|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment due by period*
|
|
|
|
Total*
|
|
Less than
1 year
|
|
1 - 3 years
|
|
3 - 5 years
|
|
More than
5 years
|
|
|
|
(in RMB'000)
|
|
Operating lease obligations
|
|
|
786,472
|
|
|
246,770
|
|
|
339,879
|
|
|
121,999
|
|
|
77,824
|
|
Purchase obligations
|
|
|
938,464
|
|
|
799,518
|
|
|
138,946
|
|
|
|
|
|
|
|
Convertible senior notes*
|
|
|
4,555,476
|
|
|
87,406
|
|
|
4,468,070
|
|
|
|
|
|
|
|
-
*
-
The
potential repurchase of the convertible senior notes was refinanced by a financing arrangement in the event of repurchase.
-
G.
-
Safe Harbor
This
annual report on Form 20-F contains forward-looking statements that involve risks and uncertainties. All statements other than statements of historical facts are
forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different
from those expressed or implied by the forward-looking statements.
You
can identify some of these forward-looking statements by words or phrases such as "may," "will," "expect," "anticipate," "aim," "estimate," "intend," "plan," "believe," "is/are
likely to," "potential," "continue" or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events that we believe
may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, but are not limited to, statements relating
to:
-
-
our goals and strategies;
-
-
our future business development, results of operations and financial condition;
-
-
the expected growth of the online discount retail market in China;
-
-
our ability to attract customers and brand partners and further enhance our brand recognition;
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-
-
our expectations regarding demand for and market acceptance of flash sales products and services;
-
-
competition in our industry;
-
-
fluctuations in general economic and business conditions in China; and
-
-
assumptions underlying or related to any of the foregoing.
You
should read thoroughly this annual report and the documents that we refer to in this annual report with the understanding that our actual future results may be materially different
from and worse than what we expect. We qualify all of our forward-looking statements by these cautionary statements. Other sections of this annual report include additional factors which could
adversely impact our business and financial performance. Moreover, we operate in an evolving environment. New risk factors and uncertainties emerge from time to time and it is not possible for our
management to predict all risk factors and uncertainties, nor can we assess the impact of all factors on our business or the extent to
which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
This
annual report also contains certain data and information, which we obtained from various government and private publications. Although we believe that the publications and reports
are reliable, we have not independently verified the data. Statistical data in these publications includes projections that are based on a number of assumptions. If any one or more of the assumptions
underlying the market data is later found to be incorrect, actual results may differ from the projections based on these assumptions.
You
should not rely upon forward-looking statements as predictions of future events. The forward-looking statements made in this annual report relate only to events or information as of
the date on which the statements are made in this annual report. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or
otherwise.
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
-
A.
-
Directors and Senior Management
The
following table sets forth information regarding our directors and executive officers as of the date of this annual report.
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|
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|
Directors and Executive Officers
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|
Age
|
|
Position/Title
|
Eric Ya Shen
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|
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45
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Chairman of the Board of Directors, Chief Executive Officer
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Arthur Xiaobo Hong
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44
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Vice Chairman of the Board of Directors, Chief Operating Officer
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Bin Wu
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|
|
43
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Director
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Jacky Yu Xu
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|
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45
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Director
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Chun Liu
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|
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49
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Independent Director
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Frank Lin
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|
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52
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Independent Director
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Xing Liu
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|
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46
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Independent Director
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Kathleen Chien
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|
|
47
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|
Independent Director
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Nanyan Zheng
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|
|
48
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Independent Director
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Donghao Yang
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|
|
45
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Chief Financial Officer
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Bill Yanlin Huang
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|
|
44
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Chief Technology Officer
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Yizhi Tang
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|
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43
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Senior Vice President of Logistics
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Mr. Eric Ya Shen
is our co-founder and has served as the chairman of our board of directors and chief executive officer since our
inception in August 2010. He has over 20 years of experience in the distribution of consumer electronic products in domestic and overseas markets. Since 2001, Mr. Shen
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has
served as the chairman of the board of directors of Guangzhou NEM Import and Export Co., Ltd., a company primarily engaging in the sales of consumer electronic and telecommunication
products. Mr. Shen received an EMBA degree from Cheung Kong Graduate School of Business in 2010 and an associate degree in telecommunication from Shanghai Railway College in 1990.
Mr. Arthur Xiaobo Hong
is our co-founder and has served as the vice chairman of our board of directors since January 2011.
Mr. Hong has served as our chief operating officer since August 2012. Mr. Hong has over 15 years of experience in the distribution of consumer electronic products in overseas
markets. Mr. Hong has served as chairman of the board of directors of Société Europe Pacifique Distribution, a French company engaging in the distribution of
consumer electronic products, since 1998. Mr. Hong graduated from Cheung Kong Graduate School of Business in 2010.
Mr. Bin Wu
is an angel investor of our company and has served as our director since January 2011. Mr. Wu is the director of
several privately held companies in China. Mr. Wu received an EMBA degree from Cheung Kong Graduate School of Business in 2006 and a master's and bachelor's degree in physics from Lanzhou
University in 1998 and 1996, respectively.
Mr. Jacky Yu Xu
is an angel investor of our company and has served as our director since January 2011. Mr. Xu is the
director of several privately held companies in China. Mr. Xu graduated from Cheung Kong Graduate School of Business in 2009.
Mr. Chun Liu
has served as our director since March 2013. Mr. Chun Liu is currently the chief culture officer of Zhong Nan
Zhong Gong. Prior to joining Zhong Nan Zhong Gong, he was the senior vice
president of iQiyi.com. Prior to joining iQiyi.com, he was vice president and managing director of Soho.com Inc. and chief operating officer of Sohu Video. Prior to joining Sohu, Mr. Liu
worked with Phoenix TV from 2000 to 2011. His last position at Phoenix TV was the executive director and the head of Phoenix TV Beijing Program Center. Earlier in his career, Mr. Liu worked in
the Youth Division and News Commentary Department at CCTV, China's state television broadcaster. As the executive producer of a famous program "News Investigation," he produced dozens of award winning
documentaries. Mr. Chun Liu received an EMBA degree from Cheung Kong Graduate School of Business in China and a master's degree from the Communication University of China.
Mr. Frank Lin
has served as our director since January 2011. Mr. Lin is a general partner of DCM, a technology venture
capital firm. Prior to joining DCM in 2006, Mr. Lin was chief operating officer of SINA Corporation (Nasdaq: SINA). He co-founded SINA's predecessor, SinaNet, in 1995 and later guided SINA
through its listing on Nasdaq. Prior to founding SinaNet, Mr. Lin was a consultant at Ernst & Young Management Consulting Group. Mr. Lin had also held various marketing,
engineering and managerial positions at Octel Communication Inc. and NYNEX. Mr. Lin currently serves on the board of directors of numerous DCM portfolio companies. Mr. Lin
received an MBA degree from Stanford University and a bachelor's degree in engineering from Dartmouth College.
Mr. Xing Liu
has served as our director since January 2011. Mr. Liu is a partner of Sequoia Capital China. Prior to joining
Sequoia Capital China in 2007, Mr. Liu had over nine years of work experience in investment banking, technology and product development and consulting at Merrill Lynch, Xerox and GlobalSight,
respectively. Mr. Liu currently serves on the board of directors of numerous Sequoia Capital China portfolio companies. Mr. Liu received a master's degree in computer engineering from
Syracuse University, an MBA degree from The Wharton School of the University of Pennsylvania and a bachelor's degree in management information systems from Fudan University.
Ms. Kathleen Chien
has served as our director since March 2012. Ms. Chien is currently the chief operating officer and
acting chief financial officer of 51job, Inc., a Nasdaq-listed provider of integrated human resource services in China, and an independent director of ChinaCache International
Holdings Ltd., a Nasdaq-listed provider of content and application delivery network services in China. Ms. Chien joined 51job, Inc. in 1999 and served as its chief financial
officer from 2004 to March 2009.
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Prior
to joining 51job, Inc., Ms. Chien worked in the financial services and management consulting industries, including three years with Bain & Company in Hong Kong and two years
with Capital Securities Corp. in Taiwan. During her tenure at Bain & Company, Ms. Chien was a consultant to a number of companies on strategic and marketing issues, including entry into
the Chinese market and achieving cost and operating efficiencies. While at Capital Securities Corp., Ms. Chien completed a number of equity and equity-linked transactions, enabling Taiwanese
companies to raise significant capital from the international capital markets. Ms. Chien received her bachelor's degree in economics
from the Massachusetts Institute of Technology and an MBA degree from the Walter A. Haas School of Business at University of California, Berkeley.
Mr. Nanyan Zheng
has served as our director since March 2012. Mr. Zheng is currently the chairman of Plateno
Group Ltd. Mr. Zheng founded Plateno Group Ltd. in 2013, which wholly owned 7 Days Groups Holdings Ltd. after its privatization and launched a series of new mid-level and
upscale hotel brands. Mr. Zheng co-founded 7 Days Groups Holdings Ltd. and has been serving as its chief executive officer since October 2004. Mr. Zheng is also a co-founder and
partner of Ocean Link Partners Limited, a fund management company founded in April 2016, and a co-founder and co-chairman since January 2011 of Reocar Group Limited, one of the leading
car rental agencies in China. In June 2016, Mr. Zheng invested in OGC Nice, a French football club. From 2000 to October 2004, Mr. Zheng worked for Ctrip.com
International Ltd., a Nasdaq-listed company and a leading travel service provider in China, and served as vice president and general manager of southern China, and later as vice president of
marketing in charge of national marketing. During 2001, Mr. Zheng also worked for the computer center of the Economic and Trade Commission of Guangdong Province. Mr. Zheng received a
bachelor's degree from Sun Yat-Sen University in China.
Mr. Donghao Yang
has served as our chief financial officer since August 2011. Mr. Yang has held senior executive and
managerial positions in various public and private companies, including serving as the chief finance officer of Synutra International Inc. (Nasdaq: SYUT) from May 2010 to August 2011, as the
chief financial officer of Greater China of Tyson Foods, Inc. (NYSE: TSN) from March 2007 to April 2010, as a finance director of Asia Pacific of Valmont Industries, Inc. (NYSE: VMI)
from October 2003 to March 2007, and as a director of China Minmetals Brazil Holding Limited from January 1999 to April 2001. Mr. Yang received an MBA degree from Harvard Business School in
2003 and a bachelor's degree in international economics from Nankai University in 1993.
Dr. Bill Yanlin Huang
has served as our chief technology officer since October 2016. Prior to joining our company, Bill served as
chief technology officer and senior vice president of Sina Corporation (Nasdaq: SINA) from April 2015 to September 2016. Before that, he was the chief technology officer and senior vice president of
R&D at PPTV from May 2011 to April 2015. From 2003 to 2011, Bill held various positions at Microsoft in its headquarters in Redmond, Washington. Bill received a Master's degree in computer science
from The University of Virginia in January 2001, a PhD in biochemistry and molecular biology from The State University of New York at Buffalo in August 1999, and a Bachelor's degree in biology from
Wuhan University in July 1993.
Mr. Yizhi Tang
has served as our senior vice president since November 2012. Before that, Mr. Tang served as our vice
president from September 2010 to November 2012. Mr. Tang has over 10 years of experience in the logistics industry. Prior to joining us, Mr. Tang served as an operating director
of Best Logistics Technology Co., Ltd. from 2009 to 2010. From 2008 to 2009, Mr. Tang served as the head of logistics department of Tesco, responsible for the logistics in the
northern China area. From 2006 to 2008, Mr. Tang worked as the senior director of the logistics department of
Dangdang.com
. Mr. Tang
received a master's degree from Sun Yat-Sen University in 2003 and a bachelor's degree from Nanjing University of Aeronautics and Astronautics in 1997.
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Employment Agreements
We have entered into employment agreements with each of our executive officers. Under these agreements, each of our executive officers is
employed for a specified time period. We may terminate employment for cause, at any time, without advance notice or remuneration, for certain acts of the executive officer, such as conviction or plea
of guilty to a felony or any crime involving moral turpitude, negligent or dishonest acts to our detriment, or misconduct or a failure to perform agreed duties. In such case, the executive officer
will not be entitled to receive payment of any severance benefits or other amounts by reason of the termination, and the executive officer's right to all other benefits will terminate, except as
required by any applicable law. We may also terminate an executive officer's employment without cause upon one-month advance written notice. In such case of termination by us, we are required to
provide compensation to the executive officer, including severance pay, as expressly required by the applicable law of the jurisdiction where the executive officer is based. The executive officer may
terminate the employment at any time with a one-month advance written notice if there is any significant change in the executive officer's duties and responsibilities that
is inconsistent in any material and adverse respect with his or her title and position or a material reduction in the executive officer's annual salary before the next annual salary review, or if
otherwise approved by the board of directors.
Each
executive officer has agreed to hold, both during and after the termination or expiry of his or her employment agreement, in strict confidence and not to use, except as required in
the performance of his or her duties in connection with the employment, any of our confidential information or trade secrets, any confidential information or trade secrets of our clients or
prospective clients or the confidential or proprietary information of any third party received by us and for which we have confidential obligations. The executive officers have also agreed to disclose
in confidence to us all inventions, designs and trade secrets which they conceive, develop or reduce to practice and to assign all right, title and interest in them to us, and assist us in obtaining
patents,
In
addition, each executive officer has agreed to be bound by non-competition and non-solicitation restrictions during the term of his or her employment and for one year following the
last date of employment. Specifically, each executive officer has agreed not to (a) approach our clients, customers, contacts or other persons or entities introduced to the executive officer
for the purpose of doing business with such persons or entities that will harm our business relationships with these persons or entities; (b) assume employment with or provide services to any
of our competitors, or engage with, whether as principal, partner, licensor or otherwise, any of our competitors; or (c) seek directly or indirectly, to solicit the services of any of our
employees who is employed by us on or after the date of the executive officer's termination, or in the year preceding such termination.
-
B.
-
Compensation
For
the fiscal year ended December 31, 2016, we paid an aggregate of RMB19.7 million (US$2.8 million) in cash to our executive officers, and we paid an aggregate of
RMB2.7 million (US$384 thousand) in cash to our non-executive directors. We have not set aside or accrued any amount to provide pension, retirement or other similar benefits to our
executive officers and directors. Our PRC subsidiaries and consolidated affiliated entities are required by PRC law to make contributions equal to certain percentages of each employee's salary for his
or her pension insurance, medical insurance, unemployment insurance and other statutory benefits and a housing provident fund.
Stock Incentive Plans
In March 2011, we adopted our 2011 Plan, in order to attract and retain the best available personnel, to provide additional incentives to
employees, directors, officers, consultants and other
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eligible
persons and to promote the success of our business. Under the 2011 Plan, the maximum number of shares may be granted is 7,350,000 ordinary shares. As of the date of this annual report,
options to acquire 1,138,712 Class A ordinary shares have been granted and are outstanding under the 2011 Plan.
The
following paragraphs summarize the terms of the 2011 Plan.
Plan Administration.
The plan administrator is our board or a committee designated by our board.
Awards.
We may grant options, restricted shares and restricted share units as well as other rights or benefits, such as share
appreciation rights and
dividend equivalent rights, under the 2011 Plan.
Award Agreement and Notice of Stock Option Award.
Awards granted under the 2011 Plan are evidenced by an award agreement and, in the
case of stock
options, a notice of stock option award that sets forth the terms, conditions, and limitations for each grant.
Exercise Price.
The exercise price of an award shall be determined by the administrator in accordance with the 2011 Plan.
Eligibility.
We may grant awards other than incentive stock options to our employees, directors and consultants or those of our related
entities.
Incentive stock options may be granted only to employees of our company or a parent or a subsidiary of our company.
Term of the Awards.
The term of each award grant shall be determined by the plan administrator and stated in the award agreement,
provided that the
term of incentive stock options shall not exceed 10 years from the date of grant. In the event of an incentive stock option granted to a grantee who, at the time the option is granted, owns
shares representing more than 10% of the voting power of all classes of shares of our company or any parent or subsidiary of our company, the term of the incentive stock option shall be five years
from the date of grant or such shorter term as may be provided in the award agreement.
Vesting Schedule.
The vesting schedule is determined by the plan administrator and set forth in the notice of stock option award and
award agreement.
Except as unanimously approved by our board, awards granted under the 2011 Plan shall be subject to a minimum four-year vesting schedule calling for vesting no faster than the following: one-fourth of
the total ordinary shares subject to the awards shall vest at the first anniversary of the vesting commencement date and one-forty-eighth of the total ordinary shares subject to the awards shall vest
at the end of each month thereafter; provided that the awards shall not be exercised or released until the earlier of consumption of a qualified initial public offering or immediately prior to a
change in control. Our initial public offering in March 2012 is a qualified initial public offering under the 2011 Plan.
Transfer Restrictions.
Incentive stock options may not be transferred in any manner other than by will or by the laws of descent or
distribution and
may be exercised, during the lifetime of the grantee, only by the grantee. Other awards are transferable by will and by the laws of descent and distribution, and during the lifetime of the grantee,
may be transferred to the extent and in the manner authorized by the plan administrator.
Termination of Employment or Service.
In the event that an award recipient ceases employment with us or ceases to provide services to
us, an award
may be exercised following the termination of employment or service to the extent provided in the award agreement.
Termination and Amendment of the Plan.
Unless terminated earlier, the 2011 Plan will terminate automatically in 2021. Our board has the
authority to
amend, suspend or terminate the plan subject to
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shareholder
approval with respect to certain amendments. However, no suspension or termination shall adversely affect any rights under awards previously granted.
In March 2012, we adopted our 2012 Plan, in order to attract and retain the best available personnel, provide additional incentives to
employees, directors and consultants, and promote the success of our business. The plan permits the grant of options to purchase our ordinary shares, restricted shares and restricted share units as
deemed appropriate by the administrator under the plan. The maximum aggregate number of shares that may be issued pursuant to our 2012 Plan is 9,000,000, and the maximum aggregate number of shares
that may be issued per calendar year is 1,500,000 from 2012 until the termination of this plan. As of the date of this annual report, options to acquire 395,139 Class A ordinary shares and
232,233 restricted shares have been granted and are outstanding under the 2012 Plan.
The
following paragraphs describe the principal terms of our 2012 Plan:
Plan Administration.
The plan will be administered by a committee of one or more directors to whom the board shall delegate the
authority to grant or
amend awards to participants other than any of the committee members. The committee will determine the provisions and terms and conditions of each award grant.
Awards and Award Agreement.
We may grant options, restricted shares or restricted share units to our directors, employees or consultants
under the
plan. Awards granted under the plan will be evidenced by award agreements that set forth the terms, conditions and limitations for each award. These may include the term of an award, the provisions
applicable in the event the participant's employment or service terminates, and our authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind an award.
Option Exercise Price.
The exercise price of an option shall be determined by the plan administrator and set forth in the award
agreement. It may be
a fixed price or a variable price related to the fair market value of our ordinary shares, to the extent not prohibited by applicable laws. Subject to certain limits set forth in the plan, the
exercise price may be amended or adjusted in the absolute discretion of the plan administrator, whose determination shall be final, binding and conclusive. To the extent not prohibited by applicable
laws or any exchange rule, a downward adjustment of the exercise prices of options shall be effective without the approval of the shareholders or the approval of the affected participants.
Eligibility.
We may grant awards to our employees, directors and consultants or those of any of our related entities, which include our
subsidiaries
or any entities in which we hold a substantial ownership or control interest, as determined by our plan administrator. Awards other than incentive share options may be granted to our employees,
directors and consultants. Incentive share options may be granted only to employees of our company or a parent or a subsidiary of our company.
Term of the Awards.
The term of each award grant shall be determined by our plan administrator, provided that the term shall not exceed
10 years from the date of the grant.
Vesting Schedule.
In general, the plan administrator determines, or the award agreement specifies, the vesting schedule. Restricted
shares granted
under the plan will have either a three-year, a two-year or a one-year vesting schedule. We have the right to repurchase the restricted shares until they have vested.
Transfer Restrictions.
Except as otherwise provided by the plan administrator, an award may not be transferred or otherwise disposed of
by a
participant other than by will or the laws of descent and
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distribution.
The plan administrator may permit an award other than an incentive share option to be transferred to or exercised by certain persons related to the participant by express provision in
the award or by an amendment to the award.
Corporate Transactions.
Except as otherwise provided in an individual award agreement or any other written agreement entered into
between a
participant and us, our plan administrator may provide for one or more of the following in the event of a change of control or other similar corporate transaction: (i) the termination of each
award outstanding under the plan at a specific time in the future, with each participant having the right to exercise the vested portion of the awards during a period of time as determined by the plan
administrator; (ii) the termination of any award in exchange for an amount of cash equal to the amount that could have been obtained upon the exercise of the award; (iii) the replacement
of an award with other rights or property selected by the plan administrator; (iv) the assumption of the award by our successor, parent or subsidiary, or the substitution of an award granted by
our successor, parent or subsidiary, with appropriate adjustments; or (v) payment of an award in cash based on the value of our ordinary shares on the date of the corporate transaction plus
reasonable interest on the award.
Amendment and Termination of the Plan.
With the approval of our board, the plan administrator may amend, modify or terminate the plan at
any time and
from time to time. However, no amendment may be made without the approval of our shareholders to the extent that approval is required by applicable laws. The approval of our shareholders would also be
required in the event that the amendment increased the number of shares available under our plan, permitted the plan administrator to extend the term of our plan or the exercise period for an option
beyond ten years from the date of grant, or resulted in a material increase in benefits or a change in eligibility requirements, unless we decided to follow home country practice.
In July 2014, we adopted our 2014 Plan, in order to attract and retain the best available personnel, provide additional incentives to employees,
directors and consultants, and promote the success of our business. The plan permits the grant of options to purchase our ordinary shares, restricted shares, share appreciation rights, and other types
of awards as deemed appropriate by the administrator under the plan. The maximum aggregate number of shares that may be issued pursuant to our 2014 Plan is (i) 5,366,998 Class A ordinary
shares, and (ii) an automatic increase on January 1 of
each year after the effective date of the 2014 Plan by that number of shares representing 1.5% of our then total issued and outstanding share capital as of December 31 of the preceding year, or
such less number as determined by the board of directors. As of the date of this annual report, options to acquire 1,320,000 Class A ordinary shares and 2,798,511 restricted shares have been
granted and are outstanding under the 2014 Plan.
The
following paragraphs describe the principal terms of our 2014 Plan:
Plan Administration.
The plan will be administered by the Compensation Committee, or a committee of two or more directors to whom the
Compensation
Committee shall delegate the authority to grant or amend awards to participants other than independent directors and executive officers. The committee will determine the provisions and terms and
conditions of each award grant.
Awards and Award Agreement.
We may grant options, restricted shares, share appreciation rights, or other types of awards to our
directors, employees
or consultants under the plan. Awards granted under the plan will be evidenced by award agreements that set forth the terms, conditions and limitations for each award. These may include the term of an
award, the provisions applicable in the event the participant's employment or service terminates, and our authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind an award.
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Option Exercise Price.
The exercise price of an option shall be determined by the plan administrator and set forth in the award
agreement. It may be
a fixed price or a variable price related to the fair market value of our Class A ordinary shares, to the extent not prohibited by applicable laws. Subject to certain limits set forth in the
plan, the exercise price may be amended or adjusted in the absolute discretion of the plan administrator, whose determination shall be final, binding and conclusive. To the extent not prohibited by
applicable laws or any exchange rule, a downward adjustment of the exercise prices of options shall be effective without the approval of the shareholders or the approval of the affected participants.
Eligibility.
We may grant awards to our employees, directors and consultants or those of any of our related entities, which include our
subsidiaries
or any entities in which we hold a substantial ownership or control interest, as determined by our plan administrator. Awards other than incentive share options may be granted to our employees,
directors and consultants. Incentive share options may be granted only to employees of our company or a parent or a subsidiary of our company.
Term of the Awards.
The term of each award grant shall be determined by our plan administrator, provided that the term for an option
shall not exceed
10 years from the date of the grant.
Vesting Schedule.
In general, the plan administrator determines, or the award agreement specifies, the vesting schedule. We have the
right to
repurchase the restricted shares until they have vested.
Transfer Restrictions.
Except as otherwise provided by the plan administrator, an award may not be transferred or otherwise disposed of
by a
participant other than by will or the laws of descent and distribution. The plan administrator may permit an award other than an incentive share option to be transferred to or exercised by certain
persons related to the participant by express provision in the award or by an amendment to the award. A participant must give us prompt notice of any disposition of shares acquired by exercise of an
incentive share option within (i) two years from the date of grant of such incentive share option or (ii) one year after the transfer of such shares to the participant.
Corporate Transactions.
Except as otherwise provided in an individual award agreement or any other written agreement entered into
between a
participant and us, our plan administrator may provide for one or more of the following in the event of a change of control or other similar corporate transaction: (i) the termination of each
award outstanding under the plan at a specific time in the future, with each participant having the right to exercise such awards during a period of time as determined by the plan administrator;
(ii) either the purchase of any award for an amount of cash equal to the amount that could have been attained upon the exercise of such award or realization of the participant's rights had such
award been currently exercisable or payable or fully vested; (iii) the replacement of an award with other rights or property selected by the plan administrator in its sole discretion the
assumption of or substitution of such award by the successor or surviving corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices,
or (iv) provide for payment of awards in cash based on the value of shares on the date of the change of control plus reasonable interest on the award through the date such award would otherwise
be vested or have been paid in accordance with its original terms, if necessary to comply with the Code.
Amendment and Termination of the Plan.
With the approval of our board of directors, at any time and from time to time, the plan
administrator may
terminate, amend or modify the 2014 Plan; provided, however, that to the extent necessary and desirable to comply with any applicable law, regulation, or stock exchange rule, unless we decide to
follow home country practice, shareholder approval is required for any plan amendment, including any amendment to the plan that (i) increases the number of shares available under the 2014 Plan,
(ii) permits the plan administrator to extend the exercise period for an option beyond ten years from the date of grant, or (iii) results in a change in eligibility requirements.
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Share Incentive Grants
The following table summarizes, for the year ended December 31, 2016, the outstanding options we granted to our directors and executive
officers under the 2011 Plan and the 2012 Plan. No option has been granted to our directors and executive officers under the 2014 Plan for the year ended December 31, 2016.
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|
|
Name
|
|
Number of
Ordinary
Shares
Underlying
Options
|
|
Exercise
Price
(US$/Share)
|
|
Date of Grant
|
|
Date of Expiration
|
|
Donghao Yang
|
|
*
|
|
|
0.50
|
|
|
August 30, 2011
|
|
|
August 29, 2021
|
|
|
|
*
|
|
|
0.50
|
|
|
January 1, 2013
|
|
|
December 31, 2022
|
|
Yizhi Tang
|
|
*
|
|
|
0.50
|
|
|
March 18, 2011
|
|
|
March 17, 2021
|
|
|
|
*
|
|
|
2.52
|
|
|
November 30, 2011
|
|
|
November 29, 2021
|
|
Nanyan Zheng
|
|
*
|
|
|
2.50
|
|
|
April 16, 2012
|
|
|
April 15, 2022
|
|
Kathleen Chien
|
|
*
|
|
|
2.50
|
|
|
April 16, 2012
|
|
|
April 15, 2022
|
|
Chun Liu
|
|
*
|
|
|
2.50
|
|
|
March 22, 2013
|
|
|
March 22, 2023
|
|
-
*
-
Aggregate
number of shares represented by all grants of options and/or restricted share units to the person account for less than 1% of our total outstanding ordinary
shares.
The
following table summarizes, for the year ended December 31, 2016, the outstanding restricted shares we granted to our directors and executive officers under the 2012 Plan and
the 2014 Plan.
|
|
|
|
|
|
|
Name
|
|
Number of
Restricted Shares
|
|
Date of Grant
|
|
Bill Yanlin Huang
|
|
*
|
|
|
October 1, 2016
|
|
Yizhi Tang
|
|
*
|
|
|
January 1, 2013
|
|
Frank Lin
|
|
*
|
|
|
January 1, 2013
|
|
|
|
*
|
|
|
April 1, 2016
|
|
Xing Liu
|
|
*
|
|
|
January 1, 2013
|
|
|
|
*
|
|
|
April 1, 2016
|
|
Nanyan Zheng
|
|
*
|
|
|
January 1, 2013
|
|
|
|
*
|
|
|
April 1, 2016
|
|
Kathleen Chien
|
|
*
|
|
|
January 1, 2013
|
|
|
|
*
|
|
|
April 1, 2016
|
|
Chun Liu
|
|
*
|
|
|
March 22, 2013
|
|
|
|
*
|
|
|
April 1, 2016
|
|
-
*
-
Aggregate
number of shares represented by all grants of options and/or restricted share units to the person account for less than 1% of our total outstanding ordinary
shares.
-
C.
-
Board Practices
Board of Directors
Our board of directors consists of nine directors. A director is not required to hold any shares in our company by way of qualification. A
director may vote with respect to any contract or transaction in which he or she is materially interested provided the nature of the interest is disclosed prior to its consideration. Subject to our
amended and restated memorandum and articles of association, the directors may exercise all the powers of our company to borrow money, mortgage their undertaking, property and uncalled capital and
issue debentures or other securities whether outright or as security for any debt, liability or obligation of our company or of any third party. None of our directors has a service contract with us
that provides for benefits upon termination of service.
115
Table of Contents
Committees of the Board of Directors
We have three committees under the board of directors, namely the audit committee, the compensation committee and the nominating and corporate
governance committee. We have adopted a charter for each of the three committees. Each committee's members and functions are described below.
Audit Committee.
Our audit committee consists of Ms. Kathleen Chien, Mr. Nanyan Zheng and Mr. Chun Liu.
Ms. Kathleen
Chien, Mr. Nanyan Zheng and Mr. Chun Liu satisfy the "independence" requirements under Section 303A of the Corporate Governance Rules of NYSE and Rule 10A-3 under the
Exchange Act. Ms. Kathleen Chien is the chair of our audit committee. We have determined that Ms. Kathleen
Chien qualifies as an "audit committee financial expert." The purpose of the audit committee is to assist our board of directors with its oversight responsibilities regarding: (a) the integrity
of our financial statements, (b) our compliance with legal and regulatory requirements, (c) the independent auditor's qualifications and independence and (d) the performance of
our internal audit function and independent auditor. The audit committee will be responsible for, among other things:
-
-
appointing the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by the independent
auditors;
-
-
reviewing with the independent auditors any audit problems or difficulties and management's response;
-
-
discussing the annual audited financial statements with management and the independent auditors;
-
-
reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any steps taken to monitor and
control major financial risk exposures;
-
-
reviewing and approving all proposed related party transactions;
-
-
meeting separately and periodically with management and the independent auditors; and
-
-
monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to
ensure proper compliance.
Compensation Committee.
Our compensation committee consists of Mr. Nanyan Zheng, Ms. Kathleen Chien and Mr. Frank
Lin.
Mr. Nanyan Zheng, Mr. Frank Lin and Ms. Kathleen Chien satisfy the "independence" requirements under Section 303A of the Corporate Governance Rules of NYSE.
Mr. Nanyan Zheng is the chair of our compensation committee. The compensation committee assists the board in reviewing and approving compensation structure, including all forms of compensation,
relating to our directors and executive officers. Our chief executive officer may not be present at any committee meeting during which his compensation is deliberated. The compensation committee is
responsible for, among other things:
-
-
reviewing and approving, or recommending to the board for its approval, the compensation for our chief executive officer and other executive
officers;
-
-
reviewing and recommending to the board for determination with respect to the compensation of our directors; and
-
-
reviewing periodically and approving any incentive compensation or equity plans, programs or similar arrangements.
Nominating and Corporate Governance Committee.
Our nominating and corporate governance committee consists of Mr. Nanyan
Zheng,
Ms. Kathleen Chien and Mr. Xing Liu. Mr. Nanyan Zheng, Ms. Kathleen Chien and Mr. Xing Liu satisfy the "independence" requirements under Section 303A of
116
Table of Contents
the
Corporate Governance Rules of NYSE. Mr. Nanyan Zheng is the chair of our nominating and corporate governance committee. The nominating and corporate governance committee assists the board
of directors in selecting individuals qualified to become our directors and in determining the composition of the board and its committees. The nominating and corporate governance committee is
responsible for, among other things:
-
-
selecting and recommending to the board nominees for election by the shareholders or appointment by the board;
-
-
reviewing annually with the board the current composition of the board with regard to characteristics such as independence, knowledge, skills,
experience and diversity;
-
-
making recommendations on the frequency and structure of board meetings and monitoring the functioning of the committees of the board; and
-
-
advising the board periodically with regard to significant developments in the law and practice of corporate governance as well as our
compliance with applicable laws and regulations, and making recommendations to the board on all matters of corporate governance and on any remedial action to be taken.
Duties of Directors
Under Cayman Islands law, our directors have a duty of loyalty to act honestly in good faith with a view to our best interests. Our directors
also have a duty to exercise the skill they actually possess and such care and diligence that a reasonably prudent person would exercise in comparable circumstances. In fulfilling their duty of care
to us, our directors must ensure compliance with our memorandum and articles of association. Our company has the right to seek damages if a duty owed by our directors to us is breached.
Terms of Directors and Officers
Our officers are elected by and serve at the discretion of the board of directors and the shareholders. Our directors are not subject to a term
of office and hold office until such time as they are removed from office by ordinary resolution of the shareholders in a general meeting or by the unanimous written resolution of all shareholders. A
director will be removed from office automatically if, among other things, the director (a) becomes bankrupt or makes any arrangement or composition with his creditors; or (b) dies or is
found by our company to be or becomes of unsound mind.
-
D.
-
Employees
As
of December 31, 2016, we had 45,302 full time employees, compared with 16,919 and 29,720 employees as of December 31, 2014 and 2015, respectively. We also employ
independent contractors
117
Table of Contents
and
part-time personnel from time to time. The following table sets forth the number of our full time employees categorized by areas of operations as of December 31, 2016:
|
|
|
|
|
Operations
|
|
Number
of
Employees
|
|
Merchandising
|
|
|
1,634
|
|
Products and technology support
|
|
|
2,369
|
|
Business development, sales and marketing
|
|
|
191
|
|
Internet finance
|
|
|
722
|
|
Customer services
|
|
|
1,727
|
|
Logistics and delivery
|
|
|
38,065
|
|
Administration and management
|
|
|
594
|
|
|
|
|
|
|
Total
|
|
|
45,302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our
success depends on our ability to attract, retain and motivate qualified personnel. We have developed a corporate culture that encourages teamwork, effectiveness, self-development
and commitment to providing our customers with superior services. We regularly provide our employees with training tailored to each job function to enhance performance and service quality.
