アメリカ合衆国

証券取引委員会

ワシントン D. C. 20549

形式 20-F

↓ ↓ 登録ステートメントセクションに進む 1934 年の証券取引法 12 （ b ）または（ g ）

」と セクション 13 への年次報告書を追求または 1934 年の証券交換法 15 （ d ）

会計年度終了について 6 月 30 日, 2024

↓ ↓ TRANSITION REPORT PURSUANt セクションへ 1934 年の証券取引法の 13 または 15 （ d ）

↓ ↓ シェル会社報告 PURSUANt セクションへ 1934 年の証券取引法の 13 または 15 （ d ）

このシェル会社報告を必要とする事象の日付 ________

__________ から __________ への移行期間について

手数料書類番号001-38813

ハイベストパフォーマンスホールディングス株式会社

（登録者の正確な名称憲章）

N / A

(登録者氏名英文訳)

ケイマン諸島

(登録成立または組織の司法管轄権)

パールリバータワー 61 階

No. 15 珠江西路, 珠江新町、天河, 広州.広州

広東省、人民共和国オフ中国

電話番号： + 86 — 020 — 28381666

（主要執行役所の住所）

楊元芬最高財務官

パールリバータワー 61 階

No. 15 珠江西路, 珠江新町、天河, 広州.広州

広東省人民共和国オフ中国

電話：+ 86-020-28381666

(Name、電話、電子メールおよび / またはファクシミルの番号会社の連絡先及び住所）

登録または登録予定の証券同法第 12 条（ b ）項の規定

各クラスのタイトル		登録された各取引所の名称
普通株式、 1 株当たり $0.001		ナスダックグローバルマーケット

登録または登録予定の証券同法第 12 条（ g ）項に規定する。

N / A

（クラス名）

報告義務のある証券同法第 15 条（ d ）に基づき、

なし

（クラス名）

各株の発行済株式数を表示します年次報告書の対象となる期間の終了時点における発行者の資本または普通株式の種類 372,547,538 普通の 2024 年 6 月 30 日現在、 1 株当たり 0.0 01 ドル。

登録者が A である場合はチェックマークで示します。証券法第 405 条に定義されている有名な経験豊富な発行者。▽ はい ▽ いいえ

第 2 条に基づき有価証券を登録する場合法 12 （ b ），出願に含まれる登録者の財務諸表が訂正を反映しているかどうかをチェックマークで示します。以前に発行された財務諸表に誤りがあります」と

これらのエラーのいずれかをチェックマークで示します訂正は、登録者の役員によって受け取られたインセンティブベースの報酬の回復分析を必要とする再記述です § 240.10 D—1 （ b ）に基づく関連する回復期間の役員。 ↓ ↓会計基準をチェックマークで示す登録者はこの書類に含まれる財務諸表を作成するために使用しました：

」とアメリカは会計原則を公認している国際金融

⇒ その他

発行された報告基準	国際会計	規格委員会	「その他」がチェックされている場合前の質問に対して、登録者が従うことを選択した財務諸表項目をチェックマークで示します。
⇒ 項目 17 ⇒ 項目 18	年次報告書の場合はチェックで示します。登録者がシェル会社であるかどうかをマークします（取引法規則 120億 2 で定義されています）。	⇒ はい	」と

いいえ

（破産に巻き込まれた発行者のみ適用過去 5 年間の議事録）登録者がチェックマークで表示する 1934 年の証券取引法第 12 条、第 13 条または第 15 条（ d ）によって提出されるすべての書類および報告書を提出している。裁判所が確定した計画に基づく有価証券の配分について

⇒ はい ⇒ いいえカタログ表

ページ番号.序言：序言

前向きに陳述する

第1部第1項。	役員·上級管理職·コンサルタントの身分	第二項です。
	見積統計データと予想スケジュール
	第三項です。
	重要な情報

第四項です。

グループ情報

4A 号。

未解決従業員意見ITEM 5 。経営と財務回顧と展望

第六項です

役員、上級管理者、従業員

第七項。

大株主および関係者取引

		8. 商品
財務情報		ii
ITEM 9 。		vi
見積もりと看板		1
ITEM 10 。	情報を付加する	1
ITEM 11 。	市場リスクに関する定量的 · 質的開示	1
ITEM 12 。	株式証券を除くその他の証券説明	1
パート II	十三項	46
違約、延滞配当金、延滞配当金	14項です	100
有価証券保有者の権利の重要な変更及びプロセスの使用	第十五項	100
制御とプログラム	第十六項	124
【予約】	16 A 号。	132
監査委員会財務専門家	160億円。	134
道徳的準則	16C 。	135
チーフ会計士費用とサービス	16D 。	135
免除監査委員会は上場基準を遵守する	プロジェクト16 E。	145
発行者及び関連会社による株式証券の購入購入者	16F 。	146

登録者の証明会計士の変更		148
プロジェクト16 Gです。	会社の管理	148
16H 。	炭鉱安全情報開示	148
アイテム 16 位。	開示情報検査を妨げる外国法域について	148
16 J 。	● ●	149
私たちの当社が流通、管理、または提供する製品およびサービスの需要と市場の受容に関する期待；	● ●	149
私たちの製品プロバイダーとの関係を維持 · 強化することに対する期待	● ●	149
関連当社が事業を展開する産業に関する政府の政策や規制	● ●	150
私たちの優秀な従業員を引き付け維持する能力	● ●	150
私たちの市場の動向や技術の進歩に対応する能力	● ●	150
私たちの研究開発に投資し、製品の選択肢とサービスの提供を強化する計画です。	● ●	151
競争当社が事業を展開する産業において	● ●	151
将軍中国と国際の経済 · ビジネス状況	● ●	152
その他地政学的出来事、貿易緊張、自然災害、健康伝染病などの事業に影響を与える状況制御不能です	● ●	152
私たちの当社の事業を運営 · 拡大するために必要な特定のライセンス · 許可を取得する能力	短期投資	152
売掛金純額	契約資産、純額	152

その他売掛金 · 貸付債権純		154
社内からの支払金額	子会社および VIE および VIE の子会社への投資	154
関連会社への投資	使用権資産	154
繰延税金資産	財産·工場·設備·純価値	154

他の非流動資産

無形資産、純額

その他の資産

資産総額

負債.負債

短期ローン

売掛金

手数料を計算する

その他の買掛金 · 経費

社内企業に対する債務額

所得税に対処する

繰延税金負債

リース負債を経営する

賃金総額を計算すべきである

その他の負債

負債総額

中間株権

純資産総額

2023年6月30日まで

両親

統合

VIE と

彼らの

関連会社の損失分担

所得税の割引

純収益

2023 年 6 月 30 日期

両親

統合

VIE と

彼らの

付属会社

WFOE

その他

子会社排除調節

統合

合計

純収入合計

第三者収益

グループ内収益

総運営コストと費用

第三者の運営費 · 経費

グループ内営業費用 · 経費

営業利益（損失）

利子収入，純額

販売可能利益に伴う投資収益投資

他にもネットワークは

	所得税費用
	アフィリエイトの所得シェア		純収益注記（ 1 ）：主に排除（ 1 ）生命保険商品及び非生命保険の流通代理店業務に係る会社間業務料連結関連会社が子会社に提供する保険会社に代わって提供する商品及び（ ii ）会社間サービス連結可変持分法人が子会社に提供する技術サービスに関する手数料。 2022 年 6 月 30 日期末両親		統合		VIE と彼らの		付属会社 WFOE			その他子会社
排除
調節		11,792		41,817		58,336		183,748		-			295,693
統合		-		18,213		-		56,490		-			74,703
合計		-		3,312		28,734		551,872		-			583,918
純収入合計		-		32,628		855		239,448		-			272,931
第三者収益		-		9,040		-		1,041,061		-			1,050,101
グループ内収益		-		2,134		775,036		35,700		-			812,870
総運営コストと費用		1,210		193,180		799,110		3,726,913		(4,720,413	)		-
第三者の運営費 · 経費		1,318,077		-		1,653,071		3,113,741		(6,084,889	)		-
グループ内の営業費用 · 経費		-		-		-		8,614		-			8,614
営業収入(赤字)		-		8,396		16,119		97,724		-			122,239
利子収入，純額		-		1,000		-		34,250		-			35,250
売却可能投資の実現利益に伴う投資収益		-		1,897		600		84,279		-			86,776
他にもネットワークは		-		32,395		123,376		69,583		-			225,354
アフィリエイトの所得シェア		-		11,843		-		405,724		-			417,567
所得税（経費）給付		-		68,670		1,067		222,125		-			291,862
純収益		1,331,079		424,525		3,456,304		9,871,272		(10,805,302	)		4,277,878
2024年6月30日までの年度
両親		-		-		-		98,375		-			98,375
統合		-		5,053		202		189,103		-			194,358
VIE と		-		2,303		-		554,247		-			556,550
彼らの		-		4,175		1,815		174,519		-			180,509
付属会社		-		138,635		2,244,750		2,396,305		(4,779,690	)		-
WFOE		-		7,132		852		88,796		-			96,780
その他		-		4,317		12		232,745		-			237,074
付属会社		-		8,273		17,756		91,158		-			117,187
排除		163		6,242		1,624		60,064		-			68,093
調整する		-		44,353		33,082		11,809		-			89,244
統合		163		220,483		2,300,093		3,897,121		(4,779,690	)		1,638,170
合計する		45,794		-		-		-		-			45,794
営業活動による純キャッシュフロー（使用）：		1,285,122		204,042		1,156,211		5,974,151		(6,025,612	)		2,593,914

	グループ企業への融資
	グループ会社からの償還		グループ内事業体への投資その他の投資活動投資活動から生み出された（使用された）純現金グループ企業への融資		グループ会社からの返済		その他の資金調達活動資金調達活動から生じた（使用された）純現金：			2023 年 6 月 30 日期両親			統合 VIE と
彼らの
付属会社		2,605		63,527		97,610		728			-			164,470
WFOE		-		-		-		-			-			-
その他		-		-		-		-			-			-
関連会社		-		16,806		20,725		70			-			37,601
排除		-		-		-		-			-			-
調整		-		21,682		872		-			-			22,554
統合		809		52,080		49,161		-			(102,050	)		-
合計		213,620		-		-		-			(213,620	)		-
営業活動による純キャッシュフロー（使用）：		-		-		-		-			-			-
外部との取引で提供される現金純額		-		7,002		6,605		-			-			13,607
社内取引による正味現金（使用）		-		16,552		-		-			-			16,552
グループ内企業への投資		-		1,319		247		-			-			1,566
その他の投資活動		-		22		-		-			-			22
投資活動による純キャッシュフロー（使用）：		-		1,791		-		-			-			1,791
グループ企業への融資		-		3,657		2,723		-			-			6,380
グループ会社からの償還		217,034		184,438		177,943		798			(315,670	)		264,543
グループ資本出資収益
資金調達活動（使用）から発生した純キャッシュフロー：		-		-		-		-			-			-
2022 年 6 月 30 日期末		-		3,668		2,624		-			-			6,292
両親		-		-		-		-			-			-
統合		-		-		-		-			-			-
VIE と		-		2,677		89		-			-			2,766
彼らの		-		49,180		52,040		813			(102,033	)		-
付属会社		-		1,753		4		-			-			1,757
WFOE		-		-		-		-			-			-
その他		-		7,337		7,129		-			-			14,466
関連会社		-		4,991		2,674		-			-			7,665
排除		-		11,897		2,666		-			-			14,563
調整		-		81,504		67,225		813			(102,033	)		47,509
統合		217,034		102,934		110,718		(15	)		(213,637	)		217,034

	合計
	営業活動による純キャッシュフロー（使用）：			グループ会社への融資グループ会社からの返済その他の投資活動投資活動による純キャッシュフロー（使用）：			グループ企業への融資			グループ会社からの返済私たちが提供する補償医療保険製品は通常1年で、条件付きのを提供します。保険期間中の医療と手術費用を精算する。これらの製品は通常一回だけ保険料を払わなければなりません。保証期間ごとに。私たちが販売しているこれらの医療保険製品の多くは財産と傷害保険で保険を受けているからです。会社、賠償医療製品を分類します。個人意外保険製品を財産保険と傷害保険に分類しますから。損害保険製品の種類に属する保険製品です。			ビジネス広告も販売しています企業顧客に財産保険製品、団体生命保険製品、責任保険製品シリーズを提供し、 AIXのブローカーです。また、各業界の企業や再保険ブローカーにリスク管理サービスを提供している。保険会社にサービスを提供します。当保険仲買会社が提供する保険商品は大きく分けて分けられます以下に示すカテゴリ. ● ●			商業広告. 財産保険それは.私たちが取り扱う商業財産保険製品には基本保険証書、総合保険証書とすべての保険証書が含まれています。基本商業財産保険は一般的に火災、爆発、落雷による保険財産損失を保証する。稲妻。総合的商業財産保険証書は一般的に火災·爆発による保険財産損失を保証する。自然災害もありますすべての危険な商業財産保険証書が保険財産によって損傷されたすべての原因は含まれていません。保険証書から明確に除外する。
● ●		-			144,024			16,562			1,114,137			(89,397	)		1,185,326
貨物品. 保険		-			118,737			5,589			1,061,000			-			1,185,326
それは.私たちが扱っている貨物保険製品は貨物の海上輸送、陸運あるいは航空便の途中での破損や損失をカバーしています。		-			25,287			10,973			53,137			(89,397	)		-
● ●		(5,759	)		(170,787	)		(30,691	)		(1,060,315	)		47,873			(1,219,679	)
船体.船体保険です。		(5,759	)		(110,968	)		(26,930	)		(1,076,022	)		-			(1,219,679	)
私たちが扱っている船体保険製品には、自然災害による船舶の損失、責任、費用が含まれている。船員たちの不注意と海上事故、そして衝突責任。		-			(59,819	)		(3,761	)		15,707			47,873			-
● ●		-			-			-			(426,410	)		-			(426,410	)
負債.負債保険		(5,759	)		(26,763	)		(14,129	)		(372,588	)		(41,524	)		(460,763	)
それは.私たちが取り扱う責任保険製品は主に製品責任、雇用主責任、公衆責任があります。専門責任保険製品を持っていますこれらの製品は一般的に不当な行為や不注意による第三者への損失を保証する。保険加入者側の損失はあるが、詐欺や保険加入者の意図的な不正による損失は含まれていない。		518			2,969			12,232			900			-			16,619
● ●		-			2,226			4,613			15,543			-			22,382
建設勃起保険です。		-			-			-			(73,761	)		-			(73,761	)
私たちが扱っている建築設置保険製品には財産損失と人身傷害が含まれています。中国は国内外で自然災害や建築設置工事事故による損失を受けている。		163			297			(6,162	)		3,220			-			(2,482	)
● ●		(284,592	)		-			95,842			-			188,750			-
広がる保証保険です。		-			-			-			(1,121	)		-			(1,121	)
私たちが販売している延長保証保険製品はどんな修理に関連する費用に保険を提供します。あるいはメーカーの保証期間が過ぎた後、販売されたもの、例えば電気製品や自動車を交換します。		-			(15,767	)		4			2,818			-			(12,945	)
数量		(289,670	)		(37,038	)		92,400			(424,989	)		147,226			(512,071	)

	販売
	エージェント			数量社内調整者山東			河北省			四川省広東省			湖南省安徽省			江蘇省浙江省
福建省		-			87,728			40,582			705			(14,575	)		114,440
河南省		-			87,728			26,007			705			-			114,440
遼寧省		-			-			14,575			-			(14,575	)		-
内モンゴル		(2,084	)		(126,620	)		(58,819	)		(1,233	)		15,512			(173,244	)
広西省		(2,084	)		(111,108	)		(58,819	)		(1,233	)		-			(173,244	)
重慶市		-			(15,512	)		-			-			15,512			-
保険代理店		(2,084	)		(38,892	)		(18,237	)		(528	)		937			(58,804	)
生命保険		129			5,037			3,415			10			-			8,591
非生命保険		-			13,561			-			-			-			13,561
クレーム調整		157			559			1,880			-			(936	)		1,660
ウェルスマネジメント		(8	)		(3,307	)		(5,270	)		-			-			(8,585	)
公募ファンド商品		(41,771	)											41,771			-
グロス手数料ベースのプライベート · ラウンド · ファンド商品		(43,577	)		(23,041	)		(18,212	)		(518	)		41,771			(43,577	)

その他

	販売総コスト
	販売費用			主に販売費用（ i ）マーケティングおよびセールスイベント費用、（ ii ）トレーニング費用、社内財務アドバイザーの給与および福利厚生で構成されます。投資顧問その他の営業 · マーケティング従業員、（ iv ）賃貸 · 賃借改善費用。一般と行政費用一般的 · 管理的費用は主に： ● ●			管理職員の給与と手当			● ● 管理職および管理職員のシェアベースの報酬費用			● ● モバイルおよびオンラインプログラムに関する研究開発費用			● ● そこで私たちは 2024 年 6 月 30 日に終了した会計年度における株式報酬費用は 2330万元。株式報酬費用を想定しています近い将来、当社の営業費用の重要な部分になるでしょう。
主なバランスシート項目の議論		-			159,181			46,841			-			(17,281	)		188,741
以下の表は 2023 年 6 月 30 日および 2024 年 6 月 30 日現在の連結貸借対照表から選択した情報。この情報は、連結財務諸表および関連注記は、この年次報告書の他の場所に含まれています。		-			156,916			31,825			-			-			188,741
6月30日まで		-			2,265			15,016			-			(17,281	)		-
人民元		(1,610	)		(199,230	)		(80,102	)		(159	)		18,257			(262,844	)
人民元		(1,610	)		(183,713	)		(77,362	)		(159	)		0			(262,844	)
US $		-			(15,517	)		(2,740	)		-			18,257			-
(in数千人）		(1,610	)		(40,049	)		(33,261	)		(159	)		976			(74,103	)
連結バランスシートデータ選択		19			3,459			4,071			-			(75	)		7,474
資産：		-			-			-			-			-			-
短期投資		208			1,325			4,405			-			(901	)		5,037
借金売掛金、ネット		(59,220	)		-			-			-			59,220			-
その他流動資産		(64	)		1,652			(663	)		-			-			925
契約資産（手当を除く）		(60,667	)		(33,613	)		(25,448	)		(159	)		59,220			(60,667	)

	契約資産 — 非経常、引当を除く
	資産総額			責任と資本：短期ローン手数料を計算する未払い手数料 — 非経常			人民元			人民元 US $			(inパーセントを除く千）純収入：			代理店請求調整

ウェルスマネジメントなど		(5,310	)		(69,861	)		80,480			52,425			-			57,734
小計		-			(99,980	)		(1,108,064	)		(455,348	)		1,663,392			-
運営コストと支出		-			95,150			1,069,803			974,626			(2,139,579	)		-
代理店					20,491			-			(20,491	)		-			-
クレーム調整					28,752			(716,210	)		921,618			-			234,160
ウェルスマネジメントなど		-			44,413			(754,471	)		1,420,405			(476,187	)		234,160
小計		-			58,090			519,549			1,085,753			(1,663,392	)		-
商誉減損前の営業利益（損失）		-			(78,227	)		(1,060,271	)		(1,001,081	)		2,139,579			-
代理店		14,317			-			-			(101,158	)		-			(86,841	)
クレームの調整		14,317			(20,137	)		(540,722	)		(16,486	)		476,187			(86,841	)

	ウェルスマネジメントその他
	小計			営業権減価損失卓越した価格を行使する (Per普通			シェア）（ US $）			授与日満期になる			日付任勇			2024 年 2 月 20 日 2028 年 3 月 31 日

孔友傑		(2,735	)		(54,828	)		32,076			124			-			(25,363	)
2024 年 2 月 20 日		-			(99,386	)		(19,927	)		-			119,313			-
2028 年 3 月 31 日		-			67,346			16,755			-			(84,101	)		-
楊元芬		(6,952	)		-			-			(6,952	)		13,904			-
2024 年 2 月 20 日		-			23,947			(28,933	)		-			-			(4,986	)
2028 年 3 月 31 日		(6,952	)		(8,093	)		(32,105	)		(6,952	)		49,116			(4,986	)
集団としての他の個人		-			19,927			99,386			-			(119,313	)		-
2024 年 2 月 20 日		-			(16,755	)		(67,346	)		-			84,101			-
2028 年 3 月 31 日		-			-			6,952			6,952			(13,904	)		-
AIX 株式インセンティブプラン		-			3,172			38,992			6,952			(49,116	)		-

	● ●
	配当と分配を宣言する			● ● 士官を任命し，士官の任期を決定した ● ● 当社の借金権力を行使し、当社の財産を抵当に入れる			● ●			わが社の株式の譲渡を許可し、その株式をわが社の株式登録簿に登録することを含む。役員および上級者の任期			役員は取締役会の裁量に従って務めます当社の取締役は任期を受けず、任期まで在任します。株主の通常決議または取締役会によって解任されます取締役は自動的に解任されます。取締役が（ i ）破産し、または債権者と取り決めまたは和解を行った場合。取締役会からの特別な欠席休暇なしに、取締役会の会合に欠席している。取締役会は 3 回連続して開催され、取締役会は、その事務所を空席することを決議する。取締役会の多様性			以下の表は特定の取締役会の構成に関する情報各取締役の自己識別に基づく情報取締役会ダイバーシティマトリックス（ 2024 年 9 月 30 日現在）

主な執行機関がある国·地域：		(1,455	)		6,120			(60,676	)		(144	)		-			(56,155	)
中国		-			(214,052	)		(76,789	)		-			290,841			-
外国の個人発行業者		-			238,452			70,311			-			(308,763	)		-
はい		-			(40,375	)		29,779			-			-			(10,596	)
母国法律で開示が禁止されている		-			(15,975	)		23,301			-			(17,922	)		(10,596	)
いいえ		-			76,789			214,052			-			(290.841	)		-
役員総数		-			(70,311	)		(238,452	)		-			308,763			-
第1部：性別同意		-			6,478			(24,400	)		-			17,922			-

女子

男性

非バイナリしなかった

公開

性別

役員.取締役

第2部：人口統計的背景

母国管内に在任人数が足りない個人

LGBTQ+

人口統計の背景は明らかにされていない

D.従業員

以下の表は 2024 年 6 月 30 日現在、 AIX の職務別従業員の内訳。

	数量	従業員

	% of	合計

	管理する	管理職

	財務 · 会計担当	プロフェッショナルクレーム調整者

	IT スタッフ	リスク管理

	資産管理	合計

	以下の表は 2024 年 6 月 30 日現在、 HPH の AIX 社を除く職務別従業員の内訳。	機能エリア

	数量	社員

	パーセンテージ	合計

	投資顧問	管理 · 行政

	技術部	リスク管理

資産管理

合計

	中華人民共和国の規制に従って、当社は、年金を含む市 · 州政府が組織する様々な従業員の社会保障制度に参加しています。失業保険、出産保険、労働傷害保険、医療保険、住宅保険。必須中華人民共和国の法律に基づき、給与、ボーナスおよび特定の手当の特定の割合で従業員給付計画に貢献します。従業員は、地方自治体が随時指定する最大額まで。良好な労働関係を維持すると考えています従業員との重大な労働紛争は経験していません	E.株式所有権
	保有しているアメリカ預託株式は最高0.05ドルが得られます	● ●
	現金権利（現金配当を除く）及び / または権利、有価証券その他の権利の売却による現金収益の分配	保有しているアメリカ預託株式は最高0.05ドルが得られます

	● ●	権利の行使による ADS の配布

	保有しているアメリカ預託株式は最高0.05ドルが得られます	● ●

	米国預託証明書ではない証券の流通または追加の米国預託証明書の購入の権利	保有しているアメリカ預託株式は最高0.05ドルが得られます

● ●

信託サービス

口座開設銀行で設立された適用記録日(S)が保有する米国預託株式あたり最高0.05ドル

ADS ホルダーとして、あなたはまた、預託銀行が負担する一定の手数料および費用、一定の税金および政府手数料（さらに適用される手数料、経費、税金およびその他の政府手数料に対して、 ADS ）など。

● ●

ケイマン諸島における普通株式の登記官および譲渡代理人が請求する普通株式の譲渡および登記手数料（すなわち、普通株式の入金および引き出し時）。

	● ●	外国通貨を米ドルに換算するために発生した費用。

	● ●	ケーブル、テレックス、ファックスの伝送および有価証券の配送に対する費用。

	Marcum Asia の同意書 CPAs LLP の	Deloitte Touche Tohmatsu Certified Public Accountants LLP の同意

	Marcum Asia CPAs LLP からの証券取引委員会宛の書簡、 2024 年 4 月 2 日付（ 2024 年 4 月 2 日に委員会に提出された当社のフォーム 6—k の付属書類 16.1 を参照して組み込まれます）	払戻政策

	101.INS*	XBRLインスタンスドキュメントを連結する

	101.Sch*	インライン XBRL Taxonomy 拡張スキーマドキュメント

101.カール*

インライン XBRL Taxonomy 拡張計算 Linkbase ドキュメント

	101.定義*	インライン XBRL Taxonomy 拡張定義 Linkbase ドキュメント

	101.実験所*	インライン XBRL Taxonomy 拡張ラベル Linkbase ドキュメント

	101.前期*	インライン XBRL Taxonomy 拡張プレゼンテーション Linkbase ドキュメント

	表紙ページインタラクティブデータファイル（ Inline XBRL 形式で、資料 101 に記載）	本局に提出します。

	同封して提供する	署名

	流動資産：	現金 · 現金同等物

	制限現金（連結 VIE 及び VIE の子会社の制限現金を含み、 VIE の債務の清算にのみ使用可能）	ゼロ

	RMB と	2023 年 6 月 30 日、 2024 年 6 月 30 日現在）

	短期投資（公正価値で測定された投資を含む）	ゼロ

A. RMB と

B. 2023 年 6 月 30 日、 2024 年 6 月 30 日現在）

人民元引当を差し引いた売掛金

C. RMB と

2023 年 6 月 30 日、 2024 年 6 月 30 日現在

D. 契約資産（ RMb の手当を差し引いた）

ゼロ

RMB と

2023 年 6 月 30 日、 2024 年 6 月 30 日現在

その他の売掛金，純額

借金売掛金、ネット

その他流動資産HIGHEST パフォーマンスホールディングス株式会社連結貸借対照表 - （続き） (In株式と 1 株あたりのデータを除く数千）6月30日まで人民元人民元US $, 注釈 2 （ v ）負債、メザナイン株式および株式：流動負債：短期ローン買掛金（連結 VIEs 及び VIEs の子会社の買掛金を含む） RMB と 2023 年 6 月 30 日、 2024 年 6 月 30 日現在）発生手数料（合併 VIE 及び VIE の子会社の発生手数料を含む）ゼロ RMB と 2023 年 6 月 30 日、 2024 年 6 月 30 日現在）その他の買掛金および発生費用（合併 VIE および VIE の子会社のその他の買掛金および発生費用を含む）

RMB と

2023 年 6 月 30 日、 2024 年 6 月 30 日現在）

未払給与（合併 VIE 及び VIE の子会社の未払給与を含む）

RMB と

2023 年 6 月 30 日、 2024 年 6 月 30 日現在）

納付所得税（連結 VIE 及び VIE の子会社の納付所得税を含みます）

RMB と

2023 年 6 月 30 日、 2024 年 6 月 30 日現在）

現行営業リース債務（合併 VIEs 及び VIEs の子会社の現行営業リース債務を含む）。

RMB と

2023 年 6 月 30 日、 2024 年 6 月 30 日現在）

その他経常負債（合併 VIEs 及び VIEs の子会社の他の経常負債を含む）

ゼロ

RMB と

2023 年 6 月 30 日、 2024 年 6 月 30 日現在）

流動負債総額

HIGHEST パフォーマンスホールディングス株式会社

連結貸借対照表

- （続）

(In株式と 1 件あたりを除いて数千共有データ）

6月30日まで

人民元

人民元

US $

注釈 2 （ v ）

非流動負債：

未払い手数料 — 非経常（統合 VIE および VIE の子会社の未払い手数料を含む）

ゼロ

RMB と

2023 年 6 月 30 日、 2024 年 6 月 30 日現在）

その他税金債務（合併 VIEs 及び VIEs の子会社のその他の税金債務を含む）

RMB と

2023 年 6 月 30 日、 2024 年 6 月 30 日現在）

繰延税金負債（合併 VIE 及び VIE の子会社の繰延税金負債を含む）

ゼロ

RMB と

2023 年 6 月 30 日、 2024 年 6 月 30 日現在）

非経常営業リース債務（合併 VIE 及び VIE の子会社の非経常営業リース債務を含む）

RMB と

2023 年 6 月 30 日、 2024 年 6 月 30 日現在）

追加実収資本

法定備蓄金

留保利益

その他の総合収益を累計する

株主権益総額

	非制御的権益	総株式

	総負債、中間層権益、株主資本	付属の注釈は、連結財務諸表です

HIGHEST パフォーマンスホールディングス株式会社

連結業績計算書および包括的ロス

(In株式と 1 件あたりを除いて数千共有データ）年度 6 月 30 日終了

人民元

人民元

人民元

US $

注 2 （ v ）

純収入：

代理店

生命保険業務

損害保険業務

クレーム調整

ウェルスマネジメントなど

純収入合計

運営コストと支出：

代理店

生命保険業務

損害保険業務

クレーム調整

ウェルスマネジメントなど

総運用コスト

販売費用

一般と行政費用

総運営コストと費用

営業権減価損失

運営損失

その他利益（損失）、純：

公正価値変動による純損失

売却可能投資の実現利益に伴う投資収益

利子収入，純額

他にもネットワークは

所得税引前損失および関連会社の損失分担額

所得税の割引

関連会社の損失分担

純損失

マイナス：非支配権益に起因する純損失

当社の所有者に帰属する純損失

分配利益：

償還可能普通株式の発生

当社の普通株主に帰属する純損失

HIGHEST パフォーマンスホールディングス株式会社

	連結業績計算書および包括的ロス	- （続き）

	(In株式と 1 株あたりのデータを除く千）	年度 6 月 30 日終了

	人民元	人民元

	人民元	US $

	注釈 2 （ v ）	当社の普通株主に帰属する 1 株当たり純損失：

	基本的な情報：	希釈：;

	1 株当たり純利益の計算に使用される株式：	基本的な情報：

希釈：

純損失

その他の総合損失、税引き後純額：

外国為替換算調整

売却可能投資の未実現純損失

全面損失総額

減：非支配権益に起因する包括損失

普通株主に帰属する総合損失について

付属の注釈は、連結財務諸表です

HIGHEST パフォーマンスホールディングス株式会社

合併株主権益報告書

(In株式と 1 件あたりを除いて数千共有データ）

資本金

その他の内容

在庫株

累積

その他

数量

株

数量

支払い済み

キャピタル

数量：

株

数量

法律を定める

リザーブ

保持

収益

全面的に

（損失）収入

非制御性

興味

合計

人民元

2021年6月30日現在の残高

純損失

外貨換算

法定準備金の規定

2022年6月30日までの残高

純損失

外貨換算

法定準備金に関する規定

子会社の処分（注 3 （ b ））

2023年6月30日までの残高

HIGHEST パフォーマンスホールディングス株式会社

合併株主権益報告書

- （続き）

(In株式と 1 株あたりのデータを除く数千）

資本金

その他の内容

在庫株

累積

その他

数量

株

数量

支払い済み

キャピタル

数量：“ 株”数量法律を定めるリザーブ’保持

収益

全面的に

非支配権益に対する配当宣告付属会社を売却する

買い戻し

株式会社 AIX が保有する出資比率(Note 1 ）

償還可能普通株式の発生

子会社の持分の一部処分

2024年6月30日までの残高

2024 年 6 月 30 日現在の残高（米ドル）（注 2 （ v ））

付属の注釈は、連結財務諸表です

HIGHEST パフォーマンスホールディングス株式会社

統合現金フロー表

(単位：千)

年度 6 月 30 日終了

人民元

人民元

US $

注 2 （ v ）

経営活動のキャッシュフロー：

純損失

営業活動による純損失と純現金の調整：

減価償却費

無形資産の償却

非現金でレンタル料金を扱っております

営業リースの終了による損失

金融資産の信用損失引当の規定

営業権減価損失

株式ベースの給与費用

財産·工場·設備の損失を処分する

株式投資の公正価値の変動と偶発的対価

不確実な税務に関する規定（撤回）

投資収益

子会社の売却利益

関連会社の損失分担

繰延税金

その他債権 · 貸付債権の利子発生

営業資産 · 負債の変動

売掛金 · 契約資産

その他の債権 · 経常資産

他の非流動資産

買掛金 · 未払手数料

その他の買掛金 · 経費

その他流動負債

所得税に対処する

リース責任

純現金（使用）事業活動から生じるもの

投資活動によるキャッシュフロー：

短期投資の購入

短期投資の処分収益

長期投資を購入する

不動産 · 設備の購入

財産と設備を処分して得た収益

第三者からの貸付債権に対する支払金

第三者からの貸付債権に対する受領金

HIGHEST パフォーマンスホールディングス株式会社

統合現金フロー表

- （続き）

(単位：千)

年度 6 月 30 日終了

人民元

人民元

US $

注釈 2 （ v ）

無形資産の前払金

無形資産を購入する

子会社の処分収益（処分済現金を差し引いたもの）

非現金買収による現金取得

投資活動による純現金（使用）

資金調達活動のキャッシュフロー：

株式公開による普通株式の発行収益

銀行借入金

銀行借入金等の返済

非支配株主への配当

公開市場からの普通株式の買い戻しについて

子会社の非支配権の取得について

資金調達活動に使用された純現金

現金及び現金同等の純（減少）増加、制限現金

年度初めの現金および現金同等物および制限現金

為替レート変動が現金及び現金同等物に与える影響

年末の現金および現金等価物および制限現金

連結貸借対照表の金額の調整：

年末現金と現金等価物

年末の制限現金

年度末の現金および現金同等物および制限現金の合計

キャッシュフロー情報の追加開示：

納めた所得税

支払利子

非現金投資活動の補足開示：

リース債務と引き換えに取得した使用権資産（早期終了による使用権資産の減少を除いたもの）

普通株式の発行による子会社の取得

付属の注釈は、連結財務諸表です

HIGHEST パフォーマンスホールディングス株式会社

連結財務諸表付記

(In株式と 1 件あたりを除いて数千共有データ）

業務の組織と記述

ハイベストパフォーマンスホールディングス株式会社(the「当社」（旧「 Puyi Inc. 」）2018 年 7 月にケイマン諸島に法人化され、上場しました。 NASDAQ では

2019 年 3 月 29 日

エイックス株式会社（『 AIX 』）（旧「 Fanhua Inc. 」）およそ

2018 年 9 月以降の株式保有率。オン当社は、 2023 年 12 月 22 日、 AIX と株式買戻し契約を締結し、株式買戻しに合意しました。 All of the

人民元

人民元

売掛金

契約資産（注 2 （ r ）参照）

不良債権準備

売掛金 · 契約資産（ネット）

以下の表は概要です。売掛金および契約資産の信用損失予想引当金の動向

人民元

人民元

年初残高

当期予想信用損失引当額

核販売

年末の残高

HIGHEST パフォーマンスホールディングス株式会社

連結財務諸表への注記

(In株式と 1 株あたりのデータを除く数千）

重要会計政策の概要

（続き）

不動産·工場および設備

A. 不動産 · 設備コストで記載されます。減価償却費と償却費は、以下の推定耐用年数について直線法を使用して計算されます。残留価値を考慮すると

推計

耐用性

（年）

推計

残留物

価値がある

家を建てる

オフィス機器 · 家具 · 備品

機動車

賃借権改善残りリース期間と推定耐用年数の短縮減価償却方法耐用年数と推定耐用年数は定期的に見直されます連結計で計上された減価償却費の概要は以下の表です。営業と包括損失の明細書.

B. 人民元

人民元

運営コスト

販売費用

一般と行政費用

減価償却費

事業合併と非支配的利益

資産

（レベル 1）

意味が重大である

その他 ( 観察可能) 入力

（レベル 2 ）

意味が重大である

観測できない

入力（ Level 3 ）

人民元

人民元人民元

人民元

短期投資 — 負債担保投資 — その他の経常資産に計上される株式担保

値段が合うかもしれない

HIGHEST パフォーマンスホールディングス株式会社 連結財務諸表への注記

(In株式と 1 株あたりのデータを除く数千）

重要会計政策の概要 （続き）

金融商品の公正価値

（続き）フェアで測定繰り返しの価値

（続き）

公正価値計量

報告日使用

説明する

【 As of 6 月 30 日、

引用する

価格アクティブで

市場

同一資産

（レベル 1）

意味が重大である(ad)Revised to 以前の財務諸表

（続）

以下の表は概要です。連結貸借対照表における影響を受けた事業項目に及ぼす影響について投資者と入力付加価値税控除：

2023年6月30日報告通り

調整

訂正済流動資産：

制限現金

その他流動資産流動資産総額

資産総額

流動負債：投資家の預金

その他の買掛金 · 経費

流動負債総額負債総額

総株式

現行期間に対応するその他売掛金 · 経常資産 · その他買掛金 · 経費の明細は、その他の売掛金、純およびその他の経常資産、その他の買掛金および未払費用および未払給与の明細に別個に記載されています。それぞれです以下の表は概要です。連結営業計算書における影響を受けた項目に及ぼす影響及び関連連結損失コミッションの分類誤差へ：

2022年6月30日までの年度

2023年6月30日までの年度

報告通り

調整訂正済

報告通り

調整訂正済み

運営コストと支出：

販売コスト販売費用

総運営コストと費用

運営損失株主による純損失及び純損失

HIGHEST パフォーマンスホールディングス株式会社

連結財務諸表への注記(In株式と 1 株あたりのデータを除く数千）

重要会計政策の概要

（続き）

(ad)以前への改訂発行済財務諸表

	（続）
	以下の表は概要です。連結キャッシュ · フロー計算書における一時保有資金に関する影響項目の修正の影響投資家のために：				2022年6月30日までの年度
	2023年6月30日までの年度		$		報告通り		$
	調整
訂正済み		25,608,829		3,523,892		47,363		6,517
報告通り⁽¹⁾		71,822		9,883		9,625		1,324
調整		25,680,651		3,533,775		56,988		7,841

(1)

訂正済み

経営活動のキャッシュフロー：

投資家の預金の変更

経営活動のための現金純額

現金および現金等価物と制限的現金純減少

現金および現金同等物、および年始の制限現金

現金および現金同等物、および年末の制限現金取得 · 処分

2024 年の買収

AIX の買収注釈 1 に記載されているように、 2023 年 12 月 31 日に株式交換による取引の完了により、当社は

買収した資産

人民元現金および現金同等物および制限現金

短期投資

売掛金 · 契約資産

その他の債権 · 経常資産

財産·工場·設備·純価値

無形資産（注 2 （ h ）、注 9 ）

- ソフトウェア

- 非競争協定- エージェント資源

- 保険ブローカーのライセンス

- 商号繰延税金資産

他の非流動資産

使用権資産買収した総資産

負債

短期ローン買掛金 · 未払い手数料

その他の支払 · 未払金

賃金総額を計算すべきである所得税に対処する

リース負債を経営する

繰延税金負債

その他の負債

負担総負債

買収の確認可能純資産総額

マイナス： AIX の特定の子会社の非支配権益

	グッドウィル報告は 1 回のみでした。ユニット（すなわち、ウェルスマネジメント）と、保険代理店とクレームを含む 2 つの追加報告ユニットの買収前の AIX の買収に伴う調整が特定されました。ウェルスマネジメントの報告単位は期待されません AIX の買収に伴うシナジー効果の恩恵を受けることができますその結果、買収に記録された親善は、 AIX の資産と負債が割り当てられる保険代理店の適用可能な報告単位および請求の調整。結果は善意は税務上の控除の対象ではない。
	2022		2023		2024		2024
	HIGHEST パフォーマンスホールディングス株式会社		連結財務諸表への注記		(In株式と 1 株あたりのデータを除く数千）		$
	取得 · 処分
（続き）		13,918		10,478		17,299		1,528
2024 年の買収		2,772		5,300		6,900		949
（続き）		1,139		1,064		771		106
AIX の買収		2,400		-		24,659		3,393
（続き）		-		-		44,622		6,140
この子会社の処分について売却時の子会社の純帳簿価値に対する売上対価の超過に基づいて決定されました		-		-		1,732		238
HIGHEST パフォーマンスホールディングス株式会社		76,789		19,927		58,090		7,993
連結財務諸表への注記		70,311		16,755		78,227		10,764
(In株式と 1 株あたりのデータを除く数千）		214,052		99,386		99,980		13,758
その他売掛金、ネット		238,452		67,346		95,150		13,093

その他の売掛金、ネット構成以下のもの：

6月30日まで

人民元

職員からの債権（ i ）

第三者チャネルベンダーからの債権（ ii ）

短期リースに関する預金

子会社の処分に対する対価額

第三者からの債権金額

その他

サブ合計	現在の予想信用損失引当額年初残高 ASU 2016 — 13 採用時の累積効果調整当期予想信用損失準備金		コスト：家を建てるオフィス機器 · 家具 · 備品		機動車賃借権改善サブ合計
減価償却累計		83		14,200		76
建設中の工事		75		6,967		72
減価償却費負担 RMB		54		2,942		88
人民元、人民元		52		6,180		503
RMB と		45		1,866		37
2022 年 6 月 30 日、 2023 年 6 月 30 日、 2024 年 6 月 30 日。2024 年 6 月 30 日に終了した年度は、グループは人民元の損失を計上しました		33		3,281		32
(2023： RMB		32		4,814		223
）家具 · 事務機器 · 設備 · リース改修の処分に関する連結営業計算書および包括的損失を差し引いた他における賃貸オフィスの終了によるものです		31		2,728		154
いいえ		30		2,328		68
財産の損耗、 2022 年 6 月 30 日、 2023 年、 2024 年のプラント設備を計上しました。		24		5,500		46
商誉，純額		22		2,077		80
グロス · ウェルの額 2023 年 6 月 30 日および 2024 年 6 月 30 日時点の報告単位別減損損失の累積は以下のとおりです。		16		1,928		31
富		15		12,145		96
管理する		12		706		17
RMB と		10		1,022		22
それぞれ。償却費費用は RMB と予想されます		10		757		118
人民元、人民元		6		197		117
人民元、人民元		6		428		56
人民元、人民元		5		919		123
RMB と		5		730		39
2025 年 6 月 30 日期、 2025 年 6 月 30 日期、 2026 年 6 月 30 日期、 2027 年 6 月 30 日期 2028 年、 2029 年。		5		18		61
損傷はなかった 2022 年 6 月 30 日、 2023 年、 2024 年の計上された無形資産の費用。		5		938		115
HIGHEST パフォーマンスホールディングス株式会社		22		394		51
連結財務諸表への注記		2		494		26
(In株式と 1 株あたりのデータを除く千）		2		-		15
他の非流動資産、純額		1		-		9
その他の非流動資産以下の内容から構成されます。		1		-		1
6月30日まで		1		-		63
人民元		1		-		2
人民元		1		-		43
適正価値が容易に決定できない株式投資（注 2 （ j ））		1		-		73
組み込み機能付き債務証券の商品（注 2 （ j ））		588		73,559		2,457

