or capital contributions, subject to the satisfaction of the applicable government registration and approval requirements. Before providing loans to our PRC subsidiaries, we will be required to make filings about details of the loans with the State Administration of Foreign Exchange of the PRC (the “SAFE”) in accordance with relevant PRC laws and regulations. Our PRC subsidiaries that receive the loans are only allowed to use the loans for the purposes set forth in these laws and regulations. Under regulations of the SAFE, Renminbi is not convertible into foreign currencies for capital account items, such as loans, repatriation of investments and investments outside of China, unless the prior approval of the SAFE is obtained and prior registration with the SAFE is made. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in the PRC” for more details.

Risks Associated with Operations in China

The majority of our operations are in China. We are exposed to legal and operational risks associated with our operations in China. Rules and regulations in China have been constantly evolving. Recently, the PRC regulatory authority initiated a series of regulatory actions and released guidelines to regulate business operations in China, including those related to data security or anti-monopoly concerns, which may have an impact on our ability to conduct certain business in China, accept foreign investments, or list on a U.S. or other exchange. If we are unable to address any data security or information protection concerns, any compromise of security that results unauthorized disclosure or transfer of personal information, or to comply with the then applicable laws and regulations, we may incur additional costs and liability and result in regulatory enforcement actions, litigation, fines and penalties or adverse publicity and could cause our users and clients to lose trust in us, which could have a material adverse effect on our business, results of operations, financial condition and prospects. And if certain of our activities in mainland China were deemed by relevant regulators as violation of the laws and regulations on anti-monopoly other matters, it may result in regulatory investigations, fines and/or other sanctions against us.

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The PRC regulatory authorities have significant oversight over our business and may influence our operations. The PRC regulatory authorities have recently published new regulations and guidance to exert more oversight and control over securities offerings and other capital markets activities that are conducted overseas and foreign investment in China-based companies like us. Any such actions by the PRC regulatory authority could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or in extreme cases, become worthless. While we do not believe that these regulatory changes would have any material impact on us, we cannot assure you that we will be able to comply with these new laws and regulations in all aspects, or the future regulatory changes will not restrict our business operations or access to capital.

Recent Regulatory Developments

Cyber Security Review and Data Privacy Regulations

Recently, the PRC regulatory authorities have promulgated, among others, the Personal Information Protection Law of the PRC and the Data Security Law of the PRC to ensure cybersecurity, data and personal information protection. These new laws, as well as other proposed regulations, demonstrate that relevant laws and regulations governing these areas are developing along with the enforced and constantly tightening of relevant regulatory supervision. The State Council of the PRC promulgated the Regulations on the Protection of the Security of Critical Information Infrastructure on July 30, 2021, which took effect on September 1, 2021. This regulation requires, among other things, that certain competent authorities identify and protect critical information infrastructures. In addition, in November 2021, the Cyberspace Administration of China, or the CAC, promulgated the Regulations on Network Data Security (draft for public comments), which set forth different scenarios where data processors should apply for cybersecurity review. The CAC and a number of other departments under the State Council promulgated the Cybersecurity Review Measures on December 28, 2021, which became effective on February 15, 2022. According to this regulation, critical information infrastructure operators, or CIIO, purchasing network products and services and network platform operators carrying out data processing activities, which affect or may affect national security, are required to conduct cybersecurity review.

On September 1, 2021, the Data Security Law of the PRC became effective, which imposes data security and privacy obligations on entities and individuals conducting data-related activities, and introduces a data classification and hierarchical protection system. In addition, the Standing Committee of the National People’s Congress promulgated the Personal Information Protection Law of the PRC, or the PIPL, on August 20, 2021, and this law took effect on November 1, 2021. The PIPL further emphasizes processors’ obligations and responsibilities for personal information protection and sets out the basic rules for processing personal information and the rules for cross-border provision of personal information. Under the Regulations on Network Data Security (draft for public comments), critical data processors or foreign-listed data processors are required to carry out annual data security evaluations and submit evaluation reports to the municipal cyberspace administration authority. We have implemented comprehensive cybersecurity and data protection policies, procedures and measures to safeguard personal information and ensure secured storage and transmission of data and prevent unauthorized access or use of data. However, we cannot guarantee that we will be able to comply with these new laws and regulations in all aspects or future laws and regulations will not restrict our business operations.