As
required by regulations in China, we participate in various employee social security plans that are organized by municipal and provincial governments, including pension, unemployment
insurance, childbirth insurance, work-related injury insurance, medical insurance and housing insurance. We are required under PRC law to make contributions to employee benefit plans at specified
percentages of the salaries, bonuses and certain allowances of our employees, up to a maximum amount specified by the local government from time to time. In addition, we also provide our employees
fringe benefits such as free lunches and periodic appreciation payments to employees' family members. For the year ended December 31, 2016, we have not experienced any significant labor
disputes.
-
E.
-
Share Ownership
The
following table sets forth information with respect to the beneficial ownership of our ordinary shares as of March 31, 2017 by:
-
-
each of our directors and executive officers; and
-
-
each person known to us to own beneficially more than 5% of our ordinary shares.
The
calculations in the shareholder table below are based on 117,392,602 ordinary shares issued and outstanding as of March 31, 2017, comprising of (i) 100,882,244
Class A ordinary shares, excluding the 626,020 Class A ordinary shares issued to Deutsche Bank Trust Company Americas, the depositary
118
Table of Contents
of
our ADS program, for bulk issuance of ADSs reserved for future issuances upon the exercise or vesting of awards granted under our stock incentive plans, and (ii) 16,510,358 Class B
ordinary shares.
|
|
|
|
|
|
|
|
|
|
Number of
Ordinary Shares
Beneficially
Owned
(1)
|
|
%
(2)
|
|
Directors and Executive Officers
**
:
|
|
|
|
|
|
|
|
Eric Ya Shen
(3)
|
|
|
16,510,358
|
|
|
14.1
|
|
Arthur Xiaobo Hong
(4)
|
|
|
8,952,810
|
|
|
7.6
|
|
Bin Wu
(5)
|
|
|
1,868,187
|
|
|
1.6
|
|
Jacky Xu
(6)
|
|
|
3,952,155
|
|
|
3.4
|
|
Chun Liu
(7)
|
|
|
*
|
|
|
*
|
|
Frank Lin
(8)
|
|
|
*
|
|
|
*
|
|
Xing Liu
(9)
|
|
|
*
|
|
|
*
|
|
Kathleen Chien
(10)
|
|
|
*
|
|
|
*
|
|
Nanyan Zheng
(11)
|
|
|
*
|
|
|
*
|
|
Donghao Yang
(12)
|
|
|
*
|
|
|
*
|
|
Bill Yanlin Huang
(12)
|
|
|
*
|
|
|
*
|
|
Yizhi Tang
(12)
|
|
|
*
|
|
|
*
|
|
All directors and executive officers as a group
|
|
|
32,799,876
|
|
|
27.9
|
|
Principal Shareholders
:
|
|
|
|
|
|
|
|
Elegant Motion Holdings Limited
(13)
|
|
|
16,510,358
|
|
|
14.1
|
|
High Vivacity Holdings Limited
(14)
|
|
|
8,952,810
|
|
|
7.6
|
|
-
*
-
Less
than 1% of our total outstanding ordinary shares.
-
**
-
Except
for Mr. Frank Lin, Mr. Xing Liu, Mr. Nanyan Zheng, Ms. Kathleen Chien and Mr. Chun Liu, the business address of our
directors and executive officers is c/o No. 20 Huahai Street, Liwan District, Guangzhou 510370, People's Republic of China.
-
(1)
-
Beneficial
ownership is determined in accordance with the SEC rules and includes voting or investment power with respect to the securities.
-
(2)
-
For
each person and group included in this column, percentage ownership is calculated by dividing the number of shares beneficially owned by such person or group by
the sum of the number of shares outstanding and the number of shares such person or group has the right to acquire upon exercise of the stock options or vesting of restricted shares within
60 days after March 31, 2017.
-
(3)
-
Beneficially
owned through Elegant Motion Holdings Limited, a British Virgin Islands company. Elegant Motion Holdings Limited is ultimately wholly owned by the SYZXC
Trust. Under the terms of the SYZXC Trust, Mr. Eric Ya Shen and his wife Ms. Xiaochun Zhang have the power to jointly direct the trustee with respect to the retention or disposal of, and
the exercise of any voting and other rights attached to these shares. As of March 31, 2017, Mr. Eric Ya Shen beneficially owned 16,510,358 Class B ordinary shares, representing
62.1% of the aggregate voting power of our company.
-
(4)
-
Beneficially
owned through High Vivacity Holdings Limited, a British Virgin Islands company, which is ultimately wholly owned by the Nasa Stand Trust. Under the
terms of the Nasa Stand Trust, Mr. Hong has the power to direct the trustee with respect to the retention or disposal of, and the exercise of any voting and other rights attached to these
shares.
-
(5)
-
Beneficially
owned through Rapid Prince Development Limited, a British Virgin Islands company. Rapid Prince Development Limited is ultimately wholly owned by the HGS
Trust (formerly known as the "Wu Family Trust"). Under the terms of the HGS Trust, Mr. Wu has the power to direct the trustee with respect to the retention or disposal of, and the exercise of
any voting and other rights attached to these shares.
-
(6)
-
Beneficially
owned through Advanced Sea International Limited, a British Virgin Islands company wholly owned by Mr. Xu.
-
(7)
-
The
business address of Mr. Liu is Level 11, Sohu.com Internet Plaza, No. 1 Unit Zhongguancun East Road, Haidian District, Beijing 100084,
People's Republic of China.
-
(8)
-
The
business address of Mr. Lin is 2420 Sand Hill Road, Suite 200, Menlo Park, CA 94025, U.S.A.
119
Table of Contents
-
(9)
-
Mr. Liu
is a partner of Sequoia Entities. The business address of Mr. Liu is Suite 2215, Two Pacific Place, 88 Queensway, Hong Kong.
-
(10)
-
The
business address of Ms. Chien is Building 3, No. 1387 Zhang Dong Road, Shanghai 201203, People's Republic of China.
-
(11)
-
The
business address of Mr. Zheng is 10F, 705 Guangzhou Da Dao Nan Road, Guangzhou, Guangdong, 510290, People's Republic of China.
-
(12)
-
Certain
of our directors and executive officers have been granted options pursuant to our stock incentive plans. See "Item 6.B. Directors, Senior Management
and EmployeesCompensation of Directors and Executive OfficersStock Incentive Plans."
-
(13)
-
Elegant
Motion Holdings Limited is a British Virgin Islands company. Elegant Motion Holdings Limited is ultimately wholly owned by the SYZXC Trust. Under the terms
of the SYZXC Trust, Mr. Eric Ya Shen and his wife Ms. Xiaochun Zhang have the power to jointly direct the trustee with respect to the retention or disposal of, and the exercise of any
voting and other rights attached to these shares. The registered address of Elegant Motion Holdings Limited is Palm Grove House, P.O. Box 438, Road Town, Tortola, British Virgin Islands.
-
(14)
-
High
Vivacity Holdings Limited is a British Virgin Islands company, which is ultimately wholly owned by the Nasa Stand Trust. Under the terms of the Nasa Stand
Trust, Mr. Hong has the power to direct the trustee with respect to the retention or disposal of, and the exercise of any voting and other rights attached to these shares. The registered
address of High Vivacity Holdings Limited is Palm Grove House, P.O. Box 438, Road Town, Tortola, British Virgin Islands.
To
our knowledge and based on our review of our register of shareholders as of March 31, 2017, 90,332,833 Class A ordinary shares were held of record by one holder that
resides in the United States, Deutsche Bank Trust Company Americas, the depositary of our ADS program. The number of beneficial owners of our ADSs in the United States is likely to be much larger than
the number of record holders of our Class A ordinary shares in the United States. For the different voting rights of our Class A ordinary shareholders and Class B ordinary
shareholders, please refer to "Item 4.A. Information on the CompanyHistory and Development of the CompanyOur Company." We are not aware of any arrangement that may, at
a subsequent date, result in a change of control of our company.
For
the options granted to our directors, officers and employees, please refer to "Item 6.B. Directors, Senior Management and EmployeesCompensation of Directors and
Executive Officers."
120
Table of Contents
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
-
A.
-
Major Shareholders
Please
refer to "Item 6.E. Directors, Senior Management and EmployeesShare Ownership."
-
B.
-
Related Party Transactions
Contractual Arrangements
Our wholly-owned subsidiary, Vipshop China, has entered into a series of contractual arrangements with our consolidated affiliated entity,
Vipshop Information, and its shareholders, which enable us to exercise effective control over Vipshop Information, receive substantially all of the economic benefits of Vipshop Information through
service fees in consideration for the technical and consulting services provided by Vipshop China, and have an exclusive option to purchase, or designate one or more person(s) to purchase, all of the
equity interests in Vipshop Information to the extent permitted under PRC laws, regulations and legal procedures. For a description of these contractual arrangements, see "Item 4.C. Information
on the CompanyOrganizational StructureContractual Arrangements with Vipshop Information."
Transactions with Our Directors and Shareholders
We purchased products and goods from companies controlled by certain of our directors and ordinary shareholders, namely, Bin Wu and Jacky
Xu, in the amount of RMB106.3 million (US$15.3 million) for the year ended December 31, 2016. As of December 31, 2016, the amount due to companies controlled by our
ordinary shareholders was RMB49.8 million (US$7.2 million), which was unsecured and interest free.
Transactions with Other Related Parties
We also purchased products and goods from our affiliate in the amount of RMB48.8 million (US$7.0 million), and engaged certain of
our affiliates to provide delivery service to our customers and other service in the amount of RMB138.6 million (US$20.0 million), for the year ended December 31, 2016.
As of December 31, 2016, the amount due to our affiliates was RMB2.9 million (US$0.4 million).
Employment Agreements
See "Item 6.A. Directors, Senior Management and EmployeesDirectors and Senior ManagementEmployment Agreements."
Share Options
See "Item 6.B. Directors, Senior Management and EmployeesCompensation of Directors and Executive OfficersStock
Incentive Plans."
-
C.
-
Interests of Experts and Counsel
Not
applicable.
ITEM 8. FINANCIAL INFORMATION
-
A.
-
Consolidated Statements and Other Financial Information
We
have appended consolidated financial statements filed as part of this annual report.
121
Table of Contents
Legal Proceedings
From time to time, we have become and may in the future become a party to various legal or administrative proceedings arising in the ordinary
course of our business, including actions with respect to intellectual property infringement, violation of third-party license or other rights, breach of contract, labor and employment claims. We are
currently not a party to, and we are not aware of any threat of, any legal or administrative proceedings that, in the opinion of our management, are likely to have a material and adverse effect on our
business, financial condition or results of operations and cash flows.
Litigation
We and certain of our officers and directors were named as defendants in two putative securities class actions filed in the U.S. District Court
for the Southern District of New York:
Heller v. Vipshop Holdings Limited et al.
, Civil Action No. 1:15-cv-03870-LTS (S.D.N.Y.) (filed on
May 19, 2015) and
Schwartz v. Vipshop Holdings Limited et al.
, Civil Action No. 1:15-cv-05097-LTS (S.D.N.Y.)(filed on June 30,
2015). The complaints in both putative class actions allege that certain of our financial statements and other public disclosures contained misstatements or omissions and assert claims under the U.S.
securities laws. On September 15, 2015, the court consolidated the two actions, and appointed a lead plaintiff and approved the lead plaintiff's selection of lead counsel for the consolidated
action. On November 24, 2015, the lead plaintiff filed a Notice of Voluntary Dismissal Without Prejudice which was entered by the court, voluntarily dismissing, without prejudice, all claims in
the consolidated action.
Dividend Policy
We have not paid in the past and do not have any present plan to pay any cash dividends on our ordinary shares in the foreseeable future. We
currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business.
Our
board of directors has discretion as to whether to distribute dividends, subject to applicable laws. Even if our board of directors decides to declare dividends, their form,
frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual and statutory restrictions and other factors that
the board of directors may deem relevant.
Holders
of our ADSs will be entitled to receive dividends, if any, subject to the terms of the deposit agreement, to the same extent as the holders of our ordinary shares. Cash dividends
will be paid to the depositary of our ADSs in U.S. dollars, which will distribute them to the holders of ADSs according to the terms of the deposit agreement. Other distributions, if any, will be paid
by the depositary to the holders of ADSs in any means it deems legal, fair and practical.
We
are a holding company incorporated in the Cayman Islands. We principally rely on dividends from our subsidiaries in China and Hong Kong for our cash needs. To pay dividends to us, our
subsidiaries in China and Hong Kong need to comply with the applicable regulations. See "Item 3.D. Key InformationRisk FactorsRisks Relating to Doing Business in
ChinaWe principally rely on dividends and other distributions on equity paid by Vipshop China in China to fund our cash and financing requirements, and any limitation on the ability of
Vipshop China to make payments to us could materially and adversely affect our ability to conduct our business."
-
B.
-
Significant Changes
Except
as disclosed elsewhere in this annual report, we have not experienced any significant changes since the date of our audited consolidated financial statements included in this
annual report.
122
Table of Contents
ITEM 9. THE OFFER AND LISTING
-
A.
-
Offer and Listing Details
Our
ADSs, each representing 0.2 Class A ordinary share, have been listed on NYSE since March 23, 2012. Our ADSs trade under the symbol "VIPS."
The
following table provides the high and low trading prices on NYSE for the periods indicated below, and all prices have been retrospectively adjusted to reflect the current ADS to
ordinary share ratio of five ADSs to one Class A ordinary share effective on November 3, 2014 for all periods presented.
|
|
|
|
|
|
|
|
|
|
Trading Price Per ADS
|
|
|
|
High (US$)
|
|
Low (US$)
|
|
Monthly High and Low
|
|
|
|
|
|
|
|
April 2017 (through April 13, 2017)
|
|
|
13.60
|
|
|
12.55
|
|
March 2017
|
|
|
14.50
|
|
|
12.76
|
|
February 2017
|
|
|
13.80
|
|
|
11.31
|
|
January 2017
|
|
|
11.78
|
|
|
10.50
|
|
December 2016
|
|
|
12.11
|
|
|
10.84
|
|
November 2016
|
|
|
14.36
|
|
|
10.61
|
|
Quarterly High and Low
|
|
|
|
|
|
|
|
First Quarter 2017
|
|
|
14.50
|
|
|
10.50
|
|
Fourth Quarter 2016
|
|
|
16.24
|
|
|
10.61
|
|
Third Quarter 2016
|
|
|
17.41
|
|
|
10.97
|
|
Second Quarter 2016
|
|
|
15.03
|
|
|
10.21
|
|
First Quarter 2016
|
|
|
15.34
|
|
|
10.37
|
|
Fourth Quarter 2015
|
|
|
22.31
|
|
|
12.02
|
|
Third Quarter 2015
|
|
|
23.56
|
|
|
14.68
|
|
Second Quarter 2015
|
|
|
30.72
|
|
|
21.30
|
|
First Quarter 2015
|
|
|
29.79
|
|
|
19.18
|
|
Annual High and Low
|
|
|
|
|
|
|
|
2016
|
|
|
17.41
|
|
|
10.21
|
|
2015
|
|
|
30.72
|
|
|
12.02
|
|
2014
|
|
|
24.80
|
|
|
8.02
|
|
2013
|
|
|
9.12
|
|
|
1.57
|
|
2012 (from March 23, 2012)
|
|
|
1.93
|
|
|
0.41
|
|
-
B.
-
Plan of Distribution
Not
applicable.
-
C.
-
Markets
Our
ADSs, each representing 0.2 Class A ordinary shares, have been listed on NYSE since March 23, 2012. Our ADSs trade under the symbol "VIPS."
-
D.
-
Selling Shareholders
Not
applicable.
-
E.
-
Dilution
Not
applicable.
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-
F.
-
Expenses of the Issue
Not
applicable.
ITEM 10. ADDITIONAL INFORMATION
-
A.
-
Share Capital
Not
applicable.
-
B.
-
Memorandum and Articles of Association
Our
second amended and restated memorandum and articles of association became effective on September 15, 2014. The following are summaries of material provisions of our second
amended and restated memorandum and articles of association and the Companies Law insofar as they relate to the material terms of our ordinary shares.
Registered Office and Objects
Pursuant to Article 2 of our second amended and restated memorandum of association, our registered office is at the offices of
International Corporation Services Ltd., PO Box 472, 2nd Floor, Harbour Place, 103 South Church Street, George Town, Grand Cayman KY1-1106, Cayman Islands or at such other place
as our board of directors may from time to time decide. Pursuant to Article 3 of our second amended and restated memorandum of association, the objects for which our company is established are
unrestricted and our company has full power and authority to carry out any object not prohibited by the Companies Law as the same may be revised from time to time, or any other law of the Cayman
Islands.
Directors
See "Item 6.C. Directors, Senior Management and EmployeesBoard Practices."
Ordinary Shares
General.
All of our outstanding Class A and Class B ordinary shares are fully paid and non-assessable. Certificates
representing the
Class A and Class B ordinary shares are issued in registered form. Our
shareholders may freely hold and vote their shares. Each holder of our Class A ordinary shares is entitled to one vote for each Class A ordinary share held on matters submitted to a vote
of shareholders, and each holder of our Class B ordinary shares is entitled to ten votes for each Class B ordinary share held on matters submitted to a vote of shareholders.
Dividends.
The holders of our ordinary shares are entitled to such dividends as may be declared by our board of directors subject to
the Companies
Law.
Voting Rights.
Each Class A ordinary share is entitled to one vote and each Class B ordinary share is entitled to ten votes on
all
matters upon which the ordinary shares are entitled to vote. Voting at any shareholders' meeting is by show of hands unless a poll is demanded. A poll may be demanded by one or more shareholders
holding at least 10% of the paid up voting share capital, present in person or by proxy.
A
quorum required for a meeting of shareholders consists of at least one shareholder present in person or by proxy or, if a corporation or other non-natural person, by its duly
authorized representative, who holds no less than one-third of our voting share capital. Shareholders' meetings are held annually and may be convened by our board of directors on its own initiative or
upon a request to the directors by shareholders holding in aggregate at least one-third of our voting share capital.
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Advance
notice to shareholders of at least seven days is required for the convening of our annual general meeting and other shareholders' meetings.
An
ordinary resolution to be passed by the shareholders requires a simple majority of votes cast in a general meeting, while a special resolution requires no less than two-thirds of the
votes cast. A special resolution is required for important matters such as a change of name. Our shareholders may effect certain changes by ordinary resolution, including increasing the amount of our
authorized share capital, consolidating and dividing all or any of our share capital into shares of larger amount than our existing shares and canceling any shares.
Transfer of Shares.
Subject to the restrictions of our memorandum and articles of association, as applicable, any of our shareholders
may transfer
all or any of his or her ordinary shares by an instrument of transfer in the usual or common form or any other form approved by our board.
Our
board of directors may, in its sole discretion, decline to register any transfer of any ordinary share which is not fully paid up or on which we have a lien. Our directors may also
decline to register any transfer of any share unless (a) the instrument of transfer is lodged with us, accompanied by the certificate for the shares to which it relates and such other evidence
as our board of directors may reasonably require to show the right of the transferor to make the transfer; (b) the instrument of transfer is in respect of only one class of shares;
(c) the instrument of transfer is properly stamped, if required; (d) in the case of a transfer to joint holders, the number of joint holders to whom the share is to be transferred does
not exceed four; (e) the shares conceded are free of any lien in favor of us; or (f) a fee of such maximum sum as NYSE may determine to be payable, or such lesser sum as our board of
directors may from time to time require, has been paid to us in respect thereof.
If
our directors refuse to register a transfer they shall, within two months after the date on which the instrument of transfer was lodged, send to each of the transferor and the
transferee notice of such refusal. The registration of transfers may, on 14 days' notice being given by advertisement in such one or more newspapers or by electronic means, be suspended and the
register closed at such times and for such periods as our board of directors may from time to time determine, provided, however, that the registration of transfers shall not be suspended nor the
register closed for more than 30 days in any year.
Liquidation.
On a return of capital on winding up or otherwise (other than on conversion, redemption or purchase of shares), assets
available for
distribution among the holders of ordinary shares shall be distributed among the holders of the ordinary shares in accordance with the Companies Law and the memorandum or articles of association of
the company. If our assets available for distribution are insufficient to repay all of the paid-up capital, the assets will be distributed so that the losses are borne by our shareholders
proportionately.
Calls on Shares and Forfeiture of Shares.
Our board of directors may from time to time make calls upon shareholders for any amounts
unpaid on their
shares in a notice served to such shareholders at least 14 days prior to the specified time of payment. The shares that have been called upon and remain unpaid on the specified time are subject
to forfeiture.
Redemption of Shares.
Subject to the provisions of the Companies Law, we may issue shares on terms that are subject to redemption, at
our option or
at the option of the holders, on such terms and in such manner as may be determined by special resolution.
Variations of Rights of Shares.
All or any of the special rights attached to any class of shares may, subject to the provisions of the
Companies Law,
be varied either with the written consent of the holders of a majority of the issued shares of that class or with the sanction of a special resolution passed at a general meeting of the holders of the
shares of that class. The rights conferred upon the holders of the shares of any class shall not, unless otherwise expressly provided by the terms of issue of
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the
shares of that class, be deemed to be varied by the creation or issue of further shares ranking in priority to or pari passu with such previously existing shares.
Inspection of Books and Records.
Holders of our ordinary shares will have no general right under Cayman Islands law to inspect or
obtain copies of
our list of shareholders or our corporate records. However, we will provide our shareholders with annual audited financial statements.
Anti-Takeover Provisions.
Some provisions of our second amended and restated memorandum and articles of association may discourage,
delay or prevent
a change of control of our company or management that shareholders may consider favorable, including provisions that:
-
-
authorize our board of directors to issue preferred shares in one or more series and to designate the price, rights, preferences, privileges
and restrictions of such preferred shares without any further vote or action by our shareholders; and
-
-
limit the ability of shareholders to requisition and convene general meetings of shareholders.
However,
under Cayman Islands law, our directors may only exercise the rights and powers granted to them under our second amended and restated memorandum and articles of association for
a proper purpose and for what they believe in good faith to be in the best interests of our company.
-
C.
-
Material Contracts
Other
than in the ordinary course of business and other than those described under this item, in "Item 4. Information on the Company," "Item 7.B. Major Shareholders and
Related Party TransactionsRelated Party Transactions" or elsewhere in this annual report, we have not entered into any material contract during the two years immediately preceding the
date of this annual report: (i) a contract for assignment of State-owned construction land use right dated July 16, 2015 between Guangzhou Municipal Bureau of Land Resources and Housing
Management and Guangzhou Vipshop Data Technology Co., Ltd. and (ii) a contract for assignment of State-owned construction land use right dated August 20, 2015 between
Guangzhou Municipal Bureau of Land Resources and Housing Management and Guangzhou Vipshop Data Technology Co., Ltd.
-
D.
-
Exchange Controls
See
"Item 4.B. Information on the CompanyBusiness OverviewRegulationRegulations on Foreign Currency Exchange."
-
E.
-
Taxation
Cayman Islands Taxation
The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no
taxation in the nature of inheritance tax or
estate duty. There are no other taxes likely to be material to us levied by the government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or brought
within the jurisdiction of the Cayman Islands. The Cayman Islands is not party to any double tax treaties that are applicable to any payments made to or by us. There are no exchange control
regulations or currency restrictions in the Cayman Islands.
People's Republic of China Taxation
PRC Enterprise Income Tax Law
Under the EIT Law, an enterprise established outside of China with "de facto management bodies" within China is considered a PRC "resident
enterprise," meaning it can be treated in a manner
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similar
to a PRC enterprise for EIT purposes, although the dividends paid to a PRC resident enterprise from another may qualify as "tax-exempt income." The implementation rules of the EIT Law define a
"de facto management body" as a body that has substantial and overall management and control over the manufacturing and business operations, personnel and human resources, finances and properties of
an enterprise. SAT Circular 82 issued by SAT on April 22, 2009 specifies that certain offshore enterprises controlled by a PRC company or a PRC company group will be classified as PRC "resident
enterprises" if the following requirements are satisfied: (a) the senior management and core management departments in charge of its daily operations function are mainly in China;
(b) its financial and human resources decisions are subject to determination or approval by persons or bodies in China; (c) its major assets, accounting books, company seals, and minutes
and files of its board and shareholders' meetings are located or kept in China; and (d) at least half of the enterprise's directors with voting rights or senior management reside in China.
Although SAT Circular 82 only applies to offshore enterprises controlled by PRC enterprises and not those controlled by PRC individuals, the determination criteria set forth in SAT Circular 82 may
reflect SAT's general position on how the "de facto management body" test should be applied in determining tax resident status of offshore enterprises, regardless of whether they are controlled by PRC
enterprises or PRC individuals.
We
believe that we are not a PRC resident enterprise and therefore we are not subject to PRC EIT reporting obligations and the dividends paid by us to holders of our ADSs or ordinary
shares will not be subject to PRC withholding tax. However, if the PRC tax authorities determine that we are a PRC resident enterprise for EIT purposes, we may be required to withhold a 10%
withholding tax from dividends we pay to our non-PRC enterprise shareholders and a 20% withholding tax from dividends we pay to our non-PRC individual shareholders, including the holders of our ADSs.
In addition, non-PRC shareholders may be subject to PRC tax on gains realized on the sale or other disposition of ADSs or ordinary shares if such income is treated as China-sourced income. It is
unclear whether our non-PRC shareholders would be able to claim the benefits of any tax treaties between their tax residence and China in the event we are treated as a PRC resident enterprise. See
"Item 3.D. Key InformationRisk FactorsRisks Relating to Doing Business in ChinaIt is unclear whether we will be considered a PRC 'resident enterprise'
under the PRC Enterprise Income Tax Law and, depending on the determination of our PRC 'resident enterprise' status, our global income may be subject to the 25% PRC enterprise income tax, which could
materially and adversely affect our results of operations."
Enterprise Income Tax for Share Transfer by Non-PRC Resident Enterprises
Pursuant to SAT Circular 698, issued by SAT on December 10, 2009, where a non-PRC resident enterprise transfers equity interests of a PRC
resident enterprise indirectly via disposing of equity interests of an offshore holding company, or an Indirect Transfer, and such offshore holding company is located in a tax jurisdiction that:
(a) has an effective tax rate less than 12.5% or (b) does not tax foreign income of its residents, the non-PRC resident enterprise must report this Indirect Transfer to the competent PRC
tax authority, which will examine the true nature of the Indirect Transfer. If the PRC tax authority concludes that the non-PRC resident enterprise has adopted an "abusive arrangement" in order to
avoid PRC tax, it may disregard the existence of the offshore holding company and re-characterize the Indirect Transfer and, as a result, gains derived from such Indirect Transfer may be subject to
PRC withholding tax at a rate of up to 10%.
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On February 3, 2015, SAT issued a Public Notice Regarding Certain Enterprise Income Tax Matters on Indirect Transfer of Properties by Non-Tax Resident
Enterprises, or SAT Public Notice 7. SAT Public Notice 7 supersedes the rules with respect to the Indirect Transfer under SAT Circular 698, but does not touch upon other provisions of SAT Circular
698, which remain in force. SAT Public Notice 7 has introduced a new tax regime that is significantly different from the one under SAT Circular 698. SAT Public Notice 7 covers not only Indirect
Transfers but also transactions involving transfer of other taxable assets through offshore transfer of an offshore intermediate holding company. In addition, SAT Public Notice 7 provides clearer
criteria than SAT Circular 698 for assessment of reasonable commercial purposes and has introduced safe harbors for internal group restructurings and the purchase and sale of equity interests through
a public securities market. SAT Public Notice 7 also brings challenges to both offshore transferor and transferee (or other person who is obligated to pay for the transfer) of taxable assets. Where a
non-PRC resident enterprise transfers taxable assets indirectly by disposing of the equity interests of an offshore holding company, which is an Indirect Transfer, the non-PRC resident enterprise as
either transferor or transferee, or the PRC entity that directly owns the taxable assets, may report such Indirect Transfer to the relevant PRC tax authority. Using a "substance over form" principle,
the PRC tax authority may disregard the existence of the offshore holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding or deferring PRC
tax. As a result, gains derived from such Indirect Transfer may be subject to EIT, and the transferee or other person who is obligated to pay for the transfer is obligated to withhold the applicable
taxes, currently at a rate of 10% for the transfer of equity interests in a PRC resident enterprise. Both the transferor and the transferee may be subject to
penalties under PRC tax laws if the transferee fails to withhold the taxes and the transferor fails to pay the taxes.
PRC Value-Added Tax (VAT) Law
China started to apply VAT in 1984 on 24 specified taxable items until a structural reform on taxation system was implemented in 1994. In
December 1993, the PRC State Council promulgated The Provisional Regulation of the People's Republic of China on Value-Added Tax, which went effective on January 1, 1994 and is currently
effective in China. According to this provisional regulation, VAT should be paid by enterprises or individuals who sell merchandise, provide processing, repairing or assembling services, or import
goods within China on the added value derived from their production and/or services. Based on the categories of taxable goods and services, different flat rates are adopted ranging from zero to 17%.
We also conduct product promotional activities for certain brands on our Vipshop Online Platform. Prior to January 1, 2012, pursuant to Provisional Regulation of the People's Republic of China
on Business Tax and its implementing rules, any entity or individual rendering services in the PRC territory is generally subject to a business tax at the rate of 5% on the revenues generated from
provision of such services. In November 2011, MOF and SAT jointly issued two circulars setting out the details of the VAT Pilot Program, which change business tax to VAT for certain industries,
including, among others, transportation services, research and development and technical services, information technology services, and cultural and creative services. The VAT Pilot Program initially
applied only to these industries in Shanghai, and expanded to eight additional provinces, including Beijing, Tianjin, Zhejiang Province (including Ningbo), Anhui Province, Guangdong Province
(including Shenzhen), Fujian Province (including Xiamen), Hubei Province and Jiangsu province, in 2012. On May 24, 2013, MOF and SAT jointly issued SAT Circular 37, which expanded the VAT Pilot
Program nationwide as of August 1, 2013. On December 12, 2013, SAT issued SAT Circular 106, which replaced SAT Circular 37 and expanded the VAT Pilot Program to also cover railway
transport industry and postal service industry nationwide as of January 1, 2014, in addition to those industries covered under SAT Circular 37. On April 29, 2014, MOF and SAT issued the
Circular on the Inclusion of Telecommunications Industry in the Pilot Collection of Value-Added Tax in Lieu of Business Tax. On March 23, 2016, MOF and SAT issued the Circular on
Comprehensively Promoting the Pilot Program
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of
the Collection of Value-Added Tax in Lieu of Business Tax. Effective from May 1, 2016, the PRC tax authorities will collect VAT in lieu of business tax on a trial basis within the PRC
territory, and in industries such as construction industries, real estate industries, financial industries, and living service industries.
To
compute the VAT payable, the subject taxpayer needs to separately calculate the output tax and the input tax for the applicable period. The VAT payable is the difference between the
output tax and the input tax. The formula for computing the tax payable is:
VAT
payable = Output tax payable for the applicable period
minus
Input tax receivable for the same applicable period
As
of December 31, 2014, 2015, and 2016, we had VAT receivable of approximately RMB362.2 million, RMB473.9 million and RMB555.9 million
(US$80.1 million) respectively. VAT receivable occurs due to timing difference on operation of certain entities, as we record the revenue and VAT output when goods are delivered, but VAT input
invoice from suppliers may be delayed. We also had VAT tax payable of RMB345.8 million, RMB289.6 million and RMB258.2 million (US$37.2 million) as of December 31,
2014, 2015 and 2016, respectively, included as other tax payable. We do not net off VAT receivable and payable from different entities within our group companies.
United States Federal Income Tax Considerations
The following is a summary of United States federal income tax considerations with respect to the ownership and disposition of our ADSs or
Class A ordinary shares by a U.S. Holder, as defined below, that holds our ADSs or Class A ordinary shares as "capital assets" (generally, property held for investment) under the United
States Internal Revenue Code of 1986, as amended, or the Code. This summary is based upon existing United States federal tax law, which is subject to differing interpretations or change, possibly with
retroactive effect. No ruling has been sought from the Internal Revenue Service, or the IRS, with respect to any United States federal income tax consequences described below, and there can be no
assurance that the IRS or a court will not take a contrary position. This summary does not discuss all aspects of United States federal income taxation that may be important to particular investors in
light of their individual investment circumstances, including investors subject to special tax rules (for example, financial institutions, insurance companies, broker-dealers, traders in securities
that elect mark-to-market treatment, partnerships and their partners, pension plans, regulated investment companies, real estate investment trusts, cooperatives, and tax-exempt organizations
(including private foundations)), holders who are not U.S. Holders, holders who own (directly, indirectly, or constructively) 10% or more of our voting stock, holders that hold their ADSs or
Class A ordinary shares as part of a straddle, hedge, conversion, constructive sale, or other integrated transaction for United States federal income tax purposes, United States expatriates,
persons liable for alternative minimum tax, holders who acquired their ADSs or Class A ordinary shares pursuant to any employee share option or otherwise as compensation, or holders that have a
functional currency other than the United States dollar, all of whom may be subject to tax rules that differ significantly from those summarized below. In addition, this summary of United States
federal income tax considerations does not discuss any state, local, or non-United States tax considerations, any non-income tax (such as gift or estate tax) considerations, or the Medicare Tax. Each
U.S. Holder is advised to consult its tax advisors regarding the United States federal, state, local,
and non-United States income and other tax considerations of an investment in our ADSs or Class A ordinary shares.
General
For purposes of this summary, a "U.S. Holder" is a beneficial owner of our ADSs or Class A ordinary shares that is, for United States
federal income tax purposes, (a) an individual who is a citizen or resident of the United States, (b) a corporation (or other entity treated as a corporation for United
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States
federal income tax purposes) created in, or organized under the law of, the United States or any state thereof or the District of Columbia, (c) an estate the income of which is
includible in gross income for United States federal income tax purposes regardless of its source, or (d) a trust (A) the administration of which is subject to the primary supervision of
a United States court and which has one or more United States persons who have the authority to control all substantial decisions of the trust or (B) that has otherwise elected to be treated as
a United States person under the Code.
