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Filed Pursuant to Rule 424(b)(5)
Registration No. 333-238762

CALCULATION OF REGISTRATION FEE

(1)

Includes all ordinary shares in the Global Offering (as defined in the prospectus supplement under the caption "Underwriting"). Such ordinary shares include (i) those initially offered and sold within the United States and (ii) those initially offered and sold outside the United States that may be resold from time to time within the United States. Offers and sales of ordinary shares outside the United States are being made pursuant to the exemption provided by Rule 901 of Regulation S.

(2)

Includes 25,722,000 ordinary shares, which may be purchased by the international underwriters upon exercise of the international underwriters' option to purchase additional ordinary shares.

(3)

Calculated based on an exchange rate of HK$7.7513 to US$1.00 as of May 29, 2020, per the noon buying rate set forth in the H.10 statistical release of the U.S. Federal Reserve Board. The offering price is HK$123.00 per ordinary share.

(4)

Calculated in accordance with Rule 457(r) under the Securities Act of 1933, as amended.

(5)

These ordinary shares may be represented by American depositary shares, each of which represents 25 ordinary shares. The ADSs issuable on deposit of the ordinary shares registered hereby have been registered under separate registration statements on Form F-6 (Registration Nos. 333-11738, 333-115868 and 333-212198).

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Prospectus Supplement
(to Prospectus dated May 29, 2020)

171,480,000 Ordinary Shares

NetEase, Inc.

          We are offering 171,480,000 ordinary shares, par value US$0.0001 per share, as part of a global offering, comprising an international offering of 150,900,000 ordinary shares offered hereby, and a Hong Kong public offering of 20,580,000 ordinary shares. The public offering price for the international offering and the Hong Kong public offering is HK$123.00 per ordinary share, or approximately US$15.87 per ordinary share based on an exchange rate of HK$7.7513 to US$1.00.

          ADSs representing our ordinary shares are listed on the Nasdaq Global Select Market, or the Nasdaq, under the symbol "NTES." On June 4, 2020, the last reported trading price of our ADSs on the Nasdaq was US$405.01 per ADS, or HK$125.57 per ordinary share, based upon an exchange rate of HK$7.7513 to US$1.00. Each ADS represents 25 ordinary shares.

          The international offering contemplated herein consists of a U.S. offering and a non-U.S. offering made outside the United States in compliance with applicable law. We are paying a registration fee for ordinary shares sold in the United States, as well as for ordinary shares initially offered and sold outside the United States in the global offering that may be resold from time to time into the United States in compliance with applicable law.

          Approval-in-principal has been granted by The Stock Exchange of Hong Kong Limited, or the Hong Kong Stock Exchange, for the listing of, and permission to deal in, our ordinary shares under the stock code "9999."

          Investing in the ordinary shares involves a high degree of risk. See the "Risk Factors" beginning on page S-23 of this prospectus supplement.

          Neither the United States Securities and Exchange Commission, or the SEC, nor any state securities commission or other regulatory body has approved or disapproved of these securities or determined if this prospectus supplement is truthful or complete. Any representation to the contrary is a criminal offense.

HK$123.00 PER ORDINARY SHARE

(1)

Equivalent to approximately US$396.71 per ADS, based upon each ADS representing 25 of our ordinary shares and an exchange rate of HK$7.7513 to US$1.00.

(2)

See "Underwriting" beginning on page S-45 of this prospectus supplement for additional information regarding the structuring fee and expenses reimbursement arrangements.

(3)

Includes estimated proceeds to us (before expenses) of HK$2,525,011,650.00 from the sale of 20,580,000 ordinary shares in the Hong Kong public offering.

          We have granted the international underwriters the option, exercisable by China International Capital Corporation Hong Kong Securities Limited, Credit Suisse (Hong Kong) Limited and J.P. Morgan Securities (Asia Pacific) Limited, or the Joint Global Coordinators, on behalf of the international underwriters, to purchase up to an additional 25,722,000 ordinary shares at the public offering price in the international offering until 30 days after the last day for the lodging of applications under the Hong Kong public offering. J.P. Morgan Securities plc has entered into a borrowing arrangement with Shining Globe International Limited that is intended to facilitate the settlement of over-allocations. J.P. Morgan Securities plc is obligated to return ordinary shares to Shining Globe International Limited by exercising the option to purchase additional ordinary shares from us or by making purchases in the open market. No fees or other remuneration will be paid by the underwriters to us or Shining Globe International Limited for the loan of these ordinary shares.

          The underwriters expect to deliver the ordinary shares against payment therefor through the facilities of the Central Clearing and Settlement System on or about June 11, 2020.

Joint Sponsors, Joint Global Coordinators and Joint Bookrunners
(in alphabetical order)

Joint Bookrunners
(in alphabetical order)

Prospectus Supplement dated June 5, 2020.

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PROSPECTUS SUPPLEMENT

PROSPECTUS

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        You should rely only on the information contained or incorporated by reference into this prospectus supplement, the accompanying prospectus or any other offering materials we file with the SEC. Neither we nor the underwriters have authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on such different or inconsistent information. Neither we nor the underwriters are making an offer of the ordinary shares in any jurisdiction where such offer is not permitted. You should not assume that the information contained or incorporated by reference into this prospectus supplement and the accompanying prospectus or in any other offering material is accurate as of any date other than the respective dates thereof. Our business, financial condition, results of operations and prospects may have changed since those dates. Neither this prospectus supplement nor the accompanying prospectus constitutes an offer, or an invitation on our behalf or the underwriter to subscribe for and purchase, any of the ordinary shares and may not be used for or in connection with an offer or solicitation by anyone, in any jurisdiction in which such an offer or solicitation is not authorized or to any person to whom it is unlawful to make such an offer or solicitation.

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LETTER FROM OUR FOUNDER AND CEO

"Believing in the Power of Passion"
CEO William Ding's Letter to Investors
On NetEase's 20^th Listing Anniversary

Dear NetEase Investors,

        When NetEase went public on Nasdaq in June 2000, we began a new journey, which coincided with the start of a new century. We were all curious about what the future would hold.

        NetEase's share price has risen significantly in the 20 years since listing, and we have maintained a regular quarterly dividend for the last six consecutive years, a trend that strongly demonstrates our commitment to returning value to shareholders and symbolises our youthful vigor and vitality.

        We are truthful, high-spirited, enthusiastic and curious, rather than complicated and calculating. The contrast of our uncomplicatedness to a world full of complications often makes NetEase an "enigmatic" company. I'd like to take this opportunity to dispel some of the confusion and misconceptions that may exist about our business.

1.     Some say they don't understand NetEase's strategies.

In my view, the term "strategy" has become an overly metaphysical concept, which one associates with an ambitious blueprint and elaborate planning. However, the attractiveness of business lies precisely in the fact that unexpected occurrences often undo carefully calculated plans.

For NetEase, our business strategy is by no means derived from some grand masterplan. Before embarking on new businesses, we usually ask ourselves three questions: Does this product truly address user needs? Are we passionate about it? Are we capable of delivering superior services and products compared to our competitors?

This is our philosophy—one that is centred on user demand, driven by dedication and empowered by capability. Our philosophy embodies a relentless pursuit of our vision and an unwavering belief that we will find our answers in the end.

As such, the notion of being "user centric" and "passionate" is manifest in the history of our company. Through these ideas, one can truly understand us. In an ever-changing world, our ethos and perpetual desire to meet users' demands remain constant.

NetEase believes in the power of people.

2.     Some say they don't understand NetEase's pace.

When it comes to the internet, being perceived as being slow seems to be a "sin" to some. However, the mere desire for speed comes at the cost of the inability to appreciate beauty and what is really important to users and what makes a product great. NetEase has never feared to progress at its own pace. Instead of being driven by short-term goals, we focus on innovation and delivering premium content and an excellent experience to users. This is the path that we have chosen and adhered to since our early days.

Developing "premium content and product excellence" involves years of hard work. It requires us to dig deep and gain insights into user needs and to attend to the most intricate product details.

We are okay with spending two decades to fine-tune a game or several years to perfect a music app. Our principle is an unwavering belief in proceeding at our own pace, come what may.

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Running a company is not a 100-meter sprint but rather a marathon. One does not simply win the race with a faster start. As we focus on our long-term goals, we strive to create wonders for our users and the best possible products and services.

NetEase believes in the power of time.

3.     Some say they don't know how to define NetEase.

NetEase has experienced and withstood numerous market cycles. Our resilience through difficult circumstances is not a result of wit or luck, but a testament to our respect of and adherence to the fundamental driver of long-term business success: the creation of true value for our users and society at large.

From e-mail services, web portals and interactive entertainment to Youdao products, open courses, music streaming and e-commerce services, etc., we don't define ourselves as a specific type of company nor limit ourselves to one particular field. As long as we believe in our ability to make a difference, we are willing to go the extra mile to achieve it.

Such philosophy sometimes comes at a potential cost of missing short-term gains or being misunderstood, and sometimes being mocked. However, we embrace these obstacles with an unwavering faith in our mission and our values.

We hope to bring a little more positivity and a little more wonderfulness to the world every time that we can. When there is a clash between idealism and practicality, our approach is to lean toward the former. Our thinking is grounded in the belief that if we stick with our principles, wonderfulness will gradually come and be evident in our offerings.

Such is the underlying ethos for success.

NetEase believes in the power of faith.