第三者からの支払金（ i ）

偶発的な考慮事項（ ii ）

以下の代表 2023 年 6 月 30 日および 2024 年 6 月 30 日時点の ROU 資産および関連リース負債の総額：

6月30日まで

人民元

リースROU資産を経営する

当期経営賃貸負債

非流動経営賃貸負債

リース負債総額を経営する

加重平均賃貸借 2023 年 6 月 30 日および 2024 年 6 月 30 日時点の期限および割引率は以下の通りです。

6月30日まで

加重平均リース期間（年）：

賃貸借契約を経営する

加重平均割引率：

賃貸借契約を経営する

HIGHEST パフォーマンスホールディングス株式会社 連結財務諸表への注記

(In株式と 1 株あたりのデータを除く数千）

賃貸借証書（続き）

リース費用の構成要素 2023 年 6 月 30 日および 2024 年 6 月 30 日を末日とする年度は以下の通りです。

税金(福祉)費用を繰延する所得税(福祉)費用

主な構成要素繰延所得税資産 · 負債は以下のとおりです。

6月30日まで人民元

人民元

繰延税金資産：

営業損失の繰越

控除可能な研究開発費

広告費

疑わしい勘定 · 信用損失 · 減損損失の引当その他一時的な帳簿 · 税金差異

推定免税額

合計繰延税金負債：

短期投資に関する公正価値調整

将来の更新手数料による利益の推定中華人民共和国配当源泉徴収税

事業買収による長期資産の公正価値調整

合計人民元

中国本土での営業損失

香港等での事業損失所得税引前営業継続損失及び関連会社の損失分担

法定税率

法定税率による所得税の優遇措置税率変更の繰延税効果

一時的な帳簿 / 税金差異の True—up

子会社の処分について

税金控除不可の経費：娯楽

その他

中華人民共和国法人に対する税制猶予の影響他法域で事業を行う事業体の税率の違いの影響

評価免除額を変更する

公正価値変更の純効果 *特定の移転価格協定から生じる未認識の税制優遇措置

その他

所得税(福祉)費用2024 年 6 月 30 日期における公正価値の変更の純効果は、主に公正価値に起因しています。グループが保有する偶発的対価および持分における価値の変化。

年度 6 月 30 日終了

人民元人民元

人民元

基本的な情報：純損失

マイナス：非支配権益に起因する純損失

当社の所有者に帰属する純損失

減算：ニュードラゴンへの利益分配（注 17 ）

当社の普通株式に起因する純損失

発行済み普通株式加重平均

普通株当たり基本純損失

ADS ごとの基本純損失

HIGHEST パフォーマンスホールディングス株式会社

連結財務諸表への注記

(In株式と 1 株あたりのデータを除く千）

1株当たり純損失

（続き）

年度 6 月 30 日終了人民元

% of

セールス人民元

人民元

人民元A社

B社

C社カンパニー D

小計

年間純収益の 10% 未満でした

占めるお客様債権総額の 10% 以上と、顧客ベースに計上されている契約資産の一定額（「そのような売掛金（ Accounts Receivable ）は以下の通りである。

6月30日まで

人民元

人民元

A社

カンパニー D

小計

年度末の売掛金額の 10% 未満でした。

グループは継続的なパフォーマンスをお客様の信用評価を行い、一般的に当該売掛金に担保を必要としません。

平均

演習価格

USD

重み付け

平均

残り“ 契約寿命 ” (In年間）

骨材

本質価値

USD

2023 年 6 月 30 日現在未払い

AIX の買収による追加

2024 年 6 月 30 日現在未払い

6 月 30 日期末の年度について 2024 年、 RMb の株式報酬費用

それぞれ 2022 年オプションに関連して認識されました。実際の没収なし 2024 年 6 月 30 日に終了した年度の独立取締役について

2024 年 6 月 30 日現在、未承認。独立取締役に付与された未出資の株式オプションに係る株式報酬費用は、総額 US $

（人民元

）。加重平均期間にわたって認識されると予想されます

何年？6 月時点の株式オプションの本質価値の合計 30 、 2024 は US $

各年 3 月 31 日に付与されるオプションの% 2024 年から 2025 年まで、オプション被授与者の継続的なサービスとパフォーマンス条件の達成を条件としています。 2023 年 MDRt オプションは、オプション取得者のサービス終了に伴う早期終了を条件として、遅くとも 2027 年 8 月 1 日までに失効します。 2023 MDRt オプションの行使価格は US $でした。

（人民元

）と US ドルの本質的価値

（人民元

） 1 普通株当たり授与の日付です

シェアオプションの概要 2024 年 6 月 30 日時点の残高およびその期間の活動については、以下のとおりです。

数量

オプション

重み付け

平均

演習価格

USD

重み付け

平均

残り

契約寿命

(In年間）

骨材

本質価値

USD

2023 年 6 月 30 日現在未払い

付与

AIX の買収による追加

演習

没収される

2024 年 6 月 30 日現在未払い

HIGHEST パフォーマンスホールディングス株式会社

連結財務諸表への注記

(In株式と 1 株あたりのデータを除く数千）

株式ベースの報酬

（続き）

202300万ドルのラウンドテーブルオプション（「 2023 MDRt オプション」）

（続き）

2024 年 6 月 30 日期における株式報酬費用 RMB の

2023 年 MDRt オプションに関連して認識されました。2024 年 6 月 30 日現在、未認識株式報酬費用未投資 2023 年 MDRt オプション関連総額人民元

重み付き平均期間内に確認する予定である

年間直線ベースでですグループは約

独立した高性能エージェントの% はおそらく満たさないでしょう 2024 年 6 月 30 日に終了した年度の賦予条件。

2024 年株式オプション（「 2024 年オプション」）

2024 年 2 月 20 日、当社は、株式オプション（「 2024 オプション」）を、当社の特定の取締役、執行役員、従業員およびトップエージェントに付与しました。購入するグループ最大

（続き）

2024 年株式オプション（「 2024 年オプション」）

（続き）

期待配当利回り：

予想配当利回り過去の配当方針に基づいて推計されました。

リスクフリー金利：

無リスク金利は米国国債利回りに基づいて推定され、評価日時点のオプションのテノールに従って比例評価されます。

予想変動率：

原材料のボラティリティ普通株式は 1 日平均の連続複合収益率の年化標準偏差に基づいて推計されました評価日時点のグループ株価を修正しました。

期待寿命：

期待寿命は推定された 2024 オプションの譲渡期間の終了と授与の契約期間に基づいて。

多重運動：

演習の多重は実証研究に基づいた推定です

株式オプションの概要 2024 年 6 月 30 日時点の残高およびその期間の活動については、以下のとおりです。

数量

オプション

重み付け

平均

演習価格

USD で

重み付け

平均

残り

契約寿命

(In年間）

骨材

本質価値

USD

2023 年 6 月 30 日現在未払い

付与

AIX の買収による追加

演習

没収される

2024 年 6 月 30 日現在未払い

6 月 30 日に終了した年度は、 2024 年、人民元の株式報酬費用

2024 オプションに関連して認識されました。2024 年 6 月 30 日現在、未承認。未投資 2024 オプションに関連する株式報酬費用は合計 4 米ドルでした。

加重平均で認識されると予想される period of

直線ベースで数年間。グループは約

グループ従業員およびトップエージェントの% 2024 年 6 月 30 日に終了した年度の業績目標を達成できない可能性が高い。

HIGHEST パフォーマンスホールディングス株式会社

付与日時点のオプションの公正価値

US $

〜 US $

期待配当利回り：

期待配当利回り AIX は過去の配当政策に基づいて推定しました

リスクフリー金利：

リスクフリー金利金利は、米国国債の利回りを基に推定し、評価日時点のオプションのテノールに応じて比例評価されました。

予想変動率：

基礎となるボラティリティ普通株式は 1 日平均の連続複合収益率の年化標準偏差に基づいて推計されました評価日時点の AIX の修正株価です。

期待寿命：

期待寿命は推定された 2024 AIX オプション 1 の譲渡期間の終了と授与の契約期間に基づいて。

多重運動：

演習多重は実証研究に基づいた推定です

株式オプションの概要 2024 年 6 月 30 日時点の残高およびその期間の活動については、以下のとおりです。

数量

オプション

重み付け

平均

演習価格

USD

重み付け

平均

残り

契約寿命

(In年間）

骨材

本質価値

USD

2023 年 6 月 30 日現在未払い

付与

AIX の買収による追加

演習

没収される

2024 年 6 月 30 日現在未払い

高いパフォーマンス株式会社ホールディングス

連結財務諸表への注記

(In株式と 1 株あたりのデータを除く千）

株式ベースの報酬

（続き）

2024 年 AIX 株式オプション 2 （「 2024 年 AIX 株式オプション 2 」）

リスクフリー金利：

リスクフリー金利金利は、米国国債の利回りを基に推定し、評価日時点のオプションのテノールに応じて比例評価されました。

予想変動率：

原材料のボラティリティ普通株式は 1 日平均の連続複合収益率の年化標準偏差に基づいて推計されました評価日時点の AIX の修正株価です。

期待寿命：

期待寿命は推定された 2024 AIX オプション 2 の譲渡期間の終了と授与の契約期間に基づいて。

複数の運動：

演習多重は実証研究に基づいた推定です

シェアオプションの概要 2024 年 6 月 30 日時点の残高およびその期間の活動については、以下のとおりです。

数量

オプション

重み付け

平均

演習価格

USD で

重み付け

平均

残り

契約寿命

(In年間）

骨材

固有

価値

USD

2023 年 6 月 30 日現在未払い

付与

AIX の買収による追加

演習

没収される

2024 年 6 月 30 日現在未払い

高いパフォーマンス株式会社ホールディングス

連結財務諸表への注記

(In株式と 1 株あたりのデータを除く千）

株式ベースの報酬

（続き）

2024 年 AIX 株式オプション 3 （「 2024 年 AIX 株式オプション 3 」）2024 年 6 月 25 日、 AIX が授与株式オプション（「 2024 AIX オプション 3 」）を特定営業チームリーダーに購入する

AIX の普通株式。追随者 AIX とオプションの助成者との間で締結されたオプション契約に、オプションは 2 年間のサービス期間で付与されます授与日、

% と残り 2025 年から 2026 年までの各年の 3 月 31 日に付与されるオプションの% 。それぞれ、オプションの助成者の継続的なサービスとパフォーマンス条件の達成を条件とします。2024 年 AIX オプション 3 は 2027 年 8 月 1 日までに失効します。オプションの利用者がサービスを終了した場合に早期に終了する場合があります。2024 年 AIX オプション 3 の行使価格は US ドルです。

（人民元

）と US ドルの本質的価値 （人民元

）付与日の普通株式 1 株当たり。

仮に6 月 25 日

予想配当利回り（注 i ）

リスクフリー金利（注記 ii ）

予想ボラティリティ（注釈 iii ）

平均寿命（年）（注 4 ）

多重演習（注 v ）

付与日時点のオプションの公正価値

US $

〜 US $

期待配当利回り：

予想配当利回り AIX は過去の配当政策に基づいて推定しました

リスクフリー金利：

リスクフリー金利金利は、米国国債の利回りを基に推定し、評価日時点のオプションのテノールに応じて比例評価されました。

予想変動率：

原材料のボラティリティ普通株式は 1 日平均の連続複合収益率の年化標準偏差に基づいて推計されました評価日時点の AIX の修正株価です。

期待寿命：

期待寿命が推定された 2024 年 AIX オプション 3 の譲渡期間の終了と授与の契約期間に基づいて。

多重運動：

演習多重は実証研究に基づいた推定です

株式オプションの概要 2024 年 6 月 30 日時点の残高およびその期間の活動については、以下のとおりです。

数量

オプション

重み付け

平均

演習価格

USD

重み付け

平均

残り

契約寿命

(In年間）

骨材

本質価値

USD2023 年 6 月 30 日現在未払い人民元

人民元

US $

資産：

流動資産：

現金 · 現金同等物

子会社の応受金

流動資産総額

子会社への投資

資産総額

責任と資本：

負債：

流動負債：

賃金総額を計算すべきである

流動負債総額

負債総額

中間株権

株本：

普通株式（授権株：

US ドルで

それぞれ発行されます

そして

株式は

2023 年 6 月 30 日現在、 2024 年 6 月 30 日現在、 370，55 1，728 株を発行しています。

在庫株

追加実収資本

留保利益

その他の総合収益を累計する

総株式

負債総額、メザニン · エクイティ、エクイティ

HIGHEST パフォーマンスホールディングス株式会社

スケジュール I 財務情報概要会社概要

- （続き）

経営報告書と全面赤字

(単位：千)

6 月 30 日末

人民元

US $

一般と行政費用

その他の純収入

子会社の損失に対する持分

所得税前損失

所得税支出

純損失

その他の包括所得（税抜き）：外国為替換算調整

総総合損失

HIGHEST パフォーマンスホールディングス株式会社

スケジュール I 財務情報概要会社について

- （続き）

現金フロー表

(単位：千)

年度 6 月 30 日終了

人民元

人民元

US $

経営活動のキャッシュフロー：

純損失

純損失と経営活動で使用される現金純額の調整：

子会社及び関連会社の利益に対する持分

ストックオプションに伴う報酬費用

その他非現金調整

営業資産 · 負債の変動

その他の債権

その他の買掛金 · 経費発生

経営活動のための現金純額

投資活動によるキャッシュフロー：

子会社への資本出資

投資活動に使用された純現金

資金調達活動のキャッシュフロー：

ストック · オプションの行使収益

非支配権益の購入に対する支払い

普通株式の買戻し支払い

資金調達活動による純現金

現金および現金等価物の純増加

年度初めの現金および現金同等物および制限現金

為替レート変動が現金及び現金同等物に与える影響

年末の現金および現金等価物および制限現金

hph：生命保険ビジネスメンバー

hph：生命保険ビジネスメンバー

hph： PCInsurance ビジネスメンバー

hph： PCInsurance ビジネスメンバー

hph： PCInsurance ビジネスメンバー

hph：クレーム調整メンバー

hph：クレーム調整メンバー

hph：クレーム調整メンバー

hph：ウェルスマネジメントその他メンバー

hph：ウェルスマネジメントその他メンバー

us—gaap： CommonStockMember

us—gaap： AdditionalPaidInCapitalMember

hph： TreasuryStockoneMember

hph：法定予約メンバー

us—gaap：留保所得メンバー

us—gaap：累積その他総合所得メンバー

us—gaap： NoncontrollingInterestMember

us—gaap： CommonStockMember

us—gaap： AdditionalPaidInCapitalMember

hph： TreasuryStockoneMember

hph：法定予約メンバー

us—gaap：留保所得メンバー

us—gaap：累積その他総合所得メンバー

us—gaap： NoncontrollingInterestMember

us—gaap： CommonStockMember

us—gaap： AdditionalPaidInCapitalMember

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hph：法定予約メンバー

us—gaap：留保所得メンバー

us—gaap：累積その他総合所得メンバー

us—gaap： NoncontrollingInterestMemberus—gaap： CommonStockMemberus—gaap： AdditionalPaidInCapitalMember

hph： TreasuryStockoneMember

hph：法定予約メンバー

us—gaap：留保所得メンバー

us—gaap：累積その他総合所得メンバー

us—gaap： NoncontrollingInterestMember

us—gaap： CommonStockMember

us—gaap： AdditionalPaidInCapitalMember

hph： TreasuryStockoneMember

hph：法定予約メンバー

us—gaap：留保所得メンバー

us—gaap：累積その他総合所得メンバー

us—gaap： NoncontrollingInterestMember

SRT：累計調整有効期限調整メンバ

C. us—gaap： CommonStockMember

SRT：累計調整有効期限調整メンバ

us—gaap： AdditionalPaidInCapitalMember

SRT：累計調整有効期限調整メンバ

hph： TreasuryStockoneMember

SRT：累計調整有効期限調整メンバ

hph：法定予約メンバー

SRT：累計調整有効期限調整メンバus—gaap：留保所得メンバー

SRT：累計調整有効期限調整メンバus—gaap：累積その他総合所得メンバー

SRT：累計調整有効期限調整メンバ

us—gaap： NoncontrollingInterestMemberSRT：累計調整有効期限調整メンバ

SRT：累計調整有効期限調整メンバus—gaap： CommonStockMember

SRT：累計調整有効期限調整メンバus—gaap： AdditionalPaidInCapitalMember

SRT：累計調整有効期限調整メンバ

hph： TreasuryStockoneMember

SRT：累計調整有効期限調整メンバ

hph：法定予約メンバー

SRT：累計調整有効期限調整メンバ

us—gaap：留保所得メンバーSRT：累計調整有効期限調整メンバ

us—gaap：累積その他総合所得メンバー

SRT：累計調整有効期限調整メンバ

us—gaap： NoncontrollingInterestMember

SRT：累計調整有効期限調整メンバ

us—gaap： CommonStockMember

SRT：累計調整有効期限調整メンバ

us—gaap： AdditionalPaidInCapitalMember

SRT：累計調整有効期限調整メンバ

hph： TreasuryStockoneMember

SRT：累計調整有効期限調整メンバ

hph：法定予約メンバー

SRT：累計調整有効期限調整メンバ

us—gaap：留保所得メンバー

SRT：累計調整有効期限調整メンバ

us—gaap：累積その他総合所得メンバー

SRT：累計調整有効期限調整メンバus—gaap： NoncontrollingInterestMember

SRT：累計調整有効期限調整メンバ

hph： AIXMemberhph ： AIXMember

hph： FanhuaPuyiFundSalesCoLtd メンバー. hph： FanhuaPuyiFundSalesCoLtd メンバー

hph： PuyiFundToFanhuaMember

hph：販売株主契約会員hph： AIXMember

hph： AIXMember. hph：販売株主会員

hph： AIXMember

srt ： MinumMember

srt ： MaximumMemberhph：借金証券埋め込み機能メンバー

通貨： USD通貨： CNY

srt ： MinumMember

srt ： MaximumMembersrt ： MinumMember

us—gaap： BuildingMembersrt ： MaximumMember

us—gaap： BuildingMember

srt ： MinumMember

us—gaap：家具 · 設備会員

srt ： MaximumMember

us—gaap：家具 · 設備会員

srt ： MinumMember

hph： MotorVehiclesMember

hph：ウェルスマネジメントその他メンバー

US-GAAP：TransferredAtPointInTimeMember

hph：ウェルスマネジメントその他メンバー

US-GAAP：転送時間を超えるメンバ

hph：ウェルスマネジメントその他メンバー

US-GAAP：TransferredAtPointInTimeMember

US-GAAP：転送時間を超えるメンバ

hph： AgencyMember

US-GAAP：TransferredAtPointInTimeMember

hph： AgencyMember

US-GAAP：転送時間を超えるメンバ

hph： AgencyMember

hph：生命保険ビジネスメンバー

100

A. US-GAAP：TransferredAtPointInTimeMember

hph：生命保険ビジネスメンバー

US-GAAP：転送時間を超えるメンバ

hph：生命保険ビジネスメンバー

hph：非生命保険ビジネスメンバー

US-GAAP：TransferredAtPointInTimeMember

hph：非生命保険ビジネスメンバー

US-GAAP：転送時間を超えるメンバ

hph：非生命保険ビジネスメンバーhph：クレーム調整メンバーUS-GAAP：TransferredAtPointInTimeMember

hph：クレーム調整メンバー

US-GAAP：転送時間を超えるメンバ

101

3. hph：クレーム調整メンバー

hph：ウェルスマネジメントその他メンバー

US-GAAP：TransferredAtPointInTimeMember

6. hph：ウェルスマネジメントその他メンバー

US-GAAP：転送時間を超えるメンバ

hph：ウェルスマネジメントその他メンバー

US-GAAP：TransferredAtPointInTimeMember

US-GAAP：転送時間を超えるメンバ

us—gaap： FairValueInputsLevel1 メンバー

us—gaap： FairValueInputsLevel2Member

us—gaap： FairValueInputsLevel3Member

	us—gaap： FairValueInputsLevel1 メンバー	us—gaap： FairValueInputsLevel2Member

	us—gaap： FairValueInputsLevel3Member	us—gaap：年末調整メンバー

srt：シナリオ以前報告メンバー

srt： RestatementAdjustmentMember

hph： AsCorrectedMember

srt：シナリオ以前報告メンバー

102

srt： RestatementAdjustmentMember

hph ： AsCorrectedMember

srt：シナリオ以前報告メンバー

srt： RestatementAdjustmentMemberhph ： AsCorrectedMember

srt：シナリオ以前報告メンバー

srt： RestatementAdjustmentMember

hph： AsCorrectedMember

srt：シナリオ以前報告メンバー

srt： RestatementAdjustmentMemberhph： AsCorrectedMember

hph： AIXMember

hph： AcquisitionOfAIXMemberus—gaap：セグメント廃止オペレーションメンバー

(i) hph： Fanhua メンバーの取得us—gaap：ソフトウェア開発メンバー

(ii) US-GAAP：非競争プロトコルメンバhph ： AgentResourcesMember

103

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hph：深セン市 Chetong Technology CoLtd メンバー

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	Year Ended June 30,
	2023			2023 to 2024 Percentage Change			2024			2024
	RMB			%			RMB			US$
	(in thousand except percentage)
Net revenues:
Agency		-			100.0			900,246			123,877
Claims adjusting		-			100.0			222,114			30,564
Wealth management and others		114,440			(45.0	)		62,966			8,663
Subtotal		114,440			935.8			1,185,326			163,104
Operating costs and expenses
Agency		-			100.0			(889,185	)		(122,356	)
Claims Adjusting		-			100.0			(219,417	)		(30,193	)
Wealth Management and others		(173,244	)		(35.9	)		(111,077	)		(15,283	)
Subtotal		(173,244	)		604.0			(1,219,679	)		(167,832	)
Income (loss) from operations before goodwill impairment
Agency		-			100.0			11,061			1,521
Claims Adjusting		-			100.0			2,697			371
Wealth Management and others		(58,804	)		(18.2	)		(48,111	)		(6,620	)
Subtotal		(58,804	)		(41.6	)		(34,353	)		(4,728	)
Impairment loss on goodwill		-			100.0			(426,410	)		(58,676	)
Loss from operations		(58,804	)		683.6			(460,763	)		(63,404	)
Other income (loss), net:
Net loss from fair value change		-			100.0			(73,761	)		(10,150	)
Investment income related to the realized gain on available-for-sale investments		13,561			65.0			22,382			3,080
Interest income, net		8,591			93.4			16,619			2,287
Others, net		1,660			(249.5	)		(2,482	)		(341	)
Loss before income taxes and share of loss of affiliates		(34,992	)		1,323.2			(498,005	)		(68,528	)
Income tax expense		(8,585	)		50.8			(12,945	)		(1,781	)
Share of loss of affiliates		-			100.0			(1,121	)		(154	)
Net loss		(43,577	)		1,075.1			(512,071	)		(70,463	)
Less: net loss attributable to the noncontrolling interests		-			100.0			(222,401	)		(30,603	)
Net loss attributable to owners of the Company		(43,577	)		564.7			(289,670	)		(39,860	)

Year Ended June 30, 2024 Compared to Year Ended June 30, 2023

Net Revenues

Our net revenues increased by RMB1,070.9 million, or 935.8%, from RMB114.4 million for the fiscal year ended June 30, 2023 to RMB1,185.3 million (US$163.1 million) for fiscal year ended June 30, 2024, primarily due to the acquisition of controlling interests in AIX.

114

Insurance agency segment

Net revenues from our insurance agency segment increased by 100% from nil to RMB900.2 million (US$123.9 million) for fiscal year ended June 30, 2024 due to the acquisition of AIX. Net revenues from our insurance agency segment consist of net revenues derived from our life insurance business and non-life insurance business.

●

Net revenues from life insurance agency business consist of first year commissions, renewal commissions collected and renewal commissions recognized related to variable consideration estimates. Net revenues for the life insurance business were RMB827.8 million (US$113.9 million) for fiscal year ended June 30, 2024. Net revenues generated from our life insurance business accounted for 69.8% of our total net revenues for fiscal year ended June 30, 2024.

●

Revenues for the non-life insurance business were mainly derived from commissions generated for internet-based insurance products sold on Baowang, including medical insurance, accident insurance, travel insurance and homeowner insurance products and to a lesser extent from commissions and services fees from the provision of insurance brokerage services for commercial line of insurance products. Net revenues for the non-life insurance business were RMB72.4 million (US$10.0 million) for fiscal year ended June 30, 2024. Net revenues generated from the non-life insurance business accounted for 6.1% of our total net revenues for fiscal year ended June 30, 2024.

Claims adjusting services segment

Revenues generated from the claims adjusting business increased by 100% from nil for fiscal year ended June 30, 2023 to RMB222.1 million (US$30.6 million) for fiscal year ended June 30, 2024. Revenues generated from the claims adjusting business accounted for 18.7% of our total net revenues for fiscal year ended June 30, 2024.

Wealth management services segment

Net revenues from wealth management services decreased by RMB51.5 million, or 45.0%, from RMB114.4 million for the fiscal year ended June 30, 2023 to RMB63.0 million (US$8.7 million). Revenues generated from the wealth management business accounted for 5.3% of our total net revenues for fiscal year ended June 30, 2024

●

Publicly raised fund products. Our revenue from publicly raised fund products decreased by RMB21.9 million, or 31.6%, from RMB69.3 million for the fiscal year ended June 30, 2023 to RMB47.4 million (US$6.5 million). The decrease was primarily due to the subdued performance of the A-share market and the correspondingly low investment confidence among individual investors, which in turn led to a diminished transaction value for our publicly raised fund products to individual clients decreased by 1.6 billion, or 28.1%, from 5.7 billion for the fiscal year ended June 30, 2023 to 4.1 billion for the fiscal year ended June 30, 2024 and consequently, a reduction in our commission income.

●

Privately raised fund products. Our net revenues from privately raised fund products decreased by RMB16.0 million, or 62.3%, from RMB25.7 million for the fiscal year ended June 30, 2023 to RMB9.7 million (US$1.3 million). The decrease was primarily due to (i) the fact that investors were affected by the volatile market with increased uncertainty of the future, leading to negative sentiments for privately raised fund products and other high-risk products and their willingness to redeem funds has increased. Therefore, during the fiscal year ended June 30, 2024, the transaction value of our privately raised fund products decreased by 132.0 million, or 64.8%, from 203.8 million for the fiscal year ended June 30, 2023 to 71.8 million for the fiscal year ended June 30, 2024, resulting in a decrease in commission income (including management fees); and (ii) performance-based fees of RMB0.5 million recognized for the fiscal year ended June 30, 2024, as compared to RMB1.8 million for the fiscal year ended June 30, 2023, representing a decrease of 72.2%.

We commenced our asset management services by launching two FoFs in April 2018. As of June 30, 2024, we had three funds under management with AUM of RMB82.7 million (US$11.4 million). Our net revenues from asset management services decreased by RMB1.3 million, or 65.0%, from RMB2.0 million for the fiscal year ended June 30, 2023 to RMB0.7 million (US$93,000). Revenue from consulting and other services primarily consists of service fee from providing comprehensive trust consulting service. Revenue from consulting and other services decreased by RMB12.1 million, or 69.4% from RMB17.4 million for the fiscal year ended June 30, 2023 to RMB5.3 million (US$0.7 million) million for the fiscal year ended June 30, 2024.

115

Operating Costs and Expenses

Our total operating costs and expenses increased by RMB1,046.4 million, or 604.0%, from RMB173.2 million for the fiscal year ended June 30, 2023 to RMB1,219.7 million (US$167.8 million) for the fiscal year ended June 30, 2024, primarily due to the acquisition of controlling interests in AIX which led to a100% increase in both insurance agency segment and claims adjusting segment.

●

Operating costs and expenses for our insurance agency segment increased by 100% from nil for fiscal year ended June 30, 2023 to RMB889.2 million (US$122.4 million) for fiscal year ended June 30, 2024 due to the acquisition of AIX.

●

Operating costs and expenses for our claims adjusting segment increased by 100% from nil to RMB219.4 million (US$30.2 million) for fiscal year ended June 30, 2024 due to the acquisition of AIX.

●

Operating costs and expenses for our wealth management services segment decreased from RMB173.2 million for the fiscal year ended June 30, 2023 to RMB111.1 million (US$15.3 million) for the fiscal year ended June 30, 2024, primarily due to (i) decrease by 35.4 million, or 37.9%, in labor cost related to the optimization of our sales and marketing team and our administrative workforce and (ii) decreased by 12.1 million, or 61.3%, in office expense related to our cost control measure in fiscal year 2024.

Impairment loss on goodwill

Impairment loss on goodwill for fiscal year ended June 30, 2024 primarily consisted of the impairment loss recognized on goodwill arising from acquisition of AIX. Based on the underperformance of acquired business that the actual revenue and operating income declined as compared with projected results of current period mainly due to the release of new industrial regulatory rules, slowing down macroeconomic condition and a sustained decrease in stock prices, we determined that it was more likely than not that there were indications of impairment for the reporting unit of Insurance Agency. As such, recognize goodwill impairment of RMB426.4 million (US$58.7 million) during the year ended June 30, 2024.

Loss from Operations

As a result of the foregoing factors, we recorded an operating loss of RMB460.8 million (US$63.4 million) for fiscal year ended June 30, 2024, increased by 683.6% from RMB58.8 million for fiscal year ended June 30, 2023.

●

Operations loss for our agency insurance segment was RMB415.3 million (US$1.5 million) for fiscal year ended June 30, 2024 as compared to nil for fiscal year ended June 30, 2023, which was primarily due to the impairment loss on goodwill arising from the acquisition of AIX, offset by operations income of RMB11.1 million contributed by our insurance agency business.

●

Operations income for our claims adjusting segment was RMB2.7 million (US$0.4 million) for fiscal year ended June 30, 2024 as compared to nil for fiscal year ended June 30, 2023, which was primarily due to the acquisition of controlling interests in AIX.

●

Loss from operations for our wealth management segment was RMB48.1 million for fiscal year ended June 30, 2024 as compared to RMB58.8 million for fiscal year ended June 30, 2023, which was primarily due to the decrease of revenue and offset by decrease of operating expenses saving from personnel optimization.

116

Other Income

Loss from fair value change. Loss from fair value change was RMB73.8 million (US$10.2 million), primarily represents: (i) an unrealized holding loss of RMB82.5 million (US$11.4 million) in fiscal year ended June 30, 2024, reflecting a change in the fair value of the Company’s equity interests holding in Cheche Group Inc; in which we own approximately 3.2%, which is partially offset by an unrealized income of RMB8.8 million (US$1.2 million) representing a change in the fair value of the contingent consideration in regard to AIX’s business combinations in the first quarter of 2023.

Investment Income. Investment income represents income received from short-term investments. Our investment income increased by 65.0% from RMB13.6 million for fiscal year ended June 30, 2023 to RMB22.4 million (US$3.1 million) in fiscal year ended June 30, 2024.

Net Interest Income. Our net interest income increased by 93.4% from RMB8.6 million for fiscal year ended June 30, 2023 to RMB16.6 million (US$2.3 million) for fiscal year ended June 30, 2024 primarily due to the increase in term loans of RMB774.1 million for fiscal year ended June30, 2024 compared from nil for fiscal year ended June30, 2023.

Income Tax Expense

Our income tax expense increased by 50.8% from RMB8.6 million for fiscal year ended June 30, 2023 to RMB12.9 million (US$1.8 million) for fiscal year ended June 30, 2024.

Net Loss Attributable to the Non-controlling Interests

The net loss attributable to the non-controlling interests was RMB222.4 million (US$30.6 million) in fiscal year ended June 30, 2024, as compared to nil for the fiscal year ended June 30, 2023, primarily due to the acquisition of controlling interests in AIX.

Net Loss Attributable to the Company’s Shareholders

As a result of the foregoing factors, our net loss attributable to our shareholders increased by 564.7% from RMB43.6 million for fiscal year ended June 30, 2023 to RMB289.7 million (US$39.9 million) in fiscal year ended June 30, 2024.

Supplemental pro forma information

The following supplemental pro forma information is extracted from Note 3 of our consolidated financial statements which is prepared based on the requirement of ASC 805 for business combinations that occurred in the current reporting period. The pro formation information is prepared as if the business acquisition occurred on July 1, 2022. For the business acquisition, depreciation and amortization have been included in the calculation of the pro forma information provided below, based on the results of purchase price allocation. Depreciation is computed on the straight-line method over the estimated remaining economic lives of the assets, ranging from three to thirty-six years. Amortization is computed on the straight-line method over the estimated useful lives of the assets ranging from three to twenty years.

This supplemental pro forma information is presented for information purposes only. It is based on historical information and does not purport to represent the actual results that may have occurred had the Company consummated the acquisitions on July 1, 2022, nor is it necessarily indicative of future results of operations of the consolidated enterprises:

	Year Ended June 30,
	2023		2024
	RMB		RMB
Total net revenues		3,452,208		2,419,634
Income (loss) from operations		116,065		(453,560	)
Net income (loss)		131,771		(397,718	)
Net income (loss) attributable to the Company’s shareholders		11,784		(250,192	)

Our pro forma net revenues decreased by RMB1,032.6million, or 29.9%, from RMB3,452.2 million for the fiscal year ended June 30, 2023 to RMB2,419.6 million (US$333.0 million) for fiscal year ended June 30, 2024, primarily due to the decrease of net revenues derived from insurance agency services segment from RMB2,938.2 million for the fiscal year ended June 30, 2023 to RMB1,908.0 million for the fiscal year ended June 30, 2024, offset by the increase of net revenues derived from the claims adjusting segment from RMB414.3 million for the fiscal year ended June 30, 2023 to RMB452.4 million for the fiscal year ended June 30, 2024.

117

The decrease in pro forma net revenues derived from insurance agency segment was mainly due to i) the decrease in life insurance commission rates paid to us by insurance companies in anticipation of a forthcoming regulatory requirement to align the actual expenses with the cost structure and commission ceiling as filed, which in turn adversely impacted the sales volume of our new life insurance business as sales agents became less incentivized to sell life insurance products through us and ii) the business fluctuation caused by the pricing rate change to life insurance products from 3.5% to 3% effective on August 1, 2023 which caused a spike in new business sales in June and July 2023 and then followed by a significant drop in sales since August 2023. Total gross written premiums increased from RMB15.4 billion for the fiscal year ended June 30, 2023 to RMB16.4 billion for the fiscal year ended June 30, 2024, of which first year premiums decreased from RMB4.2 billion to RMB2.7 billion while renewal premiums grew from RMB11.2 billion to RMB13.7 billion.

The increase in pro forma net revenues derived from claims adjusting segment was mainly due to increase in cases of auto insurance-related claims adjustment commissioned by insurance companies, primarily because more insurance companies chose to outsource claims adjusting functions to professional service providers like us to cut fixed costs.

Our pro forma loss from operations was RMB453.6 million (US$62.4 million) for fiscal year ended June 30, 2024, as compared with an income from operations of RMB116.1 million for the fiscal year ended June 30, 2023, mainly due to the decrease in net revenues derived from insurance agency segment and an impairment loss on goodwill of RMB426.4 million reflecting the decrease in the fair value of AIX since the acquisition, partially offset by cost-savings from personnel optimization and decrease number of sales outlets in the insurance agency segment.

As a result of the foregoing factors, our pro forma net loss was RMB397.7 million (US$54.7 million) for fiscal year ended June 30, 2024 as compared with net income from operations of RMB131.7 million for fiscal year ended June 30, 2023.

As a result of the foregoing factors, our pro forma net loss attributable to the Company’s shareholders was RMB250.2 million (US$34.4 million) for fiscal year ended June 30, 2024 as compared with net income attributable to the Company’s shareholders of RMB11.8 million for fiscal year ended June 30, 2023.

Revision to Previously Issued Financial Statements

In 2024, we identified an error related to recording funds it held temporarily for the investors as its asset, yet it did not have control over with. We assessed the materiality of this error individually and in the aggregate with other identified errors to prior periods’ consolidated financial statements in accordance with SEC Staff Accounting Bulletin (“SAB”) No. 99 “Materiality” codified in ASC 250 “Accounting Changes and Error Corrections.” We concluded that the errors including two classification errors were immaterial to our previously issued financial statements and restatement of previously filed financial statements is not required. However, we determined it was appropriate to correct the prior periods errors by revising the financial statement line item amounts previously disclosed in SEC filings in order to achieve comparability in the consolidated financial statements. For details, see Note 2(ad) of the financial statements filed as part of this report.

118

B. Liquidity and Capital Resources

Our principal sources of liquidity have been cash generated from our operating activities. As of June 30, 2024, we had RMB 295.7 million (US$40.7 million) in cash and cash equivalents, and RMB583.9 million (US$80.4 million) in short-term investments. Our cash and cash equivalents consist of cash on hand and bank deposits and our short-term investments consisting of short-term, highly liquid investments that are readily convertible to known amounts of cash, and have an insignificant risk of changes in value related to changes in interest rates. Our principal uses of cash have been to maintenance and development of online and digital platforms including Du Xiaobao, FA App, Baoxian.com, eHuzhu, Fanhua RONS DOP, Fanhua RONS Guanjia, Policy Escrow System and AIX WeCom, investment to digitalize our mid-office and back-office functions, establishment of new branches and sales outlets, working capital requirements, automobiles and office equipment purchases, office renovation and rental deposits.

We expect to require cash to fund our ongoing business needs, particularly acquisitions of complementary business including quality insurance intermediary companies which we expect to fund in stock payment and cash to a lesser degree, further expansion of our distribution and service network in China with the focus on developing a more professional sales force in major cities, the development of digital capabilities and expand our market presence in international markets.

We believe that our current cash and cash equivalents and anticipated cash flow from operations will be sufficient to meet our anticipated cash needs, including our cash needs for working capital and capital expenditures, for at least the next 12 months. We may, however, require additional cash due to changing business conditions or other future developments, including any investments or acquisitions we may decide to pursue. If our existing cash is insufficient to meet our requirements, we may seek to sell additional equity securities, debt securities or borrow from lending institutions. Financing may be unavailable in the amounts we need or on terms acceptable to us, if at all. The sale of additional equity securities, including convertible debt securities, would dilute our earnings per share. The incurrence of debt would divert cash for working capital and capital expenditures to service debt obligations and could result in operating and financial covenants that restrict our operations and our ability to pay dividends to our shareholders. If we are unable to obtain additional equity or debt financing as required, our business operations and prospects may suffer.

Although we consolidate the results of the VIEs, we only have access to cash balances or future earnings of the VIEs through our contractual arrangements with the VIE. See “Item 3. Key Information — D. Risk Factors — Risks Related to Our Corporate Structure — We rely on contractual arrangements with the VIEs and their nominee shareholders for a portion of our China operations, which may not be as effective as ownership in directing operational activities of the VIEs.” For restrictions and limitations on liquidity and capital resources as a result of our corporate structure, see “— Holding Company Structure” below.

As a Cayman exempted and offshore holding company, we are permitted under PRC laws and regulations to provide funding to our wholly foreign-owned subsidiary in China only through loans or capital contributions, subject to the approval of government authorities and limits on the amount of capital contributions and loans. In addition, our wholly foreign-owned subsidiary in China may provide Renminbi funding to our consolidated VIE only through entrusted loans. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of conversion of foreign currencies into Renminbi may delay or prevent us from using any offshore cash we may have to make loans to our PRC subsidiaries and the VIE or to make additional capital contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.”

	For the fiscal year ended June 30,
	2022			2023			2024
	RMB			RMB			RMB			US$
	(in thousands)
Net cash (used in) generated from operating activities		(56,155	)		(25,363	)		57,734			7,945
Net cash (used in) generated from investing activities		(10,596	)		(4,986	)		234,160			32,221
Net cash used in financing activities		-			-			(86,841	)		(11,948	)
Net (decrease) increase in cash and cash equivalents, and restricted cash		(66,751	)		(30,349	)		205,053			28,218
Cash and cash equivalents and restricted cash at beginning of year		260,593			194,259			164,470			22,632
Effect of exchange rate changes on cash and cash equivalents		417			560			873			118
Cash and cash equivalents and restricted cash at end of the year		194,259			164,470			370,396			50,968

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Operating Activities

Net cash generated from operating activities for the fiscal year ended June 30, 2024 was RMB57.7 million (US$7.9 million). This reflected the net loss of RMB512.1 million (US$70.5 million), as adjusted for non-cash and non-operating items, primarily including (i) depreciation of expense of RMB8.4 million (US$1.2 million); (ii) amortization of intangible assets of RMB50.8 million (US$7.0 million); (iii) non-cash operating lease expense of RMB37.1 million (US$5.1 million); (iv) share-based compensation expenses of RMB23.3 million (US$3.2 million); (v) impairment loss on goodwill of RMB426.4 million (US$58.7 million), reflecting the change in fair value of AIX since the acquisition of AIX in December 2023; and (vi) change in fair value of equity investments and contingent consideration of RMB73.8 million (US$10.2 million). The significant changes in such non-cash and non-operating items were primarily due to amortization of intangible assets and impairment loss on goodwill due to the acquisition of AIX. Operating cash flows were negatively affected by a RMB49.8 million net change in our operating assets and liabilities, primarily from the effects of (i) a decrease of RMB61.6 million (US$8.5 million) in accounts payable and accrued commissions, (ii) a decrease of RMB38.1 million (US$5.2 million) in other payables and accrued expenses; (iii) an decrease of RMB36.5 million (US$5.0 million) in lease liability, (iii) a decrease of RMB67.4 million (US$9.3 million) in accounts receivable and contracts assets and (iv) a decrease of RMB19.9 million (US$2.7 million) in other non-current assets. The net change in our operating assets and liabilities was primarily due to the payment of annual bonus to AIX’s employees and other accrued expenses incurred by AIX.

Net cash used in operating activities for the fiscal year ended June 30, 2023 was RMB25.4 million. This reflected the net loss of RMB43.6 million, as adjusted for non-cash and non-operating items, primarily including (i) depreciation expense of RMB3.5 million; (ii) non-cash operating lease expense of RMB8.8 million; (iii) deferred taxes of RMB15.6 million; and (iv) net gain on disposal of subsidiaries of RMB13.7 million. This amount was further adjusted by negative changes in working capital primarily including (i) an increase of RMB8.2 million in deferred tax assets generated from net loss; and (ii) a decrease of RMB7.7 million in lease liability, primarily due to the early termination of rents. The negative changes were partially offset by (i) a decrease of RMB21.9 million in accounts receivable and contract assets, primarily due to a decrease in the commission receivable of privately raised fund products; and (ii) a decrease of RMB5.4 million in other receivables and current assets, primarily due to a decrease in rental deposit.

Investing Activities

Net cash generated from investing activities for the fiscal year ended June 30, 2024 was RMB234.2 million (US$32.2 million), primarily attributable to cash used to purchase short-term investment products of RMB1.7 billion (US$240.3 million), cash lent to third parties of RMB838.8 million(US$115.4 million), purchase of property, plant and equipment of RMB4.3 million (US$0.6 million) and disposal of subsidiaries, net of cash disposed of RMB12.8 million(US$1.8 million), offset by proceeds from disposal of short-term investments of RMB2.1 billion (US$287.3 million) that matured, repayment of loan receivables from third parties of RMB145.5 million (US$20.0 million) and cash acquired on non-cash acquisitions of RMB601.9 million(US$82.8 million).

Net cash used in investing activities for the fiscal year ended June 30, 2023 was RMB5.0 million, which was primarily attributable to (i) proceeds from disposal of a subsidiary of RMB7.9 million, and (ii) proceeds from disposal of short-term investments of RMB4.8 million.

Financing Activities

Net cash used in financing activities was RMB86.8 million (US$11.9 million) for the fiscal year ended June 30, 2024, attributable to repayment of bank borrowings and other borrowings of RMB164.3 million(US$22.6 million), dividend distributed to non-controlling interest of RMB29.5 million(US$4.1 million), acquisition of non-controlling interests in subsidiaries of RMB26.4 million(US$3.6 million), and repurchase of ordinary shares of AIX from open market of RMB10.0 million(US$1.4 million), partially offset by proceeds from bank borrowings of RMB98.4 million(US$13.5 million) and proceeds of issuance of ordinary shares upon private placement of RMB45.0 million(US$6.2 million).