If
a partnership (or other entity treated as a partnership for United States federal income tax purposes) is a beneficial owner of our ADSs or Class A ordinary shares, the tax
treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. Partnerships and partners of a partnership holding our ADSs or
Class A ordinary shares are advised to consult their tax advisors regarding an investment in our ADSs or Class A ordinary shares.
It
is generally expected that a U.S. Holder of ADSs should be treated as the beneficial owner, for United States federal income tax purposes, of the underlying shares represented by the
ADSs. The remainder of this discussion assumes that a holder of ADSs will be treated in this manner. Accordingly, deposits or withdrawals of Class A ordinary shares for ADSs will not be subject
to United States federal income tax.
Passive Foreign Investment Company Considerations
A non-United States corporation, such as our company, will be a PFIC for United States federal income tax purposes for any taxable year if
either (a) 75% or more of its gross income for such year consists of certain types of "passive" income or (b) 50% or more of the average quarterly value of its assets (as determined on
the basis of fair market value) during such year is attributable to assets that produce or are held for the production of passive income. For this purpose, cash and assets readily convertible into
cash are categorized as passive assets and the company's goodwill and other unbooked intangibles associated with active business activities may generally be classified as active assets. Passive income
generally includes, among other things, dividends, interest, rents, royalties, and gains from the disposition of passive assets. We will be treated as owning a proportionate share of the assets and
earning a proportionate share of the income of any other corporation in which we own, directly or indirectly, more than 25% (by value) of the stock.
Although
the law in this regard is unclear, we treat our consolidated affiliated entities (and their subsidiaries) as being owned by us for United States federal income tax purposes, not
only because we control their management decisions but also because we are entitled to substantially all of the economic benefits associated with these entities, and, as a result, we consolidate these
entities' operating results in our consolidated financial statements. If it were determined, however, that we are not the owner of any of our consolidated affiliated entities (or their subsidiaries)
for United States federal income tax purposes, we would likely be treated as a PFIC for the current taxable year or any future taxable year.
Assuming
that we are the owner of our consolidated affiliated entities (and their subsidiaries) for United States federal income tax purposes, and based upon our income and assets and
the market price of our ADSs, we do not believe that we were a PFIC for the taxable year ended December 31, 2016 and do not anticipate becoming a PFIC in the foreseeable future. While we do not
expect to become a PFIC, the determination of whether we will be or become a PFIC will depend in part upon the market price of our ADSs, which we cannot control. Among other matters, if our market
capitalization declines, we may be classified as a PFIC for the current or future taxable years. It is also possible that the IRS may challenge our classification or valuation of our goodwill and
other unbooked intangibles, which may result in our company being, or becoming, a PFIC for the current or one or more future taxable years.
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The
determination of whether we are or will be a PFIC will also depend, in part, on the composition of our income and our assets, which will be affected by how, and how quickly, we use
our liquid assets. Under circumstances where we determine not to deploy significant amounts of cash for active purposes,
our risk of becoming classified as a PFIC may substantially increase. Because there are uncertainties in the application of the relevant rules and PFIC status is a fact-intensive determination made on
an annual basis, no assurance can be given that we are not or will not become a PFIC and our special United States counsel expresses no opinion with respect to our PFIC status and also expresses no
opinion with respect to our expectations regarding our PFIC status. If we are a PFIC for any year during which a U.S. Holder holds our ADSs or Class A ordinary shares, we generally will
continue to be treated as a PFIC for all succeeding years during which such U.S. Holder holds our ADSs or Class A ordinary shares.
The
discussion below under "Dividends" and "Sale or Other Disposition of ADSs or Class A Ordinary Shares" assumes that we will not be a PFIC for United States federal income tax
purposes. The United States federal income tax rules that apply if we are a PFIC for the current taxable year or any subsequent taxable year are generally discussed below under "Passive Foreign
Investment Company Rules."
Dividends
Subject to the PFIC rules discussed below, any cash distributions (including the amount of any PRC tax withheld) paid on our ADSs or
Class A ordinary shares out of our current or accumulated earnings and profits, as determined under United States federal income tax principles, will generally be includible in the gross income
of a U.S. Holder as dividend income on the day actually or constructively received by the U.S. Holder, in the case of Class A ordinary shares, or by the depositary, in the case of ADSs. Because
we do not intend to determine our earnings and profits on the basis of United States federal income tax principles, any distribution paid will generally be reported as a "dividend" for United States
federal income tax purposes. A non-corporate recipient of dividend income generally will be subject to tax on dividend income from a "qualified foreign corporation" at a reduced capital gains rate
rather than the marginal tax rates generally applicable to ordinary income provided that certain holding period requirements and other requirements are met. Each U.S. Holder is advised to consult its
tax advisors regarding the availability of the reduced tax rate on dividends to its particular circumstances.
A
non-United States corporation (other than a corporation that is classified as a PFIC for the taxable year in which the dividend is paid or the preceding taxable year) generally will be
considered to be a qualified foreign corporation (a) if it is eligible for the benefits of a comprehensive tax treaty with the United States which the Secretary of Treasury of the United States
determines is satisfactory for purposes of this provision and which includes an exchange of information provision, or (b) with respect to any dividend it pays on stock (or ADSs in respect of
such stock) which is readily tradable on an established securities market in the United States. Our ADSs are listed on NYSE, which is an established securities market in the United States, and we
expect our ADSs to be readily tradable on NYSE for as long as our ADSs continue to be listed on NYSE. Accordingly, we believe that dividends we pay on our ADSs will meet the conditions required for
the reduced tax rate. Since we do not expect that our Class A ordinary shares will be listed on an established securities market in the United States, it is unclear whether dividends that we
pay on our Class A ordinary shares that are not backed by ADSs currently meet the conditions required for these reduced tax rates. There can be no assurance that our
ADSs will be considered readily tradable on an established securities market in the United States in later years.
In
the event that we are deemed to be a PRC "resident enterprise" and are liable to tax under EIT Law, we should be eligible for the benefits of the United States-PRC income tax treaty
(the "U.S.-PRC Treaty"), which the Secretary of Treasury of the United States has determined is satisfactory
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for
purposes of clause (a) above and which includes an exchange of information provision. If we are eligible for such benefits, dividends we pay on our Class A ordinary shares,
regardless of whether such shares are represented by the ADSs, would generally be eligible for the reduced rate of taxation applicable to qualified dividend income whether or not such shares are
readily tradable on an established securities market in the United States. Dividends received on the ADSs or Class A ordinary shares will not be eligible for the dividends received deduction
allowed to corporations. Each U.S. Holder is advised to consult its tax advisors regarding the availability of the lower capital gains rate applicable to qualified dividend income for any dividends we
pay with respect to our ADSs or Class A ordinary shares.
Dividends
paid on our ADSs or Class A ordinary shares generally will be treated as income from foreign sources for United States foreign tax credit purposes and generally will
constitute passive category income. In the event that we are deemed to be a PRC "resident enterprise" under the EIT Law, a U.S. Holder may be subject to PRC withholding taxes on dividends paid on our
ADSs or Class A ordinary shares. A U.S. Holder may be eligible, subject to a number of complex limitations, to claim a foreign tax credit in respect of any foreign withholding taxes imposed on
dividends received on our ADSs or Class A ordinary shares. A U.S. Holder who does not elect to claim a foreign tax credit for foreign tax withheld may instead claim a deduction for United
States federal income tax purposes in respect of such withholdings, but only for a year in which such U.S. Holder elects to do so for all creditable foreign income taxes. The rules governing the
foreign tax credit are complex. Each U.S. Holder is advised to consult its tax advisors regarding the availability of the foreign tax credit under its particular circumstances.
Sale or Other Disposition of ADSs or Class A Ordinary Shares
Subject to the PFIC rules discussed below, a U.S. Holder will generally recognize capital gain or loss upon the sale or other disposition of
ADSs or Class A ordinary shares in an amount equal to the difference between the amount realized upon the disposition and the U.S. Holder's
adjusted tax basis in such ADSs or Class A ordinary shares. Any capital gain or loss will be long-term if the ADSs or Class A ordinary shares have been held for more than one year and
will generally be United States source gain or loss for United States foreign tax credit purposes. Long-term capital gain of non-corporate U.S. Holders is generally eligible for a reduced rate of
taxation. In the event that we are deemed to be a PRC "resident enterprise" under the EIT Law and gain from the disposition of the ADSs or Class A ordinary shares is subject to tax in China, a
U.S. Holder that is eligible for the benefits of the U.S.-PRC Treaty may elect to treat the gain as PRC source income. The deductibility of a capital loss may be subject to limitations. Each U.S.
Holder is advised to consult its tax advisors regarding the tax consequences if a foreign tax is imposed on a disposition of our ADSs or Class A ordinary shares, including the availability of
the foreign tax credit under its particular circumstances.
Passive Foreign Investment Company Rules
If we are a PFIC for any taxable year during which a U.S. Holder holds our ADSs or Class A ordinary shares, unless the U.S. Holder makes
a mark-to-market election (as described below), the U.S. Holder will generally be subject to special tax rules that have a penalizing effect, regardless of whether we remain a PFIC, on (a) any
excess distribution that we make to the U.S. Holder (which generally means any distribution paid during a taxable year to a U.S. Holder that is greater than 125% of the average annual distributions
paid in the three preceding taxable years or, if shorter, the U.S. Holder's holding period for the ADSs or Class A ordinary shares), and (b) any gain realized on the sale or other
disposition, including, under certain circumstances, a pledge, of ADSs or Class A ordinary shares. Under the PFIC rules:
-
-
such excess distribution and/or gain will be allocated ratably over the U.S. Holder's holding period for the ADSs or Class A ordinary
shares;
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Table of Contents
-
-
such amount allocated to the current taxable year and any taxable years in the U.S. Holder's holding period prior to the first taxable year in
which we are classified as a PFIC, or pre-PFIC year, will be taxable as ordinary income;
-
-
such amount allocated to each prior taxable year, other than a pre-PFIC year, will be subject to tax at the highest tax rate in effect
applicable to individuals or corporations as appropriate for that year; and
-
-
an interest charge generally applicable to underpayments of tax will be imposed on the tax attributable to each prior taxable year, other than
a pre-PFIC year.
If
we are a PFIC for any taxable year during which a U.S. Holder holds our ADSs or Class A ordinary shares and any of our non-United States subsidiaries is also a PFIC
(i.e., a lower-tier PFIC), such U.S. Holder would be treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC and would be subject to the rules described above
on certain distributions by a lower-tier PFIC and a disposition of shares of a lower-tier PFIC even though such U.S. Holder would not receive the proceeds of those distributions or dispositions. Each
U.S. Holder is advised to consult its tax advisors regarding the application of the PFIC rules to any of our subsidiaries.
As
an alternative to the foregoing rules, if we are a PFIC, a U.S. Holder of "marketable stock" may make a mark-to-market election with respect to our ADSs, provided that the ADSs are
regularly traded on NYSE. In addition, we do not expect that holders of Class A ordinary shares that are not represented by ADSs will be eligible to make a mark-to-market election. We
anticipate that our ADSs should qualify as being regularly traded, but no assurances may be given in this regard. If a U.S. Holder makes this election, the U.S. Holder will generally
(a) include as ordinary income for each taxable year that we are a PFIC the excess, if any, of the fair market value of ADSs held at the end of the taxable year over the adjusted tax basis of
such ADSs and (b) deduct as an ordinary loss the excess, if any, of the adjusted tax basis of the ADSs over the fair market value of such ADSs held at the end of the taxable year, but such
deduction will only be allowed to the extent of the net amount previously included in income as a result of the mark-to-market election. The U.S. Holder's adjusted tax basis in the ADSs would be
adjusted to reflect any income or loss resulting from the mark-to-market election. If a U.S. Holder makes a mark-to-market election, any gain recognized upon the sale or other disposition of ADSs will
be treated as ordinary income and any loss will be treated as ordinary loss, but only to the extent of the net amount previously included in the income as a result of the mark-to-market election.
If
a U.S. Holder makes a mark-to-market election and we cease to be a PFIC, the U.S. Holder will not be required to take into account the mark-to-market gain or loss described above
during any period that we are not classified as a PFIC. Because a mark-to-market election cannot be made for any lower-tier PFICs that we may own, a U.S. Holder may continue to be subject to the PFIC
rules with respect to such U.S. Holder's indirect interest in any investments held by us that are treated as an equity interest in a PFIC for United States federal income tax purposes.
We
do not intend to provide the information necessary for U.S. Holders to make qualified electing fund elections, which, if available, would result in tax treatment different from the
general tax treatment for PFICs described above.
If
a U.S. Holder owns our ADSs or Class A ordinary shares during any taxable year that we are a PFIC, the U.S. Holder must file an annual report containing such information as the
United States Treasury Department may require and will generally be required to file an annual IRS Form 8621. Each U.S. Holder is advised to consult its tax advisors concerning the United
States federal income tax consequences of purchasing, holding, and disposing of ADSs or Class A ordinary shares if we are or become a PFIC, including the possibility of making a mark-to-market
election.
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Table of Contents
Information Reporting
U.S. Holders may be subject to information reporting to the IRS with respect to dividends on and proceeds from the sale or other disposition of
our ADSs or Class A ordinary shares. Each U.S. Holder is advised to consult its tax advisors regarding the application of the United States information reporting rules to its particular
circumstances.
Certain
U.S. Holders who hold "specified foreign financial assets", including stock of a non-U.S. corporation that is not held in an account maintained by a U.S. "financial institution,"
whose aggregate value exceeds US$50,000 during the tax year, may be required to attach to their tax returns for the year certain specified information. An individual who fails to timely furnish the
required information may be subject to a penalty. U.S. Holders who are individuals should consult their own tax advisors regarding their reporting obligations under this legislation.
-
F.
-
Dividends and Paying Agents
Not
applicable.
-
G.
-
Statement by Experts
Not
applicable.
-
H.
-
Documents on Display
We
have filed with SEC a registration statement on Form F-1, including relevant exhibits and securities under the Securities Act with respect to underlying ordinary shares
represented by the ADSs. We have also filed with SEC a related registration statement on Form F-6 (File No. 333-180029) to register the ADSs.
We
are subject to periodic reporting and other informational requirements of the Exchange Act as applicable to foreign private issuers. Accordingly, we are required to file reports,
including annual reports on Form 20-F, and other information with SEC. All information filed with SEC can be obtained over the Internet at SEC's website at
www.sec.gov
or inspected and copied at
the public reference facilities maintained by SEC at 100 F Street, N.E., Washington, D.C. 20549. You can
request copies of these documents, upon payment of a duplicating fee, by writing to the SEC. Please call SEC at 1-800-SEC-0330 or visit the SEC website for further information on the operation of the
public reference rooms.
As
a foreign private issuer, we are exempt from the rules of the Exchange Act prescribing the furnishing and content of proxy statements to shareholders, and our executive officers,
directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we will not be required
under the Exchange Act to file periodic reports and financial statements with SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act. However, we
intend to furnish the depositary with our annual reports, which will include a review of operations and annual audited consolidated financial statements prepared in conformity with U.S. GAAP,
and all notices of shareholders' meeting and other reports and communications that are made generally available to our shareholders. The depositary will make such notices, reports and communications
available to holders of ADSs and, upon our written request, will mail to all record holders of ADSs the information contained in any notice of a shareholders' meeting received by the depositary from
us.
-
I.
-
Subsidiary Information
Not
applicable.
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Table of Contents
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
Our exposure to interest rate risk primarily relates to the interest income generated by excess cash, which is mostly held in interest bearing
demand deposits and held-to-maturity securities, and interest rates associated with the 2014 offering. The convertible senior notes we issued in the 2014 offering bear interest at a rate of 1.50% per
year, payable semiannually in arrears on March 15 and September 15 of each year, beginning on September 15, 2014. Interest-earning instruments carry a degree of interest rate
risk. We have not been exposed to material risks due to changes in interest rates. We have not used any derivative financial instruments to manage our interest risk exposure. Based on our cash balance
as of December 31, 2016, a one basis point decrease in interest rates would only result in a minimal decrease in our interest income on an annual basis. Our future interest income may fluctuate
in line with changes in interest rates. However, the risks associated with fluctuating interest rates are principally confined to our interest-bearing cash deposits, and, therefore, our exposure to
interest rate risk is limited.
Foreign Exchange Risk
All of our revenues and most of our expenses are denominated in Renminbi. Our exposure to foreign exchange risk primarily relates to the U.S.
dollar proceeds of the public offerings of our equity securities, most or substantially all of which we expect to convert into Renminbi over time. As the impact of foreign currency risk on our
operations was not material in the past, we have not used any forward contracts, currency borrowings or derivative instruments to hedge our exposure to foreign currency exchange risk.
The
value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions in China and by
China's foreign exchange policies. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the Renminbi to the U.S. dollar, and the Renminbi appreciated more
than 20% against the U.S. dollar over the following three years. Between July 2008 and June 2010, this appreciation halted and the exchange rate between the Renminbi and the U.S. dollar remained
within a narrow band. Since June 2010, the Renminbi has fluctuated against the U.S. dollar, at times significantly and unpredictably. It is difficult to predict how market forces or PRC or U.S.
government policy may impact the exchange rate between the Renminbi and the U.S. dollar in the future.
To
the extent that we need to convert the U.S. dollars we received from our initial public offering, the 2013 offering and the 2014 offering into Renminbi to fund our operations,
acquisitions, or for other uses within the PRC, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount we receive from the conversion. To the extent
that we seek to convert Renminbi into U.S. dollars, depreciation of the Renminbi against the U.S. dollar would have an adverse effect on the U.S. dollar amount we receive from the conversion. On the
other hand, a decline in the value of the Renminbi against the U.S. dollar could reduce the U.S. dollar equivalent of our financial results, the value of your investment in the company and the
dividends that we may pay in the future, if any, all of which may materially and adversely affect the prices of our ADS.
The
Renminbi has fluctuated significantly against the U.S. dollar during the reporting periods presented, from a rate of RMB6.2046 to US$1.00 as of December 31, 2014 to a rate of
RMB6.4778 to US$1.00 as of December 31, 2015 and to a rate of RMB6.9430 to US$1.00 as of December 30, 2016. As all of our revenues and most of our expenses are denominated in Renminbi,
the changes in the exchange rates of Renminbi against U.S. dollars have not historically materially impacted our results of operations. Effective January 1, 2015, we changed our reporting
currency from U.S. dollars to Renminbi. The translation effect on our revenues and expenses in our previous income statements prior to 2015 would no longer be applicable to us.
135
Table of Contents
We
are not currently subject to any significant direct foreign exchange risk and accordingly, we have not hedged exposures denominated in foreign currencies, nor do we have any other
derivative financial instruments outstanding. Based on the amount of our cash and cash equivalents on hand as of December 31, 2016, a 1.0% change in the exchange rate between the Renminbi and
the U.S. dollar would result in an increase or decrease of US$5.9 million to our cash and cash equivalents.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
-
A.
-
Debt Securities
Not
applicable.
-
B.
-
Warrants and Rights
Not
applicable.
-
C.
-
Other Securities
Not
applicable.
-
D.
-
American Depositary Shares
Fees and Charges Our ADS Holders May Have to Pay
Deutsche Bank Trust Company Americas, the depositary of our ADS program, collects its fees for delivery and surrender of ADSs directly from
investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting
those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deducting from cash
distributions or by directly billing investors or by charging the book-entry system accounts of participants acting for them. The depositary may generally refuse to provide fee-attracting services
until its fees for those services are paid. Set forth below is a summary of fees holders of our ADSs may be required to pay for various services the depositary may provide:
|
|
|
Service
|
|
Fees
|
Issuance of ADSs,
including issuances resulting from a distribution of shares or rights or other property
|
|
Up to US$0.05 per ADS issued
|
Cancellation of ADSs,
including the case of termination of the deposit agreement
|
|
Up to US$0.05 per ADS cancelled
|
Distribution of cash
dividends or other cash distributions
|
|
Up to US$0.05 per ADS held
|
Distribution of ADSs
pursuant to share dividends, free share distributions or exercise of rights.
|
|
Up to US$0.05 per ADS held
|
Distribution of
securities other than ADSs or rights to purchase additional ADSs
|
|
A fee equivalent to the fee that would be payable if securities distributed to you had been ordinary shares and the ordinary shares had been deposited for issuance of ADSs
|
Depositary
services
|
|
Up to US$0.05 per ADS held on the applicable record date(s) established by the depositary bank
|
Transfer of
ADRs
|
|
US$1.50 per certificate presented for transfer
|
136
Table of Contents
As an ADS holder, you will also be responsible to pay certain fees and expenses incurred by the depositary bank and certain taxes and governmental charges such
as:
-
-
Fees for the transfer and registration of ordinary shares charged by the registrar and transfer agent for the ordinary shares in the Cayman
Islands (i.e., upon deposit and withdrawal of ordinary shares).
-
-
Expenses incurred for converting foreign currency into U.S. dollars.
-
-
Expenses for cable, telex and fax transmissions and for delivery of securities.
-
-
Taxes and duties upon the transfer of securities, including any applicable stamp duties, any stock transfer charges or withholding taxes
(i.e., when ordinary shares are deposited or withdrawn from deposit).
-
-
Fees and expenses incurred in connection with the delivery or servicing of ordinary shares on deposit.
-
-
Fees and expenses incurred in connection with complying with exchange control regulations and other regulatory requirements applicable to
ordinary shares, deposited securities, ADSs and ADRs.
-
-
Any applicable fees and penalties thereon.
Fees and Other Payments Made by the Depositary to Us
The depositary has agreed to reimburse us for a portion of certain expenses we incur that are related to establishment and maintenance of the
ADR program, including investor relations expenses. There are limits on the amount of expenses for which the depositary will reimburse us, but the amount of reimbursement available to us is not
related to the amounts of fees the depositary collects from investors. Further, the depositary has agreed to reimburse us certain fees payable to the depositary by holders of ADSs. Neither the
depositary nor we can determine the exact amount to be made available to us because (i) the number of ADSs that will be issued and outstanding, (ii) the level of service fees to be
charged to holders of ADSs and (iii) our reimbursable expenses related to the program are not known at this time.
PART II.
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
None.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
On September 15, 2014, our shareholders voted in favor of a proposal to adopt a dual-class share structure, pursuant to which our
authorized share capital was reclassified and re-designated into Class A ordinary shares and Class B ordinary shares, with each Class A ordinary share being entitled to one vote
and each Class B ordinary share being entitled to ten votes on all matters that are subject to shareholder vote.
See
"Item 10. Additional Information" for a description of the rights of securities holders.
The
following "Use of Proceeds" information relates to:
-
-
The registration statement on Form F-1 (File number: 333-179581) for our initial public offering of 11,004,600 ADSs, representing
22,009,200 ordinary shares, which registration statement was declared effective by SEC on March 22, 2012.
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Table of Contents
-
-
The registration statement on Form F-1 (File number: 333-186781), together with the post-effective registration statement on
Form F-1 (File number: 333-187247) to register additional securities that became effective immediately upon filing, for the public offering of 7,200,000 ADSs, representing 14,400,000 ordinary
shares, by us and the selling shareholders therein, and the underwriters' full exercise of their option to purchase an additional 1,080,000 ADSs from certain selling shareholders, which registration
statement was declared effective by SEC on March 13, 2013.
-
-
The registration statement on Form F-3 (File number: 333-194472), together with the prospectus supplements to register additional
securities that became effective immediately upon filing, for the public offering of US$550,000,000 aggregate principal amount of our 1.50% convertible senior notes due 2019 and 1,140,000 ADSs,
representing 2,280,000 ordinary shares, by us and the selling shareholders therein, and the underwriters' full exercise of their option to purchase an additional 171,000 ADSs from certain selling
shareholders and an additional US$82,500,000 aggregate principal amount of our 1.50% convertible senior notes.
As
of December 31, 2016, we used all net proceeds from our initial public offering, our 2013 public offering and our 2014 public offering.
ITEM 15. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
As required by Rule 13a-15(b) under the Exchange Act, our senior management, with the participation of our chief executive officer and
chief financial officer, has performed an evaluation of the effectiveness of our disclosure controls and procedures within the meaning of Rules 13a-15(e) and 15d-15(e) of the Exchange Act.
Based upon that evaluation, our senior management has concluded that, as of December 31, 2016, our disclosure controls and procedures were effective.
Disclosure
controls and procedures means controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit
under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in SEC's rule and forms and that such information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing
similar functions, as appropriate to allow timely decisions regarding required disclosures.
Management's Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of our
financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP and includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with U.S. GAAP, and that receipts and expenditures of our company are being made
only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of the unauthorized acquisition, use or
disposition of our company's assets that could have a material effect on the consolidated financial statements. Because of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may
138
Table of Contents
become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our
management conducted an assessment of the effectiveness of our company's internal control over financial reporting as of December 31, 2016 based on the framework in Internal
ControlIntegrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, our management concluded that our internal
control over financial reporting was effective as of December 31, 2016.
Deloitte
Touche Tohmatsu, our independent registered public accounting firm, audited the financial statements included in this annual report and issued an attestation report on our
management's assessment of our company's internal control over financial reporting as of December 31, 2016.
Attestation Report of the Registered Public Accounting Firm
The attestation report on our management's assessment of our company's internal control over financial reporting issued by Deloitte Touche
Tohmatsu, our independent registered public accounting firm, appears on page F-3 of this annual report.
Changes in Internal Control over Financial Reporting
As required by Rule 13a-15(d), under the Exchange Act, our management, including our chief executive officer and our chief financial
officer, also conducted an assessment of our company's internal control over financial reporting to determine whether any changes occurred during the period covered by this annual report have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on that assessment, it has been determined that there has been no such change
during the period covered by this annual report.
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
Our board of directors has determined that Ms. Kathleen Chien, an independent director (under the standards set forth in
Section 303A of the NYSE Listed Company Manual and Rule 10A-3 under the Exchange Act) and member of our audit committee, qualifies as an audit committee financial expert.
ITEM 16B. CODE OF ETHICS
Our board of directors has adopted a code of ethics that applies to all of the directors, officers and employees of us and our subsidiaries,
whether they work for us on a full-time, part-time, consultative, or temporary basis. In addition, we expect those who do business with us, such as consultants, suppliers and collaborators, to also
adhere to the principles outlined in the code of ethics. Certain provisions of the code of ethics apply specifically to our chief executive officer, chief financial officer, senior finance officer,
controller, vice presidents and any other persons who perform similar functions for us. We have filed our code of business conduct and ethics as an exhibit to our registration statement on
Form F-1 (No. 333-179581) in connection with our initial public offering in March 2012, which was incorporated by reference thereto in this annual report.
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets forth the aggregate fees by categories specified below in connection with certain professional services rendered by
Deloitte Touche Tohmatsu, our principal accountant, for the
139
Table of Contents
periods
indicated. We did not pay any other fees to our principal accountant during the periods except as indicated below.
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
2016
|
|
|
|
RMB
|
|
RMB
|
|
US$
|
|
|
|
(in thousands)
|
|
Audit Fees
(1)
|
|
|
8,679
|
|
|
10,500
|
|
|
1,512
|
|
Audit-Related Fees
(2)
|
|
|
|
|
|
2,797
|
|
|
403
|
|
Tax Fees
(3)
|
|
|
290
|
|
|
1,307
|
|
|
188
|
|
All Other Fees
(4)
|
|
|
921
|
|
|
900
|
|
|
130
|
|
-
(1)
-
"Audit
Fees" represent the aggregate fees billed for each of the fiscal years listed for professional services rendered by our principal accountant for the audit of
our annual consolidated financial statements, review of quarterly financial information, and audit services that are normally provided by the principal accountant in connection with regulatory filings
or engagements for those fiscal years.
-
(2)
-
"Audit-Related
Fees" represent the aggregate fees billed in each of the fiscal years listed for assurance and related services by our principal accountant that are
reasonably related to the performance of the audit or review of our financial statements and are not reported under "Audit Fees."
-
(3)
-
"Tax
Fees" represent the aggregate fees billed in each of the fiscal years listed for professional services rendered by our principal accountant for tax compliance,
tax advice, and tax planning.
-
(4)
-
"All
Other Fees" represent the aggregate fees billed in each of the fiscal years listed for products and services provided by our principal accountant, other than
the services reported in (1), (2) and (3).
All
audit and permitted non-audit services provided by our principal accountant, including audit services, audit-related services, tax services and other services as described above,
must be and have been approved in advance by our audit committee.
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
None.
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
On November 17, 2015, our board of directors has approved a share repurchase program, or the 2015 Repurchase Program, pursuant to which
we were authorized to purchase our own ADSs with an aggregate value of up to US$300 million over the following 24-month period, ending on November 16, 2017. We expect to fund the 2015
Repurchase Program out of our existing cash balance, including cash generated from our operations. Under the 2015 Repurchase Program, we were authorized to effect the proposed share repurchase on the
open market at prevailing market prices, in negotiated transactions off the market, and/or in other legally permissible means from time to time as market conditions warrant in compliance with
applicable requirements of Rule 10b5-1 and/or Rule 10b-18 under the Exchange Act, at times and in such amounts as we deem appropriate. As of December 31, 2016, we
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Table of Contents
repurchased
approximately 8.1 million our own ADSs with a total consideration of approximately US$130.4 million from the open market under the 2015 Repurchase Program.
|
|
|
|
|
|
|
|
|
|
|
|
|
Period
|
|
Total Number of
ADS Purchased
|
|
Average Price
Paid Per ADS
(1)
|
|
Total Number of
ADSs Purchased
as Part of Publicly
Announced Plans or
Programs
|
|
Approximate
Dollar Value of
ADSs that May
Yet Be Purchased
Under the Plans or
Programs
|
|
January 1 to January 31, 2016
|
|
|
|
|
N/A
|
|
|
|
|
US$
|
169,599,129
|
|
February 1 to February 29, 2016
|
|
|
|
|
N/A
|
|
|
|
|
US$
|
169,599,129
|
|
March 1 to March 31, 2016
|
|
|
|
|
N/A
|
|
|
|
|
US$
|
169,599,129
|
|
April 1 to April 30, 2016
|
|
|
|
|
N/A
|
|
|
|
|
US$
|
169,599,129
|
|
May 1 to May 31, 2016
|
|
|
|
|
N/A
|
|
|
|
|
US$
|
169,599,129
|
|
June 1 to June 30, 2016
|
|
|
|
|
N/A
|
|
|
|
|
US$
|
169,599,129
|
|
July 1 to July 31, 2016
|
|
|
|
|
N/A
|
|
|
|
|
US$
|
169,599,129
|
|
August 1 to August 31, 2016
|
|
|
|
|
N/A
|
|
|
|
|
US$
|
169,599,129
|
|
September 1 to September 30, 2016
|
|
|
|
|
N/A
|
|
|
|
|
US$
|
169,599,129
|
|
October 1 to October 31, 2016
|
|
|
|
|
N/A
|
|
|
|
|
US$
|
169,599,129
|
|
November 1 to November 30, 2016
|
|
|
|
|
N/A
|
|
|
|
|
US$
|
169,599,129
|
|
December 1 to December 31, 2016
|
|
|
|
|
N/A
|
|
|
|
|
US$
|
169,599,129
|
|
Total
|
|
|
|
|
N/A
|
|
|
|
|
US$
|
169,599,129
|
|
-
(1)
-
Each
ADS represents 0.2 Class A ordinary share.
ITEM 16F. CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT
None.
ITEM 16G. CORPORATE GOVERNANCE
Section 303A.08 of the NYSE Listed Company Manual requires a NYSE-listed company to obtain its shareholders' approval when an equity
compensation arrangement is established or materially amended. Section 303A.00 of the NYSE Listed Company Manual permits a foreign private issuer like our company to follow home country
practice in certain corporate governance matters. Pursuant to the approval on July 1, 2014 by our board of directors, we adopted our 2014 Plan. Our Cayman Islands counsel has provided a letter
to NYSE dated July 5, 2014 certifying that under Cayman Islands law, we are not required to obtain shareholders' approval for adoption of an equity incentive plan. NYSE has acknowledged the
receipt of such letter and our home country practice with respect to approval for the adoption of our 2014 Plan.
Other
than the home country practices described above, we are not aware of any significant differences between our corporate governance practices and those followed by domestic companies
under NYSE Listed Company Manual.
ITEM 16H. MINE SAFETY DISCLOSURE
Not applicable.
141
Table of Contents
PART III.
ITEM 17. FINANCIAL STATEMENTS
We have elected to provide financial statements pursuant to Item 18.
ITEM 18. FINANCIAL STATEMENTS
The consolidated financial statements of Vipshop Holdings Limited are included at the end of this annual report.