The Future of NetEase

        NetEase's growth will continue to be transparent and driven by our faith and passion. This remains our blueprint for the next 20 years, one which we will adhere to and persevere with. Going forward, we are committed to the following four causes:

1.     Building an organization that is self-evolving and entrepreneurial

Since the end of 2018, we have enacted a series of organizational and structural adjustments to streamline and stay focused on our core businesses, which we believe has made us more resilient to global crises. Our next step is to prioritise organizational development. We recently revisited our corporate culture, accentuating key notions of our corporate values such as "passion" and "connection with users" with our employees—values we intend to embody and uphold.

NetEase became listed on Nasdaq when I was 29 years old. At that time, we had 221 employees. Today, the number of our employees has grown almost a hundred-fold to over 20,000, while the average age of our employees has remained under 29. A coincidence, but also a perfect reflection of NetEase: seasoned and mature, yet young and entrepreneurial.

We will continue to aggressively search for youthful, intelligent, dedicated and intrepid talents to train and nurture. We want them to have the right opportunity to grow quickly and shine. This will be of great importance.

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2.     Advancing NetEase's strategy of quality and excellence to continue delivering products and services that make us proud

2020 will no doubt be a year of uncertainties and challenges, but our pursuit of excellence remains unchanged. NetEase strives to run businesses and develop products that withstand the test of time. We aim to exceed user expectations, not merely meet them.

We aspire to create products and services that our employees are proud of and our users truly love. While such pursuit of excellence may bring forth competition and imitation, it will further drive us to reflect and continue to innovate in order to be an industry leader—a positive cycle that ultimately improves the user experience.

3.     Embracing global opportunities while further solidifying our position in China

In the last several years, NetEase has started to explore global opportunities. While some people may not have noticed these efforts, we have seen remarkable results in these early explorations.

Becoming more global is a crucial part of and an inevitable step in NetEase's growth. Our vision to "foster collaboration and realize people's aspiration for a better life through technology and innovation" calls for a bigger platform. Going forward, as we continue to solidify our position in China, we will also further expand overseas, driving innovation and breakthroughs through incubation, investment, collaboration, and strategic partnerships. We strongly believe that high-quality Chinese products and services deserve more spotlight on the international stage.

4.     Empowering individuals with more accessible resources

The start of NetEase was inspired by the spirit of the internet. We will continue to adhere to this spirit of openness, fairness and sharing as we march forward. We are not only driven by short-term profits and hope our stakeholders can understand and support our philosophy.

The post-COVID-19 era may be different but also presents unique opportunities for growth. NetEase will continue to help our community in areas such as basic human needs and empower people with innovations and technology in areas such as education and entertainment.

        So to the shareholders of NetEase, I wish to say that when NetEase first became public 20 years ago, our youthfulness was the biggest barrier to gaining trust from the investment community and the media. But as you have witnessed, it was exactly our youthfulness that fuelled our enthusiasm for hope and opportunity in the decades that followed.

        As we come to NetEase's 20th listing anniversary this month, we are at another new starting point. We are also preparing our secondary listing on the Stock Exchange of Hong Kong, bringing our established brand back to China. I believe that returning to a market that is closer to our roots will further fuel our passion in our business and our users.

        We would like to thank our colleagues and users for accompanying us on NetEase's long journey. And a big thank you to our shareholders. I would like to conclude with a phrase I used in 2003 at my alma mater:

        "To date, we have yet to achieve success and are still growing."

William Ding

Founder and CEO of NetEase

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ABOUT THIS PROSPECTUS SUPPLEMENT

        This document is in two parts. The first part is this prospectus supplement, which describes the terms of the Global Offering (as defined in this prospectus supplement under the "Underwriting" section) and also supplements and updates information contained in the accompanying prospectus and the documents incorporated by reference into the accompanying prospectus. The second part is the accompanying prospectus dated May 29, 2020 included in the registration statement on Form F-3 (No. 333-238762), which provides more general information.

        To the extent there is a conflict between the information contained in this prospectus supplement, on the one hand, and the information contained in the accompanying prospectus or any document incorporated by reference into the accompanying prospectus, on the other hand, you should rely on the information in this prospectus supplement.

        The Global Offering comprises an International Offering and Hong Kong Public Offering (each as defined in this prospectus supplement under the "Underwriting" section). Other than the Hong Kong Public Offering, no action is being taken in any jurisdiction outside the United States to permit a public offering of the ordinary shares, and no action is being taken in any jurisdiction outside the United States to permit the possession or distribution of this prospectus supplement or the accompanying prospectus in that jurisdiction. Persons who come into possession of this prospectus supplement or the accompanying prospectus in jurisdictions outside the United States are required to inform themselves about and to observe any restrictions as to the Global Offering and the distribution of this prospectus supplement and the accompanying prospectus applicable to that jurisdiction.

        This prospectus supplement and the accompanying prospectus contain or incorporate by reference market and industry data that was obtained from third parties and industry publications. These data involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. We have not independently verified any third-party information. While we believe the market position, market opportunity and market size information included in this prospectus supplement is generally reliable, such information is inherently imprecise.

        The representations, warranties and covenants made by us in any agreement that is filed as an exhibit to any document that is incorporated by reference in the accompanying prospectus were made solely for the benefit of the parties to such agreement, including, in some cases, for the purpose of allocating risk among the parties to such agreements, and should not be deemed to be a representation, warranty or covenant to you. Moreover, such representations, warranties or covenants were accurate only as of the date when made. Accordingly, such representations, warranties and covenants should not be relied on as accurately representing the current state of our affairs.

        In this prospectus supplement, unless otherwise indicated or unless the context otherwise requires, references to:

•

"ADSs" are to our American depositary shares, each of which represents 25 of our ordinary shares;



•

"Blizzard" are to Blizzard Entertainment, Inc. and its affiliated companies;



•

"China" and the "PRC" are to the People's Republic of China, excluding, for the purposes of this prospectus supplement only, Taiwan and the special administrative regions of Hong Kong and Macau;



•

"HK$" and "Hong Kong dollars" are to the legal currency of the Hong Kong Special Administrative Region of the PRC;



•

"MAUs" are, with respect to each of Youdao's products and services (except for smart devices), to the average of the monthly number of unique mobile or PC devices, as the case may be,

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through which such product and service is accessed at least once in that month (duplicate access to different products and services is not eliminated from the calculation). MAUs for Youdao are calculated using internal company data, treating each distinguishable device as a separate MAU even though some users may access Youdao's products and services using more than one device and multiple users may access our services using the same;

•

"Q1 Dividend" are to the dividend of US$0.0464 per ordinary share (equivalent to US$1.16 per ADS, representing 25 ordinary shares) for the first quarter of 2020 approved by our board of directors, which we expect to pay on June 23, 2020 to shareholders of record as of the close of business on June 12, 2020;



•

"RMB" and "Renminbi" are to the legal currency of China;



•

"shares" and "ordinary shares" are to our ordinary shares, par value US$0.0001 per ordinary share;



•

"US$," "dollars" and "U.S. dollars" are to the legal currency of the United States;



•

"U.S. GAAP" are to the generally accepted accounting principles in the United States;



•

"we," "us," "our company" and "our" are NetEase, Inc. and, where context requires, its consolidated subsidiaries (including its consolidated affiliated entities); and



•

"Youdao" are to Youdao, Inc., our majority-controlled subsidiary which is listed on the New York Stock Exchange under the symbol "DAO."

        This prospectus supplement contains translations of RMB amounts and Hong Kong dollar amounts into U.S. dollars at specific rates solely for your convenience. Most of our revenues are denominated in RMB, and we use RMB as our reporting currency. Unless otherwise indicated, all translations of RMB into U.S. dollars were made at RMB7.0808 to US$1.00 and all translations of Hong Kong dollars into U.S. dollars were made at HK$7.7531 to US$1.00, the respective exchange rates on March 31, 2020 as set forth in the H.10 statistical release of the Federal Reserve Board. We make no representation that the RMB amounts or Hong Kong dollar amounts referred to in this prospectus supplement could have been or could be converted into U.S. dollars at any particular rate or at all.

        Unless specifically indicated otherwise or unless the context otherwise requires, all references to our ordinary shares exclude ordinary shares issuable upon the vesting of restricted share units, or RSUs, outstanding under our RSU plans as of the date of this prospectus supplement.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

        This prospectus supplement, the accompanying prospectus and the documents incorporated by reference therein contain forward-looking statements that are, by their nature, subject to significant risks and uncertainties. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as "will," "expect," "anticipate," "estimate," "believe," "going forward," "ought to," "may," "seek," "should," "intend," "plan," "projection," "could," "vision," "goals," "aim," "aspire," "objective," "target," "schedules" and "outlook") are not historical facts, are forward-looking and may involve estimates and assumptions and are subject to risks (including but not limited to the risk factors detailed in this prospectus supplement), uncertainties and other factors some of which are beyond our company's control and which are difficult to predict. Accordingly, these factors could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements.

        Our forward-looking statements have been based on assumptions and factors concerning future events that may prove to be inaccurate. Those assumptions and factors are based on information currently available to us about the businesses that we operate. The risks, uncertainties and other factors, many of which are beyond our control, that could influence actual results include, but are not limited to:

•

our operations and business prospects;



•

our business and operating strategies and our ability to implement such strategies;



•

our ability to develop and manage our operations and business;



•

competition for, among other things, capital, technology and skilled personnel;



•

our ability to control costs;



•

our dividend policy;



•

changes to regulatory and operating conditions in the industry and geographical markets in which we operate; and



•

all other risks and uncertainties, including those listed under the heading "Risk Factors" in this prospectus supplement and the accompanying prospectus and the documents incorporated therein by reference.