We did not have any cash inflow or outflow due to financing activities for the fiscal year ended June 30, 2023.

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Capital Expenditures

We made capital expenditures of RMB1.9 million and RMB4.3 million (US$0.6 million) for the fiscal years ended June 30, 2023 and 2024, respectively. These expenditures were primarily related to leasehold improvement and our purchase of office equipment.

Holding Company Structure

HPH is a holding company with no material operations of its own. We conduct our operations primarily through our subsidiaries in which we hold equity interest and the VIEs through contractual arrangements in China. As a result, our ability to pay dividends depends upon dividends paid by our wholly owned subsidiaries. If our wholly-owned 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 wholly owned subsidiary in China is permitted to pay dividends to us only out of its retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Under PRC law, each of our wholly owned subsidiaries and the VIEs in China is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve funds reach 50% of its registered capital. In addition, our wholly foreign-owned subsidiary in China may allocate a portion of its after-tax profits based on PRC accounting standards to enterprise expansion funds and staff bonus and welfare funds at its discretion, and each of the VIEs may allocate a portion of its after-tax profits based on PRC accounting standards to a discretionary surplus fund at its discretion. Although the statutory reserves can be used, among other ways, to increase the registered capital and eliminate future losses in excess of retained earnings of the respective companies, the reserve funds are not distributable as cash dividends. Remittance of dividends by a wholly foreign-owned company out of China is subject to examination by the banks designated by the SAFE. We currently plan to reinvest all earnings from our wholly-owned subsidiary in China to its business development and do not plan to request dividend distributions from it.

Off-Balance Sheet Arrangements

As of June 30, 2024, we did not enter any off-balance sheet arrangements such as any financial guarantees or other commitments to guarantee the payment obligations of any third-parties, which in the opinion of management are likely to have, a current or future material effect on our financial condition or results of operation. In addition, we have not entered into any derivative contracts that are indexed to our own shares and classified as equity, or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. Moreover, we do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.

C. Research and Development, Intellectual Property

Research and Development

Not applicable.

Intellectual Property

See “Item 4. Information on our group — B. Business Overview — Intellectual Property”.

D. Trend Information

Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the fiscal year ended June 30, 2024 that are reasonably likely to have a material adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that are reasonably likely to cause the disclosed financial information to be not necessarily indicative of future operating results or financial conditions.

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E. Critical Accounting Estimates

We prepare financial statements in accordance with U.S. GAAP, which requires us to make judgments, estimates and assumptions that affect the reported amounts of our assets and liabilities and the disclosure of our contingent assets and liabilities at the end of each fiscal period, as well as the reported amounts of revenues and expenses during each fiscal period. We continually evaluate these judgments and estimates based on our own historical experience, knowledge and assessment of current business and other conditions, our expectations regarding the future based on available information and assumptions that we believe to be reasonable. This forms our basis for making judgments about matters that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, our actual results could differ from those estimates. Some of our accounting policies require a higher degree of judgment than others in their application.

The selection of critical accounting policies, the judgments and other uncertainties affecting the application of those policies and the sensitivity of reported results to changes in conditions and assumptions are factors that should be considered when reviewing our financial statements. The following descriptions of critical accounting estimates should be read in conjunction with our consolidated financial statements and other disclosures included in this annual report. For further information, see Note 2 to our consolidated financial statements in this annual report.

Revenue Recognition

Revenue is recognized when control of promised goods or services is transferred to our customers in an amount of consideration to which an entity expects to be entitled to in exchange for those goods or services.

We derive agency revenue by serving as a sales agent to distribute various life insurance and a wide range of non-life insurance products on behalf of the insurance companies by which we are entitled to receive initial commission from the insurance companies based on the premium paid by the policyholders for the related insurance policy sold. For life insurance agency, we are also entitled to subsequent renewal commission and compensation, and renewal performance bonus (collectively referred to as “renewal commissions”) which represent variable considerations and are contingent on future renewals of initial policies or we achieve our performance target as such life insurance products are long-term products.

When estimating the variable consideration, we use the expected value method based on accumulated historical data and experiences. We also consider constraints when determining the estimated variable consideration, which we refer to as “estimated constrained values”.

We perform ongoing evaluation of the appropriateness of the constraint applied, and consider the sufficiency of evidence that would suggest that the long-term expectation underlying the assumptions has changed. The estimated renewal commissions are contingent on future renewals of initial policies or achievement of certain performance targets. Given the material uncertainty around the subsequent renewal of the insurance policies, the estimated renewal commissions expected to be collected are recognized as revenue only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty is subsequently resolved. With the passage of time and accumulation of historical experiences and data, the judgment and assumptions are to be continuously re-evaluated and adjusted as needed when more information becomes available.

The following describes how we apply the expected value method and our key considerations and judgments under the expected value method:

●

Determining portfolio of contracts: We set up portfolios segregated by renewal term of the underlying policies which we refer to as a “batch” under the expected value method, by grouping long-term life insurance policies into batches of policies with various renewal terms.

●

Accumulating historical data and experiences: We believe that accumulating sufficient renewal years’ data for new products sold as the basis for the estimate is necessary for making a reasonable estimate that is representative and comparable to those policies sold in subsequent periods. On-going accumulation of historical renewal data and experiences represents the growth of our confidence for making a reasonable estimate without a significant subsequent reversal in revenue recognized.

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●

Estimating variability for each variable renewal consideration: For each of the variable renewal commissions, there is only one underlying variability (i.e., the renewal rates for each of the subsequent years of the policy period which is contingent on policyholders’ renewal). Given the payment term for each of the renewal commissions is different, we thus separately estimate the future renewal rates of batches of policies based on accumulated historical renewal information.

●

Considering constraints on estimates: In estimating the variable consideration, we evaluated the following factors that could increase the likelihood or magnitude of a reversal:

we have limited history of selling our current life insurance products and co-operating with our current customers, such that our confidence for making a reasonable estimate of future renewal(s) of long-term life insurance policies is limited;

the occurrence of renewal is outside our control and the estimate of renewal rates is complex and requires significant judgment;

the estimate of variable consideration associated with policy renewals has a broad range of possible consideration amounts; and

the contingency is not expected to be resolved for a long period of time

Along with the accumulation of historical renewal data and experiences, we re-evaluate the appropriateness of the constraint applied on an on-going basis and adjust the constraint accordingly when we observe more evidence that would suggest that the long-term expectation underlying the assumptions has changed. Accordingly, the constraint applied to existing business’s total estimated renewal commissions we expect to receive for all sold long-term life insurance products was 45% as of June 30, 2024. Considering the difference in historical product matrix and portfolio of renewal data, we apply different constraints in estimating the renewal commission revenues to its existing business and the newly acquired entities. Accordingly, the constraints applied to Zhongrong’s and Zhongji’s total estimated renewal commissions we expect to receive for all sold long-term life insurance products are 5% and 27%, respectively, as of June 30, 2024.

●

Ongoing reassessment of the estimated constrained values: We continue to reassess the estimated constrained values at the end of each reporting period on a quarterly basis, including continuing to review and evaluate the reasonableness of the applied assumptions by comparing the original estimated constrained values with the actual renewal commissions collected to monitor and determine whether any changes to the assumptions are needed.

Business Combinations

Business combinations are recorded using the acquisition method of accounting. We allocate the purchase consideration to the tangible assets acquired, liabilities assumed, and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, expected cash flows and discount rates.

Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. We use various techniques to determine fair value in such instances, including the income approach. Significant estimates used in determining fair value include, but are not limited to, cash flow projections, discount rate and useful lives. Allocation of purchase consideration to identifiable assets and liabilities affects our amortization expense, as acquired finite-lived intangible assets are amortized over the useful life, whereas any indefinite lived intangible assets, including goodwill, are not amortized. Changes in these estimates and assumptions could materially affect the determination of the asset’s fair value. See Note 3 of the Notes to the Consolidated Financial Statements for information regarding business combination.

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Goodwill Impairment Test

Goodwill represents the excess of costs over fair value of net assets of businesses acquired in a business combination. Goodwill is not amortized, but is tested for impairment at the reporting unit level at least on an annual basis at the balance sheet date or more frequently if certain indicators arise. The impairment test is performed as of year-end or if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount by comparing the fair value of a reporting unit with its carrying value.

The impairment review is highly judgmental and involves the use of significant estimates and assumptions. These estimates and assumptions have a significant impact on the amount of any impairment charge recorded. Estimates of fair value are primarily determined by using discounted cash flows. Discounted cash flows method is dependent upon assumptions of future sales trends, market conditions and cash flows of each reporting unit over several years. Actual cash flows in the future may differ significantly from those previously forecasted. Other significant assumptions include growth rates, operating margins and the discount rates applicable to future cash flows. Based on this quantitative test in 2024, it was determined that the carrying amount of the insurance agency reporting unit exceeded its fair value and, therefore, the Company recorded an impairment loss on goodwill of RMB426 million for the year ended June 30, 2024.

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. Directors and Senior Management.

The following table sets forth information regarding our directors and executive officers as of the date of this annual report.

Name	Age	Position
Hang Suong Nguyen	39	Chairperson of the board
Hu Yinan	59	Chief Executive Officer and Vice-Chairman of the Board of Directors
Ren Yong	41	Director
Kong Youjie	60	Director
Zhai Lihong	55	Independent Director
Zhou Min	41	Independent Director
Li Yingying	41	Independent Director

Hang Suong Nguyen Ms. Nguyen has been our chairperson since September 2024. Since June 2023, Ms. Hang Suong Nguyen has served as the Vice President of Wealth Will Limited, overseeing operational strategies and driving the company’s capital deployment and growth in multiple emerging markets. Prior to that, from late 2018 until May 2023, she held the position of Sales Director at Trustwell Far East Pte. Ltd., where she was responsible for formulating and executing sales strategies, managing the sales team, analyzing market demands, maintaining customer relationships, and expanding business channels, making significant contributions to the company’s cross-border business. She obtained her Bachelor’s degree in International Business from Vietnam National University in 2008 and her Master’s degree in Business Administration from Hanoi University of Science and Technology in 2009.

Hu Yinan Mr. Hu has served as our chief executive officer and Vice Chairman of the Board since February 2024 and Director since August 2018. Mr. Hu was the chairman of the board of AIX Inc. (NASDAQ: CISG) from 1998 to 2017 and subsequently served as the director of this company from 2017 to 2021. From 1998 to October 2011, Mr. Hu served as the chief executive officer of AIX Inc. He was reappointed as the chairman of the board and the chief executive officer of AIX Inc. from December 2021 till now. From 1993 to 1998, Mr. Hu served as chairman of the board of directors of Guangdong Nanfeng Enterprises Co., Ltd., a company he co-founded that engaged in import and export, manufacturing of wooden doors and construction. From 1991 to 1995, Mr. Hu was an instructor of money and banking at Guangdong Institute for Managers in Finance and Trade. Mr. Hu received a bachelor’s degree and a master’s degree in economics from Southwestern University of Finance and Economics in China.

Ren Yong Mr. Ren has been our Director since September 2022. He served as our chief executive officer from September 2019 to February 2024 and as chairman of the Board from September 2022 to February 2024. Mr. Ren has over 10 years of experience in corporate management. Prior to joining us, Mr. Ren served as the vice president of Fanhua Insurance Sales Services Group Company Limited from 2017 to 2019, and successively served as financial manager, vice general manager, and general manager at a branch office in this company from 2006 to 2017. Mr. Ren received his bachelor’s degree in accounting from Southwestern University of Finance and Economics in 2005 and received his master’s degree in finance from Shandong University in 2011.

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Kong Youjie Mr. Kong has been our Director since October 2022. He served as our co-chairman of the Board from October 2022 to February 2024. He has more than 30 years of working experience in the financial industry in China. Prior to joining us, Mr. Kong worked at the People’s Bank of China and the China Insurance Regulatory Commission, as well as multiple security firms, fund management companies and insurance companies. Since 2005, he has successively served as vice general manager, general manager, director, or chairman of the board in several well-known financial institutions. He obtained a doctorate degree in finance from Renmin University of China in 2005.

Zhai Lihong Dr. Zhai has been our independent director since March 2020. Prior to joining our group, Dr. Zhai has more than 30 years of experiences in the financial industry, including experiences as a lecturer in finance at Southwestern University of Finance and Economics and as the director of a well-known trust and financing research institute. In addition, Dr. Zhai has extensive experience in corporate management, and he has also held multiple senior management positions, including being an independent director and supervisor, in several banks and corporations. Dr. Zhai received his bachelor’s degree in finance from Shanxi University of Finance and Economics in 1991 and his master and doctor degrees in finance from Southwestern University of Finance and Economics in 1999 and 2005, respectively.

Zhou Min has been an executive director of Tian Ruixiang Holdings Ltd (NASDAQ “TIRX”) since April 2024. Prior to this role, Ms. Zhou worked as an investment manager at Huobi Capital from September 2021 to September 2022, where she developing investment plans and agreements for participating in the negotiation and trading of investment projects, she has rich experience in supervising the operation and development of investment projects,. From September 2016 to June 2021, Ms. Zhou was the business development manager of Delta Insurance Brokerage Co., Ltd. Ms. Zhou has extensive experience in ensuring compliance with securities laws and regulations, protecting shareholders’ interests, as well as participating in the formulation of company strategy and supervising management implementation to promote the company’s long-term development and enhance shareholder value. Ms Zhou graduated from Hunan University with a bachelor’s degree in mechanical automation.

Li Yingying has served as the OEM Cotton Product Director for Qinshu (Shanghai) Trading Co., Ltd since 2022. From July 2021 to October 2022, Ms. Li served as the General Manager of the Product Planning Department at Shanghai Metersbonwe Fashion Co., Ltd., where she had extensive experience in leading the planning team to collect, sort, analyze fashion trends, and develop product strategies based on brand positioning and annual business goals. She also had experience in preparing planning proposals, themes, and quarterly development timetables. From October 2017 to June 2021, Ms. Li served as the Manager of the Product Planning Department at E-Land Group. She had extensive experience in leading the planning, design, and production teams in conducting product sketch review, sample review at selection meetings, and pricing work to ensure product completion. Ms. Li graduated from Donghua University with a Master’s degree in Textile Engineering.

B. Compensation

Our board of directors has not adopted or established a formal policy or procedure for determining the amount of compensation paid to our executive officers. Our board of directors determines the compensation to be paid to our executive officers based on our financial and operating performance and prospects, and contributions made by the officers to our success. Each of our named executive officers are measured by a series of performance criteria by the board of directors on a yearly basis. Such criteria are set forth based on certain objective parameters such as job characteristics, required professionalism, management skills, interpersonal skills, related experience, personal performance and overall corporate performance. The board of directors will make an independent evaluation of appropriate compensation to key employees, with input from management. The board of directors has oversight of executive compensation plans, policies and programs.

For the fiscal year ended June 30, 2024, we paid an aggregate of approximately RMB3.0 million (US$0.4 million) in cash to our executive officers and an aggregate of approximately RMB0.7 million in cash (US$90,000) to our independent directors. We have not set aside or accrued any amounts to provide pension, retirement or other similar benefits to our executive officers and directors. Our PRC subsidiaries and the VIEs are required by law to make contributions equal to certain percentages of each employee’s salary for his or her pension insurance, medical insurance, unemployment insurance, maternity insurance, on-the-job injury insurance, and housing fund plans through a PRC government-mandated defined contribution plan.

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Share Incentives

2018 Share Incentive Plan

Under the 2018 Share Incentive Plan, or the 2018 Plan, the maximum aggregate number of ordinary shares available for issuance will be 16,806,720 ordinary shares (“2018 Share Incentive Plan”).

On February 20, 2024, our board of directors approved the grant of share options to certain directors, executive officers, employees and top agents of the Company and AIX to purchase 6,011,608 ADSs, equal to 9,017,413 ordinary shares of the Company, as a supplement of salary and benefit packages pursuant to the 2018 Share Incentive Plan (the “2018 Option 1”). Pursuant to the share incentive program, the exercise price of these options is US$0.001 per ADS, equating to approximately US$0.0007 per ordinary share. The options are scheduled to vest over a one-year period starting from March 1, 2025, subject to the achievement of certain key performance indicators by the option holders and their continued service with the Company.

2024 Share Incentive Plan

On February 20, 2024, our board of directors adopted a share incentive plan under which we have reserved 111,165,518 ordinary shares for issuance, which was approximately 30% of our outstanding ordinary shares as of December 31, 2023 (“2024 Share Incentive Plan”). As of September 30, 2024, no share award has been granted under the 2024 Share Incentive Plan.

The following paragraphs describe the principal terms of the 2018 Share Incentive Plan and 2024 Share Incentive Plan:

Type of Awards. The plans permit the awards of options, restricted shares, restricted share units and other share awards that relate to our ordinary shares.

Plan Administration. Our board of directors or a committee of one or more members of the board of directors will administer the plans, provided that grants to directors and executive officers of our company will be made by the full board. The committee or the board of directors, as applicable, will determine the participants to receive awards, the type and number of awards to be granted to each participant, and the terms and conditions of each grant. We refer to our board of directors or a designated committee plan administrator.

Award Agreement. Awards granted under the plans are evidenced by an award agreement that sets forth the terms, conditions and limitations for each award, which may include the term of the award, vesting schedule, the provisions applicable in the event that the grantee’s employment or service terminates, and our authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind the award.

Eligibility. We may grant awards to our employees, consultants and directors, as determined and approved by the plan administrators.

Exercise of Options. Subject to applicable laws, the plan administrator determines the exercise price for each award, which is stated in the relevant award agreement. Options that are vested and exercisable will terminate if they are not exercised prior to the time as the plan administrator determines at the time of grant. However, the maximum exercisable term is ten years from the date of grant.

Transfer Restrictions. Awards may not be transferred in any manner by the participant other than in accordance with the exceptions provided in the plans or the relevant award agreement or otherwise determined by the plan administrator, such as transfers by will or the laws of descent and distribution.

Termination and Amendment of the Plans. Our board of directors has the authority to terminate, amend, suspend or modify the plans in accordance with our articles of association and subject to applicable laws. However, without the prior written consent of the participant, no such action may adversely affect in any material way any award previously granted pursuant to the plans.

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As of June 30, 2024, options to purchase 1,479,453 ordinary shares of the Company were outstanding.

The following table summarizes, as of June 30, 2024, the outstanding options that we granted to our directors, executive officers and other individuals as a group.

Name

Options

Outstanding

Exercise Price

(Per Ordinary

Share)(US$)

Grant Date

Expiration
Date

Ren Yong

37,500

0.0007

February 20, 2024

March 31, 2028

Kong Youjie

37,500

0.0007

February 20, 2024

March 31, 2028

Yang Yuanfen

35,000

0.0007

February 20, 2024

March 31, 2028

Other individuals as a group

1,369,453

0.0007

February 20, 2024

March 31, 2028

AIX Share Incentive Plans

AIX 2022 Share Incentive Plan

On August 12, 2022, AIX’s board of directors adopted a share incentive plan under which it has reserved 161,143,768 ordinary shares for issuance, which was approximately 15% of its outstanding ordinary shares as of June 30, 2022 (“AIX 2022 Share Incentive Plan”).

Simultaneously, its board of directors approved the grant of options to purchase an aggregate of 4,000,000 ordinary shares of AIX to its independent directors pursuant to the AIX 2022 Share Incentive Plan (the “AIX 2022 Option 1”). The exercise price of these options is US$0.2305 per ordinary share, equal to the closing price of its ADS on the Nasdaq Global Select Market one day prior to the grant date (after adjusting for the 20 ordinary shares to 1 ADS ratio). The options are scheduled to vest over a four-year period starting from August 31, 2023, subject to their continued service with us. Upon resignation of one of its independent directors, options granted to such independent directors to purchased 800,000 ordinary shares were immediately exercisable and vested. As of June 30, 2024, options to purchase 1,760,000 ordinary shares of AIX related to AIX 2022 Option 1 have been vested.

On February 6, 2023, its board of directors approved the grant of options to purchase an aggregate of 13,680,000 AIX’s ordinary shares to certain top agents who have met the requirements for Million Dollar Round Table Membership (“MDRT” Agents), pursuant to the AIX 2022 Share Incentive Plan (the “AIX 2022 Option 2”). The exercise price of these options is US$0.05 per ordinary share. The options are scheduled to vest over a two-year period starting from March 31, 2024, subject to the achievement of certain key performance indicators by the option holders and their continued service with AIX. As of June 30, 2024, options to purchase 4,718,580 ordinary shares of AIX related to AIX 2022 Option 2 have been vested.

AIX Restricted Share Units

On August 16, 2023, the board of directors of AIX approved the grant of 536,990 restricted share units in the form of ADS (“RSUs”) of AIX to one of its executive officers. The RSUs are scheduled to vest over a five-year period starting from June 30, 2024, subject to his continued service with AIX.

AIX 2024 Share Incentive Plan

On February 20, 2024, AIX’s board of directors adopted a share incentive plan under which it has reserved 113,423,618 of its ordinary shares for issuance, which was approximately 10% of its outstanding ordinary shares as of December 31, 2023 (“AIX 2024 Share Incentive Plan”).

Pursuant to AIX 2024 Share Incentive Plan, two option grants were approved by AIX’s board of directors as follows:

On April 16, 2024, share options were granted to certain “MDRT” Agents to purchase an aggregate of 18,088,000 AIX’s ordinary shares with an exercise price of US$0.11809 per ordinary share, and to certain new agents to purchase 800,000 AIX’s ordinary shares, with an exercise price of US$0.05 per ordinary share, respectively. The options are scheduled to vest over a two-year period starting from March 31, 2025, subject to the achievement of certain key performance indicators by the option holders and their continued service with AIX.

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On June 25, 2024, share options were granted to certain sales team leaders to purchase an aggregate of 4,930,000 AIX’s ordinary shares. The exercise price of these options is US$0.05 per ordinary share. The options are scheduled to vest over a two-year period starting from March 31, 2025, subject to the achievement of certain key performance indicators by the option holders and their continued service with AIX.

As of June 30, 2024, options to purchase 29,356,900 ordinary shares of AIX were outstanding and an aggregate of 536,990 RSUs in ADSs of AIX have been issued and outstanding.

See “Item 6. Directors, Senior Management and Employees—B. Compensation—Share Incentives” disclosed in AIX’s annual report on Form 20-F filed with the Commission on April 29, 2024 for more details of AIX’s share incentives.

C. Board Practices

Board Committees

We have established three committees under the board of directors: the audit committee, the compensation committee, the corporate governance and nominating committee and have adopted a charter for each of the committees. Each committee’s members and functions are described below.

Audit Committee. Our audit committee consists of three independent directors, Dr. Zhai Lihong and Ms. Zhou Min and Ms. Li Yingying, and is chaired by Dr. Zhai Lihong. We have determined that these three independent directors satisfy the independence requirements of Rule 5605(a)(2) of the Listing Rules of the NASDAQ Stock Market and the independence standards under Rule 10A-3 under the Securities Exchange Act of 1934, as amended. We have determined that Dr. Zhai Lihong qualify as “audit committee financial experts” within the meaning of Item 407(d) of Regulation S-K under the Securities Act of 1933, as amended. The audit committee oversees our accounting and financial reporting processes and the audits of the financial statements of our group. The audit committee is responsible for, among other things:

●

appointing the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by the independent auditors;

●

reviewing with the independent auditors any audit problems or difficulties and management’s response;

●

discussing the annual audited financial statements with management and the independent auditors;

●

reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any steps taken to monitor and control major financial risk exposures;

●

reviewing and approving all proposed related party transactions;

●

meeting separately and periodically with management and the independent auditors; and

●

monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance.

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Compensation Committee. Our compensation committee consists of Ms. Li Yingying, Dr. Zhai Lihong and Ms. Zhou Min, and is chaired by Ms. Li Yingying. We have determined that these three independent directors satisfy the independence requirements of Rule 5605(a)(2) of the Listing Rules of the NASDAQ Stock Market and the independence standards under Rule 10A-3 under the Securities Exchange Act of 1934, as amended. Our compensation committee assists the board of directors in reviewing and approving the compensation structure of our directors and executive officers, including all forms of compensation to be provided to our directors and executive officers. Our chief executive officer may not be present at any committee meeting during which his compensation is deliberated. The compensation committee is responsible for, among other things:

●

reviewing and recommending to the board with respect to the total compensation package for our chief executive officer;

●

approving and overseeing the total compensation package for our executives other than the chief executive officer;

●

reviewing and making recommendations to the board with respect to the compensation of our directors; and

●

reviewing periodically and approving any long-term incentive compensation or equity plans, programs or similar arrangements, annual bonuses, employee pension and welfare benefit plans.

Corporate Governance and Nominating Committee. Our corporate governance and nominating committee consists of Ms. Zhou Min, Dr. Zhai Lihong and Ms. Li Yingying, and is chaired by Ms. Zhou Min. We have determined that these three independent directors satisfy the independence requirements of Rule 5605(a)(2) of the Listing Rules of the NASDAQ Stock Market and the independence standards under Rule 10A-3 under the Securities Exchange Act of 1934, as amended. The corporate governance and nominating committee assists our board of directors in identifying individuals qualified to become our directors and in determining the composition of the board and its committees. The corporate governance and nominating committee is responsible for, among other things:

●

identifying and recommending to the board nominees for election or re-election to the board, or for appointment to fill any vacancy;

●

reviewing annually with the board the current composition of the board in light of the characteristics of independence, skills, experience and availability of service to us;

●

identifying and recommending to the board the names of directors to serve as members of the audit committee and the compensation committee, as well as the corporate governance and nominating committee itself;

●

advising the board periodically with respect to significant developments in the law and practice of corporate governance, as well as our compliance with applicable laws and regulations, and making recommendations to the board on all matters of corporate governance and on any corrective action to be taken; and

●

monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance.

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Duties of Directors

Under Cayman Islands law, our directors owe fiduciary duties to our company, including a duty to act honestly, and a duty to act in what they consider in good faith to be in our best interests. Our directors must also exercise their powers only for a proper purpose. Our directors also owe to our company a duty to act with skill and care. It was previously considered that a director need not exhibit in the performance of his duties a greater degree of skill than may reasonably be expected from a person of his knowledge and experience. However, English and Commonwealth courts have moved towards an objective standard with regard to the required skill and care and these authorities are likely to be followed in the Cayman Islands. In fulfilling their duty of care to our company, our directors must ensure compliance with our memorandum and articles of association, as amended and restated from time to time, and the rights vested thereunder in the holders of the shares. Our directors owe their fiduciary duties to our company and not to our company’s individual shareholders, and it is our company which has the right to seek damages if a duty owed by our directors is breached. In limited exceptional circumstances, a shareholder may have the right to seek damages in our name if a duty owed by our directors is breached.

Our board of directors has all the powers necessary for managing, and for directing and supervising, our business affairs.

The functions and powers of our board of directors include, among others:

●

convening shareholders’ annual general meetings and reporting its work to shareholders at such meetings;

●

declaring dividends and distributions;

●

appointing officers and determining the term of office of the officers;

●

exercising the borrowing powers of our company and mortgaging the property of our company; and

●

approving the transfer of shares in our company, including the registration of such shares in our share register.

Terms of Directors and Officers

Our officers are elected by and serve at the discretion of the board of directors. Our directors are not subject to a term of office and hold office until such time as they are removed from office by ordinary resolution of the shareholders or by the board. A director will be removed from office automatically if, among other things, the director (i) becomes bankrupt or makes any arrangement or composition with his creditors; (ii) is found by our company to be or becomes of unsound mind; or (iii) without special leave of absence from the Board, is absent from meetings of the Board for three consecutive meetings and the Board resolves that his office be vacated.

Board Diversity

The table below provides certain information regarding the composition of our board of directors, based on the self-identification of each board member.

Board Diversity Matrix (As of September 30, 2024)
Country of Principal Executive Offices:		China
Foreign Private Issuer		Yes
Disclosure Prohibited Under Home Country Law		No
Total Number of Director		8

Part I: Gender Identity

Female

Male

Non-Binary

Did not

Disclose

Gender

Directors

Part II: Demographic Background

Underrepresented Individual in Home Country Jurisdiction

LGBTQ+

Did Not Disclose Demographic Background

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D. Employees

The following table sets forth the breakdown of AIX’s employees by function as of June 30, 2024.

	Number of Employees		% of Total
Management		525		11.1
Administrative staff		1,410		29.9
Financial and accounting staff		173		3.7
Professional claims adjustors		2,448		51.9
Information technology staff		160		3.4
Risk management		-		-
Asset management		-		-
Total		4,716		100.0

The following table sets forth the breakdown of HPH’ employees excluding those of AIX’s by function as of June 30, 2024.

Functional area	Number of employees		Percentage of total
Investment advisory		114		49.6	%
Management and administrative		29		12.6	%
Technical department		59		25.7	%
Risk management		6		2.5	%
Asset management		22		9.6	%
Total		230		100.0	%

In accordance with PRC regulations, we participate in various employee social security plans that are organized by municipal and provincial governments, including pension, unemployment insurance, childbirth insurance, work-related injury insurance, medical insurance and housing insurance. We are required under PRC law to contribute to employee benefit plans at specified percentages of the salaries, bonuses and certain allowances of our employees, up to a maximum amount specified by local governments from time to time. We believe that we maintain good working relationships with our employees, and we have not experienced any major labor disputes.

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E. Share Ownership

See Item 7 below.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. Major Shareholders

The following tables set forth certain information with respect to the beneficial ownership of our ordinary shares as of September 30, 2024 and as adjusted to reflect the sale of the ordinary shares offered by us in our initial public offering, for:

●

each shareholder known by us to be the beneficial owner of more than 5% of our outstanding ordinary shares; and

●

each of our directors and executive officers;

As of September 30, 2024, we had 372,547,538 ordinary shares outstanding. Beneficial ownership is determined in accordance with the rules and regulations of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, we have included shares that the person has the right to acquire within 60 days of September 30, 2024, including through the exercise of any option, warrant or other right or the conversion of any other security. These shares, however, are not included in the computation of the percentage ownership of any other person.

	Shares beneficially owned
Name of beneficial owner	Ordinary Shares		Percentage
Directors and Executive Officers:
Hang Suong Nguyen	-		-
Hu Yinan ⁽²⁾	100,179,785		26.89%
Ren Yong		*		*
Kong Youjie		*		*
Zhai LihongZhai Lihong		-		-
Zhou Min		-		-
Li Yingying		-		-
Yang Yuanfen		*		*
All Directors and Executive Officers as a Group		101,054,932		27.13	%

Principal Shareholders:
Sea Synergy Limited ⁽³⁾		94,849,055		25.46	%
Yu Haifeng ⁽⁴⁾		37,032,000		9.94	%
Worldwide Success Group Limited ⁽⁴⁾		37,032,000		9.94	%
Ge Peng⁽⁵⁾		26,781,130		7.19	%
Green Ease Holdings Limited ⁽⁶⁾		24,281,130		6.52	%
Kingsford Resources Limited ⁽⁷⁾		19,626,050		5.27	%

*	Less than 1% of our total outstanding ordinary shares.

†	The business address of our directors and executive officers is c/o 61/F, Pearl River Tower, No. 15 West Zhujiang Road, Guangzhou, Guangdong 510623, People’s Republic of China.

(1)	Percentage of beneficial ownership of each director and executive officer is based on 372,547,538 ordinary shares outstanding as of September 30, 2024.

(2)

Includes (i) 94,849,055 ordinary shares of our company directly held by Sea Synergy Limited, or Sea Synergy, and (iii) 5,330,730 ordinary shares of our company held through Kingsford Resources Ltd., or Kingsford Resources. Sea Synergy is a holding company without any substantive operations. It is 100% held by Summer Day Limited which is 100% owned by Mr. Yinan Hu. Kingsford Resources is a shareholding vehicle that we established to hold shares of the Company on behalf of certain executive officers. Mr. Hu directly holds 27.1% of the equity interests of Kingsford Resources which directly holds 19,626,050 ordinary shares of the Company.

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(3)	Includes 94,849,055 ordinary shares of the Company directly held by Sea Synergy. The registered address of Sea Synergy is P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands.

(4)

Represents 37,032,000 ordinary shares held through Worldwide Success Group Limited. Worldwide Success Group Limited is a BVI business company incorporated with limited liability in the British Virgin Islands and is wholly owned by Mr. Yu Haifeng. The registered address of Worldwide Success Group Limited is OMC Chambers, Wickhams Cay 1, Road Town, Tortola, British Virgin Islands.

(5)

Represents (i) 24,281,130 ordinary shares of our Company directly held by Green Ease Holdings Limited, or Green Ease, and (iii) 2,500,000 ordinary shares of our Company held through Kingsford. Green Ease is a holding company without any substantive operations. It is 100% held by High Rank Investment Limited, which is 100% held by Mr. Peng Ge, director and chief financial officer of AIX. Pursuant to Section 13(d) of the Exchange Act and the rules promulgated thereunder, High Rank Investments and Mr. Ge may be deemed to beneficially own all of the Ordinary Shares of the Issuer held by High Rank. Mr. Ge beneficially holds 12.7% of the equity interests of Kingsford Resources.

(6)	Represents 19,626,050 ordinary shares of the Company directly held by Green Ease. The registered address of Green Ease is P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands.

(7)	Represents 19,626,050 ordinary shares of the Company directly held by Kingsford. The registered address of Kingsford is P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands.

To our knowledge, as of September 30, 2024, 42,528,804 ordinary shares were held by one record holder in the United States, representing approximately 11.4% of our total outstanding shares. The record holder is Deutsche Bank Trust Company Americas, the depositary of our ADS program. The number of beneficial owners of our ADSs in the United States is likely to be much larger than the number of record holders of our ordinary shares in the United States.

B. Related Party Transactions

Contractual Arrangements with the VIEs and Their Respective Shareholders

See “Item 4. Information on Our Group—C. Organizational Structure.”

Employment Agreements

We have entered employment agreements with each of our executive officers, which generally provide for a term of three years, provided that either party may terminate the agreement on 60 days’ notice before expiration of the initial term. Pursuant to the agreements, the executive officers are entitled to receive annual compensation and bonus approved by the board of the directors. The agreements also provide that the executive officers are to work a minimum of 40 hours per week.

Under applicable laws and regulations, there are some situations where we can terminate employment agreements without paying economic compensation, such as the employer maintains or raises the employment conditions but the employee refuses to accept the new employment agreement, when the employment agreement is scheduled to expire, the employee is retired in accordance with laws or the employee is dead, declared dead or has disappeared. For termination of employment in absence of legal cause we are obligated to pay the employee two-month’s salary for each year we have employed the employee. We are, however, permitted to terminate an employee for cause without paying economic compensation, such as when the employee has committed a crime, being proved unqualified for recruitment during the probation period, seriously violating the rules and regulations of the employer, or the employee’s actions or inactions have resulted in a material adverse effect to us.

Additionally, the employment agreements with executive officers provide for confidentiality and nondisclosure provisions, pursuant to which the executive officers are required to keep trade secrets confidential during the course of their employment and for a period of 36 months following the termination of their employment. Such employment agreements also contain a non-compete clause for a duration of 24 months following their employment, which prohibited the executive officers render services to or for, directly or indirectly, our competitors.

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Share Incentive Plan

See “Directors, Senior Management and Employees — B. Compensation —Share Incentive.”

Other Related Party Transactions

Please see Note 21 of the consolidated financial statements filed as part of this annual report.

C. Interests of experts and counsel.

Not applicable.

ITEM 8. FINANCIAL INFORMATION

A. Consolidated Statements and Other Financial Information.

We have appended consolidated financial statements to this annual report. See “Item 18. Financial Statements.”

Dividend Policy

Our board of directors has complete discretion as to whether to distribute dividends, subject to our articles of association and Cayman Islands law. In addition, our shareholders by ordinary resolution may declare a dividend, but no dividend may exceed the amount recommended by our board of directors. Under Cayman Islands law, a Cayman Islands company may pay a dividend on its shares out of either profit or share premium amount, provided that in no circumstances may a dividend be paid if this would result in the company being unable to pay its debts as they fall due in the ordinary course of business. Even if our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant. If we pay any dividends, our ADS holders will be paid to the same extent as holders of our ordinary shares, subject to the terms of the deposit agreement, including the fees and expenses payable thereunder. See “Item 12. Description of Securities Other than Equity Securities—D. American Depositary Shares.”

For undistributed profits earned from our China subsidiaries, we have both the intent and ability to permanently reinvest these undistributed profits.

B. Significant Changes

Except as disclosed elsewhere in this annual report, we have not experienced any significant changes since the date of our audited consolidated financial statements included in this annual report.

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ITEM 9. THE OFFER AND LISTING

A. Offer and Listing Details

See “C. Markets”

B. Plan of Distribution

Not applicable.

C. Markets

Our ADSs, of which every two represent three ordinary shares, are listed on the Nasdaq Global Market under the symbol “HPH.” From March 29, 2019 until March 13, 2024, our ticker symbol was “PUYI.”

D. Selling Shareholders

Not applicable.

E. Dilution

Not applicable.

F. Expenses of the Issue

Not applicable.

ITEM 10. ADDITIONAL INFORMATION

A. Share Capital

Not applicable.

B. Memorandum and Articles of Association

The following are summaries of material provisions of our fourth amended and restated memorandum and articles of association, as adopted by our shareholders by special resolution, insofar as they relate to the material terms of our ordinary shares.

Objects of Our Company. Under our fourth amended and restated memorandum and articles of association, the objects of our company are unrestricted and we have the full power and authority to carry out any object not prohibited by the law of the Cayman Islands.

Ordinary Shares. Our authorized share capital is divided into Class A ordinary shares and Class B ordinary shares, and their respective rights and restrictions are set out in our fourth amended and restated memorandum and articles of association. Our Class A ordinary shares and Class B ordinary shares are issued in registered form and are issued when registered in our register of members. We may not issue shares to bearer. Our shareholders who are non-residents of the Cayman Islands may freely hold and vote their shares. Each Class B ordinary share is convertible into one (1) fully paid Class A ordinary share at any time by the relevant holder. The right to convert shall be exercisable by the holder of the Class B ordinary share delivering a written notice to our company. In no event shall our Class A ordinary shares be convertible into Class B ordinary shares. Save for the voting rights and conversion rights set out in our fourth amended and restated memorandum and articles of association, our Class A ordinary shares and Class B ordinary shares shall rank pari passu and shall have the same rights, preferences, privileges and restrictions.

Fractional Shares. Under the terms of our fourth memorandum and articles of association, the directors of the Company may issue fractions of a share and, if so issued, a fraction of a share shall be subject to and carry the corresponding fraction of liabilities (whether with respect to nominal or par value, premium, contributions, calls or otherwise), limitations, preferences, privileges, qualifications, restrictions, rights (including, without prejudice to the generality of the foregoing, voting and participation rights) and other attributes of a whole share. If more than one fraction of a share is issued to or acquired by the same shareholder such fractions shall be accumulated.

Dividends. The holders of our shares are entitled to such dividends as may be declared by our board of directors. Under the laws of the Cayman Islands, our company may declare and pay a dividend out of either profit or share premium account, provided that in no circumstances may a dividend be paid if this would result in our company being unable to pay its debts as they fall due in the ordinary course of business.

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Voting rights. Holders of our shares have the right to receive notice of, attend, speak and vote at general meetings of our company. At any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands, unless a poll is (before or on the declaration of the result of the show of hands) demanded by the chairman. Subject to any rights and restrictions for the time being attached to any share, on a show of hands every shareholder present in person and every person representing a shareholder by proxy (or, if a corporation or other non-natural person, by its duly authorized representative or proxy) shall, at a general meeting or extraordinary general meeting of our company, each have one (1) vote for each Class A ordinary share and one hundred (100) votes for each Class B ordinary share and on a poll every shareholder and every person representing a shareholder by proxy (or, if a corporation or other non-natural person, by its duly authorized representative or proxy) shall have one (1) vote for each Class A ordinary share and one hundred (100) votes for each Class B ordinary share of which he or the Person represented by proxy is the holder.

A quorum required for a meeting of shareholders consists of one or more shareholders holding not less than an aggregate of one-third of all shares in issue of our company present in person or by proxy or, if a corporation or other non-natural person, by its duly authorized representative. Advance notice of at least ten calendar days is required for the convening of our annual general meeting and other shareholders meetings.

An ordinary resolution to be passed at a meeting by the shareholders requires the affirmative vote of a simple majority of the votes attaching to the ordinary shares cast at a meeting. A special resolution requires the affirmative vote of no less than two-thirds of the votes cast attaching to the outstanding shares at a meeting. Both ordinary resolutions and special resolutions may also be passed by a unanimous written resolution signed by all the shareholders of our company, as permitted by the Companies Act and our fourth amended and restated memorandum and articles of association. A special resolution will be required for important matters such as a change of name or making changes that will affect the rights, preferences, privileges or powers of the preferred shareholders.

General Meetings of Shareholders. As a Cayman Islands exempted company with limited liability, we are not obliged by the Companies Act to call shareholders’ annual general meetings. At our general meetings the report of our directors (if any) shall be presented.

Shareholders’ general meetings may be convened by the chairman or a majority of our board of directors. Advance notice of at least ten (10) calendar days is required for the convening of general meeting of our shareholders. A quorum required for any general meeting of shareholders consists of at least one shareholder present or by proxy, representing not less than an aggregate of one-third of all votes attaching to all of our shares in issue and entitled to vote.

The Companies Act provides shareholders with only limited rights to require a general meeting, and does not provide shareholders with any right to put any proposal before a general meeting. However, these rights may be provided in a company’s articles of association. Our fourth memorandum and articles of association provide that upon the requisition of shareholders representing in aggregate not less than one-third of the paid up capital of our company entitled to vote at general meetings, our board will convene an extraordinary general meeting and put the resolutions so requisitioned to a vote at such meeting. However, our fourth amended and restated memorandum and articles of association do not provide our shareholders with any right to put any proposals before annual general meetings or extraordinary general meetings not called by such shareholders.

Transfer of Ordinary Shares. Subject to the restrictions set out below, any of our shareholders may transfer all or any of his or her shares by an instrument of transfer in writing, and shall be executed by or on behalf of the transferor, and if the directors so require, signed by the transferee.

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Our board of directors may, in its absolute discretion, decline to register any transfer of any share which is not fully paid up or on which we have a lien. Our board of directors may also decline to register any transfer of any share unless:

●

the instrument of transfer is lodged with us, accompanied by the certificate for the shares to which it relates and such other evidence as our board of directors may reasonably require to show the right of the transferor to make the transfer;

●

the instrument of transfer is in respect of only one class of shares;

●

in the case of a transfer to joint holders, the number of joint holders to whom the share is to be transferred does not exceed four; and

●

a fee of such maximum sum as the NASDAQ Global Market may determine to be payable or such lesser sum as our directors may from time to time require is paid to us in respect thereof.

If our directors refuse to register a transfer they shall, within two months after the date on which the instrument of transfer was lodged, send to each of the transferor and the transferee notice of such refusal.

The registration of transfers may, after compliance with any notice required of the NASDAQ Stock Market, be suspended and the register closed at such times and for such periods as our board of directors may from time to time determine, provided, however, that the registration of transfers shall not be suspended nor the register closed for more than 30 days in any year as our board may determine.