ITEM 19. EXHIBITS
|
|
|
|
Exhibit
Number
|
|
Document
|
|
1.1
|
|
Amended and Restated Memorandum and Articles of Association of the Registrant (incorporated by reference to Exhibit 3.2 to our Registration Statement on Form F-1 (File No. 333-179581), as amended, initially
filed with the Securities and Exchange Commission on February 17, 2012).
|
|
|
|
|
|
1.2
|
|
Second Amended and Restated Memorandum and Articles of Association of the Registrant adopted by the shareholders of the Registrant on September 15, 2014 (incorporated by reference to Exhibit 99.2 to our Report
of Foreign Private Issuer on Form 6-K furnished to the Securities and Exchange Commission on September 16, 2014).
|
|
|
|
|
|
2.1
|
|
Form of Ordinary Share Certificate of the Registrant (incorporated by reference to Exhibit 4.1 to our Registration Statement on Form F-1 (File No. 333-179581), as amended, initially filed with the
Securities and Exchange Commission on February 17, 2012).
|
|
|
|
|
|
2.2
|
|
Deposit Agreement among the Registrant, the depositary and all holders of the American Depositary Receipts of the Registrant, dated as of March 22, 2012 (incorporated by reference to Exhibit 4.3 to our
Registration Statement on Form S-8 (File No. 333-181559) filed with the Securities and Exchange Commission on May 21, 2012).
|
|
|
|
|
|
2.3
|
|
Form of Amendment to Deposit Agreement among the Registrant, the depositary and all holders of the American Depositary Receipts of the Registrant (incorporated by reference to Exhibit 99.(A)(2) to the Registration
Statement on Form F-6EF filed by Deutsche Bank Trust Company Americas with the Securities and Exchange Commission on October 21, 2014).
|
|
|
|
|
|
2.4
|
|
Amended and Restated Shareholders' Agreement, among the Registrant and other parties thereto dated as of April 11, 2011 (incorporated by reference to Exhibit 4.4 to our Registration Statement on Form F-1
(File No. 333-179581), as amended, initially filed with the Securities and Exchange Commission on February 17, 2012).
|
|
|
|
|
|
2.5
|
|
Indenture, dated as of March 17, 2014 between the Registrant and Deutsche Bank Trust Company Americas (incorporated by reference to Exhibit 2.4 to our Annual Report on Form 20-F (File No. 001-35454)
filed with the Securities and Exchange Commission on April 25, 2014).
|
|
|
|
|
|
2.6
|
|
First Supplemental Indenture, dated as of March 17, 2014, between the Registrant and Deutsche Bank Trust Company Americas (incorporated by reference to Exhibit 2.5 to our Annual Report on Form 20-F (File
No. 001-35454) filed with the Securities and Exchange Commission on April 25, 2014).
|
|
|
|
|
142
Table of Contents
|
|
|
|
Exhibit
Number
|
|
Document
|
|
2.7
|
|
Second Supplemental Indenture, dated as of November 11, 2014, between the Registrant and Deutsche Bank Trust Company Americas (incorporated by reference to Exhibit 2.7 to our Annual Report on Form 20-F
(File No. 001-35454) filed with the Securities and Exchange Commission on April 24, 2015).
|
|
|
|
|
|
4.1
|
|
2011 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to our Registration Statement on Form F-1 (File No. 333-179581), as amended, initially filed with the Securities and Exchange Commission
on February 17, 2012).
|
|
|
|
|
|
4.2
|
|
2012 Share Incentive Plan (incorporated by reference to Exhibit 10.11 to our Registration Statement on Form F-1 (File No. 333-179581), as amended, initially filed with the Securities and Exchange Commission
on February 17, 2012).
|
|
|
|
|
|
4.3
|
|
2014 Share Incentive Plan (incorporated by reference to Exhibit 10.1 to our Registration Statement on Form S-8, as amended, initially filed with the Securities and Exchange Commission on October 22,
2014).
|
|
|
|
|
|
4.4
|
|
Form of Employment Agreement between the Registrant and the executives of the Registrant (incorporated by reference to Exhibit 10.2 to our Registration Statement on Form F-1 (File No. 333-179581), as
amended, initially filed with the Securities and Exchange Commission on February 17, 2012).
|
|
|
|
|
|
4.5
|
|
Amended and Restated Business Operation Agreement, dated as of October 8, 2011, between Guangzhou Vipshop Computer Service Co., Ltd (now Vipshop (China) Co., Ltd.) and Guangzhou Vipshop
Information Technology Co., Ltd. (incorporated by reference to Exhibit 10.5 to our Registration Statement on Form F-1 (File No. 333-179581), as amended, initially filed with the Securities and Exchange Commission on
February 17, 2012).
|
|
|
|
|
|
4.6
|
|
Fourth Amended and Restated Equity Interest Pledge Agreement, dated as of December 23, 2015, among Vipshop (China) Co., Ltd. (formerly known as Guangzhou Vipshop Computer Service Co., Ltd.), the
shareholders of Guangzhou Vipshop Information Technology Co., Ltd. and Guangzhou Vipshop Information Technology Co., Ltd. (incorporated by reference to Exhibit 4.8 to our Annual Report on Form 20-F (File
No. 001-35454) filed with the Securities and Exchange Commission on April 22, 2016)
|
|
|
|
|
|
4.7
|
|
Fourth Amended and Restated Exclusive Option Agreement, dated as of December 23, 2015, among Vipshop (China) Co., Ltd. (formerly known as Guangzhou Vipshop Computer Service Co., Ltd.), the
shareholders of Guangzhou Vipshop Information Technology Co., Ltd. and Guangzhou Vipshop Information Technology Co., Ltd. (incorporated by reference to Exhibit 4.9 to our Annual Report on Form 20-F (File
No. 001-35454) filed with the Securities and Exchange Commission on April 22, 2016)
|
|
|
|
|
|
4.8
|
|
Third Amended and Restated Power of Attorney and Second Amended and Restated Power of Attorney, both dated as of December 23, 2015, by the respective shareholders of Guangzhou Vipshop Information Technology Co.,
Ltd. (incorporated by reference to Exhibit 4.10 to our Annual Report on Form 20-F (File No. 001-35454) filed with the Securities and Exchange Commission on April 22, 2016)
|
|
|
|
|
|
4.9
|
|
Form of Indemnity Agreement between the Registrant and its directors and officers (incorporated by reference to Exhibit 10.10 to our Registration Statement on Form F-1 (File No. 333-179581), as amended,
initially filed with the Securities and Exchange Commission on February 17, 2012).
|
143
Table of Contents
|
|
|
|
Exhibit
Number
|
|
Document
|
|
4.10
|
*
|
English Translation of Contract for Assignment of State-owned Construction Land Use Right dated July 16, 2015 between Guangzhou Municipal Bureau of Land Resources and Housing Management and Guangzhou Vipshop Data
Technology Co., Ltd.
|
|
|
|
|
|
4.11
|
*
|
English Translation of Contract for Assignment of State-owned Construction Land Use Right dated August 20, 2015 between Guangzhou Municipal Bureau of Land Resources and Housing Management and Guangzhou Vipshop Data
Technology Co., Ltd.
|
|
|
|
|
|
8.1
|
*
|
List of Significant Consolidated Entities of the Registrant.
|
|
|
|
|
|
11.1
|
|
Code of Business Conduct and Ethics of the Registrant (incorporated by reference to Exhibit 99.1 to our Registration Statement on Form F-1 (File No. 333-179581), as amended, initially filed with the
Securities and Exchange Commission on February 17, 2012).
|
|
|
|
|
|
12.1
|
*
|
Chief Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
12.2
|
*
|
Chief Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
13.1
|
**
|
Chief Executive Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
13.2
|
**
|
Chief Financial Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
15.1
|
*
|
Consent of Deloitte Touche Tohmatsu
|
|
|
|
|
|
15.2
|
*
|
Consent of Han Kun Law Offices
|
|
|
|
|
|
15.3
|
*
|
Consent of Travers Thorp Alberga
|
|
|
|
|
|
101.INS
|
*
|
XBRL Instance Document
|
|
|
|
|
|
101.SCH
|
*
|
XBRL Taxonomy Extension Scheme Document
|
|
|
|
|
|
101.CAL
|
*
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
|
|
101.DEF
|
*
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
|
|
101.LAB
|
*
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
|
|
101.PRE
|
*
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
-
*
-
Filed with this annual report on Form 20-F.
-
**
-
Furnished with this annual report on Form 20-F.
144
Table of Contents
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized
the undersigned to sign this annual report on its behalf.
|
|
|
|
|
|
|
|
|
Vipshop Holdings Limited
|
|
|
By:
|
|
/s/ Eric Ya Shen
|
|
|
|
|
Name:
|
|
Eric Ya Shen
|
|
|
|
|
Title:
|
|
Chairman of the Board of Directors and Chief Executive Officer
|
Date:
April 14, 2017
Table of Contents
VIPSHOP HOLDINGS LIMITED
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
F-1
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Shareholders and the Board of Directors of Vipshop Holdings Limited:
We
have audited the accompanying consolidated balance sheets of Vipshop Holdings Limited and subsidiaries and VIE and VIE' subsidiaries (the "Group") as of December 31,
2015 and 2016, and the related consolidated statements of income and comprehensive income, shareholders' equity, and cash flows for each of the three years in the period ended December 31,
2016. Our audits also included the financial statements schedule in Schedule I. These consolidated financial statements and the financial statement schedule are the responsibility of the
Group's management. Our responsibility is to express an opinion on these consolidated financial statements and the financial statement schedule based on our audits.
We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In
our opinion, such consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2015 and 2016,
and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2016, in conformity with accounting principles generally
accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
We
have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Group's internal control over financial reporting as
of December 31, 2016, based on the criteria established in Internal ControlIntegrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) and our report dated April 14, 2017 expressed an unqualified opinion on the Group's internal control over financial reporting.
Our
audits also comprehended the translation of Renminbi amounts into United States dollar amounts and, in our opinion, such translation has been made in conformity with the basis
stated in Note 2. Such United States dollar amounts are presented solely for the convenience of readers in the United States of America.
/s/
Deloitte Touche Tohmatsu
Certified
Public Accountants
Hong
Kong
April 14,
2017
F-2
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Shareholders and the Board of Directors of Vipshop Holdings Limited:
We
have audited the internal control over financial reporting of Vipshop Holdings Limited and subsidiaries and VIE and VIE' subsidiaries (the "Group") as of December 31,
2016, based on the criteria established in Internal ControlIntegrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Group's
management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the
accompanying Management's Annual Report on Internal Control over Financing Reporting. Our responsibility is to express an opinion on the Group's internal control over financial reporting based on
our audit.
We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed
risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A
company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or
persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Because
of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material
misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to
future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In
our opinion, the Group maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on the criteria established in
Internal ControlIntegrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We
have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial
statement schedule as of and for the year ended December 31, 2016 of the Group and our report dated April 14, 2017 expressed an unqualified opinion on those consolidated financial
statements and financial statement schedule.
/s/
Deloitte Touche Tohmatsu
Certified
Public Accountants
Hong
Kong
April 14,
2017
F-3
Table of Contents
VIPSHOP HOLDINGS LIMITED
CONSOLIDATED BALANCE SHEETS
(All amounts in thousands, except for share and par value data)
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2015
|
|
2016
|
|
2016
|
|
|
|
RMB
|
|
RMB
|
|
US$
|
|
|
|
|
|
|
|
Note 2(aa)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
3,324,384
|
|
|
4,109,577
|
|
|
591,902
|
|
Held-to-maturity securities (Note 6)
|
|
|
1,807,403
|
|
|
671,776
|
|
|
96,756
|
|
Accounts receivable, net (Note 4)
|
|
|
351,423
|
|
|
2,333,918
|
|
|
336,154
|
|
Amounts due from related parties (Note 26(a))
|
|
|
31,856
|
|
|
8,352
|
|
|
1,203
|
|
Other receivables and prepayments, net (Note 5)
|
|
|
1,869,461
|
|
|
2,293,825
|
|
|
330,380
|
|
Inventories
|
|
|
4,566,746
|
|
|
4,948,609
|
|
|
712,748
|
|
Deferred tax assets (Note 23)
|
|
|
202,003
|
|
|
214,815
|
|
|
30,940
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
12,153,276
|
|
|
14,580,872
|
|
|
2,100,083
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT ASSETS
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net (Note 7)
|
|
|
2,949,604
|
|
|
4,467,451
|
|
|
643,447
|
|
Deposits for property and equipment
|
|
|
933,419
|
|
|
1,039,793
|
|
|
149,761
|
|
Land use right, net (Note 8)
|
|
|
197,462
|
|
|
2,399,058
|
|
|
345,536
|
|
Intangible assets, net (Note 9)
|
|
|
744,369
|
|
|
725,147
|
|
|
104,443
|
|
Investment in affiliates (Note 10)
|
|
|
252,706
|
|
|
93,144
|
|
|
13,415
|
|
Other investments (Note 11)
|
|
|
489,862
|
|
|
503,117
|
|
|
72,464
|
|
Available-for-sale securities investments (Note 12)
|
|
|
269,736
|
|
|
407,944
|
|
|
58,756
|
|
Other long-term assets (Note 13)
|
|
|
1,936,307
|
|
|
510,821
|
|
|
73,574
|
|
Goodwill (Note 14)
|
|
|
108,781
|
|
|
367,106
|
|
|
52,874
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current assets
|
|
|
7,882,246
|
|
|
10,513,581
|
|
|
1,514,270
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
20,035,522
|
|
|
25,094,453
|
|
|
3,614,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the consolidated financial statements.
F-4
Table of Contents
VIPSHOP HOLDINGS LIMITED
CONSOLIDATED BALANCE SHEETS (Continued)
(All amounts in thousands, except for share and par value data)
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2015
|
|
2016
|
|
2016
|
|
|
|
RMB
|
|
RMB
|
|
US$
|
|
|
|
|
|
|
|
Note 2(aa)
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
Accounts payable (Including accounts payable of the consolidated VIE and VIE's subsidiaries without recourse to the Company of RMB48,178 and
RMB22,471 as of December 31, 2015 and December 31, 2016, respectively)
|
|
|
6,645,262
|
|
|
8,333,610
|
|
|
1,200,290
|
|
Advance from customers (Including advance from customers of the consolidated VIE and VIE's subsidiaries without recourse to the Company of RMB879,848 and
RMB1,211,643 as of December 31, 2015 and December 31, 2016, respectively)
|
|
|
2,009,578
|
|
|
2,699,981
|
|
|
388,878
|
|
Accrued expenses and other current liabilities (Note 15) (Including accrued expenses and other current liabilities of the consolidated VIE and VIE's
subsidiaries without recourse to the Company of RMB1,127,270 and RMB1,257,667 as of December 31, 2015 and December 31, 2016, respectively).
|
|
|
3,104,622
|
|
|
3,322,599
|
|
|
478,554
|
|
Amounts due to related parties (Note 26(b)) (Including amounts due to related parties of the consolidated VIE and VIE's subsidiaries without recourse
to the Company of RMB82,994 and RMB591 as of December 31, 2015 and December 31, 2016, respectively)
|
|
|
206,966
|
|
|
52,729
|
|
|
7,595
|
|
Deferred income (Including deferred income of the consolidated VIE and VIE's subsidiaries without recourse to the Company of RMB95,643 and
RMB16,222 as of December 31, 2015 and December 31, 2016, respectively)
|
|
|
104,531
|
|
|
174,547
|
|
|
25,140
|
|
Short term loans (Note 17) (Including short term loans of the consolidated VIE and VIE's subsidiaries without recourse to the Company of nil and nil
as of December 31, 2015 and December 31, 2016)
|
|
|
95,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
12,165,959
|
|
|
14,583,466
|
|
|
2,100,457
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liability (Note 23) (Including deferred tax liability of the consolidated VIE and VIE's subsidiaries without recourse to the Company of
RMB116 and RMB4,904 as of December 31, 2015 and December 31, 2016, respectively)
|
|
|
175,416
|
|
|
100,583
|
|
|
14,487
|
|
Deferred income (Including deferred income of the consolidated VIE and VIE's subsidiaries without recourse to the Company of RMB3,573 and RMB1,928 as
of December 31, 2015 and December 31, 2016, respectively)
|
|
|
22,699
|
|
|
246,902
|
|
|
35,561
|
|
Convertible senior notes (Note 18)
|
|
|
4,058,181
|
|
|
4,381,698
|
|
|
631,096
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current liabilities
|
|
|
4,256,296
|
|
|
4,729,183
|
|
|
681,144
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
16,422,255
|
|
|
19,312,649
|
|
|
2,781,601
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the consolidated financial statements.
F-5
Table of Contents
VIPSHOP HOLDINGS LIMITED
CONSOLIDATED BALANCE SHEETS (Continued)
(All amounts in thousands, except for share and par value data)
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2015
|
|
2016
|
|
2016
|
|
|
|
RMB
|
|
RMB
|
|
US$
|
|
|
|
|
|
|
|
Note 2(aa)
|
|
EQUITY:
|
|
|
|
|
|
|
|
|
|
|
Class A ordinary shares(US$0.0001 par value, 483,489,642 shares authorized, and 100,085,519 and 101,508,264 shares issued and outstanding as
of December 31, 2015 and December 31, 2016, respectively)
|
|
|
65
|
|
|
66
|
|
|
9
|
|
Class B ordinary shares (US$0.0001 par value, 16,510,358 shares authorized, and 16,510,358 and 16,510,358 shares issued and outstanding as
of December 31, 2015 and December 31, 2016, respectively)
|
|
|
11
|
|
|
11
|
|
|
2
|
|
Treasury shares, at cost (1,614,135 and 1,356,918 Class A shares as of December 31, 2015 and December 31, 2016, respectively
(Note 21)
|
|
|
(844,711
|
)
|
|
(707,441
|
)
|
|
(101,893
|
)
|
Additional paid-in capital
|
|
|
2,838,591
|
|
|
3,130,126
|
|
|
450,832
|
|
Retained earnings
|
|
|
1,616,209
|
|
|
3,653,026
|
|
|
526,145
|
|
Accumulated other comprehensive loss
|
|
|
(70,981
|
)
|
|
(343,608
|
)
|
|
(49,490
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total Vipshop Holdings Limited shareholders' equity
|
|
|
3,539,184
|
|
|
5,732,180
|
|
|
825,605
|
|
Non-controlling interests
|
|
|
74,083
|
|
|
49,624
|
|
|
7,147
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders' equity
|
|
|
3,613,267
|
|
|
5,781,804
|
|
|
832,752
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
20,035,522
|
|
|
25,094,453
|
|
|
3,614,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the consolidated financial statements.
F-6
Table of Contents
VIPSHOP HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(All amounts in thousands, except for share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2014
|
|
2015
|
|
2016
|
|
2016
|
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
US$
Note 2(aa)
|
|
Product revenues
|
|
|
22,685,111
|
|
|
39,409,961
|
|
|
55,281,900
|
|
|
7,962,250
|
|
Other revenues
|
|
|
444,202
|
|
|
793,251
|
|
|
1,309,402
|
|
|
188,593
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenues
|
|
|
23,129,313
|
|
|
40,203,212
|
|
|
56,591,302
|
|
|
8,150,843
|
|
Cost of goods sold (including inventory write-down of RMB218,108, RMB293,946 and RMB303,233 for the years ended December 31, 2014, 2015 and 2016,
respectively)
|
|
|
(17,378,044
|
)
|
|
(30,306,723
|
)
|
|
(42,994,688
|
)
|
|
(6,192,523
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
5,751,269
|
|
|
9,896,489
|
|
|
13,596,614
|
|
|
1,958,320
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fulfillment expenses (including shipping and handling expenses of RMB1,174,296, RMB1,714,606 and RMB2,578,491 for the years ended December 31,
2014, 2015 and 2016, respectively) (Note 27(c))
|
|
|
(2,268,949
|
)
|
|
(3,667,031
|
)
|
|
(4,904,526
|
)
|
|
(706,399
|
)
|
Marketing expenses (Note 27(c))
|
|
|
(1,164,149
|
)
|
|
(2,089,348
|
)
|
|
(2,837,680
|
)
|
|
(408,711
|
)
|
Technology and content expenses (Note 27(c))
|
|
|
(670,998
|
)
|
|
(1,076,520
|
)
|
|
(1,563,582
|
)
|
|
(225,203
|
)
|
General and administrative expenses (Note 27(c))
|
|
|
(967,463
|
)
|
|
(1,301,472
|
)
|
|
(1,941,146
|
)
|
|
(279,583
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
(5,071,559
|
)
|
|
(8,134,371
|
)
|
|
(11,246,934
|
)
|
|
(1,619,896
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operating income (Note 22)
|
|
|
153,977
|
|
|
308,431
|
|
|
358,029
|
|
|
51,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
833,687
|
|
|
2,070,549
|
|
|
2,707,709
|
|
|
389,991
|
|
Other non-operating income
|
|
|
20,300
|
|
|
|
|
|
|
|
|
|
|
Impairment loss of investments
|
|
|
(6,166
|
)
|
|
(99,749
|
)
|
|
(114,574
|
)
|
|
(16,502
|
)
|
Interest expenses
|
|
|
(75,249
|
)
|
|
(85,762
|
)
|
|
(85,195
|
)
|
|
(12,271
|
)
|
Interest income
|
|
|
288,622
|
|
|
267,208
|
|
|
107,044
|
|
|
15,418
|
|
Exchange (loss) gain
|
|
|
(853
|
)
|
|
(101,726
|
)
|
|
51,100
|
|
|
7,360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes and share of loss of affiliates
|
|
|
1,060,341
|
|
|
2,050,520
|
|
|
2,666,084
|
|
|
383,996
|
|
Income tax expense (Note 23)
|
|
|
(245,032
|
)
|
|
(457,745
|
)
|
|
(601,828
|
)
|
|
(86,681
|
)
|
Share of loss of affiliates
|
|
|
(62,716
|
)
|
|
(84,063
|
)
|
|
(71,489
|
)
|
|
(10,297
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
752,593
|
|
|
1,508,712
|
|
|
1,992,767
|
|
|
287,018
|
|
Net loss attributable to non-controlling interests
|
|
|
88,693
|
|
|
80,953
|
|
|
44,050
|
|
|
6,345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Vipshop Holdings Limited's shareholders
|
|
|
841,286
|
|
|
1,589,665
|
|
|
2,036,817
|
|
|
293,363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in calculating earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of Class A and Class B ordinary shares for computing earnings per Class A and Class B ordinary
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
113,310,682
|
|
|
115,736,092
|
|
|
115,958,088
|
|
|
115,958,088
|
|
Diluted
|
|
|
120,227,584
|
|
|
120,168,063
|
|
|
125,817,183
|
|
|
125,817,183
|
|
Net earnings per Class A and Class B ordinary share (Note 24)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
7.42
|
|
|
13.74
|
|
|
17.57
|
|
|
2.53
|
|
Diluted
|
|
|
7.00
|
|
|
13.23
|
|
|
16.86
|
|
|
2.43
|
|
Net income
|
|
|
752,593
|
|
|
1,508,712
|
|
|
1,992,767
|
|
|
287,018
|
|
Other comprehensive loss, net of tax of nil:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
(1,709
|
)
|
|
(55,653
|
)
|
|
(288,956
|
)
|
|
(41,618
|
)
|
Unrealized loss of available-for-sales securities
|
|
|
|
|
|
(7,783
|
)
|
|
(17,042
|
)
|
|
(2,455
|
)
|
Reclassification adjustment for losses included in net income
|
|
|
|
|
|
|
|
|
36,567
|
|
|
5,267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
750,884
|
|
|
1,445,276
|
|
|
1,723,336
|
|
|
248,212
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Comprehensive loss attributable to non-controlling interests
|
|
|
(89,975
|
)
|
|
(84,119
|
)
|
|
(40,854
|
)
|
|
(5,884
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to Vipshop Holdings Limited's shareholders
|
|
|
840,859
|
|
|
1,529,395
|
|
|
1,764,190
|
|
|
254,096
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the consolidated financial statements.
F-7
Table of Contents
VIPSHOP HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(All amounts in thousands, except for share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vipshop Holdings Limited Shareholders' Equity
|
|
|
|
|
|
|
|
Class A ordinary
shares
|
|
Class B ordinary
shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
other
comprehensive
loss
|
|
|
|
|
|
|
|
No. of
shares
|
|
Amount
|
|
No. of
shares
|
|
Amount
|
|
Additional
paid-in
capital
|
|
No. of
shares
|
|
Amount
|
|
Retained
earnings
(deficit)
|
|
Non-
controlling
interest
|
|
Total
|
|
|
|
|
|
RMB
|
|
|
|
RMB
|
|
RMB
|
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
RMB
|
|
RMB
|
|
Balance as of January 1, 2014
|
|
|
95,155,614
|
|
|
62
|
|
|
16,510,358
|
|
|
11
|
|
|
2,297,549
|
|
|
|
|
|
|
|
|
(814,742
|
)
|
|
(10,284
|
)
|
|
|
|
|
1,472,596
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
841,286
|
|
|
|
|
|
(88,693
|
)
|
|
752,593
|
|
Issuance of ordinary shares upon exercise of stock options
|
|
|
1,883,977
|
|
|
1
|
|
|
|
|
|
|
|
|
10,949
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,950
|
|
Issuance of ordinary shares upon vesting of shares awards
|
|
|
988,723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
225,494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
225,494
|
|
Non-controlling interest arising from business combinations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
233,919
|
|
|
233,919
|
|
Other capital contribution
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,225
|
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(427
|
)
|
|
(1,282
|
)
|
|
(1,709
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2014
|
|
|
98,028,314
|
|
|
63
|
|
|
16,510,358
|
|
|
11
|
|
|
2,538,217
|
|
|
|
|
|
|
|
|
26,544
|
|
|
(10,711
|
)
|
|
143,944
|
|
|
2,698,068
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,589,665
|
|
|
|
|
|
(80,953
|
)
|
|
1,508,712
|
|
Issuance of ordinary shares upon exercise of stock options
|
|
|
956,587
|
|
|
2
|
|
|
|
|
|
|
|
|
6,321
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,323
|
|
Issuance of ordinary shares upon exercise of share awards
|
|
|
1,100,618
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
302,941
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
302,941
|
|
Non-controlling interest arising from business combinations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,417
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,418
|
|
|
19,001
|
|
Purchase additional ownership interests in a subsidiary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,471
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,160
|
)
|
|
(13,631
|
)
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(52,487
|
)
|
|
(3,166
|
)
|
|
(55,653
|
)
|
Fair value changes of available for sale securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,783
|
)
|
|
|
|
|
(7,783
|
)
|
Repurchase of ordinary shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,614,135
|
)
|
|
(844,711
|
)
|
|
|
|
|
|
|
|
|
|
|
(844,711
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2015
|
|
|
100,085,519
|
|
|
65
|
|
|
16,510,358
|
|
|
11
|
|
|
2,838,591
|
|
|
(1,614,135
|
)
|
|
(844,711
|
)
|
|
1,616,209
|
|
|
(70,981
|
)
|
|
74,083
|
|
|
3,613,267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of the consolidated financial statements.
F-8
Table of Contents
VIPSHOP HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Continued)
(All amounts in thousands, except for share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vipshop Holdings Limited Shareholders' Equity
|
|
|
|
|
|
|
|
Class A ordinary
shares
|
|
Class B ordinary
shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
other
comprehensive
income (loss)
|
|
|
|
|
|
|
|
No. of
shares
|
|
Amount
|
|
No. of
shares
|
|
Amount
|
|
Additional
paid-in
capital
|
|
No. of
shares
|
|
Amount
|
|
Retained
earnings
|
|
Non-
controlling
interest
|
|
Total
|
|
|
|
|
|
RMB
|
|
|
|
RMB
|
|
RMB
|
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
RMB
|
|
RMB
|
|
Balance as of December 31, 2015
|
|
|
100,085,519
|
|
|
65
|
|
|
16,510,358
|
|
|
11
|
|
|
2,838,591
|
|
|
(1,614,135
|
)
|
|
(844,711
|
)
|
|
1,616,209
|
|
|
(70,981
|
)
|
|
74,083
|
|
|
3,613,267
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,036,817
|
|
|
|
|
|
(44,050
|
)
|
|
1,992,767
|
|
Issuance of ordinary shares upon exercise of stock options
|
|
|
560,930
|
|
|
|
|
|
|
|
|
|
|
|
5,747
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,747
|
|
Issuance of ordinary shares upon vesting of shares awards
|
|
|
861,815
|
|
|
1
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Re-issuance of treasury stock upon vesting of shares awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(137,270
|
)
|
|
257,217
|
|
|
137,270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
475,653
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
475,653
|
|
Non-controlling interest arising from business combinations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
73,637
|
|
|
73,637
|
|
Purchase additional ownership interests in subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(52,594
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(59,042
|
)
|
|
(111,636
|
)
|
Capital contribution from non-controlling interest shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,800
|
|
|
1,800
|
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(292,152
|
)
|
|
3,196
|
|
|
(288,956
|
)
|
Fair value changes of available for sale securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(17,042
|
)
|
|
|
|
|
(17,042
|
)
|
Reclassification adjustment for losses included in net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,567
|
|
|
|
|
|
36,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2016
|
|
|
101,508,264
|
|
|
66
|
|
|
16,510,358
|
|
|
11
|
|
|
3,130,126
|
|
|
(1,356,918
|
)
|
|
(707,441
|
)
|
|
3,653,026
|
|
|
(343,608
|
)
|
|
49,624
|
|
|
5,781,804
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of the consolidated financial statements.
F-9
Table of Contents
VIPSHOP HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(All amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2014
|
|
2015
|
|
2016
|
|
2016
|
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
US$
|
|
|
|
|
|
|
|
|
|
Note 2(aa)
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
752,593
|
|
|
1,508,712
|
|
|
1,992,767
|
|
|
287,018
|
|
Adjustments to reconcile net income to net cash by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful debts
|
|
|
4,167
|
|
|
11,884
|
|
|
66,575
|
|
|
9,589
|
|
Write-offs for doubtful debts
|
|
|
|
|
|
|
|
|
(8,832
|
)
|
|
(1,272
|
)
|
Inventory write-down
|
|
|
218,108
|
|
|
293,946
|
|
|
303,233
|
|
|
43,674
|
|
Depreciation of property and equipment
|
|
|
109,990
|
|
|
291,401
|
|
|
610,976
|
|
|
87,999
|
|
Amortization of intangible assets
|
|
|
250,221
|
|
|
289,644
|
|
|
363,977
|
|
|
52,424
|
|
Amortization of land use rights
|
|
|
689
|
|
|
2,785
|
|
|
37,657
|
|
|
5,424
|
|
Impairment loss on intangible assets
|
|
|
16,907
|
|
|
|
|
|
|
|
|
|
|
Loss on disposal of property and equipment
|
|
|
196
|
|
|
1,688
|
|
|
10,499
|
|
|
1,512
|
|
Share-based compensation expenses
|
|
|
225,494
|
|
|
302,941
|
|
|
475,653
|
|
|
68,508
|
|
Share of loss of affiliates
|
|
|
62,716
|
|
|
84,063
|
|
|
71,489
|
|
|
10,297
|
|
Impairment loss of investments
|
|
|
6,166
|
|
|
99,749
|
|
|
114,574
|
|
|
16,502
|
|
Interest income on held-to-maturity securities
|
|
|
(119,615
|
)
|
|
(133,027
|
)
|
|
(31,855
|
)
|
|
(4,588
|
)
|
Amortization of debt issuance cost
|
|
|
26,701
|
|
|
33,453
|
|
|
35,824
|
|
|
5,160
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(22,950
|
)
|
|
(279,165
|
)
|
|
(1,951,397
|
)
|
|
(281,060
|
)
|
Amounts due from related parties
|
|
|
(30,991
|
)
|
|
(865
|
)
|
|
30,251
|
|
|
4,357
|
|
Other receivables and prepayments
|
|
|
(526,476
|
)
|
|
(1,094,085
|
)
|
|
(323,182
|
)
|
|
(46,548
|
)
|
Inventories
|
|
|
(2,129,050
|
)
|
|
(1,272,336
|
)
|
|
(685,018
|
)
|
|
(98,663
|
)
|
Deferred tax assets
|
|
|
(165,791
|
)
|
|
31,146
|
|
|
(10,119
|
)
|
|
(1,457
|
)
|
Accounts payable
|
|
|
2,855,375
|
|
|
643,370
|
|
|
1,553,400
|
|
|
223,736
|
|
Advance from customers
|
|
|
625,167
|
|
|
585,624
|
|
|
690,402
|
|
|
99,439
|
|
Accrued expenses and other current liabilities
|
|
|
1,073,047
|
|
|
537,300
|
|
|
(305,221
|
)
|
|
(43,962
|
)
|
Amounts due to related parties
|
|
|
19,776
|
|
|
131,182
|
|
|
(186,533
|
)
|
|
(26,866
|
)
|
Deferred income
|
|
|
63,158
|
|
|
(86,880
|
)
|
|
55,549
|
|
|
8,000
|
|
Deferred tax liability
|
|
|
(52,936
|
)
|
|
(67,444
|
)
|
|
(79,256
|
)
|
|
(11,415
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash generated from operating activities
|
|
|
3,262,662
|
|
|
1,915,086
|
|
|
2,831,413
|
|
|
407,808
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(1,588,910
|
)
|
|
(2,183,228
|
)
|
|
(1,967,645
|
)
|
|
(283,400
|
)
|
Purchase of land use right
|
|
|
(82,680
|
)
|
|
(118,256
|
)
|
|
(199,642
|
)
|
|
(28,754
|
)
|
Government subsidies for land use right
|
|
|
|
|
|
19,550
|
|
|
240,069
|
|
|
34,577
|
|
Deposit related to acquisition of land use right
|
|
|
(44,476
|
)
|
|
(1,873,553
|
)
|
|
(618,219
|
)
|
|
(89,042
|
)
|
Proceed from disposal of property and equipment
|
|
|
|
|
|
204
|
|
|
13,385
|
|
|
1,928
|
|
Purchase of other assets
|
|
|
(28,964
|
)
|
|
(9,388
|
)
|
|
(5,121
|
)
|
|
(738
|
)
|
Purchase of held-to-maturity securities
|
|
|
(6,317,500
|
)
|
|
(5,540,000
|
)
|
|
(2,165,000
|
)
|
|
(311,824
|
)
|
Proceed from redemption of held-to-maturity securities upon maturities
|
|
|
5,004,546
|
|
|
7,633,963
|
|
|
3,332,482
|
|
|
479,978
|
|
Investment in affiliates and other investments
|
|
|
(463,093
|
)
|
|
(523,643
|
)
|
|
(58,327
|
)
|
|
(8,401
|
)
|
Acquisition of subsidiaries, net of cash acquired of RMB125, RMB30,303 and RMB19,490 in 2014, 2015 and 2016, respectively
|
|
|
(687,233
|
)
|
|
(39,198
|
)
|
|
(106,365
|
)
|
|
(15,321
|
)
|
Investment in available-for-sale securities
|
|
|
|
|
|
(246,953
|
)
|
|
(97,314
|
)
|
|
(14,016
|
)
|
Prepayment for investment in affiliates and other investments
|
|
|
(40,503
|
)
|
|
(48,000
|
)
|
|
|
|
|
|
|
Increase in entrusted loan to an investee
|
|
|
(4,167
|
)
|
|
|
|
|
|
|
|
|
|
Loan to the employees
|
|
|
|
|
|
(9,207
|
)
|
|
(46,305
|
)
|
|
(6,669
|
)
|
Withdrawal of deposit for other investment
|
|
|
|
|
|
|
|
|
9,000
|
|
|
1,296
|
|
(Increase) decrease in restricted cash
|
|
|
(400
|
)
|
|
400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(4,253,380
|
)
|
|
(2,937,309
|
)
|
|
(1,669,002
|
)
|
|
(240,386
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the consolidated financial statements.
F-10
Table of Contents
VIPSHOP HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(All amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2014
|
|
2015
|
|
2016
|
|
2016
|
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
US$
|
|
|
|
|
|
|
|
|
|
Note 2(aa)
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from bank borrowings
|
|
|
1,053,992
|
|
|
669,463
|
|
|
3,000
|
|
|
432
|
|
Repayment to bank borrowings
|
|
|
(1,053,992
|
)
|
|
(574,463
|
)
|
|
(98,000
|
)
|
|
(14,115
|
)
|
Capital contributions from non-controlling interests
|
|
|
7,537
|
|
|
9,740
|
|
|
1,380
|
|
|
199
|
|
Acquisition of non-controlling interest
|
|
|
|
|
|
|
|
|
(111,636
|
)
|
|
(16,079
|
)
|
Repurchase of ordinary shares
|
|
|
|
|
|
(650,197
|
)
|
|
(193,619
|
)
|
|
(27,887
|
)
|
Other capital contributions
|
|
|
4,225
|
|
|
|
|
|
|
|
|
|
|
Proceed from issuance of convertible notes
|
|
|
3,836,110
|
|
|
|
|
|
|
|
|
|
|
Issuance cost of convertible notes offering
|
|
|
(6,689
|
)
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of ordinary shares upon exercise of stock options
|
|
|
10,950
|
|
|
6,323
|
|
|
5,747
|
|
|
829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
3,852,133
|
|
|
(539,134
|
)
|
|
(393,128
|
)
|
|
(56,621
|
)
|
Effect of exchange rate changes
|
|
|
(96,928
|
)
|
|
94,990
|
|
|
15,910
|
|
|
2,293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
2,764,487
|
|
|
(1,466,367
|
)
|
|
785,193
|
|
|
113,094
|
|
Cash and cash equivalents at beginning of the period
|
|
|
2,026,264
|
|
|
4,790,751
|
|
|
3,324,384
|
|
|
478,808
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of the period
|
|
|
4,790,751
|
|
|
3,324,384
|
|
|
4,109,577
|
|
|
591,902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid, net of amount capitalized
|
|
|
57,851
|
|
|
85,775
|
|
|
85,195
|
|
|
12,271
|
|
Income tax paid
|
|
|
454,510
|
|
|
446,621
|
|
|
631,129
|
|
|
90,902
|
|
Supplemental disclosure of non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payables incurred for purchase of property and equipment
|
|
|
361,249
|
|
|
137,679
|
|
|
271,999
|
|
|
39,176
|
|
Payables for repurchase of ordinary shares (Note 15 & 21)
|
|
|
|
|
|
194,514
|
|
|
|
|
|
|
|
Payables for acquisition of a subsidiary (Note 3(b))
|
|
|
|
|
|
|
|
|
74,352
|
|
|
10,709
|
|
The accompanying notes are an integral part of the consolidated financial statements.
F-11
Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise stated)
1. Organization and principal activities
Vipshop Holdings Limited (the "Company") was incorporated in the Cayman Islands on August 27, 2010. The Company, through its subsidiaries, and variable interest entities
("VIEs") and VIEs' subsidiaries (collectively, the "Group"), operate online platforms that offer high-quality branded products to consumers in the People's Republic of China (the "PRC") through
flash sales on its vipshop.com, vip.com and lefeng.com online platform. Flash sale represents an online retail format combining the advantages of e-commerce and discount sales through selling a finite
quantity of discounted products or services online for a limited period of time. The Group began offering services in 2008 through Guangzhou Vipshop Information Technology Co., Ltd.
("Vipshop Information"), a consolidated VIE incorporated in the PRC on August 22, 2008 by Mr. Eric Ya Shen ("Mr. Shen"), the Chairman and chief executive officer of the Company,
Mr. Arthur Xiaobo Hong, the Vice Chairman of the Board of Directors of the Company (collectively, the "Founders"), and three other investors (the "Original Investors").
On
June 24, 2014, the Company and Ovation Entertainment Limited ("Ovation") have each designated a PRC citizen, namely, Mr. Shen by the Company and Mr. Zhihui Yu by
Ovation, to be the nominee shareholders and established Shanghai Pinjian E-Commerce Co., Ltd., ("Lefeng Information") to carry out online retail services. Mr. Shen holds 75% of
the equity interest in Lefeng Information, and Mr. Zhihui Yu holds the remaining 25%. On the same day, Lefeng (Shanghai) Information Technology Co., Limited entered into series of
agreements with Lefeng Information and each of its individual shareholders that are disclosed in the Note 2(b).
F-12
Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
1. Organization and principal activities (Continued)
As
of December 31, 2016, the Company's significant consolidated subsidiaries, VIEs and VIEs' subsidiaries consist of the following:
|
|
|
|
|
|
|
|
|
|
Name of subsidiaries
|
|
Date of
incorporation/
establishment
|
|
Place of
incorporation/
establishment
|
|
Percentage of
shareholdings
|
|
Principal activities
|
Vipshop International Holdings Limited ("Vipshop HK")
|
|
October 22, 2010
|
|
Hong Kong
|
|
|
100
|
%
|
Investment holding
|
Vipshop (China) Co., Ltd. (the "WFOE")
|
|
January 20, 2011
|
|
China
|
|
|
100
|
%
|
Warehousing, logistics, procurement, research and development, consulting
|
Vipshop (Kunshan) E-Commerce Co., Ltd. ("Vipshop Kunshan")
|
|
August 2, 2011
|
|
China
|
|
|
100
|
%
|
Warehousing and logistics
|
Vipshop (Jianyang) E-Commerce Co., Ltd. ("Vipshop Jianyang")
|
|
February 22, 2012
|
|
China
|
|
|
100
|
%
|
Warehousing and logistics
|
Vipshop (Tianjin) E-Commerce Co., Ltd. ("Vipshop Tianjin")
|
|
July 31, 2012
|
|
China
|
|
|
100
|
%
|
Warehousing and logistics
|
Guangzhou Pinwei Software Co., Ltd. ("Pinwei Software")
|
|
December 6, 2012
|
|
China
|
|
|
100
|
%
|
Software development and information technology support
|
Vipshop (Zhuhai) E-Commerce Co., Ltd. ("Vipshop Zhuhai")
|
|
July 16, 2013
|
|
China
|
|
|
100
|
%
|
Warehousing and logistics
|
Vipshop (Hubei) E-Commerce Co., Ltd. ("Vipshop Hubei")
|
|
July 4, 2013
|
|
China
|
|
|
100
|
%
|
Warehousing and logistics
|
Shanghai Pinzhong Commercial Factoring Co., Ltd. ("Pinzhong Factoring")
|
|
August 9, 2013
|
|
China
|
|
|
100
|
%
|
Business financing
|
Chongqing Vipshop E-Commerce Co., Ltd. ("Vipshop Chongqing")
|
|
October 22, 2013
|
|
China
|
|
|
100
|
%
|
Warehousing and logistics
|
Vipshop (Zhaoqing) E-Commerce Co., Ltd. ("Vipshop Zhaoqing")
|
|
November 22, 2013
|
|
China
|
|
|
100
|
%
|
Warehousing and logistics
|
F-13
Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
1. Organization and principal activities (Continued)
|
|
|
|
|
|
|
|
|
Name of VIEs and VIEs' subsidiaries
|
|
Date of
incorporation
|
|
Place of
incorporation
|
|
Economic
interest held
|
|
Principal activities
|
Guangzhou Vipshop Information Technology Co., Ltd.("Vipshop Information")
|
|
August 22, 2008
|
|
China
|
|
VIE
|
|
Online retail
|
Lefeng (Shanghai) Information Technology Co., Limited ("Lefeng Shanghai")
|
|
August 30, 2013
|
|
China
|
|
75%
|
|
Online retail
|
2. Summary of Significant Accounting Policies
(a) Basis of Presentation
The
consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP").
(b) Principles of consolidation
The
consolidated financial statements include the financial statements of the Company, its subsidiaries, VIEs and VIEs' subsidiaries for which the Company is the primary beneficiary. All
intercompany transactions, balances and unrealized profit and losses have been eliminated on consolidation.
The
Company evaluates the need to consolidate its VIEs and VIEs' subsidiaries in which equity investors do not have the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities without additional subordinated financial support.
As
foreign-invested companies engaged in Internet-based businesses is subject to significant restrictions under current PRC laws and regulations, the Company and its PRC subsidiary,
Vipshop China, as a wholly foreign owned enterprise ("WFOE"), are both restricted from holding the licenses that are necessary for the online operation in China. To comply with these restrictions, The
Company conducts the online operations principally through Vipshop Information. Vipshop Information holds the licenses necessary to conduct the Internet-related operations of
vipshop.com
and
vip.com
in China.
Since
the Company does not have any equity interests in Vipshop Information, in order to exercise effective control over its operations, the Company, through its wholly owned subsidiary,
the WFOE, entered into a series of contractual arrangements with Vipshop Information and its shareholders, pursuant to which the Company is entitled to receive effectively all economic benefits
generated from Vipshop Information shareholders' equity interests in it. Details of certain key agreements entered into between the WFOE, Vipshop Information and each of its individual shareholders on
January 20, 2011 and amended on October 8, 2011 are as follows:
Power of Attorney Agreements:
Each equity holder of Vipshop Information irrevocably authorized the WFOE to exercise the rights related
to their
shareholdings, including attending shareholders' meetings and voting on their behalf on all matters, including but not limited to matters related to the transfer, pledge or disposition of their
respective equity interests in Vipshop Information, and appointment of the executive directors and senior management of Vipshop Information. The WFOE
F-14
Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
2. Summary of Significant Accounting Policies (Continued)
has
the right to appoint any individual or entity to exercise the power of attorney on its behalf. Each power of attorney will remain in effect until the shareholder ceases to hold any equity interest
in Vipshop Information.
Amended and Restated Exclusive Business Cooperation Agreement:
The WFOE entered into an agreement with Vipshop Information to provide
Vipshop
Information with technical, consulting and other services. In considerations of these services, Vipshop Information shall pay the WFOE fees equal to 100% of its net income of Vipshop Information,
provided that the WFOE, at its sole discretion, shall have the right to adjust the rate of the service through written notice. The WFOE is the exclusive provider of these services for a term of
10 years and may be extended for a period to be determined by the WFOE. The WFOE may terminate this agreement at any time by giving 30 days prior written notice. Vipshop Information has
no right to terminate this agreement unless the WFOE commits gross negligence or fraud.
Amended and Restated Equity Interest Pledge Agreements:
Each equity holder of Vipshop Information pledged all their respective equity
interests in
Vipshop Information as security to ensure that Vipshop Information fully performs its obligations under the Exclusive Business Cooperation Agreement, and pays the consulting and service fees to the
WFOE when the fees becomes due. The agreement will remain in effect until all of the obligations of Vipshop Information under the Amended and Restated Exclusive Business Cooperation Agreement have
been duly performed or terminated.
Amended and Restated Exclusive Option Agreements:
Each equity holder of Vipshop Information granted the WFOE an irrevocable and
exclusive right to
purchase, or designate one or more persons to purchase, their equity interest in Vipshop Information at the WFOE's sole and absolute discretion to the extent permitted by the PRC laws. The purchase
price is 10 Renminbi ("RMB") (US$1.44); if appraisal is required by laws of the PRC at the time when the WFOE exercises the option, the parties shall negotiate in good faith, to make necessary
adjustments to the purchase price based on the appraisal result to comply with applicable laws of the PRC. The term of this agreement is ten years from the execution date of October 8, 2011,
which may be extended for a period to be determined by the WFOE.
Exclusive Purchase Framework Agreement:
The WFOE and Vipshop Information entered into this agreement during the third quarter of fiscal
2011. Under
this agreement, Vipshop Information agrees to purchase products or services exclusively from the WFOE or its subsidiaries. Vipshop Information and its subsidiaries must not purchase from any third
party products or services which the WFOE is capable of providing. The term of this agreement is ten years from September 1, 2011. If neither party objects in writing nor both parties remain
cooperating at the expiration of the agreement, the parties will continue to be bound by this agreement until a new agreement is entered into. Vipshop Information must pay the WFOE for its products an
amount, which includes a service fee, based on the unit price and the quantity of the products ordered by Vipshop Information. The WFOE may terminate this agreement at any time by giving
15 days' prior written notice. Vipshop Information has no right to terminate this agreement unless the WFOE commits gross negligence or fraud.
In
October 2012, the Company effected transfer of 10.4% of equity interest from one of the former shareholder of Vipshop Information to Mr. Shen, an existing shareholder of
Vipshop Information. In August 2015, the Company effected transfer of 22.0% of equity interest from two of
F-15
Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
2. Summary of Significant Accounting Policies (Continued)
the
former shareholders of Vipshop Information to Mr. Shen and a concurrent capital increase of Vipshop Information from RMB24.5 million to RMB274.5 million as contributed by
Mr. Shen. In December 2015, the Company effected a concurrent capital increase of Vipshop Information to RMB824.5 million as contributed by Mr. Shen. The Company amended
the contractual arrangements the relevant entities had as explained above with Mr. Shen and Mr. Arthur Xiaobo Hong to reflect each transfer. As of December 31, 2016, shareholders
of Vipshop Information include Mr. Shen and Mr. Arthur Xiaobo Hong, holding 99.23% and 0.77% of the total equity interests in Vipshop Information, respectively.
The
Company participated significantly in the design of Vipshop Information. Based on the Amended and Restated Equity Pledge Agreements, the Amended and Restated Exclusive Option
Agreement, and the Power of Attorney Agreements dated January 20, 2011, the Company has the ability to effectively control Vipshop Information through the WFOE. The Company is also able to
receive a majority of the economic benefits of Vipshop Information, because of its ability to effectively determine the service fees payable by Vipshop Information to the WFOE under the Amended and
Restated Exclusive Business Cooperation Agreement, and through the Exclusive Purchase Framework Agreement. Therefore, the Company has determined that it is the primary beneficiary of Vipshop
Information and has consolidated its respective results for the periods presented.
The
Company also has another set of contractual arrangements among Lefeng Shanghai, Lefeng Information, and shareholders of Lefeng Information, under which Lefeng Shanghai is the primary
beneficiary of Lefeng Information and the Company consolidates Lefeng Information through Lefeng Shanghai. The contractual arrangements thereunder are substantially similar to the set with Vipshop
Information described above.
Other
than Vipshop Information and Lefeng Information, the Company has no interest in any other variable interest entities.
Risks in relation to the VIE structure
The
Group believes that the VIE arrangements are in compliance with PRC law and are legally enforceable. The equity holders of the VIEs are also shareholders of the Company and therefore
have no current interest in seeking to act contrary to the contractual arrangements. However, there are
certain risks related to the VIE arrangements, which include but are not limited to the following:
-
-
If the Group's ownership structure, are found to be in violation of any existing or future PRC laws or regulations, the relevant governmental
authorities, including the China Securities Regulatory Commission, would have broad discretion in dealing with such violation, including levying fines, confiscating its income or the income of the
WFOE, Vipshop Information, Lefeng Shanghai, or Lefeng Information, revoking the business licenses or operating licenses of the WFOE, Vipshop Information, Lefeng Shanghai, or Lefeng Information,
shutting down the Group's servers or blocking the Group's websites, discontinuing or placing restrictions or onerous conditions on the Group's operations, requiring the Group to undergo a costly and
disruptive restructuring, restricting or prohibiting the Group's use of various funding to finance its business and operations in China, and taking other regulatory or enforcement actions that could
be harmful to the Group's business;
F-16
Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
2. Summary of Significant Accounting Policies (Continued)
-
-
The Group relies on contractual arrangements with the VIEs and their equity holders for a majority all of its PRC operations, which may not be
as effective as direct ownership in providing operational control;
-
-
The Group may have to incur significant cost to enforce, or may not be able to effectively enforce, the contractual arrangements with the VIEs
and their equity holders in the event of a breach or non-compliance by the VIEs or their equity holders; and
-
-
Each of the shareholders of the VIEs is also a director of the Company or its subsidiaries, and has a duty of care and loyalty to the Company
and its shareholders as a whole under Cayman Islands law. Under the contractual arrangements with the VIEs and their shareholders, (a) the Company may replace any such individual as a
shareholder of the VIEs at the Company's discretion, and (b) each of these individuals has executed a power of attorney to appoint the WFOE or its designated third party to vote on their behalf
and exercise shareholder rights of the VIE. However, the Company cannot assure that these individuals will act in the best interests of the Company should any conflicts of interest arise, or that any
conflicts of interest will be resolved in the Company's favor. These individuals may breach or cause the VIE to breach the existing contractual arrangements. If the Company cannot resolve any
conflicts of interest or disputes between the Company and any of these individuals, the Company would have to rely on legal proceedings, which may be expensive, time-consuming and disruptive to its
operations. There is also substantial uncertainty as to the outcome of any such legal proceedings.
-
-
There are, however, substantial uncertainties regarding the interpretation and application of current or future PRC laws and regulations.
Particularly, in January 2015, the Ministry of Commerce published a discussion draft of the proposed Foreign Investment Law for public review and comments. Under the draft Foreign Investment
Law, variable interest entities would also be deemed as foreign-invested enterprises, if they are ultimately "controlled" by foreign investors, and be subject to restrictions on foreign investments.
The draft Foreign Investment Law, if enacted as proposed, may materially impact the entire legal framework regulating the foreign investments in China as well as the viability of the Group's current
corporate structure, corporate governance and business operations in many aspects.
F-17
Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
2. Summary of Significant Accounting Policies (Continued)
The
financial information of the Company's VIEs and VIEs' subsidiaries, including total assets, total liabilities, net revenues, total operating expenses, net income attributable to the
Company and cashflows after intercompany eliminations are as follows:
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2015
|
|
2016
|
|
|
|
RMB
|
|
RMB
|
|
Total assets
|
|
|
4,673,422
|
|
|
3,396,705
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
(48,178
|
)
|
|
(22,471
|
)
|
Advance from customers
|
|
|
(879,848
|
)
|
|
(1,211,643
|
)
|
Accrued expenses and other current liabilities
|
|
|
(1,127,270
|
)
|
|
(1,257,667
|
)
|
Amounts due to related parties
|
|
|
(82,994
|
)
|
|
(591
|
)
|
Deferred income
|
|
|
(95,643
|
)
|
|
(16,222
|
)
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
(2,233,933
|
)
|
|
(2,508,594
|
)
|
|
|
|
|
|
|
|
|
Deferred tax liability
|
|
|
(116
|
)
|
|
(4,904
|
)
|
Deferred income
|
|
|
(3,573
|
)
|
|
(1,928
|
)
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
(2,237,622
|
)
|
|
(2,515,426
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2014
|
|
2015
|
|
2016
|
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
Net revenues
|
|
|
18,794,999
|
|
|
7,388,637
|
|
|
5,500,226
|
|
Total operating expenses
|
|
|
(2,269,740
|
)
|
|
(1,542,401
|
)
|
|
(1,740,370
|
)
|
Net income
|
|
|
162,955
|
|
|
226,986
|
|
|
230,954
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2014
|
|
2015
|
|
2016
|
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
Net cash provided by (used in) operating activities (Note a)
|
|
|
1,052,069
|
|
|
(1,363,805
|
)
|
|
(1,192,894
|
)
|
Net cash (used in) provided by investing activities
|
|
|
(890,327
|
)
|
|
1,018,250
|
|
|
626,798
|
|
Net cash provided by (used in) financing activities
|
|
|
12,665
|
|
|
809,740
|
|
|
(108,779
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note a:
|
|
Cash flows provided by (used in) operating activities in 2014, 2015 and 2016 include amounts due to the Group's subsidiaries of RMB718,759, RMB(1,649,956) and RMB(994,474).
|
There
are no consolidated VIEs' assets that are collateral for the VIEs' obligations or are restricted solely to settle the VIEs' obligations. The Company has not provided any financial
support that it was not previously contractually required to provide to the VIEs.
F-18
Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
2. Summary of Significant Accounting Policies (Continued)
(c) Use of Estimates
The
preparation of financial statements in conformity with U.S. GAAP requires management of the Group to make estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenues and expenses during the reporting periods. Actual
results may differ from these estimates. The Group's management based their estimates on historical experience and various other factors believed to be reasonable under the circumstances, the results
of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Significant accounting estimates reflected in the
Group's financial statements include inventory write-down, valuation of goodwill and intangible assets acquired in the business acquisitions and acquisition of significant equity affiliates both on
the acquisition dates and at the time of impairment assessments, valuation of significant other investments impairment assessment and valuation of receivables arising from customer financing. Changes
in facts and circumstances may result in revised estimates.
(d) Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand, demand deposits and highly liquid investments with maturity of less than three months.
Cash
and cash equivalents are placed with financial institutions with high-credit ratings and quality.
(e) Held-to-maturity securities
The Group invests in debt securities which have fixed maturity dates, pay a fixed return on the amount invested and early redemption of these securities is not
allowed. The Group classifies these investments as held-to-maturity as it has both the positive intent and ability to hold them until maturity.
(f) Inventories
Inventory used to be stated at the lower of cost or market before 2016. The Group early adopted Accounting Standard Update ("ASU") 2015-11,
Inventory (Topic 330):
Simplifying the Measurement of Inventory
and applied it prospectively from 2016. Upon the adoption of this new accounting
guidance, inventory is stated at the lower of cost or net realisable value. Cost of inventory is determined using the weighted average cost method. Net realizable value is the estimated selling prices
in the ordinary course of business, less reasonably predictable costs, disposal, and transportation. Adjustments are recorded to write down the cost of inventory to the estimated net realizable value
for slow-moving merchandise and damaged goods. The amount of write down is also dependent upon factors such as whether the goods are returnable to vendors, inventory aging, historical and forecasted
consumer demand, and promotional environment.
The
Group assesses the inventory write-down based on different product categories and applies a certain percentages based on aging. The Group classifies all goods into the following two
categories: non-returnable goods and returnable goods. Non-returnable goods cannot be returned to suppliers and general inventory write-down of different percentages are applied to these goods within
the different aging categories. These percentages were developed based on historical write-down on these different
F-19
Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
2. Summary of Significant Accounting Policies (Continued)
types
of goods. In addition to general write-down, specific write-down will also be applied to non-returnable goods if assessed to be needed based on the factors mentioned above. Returnable goods will
have no general write-down based on aging but specific write down will be made at the end of each reporting periods based on forecast sales, conditions of the goods and planned promotions.
Write
downs are recorded in cost of goods sold in the consolidated statements of income and comprehensive income.
(g) Accounts receivable from customer financing business
Accounts receivable are stated at the historical carrying amount net of write-offs and allowance for uncollectible accounts. The Group establishes an allowance
for uncollectible accounts receivable based on estimates, historical experience and other factors surrounding the credit risk of specific customers. Uncollectible accounts receivable are written off
when a settlement is reached for an amount that is less than the outstanding historical balance or when the Group has determined the balance will not be collected.
The
Group recorded the allowance for the uncollectible accounts receivables in the amount of nil and RMB43,641 in relation to receivables from customer financing business as of
December 31, 2015 and 2016.
(h) Other receivable from supplier financing business
Other receivable are stated at the historical carrying amount net of write-offs and allowance for uncollectible accounts. The Group establishes an allowance for
uncollectible other receivable based on estimates, historical experience and other factors surrounding the credit risk of specific suppliers. Uncollectible accounts receivable are written off when a
settlement is reached for an amount that is less than the outstanding historical balance or when the Group has determined the balance will not be collected.
The
Group recorded the allowance for the uncollectible other receivables in the amount of RMB11,884 and RMB21,942 in relation to receivables from supplier financing business as of
December 31, 2015 and 2016, respectively.
(i) Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and impairment losses. Gains or losses on dispositions of property and equipment are
included in operating income. Major additions, renewals and betterments are capitalized, while maintenance and repairs are expensed as incurred.
F-20
Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
2. Summary of Significant Accounting Policies (Continued)
Depreciation
and amortization are provided over the estimated useful lives of the assets using the straight-line method from the time the assets are placed in service. Estimated useful
lives are as follows, taking into account the assets' estimated residual value:
|
|
|
Classification
|
|
Estimated useful life
|
Buildings
|
|
20 years
|
Furniture, fixtures and equipment
|
|
2 to 10 years
|
Leasehold improvements
|
|
Shorter of lease term or the estimated useful life of lease improvements
|
Motor vehicles
|
|
5 years
|
Software
|
|
3 years
|
Direct
and incremental costs related to the construction of assets, including costs under the construction contracts, duties and tariffs, equipment installation and shipping costs, are
capitalized. Management estimates the residual value of its furniture, fixtures and equipment and motor vehicles to be 5%.
(j) Capitalization of interest
Interest and amortization of deferred financing costs incurred on funds used to construct the Group's warehouses during the active construction period are
capitalized. Interest subject to capitalization primarily includes interest paid or payable on the Group's convertible senior notes due 2019 at interest of 1.5%. The capitalization of interest and
amortization of deferred financing costs ceases once a project is substantially completed or development activity is suspended for more than a brief period. The amount to be capitalized is determined
by applying the weighted average interest rate of the Group's outstanding borrowings to the average amount of accumulated capital expenditures for assets under construction during the year and is
added to the cost of the underlying assets and amortized over their respective useful lives. Total interest expenses incurred amounted to RMB84,281, RMB94,077 and RMB99,437, of which RMB9,033,
RMB8,315 and RMB14,242 were capitalized for the years ended December 31, 2014, 2015 and 2016, respectively.
(k) Land use rights
Land use rights represent amounts paid for the Group's lease for the use right of lands located in Zhaoqing City, Tianjin City, Qingdao City, Ezhou City,
Zhengzhou City, Guangzhou City and Jianyang City of PRC. Amounts are charged to earnings ratably over the term of the lease of 50 years.
(l) Intangible assets, net
Acquired intangible assets mainly consist of domain name, customer relationship, non-compete agreements, trademarks and payment license acquired from third
parties and from business combination.
F-21
Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
2. Summary of Significant Accounting Policies (Continued)
Domain name and trademarks purchased from third parties are initially recorded at cost and amortized on a straight-line basis over the estimated
economic lives of approximately two to three years.
Identifiable intangibles assets are required to be determined separately from goodwill based on their fair values. In particular, an intangible
asset acquired in a business combination should be recognized as an asset separate from goodwill if it satisfies either the "contractual-legal" or "separability" criterion.
Intangible
assets with a definite economic life are carried at cost less accumulated amortization. Amortization for identifiable intangibles assets are computed using the straight-line
method over the intangible assets' economic lives.
Alternatively,
intangible assets acquired in a business combination with indefinite lives are carried out cost less than subsequent accumulated impairment loss. Cost to renew or extend
the term of a recognized intangible asset is charged to profit or loss as incurred in the consolidated statements of income and comprehensive income.
Estimated
economic lives of the intangible assets are as follows:
|
|
|
Classification
|
|
Estimated economic life
|
Customer relationship
|
|
4 - 14 years
|
Trademarks
|
|
2 - 5 years
|
Non-compete agreement
|
|
3 years
|
Domain name
|
|
2 - 3 years
|
Payment license
|
|
Indefinite life
|
(m) Investment in affiliates
Affiliated companies are entities over which the Group has significant influence, but which it does not control. The Group generally considers an ownership
interest of 20% or higher to represent significant influence.
Investments
in affiliates are accounted for by the equity method of accounting. Under this method, the Group's share of the post-acquisition profits or losses of the affiliated companies
is recognized in the statement of income and comprehensive income and its shares of post-acquisition movements in other comprehensive income are recognized in other comprehensive income. Unrealized
gains on transactions between the Group and its affiliated companies are eliminated to the extent of the Group's interest in the affiliated companies; unrealized losses are also eliminated unless the
transaction provides evidence of an impairment of the asset transferred. When the Group's share of losses in an affiliated company equals or exceeds its interest in the affiliated company, the Company
does not recognize further losses, unless the Group has incurred obligations or made payments on behalf of the affiliated company.
F-22
Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
2. Summary of Significant Accounting Policies (Continued)
The
Group is required to perform an impairment assessment of its investments whenever events or changes in business circumstances indicate that the carrying value of the investment may
not be fully
recoverable. An impairment loss is recorded when there has been a loss in value of the investment that is other than temporary. The Group assess its equity investments for other-than-temporary
impairment by considering all relevant and available information including, but not limited to, current economic and market conditions, the operating performance of the companies including current
earnings trends and other company-specific information such as financing needs, the Group's intent and ability to retain the investment for a period of time sufficient to allow for any anticipated
recovery in market value, and the severity and duration of the impairment. The Group has recorded impairment losses in the periods presented. As of December 31, 2015 and 2016, the accumulated
impairment loss of investments were RMB58,510 and RMB58,510, respectively. The other-than-temporary impairment recorded in 2015 on the equity affiliate due to sustained depression of the affiliate's
expected results of operations.
(n) Other investments
Other investments represent investments in equity security of private companies which the Group owes equity interest, over which the Group exerts no significant
influence and are measured initially at cost.
The
Group reviews the investments for impairment whenever events or changes in circumstances indicate that the carrying amount of the investments may not be recoverable. Certain of the
Group's investments are in development stage companies whose success depends on factors including the ability of the investee companies to raise additional funds in financial markets that can be
volatile and other key business factors, any of which may impact the Company's ability to recover its investments. At Decemer 31, 2015 and 2016, the accumulated impairment loss of invesetments were
RMB41,239 and RMB110,608, respectively.
(o) Available for sale securities
The Group invests in marketable equity securities and debt securities to meet business objectives. These marketable securities are reported at fair value,
classified and accounted for as available-for-sale securities in investment securities. The assessment of a decline in the fair value of an individual security is based on whether the decline is
other-than-temporary. The Group assesses its available-for-sale securities for other-than-temporary impairment by considering factors including, but not limited to, its ability and intent to hold the
individual security, severity of the impairment, expected duration of the impairment and forecasted recovery of fair values. Investments classified as available-for-sale securities are reported at
fair value with unrealized gains or losses, if any, recorded in accumulated other comprehensive income in shareholders' equity. If the Group determines a decline in fair value is other-than-temporary,
the cost basis of the individual security is written down to fair value as a new cost basis and the amount of the write-down is accounted for as a realized loss charged in the consolidated statement
of income and comprehensive income. The fair values of the investments would not be adjusted for subsequent recoveries in fair values. The Group recorded nil, nil and RMB48,634 of impairment on
available-for-sale securities for the years ended December 31, 2014, 2015 and 2016.
F-23
Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
2. Summary of Significant Accounting Policies (Continued)
(p) Impairment of long-lived assets (other than goodwill and intangible assets with indefinite life)
The Group evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be
recoverable. When these events occur, the Group assesses the recoverability of these long-lived assets by comparing the carrying amount of the assets to the future undiscounted cash flows expected to
result from the use of the assets and their eventual disposition. If the future undiscounted cash flow is less than the carrying amount of the assets, the Group recognizes an impairment equal to the
difference between the carrying amount and fair value of these assets. The Group recorded no impairment for the years ended December 31, 2014, 2015 and 2016, respectively.
(q) Goodwill
Goodwill represents the excess of the purchase price over the fair value of the identifiable assets and liabilities acquired in a business combination.
Goodwill
is not amortized but is tested for impairment on an annual basis as of December 31, and in between annual tests when an event occurs or circumstances change that could
indicate that the asset might be impaired. In accordance with Accounting Standards Codification ("ASC") 350-20, a company firstly has the option to assess qualitative factors to determine whether it
is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company decides, as a result of its qualitative assessment, that it is more likely than not
that the fair value of a reporting unit is less than its carrying amount, a two-step quantitative impairment test is mandatory. The Company may also elect to proceed directly to the two-step
impairment test without considering qualitative factors.
The
quantitative impairment test consists of a comparison of the fair value of each reporting unit with its carrying amount. If the carrying amount of each reporting unit exceeds its
fair value, an impairment loss equal to the difference between the implied fair value of the reporting unit and their carrying amounts will be recorded.
Application
of impairment test for goodwill requires significant management judgment, including the identification of the reporting unit, assigning assets, liabilities and goodwill to
each reporting unit, and
determining the fair value of each reporting unit. The fair value of each reporting unit is determined by analysis of discounted cash flows. The significant assumptions regarding reporting unit's
future operating performance are revenue growth rates, costs of goods and operating expenses growth rates, discount rates and terminal values. Changes in these estimates and assumptions could
materially affect the determination of fair value for each reporting unit.
In
2015, management has conducted step 1 of the quantitative impairment test to compare the carrying value of the reporting unit, including assigned goodwill, to its respective fair
value. The fair value of the reporting unit was estimated by using the income approach.
F-24
Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
2. Summary of Significant Accounting Policies (Continued)
Based
on the quantitative test, it was determined that the fair value of the reporting unit tested exceeded its carrying amount and, therefore, step two of the two-step goodwill
impairment test was not required. The management concluded that goodwill was not impaired as of December 31, 2015.
In
2016, management has conducted the qualitative impairment test to compare the carrying value of the reporting units, including assigned goodwill, to its respective fair value.
Based
on the qualitative impairment assessment, it was determined that it is more likely than not the fair values of the reporting units tested exceeded their carrying amounts and,
therefore, quantitative impairment test for goodwill was not required. The management concluded that goodwill were not impaired as of December 31, 2016.
(r) Intangible assets with indefinite lives
Intangible assets with indefinite lives represents the purchase price of the payment license in a business combination.
The
payment license was determined to have an indefinite life. In determining its indefinite life, the Company considered the following: the expected use of the intangible; the longevity
of the license; the legal, regulatory and contractual provisions that affect their maximum useful life; the Company's ability to renew or extend the asset's legal or contractual life without
substantial costs; effects of the
regulatory environment; maintenance expenditures required to obtain the expected future cash flows from the asset; and considerations for obsolescence, demand, competition and other economic factors.
Intangible
assets with indefinite lives is not amortized but is tested for impairment on an annual basis as of December 31, and in between annual tests when an event occurs or
circumstances change that could indicate that the asset might be impaired.
In
2016, management has conducted the qualitative impairment test and the qualitative assessment indicated that it is more likely than not that the Company's indefinite lived intangible
assets are not impaired.
(s) Business combinations and non-controlling interests
The Group accounts for its business combinations using the acquisition method of accounting in accordance with ASC 805 "Business Combinations". The cost of an
acquisition is measured as the aggregate of the acquisition date fair values of the assets transferred and liabilities incurred by the Group to the sellers and equity instruments issued. Transaction
costs directly attributable to the acquisition are expensed as incurred. Identifiable assets and liabilities acquired or assumed are measured separately at their fair values as of the acquisition
date, irrespective of the extent of any non-controlling interests. The excess of (i) the total costs of acquisition, fair value of the non-controlling interests and acquisition date fair value
of any previously held equity interest in the acquiree over (ii) the fair value of the identifiable net assets of the acquiree is recorded as goodwill.
For
the Group's majority-owned subsidiaries and subsidiaries of VIEs, a non-controlling interest is recognized to reflect the portion of their equity which is not attributable, directly
or indirectly, to the Group. Consolidated net income on the consolidated statements of income and comprehensive income includes the net income (loss) attributable to non-controlling interests. The
cumulative results of
F-25
Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
2. Summary of Significant Accounting Policies (Continued)
operations
attributable to non-controlling interests, are recorded as non-controlling interests in the Group's consolidated balance sheets.
(t) Debt issuance costs and debt discounts
Debt issuance costs and debt discounts are amortized as interest expense, using the effective interest method, through the earlier of the maturity date of the
Convertible Senior Notes or the date of redemption, if any. Debt issuance costs and debt discounts are recorded as a direct deduction from the face amount of Convertible Senior Notes.
(u) Revenue recognition
The Group recognizes revenue from the sale of apparel, fashion goods, cosmetics, home goods and lifestyle products and other merchandise through its online
platforms, including its internet website and cellular phone application. The Group recognizes revenue when persuasive evidence of an arrangement exists, products are delivered, the price to the buyer
is fixed or determinable and collectability is reasonably assured.
The
Group utilizes delivery service providers to deliver goods to its customers directly from its own warehouses. The Group estimates and defers revenue and the related product costs for
goods that are in-transit to the customers.
The
Group offers customers with an unconditional right of return for a period of 7 days upon receipt of products on sales from vip.com and lefeng.com platforms. The Group defers
revenue from sales of vip.com platforms until the return period expires as the Group cannot reasonably estimate the amount of future returns. The Group recognizes revenue from sales of lefeng.com
platforms when products are delivered to customers because historical returns on sales on lefeng.com are insignificant.
Revenue
was recorded on a gross basis, net of surcharges and value added tax ("VAT") which is mainly 17% of gross sales. Surcharges are sales related taxes representing the City
Maintenance and Construction Tax and Education Surtax. The Group recorded revenue on a gross basis because the Group has the following indicators for gross reporting: it is the primary obligor of the
sales arrangements, is subject to inventory risks of physical loss, has latitude in establishing prices, has discretion in suppliers' selection and assumes credit risks on receivables from customers.
The Group also retains some of general inventory risks despite its arrangements to return goods to some vendors within limited time periods.
Discount coupons membership reward program
The Group voluntarily provides discount coupons through certain co-operative websites or through public distributions during its marketing
activities. These coupons are not related to prior purchases, and can only be utilized in conjunction with subsequent purchases on the Group's platforms. These discount coupons are recorded as
reduction of revenues at the time of use. The Group has established a membership reward program wherein customers earn one point for one RMB of purchase made on the Group's platforms. Membership
reward points can be either exchanged into coupons to be used in connection with subsequent purchases, or exchanged into free gifts. The expiry dates of these reward points vary based on different
individual promotional programs, while the coupons expire three months
F-26
Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
2. Summary of Significant Accounting Policies (Continued)
after
redemption. Prior to fiscal 2014, the Group accrued liabilities for the estimated value of the points earned and expected to be redeemed, which were based on all outstanding reward points
related to prior purchases at the end of each reporting period, as it did not have sufficient historical data to reasonably estimate the usage rate of these reward points. Starting from 2014, the
Group derecognized the deferred revenue liability and began to recognize revenue based on an estimated breakage rate as it has accumulated sufficient historical data to be able to reasonably estimate
the usage rate of these reward points. All the reward points expired as of December 31, 2015.
Effective
from January 1, 2015, the Company started to adopt a new membership reward points program (the "2015 Reward Program"). Under the 2015 Reward Program, the Company
grants Weipin Coin to the customers when they purchase goods from vipshop.com platforms. Customers earn Weipin Coins for purchases made on the Group's platforms. Weipin Coin can be either exchanged
into coupons to be used in connection with subsequent purchases, or directly offset against payments when customers make their future purchases. The Group accrued liabilities for the estimated value
of the Weipin Coins earned and expected to be redeemed, which were based on all outstanding reward points related to prior purchases at the end of each reporting period, as the Group does not have
sufficient historical data to reasonably estimate the usage rate of these new reward points.
These
liabilities reflect management's best estimate of the cost of future redemptions. As of December 31, 2015 and 2016, the Group recorded deferred revenue related to rewards
earned from prior purchases of RMB87,019 and RMB117,617 respectively.
The
Group does not charge any membership fees from its registered members. New members who register on the Group's platforms or existing members introducing new members to the Group's
website will be granted free Weipin Coins, which can be used to offset against payments for future purchases. These Weipin Coins are not related to prior purchases and are recorded as reduction of
revenues at the time of use.
Credit
sales and amounts collected by delivery service providers but not yet remitted to the Group are classified as accounts receivable on the consolidated balance sheets. Payments
received in advance of delivery and unused prepaid cards credits are classified as advances from customers. Revenues include fees charged to customers for shipping and handling expenses. The Company
pays fees to the delivery service providers and records such fees as shipping and handling expenses.
Other revenues
Other revenues consist of fees charged to third-party merchants which the Group provides platform access for sales of their products. The Group
is not the primary obligor on these transactions, it does not bear the inventory risk, does not have the ability to establish prices and does not provide any fulfillment services as the goods are
directly shipped from third-party merchants to end customers. Upon successful sales on the Group's platforms, the Group will charge the third-party merchants commission fees. Commission fees are
recognized on a net basis at the point of sales of products, net of return allowance.
The
Group recognizes other revenue from providing logistic services to external customers, revenue from logistic services are recognized upon the completion of the performance
of services.
F-27
Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
2. Summary of Significant Accounting Policies (Continued)
The
Group conducts product promotion activities for certain brands on its website, including advanced and prominent placement of vendors' products on its website, and technical
consultations services related to on-line advertising. Moreover, the Group also provide inventory and warehouse management services to certain suppliers. These revenues are recognized over the period
during which the services are provided and the revenues are earned, net of 6% or 11% VAT, in certain pilot locations as a result of the pilot VAT reform program.
(v) Cost of goods sold
Cost of goods sold consists primarily of cost of merchandise sold and inventory write-down. The amounts of inventory write-down were RMB218,108, RMB293,946 and
RMB303,233 for the years ended December 31, 2014, 2015 and 2016, respectively. Cost of goods sold does not include fulfillment expenses, therefore the Group's cost of goods sold may not
be comparable to other companies which include such expenses in their cost of goods sold.
The
Group provides financing to some of its suppliers by advancing them cash for portions of accounts payables the Group owes to them, and receive interest over the financing periods
which is presented as a reduction to cost of goods sold. The advances to these suppliers related to the Group's financing activities have no offsetting rights against the Group's accounts payables to
these suppliers, and are presented as part of other receivables and prepayments in the consolidated balance sheets (note 5).
(w) Fulfillment expenses
Fulfillment expenses primarily consist of payroll, bonus and benefits of logistics staff, logistics centers rental expenses, shipping and handling expenses and
packaging expenses.
(x) Marketing expenses
Marketing expenses primarily consist of payroll, bonus and benefits of marketing staff, advertising costs, agency fees and costs for promotional materials.
Advertising
expenses are charged to the statements of income and comprehensive income in the period incurred. The amounts of advertising expenses incurred were RMB787,687, RMB1,022,398
and RMB1,671,779 for the years ended December 31, 2014, 2015 and 2016, respectively.
(y) Technology and content expenses
Technology and content expenses primarily consist of payroll, bonus and benefits of the staff in the technology and system department, telecommunications
expenses, model fees and photography expenses.
(z) General and administrative expenses
General and administrative expenses primarily consist of payroll, bonus and benefit costs for retail and corporate employees, legal, finance, information systems,
rental expenses and other corporate overhead costs.
F-28
Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
2. Summary of Significant Accounting Policies (Continued)
(aa) Foreign Currency Transactions and Translations
The functional currency of the Company, Vipshop HK and Lefeng.com Limited are the United States dollar ("US dollar"). The functional currency of all
the other significant subsidiaries and the variable interest entities is RMB. Foreign currency denominated monetary assets and liabilities have been translated into the functional currency at the
rates of exchange ruling at the balance sheet date. Transactions in foreign currencies have been translated into the functional currency at the applicable rates of exchange prevailing on the date
transactions occurred. Transaction gains and losses are recognized in the consolidated statements of income and comprehensive income.
The
RMB is not a freely convertible currency. The PRC State Administration for Foreign Exchange, under the authority of the People's Bank of China, controls the conversion of RMB into
foreign currencies. The value of the RMB is subject to changes in central government policies and to international economic and political developments affecting supply and demand in the China foreign
exchange trading system market. The Group's cash and cash equivalents denominated in RMB amounted to RMB3,216,485 and RMB4,021,551 at December 31, 2015 and 2016, respectively.
Change in Reporting Currency to the RMB
Effective January 1, 2015, the Company changed its reporting currency from US dollar to RMB. The change in reporting currency is to
better reflect the Company's performance and to improve investors' ability to compare the Company's financial results with other publicly traded companies in the industry. Prior to January 1,
2015, the Company reported its consolidated balance sheets and consolidated statements of income and comprehensive income and shareholder's equity and cash flows in US dollar. The audited financial
results for the year ended December 31, 2015 are stated in RMB. The related financial statements prior to January 1, 2015 have been recast to reflect RMB as the reporting currency for
comparison to the financial results for the year ended December 31, 2015.
The
financial statements of the Company have been translated into RMB. Assets and liabilities denominated in foreign currencies are translated into RMB using the applicable exchange
rates at the balance sheet date. Equity accounts other than earnings generated in current period are translated into RMB at the appropriate historical rates. Revenues, expenses, gains and losses are
translated into RMB using the periodic average exchange rates. The resulting foreign currency translation adjustments are recorded as a component of accumulated other comprehensive income or loss in
the consolidated statements of changes in shareholders' equity.
(ab) Convenience translation
Translations of balances in the consolidated balance sheets, consolidated statements of income and comprehensive income, and consolidated statements of cash flows
from RMB into US dollar as of and for the year ended December 31, 2016 are solely for the convenience of the readers and were calculated at the rate of 6.9430 representing the noon
buying rate set forth in the H.10 statistical release of the U.S. Federal Reserve Board on December 31, 2016. No representation is made that the RMB amounts could have been, or
could be, converted, realized or settled into US dollar at that rate on December 30, 2016, or at any other rate.
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Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
2. Summary of Significant Accounting Policies (Continued)
(ac) Income Taxes
Current income taxes are provided for in accordance with the laws of the relevant taxing authorities. As part of the process of preparing financial statements,
the Group is required to estimate its income taxes in each of the jurisdictions in which it operates. The Group accounts for income taxes using the liability method. Under this method, deferred income
taxes are recognized for tax consequences in future years of differences between the tax bases of assets and liabilities and their reported amounts in the financial statements at each year-end and tax
loss carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates applicable for the differences that are expected to affect taxable income. Deferred tax assets are reduced
by a valuation allowance when, based upon the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
(ad) Value added taxes
The Company's PRC subsidiaries are subject to VAT at rates ranged from 6% to 17% on proceeds received from customers, and are entitled to a deduction for VAT
already paid or borne on the goods purchased by it and utilized in the production of goods that have generated the gross sales proceeds and service incurred. The VAT balance is recorded either in
other current liabilities or other current receivables on the consolidated balance sheets.
(ae) Comprehensive income (loss)
Comprehensive income (loss) is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. During the
periods presented, comprehensive income (loss) is reported in the consolidated statements of income and comprehensive income, and other comprehensive income (loss) includes foreign currency
translation adjustments and unrealized gain or loss of available-for-sales securities.
(af) Concentration of credit risk
Financial instruments that potentially expose the Group to concentrations of credit risk consist primarily of cash and cash equivalents, accounts receivable,
held-to-maturity securities, amounts due from related parties, other receivables and prepayments. The Group places its cash and cash equivalents and held-to-maturity securities with financial
institutions with high-credit ratings and quality. Accounts receivable primarily comprise of amounts receivable from product delivery service providers, receivables from consumer and supplier
financing services. There are no significant credit risk concentrated with any specific de livery service providers, end customers under consumer financing, or suppliers under financing service
arrangements.
Account
receivables from product delivery service providers relates to amounts collected from customers by the service providers when products are delivered. The Group conducts a credit
evaluation of these service providers and require a certain amount of security deposits from them to manage its credit risk. The principal amounts of all held-to-maturity securities are guaranteed by
the issuers. Amounts due from related parties are prepayments related to purchases of goods from the entities controlled by shareholders of the Company. Due to the nature of the relationship, the
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VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
2. Summary of Significant Accounting Policies (Continued)
Company
considers there to be no collection risks in regard to amounts due from related parties. With respect to advances to product suppliers, the Group performs on-going credit evaluations of the
financial condition of its suppliers. The Group establishes an allowance for doubtful accounts based upon estimates of factors surrounding the credit risk of delivery service providers, end customers,
suppliers and other information.
(ag) Fair value of financial instruments
Fair value is considered to be the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Group considers the principal or
most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability. The established fair value hierarchy requires an
entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument's categorization within the fair value hierarchy is based
upon the lowest level of input that is significant to the fair value measurement. The three levels of inputs may be used to measure fair value include:
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Level 1
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applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
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Level 2
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applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1 that are observable for the asset or liability such as quoted prices for similar assets or
liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be
derived principally from, or corroborated by, observable market data.
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Level 3
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|
applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
|
Measured at fair value on a recurring basis
The Group's financial assets and liabilities or nonfinancial assets and liabilities that were required to be measured at fair value on a
recurring basis as at December 31, 2016 include available-for-sale securities investments. As of December 31, 2015 and 2016, information about inputs into the fair value
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
2. Summary of Significant Accounting Policies (Continued)
measurements
of the Group's assets that are measured at fair value on a recurring basis in periods subsequent to their initial recognition is as follows.
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|
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|
|
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|
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Fair Value Measurements at Reporting
Date Using
|
|
Description
|
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As of
December 31,
2015
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Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
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Significant
Other
Observable
Inputs
(Level 2)
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Significant
Unobservable
Inputs
(Level 3)
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|
RMB
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|
RMB
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|
RMB
|
|
RMB
|
|
Available-for-sale investmentsmarketable equity securities
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254,736
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|
|
254,736
|
|
|
|
|
|
|
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Available-for-sale investmentsdebt security
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|
|
15,000
|
|
|
|
|
|
15,000
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at Reporting
Date Using
|
|
Description
|
|
As of
December 31,
2016
|
|
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
RMB
|
|
Available-for-sale investmentsmarketable equity securities
|
|
|
240,889
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|
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240,889
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|
|
|
|
|
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Available-for-sale investmentsdebt security
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167,055
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167,055
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|
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Available-for-sale
securities investments represent the marketable equity securities and debt securities invested by the Group. The marketable equity securities are carried at fair
values. The Group measures its listed equity securities using quoted prices for the underlying securities in active markets, and accordingly, the Group classifies the valuation techniques that use
these inputs as Level 1. The debt
securities consist of investments in private companies' redeemable shares that has stated maturity and pay a prospective fixed rate of return. The investment is recorded at fair value on a recurring
basis. The fair value is measured using discounted cash flow model based on contractual cash flow and a discount rate of prevailing market yield for products with similar terms as of the measurement
date, as such, it is classified within Level 2 measurement.
As
of December 31, 2015 and 2016, gross unrealized gains of RMB2,498 and RMB11,742 and gross unrealized losses of RMB10,281 and nil were recorded on listed equity securities,
respectively. Impairment charges of nil and RMB48,634 were recorded for years ended December 31, 2015 and 2016, respectively.
Measured at fair value on a non-recurring basis
Other than the impaired intangible assets (Note 9), investment in affiliates (Note 10), and other investments (Note 11),
the Group did not have any assets and liabilities that were measured at fair value on a nonrecurring basis. The estimated fair values of the impaired intangible assets, investment in affiliates and
other investments at the time of impairment test were estimated by applying unobservable
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
2. Summary of Significant Accounting Policies (Continued)
inputs
to the discounted cash flow valuation methodology that are significant to the measurement of the fair value of these assets (Level 3).
The
carrying values of the Group's financial instruments, including cash and cash equivalents, accounts receivable, other receivables, accounts payable, other current liabilities,
amounts due from and to related parties, approximate their fair values due to the short term nature of these instruments. The estimated fair value of convertible senior notes as of December 31,
2015 and 2016 were approximately RMB4,346,278 and RMB4,382,445, respectively, as compared to its carrying value of RMB4,058,181 and RMB4,381,698, respectively. Fair value was estimated using quoted
market prices and represented a level 1 measurement.
The
carrying value of the Group's short-term held-to-maturity securities securities approximate their fair values due to the short term nature and significant inputs are observable or
can be derived principally from, or corroborated by, observable market data (Level 2).
The
Group measures certain assets, including investment in affiliates, and other investments, at fair value on a nonrecurring basis when they are deemed to be impaired. The fair values
of these investments are determined based on valuation techniques using the best information available, and may include management judgments, future performance projections, etc. An impairment charge
to these investments is recorded when the cost of the investment exceeds its fair value and this condition is determined to be other-than-temporary.
(ah) Operating leases
Leases where substantially all the rewards and risks of ownership of assets remain with the leasing company are accounted for as operating leases. Other leases
are accounted for as capital leases. Payments made under operating leases, net of any incentives received by the Group from the leasing company, are charged to the statements of income and
comprehensive income on a straight-line basis over the lease periods.
(ai) Share-based Compensation
Employee share-based compensation
Share-based payments made to employees, including employee stock options, and non-vested shares issued to employees which the Company has a
repurchase option, are recognized as compensation expenses over the requisite service periods. The Group measures the cost of employee services received in exchange for share-based compensation at the
grant date fair value of the awards. The Company has elected to recognize compensation expense on a straight-line basis over the requisite service period for the entire award with graded vesting
provided that the amount of compensation cost recognized at any date must at least equal the portion of the grant-date value of the award that is vested at that date. The estimate of forfeitures will
be adjusted over the requisite service period to the extent that actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures will be recognized through
a cumulative catch-up adjustment in the period of change and will also impact the amount of share-based compensation expense to be recognized in future periods.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
2. Summary of Significant Accounting Policies (Continued)
Non-employee share-based compensation
Share-based compensation made to non-employees are recognized as compensation expenses ratably over the requisite service periods. The Group
measures the cost of non-employee services received in exchange for share-based compensation based on the fair value of the equity instruments issued. The Group measures the fair value of the equity
instruments in these transactions using the stock price and other measurement assumptions on the measurement date, which is determined as the earlier of the date at which a commitment for performance
by the counterparty to earn the equity instruments is reached, or the date at which the counterparty's performance is complete.
As
the quantity and terms of the equity instruments issued to non-employees are known up front, the Group recognizes the cost incurred during financial reporting periods before the
measurement date. The Group measures the equity instruments at their then-current fair values at each of the financial reporting dates, and attributes the changes in those fair values over the future
services period until the measurement date has been established.
(aj) Earnings per share
Basic earnings per share are computed by dividing net earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding
during the year. Diluted earnings per
share reflect the potential dilution that could occur if securities or other contracts to issue ordinary shares were exercised or converted into ordinary shares.
(ak) Treasury stock
Treasury stock represents ordinary shares repurchased by the Group that are no longer outstanding and are held by the Group. The repurchase of ordinary shares is
accounted for under the cost method whereby the entire cost of the acquired stock is recorded as treasury stock. The cost of treasury stock is transfered to "additional paid-in capital" when it was
re-issued for the purpose of stock options exercised and share awards.
(al) Recent Changes in Accounting Standards
In May 2014, the Financial Accounting Standards Board ("FASB") issued, ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)",
which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised
goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The accounting guidance also requires
additional disclosure regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and
assets recognized from costs incurred to obtain or fulfil a contract. ASU 2014-09 can be adopted using one of two retrospective application methods. In August 2015, the FASB
issued ASU 2015-14, "Revenue from Contracts with Customers (Topic 606), Deferral of the Effective Date", which defers the effective date of ASU 2014-09 by one year, to
fiscal years beginning after December 15, 2017, and interim periods therein.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
2. Summary of Significant Accounting Policies (Continued)
Additionally,
the FASB issued the following various updates affecting the guidance in ASU 2014-09. The effective dates and transition requirements are the same as those in ASC
Topic 606 above. In March 2016, FASB issued an amendment to the standard, ASU 2016-08, "Revenue from Contracts with Customers (Topic 606): Principal versus Agent
Considerations" Under the amendment, an entity is required to determine whether the nature of its promise is to provide the specified good or service itself (that is, the entity is a principal) or to
arrange for that good or service to be provided by the other party (as an agent). The Group currently expects to adopt ASU 2014-09 and ASU 2016-08 and related topics in its first
quarter of 2018, and is evaluating which transition approach to use. In April 2016, FASB issued ASU 2016-10, "Revenue from Contracts with Customers (Topic 606): Identifying
Performance Obligations and Licensing", to clarify identifying performance obligations and the licensing implementation guidance, which retaining the related principles for those areas. In
May 2016, the FASB issued ASU 2016-12, "Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients". This update addresses narrow-scope
improvements to the guidance on collectability, noncash consideration and completed contracts at transition. The update provides a practical expedient for contract modifications at transition and an
accounting policy election related to the presentation of sales taxes and other similar taxes collected from customers. Then, in December 2016, the FASB issued ASU 2016-20, "Technical
Corrections and Improvements to Topic 606, Revenue from Contracts with Customers". The updates in ASU 2016-20 affect narrow aspects of the guidance issued in ASU 2014-09.
The Group is in the process of evaluating the impact of adoption of this guidance on the consolidated financial statements. The Group plans to adopt these ASU beginning in the first quarter of
fiscal 2018.
In
November 2015, the FASB issued ASU 2015-17, "Income Taxes (Topic 740)": Balance Sheet Classification of Deferred Taxes, which requires deferred income tax
liabilities and assets to be classified as noncurrent on the balance sheet rather than being separated into current and noncurrent. The guidance is effective for public entities for annual periods
beginning after December 15, 2016, and interim periods within those annual periods with early adoption being permitted. The guidance will be applied prospectively upon its effective date by the
Group. The Group expects upon adoption of this guidance, the Group's deferred tax assets and deferred tax liabiltiies will be classified to noncurrent.
In
January 2016, the FASB issued ASU 2016-01, "Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial
Liabilities" ("ASU 2016-01"), which requires that equity investments, except for those accounted for under the equity method or those that result in consolidation of the investee, be measured
at fair value, with subsequent changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost
minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.
ASU 2016-01 also impacts the presentation and disclosure requirements for financial instruments. ASU 2016-01 is effective for public business entities for annual periods,
and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted only for certain provisions. The guidance should be applied prospectively upon
its effective date. The Group is in the process of evaluating the impact of adoption of this guidance on the Group's consolidated financial statements, but it is not expected to have a significant
impact.
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VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
2. Summary of Significant Accounting Policies (Continued)
In
February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)", which requires lessees to recognize most leases on the balance sheet. This ASU
requires lessees to recognize a right-of-use asset and lease liability for all leases with terms of more than 12 months. Lessees are permitted to make an accounting policy election to not
recognize the asset and liability for leases with a term of twelve months or less. The ASU does not significantly change the lessees' recognition, measurement and presentation of expenses and cash
flows from the previous accounting standard. Lessors' accounting
under the ASC is largely unchanged from the previous accounting standard. In addition, the ASU expands the disclosure requirements of lease arrangements. Lessees and lessors will use a modified
retrospective transition approach, which includes a number of practical expedients. The provisions of this guidance are effective for annual periods beginning after December 15, 2018, and
interim periods within those years, with early adoption permitted. The Group is in the process of evaluating the impact of adoption of this guidance on the Group's consolidated financial statements,
but expects that it will have an impact on the Group's assets and liabilities.
In
March 2016, the FASB issued ASU 2016-07 "InvestmentEquity Method and Joint Ventures", which eliminate the requirement to retroactively adopt the equity
method of accounting. The amendments require that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor's previously held
interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. The amendments in this Update are effective for all entities for fiscal
years, and interim periods within those fiscal years, beginning after December 15, 2016. The amendments should be applied prospectively upon their effective date to increases in the level of
ownership interest or degree of influence that result in the adoption of the equity method. Earlier application is permitted. The Group does not anticipate that the adoption of
ASU 2016-07 will have a material impact on the consolidated financial statements.
In
March 2016, the FASB issued ASU 2016-09 "CompensationStock Compensation (Topic 718): Improvements to Employee Share-based Payment Accounting", which
simplifies several aspects of the accounting for employee share-based payment transactions for both public and nonpublic entities, including the accounting for income taxes, forfeitures, and statutory
tax withholding requirements, as well as classification in the statement of cash flows. For public entities, the ASU is effective for annual reporting periods beginning after December 15, 2016,
including interim periods within those annual reporting periods. Early adoption will be permitted in any interim or annual period for which financial statements have not yet been issued or have not
been made available for issuance. The guidance should be applied prospectively upon its effective date. The Group does not expect the adoption of ASU 2016-09 to have a material impact on the
consolidated financial statements.
In
June, 2016, the FASB issued ASU 2016-13, "Financial InstrumentsCredit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" which is
intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The ASU
requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.
Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be
permitted, although the inputs to those techniques will
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VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
2. Summary of Significant Accounting Policies (Continued)
change
to reflect the full amount of expected credit losses. Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances. The ASU
requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit
quality and underwriting standards of an organization's portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in
the financial statements. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The ASU is
effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Group will apply the amendments in this guidance through a cumulative-effect
adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The Group is in the process of evaluating the impact of adoption of this guidance
on the consolidated financial statements.
In
August 2016, the FASB issued ASU 2016-15, "Statement of Cash Flows (Topic 230)". The update is intended to improve financial reporting in regards to how certain
transactions are classified in the statement of cash flows. This update requires that debt extinguishment costs be classified as cash outflows for financing activities and provides additional
classification guidance for the statement of cash flows. The update also requires that the classification of cash receipts and payments that have aspects of more than one class of cash flows to be
determined by applying specific guidance under generally accepted accounting principles. The update also requires that each separately identifiable source or use within the cash receipts and payments
be classified on the basis of their nature in financing, investing or operating activities. The update is effective for public companies for fiscal years beginning after December 15, 2017,
including interim periods within those fiscal years. This guidance will be adopted retrospectively by the Group to all periods presented. The Group does not anticipate that the adoption of
ASU 2016-15 will have a material impact on the consolidated financial statements.
In
October 2016, FASB issued ASU 2016-16, "Income Taxes (Topic 740)". Current GAAP prohibits the recognition of current and deferred income taxes for an intra-entity
asset transfer until the asset has been sold to an outside party. Under the new standard, an entity is to recognize the income tax consequences of an intra-entity transfer of an asset other than
inventory when the transfer occurs. The new standard does not include new disclosure requirements; however, existing disclosure requirements might be applicable when accounting for the current and
deferred income taxes for an intra-entity transfer of an asset other than inventory. The new standard is effective for annual periods beginning after December 15, 2017, including interim
reporting periods within those annual periods. This guidance will be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning
of the period of adoption. The Group does not anticipate that the adoption of ASU 2016-16 will have a material impact on the consolidated financial statements.
In
October, 2016, the FASB issued ASU 2016-17, "Consolidation (Topic 810): Interests Held through Related Parties That Are under Common Control" which amends the guidance
in U.S. GAAP on related parties that are under common control. Specifically, the new ASU requires that a single decision maker consider indirect interests held by related parties under common
control on a
proportionate basis in a manner consistent with its evaluation of indirect interests held through other related parties. That is, the single decision maker does not consider indirect interests held
through
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VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
2. Summary of Significant Accounting Policies (Continued)
related
parties as equivalent to direct interests in determining whether it meets the economics criterion to be a primary beneficiary. The ASU does not change the need for a single decision that has
determined that it individually does not meet the criterion to be a primary beneficiary to then evaluate whether the related-party group meets these conditions and, if so, to determine whether the
single decision maker is the party most closely associated with the variable interest entity in the related-party group. The guidance in ASU 2016-17 is effective for annual periods
beginning on or after December 15, 2016, including interim and annual periods. Entities that have not yet adopted ASU 2015-02 are required to adopt the guidance in
ASU 2016-17 at the same time they adopt the amendments in ASU 2015-02. The Group is in the process of evaluating the impact of adoption of this guidance on the consolidated
financial statements.
In
January 2017, the FASB issued ASU 2017-01, "Business Combinations (Topic 805): Clarifying the Definition of a Business". The update affects all companies and
other reporting organizations that must determine whether they have acquired or sold a business. The definition of a business affects many areas of accounting including acquisitions, disposals,
goodwill, and consolidation. The update is intended to help companies and other organizations evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or
businesses. The update provides a more robust framework to use in determining when a set of assets and activities is a business, and also provides more consistency in applying the guidance, reduce the
costs of application, and make the definition of a business more operable. For public companies, the update is effective for annual periods beginning after December 15, 2017, including interim
periods within those periods. The guidance should be applied prospectively upon its effective date. The effect of ASU 2017-01 on the consolidated financial statements will be dependent
on any future acquisitions.
In
January 2017, the FASB issued ASU 2017-04, "IntangiblesGoodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment". The update
simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. The annual, or interim, goodwill impairment test is performed by comparing the fair
value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit's fair value. The update also
eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill
impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The update should be applied
on a prospective basis. The nature of and reason for the change in accounting principle should be disclosed upon transition. For public companies, the update is effective for any annual or interim
goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after
January 1, 2017. The guidance should be applied
prospectively upon its effective date. The Group does not anticipate that the adoption of ASU 2017-04 will have a material impact on the consolidated financial statements.
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VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
3. Significant acquisition and equity transactions
(a) Acquisitions in 2015
The Group completed several acquisitions during 2015 by acquiring over 50% of the net assets of the following companies in cash. These acquisitions have been
accounted for using the acquisition method for business combinations. These acquisitions are not material individually or in aggregate to the Group's consolidated financial statements. The acquisition
cost was recorded in general and administrative expenses when it incurred and it was not material in aggregate.
The
Group made series of investments into Zhengzhou Andaxin Transportation Co., Ltd. ("Zhengzhou Andaxin") which is a PRC registered company that provides logistic services
in 2015, and held 90% equity interest of Zhengzhou Andaxin as of December 31, 2015 with total consideration of RMB25,251. The financial results of Zhengzhou Andaxin are immaterial to the
Group's net assets and results of operations. The acquisition was accounted for as a purchase and the results of Zhengzhou Andaxin are included in the Group's consolidated results from the acquisition
date. The Group recorded RMB17,807 in goodwill related to the acquisition. No additional intangible asset was identified during this acquisition.
During
the year ended December 31, 2015, the Group acquired equity interests of certain logistic companies and another service entity with voting right over than 50%. The
acquisitions are not individually and in aggregate significant to the Group's net assets and results of operations. These acquisitions have an aggregate purchase price of RMB47,516. The acquisitions
were accounted for under purchase accounting and the results of these logistic companies are included in the Group's consolidated results from the acquisition dates. The Group recorded
RMB19,917 in goodwill related to the acquisitions of these logistic companies. No additional intangible asset was identified during these acquisitions.
Based
on the assessment of the acquired companies' financial performance made by the Group, acquired companies including its subsidiary during 2015 are not considered material to the
consolidated results of operations both individually and in aggregate. Thus pro forma results of operations for these acquisitions in 2015 as well as the results of operations since the date of
acquisitions to the period end have not been presented. None of the goodwill recognized during the acquisitions is expected to be deductible for income tax purposes.
(b) Acquisitions in 2016
In February 2015, the Group acquired a 42.61% equity interest of Feiyuan Logistic Company Ltd. and its subsidiaries ("Feiyuan") and obtained
significant influence over it. As a result, Feiyuan become an equity affiliate of the Group. Feiyuan is a company principally providing warehousing, express, transportation and distribution services
to E-commerce companies in southeast China.
In
January 2016, the Group acquired additional equity interest of 26.18% in Feiyuan with a cash consideration of RMB65,452 and Feiyuan become subsidiaries of the Group since then,
as the Group has control over its operating and financing decisions.
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Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
3. Significant acquisition and equity transactions (Continued)
The
acquisition had been accounted for as a business combination, and the results of operations of Feiyuan have been included in the Group's consolidated financial statements from the
acquisition date. The Group made estimates and judgments in determining the fair values of acquired assets and liabilities, based on an independent valuation report and management's experiences with
similar assets and liabilities. The following table summarizes the estimated fair values for major classes of assets acquired and liabilities assumed at the date of acquisition:
|
|
|
|
|
|
|
|
|
|
RMB
|
|
Weighted average amortization
period at the acquisition date
(in years)
|
|
Net tangible liabilities acquired
|
|
|
(18,388
|
)
|
|
|
|
Intangible assetscustomer relationship
|
|
|
17,693
|
|
|
14
|
|
Goodwill
|
|
|
210,669
|
|
|
|
|
Deferred tax liabilities
|
|
|
(4,423
|
)
|
|
|
|
Non-controlling interest
|
|
|
(59,851
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total consideration
|
|
|
145,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consideration transferred
|
|
|
|
|
|
|
|
Cash
|
|
|
65,452
|
|
|
|
|
Fair value of the Group's previously held equity interests in Feiyuan (Note)
|
|
|
80,248
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consideration
|
|
|
145,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note:
|
|
The fair value of the Group's previously held equity interests in Feiyuan as at the acquisition date was determined by using the discounted cash flow model. The key inputs from this valuation include a risk-adjusted
discount rate and discount of lack of control. No gain or loss was recognized as a result of remeasuring to fair value of the previously held equity interests in Feiyuan.
|
In
May 2016, the Group acquired additional non-controlling equity interest of 28.19% in Feiyuan with a cash consideration of RMB110,001, which did not result in change in control
and was accounted for as equity transaction. After these transactions, the Group hold 96.98% equity interest of Feiyuan.
In
September 2016, the Group completed the acquisition of Zhejiang Ebatong Technology Co. ("Ebatong"), following the completion of the transaction, Ebatong became a
wholly-owned subsidiary of the Group. Ebatong is a company which principally provides third party payment service to customers, acquisition of Ebatong was primarily for the purpose of developing the
Company's internet payment channel. After the acquisition, Ebatong changed its business registration into Zhejaing Vipshop Payment Co., Ltd.
The
total cash consideration was RMB410,417 in which RMB336,065 was paid during the year ended December 31, 2016 and the remaining amount of RMB74,352 was
included in the other payables.
The
acquisition cost amounted to RMB4,000 was recorded in general and administrative expenses when it incurred.
