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What changed in Tencent Music Entertainment Group's 20-F — 2022 vs 2023

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Paragraph-level year-over-year comparison of Tencent Music Entertainment Group's 2022 and 2023 20-F annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+833 added−753 removedSource: 20-F (2024-04-18) vs 20-F (2023-04-25)

Top changes in Tencent Music Entertainment Group's 2023 20-F

833 paragraphs added · 753 removed · 623 edited across 5 sections

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

272 edited+104 added−28 removed678 unchanged
Biggest changeFor the Year Ended December 31, 2020 Parent VIE and its consolidated subsidiaries WOFEs Other subsidiaries Eliminating adjustments Consolidated totals (RMB in millions) Net cash (outflow)/inflow from operating activities (67 ) 454 4,574 (76 ) — e 4,885 Net cash (outflow)/inflow from investing activities (10,230 ) (1,099 ) (3,535 ) (710 ) 1,368 f (14,206 ) Net cash inflow/(outflow) from financing activities 5,383 715 (86 ) 648 (1,368 ) f 5,292 Net (decrease)/increase in cash and cash equivalents (4,914 ) 70 953 (138 ) — (4,029 ) Cash and cash equivalents, beginning of the year 10,870 1,327 2,999 230 — 15,426 Exchange differences on cash and cash equivalents (270 ) — — 1 — (269 ) Cash and cash equivalents, end of the year 5,686 1,397 3,952 93 — 11,128 For the Year Ended December 31, 2021 Parent VIE and its consolidated subsidiaries WOFEs Other subsidiaries Eliminating adjustments Consolidated totals (RMB in millions) Net cash inflow/(outflow) from operating activities 69 (671 ) 5,628 213 — e 5,239 Net cash (outflow)/inflow from investing activities (1,064 ) (3,554 ) (5,005 ) 95 3,529 f (5,999 ) Net cash (outflow)/inflow from financing activities (3,571 ) 3,462 (71 ) (1 ) (3,529 ) f (3,710 ) Net (decrease)/ increase in cash and cash equivalents (4,566 ) (763 ) 552 307 — (4,470 ) Cash and cash equivalents, beginning of the year 5,686 1,397 3,952 93 — 11,128 Exchange differences on cash and cash equivalents (59 ) — — (8 ) — (67 ) Cash and cash equivalents, end of the year 1,061 634 4,504 392 — 6,591 8 For the Year Ended December 31, 2022 Parent VIE and its consolidated subsidiaries WOFEs Other subsidiaries Eliminating adjustments Consolidated totals (RMB in millions) Net cash inflow/(outflow) from operating activities 59 (17 ) 7,306 133 — e 7,481 Net cash inflow/(outflow) from investing activities 2,639 (379 ) (3,819 ) (1,726 ) 1,839 f (1,446 ) Net cash (outflow)/inflow from financing activities (3,162 ) 252 (58 ) 1,388 (1,839 ) f (3,419 ) Net (decrease)/ increase in cash and cash equivalents (464 ) (144 ) 3,429 (205 ) — 2,616 Cash and cash equivalents, beginning of the year 1,061 634 4,504 392 — 6,591 Exchange differences on cash and cash equivalents 294 — — 54 — 348 Cash and cash equivalents, end of the year 891 490 7,933 241 — 9,555 For the eliminating adjustments: a) Represents the elimination of Service Charges between the VIEs and our PRC subsidiaries. b) Represents the elimination of the investments in the VIEs and our PRC subsidiaries. c) Represents the elimination of intercompany balance between Tencent Music Entertainment Group, the VIEs, and our subsidiaries. d) Represents the Services Charges between Tencent Music Entertainment Group, the VIEs and our PRC subsidiaries, which were eliminated at the consolidation level.
Biggest changeFor the Year Ended December 31, 2021 Parent VIE and its consolidated subsidiaries WOFEs Subsidiaries (other than the WOFEs) Eliminating adjustments Consolidated totals (RMB in millions) Net cash inflow/(outflow) from operating activities 69 (671 ) 5,628 213 — 5,239 Include: Intercompany services fees — (17,743 ) 17,743 — — e — Net cash (outflow)/inflow from investing activities (1,064 ) (3,554 ) (5,005 ) 95 3,529 (5,999 ) Include: Intercompany advances — — (3,636 ) (5 ) 3,641 f — Loans repayments from VIEs to WOFEs — — 112 — (112 ) f — Net cash (outflow)/inflow from financing activities (3,571 ) 3,462 (71 ) (1 ) (3,529 ) (3,710 ) Include: Intercompany advances — 3,636 5 — (3,641 ) f — Loans repayments from VIEs to WOFEs — (112 ) — — 112 f — Net (decrease)/ increase in cash and cash equivalents (4,566 ) (763 ) 552 307 — (4,470 ) Cash and cash equivalents, beginning of the year 5,686 1,397 3,952 93 — 11,128 Exchange differences on cash and cash equivalents (59 ) — — (8 ) — (67 ) Cash and cash equivalents, end of the year 1,061 634 4,504 392 — 6,591 For the Year Ended December 31, 2022 Parent VIE and its consolidated subsidiaries WOFEs Subsidiaries (other than the WOFEs) Eliminating adjustments Consolidated totals (RMB in millions) Net cash inflow/(outflow) from operating activities 59 (17 ) 7,306 133 — 7,481 Include: Intercompany services fees — (16,415 ) 16,415 — — e — Net cash inflow/(outflow) from investing activities 2,639 (379 ) (3,819) (1,726 ) 1,839 (1,446 ) Include: Intercompany advances (1,388 ) — (364) (56 ) 1,808 f — Loans from WOFEs to VIEs — — (31) — 31 f — Net cash (outflow)/inflow from financing activities (3,162 ) 252 (58) 1,388 (1,839 ) (3,419 ) Include: Intercompany advances — 364 56 1,388 (1,808 ) f — Loans from WOFEs to VIEs — 31 — — (31 ) f — Net (decrease)/ increase in cash and cash equivalents (464 ) (144 ) 3,429 (205 ) — 2,616 Cash and cash equivalents, beginning of the year 1,061 634 4,504 392 — 6,591 Exchange differences on cash and cash equivalents 294 — — 54 — 348 Cash and cash equivalents, end of the year 891 490 7,933 241 — 9,555 8 For the Year Ended December 31, 2023 Parent VIE and its consolidated subsidiaries WOFEs Subsidiaries (other than the WOFEs) Eliminating adjustments Consolidated totals (RMB in millions) Net cash inflow from operating activities 217 518 6,258 344 — 7,337 Include: Intercompany services fees — (16,610 ) 16,610 — — e — Net cash inflow/(outflow) from investing activities 307 (430 ) (2,742 ) 312 690 (1,863 ) Include: Intercompany advances (812 ) (47 ) (22 ) 171 710 f — Loans repayment from VIEs to WOFEs — — 20 — (20 ) f — Net cash (outflow)/inflow from financing activities (1,393 ) (40 ) (223 ) 808 (690 ) (1,538 ) Include: Intercompany advances — 69 (171 ) 812 (710 ) f — Loans repayment from VIEs to WOFEs — (20 ) — — 20 f — Net (decrease)/ increase in cash and cash equivalents (869 ) 48 3,293 1,464 — 3,936 Cash and cash equivalents, beginning of the year 891 490 7,933 241 — 9,555 Exchange differences on cash and cash equivalents (1 ) — — 77 — 76 Cash and cash equivalents, end of the year 21 538 11,226 1,782 — 13,567 For the eliminating adjustments: a) Represents the elimination of Service Charges between the VIEs and our PRC subsidiaries. b) Represents the elimination of the investments in the VIEs and our PRC subsidiaries. c) Represents the elimination of intercompany balance between Tencent Music Entertainment Group, the VIEs, and our subsidiaries. d) Represents the Services Charges between Tencent Music Entertainment Group, the VIEs and our PRC subsidiaries, which were eliminated at the consolidation level.
