☐ |
REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR 12(G) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☒ |
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ |
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
American depositary shares, each ADS represents two Class A ordinary shares, par value US$0.000083 per share* |
TME |
The New York Stock Exchange |
* |
Not for trading, but only in connection with the listing on the New York Stock Exchange of American depositary shares. |
Large accelerated filer |
☒ |
Accelerated filer |
☐ | |||
Non-accelerated filer |
☐ |
Emerging growth company |
☐ |
† |
The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012. |
U.S. GAAP ☐ |
International Financial Reporting Standards as issued |
Other ☐ | ||||||
by the International Accounting Standards Board |
☒ |
Page |
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iv |
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1 |
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ITEM 1. |
1 |
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ITEM 2. |
1 |
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ITEM 3. |
1 |
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ITEM 4. |
58 |
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ITEM 4A. |
118 |
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ITEM 5. |
118 |
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ITEM 6. |
139 |
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ITEM 7. |
153 |
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ITEM 8. |
156 |
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ITEM 9. |
158 |
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ITEM 10. |
159 |
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ITEM 11. |
169 |
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ITEM 12. |
170 |
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172 |
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ITEM 13. |
172 |
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ITEM 14. |
172 |
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ITEM 15. |
172 |
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ITEM 16.A. |
173 |
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ITEM 16.B. |
173 |
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ITEM 16.C. |
174 |
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ITEM 16.D. |
174 |
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ITEM 16.E. |
175 |
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ITEM 16.F. |
175 |
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ITEM 16.G. |
175 |
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ITEM 16.H. |
175 |
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176 |
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ITEM 17. |
176 |
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ITEM 18. |
176 |
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ITEM 19. |
176 |
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F-1 |
• |
“ADSs” refers to the American depositary shares, each representing two Class A ordinary shares; |
• |
“AI” refers to artificial intelligence; |
• |
“Beijing Gongse” refers to Beijing Gongse Enterprise Management Co., Ltd., one of the VIEs; |
• |
“Beijing Shangqin” refers to Beijing Shangqin Culture Management Partnership (Limited Partnership), one of the VIEs; |
• |
“Beijing Yuzhong” refers to Beijing Yuzhong Entertainment Culture Partnership (Limited Partnership), one of the VIEs; |
• |
“Beijing Zhizheng” refers to Beijing Zhizheng Music Culture Co., Ltd., one of the VIEs; |
• |
“Beijing Kuwo” refers to Beijing Kuwo Technology Co., Ltd., one of the VIEs; |
• |
“CAC” refers to the Cyberspace Administration of China; |
• |
“China” or “PRC” refers to the People’s Republic of China, excluding, for the purpose of this annual report only, Taiwan, Hong Kong and Macau; |
• |
“CMC” refers to China Music Corporation; |
• |
“Guangxi Hexian” refers to Guangxi Hexian Investment Management Co., Ltd., one of the VIEs; |
• |
“Guangxi Qingse” refers to Guangxi Qingse Venture Capital Co., Ltd., one of the VIEs; |
• |
“Guangzhou Kugou” refers to Guangzhou Kugou Computer Technology Co., Ltd., one of the VIEs; |
• |
“Group” refers to our company, its subsidiaries, its controlled structured entities (“Variable interest entities”, or “VIEs”) and their subsidiaries; |
• |
“HK$” or “Hong Kong dollars” refers to the legal currency of the Hong Kong SAR; |
• |
“IFRS” refers to International Financial Reporting Standards as issued by the International Accounting Standards Board; |
• |
“MCSC” refers to the Music Copyright Society of China; |
• |
“monthly ARPPU” of each of our online music services and social entertainment services for any given period refers to the monthly average of (i) the revenues of the respective services for that period divided by (ii) the number of paying users of the respective services for that period. The monthly ARPPU of social entertainment services is calculated based on revenues from social entertainment and others, including advertising services provided on our social entertainment platforms; |
• |
“ordinary shares” refers to our ordinary shares of par value US$0.000083 per share; |
• |
“paying ratio” for a given period is measured by the number of paying users as a percentage of the mobile MAUs for that period; |
• |
“paying users” for our online music services (i) for any given quarter refers to the average of the number of users whose subscription packages remain active as of the last day of each month of that quarter; and (ii) for any given year refers to the average of the total number of paying users of the four quarters in that year. The number of paying users for our online music services for any given period excludes the number of users who only purchase digital music singles and albums during such period because these purchasing patterns tend to reflect specific releases, which may fluctuate from period to period; |
• |
“paying users” for our social entertainment services (i) for any given quarter refers to the average of the number of paying users for each month in that quarter; (ii) for any given year refers to the average of the total number of paying users of the four quarters in that year. The number of paying users of our social entertainment services for a given month refers to the number of users who contribute revenues to our social entertainment services (primarily through purchases of virtual gifts or premium memberships) during that month; |
• |
“publishing rights” refers to the copyrights of music and non-music works for the purpose of this annual report; |
• |
“Qianhai Daizheng” refers to Shenzhen Qianhai Daizheng Music Culture Co., Ltd., one of the VIEs; |
• |
“RMB” or “Renminbi” refers to the legal currency of the People’s Republic of China; |
• |
“Shenzhen Lanren” refers to Shenzhen Lanren Online Technology Co, Ltd., which we acquired in March 2021; |
• |
“Shenzhen Ultimate Music” refers to Shenzhen Ultimate Music Culture and Technology Co., Ltd., one of the VIEs; |
• |
“Spotify” refers to Spotify Technology S.A., one of our principal shareholders; |
• |
“Tencent” refers to Tencent Holdings Limited, our controlling shareholder; |
• |
“US$,” “dollars” or “U.S. dollars” refers to the legal currency of the United States; |
• |
“we,” “us,” “our company” and “our” refer to Tencent Music Entertainment Group (or, where the context requires, its predecessor), its subsidiaries and, in the context of describing our operations and consolidated financial information, its VIEs; |
• |
with respect to MAU data used in this annual report: |
• |
“mobile MAUs” or “PC MAUs” for a given month (i) with respect to each of our products (except WeSing WeSing WeSing |
• |
“mobile MAUs” for a given period refers to the monthly average of the sum of the mobile MAUs for that period; |
• |
“online music mobile MAUs” for a given month refers to the sum of mobile MAUs of our music products, namely QQ Music Kugou Music Kuwo Music |
• |
“social entertainment mobile MAUs” for a given month refers to the sum of mobile MAUs that have accessed the social entertainment services offered by (i) WeSing Kugou’s Live Streaming Kuwo’s Live Streaming Kugou Changchang (v) QQ Music’s Live Streaming |
• |
“social entertainment mobile MAUs” for a given period refers to the monthly average of the sum of the social entertainment mobile MAUs for that period; and |
• |
our MAUs are calculated using internal company data, treating each distinguishable user account or device as a separate MAU even though some users may access our services using more than one user account or device and multiple users may access our services using the same user account or device. |
• |
our growth strategies; |
• |
our future business development, financial condition and results of operations; |
• |
our ability to retain, grow and engage our user base and expand our music and audio entertainment content offering; |
• |
our ability to retain and grow our paying users and drive their spending on our services; |
• |
expected changes in our revenues, content-related costs and operating margins; |
• |
our ability to retain key personnel and attract new talent; |
• |
competition landscape in China’s online music and audio entertainment industry; |
• |
general economic, political, demographic and business conditions in China and globally; and |
• |
the regulatory environment in which we operate. |
ITEM 1. |
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS |
ITEM 2. |
OFFER STATISTICS AND EXPECTED TIMETABLE |
ITEM 3. |
KEY INFORMATION |
• |
If we fail to anticipate user preferences to provide online music and/or long-form audio entertainment content catering to user demands, our ability to attract and retain users may be materially and adversely affected. |
• | We depend upon third-party licenses for the content of our content offerings, and any adverse changes to or loss of, our relationships with these content providers may materially and adversely affect our business, operating results, and financial condition. |
• | We may not have obtained complete licenses for certain copyrights with respect to a portion of the content offered on our platform. |
• | We allow user-generated content to be uploaded on our platform. If users have not obtained all necessary copyright licenses in connection with such uploaded content, we may be subject to potential disputes and liabilities. |
• | Assertions or allegations that we have infringed or violated intellectual property rights, even not true, could harm our business and reputation. |
• | Our license agreements are complex, impose numerous obligations upon us and may make it difficult to operate our business. Any breach or adverse change to the terms of such agreements could adversely affect our business, operating results and financial condition. |
• | Minimum guarantees required under certain of our license agreements for music and long-form audio content may limit our operating flexibility and may materially and adversely affect our business, financial condition and results of operations. |
• | If we are unable to obtain accurate and comprehensive information necessary to identify the copyright ownership of the content offered on our platform, our ability to obtain necessary or commercially viable licenses from the copyright owners may be adversely affected, which may result in us having to remove content from our platform, and may subject us to potential copyright infringement claims and difficulties in controlling content-related costs. |
• |
If music copyright owners withdraw all or a portion of their music works from the MCSC to the extent the MCSC had not obtained authorization to license from the relevant copyright owners, we may |
have to enter into direct licensing agreements with these copyright owners, which may be time-consuming and costly, and we may not be able to reach an agreement with some copyright owners, or may have to pay higher rates than we currently pay. |
• |
Uncertainties surrounding our monetization efforts may cause us to lose users and materially and adversely affect our business, financial condition and results of operations. |
• |
Complying with evolving laws and regulations regarding cybersecurity, information security, privacy and data protection and other related laws and requirements may be expensive and force us to make adverse changes to our business. Many of these laws and regulations are subject to changes and uncertain interpretations, and any failure or perceived failure to comply with these laws and regulations could result in negative publicity, legal proceedings, suspension or disruption of operations, increased cost of operations, or otherwise harm our business. |
• | If we are no longer able to benefit from our business cooperation with Tencent, our business may be adversely affected. |
• | Any negative development in Tencent’s market position, brand recognition or financial condition may materially and adversely affect our user base, marketing efforts and the strength of our brand. |
• | Tencent, our controlling shareholder, has had and will continue to have effective control over the outcome of shareholder actions in our company. The interests of Tencent may not be aligned with the interests of our other shareholders and holders of the ADSs. |
• | We may have conflicts of interest with Tencent and, because of Tencent’s controlling ownership interest in our company, we may not be able to resolve such conflicts on terms favorable to us. |
• |
There are substantial uncertainties regarding the interpretation and application of current and future PRC laws, regulations, and rules relating to the agreements that establish the VIE structure for our operations in China, including potential future actions by the PRC government, which could affect the enforceability of our contractual arrangements with the VIEs and, consequently, significantly affect the financial condition and results of operations performance of TME. If the PRC government finds such agreements non-compliant with relevant PRC laws, regulations, and rules, or if these laws, regulations, and rules or the interpretation thereof change in the future, we could be subject to severe penalties or be forced to relinquish our interests in the VIEs. |
• |
Any failure by the VIEs or their shareholders to perform their obligations under our contractual arrangements with them would have a material adverse effect on our business. |
• |
The approval, filing or other requirements of the China Securities Regulatory Commission or other PRC government authorities may be required under PRC law in connection with our issuance of securities overseas. |
• |
Substantial uncertainties exist with respect to the interpretation and implementation of the Foreign Investment Law of the PRC and how it may impact the viability of our current corporate structure, corporate governance and business operations. |
• |
We rely on contractual arrangements with the VIEs and their respective shareholders for a large portion of our business operations, which may not be as effective as direct ownership in providing operational control. |
• | A severe or prolonged downturn in the PRC or global economy could materially and adversely affect our business and our financial condition. |
• | Uncertainties with respect to the PRC legal system, including those regarding the enforcement of laws, and sudden or unexpected changes in policies, laws and regulations in China, could materially and adversely affect us. |
• | The custodians or authorized users of our controlling non-tangible assets, including chops and seals, may fail to fulfill their responsibilities, or misappropriate or misuse these assets. |
• | Our operations depend on the performance of the internet infrastructure and telecommunications networks in China, which are in large part operated and maintained by state-owned operators. |
• |
The PCAOB is currently unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections over our auditor deprives our investors with the benefits of such inspections. |
• |
Our ADSs may be delisted and our ADSs and shares prohibited from trading in the over-the-counter over-the-counter non-U.S. exchange or that a market for our shares will develop outside of the U.S. The delisting of our ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment. |
• |
The potential enactment of the Accelerating Holding Foreign Companies Accountable Act would decrease the number of non-inspection years from three years to two, thus reducing the time period before our ADSs may be prohibited from over-the-counter over-the-counter |
• | The trading price of the ADSs is likely to be volatile, which could result in substantial losses to investors. |
• | If securities or industry analysts do not publish favorable research, or if they adversely change their recommendations regarding the ADSs, the market price for the ADSs and trading volume could decline. |
• | The sale or availability for sale of substantial amounts of the ADSs could adversely affect their market price. |
• | The dual-class structure of our ordinary shares may adversely affect the trading market for our ADSs. |
• | calculate and make payments based on complex royalty structures that involve a number of variables, including the revenue generated and size of user base, which requires tracking usage of content on our platform that may have inaccurate or incomplete metadata necessary for such calculation; |
• | make minimum guaranteed payments; |
• | use reasonable efforts to achieve certain paying user conversion targets; |
• | adopt and implement effective anti-piracy and geo-blocking measures; |
• | monitor performance by third parties to whom we distribute our licensed content of their obligations with respect to content distribution and copyright protections; and |
• | comply with certain security and technical specifications. |
• | providing consistently high-quality and user-friendly experience, particularly with the development of our pay-for-streaming |
• | continuing to curate a catalog of engaging content; |
• | continuing to introduce new, appealing products, services and content that users are willing to pay for; |
• | continuing to innovate and stay ahead of our competitors; |
• | continuing to maintain and enhance the copyright protection environment; and |
• | maintaining and building our relationships with our content providers and other industry partners. |
• | our future business development, financial condition and results of operations; |
• | general market conditions for financing activities; |
• | macro-economic and other conditions in China and elsewhere; and |
• | our relationship with Tencent, our controlling shareholder. |
• | alleged misconduct or other improper activities committed by our shareholders, affiliates, directors, officers and other employees; |
• | false or malicious allegations or rumors about us or our shareholders, affiliates, directors, officers and other employees; |
• | user complaints about the quality of our products and services; |
• | copyright infringements involving us and content offered on our platform; |
• | security breaches of confidential user information; and |
• | governmental and regulatory investigations or penalties resulting from failure of us or our related parties to comply with applicable laws and regulations. |
• | Agreements with Tencent |
• | Allocation of business opportunities |
• | Employee recruiting and retention |
• | Sale of shares in our company |
• | Developing business relationships with Tencent’s competitors |
• | Our directors may have conflicts of interest |
• | revoking the business licenses and/or operating licenses of such entities; |
• | discontinuing or placing restrictions or onerous conditions on our operation through any transactions between our PRC subsidiaries and the VIEs; |
• | imposing fines, confiscating the income from our PRC subsidiaries or the VIEs, or imposing other requirements with which we or the VIEs may not be able to comply; or |
• | requiring us to restructure our ownership structure or operations, including terminating the contractual arrangements with the VIEs and deregistering the equity pledges of the VIEs, which in turn would affect our ability to consolidate, derive economic interests from, or exert effective control over the VIEs. |