F-40
Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
3. Significant acquisition and equity transactions (Continued)
The
acquisition had been accounted for as a business combination and the results of operations of Ebatong have been included in the Group's consolidated financial statements from the
acquisition date. The Group made estimates and judgments in determining the fair value of acquired assets and liabilities, based on an independent valuation report and management's experiences with
similar assets
and liabilities. The following table summarizes the estimated fair values for major classes of assets acquired and liabilities assumed at the date of acquisition:
|
|
|
|
|
|
|
|
RMB
|
|
Weighted average amortization
period at the acquisition date
(in years)
|
Net tangible assets acquired
|
|
|
95,332
|
|
|
Intangible assetsPayment license
|
|
|
319,660
|
|
Indefinite life
|
Goodwill
|
|
|
13,291
|
|
|
|
|
|
|
|
|
Total consideration
|
|
|
428,283
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consideration transferred and liabilities assumed
|
|
|
|
|
|
Cash
|
|
|
410,417
|
|
|
Other receivables
|
|
|
17,866
|
|
|
|
|
|
|
|
|
Total consideration
|
|
|
428,283
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During
the year ended December 31, 2016, the Group acquired additional equity interests of certain logistic companies and obtained over 50% voting right. The acquisitions are not
individually and in aggregate significant to the Group's net assets and results of operations. These acquisitions have an aggregate purchase price of RMB50,218. The acquisitions were accounted for
under purchase accounting and the results of these logistic companies are included in the Group's consolidated results from the acquisition dates. The Group recorded RMB34,365 in goodwill
related to the acquisitions of these logistic companies. No additional intangible asset was identified during these acquisitions.
Based
on the assessment of the acquired companies' financial performance made by the Group, acquired companies including its subsidiaries during 2016 are not considered material to the
consolidated results of operations both individually and in aggregate. Thus pro forma results of operations for these acquisitions in 2016 as well as the results of operations since the date of
acquisitions to the period end have not been presented. None of the goodwill recognized during the acquisitions is expected to be deductible for income tax purposes.
F-41
Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
4. Accounts Receivable, Net
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2015
|
|
2016
|
|
|
|
RMB
|
|
RMB
|
|
Components of accounts receivable are as follows:
|
|
|
|
|
|
|
|
Delivery service providers (Note a)
|
|
|
135,050
|
|
|
209,340
|
|
Other trade receivables (Note b)
|
|
|
190,792
|
|
|
2,165,639
|
|
Other
|
|
|
25,581
|
|
|
5,148
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
351,423
|
|
|
2,380,127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: allowance for doubtful debts
|
|
|
|
|
|
(46,209
|
)
|
Total
|
|
|
351,423
|
|
|
2,333,918
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No
individual accounts receivable consists more than 10% of the account receivable as of December 31, 2015 and 2016.
|
|
|
|
|
|
Note a:
|
|
For certain sales transactions, delivery service providers will collect payments from the Group's customers upon delivery of goods, and remit such payments back to the Group on a periodic
basis.
|
Note b:
|
|
The Group provides consumer financing to certain customers as part of the Group's internet financing activities conducted since 2015.
|
The
movement of allowance for doubtful debts during the years are as follow:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2014
|
|
2015
|
|
2016
|
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
Allowance for doubtful debts:
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of the year
|
|
|
|
|
|
|
|
|
|
|
Allowance during the year
|
|
|
|
|
|
|
|
|
(53,316
|
)
|
Write-offs during the year
|
|
|
|
|
|
|
|
|
7,107
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of the year
|
|
|
|
|
|
|
|
|
(46,209
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-42
Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
5. Other Receivables and Prepayments, Net
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2015
|
|
2016
|
|
|
|
RMB
|
|
RMB
|
|
Components of other receivables and prepayments are as follows:
|
|
|
|
|
|
|
|
Deposits (Note a)
|
|
|
210,758
|
|
|
236,066
|
|
Cash advanced to staff
|
|
|
8,241
|
|
|
16,272
|
|
Loan to staff
|
|
|
12,099
|
|
|
12,467
|
|
VAT receivable
|
|
|
473,932
|
|
|
555,899
|
|
Interest receivable
|
|
|
86,545
|
|
|
16,905
|
|
Advances to suppliers related to financing activities (Note b)
|
|
|
559,857
|
|
|
877,697
|
|
Advances to suppliers related to procurement activities
|
|
|
377,837
|
|
|
263,001
|
|
Prepaid expense
|
|
|
52,383
|
|
|
92,452
|
|
Receivables on behalf of staffs for options exercised and non-vested shares vested
|
|
|
41,111
|
|
|
31,249
|
|
Others
|
|
|
58,582
|
|
|
215,235
|
|
Less: allowance for doubtful debts (Note c)
|
|
|
(11,884
|
)
|
|
(23,418
|
)
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,869,461
|
|
|
2,293,825
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note a:
|
|
Deposits consist of amounts paid to vendors for advertising and rentals.
|
Note b:
|
|
The Group provides financing to some of its suppliers by advancing them cash, and held portions of accounts payables the Group owes to them as pledges or procurements are expected to be made by the
Group from the suppliers in the near term.
|
Note c:
|
|
The Group considers many factors in assessing the collectability of its receivable, such as, the age of the amounts due, the debtor's payment history, credit-worthiness, and financial conditions of the
debtor and industry trends. An allowance for doubtful accounts is recorded in the period in which a loss is determined to be probable. The Group also makes specific allowance if there is strong evidence indicating that the receivable is likely to be
unrecoverable. Receivable balances are written off after all collection efforts have been exhausted.
|
F-43
Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
5. Other Receivables and Prepayments, Net (Continued)
The
movement of allowance for doubtful debts during the years are as follow:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2014
|
|
2015
|
|
2016
|
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
Allowance for doubtful debts:
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of the year
|
|
|
|
|
|
(4,167
|
)
|
|
(11,884
|
)
|
Allowance during the year
|
|
|
(4,167
|
)
|
|
(11,884
|
)
|
|
(13,259
|
)
|
Write-offs during the year
|
|
|
|
|
|
4,167
|
|
|
1,725
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of the year
|
|
|
(4,167
|
)
|
|
(11,884
|
)
|
|
(23,418
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6. Held-to-Maturity Securities
As of December 31, 2015 and 2016, the Group's held-to-maturity securities consist of debt securities carried at amortized cost of RMB1,807,403 and RMB671,776 respectively,
which approximate the aggregate fair value. All of these securities mature within one year and are classified as current asset. The amount of unrealized holding gain as of December 31, 2015 and
2016 was RMB17,403 and RMB1,776 respectively.
The
held-to-maturity securities all consist of wealth management products purchased from third-party financial institutions with high credit ratings in China. These debt securities have
fixed maturity dates and pay a target return on the amount invested. In addition, the principals of these securities are fully guaranteed and early redemption is not allowed.
There
has been no impairment recognized and no sales of any held-to-maturity securities before maturities during the periods presented.
7. Property and Equipment, Net
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2015
|
|
2016
|
|
|
|
RMB
|
|
RMB
|
|
Cost:
|
|
|
|
|
|
|
|
Building
|
|
|
2,021,245
|
|
|
2,525,064
|
|
Furniture, fixtures and equipment
|
|
|
1,078,365
|
|
|
1,602,608
|
|
Leasehold improvements
|
|
|
118,043
|
|
|
252,331
|
|
Motor vehicles
|
|
|
58,555
|
|
|
117,661
|
|
Software
|
|
|
13,395
|
|
|
147,329
|
|
Construction in process
|
|
|
158,842
|
|
|
893,275
|
|
|
|
|
|
|
|
|
|
Sub-total
|
|
|
3,448,445
|
|
|
5,538,268
|
|
Less: accumulated depreciation
|
|
|
(498,841
|
)
|
|
(1,070,817
|
)
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
2,949,604
|
|
|
4,467,451
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-44
Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
7. Property and Equipment, Net (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2014
|
|
2015
|
|
2016
|
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
Depreciation expenses were charged to:
|
|
|
|
|
|
|
|
|
|
|
Fulfillment expenses
|
|
|
28,634
|
|
|
145,375
|
|
|
289,338
|
|
Marketing expenses
|
|
|
2,293
|
|
|
2,694
|
|
|
296
|
|
Technology and content expenses
|
|
|
65,268
|
|
|
132,448
|
|
|
262,073
|
|
General and administrative expenses
|
|
|
13,795
|
|
|
10,884
|
|
|
59,269
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
109,990
|
|
|
291,401
|
|
|
610,976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8. Land Use Rights, Net
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2015
|
|
2016
|
|
|
|
RMB
|
|
RMB
|
|
Cost:
|
|
|
|
|
|
|
|
Land in Zhaoqing City
|
|
|
112,457
|
|
|
187,081
|
|
Land in Tianjing City
|
|
|
37,905
|
|
|
37,905
|
|
Land in Jianyang City
|
|
|
50,574
|
|
|
143,452
|
|
Land in Ezhou City
|
|
|
|
|
|
241,927
|
|
Land in Zhengzhou City
|
|
|
|
|
|
24,776
|
|
Land in Qingdao City
|
|
|
|
|
|
68,631
|
|
Land in Guangzhou City
|
|
|
|
|
|
1,736,417
|
|
|
|
|
|
|
|
|
|
Sub-total
|
|
|
200,936
|
|
|
2,440,189
|
|
|
|
|
|
|
|
|
|
Less: Accumulated amortization
|
|
|
(3,474
|
)
|
|
(41,131
|
)
|
|
|
|
|
|
|
|
|
Land use rights, net
|
|
|
197,462
|
|
|
2,399,058
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
expiry dates of the land use rights are from October 2064 to August 2065. Expenses charged were RMB689, RMB2,785 and RMB37,657 for the years ended
December 31, 2014, 2015 and 2016, respectively.
F-45
Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
9. Intangible Assets, Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2015
|
|
As of December 31, 2016
|
|
|
|
Cost
|
|
Accumulated
amortization
|
|
Impairment
|
|
Net
amount
|
|
Cost
|
|
Accumulated
amortization
|
|
Impairment
|
|
Net
amount
|
|
|
|
RMB
|
|
(Note a)
|
|
|
|
|
|
|
|
|
|
|
|
RMB
|
|
Domain names
|
|
|
14,983
|
|
|
(11,869
|
)
|
|
|
|
|
3,114
|
|
|
15,927
|
|
|
(15,927
|
)
|
|
|
|
|
|
|
Customer Relationships
|
|
|
295,610
|
|
|
(116,954
|
)
|
|
|
|
|
178,656
|
|
|
313,303
|
|
|
(202,418
|
)
|
|
|
|
|
110,885
|
|
Trademarks
|
|
|
893,390
|
|
|
(360,167
|
)
|
|
|
|
|
533,223
|
|
|
898,514
|
|
|
(611,359
|
)
|
|
|
|
|
287,155
|
|
Non-compete agreement
|
|
|
70,127
|
|
|
(43,830
|
)
|
|
|
|
|
26,297
|
|
|
70,127
|
|
|
(67,102
|
)
|
|
|
|
|
3,025
|
|
Payment license (Note b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
319,660
|
|
|
|
|
|
|
|
|
319,660
|
|
Others
|
|
|
28,448
|
|
|
(8,462
|
)
|
|
(16,907
|
)
|
|
3,079
|
|
|
29,782
|
|
|
(8,453
|
)
|
|
(16,907
|
)
|
|
4,422
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,302,558
|
|
|
(541,282
|
)
|
|
(16,907
|
)
|
|
744,369
|
|
|
1,647,313
|
|
|
(905,259
|
)
|
|
(16,907
|
)
|
|
725,147
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note:
-
(a)
-
Amortization
expenses for intangible assets were RMB250,221, RMB289,644 and RMB363,977 for the years ended December 31, 2014, 2015 and 2016,
respectively. The Group expects to record amortization expenses of RMB340,707, RMB46,914, RMB2,782, RMB2,275 and RMB1,438 for the years ending December 31, 2017, 2018, 2019, 2020 and
2021 respectively.
-
(b)
-
The
payment license, which enbles the Group to provide payment services and qualifies as a paying institution, has a legal life of 5 years and the nearest
expiry date is June 2017, but it is renewable every 5 years at minimal cost. The Group believes it would renew the payment license continuously and has the ability to do so. As a result,
the payment license is considered by the Group as having an indefinite life because it is expected to contribute to net cash inflow indefinitely.
10. Investment in Affiliates
Investments in affiliates as of December 31, 2015 and 2016 were as follows:
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2015
|
|
2016
|
|
|
|
RMB
|
|
RMB
|
|
Equity-method investments:
|
|
|
|
|
|
|
|
Ovation
(i)
|
|
|
137,401
|
|
|
71,908
|
|
Feiyuan (Note 3(b))
|
|
|
85,920
|
|
|
|
|
Others
(ii)
|
|
|
29,385
|
|
|
21,236
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
252,706
|
|
|
93,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Details
of the significant investments are as follows:
-
(i)
-
On
February 21, 2014, the Group acquired a 23% equity interest in Ovation, which is a BVI company that engages in research and development, and distribution
of beauty products and production and publication of TV programme, for a total consideration of approximately US$55,777 (approximately RMB339,303) pursuant to a share purchase and subscription
agreement with Ovation and certain of its existing shareholders.
-
(ii)
-
Other
investments in affiliates comprise of a number of investments in private companies which the Group owns 20% voting right or higher and have significant
influence, these investments include certain PRC registered companies that provides logistic services and engages in cosmetic sales.
F-46
Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
10. Investment in Affiliates (Continued)
During the years ended December 31, 2014, 2015 and 2016, the Group recognized its share of loss of affiliates in the amount of RMB62,716, RMB84,063 and
RMB71,489 respectively. The total impairment losses on equity method investments were nil, RMB58,510 and nil during the years ended December 31, 2014, 2015 and 2016, respectively. The
amount of impairment in 2015 relate to Ovation and is recorded as impairment loss of investments in the consolidated statements of income and comprehensive income.
11. Other Investments
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2015
|
|
2016
|
|
|
|
RMB
|
|
RMB
|
|
Cost-method investments:
|
|
|
|
|
|
|
|
WangZhi Technology Limited.
|
|
|
161,417
|
|
|
172,860
|
|
Qima Holdings Limited.
|
|
|
69,960
|
|
|
74,920
|
|
BabySpace Corporation
|
|
|
64,778
|
|
|
69,370
|
|
Hifashion Group Inc.
|
|
|
64,778
|
|
|
69,370
|
|
Others (Note)
|
|
|
170,168
|
|
|
227,205
|
|
|
|
|
|
|
|
|
|
Total investment costs:
|
|
|
531,101
|
|
|
613,725
|
|
Less: Accumulated impairment
|
|
|
(41,239
|
)
|
|
(110,608
|
)
|
|
|
|
|
|
|
|
|
Total
|
|
|
489,862
|
|
|
503,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Note:
-
Other
investments comprise of a number of investments in private companies which the Group owes equity interest of less than 20%, including certain E-commence companies and PRC
registered companies that provide technology services.
The
impairment losses on cost method investments were RMB6,166, RMB41,239 and RMB65,940 during the years ended December 31, 2014, 2015 and 2016, respectively.
12. Available-for-Sale Securities Investments:
The carrying amount and fair value of the Group's available-for-sale securities investments were RMB269,736 and RMB407,944 as follows as of December 31, 2015
and 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2015
|
|
|
|
Amortized
cost
|
|
Gross
unrealized
gains
|
|
Gross
unrealized
losses
|
|
Fair
value
|
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
RMB
|
|
Listed equity securities.
|
|
|
262,519
|
|
|
2,498
|
|
|
(10,281
|
)
|
|
254,736
|
|
Debt securities
|
|
|
15,000
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
277,519
|
|
|
2,498
|
|
|
(10,281
|
)
|
|
269,736
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-47
Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
12. Available-for-Sale Securities Investments: (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2016
|
|
|
|
Amortized
cost
|
|
Gross
unrealized
gains
|
|
Gross
unrealized
losses
|
|
Fair
value
|
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
RMB
|
|
Listed equity securities.
|
|
|
229,147
|
|
|
11,742
|
|
|
|
|
|
240,889
|
|
Debt securities
|
|
|
167,055
|
|
|
|
|
|
|
|
|
167,055
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
396,202
|
|
|
11,742
|
|
|
|
|
|
407,944
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Group reviews its available-for-sale investments regularly to determine if an investment is other-than-temporarily impaired due to changes in quoted market price or other impairment
indicators such as market condition for the investees' industry and products and services. The Group recorded impairments in the amounts of nil, nil and RMB48,634 for the years ended
December 31, 2014, 2015 and 2016, respectively.
13. Other Long-Term Assets
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2015
|
|
2016
|
|
|
|
RMB
|
|
RMB
|
|
Deposit for land use rights (Note a)
|
|
|
1,873,553
|
|
|
458,447
|
|
Prepayment for investments (Note b)
|
|
|
57,000
|
|
|
895
|
|
Others
|
|
|
5,754
|
|
|
51,479
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,936,307
|
|
|
510,821
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note a:
|
|
During the year ended December 31, 2015, the Group signed contracts with local government and paid certain amounts of deposits to purchase land use rights located in Ezhou City, Jianyang City,
Zhaoqing City and Guangzhou City in the PRC. The purchase process for these land use rights was completed during the year ended December 31, 2016, and the deposits were transferred to the land use rights.
|
|
|
During the year ended December 31, 2016, the Group signed some new contracts with local governments and paid cerntain amounts of deposits to purchase land use rights located in Chongqing City,
Xinjiang Autonomous Region, Liaoning Province, Hengyang City, Tianjin City, Shanxi Province and Guangzhou City.
|
Note b:
|
|
The Company signed contracts to acquire certain investments from the investees' existing shareholders. According to the agreements, the Company needs to prepay deposits before the completion of the
legal closing process of the acquisitions.
|
F-48
Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
14. Goodwill
The movements in carrying amount of goodwill are as follows:
|
|
|
|
|
|
|
Goodwill
|
|
|
|
RMB
|
|
Balance as of January 1, 2015
|
|
|
60,000
|
|
Addition for acquisitionZhengzhou Andaxin
|
|
|
17,807
|
|
Addition for acquisitionExplink
|
|
|
11,057
|
|
Addition for acquisitionOther investments
|
|
|
19,917
|
|
|
|
|
|
|
Balance as of December 31, 2015
|
|
|
108,781
|
|
Addition for acquisitionFeiyuan (Note 3(b))
|
|
|
210,669
|
|
Addition for acquisitionEbatong (Note 3(b))
|
|
|
13,291
|
|
Addition for acquisitionOther investments
|
|
|
34,365
|
|
|
|
|
|
|
Balance as of December 31, 2016
|
|
|
367,106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
stated in Note 3, the Group has acquired certain businesses during 2015 and 2016. The excess of purchase price over net tangible assets and identifiable intangible assets
acquired were recorded as goodwill accordingly.
The
Group performed the annual impairment analysis as of the balance sheet date. There has been no impairment recognized in goodwill during the periods presented.
15. Accrued Expenses and Other Current Liabilities
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2015
|
|
2016
|
|
|
|
RMB
|
|
RMB
|
|
Accrued advertising expense
|
|
|
193,785
|
|
|
511,394
|
|
Accrued shipping and handling expenses
|
|
|
1,032,123
|
|
|
624,699
|
|
Accrued payroll
|
|
|
425,102
|
|
|
649,301
|
|
Social benefit provision
|
|
|
60,911
|
|
|
58,166
|
|
Deposits from delivery service providers
|
|
|
93,629
|
|
|
152,494
|
|
Other tax payable
|
|
|
38,264
|
|
|
69,336
|
|
Income tax payable
|
|
|
216,770
|
|
|
275,114
|
|
VAT tax payable
|
|
|
289,633
|
|
|
258,221
|
|
Accrued rental expenses
|
|
|
58,276
|
|
|
64,829
|
|
Accrued administrative expenses
|
|
|
52,672
|
|
|
170,708
|
|
Amounts received on behalf of third-party merchants (Note a)
|
|
|
388,388
|
|
|
302,486
|
|
Payables for repurchase of ordinary shares (Note 21)
|
|
|
194,514
|
|
|
|
|
Interest payable
|
|
|
17,385
|
|
|
18,529
|
|
Others
|
|
|
43,170
|
|
|
167,322
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,104,622
|
|
|
3,322,599
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note a:
|
|
Amounts relate to the cash collected on behalf of third-party merchants which the Company provides platform access for sales of their products.
|
F-49
Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
16. Employee Retirement Benefit
Full time employees in the PRC participate in a government-mandated defined contribution plan pursuant to which certain pension benefits, medical care, unemployment insurance, employee
housing fund and other welfare benefits are provided to employees. PRC labor regulations require the Group to make contributions based on certain percentages of the employees' basic salaries. Other
than the contribution, there is no further obligation under these plans. The total contributions and accruals made for such employee benefits was RMB196,778, RMB337,762 and RMB585,073 for the
years ended December 31, 2014, 2015 and 2016, respectively.
17. Short term loans
On December 31, 2015, a subsidiary of the Group entered into a short-term loan arrangement with a domestic bank in the PRC to finance its working capital, the outstanding amount
as of December 31, 2015 was RMB95,000 with an interest rate of 4.35% per annum and a maturity term of three months. The loan is guaranteed by a pledge of the Group's held-to-maturity
securities amounted to RMB100,000. The full loan amount was settled during the year ended December 31, 2016.
On
March 9, 2016, a subsidiary of the Group entered into an interest-free loan with a local bank to finance its working capital, the principle amount was RMB3,000. The loan was
settled during the year ended December 31, 2016.
18. Convertible Senior Notes
On March 17, 2014, the Company issued US$632,500 (approximate RMB4,391,448) in aggregate principal amount of 1.5% Convertible Senior Notes due 2019 (the "Notes"). The Notes
can be converted into the Company's ADSs, each representing
1
/
5
Class A ordinary share of the Company, par value 0.001 per share (the "ordinary shares"), at the
option of the holders, based on an initial conversion rate of 49.693 of the Company's ADSs (4.9693 ADSs before the ADS ratio change effective November 3, 2014) per 1,000 principal
amount of Notes (US$20.124 per ADS, or $201.24 per ADSs before the ADS ratio change). Holders of the Notes will have the right to require the Company to repurchase for cash all or part of their Notes
on March 15, 2017 or upon the occurrence of certain fundamental changes at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid
interest to, but excluding, the repurchase date. The Notes bear interest at a rate of 1.5% per year, payable semiannually in arrears on March 15 and September 15 of each year, beginning
on September 15, 2014. The Notes will mature on March 15, 2019, unless previously repurchased or converted in accordance with their terms prior to such date.
The
net proceeds from the Notes offering were US$617,191 (approximate RMB4,285,157), after deducting discounts to the initial purchaser of US$14,231(approximate RMB98,806) and debt
issuance costs of US$1,078 (approximate RMB7,485). Debt issuance costs and debt discounts are recorded as a direct deduction from the face amount of Convertible Senior Notes, and amortized as interest
expenses, using the effective interest method, from issuance date to the first put date of the Notes (March 15, 2017).
In
February and March 2017, the Group has entered into a commitment letter and a related financing agreement with two reputable international banks respectively that permits the
Group to borrow up to US$632.5 million (approximate RMB4,391 million) and the loan will mature in 364 days
F-50
Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
18. Convertible Senior Notes (Continued)
from
the date of drawdown, which is more than twelve months from the year ended December 31, 2016. Therefore, the Notes were classified as non-current liability on the consolidated balance
sheets of Company.
On
March 15, 2017, part of the Notes holders exercised their option to redeem the Notes, the total redemption amount is US$3,125 (approximate RMB21,697), and the remaining amount
of the Notes will mature on March 15, 2019.
The
Company recorded the Notes as a liability in their entirety, and the conversion feature or any other feature does not need to be bifurcated and accounted for separately. As of
December 31, 2016, none of the Notes had been converted yet.
19. Distribution of Profit
Pursuant to the laws applicable to entities incorporated in the PRC, the PRC subsidiaries are prohibited from distributing their statutory capital and are required to appropriate from
PRC GAAP profit after tax to other non-distributable reserve funds after offsetting accumulated losses from prior years, until the cumulative amount of such reserve fund reaches 50% of their
registered capital. These reserve funds include one or more of the following: (i) a general reserve, (ii) an enterprise expansion fund and (iii) a staff bonus and welfare fund.
Subject to certain cumulative limits, the general reserve fund requires annual appropriation at 10% of after tax profit (as determined under accounting principles generally accepted in the PRC
at each year-end); the appropriation to the other fund are at the discretion of the subsidiaries.
The
general reserve is used to offset future extraordinary losses. A subsidiary may, upon a resolution passed by the shareholders, convert the general reserve into capital. The staff
welfare and bonus reserve is used for the collective welfare of the employees of the subsidiary. The enterprise expansion reserve is for the expansion of the subsidiary's operations and can be
converted to capital subject to approval by the relevant authorities. These reserves represent appropriations of the retained earnings determined in accordance with Chinese law, and are not
distributable as cash dividends to the Group.
Relevant
PRC statutory laws and regulations permit payment of dividends by the Company's PRC subsidiaries only out of their retained earnings, if any, as determined in accordance with
PRC accounting standards and regulations. The Company's PRC subsidiaries transferred RMB135,797, RMB234,425 and RMB84,873 to general reserve during the years ended December 31, 2014, 2015 and
2016, respectively.
The
balance of restricted net assets was RMB1,957,529 and RMB4,278,531 of which RMB829,500 and RMB829,500 was attributed to the net assets of the VIEs and VIEs' subsidiaries, and
RMB1,128,029 and RMB1,128,029 was attributed to the paid in capital of the WFOE, as of December 31, 2015 and 2016, respectively.
F-51
Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
20. Capital Structure
Issuance of convertible senior notes
On March 17, 2014, the Company completed a public offering of 1,140,000 ADSs by certain of the Company's selling shareholders,
representing 2,280,000 ordinary shares, at a public offering price of US143.74 per ADS, and US$550,000 (approximate RMB3,818,650) aggregate principal amount of the Company's 1.50%
convertible senior notes due 2019. Concurrently, the underwriters exercised in full the option to purchase an aggregate of 171,000 additional ADSs from certain selling shareholders at the
public offering price of the offering and up to an additional US$82,500 (approximate RMB572,798) aggregate principal amount of the Company's 1.50% convertible senior notes due 2019.
Dual-class share structure
On September 15, 2014, the Company's shareholders voted in favor of a proposal to adopt a dual-class share structure, pursuant to which
the Company's authorized share capital was reclassified and re-designated into Class A ordinary shares and Class B ordinary shares, with each Class A ordinary share being entitled
to one vote and each Class B ordinary share being entitled to ten votes on all matters that are subject to shareholder vote. Both Class A ordinary shares and Class B ordinary
shares are entitled to the same dividend right. The holders of the Group's ordinary shares are entitled to such dividends as may be declared by the board of directors subject to the Companies Law. The
computation of net earnings per Class A ordinary shares and Class B ordinary shares have been adjusted retroactively for all periods presented to reflect this change. As of
December 31, 2015 and 2016, all Class B ordinary shares were held by the Chairman of the Company.
ADS Ratio Change
Effective November 3, 2014, the Company changed its ADS to Class A ordinary share ratio from one ADS representing two
Class A ordinary shares to five ADSs representing one Class A ordinary share. The computation of net earnings per ADS have been adjusted retroactively for all periods presented to
reflect this change.
Exercise of stock options
During the years ended December 31, 2014, 2015 and 2016, 1,883,977, 956,587 and 560,930 Class A ordinary shares were issued
respectively as a result of exercises of share options by employees and a consultant.
Vesting of shares awards
During the years ended December 31, 2014, 2015 and 2016, 988,723, 1,100,618 and 861,815 Class A ordinary shares were issued
respectively as a result of vesting of shares awards granted to employees and consultants.
F-52
Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
21. Treasury Stock
On November 17, 2015, the Company's board of directors approved a share repurchase program whereby the Company may purchase its own ADSs with an aggregate value of up to
US$300 million over the following 24-month period, ending on November 16, 2017. As of December 31, 2016, the Company has repurchased 1,614,135 shares from the market in the
consideration of approximately RMB844,711 in aggregate. Part of the considerations for the repurchase of shares in the amount RMB194,514 has not yet been settled as at
December 31, 2015, but was fully settled during the year ended December 31, 2016.
During
the year ended December 31, 2016, 257,217 of the treasury stock was re-issued to employees of the Group for the purpose of share awards.
22. Other Income
Other income consists of government grants and miscellaneous. Government grants represent rewards
provided by the relevant PRC municipal government authorities to the Group for business achievements made by the Group, tax refunds, or subsidies for asset related investments made by the Group.
Government grants are recognized in profit or loss on a systematic basis over the periods in which the Group recognizes as expenses the related costs for which the grants are intended to compensate. A
government grant will only be recognized as other income when it is probable that any future economic benefit associated with an item will flow to the Group, and the grant has been received because
the amount of such government grants are determined solely at the discretion of the relevant government authorities and there is no assurance that the Group will continue to receive these government
grants in the future. Grants related to depreciable assets are recognized in profit or loss over the periods in which depreciation expense on those assets is recognized, corresponding to the useful
lives of the assets.
Other
income is comprised of:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2014
|
|
2015
|
|
2016
|
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
Government grants
|
|
|
121,463
|
|
|
282,330
|
|
|
282,866
|
|
Claims for goods insurance
|
|
|
27,754
|
|
|
11,136
|
|
|
19,694
|
|
Others
|
|
|
4,760
|
|
|
14,965
|
|
|
55,469
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income
|
|
|
153,977
|
|
|
308,431
|
|
|
358,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23. Income Taxes
Under the current laws of the Cayman Islands, the Company is not subject to tax on its income or capital gains. In addition, upon payments of
dividends by the Company to its shareholders, no Cayman Islands withholding tax will be imposed.
F-53
Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
23. Income Taxes (Continued)
The provision for current income taxes of the subsidiaries operating in Hong Kong has been calculated by applying the current rate of taxation
of 16.5% for the years ended December 31, 2014, 2015 and 2016, if applicable.
Under the Law of the People's Republic of China on Enterprise Income Tax ("EIT Law"), domestically owned enterprises and foreign invested
enterprises (the "FIEs") are subject to a uniform tax rate of 25%. While the EIT Law equalizes the tax rates for FIEs and domestically-owned enterprises, preferential tax treatment may continue
to be given to companies in certain encouraged sectors and to entities classified as high-technology companies, regardless of whether these are domestically-owned enterprises or FIEs. The Group's
subsidiaries and the variable interest entity in the PRC are all subject to the tax rate of 25% for the periods presented, except for Vipshop Jianyang, Vipshop Chongqing, Vipshop Zhuhai and Pinwei
Software that enjoyed the following preferential tax treatment:
Vipshop
Jianyang and Vipshop Chongqing have been recognized as within encouraged industries in the Western Regions of China and enjoyed a preferential income tax rate of 15% since year
2012 and year 2014 respectively.
Vipshop
Zhuhai enjoyed a preferential tax rate of 15% on annual renewal basis as it is located in an economy development zone in the PRC.
The
term "domestically-owned enterprises in an industry sector encouraged by the PRC government" as used herein refers to any enterprise that its primary business falls into the scopes
of the encouraged industries stipulated in the existing related policies, including Industrial Restructuring Guidance Catalogue (2011), Industrial Restructuring Guidance Catalogue (2005), Catalogue
for the Guidance of Foreign Investment Industries (Revised in 2007), Circular Caishui (2014) and Catalogues of Foreign-invested Advantage Industries in Central-Western Areas (2008 Revision), and the
annual primary business revenue of which accounts for more than 70% of the total enterprise revenue.
Pinwei
Software was qualified as a high and new technology enterprise and enjoy a preferential corporate income tax rate of 15% Circular Caishui (2014) for the period from
January 1, 2015 to December 31, 2016.
The
Group evaluates the level of authority for each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measures the
unrecognized benefits associated with the tax positions. As of December 31, 2015 and 2016, the Group had no unrecognized tax benefits. The Group does not anticipate any significant increase to
its liability for unrecognized tax benefit within the next 12 months. The Group will classify interest and penalties related to income tax matters, if any, in income tax expense.
According
to the PRC Tax Administration and Collection Law, the statute of limitations is three years if the underpayment of income taxes is due to computational errors made by the
taxpayer. The statute of limitations will be extended to five years under special circumstances, which are not clearly defined, but an underpayment of income tax liability exceeding RMB100 (US$14) is
specifically listed
F-54
Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
23. Income Taxes (Continued)
as
a special circumstance. In the case of a transfer pricing related adjustment, the statute of limitations is ten years. There is no statute of limitations in the case of tax evasion.
Income
tax expense is comprised of:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2014
|
|
2015
|
|
2016
|
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
Income (loss) before tax and share of loss of affiliates
|
|
|
|
|
|
|
|
|
|
|
Income from China operations
|
|
|
1,354,239
|
|
|
2,540,418
|
|
|
3,241,171
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from non-China operations
|
|
|
(293,898
|
)
|
|
(489,898
|
)
|
|
(575,087
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total income before tax and share of loss of affiliates
|
|
|
1,060,341
|
|
|
2,050,520
|
|
|
2,666,084
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2014
|
|
2015
|
|
2016
|
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
Income tax expenses applicable to China operations
|
|
|
|
|
|
|
|
|
|
|
Current tax (Note)
|
|
|
464,025
|
|
|
561,001
|
|
|
689,473
|
|
Deferred tax
|
|
|
(218,993
|
)
|
|
(103,256
|
)
|
|
(87,645
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal income tax expenses applicable to China operations
|
|
|
245,032
|
|
|
457,745
|
|
|
601,828
|
|
|
|
|
|
|
|
|
|
|
|
|
Total tax expenses
|
|
|
245,032
|
|
|
457,745
|
|
|
601,828
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: All current tax was related to income tax in PRC and Hong Kong.