There are uncertainties as to the interpretation and application of these cybersecurity and data privacy laws, regulations and standards, and they may be interpreted and applied in a manner that is inconsistent with our current policies and practices or require changes to the features of our data systems. If the Chinese Securities Regulatory Commission, or the CSRC, the CAC or other regulatory agencies later deem us to be a CIIO and require that we obtain their approvals for our future offshore offerings, we may be unable to obtain such approvals in a timely manner, or at all, and such approvals may be rescinded even if obtained. Any such circumstance could significantly limit or completely hinder our ability to continue to offer securities to investors and cause the value of our securities to significantly decline or be worthless. In addition, implementation of industry-wide regulations affecting our business operations could limit our ability to attract new customers and/or users and cause the value of our securities to significantly decline.

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CSRC Approval on Overseas Listing

On July 6, 2021, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance with the Law. These opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas listings by China-based companies. These opinions proposed to take effective measures, such as promoting the construction of relevant regulatory systems, to deal with the risks and incidents facing China-based overseas-listed companies and the demand for cybersecurity and data privacy protection. These opinions and any related implementation rules to be enacted may subject us to additional compliance requirement. On February 17, 2023, the CSRC released a set of regulations consisting of six documents, including the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies and five supporting guidelines, collectively, the Overseas Listing Filing Rules, which came into effective on March 31, 2023. According to the Overseas Listing Filing Rules, companies that have already offered shares or been listed overseas prior to the implementation of such new regulations qualify as “Stock Enterprises”, and Stock Enterprises are not required to apply for the filing immediately until a subsequent re-financing event occurs. However, the Overseas Listing Filing Rules, among others, require the issuer or its main operational entity in the PRC to file with the CSRC for its follow-on securities offerings in the same offshore market within three business days after the completion of such offerings, and file with the CSRC for its offerings or listing in offshore stock market other than the stock market of its initial public offering or listing within three business days after the submission of offering application outside mainland China.

We have been listed on the New York Stock Exchange and the Hong Kong Stock Exchange prior to the implementation of the Overseas Listing Filing Rules. Therefore, we are qualified as “Stock Enterprises” and are not required to apply for the filing immediately until a subsequent re-financing event occurs according to the Overseas Listing Filing Rules. However, we are required to file with the CSRC for its follow-on securities offerings in the same offshore market within three business days after the completion of such offerings, and file with the CSRC for our offerings or listing in offshore stock market other than the stock market of our initial public offering or listing within three business days after the submission of offering application outside mainland China. Failure to comply with the filing requirements for any offering, listing or any other capital raising activities, may result in administrative penalties, such as order to rectify, warnings, fines and other penalties, on the companies, the controlling shareholders, the actual controllers, the person directly in charge and other directly liable persons. Given the uncertainties surrounding the CSRC filing requirements at this stage, we cannot assure you that we will be able to complete the filings and fully comply with the relevant new rules on a timely basis, or at all, if we conduct listing in other offshore stock markets or follow-on offerings, issuance of convertible corporate bonds, exchangeable bonds, and other equivalent offering activities in the future.

We have been closely monitoring regulatory developments in China regarding any necessary approvals from the CSRC, the CAC, or other PRC regulatory authorities required for overseas listings. As of the date of this annual report, we have not received any inquiry, notice, warning, sanctions or regulatory objection from the CSRC or the CAC. Because these regulatory actions are relatively new and evolving, it is uncertain how soon legislative or regulatory bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated, if any, or the potential impact such modified or new laws and regulations will have on our daily business operation, our ability to accept foreign investments and listing on a U.S. or other foreign exchanges.

For more detailed information, see “Item 3. Key Information — Risk Factors — Risks Relating to Doing Business in the PRC.”

