tm227717-2_6k_DIV_12-ex99x3 - none

ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.

UNAUDITED CONDENSED INTERIM FINANCIAL INFORMATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

	Note	Three months ended March 31,
		2021		2022
		RMB’000		RMB’000
		(Unaudited)		(Unaudited)
Revenue	5		819,765		1,018,938
Cost of revenue	6		(541,210)		(669,907)
Gross profit			278,555		349,031
Research and development expenses	6		(281,299)		(363,013)
Selling and marketing expenses	6		(167,054)		(108,907)
General and administrative expenses	6		(180,457)		(211,301)
Net impairment losses on financial and contract assets			(7,104)		(17,214)
Other income, gains or loss-net	7		11,229		(3,491)
Operating loss			(346,130)		(354,895)
Finance income	8		18,157		2,446
Finance costs	8		(26,235)		(12,124)
Finance costs – net	8		(8,078)		(9,678)
Share of gain of associate and joint venture	13		4,547		11,537
Loss before income tax			(349,661)		(353,036)
Income tax benefit	9		26,871		20,728
Loss for the period			(322,790)		(332,308)
Loss attributable to:
– Owners of the Company			(304,732)		(317,585)
– Non-controlling interests			(18,058)		(14,723)
			(322,790)		(332,308)
Other comprehensive income, net of tax
Items that may be subsequently reclassified to profit or loss
– Foreign currency translation differences			50,099		(23,193)
– Changes in the fair value of debt instruments measured at fair value through other comprehensive income			1		12,523
			50,100		(10,670)
Total comprehensive loss for the period			(272,690)		(342,978)
Total comprehensive loss attributable to:
– Owners of the Company			(254,632)		(328,255)
– Non-controlling interests			(18,058)		(14,723)
			(272,690)		(342,978)
Loss per share attributable to owners of the Company (expressed in RMB per share)
– Basic and diluted	10		(0.28)		(0.29)
Loss per ADS attributable to owners of the Company (expressed in RMB per share)
– Basic and diluted	10		(0.83)		(0.86)

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ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.

UNAUDITED CONDENSED INTERIM FINANCIAL INFORMATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

	Note	As at December 31, 2021		As at March 31, 2022
		RMB’000		RMB’000
				(Unaudited)
ASSETS
Non-current assets
Property and equipment	11		244,412		259,506
Intangible assets	12		687,194		653,232
Deferred tax assets			683,218		707,342
Financial assets measured at amortized cost from virtual bank	19		674		—
Investments accounted for using the equity method	13		185,346		196,883
Financial assets measured at fair value through other comprehensive income	15		640,501		735,926
Contract assets	5		868		145
Restricted cash	21		—		9,000
Total non-current assets			2,442,213		2,562,034
Current assets
Trade receivables	17		891,174		1,274,817
Contract assets	5		227,895		198,986
Prepayments and other receivables	18		752,667		890,640
Financial assets measured at amortized cost from virtual bank	19		12,711		9,307
Financial assets measured at fair value through other comprehensive income	15		482,497		782,730
Financial assets at fair value through profit or loss	20		2,071,653		917,561
Restricted cash	21		1,060,427		475,314
Cash and cash equivalents	22		1,399,370		1,270,695
Total current assets			6,898,394		5,820,050
Total assets			9,340,607		8,382,084
EQUITY AND LIABILITIES
Equity
Share capital	23		78		78
Shares held for share incentive scheme	25		(80,102)		(79,752)
Other reserves	24		10,512,631		10,513,082
Accumulated losses			(6,638,625)		(6,956,210)
Equity attributable to equity owners of the Company			3,793,982		3,477,198
Non-controlling interests			41,100		26,377
Total equity			3,835,082		3,503,575
LIABILITIES
Non-current liabilities
Trade and other payables	26		313,834		323,322
Contract liabilities			19,418		19,041
Deferred tax liabilities			9,861		8,347
Total non-current liabilities			343,113		350,710
Current liabilities
Trade and other payables	26		2,137,099		2,107,183
Payroll and welfare payables			515,067		314,429
Contract liabilities			153,844		164,269
Short-term borrowings	27		815,260		294,829
Customer deposits	28		1,350,171		1,424,078
Derivative financial liabilities	29		190,971		223,011
Total current liabilities			5,162,412		4,527,799
Total liabilities			5,505,525		4,878,509
Total equity and liabilities			9,340,607		8,382,084

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ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.

UNAUDITED CONDENSED INTERIM FINANCIAL INFORMATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

		Attributable to owners of the Company
	Note	Share capital		Shares held for share incentive scheme		Other reserves		Accumulated losses		Total		Non- controlling interest		Total equity
		RMB’000		RMB’000		RMB’000		RMB’000		RMB’000		RMB’000		RMB’000
(Unaudited)
As at January 1, 2021			78		(87,714)		10,639,931		(5,356,926)		5,195,369		89,914		5,285,283
Loss for the period			—		—		—		(304,732)		(304,732)		(18,058)		(322,790)
Other comprehensive income, net of tax
– Foreign currency translation differences	24		—		—		50,099		—		50,099		—		50,099
– Fair value changes on financial assets measured at fair value through other comprehensive income	24		—		—		1		—		1		—		1
Total comprehensive loss for the period			—		—		50,100		(304,732)		(254,632)		(18,058)		(272,690)
Transactions with equity holders:
Share-based payments:
– Value of employee services	25		—		—		6,643		—		6,643		—		6,643
– Exercise of shares under Share Option Scheme	25		—		3,236		1,113		—		4,349		—		4,349
Total transactions with equity holders at their capacity as equity holders for the period			—		3,236		7,756		—		10,992		—		10,992
As at March 31, 2021			78		(84,478)		10,697,787		(5,661,658)		4,951,729		71,856		5,023,585

		Attributable to owners of the Company
	Note	Share capital RMB’000		Shares held for share incentive scheme RMB’000		Other reserves RMB’000		Accumulated losses RMB’000		Total RMB’000		Non- controlling interest RMB’000		Total equity RMB’000
(Unaudited)
As at January 1, 2022			78		(80,102)		10,512,631		(6,638,625)		3,793,982		41,100		3,835,082
Loss for the period			—		—		—		(317,585)		(317,585)		(14,723)		(332,308)
Other comprehensive income, net of tax
– Foreign currency translation differences	24		—		—		(23,193)		—		(23,193)		—		(23,193)
– Fair value changes on financial assets measured at fair value through other comprehensive income	24		—		—		12,523		—		12,523		—		12,523
Total comprehensive loss for the period			—		—		(10,670)		(317,585)		(328,255)		(14,723)		(342,978)
Transactions with equity holders:
Share-based payments:
– Value of employee services	25		—		—		11,589		—		11,589		—		11,589
– Vesting of shares under Restricted Share Unit Scheme	25		—		142		(142)		—		—		—		—
– Exercise of shares under Share Option Scheme	25		—		208		71		—		279		—		279
Others			—		—		(397)		—		(397)		—		(397)
Total transactions with equity holders at their capacity as equity holders for the period			—		350		11,121		—		11,471		—		11,471
As at March 31, 2022			78		(79,752)		10,513,082		(6,956,210)		3,477,198		26,377		3,503,575

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ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.

UNAUDITED CONDENSED INTERIM FINANCIAL INFORMATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

	Three months ended March 31,
	2021		2022
	RMB’000		RMB’000
	(Unaudited)		(Unaudited)
Cash flows from operating activities
Cash used in operations		(457,528)		(1,115,120)
Income tax paid		(3,255)		(3,574)
Net cash used in operating activities		(460,783)		(1,118,694)
Cash flows from investing activities
Payments for property and equipment		(7,007)		(5,066)
Payments for intangible assets		(33,640)		(13,847)
Payments for financial assets measured at fair value through other comprehensive income		—		(216,713)
Payments for financial assets at fair value through profit or loss		(1,364,115)		(488,280)
Payments for settlement of derivatives		—		(9,417)
Release of restricted cash, net		1,189,446		629,674
Proceeds from sales of property and equipment		13		11
Proceeds from sales of financial assets at fair value through profit or loss		1,229,007		1,651,391
Interest received on financial assets at fair value through profit or loss		14,743		2,514
Net cash generated from investing activities		1,028,447		1,550,267
Cash flows from financing activities
Proceeds from short-term borrowings		697,400		138,000
Proceeds from exercise of shares under share incentive scheme		4,349		279
Payments for lease liabilities		(22,941)		(17,267)
Repayments of short-term borrowings		(1,908,900)		(656,129)
Interest paid		(34,567)		(9,225)
Prepayments for shares repurchase		—		(12,696)
Net cash used in financing activities		(1,264,659)		(557,038)
Net decrease in cash and cash equivalents		(696,995)		(125,465)
Cash and cash equivalents at beginning of period		3,055,194		1,399,370
Effects of exchange rate changes on cash and cash equivalents		2,681		(3,210)
Cash and cash equivalents at the end of period		2,360,880		1,270,695

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ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.

NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL INFORMATION

1 General information and basis of presentation

1.1 General information

OneConnect Financial Technology Co., Ltd. (the “Company”) was incorporated in the Cayman Islands on October 30, 2017 as an exempted company with limited liability under the Companies Law (Cap. 22, Law 3 of 1961 as consolidated and revised) of the Cayman Islands. The address of the Company’s registered office is PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. The Company completed its initial public offering (“IPO”) on December 13, 2019 on the New York Stock Exchange. Each American Depositary Shares (“ADSs”) of the Company represents three ordinary shares.

The Company, its subsidiaries, its controlled structured entities (“Structured Entities”, “Variable Interest Entities” or “VIEs”) and their subsidiaries (“Subsidiaries of VIEs”) are collectively referred to as the “Group”. The Group is principally engaged in providing cloud-platform-based Fintech solutions, online information service and operating support service to financial institutions (the “Listing Business”) mainly in the People’s Republic of China (the “PRC”). The Company does not conduct any substantive operations of its own but conducts its primary business operations through its subsidiaries, VIEs and subsidiaries of VIEs in the PRC.

The condensed consolidated financial statements comprise the condensed consolidated statements of financial position as of March 31, 2022, the condensed consolidated statement of comprehensive income, the condensed consolidated statement of changes in equity and the condensed consolidated statement of cash flows for the three-month period then ended, and a summary of significant accounting policies and other explanatory notes (the “Interim Financial Information”). The Interim Financial Information are presented in Renminbi (“RMB”), unless otherwise stated. The Interim Financial Information have not been audited.

1.2 Basis of preparation and presentation

The Interim Financial Information has been prepared in accordance with International Accounting Standard (“IAS”) 34 “Interim Financial Reporting” issued by the International Accounting Standards Board and should be read in conjunction with the audited consolidated financial statements for the three years ended December 31, 2021 of the Group (“Financial Statements”), which have been prepared in accordance with International Financial Reporting Standards (“IFRS”) issued by International Accounting Standards Board.

2 Summary of significant accounting policies

Except as described below, the accounting policies and method of computation used in the preparation of the Interim Financial Information are generally consistent with those used in the Financial Statements in all material aspects, which have been prepared in accordance with IFRS under the historical cost convention, as modified by the revaluation of financial assets at fair value through profit of loss (“FVPL”), financial assets at fair value through other comprehensive income (“FVOCI”), certain other financial liabilities, which are carried at fair values.

Taxes on income for the interim period are accrued using the estimated tax rates that would be applicable to expected total annual assessable profit.

(a)

New and amended standards and interpretations adopted by the Group

The Group has applied the following standards and amendments for the first time for their annual reporting period commencing January 1, 2022:

•

Amendments to IAS 16 — Property, Plant and Equipment: Proceeds before intended use

•

Amendments to IFRS 3 — Reference to the Conceptual Framework

•

Cost of Fulfilling a Contract Amendments to IAS 37 — Onerous Contracts

•

Annual Improvements to IFRS Standards 2018-2020

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ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.

NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL INFORMATION

2 Summary of significant accounting policies (Continued)

(a)

New and amended standards and interpretations adopted by the Group (Continued)

The amendments listed above did not have material impact on the amounts recognized in prior periods and are not expected to significantly affect the current or future periods.

(b)

New standards and amendments to standards and interpretations not yet adopted

Several new standards and amendments to standards and interpretations have been issued but not effective during the three months ended March 31, 2022 and have not been early adopted by the Group in preparing this historical financial information:

			Effective for annual periods beginning on or after
IFRS 17 – Insurance Contracts			January 1, 2023
Amendments to IAS 1 – Classification of Liabilities as Current or Non-current			January 1, 2023
Amendments to IAS 1 – Disclosure of accounting policies			January 1, 2023
Amendments to IAS 8 – Definition of accounting estimates			January 1, 2023
Amendments to IAS 12 – Deferred tax related to assets and liabilities arising from a single transaction			January 1, 2023
Amendments to IFRS 10 and IAS 28 – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture			To be determined

The above new standards, new interpretations and amended standards are not expected to have a material impact on the historical financial information of the Group.

3 Critical accounting estimates and judgments

The preparation of the Interim Financial Information requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing the Interim Financial Information, the significant judgments made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty are the same as those applied to the Financial Statements.

4 Management of financial risk

The Group’s activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk.

The Interim Financial Information do not include all financial risk management information and disclosures required in the annual financial statements, and should be read in conjunction with the Financial Statements.

There were no changes in any material risk management policies during the three months ended March 31, 2022.

Since December 2019 COVID-19 has become widespread in China and many other countries. Although China’s economy is reopening, the Group’s operations have been negatively affected by delays in project implementation, on-site work, business development, client interaction and general uncertainties surrounding the effective and timely constraint of COVID-19. The outbreak of COVID-19 and the resulting widespread health crisis have also adversely affected the economies and financial markets, which could result in an economic downturn. As a result, customer usage of the Group’s solutions and the revenue growth have been and will continue to be adversely affected.

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ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.

NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL INFORMATION

4 Management of financial risk (Continued)

The extent to which this outbreak impacts the Group’s financial position and results of operations will depend on future developments, which are highly uncertain and unpredictable, including new information which may emerge concerning the severity of this outbreak and future actions, if any, to contain this outbreak or treat its impact, among others.

The Group has been proactively working with existing and new customers to provide operation support services and assist their shift to cloud-based solutions amid the interruptions. The Group will keep continuous attention on the situation of the COVID-19, assess and react actively to its impacts on the financial position and operating results of the Group.

The Group manages liquidity risk by maintaining adequate cash and cash equivalents and borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities. Management believes that the Group’s current cash and cash equivalents and anticipated cash flows from operations, investment and financing activities will be sufficient to meet the Group’s anticipated working capital requirements and capital expenditures for the next 12 months from March 31, 2022.

4.1 Capital management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to enhance shareholders’ value in the long-term.

The Group monitors capital (including share capital and reserves) by regularly reviewing the capital structure. As a part of this review, the Company considers the cost of capital and the risks associated with the issued share capital. The Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or repurchase the Company’s shares. In the opinion of the Directors of the Company, the Group’s capital risk was low as at March 31, 2022.

4.2 Fair value estimation

Fair value estimates are made at a specific point in time based on relevant market information and information about financial instruments. When an active market exists, such as an authorized securities exchange, the market value is the best reflection of the fair values of financial instruments. For financial instruments where there is no active market, fair value is determined using valuation techniques.

The Group’s financial assets measured at fair value mainly include financial assets at fair value through profit or loss and financial assets measured at fair value through other comprehensive income.

Determination of fair value and fair value hierarchy

All assets and liabilities for which fair value is measured or disclosed in the historical financial information are categorized within the fair value hierarchies. The fair value hierarchy categorizes the inputs to valuation techniques used to measure fair value into three broad levels. The level in the fair value hierarchy within which the fair value measurement is categorized in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety.

The levels of the fair value hierarchy are as follows:

(a)

Fair value is based on quoted prices (unadjusted) in active markets for identical assets or liabilities (“Level 1”);

(b)

Fair value is based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices) (“Level 2”); and

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ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.

NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL INFORMATION

4 Management of financial risk (Continued)

4.2 Fair value estimation (Continued)

Determination of fair value and fair value hierarchy (Continued)

(c)

Fair value is based on inputs for the asset or liability that are not based on observable market data (unobservable inputs) (“Level 3”).

The level of fair value calculation is determined by the lowest level input that is significant in the overall calculation. As such, the significance of the input should be considered from an overall perspective in the calculation of fair value.