        Since actual results or outcomes could differ materially from those expressed in any forward-looking statements, we strongly caution investors against placing undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as at the date on which such statement is made, and we undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. Statements of or references to our intentions or those of any of our directors are made as at the date of this prospectus supplement. Any such intentions may change in light of future developments.

        All forward-looking statements in this prospectus supplement, the accompanying prospectus and the documents incorporated by reference are expressly qualified by reference herein and therein to this cautionary statement.

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RISK FACTORS

        Any investment in the ordinary shares involves a high degree of risk. Holders of the ordinary shares may be able to deposit and exchange their shares to ADSs with the depositary. See "Exchanges between Ordinary Shares Trading in Hong Kong and ADSs" for more information about this process. You should carefully consider the risk factors set forth below, which discuss risks related to our ordinary shares, ADSs and the Global Offering, together with the other information contained in this prospectus supplement, the accompanying prospectus and the documents incorporated by reference, before deciding whether to purchase the ordinary shares. In addition, you should carefully consider the matters discussed under "Risk Factors" in the 2019 Annual Report and in Exhibit 99.1 to our current report on Form 6-K furnished to the SEC on May 29, 2020, titled "NetEase, Inc. Supplemental and Updated Disclosures", as well as other documents incorporated by reference into the accompanying prospectus. Any of the following risks and the risks described in the 2019 Annual Report, and additional risks and uncertainties not currently known to us or those we currently view to be immaterial, may also materially and adversely affect our business, financial condition or results of operations. In such case, you may lose all or part of your original investment.

Risks Related to our Ordinary Shares, the ADSs, the Listing, and the Global Offering

The trading price of ADSs has been and is likely to continue to be, and the trading price of our ordinary shares can be, volatile, which could result in substantial losses to holders of our ordinary shares and/or the ADSs.

        The trading price of ADSs has been and is likely to continue to be volatile and could fluctuate widely in response to a variety of factors, many of which are beyond our control. The trading price of our ordinary shares, likewise, can be volatile for similar or different reasons. For example, the trading prices of ADSs ranged from US$209.01 to US$325.00 per ADS in 2019. In addition, the performance and fluctuation of the market prices of other companies with business operations located mainly in China, especially internet and technology companies, that have listed their securities in Hong Kong and/or the United States may affect the overall investor attitude towards Chinese public companies. The securities of some of these companies have experienced and may continue to experience significant volatility, resulting from, among other things, underperformance and deteriorating financial results, negative news or perceptions about inadequate corporate governance practices, and fraudulent behaviors of such companies. Consequently, the trading performance of our ordinary shares and/or the ADSs may be adversely and materially affected, regardless of our actual operation performance.

        In addition to market and industry factors, the price and trading volume for our ordinary shares and/or the ADSs may be highly volatile for factors specific to our operation, including the followings:

•

variations in our results of operations that are not in line with market or research analyst expectations or changes in financial estimates by securities research analysts;



•

announcements of studies and reports relating to the quality of our product and service offerings or those of our competitors;



•

changes in the economic performance or market valuations of other market players in our industries;



•

announcements made by us or our competitors of new features or functionalities or other product and service offerings, investments, acquisitions, strategic relationships, joint ventures or capital commitments;



•

press and other reports, whether or not true, about our business, including negative reports published by short sellers, regardless of their veracity or materiality to us;



•

litigation and regulatory allegations or proceedings that involve us and our directors;

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additions to or departures of our management;



•

political or market instability or disruptions, and actual or perceived social unrest in the markets where we operate;



•

fluctuations of exchange rates among the Renminbi, the Hong Kong dollar and the U.S. dollar;



•

sales or perceived potential sales or other dispositions of existing or additional ordinary shares and/or ADSs or other equity or equity-linked securities;



•

any actual or alleged illegal acts of our senior management or other key employees;



•

any share repurchase program; and



•

regulatory developments affecting us or our industry, customers, licensors and other suppliers.

        In particular, our revenues and results of operations have varied significantly in the past and may continue to fluctuate in the future, which may adversely impact the trading price of our ADSs and ordinary shares. Historically, usage of our online games has generally increased around the Chinese holidays, particularly the winter and summer school holidays. Our Youdao platform tends to have larger student enrollments in the second and fourth quarters when it offers more courses including, for example, test preparation courses for school exams in the spring and fall semesters and China's national college entrance exams, national postgraduate entrance exams and college English tests, compared to the rest of the year. Revenues from innovative businesses and others, including advertising services, have followed the same general seasonal trend throughout each year, with the first quarter of the year being the weakest quarter due to the Chinese New Year holiday and the traditional close of customers' annual budgets, and the fourth quarter as the strongest. Our e-commerce business revenues are relatively lower during the Chinese New Year holiday season in the first quarter of each year, while sales in the fourth quarter are higher than each of the preceding three quarters due to a variety of promotional activities conducted by retail and e-commerce businesses in China. Accordingly, you should not rely on quarter-to-quarter comparisons of our results of operations as an indication of our future performance. It is possible that future fluctuations may cause our results of operations to be below the expectations of market analysts and investors. This could cause the trading price of our ADSs or any other securities of ours which may become publicly traded to decline.

        Furthermore, the stock market in general experiences price and volume fluctuations that are often unrelated or disproportionate to the operating performance of companies like us, such as the large decline in share prices in the United States in early 2020. These market and industry fluctuations may significantly affect the trading price of our ordinary shares and/or ADSs. In the past, following periods of instability in the market price of a company's securities, shareholders have often instituted securities class action suits against that company.

        Furthermore, our directors and employees may face additional exposure to claims and lawsuits as a result of their position in other public companies. For example, one of our directors, Mr. Denny Lee, was named as a defendant in ongoing securities class action lawsuits filed in the United States against NIO Inc., a company listed on the New York Stock Exchange (ticker: NIO), together with certain current, former directors and/or senior officers of NIO Inc., regarding an alleged misrepresentation in the registration statement and the prospectus filed in connection with the company's initial public offering. Mr. Lee's appointment as the independent director of NIO Inc. was effective immediately after the SEC's declaration of effectiveness of NIO Inc.'s registration statement on Form F-1, of which its prospectus is a part. Mr. Lee has also been named as a defendant in a putative class action lawsuit against another U.S.-listed company. All of these cases concern Mr. Lee in his capacity as an independent director of such U.S.-listed companies. The existence of litigation, claims, investigations and proceedings against our directors and employees, even if they do not involve our company, may harm our reputation and adversely affect the trading price of our ordinary shares and/or ADSs.

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Substantial future sales or perceived potential sales of our ordinary shares, ADSs, or other equity or equity-linked securities in the public market could cause the price of our ordinary shares and/or ADSs to decline.

        Sales of our ordinary shares, ADSs, or other equity or equity-linked securities in the public market, or the perception that these sales could occur, could cause the market price of our ordinary shares and/or ADSs to decline significantly. All of our ordinary shares represented by ADSs were freely transferable by persons other than our affiliates without restriction or additional registration under the Securities Act of 1933, as amended, or the Securities Act. The ordinary shares held by our affiliates are also available for sale, subject to volume and other restrictions as applicable under Rule 144 of the Securities Act, under trading plans adopted pursuant to Rule 10b5-1 or otherwise.

        Divesture in the future of our ordinary shares and/or ADSs by shareholders, the announcement of any plan to divest our ordinary shares and/or ADS, or hedging activity by third-party financial institutions in connection with similar derivative or other financing arrangements entered into by shareholders, could cause the price of our ordinary shares and/or ADSs to decline.

        Furthermore, although all of our directors and executive officers have agreed to a lock-up of their ordinary shares, any major disposal of our ordinary shares and/or ADSs by any of them upon expiration of the relevant lock-up periods (or the perception that these disposals may occur upon the expiration of the lock-up period) may cause the prevailing market price of our ordinary shares and/or ADSs to fall which could negatively impact our ability to raise equity capital in the future.

The different characteristics of the capital markets in Hong Kong and the U.S. may negatively affect the trading prices of our ordinary shares and/or ADSs.

        Upon the listing on the Hong Kong Stock Exchange, we will be subject to Hong Kong and SEC requirements and Nasdaq rules concurrently. The Hong Kong Stock Exchange and Nasdaq have different trading hours, trading characteristics (including trading volume and liquidity), trading and listing rules, and investor bases (including different levels of retail and institutional participation). As a result of these differences, the trading prices of our ordinary shares and our ADSs may not be the same, even allowing for currency differences. Fluctuations in the price of our ADSs due to circumstances peculiar to the U.S. capital markets could materially and adversely affect the price of the ordinary shares, or vice versa. Certain events having significant negative impact specifically on the U.S. capital markets may result in a decline in the trading price of our ordinary shares notwithstanding that such event may not impact the trading prices of securities listed in Hong Kong generally or to the same extent, or vice versa. Because of the different characteristics of the U.S. and Hong Kong capital markets, the historical market prices of our ADSs may not be indicative of the trading performance of the ordinary shares after the Global Offering.

Exchange between our ordinary shares and our ADSs may adversely affect the liquidity and/or trading price of each other.