Our VIE Structure

PRC laws and regulations restrict and impose conditions on foreign investment in internet-based businesses, including online information, internet data center services and other value-added telecommunication services. Furthermore, our electronic certification service business is subject to foreign investment restrictions in practice under the regulatory requirements. Accordingly, we operate these businesses in China through OneConnect Smart Technology Co., Ltd., (Shenzhen), or Shenzhen OneConnect, and Shenzhen Digital Certificate Authority Center Co., Ltd., or Shenzhen CA, which we refer to as the VIEs in this annual report, and their subsidiaries, and rely on contractual arrangements among our PRC subsidiary, the VIEs and their respective nominee shareholders to control the business operations of the VIEs and their subsidiaries. We are the primary beneficiary of these VIEs for accounting purposes because of these contractual arrangements. Accordingly, under IFRS, the financial statements of the VIEs are consolidated as part of our financial statements. Any references to control or benefits that accrue to us because of the VIEs in this annual report are limited to, and subject to conditions for consolidation of, the VIEs under IFRS. Although these VIE agreements have been widely adopted by PRC companies seeking to list overseas, such agreements have not been tested in a court of law.

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Our corporate structure is subject to risks associated with our contractual arrangements with the VIEs. The company that investors will own may never have a direct equity ownership interest in the businesses that are conducted by the VIEs. If the PRC regulatory authority deems that our contractual arrangements with the VIEs do not comply with PRC laws, or if these laws or the interpretation of existing laws change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations or otherwise significantly change our corporate structure. The majority of our assets, including the necessary licenses to conduct business in China, are held by the VIEs and a significant part of our revenues are generated by the VIEs. If any event happens that would result in the deconsolidation of the VIEs, our operations could be materially affected and the value of the securities could be diminished substantially or even become worthless. We and our investors face uncertainty about potential future actions by the PRC regulatory authority that could affect the legality and enforceability of the contractual arrangements with the VIEs and, consequently, significantly affect the financial performance of the VIEs and their subsidiaries and our company as a whole. If the PRC government deems that any of our business operations carried out through the VIEs do not comply with PRC regulatory restrictions, especially the restrictions on foreign investment in the relevant industries, or if the relevant regulations or their interpretation change in the future, the PRC regulatory authorities could disallow this structure, which could result in us being subject to penalties or being forced to relinquish its interests in the affected operations. If any of these happens, our ordinary shares or our ADSs may decline in value or become worthless, if we are unable to claim our contractual control rights over the assets of the VIEs that conduct some or all of our operations. For a detailed description of the risks associated with our corporate structure, please refer to risks disclosed under “Item 3.D. Key Information—Risk Factors—Risks Relating to Our Corporate Structure”.

Permissions Required from the PRC Authorities for Our Operations

We believe that our corporate structure and contractual arrangements with the VIEs are not in violation of the current applicable PRC laws and regulations. As of the date of this annual report, our PRC subsidiaries and the VIEs have obtained all material licenses and approvals required for conducting our operations in China, except as disclosed under “Item 3. Key Information—3.D. Risk Factors—Risks Relating to Our Business and Our Industry—Failure to comply with existing or future laws and regulations related to data security, data protection, cyber security or personal information protection could lead to liabilities, administrative penalties and other regulatory actions, which could negatively affect our operating results and business. ” As of the date of this annual report, we believe that our PRC subsidiaries and VIEs are not required to obtain permission or approval from the CSRC, or the CAC, on our contractual arrangements with the VIEs and their respective shareholders. However, PRC laws and regulations governing the conditions and the requirements of such approval are uncertain and evolving and the relevant government authorities have discretion in interpreting these laws and regulations. There can be no assurance that the PRC regulatory authorities such as the CSRC, the CAC, the Ministry of Commerce, or MOFCOM, the Ministry of Industry and Information Technology, or the MIIT, or other authorities that regulate our business and other participants in the telecommunications industry, would agree that our corporate structure or any of the above contractual arrangements comply with PRC licensing, registration or other regulatory requirements, with existing policies or with requirements or policies that may be adopted in the future. It is also uncertain whether any new PRC laws, regulations or interpretations relating to contractual arrangements will be adopted, or if adopted, what they would provide. On February 17, 2023, the CSRC released the Overseas Listing Filing Rules, which came into effective on March 31, 2023. According to the Overseas Listing Filing Rules, PRC domestic companies that seek to offer and list securities in overseas markets, either in direct or indirect means, are required to fulfill the filing procedure with the CSRC and report relevant information. In addition, an overseas listed company should also submit the filing with respect to its follow-on offerings, issuance of convertible corporate bonds, exchangeable bonds, and other equivalent offering activities, within a specific time frame requested by the Overseas Listing Filing Rules. Therefore, we will be required to file with the CSRC for our future overseas offering of equity, ADS and equity linked securities within the timeframe as required by Overseas Listing Filing Rules. On the same day, at the press conference held for the Overseas Listing Filing Rules, the officials from the CSRC clarified that, if a company with a VIE structure is in compliance with applicable PRC laws, regulations and regulatory requirements, the CSRC may permit its filing application of the overseas listings of such companies after soliciting opinions from relevant regulatory authorities. However, given that the Overseas Listing Filing Rules were recently promulgated and there is no further explanation on such compliance requirements, there remains substantial uncertainties as to their interpretation, application, and enforcement and how they will affect our operations and our future financing and there can be no assurance that we will be able to satisfy compliance requirements. As of the date of this annual report, we have not received any inquiry, notice, warning, or sanctions regarding our corporate structure and contractual arrangements from the CSRC, CAC or any other PRC regulatory agency. If we, our subsidiaries or VIEs inadvertently conclude that approvals are not required, or if these regulations change or are interpreted differently and we are required to obtain approval in the future, our ADSs may significantly decline in value or become worthless if we are unable to assert our contractual control rights over the economic benefits and assets of the VIEs and their subsidiaries.