Liquidation. On the winding up of our company by special resolution of our company our any other sanction required by the Companies Act, if the assets available for distribution amongst our shareholders shall be more than sufficient to repay the whole of the share capital at the commencement of the winding up, the surplus shall be distributed amongst our shareholders in proportion to the par value of the shares held by them at the commencement of the winding up, subject to a deduction from those shares in respect of which there are monies due, of all monies payable to our company for unpaid calls or otherwise. If our assets available for distribution are insufficient to repay all of our paid-up capital, the assets will be distributed so that, as nearly as may be, the losses are borne by our shareholders in proportion to the par value of the shares held by them.

Calls on Shares and Forfeiture of Shares. Our board of directors may from time to time make calls upon shareholders for any amounts unpaid on their shares in a notice served to such shareholders at least 14 days prior to the specified time of payment. The shares that have been called upon and remain unpaid are subject to forfeiture.

Redemption, Repurchase and Surrender of Shares. We may issue shares on terms that such shares are subject to redemption, at our option or at the option of the holders of these shares, on such terms and in such manner as may be determined by our board of directors, or by the shareholders by ordinary resolutions. Our company may also repurchase any of our shares on such terms and in such manner as have been approved by our board of directors or by an ordinary resolution of our shareholders. Under the Companies Act, the redemption or repurchase of any share may be paid out of our company’s profits or out of the proceeds of a new issue of shares made for the purpose of such redemption or repurchase, or out of capital (including share premium account and capital redemption reserve) if our company can, immediately following such payment, pay its debts as they fall due in the ordinary course of business. In addition, under the Companies Act no such share may be redeemed or repurchased (a) unless it is fully paid up, (b) if such redemption or repurchase would result in there being no shares outstanding or (c) if the company has commenced liquidation. In addition, our company may accept the surrender of any fully paid share for no consideration.

Variations of Rights of Shares. If at any time, our share capital is divided into different classes of shares, the rights attached to any class of shares, subject to any rights or restrictions for the time being attached to any class of shares, may only be materially varied or abrogated with the consent in writing of the holders of not less than two-thirds of the issued shares of that class or with the sanction of a resolution passed at a separate meeting of the holders of the shares of the class by a majority of two-thirds of the votes cast at such meeting. The rights conferred upon the holders of the shares of any class issued shall not, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be materially adversely varied by the creation or issue of further shares ranking pari passu with such existing class of shares.

Issuance of Additional Shares. Our fourth amended and restated memorandum of association authorizes our board of directors to issue additional shares from time to time as our board of directors shall determine, to the extent of available authorized but unissued shares.

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Our fourth amended and restated memorandum of association also authorizes our board of directors to establish from time to time one or more series of preference shares and to determine, with respect to any series of preference shares, the terms and rights of that series, including:

●

the designation of the series;

●

the number of shares of the series;

●

the dividend rights, dividend rates, conversion rights, voting rights; and

●

the rights and terms of redemption and liquidation preferences.

Our board of directors may issue preference shares without action by our shareholders to the extent authorized but unissued. Issuance of these shares may dilute the voting power of holders of ordinary shares.

Inspection of Books and Records. Holders of our ordinary shares will have no general right under Cayman Islands law to inspect or obtain copies of our list of shareholders or our corporate records. However, we will provide our shareholders with annual audited financial statements. See “Item 10. Additional Information — H. Documents on Display.”

Anti-Takeover Provisions. Some provisions of our third memorandum and articles of association may discourage, delay or prevent a change of control of our company or management that shareholders may consider favorable, including provisions that:

●

authorize our board of directors to issue preference shares in one or more series and to designate the price, rights, preferences, privileges and restrictions of such preference shares without any further vote or action by our shareholders; and

●

limit the ability of shareholders to requisition and convene general meetings of shareholders.

However, under Cayman Islands law, our directors may only exercise the rights and powers granted to them under our fourth memorandum and articles of association for a proper purpose and for what they believe in good faith to be in the best interests of our company.

Exempted Company. We are an exempted company with limited liability under the Companies Act. The Companies Act distinguishes between ordinary resident companies and exempted companies. Any company that is registered in the Cayman Islands but conducts business mainly outside of the Cayman Islands may apply to be registered as an exempted company. The requirements for an exempted company are essentially the same as for an ordinary company except that an exempted company:

●

does not have to file an annual return of its shareholders with the Registrar of Companies;

●

is not required to open its register of members for inspection;

●

does not have to hold an annual general meeting;

●

may obtain an undertaking against the imposition of any future taxation (such undertakings are usually given for 20 years in the first instance);

●

may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands;

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may register as an exempted limited duration company; and

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may register as a segregated portfolio company.

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“Limited liability” means that the liability of each shareholder is limited to the amount unpaid by the shareholder on the shares of the company (except in exceptional circumstances, such as involving fraud, the establishment of an agency relationship or an illegal or improper purpose or other circumstances in which a court may be prepared to pierce or lift the corporate veil).

C. Material Contracts

We have not entered into any material contracts other than in the ordinary course of business and other than those described in “Item 4. Information on Our Group,” “Item 7. Major Shareholders and Related Party Transactions — B. Related Party Transactions,” in this “Item 10. Additional Information — C. Material Contracts” or elsewhere in this annual report on Form 20-F.

D. Exchange Controls

See “Item 4. Information on our group — B. Business Overview — Regulation— PRC Regulations Relating to Foreign Exchange.”

E. Taxation

The following summary of the material Cayman Islands, PRC and U.S. federal income tax consequences of an investment in our ADSs or ordinary shares is based upon laws and relevant interpretations thereof in effect as of the date of this annual report, all of which are subject to change. This summary does not deal with all possible tax consequences relating to an investment in our ADSs or ordinary shares, such as the tax consequences under U.S. state and local tax laws or under the tax laws of jurisdictions other than the Cayman Islands, China and the United States. To the extent that the discussion relates to matters of Cayman Islands tax law, it represents the opinion of Walkers (Hong Kong), our counsel as to Cayman Islands law, and to the extent it relates to PRC tax law, it represents the opinion of ETR Law Firm, our counsel as to PRC law.

PRC Enterprise Income Tax

According to the Enterprise Income Tax Law of PRC (the “EIT Law”), which was promulgated on March 16, 2007, effective as of January 1, 2008, and last amended in December 2018, the income tax for both domestic and foreign-invested enterprises is at a uniform rate of 25%. The Regulation on the Implementation of Enterprise Income Tax Law of the PRC (the “EIT Rules”) was promulgated on December 6, 2007 and came into effect on January 1, 2008, and which was revised and effectuated on April 23, 2019.

Uncertainties exist with respect to how the EIT Law applies to the tax residence status of HPH and our offshore subsidiaries. Under the EIT Law, an enterprise established outside of China with a “de facto management body” within China is considered a “resident enterprise”, which means that it is treated in a manner similar to a Chinese enterprise for enterprise income tax purposes. Although the implementation rules of the EIT Law define “de facto management body” as a managing body that exercises substantive and overall management and control over the production and business, personnel, accounting books and assets of an enterprise, the only official guidance for this definition currently available is set forth in Circular 82 issued by the State Administration of Taxation, on April 22, 2009 which provides that a foreign enterprise controlled by a PRC company or a PRC company group will be classified as a “resident enterprise” with its “de facto management bodies” located within China if the following criteria are satisfied:

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the place where the senior management and core management departments that are in charge of its daily operations perform their duties is mainly located in the PRC;

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its financial and human resources decisions are made by or are subject to approval by persons or bodies in the PRC;

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its major assets, accounting books, company seals, and minutes and files of its board and shareholders’ meetings are located or kept in the PRC; and

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more than half of the enterprise’s directors or senior management with voting rights frequently reside in the PRC.

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We believe that HPH is not a PRC resident enterprise for PRC tax purposes. However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body”. If we are deemed a China resident enterprise, we may be subject to the EIT at the rate of 25% on our global income, except that the dividends we receive from our Chinese subsidiaries may be exempt from the EIT to the extent such dividends are deemed dividends among qualified resident enterprises. If we are considered a resident enterprise and earn income other than dividends from our Chinese subsidiaries, a 25% EIT on our global income could significantly increase our tax burden and materially and adversely affect our cash flow and profitability.

PRC Value-Added Tax

On March 23, 2016, the Ministry of Finance of China and the State Administration of Taxation of China jointly issued the Circular on the Nationwide Implementation of Pilot Program for the Collection of Value Added-Tax Instead of Business Tax, or Circular 36, which came into effect on May 1, 2016. Subsequent to the effectiveness of Circular 36, the business of the VIEs and WFOEs and their subsidiary will be primarily subject to value-added tax, or VAT, at a rate of 6% and they would be permitted to offset input VAT by providing valid VAT invoices received from vendors against their VAT liability.

PRC Stamp Tax

The Stamp Tax Law of the People’s Republic of China (the “Stamp Tax Law”) was promulgated by the SCNPC on June 10, 2021 and came into effect on July 1, 2022. According to the Stamp Tax Law, all units and individuals which execute taxable documents or conduct security transactions should be regarded as obligatory payers of stamp duty. The taxable documents include the contracts, property transfer documents and business account books listed in the Schedule of Stamp Duty Items and Tax Rates attached hereto. The securities transactions refer to the transfer of the stocks and depository receipts based on stocks, which are traded on the stock exchanges established according to laws or other national stock exchanges approved by the State Council. Taxpayers shall calculate the amount of tax payable in accordance with the nature of the taxable documents, and the tax rate varies from 0.003% to 0.1%.

Dividend Withholding Tax

Under the PRC tax laws effective prior to January 1, 2008, dividends paid to foreign investors by foreign-invested enterprises are exempt from PRC withholding tax. Pursuant to the EIT Law and the Implementation Rules, dividends generated after January 1, 2008 and distributed to us by our PRC subsidiaries through our BVI subsidiary are subject to a 10% withholding tax, provided that we are determined by the relevant PRC tax authorities to be a “non-resident enterprise” under the EIT Law. Pursuant to the Avoidance of Double Taxation Arrangement, which became effective on January 1, 2007, which was subsequently amended on January 30, 2008, May 27, 2010, April 1, 2015 and July 19, 2019, dividends from our PRC subsidiaries paid to us through our Hong Kong SAR subsidiary CNinsure Holdings Ltd. are subject to a withholding tax at a rate of 5%. However, as described above, we may be considered a PRC resident enterprise for EIT purposes, in which case dividends received by us from our PRC subsidiary would be exempt from the PRC withholding tax because such income is exempted under the EIT Law for a PRC resident enterprise recipient. In July 2018, CNinsure Holdings Ltd. was determined by Hong Kong SAR Taxation Bureau to be a Hong Kong SAR resident enterprise and completed the application and filing process for enjoying the tax treaty in PRC Taxation Bureau therefore we have applied 5% withholding tax rate for the dividends paid by our PRC subsidiaries since then. As there remains uncertainty regarding the interpretation and implementation of the EIT Law and the Implementation Rules, it is uncertain whether any dividends to be distributed by us, if we are deemed a PRC resident enterprise, to our non-PRC shareholders and ADS holders would be subject to any PRC withholding tax. See “Item 3. Key Information—D. Risk Factors—cc—Our global income or the dividends we receive from our PRC subsidiaries may be subject to PRC tax under the EIT Law, which could have a material adverse effect on our results of operations.”

Cayman Islands Taxation

The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to us levied by the government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in or brought within the jurisdiction of the Cayman Islands. The Cayman Islands is not party to any double tax treaties that are applicable to any payments made to or by our company. There are no exchange control regulations or currency restrictions in the Cayman Islands.

Payments of dividends and capital in respect of our ordinary shares and ADSs will not be subject to taxation in the Cayman Islands, and no withholding will be required on the payment of a dividend or capital to any holder of our ordinary shares or ADSs, nor will gains derived from the disposal of our ordinary shares or ADSs be subject to Cayman Islands income or corporation tax.

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U.S. Federal Income Tax Considerations

The following discussion is a summary of U.S. federal income tax considerations generally applicable to the ownership and disposition of our ADSs or ordinary shares by a U.S. holder (as defined below) that holds our ADSs or ordinary shares as “capital assets” (generally, property held for investment) under the U.S. Internal Revenue Code of 1986, as amended (the “Code”). This discussion is based upon existing U.S. federal income tax law, which is subject to differing interpretations and may be changed, possibly with retroactive effect. No ruling has been sought from the Internal Revenue Service (the “IRS”) with respect to any U.S. federal income tax consequences described below, and there can be no assurance that the IRS or a court will not take a contrary position. This discussion does not address all aspects of U.S. federal income taxation that may be important to particular investors in light of their individual circumstances, including investors subject to special tax rules (for example, certain financial institutions, insurance companies, broker-dealers, traders in securities that have elected the mark-to-market method of accounting for their securities, accrual method taxpayers subject to special tax accounting rules as a result of their use of financial statements, partnerships and their partners, regulated investment companies, real estate investment trusts, and tax-exempt organizations (including private foundations)), investors who are not U.S. holders, investors who own (directly, indirectly, or constructively) 10% or more of our stock, investors that will hold their ADSs or ordinary shares as part of a straddle, hedge, conversion, constructive sale, or other integrated transaction for U.S. federal income tax purposes, or U.S. holders (as defined below) that have a functional currency other than the U.S. dollar, all of whom may be subject to tax rules that differ significantly from those summarized below. In addition, this discussion does not discuss any non-U.S., alternative minimum tax, state, or local tax or any non-income tax (such as the U.S. federal gift or estate tax) considerations, or the Medicare tax on net investment income. Each U.S. holder is urged to consult its tax advisor regarding the U.S. federal, state, local, and non-U.S. income and other tax considerations of an investment in our ADSs or ordinary shares.

We urge potential purchasers of our shares to consult their own tax advisors concerning the U.S. federal, state, local and non-U.S. tax consequences of purchasing, owning and disposing of our ADSs or ordinary shares.

General

For purposes of this discussion, a “U.S. holder” is a beneficial owner of our ADSs or ordinary shares that is, for U.S. federal income tax purposes, (i) an individual who is a citizen or resident of the United States, (ii) a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created in, or organized under the laws of, the United States or any state thereof or the District of Columbia, (iii) an estate the income of which is subject to U.S. federal income taxation regardless of its source, or (iv) a trust (A) the administration of which is subject to the primary supervision of a U.S. court and which has one or more U.S. persons who have the authority to control all substantial decisions of the trust or (B) that has otherwise elected to be treated as a U.S. person under applicable U.S. Treasury regulations.

If a partnership (or other entity or arrangement treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of our ADSs or ordinary shares, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. Partnerships holding our ADSs or ordinary shares and partners in such partnerships are urged to consult their tax advisors as to the particular U.S. federal income tax consequences of an investment in our ADSs or ordinary shares.

For U.S. federal income tax purposes, a U.S. holder of ADSs will generally be treated as the beneficial owner of the underlying shares represented by the ADSs. The remainder of this discussion assumes that a U.S. holder of our ADSs will be treated as the beneficial owner of the underlying shares represented by the ADSs. Accordingly, deposits or withdrawals of ADSs or ordinary shares will generally not be subject to U.S. federal income tax.

Passive Foreign Investment Company Considerations

A non-U.S. corporation, such as our company, will be a “passive foreign investment company,” or “PFIC,” for U.S. federal income tax purposes, if, in any particular taxable year, either (i) 75% or more of its gross income for such year consists of certain types of “passive” income or (ii) 50% or more of the average quarterly value of its assets (as determined on the basis of fair market value) during such year produce or are held for the production of passive income. Cash is categorized as a passive asset and the company’s unbooked intangibles associated with active business activities may generally be classified as active assets. Passive income generally includes, among other things, dividends, interest, rents, royalties, and gains from the disposition of passive assets.

We will be treated as owning a proportionate share of the assets and earning a proportionate share of the income of any other corporation in which we own, directly or indirectly, at least 25% (by value) of the stock. Although the law in this regard is unclear, we intend to treat the VIE (including its subsidiaries) as being owned by us for U.S. federal income tax purposes, and we treat it that way, not only because we exercise effective control over the operation of such entity but also because we are entitled to substantially all of the economic benefits associated with it, and, as a result, we consolidate its results of operations in our consolidated U.S. GAAP financial statements. Assuming that we are the owner of the VIE (including its subsidiaries) for U.S. federal income tax purposes, and based upon our current and expected income and assets, including the market price of our ADSs, we do not presently expect to be a PFIC for the current taxable year or the foreseeable future.

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While we do not expect to be or become a PFIC in the current or future taxable years, the determination of whether we are or will become a PFIC will depend in part upon the value of our goodwill and other unbooked intangibles (which will depend upon the market price of our ADSs from time-to-time, which may be volatile). In estimating the value of our goodwill and other unbooked intangibles, we have taken into account our current and anticipated market capitalization. Among other matters, if our market capitalization is less than anticipated or subsequently declines, we may be or become a PFIC for the current or future taxable years. It is also possible that the IRS may challenge our classification or valuation of our goodwill and other unbooked intangibles, which may result in our company being or becoming a PFIC for the current or one or more future taxable years.

The determination of whether we will be or become a PFIC will also depend, in part, on the composition of our income and assets. If we were treated as not owning the VIE (including its subsidiaries) for U.S. federal income tax purposes, our risk of being classified as a PFIC may substantially increase. Because our PFIC status for any taxable year is a factual determination that can be made only after the close of a taxable year, there can be no assurance that we will not be a PFIC for the current taxable year or any future taxable year. If we are a PFIC for any year during which a U.S. holder holds our ADSs or ordinary shares, we generally will continue to be treated as a PFIC for all succeeding years during which such U.S. holder holds our ADSs or ordinary shares.

The discussion below under “Dividends” and “Sale or Other Disposition of ADSs or Ordinary Shares” is written on the basis that we will not be or become a PFIC for U.S. federal income tax purposes. The U.S. federal income tax rules that apply if we are a PFIC for the current taxable year or any subsequent taxable year are generally discussed below under “Passive Foreign Investment Company Rules.”

Dividends

Subject to the PFIC rules discussed below, any cash distributions paid on our ADSs or ordinary shares (including the amount of any tax withheld) out of our current or accumulated earnings and profits, as determined under U.S. federal income tax principles, will generally be includible in the gross income of a U.S. holder as dividend income on the day actually or constructively received by the U.S. holder, in the case of ordinary shares, or by the depositary, in the case of ADSs. Because we do not intend to determine our earnings and profits on the basis of U.S. federal income tax principles, we will generally report any distribution paid as a dividend for U.S. federal income tax purposes. Dividends received on the ADSs or ordinary shares will not be eligible for the dividends received deduction allowed to corporations.

Individuals and other non-corporate U.S. holders will generally be subject to tax at the lower capital gain tax rate applicable to “qualified dividend income,” provided that certain conditions are satisfied, including that (1) our ADSs are readily tradable on an established securities market in the United States, or, in the event that we are deemed to be a PRC resident enterprise under the PRC tax law, we are eligible for the benefit of the United States-PRC income tax treaty, (2) we are neither a PFIC nor treated as such with respect to a U.S. holder for the taxable year in which the dividend was paid and the preceding taxable year, and (3) certain holding period requirements are met. Since the ADSs are listed on the NASDAQ Global Market, we believe that the ADSs are readily tradable on an established securities market in the United States and that we are a qualified foreign corporation with respect to dividends paid on the ADSs. There can be no assurance that our ADSs will continue to be considered readily tradable on an established securities market in later years. Since we do not expect that our ordinary shares will be listed on established securities markets, we do not believe that dividends that we pay on our ordinary shares that are not backed by ADSs currently meet the conditions required for the reduced tax rate. However, in the event we are deemed to be a resident enterprise under the PRC Enterprise Income Tax Law, we may be eligible for the benefits of the United States-PRC income tax treaty (which the U.S. Treasury Department has determined is satisfactory for this purpose) and in that case, we would be treated as a qualified foreign corporation with respect to dividends paid on our ordinary shares as well as our ADSs. Each non-corporate U.S. holder is advised to consult its tax advisors regarding the availability of the reduced tax rate applicable to qualified dividend income for any dividends we pay with respect to our ADSs or ordinary shares.

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Dividends generally will be treated as income from foreign sources for U.S. foreign tax credit purposes and generally will constitute passive category income. In the event that we are deemed to be a PRC “resident enterprise” under the Enterprise Income Tax Law, a U.S. holder may be subject to PRC withholding taxes on dividends paid on our ADSs or ordinary shares. See “Item 10. Additional Information — E.Taxation — PRC Enterprise Income Tax.” In that case, a U.S. holder may be eligible, subject to a number of complex limitations, to claim a foreign tax credit in respect of any foreign withholding taxes imposed on dividends received on ADSs or ordinary shares. A U.S. holder who does not elect to claim a foreign tax credit for foreign tax withheld may instead claim a deduction, for U.S. federal income tax purposes, in respect of such withholdings, but only for a year in which such U.S. holder elects to do so for all creditable foreign income taxes. The rules governing the foreign tax credit are complex. U.S. holders are advised to consult their tax advisors regarding the availability of the foreign tax credit under their particular circumstances.

Sale or Other Disposition of ADSs or Ordinary Shares

Subject to the PFIC rules discussed below, a U.S. holder generally will recognize capital gain or loss upon the sale or other disposition of ADSs or ordinary shares in an amount equal to the difference between the amount realized upon the disposition and the U.S. holder’s adjusted tax basis in such ADSs or ordinary shares. Any capital gain or loss will be long-term if the ADSs or ordinary shares have been held for more than one year and generally will be U.S. source gain or loss for U.S. foreign tax credit purposes. Long-term capital gains of individuals and other non-corporate U.S. holders generally are eligible for a reduced rate of taxation. The deductibility of a capital loss may be subject to limitations.

In the event that we are treated as a PRC “resident enterprise” under the Enterprise Income Tax Law and gain from the disposition of the ADSs or ordinary shares is subject to tax in the PRC, a U.S. holder that is eligible for the benefits of the income tax treaty between the United States and the PRC may elect to treat the gain as PRC source income. If a U.S. holder is not eligible for the benefits of the income tax treaty or fails to make the election to treat any gain as foreign source, then such U.S. holder may not be able to use the foreign tax credit arising from any PRC tax imposed on the disposition of the ADSs or ordinary shares unless such credit can be applied (subject to applicable limitations) against U.S. federal income tax due on other income derived from foreign sources in the same income category (generally, the passive category). U.S. holders are advised to consult their tax advisors regarding the tax consequences if a foreign tax is imposed on a disposition of our ADSs or ordinary shares, including the availability of the foreign tax credit under their particular circumstances and the election to treat any gain as PRC source.

Passive Foreign Investment Company Rules

If we are a PFIC for any taxable year during which a U.S. holder holds our ADSs or ordinary shares, and unless the U.S. holder makes a mark-to-market election (as described below), the U.S. holder will generally be subject to special tax rules that have a penalizing effect, regardless of whether we remain a PFIC, for subsequent taxable years, on (i) any excess distribution that we make to the U.S. holder (which generally means any distribution paid during a taxable year to a U.S. holder that is greater than 125% of the average annual distributions paid in the three preceding taxable years or, if shorter, the U.S. holder’s holding period for the ADSs or ordinary shares), and (ii) any gain realized on the sale or other disposition, including, under certain circumstances, a pledge, of ADSs or ordinary shares. Under the PFIC rules:

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such excess distribution and/or gain will be allocated ratably over the U.S. holder’s holding period for the ADSs or ordinary shares;

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such amount allocated to the current taxable year and any taxable years in the U.S. holder’s holding period prior to the first taxable year in which we are a PFIC, or pre-PFIC year, will be taxable as ordinary income;

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such amount allocated to each prior taxable year, other than a pre-PFIC year, will be subject to tax at the highest tax rate in effect for that year; and

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an interest charge generally applicable to underpayments of tax will be imposed on the tax attributable to each prior taxable year, other than a pre-PFIC year.

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If we are a PFIC for any taxable year during which a U.S. holder holds our ADSs or ordinary shares and any of our non- U.S. subsidiaries is also a PFIC, such U.S. holder would be treated as owning a proportionate amount (by value) of the shares of the lower tier PFIC for purposes of the application of these rules. U.S. holders are advised to consult their tax advisors regarding the application of the PFIC rules to any of our subsidiaries.

As an alternative to the foregoing rules, a U.S. holder of “marketable stock” in a PFIC may make a mark-to-market election with respect to our ADSs, provided that the ADSs are regularly traded on the NASDAQ Global Market. Because a mark-to-market election cannot be made for any lower-tier PFICs that a PFIC may own, a U.S. holder who makes a mark-to-market election with respect to our ADSs will generally continue to be subject to the foregoing rules with respect to such U.S. holder’s indirect interest in any investments held by us that are treated as an equity interest in a PFIC for U.S. federal income tax purposes.

If a U.S. holder makes a mark-to-market election with respect to our ADSs, the U.S. holder generally will (i) include as ordinary income for each taxable year that we are a PFIC the excess, if any, of the fair market value of ADSs held at the end of the taxable year over the adjusted tax basis of such ADSs and (ii) deduct as an ordinary loss the excess, if any, of the adjusted tax basis of the ADSs over the fair market value of such ADSs held at the end of the taxable year, but only to the extent of the net amount previously included in income as a result of the mark-to-market election. The U.S. holder’s adjusted tax basis in the ADSs would be adjusted to reflect any income or loss resulting from the mark-to-market election. Further, in each year that we are a PFIC any gain recognized upon the sale or other disposition of the ADSs will be treated as ordinary income and loss will be treated as ordinary loss, but only to the extent of the net amount previously included in income as a result of the mark-to-market election. If a U.S. holder makes a mark-to-market election it will be effective for the taxable year for which the election is made and all subsequent taxable years unless the ADSs are no longer regularly traded on a qualified exchange or the IRS consents to the revocation of the election. Only the ADSs and not the ordinary shares are listed on the NASDAQ Global Market. Consequently, if a U.S. holder holds ordinary shares that are not represented by ADSs, such holder generally will not be eligible to make a mark-to-market election if we are or were to become a PFIC.

If a U.S. holder makes a mark-to-market election in respect of a PFIC and such corporation ceases to be a PFIC, the U.S. holder will not be required to take into account the mark-to-market gain or loss described above during any period that such corporation is not a PFIC.

We do not intend to provide information necessary for U.S. holders to make qualified electing fund elections, which, if available, would result in tax treatment different from (and generally less adverse than) the general tax treatment for PFICs described above.

If a U.S. holder owns our ADSs or ordinary shares during any taxable year that we are a PFIC, such holder would generally be required to file an annual IRS Form 8621. Each U.S. holder is advised to consult its tax advisors regarding the potential tax consequences to such holder if we are or become a PFIC, including the possibility of making a mark-to-market election.

F. Dividends and Paying Agents

Not applicable.

G. Statement by Experts

Not applicable.

H. Documents on Display

We previously filed with the SEC our registration statement on Form F-1 (Registration No. 333-228510), as amended, including the prospectus contained therein, to register the issuance and sale of our ordinary shares represented by ADSs in relation to our initial public offering. We have also filed with the SEC our registration statement on Form F-6 (Registration No. 333-229521) to register our ADSs.

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We are subject to the periodic reporting and other informational requirements of the Exchange Act. Under the Exchange Act, we are required to file reports and other information with the SEC. Specifically, we are required to file annually a Form 20-F no later than four months after the close of each fiscal year, which is June 30 of each year. All information filed with the SEC can be obtained over the internet at the SEC’s website at www.sec.gov or inspected and copied at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. You can request copies of documents, upon payment of a duplicating fee, by writing to the SEC. As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of quarterly reports and proxy statements, and officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act.

We will furnish Deutsche Bank Trust Company Americas, the depositary of our ADSs, with our annual reports, which will include a review of operations and annual audited consolidated financial statements prepared in conformity with U.S. GAAP, and all notices of shareholders’ meetings and other reports and communications that are made generally available to our shareholders. The depositary will make such notices, reports and communications available to holders of ADSs and, upon our request, will mail to all record holders of ADSs the information contained in any notice of a shareholders’ meeting received by the depositary from us.

I. Subsidiary Information

Not applicable.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Interest rate risks

Our exposure to interest rate risk primarily relates to the interest income generated by cash in bank and short-term, highly-liquid investments with original maturities of 90 days or less, and interest expenses incurred by short-term borrowing. Interest-earning instruments carry a degree of interest rate risk, and our future interest income may be lower than expected. We have not been exposed nor do we anticipate being exposed to material risks due to changes in interest rates. We have not used any derivative financial instruments to manage our interest risk exposure. Due to changes in market interest rates, our future interest expense may increase and our future interest income may fall short of expectations.

Foreign exchange risks

Substantially all of our revenues and expenses are denominated in RMB. Our exposure to foreign exchange risk primarily relates to the cash and cash equivalents denominated in U.S. dollars that we keep offshore for dividend payments. We have not hedged exposures denominated in foreign currencies using any derivative financial instruments. Although in general, our exposure to foreign exchange risks should be limited, the value of your investment in our ADSs will be affected by the foreign exchange rate between U.S. dollars and RMB because the value of our business is effectively denominated in RMB, while the ADSs will be traded in U.S. dollars.

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The value of the RMB against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in China’s political and economic conditions. The conversion of RMB into foreign currencies, including U.S. dollars, has been based on rates set by the PBOC. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the RMB to the U.S. dollar. Under such policy, the RMB is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. Removal of the U.S. dollar peg has resulted in an approximately more than 25.0% appreciation of the RMB against the U.S. dollar over the following eight years. In April 2012, the trading band has been widened to 1%, and in March 2014 it was further widened to 2%, which allows the Renminbi to fluctuate against the U.S. dollar by up to 2% above or below the central parity rate published by the PBOC. In August 2015, the PBOC changed the way it calculates the mid-point price of Renminbi against U.S. dollar, requiring the market-makers who submit for the PBOC’s reference rates to consider the previous day’s closing spot rate, foreign-exchange demand and supply as well as changes in major currency rates. This change, and other changes such as widening the trading band that may be implemented, may increase volatility in the value of the Renminbi against foreign currencies. The PRC government may from time to time make further adjustments to the exchange rate system in the future. To the extent that we need to convert our U.S. dollar or other currencies-denominated assets into RMB for our operations, appreciation of the RMB against the U.S. dollar or other currencies would have an adverse effect on the RMB amount we receive from the conversion. We had U.S. dollar-denominated and Hong Kong dollar-denominated financial assets amounting to US$4.3 million and HKD11.9 million as of June 30, 2024, respectively. A 10% appreciation of the RMB against the U.S. dollar and Hong Kong dollar would have resulted in a total decrease of RMB4.2 million (US$0.6 million) in the value of our U.S. dollar-denominated and Hong Kong dollar-denominated financial assets. Conversely, if we decide to convert our RMB denominated cash amounts into U.S. dollars amounts or other currencies amounts for the purpose of making payments for dividends on our ordinary shares or ADSs or for other business purposes, appreciation of the U.S. dollar or other currencies against the RMB would have a negative effect on the U.S. dollar or other currencies amount available to us.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

A. Debt Securities

Not applicable.

B. Warrants and Rights

Not applicable.

C. Other Securities

Not applicable.

D. American Depositary Shares

As an ADS holder, you will be required to pay the following service fees to the depositary bank and certain taxes and governmental charges (in addition to any applicable fees, expenses, taxes and other governmental charges payable on the deposited securities represented by any of your ADSs):

Service		Fees
●	To any person to which ADSs are issued or to any person to which a distribution is made in respect of ADS distributions pursuant to stock dividends or other free distributions of stock, bonus distributions, stock splits or other distributions (except where converted to cash)	Up to US$0.05 per ADS issued

●	Cancellation of ADSs, including the case of termination of the deposit agreement	Up to US$0.05 per ADS cancelled

●	Distribution of cash dividends	Up to US$0.05 per ADS held

●	Distribution of cash entitlements (other than cash dividends) and/or cash proceeds from the sale of rights, securities and other entitlements	Up to US$0.05 per ADS held

●	Distribution of ADSs pursuant to exercise of rights	Up to US$0.05 per ADS held

●	Distribution of securities other than ADSs or rights to purchase additional ADSs	Up to US$0.05 per ADS held

●	Depositary services	Up to US$0.05 per ADS held on the applicable record date(s) established by the depositary bank

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As an ADS holder, you will also be responsible to pay certain fees and expenses incurred by the depositary bank and certain taxes and governmental charges (in addition to any applicable fees, expenses, taxes and other governmental charges payable on the deposited securities represented by any of your ADSs) such as:

●

Fees for the transfer and registration of ordinary shares charged by the registrar and transfer agent for the ordinary shares in the Cayman Islands (i.e., upon deposit and withdrawal of ordinary shares).

●

Expenses incurred for converting foreign currency into U.S. dollars.

●

Expenses for cable, telex and fax transmissions and for delivery of securities.

●

Taxes and duties upon the transfer of securities, including any applicable stamp duties, any stock transfer charges or withholding taxes (i.e., when ordinary shares are deposited or withdrawn from deposit).

●

Fees and expenses incurred in connection with the delivery or servicing of ordinary shares on deposit.

●

Fees and expenses incurred in connection with complying with exchange control regulations and other regulatory requirements applicable to ordinary shares, deposited securities, ADSs and ADRs.

●

Any applicable fees and penalties thereon.

The depositary fees payable upon the issuance and cancellation of ADSs are typically paid to the depositary bank by the brokers (on behalf of their clients) receiving the newly issued ADSs from the depositary bank and by the brokers (on behalf of their clients) delivering the ADSs to the depositary bank for cancellation. The brokers in turn charge these fees to their clients. Depositary fees payable in connection with distributions of cash or securities to ADS holders and the depositary services fee are charged by the depositary bank to the holders of record of ADSs as of the applicable ADS record date.

The depositary fees payable for cash distributions are generally deducted from the cash being distributed or by selling a portion of distributable property to pay the fees. In the case of distributions other than cash (i.e., share dividends, rights), the depositary bank charges the applicable fee to the ADS record date holders concurrent with the distribution. In the case of ADSs registered in the name of the investor (whether certificated or uncertificated in direct registration), the depositary bank sends invoices to the applicable record date ADS holders. In the case of ADSs held in brokerage and custodian accounts (via DTC), the depositary bank generally collects its fees through the systems provided by DTC (whose nominee is the registered holder of the ADSs held in DTC) from the brokers and custodians holding ADSs in their DTC accounts. The brokers and custodians who hold their clients’ ADSs in DTC accounts in turn charge their clients’ accounts the amount of the fees paid to the depositary banks.

In the event of refusal to pay the depositary fees, the depositary bank may, under the terms of the deposit agreement, refuse the requested service until payment is received or may set off the amount of the depositary fees from any distribution to be made to the ADS holder.

The depositary may make payments to us or reimburse us for certain costs and expenses, by making available a portion of the ADS fees collected in respect of the ADR program or otherwise, upon such terms and conditions as we and the depositary bank agree from time to time.

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PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

There has been no default of any indebtedness nor is there any arrearage in the payment of dividends.

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

A. Material Modifications to the Rights of Security Holders

See “Item 10. Additional Information—B. Memorandum and Articles of Association—Ordinary Shares” for a description of the rights of securities holders.

By passing resolutions at the Extraordinary General Meeting of Shareholders on March 13, 2024, the Company had re-designated 50,000,000 of its authorized but unissued ordinary shares of par value of $0.001 each (the “Ordinary Shares”) as 50,000,000 preference shares of par value of $0.001 each (the “Preference Shares”) and amended and restated its existing memorandum and articles of association as the third amended and restated memorandum and articles of association.

By passing resolutions at the Extraordinary General Meeting of Shareholders and separate Class Meeting of the holders of ordinary shares of the Company on October 31, 2024, the Company had amended its authorized share capital to US$5,000,000 divided into 5,000,000,000 shares consisting of (i) 4,000,000,000 Class A ordinary shares of a nominal or par value of US$0.001 each (the “Class A Ordinary Shares”); and (ii) 1,000,000,000 Class B ordinary shares of a nominal or par value of US$0.001 each (the “Class B Ordinary Shares”), and amended and restated its existing memorandum and articles of association as the fourth amended and restated memorandum and articles of association.

As of the date of this report, pursuant to the fourth amended and restated memorandum and articles of association, the Company is authorized to issue 4,000,000,000 Class A Ordinary Shares and 1,000,000,000 Class B Ordinary shares. Each holder of a Class A Ordinary Share shall have one (1) vote for each Class A Ordinary Share and each holder of the Class B Ordinary Shares shall have one hundred (100) votes for each Class B Ordinary Share.

See the disclosure regarding the third amended and restated memorandum and articles of association and issuance of Preference Shares contained in the Explanatory Note and Exhibit 3.1 to the Form 6-K filed with the SEC on March 13, 2024, which are incorporated herein by reference.

See the disclosure regarding the fourth amended and restated memorandum and articles of association and issuance of Class A ordinary shares and Class B ordinary shares contained in the Explanatory Note and Exhibit 3.1 to the Form 6-K filed with the SEC on October 31, 2024, which are incorporated herein by reference.

B. Use of Proceeds

None.

ITEM 15. CONTROLS AND PROCEDURES

A. Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, has performed an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report, as required by Rule 13a-15(b) under the Exchange Act.

Based upon this evaluation, our management, with the participation of our chief executive officer and chief financial officer, has concluded that, as of June 30, 2024, our disclosure controls and procedures were effective in ensuring that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in by the SEC’s rules and forms, and that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

B. Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such item is defined in Rules 13a-15(f) under the Exchange Act, for our company. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements in accordance with generally accepted accounting principles and includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of a company’s assets, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that a company’s receipts and expenditures are being made only in accordance with authorizations of a company’s management and directors, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of a company’s assets that could have a material effect on the consolidated financial statements.

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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As required by Section 404 of the Sarbanes-Oxley Act and related rules as promulgated by the SEC, our management assessed the effectiveness of the internal control over financial reporting as of June 30, 2024, excluding AIX Inc. (formerly known as “Fanhua Inc.”), which was acquired on December 31, 2023 and whose financial results constitute 87.7% of net assets, 89.3% of total assets and 94.8% of net revenues of the consolidated financial statement amounts as of and for the year ended June 30, 2024, using criteria established in “Internal Control — Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In 2024, we identified three uncorrected errors to previously issued financial statements. These uncorrected misstatements were not prevented or detected as a result of operating effectiveness deficiencies of certain internal controls during prior periods. During the fiscal year ended June 30, 2024, our management has designed and implemented corrective actions to remediate the control deficiencies primarily through enhancing the detailed description of the review steps as well as the inputs needed in the relevant controls.

Based on this assessment, management concluded that our internal control over financial reporting was effective as of June 30, 2024 based on the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Attestation Report of the Independent Registered Public Accounting Firm

Our independent registered public accounting firm, Deloitte Touche Tohmatsu Certified Public Accountants LLP, has audited the effectiveness of our company’s internal control over financial reporting as of June 30, 2024, as stated in its report, which appears on page F-2 of this annual report on Form 20-F.

C. Changes in Internal Control over Financial Reporting

As required by Rule 13a-15(d), under the Exchange Act, our management, including our chief executive officer and our chief financial officer, also conducted an evaluation of our internal control over financial reporting to determine whether any changes occurred during the period covered by this report have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Based on the evaluation we conducted, management has concluded that only those changes implemented by management in connection with our implementation of the corrective actions discussed above in Item 15B to remediate control deficiencies in prior period occurred during the period covered by this annual report on Form 20-F.

ITEM 16. [RESERVED]

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

Our board of directors has determined that Dr. Zhai Lihong, the chair of our audit committee and an independent director (under the standards set forth in Rule 5605(c)(2) of the Nasdaq Stock Market Rules and Rule 10A-3 under the Securities Exchange Act of 1934), is audit committee financial expert.

ITEM 16B. CODE OF ETHICS

Our board of directors adopted a code of business conduct and ethics that applies to our directors, officers and employees in November 2018. We have posted a copy of our code of business conduct and ethics on our website at website https://ir.puyiwm.com/.

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ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

On March 29, 2024, we engaged Deloitte Touche Tohmatsu Certified Public Accountants LLP (“Deloitte”) as our independent registered public accounting firm, and dismissed Marcum Asia CPAs LLP. See also “Item 16F. Change in Registrant’s Certifying Accountant.” The following table sets forth the aggregate fees by categories specified below in connection with certain professional services rendered by Marcum Asia CPAs LLP and Deloitte (PCAOB No. 1113) for the periods indicated.

	For the fiscal year ended June 30,
	2023		2024
	USD		USD
	(in thousands)
Audit Fees
–Marcum Asia CPAs LLP		340		72
–Deloitte Touche Tohmatsu Certified Public Accountants LLP		-		350
Total Fees		340		422

Audit Fees

Audit Fees means the aggregate fees incurred in each of the fiscal years listed for professional services rendered by our principal auditor for the audit or review of our annual financial statements or quarterly financial information and review of documents filed with the SEC. The amount included VAT.

The policy of our audit committee is to pre-approve all audit and non-audit services provided by our independent registered public accounting firm, including audit services, audit-related services, tax services and other services as described above, which are approved by the Audit Committee prior to the completion of the audit.

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

None.

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

None.

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ITEM 16F. CHANGES IN REGISTRANT’S CERTIFYING ACCOUNTANT

On March 29, 2024, we engaged Deloitte as our independent registered public accounting firm, and dismissed Marcum Asia CPAs LLP. The change of our independent registered public accounting firm had been approved by our board and the audit committee of our board, and the decision was not made due to any disagreements between us and Marcum Asia CPAs LLP.

The reports of Marcum Asia CPAs LLP on our consolidated financial statements for the fiscal years ended June 30, 2022 and 2023 did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principle.

During the fiscal years ended June 30, 2022 and 2023 and the subsequent interim period through March 29, 2024, there have been no (i) disagreements between us and Marcum Asia CPAs LLP on any matter of accounting principles or practices, financial statement disclosure, or audit scope or procedure, which disagreements if not resolved to the satisfaction of Marcum Asia CPAs LLP would have caused them to make reference thereto in their reports on the consolidated financial statements for such years, or (ii) reportable events as defined in Item 16F(a)(1)(v) of the instructions to Form 20-F.

We have provided Marcum Asia CPAs LLP with a copy of the disclosures in Form 6-K filed with the Commission on April 2, 2024 and here under this Item 16F as required under Item 16F of Form 20-F and requested from Marcum Asia CPAs LLP a letter addressed to the SEC indicating whether it agrees with such disclosures. A copy of Marcum Asia CPAs LLP’s letter dated April 2, 2024 was attached as Exhibit 15.6 in our annual report on Form 20-F filed with the Commission on November 15, 2024.

During the fiscal years ended June 30, 2022 and 2023 and the subsequent interim period through March 29, 2024, neither we nor anyone on behalf of us has consulted with Deloitte regarding (i) the application of accounting principles to a specific transaction, either completed or proposed, or the type of audit opinion that might be rendered on our consolidated financial statements, and neither a written report nor oral advice was provided to us that Deloitte concluded was an important factor considered by us in reaching a decision as to any accounting, audit, or financial reporting issue, (ii) any matter that was the subject of a disagreement pursuant to Item 16F(a)(1)(iv) of the instructions to Form 20-F, or (iii) any reportable event pursuant to Item 16F(a)(1)(v) of the instructions to Form 20-F.

ITEM 16G. CORPORATE GOVERNANCE

Rule 5635(c) of the Nasdaq Rules requires a Nasdaq-listed company to obtain its shareholders’ approval of all equity compensation plans, including stock plans, and any material amendments to such plans. Nasdaq Stock Market Rule 5620(a) requires each issuer to hold an annual meeting of shareholders no later than one year after the end of the issuer’s fiscal year-end. However, Nasdaq Stock Market Rule 5615(a)(3) permits foreign private issuers like us to follow “home country practice” in certain corporate governance matters. Walkers (Hong Kong), our Cayman Islands counsel, has provided a letter to the Nasdaq Stock Market certifying that under Cayman Islands law, we are not required to hold annual shareholder meetings every year. We followed home country practice with respect to annual meetings and did not hold an annual meeting of shareholders. However, we held an extraordinary general meeting on March 13, 2024 and obtained requisite shareholders’ approval to change the Company name from “Puyi Inc.” to “Highest Performances Holdings Inc.” We may hold annual or extraordinary shareholder meetings in the future if there are significant issues that require shareholders’ approvals.