        Our ADSs are currently traded on the Nasdaq. Subject to compliance with U.S. securities law and the terms of the deposit agreement, holders of our ordinary shares may deposit ordinary shares with the depositary in exchange for the issuance of our ADSs. Any holder of ADSs may also withdraw the underlying ordinary shares represented by the ADSs pursuant to the terms of the deposit agreement for trading on the Hong Kong Stock Exchange. In the event that a substantial number of ordinary shares are deposited with the depositary in exchange for ADSs or vice versa, the liquidity and trading price of our ordinary shares on the Hong Kong Stock Exchange and our ADSs on the Nasdaq may be adversely affected.

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The time required for the exchange between ordinary shares and ADSs might be longer than expected and investors might not be able to settle or effect any sale of their securities during this period, and the exchange of ordinary shares into ADSs involves costs.

        There is no direct trading or settlement between the Nasdaq and the Hong Kong Stock Exchange on which our ADSs and the ordinary shares are respectively traded. In addition, the time differences between Hong Kong and New York and unforeseen market circumstances or other factors may delay the deposit of ordinary shares in exchange for ADSs or the withdrawal of ordinary shares underlying the ADSs. Investors will be prevented from settling or effecting the sale of their securities during such periods of delay. In addition, there is no assurance that any exchange of ordinary shares into ADSs (and vice versa) will be completed in accordance with the timelines investors may anticipate.

        Furthermore, the depositary for the ADSs is entitled to charge holders fees for various services including for the issuance of ADSs upon deposit of ordinary shares, cancelation of ADSs, distributions of cash dividends or other cash distributions, distributions of ADSs pursuant to share dividends or other free share distributions, distributions of securities other than ADSs and annual service fees. As a result, shareholders who exchange ordinary shares into ADSs, and vice versa, may not achieve the level of economic return the shareholders may anticipate.

As a company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from Nasdaq rules.

        As a Cayman Islands exempted company listed on the Nasdaq, we are subject to Nasdaq rules. However, Nasdaq rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in the Cayman Islands, which is our home country, may differ significantly from Nasdaq rules applicable to U.S. domestic issuers. For instance, we are not required to:

•

have a majority of the board be independent (although all of the members of the audit committee must be independent under the Securities Exchange Act of 1934, as amended, or the Exchange Act);



•

have a compensation committee or a nominating or corporate governance committee consisting entirely of independent directors;



•

have regularly scheduled executive sessions for non-management directors; or



•

have executive sessions of solely independent directors each year.

        We have relied on and intend to continue to rely on some of these exemptions. Specifically, our board of directors adopted our 2009 RSU Plan and 2019 RSU Plan without seeking shareholder approval which is generally required under Rule 5635(c) of the Nasdaq Marketplace Rules. There is no specific requirement under Cayman Islands law for shareholder approval to be obtained with respect to the establishment or amendment of equity compensation arrangements. In situations where we choose to follow home country practices, our shareholders may be afforded less protection than they otherwise would under Nasdaq rules applicable to U.S. domestic issuers.

We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to U.S. domestic public companies.

        Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including:

•

the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q or current reports on Form 8-K;

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•

the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under the Exchange Act;



•

the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and



•

the selective disclosure rules by issuers of material nonpublic information under Regulation FD.

        We are required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we intend to continue to publish our results on a quarterly basis as press releases, distributed pursuant to Nasdaq rules. Press releases relating to financial results and material events will also be furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to the SEC will be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. As a result, holders of our ADSs may be afforded less protection or information than they would under the Exchange Act rules applicable to U.S. domestic companies.

The voting rights of holders of ADSs are limited by the terms of the deposit agreement.

        Holders of ADSs may exercise their voting rights with respect to the underlying ordinary shares represented by their ADSs only in accordance with the provisions of the deposit agreement. Upon receipt of voting instructions from them in the manner set forth in the deposit agreement, the depositary will endeavor, in so far as practicable, to vote the underlying ordinary shares represented by their ADSs in accordance with these instructions. However, the depositary and its agents may not be able to send voting instructions to holders of ADSs or carry out their voting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting rights to holders of ADSs in a timely manner, but they may not receive the voting materials in time to ensure that they can instruct the depositary to vote the underlying ordinary shares represented by their ADSs. Furthermore, the depositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of any vote. As a result, holders of ADSs may not be able to exercise their rights to vote and they may lack recourse if the underlying ordinary shares represented by their ADSs are not voted as they requested.

Except in limited circumstances, the depositary will give us a discretionary proxy to vote our ordinary shares underlying the ADSs if holders of these ADSs do not give voting instructions to the depositary, which could adversely affect the interests of holders of ordinary shares and/or the ADSs.

        Under the deposit agreement, the depositary will give us a discretionary proxy to vote the ordinary shares underlying the ADSs at shareholders' meetings if holders of these ADSs do not give voting instructions to the depositary, unless:

•

we have instructed the depositary that we do not wish a discretionary proxy to be given;



•

we have informed the depositary that there is substantial opposition as to a matter to be voted on at the meeting;



•

a matter to be voted on at the meeting would have a material adverse impact on shareholders; or



•

voting at the meeting is made on a show of hands.

        The effect of this discretionary proxy is that, if holders of ADSs fail to give voting instructions to the depositary, they cannot prevent our ordinary shares underlying their ADSs from being voted, except under the circumstances described above. This may make it more difficult for shareholders to influence our management. Holders of our ordinary shares are not subject to this discretionary proxy.

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Holders of ADSs may be subject to limitations on transfer of their ADSs.

        ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason.

Holders of ADSs may not receive distributions on our ordinary shares if the depositary decides it is impractical or unlawful to make such distributions.

        The depositary has agreed to pay cash to holders of ADSs to the extent that we decide to distribute cash dividends or other cash distributions on our ordinary shares or other deposited securities. In the second quarter of 2019, our board of directors determined that quarterly dividends will be set at an amount equivalent to approximately 20%-30% of our anticipated net income after tax in each fiscal quarter. Our board of directors also approved an additional special dividend equivalent to US$3.45 per ADS in the third quarter of 2019.

        To the extent that there is a distribution in shares, rights or other securities and properties, the depositary has agreed to distribute to holders of ADSs the shares, rights or other distributions it or the custodian receives on our ordinary shares or other deposited securities after deducting its fees and expenses. ADS holders will receive these distributions in proportion to the number of ordinary shares their ADSs represent. However, the depositary may, at its discretion, decide that it is impractical to make a distribution available to holders of ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act but that are not properly registered or distributed pursuant to an applicable exemption from registration. We have no obligation to take any other action to permit the distribution of shares, rights or anything else to holders of ADSs. This means that holders of ADSs may not receive the distributions we make on our ordinary shares if it is impractical for us to make them available. These restrictions may materially reduce the value of the ADSs.

Our auditor of the consolidated financial statements included in our annual report on Form 20-F filed with the SEC, like other independent registered public accounting firms operating in China, is not permitted to be subject to inspection by the PCAOB, and consequently you are deprived of the benefits of such inspection.

        Our auditor of the consolidated financial statements included in our annual report on Form 20-F filed with the SEC, the independent registered public accounting firm, as an auditor of companies that are registered with the SEC and traded publicly in the United States and a firm registered with the PCAOB, is subject to the laws in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards. It is located in, and organized under the laws of, the PRC, which is a jurisdiction where the PCAOB has been unable to conduct inspections without the approval of the Chinese authorities.

        On May 24, 2013, the PCAOB announced that it had entered into a Memorandum of Understanding on Enforcement Cooperation, or the MOU, with the China Securities Regulatory Commission, or the CSRC, and the Ministry of Finance of the PRC, or the MOF. The MOU establishes a cooperative framework between the parties for the production and exchange of audit documents relevant to investigations in the U.S. and the PRC. The PCAOB continues to engage in discussions with the CSRC and the MOF to permit joint inspections in China of audit firms that are registered with the PCAOB and audit China-based companies that trade on U.S. exchanges. However, the implementation procedures of the MOU remain uncertain.

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        On December 7, 2018, the SEC and the PCAOB issued a joint statement highlighting continued challenges faced by the U.S. regulators in their oversight of financial statement audits of U.S.-listed companies with significant operations in China. On April 21, 2020, the SEC and the PCAOB issued another joint statement reiterating the greater risk that disclosures will be insufficient in many emerging markets, including China, compared to those made by U.S. domestic companies. In discussing the specific issues related to the greater risk, the statement again highlights the PCAOB's inability to inspect audit work paper and practices of accounting firms in China, with respect to their audit work of U.S. reporting companies. However, it remains unclear what further actions, if any, the SEC and PCAOB will take to address the problem.

        This lack of PCAOB inspections in China prevents the PCAOB from fully evaluating audits and quality control procedures of our independent registered public accounting firm. As a result, we and our investors are deprived of the benefits of such PCAOB inspections. The inability of the PCAOB to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of our independent registered public accounting firm's audit procedures or quality control procedures as compared to auditors outside of China that are subject to PCAOB inspections, which could cause investors and potential investors in us to lose confidence in our audit procedures and reported financial information and the quality of our financial statements.

        As part of a continued regulatory focus in the United States on access to audit and other information currently protected by national law, in particular China's, in June 2019, a bipartisan group of lawmakers introduced bills in both houses of Congress that would require the SEC to maintain a list of issuers for which the PCAOB is not able to inspect or investigate an auditor report issued by a foreign public accounting firm. The Ensuring Quality Information and Transparency for Abroad-Based Listings on our Exchanges (EQUITABLE) Act prescribes increased disclosure requirements for such issuers and, beginning in 2025, the delisting from national securities exchanges such as Nasdaq of issuers included for three consecutive years on the SEC's list.