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Implications of the Holding Foreign Companies Accountable Act, or the HFCA Act

Our financial statements contained in this annual report have been audited by PricewaterhouseCoopers Zhong Tian LLP, an independent registered public accounting firm that is headquartered in Shenzhen, China with offices in other cities in China. It is a firm registered with the U.S. Public Company Accounting Oversight Board, or PCAOB, and is required by the laws of the U.S. to undergo regular inspections by the PCAOB to assess its compliance with the laws of the U.S. and professional standards. According to Article 177 of the PRC Securities Law which became effective in March 2020, the securities regulatory authority of the State Council may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region, to implement cross-border supervision and administration, or the Regulatory Cooperation Mechanism; no overseas securities regulator is allowed to directly conduct investigation or evidence collection activities within the territory of the PRC. Accordingly, without a Regulatory Cooperation Mechanism or the consent of the competent PRC securities regulators and relevant authorities, no organization or individual may provide the documents and materials relating to securities business activities to overseas parties.

The HFCA Act, was enacted on December 18, 2020. The HFCA Act states if the SEC determines that a company has 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 shall prohibit such securities from being traded on a national securities exchange or in the over the counter trading market in the U.S. The SEC has adopted rules to implement the HFCA Act and, pursuant to the HFCA Act, the PCAOB has issued a report notifying the SEC of its determination that it is currently unable to inspect or investigation completely accounting firms headquartered in mainland China or Hong Kong. Our auditor PricewaterhouseCoopers Zhong Tian LLP was subject to the determinations announced by the PCAOB on December 16, 2021. We were also conclusively identified as a “Commission-Identified Issuer” under the HFCA Act on May 4, 2022 in respect of our Annual Report for 2021 on Form 20-F filed on March 31, 2022. Further, on December 29, 2022, the Accelerating Holding Foreign Companies Accountable Act, or the AHFCA Act, was signed into law, which reduced the number of consecutive non-inspection years required for triggering the prohibitions under the HFCA Act from three years to two. As a result, the risk has been heightened.

On August 26, 2022, the PCAOB signed a Statement of Protocol with the CSRC and the Ministry of Finance of the PRC, taking a first step toward opening access for the PCAOB to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong. On December 15, 2022, the PCAOB announced its determination that it has been able to inspect and investigate audit firms in mainland China and Hong Kong completely for purposes of the HFCA Act, and the PCAOB vacated its December 16, 2021 determinations. Based on this announcement, we do not expect to be a Commission-Identified Issuer in respect of this annual report for 2022 on Form 20-F. However, the PCAOB stated that should PRC authorities obstruct the PCAOB’s ability to inspect or investigate completely in any way and at any point in the future, the PCAOB Board will act immediately to consider the need to issue new determinations consistent with the HFCA Act. While we currently do not expect the HFCA Act or the AHFCA Act to prevent us from maintaining the trading of our ADSs in the U.S., uncertainties exist with respect to future determinations of the PCAOB in this respect and any further legislative or regulatory actions to be taken by the U.S. or Chinese regulators that could affect our listing status in the U.S.