If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our offshore intermediary holding companies or ultimate parent company, and therefore, our shareholders or holders of our ADSs.
If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our offshore intermediary holding companies or ultimate parent company, and therefore, our shareholders or holders of the ADSs.
Moreover, claims or allegations that we and/or the VIEs have failed to adequately protect personal data, or otherwise violated applicable privacy and data security laws, regulations, policies, contractual provisions, industry standards, or other requirements, may result in damage to our reputation and a loss of confidence in us and/or the VIEs by users or partners, potentially causing us and/or the VIEs to lose users, advertisers, content providers, other business partners and revenues, which could have a material adverse effect on our business, financial condition and results of operations and could cause the market price of our Class A ordinary shares and/or ADSs to drop significantly.
Moreover, claims or allegations that we and/or the VIEs have failed to adequately protect personal data, or otherwise violated applicable privacy and data security laws, regulations, policies, contractual provisions, industry standards, or other requirements, may result in damage to our reputation and a loss of confidence in us and/or the VIEs by users or partners, potentially causing us and/or the VIEs to lose users, advertisers, content providers, other business partners and revenues, which could have a material adverse effect on our business, financial condition and results of operations and could cause the market price of our Class A ordinary shares and/or the ADSs to drop significantly.
Virtual currency is used to exchange internet game services provided by the issuing enterprise for a designated extent and time, and is represented by several forms, such as online prepaid game cards, prepaid amounts or internet game points, and does not include game props obtained from playing online games.
Virtual currency is used to exchange online game services provided by the issuing enterprise for a designated extent and time, and is represented by several forms, such as online prepaid game cards, prepaid amounts or internet game points, and does not include game props obtained from playing online games.
We account for compensation costs for all share-based awards using a fair-value based method and recognize expenses in our consolidated statements of comprehensive income in accordance with IFRS. Under such plans, we are authorized to grant options, stock appreciation rights, restricted shares, restricted stock units and other types of awards as the administrator of such plans may decide.
We account for compensation costs for all share-based awards using a fair-value based method and recognize expenses in our consolidated statements of comprehensive income in accordance with IFRS. Under such plans, we are authorized to grant options, stock appreciation rights, restricted shares, restricted share units and other types of awards as the administrator of such plans may decide.
Pursuant to the Trial Measures, PRC domestic companies that directly or indirectly seek to offer or list their securities overseas are required to fulfill the filing procedure with the CSRC and report relevant information to the CSRC.
Pursuant to the Trial Measures, PRC domestic companies that directly or indirectly seek to offer or list their securities overseas are required to fulfill the filing procedure with the CSRC and report relevant information to the CSRC.
In addition, pursuant to the Trial Measures, an overseas offering and listing of the securities of a PRC domestic company is prohibited under any of the following circumstances, if (i) such securities offering and listing is explicitly prohibited by provisions in laws, administrative regulations and relevant state rules; (ii) the intended securities offering and listing may endanger national security as reviewed and determined by competent authorities under the State Council in accordance with law; (iii) the PRC domestic company intending to make the securities offering and listing, or its controlling shareholder(s) and the actual controller, have committed crimes such as corruption, bribery, embezzlement, misappropriation of property or undermining the order of the socialist market economy during the latest three years; (iv) the PRC domestic company intending to make the securities offering and listing is currently under investigations for suspicion of criminal offenses or major violations of laws and regulations, and no clear conclusion has yet been made thereof; or (v) there are material ownership disputes over equity interests held by the PRC domestic company’s controlling shareholder(s) or by other shareholder(s) that are controlled by the controlling shareholder(s) and/or actual controller.
In addition, pursuant to the Trial Measures, an overseas offering and listing of the securities of a PRC domestic company is prohibited under any of the following circumstances, if (i) such securities offering and listing is explicitly prohibited by provisions in laws, administrative regulations and relevant state rules; (ii) the intended securities offering and listing may endanger national security as reviewed and determined by competent authorities under the State Council in accordance with law; (iii) the PRC domestic company intending to make the securities offering and listing, or its controlling shareholder(s) and the actual controller, have committed crimes such as corruption, bribery, embezzlement, misappropriation of property or undermining the order of the socialist market economy during the latest three years; (iv) the PRC domestic company intending to make the securities offering and listing is currently under investigations for suspicion of criminal offenses or major violations of laws and regulations, and no clear conclusion has yet been made thereof; or (v) there are material ownership disputes over equity interests held by the PRC domestic company’s controlling shareholder(s) or by other shareholder(s) that are controlled by the controlling shareholder(s) and/or actual controller.
Further, at the press conference held for the Trial Measures on February 17, 2023, officials from the CSRC clarified that the PRC domestic companies that have already been listed overseas on or before the effective date of the Trial Measures (i.e., March 31, 2023) shall be deemed as existing issuers, or the Existing Issuers.
Further, at the press conference held for the Trial Measures on February 17, 2023, officials from the CSRC clarified that the PRC domestic companies that have already been listed overseas on or before the effective date of the Trial Measures (i.e., March 31, 2023) shall be deemed as existing issuers, or the Existing Issuers.
Existing Issuers are not required to complete the filing procedures immediately but shall carry out filing procedures as required if they conduct refinancing or are involved in other circumstances that require filing with the CSRC.
Existing Issuers are not required to complete the filing procedures immediately but shall carry out filing procedures as required if they conduct refinancing or are involved in other circumstances that require filing with the CSRC.
The officials from the CSRC have also confirmed that for the PRC domestic companies that seek to list overseas with VIE structure, the CSRC will solicit opinions from relevant regulatory authorities and complete the filing of the overseas listing of companies with VIE structure which meet the compliance requirements.
The officials from the CSRC have also confirmed that for the PRC domestic companies that seek to list overseas with VIE structure, the CSRC will solicit opinions from relevant regulatory authorities and complete the filing of the overseas listing of companies with VIE structure which meet the compliance requirements.
Moreover, developments in the market for online music and audio content may lead to changes in PRC laws, regulations and policies or in the interpretation and application of existing laws, regulations and policies that may limit or restrict online music and audio entertainment platforms like us, which could materially and adversely affect the Group’s business and operations as well as the value of our ADSs and/or Class A ordinary shares.