        On May 20, 2020, the U.S. Senate passed S.945, the Holding Foreign Companies Accountable Act. If passed by the U.S. House of Representatives and signed by the U.S. President, this bill would amend the Sarbanes-Oxley Act of 2002 to direct the SEC to prohibit securities of any registrant from being listed on any of the U.S. securities exchanges or traded "over-the-counter" if the auditor of the registrant's financial statements is not subject to PCAOB inspection for three consecutive years. Enactment of any of such legislations or other efforts to increase U.S. regulatory access to audit information could cause investor uncertainty for affected issuers, including us, the market price of our ADSs could be adversely affected, and we could be delisted if we are unable to cure the situation to meet the PCAOB inspection requirement in time. It is unclear if and when any of such proposed legislations will be enacted. Furthermore, there have been recent media reports on deliberations within the U.S. government regarding potentially limiting or restricting China-based companies from accessing U.S. capital markets. On June 4, 2020, the U.S. President issued a memorandum ordering the President's Working Group on Financial Markets to submit a report to the President within 60 days of the memorandum that includes recommendations for actions that can be taken by the executive branch and by the SEC or PCAOB on Chinese companies listed on U.S. stock exchanges and their audit firms, in an effort to protect investors in the United States. If any such deliberations were to materialize, the resulting legislation may have material and adverse impact on the stock performance of China-based issuers listed in the United States.

An active trading market for our ordinary shares on the Hong Kong Stock Exchange might not develop or be sustained and trading prices of our ordinary shares might fluctuate significantly.

        Following the completion of the Global Offering, we cannot assure you that an active trading market for our ordinary shares on the Hong Kong Stock Exchange will develop or be sustained. The trading price or liquidity for our ADSs on the Nasdaq might not be indicative of those of our ordinary

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shares on the Hong Kong Stock Exchange following the completion of the Global Offering. If an active trading market of our ordinary shares on the Hong Kong Stock Exchange does not develop or is not sustained after the Global Offering, the market price and liquidity of our ordinary shares could be materially and adversely affected.

        In 2014, the Hong Kong, Shanghai and Shenzhen Stock Exchanges collaborated to create an inter-exchange trading mechanism called Stock Connect that allows international and mainland Chinese investors to trade eligible equity securities listed in each other's markets through the trading and clearing facilities of their home exchange. Stock Connect currently covers over 2,000 equity securities trading in the Hong Kong, Shanghai and Shenzhen markets. Stock Connect allows mainland Chinese investors to trade directly in eligible equity securities listed on the Hong Kong Stock Exchange, known as Southbound Trading. Without Stock Connect, mainland Chinese investors would not otherwise have a direct and established means of engaging in Southbound Trading. However, it is unclear whether and when our ordinary shares with a secondary listing in Hong Kong will be eligible to be traded through Stock Connect, if at all. The ineligibility or any delay of our ordinary shares for trading through Stock Connect will affect mainland Chinese investors' ability to trade our ordinary shares and therefore may limit the liquidity of the trading of our ordinary shares on the Hong Kong Stock Exchange.

Since there will be a gap of several days between pricing and trading of our ordinary shares, the price of our ADSs traded on the Nasdaq may fall during this period and could result in a fall in the price of our ordinary shares to be traded on the Hong Kong Stock Exchange.

        The pricing of the Offer Shares (as defined below) will be determined on the price determination date. However, our ordinary shares will not commence trading on the Hong Kong Stock Exchange until they are delivered, which is expected to be about four Hong Kong business days after the price determination date. As a result, investors may not be able to sell or otherwise deal in our ordinary shares during that period. Accordingly, holders of our ordinary shares are subject to the risk that the trading price of our ordinary shares could fall when trading commences as a result of adverse market conditions or other adverse developments that could occur between the price determination date and the time trading begins. In particular, as our ADSs will continue to be traded on the Nasdaq and their price can be volatile, any fall in the price of our ADSs may result in a fall in the price of our ordinary shares to be traded on the Hong Kong Stock Exchange.

There is uncertainty as to whether Hong Kong stamp duty will apply to deposits of our ordinary shares into or withdrawal of our ordinary shares from the ADS facility or trading of our ADSs following our initial public offering in Hong Kong and listing of our ordinary shares on the Hong Kong Stock Exchange.

        In connection with our initial public offering of ordinary shares in Hong Kong, we will establish a branch register of members in Hong Kong, or the Hong Kong share register. Our ordinary shares that are traded on the Hong Kong Stock Exchange, including those to be issued in the Global Offering and those represented by ADSs, will be registered on the Hong Kong share register, and the trading of these ordinary shares on the Hong Kong Stock Exchange will be subject to the Hong Kong stamp duty. To facilitate exchanges between ordinary shares trading in Hong Kong and ADSs and their respective trading on the Hong Kong Stock Exchange and Nasdaq, we also intend to move a portion of our issued ordinary shares, including all of the ordinary shares deposited in our ADS program, from our Cayman share register to our Hong Kong share register.

        Under the Hong Kong Stamp Duty Ordinance, any person who effects any sale or purchase of Hong Kong stock, defined as stock the transfer of which is required to be registered in Hong Kong, is required to pay Hong Kong stamp duty. The stamp duty is currently set at a total rate of 0.2% of the greater of the consideration for, or the value of, shares transferred, with 0.1% payable by each of the buyer and the seller. See below "Exchanges between Ordinary Shares Trading in Hong Kong and ADSs—Dealings and Settlement of Ordinary Shares in Hong Kong."

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        To the best of our knowledge, Hong Kong stamp duty has not been levied in practice on the trading of ADSs representing shares of companies that are listed in both the United States and Hong Kong and that have maintained all or a portion of their ordinary shares, including ordinary shares underlying ADSs, in their Hong Kong share registers, or on the deposit of shares in or withdrawal of shares from ADS facilities of that kind. However, it is unclear whether, as a matter of Hong Kong law, the trading of ADSs representing shares of these dual-listed companies or the deposit of shares in or withdrawal of shares from those ADS facilities constitutes a sale or purchase of the underlying Hong Kong-registered ordinary shares that is subject to Hong Kong stamp duty. We advise investors to consult their own tax advisors on this matter. If Hong Kong stamp duty is determined by the competent authority to apply to the trading of those ADSs or deposits of shares in or withdrawal of shares from those ADS facilities, the trading price and the value of your investment in our ordinary shares and/or the ADSs may be affected.

Purchasers of our ordinary shares in the Global Offering will experience immediate dilution and may experience further dilution if we issue additional ordinary shares in the future.

        The public offering price of our ordinary shares is higher than the net tangible assets per ordinary share of the ordinary shares issued to our existing shareholders immediately prior to the Global Offering. Therefore, purchasers of our ordinary shares in the Global Offering will experience an immediate dilution in terms of the pro forma net tangible asset value. In addition, we may consider offering and issuing additional ordinary shares, ADSs or equity-related securities in the future to raise additional funds, finance acquisitions or for other purposes. Purchasers of our ordinary shares may experience further dilution in terms of the net tangible asset value per ordinary share, ADS or equity-related security if we issue additional ordinary shares in the future at a price that is lower than the net tangible asset value per ordinary share.

As a company applying for listing under Chapter 19C, we adopt different practices as to certain matters as compared with many other companies listed on the Hong Kong Stock Exchange.

        As we are applying for listing under Chapter 19C of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, or the Hong Kong Listing Rules, we will not be subject to certain provisions of the Hong Kong Listing Rules pursuant to Rule 19C.11, including, among others, rules on notifiable transactions, connected transactions, share option schemes, content of financial statements as well as certain other continuing obligations. In addition, in connection with the listing on the Hong Kong Stock Exchange, we have applied for a number of waivers and/or exemptions from strict compliance with the Hong Kong Listing Rules, the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong), or the Companies (WUMP) Ordinance, the Codes on Takeovers and Mergers and Share Buybacks issued by the Securities and Futures Commission of Hong Kong, or the Takeover Codes, and the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), or the SFO. As a result, we will adopt different practices as to those matters as compared with other companies listed on the Hong Kong Stock Exchange that do not enjoy those exemptions or waivers.

        Furthermore, if 55% or more of the total worldwide trading volume, by dollar value, of our ordinary shares and ADSs over our most recent fiscal year takes place on the Hong Kong Stock Exchange, the Hong Kong Stock Exchange will regard us as having a dual primary listing in Hong Kong and we will no longer enjoy certain exemptions or waivers from strict compliance with the requirements under the Hong Kong Listing Rules, the Companies (WUMP) Ordinance, the Takeovers Codes and the SFO, which could result in our incurring of incremental compliance costs.

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If we are classified as a passive foreign investment company, or PFIC, such classification could result in adverse U.S. federal income tax consequences to U.S. investors.

        We could be classified as a passive foreign investment company, or PFIC, by the U.S. Internal Revenue Service, or the IRS, for U.S. federal income tax purposes. Such characterization could result in adverse U.S. federal income tax consequences to you if you are a U.S. investor. For example, U.S. investors who owned our ordinary shares or ADSs during any taxable year in which we were a PFIC generally are subject to increased U.S. tax liabilities and reporting requirements for that taxable year and all succeeding years, regardless of whether we actually continue to be a PFIC, although a shareholder election to terminate such deemed PFIC status may be available in certain circumstances.