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Pursuant to the Nasdaq Stock Market Rule 5635(c), shareholder approval is required prior to the issuance of securities when a stock option or purchase plan is to be established or materially amended or other equity compensation arrangement made or materially amended, pursuant to which stock may be acquired by officers, directors, employees, or consultants, except for a few situations stated thereunder. In relations to the 2024 Share Incentive Plan mentioned above, Walkers (Hong Kong), our Cayman Island counsel, has provided letters to the Nasdaq Stock Market certifying that under Cayman Islands law, we are not required to obtain shareholder approval in respect of the issuance of securities in the circumstances set out in Nasdaq Stock Market Rule 5635(c). We follow home country practices accordingly. Other than the annual meeting, share purchase plan to employees practices and the independent director majority requirement and compensation committee requirement described above, there are no significant differences between our corporate governance practices and those followed by U.S. domestic companies under Nasdaq Stock Market Rules.

ITEM 16H. MINE SAFETY DISCLOSURE

Not applicable.

Item 16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

ITEM 16J. INSIDER TRADING POLICIES

In march 2019, an insider trading policy was adopted by our board of directors and subsequently amended on March 15, 2023, governing the purchase, sale, and/or other dispositions of our securities by our directors, officers, and employees, to promote compliance with insider trading laws, rules and regulations, and Nasdaq listing standards applicable to us. Our insider trading policy is filed as Exhibit 11.2 to this Form 20-F.

ITEM 16K. CYBERSECURITY

Risk Management and Strategy

We rely increasingly on information technology systems and network infrastructure to conduct operations and engage with our customers and business partners. As the complexity of our engagements grows, so do the potential threats from cyber intrusion, ransomware, denial of service, phishing, account takeover, data manipulation, and other cyber misconduct. To counter these threats, we have implemented comprehensive cybersecurity risk assessment procedures and taken various measures to ensure their effectiveness in reporting and managing cybersecurity risks. We have also integrated cybersecurity risk management procedures into our overall risk management system.

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We have developed a comprehensive cybersecurity threat defense system to address both internal and external threats. This system encompasses various operational levels, including access management, network management, system maintenance, data integrity, and proper use of information resources. We strive to manage cybersecurity risks and protect sensitive information through various means and processes, including, but not limited to, the following: (i) an incident response team designated to assess, contain, and mitigate the potentially harmful effects of cybersecurity incidents, including developing a comprehensive plan outlining the appropriate steps of incident response and disciplinary measures to be implemented upon the occurrence of such incidents, (ii) access control protocols based on a “least privilege” principle, which allows user access only to the resources necessary to perform their respective function(s); (iii) network security monitoring, including firewalls, Intrusion Detection Systems (IDS) and other programs to monitor suspect activity on our network, (iii) regular updates to keep our software and systems current through the use of automated patching solutions, and monitor news sources, industry consortia, and vendors for updates and threat information, and (iv) periodic review of information security controls by internal and external staff, and regular training sessions on information security conducted for employees. addition, we work with third-party cybersecurity professionals to guide and support our cybersecurity management efforts. We have implemented information technology access control procedures to oversee and identify cybersecurity risks associated with our third-party service providers. For example, third-party access may be evaluated and approved by the director of technical department on a case-by-case basis and granted strictly in accordance with the “least privilege” principle, after such third parties have undergone a background check or other due-diligence process. Any third-party service providers connecting to our network must demonstrate that they are capable of maintaining appropriate safeguards to comply with applicable cybersecurity laws and regulations.

As of the date of this annual report, we have not experienced any material cybersecurity incidents or identified any material cybersecurity threats that have affected or are reasonably likely to materially affect us, our business strategy, results of operations or financial condition.

Governance

The audit committee of our board of directors is responsible for overseeing the Company’s risk management processes and the implementation of our cybersecurity policy. The board and the audit committee are aware of the rapidly evolving nature of threats presented by cybersecurity incidents and are committed to the prevention, timely detection, and mitigation of the effects of cybersecurity incidents on the Company. The audit committee shall review, approve and maintain oversight of the disclosure (i) on Form 6-K for material cybersecurity incidents (if any) and (ii) related to cybersecurity matters in the periodic reports (including annual report on Form 20-F) of the Company. The audit committee routinely provides updates to the board on the matters related to cybersecurity, and is responsible for reviewing and evaluating the sufficiency of our cybersecurity policy and proposing any necessary changes to the board for approval.

The audit committee also receives regular reports and updates from the director of technical department, such as the internal and external cybersecurity threat landscape, material risks arising from cybersecurity threats, and any material cybersecurity incidents.

Our management is committed to cybersecurity risk management. The head of our technology department, Mr. Shuqiang Liu, who leads a dedicated cybersecurity team, is responsible for assessing and managing cybersecurity risks and monitoring the prevention, detection, mitigation, and remediation of cybersecurity incidents related to HPH’s legacy IT system. Mr. Liu has 15 years of experiences in the field including in application, infrastructure, development, security and governance. He directly reports to our chief executive officer. Currently, AIX’s information technology systems are maintained by its own IT team, and AIX’s chief digital officer, Mr. Jun Li, who has over 20 years of experience in the field and holds relevant certificates such as Certified System Analyst, Certified Network Associate and Certified Database Tuning Expert, oversees key aspects of cybersecurity in AIX and is primarily responsible for assessing and managing the risks from cybersecurity threats and monitoring the prevention, detection, mitigation, and remediation of cybersecurity incidents within AIX. Mr. Li reports to AIX’s chief executive officer Mr. Yinan Hu who also serves as HPH’s chief executive officer. Mr. Hu will provide timely and routine updates to the audit committees of both AIX and HPH on any material cybersecurity incidents.

Although we have implemented various measures to mitigate cybersecurity threats, we cannot guarantee that cybersecurity risks will be completely eliminated, and we may from time to time be exposed to risks from cybersecurity threats. As of the date of this annual report, we have not experienced any cybersecurity incidents or identified any risks from cybersecurity threats that have affected or are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition.

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PART III

ITEM 17. FINANCIAL STATEMENTS

We have elected to provide financial statements pursuant to Item 18.

ITEM 18. FINANCIAL STATEMENTS

The financial statements are filed as part of this annual report beginning on page F-1.

ITEM 19. EXHIBITS

Exhibit No.		Description
1.1		Second Amended and Restated Memorandum and Articles of Association of the Registrant, effective March 19, 2019 (incorporated herein by reference to Exhibit 3.2 to the Form F-1, as amended, initially filed on November 21, 2018 (File No. 333-228510))
1.2		Third Amended and Restated Memorandum and Articles of Association of the Registrant, effective March 13, 2024 (incorporated herein by reference to Exhibit 3.1 to Form 6-K filed on March 13, 2024 (File No. 001-38813))
1.3		Fourth Amended and Restated Memorandum and Articles of Association of the Registrant, effective October 31, 2024 (incorporated herein by reference to Exhibit 3.1 to Form 6-K filed on October 31, 2024 (File No. 001-38813))
2.1		Registrant’s Specimen Share Certificate for ordinary shares (incorporated herein by reference to Exhibit 4.1 to the Form F-1, as amended, initially filed on November 21, 2018 (File No. 333-228510))
2.2		Form of Chengdu Puyi Bohui Information Technology Co., Ltd. Equity Entrustment Agreement (same as Exhibit 4.23) (incorporated herein by reference to Exhibit 4.2 to the Form F-1, as amended, initially filed on November 21, 2018 (File No. 333-228510))
2.3		Purchase Agreement between Fanhua Inc. and Puyi Inc. dated September 5, 2018 (incorporated herein by reference to Exhibit 4.3 to the Form F-1, as amended, initially filed on November 21, 2018 (File No. 333-228510))
2.4		Registrant’s Specimen American Depositary Receipt (included in Exhibit 2.5) (incorporated herein by reference to Exhibit 4.4 to the Form F-1, as amended, initially filed on November 21, 2018 (File No. 333-228510))
2.5		Deposit Agreement, among the Registrant, the Depositary and Beneficial Owners of the American Depositary Receipts dated March 27, 2019 (incorporated herein by reference to Exhibit 2.5 to the Form 20-F, as amended, initially filed on October 14, 2019 (File No. 001-38813))
2.6*		Description of Securities
4.1		Instrument of Transfer between Worldwide Success Group Limited and Advance Tycoon Limited dated August 31, 2018 (incorporated herein by reference to Exhibit 10.1 to the Form F-1, as amended, initially filed on November 21, 2018 (File No. 333-228510))
4.2		Instrument of Transfer between Worldwide Success Group Limited and Danica Surge Limited dated August 31, 2018 (incorporated herein by reference to Exhibit 10.2 to the Form F-1, as amended, initially filed on November 21, 2018 (File No. 333-228510))
4.3		Instrument of Transfer between Worldwide Success Group Limited and Winter Dazzle Limited dated August 31, 2018 (incorporated herein by reference to Exhibit 10.3 to the Form F-1, as amended, initially filed on November 21, 2018 (File No. 333-228510))
4.4		Equity Interest Transfer Agreement between Yu Haifeng and Chengdu Puyi Bohui Information Technology Co., Ltd. dated August 7, 2018 (incorporated herein by reference to Exhibit 10.4 to the Form F-1, as amended, November 21, 2018 (File No. 333-228510))
4.5		Equity Interest Transfer Agreement between Yu Haifeng and Renshou Xinrui Enterprises Management Center (Limited Partnership) dated August 7, 2018 (incorporated herein by reference to Exhibit 10.5 to the Form F-1, as amended, initially filed on November 21, 2018 (File No. 333-228510))
4.6		Share Transfer Agreement between Chengdu Puyi Bohui Information Technology Co., Ltd. and Renshou Xinrui Enterprises Management Center (Limited Partnership) & Yu Haifeng dated December 28, 2016 (incorporated herein by reference to Exhibit 10.6 to the Form F-1, as amended, initially filed on November 21, 2018 (File No. 333-228510))

154

4.7		Share Transfer Agreement between Li Shaogang & Dai Zijian and Tibet Zhuli Investment Co., Ltd & Guangdong Fanhua Puyi Asset Management Co., Ltd. dated May 22, 2018 (incorporated herein by reference to Exhibit 10.7 to the Form F-1, as amended, initially filed on November 21, 2018 (File No. 333-228510))
4.8		Equity Transfer Agreement between Yu Haifeng & Renshou Xinrui Enterprises Management Center (Limited Partnership) and Chengdu Puyi Bohui Information Technology Co., Ltd dated June 5, 2018 (incorporated herein by reference to Exhibit 10.8 to the Form F-1, as amended, initially filed on November 21, 2018 (File No. 333-228510))
4.9		Share Transfer Agreement between Shao Yanhui & Diao Yi and Dai Zijian & Li Shaogang dated March 20, 2017 (incorporated herein by reference to Exhibit 10.9 to the Form F-1, as amended, initially filed on November 21, 2018 (File No. 333-228510))
4.10		Equity Transfer Agreement between Shenzhen Chuangjia Investment Partnership (Limited Partnership) and Yang Yuanfen dated July 16, 2018 (incorporated herein by reference to Exhibit 10.10 to the Form F-1, as amended, initially filed on November 21, 2018 (File No. 333-228510))
4.11		Equity Transfer Agreement between Shenzhen Chuangjia Investment Partnership (Limited Partnership) and Yu Haifeng dated July 16, 2018 (incorporated herein by reference to Exhibit 10.11 to the Form F-1, as amended, initially filed on November 21, 2018 (File No. 333-228510))
4.12		Equity Interest Transfer Agreement between Shenzhen Yingjiasheng Investment Partnership (Limited Partnership) and Yu Haifeng dated March 14, 2016 (incorporated herein by reference to Exhibit 10.12 to the Form F-1, as amended, initially filed on November 21, 2018 (File No. 333-228510))
4.13		Equity Transfer Agreement between Tang Jianping and Guangdong Fanhua Puyi Asset Management Co., Ltd dated July 3, 2018 (incorporated herein by reference to Exhibit 10.13 to the Form F-1, as amended, initially filed on November 21, 2018 (File No. 333-228510))
4.14		Form of Employment Agreement between the Registrant and its chief executive officers (incorporated herein by reference to Exhibit 10.14 to the Form F-1, as amended, initially filed on November 21, 2018 (File No. 333-228510))
4.15		Form of Indemnification Agreement between the Registrant and its directors and executive officers (incorporated herein by reference to Exhibit 10.15 to the Form F-1, as amended, initially filed on November 21, 2018 (File No. 333-228510))
4.16		Exclusive Technology and Consultancy Services Agreement between Puyi Enterprises Management Consulting Co., Ltd. and Chengdu Puyi Bohui Information Technology Co., Ltd. dated September 6, 2018 (incorporated herein by reference to Exhibit 10.16 to the Form F-1, as amended, initially filed on November 21, 2018 (File No. 333-228510))
4.17		Equity Interest Pledge Agreement among Puyi Enterprises Management Consulting Co., Ltd., Yu Haifeng, Yang Yuanfen and Chengdu Puyi Bohui Information Technology Co., Ltd. dated September 6, 2018 (incorporated herein by reference to Exhibit 10.17 to the Form F-1, as amended, initially filed on November 21, 2018 (File No. 333-228510))
4.18		Exclusive Option Agreement among Puyi Enterprises Management Consulting Co., Ltd., Haifeng Yu, Yuanfen Yang and Chengdu Puyi Bohui Information Technology Co., Ltd. dated September 6, 2018 (incorporated herein by reference to Exhibit 10.18 to the Form F-1, as amended, initially filed on November 21, 2018 (File No. 333-228510))
4.19		Spouse Consent Letter provided by Xiao Qi, Yu Haifeng’s spouse, dated September 6, 2018 (incorporated herein by reference to Exhibit 10.19 to the Form F-1, as amended, initially filed on November 21, 2018 (File No. 333-228510))
4.20		Spouse Consent Letter provided by Cheng Jianping, Yang Yuanfen’s spouse, dated September 6, 2018 (incorporated herein by reference to Exhibit 10.20 to the Form F-1, as amended, initially filed on November 21, 2018 (File No. 333-228510))
4.21		Powers of Attorney granted by Yu Haifeng dated September 6, 2018 (incorporated herein by reference to Exhibit 10.21 to the Form F-1, as amended, initially filed on November 21, 2018 (File No. 333-228510))
4.22		Powers of Attorney granted by Yang Yuanfen dated September 6, 2018 (incorporated herein by reference to Exhibit 10.22 to the Form F-1, as amended, initially filed on November 21, 2018 (File No. 333-228510))

155

4.25		Supplemental Agreement to Exhibit 10.24 dated September 19, 2018 (incorporated herein by reference to Exhibit 10.25 to the Form F-1, as amended, initially filed on November 21, 2018 (File No. 333-228510))
4.26		Purchase Agreement between Fanhua Inc. and Puyi Inc. dated September 5, 2018 (incorporated herein by reference to Exhibit 10.26 to the Form F-1, as amended, initially filed on November 21, 2018 (File No. 333-228510))
4.27		2018 Share Incentive Plan (incorporated herein by reference to Exhibit 10.27 to the Form F-1, as amended, initially filed on November 21, 2018 (File No. 333-228510))
4.28		2024 Share Incentive Plan (incorporated herein by reference to Exhibit 10.2 to the Form S-8, as amended, initially filed on March 11, 2024 (File No. 333-277814))
4.29		Escrow Agreement among the Registrant, Continental Stock Transfer & Trust Company and Network 1 Financial Securities, Inc. dated February 25, 2019 (incorporated herein by reference to Exhibit 4.28 to the Form 20-F, as amended, initially filed on October 14, 2019 (File No. 001-38813))
4.30		Equity Interest Transfer Agreement between Yang Yuanfen and Puyi Enterprises Management Consulting Co., Ltd. dated June 30, 2023 (incorporated herein by reference to Exhibit 4.29 to the Form 20-F, as amended, initially filed on September 25, 2023 (File No. 001-38813))
4.31		Share Purchase Agreement with GEM Global Yield LLC SCS and GEM YIELD BAHAMAS LIMITED dated April 16, 2024 (incorporated herein by reference to Exhibit 10.1 to Form 6-K filed on April 16, 2024 (File No. 001-38813)
4.32		Form of Securities Agreement with Certain Shareholders of AIX dated December 27, 2023 (incorporated herein by reference to Exhibit 10.1 to Form 6-K filed on December 27, 2023 (File No. 001-38813)
4.33*		English translation of Share Transfer Agreement between Chengdu Puyi Bohui Information Technology Co., Ltd. and Beijing Fanlian Investment Co., Ltd., dated December 22, 2023
4.34*		English translation of Framework Cooperation Agreement, dated February 2, 2024, among Singapore White Group Pte. Ltd., Puyi Inc., and Fanhua Inc.
8.1*		Subsidiaries and Affiliated Entities of the Registrant
11.1		Code of Business Conduct and Ethics of the Registrant (incorporated herein by reference to Exhibit 99.1 to the Form F-1, as amended, initially filed on November 21, 2018 (File No. 333-228510))
11.2*		Insider Trading Policy
12.1*		CEO Certificate Pursuant to Section 302 of Sarbanes-Oxley Act of 2002
12.2*		CFO Certificate Pursuant to Section 302 of Sarbanes-Oxley Act of 2002
13.1**		CEO Certificate Pursuant to Section 906 of Sarbanes-Oxley Act of 2002
13.2**		CFO Certificate Pursuant to Section 906 of Sarbanes-Oxley Act of 2002
15.1*		Consent of Walkers (Hong Kong)
15.2*		Consent of ETR Law Firm
15.3*		Consent of Hai Run Law Firm
15.4*		Consent of Marcum Asia CPAs LLP
15.5*		Consent of Deloitte Touche Tohmatsu Certified Public Accountants LLP
15.6		Letter from Marcum Asia CPAs LLP to the Securities and Exchange Commission, dated April 2, 2024 (incorporated by reference to Exhibit 16.1 of our Form 6-K filed with the Commission on April 2, 2024)
97.1*		Clawback Policy
101.INS*		Inline XBRL Instance Document
101.SCH*		Inline XBRL Taxonomy Extension Schema Document
101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*	Filed herewith.

**	Furnished herewith

156

SIGNATURES

The Registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

	Highest Performances Holdings Inc.

November 15, 2024	BY:	/s/ Hu Yinan
		Hu Yinan
		Vice-Chairman of the Board, Chief Executive Officer

157

HIGHEST PERFORMANCES HOLDINGS INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

		Page

Report of Independent Registered Public Accounting Firm - Deloitte Touche Tohmatsu Certified Public Accountants LLP (PCAOB No. 1113)		F-2

Report of Independent Registered Public Accounting Firm - Marcum Asia CPAs LLP (PCAOB No. 5395)		F-7

Consolidated Balance Sheets as of June 30, 2023 and 2024		F-8

Consolidated Statements of Operations and Comprehensive Loss for the Years Ended June 30, 2022, 2023 and 2024		F-11

Consolidated Statements of Shareholders’ Equity for the Years Ended June 30, 2022, 2023 and 2024		F-13

Consolidated Statements of Cash Flows for the Years Ended June 30, 2022, 2023 and 2024		F-15

Notes to the Consolidated Financial Statements		F-17

Schedule I—Condensed Financial Information of Highest Performances Holdings Inc.		F-71

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Highest Performances Holdings Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheet of Highest Performances Holdings Inc. and its subsidiaries (the “Company”) as of June 30, 2024, the related consolidated statements of operations and comprehensive loss, shareholders’ equity, and cash flows, for the year ended June 30, 2024, and the related notes and schedule I (collectively referred to as the “financial statements”). We have also audited the Company’s internal control over financial reporting as of June 30, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of June 30, 2024, and the results of its operations and its cash flows for the year ended June 30, 2024, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

As described in the Management’s Annual Report on Internal Control over Financial Reporting, management excluded from its assessment the internal control over financial reporting at AIX Inc. (formerly known as “Fanhua Inc.”), which was acquired on December 31, 2023 and whose financial results constitute 87.7% of net assets, 89.3% of total assets and 94.8% of net revenues of the consolidated financial statement amounts as of and for the year ended June 30, 2024. Accordingly, our audit did not include the internal control over financial reporting at AIX Inc.

Convenience Translation

Our audits also comprehended the translation of Renminbi amounts into United States dollar amounts and, in our opinion, such translation has been made in conformity with the basis stated in Note 2(v) to the financial statements. Such United States dollar amounts are presented solely for the convenience of readers outside of People’s Republic of China.

Basis for Opinions

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. These standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (continued)

To the Shareholders and the Board of Directors of Highest Performances Holdings Inc. (continued)

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue recognition: Estimate of variable renewal commissions for long-term life insurance products and impact on revenue recognized — Refer to Note 2(r) to the financial statements

Critical Audit Matter Description

The agency revenues recognized for the life insurance business include estimated variable renewal commissions for long-term life insurance products. As described in Note 2(r) to its financial statements, the Company uses the expected value method and considers constraints as well to estimate variable renewal commissions, which are contingent on future renewals of initial policies or achievement of certain performance targets. Given the material uncertainty around the future renewal of the insurance policies, the estimated renewal commissions expected to be collected are recognized as revenue only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty is subsequently resolved.

Auditing management’s determination of estimated variable renewal commissions was complex and highly judgmental due to the complexity of the models used and the subjectivity required by the Company to estimate the amount for future renewals of policies, the calculation of the amount of commission revenue that is probable of not being reversed, and the determination of the timing and amount of any revenue adjustment that results from changes in the estimates of previously recorded estimated renewal commissions. The Company utilizes statistical methodologies to estimate renewal rate(s), which is a key driver when estimating the amount of future renewals of policies. To determine the constraint to be applied to the estimated renewal commissions, the Company evaluates historical experiences and data and applies judgment. For the ongoing evaluation of assumptions, the Company also analyzes whether circumstances have changed and considers any known or potential modifications to the inputs into estimated renewal commissions model and the factors that can impact the amount of renewal commissions expected to be collected in future periods such as commission rates, insurance products composition, renewal terms of insurance products and changes in relevant laws and regulations. The judgment and assumptions are continuously re-evaluated and adjusted as needed along with the accumulation of historical experiences and data when new information becomes available.

Given the significant judgment required to determine the amount of estimated variable renewal commissions, performing audit procedures to evaluate the reasonableness of management’s assessment required a high degree of auditor judgment and an increased extent of effort.

F-3

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (continued)

To the Shareholders and the Board of Directors of Highest Performances Holdings Inc. (continued)

Critical Audit Matters (continued)

Revenue recognition: Estimate of variable renewal commissions for long-term life insurance products and impact on revenue recognized — Refer to Note 2(r) to the financial statements (continued)

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the evaluation of the reasonableness of the Company’s estimate of variable renewal commissions for long-term life insurance products discussed above included the following, among others:

●

We engaged an actuarial specialist to assist in our evaluation of the appropriateness of the valuation methodology, including the determination of portfolio of contracts, and assumptions used by management to estimate variable renewal commissions by benchmarking the methods and assumptions against general market practice within the insurance industry.

●

We performed a substantive analytical procedure by developing a range of independent estimates and comparing those to the renewal rate selected by management for evaluating the reasonableness of management’s assumptions.

●

We performed substantive analytical procedures by developing an independent expectation and compared to the Company’s estimate applying our own methods as well as assumptions with the Company’s data, and we evaluated significant unexpected differences, if any.

●

We tested the completeness and accuracy of the underlying data that served as the basis for our substantive analytical procedures.

●

We performed retrospective review to compare the actual realized renewal commissions with the estimated value that has been recognized as revenues.

Business combination: Estimate of the fair values of identifiable intangible assets for purchase price allocation — Refer to Note 3(a) to the financial statements

Critical Audit Matter Description

As described in Note 3(a) to the financial statements, the Company acquired AIX Inc. on December 31, 2023 in a business combination. Management of the Company estimated the allocation of the purchase price to the identifiable tangible and intangible assets acquired and liabilities assumed, with the remaining amount being classified as goodwill based on valuation report prepared by an independent specialist.

We deemed the estimate of the fair values of identifiable intangible assets in the purchase price allocation a significant audit matter because of the significant assumptions made by management to estimate the fair values. These estimates include cash flow projections and discount rate which required a high degree of subjectivity, auditor judgment and an increased extent of effort, including the use of valuation specialists.

F-4

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (continued)

To the Shareholders and the Board of Directors of Highest Performances Holdings Inc. (continued)

Critical Audit Matters (continued)

Business combination: Estimate of the fair values of identifiable intangible assets for purchase price allocation — Refer to Note 3(a) to the financial statements (continued)

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the purchase price allocation in a business combination included the following, among others:

●

We tested the operating effectiveness of the controls over the purchase price allocation in a business combination, including management’s controls over the adoption of valuation methodology and selection of assumptions for estimating the fair values of identifiable intangible assets acquired.

●

With the assistance of the valuation specialist engaged, we evaluated the following related to the fair values of identifiable intangible assets: (i) the appropriateness of the valuation methodologies, (ii) the reasonableness of the discount rate and the long-term growth rate used by management by developing a range of independent estimates and comparing those to the discount rate and long-term growth rate selected by management, and (iii) the mathematical accuracy of the calculation of the underlying schedules used in the valuation.

●

We evaluated key business assumptions, such as the cash flow projections by comparing them to historical results and certain peer companies as well as considering relevant economic trend and industry factors to assess the reasonableness of these forecasts.

●

We tested the accuracy and completeness of the underlying data used in the valuation.

Goodwill: Insurance agency and claims adjusting reporting units — Refer to Note 2(h) and Note 8 to the financial statements

Critical Audit Matter Description

The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to its carrying amount. The Company used the discounted cash flow model to estimate fair value, which requires management to make significant estimates and assumptions related to discount rates and forecasts of future revenues and operating margins. Changes in these assumptions could have a significant impact on either the fair value, the amount of any goodwill impairment charge, or both. Both the carrying amounts of insurance agency and claims adjusting exceeded their fair values as of the measurement date and, therefore, goodwill impairment loss for each of the reporting units was recognized.

We identified goodwill for insurance agency and claims adjusting as a critical audit matter because of the significant judgments made by management to estimate the fair values of insurance agency and claims adjusting. This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to the selection of the discount rates and forecasts of future revenue and operating margins.

F-5

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (continued)

To the Shareholders and the Board of Directors of Highest Performances Holdings Inc. (continued)

Critical Audit Matters (continued)

Goodwill: Insurance agency and claims adjusting reporting units — Refer to Note 2(h) and Note 8 to the financial statements (continued)

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the forecasts of future revenues and operating unit profit margins (“forecasts”), and the selection of discount rates for the insurance agency and claims adjusting reporting units included the following, among others:

●

We tested the operating effectiveness of the controls over management’s goodwill impairment evaluation, including those over the determination of the fair values of the reporting units of insurance agency and claims adjusting, such as controls related to management’s forecasts and selection of the discount rates.

●

We evaluated management’s ability to accurately forecast by comparing actual results to management’s historical forecasts.

●

We evaluated the reasonableness of management’s forecasts by comparing the forecasts to (1) historical results, (2) communications to management, and (3) forecasted information included in analyst and industry reports.

●

We considered the reasonableness and the impact of the changes in regulatory environment on management’s forecasts.

●

With the assistance of the valuation specialists engaged, we evaluated the reasonableness of the discount rates, including testing the underlying source information and the mathematical accuracy of the calculations, and developing a range of independent estimates and comparing those to the discount rates selected by management.

/s/ Deloitte Touche Tohmatsu Certified Public Accountants LLP

Shenzhen, the People’s Republic of China

November 15, 2024

We have served as the Company’s auditor since 2024.

F-6

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of Highest Performances Holdings Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Highest Performances Holdings Inc. (formerly known as “Puyi Inc.”) (the “Company”) as of June 30, 2023, the related consolidated statements of income operations and comprehensive loss, shareholders’ equity and cash flows for each of the two years in the periods ended June 30, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2023, and the results of its operations and its cash flows for each of the two years in the period ended June 30, 2023, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Marcum Asia CPAs LLP

Marcum Asia CPAs LLP

We have served as the Company’s auditor from 2018 to 2023.

New York, New York

September 25, 2023, except for the effects of the revision discussed in Note 2(ad) as to which the date is November 15, 2024.

F-7

HIGHEST PERFORMANCES HOLDINGS INC.

Consolidated Balance Sheets
(In thousands, except for shares and per share data)

	As of June 30,
	2023		2024		2024
	RMB		RMB		US$
					Note 2(v)
ASSETS:
Current assets:
Cash and cash equivalents		164,470		295,693		40,689
Restricted cash (including restricted cash of the consolidated VIEs and VIEs’ subsidiaries that can only be used to settle obligations of the VIEs of nil and RMB10,409 as of June 30, 2023 and 2024, respectively)		-		47,920		6,594
Short term investments (including investments measured at fair value of nil and RMB576,919 as of June 30, 2023 and 2024, respectively)		-		583,918		80,350
Accounts receivable, net of allowances of RMB6,892 and RMB3,175 as of June 30, 2023 and 2024, respectively		37,601		272,931		37,557
Contract assets, net of allowances of RMB nil and RMB21 as of June 30, 2023 and 2024, respectively		-		323,222		44,477
Other receivables, net		22,554		38,819		5,342
Loan receivables, net		-		774,051		106,513
Other current assets		6,380		48,753		6,708
Total current assets		231,005		2,385,307		328,230

Non-current assets:
Restricted bank deposit - non-current (including restricted cash of the consolidated VIEs and VIEs’ subsidiaries that can only be used to settle obligations of the VIEs of nil and RMB7,804 as of June 30, 2023 and 2024, respectively)		-		26,783		3,685
Contract assets - non-current, net of allowances of nil and nil as of June 30, 2023 and 2024, respectively		-		726,879		100,022
Property, plant, and equipment, net		1,566		86,776		11,941
Intangible assets, net		1,791		417,567		57,459
Goodwill, net		-		243,109		33,453
Deferred tax assets		16,552		35,250		4,851
Investments in affiliates		-		8,614		1,185
Other non-current assets		22		225,354		31,010
Right of use assets		13,607		122,239		16,821
Total non-current assets		33,538		1,892,571		260,427
Total assets		264,543		4,277,878		588,657

F-8

HIGHEST PERFORMANCES HOLDINGS INC.

Consolidated Balance Sheets - (continued)
(In thousands, except for shares and per share data)

	As of June 30,
	2023		2024		2024
	RMB		RMB		US$
					Note 2(v)
LIABILITIES, MEZZANINE EQUITY AND EQUITY:
Current liabilities:
Short-term loan		-		98,375		13,536
Accounts payable (including accounts payable of the consolidated VIEs and VIEs’ subsidiaries without recourse to the Company of RMB3,668 and RMB5,053 as of June 30, 2023 and 2024, respectively)		6,292		194,358		26,745
Accrued commissions (including accrued commissions of the consolidated VIEs and VIEs’ subsidiaries without recourse to the Company of nil and RMB535 as of June 30, 2023 and 2024, respectively)		-		148,134		20,384
Other payables and accrued expenses (including other payables and accrued expenses of the consolidated VIEs and VIEs’ subsidiaries without recourse to the Company of RMB2,677 and RMB4,175 as of June 30, 2023 and 2024, respectively)		2,766		180,509		24,839
Accrued payroll (including accrued payroll of the consolidated VIEs and VIEs’ subsidiaries without recourse to the Company of RMB4,991 and RMB6,242 as of June 30, 2023 and 2024, respectively)		7,665		68,093		9,370
Income taxes payable (including income taxes payable of the consolidated VIEs and VIEs’ subsidiaries without recourse to the Company of RMB1,753 and RMB7,132 as of June 30, 2023 and 2024, respectively)		1,757		96,780		13,317
Current operating lease liability (including current operating lease liability of the consolidated VIEs and VIEs’ subsidiaries without recourse to the Company of RMB2,527 and RMB4,967 as of June 30, 2023 and 2024, respectively)		4,793		54,233		7,463
Other current liabilities (including other current liabilities of the consolidated VIEs and VIEs’ subsidiaries without recourse to the Company of nil and RMB10,212 as of June 30, 2023 and 2024, respectively)		803		10,505		1,446
Total current liabilities		24,076		850,987		117,100

F-9

HIGHEST PERFORMANCES HOLDINGS INC.

Consolidated Balance Sheets - (continued)

(In thousands, except for shares and per share data)

	As of June 30,
	2023			2024			2024
	RMB			RMB			US$
							Note 2(v)
Non-current liabilities:
Accrued commissions – non-current (including accrued commissions of the consolidated VIEs and VIEs’ subsidiaries without recourse to the Company of nil and RMB1,768 as of June 30, 2023 and 2024, respectively)		-			408,416			56,200
Other tax liabilities (including other tax liability of the consolidated VIEs and VIEs’ subsidiaries without recourse to the Company of RMB11,897 and RMB33,502 as of June 30, 2023 and 2024, respectively)		13,760			45,365			6,242
Deferred tax liabilities (including deferred tax liabilities of the consolidated VIEs and VIEs’ subsidiaries without recourse to the Company of nil and RMB4,317 as of June 30, 2023 and 2024, respectively)		-			237,074			32,623
Non-current operating lease liability (including non-current operating lease liability of the consolidated VIEs and VIEs’ subsidiaries without recourse to the Company of 4,810 and RMB3,306 as of June 30, 2023 and 2024, respectively)		9,673			62,954			8,664
Other non-current liabilities (including other non-current liabilities of the consolidated VIEs and VIEs’ subsidiaries without recourse to the Company of nil and RMB639 as of June 30, 2023 and 2024, respectively)		-			33,374			4,592
Total non-current liabilities		23,433			787,183			108,321
Total liabilities		47,509			1,638,170			225,421

Commitments and contingencies

Mezzanine equity:
Redeemable ordinary shares (US$0.001 par value, nil and 1,995,810 shares issued and outstanding as of June 30, 2023 and 2024, respectively) (Note 17)		-			45,794			6,301

Equity:
Ordinary shares (Authorized shares:1,950,000,000 at US$0.001 each; issued 90,472,014 and 376,581,138 shares, of which 90,472,014 and 370,551,728 shares were outstanding as of June 30, 2023 and 2024, respectively)		600			2,617			360
Treasury stock		-			(29	)		(4	)
Additional paid-in capital		224,694			1,583,017			217,830
Statutory reserves		23,071			23,064			3,174
Retained earnings		(31,498	)		(321,254	)		(44,206	)
Accumulated other comprehensive income (loss)		167			(2,293	)		(316	)
Total shareholders’ equity		217,034			1,285,122			176,838
Noncontrolling interests		-			1,308,792			180,097
Total equity		217,034			2,593,914			356,935
Total liabilities, mezzanine equity and shareholders’ equity		264,543			4,277,878			588,657

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

F-10

HIGHEST PERFORMANCES HOLDINGS INC.

Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except for shares and per share data)

	Year Ended June 30,
	2022			2023			2024			2024
	RMB			RMB			RMB			US$
										Note 2(v)
Net revenues:
Agency		-			-			900,246			123,877
Life insurance business		-			-			827,803			113,909
Non-life insurance business		-			-			72,443			9,968
Claims adjusting		-			-			222,114			30,564
Wealth management and others		188,741			114,440			62,966			8,663
Total net revenues		188,741			114,440			1,185,326			163,104
Operating costs and expenses:
Agency		-			-			(551,247	)		(75,854	)
Life insurance business		-			-			(504,866	)		(69,472	)
Non-life insurance business		-			-			(46,381	)		(6,382	)
Claims adjusting		-			-			(147,333	)		(20,274	)
Wealth management and others		(55,058	)		(20,285	)		(17,031	)		(2,343	)
Total operating costs		(55,058	)		(20,285	)		(715,611	)		(98,471	)
Selling expenses		(105,519	)		(60,560	)		(127,936	)		(17,604	)
General and administrative expenses		(102,267	)		(92,399	)		(376,132	)		(51,757	)
Total operating costs and expenses		(262,844	)		(173,244	)		(1,219,679	)		(167,832	)
Impairment loss on goodwill		-			-			(426,410	)		(58,676	)
Loss from operations		(74,103	)		(58,804	)		(460,763	)		(63,404	)
Other income (loss), net:
Net loss from fair value change		-			-			(73,761	)		(10,150	)
Investment income related to the realized gain on available-for-sale investments		-			13,561			22,382			3,080
Interest income, net		7,474			8,591			16,619			2,287
Others, net		5,037			1,660			(2,482	)		(341	)
Loss before income taxes and share of loss of affiliates		(61,592	)		(34,992	)		(498,005	)		(68,528	)
Income tax benefit (expense)		925			(8,585	)		(12,945	)		(1,781	)
Share of loss of affiliates		-			-			(1,121	)		(154	)
Net loss		(60,667	)		(43,577	)		(512,071	)		(70,463	)
Less: net loss attributable to the noncontrolling interests		-			-			(222,401	)		(30,603	)
Net loss attributable to owners of the Company		(60,667	)		(43,577	)		(289,670	)		(39,860	)
Distributed earnings:
Accretion of redeemable ordinary shares		-			-			(826	)		(114	)
Net loss attributable to ordinary shareholders of the Company		(60,667	)		(43,577	)		(290,496	)		(39,974	)

F-11

HIGHEST PERFORMANCES HOLDINGS INC.

Consolidated Statements of Operations and Comprehensive Loss - (continued)
(In thousands, except for shares and per share data)

	Year Ended June 30,
	2022			2023			2024			2024
	RMB			RMB			RMB			US$
										Note 2(v)
Net loss per share attributable to ordinary shareholders of the Company:
Basic:		(0.671	)		(0.482	)		(1.244	)		(0.171	)
Diluted:		(0.671	)		(0.482	)		(1.262	)		(0.174	)

Shares used in calculating net income per share:

Basic:		90,472,014			90,472,014			232,761,359			232,761,359
Diluted:		90,472,014			90,472,014			232,761,359			232,761,359

Net loss		(60,667	)		(43,577	)		(512,071	)		(70,463	)
Other comprehensive loss, net of tax:
Foreign currency translation adjustments		417			560			583			80
Unrealized net loss on available-for-sale investments		-			-			(3,043	)		(419	)
Total comprehensive loss		(60,250	)		(43,017	)		(514,531	)		(70,802	)
Less: Comprehensive loss attributable to the noncontrolling interests		-			-			(222,401	)		(30,603	)
Comprehensive loss attributable to ordinary shareholders the Company		(60,250	)		(43,017	)		(292,130	)		(40,199	)

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

F-12

HIGHEST PERFORMANCES HOLDINGS INC.

Consolidated Statements of Shareholders’ Equity

(In thousands, except for shares and per share data)

	Share Capital				Additional		Treasury Stock										Accumulated Other
	Number of Shares		Amounts		Paid-in Capital		Number of Shares		Amounts		Statutory Reserves			Retained Earnings			Comprehensive (Loss) income			Noncontrolling Interests		Total
			RMB		RMB				RMB		RMB			RMB			RMB			RMB		RMB
Balance as of June 30, 2021		90,472,014		600		224,694		—		—		23,103			72,714			(810	)		—		320,301
Net loss		—		—		—		—		—		—			(60,667	)		—					(60,667	)
Foreign currency translation		—		—		—		—		—		—			—			417			—		417
Provision for statutory reserves		—		—		—		—		—		211			(211	)		—			—		—
Balance as of June 30, 2022		90,472,014		600		224,694		—		—		23,314			11,836			(393	)		—		260,051
Net loss		—		—		—		—		—		—			(43,577	)		—					(43,577	)
Foreign currency translation		—		—		—		—		—		—			—			560			—		560
Provision for statutory reserves		—		—		—		—		—		7			(7	)		—			—		—
Disposal of a subsidiary (Note 3(b))		—		—		—		—		—		(250	)		250			—			—		—
Balance as of June 30, 2023		90,472,014		600		224,694		—		—		23,071			(31,498	)		167			—		217,034

F-13

HIGHEST PERFORMANCES HOLDINGS INC.

Consolidated Statements of Shareholders’ Equity - (continued)
(In thousands, except for shares and per share data)

	Share Capital				Additional			Treasury Stock											Accumulated Other
	Number of Shares		Amounts		Paid-in Capital			Number of Shares		Amounts			Statutory Reserves			Retained Earnings			Comprehensive Loss			Noncontrolling Interests			Total
			RMB		RMB					RMB			RMB			RMB			RMB			RMB			RMB
Cumulative-effect adjustment to beginning balance from adoption of ASU 2016-13		—		—		—			—		—			—			(93	)		—			—			(93	)
Net loss		—		—		—			—		—			—			(289,670	)		—			(222,401	)		(512,071	)
Foreign currency translation		—		—		—			—		—			—			—			583			378			961
Unrealized net loss on available-for-sale investments		—		—		—			—		—			—			—			(3,043	)		(2,927	)		(5,970	)
Issuance of shares for business combination (Note 3(a))		284,113,314		2,017		1,339,405			—		—			—			—			—			1,336,190			2,677,612
Addition in non-controlling interests due to business combination (Note 3(a))		—		—		—			—		—			—			—			—			266,255			266,255
Acquisition of non-controlling interests in AIX Inc.		—		—		21,697			—		—			—			—			—			(42,320	)		(20,623	)
Share-based compensation		—		—		13,188			—		—			—			—			—			10,148			23,336
Dividend declared to non-controlling interests		—		—		—			—		—			—			—			—			(29,500	)		(29,500	)
Disposal of subsidiaries		—		—		—			—		—			—			—			—			(6,438	)		(6,438	)
Repurchase 4.46% equity interests held by AIX Inc. (Note 1)		—		—		(12,952	)		4,033,600		(29	)		—			—			—			(2,782	)		(15,763	)
Accretion of redeemable ordinary shares		—		—		(826	)		—		—			—			—			—			—			(826	)
Partial disposal of equity interests in a subsidiary		—		—		(2,189	)		—		—			(7	)		7			—			2,189			—
Balance as of June 30, 2024		374,585,328		2,617		1,583,017			4,033,600		(29	)		23,064			(321,254	)		(2,293	)		1,308,792			2,593,914
Balance as of June 30, 2024 in US$ (Note 2(v))		374,585,328		360		217,830			4,033,600		(4	)		3,174			(44,206	)		(316	)		180,097			356,935

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

F-14

HIGHEST PERFORMANCES HOLDINGS INC.