Moreover, developments in the market for online music and audio content may lead to changes in PRC laws, regulations and policies or in the interpretation and application of existing laws, regulations and policies that may limit or restrict online music and audio entertainment platforms like us, which could materially and adversely affect the Group’s business and operations as well as the value of the ADSs and/or our Class A ordinary shares.
On March 24, 2023, the SAMR promulgated four regulations ancillary to the Anti-Monopoly Law, namely the Review Measures of Concentration of Undertakings, the Provisions on the Prohibition of Monopoly Agreements, the Provisions on the Prohibitions of Acts of Abuse of Dominant Market Positions, and the Provisions on Curbing the Abuse of Administrative Power to Exclude or Restrict Competition, all of which took effect from April 15, 2023.
On March 24, 2023, the SAMR promulgated four regulations ancillary to the Anti-Monopoly Law, namely the Review Measures of Concentration of Undertakings, the Provisions on the Prohibition of Monopoly Agreements, the Provisions on the Prohibitions of Acts of Abuse of Dominant Market Positions, and the Provisions on Curbing the Abuse of Administrative Power to Exclude or Restrict Competition, all of which took effect from April 15, 2023.
These regulations have, among other things, elaborated the specific requirements under the Anti-Monopoly Law, optimized the regulatory and enforcement procedures and imposed more stringent legal responsibilities on the relevant parties.
These regulations have, among other things, elaborated the specific requirements under the Anti-Monopoly Law, optimized the regulatory and enforcement procedures and imposed more stringent legal responsibilities on the relevant parties.
According to the Review Measures of Concentration of Undertakings, where a concentration of undertakings does not meet the threshold for declaration, but there is evidence that the concentration of undertakings has or may have the effect of excluding or limiting competition, the SAMR may order the operators to file the concentration of undertakings.
According to the Review Measures of Concentration of Undertakings, where a concentration of undertakings does not meet the threshold for declaration, but there is evidence that the concentration of undertakings has or may have the effect of excluding or limiting competition, the SAMR may order the operators to file the concentration of undertakings.
On May 26, 2022, we were conclusively identified by the SEC under the HFCAA as having filed audit reports issued by a registered public accounting firm that cannot be inspected or investigated completely by the PCAOB in connection with the filing of our 2021 Form 20-F.
On May 26, 2022, we were conclusively identified by the SEC under the HFCAA as having filed audit reports issued by a registered public accounting firm that cannot be inspected or investigated completely by the PCAOB in connection with the filing of our 2021 Form 20-F.
A determination that we have not timely filed financial statements in compliance with the SEC requirements could ultimately lead to the delisting of our ADSs from the NYSE or the termination of the registration of our ordinary shares under the Securities Exchange Act of 1934, or both, which would substantially reduce or effectively terminate the trading of our ADSs in the United States.
A determination that we have not timely filed financial statements in compliance with the SEC requirements could ultimately lead to the delisting of the ADSs from the NYSE or the termination of the registration of our ordinary shares under the Securities Exchange Act of 1934, or both, which would substantially reduce or effectively terminate the trading of the ADSs in the United States.
The trading price of our ADSs and Class A ordinary shares is likely to be volatile, which could result in substantial losses to investors. The trading price of our ADSs and Class A ordinary shares is likely to be volatile and could fluctuate widely due to multiple factors, many of which are beyond our control.
The trading price of the ADSs and our Class A ordinary shares is likely to be volatile, which could result in substantial losses to investors. The trading price of the ADSs and our Class A ordinary shares is likely to be volatile and could fluctuate widely due to multiple factors, many of which are beyond our control.
The dual-class structure of our ordinary shares may adversely affect the trading market for our ADSs and Class A ordinary shares.
The dual-class structure of our ordinary shares may adversely affect the trading market for the ADSs and our Class A ordinary shares.
Any such exclusion from indices could result in a less active trading market for our ADSs and/or Class A ordinary shares. Any actions or publications by shareholder advisory firms critical of our corporate governance practices or capital structure could also adversely affect the value of our ADSs and/or Class A ordinary shares.
Any such exclusion from indices could result in a less active trading market for the ADSs and/or our Class A ordinary shares. Any actions or publications by shareholder advisory firms critical of our corporate governance practices or capital structure could also adversely affect the value of the ADSs and/or our Class A ordinary shares.
Accordingly, holders of ADSs may be unable to participate in our rights offerings and may experience dilution of their holdings as a result. Our ADS holders may be subject to limitations on transfer of their ADSs. In certain cases, our ADSs are transferable on the books of the depositary.
Accordingly, holders of ADSs may be unable to participate in our rights offerings and may experience dilution of their holdings as a result. The ADS holders may be subject to limitations on transfer of their ADSs. In certain cases, the ADSs are transferable on the books of the depositary.
As a result of these differences, the trading prices of our Class A ordinary shares and our ADSs may not be the same, even allowing for currency differences. Fluctuations in the price of our ADSs due to circumstances peculiar to the U.S. capital markets could materially and adversely affect the price of our Class A ordinary shares, or vice versa.
As a result of these differences, the trading prices of our Class A ordinary shares and the ADSs may not be the same, even allowing for currency differences. Fluctuations in the price of the ADSs due to circumstances peculiar to the U.S. capital markets could materially and adversely affect the price of our Class A ordinary shares, or vice versa.
Because of the different characteristics of the U.S. and Hong Kong capital markets, the historical market prices of our ADSs may not be indicative of the trading performance of our Class A ordinary shares after the Listing. Exchange between our Class A ordinary shares and our ADSs may adversely affect the liquidity and/or trading price of each other.
Because of the different characteristics of the U.S. and Hong Kong capital markets, the historical market prices of the ADSs may not be indicative of the trading performance of our Class A ordinary shares after the Listing. Exchange between our Class A ordinary shares and the ADSs may adversely affect the liquidity and/or trading price of each other.
Our ADSs are currently traded on NYSE. Subject to compliance with U.S. securities law and the terms of the Deposit Agreement, holders of our Class A ordinary shares may deposit Class A ordinary shares with the depositary in exchange for the issuance of our ADSs.
The ADSs are currently traded on NYSE. Subject to compliance with U.S. securities law and the terms of the deposit agreement, holders of our Class A ordinary shares may deposit Class A ordinary shares with the depositary in exchange for the issuance of the ADSs.
In the event that a substantial number of Class A ordinary shares are deposited with the depositary in exchange for ADSs or vice versa, the liquidity and trading price of our Class A ordinary shares on the Hong Kong Stock Exchange and our ADSs on NYSE may be adversely affected.
In the event that a substantial number of Class A ordinary shares are deposited with the depositary in exchange for ADSs or vice versa, the liquidity and trading price of our Class A ordinary shares on the Hong Kong Stock Exchange and the ADSs on NYSE may be adversely affected.
There is no direct trading or settlement between the NYSE and the Hong Kong Stock Exchange on which our ADSs and our Class A ordinary shares are respectively traded.
There is no direct trading or settlement between the NYSE and the Hong Kong Stock Exchange on which the ADSs and our Class A ordinary shares are respectively traded.
We advise investors to consult their own tax advisers on this matter. If Hong Kong stamp duty is determined by the competent authority to apply to the trading of ADSs or deposits in, or withdrawals from, our ADS facility, the trading price and the value of your investment in our Class A ordinary shares and/or ADSs may be affected.