        The determination of whether or not we are a PFIC is made on an annual basis and depends on the composition of our income and assets, including goodwill, from time to time. Specifically, we will be classified as a PFIC for U.S. tax purposes for a taxable year if either (a) 75% or more of our gross income for such taxable year is passive income, or (b) 50% or more of the average percentage of our assets during such taxable year either produce passive income or are held for the production of passive income. For such purposes, if we directly or indirectly own 25% or more of the shares of another corporation, we generally will be treated as if we (a) held directly a proportionate share of the other corporation's assets, and (b) received directly a proportionate share of the other corporation's income.

        We do not believe that we were a PFIC for the taxable years 2017, 2018 and 2019. Based on certain estimates and assumptions, we do not expect to be a PFIC for taxable year 2020. However, as more fully described under "Taxation—Material United States Federal Income Tax Considerations" in the accompanying prospectus, the PFIC determination is highly fact intensive and made at the end of each taxable year. We hold and will continue to hold a substantial amount of cash and cash equivalents, and our PFIC status may depend in large part in the market price of our ADSs and ordinary shares which is likely to fluctuate. For these reasons, there can be no assurance that we are not a PFIC in taxable year 2020 or that we will not be a PFIC in any future taxable year or that the IRS will not challenge our determination concerning our PFIC status.

        If we are or become a PFIC, and, if so, if one or more of our subsidiaries or VIEs are treated as PFICs, U.S. investors would be subject to adverse U.S. federal income tax consequences, such as increased tax liability on capital gains and actual or deemed dividends, interest charges on certain taxes treated as deferred, and additional reporting requirements under U.S. federal income tax laws and regulations. Whether U.S. investors make (or are eligible to make) a timely mark-to-market election may affect the U.S. federal income tax consequences to U.S. investors with respect to the acquisition, ownership and disposition of our ordinary shares and ADSs and any distributions such U.S. investors may receive. We do not expect to provide the information regarding our income that would be necessary in order for a U.S. investor to make a qualified electing fund, or QEF, election if we are classified as a PFIC. Investors should consult their own tax advisors regarding all aspects of the application of the PFIC rules to our ordinary shares and ADSs.

        If we are a PFIC in any year with respect to a U.S. investor, the U.S. investor will be required to file an annual information return on IRS Form 8621 (or other then-applicable IRS Form or statement) regarding distributions received on our ordinary shares or ADSs and any gain realized on the disposition of our ordinary shares or ADSs, and certain U.S. investors will be required to file an annual information return (also on IRS Form 8621 or other then-applicable IRS Form or statement) relating to their ownership of our ordinary shares or ADSs. U.S. investors should consult their tax advisors regarding the potential application of the PFIC regime and related reporting requirements.

        For further discussion of the adverse U.S. federal income tax consequences of our possible classification as a PFIC, see "Taxation—Material United States Federal Income Tax Considerations" in the accompanying prospectus.

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USE OF PROCEEDS

        We estimate that we will receive net proceeds from the Global Offering of approximately HK$20,929.5 million (US$2,700.1 million), assuming the option of the international underwriters to purchase additional ordinary shares is not exercised, or HK$24,084.7 million (US$3,107.2 million) if the over-allotment option is exercised in full, based on the public offering price for the International Offering and the Hong Kong Public Offering of HK$123.00 per ordinary share, or approximately US$15.87 per ordinary share (equivalent to approximately US$396.71 per ADS) after deducting estimated underwriting fees and the estimated offering expenses payable by us (excluding the structuring fee to be paid by us at our sole discretion to the underwriters and certain offering related expenses to be reimbursed by the underwriters). On June 4, 2020, the last reported trading price of our ADSs on the Nasdaq was US$405.01 per ADS, or HK$125.57 per ordinary share. Each ADS represents 25 ordinary shares.

        We plan to use the net proceeds we will receive from the Global Offering for the following purposes:

•

approximately 45% (approximately HK$9,418.3 million (US$1,215.1 million), assuming the over-allotment option is not exercised) for globalization strategies and opportunities. We will continue to improve our global presence by expanding our online game offerings in overseas markets, such as Japan, the United States, Europe and Southeast Asia and enhancing our global R&D and game design capabilities. We will also continue to explore global opportunities by investing in and collaborating with international game developers, IP and content owners. Furthermore, we aim to grow our intelligent learning and other innovative businesses in overseas markets with large potential user bases and favorable demographic characteristics.



•

approximately 45% (approximately HK$9,418.3 million (US$1,215.1 million), assuming the over-allotment option is not exercised) for fueling our continued pursuit of innovation. We will continue to expand and enhance our innovative content offerings, and strengthen our innovative technologies. Our R&D approach will remain focused on bringing commercially viable technologies into specific applications that can further enhance user experience. In addition, we will continue to attract and nurture talents to support further innovation and growth.



•

approximately 10% (approximately HK$2,092.9 million (US$269.9 million), assuming the over-allotment option is not exercised) for general corporate purposes. We will use the remaining proceeds for general corporate purposes, working capital needs and potential strategic investments and acquisitions, although we have not identified any specific investments or acquisition opportunities at this time.

        For the purposes of this "Use of Proceeds" section, all translations of Hong Kong dollars into U.S. dollars were made at HK$7.7513 to US$1.00, the exchange rate on May 29, 2020 as set forth in the H.10 statistical release of the Federal Reserve Board.

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CAPITALIZATION

        The following table sets forth our capitalization as of March 31, 2020:

•

on an actual basis; and



•

on an adjusted basis giving effect to our issuance and sale in the Global Offering of 171,480,000 ordinary shares, resulting in estimated net proceeds of HK$20,929.5 million (US$2,700.1 million), based on the offer price of HK$123.00, or approximately US$15.87, per ordinary share (equivalent to approximately US$396.71 per ADS), after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us (excluding the structuring fee to be paid by us at our sole discretion to the underwriters and certain offering related expenses to be reimbursed by the underwriters), and assuming (i) the Joint Global Coordinators do not exercise, on behalf of the international underwriters, their option to purchase additional ordinary shares and (ii) no adjustment to the allocation of ordinary shares between the Hong Kong Public Offering and the International Offering.

        The as adjusted information below is illustrative only. You should read this table in conjunction with, and this table is qualified in its entirety by reference to, Item 5. "Operating and Financial Review and Prospects," and our consolidated financial statements and the related notes included in the financial statements as of December 31, 2018 and 2019 and for each of the three years in the period ended December 31, 2019 in our 2019 Annual Report and the financial statements as of March 31, 2020 and for the three months ended March 31, 2019 and 2020 included in Exhibit 99.1, titled "Unaudited Condensed Consolidated Financial Statements as of March 31, 2020 and for the three months ended March 31, 2019 and 2020," to our Form 6-K dated May 29, 2020, each of which are incorporated by reference into the accompanying prospectus.

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DILUTION

        If you invest in the ordinary shares in the Global Offering, your interest will be diluted to the extent of the difference between the public offering price per ordinary share and our as adjusted net tangible book value per ordinary share after the Global Offering. Dilution results from the fact that the public offering price per ordinary share is substantially in excess of the net tangible book value per ordinary share attributable to the existing shareholders for our presently issued ordinary shares.

        Our net tangible book value as of March 31, 2020 was RMB73,912.0 million (US$10,438.4 million), or RMB22.69 (US$3.20) per ordinary share as of that date, and RMB567.17 (US$80.10) per ADS. Net tangible book value represents the amount of our total consolidated assets, less the amount of our intangible assets and total consolidated liabilities. Dilution is determined by subtracting as adjusted net tangible book value per ordinary share, after giving effect to the issuance and sale by us of ordinary shares in the Global Offering at an offer price of HK$123.00, or approximately US$15.87 per ordinary share, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us from the public offering price per ordinary share (excluding the structuring fee to be paid by us at our sole discretion to the underwriters and certain offering related expenses to be reimbursed by the underwriters), and assuming the Joint Global Coordinators do not exercise, on behalf of the international underwriters, their option to purchase additional ordinary shares.

        Without taking into account any other changes in net tangible book value after March 31, 2020, other than to give effect to the issuance and sale by us of ordinary shares in the Global Offering at an offer price of HK$123.00, or approximately US$15.87, per ordinary share, assuming no adjustment to the allocation of ordinary shares between the Hong Kong Public Offering and the International Offering and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, and assuming the Joint Global Coordinators do not exercise, on behalf of the international underwriters, their option to purchase additional ordinary shares, our as adjusted net tangible book value as of March 31, 2020 would have been US$13,138.5 million, or US$3.83 per issued ordinary share and US$95.78 per ADS. This represents an immediate increase in net tangible book value of US$0.63 per ordinary share and US$15.68 per ADS to the existing shareholders and an immediate dilution in net tangible book value of US$12.04 per ordinary share and US$300.93 per ADS to investors purchasing ordinary shares in the Global Offering.

        The following table illustrates such dilution:

        If the Joint Global Coordinators, on behalf of the international underwriters, exercise their option to purchase additional ordinary shares in full, the as adjusted net tangible book value would be US$3.92 per ordinary share and US$98.01 per ADS, and the dilution in as adjusted net tangible book value to investors in the Global Offering would be US$11.95 per ordinary share and US$298.70 per ADS.

        The discussion and tables above do not reflect any ordinary shares issuable under granted but not yet vested RSUs. As of March 31, 2020, there were 74,512,830 ordinary shares issuable under granted but not yet vested RSUs and 304,776,175 ordinary shares reserved for future grant under our RSU plans.