Consolidated Statements of Cash Flows

(In thousands)

	Year Ended June 30,
	2022			2023			2024			2024
	RMB			RMB			RMB			US$
										Note 2(v)
Cash flows from operating activities:
Net loss		(60,667	)		(43,577	)		(512,071	)		(70,463	)
Adjustments to reconcile net loss to net cash generated from operating activities:
Depreciation expense		5,603			3,545			8,368			1,151
Amortization of intangible assets		832			848			50,837			6,995
Non-cash operating lease expense		13,636			8,753			37,091			5,104
Loss on termination of operating lease		-			-			1,031			142
Provision for allowance for credit losses on financial assets		-			-			6,821			939
Impairment loss on goodwill		-			-			426,410			58,676
Share-based compensation expenses		-			-			23,335			3,211
Loss on disposal of property, plant and equipment		-			2,951			1,293			178
Change in fair value of equity investments and contingent consideration		-			-			73,761			10,150
Provision (reversal) on uncertain tax liability		1,400			260			(2,763	)		(380	)
Investment income		-			177			(5,779	)		(795	)
Net gain on disposal of subsidiaries		-			(13,737	)		(329	)		(45	)
Share of loss of affiliates		-			-			1,121			154
Deferred taxes		3,775			15,625			9,298			1,279
Interest accrued for other receivables and loan receivables		697			-			(10,924	)		(1,503	)
Changes in operating assets and liabilities:
Accounts receivable and contract assets		(4,353	)		21,905			67,368			9,270
Other receivables and current assets		5,335			5,354			8,793			1,210
Other non-current assets		-			-			19,900			2,738
Accounts payable and accrued commissions		(631	)		(5,376	)		(61,592	)		(8,475	)
Other payables and accrued expenses		(2,674	)		(6,336	)		(38,109	)		(5,244	)
Other current liabilities		(6,547	)		(6,293	)		(4,439	)		(611	)
Income taxes payable		(5	)		(1,779	)		(5,236	)		(720	)
Lease liability		(12,556	)		(7,683	)		(36,451	)		(5,016	)
Net cash (used in) generated from operating activities		(56,155	)		(25,363	)		57,734			7,945
Cash flows from investing activities:
Purchase of short term investments		(5,000	)		-			(1,745,980	)		(240,255	)
Proceeds from disposal of short term investments		-			4,823			2,088,111			287,334
Purchase of long-term investments		-			-			-			-
Purchase of property, plant and equipment		(4,741	)		(881	)		(4,305	)		(593	)
Proceeds from disposal of property and equipment		-			-			470			65
Cash paid out for loan receivables from third parties		(130,000	)		(110,000	)		(838,800	)		(115,423	)
Cash received for loan receivables from third parties		130,000			110,000			145,500			20,021

F-15

HIGHEST PERFORMANCES HOLDINGS INC.

Consolidated Statements of Cash Flows - (continued)

(In thousands)

	Year Ended June 30,
	2022			2023			2024			2024
	RMB			RMB			RMB			US$
										Note 2(v)
Prepaid for intangible assets		(508	)		(20	)		-			-
Purchase of intangible assets		(347	)		(977	)		-			-
Proceeds from disposal of subsidiaries, net of cash disposed		-			(7,931	)		(12,761	)		(1,756	)
Cash acquired on non-cash acquisitions		-			-			601,925			82,828
Net cash (used in) generated from investing activities		(10,596	)		(4,986	)		234,160			32,221
Cash flows from financing activities:
Proceeds of issuance of ordinary shares upon private placement		-			-			44,968			6,188
Proceeds from bank borrowings		-			-			98,377			13,538
Repayment of bank borrowings and other borrowings		-			-			(164,300	)		(22,608	)
Dividend distributed to noncontrolling interest		-			-			(29,500	)		(4,059	)
Repurchase of ordinary shares from open market		-			-			(10,028	)		(1,380	)
Acquisition of non-controlling interests in subsidiaries		-			-			(26,358	)		(3,627	)
Net cash used in financing activities		-			-			(86,841	)		(11,948	)
Net (decrease) increase in cash and cash equivalents, and restricted cash		(66,751	)		(30,349	)		205,053			28,218
Cash and cash equivalents and restricted cash at beginning of year		260,593			194,259			164,470			22,632
Effect of exchange rate changes on cash and cash equivalents		417			560			873			118
Cash and cash equivalents and restricted cash at the end of the year		194,259			164,470			370,396			50,968
Reconciliation in amounts on the consolidated balance sheets:
Cash and cash equivalents at the end of the year		194,259			164,470			295,693			40,689
Restricted cash at the end of the year		-			-			74,703			10,279
Total of cash and cash equivalents and restricted cash at the end of the year		194,259			164,470			370,396			50,968

Supplemental disclosure of cash flow information:
Income taxes paid		5			4			5,236			720
Interests paid		-			-			960			132
Supplemental disclosure of non-cash investing activities:
Right-of-use assets obtained in exchange for lease obligations, net of decrease of right-of-use assets for early terminations		16,690			8,008			9,666			1,330
Acquisition of subsidiaries through issuing ordinary shares		-			-			2,341,942			322,262

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

F-16

HIGHEST PERFORMANCES HOLDINGS INC.

Notes to the Consolidated Financial Statements

(In thousands, except for shares and per share data)

(1)

Organization and Description of Business

Highest Performances Holdings Inc. (the “Company”) (formerly known as “Puyi Inc.”) was incorporated in the Cayman Islands in July 2018 and listed on the Nasdaq on March 29, 2019.

AIX Inc. (“AIX”) (formerly known as “Fanhua Inc.”) held approximately 4.46% of the Company’s equity interests since September 2018. On December 22, 2023, the Company entered into a share repurchase agreement with AIX, pursuant to which the Company agreed to repurchase all of the 4.46% equity interests (see details in Note 18). Concurrently, a wholly-owned subsidiary of AIX entered into a share transfer agreement with the Company to acquire15.41% equity interests in Fanhua Puyi Fund Sales Co., Ltd. (“Puyi Fund”), a wholly-owned subsidiary of the Company, at an aggregate consideration including a transfer price for the aforementioned 4.46% equity interests and cash of RMB10,463 which was accounted for as a partial disposal of the Group’s equity interests in Puyi Fund to AIX without losing its control over Puyi Fund. No disposal gain or loss was recognized.

On December 27, 2023, the Company and certain shareholders of AIX Inc. (the “Selling Shareholders”) entered into securities exchange agreements (the “Agreements”). According to the terms and conditions set forth in the Agreements, the Company issued an aggregate of 284,113,314 ordinary shares to the Selling Shareholders, and in exchange therefor, the Selling Shareholders transferred to the Company an aggregate of 568,226,628 ordinary shares of AIX that they beneficially owned (the “Transaction through Exchange of Equity Interests”). The transaction was completed on December 31, 2023. As a result of the Transaction through Exchange of Equity Interests, the Company owns approximately 50.10% of AIX’s equity interests and the Selling Shareholders collectively obtained around 76.67% of the Company’s equity interests. Upon the closing of the transaction, the Company directly owns a majority equity interest as well as the voting rights in AIX through which the Company possesses a controlling financial interest. On the other hand, the 76.67% of the Company’s equity interests were dispersed amongst the individual Selling Shareholders with none holding a majority equity interest in the Company. The transaction is accounted for as a business combination using the acquisition method (see details in Note 3). The Company, as a legal acquirer, is determined as the accounting acquirer while AIX is identified as the legal and accounting acquiree. In identifying the accounting acquirer, management’s assessment gives more weight to the factor in which the Company obtained control over more than 50% of the voting interests in AIX.

As of June 30, 2024, the Company has increased its shareholding in AIX to 51.65% through directly purchasing American depositary shares (“ADSs”) in the open market.

The Company, its subsidiaries and the consolidated variable interest entities (see Note 2(a) for details) are collectively referred to as the “Group”. The Group is principally engaged in the provision of agency services, insurance claims adjusting services and wealth management services in the People’s Republic of China (the “PRC”).

(2)

Summary of Significant Accounting Policies

(a)

Basis of Presentation and Consolidation

The consolidated financial statements of the Group have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The consolidated financial statements include the financial statements of the Company, all its subsidiaries and those variable interest entities (the “VIEs”) of which the Company is the primary beneficiary from the dates they were acquired or incorporated. All intercompany balances and transactions have been eliminated in consolidation.

In order to comply with the PRC laws and regulations which prohibit or restrict foreign control of companies involved in provision of internet content and other restricted businesses, the Group operates certain of its businesses which are subject to restrictions in the PRC through PRC domestic companies, whose equity interests are held by certain individuals (“Nominee Shareholders”). The Group, through its wholly foreign owned PRC subsidiaries (“WFOEs”), entered into a series of contractual arrangements with certain PRC domestic companies and the Nominee Shareholders, pursuant to which the Group is entitled to have the power to direct the activities that most significantly impact the VIEs, and receive effectively all economic benefits generated from the Nominee Shareholders’ equity interests in these VIEs, and therefore the Group consolidated these VIEs. By entering into a series of contractual arrangements through the WFOEs including Puyi Enterprises Management Consulting Co., Ltd. (“Puyi Consulting”), Fanhua Insurance Sales Service Group Company Limited (“Fanhua Group Company”) and Beijing Fanlian Investment Co., Ltd. (“Fanlian Investment”), the Group consolidates three sets of VIEs: (i) Chengdu Puyi Bohui Information Technology Co., Ltd. (“Puyi Bohui”); (ii) Shenzhen Xinbao Investment Management Co., Ltd. (“Xinbao Investment”); and (iii) Fanhua RONS (Beijing) TechnologiesCo., Ltd. (“Fanhua RONS Technologies”). Management concluded that these PRC domestic companies are consolidated VIEs of the Group, of which the Group is the primary beneficiary. As such, the Group consolidated the financial results of these PRC domestic companies and their subsidiaries in the Group’s consolidated financial statements. See Note 12 for details.

F-17

HIGHEST PERFORMANCES HOLDINGS INC.

Notes to the Consolidated Financial Statements

(In thousands, except for shares and per share data)

(2)

Summary of Significant Accounting Policies (continued)

(b)

Use of Estimates

The preparation of the consolidated financial statements in conformity with US GAAP requires management of the Group to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reported period. The Group evaluates estimates, including those related to the amounts of variable considerations of revenue contracts with respect to long-term life insurance products, fair values of identifiable assets acquired, liabilities assumed and consideration transferred in business combinations, share-based payments, goodwill impairment and deferred tax valuation allowance among others. The Group, bases these estimates on historical experience, anticipated results and trends and various other assumptions that it believes are reasonable under the circumstances including assumptions as to future events. Actual results could differ from those estimates.

(c)

Cash and Cash Equivalents and Restricted Cash

Cash and cash equivalents consist of cash on hand, bank deposits and short-term, highly liquid investments, which have original maturities of three months or less, and that are readily convertible to known amounts of cash and have insignificant risk of changes in value related to changes in interest rates.

Regarding the insurance agent service, the Group collects premiums from the insureds and remits the premiums to the appropriate insurance companies. Accordingly, as reported in Other current liabilities of the consolidated balance sheets, “premiums” are receivables from the insureds of RMB10,416 as of June 30, 2024. Unremitted net insurance premiums are held in a fiduciary capacity until disbursed by the Group. The Group invests these unremitted funds only in cash accounts held for a short term and reports such amounts as Restricted cash in the consolidated balance sheets. Also, restricted cash balance includes the entrustment deposit received from the members of eHuzhu, an online mutual aid platform operated by the Group, which is to be used during the one-year operating cycle and is therefore classified as a current asset. The balance for entrustment deposit was nil and RMB37,504 as of June 30, 2023 and 2024, respectively. Further, restricted cash balance includes guarantee deposit required by the National Financial Regulatory Administration which replaces the China Banking and Insurance Regulatory Commission as the regulatory body since May 2023 in order to protect insurance premium appropriation by insurance agency which is restricted as to withdrawal for other than current operations. Thus, the Group classifies the balance for guarantee deposit as a non-current asset. The balance for guarantee was nil and RMB26,783 as of June 30, 2023 and 2024, respectively.

(d)

Short Term Investments

All investments with original maturities less than twelve months or investments that are expected to be realized in cash during the next twelve months are classified as short-term investments. The Group accounts for short-term debt investments in accordance with ASC Topic 320, Investments – Debt Securities (“ASC 320”). The Company classifies the short-term investments in debt securities as held-to-maturity or available-for-sale, whose classification determines the respective accounting methods stipulated by ASC 320. Dividend and interest income for all categories of investments in securities are included in earnings. Any realized gains or losses on the sale of the short-term investments are determined on a specific identification method, and such gains and losses are reflected in earnings during the period in which gains or losses are realized.

F-18

HIGHEST PERFORMANCES HOLDINGS INC.

Notes to the Consolidated Financial Statements

(In thousands, except for shares and per share data)

(2)

Summary of Significant Accounting Policies (continued)

(d)

Short Term Investments (continued)

Securities that the Group has the positive intent and ability to hold to maturity are classified as held-to-maturity securities and stated at amortized cost less allowance for credit losses. The Group has no debt investments classified as trading. The Group’s short term investments are mainly available-for-sale debt securities that do not have a quoted market price in an active market. Available-for-sale investments are carried at fair values and the unrealized gains or losses from the changes in fair values are included in accumulated other comprehensive income or loss. The Group benchmarks the values of its other investments against fair values of comparable investments and reference to product valuation reports as of the balance sheet date and categorizes all fair value measures of short term investments as level 2 of the fair value hierarchy.

The Group evaluates each individual available-for-sale debt securities periodically for impairment. For investments where the Group does not intend to sell, the Group evaluates whether a decline in fair value is due to deterioration in credit risk. Credit-related impairment losses, not to exceed the amount that fair value is less than the amortized cost basis, are recognized through an allowance for credit losses on the consolidated balance sheet with corresponding adjustment in others, net of the consolidated statements of operations and comprehensive loss. Subsequent increases in fair value due to credit improvement are recognized through reversal of the credit loss and corresponding reduction in the allowance for credit loss. Any decline in fair value that is non-credit related is recorded in accumulated other comprehensive income as a component of shareholder’s equity. As of June 30, 2024, there were no investments held by the Group that had been in continuous unrealized loss position.

The Group monitors the investments for impairment indicators and makes appropriate reduction in carrying values as required whenever events or changes in circumstances indicate that the assets may be impaired. If the cost of an investment exceeds the investment’s fair value, the Group considers, among other factors, general market conditions, government economic plans, the duration and the extent to which the fair value of the investment is less than cost and the Group’s intent and ability to hold the investment to determine whether an impairment has occurred.

No impairment loss on short term investments was identified for years ended June 30, 2022, 2023 and 2024, respectively.

F-19

HIGHEST PERFORMANCES HOLDINGS INC.

Notes to the Consolidated Financial Statements

(In thousands, except for shares and per share data)

(2)

Summary of Significant Accounting Policies (continued)

(e)

Accounts Receivable and Contract Assets, net

Accounts receivable are recorded at the amount that the Group expects to collect and do not bear interest. Accounts receivable primarily consists of fees predominantly due from insurance companies for agency and claims adjusting services and amounts due from fund product providers for wealth management services. Contract assets are recorded when a long-term life insurance policy becomes effective, of which, the portion in relation to initial commissions earned is reclassified to accounts receivable upon the expiration of the hesitation period; and the remaining portion arising from estimated renewal commissions will be reclassified to accounts receivable once the initial policy has been renewed and/or the Group has achieved certain renewal targets in subsequent years within the renewal term of the policy. Accounts receivable are generally settled within 90 days since the initial recognition pursuant to the payment terms in the contract with customers, of which a minor portion relating to bonus earned based on annual performance condition is settled within one year.

The Group evaluates the collectability of its accounts receivable and contract assets based on a combination of factors. The Group generally does not require collateral on trade receivables and contract assets as the majority of the Group’s customers are large insurance companies and fund product producers. The provision of credit losses for accounts receivable and contract assets is based upon the current expected credit losses (“CECL”) model by pooling accounts receivable and contract assets into various age buckets. The entire contract assets balance is included in the bucket of within 1 year. The expected credit loss rates applied range from 0.01% to 100%. In assessing the CECL, the Group considers both quantitative and qualitative information that is reasonable and supportable, including relevant available information from internal and external sources, related to past events, historical credit loss experience, current and future economic events as well as other conditions that may be beyond the Group’s control. Credit loss expenses are assessed periodically and included in general and administrative expense on the consolidated statements of operations and comprehensive loss. Accounts receivable that are deemed uncollectible when all collection efforts have been exhausted are written off against the allowance for credit loss.

Accounts receivable and contract assets, net is analyzed as follows:

	As of June 30,
	2023			2024
	RMB			RMB
Accounts receivable		44,493			276,104
Contract assets (See Note 2(r))		-			1,050,124
Allowance for doubtful accounts		(6,892	)		(3,196	)
Accounts receivable and contract assets, net		37,601			1,323,032

The following table summarizes the movement of the Group’s allowance for expected credit losses of accounts receivable and contract assets:

	2023		2024
	RMB		RMB
Balance at the beginning of the year		6,892		6,892
Current period provision of expected credit losses		-		3,196
Write-offs		-		(6,892	)
Balance at the end of the year		6,892		3,196

F-20

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(2)

Summary of Significant Accounting Policies (continued)

(f)

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Depreciation and amortization are calculated using the straight-line method over the following estimated useful lives, taking into account residual value:

	Estimated useful life (Years)	Estimated residual value
Building	20-36	0%
Office equipment, furniture and fixtures	3-5	0%-3%
Motor vehicles	3-10	0%-3%
Leasehold improvements	Shorter of the remaining lease terms and estimated useful lives	0%

The depreciation methods and estimated useful lives are reviewed regularly. The following table summarizes the depreciation expense recognized in the consolidated statements of operations and comprehensive loss:

	2022		2023		2024
	RMB		RMB		RMB
Operating costs		-		-		392
Selling expenses		3,166		3,026		2,036
General and administrative expenses		2,437		519		5,940
Depreciation expense		5,603		3,545		8,368

(g)

Business combinations and non-controlling interests

The Group evaluates acquisitions of assets to assess whether or not the transaction should be accounted for as a business combination or asset acquisition. In determining whether a particular set of activities and assets is a business, the Group assesses whether the set of assets and activities acquired includes, at a minimum, an input and substantive process and whether the acquired set has the ability to produce outputs. The Group applies a ’screen test’ that permits a simplified assessment of whether an acquired set of activities and assets is not a business. The test is met if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets.

Transactions in which the acquired is considered a business are accounted for as a business combination as described below. Conversely, transactions not considered as business acquisition are accounted for as acquisition of assets and liabilities. In such transactions, the cost of acquisition is allocated proportionately to the acquired identifiable assets and liabilities, based on their proportionate fair value on the acquisition date. In an asset acquisition, no goodwill is recognized.

The Group accounts for its business combinations using the acquisition method of accounting in accordance with ASC 805 “Business Combinations”. The consideration transferred in a business combination is measured as the aggregate of the acquisition-date fair value of the assets transferred, liabilities incurred by the Group to the selling shareholders of the acquiree, and the equity interests issued by the Group. Transaction costs directly attributable to the acquisition are expensed as incurred. Identifiable assets acquired and liabilities assumed are measured separately at their fair value as of the acquisition date, irrespective of the extent of any non-controlling interests. The excess of (i) the consideration transferred, the fair value of any non-controlling interests and acquisition date fair value of any previously held equity interest in the acquiree over (ii) the fair value of the identifiable net assets of the acquiree, is recorded as goodwill.

F-21

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(2)

Summary of Significant Accounting Policies (continued)

(g)

Business combinations and non-controlling interests (continued)

The consideration for the Group’s business acquisitions may include future payments that are contingent upon the occurrence of a particular event or events. Contingent consideration also takes the form of a right of the Group to the returns of previously transferred assets or issued equity interests from the sellers of the acquired business. Both the rights and obligations for such contingent consideration returns and payments are recorded at fair value on the acquisition date. The Group’s contingent right to receive a return of some equity interests issued (i.e., contingently returnable shares) is recognized as an asset and measured at fair value. The Group’s obligation to pay contingent consideration is recognized and classified as a liability and measured at fair value. The contingent consideration rights and obligations are subsequently evaluated each reporting period with changes in fair value recognized as a gain or loss and recorded within change in the fair value of contingent assets and liabilities in the consolidated statements of income and comprehensive income.

For the Group’s majority-owned subsidiaries and subsidiaries of VIEs, a non-controlling interest is recognized to reflect the portion of their equity which is not attributable, directly or indirectly, to the Group. Consolidated net income (loss) on the consolidated statements of operations and comprehensive income (loss) includes the net income (loss) attributable to non-controlling interests. The cumulative results of operations attributable to non-controlling interests, are recorded as non-controlling interests on the Group’s consolidated balance sheets.

(h)

Goodwill and Other Intangible Assets

Goodwill

Goodwill represents the excess of costs over fair value of net assets of businesses acquired in a business combination. Goodwill is not amortized, but is tested for impairment at the reporting unit level at least on an annual basis at the balance sheet date or more frequently if certain indicators arise. The Group operated in three reporting units starting from December 31, 2024 upon the completion of a business combination transaction (See details in Note 3(a)). For the years ended June 30, 2022 and 2023, the Group operated one reporting unit.

The impairment test for goodwill is performed as of year-end or if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount by comparing the fair value of a reporting unit with its carrying value. In testing goodwill for impairment, the Group elects to perform a qualitative assessment to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. A quantitative assessment is performed if the qualitative assessment results in a more-likely-than-not determination. If the fair value of the reporting unit exceeds its carrying amount, goodwill is not impaired and no further testing is required. If the fair value of the reporting unit is less than the carrying value, an impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

The impairment review is highly judgmental and involves the use of significant estimates and assumptions. These estimates and assumptions have a significant impact on the amount of any impairment charge recorded. Estimates of fair value are primarily determined by using discounted cash flows. Discounted cash flows method is dependent upon assumptions of future sales trends, market conditions and cash flows of each reporting unit over several years. Actual cash flows in the future may differ significantly from those previously forecasted. Other significant assumptions include growth rates, operating margins and the discount rates applicable to future cash flows. Based on this quantitative test in 2024, it was determined that the carrying amount of the insurance agency reporting unit exceeded its fair value and, therefore, the Group recorded an impairment loss on goodwill of RMB426,410 (see details in Note 8) for the year ended June 30, 2024.

F-22

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(2)

Summary of Significant Accounting Policies (continued)

(h)

Goodwill and Other Intangible Assets (continued)

Intangible Assets

Identifiable intangibles assets are required to be determined separately from goodwill based on their fair values. In particular, an intangible asset acquired in a business combination should be recognized as an asset separate from goodwill if it satisfies either the “contractual-legal” or “separability” criterion. Intangible assets with a finite economic life are carried at cost less accumulated amortization. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets that are not considered to have an indefinite useful life are amortized over their estimated useful lives on a straight-line basis.

The estimated useful lives for the Group’s intangible assets are as follows:

		Estimated useful life (Years)
Software and operating system		3
Non-compete agreements		5.8 - 6
Agent resources		2.8 - 3
Insurance brokerage licenses		20
Trade names		5

(i)

Investments in Affiliates

The Group uses the equity method of accounting for investments in which the Group has the ability to exercise significant influence, but does not have a controlling interest.

On April 1, 2024, the Group’s one majority-owned subsidiary in Hong Kong, i.e., BWWS Limited (“BWW”) disposed its controlling financial interests in subsidiaries of Brave Moon Limited (“BML”) and Avantech Solutions Limited (“Avantech”) to the minority shareholder through entering into a supplement joint venture agreement (the “Joint Venture Agreement”) to share the power with the other shareholder to jointly control the strategic operating, investing, and financing decisions over BML and Avantech. The Group accounted for the investments using the equity method and the fair value of the retained interests as of the date of joint control forms the basis for the initial measurement. The Group therefore recorded an investment loss of RMB79 in others, net in the consolidated statement of operations and comprehensive loss and derecognized the non-controlling interests in BML and Avantech which are not attributable, directly or indirectly, to the Group amounting to RMB6,438 in the consolidated statement of shareholders’ equity for the year ended June 30, 2024.

The Group continually reviews its investment in equity investees to determine whether a decline in fair value to an amount below the carrying value is other-than-temporary. The primary factors the Group considers in its determination are the duration and severity of the decline in fair value; the financial condition, operating performance and the prospects of the equity investee; and other company specific information such as the stock price of the investee and its corresponding volatility, if publicly traded, the Group’s intent and ability to hold the investment until recovery, and changes in the macro-economic, competitive and operational environment of the investee. If the decline in fair value is deemed to be other-than-temporary, the carrying value of the equity investee is written down to fair value.

F-23

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(2)

Summary of Significant Accounting Policies (continued)

(j)

Long-term Investments

Other non-current assets mainly represent long-term equity investments accounted for under the measurement alternative method, contingent consideration measured at fair value through profit or loss (see Note 2 (g) and Note 3 for details) and an investment in debt securities classified as held-to-maturity which is measured at amortized cost.

Equity securities without readily determinable fair value

The Group has long-term investments in equity security of certain privately held companies which the Group exerts no significant influence or a controlling interest. As a result of adoption of “Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU 2016-01”) in January 1, 2019, equity securities without readily determinable fair values that do not qualify for the practical expedient in ASC 820, Fair Value Measurements and Disclosure to estimate fair value using the net asset value per share (or its equivalent) of the investment, are measured and recorded using a measurement alternative that measures the securities at cost less impairment, if any, plus or minus changes resulting from qualifying observable price changes. Significant judgments are required to determine whether observable price changes are orderly transactions and identical or similar to an investment held by the Group.

During each reporting period, the Group makes a qualitative assessment considering impairment indicators to separately evaluate whether each of its equity securities without readily determinable fair value is impaired. Impairment indicators that the Group considers include, but are not limited to a significant deterioration in the earnings performance, credit rating, asset quality, or business prospects of the investee, factors such as negative cash flows from operations and working capital deficiencies that raise significant concerns about the investee’s ability to continue as a going concern, current economic and market conditions and other specific information. If a qualitative assessment indicates that the investment is impaired, the entity has to estimate the investment’s fair value in accordance with the principles of ASC 820. If the fair value is less than the investment’s carrying value, the Group recognizes an impairment loss in earnings equal to the difference between the carrying value and fair value.

Investment in debt securities with embedded features

As of June 30, 2024, the Group held a two-year-term debt security with a principal amount valued at RMB125,000 with a fixed return rate of 6% and an additional earning right contingent upon the satisfaction of certain conditions within the contract term. The Group considered the host contract as a debt security and classified the investment as a held-to-maturity security which is measured subsequently at amortized cost as the Group has the positive intent and ability to hold it to maturity. As of June 30, 2024, the current portion of the held-to-maturity security was recorded in short term investment and the non-current portion was recorded in other non-current assets, net of the consolidated balance sheet, respectively.

The Group evaluated the additional earning right as a derivative instrument that is “embedded” to the host contract in accordance with ASC 815. The Group considered the stated and implied substantive features of the contract as well as the economic characteristics and risks of the hybrid instrument and determined that the additional earning right be considered as an embedded derivative separated from the host contract and accounted it for as a derivative instrument. The Group classified the embedded derivative measured at fair value and change in fair value is charged through profit or loss. As of June 30, 2024, the fair value of the embedded derivative was immaterial.

F-24

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(2)

Summary of Significant Accounting Policies (continued)

(k)

Impairment of Long-Lived Assets

Property, plant, and equipment and intangible assets with definite lives are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying value of the asset exceeds the fair value of the asset. No impairment of long-lived assets was recognized for the years ended June 30, 2022, 2023 and 2024.

(l)

Insurance Premium Payables

Insurance premium payables are insurance premiums collected on behalf of insurance companies but not yet remitted as of the balance sheet dates.

(m) Redeemable ordinary shares

The Company accounts for ordinary shares subject to possible redemption in accordance with ASC 480 “Distinguishing Liabilities from Equity. ” Ordinary shares subject to conditional redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the control of the Company is classified as mezzanine equity. The Company evaluates the probability of these redeemable ordinary shares becoming redeemable at each reporting date. If it is probable that the redeemable ordinary shares will become redeemable, the Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of the instrument to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable ordinary shares shall be affected by charges against retained earnings. Accordingly, if the ordinary shares are not currently redeemable and it is not probable that the ordinary shares will become redeemable, subsequent adjustment of the amount presented in temporary equity is unnecessary.

(n)

Treasury Shares

Treasury shares represent ordinary shares repurchased by the Group that are no longer outstanding and are held by the Group. The repurchased ordinary shares are recorded whereby the total par value of shares acquired is recorded as treasury stock and the difference between the par value and the amount of cash paid is recorded in additional paid-in capital. If additional paid-in capital is not available or is not sufficient, the remaining amount is to reduce retained earnings.

(o)

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred income taxes are recognized for temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements, net operating loss carryforwards and credits by applying enacted statutory tax rates applicable to future years. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

The Group records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) it determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Group recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. The Group recognizes interest and penalties related to unrecognized tax benefits, if any, on the income tax expense line in the accompanying consolidated statement of operations and comprehensive loss. Accrued interest or penalties are included on the other tax liabilities line in the consolidated balance sheets.

F-25

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(2)

Summary of Significant Accounting Policies (continued)

(p)

Share-based Compensation

All forms of share-based payments to employees and nonemployees, including restricted share units, stock options and stock purchase plans, are treated the same as any other form of compensation by recognizing the related cost in the consolidated statements of operations and comprehensive loss. The Group recognizes compensation cost for an award with only service conditions that has a graded vesting schedule on a straight-line basis over the requisite service period for the entire award, provided that the amount of compensation cost recognized at any date must at least equal to the portion of the grant-date value of the award that is vested at that date. For awards with both service and performance conditions, if each tranche has an independent performance condition for a specified period of service, the Group recognizes the compensation cost of each tranche as a separate award on a straight-line basis; if each tranche has performance conditions that are dependent of activities that occur in the prior service periods, the Group recognizes the compensation cost on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in-substance, multiple awards. The Group has made an accounting policy election to account for forfeitures when they occur for an award with only service conditions. For an award with a performance condition, the Group continues to assess at each reporting period whether it is probable that the performance condition will be achieved. No compensation cost is recognized for instruments that employees and nonemployees forfeit because a service condition or a performance condition is not satisfied.

Employee share-based compensation

Compensation cost related to employee stock options or similar equity instruments is measured at the grant date based on the fair value of the award and is recognized over the service period, which is usually the vesting period. If an award requires satisfaction of one or more performance or service conditions (or any combination thereof), compensation cost is recognized if the requisite service is rendered, while no compensation cost is recognized if the requisite service is not rendered.

Nonemployee share-based compensation

Consistent with the accounting requirement for employee share-based compensation, nonemployee share-based compensation within the scope of Topic 718 are measured at grant-date fair value of the equity instruments, which the Group is obligated to issue when the service has been rendered and any other conditions necessary to earn the right to benefit from the instruments have been satisfied.

(q)

Employee Benefit Plans

As stipulated by the regulations of the PRC, the Group’s subsidiaries in the PRC participate in various defined contribution plans organized by municipal and provincial governments for its employees. The Group is required to make contributions to these plans at a percentage of the salaries, bonuses and certain allowances of the employees. Under these plans, certain pension, medical and other welfare benefits are provided to employees. The Group has no other material obligation for the payment of employee benefits associated with these plans other than the annual contributions described above. The contributions are charged to the consolidated statements of operations and comprehensive loss as they become payable in accordance with the rules of the above mentioned defined contribution plans.

F-26

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(2)

Summary of Significant Accounting Policies (continued)

(r)

Revenue Recognition

The Group’s revenue from contracts with insurance companies is derived principally from the provision of agency and claims adjusting services, while revenue from contracts with fund product providers or issuers is derived principally from wealth management service. Insurance companies and fund product providers are defined as the Group’s customers under ASC 606 “Revenue from Contracts with Customers” (“ASC 606”).

The following is a description of the accounting policy for the principal revenue streams of the Group.

Insurance agency services revenue

The Group derives agency revenue serving as a sales agent to distribute various life insurance products and a wide rage of non-life insurance products on behalf of insurance companies by which the Group is entitled to receive an initial commission from the insurance companies based on the premium paid by the policyholders for the related insurance policy sold. For life insurance agency, the Group is also entitled to renewal commissions when the policyholder renews the policy within the renewal term of the original policy as such life insurance products are typically long-term products.

The Group has identified its promise to sell insurance products on behalf of an insurance company as the performance obligation in its contracts with the insurance companies. The Group’s performance obligation to the insurance company is satisfied and revenue is recognized at a point in time when an insurance policy becomes effective. Specifically for life insurance agency business, certain contracts include the promise to provide certain post-sales administrative services to policyholders on behalf of the insurance companies, such as responding to the policyholder inquiries, facilitating the renewal process and/or gathering information from the policyholder to assist the insurance companies to update the contact information of the policy holder, the Group has concluded such services are administrative in nature and immaterial, and none of these activities on their own results in a transfer of a good or services to the insurance company in the context of the contract. Accordingly, no performance obligation exists after a policy becomes effective.

Initial placement of an insurance policy

The Group recognizes agency revenue related non-life insurance products (which is short term in nature and related premiums are collected upfront) when an insurance policy becomes effective. The commission to be earned is required to be partially refunded contingently on policy cancellations. Based on its past experience, subsequent commission adjustments in connection with non-life insurance policy cancellations have been de minims to date, and are recognized upon notification from the insurance carriers.

For life insurance products, there is generally a 10 to 15 days hesitation period after an initial placement of a life insurance policy, during which the policyholder has a legal right to unconditionally cancel the effective policy regardless of the reasons. According to relevant terms of the insurance agency contracts with customers, the Group reconciles information of policies sold which also includes policies that have been cancelled by policyholders within the hesitation period, with the insurance companies on a monthly basis. Therefore, the Group estimates cancellation of policies that have become effective but are still within the hesitation period based on subsequent actual data at each reporting date. The cancellation of an effective life insurance policy by the policyholder after the hesitation period does not require the Group to refund initial commission to insurance companies, but rather impacts the Group’s estimate on future commission related to renewal(s) of the policy.

F-27

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(2)

Summary of Significant Accounting Policies (continued)

(r)

Revenue Recognition (continued)

Insurance agency services revenue (continued)

Initial placement of an insurance policy (continued)

In addition, for life insurance agency, the Group may receive a performance bonus from insurance companies as agreed and per contract provisions. Once the Group achieves a certain sales volume based on respective agency agreements, the bonus will become due. Performance bonus represents a form of variable consideration associated with certain sales volume, for which the Group earns commissions. The Group estimates the amount of consideration with a constraint applied that it will be received in the coming year such that a significant reversal of revenue is not probable, and includes the performance bonus as part of the transaction price. For the years ended June 30, 2022, 2023 and 2024, the Group recognized contingent performance bonus of nil, nil and RMB3,675, respectively.

Renewals of a life insurance policy

For the long-term life insurance products, in addition to the initial commission earned, the Group is also entitled to subsequent renewal commission and compensation, and renewal performance bonus which represents variable considerations and are contingent on future renewals of initial policies or the Group achieves its performance target.

When making estimates of the amount of variable consideration to which the Group expects to be entitled, the Group uses the expected value method and evaluates many factors, including but not limited to, insurance companies mix, product mix, renewal term of various products, renewal premium rates and commission rates, to determine the method(s) of measurement, relevant inputs and the underlying assumptions. The Group considers constraints as well when determining the amount which should be included in the transaction price.

The Group performs an ongoing evaluation of the appropriateness of the constraint applied and will consider the sufficiency of evidence that would suggest that the underlying the assumptions has changed. The Group makes an estimate of variable considerations over the portfolio of contracts based on accumulated historical data and experiences. The estimated renewal commissions are contingent on future renewals of initial policies or achievement of certain performance targets. Given the material uncertainty around the future renewals of the insurance policies, the estimated renewal commissions expected to be collected are recognized as revenue only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty is subsequently resolved. The judgment and assumptions are continuously re-evaluated and adjusted as needed along with the accumulation of historical experiences and data when new information becomes available. Actual renewal commissions in the future may differ significantly from those previously estimated.

Insurance claims adjusting services revenue

For insurance claims adjusting services, performance obligations are considered met and revenue is recognized when the services are rendered and completed, at the time loss adjusting reports are confirmed being received by insurance companies. The Group does not accrue any service fee before the receipt of an insurance company’s acknowledgement of receiving the adjusting reports. Any subsequent adjustments in connection with discounts which have been de minims to date are recognized in revenue upon receiving notifications from the insurance companies.

F-28

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(2)

Summary of Significant Accounting Policies (continued)

(r)

Revenue Recognition (continued)

Wealth management service revenue

The Group derives wealth management revenue serving as a sales agent to distribute and manage various fund products on behalf of fund product producers or issuers (typically referred to as “fund managers”). The fund products include publicly raised fund products, privately raised fund products and portfolio fund products. The Group is entitled to receive transaction-based commissions when product purchasers (the “investors”) purchase fund products, and scale-based management fees during the period when the investors are continuously holding their shares of fund products they purchase. For the privately raised fund products, the Group is also entitled to receive performance-based distribution commissions. The Group enters into distribution agreements with fund managers which specify the key terms and conditions of the arrangement. Such agreements do not include rights of return, credits or discounts, rebates, price protection or other similar privileges.

For the distribution service, the Group has identified its promise to sell fund products on behalf of a fund manager as the performance obligation in its contracts with the fund manager. The Group’s performance obligation to the fund manager is satisfied and revenue is recognized at a point in time when both of the following two criteria are met: (i) the investors have entered into a purchase or subscription contract with the fund manager and the investor has transferred the subscription fund to an escrow account designated by the fund manager and (ii) the fund manager has issued a formal notice to confirm the distribution of the fund product. Distribution commissions are calculated by multiplying a pre-agreed charge rate with the fund managers on the amount of products transacted, such as purchasing or redemption. Such commissions are typically paid on or shortly after the transaction is completed.

For the management service, the Group’s performance obligation to the fund manager is continuously providing the investors with investment advices through circulating latest information of the net value of the fund products in a timely manner and giving advices for a long-term holding of the fund products, and satisfying investors’ all other needs related to the fund products they purchase and hold. The aforementioned performance obligation is satisfied and revenue is recognized over the investors’ holding period of the products they purchase. Management commissions are calculated based on pre-agreed contracts with the fund mangers as either (i) pre-agreed percentage with the daily outstanding balance confirmed with the fund manager, prorated daily, (ii) pre-agreed charge rate on the amount of products transacted, prorated by the actual period length of the product held by investors, or (iii) as a percentage of the fair value of the total investment in the fund products, calculated daily. Management fees are typically paid on a regular basis (typically quarterly or annually) and are not subject to clawback once determined.

In addition, the Group earns performance-based commissions from the fund manager for distribution of privately raised fund products, which are dependent on the extent by which the fund’s investment performance exceeds a certain threshold at the end of the contract term. Such performance-based fees earned based on the performance of the underlying fund are a form of variable consideration in its contracts with customers to provide investment management services. Those performance-based income is typically calculated and distributed when the cumulative return of the fund can be determined. Performance-based income will not be recognized as revenue until (a) it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur, or (b) the uncertainty associated with the variable consideration is subsequently resolved. At each reporting date, the Group updates its estimate of the transaction price and concludes that it cannot include its estimate of performance-based income in the transaction price because performance-based income has various possible consideration amounts and the experience that the Group has with similar contracts is of little predictive value in determining the future performance of the funds, thus the Group cannot conclude that it is probable that a significant reversal in the cumulative amount of revenue recognized would not occur.

F-29

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(2)

Summary of Significant Accounting Policies (continued)

(r)

Revenue Recognition (continued)

Disaggregation of revenue

The following tables show, by timing of revenue recognition, revenue from contracts with customers disaggregated by service lines for the years ended June 30, 2022, 2023 and 2024:

	Year Ended June 30, 2022
	Point in Time		Over Time		Total
	RMB		RMB		RMB
Wealth management and others		97,719		91,022		188,741
Total net revenues		97,719		91,022		188,741

	Year Ended June 30, 2023
	Point in Time		Over Time		Total
	RMB		RMB		RMB
Wealth management and others		51,358		63,082		114,440
Total net revenues		51,358		63,082		114,440

	Year Ended June 30, 2024
	Point in Time		Over Time		Total
	RMB		RMB		RMB
Agency		890,453		9,793		900,246
Life insurance business		827,803		-		827,803
Non-life insurance business		62,650		9,793		72,443
Claims adjusting		222,114		-		222,114
Wealth management and others		22,787		40,179		62,966
Total net revenues		1,135,354		49,972		1,185,326

Contract balances

The Group’s contract balances include accounts receivable and contract asset which derives only from the insurance agency business. The balances of accounts receivable and contract asset as of June 30, 2023 and 2024 are all derived from contracts with customers. The Group presented contract assets separately in the consolidated balance sheets which include both the amount derived from estimated renewal commissions and the amount of commissions in relation to policies that are still within the hesitation period by the year-end date.

Practical expedients and exemptions

The Group generally expenses sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within selling expenses in the consolidated statements of operations and comprehensive loss, as the amortization period is less than one year and the Group has elected the practical expedient included in ASC 606.

The Group has applied the optional exemption provided by ASC 606 to not disclose the value of remaining performance obligations not yet satisfied as of period end for contracts with original expected duration of one year or less.

Contract liability

Contract liability relates to unsatisfied performance obligations at the end of each reporting period and consists of cash payment received in advance and was recorded as “other current liabilities” in the consolidated balance sheets. The amount of revenue recognized during the years ended June 30, 2023 and 2024 that was previously included in the contract liabilities balance as of June 30, 2022 and 2023 was RMB1,500 and RMB803, respectively.

Value-added tax and surcharges

The Group presents revenue net of tax surcharges and value-added taxes incurred. The tax surcharges amounted to RMB906, RMB326 and RMB6,089 for the years ended June 30, 2022, 2023 and 2024, respectively.

Total value-added taxes paid by the Group during the years ended June 30, 2022, 2023 and 2024 amounted to RMB6,668, RMB4,293 and RMB57,593 respectively.

F-30

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(2)

Summary of Significant Accounting Policies (continued)

(s)

Fair Value of Financial Instruments

Fair value is considered to be the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Group considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability. The established fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels of inputs may be used to measure fair value include:

Level 1

Applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2

Applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1 that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3

Applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

The carrying values of the Group’s financial instruments, including cash and cash equivalents, restricted cash, accounts receivable, insurance premium payables, other receivables, short-term loan, accounts payable and other payables, approximate their fair values due to the short-term nature of these instruments.

The carrying amounts of the long-term receivables and payables approximate their fair value as the interest rates are comparable to the prevailing interest rates in the market.

Measured at fair value on a recurring basis

As of June 30, 2023 and 2024, information about inputs into the fair value measurements of the Group’s assets and liabilities that are measured at fair value on a recurring basis in periods subsequent to their initial recognition is as follows.

Fair Value Measurements
at Reporting Date Using

Description

As of
June 30,
2023

Quoted
Prices
in Active
Markets for
Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

RMB

Short-term investments - debt security

Investments - equity security recorded within other current assets

Contingent consideration

F-31

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(2)

Summary of Significant Accounting Policies (continued)

(s)

Fair Value of Financial Instruments (continued)

Measured at fair value on a recurring basis (continued)

			Fair Value Measurements at Reporting Date Using
Description	As of June 30, 2024		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	RMB		RMB		RMB		RMB
Short-term investments - debt security		580,231		-		580,231		-
Investments – equity security recorded within other current assets		13,776		13,776		-		-
Contingent consideration		22,267		-		-		22,267

The majority of debt security consists of investments in bank financial products, trust products and asset management plans that normally pay a prospective fixed rate of return. These investments are recorded at fair values on a recurring basis. The Group measured these investments at fair values and the unrealized gains or losses from the changes in fair values are included in accumulated other comprehensive income or loss, at the balance sheet date. It is classified as Level 2 of the fair value hierarchy since fair value measurement at the reporting date is benchmarked against fair value of comparable investments.

The Group measures its equity investments with readily determinable fair value at its quoted price in active markets. There were no transfers into or out of Level 1 and Level 2 as of June 30, 2024.

Level 3 fair value of contingent consideration arising from business combination is determined using the Monte Caro simulation model and significant assumptions including the probability of achieving performance targets for each scenario and estimated share price during the specified period. For the year ended June 30, 2024, the Group recorded gains on changes in fair value of contingent consideration of RMB22,267.

Measured at fair value on a non-recurring basis

The Group measures certain assets, including equity securities without readily determinable fair values, equity method investments and intangible assets, at fair value on a nonrecurring basis when they are deemed to be impaired. The fair values of these investments and intangible assets are determined based on valuation techniques using the best information available, and may include management judgments, future performance projections, etc. An impairment charge to these investments is recorded when the cost of the investment exceeds its fair value and for equity method investments, this condition is determined to be other-than-temporary. Impairment charge to the intangible assets is recorded when their carrying amounts may not be recoverable.

Goodwill (Note 8) is measured at fair value on a nonrecurring basis, and they are recorded at fair value only when impairment is recognized by applying unobservable inputs such as forecasted financial performance of the acquired business, discount rate, etc. to the discounted cash flow valuation methodology that are significant to the measurement of the fair value of these assets (Level 3).

F-32

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(2)

Summary of Significant Accounting Policies (continued)

(s)

Fair Value of Financial Instruments (continued)

Measured at fair value on a non-recurring basis (continued)

Investments in affiliates are measured at fair value on a nonrecurring basis, and they are recorded at fair value only when there is other-than-temporary-impairment. The fair value of investment in an affiliate that is publicly listed is determined based on the market value of its share (Level 1) on the date such impairment is recorded.

(t)

Foreign Currencies

The functional currency of the Company and AIX is the United States dollar (“USD”). Hong Kong dollar is the functional currency of the majority offshore subsidiaries. The functional currency of all the other significant subsidiaries and the consolidated VIEs is Renminbi (“RMB”). Assets and liabilities are translated at the exchange rates at the balance sheet date, equity accounts are translated at historical exchange rates and revenues, expenses, gains and losses are translated using the average rate for the year. Translation adjustments are reported as cumulative translation adjustments and are shown as a separate component of other comprehensive income or loss in the consolidated statements of operations and comprehensive loss. The Group has chosen the RMB as their reporting currency.

The functional currency of most of the Company’s subsidiaries is RMB. Transactions in other currencies are recorded in RMB at the rates of exchange prevailing when the transactions occur. Monetary assets and liabilities denominated in other currencies are translated into RMB at rates of exchange in effect at the balance sheet dates. Exchange gains and losses are recorded in the consolidated statements of operations and comprehensive loss.

(u)

Foreign Currency Risk

The RMB is not a freely convertible currency. The State Administration for Foreign Exchange, under the authority of the People’s Bank of China, controls the conversion of RMB into foreign currencies. The value of RMB is subject to changes in central government policies and international economic and political developments that affect supply and demand in the China Foreign Exchange Trading System market of cash and cash equivalents and restricted cash. The Group had aggregate amounts of RMB153,915 and RMB327,932 of cash and cash equivalents and restricted cash denominated in RMB as of June 30, 2023 and 2024, respectively.

(v)

Translation into USD

The consolidated financial statements of the Group are stated in RMB. Translations of amounts from RMB into USD are solely for the convenience of the readers outside of China and were calculated at the rate of US$1.00 = RMB7.2672, representing the noon buying rate in the City of New York for cable transfers of RMB on June 30, 2024, the last business day in fiscal year 2024, as set forth in H.10 statistical release of the Federal Reserve Bank of New York. The translation is not intended to imply that the RMB amounts could have been, or could be, converted, realized or settled into USD at such rate.

F-33

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(2)

Summary of Significant Accounting Policies (continued)

(w)

Segment Reporting

As of June 30, 2023, the Group managed its business as a single operating segment engaged in the provision of distribution and managing wealth management services in the PRC. On December 31, 2023, the Group identified two additional operating segments upon the acquisition of AIX which are insurance agency and claims adjusting. As a result, as of June 30, 2024, the Group operated three segments: (1) the insurance agency segment, which mainly consists of providing agency services for a wide range of life and non-life insurance products to individual clients, (2) the claims adjusting segment, which consists of providing pre-underwriting survey services, claim adjusting services, disposal of residual value services, loading and unloading supervision services, and consulting services, and (3) the wealth management segment, which mainly consists of providing distribution and managing wealth management services. Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by the Group’s chief operating decision maker in deciding how to allocate resources and in assessing performance.

Substantially all revenues of the Group are derived in the PRC and all long-lived assets are located in the PRC.

(x)

Earnings per Share (“EPS”) or ADS

Basic EPS is calculated by dividing the net income available to common shareholders by the weighted average number of ordinary shares /ADS outstanding during the year. Diluted EPS is calculated by using the weighted average number of ordinary shares /ADS outstanding adjusted to include the potentially dilutive effect of outstanding share-based awards, unless their inclusion in the calculation is anti-dilutive.

The weighted average number of ordinary shares outstanding excludes the number of ordinary shares issued in business combinations (see Note 3 for details) through an exchange of equity interests that are outstanding but contingently returnable, all or partial, if necessary conditions are not satisfied by specific periods.

(y)

Advertising Costs

Advertising costs are expensed as incurred. Advertising costs amounted to RMB3,970, RMB3,733 and RMB12,797 for the years ended June 30, 2022, 2023 and 2024, respectively.

(z)

Leases

The Group leases office space, vehicles and certain equipment under operating leases for terms ranging from short term (under 12 months) to 7 years. The Group does not have options to extend or terminate leases, as the renewal or termination of relevant lease is on negotiation basis. As a lessee, the Group does not have any financing leases and none of the leases contain material residual value guarantees or material restrictive covenants. The Group’s office space leases typically have initial lease terms of 2 to 7 years, and vehicles and equipment leases typically have an initial term of 12 months or less. The Group’s office space leases include fixed rental payments. The lease payments for the Group’s office space leases do not consist of variable lease payments that depend on an index or a rate.

F-34

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(2)

Summary of Significant Accounting Policies (continued)

(z)

Leases (continued)

The Group determines whether a contract contains a lease at contract inception. A contract contains a lease if there is an identified asset and the Group has the right to control the use of the identified asset. At the commencement of each lease, management determines its classification as an operating or finance lease. For leases that qualify as operating leases, the Group recognizes a right-of-use (“ROU”) asset and a lease liability based on the present value of the lease payments over the lease term in the consolidated statements of balance sheets at commencement date. As all of the leases do not have implicit rates available, the Group uses incremental borrowing rates based on the information available at lease commencement date in determining the present value of future payments. The incremental borrowing rates are estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in economic environments where the leased assets are located.

The ROU asset is measured at the amount of the lease liabilities with adjustments, if applicable, for lease prepayments made prior to or at lease commencement, initial direct costs incurred and lease incentives. For office space leases, the Group identifies the lease and non-lease components (e.g., common-area maintenance costs) and accounts for non-lease components separately from lease component. The Group’s office space lease contracts have only one separate lease component and have no non-components (e.g., property tax or insurance). Most of the office space lease contracts have no non-lease components. For the office space lease contracts include non-lease components, the fixed lease payment is typically itemized in the office space lease contract for separate lease component and non-lease components. Therefore, the Group does not allocate the consideration in the contract to the separate lease component and the non-lease components.

Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The Group has made an accounting policy election to exempt leases with an initial term of 12 months or less without a purchase option that is likely to be exercised from being recognized on the balance sheet. Payments related to those leases continue to be recognized in the consolidated statement of operations and comprehensive loss on a straight-line basis over the lease term.

In addition, the Group does not have any related-party leases or sublease transactions.

(aa)

Accumulated Other Comprehensive Loss

The Group presents comprehensive loss in the consolidated statements of operations and comprehensive loss with net loss in a continuous statement.

Accumulated other comprehensive loss mainly represents foreign currency translation adjustments and changes in fair value of available-for-sale debt securities for the period.

(ab)

Government grants

Government grants primarily consist of financial subsidies received from provincial and local governments for operating a business in their jurisdictions and compliance with specific policies promoted by the local governments. The Group records such government subsidies as other income or reduction of expenses or cost of revenues when it has fulfilled all of its obligation related to the subsidy. The Group recognized RMB4,528, RMB1,682 and RMB2,653 in the years ended June 30, 2022, 2023 and 2024.

F-35

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(2)

Summary of Significant Accounting Policies (continued)

(ac)

Recently accounting pronouncements

Recently Adopted Accounting Pronouncements

Financial Instruments – Credit Losses (Topic 326) – In June 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments–Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This guidance requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. It also requires credit losses on available-for-sale debt securities to be presented as an allowance, rather than reducing the carrying amount. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, and for interim periods within those fiscal years. ASU 2016-13 adds to U.S. GAAP an impairment model (known as the current expected credit loss (CECL) model) that is based on expected losses rather than incurred losses.

The Group adopted ASU 2016-13 from July 1, 2023, including applicable amendments in other ASUs issued subsequent to ASU 2016-13 on January 1, 2020 under a modified-retrospective basis resulting in a cumulative-effect adjustment of RMB93 reduction to the opening retained earnings balance and the recognition of a RMB93 allowance for credit losses in the consolidated balance sheet as of July 1, 2023. Results for periods after July 1, 2023 are presented under ASU 2016-13 while prior period amounts continue to be reported under the previous accounting standards.

The Group evaluates each individual investment periodically for impairment. For investments where the Group does not intend to sell, the Company evaluates whether a decline in fair value is due to deterioration in credit risk. Credit-related impairment losses, not to exceed the amount that fair value is less than the amortized cost basis, are recognized through an allowance for credit losses on the consolidated balance sheets with corresponding adjustment in the consolidated statements of operations and comprehensive loss. Subsequent increases in fair value due to credit improvement are recognized through reversal of the credit loss and corresponding reduction in the allowance for credit loss. Any decline in fair value that is non-credit related is recorded in accumulated other comprehensive income as a component of shareholder’s equity. As of June 30, 2024, there were no investments held by the Group that had been in continuous unrealized loss position.

The impact from the adoption of ASU 2016-13 is summarized as follows:

	June 30, 2023			Transition Adjustments			July 1, 2023
	RMB			RMB			RMB
Accounts receivable, net		37,601			-			37,601
Other receivable, net		22,554			(75	)		22,479
Other non-current asset		22			(18	)		4
Total assets		264,543			(93	)		264,450
Retained earnings		(31,498	)		(93	)		(31,591	)

Business Combinations (Topic 805) – In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805) — Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”), which provides guidance on the acquirer’s accounting for acquired revenue contracts with customers in a business combination. The amendments require an acquirer to recognize and measure contract assets and contract liabilities acquired in a business combination at the acquisition date in accordance with ASC 606 as if it had originated the contracts. This guidance also provides certain practical expedients for acquirers when recognizing and measuring acquired contract assets and contract liabilities from revenue contracts in a business combination. The new guidance should be applied prospectively to business combinations occurring on or after the date of adoption. This guidance is effective for fiscal years beginning after December 15, 2022, including interim periods therein. Early adoption is permitted. The Group adopted the new standard beginning July 1, 2023 with no material impact on the consolidated financial statements.

F-36

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(2)

Summary of Significant Accounting Policies (continued)

(ac) Recently accounting pronouncements (continued)

Recently Adopted Accounting Pronouncements issued not yet adopted

Segment Reporting (Topic 280) – In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280)- Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which provides guidance on the enhanced disclosure of significant segment expenses that are regularly provided to the CODM and included within each reported measure of segment profit or loss, on an annual and interim basis. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Adoption of this guidance should be applied retrospectively to all prior periods presented. Early adoption is permitted. The Group does not expect to adopt this guidance early and does not expect the adoption of this ASU to have a material impact on its future consolidated financial statements.

Income Taxes (Topic 740) – In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures, which provides guidance on the disaggregation information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. The guidance is effective for annual periods beginning after December 15, 2024 on a prospective basis. Early adoption is permitted. The Group does not expect to adopt this guidance early and does not expect the adoption of this ASU to have a material impact on its future consolidated financial statements.

(ad) Revision to Previously Issued Financial Statements

In 2024, the Group identified an error related to recording funds it held temporarily for the investors as its asset, yet it did not have control over. The Group assessed the materiality of this error individually and in the aggregate with other identified errors to prior periods’ consolidated financial statements in accordance with SEC Staff Accounting Bulletin (“SAB”) No. 99 “Materiality” codified in ASC 250 “Accounting Changes and Error Corrections.” The Group concluded that the errors were immaterial to its previously issued financial statements and restatement of previously filed financial statements is not required. However, the Group determined it was appropriate to correct the prior periods errors by revising the financial statement line item amounts previously disclosed in SEC filings in order to achieve comparability in the consolidated financial statements. The impact of this revision of the Group’s previously reported consolidated financial statements are detailed below.

In connection with this revision, the Group also corrected other immaterial errors in the prior periods which include a classification error for commission expense that was reported previously under selling expense but should have been under cost of sales as well as a classification error for excess input value-added tax credit that was reported previously as a current liability but should have been reported as a current asset.

F-37

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(2)

Summary of Significant Accounting Policies (continued)

(ad) Revision to Previously Issued Financial Statements (continued)

The following table summarizes the effect of the revisions on the affected line items within the consolidated balance sheets related to funds it held temporarily for the investors and input value-added tax credit:

	June 30, 2023
	As reported		Adjustment			As corrected
Current assets:
Restricted cash		8,258		(8,258	)		-
Other current assets		5,112		1,268			6,380
Total current assets		237,995		(6,990	)		231,005
Total assets		271,533		(6,990	)		264,543
Current liabilities:
Investors’ deposit		8,258		(8,258	)		-
Other payables and accrued expenses		1,498		1,268			2,766
Total current liabilities		31,066		(6,990	)		24,076
Total liabilities		54,499		(6,990	)		47,509
Total equity		217,034		-			217,034

To conform to current period presentation, the previously reported lines of Other receivables and current assets, and Other payables and accrued expenses have been stated separately to lines of Other receivables, net and Other current assets, Other payables and accrued expenses and Accrued payroll, respectively.

The following table summarizes the effect of the revisions on the affected line items within the consolidated statements of operations and comprehensive loss related to classification error for commission:

	Year Ended June 30, 2022									Year Ended June 30, 2023
	As reported			Adjustment			As corrected			As reported			Adjustment			As corrected
Operating costs and expenses:
Cost of sales		(33,834	)		(21,224	)		(55,058	)		(16,136	)		(4,149	)		(20,285	)
Selling expenses		(126,743	)		21,224			(105,519	)		(64,709	)		4,149			(60,560	)
Total operating costs and expenses		(262,844	)		-			(262,844	)		(173,244	)		-			(173,244	)
Loss from operations		(74,103	)		-			(74,103	)		(58,804	)		-			(58,804	)
Net loss and net loss attributable to shareholders		(60,667	)		-			(60,667	)		(43,577	)		-			(43,577	)

F-38

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(2)

Summary of Significant Accounting Policies (continued)

(ad) Revision to Previously Issued Financial Statements (continued)

The following table summarizes the effect of the revisions on the affected line items within the consolidated statements of cash flows related to funds it held temporarily for the investors:

	Year Ended June 30, 2022									Year Ended June 30, 2023
	As reported			Adjustment			As corrected			As reported			Adjustment			As corrected
Cash flows from operating activities:
Change in investors’ deposit		46,607			(46,607	)		-			(110,538	)		110,538			-
Net cash used in operating activities		(9,548	)		(46,607	)		(56,155	)		(135,901	)		110,538			(25,363	)
Net decrease in cash and cash equivalents, and restricted cash		(20,144	)		(46,607	)		(66,751	)		(140,887	)		110,538			(30,349	)
Cash and cash equivalents, and restricted cash at beginning of year		332,782			(72,189	)		260,593			313,055			(118,796	)		194,259
Cash and cash equivalents, and restricted cash at end of year		313,055			(118,796	)		194,259			172,728			(8,258	)		164,470

(3)

Acquisition and disposal

(a)

Acquisition in 2024

Acquisition of AIX

As disclosed in Note 1, upon the completion of the Transaction through Exchange of Equity Interests on December 31, 2023, the Company acquired 50.10% of AIX’s equity interests through issuing an aggregate of 284,113,314 ordinary shares in exchange for an aggregate of 568,226,628 ordinary shares of AIX beneficially owned by the Selling Shareholders of AIX. Although AIX is larger in size, and the Selling Shareholders of AIX holds more than 50% equity interest in the Group after the Transaction, none of the individual Selling Shareholders of AIX holds controlling financial interests in the Group, and nor do they act-in-concert. Management considered all factors and determined that, the Company obtained control of AIX and was therefore considered the accounting acquirer in this business combination transaction (see details in Note 1). The total purchase price consisted of stock.

The acquisition of AIX was accounted for using the acquisition method, and the purchase price allocation was made based on the fair value of the tangible and intangible assets acquired and liabilities assumed at the date of acquisition. The fair values of the identifiable intangible assets acquired were determined using various valuation techniques, including cost approach and income approach. The fair value measurements were primarily based on significant inputs that are not directly observable in the market and are considered Level 3 under the fair value measurements and disclosure framework. Key assumptions include cash flow projections for AIX and the discount rate applied to those cash flows. Identifiable intangible assets with finite lives are amortized over their useful lives. The carrying value of the other tangible assets acquired and liabilities assumed approximate their fair value. The excess of the consideration transferred and the fair value of any non-controlling interests over the estimated fair values of the identifiable net assets acquired was recorded as goodwill. The Fair value of the non-controlling interest was estimated with reference to the price per share as of the acquisition date.

F-39

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(3)

Acquisitions and disposals (continued)

(a)

Acquisition in 2024 (continued)

Acquisition of AIX (continued)

The following is a summary of the fair value of the purchase price and the final allocation of the purchase price to the assets acquired and liabilities assumed:

	RMB
Consideration transferred		1,341,422
Add: Non-controlling interest		1,336,190
Total fair value of purchase price		2,677,612

Assets acquired	RMB
Cash and cash equivalents and restricted cash		601,925
Short term investments		928,270
Accounts receivable and contract assets		1,350,421
Other receivables and current assets		231,853
Property, plant, and equipment, net		91,659
Intangible asset (Note 2(h) and Note 9)		468,832
- Software		91,178
- Non-compete agreements		8,175
- Agent resources		137,944
- Insurance broker licenses		89,071
- Trade names		142,464
Deferred tax assets		40,735
Other non-current assets		235,752
Right of use asset		136,056
Total assets acquired		4,085,503

Liabilities Assumed
Short-term loan		164,300
Accounts payables and accrued commissions		806,770
Other payable and accrued expenses		183,187
Accrued payroll		93,697
Income tax payable		100,260
Operating lease liabilities		128,475
Deferred tax liabilities		251,780
Other liabilities		82,686
Total liabilities assumed		1,811,155
Total identifiable net assets acquired		2,274,348
Less: Non-controlling interest of certain subsidiaries of AIX		(266,255	)
Goodwill		669,519

The Group had only one reporting unit (i.e., wealth management) prior to the acquisition of AIX and two additional reporting units including insurance agency and claims adjusting were identified due to the acquisition of AIX as of the acquisition date. The reporting unit of wealth management is not expected to benefit from the synergies associated with the acquisition of AIX. As a result, goodwill recorded in the acquisition is assigned to the applicable reporting units of insurance agency and claims adjusting to which the assets and liabilities of AIX are assigned. The resulted goodwill is not expected to be tax deductible for tax purposes.

F-40

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(3)

Acquisitions and disposals (continued)

(a)

Acquisition in 2024 (continued)

Acquisition of AIX (continued)

Acquisition-related costs for AIX were approximately RMB1,369. These were expensed as incurred and are included in general and administrative expenses within the consolidated statement of operations and comprehensive loss.

The result of operation of aforementioned acquisition has been consolidated by the Group from December 31, 2023. Revenues and net income of AIX in the amount of RMB1,123,177 and RMB2,230, respectively, were included in the Group’s consolidated statement of operations and comprehensive loss since the acquisition date.

Pro forma financial information

The following is the pro forma information as if the business acquisition occurred on July 1, 2022. For the business acquisition depreciation and amortization have been included in the calculation of the pro forma information provided below, based on the results of purchase price allocation. Depreciation is computed on the straight-line method over the estimated remaining economic lives of the assets, ranging from three to thirty-six years. Amortization is computed on the straight-line method over the estimated useful lives of the assets ranging from three to twenty years.

This pro forma information is presented for information purposes only. It is based on historical information and does not purport to represent the actual results that may have occurred had the Group consummated the acquisitions on July 1, 2022, nor is it necessarily indicative of future results of operations of the consolidated enterprises:

	Year Ended June 30,
	2023		2024
	RMB		RMB
Total net revenues		3,452,208		2,419,634
Income (loss) from operations		116,065		(453,560	)
Net income (loss)		131,771		(397,718	)
Net income (loss) attributable to the Company’s shareholders		11,784		(250,192	)

(b)

Disposal in 2023

In March 2023, the Group disposed of 100% equity interest in Shenzhen Puyi Zhongxiang Information Technology Co., Ltd. to a third party for a total consideration of RMB20,000, which has been settled as of June 30, 2024. The Group recognized a gain of RMB13,737 on disposal of this subsidiary, which was determined based on the excess of the sales consideration over the net book value of the subsidiary at the time of disposal.

F-41

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(4)

Other Receivables, net

Other receivables, net consist of the following:

	As of June 30,
	2023		2024
	RMB		RMB
Receivables from staff (i)		-		16,221
Receivables from a third party channel vendor (ii)		-		706
Deposits related to short-term leases		2,554		14,571
Consideration receivable from disposal of a subsidiary		20,000		-
Amount receivable from a third party				6,397
Other		-		1,614
Sub-total		22,554		39,509
Allowance for current expected credit losses		-		-
Balance at the beginning of the year		-		-
Cumulative-effect adjustment upon adoption of ASU 2016-13		-		(75	)
Current period provision for expected credit losses		-		(615	)
Balance at the end of the year		-		(690	)
Other receivables, net		22,554		38,819

(i)	Amounts represented advances to staff or entrepreneurial agents of the Group for daily business operations, which are unsecured, interest-free and repayable on demand.

(ii)

Amount represented pre-acquisition receivables of RMB27,386 and an incremental post-acquisition amount of RMB706 from Shenzhen Chetong Technology Co., Ltd. (“Chetong”) who provided platform services to AIX. The pre-acquisition amount of RMB27,386 was fully recorded an allowance for credit loss as of the acquisition date (i.e., December 31, 2023). The receivables were unsecured, interest-free and repayable on demand. The Group estimated the net amount expected to be collected was nil as of June 30, 2024, and accordingly recorded an allowance for credit losses of RMB706 in others, net of the consolidated statement of operations and comprehensive loss for the year ended June 30, 2024.

F-42

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(5)

Loan Receivables, net

Loan receivables, net consist of the following:

	As of June 30,
	2024
	RMB
Sichuan Tianyi Real Estate Development Co., Ltd. (“Sichuan Tianyi”) (i)		97,984
Loan receivables from a third-party company (ii)		685,287
Interest receivable from a third-party		279
Sub-total		783,550
Allowance for current expected credit losses:
Balance at the beginning of the year		-
Cumulative-effect adjustment upon adoption of ASU 2016-13		-
Current period provision for expected credit losses		(9,499	)
Balance at the end of the year		(9,499	)
Loan receivables, net		774,051

(i)

The amount represented the term-loan (matures in June 2025) to Sichuan Tianyi, a third-party, of RMB95,000 and corresponding interest receivable RMB4,259 as of June 30, 2024. The loan is guaranteed by the ultimate controlling owner of Sichuan Tianyi, whom is jointly liable, with interest rate 6% per annum. This loan receivable is expected to be settled within one year.

(ii)

The amount represented the term-loans (mature in June 2025) principal to a third-party company principally engaged in provision of education service of RMB679,300 and corresponding interest receivable RMB6,060 as of June 30, 2024. The loans bear an interest rate of 5% per annum. The loans have been subsequently pledged with equity interests as collaterals and fully guaranteed by the controlling shareholder of the debtor.

F-43

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(6)

Other current assets

Other current assets consist of the following:

	As of June 30,
	2023		2024
	RMB		RMB
Prepaid operating costs		-		4,210
Prepaid miscellaneous daily expenses		4,523		28,452
Equity investments with readily determinable fair value (i)		-		13,776
Excess input value-added tax (“VAT”) credits (ii)		1,268		1,832
Prepaid contributions of staff employee benefit		589		483
		6,380		48,753

(i)

This is an amount representing an equity investment of AIX in Cheche Technology Inc. (“Cheche”), which was listed in Nasdaq on September 18, 2023. As of June 30, 2024, the Group holds 3.1645% equity interests in Cheche. The Group measures the equity security in Cheche at fair value and recorded a loss of RMB82,527 from fair value change in the consolidated statement of operations and comprehensive loss for the year ended June 30, 2024.

(ii)

The excess input VAT credits represented VAT already paid or borne by the Group’s PRC entities that are qualified as general VAT taxpayers on the goods purchased which will be utilized to offset against future output VAT when calculating the VAT payable. The VAT balance is recorded either in other current liabilities or other current assets on the consolidated balance sheets. As discussed in Note 2 (ad), the Group reclassified the balance of excess input VAT credits as of June 30, 2023 from other payables and accrued expenses to other current assets in order to achieve comparability in the consolidated balance sheets.

F-44

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(7)

Property, Plant and Equipment, net

Property, plant and equipment, net, is comprised of the following:

	As of June 30,
	2023			2024
	RMB			RMB
Cost:
Building		-			11,242
Office equipment, furniture and fixtures		3,920			12,189
Motor vehicles		1,932			7,122
Leasehold improvements		737			8,342
Sub-total		6,589			38,895
Accumulated depreciation		(5,023	)		(5,759	)
		1,566			33,136
Construction in progress		-			53,640
		1,566			86,776

Depreciation expenses charged were RMB5,603, RMB3,545 and RMB8,368 for the years ended June 30, 2022, 2023 and 2024, respectively. In the year ended June 30, 2024, the Group recorded a loss of RMB1,293 (2023: RMB2,951) related to disposal of furniture, office equipment, fixtures and leasehold improvements due to termination of rental offices in others, net of the consolidated statements of operations and comprehensive loss.

No impairment for property, plant and equipment was recorded for the years ended June 30, 2022, 2023 and 2024.

(8)

Goodwill, net

The gross amount of goodwill and accumulated impairment losses by reporting unit as of June 30, 2023 and 2024 are as follows:

	Wealth Management		Insurance Agency			Claims Adjusting		Total
	RMB		RMB			RMB		RMB
Gross as of June 30, 2023	-		-			-		-
Addition for business combination (Note 3(a))		-		542,578			126,941		669,519
Gross as of June 30, 2024		-		542,578			126,941		669,519
Accumulated impairment loss as of June 30, 2023		-		-			-		-
Impairment loss		-		(426,410	)		-		(426,410	)
Accumulated impairment loss as of June 30, 2024		-		(426,410	)		-		(426,410	)
Net as of June 30, 2023		-		-			-		-
Net as of June 30, 2024		-		116,168			126,941		243,109

The Group performs annual goodwill impairment test at each year end. In 2024 annual test, the Group noted the underperformance of acquired insurance agency business as compared to the projected results from acquisition, mainly due to the impact of newly released industrial regulatory rules capping the commission rates charged by insurance intermediaries, and determined that it was more likely than not that there were indications of impairment for the reporting unit of Insurance Agency. The Group utilized the discounted cash flow model to estimate the fair value of the reporting unit and concluded that the carrying amount of Insurance Agency exceeded its fair value. As a result, an impairment loss on goodwill of RMB426,410 was recognized in the consolidated statement of operations and comprehensive loss for the year ended June 30, 2024.

F-45

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(9)

Intangible assets, net

Intangible assets, net, are comprised of the following:

	As of June 30,
	2023			2024
	RMB			RMB
Software and operating system		4,823			96,001
Non-compete agreements		-			8,175
Agent resources		-			137,944
Insurance brokerage licenses		-			89,071
Trade names		-			142,464
Sub-total		4,823			473,655
Disposal		-			(2,218	)
		4,823			471,437
Accumulated amortization		(3,032	)		(53,870	)
		1,791			417,567

As disclosed in in Note 3(a), the recognized intangible assets including software, non-compete agreements, agent resources, insurance brokerage license and trade names amounting to RMB468,832 in the aggregate were acquired through a business combination transaction on December 31, 2023 and were individually measured at their respective fair values as of the acquisition date. In 2024, the Group disposed an insurance brokerage license amounting to RMB2,218 owned by a majority-owned subsidiary in Hong Kong which was deconsolidated as the Group has lost its control over the subsidiary starting from April 1, 2024 (see details in Note 2(i)).

Amortization expenses for intangible assets recognized for the years ended June 30, 2022, 2023 and 2024 were RMB832, RMB848 and RMB50,837, respectively. Amortization expenses are expected to be at RMB100,447, RMB99,322, RMB74,963, RMB51,972 and RMB28,175 for the years ending June 30, 2025, 2026, 2027, 2028 and 2029, respectively.

There were no impairment charges for intangible assets recorded for the years ended June 30, 2022, 2023 and 2024.

F-46

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(10)

Other non-current assets, net

Other non-current assets consist of the following:

	As of June 30,
	2023		2024
	RMB		RMB
Equity investments without readily determinable fair value (Note 2(j))		-		11,401
Instrument in debt securities with embedded features (Note 2(j))		-		123,227
Amount due from a third party (i)		-		29,985
Contingent considerations (ii)		-		22,267
Receivables from certain shareholders as guarantee deposit due to business combinations		-		33,373
Others		22		5,128
Sub-total		22		225,381
Allowance for current expected credit losses:
Balance at the beginning of the year		-		-
Cumulative-effect adjustment upon adoption of ASU 2016-13		-		(18	)
Provision		-		(9	)
Balance at the end of the year		-		(27	)
Other non-current assets, net		22		225,354

(i)

The amount represented the fair value of a term-loan (matures in September 2028) to a third party by AIX as of the acquisition date which is comprised of a principal of RMB30,000 and a corresponding interest receivable of RMB1,032 net of allowance of RMB1,047. The loan bears interest rate 4.5% per annum and is guaranteed by the ultimate controlling owner of the borrower, whom is jointly liable.

(ii)

Contingent considerations represented the fair value as of June 30, 2024 of the partial contingent considerations transferred by AIX to certain selling shareholders of Zhongrong Smart Finance Information Technology Co., Ltd. (“Zhongrong”) and Jilin Zhongji Shi’An Insurance Agency Co., Ltd. (“Zhongji”) in business combinations completed in 2023. Pursuant to the share purchase agreement, the selling shareholders shall return certain numbers of ordinary shares back to the Group and/or the Group may incur future payments if necessary conditions have not been satisfied respectively by the end of a lock-up period of three years. The contingent considerations were subsequently measured with changes in fair value reflected in the consolidated statements of operations and comprehensive loss.

F-47

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(11)

Leases

The Group’s lease for office space include only fixed rental payments with no variable lease payment terms. As of June 30, 2023 and 2024, there were no leases that have not yet commenced.

The following represents the aggregate ROU assets and related lease liabilities as of June 30, 2023 and 2024:

	As of June 30,
	2023		2024
	RMB		RMB
Operating lease ROU assets		13,607		122,239
Current operating lease liability		4,793		54,233
Non-current operating lease liability		9,673		62,954
Total operating lease liabilities		14,466		117,187

The weighted average lease term and discount rate as of June 30, 2023 and 2024 were as follows:

	As of June 30,
	2023			2024
Weighted average lease term in years:
Operating leases		3.25			2.74
Weighted average discount rate:
Operating leases		4.75	%		3.72	%

F-48

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(11)

Leases (continued)

The components of lease expenses for the years ended June 30, 2023 and 2024 were as follows:

	As of June 30,
	2023		2024
	RMB		RMB
Operating lease expense		8,107		39,006
Short term lease expense		2,403		2,421
Total		10,510		41,427

Supplemental cash flow information related to leases for the years ended June 30, 2023 and 2024 were as follows:

	As of June 30,
	2023			2024
	RMB			RMB
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases		7,059			37,415
Supplemental noncash information:
Right-of-use assets obtained in exchange for lease obligations net of decrease in right-of-use assets for early determinations		(8,008	)		9,666

The following table provides maturities of lease liabilities at June 30, 2024:

	Minimum Lease Payment
	RMB
Year ending June 30:
2025		57,681
2026		40,243
2027		16,478
2028		5,087
2029		2,190
Thereafter		1,593
Total remaining undiscounted lease payments		123,272
Less: Interest		6,085
Total present value of lease liabilities		117,187
Less: Current operating lease liability		54,233
Non-current operating lease liability		62,954

F-49

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(12)

Variable Interest Entities (“VIEs”)

Foreign ownership of certain parts of the Group’s businesses including fund management services is subject to restrictions under current PRC laws and regulations. The Company is a Cayman Islands company and the government of the Cayman Islands has not entered into a memorandum of understanding on bilateral regulatory cooperation with the China Securities Regulatory Commission (the “CSRC”). Accordingly, the Company is not eligible to conduct the fund management business by directly establishing a foreign-invested fund management company. To comply with PRC laws and regulations and utilize the ability in providing fund management services, the Group currently conducts its business activities through the VIE, Puyi Bohui in which the Group owns 0.96% equity interests and its subsidiaries in China.

The Measures on the Supervision of Internet Insurance Business implemented in February 2021 requires an insurance institution conducts online insurance business through its own online platform who owns the domain name.

AIX conducts its online insurance business through an online platform (www.baoxian.com). To comply with the newly implemented rules, AIX operates the internet business through its consolidated VIEs of Xinbao Investment in which AIX owns 49% equity interests and Fanhua RONS Technologies and their subsidiaries.

The following is a summary of the contractual agreements that the Group, through the WFOEs, entered into with the consolidated VIEs including Puyi Bohui, Xinbao Investment, Fanhua RONS Technologies and their individual Nominee Shareholders:

Agreements that Provide the Group Effective Control over Puyi Bohui, Xinbao Investment and Fanhua RONS Technologies

●

Loan Agreement

The WFOEs entered into a loan agreement with relevant Nominee Shareholders to provide them loans solely for the purpose of contribution of registered capital of these VIEs, or the PRC domestic companies. The principal loan amounts equal to the capital contributions to the PRC domestic companies. The WFOEs have the sole discretion to determine the method of repayment, including requiring the Nominee Shareholders to transfer their equity interests in these PRC domestic companies to the WFOEs or its designated person.

The term of the loan agreement is for ten years, which may be extended only upon written agreement of the parties. If the loan is not extended, then upon its expiration and subject to then applicable PRC laws, the loan can be repaid only with the proceeds from a transfer of the individual shareholder’s equity interests in the PRC domestic companies to the WFOEs or another person or entity designated by them. The WFOEs may accelerate the loan repayment upon certain events, including but not limited to if the individual shareholder resigns or is dismissed from employment by us or if the WFOEs exercise its option to purchase the Nominee Shareholders’ equity interests in the PRC domestic companies pursuant to the Exclusive Option Agreement described below.

F-50

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(12)

Variable Interest Entities (“VIEs”) (continued)

Agreements that Provide the Group Effective Control over Puyi Bohui, Xinbao Investment and Fanhua RONS Technologies (continued)

●

Equity Interest Pledge Agreement

Relevant Nominee Shareholders of these PRC domestic companies entered into an equity interest pledge agreement, pledging all of their respective equity interests in these PRC domestic companies as collateral to ensure that these PRC domestic companies fully perform its obligations under the Exclusive Technical and Consulting Services Agreement, Exclusive Option Agreement and Loan Agreement, and pay the technology and consulting service fees and repay the loan and the accrued interests to the WFOEs when the same becomes due. Relevant Nominee Shareholders also agreed not to transfer or create any encumbrances adverse to the WFOEs on their equity interests in these PRC domestic companies. During the term of the equity pledge agreement, relevant PRC entities are entitled to all the dividends declared on the pledged equity interests. The agreement became effective on such date when the pledge of the equity interest contemplated herein is registered with relevant administration for industry and commerce (the “AIC”) and will remain in effect until all of the obligations of these PRC domestic companies under the Exclusive Technical and Consulting Services Agreement, Exclusive Option Agreement and Loan Agreement have been duly performed or terminated.

●

Power of Attorney

Relevant Nominee Shareholders of these PRC domestic companies irrevocably authorized the WFOEs to exercise the rights related to their shareholdings, including attending shareholders’ meetings and voting on their behalf on all matters, including but not limited to matters related to the transfer, pledge or disposition of their respective equity interests in these PRC domestic companies, and appointment of the executive directors and senior management of these PRC domestic companies. The WFOEs have the right to appoint any individual or entity to exercise the power of attorney on its behalf. until the shareholder ceases to hold any equity interest in these PRC domestic companies. Each power of attorney will remain in effect for ten years unless the Nominee Shareholders cease to hold any equity interest in these PRC domestic companies.

Agreements that Transfer Economic Benefits to the Group

●

Exclusive Option Agreement

Relevant Nominee Shareholders of these PRC domestic companies entered into an exclusive purchase option agreement to irrevocably grant the WFOEs an exclusive option to purchase, or designate one or more persons to purchase, part or all of their equity interests in these PRC domestic companies at the WFOEs’ sole and absolute discretion, when and to the extent permitted by PRC laws. The purchase price is equal to the higher of: (i) the amount of registered capital actually contributed by the equity holder; or (ii) a minimum price permitted under applicable PRC laws. The Exclusive Option Agreement will remain effective permanently.

●

Exclusive Technology and Consulting Services Agreement

Pursuant to Exclusive Technical and Consulting Services Agreement between (i) the WFOEs, and (ii) these PRC domestic companies, the WFOEs agreed to provide these PRC domestic companies with comprehensive business support, technical, consulting and other services including such as training services and other services relating to IT platform and internal control compliance. In exchange, these PRC domestic companies agree to pay a quarterly fee calculated primarily based on a percentage of its revenues. The agreement has a term of one year and can be renewed each year upon mutual agreement or remains effective unless otherwise terminated when all of the equity interest in these PRC domestic companies or all the assets of these PRC domestic companies have been legally transferred to the WFOEs and/or its designee.

Because of contractual arrangements with VIEs and their Nominee Shareholders, the Group is the primary beneficiary of VIEs and their subsidiaries and consolidated them into consolidated financial statements.

F-51

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(12)

Variable Interest Entities (“VIEs”) (continued)

Risks in relation to the VIE Arrangement

In the opinion of the Company’s legal counsel, (i) the ownership structure relating to the consolidated VIEs of the Company is in compliance with PRC laws and regulations; (ii) the contractual arrangements with the consolidated VIEs and the individual shareholders are legal, valid and binding obligation of such party, and enforceable against such party in accordance with their respective terms; and (iii) the execution, delivery and performance of the consolidated VIEs and its shareholders do not result in any violation of the provisions of the articles of association and business licenses of the VIEs, and any violation of any current PRC laws and regulations.

Uncertainties in the PRC legal system could cause the Company’s current corporate structure to be found in violation of any existing and/or future PRC laws or regulations and could limit the Company’s ability, through the Primary Beneficiary, to enforce its rights under these contractual arrangements. Furthermore, the shareholders of the VIEs may have interests that are different from those of the Company, which could potentially increase the risk that the shareholders would seek to breach the existing terms of the aforementioned agreements.

In addition, if the current structure or any of the contractual arrangements were found to be in violation of any existing or future PRC laws, the Company may be subject to penalties, which may include but not be limited to, the cancellation or revocation of the Company’s business and operating licenses, being required to restructure the Company’s operations or discontinue the Company’s operating activities. The imposition of any of these or other penalties may result in a material and adverse effect on the Company’s ability to conduct its operations. In such case, the Company may not be able to operate or control VIEs, which may result in deconsolidation of VIEs.

Summarized below is the information related to VIEs, including total assets, total current liabilities, total liabilities, net revenues, total operating costs and expenses, net income (loss) and cash flows after intercompany elimination are as follows:

	As of June 30,
	2023		2024
	RMB		RMB
Total assets		184,438		424,525
Total current liabilities		64,796		176,951
Total liabilities		81,504		220,483

	Year Ended June 30,
	2022			2023			2024
	RMB			RMB			RMB
Net revenues		159,181			87,728			144,024
Operating costs and expenses		(199,230	)		(126,620	)		(170,787	)
Net loss		(33,613	)		(23,041	)		(37,038	)
Net cash generated from (used in) operating activities		6,120			(54,828	)		(69,861	)

F-52

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(12)

Variable Interest Entities (“VIEs”) (continued)

Risks in relation to the VIE Arrangement (continued)

As of June 30, 2024 there were no consolidated VIE assets that are collateral for the VIE’s obligations or are restricted solely to settle the VIEs’ obligations, other than aforementioned in the restricted cash as described in Note 2(c). In the year ended June 30, 2024, aggregate revenues derived from these VIEs contributed 10.02% of the total consolidated net revenues, based on the corporate structure as of the end of 2024. As of June 30, 2024, the VIEs accounted for an aggregate of 9.92% of the consolidated total assets. The creditors of the VIEs’ third-party liabilities did not have recourse to the general credit of the Company in normal course of business. The Company has not provided any financial support that it was not previously contractually required to provide to the VIEs.

(13)

Other Payables and Accrued Expenses

Components of other payables and accrued expenses are as follows:

	As of June 30,
	2023		2024
	RMB		RMB
Business and other tax payables		493		84,874
Refundable deposits from employees and agents		-		17,762
Professional fees		-		8,539
Accrued expenses to third parties		1,600		26,082
Contributions from members of eHuzhu mutual aid program (Note 2(c))		-		36,460
Others		673		6,792
Total		2,766		180,509

(14)

Short-term loan

The Group repaid the outstanding balance of RMB164,300 under a revolving line of credit which was expired and terminated upon the Group’s repayment of the borrowings in February 2024. The repaid borrowings bore a fixed interest rate of 3.5% per annum.

During the year ended June 30, 2024, the Group entered into a new RMB denominated revolving credit facility with a financial institution in mainland China for a total credit of up to RMB200,000 without any guarantee or collateral. Under the credit facility, RMB98,375 was drawn down on March 5, 2024 for general working capital purpose and outstanding as short-term loan as of June 30, 2024 bearing a fixed interest rate of 3.5% per annum. The outstanding loan will become due on March 4, 2025.

As of June 30, 2024, the unused line of credit for the short-term loan was RMB101,625. Interest on the bank borrowing amounting to RMB926 was recorded in interest income, net of the consolidated statement of operations and comprehensive loss for the year ended June 30, 2024.

F-53

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(15)

Employee Benefit Plans

Employees of the Group located in the PRC are covered by the retirement schemes defined by local practice and regulations, which are essentially defined contribution plans.

In addition, the Group is required by law to contribute a certain percentage of applicable salaries for medical insurance benefits, unemployment and other statutory benefits. The contribution percentages may be different from district to district which is subject to the specific requirement of local regime government. The PRC government is directly responsible for the payments of the benefits to these employees.

For the years ended June 30, 2022, 2023 and 2024, the Group contributed and accrued RMB20,806, RMB16,092 and RMB72,551, respectively.

(16)

Income Taxes

The Company is a tax exempted company incorporated in the Cayman Islands. Under the current laws of the Cayman Islands, the Company is not subject to tax on its income or capital gains. In addition, upon any payments of dividends by the Company to its shareholders, no Cayman Islands withholding tax is imposed.

Subsidiaries in Hong Kong are subject to Hong Kong Profits Tax rate at 16.5%, and foreign-derived income is exempted from income tax. Under the two-tiered profits tax rates regime, the provision for current income taxes of the subsidiaries operating in Hong Kong has been calculated by applying the current rate of taxation of 8.25% for the years ended June 30, 2022, 2023 and 2024.

The Group’s subsidiaries and VIEs incorporated in the PRC are subject to the PRC Enterprise Income Tax (“EIT”) and a unified 25% enterprise income tax rate, except for certain entities that are entitled to preferential tax treatments.

Preferential EIT rates at 15% is available for qualified enterprises located in the western China regions in an industry sector encouraged by the PRC government. Fanhua Lianxing Insurance Sales Co., Ltd., the Group’s wholly-owned subsidiary, which is the holding entity of the Group’s life insurance operations, was entitled to a preferential tax rate of 15% for the year ended June 30, 2024.