For Level 2 financial instruments, valuations are generally obtained from third party pricing services for identical or comparable assets, or through the use of valuation methodologies using observable market inputs, or recent quoted market prices. Valuation service providers typically gather, analyse and interpret information related to market transactions and other key valuation model inputs from multiple sources, and through the use of widely accepted internal valuation models, provide a theoretical quote on various securities.

For Level 3 financial instruments, prices are determined using valuation methodologies such as discounted cash flow models and other similar techniques. Determinations to classify fair value measurement within Level 3 of the valuation hierarchy are generally based on the significance of the unobservable factors to the overall fair value measurement, and valuation methodologies such as discounted cash flow models and other similar techniques. To determine the fair value of loans and advances to customers from Virtual Bank, loans are segregated into portfolios of similar characteristics. Fair values are estimated using discounted cash flow methodology incorporating a range of input assumptions including expected customer prepayment rates, new business interest rate estimates for similar loans. The fair value of loans reflects uncertainty in expectations about future defaults at the balance sheet date and the fair value effect of repricing between origination and the reporting date. For credit impaired loans, fair value is estimated by discounting the future cash flows over the period they are expected to be recovered.

For assets and liabilities that are recognized at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

The following tables provide the fair value measurement hierarchy of the Group’s financial assets and liabilities:

	As at December 31, 2021
	Level 1		Level 2		Level 3		Total
	RMB’000		RMB’000		RMB’000		RMB’000
Assets measured at fair value
Financial assets at fair value through profit or loss (Note 20)		—		2,070,977		676		2,071,653
Financial assets measured at fair value through other comprehensive income (Note 15)		16,334		—		1,106,664		1,122,998
Financial liabilities
Derivative financial liabilities (Note 29)		—		190,971		—		190,971

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ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.

NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL INFORMATION

4 Management of financial risk (Continued)

4.2 Fair value estimation (Continued)

Determination of fair value and fair value hierarchy (Continued)

	As at March 31, 2022
	Level 1		Level 2		Level 3		Total
	RMB’000		RMB’000		RMB’000		RMB’000
(Unaudited)
Assets measured at fair value
Financial assets at fair value through profit or loss (Note 20)		—		916,885		676		917,561
Financial assets measured at fair value through other comprehensive income (Note 15)		201,435		30,181		1,287,040		1,518,656
Financial liabilities
Derivative financial liabilities (Note 29)		—		223,011		—		223,011

For the year ended December 31, 2021 and three months ended March 31, 2022, there were no transfers among different levels of fair values measurement.

Movements of Level 3 financial instruments measured at fair value are as follows:

	Three months ended March 31,
	2021		2022
	RMB’000		RMB’000
	(Unaudited)		(Unaudited)
At beginning of period		5,676		1,107,340
Additions		—		180,376
At end of the period		5,676		1,287,716

Valuation inputs and relationships to fair value

The significant unobservable inputs used in level 3 fair value measurements for loans and advances to customers from virtual bank measured at fair value through other comprehensive income are discount rate and prepayment rate, and the range of inputs are 31, March 2022 are 5.73% – 8.27% (31 December 2021: 5.22% – 10.05%) and 0.35% – 0.39% (31 December 2021: 0.35% – 0.39%).

If the discount rate increase or decrease by 5%, with all other variables held constant, the assets and other comprehensive income would decrease RMB 5,160,000 or increase RMB 5,192,000 as at 31 March, 2022 (31 December 2021: decrease RMB 4,579,000 or increase RMB 4,608,000), If the prepayment ratio increase or decrease by 5%, with all other variables held constant, the assets and other comprehensive income would decrease or increase RMB 235,000 as at 31 March, 2022 (31 December 2021: decrease or increase RMB 195,000).

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ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.

NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL INFORMATION

5 Segment information and revenue

5.1 Description of segments and principal activities

The chief operating decision-makers and management personnel review the Group’s internal reporting in order to assess performance, allocate resources, and determine the operating segments based on these reports.

The Group has the following reportable segments for the three months ended March 31, 2022:

•

Technology Solutions

•

Virtual Bank Business

As the Group’s assets and liabilities are substantially located in the PRC, substantially all revenues are earned and substantially all expenses incurred in the PRC, no geographical segments are presented.

	Three months ended March 31, 2021
	Virtual Bank Business		Technology Solutions		Intersegment eliminations and adjustments		Consolidated
(Unaudited)	RMB’000		RMB’000		RMB’000		RMB’000
Revenue		2,365		817,407		(7)		819,765
Cost of revenue		(6,581)		(534,636)		7		(541,210)
Gross profit		(4,216)		282,771		—		278,555
Operating loss		(43,657)		(302,473)		—		(346,130)
Loss before income tax		(43,757)		(305,904)		—		(349,661)
ASSETS
Segment Assets		1,006,405		8,088,988		(820,728)		8,274,665
Goodwill		—		289,161		—		289,161
Deferred income tax assets		—		591,384		—		591,384
Total assets		1,006,405		8,969,533		(820,728)		9,155,210
LIABILITIES
Segment Liabilities		533,470		3,641,446		(60,067)		4,114,849
Deferred income tax liabilities		—		16,776		—		16,776
Total Liabilities		533,470		3,658,222		(60,067)		4,131,625
Other segment information
Depreciation of property and equipment		2,239		33,735		—		35,974
Amortization of intangible assets		4,271		74,508		—		78,779
Additions of non-current assets except for goodwill and deferred income tax assets		9,217		31,430		—		40,647

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ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.

NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL INFORMATION

5 Segment information and revenue (Continued)

5.1 Description of segments and principal activities (Continued)

	Three months ended March 31, 2022
	Virtual Bank Business		Technology Solutions		Intersegment eliminations and adjustments		Consolidated
(Unaudited)	RMB’000		RMB’000		RMB’000		RMB’000
Revenue		21,193		997,974		(229)		1,018,938
Cost of revenue		(11,188)		(658,948)		229		(669,907)
Gross profit		10,005		339,026		—		349,031
Operating loss		(30,306)		(324,589)		—		(354,895)
Loss before income tax		(30,348)		(322,688)		—		(353,036)
ASSETS
Segment Assets		2,062,787		6,355,861		(1,033,067)		7,385,581
Goodwill		—		289,161		—		289,161
Deferred income tax assets		—		707,342		—		707,342
Total assets		2,062,787		7,352,364		(1,033,067)		8,382,084
LIABILITIES
Segment Liabilities		1,530,839		3,399,089		(59,766)		4,870,162
Deferred income tax liabilities		—		8,347		—		8,347
Total Liabilities		1,530,839		3,407,436		(59,766)		4,878,509
Other segment information
Depreciation of property and equipment		3,424		28,210		—		31,634
Amortization of intangible assets		6,126		36,717		—		42,843
Additions of non-current assets except for goodwill and deferred income tax assets		8,826		61,107		—		69,933

-11-

ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.

NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL INFORMATION

5 Segment information and revenue (Continued)

5.2 Revenue

(a)

Disaggregation of revenue from contracts with customers

	Three months ended March 31,
	2021		2022
	RMB’000		RMB’000
	(Unaudited)		(Unaudited)
– Technology Solutions
Implementation		168,567		171,678
Transaction based and support revenue
– Operation support services		212,237		255,208
– Business origination services		118,499		114,793
– Risk management services		99,290		106,951
– Cloud services platform		180,512		295,834
– Post-implementation support services		13,236		11,427
– Others		25,059		41,854
– Virtual Bank Business
Interest and commission		2,365		21,193
		819,765		1,018,938

Disaggregation of revenue by timing of transfer of services over time or at a point in time is set out below:

	At a point in time		Over time		Total
(Unaudited)
Three months ended March 31, 2021
Implementation		—		168,567		168,567
Transaction based and support revenue
– Operation support services		97,861		114,376		212,237
– Business origination services		118,499		—		118,499
– Risk management services		99,290		—		99,290
– Cloud services platform		—		180,512		180,512
– Post-implementation support services		—		13,236		13,236
– Others		24,742		2,682		27,424
		340,392		479,373		819,765

-12-

ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.

NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL INFORMATION

5 Segment information and revenue (Continued)

5.2 Revenue (Continued)

(a)

Disaggregation of revenue from contracts with customers (Continued)

	At a point in time		Over time		Total
(Unaudited)
Three months ended March 31, 2022
Implementation		—		171,678		171,678
Transaction based and support revenue
– Operation support services		89,879		165,329		255,208
– Business origination services		114,793		—		114,793
– Risk management services		106,951		—		106,951
– Cloud services platform		—		295,834		295,834
– Post-implementation support services		—		11,427		11,427
– Others		41,778		21,269		63,047
		353,401		665,537		1,018,938

During the three months ended March 31, 2021 and 2022, the Group mainly operated in PRC and most of the revenue were generated in PRC.

(b)

Contract assets and liabilities

The Group has recognized the following revenue-related contract assets and liabilities:

	As at December 31, 2021		As at March 31, 2022
	RMB’000		RMB’000
			(Unaudited)
Contract assets
– Implementation		271,521		252,709
– Transaction based and support		39,582		33,880
– Business origination services		9,976		11,318
– Operation support services		17,449		13,028
– Post implementation support services		12,157		9,534
		311,103		286,589
Less: Impairment loss allowance
– Implementation		(72,266)		(80,923)
– Transaction based and support		(10,074)		(6,535)
– Operation support services		(4,771)		(3,038)
– Post implementation support services		(5,303)		(3,497)
		(82,340)		(87,458)
		228,763		199,131
Less: Non-current contract assets		(868)		(145)
		227,895		198,986

-13-

ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.

NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL INFORMATION

5 Segment information and revenue (Continued)

5.2 Revenue (Continued)

(b)

Contract assets and liabilities (Continued)

Revenue recognized in relation to contract liabilities

	Three months ended March 31,
	2021		2022
	RMB’000		RMB’000
	(Unaudited)		(Unaudited)
Revenue recognized that was included in the contract liability balance at beginning of period		74,737		112,362

6 Expenses by nature

	Three months ended March 31,
	2021		2022
	RMB’000		RMB’000
	(Unaudited)		(Unaudited)
Employee benefit expenses (a)		422,137		450,888
Technology service fees		372,447		531,654
Outsourcing labor costs		71,019		86,586
Amortization of intangible assets (Note 12)		78,779		42,843
Business origination fees to channel partners		63,345		77,362
Purchase costs of products		24,722		41,741
Depreciation of property and equipment (Note 11)		35,974		31,634
Marketing and advertising fees		27,542		14,054
Professional service fees		5,196		2,083
Listing expenses		—		36,486
Travelling expenses		12,193		10,349
Impairment loss of intangible assets (Note 12)		—		4,036
Others		56,666		23,412
Total cost of revenue, research and development expenses, selling and marketing expenses, general and administrative expenses		1,170,020		1,353,128

-14-

ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.

NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL INFORMATION

6 Expenses by nature (Continued)

	Three months ended March 31,
	2021		2022
	RMB’000		RMB’000
	(Unaudited)		(Unaudited)
Research and development costs
– Employee benefit expenses		131,593		150,374
– Technology service fees		171,739		216,025
– Amortization of intangible assets		1,333		1,267
– Depreciation of property and equipment		2,443		4,674
– Others		4,738		4,352
Amounts incurred		311,846		376,692
Less: capitalized
– Employee benefit expenses		(25,895)		(13,559)
– Technology service fees		(4,652)		(120)
		(30,547)		(13,679)
		281,299		363,013

(a)

Employee benefit expenses are as follows:

	Three months ended March 31,
	2021		2022
	RMB’000		RMB’000
	(Unaudited)		(Unaudited)
Wages and salaries		339,551		348,285
Welfare and other benefits		77,636		91,014
Share-based payments (Note 25)		4,950		11,589
		422,137		450,888

7 Other income, gains or loss — net

	Three months ended March 31,
	2021		2022
	RMB’000		RMB’000
	(Unaudited)		(Unaudited)
Net foreign exchange (loss)/gain		(25,851)		14,238
Government grants and tax rebates		20,066		12,600
Net gain on financial assets at fair value through profit or loss		11,201		11,534
Guarantee loss, net		5,519		93
Net loss on derivatives		(235)		(43,174)
Others		529		1,218
		11,229		(3,491)

-15-

ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.

NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL INFORMATION

8 Finance costs — net

	Three months ended March 31,
	2021		2022
	RMB’000		RMB’000
	(Unaudited)		(Unaudited)
Finance income
Interest income on bank deposits		18,157		2,446
Finance costs
Interest expense on borrowings		(21,073)		(6,922)
Interest expense on lease liabilities (Note 16(b))		(1,171)		(1,894)
Interest expense on redemption liability		(3,701)		(2,511)
Bank charges		(290)		(797)
		(26,235)		(12,124)
		(8,078)		(9,678)

9 Income tax benefits

The income tax benefits of the Group for the three months ended December 31, 2021 and 2022 are analyzed as follows:

	Three months ended March 31,
	2021		2022
	RMB’000		RMB’000
	(Unaudited)		(Unaudited)
Current income tax		(3,256)		(4,910)
Deferred income tax		30,127		25,638
Income tax benefit		26,871		20,728

(a)

PRC Enterprise Income Tax (“EIT”)

The income tax provision of the Group in respect of operations in Mainland China has been calculated at the tax rate of 25%, unless preferential tax rates were applicable.

Shenzhen OneConnect, Vantage Point Technology, BER Technology and Shenzhen CA as subsidiaries of the Group, were established in mainland China. They were eligible for preferential tax policies such as the policies applicable for the qualification of “High and New Technology Enterprise” and were entitled to a preferential income tax rate of 15%.

(b)

Cayman Islands Income Tax

The Company is incorporated under the laws of the Cayman Islands as an exempted company with limited liability under the Companies Law of the Cayman Islands and is not subject to Cayman Islands income tax.

(c)

Hong Kong Income Tax

The Hong Kong income tax rate is 16.5%. No Hong Kong profits tax was provided for as there was no estimated assessable profit that was subject to Hong Kong profits tax for the three months ended March 31, 2021 and 2022.

(d)

Singapore Income Tax

The Singapore income tax rate is 17%. No Singapore profits tax was provided for as there was no estimated taxable profit that was subject to Singapore profits tax for the three months ended March 31, 2021 and 2022.

-16-

ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.

NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL INFORMATION

9 Income tax benefits (Continued)

(e)

Indonesia Income Tax

The income tax provision in respect of the Group’s operations in Indonesia was calculated at the tax rate of 22% on the taxable profits for the three months ended March 31, 2021 and 2022.

(f)

PRC Withholding Tax (“WHT”)

According to the EIT Law, distribution of profits earned by PRC companies since January 1, 2008 to overseas investors is subject to withholding tax of 5% or 10%, depending on the region of incorporation of the overseas investor, upon the distribution of profits to overseas-incorporated immediate holding companies.

For the three months ended March 31, 2021 and 2022, no deferred income tax liability on WHT was accrued because the subsidiaries of the Group were loss making.

10 Loss per share

	Three months ended March 31,
	2021		2022
	RMB’000		RMB’000
	(Unaudited)		(Unaudited)
Net loss for the period attributable to owners of the Company		(304,732)		(317,585)
Weighted average number of ordinary shares in issue (in’000 shares)		1,104,667		1,110,039
Basic loss per share (RMB yuan)		(0.28)		(0.29)
Diluted loss per share (RMB yuan)		(0.28)		(0.29)
Basic loss per ADS (RMB yuan) (Note)		(0.83)		(0.86)
Diluted loss per ADS (RMB yuan) (Note)		(0.83)		(0.86)

Note: One ADS represented three ordinary shares of the Company.

Basic loss per share is calculated by dividing the loss attributable to owners of the Company by the weighted average number of ordinary shares in issue during the three months ended March 31, 2021 and 2022.

Shares held for share incentive scheme purpose have been treated as treasury shares. Accordingly, for purpose of calculation of loss per share, the issued and outstanding number of ordinary shares as at March 31, 2021 and 2022 has taking into account the shares held for share incentive scheme purpose.

The effects of all outstanding share options granted under the Share Option Scheme and Restricted Share Units Scheme (Note 25) for three months ended March 31, 2021 and 2022 have been excluded from the computation of diluted loss per share as their effects would be anti-dilutive. Accordingly, dilutive loss per share for the three months ended March 31, 2021 and 2022 were the same as basic loss per share for the period.

-17-

ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.

NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL INFORMATION

11 Property and equipment

	Office and telecommunication equipment		Right-of-use properties		Leasehold improvements		Total
	RMB’000		RMB’000		RMB’000		RMB’000
(Unaudited)
Three months ended March 31, 2021
Opening net book amount		51,039		120,941		52,304		224,284
Additions		1,825		—		5,182		7,007
Disposals, net		(13)		(4,676)		—		(4,689)
Depreciation charge		(5,092)		(25,773)		(5,109)		(35,974)
Exchange difference		25		(63)		37		(1)
Closing net book amount		47,784		90,429		52,414		190,627
As at March 31, 2021
Cost		105,193		301,446		98,918		505,557
Accumulated depreciation		(54,465)		(209,890)		(45,415)		(309,770)
Exchange difference		(2,944)		(1,127)		(1,089)		(5,160)
Net book amount		47,784		90,429		52,414		190,627
(Unaudited)
Three months ended March 31, 2022
Opening net book amount		58,448		144,001		41,963		244,412
Additions		3,182		51,019		1,884		56,085
Disposals, net		(11)		(9,136)		—		(9,147)
Depreciation charge		(6,276)		(18,808)		(6,550)		(31,634)
Exchange difference		(33)		(128)		(49)		(210)
Closing net book amount		55,310		166,948		37,248		259,506
As at March 31, 2022
Cost		129,715		449,879		110,689		690,283
Accumulated depreciation		(71,296)		(281,466)		(72,175)		(424,937)
Exchange difference		(3,109)		(1,465)		(1,266)		(5,840)
Net book amount		55,310		166,948		37,248		259,506

During the different periods, the approximate depreciation which were charged to cost of revenue, research and development expenses, selling and marketing expenses and general and administrative expenses were as follows:

	Three months ended March 31,
	2021		2022
	RMB’000		RMB’000
	(Unaudited)		(Unaudited)
Cost of revenue		600		812
Research and development expenses		2,443		4,674
Selling and marketing expenses		1,101		1,345
General and administrative expenses		31,830		24,803
		35,974		31,634

Depreciation of office and telecommunication equipment is allocated to different functional expenses based on usage of equipment by different functional divisions. Right-of-use properties and leasehold improvement are primarily related to business office buildings leased by the Group and used as corporate headquarters. For leased business office buildings which are for general and administrative use, the depreciation of the related right-of-use properties and leasehold improvement is charged to general and administrative expense.

-18-

ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.

NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL INFORMATION

12 Intangible assets

	Application and platform
	Contributed by Ping An Group		Developed internally		Acquired		Purchased Software		Development costs in progress		Goodwill		Business license		Others		Total
(Unaudited)	RMB’000		RMB’000		RMB’000		RMB’000		RMB’000		RMB’000		RMB’000		RMB’000		RMB’000
Three months ended March 31, 2021
Opening net book amount		—		287,674		29,709		44,758		121,122		289,161		124,145		20,494		917,063
Additions		—		—		570		2,522		30,548		—		—		—		33,640
Transfer		—		60,972		—		—		(60,972)		—		—		—		—
Amortization		—		(46,405)		(6,458)		(11,420)		—		—		(8,011)		(6,485)		(78,779)
Exchange differences		—		295		—		26		107		—		—		—		428
Closing net book amount		—		302,536		23,821		35,886		90,805		289,161		116,134		14,009		872,352

As at March 31, 2021
Cost		690,910		650,498		61,078		132,826		90,698		289,161		155,492		80,263		2,150,926
Accumulated amortization		(690,910)		(347,166)		(37,257)		(96,563)		—		—		(39,358)		(66,254)		(1,277,508)
Exchange differences		—		(796)		—		(377)		107		—		—		—		(1,066)
Net book amount		—		302,536		23,821		35,886		90,805		289,161		116,134		14,009		872,352
Three months ended March 31, 2022
Opening net book amount		—		226,943		2,231		27,041		45,389		289,161		92,341		4,088		687,194
Additions		—		—		—		169		13,678		—		—		—		13,847
Write-off		—		(4,036)		—		—		—		—		—		—		(4,036)
Transfer		—		51		—		—		(51)		—		—		—		—
Amortization		—		(27,773)		(2,231)		(4,141)		—		—		(7,931)		(767)		(42,843)
Exchange differences		—		(743)		—		(82)		(105)		—		—		—		(930)
Closing net book amount		—		194,442		—		22,987		58,911		289,161		84,410		3,321		653,232

As at March 31, 2022
Cost		690,910		717,190		61,078		148,977		59,741		289,161		155,492		80,263		2,202,812
Accumulated amortization		(690,910)		(519,037)		(61,078)		(125,298)		—		—		(71,082)		(76,942)		(1,544,347)
Exchange differences		—		(3,711)		—		(692)		(830)		—		—		—		(5,233)
Net book amount		—		194,442		—		22,987		58,911		289,161		84,410		3,321		653,232

The Group assesses at each reporting date whether there is an indication that intangible assets may be impaired. During the three months ended March 31, 2022, impairment charge of RMB4,036,000 has been charged to cost of revenue. The impairment charge was charged against development costs which were in progress for certain application and platform developed internally following a decision to reduce the output of certain products.

-19-

ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.

NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL INFORMATION

12 Intangible assets (Continued)

During the three months ended March 31, 2021 and 2022, the amount of amortization charged to cost of revenue, research and development expenses and general and administrative expenses are as follows:

	Three months ended March 31,
Amortization of intangible assets	2021		2022
	RMB’000		RMB’000
	(Unaudited)		(Unaudited)
Cost of revenue		76,746		40,400
Research and development expenses		1,333		1,267
General and administrative expenses		700		1,176
		78,779		42,843

13 Investments accounted for using the equity method

(a)

Investment in associate

	Three months ended March 31,
	2021		2022
	RMB’000		RMB’000
	(Unaudited)		(Unaudited)
At beginning of period		172,757		184,907
Share of gains of associate		6,461		11,976
At end of period		179,218		196,883

On March 28, 2017, Shanghai OneConnect set up Pingan Puhui Lixin Asset Management Co., Ltd. (“Puhui Lixin”) with Pingan Puhui Enterprise Management Co., Ltd. (“Puhui Management”), a subsidiary of Lufax. The Group’s equity interests in Puhui Lixin was 40% for the three months ended March 31, 2021 and 2022.

(b)

Investment in joint venture

	Three months ended March 31,
	2021		2022
	RMB’000		RMB’000
	(Unaudited)		(Unaudited)
At beginning of period		2,976		439
Share of losses of joint venture		(1,914)		(439)
At end of period		1,062		—

On August 23, 2019, the Group entered into an investment in SBI OneConnect Japan Co., Ltd. (“SBI Japan”) with SBI Holdings, Inc., (“SBI”) and disposed of the investment in October 2021.

The Group entered into an agreement of setting up Financial Open Portal (Guangxi) Cross-border Financial Digital Co., Ltd. (“Open Portal Guangxi”) with Digital Guangxi Group Co., Ltd. (“Digital Guangxi”) on April 10, 2020. The Group and Digital Guangxi owned the equity interest in Open Portal Guangxi as to 51% and shares control with Digital Guangxi so that accounts for the investment as a joint venture. The joint ventures accounted for using the equity method are individually immaterial.

-20-

ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.

NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL INFORMATION

14 Financial instruments by category

The Group holds the following financial instruments:

		As at December 31,		As at March 31,
		2021		2022
		RMB’000		RMB’000
	Note			(Unaudited)
Financial assets
Financial assets at amortized cost
– Trade receivables	17		891,174		1,274,817
– Prepayments and other receivables (excluding non-financial asset items)	18		543,538		640,157
– Financial assets measured at amortized cost from virtual bank	19		13,385		9,307
– Restricted cash	21		1,060,427		484,314
– Cash and cash equivalents	22		1,399,370		1,270,695
Financial assets measured at fair value through other comprehensive income (FVOCI)	15		1,122,998		1,518,656
Financial assets at fair value through profit or loss (FVPL)	20		2,071,653		917,561
Total			7,102,545		6,115,507
Financial liabilities
Liabilities at amortized cost
– Trade and other payables (excluding non-financial liability items)	26		1,464,750		1,471,096
– Short-term borrowings	27		815,260		294,829
– Customer deposits	28		1,350,171		1,424,078
Derivative financial liability
– Held at FVPL	29		190,971		223,011
Total			3,821,152		3,413,014

15 Financial assets measured at fair value through other comprehensive income

	As at December 31, 2021		As at March 31, 2022
	RMB’000		RMB’000
			(Unaudited)
Loans and advances to customers from virtual bank		1,103,460		1,283,836
Equity securities (Note a)		3,204		3,204
Debt securities		16,334		231,616
		1,122,998		1,518,656
Less: Non-current financial asset measured at fair value through other comprehensive income		(640,501)		(735,926)
		482,497		782,730

(a)

On August 4, 2016, the Group acquired 5% equity interest in Fujian Exchange Settlement Centre Co., Ltd. (福建交易場所清算中心股份有限公司)at a consideration of RMB5,000,000.

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ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.

NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL INFORMATION

16 Leases

(a)

Amounts recognized in the consolidated statement of financial position

	As at December 31, 2021		As at March 31, 2022
	RMB’000		RMB’000
			(Unaudited)
Right-of-use assets (Note 11)
– Properties		144,001		166,948
Lease liabilities (Note 26)
– Non current		97,473		105,081
– Current		57,417		65,948
		154,890		171,029

(b)

Amounts recognized in the consolidated statement of comprehensive income

	Three months ended March 31,
	2021		2022
	RMB’000		RMB’000
	(Unaudited)		(Unaudited)
Depreciation charge of right-of-use assets		25,773		18,808
Interest expenses (included in finance cost)		1,171		1,894
		26,944		20,702

The total cash outflow for leases for the three months ended March 31, 2021 and 2022 were RMB 23,510,000 and RMB 18,285,000 respectively.

Expenses recognized in relation to short-term leases for the three months ended March 31, 2021 and 2022 amounted to RMB 569,000 and RMB 1,018,000 respectively.

17 Trade receivables

	As at December 31, 2021		As at March 31, 2022
	RMB’000		RMB’000
			(Unaudited)
Trade receivables		934,152		1,323,816
Less: impairment loss allowance		(42,978)		(48,999)
		891,174		1,274,817

-22-

ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.

NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL INFORMATION

17 Trade receivables (Continued)

Trade receivables and their aging analysis, based on recognition date, are as follows:

	As at December 31, 2021		As at March 31, 2022
	RMB’000		RMB’000
			(Unaudited)
Up to 1 year		897,114		1,263,140
1 to 2 years		22,920		44,904
2 to 3 years		8,026		8,417
Above 3 years		6,092		7,355
		934,152		1,323,816

18 Prepayments and other receivables

	As at December 31, 2021		As at March 31, 2022
	RMB’000		RMB’000
			(Unaudited)
Deposit receivable*		539,625		636,138
Value-added-tax deductible		53,437		86,412
Advance to suppliers		93,230		93,354
Advance to staffs		42,343		45,745
Receivables for value-added-tax paid on behalf of wealth management products		6,881		6,987
Others		20,119		24,972
Less: impairment loss allowance		(2,968)		(2,968)
		752,667		890,640

Deposit receivable mainly represents deposit paid to related parties and other suppliers according to the contract terms and receivable within one year.

(a)

Movements in the impairment loss allowance of prepayments and other receivables are as follows:

	Three months ended March 31,
	2021		2022
	RMB’000		RMB’000
	(Unaudited)		(Unaudited)
At beginning of period		(3,349)		(2,968)
Reversals		2		—
Exchange differences		9		—
At end of period		(3,338)		(2,968)

-23-

ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.

NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL INFORMATION

19 Financial assets measured at amortized cost from virtual bank

	As at December 31, 2021		As at March 31, 2022
	RMB’000		RMB’000
			(Unaudited)
Loans and advances to customers		13,575		9,359
Less: impairment loss allowance		(190)		(52)
		13,385		9,307
Less: non-current portion		(674)		—
		12,711		9,307

The balance represents financial assets measured at amortized cost carried from Virtual Bank, a wholly owned subsidiary of the Group since 2020.

20 Financial assets at fair value through profit or loss

	As at December 31, 2021		As at March 31, 2022
	RMB’000		RMB’000
			(Unaudited)
Contingent refundable consideration		676		676
Wealth management products		2,070,977		916,885
		2,071,653		917,561

As at December 31, 2021 and March 31, 2022, out of the wealth management products which the Group invested in, RMB2,070,977,000 and RMB916,885,000 were issued by subsidiaries of Ping An Group which are redeemable upon request by the holders, respectively.

21 Restricted cash

	As at December 31, 2021		As at March 31, 2022
	RMB’000		RMB’000
			(Unaudited)
Pledged bank deposits		1,043,718		416,461
Accrued interests		6,444		817
Time deposits with initial terms over three months		10,265		67,036
		1,060,427		484,314
Less: non-current portion		—		(9,000)
		1,060,427		475,314

As at December 31, 2021, RMB670,022,000 (USD105,090,000) of the bank deposits had been pledged for short-term borrowings of the Group with weighted average interest rate of 0.94% per annum, RMB368,866,000 (USD57,855,000) were pledged for currency swaps, and RMB4,830,000 , which pledged for business guarantees.

As at March 31, 2022, RMB410,824,000 (USD64,715,000) were pledged for currency swaps, and RMB5,637,000, which pledged for business guarantees.

-24-

ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.

NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL INFORMATION

22 Cash and cash equivalents

	As at December 31, 2021		As at March 31, 2022
	RMB’000		RMB’000
			(Unaudited)
Cash on hand		12		12
Cash at central bank		575,044		121,313
Cash at banks		824,314		1,149,370
		1,399,370		1,270,695

23 Share capital

			Number of shares						USD
Authorized Ordinary shares of USD0.00001 at December 31, 2021 and March 31, 2022					5,000,000,000						50,000

Issued	Number of shares		USD		Equivalent to RMB
Ordinary shares of USD0.00001 on December 31, 2020 and March 31, 2021		1,169,980,661		11,700		78,008
Surrendered ordinary shares (Note)		(8)		—		—
Ordinary shares of USD0.00001 on December 31, 2021 and March 31, 2022		1,169,980,653		11,700		78,008

Note: On April 1, 2021 and April 2, 2021, the Company bought back and cancelled 8 ordinary shares from Round A Investors.

24 Other reserves

	Recapitalization reserve		Share premium		Share-based compensation reserve		Foreign currency translation differences		Others		Total
	RMB’000		RMB’000		RMB’000		RMB’000		RMB’000		RMB’000
(Unaudited)
As at January 1, 2021		1,200,000		9,627,159		173,577		(133,132)		(227,673)		10,639,931
– Foreign currency translation differences		—		—		—		50,099		—		50,099
– Fair value changes on financial assets at fair value through other comprehensive income		—		—		—		—		1		1
Share-based payments:
– Value of employee services (Note 25)		—		—		6,643		—		—		6,643
– Exercise of shares under share option Scheme		—		—		1,113		—		—		1,113
– Vesting of shares under Restricted Share Unit Scheme		—		—		—		—		—		—
As at March 31, 2021		1,200,000		9,627,159		181,333		(83,033)		(227,672)		10,697,787

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ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.

NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL INFORMATION

24 Other reserves (Continued)

	Recapitalization reserve		Share premium		Share-based compensation reserve		Foreign currency translation differences		Others		Total
	RMB’000		RMB’000		RMB’000		RMB’000		RMB’000		RMB’000
(Unaudited)
As at January 1, 2022		1,200,000		9,627,159		200,631		(285,674)		(229,485)		10,512,631
– Foreign currency translation differences		—		—		—		(23,193)		—		(23,193)
– Fair value changes on financial assets at fair value through other comprehensive income		—		—		—		—		12,523		12,523
Share-based payments:
– Value of employee services (Note 25)		—		—		11,589		—		—		11,589
– Exercise of shares under share option Scheme		—		—		71		—		—		71
– Vesting of shares under Restricted Share Unit Scheme		—		—		(142)		—		—		(142)
Repurchase of shares		—		—		—		—		(397)		(397)
As at March 31, 2022		1,200,000		9,627,159		212,149		(308,867)		(217,359)		10,513,082

25 Share-based payments

For the purpose of establishing the Group’s share incentive scheme, Xin Ding Heng Limited (“Xin Ding Heng”) was set up in 2017 as a special purpose vehicle to indirectly hold 66,171,600 ordinary shares of the Company. As the Company has the power to govern the relevant activities of Xin Ding Heng and can derive benefits from the services to be rendered by the grantees, the directors of the Company consider that it is appropriate to consolidate Xin Ding Heng. In September 2020, the Company purchased at par value of the 66,171,600 ordinary shares indirectly held by Xin Ding Heng and deposited these shares to the depositary of its ADS program. The aggregate consideration of RMB88,280,000 for 66,171,600 shares had been recognized as “shares held for share incentive scheme” before the respective shares were effectively transferred to guarantees under share incentive scheme.