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        For the purposes of this section, all translations of Hong Kong dollars into U.S. dollars and RMB into U.S. dollars for purposes of calculating the offer price and net proceeds from the Global Offering were made at HK$7.7513 to US$1.00 and RMB7.1348 to US$1.00, the exchange rates on May 29, 2020 as set forth in the H.10 statistical release of the Federal Reserve Board. All translations of Hong Kong dollars into RMB for purposes of calculating the net proceeds were made at HK$1.00 to RMB0.91989, the exchange rate on May 29, 2020 as set forth in the release from The People's Bank of China Monetary Policy Department.

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PRINCIPAL AND OTHER SHAREHOLDERS

        Unless specifically noted, the following table summarizes the beneficial ownership of our ordinary shares held as of May 25, 2020 by:

(a)

each of our directors and our executive officers;



(b)

our directors and our executive officer as a group; and



(c)

each person known to us to beneficially own more than 5% of our total outstanding ordinary shares.

        The calculations are based on 3,257,915,456 ordinary shares issued as of May 25, 2020.

        Beneficial ownership is determined in accordance with SEC rules and regulations. In calculating the number of ordinary shares beneficially owned by a person and the percentage of ownership held by that person, we have included ordinary shares that the person has a right to acquire within 60 days, including through the exercise of any option, warrant or other right, the vesting of any RSUs, or the conversion of any other security; these ordinary shares are not included when calculating the percentage of ownership held by any other person.

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        Solely based on public filings with the SEC as of May 28, 2020, other than William Lei Ding, there are no shareholders who hold more than 10% of our total issued share capital.

        J.P. Morgan Securities plc has entered into a borrowing arrangement with Shining Globe International Limited in connection with the Global Offering that is intended to facilitate the settlement of over-allocations. J.P. Morgan Securities plc is obligated to return ordinary shares to Shining Globe International Limited by exercising the option to purchase additional ordinary shares from us or by making purchases in the open market. No fees or other remuneration will be paid by the underwriters to us or Shining Globe International Limited for the loan of these ordinary shares.

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DIVIDEND POLICY

        In May 2014, our board of directors approved a quarterly dividend policy commencing in 2014. Under this policy, quarterly dividends were set at an amount equivalent to approximately 25% of our anticipated net income after tax in each fiscal quarter. In the second quarter of 2019, our board of directors determined that quarterly dividends will be set at an amount equivalent to approximately 20%-30% of our anticipated net income after tax in each fiscal quarter. The determination to make dividend distributions and the amount of such distributions in any particular quarter will be made at the discretion of our board of directors and will be based upon our operations and earnings, cash flow, financial condition and other relevant factors. Our board of directors declared dividends on our ordinary shares which were equivalent to US$0.69, US$1.04, US$4.14 and US$1.02 per ADS for the first, second, third and fourth quarters of 2019, respectively. Our board of directors also approved an additional special dividend equivalent to US$3.45 per ADS in the third quarter of 2019. All dividends declared in 2019 have been paid.

        In May 2020, our board of directors approved the Q1 Dividend, and we expect to make dividend payments of approximately US$158 million in aggregate on June 23, 2020 to shareholders of record as of the close of business on June 12, 2020.

        Prior to June 11, 2020, the price of our ADSs traded on the Nasdaq reflects the entitlement of such ADS holders to receive the Q1 Dividend. June 11, 2020 is the first day of trading when the buyers of our ADSs are no longer entitled to the Q1 Dividend, because trades executed on June 11, 2020 will settle the day after the record date of the Q1 Dividend, making it too late for the buyers to receive the dividend. Therefore, the price of our ADSs will be adjusted down on June 11, 2020 to reflect the ex-dividend nature of ADSs bought on or after such date.

        After our listing on the Hong Kong Stock Exchange on June 11, 2020, our ordinary shares will immediately begin to trade on the Hong Kong Stock Exchange ex-dividend. If you purchase our ordinary shares in the Global Offering, provided that the International Offering and Hong Kong Public Offering become unconditional, you will be entitled to receive the Q1 Dividend. If you purchase our ordinary shares through the open market on the Hong Kong Stock Exchange, you will not be entitled to receive the Q1 Dividend. The trading price of our ordinary shares immediately after our listing on the Hong Kong Stock Exchange on June 11, 2020 may be lower than the comparable closing price of our ADSs on June 10, 2020. However, you should not interpret such difference as a discount on the price of our ordinary shares offered to investors. Rather such discrepancy is, at least in part, the result of the different entitlement rights with respect to the Q1 Dividend.

        In the event that there are unforeseen reasons (including but not limited to bad weather, extreme conditions or other events in the nature of force majeure, together "Unforeseen Reasons") that result in the listing date in the Hong Kong market being delayed to a date after June 12, 2020 but no later than June 18, 2020 (the "Delay") and the Delay is solely due to the Unforeseen Reasons, we undertake to pay investors of the Global Offering an amount equal to the Q1 Dividend (based on the investor's corresponding number of Offer Shares allocated in the Global Offering) if the investor would have been entitled to the Q1 Dividend had the Delay not otherwise occurred.

        We are a holding company incorporated in the Cayman Islands, and our ability to pay dividends to our shareholders depends upon dividends, loans or advances that we receive from our subsidiaries and variable interest entities, or VIEs. Please refer to Item 3.D. "Risk Factors—Risks Related to Our Company—Our corporate structure may restrict our ability to receive dividends from, and transfer funds to, our PRC subsidiaries and VIEs, which could restrict our ability to act in response to changing market conditions and reallocate funds internally in a timely manner" in our 2019 Annual Report.

        Holders of our ADSs will be entitled to receive dividends, if any, subject to the terms of the deposit agreement (including the fees and expenses payable thereunder), to the same extent as the

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holders of our ordinary shares. Cash dividends will be paid to the depositary, which will distribute them to the holders of ADSs according to the terms of the deposit agreement. Other distributions, if any, will be paid by the depositary to the holders of ADSs in any means it deems legal, fair and practical. Due to the relocation of certain of our ordinary shares, including all of the ordinary shares deposited in our ADS program, from our Cayman share register to our Hong Kong share register as further detailed in the section "Exchanges Between Ordinary Shares Trading in Hong Kong and ADSs" below, the time needed to distribute dividends to holders of our ADSs whose underlying ordinary shares remain on the Hong Kong share register may be longer than had been the case prior to such relocation.

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EXCHANGES BETWEEN ORDINARY SHARES TRADING IN HONG KONG AND ADSs

Register of Members and Stamp Duty

        Our principal register of members will be maintained by our principal share registrar, Maples Fund Services (Cayman) Limited, or Maples, in the Cayman Islands, and our Hong Kong register of members will be maintained by our Hong Kong share registrar, Computershare Hong Kong Investor Services Limited, in Hong Kong.

        Dealings in our ordinary shares registered on our Hong Kong share register will be subject to Hong Kong stamp duty. The stamp duty is charged to each of the seller and purchaser at the ad valorem rate of 0.1% of the consideration for, or (if greater) the value of, our ordinary shares transferred. In other words, a total of 0.2% is currently payable on a typical sale and purchase transaction of our ordinary shares. In addition, a fixed duty of HK$5.00 is charged on each instrument of transfer (if required).

        To facilitate deposits of ordinary shares to and withdrawals of ordinary shares from the ADS facility, we also intend to move a portion of our issued ordinary shares from our Cayman share register to our Hong Kong share register. It is unclear whether, as a matter of Hong Kong law, the trading of ADSs representing ordinary shares constitutes a sale or purchase of the underlying Hong Kong-registered ordinary shares that is subject to Hong Kong stamp duty. We advise investors to consult their own tax advisors on this matter. See above "Risk Factors—Risks related to our Ordinary Shares, the ADSs, the Listing, and the Global Offering—There is uncertainty as to whether Hong Kong stamp duty will apply to deposits of our ordinary shares into or withdrawal of our ordinary shares from the ADS facility or trading of our ADSs following our initial public offering in Hong Kong and listing of our ordinary shares on the Hong Kong Stock Exchange."

Dealings and Settlement of Ordinary Shares in Hong Kong

        Our ordinary shares will trade on the Hong Kong Stock Exchange in board lots of 100 ordinary shares. Dealings in our ordinary shares on the Hong Kong Stock Exchange will be conducted in Hong Kong dollars.

        The transaction costs of dealings in our ordinary shares on the Hong Kong Stock Exchange include:

(a)

Hong Kong Stock Exchange trading fee of 0.005% of the consideration of the transaction, charged to each of the buyer and seller;



(b)

SFC, transaction levy of 0.0027% of the consideration of the transaction, charged to each of the buyer and seller;



(c)

trading tariff of HK$0.50 on each and every purchase or sale transaction. The decision on whether or not to pass the trading tariff onto investors is at the discretion of brokers;



(d)

transfer deed stamp duty of HK$5.00 per transfer deed (if applicable), payable by the seller;



(e)

ad valorem stamp duty at a total rate of 0.2% of the value of the transaction, with 0.1% payable by each of the buyer and the seller;



(f)

stock settlement fee, which is currently 0.002% of the gross transaction value, subject to a minimum fee of HK$2.00 and a maximum fee of HK$100.00 per side per trade;



(g)

brokerage commission, which is freely negotiable with the broker (other than brokerage commissions for initial public offering transactions which are currently set at 1% of the subscription or purchase price and will be payable by the person subscribing for or purchasing the securities); and

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(h)

the Hong Kong share registrar will charge between HK$2.50 to HK$20.00, depending on the speed of service (or such higher fee as may from time to time be permitted under the Hong Kong Listing Rules), for each transfer of ordinary shares from one registered owner to another, each share certificate canceled or issued by it and any applicable fee as stated in the share transfer forms used in Hong Kong.