• | restricting or prohibiting our use of the proceeds of financing activities to finance our business and operations in China. |
• | variations in our revenues, operating costs and expenses, earnings and cash flow; |
• | our controlling shareholder’s business performance and the trading price of its stock; |
• | announcements of new investments, acquisitions, strategic partnerships or joint ventures by us or our competitors; |
• | announcements of new products and services by us or our competitors; |
• | changes in financial estimates by securities analysts; |
• | detrimental adverse publicity about us, our shareholders, affiliates, directors, officers or employees, our content offerings, our business model, our services or our industry; |
• | announcements of new regulations, rules or policies relevant for our business; |
• | additions or departures of key personnel; |
• | release of lock-up or other transfer restrictions on our outstanding equity securities or sales of additional equity securities; and |
• | potential litigation or regulatory investigations. |
• | 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; |
• | 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 rules under Regulation FD governing selective disclosure rules of material nonpublic information. |
• | an exemption from the rule that a majority of our board of directors must be independent directors; |
• | an exemption from the rule that the compensation of our chief executive officer must be determined or recommended solely by independent directors; and |
• | an exemption from the rule that our director nominees must be selected or recommended solely by independent directors. |
ITEM 4. |
INFORMATION ON THE COMPANY |
• | QQ Music QQ QQ Music |
• | Kugou Kugou Music Kugou Music Fanxing Live Kugou Live |
• | Kuwo Kuwo Music Kuwo Live |
• | WeSing WeSing |
• | Lazy Audio Kuwo Changting Kuwo Changting Lazy Audio |
Taxation Scenario |
||||
Statutory Tax and Standard Rates |
||||
Hypothetical pre-tax earnings |
100 | % | ||
Tax on earnings at statutory rate of 25% |
-25 | % | ||
Net earnings available for distribution |
75 | % | ||
Withholding tax at standard rate of 10%* |
-7.5 | % | ||
Net distribution to Parent/Shareholders |
67.5 | % |
* | The PRC Enterprise Income Tax Law imposes a withholding income tax of 10% on dividends distributed by a foreign invested enterprise, or FIE, to its immediate holding company outside of China. A lower withholding income tax rate of 5% is applied if the FIE’s immediate holding company is registered in Hong Kong or other jurisdictions that have a tax treaty arrangement with China, subject to a qualification review at the time of the distribution. For purposes of this hypothetical example, the table above assumes a maximum tax scenario under which the full withholding tax would be applied. |
For the Year Ended December 31, 2019 |
||||||||||||||||||||||||
Parent |
VIE and its consolidated subsidiaries |
WOFEs |
Other subsidiaries |
Eliminating adjustments |
Consolidated totals |
|||||||||||||||||||
(RMB in millions) |
||||||||||||||||||||||||
Revenues |
148 |
25,379 |
10,129 |
1,073 |
(11,295 |
) d |
25,434 |
|||||||||||||||||
Cost of revenues |
(252 | ) | (18,852 | ) | (6,575 | ) | (206 | ) | 9,124 | d |
(16,761 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Gross (loss)/profit |
(104 |
) |
6,527 |
3,554 |
867 |
(2,171 |
) |
8,673 |
||||||||||||||||
Operating (loss)/profit |
(88 | ) | 1,631 | 2,779 | 297 | 3 | 4,622 | |||||||||||||||||
(Loss)/profit before income tax |
(129 |
) |
1,607 |
2,851 |
206 |
5 |
4,540 |
|||||||||||||||||
Income from subsidiaries and VIEs |
4,111 | — | 1,329 | 3,905 | (9,345 | ) | — | |||||||||||||||||
Profit for the year |
3,982 |
1,323 |
3,901 |
4,111 |
(9,340 |
) |
3,977 |
For the Year Ended December 31, 2020 |
||||||||||||||||||||||||
Parent |
VIE and its consolidated subsidiaries |
WOFEs |
Other subsidiaries |
Eliminating adjustments |
Consolidated totals |
|||||||||||||||||||
(RMB in millions) |
||||||||||||||||||||||||
Revenues |
— |
29,094 |
11,935 |
837 |
(12,713 |
) d |
29,153 |
|||||||||||||||||
Cost of revenues |
— |
(21,889 | ) | (8,167 | ) | (78 | ) | 10,283 | d |
(19,851 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Gross profit |
— |
7,205 |
3,768 |
759 |
(2,430 |
) |
9,302 |
|||||||||||||||||
Operating (loss)/profit |
(260 | ) | 1,966 | 2,728 | 275 | 1 | 4,710 | |||||||||||||||||
(Loss)/profit before income tax |
(331 |
) |
1,936 |
2,717 |
307 |
3 |
4,632 |
|||||||||||||||||
Income from subsidiaries and VIEs |
4,466 | — | 1,625 | 4,155 | (10,246 | ) | — | |||||||||||||||||
Profit for the year |
4,176 |
1,625 |
4,152 |
4,466 |
(10,243 |
) |
4,176 |
For the Year Ended December 31, 2021 |
||||||||||||||||||||||||
Parent |
VIE and its consolidated subsidiaries |
WOFEs |
Other subsidiaries |
Eliminating adjustments |
Consolidated totals |
|||||||||||||||||||
(RMB in millions) |
||||||||||||||||||||||||
Revenues |
— |
30,949 |
15,393 |
1,920 |
(17,018 |
) d |
31,244 |
|||||||||||||||||
Cost of revenues |
— |
(25,278 | ) | (10,258 | ) | (992 | ) | 14,688 | d |
(21,840 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Gross profit |
— |
5,671 |
5,135 |
928 |
(2,330 |
) |
9,404 |
|||||||||||||||||
Operating (loss)/profit |
(201 | ) | (56 | ) | 3,354 | 713 | (10 | ) | 3,800 | |||||||||||||||
(Loss)/profit before income tax |
(298 |
) |
(34 |
) |
3,337 |
634 |
(7 |
) |
3,632 |
|||||||||||||||
Income/(loss) from subsidiaries and VIEs |
3,526 | — | (206 | ) | 2,903 | (6,223 | ) | — | ||||||||||||||||
Profit/(loss) for the year |
3,257 |
(209 |
) |
2,903 |
3,494 |
(6,230 |
) |
3,215 |
As of December 31, 2020 |
||||||||||||||||||||||||
Parent |
VIE and its consolidated subsidiaries |
WOFEs |
Other subsidiaries |
Eliminating adjustments |
Consolidated totals |
|||||||||||||||||||
(RMB in millions) |
||||||||||||||||||||||||
ASSETS |
||||||||||||||||||||||||
Non-current assets |
||||||||||||||||||||||||
Investments in subsidiaries |
28,158 | — | — | 19,214 | (47,372 | ) b |
— | |||||||||||||||||
Investments in VIEs |
— | — | 10,229 | — | (10,229 | ) b |
— | |||||||||||||||||
Intangible assets and goodwill |
13,605 | 5,358 | 550 | 4 | (5 | ) a |
19,512 | |||||||||||||||||
Investments accounted for using equity method |
— | 575 | — | 1,680 | — | 2,255 | ||||||||||||||||||
Financial assets at fair value through other comprehensive income |
— | — | — | 9,771 | — | 9,771 | ||||||||||||||||||
Prepayments, deposits and other assets |
50 | 876 | 30 | — | — | 956 | ||||||||||||||||||
Term deposits |
— | — | 2,953 | — | — | 2,953 | ||||||||||||||||||
Others |
— | 585 | 422 | 132 | — | 1,139 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
41,813 |
7,394 |
14,184 |
30,801 |
(57,606 |
) |
36,586 |
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Current assets |
||||||||||||||||||||||||
Amounts due from subsidiaries and VIEs |
3,312 | 7,668 | 3,029 | 30 | (14,039 | ) c |
— | |||||||||||||||||
Prepayments, deposits and other assets |
174 | 267 | 1,813 | 592 | — | 2,846 | ||||||||||||||||||
Term deposits |
7,758 | — | 7,100 | — | — | 14,858 | ||||||||||||||||||
Cash and cash equivalents |
5,686 | 1,397 | 3,952 | 93 | — | 11,128 | ||||||||||||||||||
Others |
— | 1,368 | 1,225 | 262 | — | 2,855 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
16,930 |
10,700 |
17,119 |
977 |
(14,039 |
) |
31,687 |
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total assets |
58,743 |
18,094 |
31,303 |
31,778 |
(71,645 |
) |
68,273 |
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
LIABILITIES |
||||||||||||||||||||||||
Non-current liabilities |
||||||||||||||||||||||||
Notes payable |
5,175 | — | — | — | — | 5,175 | ||||||||||||||||||
Others |
29 | 393 | 304 | 39 | — | 765 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
5,204 |
393 |
304 |
39 |
— |
5,940 |
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Current liabilities |
||||||||||||||||||||||||
Amounts due to subsidiaries and VIEs |
671 | 1,476 | 8,563 | 3,287 | (13,997 | ) c |
— | |||||||||||||||||
Deferred revenue |
— | 1,569 | — | 39 | — | 1,608 | ||||||||||||||||||
Others |
623 | 3,941 | 3,180 | 250 | — | 7,994 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
1,294 |
6,986 |
11,743 |
3,576 |
(13,997 |
) |
9,602 |
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total liabilities |
6,498 |
7,379 |
12,047 |
3,615 |
(13,997 |
) |
15,542 |
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total equity |
52,245 |
10,715 |
19,256 |
28,163 |
(57,648 |
) |
52,731 |
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2021 |
||||||||||||||||||||||||
Parent |
VIE and its consolidated subsidiaries |
WOFEs |
Other subsidiaries |
Eliminating adjustments |
Consolidated totals |
|||||||||||||||||||
(RMB in millions) |
||||||||||||||||||||||||
ASSETS |
||||||||||||||||||||||||
Non-current assets |
||||||||||||||||||||||||
Investments in subsidiaries |
29,149 | — | — | 22,850 | (51,999 | ) b |
— | |||||||||||||||||
Investments in VIEs |
— | — | 10,288 | — | (10,288 | ) b |
— | |||||||||||||||||
Intangible assets and goodwill |
14,173 | 6,891 | 886 | 12 | (12 | ) a |
21,950 | |||||||||||||||||
Investments accounted for using equity method |
— | 638 | — | 2,961 | — | 3,599 | ||||||||||||||||||
Financial assets at fair value through other comprehensive income |
— | — | — | 7,302 | — | 7,302 | ||||||||||||||||||
Prepayments, deposits and other assets |
9 | 151 | 559 | 24 | — | 743 | ||||||||||||||||||
Term deposits |
— | 50 | 4,253 | — | — | 4,303 | ||||||||||||||||||
Others |
— | 992 | 1,432 | 142 | — | 2,566 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
43,331 |
8,722 |
17,418 |
33,291 |
(62,299 |
) |
40,463 |
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Current assets |
||||||||||||||||||||||||
Amounts due from subsidiaries and VIEs |
4,391 | 5,049 | 3,422 | 11 | (12,873 | ) c |
— | |||||||||||||||||
Prepayments, deposits and other assets |
83 | 843 | 1,805 | — | — | 2,731 | ||||||||||||||||||
Term deposits |
7,609 | — | 5,160 | — | — | 12,769 | ||||||||||||||||||
Cash and cash equivalents |
1,061 | 634 | 4,504 | 392 | — | 6,591 | ||||||||||||||||||
Others |
— | 2,869 | 1,028 | 803 | — | 4,700 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
13,144 |
9,395 |
15,919 |
1,206 |
(12,873 |
) |
26,791 |
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total assets |
56,475 |
18,117 |
33,337 |
34,497 |
(75,172 |
) |
67,254 |
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
LIABILITIES |
||||||||||||||||||||||||
Non-current liabilities |
||||||||||||||||||||||||
Notes payable |
5,062 | — | — | — | — | 5,062 | ||||||||||||||||||
Others |
66 | 416 | 205 | — | — | 687 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
5,128 |
416 |
205 |
— |
— |
5,749 |
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Current liabilities |
||||||||||||||||||||||||
Amounts due to subsidiaries and VIEs |
826 | 503 | 7,133 | 4,413 | (12,875 | ) c |
— | |||||||||||||||||
Deferred revenue |
— | 1,834 | — | — | — | 1,834 | ||||||||||||||||||
Others |
204 | 4,333 | 3,149 | 930 | — | 8,616 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
1,030 |
6,670 |
10,282 |
5,343 |
(12,875 |
) |
10,450 |
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total liabilities |
6,158 |
7,086 |
10,487 |
5,343 |
(12,875 |
) |
16,199 |
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total equity |
50,317 |
11,031 |
22,850 |
29,154 |
(62,297 |
) |
51,055 |
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2019 |
||||||||||||||||||||||||
Parent |
VIE and its consolidated subsidiaries |
WOFEs |
Other subsidiaries |
Eliminating adjustments |
Consolidated totals |
|||||||||||||||||||
(RMB in millions) |
||||||||||||||||||||||||
Net cash inflow/(outflow) from operating activities |
745 | (182 | ) | 4,996 | 641 | — | e |
6,200 | ||||||||||||||||
Net cash inflow/(outflow) from investing activities |
696 | (185 | ) | (7,749 | ) | (32 | ) | (832 | ) f |
(8,102 | ) | |||||||||||||
Net cash inflow/(outflow) from financing activities |
108 | (34 | ) | (42 | ) | (895 | ) | 832 | f |
(31 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net increase/(decrease) in cash and cash equivalents |
1,549 | (401 | ) | (2,795 | ) | (286 | ) | — | (1,933 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Cash and cash equivalents, beginning of the year |
9,321 | 1,728 | 5,794 | 513 | — | 17,356 | ||||||||||||||||||
Exchange differences on cash and cash equivalents |
— | — | — | 3 | — | 3 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Cash and cash equivalents, end of the year |
10,870 |
1,327 |
2,999 |
230 |
— |
15,426 |
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2020 |
||||||||||||||||||||||||
Parent |
VIE and its consolidated subsidiaries |
WOFEs |
Other subsidiaries |
Eliminating adjustments |
Consolidated totals |
|||||||||||||||||||
(RMB in millions) |
||||||||||||||||||||||||
Net cash (outflow)/inflow from operating activities |
(67 |
) |
454 |
4,574 |
(76 |
) |
— |
e |
4,885 |
|||||||||||||||
Net cash (outflow)/inflow from investing activities |
(10,230 |
) |
(1,099 |
) |
(3,535 |
) |
(710 |
) |
1,368 |
f |
(14,206 |
) | ||||||||||||
Net cash inflow/(outflow) from financing activities |
5,383 | 715 | (86 | ) | 648 | (1,368 | ) f |
5,292 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net (decrease)/increase in cash and cash equivalents |
(4,914 | ) | 70 | 953 | (138 | ) | — | (4,029 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Cash and cash equivalents, beginning of the year |
10,870 | 1,327 | 2,999 | 230 | — | 15,426 | ||||||||||||||||||
Exchange differences on cash and cash equivalents |
(270 | ) | — | — | 1 | — | (269 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Cash and cash equivalents, end of the year |
5,686 |
1,397 |
3,952 |
93 |
— |
11,128 |
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2021 |
||||||||||||||||||||||||
Parent |
VIE and its consolidated subsidiaries |
WOFEs |
Other subsidiaries |
Eliminating adjustments |
Consolidated totals |
|||||||||||||||||||
(RMB in millions) |
||||||||||||||||||||||||
Net cash inflow/(outflow) from operating activities |
69 |
(671 |
) |
5,628 |
213 |
— |
e |
5,239 |
||||||||||||||||
Net cash (outflow)/inflow from investing activities |
(1,064 |
) |
(3,554 |
) |
(5,005 |
) |
95 |
3,529 |
f |
(5,999 |
) | |||||||||||||
Net cash (outflow)/inflow from financing activities |
(3,571 |
) |
3,462 |
(71 |
) |
(1 |
) |
(3,529 |
) f |
(3,710 |
) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net (decrease)/ increase in cash and cash equivalents |
(4,566 | ) | (763 | ) | 552 | 307 | — | (4,470 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Cash and cash equivalents, beginning of the year |
5,686 | 1,397 | 3,952 | 93 | — | 11,128 | ||||||||||||||||||
Exchange differences on cash and cash equivalents |
(59 | ) | — | — | (8 | ) | — | (67 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Cash and cash equivalents, end of the year |
1,061 |
634 |
4,504 |
392 |
— |
6,591 |
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
a) | Represents the elimination of Service Charges between the VIEs and our PRC subsidiaries. |
b) | Represents the elimination of the investments in the VIEs and our PRC subsidiaries. |
c) | Represents the elimination of intercompany balance between Tencent Music Entertainment Group, the VIEs, and our subsidiaries. |
d) | Represents the Services Charges between Tencent Music Entertainment Group, the VIEs and our PRC subsidiaries, which were eliminated at the consolidation level. The intercompany revenues and costs in relation to the Service Charges to the VIEs by our PRC subsidiaries amounted to RMB7,895 million, RMB9,497 million and RMB13,039 million (US$2,046 million), for the year ended December 31, 2019, 2020 and 2021, respectively. |
e) | The cash flows which have occurred between Tencent Music Entertainment Group, the VIEs and our PRC subsidiaries represents the intercompany services fees which were eliminated at the consolidation level. In 2019, 2020 and 2021, the VIEs transferred RMB11,769 million, RMB15,372 million and RMB17,743 million (US$2,784 million), respectively, to our PRC subsidiaries as Service Charge, which were eliminated at the consolidated level. |
f) | Represents the elimination of intercompany fund transfers between Tencent Music Entertainment Group, the VIEs and our PRC subsidiaries. The intercompany fund transfers from WOFEs to the VIEs, which were eliminated at consolidated level, amounted to RMB53 million, RMB717 millions and RMB3,524 million (US$553 million), for the year ended December 31, 2019, 2020 and 2021, respectively. |
• | Our online music services, QQ Music, Kugou Music and Kuwo Music |
• | Our online karaoke social community WeSing Weixin/WeChat QQ. WeSing |
• | Our music-centric live streaming services QQ Music, Kugou Music Kuwo Music Kuwo Live |
• | Users |
• | Products |
services fully integrated into one platform, users don’t just listen to music on our platform—after listening to a song, they may be inspired to sing that song and share the performance with friends or want to watch a live performance of the same song by a popular live streaming performer. |
• | Content |
• | Data and technology |
• | Monetization |
• | Significant collaboration with Tencent QQ QQ QQ Music WeSing QQ QQ Music Elegant Summer Live one-click video publishing feature from QQ Music Kugou Music Kuwo Music WeSing QQ Music WeSing pan-entertainment ecosystem across gaming, animation, literature, variety shows, |
film & television and more, to produce and release 117 original songs. For more information about our collaboration with Tencent in content development and promotion, see “—Our Content Strategies—Partnering with Music Labels and Leading Industry Players.” |
Brands |
Key Attributes | |
QQ Music |
Leading online music services with nationwide popularity that offer a comprehensive music library and a broad range of music-related video content, with a focus on popular artists and leading mainstream hits for younger music lovers in top-tier cities in China, providing a platform for initial releases of digital music to promote interactions between music lovers and artists and develop a music lover economy centered around popular artists | |
Kugou |
Pioneer and leader in online music entertainment industry with nationwide popularity and the broadest user base in China, recognized as a preferred destination for users to discover music content trending on the internet via: • Kugou Music top-tier cities• Kugou Live | |
Kuwo |
Comprehensive online music entertainment services with a large user base in Northern China: • Kuwo Music • Kuwo Live | |
WeSing |
Largest online karaoke social community by mobile MAUs with nationwide popularity, offering unique social networking features that enable users to express themselves by sharing their singing performances and interacting with friends, singers and other users with similar interests in various online social settings | |
Lazy Audio |
A growing long-form audio platform where users can enjoy a variety of audio content, including audio books, cross-talks, radio dramas and other entertainment |
• | Listening experience |
• | Personal homepage |
• | Experience-enhancing music player QQ Music Lite |
• | Music discovery |
• | Search |
• | Smart recommendations |
• | Music charts |
• | Playlists |
• | Official music accounts |
• | Original music up-and-coming, |
• | Social experience Weixin/WeChat QQ Putong Community QQ Music Putong Planet Leap of Heart |
listening to with a simple, one-click following. Furthermore, we have upgraded the synchronized listening feature in QQ Music |
• | Singing features mini-KTV booths and share their performances online. To make the singing functions more accessible to mass users and improve recording performance and online singing experience, we have continuously upgraded the audio and video recording tools, including multi-genre remix, auto-tune and quick sing, making it more simple and fun for users to create and publish recordings. In addition, we have also improved the chorus functionality to allow even the shyest user to join a chorus while retaining their anonymity by not displaying their face. |
• | Virtual karaoke rooms Friend Karaoke Room WeSing singing-on-demand, all-new interactive experience to users, targeting real-time virtual social networking as a new growth engine for user engagement. |
• | Online singing groups on-demand vocal accompaniment, which effectively mobilizes karaoke influencers on the platform with potential commercialization opportunities to reward their singing talent. |
• | Live performance |
• | Value-added services |
• | Multi-media content enrichment. |
• | Content creation WeSing WeSing WeSing |
• | Music-centric content Kugou Live Kugou Music Kugou Live |
• | Social functions |
• | Sing-offs |
• | Song requests |
• | Music events and talent shows |
• | New forms of interaction WeSing Shanbao |
• | Songs |
• | Features songs performed by both established and aspiring artists in China and around the world. |
• | Underpinned by a comprehensive original content production system leverages our deep understanding of music as well as internal and external resources to systematically create, evaluate and promote music. |
• | Represents a variety of themes such as latest top hits, internet hits, time favorites and movie soundtracks. |
• | Covers a broad range of music genres, including pop, rock, indie, hip hop, R&B, classical, jazz and electronic music in various languages including Mandarin, Cantonese, English, Korean and Japanese. |
• | Categorized by listening habits, settings and moods, such as workout, travel, study and work, relaxation and many more. |
• | Adapts to the preferences of younger music users by covering a wide range of genres such as urban, EDM, animation, comic and gaming, as well as Chinese ancient style. |
• | Live streaming of music performances |
• | Recorded video and audio behind-the-scenes |
• | Karaoke songs |
• | Reviews and articles in-house editorial team. We place links in the articles to the featured music to provide users with even more choices of content. |
• | Music labels and music copyright owners |
• | We have strong partnerships with a wide range of music labels and other copyright owners. As of December 31, 2021, we licensed musical recording rights and/or music publishing rights underlying music content mainly on terms ranging from one to three years from domestic and international music labels, including through distribution and licensing agreements with leading international and Chinese music labels. |
• | We pay for music labels for licensed music content based on licensing fee and revenue-sharing incentive royalties. Under such fee arrangements, the amounts of licensing fees and incentive royalties depend on factors including the type of content, the popularity of the performers, as well as our relationships with the licensors. Payments under the licenses are generally made in installments throughout the duration of the licenses. |
• | We have arrangements with other online music platforms in China to cross-license our respective licensable or sub-licensable rights in musical works. We believe these arrangements benefit not only particular market players like us, but also the industry at large by increasing cooperation in copyright protection and allowing users to access more songs across different platforms. |
• | Individual artists |
• | User-generated content |
• | MCSC |
• | Monitoring |
• | Enforcement of our rights |
• | Follow-up |
• | Search and discovery engines Kugou Music |
• | User-experience enhancements QQ Music Super Sound Kugou Viper Sound WeSing Super Voice best-in-class sing-off, which increases user engagement on our platform. Our technology makes our products a part of everyday life, such as our QQ Music Running Station that recommends music to match a jogger’s running tempo. In 2021, for WeSing |
• | Innovative use cases of cutting-edge technologies state-of-the-art brand-new, immersive music entertainment experience. In the fourth quarter of 2021, we launched China’s first virtual music carnival, TMELAND 130,000-square kilometer virtual setting. At TMELAND QQ Music Kugou Music Kuwo Music |
• | Entering into monopolistic agreements, which means agreements or concerted practices to eliminate or restrict competition. For example, agreements for fixing or altering prices of goods, limiting the output or sales volume of goods, fixing the price of goods for resale to third parties, among others, unless such agreements satisfy the specific exemptions prescribed therein, such as improving technologies or increasing the efficiency and competitiveness of small and medium-sized undertakings. Sanctions against such violations include an order to cease the relevant activities, and confiscation of illegal gains and fines (from 1% to 10% of sales revenue in the preceding year, or a fine up to RMB500,000 if the intended monopolistic agreement has not been performed); |
• | Abuse of dominant market position. For example, selling goods at unfairly high prices or purchasing goods at unfairly low prices, selling goods at prices below cost or refusing to trade with a trading party without any justifiable cause. Sanctions for such violations include an order to cease the relevant activities, confiscation of the illegal gains and fines (from 1% to 10% of sales revenue in the preceding year); and |
• | Concentration of undertakings which has or may have an effect of eliminating or restricting competition. Pursuant to the Anti-Monopoly Law and the Guiding Opinions of the Anti-monopoly Bureau of the State Administration for Market Regulation on the Declaration of Concentration of Business Operators (2018 Revision) require that the anti-monopoly agency (i.e., the State Administration for Market Regulation) shall be notified in advance of any concentration of undertaking if certain filing thresholds (i.e., during the previous fiscal year, (i) the total global turnover of all operators participating in the transaction exceeded RMB10 billion in the preceding fiscal year and at least two of these operators each had a turnover of more than RMB400 million within China in the preceding fiscal year, or (ii) the total turnover within China of all the operators participating in the concentration exceeded RMB2 billion in the preceding fiscal year, and at least two of these operators each had a turnover of more than RMB400 million within China in the preceding fiscal year) are triggered, and no concentration shall be implemented until the anti-monopoly enforcement agency clears the anti-monopoly filing. |
(1) | Shareholders of Guangzhou Kugou and their respective shareholdings and relationship with our company are as follows: (i) Linzhi Lichuang Information Technology Co., Ltd. (54.87%), an entity controlled by Tencent; (ii) Ms. Meiqi Wang (9.99%), spouse of our former Co-President and director, Mr. Guomin Xie; (iii) Mr. Zhongwei Qiu (9.99%), a nominee shareholder designated by affiliates of PAG Capital Limited, a minority shareholder of our company; (iv) Shenzhen Litong Industry Investment Fund Co., Ltd. (6.77%), an entity controlled by Tencent; (v) Mr. Zhenyu Xie (6.59%), our President, Chief Technology Officer and director; (vi) Mr. Liang Tang (2.73%), our director; (vii) certain individuals and entities, including Zhuhai Hengqin Red Land Red Sea Venture Capital Co., Ltd. (2.94%), Mr. Jianming Dong (1.48%), Ms. Huan Hu (1.18%), Ms. Yaping Gao (1.10%), Hangzhou Yong Xuan Yong Ming Equity Investment Partnership (Limited Partnership) (0.74%) and Mr. Hanjie Xu (0.55%), as nominee shareholders designated by certain minority shareholders of our company; and (viii) Guangzhou Lekong Investment Partnership (Limited Partnership) (1.08%), an employee equity incentive platform of Guangzhou Kugou, with Mr. Zhenyu Xie being its general partner. Guangzhou Kugou operates Kugou Music Kugou Live |
(2) | Shareholders of Beijing Kuwo and their respective shareholdings and relationship with our company are as follows: (i) Linzhi Lichuang Information Technology Co., Ltd. (61.64%), an entity controlled by Tencent; (ii) Ms. Meiqi Wang (23.02%), spouse of our former Co-President and director, Mr. Guomin |
Xie; and (iii) Mr. Lixue Shi (15.34%), our Group Vice President. Beijing Kuwo operates Kuwo Music Kuwo Live |
(3) | Shareholders of Beijing Gongse and their respective shareholdings and relationship with our company are as follows: (i) Mr. Qihu Yang (20%), our General Counsel; (ii) Mr. Dejun Gu (20%), the head of our human resources department; and (iii) Ms. Xing Chen (20%), Ms. Yueting Luo (20%) and Mr. Yunheng Liang (20%), all of whom are employees of our company. |
(4) | Partners of Beijing Shangqin are Beijing Gongse (0.0005%) (the general partner), Mr. Qihu Yang (19.9999%), Mr. Dejun Gu (19.9999%), Ms. Xing Chen (19.9999%), Ms. Yueting Luo (19.9999%) and Mr. Yunheng Liang (19.9999 %). |
(5) | Partners of Beijing Yuzhong are Beijing Gongse (0.0005%) (the general partner), Mr. Qihu Yang (19.9999%), Mr. Dejun Gu (19.9999%), Ms. Xing Chen (19.9999%), Ms. Yueting Luo (19.9999%) and Mr. Yunheng Liang (19.9999 %). |
(6) | Shareholders of Beijing Zhizheng are Beijing Shangqin (50%) and Beijing Yuzhong (50%). |
(7) | Tencent Music Shenzhen operates QQ Music WeSing |
• | the ownership structures of the VIEs and our wholly-owned PRC subsidiaries as of the date of this annual report do not contravene any PRC laws or regulations currently in effect; and |
• | the contractual arrangements among our wholly-owned PRC subsidiaries, the VIEs and their respective shareholders governed by PRC laws as of the date of this annual report are valid and binding upon each party to such arrangements and enforceable against each party thereto in accordance with their terms and applicable PRC laws and regulations currently in effect. |
4.D. |
Property, Plant and Equipment |
ITEM 4A. |
UNRESOLVED STAFF COMMENTS |
ITEM 5. |
OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
5.A. |
Operating Results |
• | our growth strategies; |
• | our future business development, financial condition and results of operations; |
• | our ability to retain, grow and engage our user base and expand our content and experience offering; |
• | expected changes in our revenues, content-related costs and operating margins; |
• | the evolving regulatory environment; |
• | our ability to retain key personnel and attract new talent; |
• | competition in China’s online music and audio entertainment industry; |
• | general economic, political, demographic and business conditions in China and globally; and |
• | changes in global economy including any adverse impacts of the COVID-19 outbreak. |
For the Year Ended December 31, |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
(in millions) |
||||||||||||
Online music mobile MAUs |
653 | 644 | 622 | |||||||||
Social entertainment mobile MAUs |
240 | 240 | 203 |
For the Year Ended December 31, |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
Paying users (1) (in millions) |
||||||||||||
Online music services |
33.7 | 49.4 | 68.6 | |||||||||
Social entertainment services |
11.6 | 11.7 | 10.3 | |||||||||
Paying ratio (1) |
||||||||||||
Online music services |
5.2 | % | 7.7 | % | 11.0 | % | ||||||
Social entertainment services |
4.8 | % | 4.9 | % | 5.1 | % | ||||||
Monthly ARPPU (1) (RMB) |
||||||||||||
Online music services (2) |
8.8 | 9.4 | 8.9 | |||||||||
Social entertainment services (3) |
131.3 | 141.1 | 160.0 |
(1) | For definitions, see “Introduction.” |
(2) | The revenues used to calculate the monthly ARPPU of online music services include revenues from subscriptions only. The revenues from subscriptions for the periods indicated were RMB3,563 million, RMB5,560 million, and RMB7,333 million (US$1,151 million) respectively. |
(3) | The revenues used to calculate the monthly ARPPU of social entertainment services include revenues from social entertainment and others, including advertising services provided on our social entertainment platforms. |
For the Year Ended December 31, |
||||||||||||||||||||||||||||
2019 |
2020 |
2021 |
||||||||||||||||||||||||||
RMB |
% |
RMB |
% |
RMB |
US$ |
% |
||||||||||||||||||||||
(in millions, except for percentages) |
||||||||||||||||||||||||||||
Revenues |
||||||||||||||||||||||||||||
Online music services |
7,152 | 28.1 | 9,349 | 32.1 | 11,467 | 1,799 | 36.7 | |||||||||||||||||||||
Social entertainment services and others |
18,282 | 71.9 | 19,804 | 67.9 | 19,777 | 3,103 | 63.3 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total revenues |
25,434 | 100.0 | 29,153 | 100.0 | 31,244 | 4,903 | 100.0 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, |
||||||||||||||||||||||||||||
2019 |
2020 |
2021 |
||||||||||||||||||||||||||
RMB |
% |
RMB |
% |
RMB |
US$ |
% |
||||||||||||||||||||||
(in millions, except for percentages) |
||||||||||||||||||||||||||||
Cost of revenues |
||||||||||||||||||||||||||||
Service costs |
14,967 | 89.3 | 17,478 | 88.0 | 18,992 | 2,980 | 87.0 | |||||||||||||||||||||
Other cost of revenues |
1,794 | 10.7 | 2,373 | 12.0 | 2,848 | 447 | 13.0 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total cost of revenues |
16,761 | 100.0 | 19,851 | 100.0 | 21,840 | 3,427 | 100.0 |
For the Year Ended December 31, |
||||||||||||||||||||||||||||
2019 |
2020 |
2021 |
||||||||||||||||||||||||||
RMB |
% |
RMB |
% |
RMB |
US$ |
% |
||||||||||||||||||||||
(in millions, except for percentages) |
||||||||||||||||||||||||||||
Operating expenses |
||||||||||||||||||||||||||||
Selling and marketing expenses |
2,041 | 43.0 | 2,475 | 44.4 | 2,678 | 420 | 40.0 | |||||||||||||||||||||
General and administrative expenses (1) |
2,703 | 57.0 | 3,101 | 55.6 | 4,009 | 629 | 60.0 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total operating expenses |
4,744 | 100.0 | 5,576 | 100.0 | 6,687 | 1,049 | 100.0 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) | Includes R&D expenses of RMB1,159 million, RMB1,667 million and RMB2,339 million (US$367 million) in 2019, 2020 and 2021, respectively. |
For the Year Ended December 31, |
||||||||||||||||||||||||||||
2019 |
2020 |
2021 |
||||||||||||||||||||||||||
RMB |
% |
RMB |
% |
RMB |
US$ |
% |
||||||||||||||||||||||
(in millions, except for percentages) |
||||||||||||||||||||||||||||
Revenues |
||||||||||||||||||||||||||||
Online music services |
7,152 | 28.1 | 9,349 | 32.1 | 11,467 | 1,799 | 36.7 | |||||||||||||||||||||
Social entertainment services and others |
18,282 | 71.9 | 19,804 | 67.9 | 19,777 | 3,103 | 63.3 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total revenues |
25,434 |
100.0 |
29,153 |
100.0 |
31,244 |
4,903 |
100.0 |
|||||||||||||||||||||
Cost of revenues (1) |
(16,761 |
) |
(65.9 |
) |
(19,851 |
) |
(68.1 |
) |
(21,840 |
) |
(3,427 |
) |
(69.9 |
) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Gross profit |
8,673 | 34.1 | 9,302 | 31.9 | 9,404 | 1,476 | 30.1 | |||||||||||||||||||||
Operating expenses |
||||||||||||||||||||||||||||
Selling and marketing expenses (1) |
(2,041 | ) | (8.0 | ) | (2,475 | ) | (8.5 | ) | (2,678 | ) | (420 | ) | (8.6 | ) | ||||||||||||||
General and administrative expenses (1) |
(2,703 | ) | (10.6 | ) | (3,101 | ) | (10.6 | ) | (4,009 | ) | (629 | ) | (12.8 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total operating expenses |
(4,744 |
) |
(18.7 |
) |
(5,576 |
) |
(19.1 |
) |
(6,687 |
) |
(1,049 |
) |
(21.4 |
) | ||||||||||||||
Interest income |
615 | 2.4 | 622 | 2.1 | 530 | 83 | 1.7 | |||||||||||||||||||||
Other gains, net |
78 | 0.3 | 362 | 1.2 | 553 | 87 | 1.8 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Operating profit |
4,622 |
18.2 |
4,710 |
16.2 |
3,800 |
596 |
12.2 |
|||||||||||||||||||||
Share of net (loss)/profit of investments accounted for using equity method |
(18 | ) | (0.1 | ) | 19 | 0.1 | (47 | ) | (7 | ) | (0.2 | ) | ||||||||||||||||
Finance cost (2) |
(64 | ) | (0.3 | ) | (97 | ) | (0.3 | ) | (121 | ) | (19 | ) | (0.4 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Profit before income tax |
4,540 |
17.9 |
4,632 |
15.9 |
3,632 |
570 |
11.6 |
|||||||||||||||||||||
Income tax expense |
(563 | ) | (2.2 | ) | (456 | ) | (1.6 | ) | (417 | ) | (65 | ) | (1.3 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Profit for the year |
3,977 |
15.6 |
4,176 |
14.3 |
3,215 |
505 |
10.3 |
|||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) | Share-based compensation expenses were allocated as follows: |
For the Year Ended December 31, |
||||||||||||||||
2019 |
2020 |
2021 |
||||||||||||||
RMB |
RMB |
RMB |
US$ |
|||||||||||||
(in millions) |
||||||||||||||||
Cost of revenues |
41 | 41 | 56 | 9 | ||||||||||||
Selling and marketing expenses |
12 | 24 | 31 | 5 | ||||||||||||
General and administrative expenses |
466 | 504 | 665 | 104 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
519 | 569 | 752 | 118 | ||||||||||||
|
|
|
|
|
|
|
|
(2) | Finance cost mainly comprises of interest on notes we issued and lease liabilities. |
For the Year Ended December 31, |
||||||||||||||||
2019 |
2020 |
2021 |
||||||||||||||
RMB |
RMB |
RMB |
US$ |
|||||||||||||
(in millions, except for share and per share data) |
||||||||||||||||
Profit for the year |
3,977 |
4,176 |
3,215 |
505 |
||||||||||||
Adjustments: |
||||||||||||||||
Amortization of intangible and other assets arising from acquisitions (1) |
362 | 392 | 484 | 76 | ||||||||||||
Share-based compensation |
519 | 570 | 753 | 118 | ||||||||||||
Losses/(gains) from investments (2) |
79 | (101 | ) | 51 | 8 | |||||||||||
Fair value change on puttable shares (3) |
37 | 37 | — | — | ||||||||||||
Income tax effects (4) |
(71 | ) | (103 | ) | (171 | ) | (27 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted profit for the year (Non-IFRS financial measure) |
4,903 |
4,971 |
4,332 |
680 |
||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Attributable to |
||||||||||||||||
Non-IFRS equity holders of the Company |
4,908 | 4,950 | 4,146 | 651 | ||||||||||||
Non-controlling interests |
(5 | ) | 21 | 186 | 29 | |||||||||||
Earnings per share for Class A and Class B ordinary shares (Non-IFRS financial measure) |
||||||||||||||||
Basic |
1.50 | 1.49 | 1.25 | 0.20 | ||||||||||||
Diluted |
1.47 | 1.47 | 1.23 | 0.19 | ||||||||||||
Shares used in earnings per Class A and Class B ordinary share computation |
||||||||||||||||
Basic |
3,272,754,403 | 3,313,527,847 | 3,321,067,177 | 3,321,067,177 | ||||||||||||
Diluted |
3,347,572,338 | 3,360,460,759 | 3,363,045,757 | 3,363,045,757 | ||||||||||||
Earnings per ADS (Non-IFRS financial measure)(5) |
||||||||||||||||
Basic |
3.00 | 2.99 | 2.50 | 0.39 | ||||||||||||
Diluted |
2.93 | 2.95 | 2.47 | 0.39 | ||||||||||||
ADS used in earnings per ADS computation |
||||||||||||||||
Basic |
1,636,377,201 | 1,656,763,924 | 1,660,533,589 | 1,660,533,589 | ||||||||||||
Diluted |
1,673,786,169 | 1,680,230,380 | 1,681,522,878 | 1,681,522,878 |
(1) | Represents the amortization of identifiable assets, including intangible assets and prepayments for music content, resulting from acquisitions. |
(2) | Including the net losses/(gains) on deemed disposals/disposals of investments, fair value changes arising from investments, impairment provision of investments and other expenses in relation to equity transactions of investments. |
(3) | Represents the fair value changes on the put liability of certain shares issued in 2018. |
(4) | Represents the income tax effects of non-IFRS adjustments. |
(5) | Each ADS represents two of our Class A ordinary shares. |
For the Year Ended December 31, |
||||||||||||||||
2019 |
2020 |
2021 |
||||||||||||||
RMB |
RMB |
RMB |
US$ |
|||||||||||||
(in millions) |
||||||||||||||||
Selected Consolidated Cash Flow Data: |
||||||||||||||||
Net cash generated from operating activities |
6,200 | 4,885 | 5,239 | 822 | ||||||||||||
Net cash used in investing activities |
(8,102 | ) | (14,206 | ) | (5,999 | ) | (941 | ) | ||||||||
Net cash generated from/(used in) financing activities |
(31 | ) | 5,292 | (3,710 | ) | (582 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Net decrease in cash and cash equivalents |
(1,933 | ) | (4,029 | ) | (4,470 | ) | (701 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Cash and cash equivalents at beginning of the year |
17,356 | 15,426 | 11,128 | 1,746 | ||||||||||||
Exchange differences on cash and cash equivalents |
3 | (269 | ) | (67 | ) | (11 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Cash and cash equivalents at end of the year |
15,426 |
11,128 |
6,591 |
1,034 |
||||||||||||
|
|
|
|
|
|
|
|
Payment due by period |
||||||||||||||||||||||||||||||||||||||||
Total |
Less than 1 year |
1 – 3 years |
3 – 5 years |
More than 5 years |
||||||||||||||||||||||||||||||||||||
RMB |
US$ |
RMB |
US$ |
RMB |
US$ |
RMB |
US$ |
RMB |
US$ |
|||||||||||||||||||||||||||||||
(in millions) |
||||||||||||||||||||||||||||||||||||||||
Operating commitments (1) |
372 | 58 | 348 | 55 | 22 | 3 | 2 | — | — | — | ||||||||||||||||||||||||||||||
Content royalties (2) |
3,700 | 581 | 2,511 | 394 | 1,168 | 183 | 21 | 3 | — | — | ||||||||||||||||||||||||||||||
Investment commitments (3) |
513 | 81 | 513 | 81 | — | — | — | — | — | — |
(1) | Represents our future minimum commitments under non-cancelable operating arrangements, which are mainly related to rental of bandwidth. |
(2) | Represents the minimum royalty payments associated with license agreements to which we are subject. |
(3) | Represents commitments to acquire the equity interests in certain entities. |
Granted in |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
Risk free interest rate |
2.08% | 0.71%-0.91% |
1.22%-1.63% |
|||||||||
Expected dividend yield |
0% | 0% | 0% | |||||||||
Expected volatility range |
40% | 40%-42.5% |
43.5%-50% |
|||||||||
Exercise multiples |
2.2-2.8 |
2.2-2.8 |
2.2-2.8 |
|||||||||
Contractual life |
10 years | 10 years | 10 years |
ITEM 6. |
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
Directors and Executive Officers |
Age |
Position/Title | ||||
Cussion Kar Shun Pang |
48 | Executive Chairman | ||||
Zhu Liang |
46 | Chief Executive Officer, Director | ||||
Zhenyu Xie |
47 | President, Chief Technology Officer, Director | ||||
Martin Lau |
49 | Director | ||||
James Gordon Mitchell |
48 | Director | ||||
Brent Richard Irvin |
49 | Director | ||||
Liang Tang |
44 | Independent Director | ||||
Edith Manling Ngan |
57 | Independent Director | ||||
Adrian Yau Kee Mak |
61 | Independent Director | ||||
Min Hu |
50 | Chief Financial Officer | ||||
Cheuk Tung Tony Yip |
41 | Chief Strategy Officer, Head of Ultimate Music | ||||
Linlin Chen |
41 | Group Vice President, Kugou | ||||
Lixue Shi |
47 | Group Vice President, Kuwo | ||||
Tsai Chun Pan |
47 | Group Vice President, Copyright Management |
Ordinary Shares Underlying Equity Awards Granted |
Exercise Price (US$/Share) |
Date of Grant |
Date of Expiration | |||||||
Cussion Kar Shun Pang |
* | 0 to 7.1411 | various dates from June 16, 2017 to March 15, 2022 |
various dates from June 16, 2027 to March 15, 2032 | ||||||
Zhu Liang |
* | 0 to 7.605 | various dates from June 16, 2017 to March 15, 2022 |
various dates from June 16, 2027 to March 15, 2032 | ||||||
Zhenyu Xie |
* | 0 to 7.1411 | various dates from October 17, 2018 to March 15, 2022 |
various dates from October 17, 2028 to March 15, 2032 | ||||||
Martin Lau |
— | — | — | — | ||||||
James Gordon Mitchell |
— | — | — | — | ||||||
Brent Richard Irvin |
— | — | — | — | ||||||
Liang Tang |
— | — | — | — | ||||||
Edith Manling Ngan |
* | 0 | December 15, 2021 | December 15, 2031 | ||||||
Adrian Yau Kee Mak |
* | 0 | November 15, 2021 | November 15, 2031 | ||||||
Min Hu |
* | 0 to 7.1411 | various dates from December 20, 2017 to March 15, 2022 |
various dates from December 20, 2027 to March 15, 2032 | ||||||
Cheuk Tung Tony Yip |
* | 0 to 7.1411 | various dates from April 16, 2018 to March 15, 2022 |
various dates from April 16, 2028 to March 15, 2032 | ||||||
Linlin Chen |
* | 0 to 7.1411 | various dates from October 17, 2018 to March 15, 2022 |
various dates from October 17, 2028 to March 15, 2032 | ||||||
Lixue Shi |
* | 0 to 7.1411 | various dates from October 17, 2018 to March 15, 2022 |
various dates from October 17, 2028 to March 15, 2032 | ||||||
Tsai Chun Pan |
* | 0 to 6.2 | various dates from January 21, 2019 to March 15, 2022 |
various dates from January 21, 2029 to March 15, 2032 | ||||||
All directors and executive officers as a group |
|
* |
|
0 to 7.605 |
Various dates from June 16, 2017 to March 15, 2022 |
Various dates from June 16, 2027 to March 15, 2032 |
* | Less than 1% of our total outstanding shares. |
• | reviewing and recommending to our board for approval, the appointment, reappointment or removal of the independent auditor, after considering its annual performance evaluation of the independent auditor; |
• | approving the remuneration and terms of engagement of the independent auditor and pre-approving all auditing and non-auditing services permitted to be performed by our independent auditors; |
• | obtaining a written report from our independent auditor describing matters relating to its independence and quality control procedures; |
• | reviewing with the independent registered public accounting firm any audit problems or difficulties and any significant disagreements with the management; |
• | discussing with our independent auditor, among other things, the audits of the financial statements, including whether any material information should be disclosed, and issues regarding accounting and auditing principles and practices; |
• | reviewing and approving all proposed related party transactions, including those to be entered into with Tencent entities, subject to further approvals by our board pursuant to the terms of the committee charter; |
• | reviewing and recommending the financial statements for inclusion within our quarterly and interim earnings releases and to our board for inclusion in our annual reports; |
• | discussing the annual audited financial statements with management and the independent registered public accounting firm; |
• | reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any special steps taken to monitor and control major financial risk exposures; |
• | reviewing and reassessing the adequacy of the committee charter; |
• | at least annually, approving annual audit plans, and undertaking an annual performance evaluation of the internal audit function; |
• | overseeing and evaluating procedures for the handling of complaints and whistleblowing; |
• | meeting separately and periodically with management, the internal auditors (or other personnel responsible for the internal audit function) and the independent registered public accounting firm; |
• | monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance and reporting on such compliance to our board of directors; and |
• | reporting regularly to the board of directors. |
• | overseeing the development and implementation of management succession planning in consultation with our chief executive officer; |
• | at least annually, reviewing and approving, or recommending to the board for its approval, the compensation for our executive officers; |
• | at least annually, reviewing periodically and approving our company’s executive compensation and benefits policies, including any incentive compensation or equity plans, programs or other similar arrangements; |
• | at least annually, leading our board of directors in a self-evaluation to determine whether it and its committees are functioning effectively; |
• | at least annually, reviewing and reassessing the adequacy of the committee charter; |
• | selecting a compensation consultant, legal counsel or other adviser only after taking into consideration all factors relevant to that person’s independence from management; and |
• | reporting regularly to the board of directors. |
Function |
Number of employees |
|||
Research and development |
3,054 | |||
Content management and operation |
1,640 | |||
Sales and marketing |
547 | |||
Management and administration |
725 | |||
|
|
|||
Total |
5,966 |
|||
|
|
• | each of our directors and executive officers; |
• | all of our directors and executive officers as a group; and |
• | each person known to us to own beneficially more than 5% of our ordinary shares. |
Ordinary Shares Beneficially Owned as of April 19, 2022 |
||||||||||||||||||||||||||||
Class A Ordinary Shares |
Class B Ordinary Shares |
Total ordinary shares |
Percentage of aggregate voting power*** |
|||||||||||||||||||||||||
Number |
% |
Number |
% |
Number |
% |
|||||||||||||||||||||||
Directors and Executive Officers† |
||||||||||||||||||||||||||||
Cussion Kar Shun Pang |
* | * | — | — | * | * | — | |||||||||||||||||||||
Zhu Liang |
* | * | — | — | * | * | — | |||||||||||||||||||||
Zhenyu Xie |
* | * | * | * | * | * | * | |||||||||||||||||||||
Martin Lau |
— | — | — | — | — | — | — | |||||||||||||||||||||
James Gordon Mitchel |
* | * | — | — | * | * | * | |||||||||||||||||||||
Brent Richard Irvin |
* | * | — | — | * | * | * | |||||||||||||||||||||
Liang Tang |
— | — | — | — | — | — | — | |||||||||||||||||||||
Edith Manling Ngan |
* | * | — | — | * | * | * | |||||||||||||||||||||
Adrian Yau Kee Mak |
— | — | — | — | — | — | — | |||||||||||||||||||||
Min Hu |
* | * | — | — | * | * | — | |||||||||||||||||||||
Cheuk Tung Tony Yip |
* | * | — | — | * | * | — | |||||||||||||||||||||
Linlin Chen |
* | * | * | * | * | * | * | |||||||||||||||||||||
Lixue Shi |
* | * | * | * | * | * | * | |||||||||||||||||||||
Tsai Chun Pan |
* | * | — | — | * | * | * | |||||||||||||||||||||
All directors and executive officers as a group |
* | * | * | * | * | * | * | |||||||||||||||||||||
Principal Shareholders: |
||||||||||||||||||||||||||||
Tencent (1) |
161,497,857 | 9.6 | 1,640,456,882 | 95.7 | 1,801,954,739 | 53.2 | 90.4 | |||||||||||||||||||||
Spotify (2) |
282,830,698 | 16.9 | — | — | 282,830,698 | 8.3 | — |
* | Less than 1% of our total outstanding shares. |
** | For each person and group included in this table, percentage ownership is calculated by dividing the number of shares beneficially owned by such person or group by the sum of (i) 3,390,154,264, being the number of ordinary shares outstanding (consisting of 1,675,015,086 Class A ordinary shares and 1,715,139,178 Class B ordinary shares) as of April 19, 2022, and (ii) the number of ordinary shares underlying share options held by such person or group that are exercisable within 60 days after the date of this annual report. |
*** | For each person and group included in this column, percentage of voting power is calculated by dividing the voting power beneficially owned by such person or group by the voting power of all of our ordinary shares as a single class. |
† | Except for Mr. Liang Zhu, Mr. Martin Lau, Mr. James Gordon Mitchell, Mr. Brent Richard Irvin, Mr. Liang Tang, Ms. Edith Manling Ngan and Mr. Adrian Yau Kee Mak, the business address of our directors and executive officers is Unit 3, Building D, Kexing Science Park, Kejizhongsan Avenue, Hi-Tech Park, Nanshan District, Shenzhen, 518057, the People’s Republic of China. The business address of Mr. Zhu Liang is FIYTA Hi-tech Building, Gaoxin South 1st Road, Nanshan District, Shenzhen City, Guangdong Province, China. The business address of Mr. Martin Lau, Mr. James Gordon Mitchell and Mr. Brent Richard Irvin is Tencent Building, Kejizhongyi Road, Hi-tech Park, Nanshan District, Shenzhen, 518057, China. The business address of Mr. Liang Tang is Building C08, Chuangye Road, Wuqing Development Zone, Tianjin, 301701, China. The business address of Ms. Edith Manling Ngan is Wu Yee Sun College Master’s Lodge, Chinese University of Hong Kong, Shatin, Hong Kong. The business address of Mr. Adrian |
Yau Kee Mak is Rm C, 9/F,1 Homantin Hill, 1 Homantin Hill Road, Kowloon, Hong Kong. Ms. Linlin Chen is the spouse of Mr. Zhenyu Xie. |
(1) | The number of ordinary shares beneficially owned represents the sum of (i) 1,640,456,882 Class B ordinary shares held by Min River Investment Limited, a company incorporated in the British Virgin Islands, which is beneficially owned and controlled by Tencent; (ii) 141,415,349 Class A ordinary shares, or 50% of the 282,830,698 Class A ordinary shares held of record by Spotify AB; the voting power of such 141,415,349 Class A ordinary shares held of record by Spotify AB is vested with Tencent pursuant to the Spotify Investor Agreement and the Tencent Voting Undertaking, therefore Tencent is deemed to beneficially own such ordinary shares (pursuant to the Spotify Investor Agreement, Spotify has given Tencent a sole and exclusive right to vote our securities beneficially owned by Spotify and its affiliates, while pursuant to the Tencent Voting Undertaking, Tencent is obligated to vote 50% of the securities subject to the foregoing proxy from Spotify in proportion to votes cast for and against by non-Spotify shareholders); and (iii) an aggregate of 20,082,508 Class A ordinary shares held of record by certain minority shareholders of our company; the voting power of these ordinary shares is vested with Tencent and therefore Tencent may be deemed to beneficially own these Class A ordinary shares. Tencent disclaims pecuniary ownership for the foregoing securities subject to the Tencent Voting Undertaking and the foregoing 20,082,508 ordinary shares held by record by the minority shareholders. The foregoing beneficial ownership information of Tencent is based on the Amendment No. 2 to Schedule 13G filed by Tencent with the SEC on February 10, 2022. Tencent is deemed to have economic interest in the foregoing 1,640,456,882 Class B ordinary shares held of record by Min River Investment Limited, representing approximately 48.4% of the total outstanding ordinary shares of our company as of April 19, 2022. The registered address of Min River Investment Limited is P.O. Box 957, Offshore Incorporation Centre, Road Town, Tortola, British Virgin Islands. |
(2) | The number of Class A ordinary shares beneficially owned represents 282,830,698 Class A ordinary shares held by Spotify AB, a company incorporated in Sweden, which is beneficially owned and controlled by Spotify Technology S.A. (NYSE: SPOT). See Note (2) above for a description of the voting proxy granted by Spotify AB with respect to such ordinary shares. The registered address of Spotify AB is Birger Jarlsgatan 61, 11356 Stockholm, Sweden. |
ITEM 7. |
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS |
7.A. |
Major Shareholders |
7.B. |
Related Party Transactions |
Name of related parties |
Relationship with the Group | |
Tencent and its subsidiaries other than the entities controlled by the Group (“Tencent Group”) |
The Group’s principal owner | |
China Literature Limited (“China Literature”) |
Tencent’s subsidiary |
For the Year Ended December 31, |
||||||||||||||||
2019 |
2020 |
2021 |
||||||||||||||
RMB |
RMB |
RMB |
US$ |
|||||||||||||
(in millions) |
||||||||||||||||
Revenues |
||||||||||||||||
Online music services to Tencent Group (1) |
355 | 277 | 364 | 57 | ||||||||||||
Online music services to the Company’s associates and associates of Tencent Group |
40 | 206 | 412 | 65 | ||||||||||||
Social entertainment services and others to Tencent Group, the Company’s associates and associates of Tencent Group |
21 | 213 | 170 | 27 | ||||||||||||
Expenses |
||||||||||||||||
Operation expenses recharged by Tencent Group (2) |
752 | 1,082 | 1,260 | 198 | ||||||||||||
Advertising agency cost to Tencent Group (3) |
231 | 440 | 652 | 102 | ||||||||||||
Content royalties to Tencent Group, the Company’s associates and associates of Tencent Group (4) |
132 | 306 | 541 | 85 | ||||||||||||
Other costs to the Company’s associates and associates of Tencent Group |
25 | 48 | 176 | 28 |
(1) | Primarily include revenue from content sublicensing, online advertising and subscriptions provided to Tencent Group pursuant to the Business Cooperation Agreement. |
(2) | Primarily include expenses associated with cloud services and certain administrative functions provided to us by Tencent Group. |
(3) | Primarily include advertising fees paid to Tencent Group for our advertising services sold through Tencent Group. |
(4) | Primarily include content royalty we paid to Tencent Group and music labels who are our associates or the associates of Tencent Group. In March 2020, we signed a five-year strategic partnership with China Literature, a subsidiary of Tencent, with an aggregate minimum guarantee of RMB250 million, and any excess portion will be shared based on a predetermined percentage. The present value of the minimum guarantee of RMB227 million was recognized as intangible assets in March 2020. Amortization expense for the year ended December 31, 2020 and 2021 was included in the content royalties to Tencent Group presented above. |
As of December 31, |
||||||||||||||||
2019 |
2020 |
2021 |
||||||||||||||
RMB |
RMB |
RMB |
US$ |
|||||||||||||
(in millions) |
||||||||||||||||
Included in accounts receivable from related parties: |
||||||||||||||||
Tencent Group |
1,653 | 1,993 | 2,510 | 394 | ||||||||||||
The Company’s associates and associates of Tencent Group |
49 | 48 | 90 | 14 | ||||||||||||
Included in prepayments, deposits and other assets from related parties: |
||||||||||||||||
Tencent Group |
50 | 39 | 51 | 8 | ||||||||||||
The Company’s associates and associates of Tencent Group |
23 | 64 | 142 | 22 | ||||||||||||
Included in accounts payable to related parties: |
||||||||||||||||
Tencent Group |
215 | 763 | 719 | 113 | ||||||||||||
The Company’s associates and associates of Tencent Group |
15 | 37 | 198 | 31 | ||||||||||||
Included in other payables and accruals to related parties: |
||||||||||||||||
Tencent Group |
382 | 237 | 440 | 69 | ||||||||||||
The Company’s associates and associates of Tencent Group |
19 | 46 | 55 | 9 |
For the Year Ended December 31, |
||||||||||||||||
2019 |
2020 |
2021 |
||||||||||||||
RMB |
RMB |
RMB |
US$ |
|||||||||||||
(in millions) |
||||||||||||||||
Short-term employee benefits |
65 | 62 | 70 | 11 | ||||||||||||
Share-based compensation |
233 | 205 | 153 | 24 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
298 | 267 | 223 | 35 | |||||||||||||
|
|
|
|
|
|
|
|
7.C. |
Interests of Experts and Counsel |
ITEM 8. |
FINANCIAL INFORMATION |
8.B. |
Significant Changes |
ITEM 9. |
THE OFFER AND LISTING |
9.A. |
Offering and Listing Details |
9.B. |
Plan of Distribution |
9.C. |
Markets |
9.D. |
Selling Shareholders |
9.E. |
Dilution |
9.F. |
Expenses of the Issue |
ITEM 10. |
ADDITIONAL INFORMATION |
10.A. |
Share Capital |
10.B. |
Memorandum and Articles of Association |
• | the instrument of transfer is lodged with us, accompanied by the certificate for the ordinary shares to which it relates and such other evidence as our board of directors may reasonably require to show the right of the transferor to make the transfer; |
• | the instrument of transfer is in respect of only one class of shares; |
• | the instrument of transfer is properly stamped, if required; |
• | in the case of a transfer to joint holders, the number of joint holders to whom the ordinary share is to be transferred does not exceed four; |
• | the shares are free from any lien in favor of our company; and |
• | a fee of such maximum sum as the NYSE may determine to be payable or such lesser sum as our board of directors may from time to time require is paid to us in respect thereof. |
• | the designation of the series; |
• | the number of shares of the series; |
• | the dividend rights, dividend rates, conversion rights and voting rights; and |
• | the rights and terms of redemption and liquidation preferences. |
• | does not have to file an annual return of its shareholders with the Registrar of Companies; |
• | is not required to open its register of members for inspection; |
• | does not have to hold an annual general meeting; |
• | may issue negotiable or bearer shares or shares with no par value; |
• | may obtain an undertaking against the imposition of any future taxation (such undertakings are usually given for 20 years in the first instance); |
• | may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands; |
• | may register as a limited duration company; and |
• | may register as a segregated portfolio company. |
10.C. |
Material Contracts |
10.D. |
Exchange Controls |
10.E. |
Taxation |
• | certain financial institutions; |
• | dealers or traders in securities that use a mark-to-market |
• | persons holding ADSs or Class A ordinary shares as part of a straddle, conversion transaction, integrated transaction or similar transaction; |
• | persons whose functional currency for U.S. federal income tax purposes is not the U.S. dollar; |
• | entities classified as partnerships for U.S. federal income tax purposes and their partners; |
• | tax-exempt entities, including “individual retirement accounts” or “Roth IRAs”; |
• | persons that own or are deemed to own ADSs or Class A ordinary shares representing 10% or more of our voting power or value; |
• | persons who acquire our ADSs or Class A ordinary shares pursuant to the exercise of an employee stock option or otherwise as compensation; or |
• | persons holding ADSs or Class A ordinary shares in connection with a trade or business outside the United States. |
• | a citizen or individual resident of the United States; |
• | a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States, any state therein or the District of Columbia; or |
• | an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source. |
10.F. |
Dividends and Paying Agents |
10.G. |
Statement by Experts |
10.H. |
Documents on Display |
ITEM 11. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 12. |
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES |
12.A. |
Debt Securities |
12.B. |
Warrants and Rights |
12.C. |
Other Securities |
12.D. |
American Depositary Shares |
ITEM 13. |
ITEM DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES |
ITEM 14. |
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |
ITEM 15. |
CONTROLS AND PROCEDURES |
ITEM 16.A. |
Audit Committee Financial Expert |
ITEM 16.B. |
Code of Ethics |
ITEM 16.C. |
Principal Accountant Fees and Services |
Year Ended December 31, |
||||||||||||
Services |
2019 |
2020 |
2021 |
|||||||||
RMB |
RMB |
RMB |
||||||||||
(in thousands) |
||||||||||||
Audit Fees (1) |
15,000 | 16,000 | 17,500 | |||||||||
Audit-Related Fees (2) |
— | 2,500 | — | |||||||||
Other Fees (3) |
2,690 | 880 | 1,800 | |||||||||
|
|
|
|
|
|
|||||||
Total |
17,690 | 19,380 | 19,300 | |||||||||
|
|
|
|
|
|
(1) | Audit Fees |
(2) | Audit-related Fees. |
(3) | Other Fees |
ITEM 16.D. |
Exemptions from the Listing Standards for Audit Committee |
ITEM 16.E. |
Purchases of Equity Securities by the Issuer and Affiliated Purchasers |
Total Number of ADSs Purchased |
Average Price Paid Per ADS |
Total Number of ADSs Purchased as Part of the Publicly Announced Plan |
Approximate Dollar Value of ADSs that May Yet Be Purchased Under the Plan |
|||||||||||||
Period |
||||||||||||||||
March 2021 |
2,503,192 | 19.87 | 2,503,192 | 950,266,080.71 | ||||||||||||
April 2021 |
3,827,338 | 17.61 | 6,330,530 | 882,874,103.37 | ||||||||||||
May 2021 |
8,020,966 | 15.59 | 14,351,496 | 757,811,273.98 | ||||||||||||
June 2021 |
1,278,518 | 14.96 | 15,630,014 | 738,687,151.50 | ||||||||||||
July 2021 |
7,671,486 | 13.05 | 23,301,500 | 638,610,441.50 | ||||||||||||
August 2021 |
17,446,231 | 7.96 | 40,747,731 | 499,810,442.11 | ||||||||||||
October 2021 |
— | 40,747,731 | 499,810,442.11 | |||||||||||||
November 2021 |
— | 40,747,731 | 499,810,442.11 | |||||||||||||
December 2021 |
8,298,598 | 6.31 | 49,046,329 | 447,457,875.18 | ||||||||||||
January 2022 |
— | 49,046,329 | 447,457,875.18 | |||||||||||||
February 2022 |
— | 49,046,329 | 447,457,875.18 | |||||||||||||
March 2022 |
7,263,402 | 5.12 | 56,309,731 | 410,260,298.42 | ||||||||||||
April, 2022 |
17,040,071 | 4.96 | 73,349,802 | 325,687,216.10 |
ITEM 16.F. |
Change in Registrant’s Certifying Accountant |
ITEM 16.G. |
Corporate Governance |
ITEM 16.H. |
Mine Safety Disclosure |
ITEM 17. |
FINANCIAL STATEMENTS |
ITEM 18. |
FINANCIAL STATEMENTS |
ITEM 19. |
EXHIBITS |
* | Filed herewith |
** | Furnished herewith |
† | Portions of this exhibit have been omitted in reliance of the revised Item 601 of Regulation S-K. |
Tencent Music Entertainment Group | ||||
By: | /s/ Zhu Liang | |||
Name: | Zhu Liang | |||
Title: | Chief Executive Officer |
Page |
||||
F-2 |
||||
F-5 |
||||
F-6 |
||||
F-7 |
||||
F-8 |
||||
F-11 |
||||
F-12 |
Year ended December 31, |
||||||||||||||||
2019 |
2020 |
2021 |
||||||||||||||
Note |
RMB’million |
RMB’million |
RMB’million |
|||||||||||||
Revenue from online music services |
7,152 | 9,349 | 11,467 | |||||||||||||
Revenue from social entertainment services and others |
18,282 | 19,804 | 19,777 | |||||||||||||
Total revenues |
5 | 25,434 | 29,153 | 31,244 | ||||||||||||
Cost of revenues |
(16,761 | ) | (19,851 | ) | (21,840 | ) | ||||||||||
Gross profit |
8,673 | 9,302 | 9,404 | |||||||||||||
Selling and marketing expenses |
(2,041 | ) | (2,475 | ) | (2,678 | ) | ||||||||||
General and administrative expenses |
(2,703 | ) | (3,101 | ) | (4,009 | ) | ||||||||||
|
|
|
|
|
|
|||||||||||
Total operating expenses |
(4,744 | ) | (5,576 | ) | (6,687 | ) | ||||||||||
Interest income |
6 | 615 | 622 | 530 | ||||||||||||
Other gains, net |
7 | 78 | 362 | 553 | ||||||||||||
Operating profit |
4,622 | 4,710 | 3,800 | |||||||||||||
Share of net (loss)/profit of investments accounted for using equity method |
17 | (18 | ) | 19 | (47 | ) | ||||||||||
Finance costs |
9 | (64 | ) | (97 | ) | (121 | ) | |||||||||
Profit before income tax |
4,540 | 4,632 | 3,632 | |||||||||||||
Income tax expense |
10(a) | (563 | ) | (456 | ) | (417 | ) | |||||||||
Profit for the year |
3,977 | 4,176 | 3,215 | |||||||||||||
|
|
|
|
|
|
|||||||||||
Attributable to: |
||||||||||||||||
Equity holders of the Company |
3,982 | 4,155 | 3,029 | |||||||||||||
Non-controlling interests |
(5 | ) | 21 | 186 | ||||||||||||
3,977 | 4,176 | 3,215 | ||||||||||||||
|
|
|
|
|
|
|||||||||||
RMB |
RMB |
RMB |
||||||||||||||
Earnings per share for Class A and Class B ordinary shares |
11 | |||||||||||||||
Basic |
1.22 | 1.25 | 0.91 | |||||||||||||
Diluted |
1.19 | 1.24 | 0.90 | |||||||||||||
|
|
|
|
|
|
|||||||||||
Earnings per ADS (2 Class A shares equal to 1 ADS) |
||||||||||||||||
Basic |
2.43 | 2.51 | 1.82 | |||||||||||||
Diluted |
2.38 | 2.47 | 1.80 | |||||||||||||
|
|
|
|
|
|
Year ended December 31, |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
RMB’million |
RMB’million |
RMB’million |
||||||||||
Profit for the year |
3,977 |
4,176 |
3,215 |
|||||||||
Other comprehensive income, net of tax: |
||||||||||||
Item that will not be reclassified subsequently to profit or loss |
||||||||||||
Fair value changes on financial assets at fair value through other comprehensive income |
1,031 |
5,219 |
(2,128 |
) | ||||||||
Currency translation differences |
— | (1,363 |
) | (397 |
) | |||||||
Items that may be subsequently reclassified to profit or loss |
||||||||||||
Currency translation differences |
261 |
77 |
19 |
|||||||||
Share of other comprehensive (losses)/income of associates |
(1 |
) | (9 |
) | 4 |
|||||||
|
|
|
|
|
|
|||||||
Total comprehensive income for the year |
5,268 |
8,100 |
713 |
|||||||||
|
|
|
|
|
|
|||||||
Attributable to: |
||||||||||||
Equity holders of the Company |
5,273 |
8,079 |
527 |
|||||||||
Non-controlling interests |
(5 |
) | 21 |
186 |
||||||||
|
|
|
|
|
|
|||||||
5,268 |
8,100 |
713 |
||||||||||
|
|
|
|
|
|
As at December 31, |
||||||||||||
2020 |
2021 |
|||||||||||
Note |
RMB’million |
RMB’million |
||||||||||
ASSETS |
||||||||||||
Non-current assets |
||||||||||||
Property, plant and equipment |
12 | 176 | 243 | |||||||||
Land use right |
13 | — | 1,495 | |||||||||
Right-of-use |
14 | 311 | 283 | |||||||||
Intangible assets |
15 | 2,020 | 2,829 | |||||||||
Goodwill |
16 | 17,492 | 19,121 | |||||||||
Investments accounted for using equity method |
17 | 2,255 | 3,599 | |||||||||
Financial assets at fair value through other comprehensive income |
18(a) | 9,771 | 7,302 | |||||||||
Other investments |
18(b) | 349 | 199 | |||||||||
Prepayments, deposits and other assets |
19 | 956 | 743 | |||||||||
Deferred tax assets |
10(b) | 303 | 346 | |||||||||
Term deposits |
21(a) | 2,953 | 4,303 | |||||||||
36,586 | 40,463 | |||||||||||
Current assets |
||||||||||||
Inventories |
18 | 24 | ||||||||||
Accounts receivable |
20 | 2,800 | 3,610 | |||||||||
Prepayments, deposits and other assets |
19 | 2,846 | 2,731 | |||||||||
Other investments |
18(b) | 37 | 37 | |||||||||
Short-term investments |
18(c) | — | 1,029 | |||||||||
Term deposits |
21(a) | 14,858 | 12,769 | |||||||||
Cash and cash equivalents |
21(b) | 11,128 | 6,591 | |||||||||
31,687 | 26,791 | |||||||||||
Total assets |
68,273 | 67,254 | ||||||||||
EQUITY |
||||||||||||
Equity attributable to equity holders of the Company |
||||||||||||
Share capital |
22 | 2 | 2 | |||||||||
Additional paid-in capital |
22 | 35,044 | 36,238 | |||||||||
Shares held for share award schemes |
22 | (78 | ) | (183 | ) | |||||||
Treasury shares |
22 | (134 | ) | (3,660 | ) | |||||||
Other reserves |
23 | 6,300 | 3,726 | |||||||||
Retained earnings |
11,111 | 14,194 | ||||||||||
52,245 | 50,317 | |||||||||||
Non-controlling interests |
486 | 738 | ||||||||||
Total equity |
52,731 | 51,055 | ||||||||||
LIABILITIES |
||||||||||||
Non-current liabilities |
||||||||||||
Notes payable |
25 | 5,175 | 5,062 | |||||||||
Accounts payable |
136 | 93 | ||||||||||
Other payables and other liabilities |
26 | 68 | 32 | |||||||||
Deferred tax liabilities |
10(b) | 265 | 271 | |||||||||
Lease liabilities |
218 | 205 | ||||||||||
Deferred revenue |
27 | 78 | 86 | |||||||||
5,940 | 5,749 | |||||||||||
Current liabilities |
||||||||||||
Accounts payable |
3,565 | 4,329 | ||||||||||
Other payables and other liabilities |
26 | 3,881 | 3,832 | |||||||||
Current tax liabilities |
445 | 363 | ||||||||||
Lease liabilities |
103 | 92 | ||||||||||
Deferred revenue |
27 | 1,608 | 1,834 | |||||||||
9,602 | 10,450 | |||||||||||
Total liabilities |
15,542 | 16,199 | ||||||||||
Total equity and liabilities |
68,273 | 67,254 | ||||||||||
Attributable to equity holders of the Company |
||||||||||||||||||||||||||||||||||||
Share capital |
Additional paid-in capital |
Shares held for share award schemes |
Other reserves |
Retained earnings |
Total |
Non- controlling interests |
Total equity |
|||||||||||||||||||||||||||||
Note |
RMB’million |
RMB’million |
RMB’million |
RMB’million |
RMB’million |
RMB’million |
RMB’million |
RMB’million |
||||||||||||||||||||||||||||
Balance at January 1, 2019 |
2 | 33,776 | — | 903 | 3,040 | 37,721 | 51 | 37,772 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Profit for the year |
— | — | — | — | 3,982 | 3,982 | (5 | ) | 3,977 | |||||||||||||||||||||||||||
Fair value changes on financial assets at fair value through other comprehensive income |
— | — | — | 1,031 | — | 1,031 | — | 1,031 | ||||||||||||||||||||||||||||
Share of other comprehensive losses of an associate |
— | — | — | (1 | ) | — | (1 | ) | — | (1 | ) | |||||||||||||||||||||||||
Currency translation differences |
— | — | — | 261 | — | 261 | — | 261 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Total comprehensive income for the year |
— | — | — | 1,291 | 3,982 | 5,273 | (5 | ) | 5,268 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Transactions with equity holders: |
||||||||||||||||||||||||||||||||||||
Issuance of ordinary shares |
22 | — | 12 | — | — | — | 12 | — | 12 | |||||||||||||||||||||||||||
Exercise of share options/ Restricted share units (“RSUs”) |
22,23 | — | 637 | — | (465 | ) | — | 172 | — | 172 | ||||||||||||||||||||||||||
Non-controlling interests arising from business combination |
— | — | — | — | — | — | 48 | 48 | ||||||||||||||||||||||||||||
Share-based compensation - value of employee services |
23,24 | — | — | — | 519 | — | 519 | — | 519 | |||||||||||||||||||||||||||
Shares held for share award schemes |
22 | — | — | (31 | ) | — | — | (31 | ) | — | (31 | ) | ||||||||||||||||||||||||
Capital contribution by non-controlling interests |
— | — | — | — | — | — | 2 | 2 | ||||||||||||||||||||||||||||
Additional investments in non-wholly owned subsidiaries |
— | — | — | (76 | ) | — | (76 | ) | (8 | ) | (84 | ) | ||||||||||||||||||||||||
Appropriations to statutory reserves |
— | — | — | 15 | (15 | ) | — | — | — | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Total transactions with equity holders at their capacity as equity holders for the year |
— | 649 | (31 | ) | (7 | ) | (15 | ) | 596 | 42 | 638 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Balance at December 31, 2019 |
2 | 34,425 | (31 | ) | 2,187 | 7,007 | 43,590 | 88 | 43,678 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to equity holders of the Company |
||||||||||||||||||||||||||||||||||||||||
Share capital |
Additional paid-in capital |
Shares held for share award schemes |
Treasury shares |
Other reserves |
Retained earnings |
Total |
Non- controlling interests |
Total equity |
||||||||||||||||||||||||||||||||
Note |
RMB’million |
RMB’million |
RMB’million |
RMB’million |
RMB’million |
RMB’million |
RMB’million |
RMB’million |
RMB’million |
|||||||||||||||||||||||||||||||
Balance at January 1, 2020 |
2 | 34,425 | (31 | ) | — | 2,187 | 7,007 | 43,590 | 88 | 43,678 | ||||||||||||||||||||||||||||||
Profit for the year |
— | — | — | — | — | 4,155 | 4,155 | 21 | 4,176 | |||||||||||||||||||||||||||||||
Fair value changes on financial assets at fair value through other comprehensive income |
— | — | — | — | 5,219 | — | 5,219 | — | 5,219 | |||||||||||||||||||||||||||||||
Share of other comprehensive losses of an associate |
— | — | — | — | (9 | ) | — | (9 | ) | — | (9 | ) | ||||||||||||||||||||||||||||
Currency translation differences |
— | — | — | — | (1,286 | ) | — | (1,286 | ) | — | (1,286 | ) | ||||||||||||||||||||||||||||
Total comprehensive income for the year |
— | — | — | — | 3,924 | 4,155 | 8,079 | 21 | 8,100 | |||||||||||||||||||||||||||||||
Transactions with equity holders: |
||||||||||||||||||||||||||||||||||||||||
Exercise of share options/ Restricted share units (“RSUs”) |
22,23 | — | 619 | — | — | (429 | ) | — | 190 | — | 190 | |||||||||||||||||||||||||||||
Non-controlling interests arising from business combination |
— | — | — | — | — | — | — |
367 | 367 | |||||||||||||||||||||||||||||||
Share-based compensation - value of employee services |
23,24 | — | — | — | — | 569 | — | 569 | — | 569 | ||||||||||||||||||||||||||||||
Shares held for share award schemes |
22 | — | — | (47 | ) | — | — | — | (47 | ) | — | (47 | ) | |||||||||||||||||||||||||||
Repurchase of shares |
— | — | — | (134 | ) | — | (134 | ) | — | (134 | ) | |||||||||||||||||||||||||||||
Additional investments in non-wholly owned subsidiaries |
— | — | — | — | (2 | ) | — | (2 | ) | — | (2 | ) | ||||||||||||||||||||||||||||
Disposal of a subsidiary |
— | — | — | — | — | — | — | 10 | 10 | |||||||||||||||||||||||||||||||
Appropriations to statutory reserves |
— | — | — | — | 51 | (51 | ) | — | — | — | ||||||||||||||||||||||||||||||
Total transactions with equity holders at their capacity as equity holders for the year |
— | 619 | (47 | ) | (134 | ) | 189 | (51 | ) | 576 | 377 | 953 | ||||||||||||||||||||||||||||
Balance at December 31, 2020 |
2 | 35,044 | (78 | ) | (134 | ) | 6,300 | 11,111 | 52,245 | 486 | 52,731 | |||||||||||||||||||||||||||||
Attributable to equity holders of the Company |
||||||||||||||||||||||||||||||||||||||||
Share capital |
Additional paid-in capital |
Shares held for share award schemes |
Treasury shares |
Other reserves |
Retained earnings |
Total |
Non- controlling interests |
Total equity |
||||||||||||||||||||||||||||||||
Note |
RMB’million |
RMB’million |
RMB’million |
RMB’million |
RMB’million |
RMB’million |
RMB’million |
RMB’million |
RMB’million |
|||||||||||||||||||||||||||||||
Balance at January 1, 2021 |
2 | 35,044 | (78 | ) | (134 | ) | 6,300 | 11,111 | 52,245 | 486 | 52,731 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Profit for the year |
— | — | — | — | — | 3,029 | 3,029 | 186 | 3,215 | |||||||||||||||||||||||||||||||
Fair value changes on financial assets at fair value through other comprehensive income |
— | — | — | — | (2,128 | ) | — | (2,128 | ) | — | (2,128 | ) | ||||||||||||||||||||||||||||
Share of other comprehensive income of associates |
— | — | — | — | 4 | — | 4 | — | 4 | |||||||||||||||||||||||||||||||
Currency translation differences |
— | — | — | — | (378 | ) | — | (378 | ) | — | (378 | ) | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Total comprehensive income for the year |
— | — | — | — | (2,502 | ) | 3,029 | 527 | 186 | 713 | ||||||||||||||||||||||||||||||
Transfer of gains on disposal financial instruments to retained earnings |
— | — | — | — | (56 | ) | 56 | — | — | — | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Transactions with equity holders: |
||||||||||||||||||||||||||||||||||||||||
Expiry of put right of puttable ordinary shares |
22 | — | 535 | — | — | — | — | 535 | — | 535 | ||||||||||||||||||||||||||||||
Exercise of share options/ Restricted share units(“RSUs”) |
22,23 | — | 659 | — | 35 | (646 | ) | — | 48 | — | 48 | |||||||||||||||||||||||||||||
Non-controlling interests arising from business combination |
— | — | — | — | — | — | — | 75 | 75 | |||||||||||||||||||||||||||||||
Share-based compensation - value of employee services |
23,24 | — | — | — | — | 647 | — | 647 | — | 647 | ||||||||||||||||||||||||||||||
Shares held for share award schemes |
22 | — | (105 | ) | — | — | — | (105 | ) | — | (105 | ) | ||||||||||||||||||||||||||||
Repurchase of shares |
— | — | — | (3,561 | ) | — | — | (3,561 | ) | — | (3,561 | ) | ||||||||||||||||||||||||||||
Additional investments in a non-wholly owned subsidiary |
— | — | — | — | (19 | ) | — | (19 | ) | — | (19 | ) | ||||||||||||||||||||||||||||
Disposal of subsidiaries |
— | — | — | — | — | — | — | (6 | ) | (6 | ) | |||||||||||||||||||||||||||||
Appropriations to statutory reserves |
— | — | — | — | 2 | (2 | ) | — | — | — | ||||||||||||||||||||||||||||||
Dividend to non-controlling interests |
— | — | — | — | — | — | — | (3 | ) | (3 | ) | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Total transactions with equity holders at their capacity as equity holders for the year |
— | 1,194 | (105 | ) | (3,526 | ) | (16 | ) | (2 | ) | (2,455 | ) | 66 | (2,389 | ) | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Balance at December 31, 2021 |
2 | 36,238 | (183 | ) | (3,660 | ) | 3,726 | 14,194 | 50,317 | 738 | 51,055 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, |
||||||||||||||
2019 |
2020 |
2021 |
||||||||||||
Note |
RMB’million |
RMB’million |
RMB’million |
|||||||||||
Cash flows from operating activities |
||||||||||||||
Cash generated from operations |
29(a) | 6,188 | 4,945 | 5,370 | ||||||||||
Interest received |
576 | 577 | 458 | |||||||||||
Income taxes paid |
(564 | ) | (637 | ) | (589 | ) | ||||||||
|
|
|
|
|
|
|||||||||
Net cash inflow from operating activities |
6,200 | 4,885 | 5,239 | |||||||||||
|
|
|
|
|
|
|||||||||
Cash flows from investing activities |
||||||||||||||
Payments for business combinations, net of cash acquired |
(45 | ) | (540 | ) | (2,078 | ) | ||||||||
Purchase of property, plant and equipment |
(95 | ) | (108 | ) | (159 | ) | ||||||||
Purchase of intangible assets |
(191 | ) | (393 | ) | (1,095 | ) | ||||||||
Purchase of land use right |
— | — | (1,504 | ) | ||||||||||
Net proceeds/(placements) from/(to) short term investments (2021: including total placement of RMB5,616 million and receipt of RMB4,739 million) |
18(c) |
36 | 6 | (877 | ) | |||||||||
Placement of term deposits with initial terms of over three months |
(12,050 | ) | (30,643 | ) | (15,153 | ) | ||||||||
Receipt from maturity of term deposits with initial terms of over three months |
4,550 | 20,332 | 15,892 | |||||||||||
Proceeds from disposal of subsidiaries |
— | 15 | 3 | |||||||||||
Proceeds from disposal of investments accounted for as financial assets at fair value through profit or loss or other comprehensive income |
— | — | 363 | |||||||||||
Payments for acquisition of investments accounted for using equity method |
(294 | ) | (2,002 | ) | (1,480 | ) | ||||||||
Payments for acquisition of investments accounted for as financial assets at fair value through profit or loss |
— | (211 | ) | — | ||||||||||
Payments for acquisition of investments accounted for as financial assets at fair value through other comprehensive income |
— | (708 | ) | — | ||||||||||
Payment for loans to a third party |
(46 | ) | — | — | ||||||||||
Receipts from repayments of loans to a third party |
— | 45 | 1 | |||||||||||
Dividend received |
32 | — | 88 | |||||||||||
Other investing activities |
1 |
1 | — | |||||||||||
|
|
|
|
|
|
|||||||||
Net cash outflow from investing activities |
(8,102 | ) | (14,206 | ) | (5,999 | ) | ||||||||
|
|
|
|
|
|
|||||||||
Cash flows from financing activities |
||||||||||||||
Loans from non-controlling interests |
— | 10 | — | |||||||||||
Proceeds from issuance of ordinary shares |
22 | 12 | — | — | ||||||||||
Proceeds from exercise of share options |
22 | 127 | 163 | 104 | ||||||||||
Payments for acquisition of non-controlling interests in non-wholly owned subsidiaries |
(79 | ) | (6 | ) | (19 | ) | ||||||||
Shares withheld for share award schemes |
22 | (31 | ) | (46 | ) | (105 | ) | |||||||
Payment for repurchase of ordinary shares |
— | (134 | ) | (3,479 | ) | |||||||||
Dividends paid to non-controlling interests |
— | — | (3 | ) | ||||||||||
Proceeds from issuance of additional equity of non-wholly owned subsidiaries |
3 | — | 13 | |||||||||||
Payments for interests |
(7 | ) | (15 | ) | (105 | ) | ||||||||
Principal elements of lease payments |
14 | (56 | ) | (78 | ) | (116 | ) | |||||||
Net proceeds from issuance of notes |
25 | — | 5,400 | — | ||||||||||
Payment for loan from non-controlling interests |
— | (2 | ) | — | ||||||||||
|
|
|
|
|
|
|||||||||
Net cash (outflow)/inflow from financing activities |
(31 | ) | 5,292 | (3,710 | ) | |||||||||
|
|
|
|
|
|
|||||||||
Net decrease in cash and cash equivalents |
(1,933 | ) | (4,029 | ) | (4,470 | ) | ||||||||
Cash and cash equivalents at beginning of the year |
17,356 | 15,426 | 11,128 | |||||||||||
Exchange differences on cash and cash equivalents |
3 | (269 | ) | (67 | ) | |||||||||
|
|
|
|
|
|
|||||||||
Cash and cash equivalents at end of the year |
15,426 | 11,128 | 6,591 | |||||||||||
|
|
|
|
|
|
1 |
General information, organization and basis of preparation |
1.1 |
General information |
1.2 |
Organization and principal activities |
(i) | Voting Trust Agreement |
1 |
General information, organization and basis of preparation (Continued) |
1.2 |
Organization and principal activities (Continued) |
(ii) | Exclusive Technical Service Agreement |
(iii) | Loan agreement |
(iv) | Exclusive option agreement |
(v) | Equity interest pledge agreement |
1 |
General information, organization and basis of preparation (Continued) |
1.2 |
Organization and principal activities (Continued) |
Place of incorporation |
Date of Incorporation or acquisition |
Equity Interest Held (direct or indirect) |
Principal activities | |||||||||||
Subsidiaries |
||||||||||||||
Tencent Music Entertainment Hong Kong Limited (“TME Hong Kong”) (formerly known as “Ocean Music Hong Kong Limited”) | Hong Kong | July 2016* | 100 | % | Investment holding and music content distribution | |||||||||
Tencent Music (Beijing) Co., Ltd (“Beijing Tencent Music”) (formerly known as “Ocean Interactive (Beijing) Information Technology Co., Ltd.”) | PRC | July 2016* | 100 | % | Technical support and consulting services | |||||||||
Yeelion Online Network Technology (Beijing) Co., Ltd. (“Yeelion Online”) | PRC | July 2016* | 100 | % | Technical support and consulting services | |||||||||
Tencent Music Entertainment Technology (Shenzhen) Co., Ltd. (“TME Tech Shenzhen”) | PRC | February 2017 | 100 | % | Online music and entertainment related services | |||||||||
Guangzhou Shiyinlian Software Technology Co., Ltd. (“Guangzhou Shiyinlian”) | PRC | October 2019 | 100 | % | Technical support and consulting service | |||||||||
Variable Interest Entities |
||||||||||||||
Guangzhou Kugou Computer Technology Co., Ltd. (“Guangzhou Kugou”) | PRC | July 2016* | 100 | % | Online music and entertainment related services | |||||||||
Beijing Kuwo Technology Co., Ltd.(“Beijing Kuwo”) | PRC | July 2016* | 100 | % | Online music and entertainment related services | |||||||||
Subsidiaries of Variable Interest Entities |
||||||||||||||
Tencent Music Entertainment (Shenzhen) Co., Ltd. (“TME Shenzhen”) | PRC | July 2016* | 100 | % | Online music and entertainment related services | |||||||||
Guangxi Hexian Music Co., Ltd. (“Guangxi Hexian”), (formerly known as “Xizang Qiming Music Co., Ltd.”) | PRC | February 2018 | 100 | % | Music content investments and other investments | |||||||||
Shenzhen Lanren Online Technology Co., Ltd (“Shenzhen Lanren”) |
PRC | March 2021 | 100 | % | Audio platform |
* | Representing the entities acquired by the Group on July 12, 2016. |
1 |
General information, organization and basis of preparation (Continued) |
1.2 |
Organization and principal activities (Continued) |
• | revoke the Group’s business and operating licenses; |
• | require the Group to discontinue or restrict its operations; |
• | restrict the Group’s right to collect revenues; |
1 |
General information, organization and basis of preparation (Continued) |
1.2 |
Organization and principal activities (Continued) |
• | block the Group’s websites; |
• | require the Group to restructure the operations, re-apply for the necessary licenses or relocate its businesses, staff and assets; |
• | impose additional conditions or requirements with which the Group may not be able to comply; or |
• | take other regulatory or enforcement actions against the Group that could be harmful to the Group’s business. |
As at December 31, |
||||||||
2020 |
2021 |
|||||||
RMB’million |
RMB’million |
|||||||
Total current assets |
10,700 | 9,395 | ||||||
Total non-current assets |
7,394 | 8,722 | ||||||
|
|
|
|
|||||
Total assets |
18,094 | 18,117 | ||||||
|
|
|
|
|||||
Total current liabilities |
(6,986 | ) | (6,670 | ) | ||||
Total non-current liabilities |
(393 | ) | (416 | ) | ||||
|
|
|
|
|||||
Total liabilities |
(7,379 | ) | (7,086 | ) | ||||
|
|
|
|
Year ended December 31, |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
RMB’million |
RMB’million |
RMB’million |
||||||||||
Total revenues |
25,379 | 29,094 | 30,949 | |||||||||
Net profit/(loss) |
1,323 | 1,625 | (209 | ) | ||||||||
Net cash (outflow)/inflow from operating activities* |
(182 | ) | 454 | (671 | ) | |||||||
Net cash outflow from investing activities |
(185 | ) | (1,099 | ) | (3,554 | ) | ||||||
Net cash (outflow)/inflow from financing activities* |
(34 | ) | 715 | 3,462 | ||||||||
Net (decrease)/increase in cash and cash equivalents |
(401 | ) | 70 | (763 | ) | |||||||
Cash and cash equivalents, beginning of the year |
1,728 | 1,327 | 1,397 | |||||||||
Cash and cash equivalents, end of the year |
1,327 | 1,397 | 634 |
* |
Amounts previously reported for 2019 and 2020 have been revised and the impact of the revisions of intercompany fund transfers from operating to financing activities, which were eliminated in consolidation of the Company. The amounts of cash flow activities of the Group’s VIEs for the year ended December 31, 2019 and 2020 have been revised to reflect adjustments with decrease of RMB81 million and RMB768 million, respectively, in cash provided by operating activities, increase of RMB81 million and RMB768 million, respectively, in cash provided by financing activities. There is no impact on the previous reported consolidated financial positions and results of operations or cash flows. |
1 |
General information, organization and basis of preparation (Continued) |
1.2 |
Organization and principal activities (Continued) |
2 |
Summary of significant accounting policies |
2.1 |
Basis of preparation |
2.2 |
New and amendments to the accounting standards adopted and recent accounting pronouncements |
(a) |
Amendments to the accounting standards adopted |
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS4 and IFRS 16 |
Interest Rate Benchmark Reform – Phase 2 |
2 |
Summary of significant accounting policies (Continued) |
2.2 |
New and amendments to the accounting standards adopted and recent accounting pronouncements (Continued) |
(b) |
Recent accounting pronouncements |
Effective for annual periods beginning on or after |
||||||
Amendments to IAS 28 and IFRS 10 |
Sale or contribution of assets between an investor and its associate or joint venture |
To be determined |
||||
IAS 16 (amendments) |
Property, plant and equipment: Proceeds before intended use |
January 1, 2022 |
||||
IAS 37 (amendments) |
Onerous contract - cost of fulfilling a contract |
January 1, 2022 |
||||
Amendments to IFRS |
Annual Improvements to IFRS Standards 2018-2020 Cycle |
January 1, 2022 |
||||
Amendments to IFRS 3 |
Reference to the Conceptual Framework |
January 1, 2022 |
||||
IAS 1 (amendments) |
Classification of Liabilities as Current or Non-current |
January 1, 2023 |
||||
IFRS 17 |
Insurance contracts |
January 1, 2023 |
||||
Amendments to IAS 1 and IFRS Practice Statement 2 |
Disclosure of Accounting Policies |
January 1, 2023 |
||||
Amendments to IAS 8 |
Definition of Accounting Estimates |
January 1, 2023 |
||||
Amendments to IAS 12 |
Deferred Tax related to Assets and Liabilities arising from a Single Transaction |
January 1, 2023 |
2.3 |
Principles of consolidation and equity accounting |
(a) |
Subsidiaries |
2 |
Summary of significant accounting policies (Continued) |
2.3 |
Principles of consolidation and equity accounting (Continued) |
(a) |
Subsidiaries (Continued) |
(b) |
Associates |
(c) |
Joint ventures |
(d) |
Equity accounting |
2.4 |
Business combinations |
• | fair values of the assets transferred |
2 |
Summary of significant accounting policies (Continued) |
2.4 |
Business combinations (Continued) |
• |
liabilities incurred to the former owners of the acquired business |
• |
equity interests issued by the Group |
• |
fair value of any asset or liability resulting from a contingent consideration arrangement, and |
• |
fair value of any pre-existing equity interest in the subsidiary. |
• | consideration transferred, |
• | amount of any non-controlling interest in the acquired entity, and |
• | acquisition-date fair value of any previous equity interest in the acquired entity |
• | Assets and liabilities of the acquired entity are stated at predecessor carrying values. Fair value measurement is not required. |
• | No new goodwill arises in predecessor accounting. |
• | Any difference between the consideration given and the aggregate carrying value of the assets and liabilities of the acquired entity at the date of the transaction is included in equity in retained earnings or in a separate reserve. |
2.5 |
Segment reporting |
2 |
Summary of significant accounting policies (Continued) |
2.5 |
Segment reporting (Continued) |
2.6 |
Foreign currency translation |
(a) |
Functional and presentation currency |
(b) |
Transactions and balances |
(c) |
Group companies |
• | assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet |
• | income and expenses for each income statement and statement of comprehensive income are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions), and |
• | all resulting exchange differences are recognized in other comprehensive income. |
2 |
Summary of significant accounting policies (Continued) |
2.6 |
Foreign currency translation (Continued) |
(c) |
Group companies (Continued) |
2.7 |
Property, plant and equipment |
Servers and network equipment |
3 – 5 years | |
Office furniture, equipment and others |
3 – 5 years | |
Leasehold improvements |
Shorter of expected lives of leasehold improvements and lease term |
2.8 |
Land use right |
2.9 |
Goodwill |
2 |
Summary of significant accounting policies (Continued) |
2.9 |
Goodwill (Continued) |
2.10 |
Other intangible assets |
(a) |
Domain name, trademark and Internet audio/video program transmission license |
(b) |
Separately acquired and internal developed contents and copyrights |
(c) |
Other intangible assets acquired in a business combination |
Online users | 1 year | |
Corporate customer relationship | 3 - 4 years | |
Supplier resources | 3 - 6 years | |
Non-compete agreements |
4 - 7 years | |
Copyrights | 3 - 7 years |
2.11 |
Impairment of non-financial assets |
2 |
Summary of significant accounting policies (Continued) |
2.11 |
Impairment of non-financial assets (Continued) |
2.12 |
Investments and other financial assets |
(a) |
Classification and measurement |
• | those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and |
• | those to be measured at amortized cost. |
• |
Amortized cost: Financial assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are classified as and measured at |
2 |
Summary of significant accounting policies (Continued) |
2.12 |
Investments and other financial assets (Continued) |
(a) |
Classification and measurement (Continued) |
amortized cost. A gain or loss on a debt investment measured at amortized cost which is not part of a hedging relationship is recognized in profit or loss when the asset is derecognized or impaired. Interest income from these financial assets is recognized using the effective interest rate method. |
• |
Fair value through other comprehensive income: Financial assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash flows represent solely payments of principal and interest, are classified as and measured at fair value through other comprehensive income. Movements in the carrying amount of these financial assets are taken through other comprehensive income, except for the recognition of impairment losses or reversals, interest income and foreign exchange gains and losses which are recognized in profit or loss. When the financial asset is derecognized, the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss and recognized in “other gains/(losses), net” in the consolidated income statement. Interest income from these financial assets is recognized using the effective interest rate method. Foreign exchange gains and losses and impairment losses or reversals are presented in “other gains/(losses), net”. |
• |
Fair value through profit or loss: Financial assets that do not meet the criteria for amortized cost or fair value through other comprehensive income are classified as and measured at fair value through profit or loss. A gain or loss on a debt investment measured at fair value through profit or loss which is not part of a hedging relationship is recognized in profit or loss and presented in “other gains/(losses), net” for the period in which it arises. |
(b) |
Impairment |
2 |
Summary of significant accounting policies (Continued) |
2.12 |
Investments and other financial assets (Continued) |
(b) |
Impairment (Continued) |
(c) |
Offsetting |
2.13 |
Inventories |
2.14 |
Accounts receivable |
2.15 |
Short-term investments |
2.16 |
Cash and cash equivalents |
2.17 |
Share capital |
2 |
Summary of significant accounting policies (Continued) |
2.18 |
Accounts and other payables |
2.19 |
Borrowings (including notes payable) |
2.20 |
Current and deferred income tax |
(a) |
Current income tax |
(b) |
Deferred income tax |
2 |
Summary of significant accounting policies (Continued) |
2.20 |
Current and deferred income tax (Continued) |
(b) |
Deferred income tax (Continued) |
(c) |
Offsetting |
(d) |
Uncertain tax positions |
2.21 |
Employee benefits |
(a) |
Employee leave entitlements |
(b) |
Pension obligations |
2 |
Summary of significant accounting policies (Continued) |
2.22 |
Share-based payments |
2.23 |
Provisions |
2 |
Summary of significant accounting policies (Continued) |
2.24 |
Revenue recognition |
(a) |
Revenue from online music services |
2 |
Summary of significant accounting policies (Continued) |
2.24 |
Revenue recognition (Continued) |
(a) |
Revenue from online music services (Continued) |
(b) |
Revenue from social entertainment services and others |
2 |
Summary of significant accounting policies (Continued) |
2.24 |
Revenue recognition (Continued) |
(b) |
Revenue from social entertainment services and others (Continued) |
(c) |
Principal and agent consideration |
(d) |
Contract liabilities and contract costs |
2.25 |
Interest income |
2.26 |
Cost of revenues |
2 |
Summary of significant accounting policies (Continued) |
2.26 |
Cost of revenues (Continued) |
2.27 |
Selling and marketing expenses |
2.28 |
General and administrative expenses |
2.29 |
Government grants |
2.30 |
Leases |
• |
fixed payments (including in-substance fixed payments), less any lease incentives receivable |
• |
variable lease payments that are based on an index or a rate, initially measured using the index or rate as at the commencement date |
• |
amounts expected to be payable by the Group under residual value guarantees |
• |
the exercise price of a purchase option if the Group is reasonably certain to exercise that option, and |
• |
payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option. |
2 |
Summary of significant accounting policies (Continued) |
2.30 |
Leases (Continued) |
• |
where possible, uses recent third-party financing received by the individual lessee as a starting point, adjusted to reflect changes in financing conditions since third party financing was received |
• |
uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by the Group, which does not have recent third party financing, and |
• |
makes adjustments specific to the lease, e.g. term, country, currency and security. |
• | the amount of the initial measurement of lease liability |
• | any lease payments made at or before the commencement date less any lease incentives received |
• | any initial direct costs, and |
• | restoration costs. |
2.31 |
Dividends distribution |
2 |
Summary of significant accounting policies (Continued) |
2.31 |
Dividends distribution (Continued) |
3 |
Financial risk management |
3.1 |
Financial risk factors |
(a) |
Market risk |
(i) |
Foreign exchange risk |
(ii) |
Price risk |
3 |
Financial risk management (Continued) |
3.1 |
Financial risk factors (Continued) |
(a) |
Market risk (Continued) |
(ii) |
Price risk (Continued) |
(iii) |
Interest rate risk |
(b) |
Credit risk |
3 |
Financial risk management (Continued) |
3.1 |
Financial risk factors (Continued) |
(c) |
Liquidity risk |
3.2 |
Capital risk management |
3.3 |
Fair value estimation |
• |
Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1); |
• |
Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2); and |
• |
Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3). |
3 |
Financial risk management (Continued) |
3.3 |
Fair value estimation (Continued) |
Year Ended December 31, |
||||||||
2020 |
2021 |
|||||||
RMB’million |
RMB’million |
|||||||
At beginning of the period |
112 | — | ||||||
Fair value change |
— | — | ||||||
Settlement |
(112 | ) | — | |||||
At end of the period |
— |
— |
||||||
4 |
Critical accounting estimates and judgments |
4 |
Critical accounting estimates and judgments (Continued) |
(a) |
Consolidation of VIEs |
(b) |
The estimates of the lifespans of durable virtual gifts |
(c) |
Recoverability of non-financial assets |
4 |
Critical accounting estimates and judgments (Continued) |
(c) |
Recoverability of non-financial assets (Continued) |
(d) |
Share-based compensation arrangements |
(e) |
Income taxes |
(f) |
Scope of consolidation |
5 |
Revenue |
6 |
Interest Income |
7 |
Other gains, net |
Year ended December 31, |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
RMB’million |
RMB’million |
RMB’million |
||||||||||
Government grants and tax rebates (note) |
132 | 245 | 393 | |||||||||
Impairment provision for investments in associates (Note 17) |
(43 | ) | (4 | ) | — | |||||||
Gain on step-up acquisition arising from business combination |
— | 19 | 8 | |||||||||
Fair value change of investment s |
(37 | ) | — | 105 | ||||||||
Gain/(loss) on disposal of a subsidiary |
— | 32 | (10 | ) | ||||||||
Dividend from investments |
— | — | 27 | |||||||||
Others |
26 | 70 | 30 | |||||||||
78 | 362 | 553 | ||||||||||
8 |
Expense by nature |
Year ended December 31, |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
RMB’million |
RMB’million |
RMB’million |
||||||||||
Service costs (note i) |
14,967 | 17,478 | 18,992 | |||||||||
Advertising agency fees |
233 | 505 | 667 | |||||||||
Employee benefits expenses (note ii and note iii) |
2,527 | 3,004 | 3,915 | |||||||||
Promotion and advertising expenses |
1,823 | 2,227 | 2,387 |
(i) | Service costs mainly comprised licensing costs, revenue sharing fees paid to content creators and content delivery costs that primarily consisted of server, cloud services and bandwidth costs. |
(ii) | During the years ended December 31, 2019, 2020 and 2021, the Group incurred expenses for the purpose of research and development of approximately RMB1,159 million, RMB1,667 million and RMB2,339 million, which comprised employee benefits expenses of RMB1,012 million, RMB1,488 million and RMB2,050 , respectively. No significant development expenses had been capitalized for the years ended December 31, 2019, 2020 and 2021. |
(iii) | Employee benefits expenses |
Year ended December 31, |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
RMB’million |
RMB’million |
RMB’million |
||||||||||
Wages, salaries and bonuses |
1,616 | 2,020 | 2,518 | |||||||||
Welfare, medical and other expenses |
295 | 373 | 453 | |||||||||
Share-based compensation expenses |
519 | 569 | 752 | |||||||||
Contribution to pension plans |
97 | 42 | 192 | |||||||||
2,527 | 3,004 | 3,915 | ||||||||||
8 |
Expense by nature (Continued) |
9 |
Finance costs |
Year ended December 31, |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
RMB’million |
RMB’million |
RMB’million |
||||||||||
Interest and related expenses |
68 | 99 | 120 | |||||||||
Exchange (gains)/losses |
(4 | ) | (2 | ) | 1 | |||||||
64 | 97 | 121 | ||||||||||
10 |
Taxation |
(a) |
Income tax expense |
(i) | Cayman Islands |
(ii) | Hong Kong |
(iii) | PRC |
10 |
Taxation (Continued) |
(a) |
Income tax expense (Continued) |
Year ended December 31, |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
RMB’million |
RMB’million |
RMB’million |
||||||||||
Current income tax |
703 | 634 | 530 | |||||||||
Deferred income tax (note b) |
(140 | ) | (178 | ) | (113 | ) | ||||||
Total income tax expense |
563 | 456 | 417 | |||||||||
Year ended December 31, |
||||||||||||
2019 RMB’million |
2020 RMB’million |
2021 RMB’million |
||||||||||
Profit before income tax expense |
4,540 | 4,632 | 3,632 |
|||||||||
Tax calculated at a tax rate of 25% |
1,135 | 1,158 | 908 | |||||||||
Effects of different tax rates applicable to different subsidiaries of the Group |
(36 | ) | 34 | 29 | ||||||||
Effects of tax holiday on assessable profit of certain subsidiaries |
(88 | ) | (214 | ) | (34 | ) | ||||||
Effects of preferential tax rate on assessable profit of certain subsidiaries |
(556 | ) | (631 | ) | (664 | ) | ||||||
Expense not deductible for tax purposes |
133 | 82 | 191 | |||||||||
Income not subject to tax |
— | — | (3 | ) | ||||||||
Unrecognized deferred income tax assets |
16 | 46 | 27 | |||||||||
Utilization of previously unrecognized tax assets |
(50 | ) | (11 | ) | (38 | ) | ||||||
Others |
9 | (8 | ) | 1 | ||||||||
563 | 456 | 417 | ||||||||||
10 |
Taxation (Continued) |
(a) |
Income tax expense (Continued) |
Year ended December 31, |
||||||||||||
2019 RMB’million |
2020 RMB’million |
2021 RMB’million |
||||||||||
Effects of tax holiday on assessable profit of certain subsidiaries |
88 | 214 | 34 | |||||||||
Per ordinary share effect—basic |
0.03 | 0.06 | 0.01 | |||||||||
Per ordinary share effect—diluted |
0.03 | 0.06 | 0.01 |
Year ended December 31, |
||||||||||||
2019 RMB’million |
2020 RMB’million |
2021 RMB’million |
||||||||||
Non-PRC |
470 | (4 | ) | (5 | ) | |||||||
PRC |
4,070 | 4,636 | 3,637 | |||||||||
4,540 | 4,632 | 3,632 | ||||||||||
(b) |
Deferred income tax |
As at December 31, |
||||||||
2020 |
2021 |
|||||||
RMB’million |
RMB’million |
|||||||
The deferred tax assets comprise temporary differences attributable to: |
||||||||
Prepayment and other investments |
105 | 134 | ||||||
Deferred revenue |
55 | 83 | ||||||
Accruals |
136 | 118 | ||||||
Deemed distribution arising from carve out of Tencent Music Business |
8 | 5 | ||||||
Others |
4 | 10 | ||||||
Total deferred tax assets |
308 | 350 | ||||||
Set-off of deferred tax liabilities pursuant to set-off provisions |
(5 | ) | (4 | ) | ||||
Net deferred tax assets |
303 | 346 | ||||||
The deferred tax liabilities comprise temporary differences attributable to: |
||||||||
Intangible assets acquired in business combinations |
270 | 275 | ||||||
Total deferred tax liabilities |
270 | 275 | ||||||
Set-off of deferred tax liabilities pursuant to set-off provisions |
(5 | ) | (4 | ) | ||||
Net deferred liabilities |
265 | 271 | ||||||
10 |
Taxation (Continued) |
(b) |
Deferred income tax (Continued) |
As at December 31, |
||||||||
2020 |
2021 |
|||||||
RMB’million |
RMB’million |
|||||||
Deferred tax assets: |
||||||||
to be recovered after more than 12 months |
38 | 48 | ||||||
to be recovered within 12 months |
265 | 298 | ||||||
303 | 346 | |||||||
Deferred tax liabilities: |
||||||||
to be recovered after more than 12 months |
203 | 201 | ||||||
to be recovered within 12 months |
62 | 70 | ||||||
265 | 271 | |||||||
Prepayment and other investments |
Deferred revenue |
Accruals |
Others |
Total |
||||||||||||||||
RMB’million |
RMB’million |
RMB’million |
RMB’million |
RMB’million |
||||||||||||||||
At January 1, 2020 |
61 | 46 | 74 | 19 | 200 | |||||||||||||||
Credited/(charged) to |
44 | 9 | 62 | (7 | ) | 108 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
At December 31, 2020 |
105 | 55 | 136 | 12 | 308 | |||||||||||||||
Credited/(charged) to income statement |
29 | 28 | (18 | ) | 3 | 42 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
At December 31, 2021 |
134 | 83 | 118 | 15 | 350 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
Intangible assets |
||||
RMB’million |
||||
At January 1, 2020 |
305 | |||
Credited to income statement |
(70 | ) | ||
Business combinations |
35 | |||
|
|
|||
At December 31, 2020 |
270 | |||
Credited to income statement |
(71 | ) | ||
Business combinations (Note 28) |
76 | |||
|
|
|||
At December 31, 2021 |
275 | |||
|
|
11 |
Earnings per share |
(a) |
Basic earnings per share |
(b) |
Diluted earnings per share |
Year ended December 31, |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
RMB’million |
RMB’million |
RMB’million |
||||||||||
Earnings |
||||||||||||
Net income attributable to equity holders of the Company |
3,982 | 4,155 | 3,029 | |||||||||
|
|
|
|
|
|
|||||||
Number of shares |
||||||||||||
Shares |
||||||||||||
Weighted average ordinary shares outstanding, used in computing basic earnings per share |
3,272,754,403 | 3,313,527,847 | 3,321,067,177 | |||||||||
Dilution effect- adjustments for share options and RSUs |
74,817,935 | 46,932,912 | 41,978,580 | |||||||||
|
|
|
|
|
|
|||||||
Shares used in computing diluted earnings per share |
3,347,572,338 | 3,360,460,759 | 3,363,045,757 | |||||||||
RMB |
RMB |
RMB |
||||||||||
Basic earnings per share for Class A and Class B ordinary shares |
1.22 | 1.25 | 0.91 | |||||||||
Diluted earnings per share for Class A and Class B ordinary shares |
1.19 | 1.24 | 0.90 | |||||||||
Basic earnings per ADS |
2.43 | 2.51 | 1.82 | |||||||||
Diluted earnings per ADS |
2.38 | 2.47 | 1.80 |
12 |
Property, plant and equipment |
Servers and network equipment |
Leasehold improve -ments |
Office furniture, equipment and others |
Total |
|||||||||||||
RMB ’million |
RMB ’million |
RMB ’million |
RMB ’million |
|||||||||||||
At January 1, 2020 |
||||||||||||||||
Cost |
264 | 59 | 41 | 364 | ||||||||||||
Accumulated depreciation |
(140 | ) | (33 | ) | (12 | ) | (185 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net book amount |
124 | 26 | 29 | 179 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Year ended December 31, 2020 |
||||||||||||||||
Opening net book amount |
124 | 26 | 29 | 179 | ||||||||||||
Additions |
53 | 11 | 33 | 97 | ||||||||||||
Business combinations |
1 | — | 1 | 2 | ||||||||||||
Disposals |
(1 | ) | — | — | (1 | ) | ||||||||||
Depreciation charge |
(66 | ) | (13 | ) | (22 | ) | (101 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Closing net book amount |
111 | 24 | 41 | 176 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
At December 31, 2020 |
||||||||||||||||
Cost |
315 | 67 | 70 | 452 | ||||||||||||
Accumulated depreciation |
(204 | ) | (43 | ) | (29 | ) | (276 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net book amount |
111 | 24 | 41 | 176 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Year ended December 31, 2021 |
||||||||||||||||
Opening net book amount |
111 | 24 | 41 | 176 | ||||||||||||
Additions |
32 | 81 | 79 | 192 | ||||||||||||
Business combinations |
1 | — | 1 | 2 | ||||||||||||
Disposals |
(1 | ) | (6 | ) | (21 | ) | (28 | ) | ||||||||
Depreciation charge |
(59 | ) | (19 | ) | (21 | ) | (99 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Closing net book amount |
84 | 80 | 79 | 243 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
At December 31, 2021 |
||||||||||||||||
Cost |
344 | 137 | 128 | 609 | ||||||||||||
Accumulated depreciation |
(260 | ) | (57 | ) | (49 | ) | (366 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net book amount |
84 | 80 | 79 | 243 | ||||||||||||
|
|
|
|
|
|
|
|
Year ended December 31, |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
RMB’million |
RMB’million |
RMB’million |
||||||||||
Cost of revenues |
64 | 74 | 66 | |||||||||
Selling and marketing expenses |
1 | 1 | — | |||||||||
General and administrative expenses |
23 | 26 | 33 | |||||||||
|
|
|
|
|
|
|||||||
88 | 101 | 99 | ||||||||||
|
|
|
|
|
|
13 |
Land use right |
Year ended December 31, |
||||||||
2020 |
2021 |
|||||||
RMB’million |
RMB’million |
|||||||
Net book amount at January 1 |
— | — | ||||||
Additions |
— | 1,504 | ||||||
Amortization charge |
— | (9 | ) | |||||
|
|
|
|
|||||
Net book amount at December 31 |
— | 1,495 | ||||||
|
|
|
|
14 |
Right-of-use |
Buildings |
Others |
Total |
||||||||||
RMB’million |
RMB’million |
RMB’million |
||||||||||
Net book amount at January 1, 2020 |
136 | 12 | 148 | |||||||||
Inception of new leases |
257 | — | 257 | |||||||||
Depreciation charge |
(76 | ) | (10 | ) | (86 | ) | ||||||
Disposal |
(8 | ) | — | (8 | ) | |||||||
|
|
|
|
|
|
|||||||
Net book amount at December 31, 2020 |
309 | 2 | 311 | |||||||||
Inception of new leases |
117 | — | 117 | |||||||||
Depreciation charge |
(122 | ) | (1 | ) | (123 | ) | ||||||
Disposal |
(22 | ) | — | (22 | ) | |||||||
|
|
|
|
|
|
|||||||
Net book amount at December 31, 2021 |
282 | 1 | 283 | |||||||||
|
|
|
|
|
|
15 |
Intangible assets |
Domain name, trademark and Internet audio/video program transmission license RMB’million |
Copyrights RMB’million |
Supplier resources RMB’million |
Corporate customer relationships RMB’million |
Non-compete agreement RMB’million |
Others RMB’million |
Total RMB’million |
||||||||||||||||||||||
At January 1, 2020 |
||||||||||||||||||||||||||||
Cost |
1,340 | 544 | 335 | 185 | 156 | 136 | 2,696 | |||||||||||||||||||||
Accumulated amortization |
(403 | ) | (170 | ) | (175 | ) | (141 | ) | (104 | ) | (81 | ) | (1,074 | ) | ||||||||||||||
Net book amount |
937 | 374 | 160 | 44 | 52 | 55 | 1,622 | |||||||||||||||||||||
Year ended December 31, 2020 |
||||||||||||||||||||||||||||
Opening net book amount |
937 | 374 | 160 | 44 | 52 | 55 | 1,622 | |||||||||||||||||||||
Additions |
— | 876 | — | — | — | 13 | 889 | |||||||||||||||||||||
Business combinations |
— | 145 | — | — | — | 1 | 146 | |||||||||||||||||||||
Amortization charge |
(116 | ) | (365 | ) | (51 | ) | (40 | ) | (34 | ) | (31 | ) | (637 | ) | ||||||||||||||
Closing net book amount |
821 | 1,030 | 109 | 4 | 18 | 38 | 2,020 | |||||||||||||||||||||
At December 31, 2020 |
||||||||||||||||||||||||||||
Cost |
1,340 | 1,554 | 335 | 185 | 156 | 160 | 3,730 | |||||||||||||||||||||
Accumulated amortization |
(519 | ) | (524 | ) | (226 | ) | (181 | ) | (138 | ) | (122 | ) | (1,710 | ) | ||||||||||||||
Net book amount |
821 | 1,030 | 109 | 4 | 18 | 38 | 2,020 | |||||||||||||||||||||
Year ended December 31, 2021 |
||||||||||||||||||||||||||||
Opening net book amount |
821 | 1,030 | 109 | 4 | 18 | 38 | 2,020 | |||||||||||||||||||||
Additions |
— | 1,036 | — | — | — | 28 | 1,064 | |||||||||||||||||||||
Business |
217 | 112 | — | 19 | 5 | 171 | 524 | |||||||||||||||||||||
Amortization charge |
(132 | ) | (517 | ) | (52 | ) | (7 | ) | (5 | ) | (66 | ) | (779 | ) | ||||||||||||||
Closing net book amount |
906 | 1,661 | 57 | 16 | 18 | 171 | 2,829 | |||||||||||||||||||||
At December 31, 2021 |
||||||||||||||||||||||||||||
Cost |
1,557 | 2,672 | 335 | 204 | 161 | 357 | 5,286 | |||||||||||||||||||||
Accumulated amortization |
(651 | ) | (1,011 | ) | (278 | ) | (188 | ) | (143 | ) | (186 | ) | (2,457 | ) | ||||||||||||||
Net book amount |
906 | 1,661 | 57 | 16 | 18 | 171 | 2,829 | |||||||||||||||||||||
15 |
Intangible assets (Continued) |
Year ended December 31, |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
RMB’million |
RMB’million |
RMB’million |
||||||||||
Cost of revenues |
239 | 434 | 577 | |||||||||
Selling and marketing expenses |
42 | 41 | 19 | |||||||||
General and administrative expenses |
153 | 162 | 183 | |||||||||
434 | 637 | 779 | ||||||||||
16 |
Goodwill |
Year ended December 31, |
||||||||
2020 |
2021 |
|||||||
RMB’million |
RMB’million |
|||||||
At January 1 |
17,140 | 17,492 | ||||||
Business combinations |
352 | 1,641 | ||||||
Disposals |
— | (12 | ) | |||||
At December 31 |
17,492 | 19,121 | ||||||
17 |
Investments accounted for using equity method |
As at December 31, |
||||||||
2020 |
2021 |
|||||||
RMB’million |
RMB’million |
|||||||
Investments in associates |
2,196 | 3,522 | ||||||
Investments in joint ventures |
59 | 77 | ||||||
|
|
|
|
|||||
2,255 | 3,599 | |||||||
|
|
|
|
Year ended December 31, |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
RMB’million |
RMB’million |
RMB’million |
||||||||||
Share of (loss)/profit of investments accounted for using equity method: |
||||||||||||
Associates |
(9 | ) | 23 | (45 | ) | |||||||
Joint ventures |
(9 | ) | (4 | ) | (2 | ) | ||||||
|
|
|
|
|
|
|||||||
(18 | ) | 19 | (47 | ) | ||||||||
|
|
|
|
|
|
Year ended December 31, |
||||||||
2020 |
2021 |
|||||||
RMB’million |
RMB’million |
|||||||
At January 1 |
489 | 2,255 | ||||||
Additions (note i) |
1,923 | 1,550 | ||||||
Business combinations |
4 | — | ||||||
Share of profit/(loss) |
19 | (47 | ) | |||||
Share of other comprehensive (losses)/income |
(9 | ) | 4 | |||||
Step acquisition accounted for as business combination |
(21 | ) | (26 | ) | ||||
Impairment provision (note ii) |
(4 | ) | — | |||||
Currency translation differences |
(146 | ) | (60 | ) | ||||
Dividend received |
— | (77 | ) | |||||
At December 31 |
2,255 | 3,599 | ||||||
|
|
|
|
(i) | In January 2021, the Group completed the additional investment in certain equity interests in a consortium, Concerto Partners LLC (“Concerto”), which is led by Tencent to acquire an additional 10% equity stake in Universal Music Group (“UMG”), for an investment consideration of EUR161 million (equivalent to approximately RMB1,270 million). According to the shareholders agreement of Concerto, the Group is able to participate in certain key decision making process of Concerto and therefore, this investment is accounted for as investment in an associate. |
(ii) | Both external and internal sources of information of associates are considered in assessing whether there is any indication that the investments maybe impaired, including but not limited to their financial positions, business performances and market capitalization. During the year ended December 31, 2020, the impairment losses recogni z ed mainly resulted from revisions of financial business outlook of the associates and changes in the market environment of the underlying businesses. During the year ended December 31, 2021, no impairment loss was recognized. |
18 |
Financial assets at fair value |
(a) |
Financial assets at fair value through other comprehensive income |
Year ended December 31, |
||||||||
2020 |
2021 |
|||||||
RMB’million |
RMB’million |
|||||||
Listed equity investments |
||||||||
At January 1 |
4,461 | 9,771 | ||||||
Additions |
708 | — | ||||||
Disposal |
— | (163 | ) | |||||
Fair value change |
5,219 | (2,128 | ) | |||||
Currency translation differences |
(617 | ) | (178 | ) | ||||
|
|
|
|
|||||
At December 31 |
9,771 | 7,302 | ||||||
|
|
|
|
(b) |
Other investments |
18 |
Financial assets at fair value (Continued) |
(c) |
Short-term investments |
Year ended December 31, |
||||||||
2020 |
2021 |
|||||||
RMB’million |
RMB’million |
|||||||
At January 1 |
6 | — | ||||||
Additions |
— | 5,616 | ||||||
Business combinations |
— | 100 | ||||||
Fair value change |
— | 52 | ||||||
Disposal |
(6 | ) | (4,739 | ) | ||||
At December 31 |
— | 1,029 | ||||||
19 |
Prepayments, deposits and other assets |
As at December 31, |
||||||||
2020 |
2021 |
|||||||
RMB’million |
RMB’million |
|||||||
Included in non-current assets |
||||||||
Prepaid contents royalties |
956 | 743 | ||||||
956 | 743 | |||||||
Included in current assets |
||||||||
Prepaid contents royalties |
1,882 | 1,755 | ||||||
Value-added tax recoverable |
149 | 136 | ||||||
Prepaid vendors deposits and other receivables |
484 | 404 | ||||||
Prepaid promotion and other expenses |
239 | 329 | ||||||
Receivable from Tencent (Note 32(b)) |
39 | 51 | ||||||
Others |
53 | 56 | ||||||
2,846 | 2,731 | |||||||
20 |
Accounts receivable |
As at December 31, |
||||||||
2020 |
2021 |
|||||||
RMB’million |
RMB’million |
|||||||
Accounts receivable |
2,814 | 3,630 | ||||||
Less: loss allowance for expected credit losses |
(14 | ) | (20 | ) | ||||
Accounts receivable, net |
2,800 | 3,610 | ||||||
Ageing analysis of the accounts receivable based on invoice date: |
||||||||
Up to 3 months |
2,490 | 2,804 | ||||||
3 to 6 months |
165 | 321 | ||||||
Over 6 months |
159 | 505 | ||||||
2,814 | 3,630 | |||||||
20 |
Accounts receivable (Continued) |
Year ended December 31, |
||||||||
2020 |
2021 |
|||||||
RMB’million |
RMB’million |
|||||||
At January 1 |
11 | 14 | ||||||
Provision for loss allowance recognized in income statement |
8 | 9 | ||||||
Receivables written off during the year as uncollectible |
(5 | ) | (3 | ) | ||||
At December 31 |
14 | 20 | ||||||
21 |
Term deposits and cash and cash equivalents |
(a) |
Term deposits |
(b) |
Cash and cash equivalents |
22 |
Share capital |
Number of issued shares* |
Share capital RMB’million |
Additional paid-in capital RMB’million |
Shares held for share award schemes RMB’million |
Treasury Shares RMB’million |
||||||||||||||||
Balance January 1, 2019 |
||||||||||||||||||||
(US$0.000083 par value; 4,800,000,000 shares authorized) |
3,265,986,486 | 2 | 33,776 | — | — | |||||||||||||||
Issuance of ordinary shares (note i) |
280,512 | — | 12 | — | — | |||||||||||||||
Employee share award schemes |
||||||||||||||||||||
-value of employee service |
— | — | 637 | — | — | |||||||||||||||
-Shares held for share award schemes (note ii) |
— | — | — | (31 | ) | — | ||||||||||||||
-Shares allotted and issued |
88,798,940 | — | — | — | — | |||||||||||||||
Balance December 31, 2019 |
||||||||||||||||||||
(US$0.000083 par value; 4,800,000,000 shares authorized) |
3,355,065,938 | 2 | 34,425 | (31 | ) | — | ||||||||||||||
Employee share award schemes |
||||||||||||||||||||
-value of employee service |
— | — | 619 | — | — | |||||||||||||||
-Shares held for share award schemes (note ii) |
— | — | — | (47 | ) | — | ||||||||||||||
-Shares allotted and issued for share award schemes (note iii) |
30,077,800 | — | — | — | — | |||||||||||||||
Repurchase of ordinary shares (note iv) |
— | — | — | — | (134 | ) | ||||||||||||||
Balance December 31, 2020 |
||||||||||||||||||||
(US$0.000083 par value; 4,800,000,000 shares authorized) |
3,385,143,738 | 2 | 35,044 | (78 | ) | (134 | ) | |||||||||||||
Expiry of put right of puttable ordinary shares (Note 26 (ii)) |
— | — | 535 | — | — | |||||||||||||||
Employee share award schemes |
||||||||||||||||||||
-value of employee service |
— | — | 659 | — | 35 |
|||||||||||||||
-Shares held for share award schemes (note ii) |
— | — | — | (105 | ) | — | ||||||||||||||
Issuance of ordinary shares |
5,010,526 |
— | — | — | — | |||||||||||||||
Repurchase of ordinary shares (note iv) |
— | — | — | — | (3,561 | ) | ||||||||||||||
Balance December 31, 2021 |
||||||||||||||||||||
(US$0.000083 par value; 4,800,000,000 shares authorized) |
3,390,154,264 | 2 | 36,238 | (183 | ) | (3,660 | ) | |||||||||||||
As at December 31, 2020 |
As at December 31, 2021 |
|||||||||||||||
Number of issued shares |
Share capital RMB’million |
Number of issued shares |
Share capital RMB’million |
|||||||||||||
Class A ordinary shares |
1,670,004,560 | 1 | 1,675,015,086 | 1 | ||||||||||||
Class B ordinary shares |
1,715,139,178 | 1 | 1,715,139,178 | 1 | ||||||||||||
3,385,143,738 | 2 | 3,390,154,264 | 2 | |||||||||||||
22 |
Share capital (Continued) |
* | All issued shares are fully paid as at December 31, 2020 and 2021. |
(i) | On February 20, 2019, the Company completed a private placement, where the Company sold to Tencent 280,512 Class A ordinary shares with an aggregate value of US$1.8 million at the offering price per share in our initial public offering for distribution to its eligible shareholders as required by the relevant listing rules of the Hong Kong Stock Exchange. |
(ii) | During the years ended December 31, 2019, 2020 and 2021, the Share Scheme Trust withheld 617,634, 1,046,852 and 1,878,732 Class A ordinary shares of the Company for an amount of approximately RMB31 million, RMB47 million and RMB105 million which had been deducted from the equity. |
(iii) | As at December 31, 2019, 2020 and 2021, 31,310,524, 35,763,090 and 16,297,722 Class A ordinary shares are held in the Share Scheme Trust for the purpose of granting awarded shares to the participants under the Share Award Schemes. |