Under
the EIT Law, enterprises are classified as either resident or non-resident. A resident enterprise refers to one that is incorporated under the PRC law or under the law of a
jurisdiction outside the PRC with its "de facto management organization" located within the PRC. Non-residential enterprise refers to one that is incorporated under the law of a jurisdiction outside
the PRC with its "de facto management organization" located also outside the PRC, but which has either set up institutions or establishments in the PRC or has income originating from the PRC without
setting up any institution or establishments in the PRC. Under the current EIT Implementation Regulations, "de facto management organization" is defined as the organization of an enterprise through
which substantial and comprehensive management and control over the business, operations, personnel, accounting and properties of the enterprise are exercised. Under the New Tax Law and the
New EIT Implementation Regulations, a resident enterprise's global net income will be subject to a 25% enterprise income tax rate. Uncertainties exist with respect to how the New Tax Law
and New EIT Implementation Regulations apply to the Group's overall operations, and more specifically, with regard to tax residency status. On April 22, 2009, the State Administration of
Taxation, or the SAT, issued SAT Circular 82, which provides certain specific criteria for determining whether the "de facto management body" of a PRC-controlled enterprise that is incorporated
offshore is located in China. In addition, the
F-55
Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
23. Income Taxes (Continued)
SAT
issued a bulletin on July 27, 2011 providing more guidance on the implementation of Circular 82 and clarifies matters such as resident status determination. Due to the present
uncertainties resulting from the limited PRC tax guidance on this issue, it is unclear that the legal entities organized outside of PRC should be treated as residents for New Tax Law purposes.
Nevertheless, even if one or more of its legal entities organized outside of the PRC were characterized as PRC tax residents, both of them are still in accumulated loss position and no significant
impact would be expected on the net current tax payable balance and the net deferred tax balance.
If
the entity were to be non-resident for PRC tax purpose, dividends paid to it out of profits earned after January 1, 2008 would be subject to a withholding tax. In the case of
dividends paid by PRC subsidiaries the withholding tax would be 10% and in the case of a subsidiary 25% or more directly owned by residents which meet the criteria of beneficial owner in the Hong Kong
SAR, the withholding tax would be 5%.
Aggregate
undistributed earnings of the Group's subsidiaries and the VIEs in the PRC that are available for distribution to the Group of approximately RMB4,148.1 million and
RMB6,993.1 million as
of December 31, 2015 and 2016 respectively are considered to be indefinitely reinvested under ASC No.740-30,
Accounting for Income TaxesSpecial
Areas
, and accordingly, no provision has been made for the Chinese dividend withholding taxes that would be payable upon the distribution of those amounts to the Group. If
those earnings were to be distributed or they were determined to be no longer permanently reinvested, the Group would have to record a deferred income tax liability in respect of those undistributed
earnings of approximately RMB207.4 million and RMB349.7 million as of December 31, 2015 and 2016 respectively.
A
reconciliation of the income tax expense to income before income tax and share of loss of affiliates computed by applying the PRC statutory income tax rate of 25% per the consolidated
statements of income and comprehensive income is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2014
|
|
2015
|
|
2016
|
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
Income before income tax and share of loss of affiliates
|
|
|
1,060,341
|
|
|
2,050,520
|
|
|
2,666,084
|
|
Computed income tax expense at PRC EIT tax rate
|
|
|
265,085
|
|
|
512,630
|
|
|
666,521
|
|
Effect of non-deductible expenses, including:
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation expenses
|
|
|
56,374
|
|
|
75,735
|
|
|
118,913
|
|
Other non-deductible expenses
|
|
|
9,487
|
|
|
4,259
|
|
|
6,408
|
|
Effect of different tax rates of a subsidiary operating in other jurisdiction
|
|
|
578
|
|
|
392
|
|
|
1,693
|
|
Effect of tax holidays on concessionary rates granted to PRC subsidiaries
|
|
|
(46,159
|
)
|
|
(144,958
|
)
|
|
(280,523
|
)
|
Effect of non-taxable income
|
|
|
(20,271
|
)
|
|
(7,242
|
)
|
|
(17,419
|
)
|
Change in valuation allowance
|
|
|
(15,891
|
)
|
|
10,444
|
|
|
105,387
|
|
Others
|
|
|
(4,171
|
)
|
|
6,485
|
|
|
848
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual income tax expenses
|
|
|
245,032
|
|
|
457,745
|
|
|
601,828
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-56
Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
23. Income Taxes (Continued)
The aggregate amount and per share effect of the tax holidays and tax concessions are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2014
|
|
2015
|
|
2016
|
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
The aggregate effect
|
|
|
46,159
|
|
|
144,958
|
|
|
280,523
|
|
Per share effect:
|
|
|
|
|
|
|
|
|
|
|
Class A and Class B ordinary share:
|
|
|
|
|
|
|
|
|
|
|
basic
|
|
|
0.41
|
|
|
1.25
|
|
|
2.42
|
|
diluted
|
|
|
0. 38
|
|
|
1.21
|
|
|
2.23
|
|
The
principal components of deferred tax assets are as follows:
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2015
|
|
2016
|
|
|
|
RMB
|
|
RMB
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
Net operating loss carry forwards
|
|
|
59,652
|
|
|
175,676
|
|
Allowance for doubtful debts
|
|
|
1,083
|
|
|
18,017
|
|
Allowance for other investments
|
|
|
9,678
|
|
|
9,044
|
|
Inventory write-down
|
|
|
33,116
|
|
|
46,488
|
|
Payroll payable and other accruals
|
|
|
28,490
|
|
|
21,427
|
|
Deferred revenue
|
|
|
93,590
|
|
|
96,454
|
|
Advertising expenses
|
|
|
24,354
|
|
|
|
|
Others
|
|
|
983
|
|
|
2,039
|
|
Less: valuation allowance
|
|
|
(48,943
|
)
|
|
(154,330
|
)
|
|
|
|
|
|
|
|
|
Total deferred tax assets-current
|
|
|
202,003
|
|
|
214,815
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liability:
|
|
|
|
|
|
|
|
Intangible assets
|
|
|
175,416
|
|
|
100,583
|
|
|
|
|
|
|
|
|
|
Total deferred tax liability
|
|
|
175,416
|
|
|
100,583
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
amount of tax loss carried forward was RMB238,606 and RMB702,705 of December 31, 2015 and 2016, respectively, for the Group's certain subsidiaries and VIEs.
The
Group has provided a valuation allowance for the deferred tax assets relating to the future benefit of net operating loss carry forwards and other deferred tax assets of certain
subsidiaries as of December 31, 2015 and 2016, respectively, as management is not able to conclude that the future realization of some of those net operating loss carry forwards and other
deferred tax assets are more likely than not.
24. Earnings Per Share
As of December 31, 2014, 2015 and 2016, there are nil, nil and 909,568 employee stock options or non-vested ordinary shares which could potentially dilute basic net
earnings per share in the future, but which were excluded from the computation of diluted net earnings per share in the periods presented,
F-57
Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
24. Earnings Per Share (Continued)
as
their effects would have been anti-dilutive. The effect of the convertible senior notes has been excluded from the computation of diluted earnings per share for the years ended December 31,
2014 and 2015 as the effect would be anti-dilutive.
Basic
net earnings per share is based on the weighted average number of ordinary shares outstanding during each period. Diluted net earnings per share is based on the weighted average
number of ordinary shares outstanding and incremental weighted average number of ordinary shares from assumed vesting of non-vested shares and exercise of share options, and conversion of the
convertible senior notes during each period.
As
economic rights and obligations are applied equally to both Class A and Class B ordinary shares, earnings are allocated between the two classes of ordinary shares evenly
with the same allocation on a per share basis.
Basic
earnings per share and diluted earnings per share have been calculated for the years ended December 31, 2014, 2015 and 2016 as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2014
|
|
2015
|
|
2016
|
|
|
|
Class A and Class B
|
|
Class A and Class B
|
|
Class A and Class B
|
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
Basic earnings per share attributable to Vipshop Holdings Limited's ordinary shareholders:
|
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
Earnings attributable to Class A and Class B ordinary shareholders for computing basic earnings per Class A and Class B ordinary
share
|
|
|
841,286
|
|
|
1,589,665
|
|
|
2,036,817
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of Class A and Class B ordinary shares outstanding for computing basic earnings per Class A and Class B
ordinary share
|
|
|
113,310,682
|
|
|
115,736,092
|
|
|
115,958,088
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per Class A and Class B ordinary shares
|
|
|
7.42
|
|
|
13.74
|
|
|
17.57
|
|
F-58
Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
24. Earnings Per Share (Continued)
Diluted
earnings per share for the years ended December 31, 2014, 2015 and 2016 are calculated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2014
|
|
2015
|
|
2016
|
|
|
|
Class A and Class B
RMB
|
|
Class A and Class B
RMB
|
|
Class A and Class B
RMB
|
|
Diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
Net earnings attributable to Class A and Class B ordinary shareholders for computing diluted earnings per Class A and Class B
ordinary share
|
|
|
841,286
|
|
|
1,589,665
|
|
|
2,120,964
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of Class A and Class B ordinary shares outstanding for computing basic earnings per Class A and Class B
ordinary share
|
|
|
113,310,682
|
|
|
115,736,092
|
|
|
115,958,088
|
|
Dilutive employee share options and non-vested ordinary shares
|
|
|
6,916,902
|
|
|
4,431,971
|
|
|
3,572,930
|
|
Dilutive convertible senior notes
|
|
|
|
|
|
|
|
|
6,286,165
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of Class A and Class B ordinary shares outstanding for computing diluted earnings per Class A and Class B
ordinary share
|
|
|
120,227,584
|
|
|
120,168,063
|
|
|
125,817,183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per Class A and Class B ordinary shares
|
|
|
7.00
|
|
|
13.23
|
|
|
16.86
|
|
The
Company granted a number of non-vested ordinary shares to certain executive officers and employees during 2014, 2015 and 2016 (refer to Note 27 (b)), these non-vested shares
are not included in the computation of basic earnings per share. Such shares are considered contingently returnable shares because in the event a non-vested shareholder's employment for the Company is
terminated for any reason prior to the fourth anniversary of the grant date, the outstanding non-vested shares shall be forfeited and automatically transferred to and reacquired by the Company at nil
consideration.
25. Commitments and contingencies
Operating Leases Agreements
The Group leases office space and certain equipment under non-cancellable operating lease agreements that expire at various dates through
October 2025. Those lease agreements provide for periodic rental increases based on both contractual incremental rates and inflation rates adjustments over the leased periods. Some of these
lease agreements include terms of renewal ranging from one to ten years upon expiry of their respective original lease terms, without purchase options or escalation
F-59
Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
25. Commitments and contingencies (Continued)
clause.
If these lease agreements are not renewed, the Company is obligated to remove the facilities constructed under certain of its warehouse space lease contracts, although the Company expects such
related removal costs to be not significant.
During
the three years ended December 31, 2014, 2015 and 2016, the Company incurred rental expenses amounting to RMB163,332, RMB191,253 and RMB248,264, respectively.
As
of December 31, 2016, minimum lease payments under all non-cancellable leases were as follows:
|
|
|
|
|
|
|
RMB
|
|
Year ending December 31, 2017
|
|
|
246,770
|
|
Year ending December 31, 2018
|
|
|
200,146
|
|
Year ending December 31, 2019
|
|
|
139,733
|
|
Year ending December 31, 2020
|
|
|
73,651
|
|
Year ending December 31, 2021
|
|
|
48,348
|
|
Over December 31, 2021
|
|
|
77,824
|
|
|
|
|
|
|
Total minimum lease payments
|
|
|
786,472
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital commitment
As of December 31, 2016, the Group has contracted for capital expenditures of RMB938,464.
Contingencies
The Company and certain of the Company's officers and directors were named as defendants in two putative securities class actions filed in the
U.S. District Court for the Southern District of New York: Heller v. Vipshop Holdings Limited et al., Civil Action No. 1:15-cv-03870-LTS (S.D.N.Y.)(filed on May 19,
2015) and Schwartz v. Vipshop Holdings Limited et al., Civil Action No. 1:15-cv-05097-LTS (S.D.N.Y.)(filed on June 30, 2015). The complaints in both putative class actions allege
that certain of the Company's financial statements and other public disclosures contained misstatements or omissions and assert claims under the U.S. securities laws. On September 15,
2015, the court consolidated the two actions, and appointed a lead plaintiff and approved the lead plaintiff's selection of lead counsel for the consolidated action. On November 24, 2015, the
lead plaintiff filed a Notice of Voluntary Dismissal without Prejudice which was entered by the court, voluntarily dismissing, without prejudice, all claims in the consolidated action.
The
Group is subject to periodic legal or administrative proceedings in the ordinary course of business. The Group does not believe that any currently pending legal proceeding to which
the Group is a party will have a material effect on its business, results of operations or cash flows.
F-60
Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
26. Related Party Transactions
For the years ended December 31, 2014, 2015 and 2016, the Group entered into the following material related party transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2014
|
|
2015
|
|
2016
|
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
Purchase of goods (Note a)
|
|
|
585,494
|
|
|
111,191
|
|
|
155,093
|
|
Delivery of goods (Note b)
|
|
|
|
|
|
469,974
|
|
|
137,088
|
|
Other income
|
|
|
|
|
|
4,027
|
|
|
1,773
|
|
Other expense
|
|
|
|
|
|
|
|
|
1,475
|
|
|
|
|
|
|
|
Note a:
|
|
The goods were purchased from an affiliate of the Company and companies controlled or significantly influenced by shareholders.
|
Note b:
|
|
The Group engages certain of the Group's affiliates to deliver the goods to its customers.
|
Details
of those material related party transactions provided in the table above are as follows:
(a) Amounts due from related parties
Amounts
due from related parties are made up by amounts due from affiliates and companies controlled by the shareholders.
Amounts
due from related parties as of December 31, 2015 and 2016 amounted to RMB31,856 and RMB8,352, respectively, are prepayments related to purchases of goods or services from
affiliates and the entities controlled by shareholders of the Company.
(b) Amounts due to related parties
Amounts
due to related parties are made up by shareholder loans and amounts due to affiliates and companies controlled or significantly influenced by shareholders.
The
amounts due to affiliates and companies controlled or significantly influenced by shareholders as of December 31, 2015 and 2016 amounted to RMB206,966 and
RMB52,729 respectively, and were unsecured and interest free. These amounts are all related to purchases of goods or logistic services from these parties.
27. Share-based Payments
(a) Stock incentive plan
In
March 2011, the Company adopted the Vipshop Holdings Limited 2011 Stock Incentive Plan (the "2011 Plan"), which provide up to an aggregate of
7,350,000 Class A ordinary shares of the Company as stock based compensation to employees, directors, officers and consultants and other eligible personal of the Group.
F-61
Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
27. Share-based Payments (Continued)
In
2012, the Company adopted the 2012 Stock Incentive Plan (the "2012 Plan"), which provide up to an aggregate of 9,000,000 Class A ordinary shares of the Company,
and the maximum aggregate number of shares that may be issued per calendar year is 1,500,000 from 2012 until the termination of the 2012 Plan.
In
July 2014, the Company adopted the 2014 Stock Incentive Plan (the "2014 Plan"), whose the maximum aggregate number of ordinary shares may be issued under the 2014 Plan
is (i) 5,366,998 Class A ordinary shares, and (ii) an automatic increase on January 1 of each year after the effective date of the 2014 Plan by that number of shares
representing 1.5% of the Company's then total issued and
outstanding share capital as of December 31 of the preceding year, or such less number as determined by the board of directors.
During
the years ended December 31,2014, 2015 and 2016, no stock option were granted to executive officers, employees and non-employees of the Group under the 2011, 2012 and
2014 Plans.
The
expiration dates of the options were 10 years from grant date, vesting is subject to the continuous services of the option holders to the Group, and post-termination exercise
period was nine months. During any authorized leave of absence, the vesting of the option shall be suspended after the leave of absence exceeds a period of 90 days. Vesting of the option shall
resume upon the option holders' return to service to the Group. The vesting schedule shall be extended by the length of the suspension.
In
the event of termination of the option holders' continuous service for cause, the option holders' right to exercise the option shall terminate concurrently, except otherwise
determined by the plan administrator, and the Company shall have the rights to repurchase all vested options purchased by the option holders at a discount price determined by the plan administrator.
The stock option holders have waived any voting rights with regard to the shares and granted a power of attorney to the Board of Directors of the Company to exercise voting rights with respect to
the shares.
F-62
Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
27. Share-based Payments (Continued)
For
the years ended December 31, 2014, 2015 and 2016, the share option movements were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
outstanding
|
|
Weighted
average
exercise
price per
share
|
|
Weighted
average
remaining
contractual
years to expiry
per share
|
|
Weighted
average
fair value
at grant
date
|
|
Weighted
average
intrinsic
value
per
option
|
|
Aggregate
intrinsic
value
|
|
|
|
|
|
US$
|
|
|
|
US$
|
|
US$
|
|
US$
|
|
As of January 1, 2014
|
|
|
5,440,760
|
|
|
1.18
|
|
7.69 years
|
|
|
6.31
|
|
|
40.66
|
|
|
221,196,775
|
|
Exercised
|
|
|
(1,883,977
|
)
|
|
0.95
|
|
6.50 years
|
|
|
3.38
|
|
|
96.75
|
|
|
182,277,923
|
|
Forfeited
|
|
|
(151,874
|
)
|
|
2.52
|
|
7.19 years
|
|
|
5.21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding as of December 31, 2014
|
|
|
3,404,909
|
|
|
1.26
|
|
6.77 years
|
|
|
|
|
|
96.44
|
|
|
328,383,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(956,587
|
)
|
|
1.04
|
|
5.45 years
|
|
|
3.07
|
|
|
75.31
|
|
|
72,038,452
|
|
Forfeited
|
|
|
(11,451
|
)
|
|
2.29
|
|
5.96 years
|
|
|
2.29
|
|
|
74.06
|
|
|
848,073
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding as of December 31, 2015
|
|
|
2,436,871
|
|
|
1.33
|
|
5.89 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(560,930
|
)
|
|
1.53
|
|
4.61 years
|
|
|
3.31
|
|
|
53.52
|
|
|
30,022,847
|
|
Forfeited
|
|
|
(3,000
|
)
|
|
2.50
|
|
4.92 years
|
|
|
2.50
|
|
|
52.55
|
|
|
157,650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding as of December 31, 2016
|
|
|
1,872,941
|
|
|
0.78
|
|
4.97 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non vested as of December 31, 2016
|
|
|
2,855
|
|
|
|
|
|
|
|
3.58
|
|
|
|
|
|
|
|
Options vested and expected to vest as of December 31, 2016
|
|
|
1,872,941
|
|
|
1.28
|
|
4.97 years
|
|
|
|
|
|
|
|
|
100,716,203
|
|
Exercisable as of December 31, 2016
|
|
|
1,870,086
|
|
|
1.27
|
|
4.97 years
|
|
|
|
|
|
|
|
|
100,566,172
|
|
For
the years ended December 31, 2014, 2015 and 2016, the Group recognized share based payment expenses of RMB34,934, RMB23,366 and RMB7,002 in connection with the share
options granted to employees, respectively. The total fair value of shares vested during 2015 and 2016 was RMB24,603 and RMB7,621 respectively.
As
of December 31, 2016, there was RMB243 unrecognized compensation cost related to unvested share options granted to executive and employees of the Group. The unvested
share options expense relating to the stock options of the Group is expected to be recognized over a weighted average period of 0.25 years on a straight-line basis schedule as of
December 31, 2016.
(b) Non-vested shares
During
2014, 2015 and 2016, a total of 1,932,680, 951,684 and 1,815,919 non-vested shares were granted to executive officers, employees, members of Audit Committee and consultants
of the Group under the 2012 and 2014 Plan, respectively.
Most
of the non-vested shares granted have a vesting period of four years of employment services with the first one-fourth vesting on the first anniversary from grant date, and the
remaining three fourth vesting on a monthly basis over a three-year period ending on the fourth anniversary of the grant date. The non-vested shares are not transferable and may not be sold or pledged
and the holder has no voting or dividend right on the non-vested shares. In the event a non-vested shareholder's
F-63
Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
27. Share-based Payments (Continued)
employment
for the Company is terminated for any reason prior to the fourth anniversary of the grant date, the holder's right to the non-vested shares will terminate effectively. The outstanding
non-vested shares shall be forfeited and automatically transferred to and reacquired by the Company at nil consideration.
For
the years ended December 31, 2015 and 2016, the non-vested shares movement was as follows:
|
|
|
|
|
|
|
Non-vested shares
outstanding
|
|
Outstanding as of January 1, 2015
|
|
|
2,448,779
|
|
Granted
|
|
|
951,684
|
|
Vested
|
|
|
(1,100,619
|
)
|
Forfeited
|
|
|
(205,135
|
)
|
Outstanding as of December 31, 2015
|
|
|
2,094,709
|
|
Granted
|
|
|
1,815,919
|
|
Vested
|
|
|
(1,119,032
|
)
|
Forfeited
|
|
|
(371,731
|
)
|
Outstanding as of December 31, 2016
|
|
|
2,419,865
|
|
The
Group recognized compensation expense over the four year service period on a straight line basis, and applied a forfeiture rate of nil for key management and 13% for employees in
2014, 2015 and 2016, respectively. The aggregate fair value of the restricted shares at grant dates was RMB900,361, RMB657,794 and RMB824,474 during 2014, 2015 and 2016 respectively. The fair
values of non-vested shares are measured at the respective fair values of the Company's ordinary shares on the grant-dates. For the years ended December 31, 2014, 2015 and 2016, the Group
recognized share based payment expenses of RMB190,560, RMB279,575 and RMB468,651 in connection with the non-vested shares granted to employees, respectively.
As
of December 31, 2016 there was RMB1,280,756 unrecognized compensation cost related to non-vested shares which is expected to be recognized over a weighted average
vesting period of 3.4 years. The weighted average granted fair value per share of non-vested shares granted during the years ended December 31, 2014, 2015 and 2016 was US$63.31
(RMB392.81), US$109.00 (RMB706.08) and US$67.66 (RMB469.76) respectively.
F-64
Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
27. Share-based Payments (Continued)
(c) Share-based compensation expenses
For
the years ended December 31, 2014, 2015 and 2016, share-based compensation expenses have been included in the following balances on the consolidated statements of income and
comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2014
|
|
2015
|
|
2016
|
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
Fulfillment expenses
|
|
|
(10,822
|
)
|
|
(18,665
|
)
|
|
(38,428
|
)
|
Marketing expenses
|
|
|
(17,293
|
)
|
|
(19,938
|
)
|
|
(38,459
|
)
|
Technology and content expenses
|
|
|
(103,160
|
)
|
|
(126,274
|
)
|
|
(183,122
|
)
|
General and administrative expenses
|
|
|
(94,219
|
)
|
|
(138,064
|
)
|
|
(215,644
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(225,494
|
)
|
|
(302,941
|
)
|
|
(475,653
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28. Segment information
The Group has only one reportable segment, which is the sales, product distribution and offering of goods on its online platforms. The Group's chief operating decision-maker ("CODM") has
been identified as the Company's President Office, consist of the Company's Chief Executive Officer, Chief Finance Officer, Chief Technology Officer and certain Senior Vice Presidents, who review
operating results to make decisions about allocating resources and assessing performance for the entire Group. Hence, the Group operates and manages its business without segments. The Group's net
revenues are all generated from customers in the PRC. All the property, plant and equipment of the Group are substantially located at the PRC.
Product
revenues: relate to sales of apparel, shoes and bags and other products.
Other
revenues: relate to revenues from product promotion and online advertising, and commission fees charged to third-party merchants which the Company provides platform access for
sales of their product, and revenues from logistic and warehouse services provided to vendors of the Group.
F-65
Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise stated)
28. Segment information (Continued)
Revenues
from different product groups and services are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2014
|
|
2015
|
|
2016
|
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
Product revenues
|
|
|
|
|
|
|
|
|
|
|
Apparel
|
|
|
9,554,581
|
|
|
13,887,533
|
|
|
20,381,929
|
|
Shoes and bags
|
|
|
3,476,839
|
|
|
5,439,785
|
|
|
7,734,909
|
|
Cosmetics
|
|
|
2,986,807
|
|
|
5,191,552
|
|
|
7,574,423
|
|
Sportswear and sporting goods
|
|
|
1,287,341
|
|
|
2,656,546
|
|
|
3,518,007
|
|
Home goods and other lifestyle products
|
|
|
1,289,114
|
|
|
2,941,734
|
|
|
6,622,624
|
|
Toys, kids and baby
|
|
|
1,575,077
|
|
|
4,609,484
|
|
|
5,535,834
|
|
Other goods
|
|
|
2,515,352
|
|
|
4,683,327
|
|
|
3,914,174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,685,111
|
|
|
39,409,961
|
|
|
55,281,900
|
|
Other revenues
|
|
|
444,202
|
|
|
793,251
|
|
|
1,309,402
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenues
|
|
|
23,129,313
|
|
|
40,203,212
|
|
|
56,591,302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29. Subsequent event
On January 1, 2017, the Company granted 900,000 restricted shares to its senior management, at the same date, the Company also granted 1,320,000 stock options to its
senior management at the exercise price of US$13.67 per ordinary share pursuant to the Company's 2014 Share Incentive plan. Twenty five percent of the restricted shares and stock options will be
vested and become exercisable on the first anniversary of the grant date; and the remaining seventy five percent of the restricted shares and stock option will be vested and become exercisable on a
monthly basis over a three-year period ending on the fourth anniversary of the grant date, so that each installment of 1/48 of the restricted shares and stock option will vested and become exercisable
by the end of each full-month period after the first anniversary of the grant date until the fourth anniversary of the grant date.
F-66
Table of Contents
VIPSHOP HOLDINGS LIMITED
Schedule ICondensed Financial Information
Statements of Income and Comprehensive Income
(All amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2014
|
|
2015
|
|
2016
|
|
2016
|
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
US$
|
|
General and administrative expenses
|
|
|
(225,494
|
)
|
|
(336,783
|
)
|
|
(490,939
|
)
|
|
(70,710
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(225,494
|
)
|
|
(336,783
|
)
|
|
(490,939
|
)
|
|
(70,710
|
)
|
Interest expense
|
|
|
(62,238
|
)
|
|
(84,467
|
)
|
|
(84,148
|
)
|
|
(12,120
|
)
|
Share of loss of affiliates
|
|
|
(62,038
|
)
|
|
(80,422
|
)
|
|
(65,492
|
)
|
|
(9,433
|
)
|
Impairment loss of investments
|
|
|
(6,166
|
)
|
|
(68,648
|
)
|
|
|
|
|
|
|
Equity in incomes of subsidiaries and VIEs
|
|
|
1,197,222
|
|
|
2,159,985
|
|
|
2,677,396
|
|
|
385,626
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
841,286
|
|
|
1,589,665
|
|
|
2,036,817
|
|
|
293,363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
(427
|
)
|
|
(52,487
|
)
|
|
(292,152
|
)
|
|
(42,078
|
)
|
Share of comprehensive income of subsidiaries
|
|
|
|
|
|
(7,783
|
)
|
|
19,525
|
|
|
2,811
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to Vipshop Holdings Limited's shareholders
|
|
|
840,859
|
|
|
1,529,395
|
|
|
1,764,190
|
|
|
254,096
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-67
Table of Contents
VIPSHOP HOLDINGS LIMITED
Schedule ICondensed Financial Information
Balance Sheets
(All amounts in thousands, except for share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2015
|
|
2016
|
|
2016
|
|
|
|
RMB
|
|
RMB
|
|
US$
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
255
|
|
|
952
|
|
|
137
|
|
Investment in affiliates
|
|
|
137,401
|
|
|
71,908
|
|
|
10,357
|
|
Available-for-sale securities investments
|
|
|
38,406
|
|
|
794
|
|
|
114
|
|
Investment in subsidiaries and VIEs
|
|
|
3,771,569
|
|
|
3,654,162
|
|
|
526,310
|
|
Amount due from subsidiaries and VIEs
|
|
|
3,861,551
|
|
|
6,448,966
|
|
|
928,844
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
|
7,809,182
|
|
|
10,176,782
|
|
|
1,465,762
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
|
|
Accrued expenses
|
|
|
203,131
|
|
|
18,529
|
|
|
2,669
|
|
Convertible senior notes
|
|
|
4,058,181
|
|
|
4,381,698
|
|
|
631,096
|
|
Deferred income
|
|
|
8,686
|
|
|
44,375
|
|
|
6,391
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
4,269,998
|
|
|
4,444,602
|
|
|
640,156
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
|
|
|
|
|
Class A ordinary shares (US$0.0001 par value, 483,489,642 shares authorized, and 100,085,519 and 101,508,264 shares issued and outstanding
as of December 31, 2015 and December 31, 2016, respectively)
|
|
|
65
|
|
|
66
|
|
|
9
|
|
Class B ordinary shares (US$0.0001 par value, 16,510,358 shares authorized, and 16,510,358 and 16,510,358 shares issued and outstanding as
of December 31, 2015 and December 31, 2016, respectively)
|
|
|
11
|
|
|
11
|
|
|
2
|
|
Treasury stock, at cost (1,614,135 and 1,356,918 Class A shares as of December 31, 2015 and December 31, 2016, respectively)
|
|
|
(844,711
|
)
|
|
(707,441
|
)
|
|
(101,893
|
)
|
Additional paid-in capital
|
|
|
2,838,591
|
|
|
3,130,126
|
|
|
450,832
|
|
Retained earnings
|
|
|
1,616,209
|
|
|
3,653,026
|
|
|
526,145
|
|
Accumulated other comprehensive loss
|
|
|
(70,981
|
)
|
|
(343,608
|
)
|
|
(49,489
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders' equity
|
|
|
3,539,184
|
|
|
5,732,180
|
|
|
825,606
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
7,809,182
|
|
|
10,176,782
|
|
|
1,465,762
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-68
Table of Contents
VIPSHOP HOLDINGS LIMITED
Schedule ICondensed Financial Information
STATEMENTS OF CASH FLOWS
(All amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2014
|
|
2015
|
|
2016
|
|
2016
|
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
US$
|
|
Cash flow from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
841,286
|
|
|
1,589,665
|
|
|
2,036,817
|
|
|
293,363
|
|
Adjustments to reconcile net income to net cash by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in incomes of subsidiaries and variable interest entities
|
|
|
(1,197,222
|
)
|
|
(2,159,985
|
)
|
|
(2,677,396
|
)
|
|
(385,626
|
)
|
Share of loss of affiliates
|
|
|
62,038
|
|
|
80,422
|
|
|
65,492
|
|
|
9,433
|
|
Impairment loss of investments
|
|
|
6,166
|
|
|
68,648
|
|
|
|
|
|
|
|
Share-based compensation expenses
|
|
|
225,494
|
|
|
302,941
|
|
|
475,653
|
|
|
68,508
|
|
Amortization of debt issuance cost
|
|
|
26,701
|
|
|
33,453
|
|
|
35,824
|
|
|
5,160
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts due from subsidiaries
|
|
|
(2,715,107
|
)
|
|
993,135
|
|
|
192,523
|
|
|
27,728
|
|
Accrued expenses and other current liabilities
|
|
|
16,699
|
|
|
(8,081
|
)
|
|
23,924
|
|
|
3,447
|
|
Deferred income
|
|
|
|
|
|
8,686
|
|
|
35,688
|
|
|
5,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) generated from operating activities
|
|
|
(2,733,945
|
)
|
|
908,884
|
|
|
188,525
|
|
|
27,153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in affiliates and other investments
|
|
|
(437,108
|
)
|
|
(335,974
|
)
|
|
|
|
|
|
|
Investment in available-for-sales securities
|
|
|
|
|
|
(38,406
|
)
|
|
|
|
|
|
|
Acquisition of a subsidiary, net of cash acquired
|
|
|
(687,233
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(1,124,341
|
)
|
|
(374,380
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of convertible notes
|
|
|
3,836,110
|
|
|
|
|
|
|
|
|
|
|
Repurchase of ordinary shares
|
|
|
|
|
|
(650,197
|
)
|
|
(193,619
|
)
|
|
(27,887
|
)
|
Issuance cost of convertible notes offering
|
|
|
(6,689
|
)
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of ordinary shares upon exercise of stock options
|
|
|
10,950
|
|
|
6,323
|
|
|
5,747
|
|
|
828
|
|
Other financing activities
|
|
|
4,225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
3,844,596
|
|
|
(643,874
|
)
|
|
(187,872
|
)
|
|
(27,059
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes
|
|
|
14,089
|
|
|
108,650
|
|
|
44
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
399
|
|
|
(720
|
)
|
|
697
|
|
|
100
|
|
Cash and cash equivalents at beginning of the period
|
|
|
576
|
|
|
975
|
|
|
255
|
|
|
37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of the period
|
|
|
975
|
|
|
255
|
|
|
952
|
|
|
137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-69
Table of Contents
VIPSHOP HOLDINGS LIMITED
NOTE TO SCHEDULE I
(All amounts in thousands, except for share or per share data)
Schedule I has been provided pursuant to the requirement of Rule 12-04(a) and 4-08(e)(3) of Regulation S-X, which
require condensed financial information as to financial position, cash flows and results of operations of a parent company as of the same dates and for the same periods for which audited consolidated
financial statements have been presented when the restricted net assets of the consolidated and unconsolidated subsidiaries together exceed 25 percent of consolidated net assets as of end of
the most recently completed fiscal year.
As
of December 31, 2015 and 2016, RMB1,957,529 and RMB4,278,531 of the restricted capital and reserves are not available for distribution respectively, and as such, the condensed
financial information of Vipshop Holdings Limited ("Parent Company") has been presented. Relevant PRC laws and regulations also restrict the subsidiaries in PRC, the VIEs and VIEs' subsidiaries from
transferring a portion of their net assets to the Company in the form of loans and advances or cash dividends. No dividends have been paid by the subsidiaries in the PRC of the Company or the VIEs to
the Company during the periods presented. Total restricted net assets of the Group represent net assets of the subsidiaries in the PRC, the VIEs and VIE's subsidiaries. The balance of restricted net
assets was RMB1,957,529 and RMB4,278,531 of which RMB829,500 and RMB829,500 was attributed to the net assets of the VIEs and VIEs' subsidiaries, and RMB1,128,029 and RMB1,128,029 was
attributed to the paid in capital of the WFOE, as of December 31, 2015 and 2016, respectively.
During
the each of the three years in the period ended December 31, 2016, no cash dividend was declared and paid by the Parent Company.
Basis of preparation
The condensed financial information of the Parent Company has been prepared using the same accounting policies as set out in its consolidated
financial statements, except that the Parent Company has used the equity method to account for its investment in its subsidiaries, VIEs and VIEs' subsidiaries. Accordingly, the condensed financial
information presented herein represents the financial information of the Parent Company.
Certain
information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of
America have been condensed or omitted. The footnote disclosure certain supplemental information relating to the operations of the Company and, as such, these statements should be read in conjunction
with the notes to the accompanying Consolidated Financial Statements.
F-70
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