        Investors must settle their trades executed on the Hong Kong Stock Exchange through their brokers directly or through custodians. For an investor who has deposited his or her ordinary shares in his or her stock account or in his or her designated Central Clearing and Settlement System participant's stock account maintained with the Central Clearing and Settlement System, or CCASS, settlement will be effected in CCASS in accordance with the General Rules of CCASS and CCASS Operational Procedures in effect from time to time. For an investor who holds the physical certificates, settlement certificates and the duly executed transfer forms must be delivered to his or her broker or custodian before the settlement date.

Exchanges between Ordinary Shares Trading in Hong Kong and ADSs

        In connection with the Hong Kong Public Offering, we have established the Hong Kong share register, which will be maintained by our Hong Kong share registrar, Computershare Hong Kong Investor Services Limited. Our principal register of members, or the Cayman share register, will continue to be maintained by our principal share registrar, Maples Fund Services (Cayman) Limited.

        All ordinary shares offered in the Hong Kong Public Offering will be registered on the Hong Kong share register in order to be listed and traded on the Hong Kong Stock Exchange. As described in further detail below, holders of ordinary shares registered on the Hong Kong share register will be able to exchange those ordinary shares for ADSs, and vice versa.

        In connection with the Hong Kong Public Offering, and to facilitate fungibility and exchanges between ordinary shares trading in Hong Kong and ADSs and trading between the Hong Kong Stock Exchange and the Nasdaq, we intend to move a portion of our issued ordinary shares, including all of the ordinary shares deposited in our ADS program, from our Cayman share register to our Hong Kong share register.

Our ADSs

        Our ADSs are traded on the Nasdaq. Dealings in our ADSs on the Nasdaq are conducted in U.S. Dollars.

        ADSs may be held either:

•

directly: (i) by having an American Depositary Receipt, also referred to as an ADR, which is a certificate evidencing a specific number of ADSs registered in the holder's name; or (ii) by having uncertificated ADSs registered in the holder's name; or



•

indirectly, by holding a security entitlement in ADSs through a broker or other financial institution that is a direct or indirect participant in The Depository Trust Company, also called DTC.

        The depositary for our ADSs is The Bank of New York Mellon, whose office is located at 240 Greenwich Street, New York, New York 10286. The depositary's custodian in Hong Kong is the Hong Kong office of The Hongkong and Shanghai Banking Corporation Limited or HSBC, whose office is located at 1 Queen's Road Central, Hong Kong.

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Depositing Ordinary Shares Trading in Hong Kong for delivery of ADSs

        An investor who holds the ordinary shares registered in Hong Kong and who wishes to receive delivery of ADSs that trade on the Nasdaq must deposit or have his or her broker deposit the ordinary shares with the depositary's Hong Kong custodian, HSBC, or the custodian, in exchange for ADSs.

        A deposit of ordinary shares trading in Hong Kong in exchange for ADSs involves the following procedures:

•

If ordinary shares have been deposited with CCASS, the investor must transfer the ordinary shares to the depositary's account with the custodian within CCASS by following the CCASS procedures for transfer and submit and deliver a duly completed and signed ADS delivery form to the custodian via his or her broker.



•

If the ordinary shares are held outside CCASS, the investor must arrange for the registration of a transfer of his/her ordinary shares into the depositary's name and delivery of evidence of that registration to the custodian, and must sign and deliver an ADS delivery form to the depositary.



•

Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, if applicable, the depositary will register the corresponding number of ADSs in the name(s) requested by an investor and will deliver the ADSs as instructed in the ADS delivery form.

        For ordinary shares deposited in CCASS, under normal circumstances, the above steps generally require two business days, provided that the investor has provided timely and complete instructions. For ordinary shares held outside CCASS in physical form, the above steps may take 14 business days, or more, to complete. Temporary delays may arise. For example, the transfer books of the depositary may from time to time be closed to ADS issuances. The investor will be unable to trade the ADSs until the procedures are completed.

Surrender of ADSs for delivery of Ordinary Shares Trading in Hong Kong

        An investor who holds ADSs and who wishes to receive ordinary shares that trade on the Hong Kong Stock Exchange must cancel the ADSs the investor holds and withdraw the ordinary shares from our ADS program and cause his or her broker or other financial institution to trade such ordinary shares on the Hong Kong Stock Exchange.

        An investor that holds ADSs indirectly through a broker or other financial institution should follow the procedures of the broker or financial institution and instruct the broker to arrange for cancellation of the ADSs, and transfer of the underlying ordinary shares from the depositary's account with the custodian within the CCASS system to the investor's Hong Kong stock account.

        For investors holding ADSs directly, the following steps must be taken:

•

To withdraw the ordinary shares from our ADS program, an investor who holds ADSs may turn in such ADSs at the office of the depositary (and the applicable ADR(s) if the ADSs are held in certificated form), and send an instruction to cancel such ADSs to the depositary. Those instructions must have a Medallion signature guarantee.



•

Upon payment or net of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, if applicable, the depositary will instruct the custodian to deliver the ordinary shares underlying the canceled ADSs to the CCASS account designated by an investor.



•

If an investor prefers to receive the ordinary shares outside CCASS, he or she must so indicate in the instruction delivered to the depositary.

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        For the ordinary shares to be received in CCASS, under normal circumstances, the above steps generally require two business days, provided that the investor has provided timely and complete instructions. For the ordinary shares to be received outside CCASS in physical form, the above steps may take 14 business days, or more, to complete. The investor will be unable to trade the ordinary shares on the Hong Kong Stock Exchange until the procedures are completed.

        Temporary delays may arise. For example, the transfer books of the depositary may from time to time be closed to ADS cancellations. In addition, completion of the above steps and procedures for delivery of ordinary shares in a CCASS account is subject to there being a sufficient number of ordinary shares on the Hong Kong share register to facilitate a withdrawal from the ADS program directly into the CCASS system. We are not under any obligation to maintain or increase the number of ordinary shares on the Hong Kong share register to facilitate such withdrawals.

Depositary Requirements

        Before the depositary delivers ADSs or permits withdrawal of ordinary shares, the depositary may require:

•

production of satisfactory proof of the identity and genuineness of any signature or other information it deems necessary; and



•

compliance with procedures it may establish, from time to time, consistent with the deposit agreement, including completion and presentation of transfer documents.

        The depositary may refuse to deliver, transfer, or register issuances, transfers and cancelations of ADSs generally when the transfer books of the depositary or our Hong Kong share registrar are closed or at any time if the depositary or we determine it advisable to do so.

        All costs attributable to the transfer of ordinary shares to effect a withdrawal from or deposit of ordinary shares into our ADS program will be borne by the investor requesting the transfer or deposit. In particular, holders of ordinary shares and ADSs should note that the Hong Kong share registrar will charge between HK$2.50 to HK$20.00, depending on the speed of service (or such higher fee as may from time to time be permitted under the Hong Kong Stock Exchange Listing Rules), for each transfer of ordinary shares from one registered owner to another, each share certificate canceled or issued by it and any applicable fee as stated in the share transfer forms used in Hong Kong. In addition, holders of the ordinary shares and ADSs must pay US$5.00 (or portion thereof) per 100 ADSs for each issuance of ADSs and for each cancelation of ADSs, as the case may be, in connection with the deposit of ordinary shares into, or withdrawal of the ordinary shares from, the ADS facility.

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UNDERWRITING

The Global Offering

        The offering of our 171,480,000 ordinary shares is referred to herein as the "Global Offering." The Global Offering comprises:

•

the offering of 20,580,000 ordinary shares in Hong Kong (the "Hong Kong offer shares") as described in "—The Hong Kong Public Offering" below, which we refer to as the "Hong Kong Public Offering"; and



•

the offering of 150,900,000 ordinary shares (subject to the option of the international underwriters to purchase additional ordinary shares mentioned below) (the "international offer shares" and together with the Hong Kong offer shares, the "Offer Shares") as described in the "—The International Offering" below, which we refer to as the "International Offering."

        The International Offering contemplated herein consists of a U.S. offering and a non-U.S. offering made outside the U.S. in compliance with applicable law. We are paying a registration fee for ordinary shares sold in the United States, as well as for ordinary shares initially offered and sold outside the United States in the Global Offering that may be resold from time to time into the United States in compliance with applicable law.

        China International Capital Corporation Hong Kong Securities Limited, Credit Suisse (Hong Kong) Limited and J.P. Morgan Securities (Asia Pacific) Limited (in alphabetical order) are acting as joint global coordinators, or the Joint Global Coordinators, for the Global Offering.

        Under the terms and subject to the conditions in the Hong Kong Underwriting Agreement (as defined below), the Hong Kong underwriters below have severally agreed to apply or procure applications for the number of ordinary shares indicated below.

        Under the terms and subject to the conditions in the International Underwriting Agreement (as defined below), the international underwriters, for whom the Joint Global Coordinators are acting as representatives, have severally agreed to purchase or procure purchasers to purchase from us, and we

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have agreed to sell to them or such purchasers, severally, the number of ordinary shares indicated below: