A：Lufax completed the ordering process for 2022-2025 financial payments and regained compliance with the New York Stock Exchange's continued listing standards. They engaged Deloitte Consulting Shanghai as an independent internal control consultant to conduct a comprehensive review and provide recommendations for enhancing the internal control system. The company has implemented corresponding remedial measures and strengthened corporate governance with a restructuring of the Board and the establishment of the position of Chief Compliance Officer.

A：China's overall economic growth moderated in the second quarter with a 4.3% year-over-year GDP growth. The operating environment for small and micro enterprises remained difficult with weak financing demand, as reflected by the decrease in the King Kong Business School SME Development Index below the 50-point threshold in June. Consumer finance demand was also soft, with household consumer loan balances down 1.7% year over year as of the end of June. These developments indicate a challenging environment for Lufax's core small business customer base.

A：Regulators have issued guidelines that now oversee the full value chain of the business, including pricing, customer acquisition, risk management, post-loan operations, and data governance, along with continued interest rate compression and fee transparency requirements. This results in narrowing industry margins and the previous business model of offsetting high risks with fees being unsustainable. This leads to term pressure on growth and profitability over time but also creates an opportunity for a healthier and more disciplined competition, enhancing the competitive advantage of top players with proper licenses.

A：Lufax's strategy involves refining their sales customer strategy to shift the customer mix towards high-priority segments and launching the 'Industry Plus' product that deploys differentiated products and priorities across regions. The goal is to develop customized financing solutions for unique industries and business owners, leveraging AI to improve operational efficiency and service quality.

A：Lufax expanded their collection model reforms and broadened the use of AI-powered collection, which resulted in an improvement in asset quality on a sequential basis. The second-quarter CM3 flow rate was 1.0%, down from 1.2% in the first quarter. The cost of funding for consumer finance loans was 3.8% in the second quarter, down around 90 basis points year over year. Funding costs were reduced through long-term relationships with banking partners.

A：Total income declined by 15.5% year over year due to a decrease in the balance of loans to small business owners, partially offset by continued growth in consumer finance loan balances. On the bottom line, net loss narrowed sequentially, but remained elevated due to credit costs. The challenging macro environment for small business owners and tightened regulatory requirements impacted repayment capabilities and increased credit costs.

A：The top priorities for the next two to three years include growing the mid to low-risk customer base, focusing on quality customers across segments, small business owners, and individually owned businesses or self-employed individuals. Additionally, there is an emphasis on salary employees and expanding the consumer finance segment to continue building a more diversified and productive customer matrix.

A：The current strategy will continue to focus on prudent operations and prioritizing asset quality over scale growth. This will involve further strengthening the due diligence strategy for small business lending and consumer finance, as well as relying on a new selective customer strategy to optimize the customer base and drive business scale and profitability.

A：Consumer finance is positioned as a new growth engine and will continue to be the primary driver for growth. The company is testing new customer acquisition models and product combinations to serve higher-quality customers. The growth is expected to be sustainable through improved customer acquisition efficiency, broad product offerings, and stronger risk management. Small business lending and consumer finance are seen as complementary, with plans to optate the business based on market conditions to achieve balanced growth.

A：The recent stress among smaller online lending platforms has led to a tightening in institutional funding and borrowing refinancing conditions. Management is responding to this by accelerating the selective customer strategy, strengthening cost management, optimizing cost structure, and improving capital efficiency to continue lowering pricing while ensuring stable profitability.

A：In the short term, the company is focusing on accelerating the selective customer strategy, strengthening cost management, optimizing the cost structure, and improving capital efficiency. These measures are intended to continue to lower pricing while ensuring stable profitability and creating room for mid-term and long-term performance growth.

A：The company believes that its current cash position is adequate for capital requirements and financial regulations, and it maintains a buffer to support future growth. The focus is on executing the strategy to return to profitability as soon as possible to create long-term value for shareholders. Once profitability targets are met, management will review the dividend policy and decide whether to pay dividends.

A：With the transition to the full guarantee model largely complete, new loans have improved profitability. The asset quality of new loans issued in the first half of the year has shown an improvement over the asset accumulation of 2025. Ongoing implementation of the new strategy is expected to continue improving overall profitability.

A：The company has upgraded its rent control measures and adopted a prudent risk strategy. Enhanced risk management initiatives include broad rollouts of collection models and the expansion of AI-powered collection. These measures have delivered initial positive results and are expected to continue sequential improvement in asset quality. While asset quality has worsened since the second half of last year, the company expects the trend to improve over the second half of the year.

A：The company does not compete directly with most banks. It targets small business owners and individually owned businesses that typically cannot access bank loans or require smaller loan amounts. The company's platform, Rong Yi, fills a supply gap in the market, complements bank products, and differentiates through features such as lower amounts, convenient processes, quick turnaround times, and flexible repayment terms.

A：The company has completed the audit of the 2022 and 2023 financial statements, as well as the internal control review and upgrades. The company is still responding to outstanding questions and comments raised by the Hong Kong Stock Exchange regarding the relevant funding. Updates on any developments will be provided in a timely manner, and appropriate announcements will be made as necessary.