(iv) | Repurchase of shares |
23 |
Other reserves |
Share-based compensation reserve RMB’million |
Contribution from ultimate holding company RMB’million |
PRC statutory reserve RMB’million |
Foreign currency translation reserve RMB’million |
Fair value reserve RMB’million |
Others RMB’million |
Total other reserves RMB’million |
||||||||||||||||||||||
At January 1, 2019 |
1,416 | 463 | 79 | 451 | (675 | ) | (831 | ) | 903 | |||||||||||||||||||
Currency translation differences |
— | — | — | 261 | — | — | 261 | |||||||||||||||||||||
Fair value changes on financial assets at fair value through other comprehensive income |
— | — | — | — | 1,031 | — | 1,031 |
23 |
Other reserves (Continued) |
Share-based compensation reserve RMB’million |
Contribution from ultimate holding company RMB’million |
PRC statutory reserve RMB’million |
Foreign currency translation reserve RMB’million |
Fair value reserve RMB’million |
Others RMB’million |
Total other reserves RMB’million |
||||||||||||||||||||||
Share of other comprehensive losses of an associate |
— |
— |
— |
— |
— |
(1 |
) |
(1 |
) | |||||||||||||||||||
Share based compensation |
519 |
— |
— |
— |
— |
— |
519 |
|||||||||||||||||||||
Exercise of share options/RSU |
(465 |
) |
— |
— |
— |
— |
— |
(465 |
) | |||||||||||||||||||
Additional investments in non-wholly owned subsidiaries |
— |
— |
— |
— |
— |
(76 |
) |
(76 |
) | |||||||||||||||||||
Profit appropriations to PRC statutory reserves |
— |
— |
15 |
— |
— |
— |
15 |
|||||||||||||||||||||
At December 31, 2019 |
1,470 |
463 |
94 |
712 |
356 |
(908 |
) |
2,187 |
||||||||||||||||||||
Currency translation differences |
— |
— |
— |
(1,286 |
) |
— |
— |
(1,286 |
) | |||||||||||||||||||
Fair value changes on financial assets at fair value through other comprehensive income |
— |
— |
— |
— |
5,219 |
— |
5,219 |
|||||||||||||||||||||
Share of other comprehensive losses of an associate |
— |
— |
— |
— |
— |
(9 |
) |
(9 |
) | |||||||||||||||||||
Share based compensation |
569 |
— |
— |
— |
— |
— |
569 |
|||||||||||||||||||||
Exercise of share options/RSU |
(429 |
) |
— |
— |
— |
— |
— |
(429 |
) | |||||||||||||||||||
Additional investments in non-wholly owned subsidiaries |
— |
— |
— |
— |
— |
(2 |
) |
(2 |
) | |||||||||||||||||||
Profit appropriations to PRC statutory reserves |
— |
— |
51 |
— |
— |
— |
51 |
|||||||||||||||||||||
At December 31, 2020 |
1,610 |
463 |
145 |
(574 |
) |
5,575 |
(919 |
) |
6,300 |
|||||||||||||||||||
Currency translation differences |
— |
— |
— |
(378 |
) |
— |
— |
(378 |
) | |||||||||||||||||||
Fair value changes on financial assets at fair value through other comprehensive income |
— |
— |
— |
— |
(2,128 |
) |
— |
(2,128 |
) |
23 |
Other reserves (Continued) |
Share-based compensation reserve RMB’million |
Contribution from ultimate holding company RMB’million |
PRC statutory reserve RMB’million |
Foreign currency translation reserve RMB’million |
Fair value reserve RMB’million |
Others RMB’million |
Total other reserves RMB’million |
||||||||||||||||||||||
Transfer of gains on disposal of financial instruments to retained earnings |
— | — | — | — | (56 | ) | — | (56 | ) | |||||||||||||||||||
Share of other comprehensive losses of associates |
— | — | — | — | — | 4 | 4 | |||||||||||||||||||||
Share based compensation |
647 | — | — | — | — | — | 647 | |||||||||||||||||||||
Exercise of share options/RSU |
(646 | ) | — | — | — | — | — | (646 | ) | |||||||||||||||||||
Additional investments in a non-wholly owned subsidiary |
— | — | — | — | — | (19 | ) | (19 | ) | |||||||||||||||||||
Profit appropriations to PRC statutory reserves |
— | — | 2 | — | — | — | 2 | |||||||||||||||||||||
At December 31, 2021 |
1,611 | 463 | 147 | (952 | ) | 3,391 | (934 | ) | 3,726 | |||||||||||||||||||
24 |
Share based compensation |
(a) |
Share-based compensation plans of the Company |
(i) | 2014 Share Incentive Plan |
24 |
Share based compensation (Continued) |
(a) |
Share-based compensation plans of the Company (Continued) |
(i) |
2014 Share Incentive Plan (Continued) |
Number of |
Weighted- average exercise price |
Weighted- average grant date fair value |
||||||||||
options |
(US$) |
(US$) |
||||||||||
Outstanding as at January 1, 2019 |
56,736,209 | 0.19 | 1.94 | |||||||||
Exercised |
(42,091,694 | ) | 0.18 | 1.97 | ||||||||
Forfeited |
(747,211 | ) | 0.20 | 2.04 | ||||||||
Outstanding as at December 31, 2019 |
13,897,304 | 0.23 | 1.92 | |||||||||
Vested and expected to vest as at December 31, 2019 |
13,670,469 | 0.23 | 1.92 | |||||||||
Exercisable as at December 31, 2019 |
12,007,012 | 0.23 | 1.91 | |||||||||
Non vested as at December 31, 2019 |
1,890,292 | 0.24 | 1.92 | |||||||||
Outstanding as at January 1, 2020 |
13,897,304 | 0.23 | 1.92 | |||||||||
Exercised |
(7,866,422 | ) | 0.23 | 1.91 | ||||||||
Forfeited |
(46,982 | ) | 0.27 | 1.91 | ||||||||
Outstanding as at December 31, 2020 |
5,983,900 | 0.23 | 1.93 | |||||||||
Vested and expected to vest as at December 31, 2020 |
5,983,900 | 0.23 | 1.93 | |||||||||
Exercisable as at December 31, 2020 |
5,983,900 | 0.23 | 1.93 | |||||||||
Non vested as at December 31, 2020 |
— | — | — | |||||||||
Outstanding as at January 1, 2021 |
5,983,900 | 0.23 | 1.93 | |||||||||
Exercised |
(2,992,122 | ) | 0.24 | 1.92 | ||||||||
Forfeited |
— | — | — | |||||||||
Outstanding as at December 31, 2021 |
2,991,778 | 0.22 | 1.94 | |||||||||
Vested and expected to vest as at December 31, 2021 |
2,991,778 | 0.22 | 1.94 | |||||||||
Exercisable as at December 31, 2021 |
2,991,778 | 0.22 | 1.94 | |||||||||
Non vested as at December 31, 2021 |
— | — | — |
24 |
Share based compensation (Continued) |
(a) |
Share-based compensation plans of the Company (Continued) |
(i) |
2014 Share Incentive Plan (Continued) |
Grant Date |
Expiry date |
Exercise price |
Share options December 31, 2020 |
Share options December 31, 2021 |
||||||||||
March 1, 2015 | February 28, 2025 | US$ | 0.000076 | 278,801 | 192,800 | |||||||||
March 1, 2015 | February 28, 2025 | US$ | 0.27 | 50,000 | — | |||||||||
March 1, 2015 | February 28, 2025 | US$ | 0.000076 | 460,220 | 292,744 | |||||||||
March 1, 2015 | February 28, 2025 | US$ | 0.27 | 417,410 | 179,020 | |||||||||
March 30, 2015 | March 29, 2025 | US$ | 0.27 | 700,882 | 403,284 | |||||||||
October 1, 2015 | September 30, 2025 | US$ | 0.27 | 125,100 | 63,760 | |||||||||
December 31, 2015 | December 30, 2025 | US$ | 0.27 | 599,658 | 196,016 | |||||||||
March 1, 2016 | February 28, 2026 | US$ | 0.27 | 107,889 | 50,746 | |||||||||
March 31, 2016 | March 30, 2026 | US$ | 0.27 | 98,938 | 72,634 | |||||||||
June 30, 2016 | June 29, 2026 | US$ | 0.000076 | 81,638 | — | |||||||||
June 30, 2016 | June 29, 2026 | US$ | 0.27 | 3,063,364 | 1,540,774 | |||||||||
Total |
5,983,900 | 2,991,778 | ||||||||||||
Weighted average remaining contractual life of options outstanding at end of period: |
5.01 | 3.97 | ||||||||||||
(ii) | 2017 Restricted Share Scheme and 2017 Option Plan |
Number of awarded shares |
||||||||||||
Year ended December 31, |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
Outstanding as at January 1 |
13,724,100 | 26,659,516 | 41,011,362 | |||||||||
Granted |
19,567,514 | 24,156,236 | 19,136,384 | |||||||||
Vested |
(5,700,520 | ) | (7,732,794 | ) | (13,096,270 | ) | ||||||
Forfeited |
(931,578 | ) | (2,071,596 | ) | (3,323,378 | ) | ||||||
Outstanding as at December 31 |
26,659,516 | 41,011,362 | 43,728,098 | |||||||||
Expected to vest as at December 31 |
24,377,060 | 37,672,420 | 39,425,569 |
24 |
Share based compensation (Continued) |
(a) |
Share-based compensation plans of the Company (Continued) |
(ii) |
2017 Restricted Share Scheme and 2017 Option Plan (Continued) |
Number of options |
Weighted- average exercise price (US$) |
Weighted- average grant date fair value (US$) |
||||||||||
Outstanding as at January 1, 2019 |
36,086,303 | 2.75 | 2.24 | |||||||||
Granted |
1,993,780 | 7.05 | 3.00 | |||||||||
Exercised |
(9,696,202 | ) | 1.78 | 1.95 | ||||||||
Forfeited |
(1,743,373 | ) | 2.67 | 2.33 | ||||||||
Outstanding as at December 31, 2019 |
26,640,508 | 3.43 | 2.39 | |||||||||
Vested and expected to vest as at December 31, 2019 |
25,329,481 | 3.44 | 2.38 | |||||||||
Exercisable as at December 31, 2019 |
6,065,968 | 2.45 | 2.04 | |||||||||
Non vested as at December 31, 2019 |
20,574,540 | 3.71 | 2.50 | |||||||||
Outstanding as at January 1, 2020 |
26,640,508 | 3.43 | 2.39 | |||||||||
Granted |
4,992,390 | 6.44 | 2.70 | |||||||||
Exercised |
(10,026,018 | ) | 2.64 | 1.92 | ||||||||
Forfeited |
(455,694 | ) | 6.27 | 3.01 | ||||||||
Outstanding as at December 31, 2020 |
21,151,186 | 4.45 | 2.68 | |||||||||
Vested and expected to vest as at December 31, 2020 |
20,097,190 | 4.44 | 2.68 | |||||||||
Exercisable as at December 31, 2020 |
4,762,058 | 3.05 | 2.74 | |||||||||
Non vested as at December 31, 2020 |
16,389,128 | 4.86 | 2.66 | |||||||||
Outstanding as at January 1, 2021 |
21,151,186 | 4.45 | 2.68 | |||||||||
Granted |
8,543,982 | 5.54 | 2.81 | |||||||||
Exercised |
(4,360,740 | ) | 1.92 | 2.26 | ||||||||
Forfeited |
(541,488 | ) | 5.70 | 2.90 | ||||||||
Outstanding as at December 31, 2021 |
24,792,940 | 5.24 | 2.79 | |||||||||
Vested and expected to vest as at December 31, 2021 |
23,552,634 | 5.21 | 2.79 | |||||||||
Exercisable as at December 31, 2021 |
9,580,612 | 4.00 | 2.64 | |||||||||
Non vested as at December 31, 2021 |
15,212,328 | 6.03 | 2.88 |
24 |
Share based compensation (Continued) |
(a) |
Share-based compensation plans of the Company (Continued) |
(ii) |
2017 Restricted Share Scheme and 2017 Option Plan (Continued) |
Granted in |
||||||||||||
2019 |
2020 |
2021 |
||||||||||
Risk free interest rate |
2.08% | 0.71%-0.91% |
1.22%-1.63% |
|||||||||
Expected dividend yield |
0% | 0% | 0% | |||||||||
Expected volatility |
40% | 40%-42.5% |
43.5%-50% |
|||||||||
Exercise multiples |
2.2-2.8 |
2.2-2.8 |
2.2-2.8 |
|||||||||
Contractual life |
10 years | 10 years | 10 years |
(b) |
Share-based compensation plans of Tencent |
24 |
Share based compensation (Continued) |
(b) |
Share-based compensation plans of Tencent (Continued) |
(c) |
Expected retention rate of grantees |
25 |
Notes payable |
As at December 31, |
||||||||
2020 RMB’million |
2021 RMB’million |
|||||||
Included in non-current liabilities |
||||||||
Notes payable |
5,175 |
5,062 |
||||||
5,175 |
5,062 |
|||||||
Principal amount (US $ ’million) |
Carrying amount at December 31, 2020 (RMB’million) |
Carrying amount at December 31, 2021 (RMB’million) |
Interest Rate (per annum) |
Due |
||||||||||||||||
2025 Notes |
300 |
1,945 |
1,903 |
1.375 |
% |
2025 | ||||||||||||||
2030 Notes |
500 |
3,230 |
3,159 |
2.000 |
% |
2030 | ||||||||||||||
800 |
5,175 |
5,062 |
||||||||||||||||||
25 |
Notes payable (Continued) |
26 |
Other payables and other liabilities |
As at December 31, |
||||||||
2020 RMB’million |
2021 RMB’million |
|||||||
Included in non-current liabilities |
||||||||
Government grants |
2 |
2 |
||||||
Deferred income |
66 |
30 |
||||||
|
|
|
|
|||||
68 |
32 |
|||||||
|
|
|
|
|||||
Included in current liabilities |
||||||||
Dividend payable |
12 |
12 |
||||||
Accrued expenses (note i) |
2,717 |
3,133 |
||||||
Advances from customers |
68 |
85 |
||||||
Investment payables |
74 |
28 |
||||||
Other tax liabilities |
137 |
131 |
||||||
Present value of liability of puttable shares (Note ii) |
539 |
— |
||||||
Deferred income |
34 |
34 |
||||||
Share repurchase payables |
— |
82 |
||||||
Other deposits |
94 |
99 |
||||||
Others |
206 |
228 |
||||||
|
|
|
|
|||||
3,881 |
3,832 |
|||||||
|
|
|
|
(i) |
Accrued expenses mainly comprise payroll and welfare, advertising and marketing, short-term lease rental and other operating expenses. |
(ii) |
Puttable ordinary shares |
26 |
Other payables and other liabilities (Continued) |
27 |
Deferred revenue |
As at December 31, |
||||||||
2020 |
2021 |
|||||||
RMB’million |
RMB’million |
|||||||
Non-current |
78 | 86 | ||||||
Current |
1,608 | 1,834 | ||||||
|
|
|
|
|||||
1,686 | 1,920 | |||||||
|
|
|
|
28 |
Business Combinations |
(a) |
Acquisition of a long-form audio company |
28 |
Business Combination s (Continued) |
(a) |
Acquisition of a long-form audio company (Continued) |
RMB’million |
||||
Purchase consideration |
2,231 | |||
|
|
|||
Recognized amounts of identifiable assets acquired and liabilities assumed: |
||||
Cash and cash equivalents |
196 | |||
Short-term investment |
100 | |||
Accounts receivable |
30 | |||
Intangible assets |
496 | |||
Prepayments, deposits and other assets |
7 | |||
Deferred revenue |
(53 | ) | ||
Other payables and accruals |
(30 | ) | ||
Accounts payable |
(22 | ) | ||
Deferred tax liabilities |
(73 | ) | ||
Goodwill |
1,580 | |||
|
|
|||
2,231 | ||||
|
|
(b) |
Other business combination |
29 |
Cash flow information |
(a) |
Cash generated from operations |
2019 |
2020 |
2021 |
||||||||||
RMB’million |
RMB’million |
RMB’million |
||||||||||
Profit before income tax |
4,540 | 4,632 | 3,632 | |||||||||
Adjustments for: |
||||||||||||
Depreciation and amortization |
583 | 824 | 1,001 | |||||||||
Impairment provision for investments in associates (Note 17) |
43 | 4 | — | |||||||||
Loss allowance for expected credit losses (Note 20) |
18 | 8 | 9 | |||||||||
Non-cash employee benefits expense – share based payments (Note 8) |
519 | 569 | 647 | |||||||||
Fair value losses /(gains) on investments |
37 | — | (105 | ) | ||||||||
Net (gains)/ losses in relation to equity investments |
(1 | ) | (32 | ) | 10 | |||||||
Dividend income (Note 7) |
— | — | (27 | ) | ||||||||
Gain of step-up acquisition arising from business combination (Note 7 ) |
— | (19 | ) | (8 | ) | |||||||
Share of loss/(profit) of associates and joint ventures (Note 17) |
18 | (19 | ) | 47 | ||||||||
Interest income (Note 6) |
(615 | ) | (622 | ) | (530 | ) | ||||||
Fair value change on puttable shares |
37 | 37 | — | |||||||||
Interest expense |
31 | 62 | 120 | |||||||||
Net exchange differences |
(4 | ) | (2 | ) | 1 | |||||||
Increase in accounts receivable |
(733 | ) | (520 | ) | (769 | ) | ||||||
Decrease/(increase) in inventories |
9 | 8 | (6 | ) | ||||||||
( Increase)/decrease in other operating assets |
(175 | ) | (887 | ) | 408 | |||||||
Increase in accounts payable |
717 | 644 | 631 | |||||||||
Increase in other operating liabilities |
1,164 | 258 | 309 | |||||||||
Cash generated from operations |
6,188 | 4,945 | 5,370 | |||||||||
(b) |
Non-cash investing and financing activities |
2019 |
2020 |
2021 |
||||||||||
RMB’million |
RMB’million |
RMB’million |
||||||||||
Equity |
— | 101 | — |
(c) |
Net cash reconciliation |
30 |
Financial instruments by category |
Financial assets at amortized cost |
Financial assets at fair value through profit and loss |
Financial assets at fair value through other comprehensive income |
Total |
|||||||||||||
Financial assets |
RMB’million |
RMB’million |
RMB’million |
RMB’million |
||||||||||||
As at December 31, 2020 |
||||||||||||||||
Accounts receivable (Note 20) |
2,800 | — | — | 2,800 | ||||||||||||
Other receivables (Note 19) |
411 | — | — | 411 | ||||||||||||
Term deposits (Note 21(a)) |
17,811 | — | — | 17,811 | ||||||||||||
Cash and cash equivalents (Note 21(b)) |
11,128 | — | — | 11,128 | ||||||||||||
Other investments (Note 18(b)) |
— | 386 | — | 386 | ||||||||||||
Financial assets at fair value through other comprehensive income (Note 18(a)) |
— | — | 9,771 | 9,771 | ||||||||||||
32,150 | 386 | 9,771 | 42,307 | |||||||||||||
As at December 31, 2021 |
||||||||||||||||
Accounts receivable (Note 20) |
3,610 | — | — | 3,610 | ||||||||||||
Other receivables (Note 19) |
270 | — | — | 270 | ||||||||||||
Term deposits (Note 21(a)) |
17,072 | — | — | 17,072 | ||||||||||||
Short-term investments (Note 18(c)) |
— | 1,029 |
— | 1,029 | ||||||||||||
Cash and cash equivalents (Note 21(b)) |
6,591 | — | — | 6,591 | ||||||||||||
Other investments (Note 18(b)) |
— | 236 | — | 236 | ||||||||||||
Financial assets at fair value through other comprehensive income (Note 18(a)) |
— | — | 7,302 | 7,302 | ||||||||||||
27,543 | 1,265 | 7,302 | 36,110 | |||||||||||||
Liabilities at amortized cost |
||||
Financial liabilities |
RMB’million |
|||
As at December 31, 2020 |
||||
Notes payable (Note 25) |
5,175 | |||
Accounts payable |
3,701 | |||
Other payables and other liabilities (note) |
2,136 | |||
Lease liabilities |
321 | |||
|
|
|||
11,333 | ||||
|
|
|||
As at December 31, 2021 |
||||
Notes payable (Note 25) |
5,062 | |||
Accounts payable |
4,422 | |||
Other payables and other liabilities (note) |
1,922 | |||
Lease liabilities |
297 | |||
|
|
|||
11,703 | ||||
|
|
31 |
Commitments |
(a) |
Operating commitments |
2020 |
2021 |
|||||||
RMB’million |
RMB’million |
|||||||
Within one year |
462 | 348 | ||||||
Later than one year but not later than five years |
23 | 24 | ||||||
|
|
|
|
|||||
485 | 372 | |||||||
|
|
|
|
(b) |
Contents royalty |
2020 |
2021 |
|||||||
RMB’million |
RMB’million |
|||||||
Within one year |
3,356 | 2,511 | ||||||
Later than one year but not later than five years |
1,271 | 1,189 | ||||||
|
|
|
|
|||||
4,627 | 3,700 | |||||||
|
|
|
|
(c) |
Investment commitments |
32 |
Related party transactions |
Name of related parties |
Relationship with the Group | |
Tencent and its subsidiaries other than the entities controlled by the Group (“Tencent Group”) |
The Company’s principal owner | |
China Literature Limited (“China Literature”) |
Tencent’s subsidiary |
32 |
Related party transactions (Continued) |
(a) |
Transactions |
2019 |
2020 |
2021 |
||||||||||
RMB’million |
RMB’million |
RMB’million |
||||||||||
Revenue |
||||||||||||
Online music services to Tencent Group (note (i)) |
355 | 277 | 364 | |||||||||
Online music services to the Company’s associates and associates of Tencent Group |
40 | 206 | 412 | |||||||||
Social entertainment services and others to Tencent Group, the Company’s associates and associates of Tencent Group |
21 | 213 | 170 | |||||||||
Expenses |
||||||||||||
Operation expenses recharged by Tencent Group |
752 | 1,082 | 1,260 | |||||||||
Advertising agency cost to Tencent Group |
231 | 440 | 652 | |||||||||
Content royalties to Tencent Group, the Company’s associates and associates of Tencent Group (note (ii)) |
132 | 306 | 541 | |||||||||
Other costs to the Company’s associates and associates of Tencent Group |
25 | 48 | 176 |
(i) |
Including revenue from content sublicensing, online advertising and subscriptions provided to Tencent Group pursuant to the Business Cooperation Agreement. |
(ii) |
In March 2020 the Group signed a five-year strategic partnership with China Literature, a subsidiary of Tencent. Through this partnership arrangement, the Group was granted a global license to produce derivative contents in the form of audiobooks of online literary works for which China Literature has the rights to or the license to adapt, and the rights to sublicense; as well as to allow the Group to distribute existing audiobooks in China Literature’s portfolio. |
32 |
Related party transactions (Continued) |
(b) |
Balances with related parties |
As at December 31, |
||||||||
2020 |
2021 |
|||||||
RMB’million |
RMB’million |
|||||||
Included in accounts receivable from related parties: |
||||||||
Tencent Group (note) |
1,993 | 2,510 | ||||||
The Company’s associates and associates of Tencent Group |
48 | 90 | ||||||
Included in prepayments, deposits and other assets from related parties: |
||||||||
Tencent Group |
39 | 51 | ||||||
The Company’s associates and associates of Tencent Group |
64 | 142 | ||||||
Included in accounts payable to related parties: |
||||||||
Tencent Group |
763 | 719 | ||||||
The Company’s associates and associates of Tencent Group |
37 | 198 | ||||||
Included in other payables and accruals to related parties: |
||||||||
Tencent Group |
237 | 440 | ||||||
The Company’s associates and associates of Tencent Group |
46 | 55 |
(c) |
Key management personnel compensation |
2019 |
2020 |
2021 |
||||||||||
RMB’million |
RMB’million |
RMB’million |
||||||||||
Short-term employee benefits |
65 | 62 | 70 | |||||||||
Share-based compensation |
233 | 205 | 153 | |||||||||
|
|
|
|
|
|
|||||||
298 | 267 | 223 | ||||||||||
|
|
|
|
|
|
33 |
Contingent liabilities |
33 |
Contingent liabilities (Continued) |
34 |
Events occurring after the reporting period |
(a) |
Acquisition of land use right |
(b) |
Acquisition of M&E Mobile Limited |
35 |
Approval of these consolidated financial statements |