On November 7, 2017, equity-settled share-based compensation plan (“the Share Option Scheme”) was set up with the objective to recognize and reward the contribution of eligible directors, employees and other persons (collectively, the “Grantees”) for the growth and developments of the Group. On September 10, 2019, the Board of Directors of the company approved to amend and restate the equity-settled share-based compensation plan to supplement the Share Option Scheme with performance-based shares to grant to the Grantees (“the Restricted Share Units Scheme”). The 66,171,600 shares reserved for the share incentive scheme comprise the options previously granted under the Share Option Scheme and the remaining shares for grant under the Restricted Share Units Scheme. Both the Share Option Scheme and the Restricted Share Units Scheme are valid and effective for 10 years from the grant date.

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ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.

NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL INFORMATION

25 Share-based payments (Continued)

Share-based compensation expenses for the three months ended March 31, 2021 and 2022 were allocated as follows:

	Three months ended March 31,
	2021		2022
	RMB’000		RMB’000
	(Unaudited)		(Unaudited)
– Cost of revenue		921		880
– Research and development expenses		2,320		870
– Selling and marketing expenses		1,177		1,313
– General and administrative expenses		2,225		8,526
Total		6,643		11,589
Value of employee’s services (Note 6)		4,950		11,589
Value of non-employee’s services		1,693		—
Total		6,643		11,589

(a)

Share Option Scheme

Subject to the Grantee continuing to be a service provider, 100% of these options will be vested over 4 years upon fulfilling the non-market performance conditions prescribed in the grantee agreement.

The exercisable period of options starts no earlier than 12 months after the Company successfully completes an initial public offering and the Company’s shares get listed in the stock exchange (“IPO and Listing”) and no later than 8 years from the grant date. The vesting date is determined by the Board of Directors of the Company.

Movements in the number of share options granted to employees are as follows:

	Number of share options
	Three months ended March 31,
	2021		2022
	(Unaudited)		(Unaudited)
At beginning of period		19,459,994		12,725,995
Exercised		(3,889,578)		(156,048)
Forfeited		(205,275)		(1,216,559)
At end of period		15,365,141		11,353,388

For the outstanding share options, the weighted-average exercise price was RMB19.84, and RMB24.92 per share and the weighted-average remaining contractual life was 5.01 and 4.12 years, respectively, as at March 31, 2021 and 2022, respectively.

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ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.

NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL INFORMATION

25 Share-based payments (Continued)

(a)

Share Option Scheme (Continued)

Share options outstanding at the balance sheet dates have the following expiry dates and exercise prices.

							Number of share options
Grant Year	Expiry Year		Exercise price RMB		Fair value of options RMB		As at December 31, 2021		As at March 31, 2022
									(Unaudited)
2017		2027		1.33		0.62		1,109,682		1,077,905
2017		2027		2.00		0.52		5,785,221		5,660,949
2018		2028		52.00		26.00		4,704,219		3,747,124
2019		2029		52.00		23.42		1,126,873		867,410
								12,725,995		11,353,388

The Company have used the discounted cash flow method to determine the underlying equity fair value of the Company to determine the fair value of the underlying ordinary share before its IPO. Key assumptions, such as discount rate and projections of future performance, are required to be determined by the Company with best estimate.

Based on fair value of the underlying ordinary share, the Company have used Binomial option-pricing model to determine the fair value of the share option as at the grant date. Key assumptions are set as below:

Date of grant	November 7, 2017		November 8, 2018		June 1, 2019
Discount rate		24.0%		17.0%		17.0%
Risk-free interest rate		4.0%		4.0%		3.0%
Volatility		52.0%		51.0%		46.0%
Dividend yield		0.0%		0.0%		0.0%

The Binomial Model requires the input of highly subjective assumptions. The risk-free rate for periods within the contractual life of the option is based on the China Treasury yield curve in effect at the time of grant. The expected dividend yield was estimated based on the Company’s expected dividend policy over the expected life of the options. The Company estimates the volatility of its ordinary shares at the respective dates of grant based on the historical volatility of similar U.S. public companies for a period equal to the expected life preceding the grant date.

(b)

Restricted Share Units Scheme

Subject to the Grantee continuing to be a service provider, 100% of these restricted share units will be vested over 4 years upon fulfilling the service conditions and non-market performance conditions prescribed in the grantee agreement.

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ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.

NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL INFORMATION

25 Share-based payments (Continued)

(b)

Restricted Share Units Scheme (Continued)

Movements in the number of restricted share units granted to employees are as follows:

	Number of restricted share units
	Three months ended March 31,
	2021		2022
	(Unaudited)		(Unaudited)
At beginning of period		1,751,702		16,552,829
Granted		—		3,895,900
Vested		—		(106,167)
Forfeited		(82,702)		(532,463)
At end of period		1,669,000		19,810,099

Restricted share units outstanding at the balance sheet dates have the following expiry dates and fair value prices.

			Number of restricted share units
Grant Year	Fair value of restricted share units		As at December 31, 2021		As at March 31, 2022
	RMB				(Unaudited)
September 2019		35.22		545,383		521,612
January 2020		16.18		18,000		17,500
April 2020		16.98		82,500		82,500
July 2020		38.67		17,250		17,250
June 2021		13.69		503,076		377,672
June 2021		14.31		226,000		226,000
June 2021		14.93		1,279,800		1,279,800
July 2021		15.16		252,000		197,000
September 2021		5.53		7,346,000		7,017,000
October 2021		5.25		448,000		353,000
October 2021		3.91		2,820		2,820
October 2021		4.68		5,832,000		5,832,000
Jaunary 2022		2.40		—		218,845
Jaunary 2022		2.41		—		2,320,000
Jaunary 2022		3.29		—		947,100
Jaunary 2022		2.64		—		400,000
				16,552,829		19,810,099

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ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.

NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL INFORMATION

25 Share-based payments (Continued)

(b)

Restricted Share Units Scheme (Continued)

Based on fair value of the underlying ordinary share, the Company have used the Monte Carlo model to determine the fair value of the restricted share units as at the grant date. Key assumptions are set as below:

	Three months ended March 31,
	2021	2022
	(Unaudited)	(Unaudited)
Discount rate*	15.0%	15.0%
Risk-free interest rate	2.0% ~ 3.0%	2.0% ~ 3.0%
Volatility	43.0% ~ 49.0%	43.0% ~ 49.0%
Dividend yield	0.0%	0.0%

Applicable for the restricted share units granted in September 2019.

The Monte Carlo model requires the input of highly subjective assumptions. The risk-free rate for periods within the contractual life of the restricted share units is based on the China Treasury Bond Yield Curve in effect at the time of grant. The expected dividend yield was estimated based on the Company’s expected dividend policy over the expected life of the restricted share units. The Company estimates the volatility of its ordinary shares at the date of grant based on the historical volatility of similar US public companies for a period equal to the expected life preceding the grant date.

26 Trade and other payables

	As at December 31, 2021		As at March 31, 2022
	RMB’000		RMB’000
			(Unaudited)
Trade payables
Due to related parties		747,449		524,262
Due to third parties		354,279		305,425
		1,101,728		829,687
Redemption liability		271,525		274,035
Accrued expenses		209,676		283,271
Security deposits		56,236		56,491
Lease liabilities (Note 16(a))		154,890		171,029
Amounts payable for purchase of shares held for share incentive scheme (Note 25)		88,280		88,280
Other tax payables		44,716		35,615
Amounts due to related parties		431,351		612,975
Service fees refundable		9,809		6,632
Others		82,722		72,490
		2,450,933		2,430,505

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ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.

NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL INFORMATION

26 Trade and other payables (Continued)

	As at December 31, 2021		As at March 31, 2022
	RMB’000		RMB’000
			(Unaudited)
Less: non-current portion
Redemption liability		(128,081)		(129,961)
Lease liabilities		(97,473)		(105,081)
Amounts payable for purchase of shares held for share incentive scheme (Note 25)		(88,280)		(88,280)
		(313,834)		(323,322)
		2,137,099		2,107,183

As at December 31, 2021 and March 31, 2022, the aging of the trade payables are mainly within one year.

27 Short-term borrowings

	As at December 31, 2021		As at March 31, 2022
	RMB’000		RMB’000
Secured		663,136		55,206
Unsecured		152,124		239,623
		815,260		294,829

As at December 31, 2021, out of the secured borrowings, RMB597,400,000 were secured by restricted cash of RMB670,022,000 (Note 21), RMB9,014,000 was guaranteed by Haidian Financing Guarantee RMB53,722,000 was guaranteed by Shenzhen HTI Financing Guarantee Co., Ltd., and RMB3,000,000 was secured by the accounts receivable that BER Technology could claim from Guilin Bank Co., Ltd. in the following two years. The weighted average interest rate of short-term borrowings was 3.93% per annum as at December 31, 2021.

As at March 31, 2022, out of the secured borrowings, RMB5,000,000 was guaranteed by Haidian Financing Guarantee RMB 50,000,000 was guaranteed by Shenzhen HTI Financing Guarantee Co., Ltd.,. The weighted average interest rate of short-term borrowings was 4.30% per annum as at March 31, 2022.

28 Customer deposits

As at
December 31,
2021

As at
March 31,
2022

RMB’000

(Unaudited)

Current and savings accounts

1,350,171

1,424,078

It represented customer deposits held by Virtual Bank.

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ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.

NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL INFORMATION

29 Derivative financial liabilities

	As at December 31,				As at March 31,
	2021				2022
	Nominal amount		Fair value		Nominal amount		Fair value
	RMB’000				RMB’000
					(Unaudited)
Foreign exchange swaps		2,186,865		152,005		2,177,432		179,039
Currency forwards		1,095,958		38,966		1,097,032		43,972
		3,282,823		190,971		3,274,464		223,011

30 Dividends

No dividends had been paid or declared by the Company for the three months ended March 31, 2021 and 2022.

31 Related party transactions

The following significant transactions were carried out between the Group and its related parties for the three months ended March 31, 2021 and 2022. In the opinion of the Directors of the Company, the related party transactions were carried out in the normal course of business and at terms negotiated between the Group and the respective related parties.

(a)

Names and relationships with related parties

The following companies are related parties of the Group that had balances and/or transactions with the Group for the three months ended March 31, 2021 and 2022.

Name of related parties			Relationship with the Group
Sen Rong Limited(i)			A shareholder that has significant influence over the Group
Rong Chang Limited(i)			A shareholder that has significant influence over the Group
Bo Yu			A shareholder that has significant influence over the Group
Ping An Group			Ultimate parent company of Bo Yu
Subsidiaries of Ping An Group			Controlled by Ping An Group
Puhui Lixin			Significant influenced by the Group
SBI Japan(ii)			Significant influenced by the Group
Open Portal Guangxi			Significant influenced by the Group

(i)

As a result of the acting-in-concert agreement entered into between Sen Rong and Rong Chang, pursuant to which Sen Rong has agreed to act together with Rong Chang for the purpose of exercising Sen Rong’s shareholders’ rights in the Company, Rong Chang and Sen Rong have significant influence over the Group as a concert group .

(ii)

On October of 2021, the Group disposed the investment of SBI Japan(Note 13) and no longer have significant influence over it.

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ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.

NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL INFORMATION

31 Related party transactions (Continued)

(b)

Key management personnel compensations

Key management includes directors (executive and non-executive) and senior officers. The compensations paid or payable by the Group to key management for employee services are shown below:

	Three months ended March 31,
	2021		2022
	RMB’000		RMB’000
	(Unaudited)		(Unaudited)
Wages and salaries		5,725		7,727
Welfare and other benefits		181		156
Share-based payments		762		3,280
		6,668		11,163

(c)

Significant transactions with related parties

Three months ended March 31,

2021

2022

RMB’000

(Unaudited)

Revenue

Ping An Group and its subsidiaries

438,238

548,682

Revenue generated by providing implementation and support service jointly with Ping An Technology (Shenzhen) Co., Ltd, a related party, for the three months ended March 31, 2021 and 2022 amounted to RMB983,358 and RMB Nil, respectively.

Purchase of services
Ping An Group and its subsidiaries	330,932	402,303

Net gain from wealth management products consolidated by related parties
Ping An Group and its subsidiaries	5,280	5,011

Net loss on derivatives
Ping An Group and its subsidiaries	(235)	(43,174)

Interest income on bank deposits
Ping An Group and its subsidiaries	4,258	2,294
Leasing payment
Ping An Group and its subsidiaries	3,715	3,688
Interest expenses
Ping An Group and its subsidiaries	6,728	2,672

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ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.

NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL INFORMATION

31 Related party transactions (Continued)

(d)

Balances with related parties

Trade related	As at December 31, 2021		As at March 31, 2022
	RMB’000		RMB’000
			(Unaudited)
Trade receivables
Ping An Group and its subsidiaries(i)		442,694		738,727
Contract assets
Ping An Group and its subsidiaries		17,746		20,345
Prepayment and other receivables
Ping An Group and its subsidiaries(i)		531,327		629,416
Cash and cash equivalents
Ping An Group and its subsidiaries		429,527		565,339
Trade and other payables
Ping An Group and its subsidiaries(i)		1,178,438		1,137,237
Open Portal Guangxi(i)		362		—
		1,178,800		1,137,237
Contract liabilities
Ping An Group and its subsidiaries(i)		19,018		22,686
Open Portal Guangxi(i)		—		1,608
		19,018		24,294
Non-trade related(ii)
Financial assets at fair value through profit or loss (Note 20)
Ping An Group and its subsidiaries		599,540		558,816
Prepayment and other receivables
Open Portal Guangxi(i)		3,515		3,567
Restricted cash
Ping An Group and its subsidiaries		702,058		413,413
Short-term borrowings
Ping An Group and its subsidiaries		300,805		—
Derivative financial liabilities
Ping An Group and its subsidiaries		190,971		223,011

(i)

The balances with related parties were unsecured, interest-free and repayable on demand.

(ii)

The balances were mainly for treasury management purpose which are collectable or repayable on demand or within one year.

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ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.

NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL INFORMATION

32 The Group’s maximum exposure to unconsolidated structured entities

The Group has determined that all of assets management products managed by the Group and its investments in wealth management products, which are not controlled by the Group, are unconsolidated structured entities.

The Group invests in wealth management products managed by related parties for treasury management purposes. The Group also managed some assets management fund products as fund manager to generate fees from managing assets on behalf of other investors, mainly Ping An Group and its subsidiaries. The assets management fund products are financed by capital contribution from investors.

The following table shows the Group’s maximum exposure to the unconsolidated structured entities which represents the Group’s maximum possible risk exposure that could occur as a result of the Group’s arrangements with structured entities. The maximum exposure is contingent in nature and approximates the sum of direct investments made by the Group. The direct investments made by the Group are classified as FVPL.

The size of unconsolidated structured entities and the Group’s funding and maximum exposure are shown below:

Unconsolidated structured entities

December 31,2021

Size

Carrying
amount

The Group’s
maximum
exposure

Interest
held by
the Group

RMB’000

Asset management products managed by the Group

1,329,453

—

Service fee

Wealth management products managed by related parties

Note a

2,070,977

Investment income

Unconsolidated structured entities

March 31, 2022

Size

Carrying
amount

The Group’s
maximum
exposure

Interest
held by
the Group

RMB’000

(Unaudited)

Asset management products managed by the Group

831,462

—

Service fee

Wealth management products managed by related
parties

Note a

916,885

Investment income

Note a: The asset management and wealth management products are sponsored by related financial institutions and the information related to size of these structured entities were not publicly available. The carrying amount is recorded in financial assets at fair value through profit or loss.

33 Contingencies

The Group did not have any material contingent liabilities as at December 31, 2021 and March 31, 2022.

34 Subsequent events

There were no material subsequent events since March 31, 2022 to the date of this report.

-35-