We advise investors to consult their own tax advisers on this matter. If Hong Kong stamp duty is determined by the competent authority to apply to the trading of ADSs or deposits in, or withdrawals from, the ADS facility, the trading price and the value of your investment in our Class A ordinary shares and/or ADSs may be affected.
Pursuant to the Cybersecurity Review Measures, (i) a CIIO that purchases network products and services, or an internet platform operator that conducts data processing activities, which affects or may affect national security, shall be subject to the cybersecurity review, (ii) an application for cybersecurity review shall be made by an issuer which is an internet platform operator holding personal information of more than one million users before such issuer applies to list its securities in a foreign country, and (iii) relevant regulatory authorities in the PRC may initiate cybersecurity review if they determine an operator’s network products or services or data processing activities affect or may affect national security.
Pursuant to the Cybersecurity Review Measures, (i) a CIIO that purchases network products and services, or an internet platform operator that conducts data processing activities, which affects or may affect national security, shall be subject to the cybersecurity review, (ii) an application for cybersecurity review shall be 42 made by an issuer which is an internet platform operator holding personal information of more than one million users before such issuer applies to list its securities in a foreign country, and (iii) relevant regulatory authorities in the PRC may initiate cybersecurity review if they determine an operator’s network products or services or data processing activities affect or may affect national security.
Any failure, or perceived failure, by us or the VIEs, or by our third-party partners, to maintain the security of personal data or to comply with applicable privacy or data security laws, regulations, policies, contractual provisions, industry standards, and other requirements, may result in civil or regulatory liability, including actions and investigations, fines, penalties, enforcement orders requiring us to cease operating in a certain way, litigation, or adverse publicity, and may require us or the VIEs to expend significant resources in responding to and defending against allegations and claims.
Any failure, or perceived failure, by us or the VIEs, or by our third-party partners, to maintain the security of personal data or to comply with applicable privacy or data security laws, regulations, policies, contractual provisions, industry standards, and other requirements, may result in civil or regulatory liability, including actions and investigations, fines, penalties, enforcement orders requiring us to cease operating in a certain way, litigation, or adverse publicity, and may require us or the VIEs to 31 expend significant resources in responding to and defending against allegations and claims.
If the regulatory authorities find that our contractual arrangements do not comply with their restrictions on foreign investment in the value-added telecommunication services, internet cultural services, internet audio-video program services and certain other businesses and related business, or if the regulatory authorities otherwise find that we, the VIEs or any of their respective subsidiaries are in violation of PRC laws or regulations or lack the necessary permits or licenses to operate our business, the relevant PRC regulatory authorities would have broad discretion in dealing with such violations or failures, including, without limitation: • revoking the business licenses and/or operating licenses of such entities; • discontinuing or placing restrictions or onerous conditions on our operation through any transactions between our PRC subsidiaries and the VIEs; • imposing fines, confiscating the income from our PRC subsidiaries or the VIEs, or imposing other requirements with which we or the VIEs may not be able to comply; • requiring us to restructure our ownership structure or operations, including terminating the contractual arrangements with the VIEs and deregistering the equity pledges of the VIEs, which in turn would affect our ability to consolidate, derive economic interests from the VIEs; or • restricting or prohibiting our use of the proceeds of financing activities to finance our business and operations in China. 39 Any of these actions could cause significant disruptions to our business operations and severely damage our reputation, which would in turn materially and adversely affect our business, financial condition and results of operations.
If the regulatory authorities find that our contractual arrangements do not comply with their restrictions on foreign investment in the value-added telecommunication services, internet cultural services, internet audio-video program services and certain other businesses and related business, or if the regulatory authorities otherwise find that we, the VIEs or any of their respective subsidiaries are in violation of PRC laws or regulations or lack the necessary permits or licenses to operate our business, the relevant PRC regulatory authorities would have broad discretion in dealing with such violations or failures, including, without limitation: • revoking the business licenses and/or operating licenses of such entities; • discontinuing or placing restrictions or onerous conditions on our operation through any transactions between our PRC subsidiaries and the VIEs; • imposing fines, confiscating the income from our PRC subsidiaries or the VIEs, or imposing other requirements with which we or the VIEs may not be able to comply; • requiring us to restructure our ownership structure or operations, including terminating the contractual arrangements with the VIEs and deregistering the equity pledges of the VIEs, which in turn would affect our ability to consolidate, derive economic interests from the VIEs; or • restricting or prohibiting our use of the proceeds of financing activities to finance our business and operations in China. 40 Any of these actions could cause significant disruptions to our business operations and severely damage our reputation, which would in turn materially and adversely affect our business, financial condition and results of operations.
See “— Risks Related to Doing Business in China — Uncertainties regarding the enforcement of laws, and changes in policies, laws and regulations could materially and adversely affect us.” 43 Contractual arrangements in relation to the VIEs may be subject to scrutiny by the PRC tax authorities and they may determine that we or the VIEs owe additional taxes, which could negatively affect our financial condition and the value of your investment.
See “— Risks Related to Doing Business in China — Uncertainties regarding the enforcement of laws, and changes in policies, laws and regulations could materially and adversely affect us.” Contractual arrangements in relation to the VIEs may be subject to scrutiny by the PRC tax authorities and they may determine that we or the VIEs owe additional taxes, which could negatively affect our financial condition and the value of your investment.
Capitalization and Indebtedness Not applicable. 3.C. Reason for the Offer and Use of Proceeds Not applicable. 3.D. Risk Factors Below please find a summary of the principal risks and uncertainties we face, organized under relevant headings. In particular, as we are a China-based company incorporated in the Cayman Islands, you should pay special attention to subsections headed “Item 3.
Capitalization and Indebtedness Not applicable. 3.C. Reason for the Offer and Use of Proceeds Not applicable. 13 3.D. Risk Factors Below please find a summary of the principal risks and uncertainties we face, organized under relevant headings. In particular, as we are a China-based company incorporated in the Cayman Islands, you should pay special attention to subsections headed “Item 3.
Moreover, failure to comply with SAFE registration requirements described above could result in liability under PRC laws for evasion of applicable foreign exchange restrictions. We have notified all PRC residents or entities who directly or indirectly hold shares in our Cayman Islands holding company and who are known to us as being PRC residents to complete the foreign exchange registrations.
Moreover, failure to comply with SAFE registration requirements described above could result in liability under PRC laws for evasion of applicable foreign exchange restrictions. 51 We have notified all PRC residents or entities who directly or indirectly hold shares in our Cayman Islands holding company and who are known to us as being PRC residents to complete the foreign exchange registrations.
On November 12, 2020, the NRTA promulgated the Circular on Strengthening the Administration of Live Streaming Web Shows and Live Streaming E-commerce, or the Circular 78, which sets forth requirements for certain live streaming businesses with respect to real-name registration, limits on users’ spending on virtual gifting, restrictions on minors from virtual gifting, live streaming review personnel requirements and content tagging requirements, among other things.