Pursuant to the relevant laws and regulations in the PRC, Shenzhen Huazhong United Technology Co., Ltd. (“Shenzhen Huazhong”), a subsidiary of the Group, was regarded as a software company and thus exempted from PRC Income Tax for two years starting from its first profit-making year, followed by a 50% reduction for the next three years. For Shenzhen Huazhong, year 2017 was the first profit-making year and accordingly it has made a 12.5% tax provision for its profits for the year ended June 30, 2021, Shenzhen Huazhong no longer enjoys such a preferential rate from 2022.

The Group’s subsidiaries that are the PRC tax resident are required to withhold the PRC withholding tax of 10% on dividend payment to their non-PRC resident immediate holding company, unless such dividend payment is qualified for the 5% reduced tax rate under the Arrangement between Mainland China and Hong Kong for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (the “PRC-HK DTA”).

F-54

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(16)

Income Taxes (continued)

The Group accounts for uncertain income tax positions by prescribing a minimum recognition threshold in the financial statements. The Group’s liabilities for unrecognized tax benefits were included in other tax liabilities. As of June 30, 2023, the balance of unrecognized tax benefits is comprised of amounts mainly arising from certain transfer pricing arrangements. During the year ended June 30, 2024, the Group recorded an addition of unrecognized tax benefits amounting to RMB34,368 due to acquisition of AIX.

The movements of unrecognized tax benefits are as follows:

	RMB
Balance as of June 30, 2021		12,100
Increase in unrecognized tax benefits		1,400
Decrease in tax positions		-
Balance as of June 30, 2022		13,500
Increase in unrecognized tax benefits		260
Decrease in tax positions		-
Balance as of June 30, 2023		13,760
Increase due to acquisition of AIX		34,368
Increase in unrecognized tax benefits		1,883
Decrease in tax positions		(4,646	)
Balance as of June 30, 2024		45,365

The uncertain tax positions are related to tax years that remain subject to examination by the relevant tax authorities. Based on the outcome of any future examinations, or as a result of the expiration of statute of limitations for specific jurisdictions, it is reasonably possible that the related unrecognized tax benefits for tax positions taken regarding previously filed tax returns, might materially change from those recorded as liabilities for uncertain tax positions in the Group’s consolidated financial statements. In addition, the outcome of these examinations may impact the valuation of certain deferred tax assets (such as net operating losses) in future periods. The Group’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits, if any, as a component of income tax expense. The Group does not anticipate any significant increases or decreases to its liability for unrecognized tax benefits within the next twelve months.

According to the PRC Tax Administration and Collection Law, the statute of limitations is three years if the underpayment of income taxes is due to computational errors made by the taxpayer. The statute of limitations will be extended to five years under special circumstances, which are not clearly defined, but an underpayment of income tax liability exceeding RMB100 is specifically listed as a special circumstance. In the case of a transfer pricing related adjustment, the statute of limitations is ten years. There is no statute of limitations in the case of tax evasion. During the current year, the Group reversed transfer pricing related uncertain tax position amounting to RMB4,646 when its statute of limitation expired in 2024.

F-55

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(16)

Income Taxes (continued)

Income tax (benefit) expense are comprised of the following:

	Year Ended June 30,
	2022			2023		2024
	RMB			RMB		RMB
Current tax expense		1,464			1,160		3,634
Deferred tax (benefit) expense		(2,389	)		7,425		9,311
Income tax (benefit) expense		(925	)		8,585		12,945

The principal components of the deferred income tax assets and liabilities are as follows:

	As of June 30,
	2023			2024
	RMB			RMB
Deferred tax assets:
Operating loss carryforward		26,104			139,726
Deductible research and development expenses		628			5,204
Advertising expense		7,931			6,538
Allowance for doubtful accounts, credit losses and impairment losses		1,723			-
Other temporary book/tax differences		1,850			-
Valuation allowances		(21,684	)		(116,218	)
Total		16,552			35,250
Deferred tax liabilities:
Fair value adjustments in relation to short-term investments		-			13,954
Estimated profit arising from future renewal commissions		-			92,964
PRC dividend withholding taxes		-			26,730
Fair value adjustments of long-lived assets from business acquisition		-			103,426
Total		-			237,074

The Group considers positive and negative evidence to determine whether some portion or all of the deferred tax assets will more likely than not be realized. This assessment considers, among other matters, the nature, frequency and severity of recent losses, forecasts of future profitability, the duration of statutory carry forward periods, the Group’s experience with tax attributes expiring unused and tax planning alternatives. Valuation allowances have been established for deferred tax assets based on a more-likely-than-not threshold. The Group’s ability to realize deferred tax assets depends on its ability to generate sufficient taxable income within the carry forward periods provided for in the tax law.

The Group had total operating loss carry-forwards of RMB149,477 and RMB607,324 as of June 30, 2023 and 2024, respectively. As of June 30, 2024, the operating loss carry-forwards amounting to RMB120,646 can be carried forward to offset future taxable income and RMB486,678 will expire in the years from 2025 to 2029. During the years ended June 30, 2022, 2023 and 2024, nil, nil and RMB35,403, respectively, of tax loss carried forward has been expired and canceled.

F-56

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(16)

Income Taxes (continued)

Reconciliation between the provision for income taxes computed by applying the PRC enterprise income rate of 25% to net income before income taxes and income of affiliates, and the actual provision for income taxes is as follows:

	Year Ended June 30,
	2022			2023			2024
	RMB			RMB			RMB
Loss from operations in mainland China		(60,049	)		(32,676	)		64,307
Loss from operations in Hong Kong and others		(1,543	)		(2,316	)		(562,312	)
Loss from continuing operations before income taxes and share of loss of affiliates		(61,592	)		(34,992	)		(498,005	)
Statutory tax rate		25	%		25	%		25	%
Income tax benefits at statutory tax rate		(15,398	)		(8,748	)		(124,501	)
Deferred tax effect of tax rate change		768			(5,751	)		-
True-up temporary book/tax differences		-			2,123			-
Disposal of a subsidiary		-			(6,561	)		-
Expenses not deductible for tax purposes:
—Entertainment		-			-			1,192
—Other		695			500			350
Effect of tax holidays on concessionary rates granted to PRC entities		7,186			3,262			(2,861	)
Effect of different tax rates of entities operating in other jurisdictions		385			579			112,158
Change in valuation allowance		3,775			23,051			24,671
Net effect of fair value changes*		-			-			19,672
Unrecognized tax benefits arising from certain transfer pricing arrangements		1,400			260			(18,096	)
Other		264			(130	)		360
Income tax (benefit) expense		(925	)		8,585			12,945

*	The net effect of fair value changes for the year ended June 30, 2024 is primarily arising from fair value changes in contingent consideration and equity interests held by the Group.

Additional PRC income taxes that would have been payable without the tax exemption amounted to approximately nil, nil and RMB2,861 for the years ended June 30, 2022, 2023 and 2024, respectively.

If the entities were to be non-resident for PRC tax purposes, dividends paid to it out of profits earned after January 1, 2008 would be subject to a withholding tax. In the case of dividends paid by PRC subsidiaries, the withholding tax would be 10%, whereas in the case of dividends paid by PRC subsidiaries which are 25% or more directly owned by tax residents in the Hong Kong Special Administrative Region, the withholding tax would be 5%. The Group’s subsidiary, CNinsure Holdings Limited qualified as Hong Kong resident and was entitled to enjoy a 5% reduced tax rate under Bulletin [2018] No. 9 promulgated by the State Taxation Administration for the years ended June 30, 2022, 2023 and 2024.

F-57

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(16)

Income Taxes (continued)

Aggregate undistributed earnings of the Group’s subsidiaries and VIEs in the PRC that are available for distribution to the Group of approximately RMB90,570 and RMB868,929 as of June 30, 2023 and 2024, respectively, are considered to be indefinitely reinvested. If those earnings were to be distributed or they were determined to be no longer permanently reinvested, the Group would have to record a deferred tax liability in respect of those undistributed earnings of approximately RMB4,529 and RMB43,496, respectively.

Under applicable accounting principles, a deferred tax liability should be recorded for taxable temporary differences attributable to the excess of financial reporting over tax basis, including those differences attributable to a more-than-50-percent-owned domestic subsidiary. However, recognition is not required in situations where the tax law provides a means by which the reported amount of that investment can be recovered tax-free and the enterprise expects that it will ultimately use that means.

(17)

Mezzanine Equity

On February 6, 2024, the Company issued 1,995,810 ordinary shares to New Dragon Group (Far East) Limited (“New Dragon” or the “Holder”) in exchange for US$6,253,538 (approximately RMB44,968) investment in the Company. In 30 days following the expiration of lock-up period of four years, both the Holder and the Company have the option to request to repurchase the shares at 1.2 times of the purchase price paid by New Dragon. The ordinary shares issued to New Dragon features the investor’s put right that is considered to be outside of the Company’s control and subject to the Holder’s option and the occurrence of uncertain future events such as the future trend of the stock price of the Company.

The Group accounted for these redeemable ordinary shares in accordance with ASC 480 “Distinguishing Liabilities from Equity” and recorded such ordinary shares in mezzanine equity between total liabilities and equity, as temporary equity in the Company’s consolidated balance sheets.

Given the redemption of these redeemable ordinary shares are subject to the option of the Holder after the lock-up period, the Group subsequently assessed that it is probable that these redeemable ordinary shares will become currently redeemable, and the Group elects to consistently using interest method to accrete changes in the redemption value to the redemption amount over the period from the date of issuance which is the same date that it becomes probable that these shares will become redeemable to the expiration date of the lock-up period. The subsequent increase in the carrying amount of these redeemable ordinary shares is treated as a dividend to the Holder.

As disclosed in in Note 19, the Group considered the shares of redeemable ordinary shares that are legally issued and outstanding as outstanding in the calculation of the weighted-average number of ordinary shares outstanding since such shares represent ordinary shares in both legal form and substance.

F-58

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(18)

Capital Structure

Shares Structure

On March 13, 2014, the Company held an extraordinary general meeting and obtained requisite shareholders’ approval to adopt a dual-class share structure. Under this structure, the authorized share capital was amended into 2,000,000,000 Ordinary Shares of a nominal or par value of US$0.001 each to US$2,000,000 divided into (1) 1,950,000,000 Ordinary Shares of a nominal or par value of US$0.001 each and (2) 50,000,000 Preference Shares of a nominal or par value of US$0.001 each, and each holder of the Preference Shares shall have twenty (20) votes for each Preference Share. As of June 30, 2024, no preference shares were outstanding, while 370,551,728 ordinary shares and 1,995,810 redeemable ordinary shares were outstanding.

Issuance of new shares

As disclosed in Note 3(a), the Company issued 284,113,314 ordinary shares to the shareholders of AIX to acquire 50.10% equity interests of AIX in December 2023.

As disclosed in Note 17, the Company issued 1,995,810 ordinary shares to New Dragon Group (Far East) Limited in exchange for US$6,253,538 (approximately RMB44,968) investment in the Company in February 2024, which were classified as mezzanine equity.

Repurchase of ordinary shares

As disclosed in Note 1, in December 2023, the Company repurchased an aggregate of 4,033,600 ordinary shares from AIX, representing 1% of the total shares outstanding as of June 30, 2024. Concurrently, the Group entered into a share transfer agreement with AIX, pursuant to which AIX, through its wholly-owned subsidiary in China, to acquire 15.41% of the equity interests in Fanhua Puyi Fund Sales Co., Ltd. (“Puyi Fund”), a wholly-owned subsidiary of the Group, for a consideration consisting of the share repurchase price and a cash consideration of approximately RMB10,463.

The Group accounts for repurchased ordinary shares under the par value method and includes such treasury stock as a component of the shareholders’ equity.

(19)

Net Loss per Share

As of June 30, 2024, there were 178,684 ordinary shares related to employee and non-employee share options or non-vested ordinary shares which could potentially dilute basic net earnings per share in the future, but which were excluded from the computation of diluted net loss per share for the year ended June 30, 2024, as their effects would have been anti-dilutive.

The computation of basic and diluted net income per ordinary share is as follows:

	Year Ended June 30,
	2022			2023			2024
	RMB			RMB			RMB
Basic:
Net loss		(60,667	)		(43,577	)		(512,071	)
Less: Net loss attributable to the noncontrolling interests		-			-			(222,401	)
Net loss attributable to owners of the Company		(60,667	)		(43,577	)		(289,670	)
Less: Distributed earnings to New Dragon (Note 17)		-			-			826
Net loss attributable to ordinary shares of the Company		(60,667	)		(43,577	)		(290,496	)
Weighted average number of ordinary shares outstanding		90,472,014			90,472,014			232,761,359
Basic net loss per ordinary share		(0.671	)		(0.482	)		(1.244	)
Basic net loss per ADS		(1.006	)		(0.722	)		(1.867	)

F-59

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(19)

Net Loss per Share (continued)

	Year Ended June 30,
	2022			2023			2024
	RMB			RMB			RMB
Diluted:
Net loss		(60,667	)		(43,577	)		(512,071	)
Less: Net loss attributable to the noncontrolling interests		-			-			(222,401	)
Net loss attributable to owners of the Company		(60,667	)		(43,577	)		(289,670	)
Less: Distributed earnings to New Dragon (Note 17)		-			-			826
Less: Net impact on the net income attributable to the Company’s shareholders arising from the share-based compensation schemes of AIX		-			-			3,164
Net loss attributable to ordinary shares of the Company		(60,667	)		(43,577	)		(293,660	)
Weighted average number of ordinary shares outstanding		90,472,014			90,472,014			232,761,359
Weighted average number of dilutive potential ordinary shares from share options and restricted share units		-			-			-
Total		90,472,014			90,472,014			232,761,359
Diluted net loss per ordinary share		(0.671	)		(0.482	)		(1.262	)
Diluted net loss per ADS		(1.006	)		(0.722	)		(1.892	)

(20)

Distribution of Profits

As stipulated by the relevant PRC laws and regulations applicable to China’s foreign investment enterprise, the Group’s subsidiaries and VIEs in the PRC are required to maintain non-distributable reserves which include a statutory surplus reserve as of June 30, 2023 and 2024. Appropriations to the statutory surplus reserve are required to be made at not less than 10% of individual company’s net profit as reported in the PRC statutory financial statements of the Company’s subsidiaries and VIEs. The appropriations to statutory surplus reserve are required until the balance reaches 50% of the registered capital of respective subsidiaries and VIEs.

The statutory surplus reserve is used to offset future losses. These reserves represent appropriations of retained earnings determined according to PRC law and may not be distributed. The accumulated amounts contributed to the statutory reserves were RMB23,071 and RMB23,064 as of June 30, 2023 and 2024, respectively.

Under PRC laws and regulations, there are restrictions on the Company’s PRC subsidiaries and VIEs with respect to transferring certain of their net assets to the Company either in the form of dividends, loans, or advances. Amounts of restricted net assets include paid in capital and statutory surplus reserve of the Company’s PRC subsidiaries and the net assets of the VIEs in which the Company has no legal ownership, totaling RMB1,901,745 as of June 30, 2024, which were not eligible to be distributed.

F-60

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(21)

Related-party Balances and Transactions

The principal related-party balances as of June 30, 2023 and 2024, and transactions for the years ended June 30, 2022, 2023 and 2024 are as follows:

(i)

On December 28, 2020, Puyi Enterprise Management Consulting Co., Ltd (“Puyi Consulting”), one wholly-owned subsidiary of the Company entered into a framework strategic partnership agreement, or, the “Agreement”, with AIX. Pursuant to the Agreement, both parties, on the basis of full compliance with relevant regulatory and legal requirements will share customer and channel resources and explore collaboration opportunities on the provision of value-added asset management services to Chinese households, by leveraging both parties’ respective strength in insurance and financial services. On March 7, 2022, Puyi Consulting entered into a supplementary agreement with AIX. For the years ended June 30, 2022 and 2023 and the period from July 1, 2023 to December 31, 2023, Puyi Consulting recorded other revenues derived from the provided consulting services of RMB10,864, RMB14,651 and RMB3,704, respectively from AIX and the balance of amounts due from related party as of June 30, 2022 and 2023 and December 31, 2023 was RMB2,895, nil and nil, respectively.

(ii)

In 2022, AIX provided referral service to one of our wholly-owned subsidiaries. The Group recorded an amount RMB1,243 as selling expense for the year ended June 30, 2022. The balance of amount due to related payable was RMB292 which was fully settled in 2023.

(iii)

As disclosed in Note 1, the Company entered into a share repurchase agreement with AIX on December 22, 2023, pursuant to which the Company agreed to repurchase all of the 4.46% equity interests. Concurrently, a wholly-owned subsidiary of the AIX entered into a share transfer agreement with the Company to acquire 15.41% equity interests in Fanhua Puyi Fund Sales Co., Ltd. (“Puyi Fund”), a wholly-owned subsidiary of the Company, at an aggregate consideration including a transfer price for the aforementioned 4.46% equity interests and cash of RMB10,463.

(22)

Commitments and Contingencies

On April 16, 2024, the Group entered into a share purchase agreement (the “GEM Agreement”) with GEM Global Yield LLC SCS (“GEM”). Under the GEM Agreement, the Group has the option to issue and sell up to a number of ordinary shares (as represented by and delivered as ADSs) of the Company with an aggregate value of US$500,000 (the “Aggregate Limit”) which can be further increased to up to US$1,000,000, subject to certain terms and conditions. During the three years from the date of signing the GEM Agreement (the “Investment Period”), the Group can control the timing and maximum amount of the drawdown under this facility and has no minimum drawdown obligation. The Group has the option to issue the Company’s shares to GEM at its own discretion within the Investment Period. A commitment fee will be paid to GEM equal to 1.8% of the Aggregate Limit, in either cash, from the proceeds of the drawdowns, or in ordinary shares of the Company. Simultaneously, the Group and GEM entered into a selling agent agreement with Wilson-Davis & Company which will act as investment banker and as selling agent for GEM and will receive a fee of 0.2 % of the Aggregate Limit. As of the date of this report, no drawdown has been made.

As of June 30, 2024, there was no pending legal proceeding to which the Group is a party that will have a material effect on the Group’s business, results of operations or cash flows.

F-61

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(23)

Concentrations of Credit Risk

Concentration risks

Customers accounting for 10% or more of total net revenues excluding estimated renewal commissions are as follows:

	Year ended June 30,
	2022		% of sales			2023		% of sales			2024		% of sales
	RMB					RMB					RMB
Company A		35,611		18.9	%		*		*			*		*
Company B		47,642		25.2	%		15,360		13.4	%		*		*
Company C		*		*			14,631		12.8	%		*		*
Company D		—		—			—		—			132,995		11.2	%
Subtotal		83,253		44.1	%		29,991		26.2	%		132,995		11.2	%

*	represented less than 10% of total net revenues for the year.

Customers which accounted for 10% or more of gross accounts receivable plus certain amount of contract assets that are accounted for on a customer-base (“Such Accounts Receivable”) are as follows:

	As of June 30,
	2023		%			2024		%
	RMB					RMB
Company A		20,311		54.0	%		*		*
Company D		—		—			41,117		12.2	%
Subtotal		20,311		54.0	%		41,117		12.2	%

*	represented less than 10% of Such Accounts Receivable as of the year end.

The Group performs ongoing credit evaluations of its customers and generally does not require collateral on Such Accounts Receivable.

The Group places its cash and cash equivalents and short-term investments with financial institutions with low credit risk.

F-62

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(24)

Share-based Compensation

(a)

2022 Options

On August 12, 2022, AIX granted share options (“2022 Options”) to its independent directors to purchase up to 4,000,000 ordinary shares of AIX. Pursuant to the option agreements entered into between AIX and the option grantees, the options vest over a four-year service period starting from the date of grant, with 30% (“Option D1”), 30% (“Option D2”), 20% (“Option D3”) and the remaining 20% (“Option D4”) of the options being vested on August 31 of each of the years starting from 2023 to 2026, respectively, subject to the continuous service of the option grantees. The 2022 Options expire no later than August 1, 2032, subject to earlier termination upon an optionee’s cessation of service. The 2022 Options had an exercise price of US$0.2305 (RMB1.68) and an intrinsic value of US$0.0020 (RMB0.01) per ordinary share on the date of grant. The fair value of the options was determined by using the Black-Scholes option pricing model.

For the year ended June 30, 2024, changes in the status of total outstanding options, were as follows:

	Number of options		Weighted average exercise price in USD		Weighted average remaining contractual life (In years)		Aggregate Intrinsic Value USD
Outstanding as of June 30, 2023		—		—		—		—
Addition due to acquisition of AIX		4,000,000		0.2305		4.69		—
Outstanding as of June 30, 2024		4,000,000		0.2305		4.69		—

For the year ended June 30 2024, share-based compensation expenses of RMB 1,103 were recognized in connection with the 2022 Options, respectively. No actual forfeitures occurred for the independent directors for the year ended June 30, 2024.

As of June 30, 2024, unrecognized share-based compensation expense related to unvested share options granted to the independent directors totaled US$225 (RMB1,635), which is expected to be recognized over a weighted-average period of 2.1 years. The aggregate intrinsic value of the share options as of June 30, 2024 was US$0.

(b)

Restricted Share Units (“RSUs”)

In August of 2023, AIX granted 536,990 RSUs at par value to one of its executive officers. Pursuant to the option agreement entered into between AIX and the RSUs grantee, the RSUs vest over a five-year service period starting from the date of grant, with 100,000 RSUs, 100,000 RSUs, 136,990 RSUs, 100,000 RSUs and the remaining 100,000 RSUs being vested on June 30 of each of the years starting from 2024 to 2028, respectively, subject to the continuous service of the RSU grantee. The Group recorded the share-based compensation of RMB2,600 based on the market price of ADS at US$6.35 on the respective grant date in general and administrative expenses in the consolidated statements of operations and comprehensive loss for the 6 months period ended June 30, 2024.

F-63

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(24)

Share-based Compensation (continued)

(b)

Restricted Share Units (“RSUs”) (continued)

A summary of the activity of the service-based RSUs for the year ended June 30, 2024 is presented as follows:

	Number of restricted shares		Weighted average grant-date fair value US$

Unvested as of June 30, 2023		—		—
Granted		—		—
Addition due to acquisition of AIX		536,990		3,410
vested		—		—
Forfeited		—		—
Unvested as of June 30, 2024		536,990		3,410

The Group recorded share-based compensation expense of RMB2,600 in connection with the RSUs for the year ended June 30, 2024. As of June 30, 2024, unrecognized share-based compensation expense related to unvested RSUs granted to the executive officer totaled US$2,775 (RMB20,166), which is expected to be recognized over a weighted-average period of 4.0 years on a straight-line basis at an amount which at least equals the portion of the grant-date fair value of the RSUs that are vested at that date.

(c)

2023 Million Dollar Round Table Options (“2023 MDRT Options”)

On February 6, 2023, AIX granted share options (“2023 MDRT Options “) to its independent high-performing agents to purchase up to 13,680,000 ordinary shares of AIX. Pursuant to the option agreements entered into between AIX and the option grantees, the options vest over a two-year service period starting from the date of grant, with 50% and the remaining 50% of the options being vested on March 31 of each of the years starting from 2024 to 2025, respectively, subject to the continuous service of the option grantees and the achievement of the performance conditions. The 2023 MDRT Options expire no later than August 1, 2027, subject to earlier termination upon an optionee’s cessation of service. The 2023 MDRT Options had an exercise price of US$0.0500 (RMB0.36) and an intrinsic value of US$0.3125 (RMB2.27) per ordinary share on the date of grant.

A summary of share options outstanding as of June 30, 2024, and activity during the year then ended, is presented below:

	Number of options			Weighted average exercise price in USD		Weighted average remaining contractual life (In years)		Aggregate Intrinsic Value USD
Outstanding as of June 30, 2023		—			—		—		—
Granted		—			—		—		—
Addition due to acquisition of AIX		11,300,000			0.0500		3.59		3,192
Exercised		-			—		—		—
Forfeited		(1,861,820	)		—		—		—
Outstanding as of June 30, 2024		9,438,180			0.0500		3.09		467

F-64

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(24)

Share-based Compensation (continued)

(c)

2023 Million Dollar Round Table Options (“2023 MDRT Options”) (continued)

For the year ended June 30, 2024, share-based compensation expense of RMB2,734 was recognized in connection with the 2023 MDRT Options. As of June 30, 2024, unrecognized share-based compensation expense related to unvested 2023 MDRT Options totaled RMB3,467, which is expected to be recognized over a weighted-average period of 0.75 years on a straight-line basis. The Group estimates that approximately 31% of the independent high-performing agents will not probably meet the vesting conditions for the year ended June 30, 2024.

(d)

2024 Share Options (“2024 Options”)

On February 20, 2024, the Company granted share options (“2024 Options”), to certain directors, executive officers, employees and top agents of the Group to purchase up to 9,017,413 ordinary shares of the Company as a supplement of salary and benefit packages. Pursuant to the share incentive program entered into between the Company and the option grantees, the options vest over a one-year service period starting from March 31, 2025, subject to the achievement of certain key performance indicators by the option grantees and their continuous service with the Group. The 2024 Options expire no later than March 31, 2028, subject to earlier termination upon an optionee’s cessation of service or achievement of the performance conditions. The 2024 Options had an exercise price of US$0.0007 (RMB0.0048) and an intrinsic value of US$4.5193 (RMB32.8429) per ordinary share on the date of grant. The fair value of the 2024 Options was determined by using the binomial option pricing model.

The Group used the binomial option pricing model in determining the fair value of the options granted, which requires the input of highly subjective assumptions, including the expected life of the stock option, stock price volatility, dividend rate and risk-free interest rate. The assumptions used in determining the fair value of the 2024 Options on the grant date were as follows:

Assumptions	February 20, 2024
Expected dividend yield (Note i)		0.00	%
Risk-free interest rates (Note ii)		4.31	%
Expected volatility (Note iii)		70.10	%
Expected life in years (Note iv)		4.11
Exercise multiple (Note v)		1
Fair value of options on grant date	US$	4.52

F-65

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(24)

Share-based Compensation (continued)

(d)

2024 Share Options (“2024 Options”) (continued)

(i)

Expected dividend yield:

The expected dividend yield was estimated by the Group based on its historical dividend policy.

(ii)

Risk-free interest rate:

Risk-free interest rate was estimated based on the US Government Bond yield and pro-rated according to the tenor of the options as of the valuation date.

(iii)

Expected volatility:

The volatility of the underlying ordinary shares was estimated based on the annualized standard deviation of the continuously compounded rate of return on the daily average adjusted share price of the Group as of the Valuation Date.

(iv)

Expected life:

The expected life was estimated based on the end of the vesting period and the contractual term of the award of the 2024 Options.

(v)

Exercise multiple:

The exercise multiple was estimated based on empirical studies.

A summary of share options outstanding as of June 30, 2024, and activity during the year then ended, is presented below:

	Number of options			Weighted average exercise price in USD		Weighted average remaining contractual life (In years)		Aggregate Intrinsic Value USD
Outstanding as of June 30, 2023		—			—		—		—
Granted		9,017,413			0.0007		4.11		40.753
Addition due to acquisition of AIX		—			—		—		—
Exercised		-			—		—		—
Forfeited		(7,537,960	)		—		—		—
Outstanding as of June 30, 2024		1,479,453			0.0007		3.75		1,962

For the year ended June 30, 2024, share-based compensation expense of RMB15,606 was recognized in connection with the 2024 Options. As of June 30, 2024, unrecognized share-based compensation expense related to unvested 2024 Options totaled USD4,523, which is expected to be recognized over a weighted-average period of 0.75 years on a straight-line basis. The Group estimates that approximately 84% of the employees of the Group and top agents will not probably meet the performance target for the year ended June 30, 2024.

F-66

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(24)

Share-based Compensation (continued)

(e)

2024 AIX Share Option 1 (“2024 AIX Option 1”)

On April 16, 2024, AIX granted share options (“2024 AIX Option 1”) to certain MDRT agents to purchase up to 18,088,000 ordinary shares of AIX. Pursuant to the option agreements entered into between AIX and the option grantees, the options vest over a two-year service period starting from the date of grant, with 50% and the remaining 50% of the options being vested on March 31 of each of the years starting from 2025 to 2026, respectively, subject to the continuous service of the option grantees and the achievement of the performance conditions. The 2024 AIX Option 1 expire no later than August 1, 2027, subject to earlier termination upon an optionee’s cessation of service. The 2024 AIX Option 1 has an exercise price of US$0.1181 (RMB0.8582) and an intrinsic value of US$0.05 (RMB0.37) per ordinary share on the date of grant.

Assumptions	April 16, 2024
Expected dividend yield (Note i)		3.22	%
Risk-free interest rates (Note ii)		4.81	%
Expected volatility (Note iii)		59.78	%
Expected life in years (Note iv)		3.29
Exercise multiple (Note v)		1
Fair value of options on grant date		US$0.0834~US$0.0839

(i)

Expected dividend yield:

The expected dividend yield was estimated by AIX based on its historical dividend policy.

(ii)

Risk-free interest rate:

Risk-free interest rate was estimated based on the US Government Bond yield and pro-rated according to the tenor of the options as of the valuation date.

(iii)

Expected volatility:

(iv)

Expected life:

The expected life was estimated based on the end of the vesting period and the contractual term of the award of the 2024 AIX Option 1.

(v)

Exercise multiple:

The exercise multiple was estimated based on empirical studies.

A summary of share options outstanding as of June 30, 2024, and activity during the year then ended, is presented below:

	Number of options		Weighted average exercise price in USD		Weighted average remaining contractual life (In years)		Aggregate Intrinsic Value USD
Outstanding as of June 30, 2023		—		—		—		—
Granted		18,088,000		0.1181		3.29		921
Addition due to acquisition of AIX		—		—		—		—
Exercised		—		—		—		—
Forfeited		5,607,280		—		—		—
Outstanding as of June 30, 2024		12,480,720		0.1181		3.09		—

F-67

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(24)

Share-based Compensation (continued)

(f)

2024 AIX Share Option 2 (“2024 AIX Option 2”)

On April 16, 2024, AIX granted share options (“2024 AIX Option 2”) to certain newly recruited agents to purchase up to 800,000 ordinary shares of AIX. Pursuant to the option agreements entered into between AIX and the option grantees, the options vest over a two-year service period starting from the date of grant, with 50% and the remaining 50% of the options being vested on March 31 of each of the years starting from 2025 to 2026, respectively, subject to the continuous service of the option grantees and the achievement of the performance conditions. The 2024 AIX Option 2 expire no later than August 1, 2027, subject to earlier termination upon an optionee’s cessation of service. The 2024 AIX Option 2 has an exercise price of US$0.05 (RMB0.3634) and an intrinsic value of US$0.12 (RMB0.86) per ordinary share on the date of grant.

Assumptions	April 16, 2024
Expected dividend yield (Note i)		3.22	%
Risk-free interest rates (Note ii)		4.81	%
Expected volatility (Note iii)		59.78	%
Expected life in years (Note iv)		3.29
Exercise multiple (Note v)		1
Fair value of options on grant date		US$0.1182~US$0.1204

(i)

Expected dividend yield:

The expected dividend yield was estimated by AIX based on its historical dividend policy.

(ii)

Risk-free interest rate:

Risk-free interest rate was estimated based on the US Government Bond yield and pro-rated according to the tenor of the options as of the valuation date.

(iii)

Expected volatility:

(iv)

Expected life:

The expected life was estimated based on the end of the vesting period and the contractual term of the award of the 2024 AIX Option 2.

(v)

Exercise multiple:

The exercise multiple was estimated based on empirical studies.

A summary of share options outstanding as of June 30, 2024, and activity during the year then ended, is presented below:

	Number of options		Weighted average exercise price in USD		Weighted average remaining contractual life (In years)		Aggregate Intrinsic Value USD
Outstanding as of June 30, 2023		—		—		—		—
Granted		800,000		0.05		3.29		95
Addition due to acquisition of AIX		—		—		—		—
Exercised		—		—		—		—
Forfeited		320,000		—		—		—
Outstanding as of June 30, 2024		480,000		0.05		3.09		24

F-68

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(24)

Share-based Compensation (continued)

(g)

2024 AIX Share Option 3 (“2024 AIX Option 3”)

On June 25, 2024, AIX granted share options (“2024 AIX Option 3”) to certain sales team leaders to purchase up to 4,930,000 ordinary shares of AIX. Pursuant to the option agreements entered into between AIX and the option grantees, the options vest over a two-year service period starting from the date of grant, with 50% and the remaining 50% of the options being vested on March 31 of each of the years starting from 2025 to 2026, respectively, subject to the continuous service of the option grantees and the achievement of the performance conditions. The 2024 AIX Option 3 expire no later than August 1, 2027, subject to earlier termination upon an optionee’s cessation of service. The 2024 AIX Option 3 has an exercise price of US$0.05 (RMB0.3634) and an intrinsic value of US$0.07 (RMB0.48) per ordinary share on the date of grant.

Assumptions	June 25, 2024
Expected dividend yield (Note i)		3.22	%
Risk-free interest rates (Note ii)		4.44	%
Expected volatility (Note iii)		60.61	%
Expected life in years (Note iv)		3.1
Exercise multiple (Note v)		1
Fair value of options on grant date		US$0.0711~US$0.0719

(i)

Expected dividend yield:

The expected dividend yield was estimated by AIX based on its historical dividend policy.

(ii)

Risk-free interest rate:

Risk-free interest rate was estimated based on the US Government Bond yield and pro-rated according to the tenor of the options as of the valuation date.

(iii)

Expected volatility:

(iv)

Expected life:

The expected life was estimated based on the end of the vesting period and the contractual term of the award of the 2024 AIX Option 3.

(v)

Exercise multiple:

The exercise multiple was estimated based on empirical studies.

A summary of share options outstanding as of June 30, 2024, and activity during the year then ended, is presented below:

	Number of options		Weighted average exercise price in USD		Weighted average remaining contractual life (In years)		Aggregate Intrinsic Value USD
Outstanding as of June 30, 2023		—		—		—		—
Granted		4,930,000		0.05		3.10		323
Addition due to acquisition of AIX		—		—		—		—
Exercised		—		—		—		—
Forfeited		1,972,000		—		—		—
Outstanding as of June 30, 2024		2,958,000		0.05		3.09		146

F-69

HIGHEST PERFORMANCES HOLDINGS INC.
Notes to the Consolidated Financial Statements
(In thousands, except for shares and per share data)

(25)

Segment Reporting

The Group uses the management approach to determine operating segments. The management approach considers the internal organization and reporting used by the Group’s chief operating decision maker (“CODM”) for making decisions, allocating resources and assessing performance. The Group’s CODM has been identified as the chief executive officer, who reviews the operating profit or loss for each reporting units when making decisions about allocating resources and assessing performance of the Group.

As of June 30, 2023, the Group managed its business as a single operating segment engaged in the provision of distribution and managing wealth management services in the PRC (the “wealth management segment”).

As of June 30, 2024, after the acquisition of AIX, the Group operated three segments: (1) the insurance agency segment, which mainly consists of providing agency services for distributing life and non-life insurance products on behalf of insurance companies, (2) the claims adjusting segment, which consists of providing pre-underwriting survey services, claim adjusting services, disposal of residual value services, loading and unloading supervision services, and consulting services, and (3) the wealth management segment.

The following table shows the Group’s operations by business segment for the years ended June 30, 2022, 2023 and 2024.

	Year ended June 30,
	2022			2023			2024			2024
	RMB			RMB			RMB			US$
Net revenues
Insurance Agency		-			-			900,246			123,877
Claims Adjusting		-			-			222,114			30,564
Wealth Management		188,741			114,440			62,966			8,663
Total net revenues		188,741			114,440			1,185,326			163,104
Operating costs and expenses
Insurance Agency		-			-			(889,185	)		(122,356	)
Claims Adjusting		-			-			(219,417	)		(30,193	)
Wealth Management		(262,844	)		(173,244	)		(111,077	)		(15,283	)
Subtotal		(262,844	)		(173,244	)		(1,219,679	)		(167,832	)
Loss from operations before goodwill impairment
Insurance Agency		-			-			11,061			1,521
Claims Adjusting		-			-			2,697			371
Wealth Management		(74,103	)		(58,804	)		(48,111	)		(6,620	)
Subtotal		(74,103	)		(58,804	)		(34,353	)		(4,728	)
Impairment loss on goodwill		-			-			(426,410	)		(58,676	)
Loss from operations		(74,103	)		(58,804	)		(460,763	)		(63,404	)
Total other income (loss)		12,511			23,812			(37,242	)		(5,124	)
Loss before income taxes and share of loss of affiliates		(61,592	)		(34,992	)		(498,005	)		(68,528	)
Income tax benefit (expense)		925			(8,585	)		(12,945	)		(1,781	)
Share of loss of affiliates		-			-			(1,121	)		(154	)
Net loss		(60,667	)		(43,577	)		(512,071	)		(70,463	)

	As of June 30,
	2023		2024		2024
	RMB		RMB		US$
Segment assets
Insurance Agency		-		3,678,861		506,229
Claims Adjusting		-		359,374		49,452
Wealth Management		264,543		239,643		32,976
Total assets		264,543		4,277,878		588,657

Substantially all of the Group’s revenues for the three years ended June 30, 2022, 2023 and 2024 were generated from the PRC. Substantially all long-lived assets of the Group are located in the PRC. Accordingly, no geographical segments are presented.

(26)

Subsequent event

In accordance with AIX’s 2022 Share Inventive Plan, on July 2, 2024 the board of directors of AIX (the “Board of AIX”) authorized the issuance of share options to purchase up to 6,900,000 ADS to certain key employees. The share options are immediately exercisable until July 15, 2024, subject to certain conditions. AIX offered these key employees a loan at an interest rate of 3% per annum to facilitate the exercise of the share options. The share options granted were fully exercised through cash payment at an exercise price of US$1.92 per ADS before the expiration date. Through the loan agreements, AIX has the right to the ADSs held by the grantees as collateral to the loans issued to them until the loans are fully paid. The Group is in the process of assessing the accounting treatment.

F-70

HIGHEST PERFORMANCES HOLDINGS INC.

SCHEDULE I—CONDENSED FINANCIAL INFORMATION OF THE COMPANY

Balance Sheets

(In thousands, except for shares and per share data)

	As of June 30,
	2023			2024			2024
	RMB			RMB			US$

ASSETS:
Current assets:
Cash and cash equivalents		2,605			11,792			1,623
Amounts due from subsidiaries		809			1,210			167
Total current assets		3,414			13,002			1,790
Investments in subsidiaries		213,620			1,318,077			181,373
Total assets		217,034			1,331,079			183,163

LIABILITIES AND EQUITY:
LIABILITIES:
Current liabilities:
Accrued payroll		-			163			24
Total current liabilities		-			163			24
Total liabilities		-			163			24

Mezzanine equity		-			45,794			6,301
EQUITY:
Ordinary shares (Authorized shares:1,950,000,000 at US$0.001 each; issued 90,472,014 and 376,581,138 shares, of which 90,472,014 and 370,551,728 shares were outstanding as of June 30, 2023 and 2024, respectively)		600			2,617			360
Treasury stock		-			(29	)		(4	)
Additional paid-in capital		224,694			1,583,017			217,830
Retained earnings		(8,427	)		(298,190	)		(41,032	)
Accumulated other comprehensive income		167			(2,293	)		(316	)
Total equity		217,034			1,285,122			176,838
Total liabilities, mezzanine equity and equity		217,034			1,331,079			183,163

F-71

HIGHEST PERFORMANCES HOLDINGS INC.

SCHEDULE I—CONDENSED FINANCIAL INFORMATION OF THE COMPANY - (continued)

Statements of Operations and Comprehensive Loss

(In thousands)

	Years ended June 30,
	2022			2023			2024			2024
	RMB			RMB			RMB			US$

General and administrative expenses		(1,610	)		(2,084	)		(5,759	)		(792	)
Other income, net		227			286			681			93
Equity in loss of subsidiaries		(59,220	)		(41,771	)		(284,592	)		(39,161	)
Loss before income taxes		(60,603	)		(43,569	)		(289,670	)		(39,860	)
Income tax expense		(64	)		(8	)		-			-
Net loss		(60,667	)		(43,577	)		(289,670	)		(39,860	)
Other comprehensive income, net of tax: Foreign currency translation adjustments		417			560			(2,460	)		(339	)
Total Comprehensive loss		(60,250	)		(43,017	)		(292,130	)		(40,199	)

F-72

HIGHEST PERFORMANCES HOLDINGS INC.

SCHEDULE I—CONDENSED FINANCIAL INFORMATION OF THE COMPANY - (continued)

Statements of Cash Flows

(In thousands)

	Year Ended June 30,
	2022			2023			2024			2024
	RMB			RMB			RMB			US$
Cash flow from operating activities:
Net loss		(60,667	)		(43,577	)		(289,670	)		(39,860	)
Adjustments to reconcile net loss to net cash used in operating activities:
Equity in earnings of subsidiaries and an affiliate		59,282			41,791			284,592			39,161
Compensation expenses associated with stock options		-			-			-			-
Other non-cash adjustments		-			-			6			1
Changes in operating assets and liabilities:		-			-			-			-
Other receivables		(78	)		(731	)		(401	)		(55	)
Other payables and accrued expense		8			(218	)		163			23
Net cash used in operating activities		(1,455	)		(2,735	)		(5,310	)		(730	)
Cash flows from investing activities:
Capital contribution to a subsidiary		-			(6,952	)		-			-
Net cash used in investing activities		-			(6,952	)		-			-
Cash flows from financing activities:
Proceeds on exercise of stock options		-			-			44,968			6,188
Payment for purchase of non-controlling interests		-			-			(20,623	)		(2,838	)
Payment for repurchase of ordinary shares		-			-			(10,028	)		(1,380	)
Net cash generated from financing activities		-			-			14,317			1,970
Net (decrease) increase in cash and cash equivalents		(1,455	)		(9,687	)		9,007			1,240
Cash and cash equivalents and restricted cash at beginning of year		12,770			11,732			2,605			358
Effect of exchange rate changes on cash and cash equivalents		417			560			180			25
Cash and cash equivalents and restricted cash at the end of the year		11,732			2,605			11,792			1,623

F-73

HIGHEST PERFORMANCES HOLDINGS INC.

Note to Schedule I

(In thousands, except for shares)

Schedule I has been provided pursuant to the requirements of Rule 12-04(a), 5-04(c) and 4-08(e)(3) of Regulation S-X, which require condensed financial information as to the financial position, cash flows and results of operations of a parent company as of the same dates and for the same periods for which audited consolidated financial statements have been presented when the restricted net assets of the consolidated and unconsolidated subsidiaries (including variable interest entities) together exceed 25 percent of consolidated net assets as of the end of the most recently completed fiscal year.

As of June 30, 2024, RMB1,901,745 of the restricted capital and reserves are not available for distribution, and as such, the condensed financial information of the Company has been presented for the years ended June 30, 2022, 2023 and 2024.

As of June 30, 2024, there were no material contingencies, significant provisions of long-term obligations, and mandatory dividend or redemption requirements of redeemable shares or guarantees of the Company except for those which have been separately disclosed in the consolidated financial statements, if any.

Basis of preparation

The condensed financial information of the Company has been prepared using the same accounting policies as set out in the accompanying consolidated financial statements except that the equity method has been used to account for investments in its subsidiaries.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The footnote disclosures contain supplemental information relating to the operations of the Company and, as such, these statements should be read in conjunction with the notes to the consolidated financial statements of the Group as of June 30, 2023 and 2024 and the years ended 2022, 2023 and 2024.

F-74