The delisting of our ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in the PRC—If the PCAOB is unable to inspect our auditors as required under the HFCA Act, the SEC will prohibit the trading of our ADSs, which may materially and adversely affect the value of your investment.”

Financial Information Related to the VIEs

The following tables present the condensed consolidating schedules depicting the financial position, cash flows and results of operations for the Company, the consolidated VIEs, our consolidated subsidiaries and any eliminating adjustments as of December 31, 2021 and 2022 and for the years ended December 31, 2020, 2021 and 2022. This table follows the line item disclosures with respect to the variable interest entity in Note 1.2 to the consolidated financial statements included elsewhere in this annual report.

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(i)	Selected Condensed Consolidated Statements of Operations Data


	For the year ended December 31, 2022
				VIE and
		Other		VIE’s	Eliminating	Consolidated
	Parent	Subsidiaries	WFOE	subsidiaries	Adjustments	Totals
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Condensed Consolidating Schedule of Results of Operations
Third- party revenues	—	192,372	206,923	4,064,707	—	4,464,002
Inter- company revenues⁽³⁾	—	—	212,507	3,084	(215,591)	—
Third- party cost	—	(609,822)	(161,719)	(2,057,445)	—	(2,828,986)
Inter- company cost for technology service⁽³⁾	—	—	(212,507)	(3,084)	215,591	—
Total expenses	(105,040)	(88,176)	(141,642)	(2,318,900)	—	(2,653,758)
Third- party net finance cost	(573)	4,535	(11,678)	(14,748)	—	(22,464)
Inter- company net finance income/(cost)⁽⁴⁾	—	16,860	(11,152)	(5,708)	—	—
Share of loss of subsidiaries and VIEs⁽¹⁾	(303,759)	(228,878)	(195,819)	—	728,456	—
Net impairment losses on amount due from subsidiaries	(465,457)	—	—	—	465,457	—
Others, net	2,555	(52,617)	32,987	68,108	—	51,033
Loss before income tax	(872,274)	(765,726)	(282,100)	(263,986)	1,193,913	(990,173)
Income tax (expense)/benefit	—	(1,941)	(4,079)	68,167		62,147
Loss for the year	(872,274)	(767,667)	(286,179)	(195,819)	1,193,913	(928,026)


	For the year ended December 31, 2021
				VIE and
		Other		VIE’s	Eliminating	Consolidated
	Parent	Subsidiaries	WFOE	subsidiaries	Adjustments	Totals
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Condensed Consolidating Schedule of Results of Operations
Third- party revenues	—	134,064	275,684	3,722,609	—	4,132,357
Inter- company revenues⁽³⁾	—	—	134,072	697	(134,769)	—
Third- party cost	—	(333,873)	(214,633)	(2,147,200)	—	(2,695,706)
Inter- company cost for technology service⁽³⁾	—	—	(134,072)	(697)	134,769
Total expenses	(54,060)	(158,802)	(156,852)	(2,413,369)	—	(2,783,083)
Third- party net finance cost	(32)	14,250	(36,036)	(25,996)	—	(47,814)
Inter- company net finance income/(cost)⁽⁴⁾	—	22,502	4,636	(27,138)	—	—
Share of loss of subsidiaries and VIEs⁽¹⁾	(1,225,545)	(808,093)	(708,699)	—	2,742,337	—
Others, net	(2,062)	(93,141)	(31,945)	78,786	—	(48,362)
Loss before income tax	(1,281,699)	(1,223,093)	(867,845)	(812,308)	2,742,337	(1,442,608)
Income tax (expense)/benefit	—	(1,731)	10,217	103,609	—	112,095
Loss for the year	(1,281,699)	(1,224,824)	(857,628)	(708,699)	2,742,337	(1,330,513)