On November 12, 2020, the NRTA promulgated the Circular on Strengthening the Administration of Live Streaming Web Shows and Live Streaming E-commerce, or the Circular 78, which sets forth requirements for certain live streaming businesses with respect to real-name registration, limits on users’ spending on virtual gifting, restrictions on minors from virtual gifting, live streaming review personnel 11 requirements and content tagging requirements, among other things.
Business Overview — Regulations — Regulations on Intellectual Property Rights — Copyright.” 16 We may not have complete licenses for the copyrights underlying a small portion of the content offered on our platform, and therefore we may be subject to assertions by third parties of infringement or other violations by us of their copyright in connection with such content.
Business Overview — Regulations — Regulations on Intellectual Property Rights — Copyright.” We may not have complete licenses for the copyrights underlying a small portion of the content offered on our platform, and therefore we may be subject to assertions by third parties of infringement or other violations by us of their copyright in connection with such content.
Although we are now a stand-alone public company and we have an audit committee, consisting of independent non-executive directors, to review and approve all proposed related party transactions, we may not be able to resolve all potential conflicts of interest, and even if we do so, the resolution may be less favorable to us than if we were dealing with a non-controlling shareholder. 38 Risks Related to the Group’s Corporate Structure Uncertainties remain as to the interpretation and application of current and future PRC laws, regulations, and rules relating to the agreements that establish the VIE structure for the Group’s operations in China, including potential future actions by the PRC regulators, which could affect the enforceability of our contractual arrangements with the VIEs and, consequently, significantly affect our financial condition and results of operations.
Although we are now a stand-alone public company and we have an audit committee, consisting of independent non-executive directors, to review and approve all proposed related party transactions, we may not be able to resolve all potential conflicts of interest, and even if we do so, the resolution may be less favorable to us than if we were dealing with a non-controlling shareholder. 39 Risks Related to the Group’s Corporate Structure Uncertainties remain as to the interpretation and application of current and future PRC laws, regulations, and rules relating to the agreements that establish the VIE structure for the Group’s operations in China, including potential future actions by the PRC regulators, which could affect the enforceability of our contractual arrangements with the VIEs and, consequently, significantly affect our financial condition and results of operations.
Under PRC laws and regulations, to secure the rights to provide music or long-form audio content on the internet or for our users to download or stream music or long-form audio from our platform, or to provide other related online music or long-form audio services, we must obtain licenses from the appropriate copyright owners for one or more of the copyrights, including the content publishing and recording rights, among others.
Under PRC laws and regulations, to secure the rights to provide music or long-form audio content on the internet or for our users to download or stream music or long-form audio from our platform, or to provide other related online music or long-form audio services, we must obtain licenses from the appropriate copyright owners for one or more of the copyrights, including the content 16 publishing and recording rights, among others.
We have followed and intend to follow Cayman Islands corporate governance practices in lieu of the corporate governance requirements of the New York Stock Exchange that listed companies must have: (i) a majority of independent directors; (ii) the establishment of a nominating/corporate governance committee composed entirely of independent directors; (iii) a compensation committee composed entirely of independent directors; and (iv) an audit committee composed of at least three members.
We have followed and intend to follow Cayman Islands corporate governance practices in lieu of the corporate governance requirements of the New York Stock Exchange that listed companies must have: (i) a majority of independent directors; (ii) the establishment of a nominating/corporate governance 60 committee composed entirely of independent directors; (iii) a compensation committee composed entirely of independent directors; and (iv) an audit committee composed of at least three members.
Furthermore, if we are found to be jointly liable either by new regulations or court judgments, we may have to change our policies and it may materially and adversely impact on our business, financial condition and results of operations. 24 Our business operations may be adversely affected by the heightened regulatory oversight and scrutiny on live streaming platforms and performers.
Furthermore, if we are found to be jointly liable either by new regulations or court judgments, we may have to change our policies and it may materially and adversely impact on our business, financial condition and results of operations. Our business operations may be adversely affected by the heightened regulatory oversight and scrutiny on live streaming platforms and performers.
Each of our PRC subsidiaries is required to set aside at least 10% of its after-tax profits each year, after making up previous years’ accumulated losses, if any, to fund certain statutory reserve funds, until the aggregate amount of such a fund reaches 50% of its registered capital.
Each of our PRC subsidiaries is required to set aside at least 9 10% of its after-tax profits each year, after making up previous years’ accumulated losses, if any, to fund certain statutory reserve funds, until the aggregate amount of such a fund reaches 50% of its registered capital.
In addition, such operator is required to evaluate the risk of its data activities periodically and file assessment reports with relevant regulatory authorities. 28 Numerous regulations, guidelines and other measures have been or are expected to be adopted under the umbrella of, or in addition to, the PRC Cyber Security Law and PRC Data Security Law.
In addition, such operator is required to evaluate the risk of its data activities periodically and file assessment reports with relevant regulatory authorities. Numerous regulations, guidelines and other measures have been or are expected to be adopted under the umbrella of, or in addition to, the PRC Cyber Security Law and PRC Data Security Law.
Evolving interpretations of such laws, regulations, announcements and provisions or any future regulatory changes might impose additional restrictions on or obligations of us and the VIEs generating and processing personal information and other data. We and the VIEs may be subject to additional regulations, laws and policies adopted by the PRC regulators.
Evolving interpretations of such laws, regulations, announcements and provisions or any future regulatory changes might impose additional restrictions or obligations on us and the VIEs for generating and processing personal information and other data. We and the VIEs may be subject to additional regulations, laws and policies adopted by the PRC regulators.
However, we cannot assure you that it can successfully obtain these licenses in a timely manner, or at all. In addition, as Tencent Music Shenzhen operates QQ Music and WeSing , an Audio and Video Service Permission, or AVSP, may be required.
However, we cannot assure you that it can successfully obtain these licenses in a timely manner, or at all. In addition, as Tencent Music Shenzhen operates QQ Music and WeSing , an Audio and 21 Video Service Permission, or AVSP, may be required.
Furthermore, if future legislations prescribed by the State Council mandate further actions to be taken by companies with respect to existing 42 contractual arrangements, we may face uncertainties as to whether we can complete such actions in a timely manner, or at all.
Furthermore, if future legislations prescribed by the State Council mandate further actions to be taken by companies with respect to existing contractual arrangements, we may face uncertainties as to whether we can complete such actions in a timely manner, or at all.
Specifically, the overseas securities offering and listing of any issuer will be deemed as indirect overseas offering by PRC domestic companies if the following conditions are met: (i) 50% or more of any of the issuer’s operating revenue, total profit, total assets or net assets as documented in its audited consolidated financial statements for the most recent fiscal year is accounted for by PRC domestic companies; and (ii) the main parts of the issuer’s business activities are conducted in mainland China, or its main place(s) of business are located in mainland China, or the majority of senior management staff in charge of its business operations and management are PRC citizens or have their usual place(s) of residence located in mainland China.
Specifically, the overseas securities offering and listing of any issuer will be deemed as indirect overseas offering by PRC domestic companies if the following conditions are met: (i) 50% or more of any of the issuer’s operating revenue, total profit, total assets or net assets as documented in its audited consolidated financial statements for the most recent fiscal year is accounted for by PRC domestic companies; and (ii) the main parts of the issuer’s business activities are conducted in the Chinese mainland, or its main place(s) of business are located in the Chinese mainland, or the majority of senior management staff in charge of its business operations and management are PRC citizens or have their usual place(s) of residence located in the Chinese mainland.
The Claimant seeks an award from CIETAC ruling, among other things, that (i) such agreements, pursuant to which the Claimant allegedly transferred his interests in the Ocean Music Entities to Mr. Xie, CMC and other Respondents, be declared invalid; (ii) Mr.
The Claimant seeks an award from CIETAC ruling, among other things, that (i) such agreements, pursuant to 27 which the Claimant allegedly transferred his interests in the Ocean Music Entities to Mr. Xie, CMC and other Respondents, be declared invalid; (ii) Mr.
Business Overview — Regulation — Regulations on Online Advertising Services.” Violation of these laws and regulations may subject us to penalties, including fines, confiscation of our advertising income, orders to cease dissemination of the advertisements and orders to publish an announcement correcting the misleading information.
Business Overview — Regulations — Regulations on Online Advertising Services.” Violation of these laws and regulations may subject us to penalties, including fines, confiscation of our advertising income, orders to cease dissemination of the advertisements and orders to publish an announcement correcting the misleading information.
All the agreements under our contractual arrangements are governed by PRC law and provide for the resolution of disputes through arbitration in China. Accordingly, these contracts would be interpreted in accordance with PRC law, and any disputes would be resolved in accordance with PRC legal procedures.
All the agreements under our contractual arrangements with the VIEs are governed by PRC law and provide for the resolution of disputes through arbitration in China. Accordingly, these contracts would be interpreted in accordance with PRC law, and any disputes would be resolved in accordance with PRC legal procedures.
All the agreements under our contractual arrangements are governed by PRC law and provide for the resolution of disputes through arbitration in China. Accordingly, these contracts would be interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures.
All the agreements under our contractual arrangements with the VIEs are governed by PRC law and provide for the resolution of disputes through arbitration in China. Accordingly, these contracts would be interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures.
In addition, our continued growth depends, in part, on our ability to respond to constant changes in the internet industry, including rapid technological evolution, continued shifts in customer demands, frequent introductions of new products and services and constant emergence of new industry standards and practices.
In addition, our continued growth depends, in part, on our ability to 22 respond to constant changes in the internet industry, including rapid technological evolution, continued shifts in customer demands, frequent introductions of new products and services and constant emergence of new industry standards and practices.
Federal Income Taxation — Passive Foreign Investment Company Rules.” Our ADS holders may experience dilution of their holdings due to inability to participate in rights offerings. We may, from time to time, distribute rights to our shareholders, including rights to acquire securities.
Federal Income Taxation — Passive Foreign Investment Company Rules.” The ADS holders may experience dilution of their holdings due to inability to participate in rights offerings. We may, from time to time, distribute rights to our shareholders, including rights to acquire securities.
If we fail to take appropriate and timely measures to comply with any of these or similar regulatory compliance requirements, the Group’s current corporate structure, corporate governance and business operations could be materially and adversely affected.
If we fail to take appropriate and 43 timely measures to comply with any of these or similar regulatory compliance requirements, the Group’s current corporate structure, corporate governance and business operations could be materially and adversely affected.
If the PCAOB determines in the future that it no longer has full access to inspect and investigate accounting firms headquartered in mainland China and Hong Kong and we continue to use such accounting firm to conduct audit work, we would be identified as a “Commission-Identified Issuer” under the HFCAA following the filing of the annual report for the relevant fiscal year, and if we were so identified for two consecutive years, trading in our securities on U.S. markets would be prohibited.
If the PCAOB determines in the future that it no longer has full access to inspect and investigate accounting firms headquartered in the Chinese mainland and Hong Kong and we continue to use such accounting firm to conduct audit work, we would be identified as a “Commission-Identified Issuer” under the HFCAA following the filing of the annual report for the relevant fiscal year, and if we were so identified for two consecutive years, trading in our securities on U.S. markets would be prohibited.
Our business expansion subjects us to increased business, legal, financial, reputational, and competitive risks. As part of our growth strategy, we have continued to expand our offerings and explore new, innovative ways to attract and engage with users.
Our business expansion subjects us to increased and additional business, legal, financial, reputational, and competitive risks. As part of our growth strategy, we have continued to expand our offerings and explore new, innovative ways to attract and engage with users.
The possibility of being a “Commission-Identified Issuer” and risk of delisting could continue to adversely affect the trading price of our securities. 54 If the PCAOB determines in the future that it no longer has full access to inspect and investigate accounting firms headquartered in mainland China and Hong Kong and we continue to use such accounting firm to conduct audit work, we would be identified as a “Commission-Identified Issuer” under the HFCAA following the filing of the annual report for the relevant fiscal year.
The possibility of being a “Commission-Identified Issuer” and risk of delisting could continue to adversely affect the trading price of our securities. 54 If the PCAOB determines in the future that it no longer has full access to inspect and investigate accounting firms headquartered in the Chinese mainland and Hong Kong and we continue to use such accounting firm to conduct audit work, we would be identified as a “Commission-Identified Issuer” under the HFCAA following the filing of the annual report for the relevant fiscal year.
Accordingly, our ability to sustain profitability and operating leverage in part depends on our ability to increase our revenue through increased sales of our music and long-form audio services to our users in order to maintain a healthy gross margin.
Accordingly, our ability to sustain profitability and operating leverage in part depends on our ability to increase our revenue through increased sales of our music and long-form audio services to our users to maintain a healthy gross margin.
Our PRC subsidiaries have obligations to file documents related to employee share options or restricted shares with relevant tax authorities and to withhold individual income taxes of those employees who exercise their share options.
Our PRC subsidiaries have obligations to file documents related to employee share options, restricted shares or restricted share units with relevant tax authorities and to withhold individual income taxes of those employees who exercise their share options.
However, there is no guarantee that the third-party platforms that we distribute our licensed content to will comply with the terms of our license arrangements or all applicable copyright laws and regulations.
However, there is no guarantee that the third-party platforms that we distribute our licensed content will comply with the terms of our license arrangements or all applicable copyright laws and regulations.
Such events may have a material and adverse impact on business, financial condition and results of operations. 22 We operate in a relatively new and evolving market. Many elements of our business are unique, evolving and relatively unproven.
Such events may have a material and adverse impact on business, financial condition and results of operations. We operate in a relatively new and evolving market. Many elements of our business are unique, evolving and relatively unproven.
There is, in effect, no statutory limit on the amount of capital contribution that we can make to our PRC subsidiaries, provided that the PRC subsidiaries 47 complete the relevant filing and registration procedures.
There is, in effect, no statutory limit on the amount of capital contribution that we can make to our PRC subsidiaries, provided that the PRC subsidiaries complete the relevant filing and registration procedures.
The Personal Information Protection Law of the PRC, which was promulgated by the Standing Committee of the National People’s Congress on August 20, 2021 and took effect on November 1, 2021, integrates the various rules with respect to personal information rights and privacy protection and applies to the processing of personal information within mainland China as well as certain personal information processing activities outside mainland China, including those for the provision of products and services to natural persons within China or for the analysis and assessment of acts of natural persons within China.
The Personal Information Protection Law of the PRC, which was promulgated by the Standing Committee of the National People’s Congress on August 20, 2021 and took effect on November 1, 2021, integrates the various rules with respect to personal 29 information rights and privacy protection and applies to the processing of personal information within the Chinese mainland as well as certain personal information processing activities outside the Chinese mainland, including those for the provision of products and services to natural persons within China or for the analysis and assessment of acts of natural persons within China.
Furthermore, we have incurred and expect to continue to incur considerable costs and to use significant management time and the other resources in an effort to comply with Section 404 and other requirements of the Sarbanes-Oxley Act which can significantly divert our management’s attention from operating our business. 36 Increasing focus with respect to environmental, social and governance matters may impose additional costs on us or expose us to additional risks.
Furthermore, we have incurred and expect to continue to incur considerable costs and to use significant management time and the other resources in an effort to comply with Section 404 and other requirements of the Sarbanes-Oxley Act which can significantly divert our management’s attention from operating our business. 37 Increasing focus with respect to environmental, social and governance matters may impose additional costs on us or expose us to additional risks.
Specifically, the Review Measures of Concentration of Undertakings have clarified the factors to be considered for the recognition of “control” and “implementation of 50 concentration” under the review mechanism of concentration of undertakings, and elaborate the implementation rules regarding the suspension of review.
Specifically, the Review Measures of Concentration of Undertakings have clarified the factors to be considered for the recognition of “control” and “implementation of concentration” under the review mechanism of concentration of undertakings and elaborate the implementation rules regarding the suspension of review.
The Circular on Strengthening the Administration of Online Game Virtual Currency, or the Virtual Currency Circular, jointly issued by the Ministry of Culture and the MOFCOM in 2009, broadly defined virtual currency as a type of virtual exchange instrument issued by internet game operation enterprises, purchased directly or indirectly by the game users by exchanging legal currency at a certain exchange rate, saved outside the game programs, stored in servers provided by the internet game operation enterprises in electronic record format and represented by specific numeric units.
The Circular on Strengthening the Administration of Online Game Virtual Currency, or the Online Game Virtual Currency Circular, jointly issued by the Ministry of Culture and the MOFCOM in June 2009, broadly defined virtual currency as a type of virtual exchange instrument issued by online game operation enterprises, purchased directly or indirectly by the game users by exchanging legal currency at a certain exchange rate, saved outside the game programs, stored in servers provided by the online game operation enterprises in electronic record format and represented by specific numeric units.
As of the date of this annual report, Tencent Music Shenzhen has not been subject to any 21 legal or regulatory penalties for failure to obtain such license.
As of the date of this annual report, Tencent Music Shenzhen has not been subject to any legal or regulatory penalties for failure to obtain such license.
Pursuant to the Decision of the Standing Committee of the National People’s Congress to Amend the Anti-Monopoly Law of the People’s Republic of China that came into effect on August 1, 2022, the State Council anti-monopoly enforcement agency may order the operators to stop the implementation of the concentration, to dispose of shares, assets, and the business within a period of time, or take other necessary measures to restore the state before the concentration, and impose on it a fine of not more than 10% of its last year’s sales revenue, if the concentration of undertakings has or may have an effect of excluding or limiting competition; if the concentration does not have the effect of excluding or limiting competition, a fine up to RMB 5,000,000 may be imposed on operators.
Pursuant to the Decision of the Standing Committee of the National People’s Congress to Amend the Anti-Monopoly Law of the People’s Republic of China that came into effect on August 1, 2022, the State Council anti-monopoly enforcement agency may order the operators to stop the implementation of the concentration, to dispose of shares, assets, and the business within a period of time, or take other necessary measures to restore the state before the concentration, and impose on it a fine of not more than 10% of its last year’s sales revenue, if the concentration of undertakings has or may have an effect of excluding or limiting competition; if the concentration does not have the effect of excluding or limiting competition, a fine up to RMB5,000,000 may be imposed on operators.
As of April 18, 2023, Tencent beneficially owns 9.1% of our outstanding Class A ordinary shares and 98.5% of our outstanding Class B ordinary shares, representing in the aggregate 92.6% of our total voting power (calculating using the beneficial ownership information reported in the Amendment No. 3 to Schedule 13G filed by Tencent with the SEC on February 10, 2023).
As of April 10, 2024, Tencent beneficially owns 9.1% of our outstanding Class A ordinary shares and 98.5% of our outstanding Class B ordinary shares, representing in the aggregate 92.6% of our total voting power (calculating using the beneficial ownership information reported in the Amendment No. 3 to Schedule 13G filed by Tencent with the SEC on February 10, 2023).
Specifically, the overseas securities offering and listing of any issuer will be deemed as indirect overseas offering by PRC domestic companies if the following conditions are met: (i) 50% or more of any of the issuer’s operating revenue, total profit, total assets or net assets as documented in its audited consolidated financial statements for the most recent fiscal year is accounted for by PRC domestic companies; and (ii) the main parts of the issuer’s business activities are conducted in mainland China, or its main place(s) of business are located in mainland China, or the majority of senior management staff in charge of its business operations and management are PRC citizens or have their usual place(s) of residence located in mainland China.
Specifically, the overseas securities offering 41 and listing of any issuer will be deemed as indirect overseas offering by PRC domestic companies if the following conditions are met: (i) 50% or more of any of the issuer’s operating revenue, total profit, total assets or net assets as documented in its audited consolidated financial statements for the most recent fiscal year is accounted for by PRC domestic companies; and (ii) the main parts of the issuer’s business activities are conducted in the Chinese mainland, or its main place(s) of business are located in the Chinese mainland, or the majority of senior management staff in charge of its business operations and management are PRC citizens or have their usual place(s) of residence located in the Chinese mainland.
Furthermore, the recently issued Opinions on Strictly Cracking Down on Illegal Securities Activities emphasized the need to strengthen the administration over “illegal securities activities” and the supervision on overseas listings by China-based companies, and proposed to take effective measures, such as promoting the construction of relevant regulatory systems to deal with the risks and incidents faced by China-based, overseas-listed companies, although such opinions did not specify the definition of “illegal securities activities.” 40 On February 17, 2023, the CSRC promulgated the Trial Administrative Measures of the Overseas Securities Offering and Listing by Domestic Companies, or the Trial Measures, and five supporting guidelines, which took effect on March 31, 2023.
Furthermore, the Opinions on Strictly Cracking Down on Illegal Securities Activities emphasized the need to strengthen the administration over “illegal securities activities” and the supervision on overseas listings by China-based companies, and proposed to take effective measures, such as promoting the construction of relevant regulatory systems to deal with the risks and incidents faced by China-based, overseas-listed companies, although such opinions did not specify the definition of “illegal securities activities.” On February 17, 2023, the CSRC promulgated the Trial Administrative Measures of the Overseas Securities Offering and Listing by Domestic Companies, or the Trial Measures, and five supporting guidelines, which took effect on March 31, 2023.
Certain of our PRC subsidiaries and VIEs have historically failed to promptly make social insurance and housing fund contributions in full for their employees.