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	For the year ended December 31, 2020
				VIE and
		Other		VIE’s	Eliminating	Consolidated
	Parent	Subsidiaries	WFOE	subsidiaries	Adjustments	Totals
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Condensed Consolidating Schedule of Results of Operations
Third- party revenues	—	83,666	230,417	2,998,207	—	3,312,290
Inter- company revenues⁽³⁾	—	—	62,404	44,790	(107,194)	—
Third- party cost	—	(31,678)	(244,937)	(1,792,219)	—	(2,068,834)
Inter- company cost for technology service⁽³⁾	—	—	(62,404)	(44,790)	107,194	—
Total expenses	(48,029)	(358,585)	(105,386)	(2,125,695)	—	(2,637,695)
Third- party net finance cost	4,564	65,461	(14,997)	(128,154)	—	(73,126)
Inter- company net finance income/(cost)⁽⁴⁾	—	49,982	(97,342)	47,360	—	—
Share of loss of subsidiaries and VIEs⁽¹⁾	(1,314,998)	(1,165,419)	(989,704)	—	3,470,121	—
Others, net	5,497	41,724	(33,975)	(97,135)	—	(83,889)
Loss before income tax	(1,352,966)	(1,314,849)	(1,255,924)	(1,097,636)	3,470,121	(1,551,254)
Income tax (expense)/benefit	(642)	(97)	29,938	107,932	—	137,131
Loss for the year	(1,353,608)	(1,314,946)	(1,225,986)	(989,704)	3,470,121	(1,414,123)

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(ii)	Selected Condensed Consolidated Balance Sheets Data


	As of December 31, 2022
		Other		VIE and	Eliminating	Consolidated
	Parent	Subsidiaries	WFOE	VIE’s subsidiaries	Adjustments	Totals
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Condensed Consolidating Schedule of Financial Position
Assets
Non-current assets
Investment in subsidiaries^(1,2)	1,764,074	—	—	—	(1,764,074)	—
Intangible assets	—	298,796	170,758	100,882	—	570,436
Deferred tax assets	—	—	266,708	499,251	—	765,959
Other non-current assets	—	864,309	1,080	306,322	—	1,171,711
Total non-current assets	1,764,074	1,163,105	438,546	906,455	(1,764,074)	2,508,106
Current assets
Trade receivables⁽³⁾	—	57,777	228,413	869,710	(214,911)	940,989
Prepayments and other receivables⁽³⁾	448	367,694	32,840	1,076,317	(398,695)	1,078,604
Amount due from Group companies⁽²⁾	1,641,677	1,769,319	2,902,240	397,473	(6,710,709)	—
Financial assets at fair value through profit or loss	—	—	101,605	589,022	—	690,627
Restricted cash and time deposits over three months	—	328,217	3,640	11,957	—	343,814
Cash and cash equivalents	7,327	865,447	128,750	906,252	—	1,907,776
Other current assets	—	1,315,524	82,546	14,396	—	1,412,466
Total current assets	1,649,452	4,703,978	3,480,034	3,865,127	(7,324,315)	6,374,276
Total assets	3,413,526	5,867,083	3,918,580	4,771,582	(9,088,389)	8,882,382
Liabilities
Non-current liabilities
Amount due to Group companies⁽²⁾	—	—	—	—	—	—
Trade and other payables-Non Current	—	36,628	—	7,925	—	44,553
Other non-current liabilities	88,280	5,196	—	19,977	—	113,453
Total non-current liabilities	88,280	41,824	—	27,902	—	158,006
Current liabilities
Trade and other payables	32,539	915,926	569,242	1,627,172	(613,606)	2,531,273
Amount due to Group companies⁽²⁾	—	1,752,042	441,634	5,256,223	(7,449,899)	—
Deficit in subsidiaries and VIEs⁽¹⁾	—	59,949	2,902,304	—	(2,962,253)	—
Short-term borrowings	—	—	15,682	273,380	—	289,062
Payroll and welfare payables	—	38,811	53,613	338,834	—	431,258
Other current liabilities	—	2,029,835	14,518	150,375	—	2,194,728

ONECONNECT FINANCIAL TECHNOLOGY CO., LTD. [OCFT] Filings
20-F	[2023-04-24]
20-F	[2022-03-31]
20-F	[2021-03-26]
F-1	[2020-08-10]
20-F	[2020-04-28]
F-1	[2019-11-13]