Certain of our PRC subsidiaries and VIEs have historically failed to promptly make social 52 insurance and housing fund contributions in full for their employees.
For example, we face risks associated with regulatory approvals of offshore offerings, anti-monopoly regulatory actions, cybersecurity and data privacy, as well as the uncertainty on whether the PCAOB will continue to be able to satisfactorily inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong.
For example, we face risks associated with regulatory approvals of offshore offerings, anti-monopoly regulatory actions, cybersecurity and data privacy, as well as the uncertainty on whether the PCAOB will continue to be able to satisfactorily inspect or investigate completely registered public accounting firms headquartered in the Chinese mainland and Hong Kong.
The PCAOB is required under the HFCAA to make its determination on an annual basis with regards to its ability to inspect and investigate completely accounting firms based in mainland China and Hong Kong. The possibility of being a “Commission-Identified Issuer” and risk of delisting could continue to adversely affect the trading price of our securities.
The PCAOB is required under the HFCAA to make its determination on an annual basis with regards to its ability to inspect and investigate completely accounting firms based in the Chinese mainland and Hong Kong. The possibility of being a “Commission-Identified Issuer” and risk of delisting could continue to adversely affect the trading price of our securities.
As the application of existing laws and regulations to specific aspects of online music business remains relatively unclear and is still evolving, it is difficult to predict whether we will be subject to joint infringement liability if our live streaming performers or users infringe on third parties’ intellectual property rights.
As the application of existing laws and regulations to specific aspects of online music and social entertainment business remains relatively unclear and is still evolving, it is difficult to predict whether we will be subject to joint infringement liability if our live streaming performers or users infringe on third parties’ intellectual property rights.
For example, the VIEs and their respective shareholders or partners could breach their contractual arrangements with us by, among other things, failing to conduct their operations in an acceptable manner or taking other actions that are detrimental to our interests. The revenues contributed by the VIEs and their subsidiaries constituted substantially all of our revenues in 2020, 2021 and 2022.
For example, the VIEs and their respective shareholders or partners could breach their contractual arrangements with us by, among other things, failing to conduct their operations in an acceptable manner or taking other actions that are detrimental to our interests. The revenues contributed by the VIEs and their subsidiaries constituted substantially all of our revenues in 2021, 2022 and 2023.
However, whether the PCAOB will continue to conduct inspections and investigations completely to its satisfaction of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong is subject to uncertainty and depends on a number of factors out of our, and our auditor’s, control, including uncertainties surrounding Sino-U.S. relations.
However, whether the PCAOB will continue to conduct inspections and investigations completely to its satisfaction of PCAOB-registered public accounting firms headquartered in the Chinese mainland and Hong Kong is subject to uncertainty and depends on a number of factors out of our, and our auditor’s, control, including uncertainties surrounding Sino-U.S. relations.
However, whether the PCAOB will continue to conduct inspections and investigations completely to its satisfaction of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong is subject to uncertainty and depends on a number of factors out of our, and our auditor’s, control, including the uncertainties surrounding Sino-U.S. relations.
However, whether the PCAOB will continue to conduct inspections and investigations completely to its satisfaction of PCAOB-registered public accounting firms headquartered in the Chinese mainland and Hong Kong is subject to uncertainty and depends on a number of factors out of our, and our auditor’s, control, including the uncertainties surrounding Sino-U.S. relations.
As a result, shareholders who exchange Class A ordinary shares into ADSs, and vice versa, may not achieve the level of economic return the shareholders may anticipate. 63 There is uncertainty as to whether Hong Kong stamp duty will apply to the trading of ADSs or deposits in, or withdrawals from, our ADS facility.
As a result, shareholders who exchange Class A ordinary shares into ADSs, and vice versa, may not achieve the level of economic return the shareholders may anticipate. There is uncertainty as to whether Hong Kong stamp duty will apply to the trading of ADSs or deposits in, or withdrawals from, the ADS facility.
With respect to loans to the PRC subsidiaries by us, (i) if the relevant PRC subsidiaries adopt the traditional foreign exchange administration mechanism, or the Current Foreign Debt Mechanism, the outstanding amount of the loans shall not exceed the difference between the total investment and the registered capital of the PRC subsidiaries; and (ii) if the relevant PRC subsidiaries adopt the Notice No. 9 Foreign Debt Mechanism, the outstanding amount of the loans shall not exceed 200% of the net asset of the relevant PRC subsidiary.
With respect to loans to the PRC subsidiaries by us, (i) if the relevant PRC subsidiaries adopt the traditional foreign exchange administration mechanism, or the Current Foreign Debt Mechanism, the outstanding amount of the loans shall not exceed the difference between the total investment and the registered capital of the PRC subsidiaries; and (ii) if the relevant PRC subsidiaries adopt the Notice No. 9 Foreign Debt Mechanism, the outstanding amount of the loans shall not exceed 300% of the net asset of the relevant PRC subsidiary.
As a result, it may be difficult or impossible for our shareholders to bring an action against us or against these individuals in the United States or Hong Kong in the event that such shareholders believe that their rights have been infringed under the U.S. federal securities laws, Hong Kong laws or otherwise.
As a result, it may be difficult or impossible for our shareholders to bring an action against us or against these individuals in the United States in the event that such shareholders believe that their rights have been infringed under the U.S. federal securities laws or otherwise.
For example, on August 26, 2022, the CSRC and the Ministry of Finance of the PRC signed a Statement of Protocol with the PCAOB, taking the first step toward opening access for the PCAOB to completely inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong.
For example, on August 26, 2022, the CSRC and the Ministry of Finance of the PRC signed a Statement of Protocol with the PCAOB, taking the first step toward opening access for the PCAOB to completely inspect and investigate registered public accounting firms headquartered in the Chinese mainland and Hong Kong.
In addition, when a company meets the SEC’s criteria, an independent registered public accounting firm must report on the effectiveness of the company’s internal control over financial reporting. Our management and independent registered public accounting firm have concluded that our internal control over financial reporting as of December 31, 2022 was effective.
In addition, when a company meets the SEC’s criteria, an independent registered public accounting firm must report on the effectiveness of the company’s internal control over financial reporting. Our management and independent registered public accounting firm have concluded that our internal control over financial reporting as of December 31, 2023 was effective.

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Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

181 edited+74 added−60 removed435 unchanged
Biggest changePursuant to the Circular of Further Improving and Adjusting Foreign Exchange Administration Policies on Foreign Direct Investment, or SAFE Circular 59 promulgated by the SAFE on November 19, 2012, which became effective on December 17, 2012, and were further amended on May 4, 2015, October 10, 2018 and December 30, 2019, the opening of various special purpose foreign exchange accounts, such as pre-establishment expenses accounts, foreign exchange capital accounts and guarantee accounts, the reinvestment of Renminbi proceeds by foreign investors in the PRC, and remittance of foreign exchange profits and dividends by a foreign invested enterprise to its foreign shareholders no longer require the approval or verification of the SAFE. 99 In February 2015, the SAFE promulgated the Circular of Further Simplifying and Improving the Policies of Foreign Exchange Administration Applicable to Direct Investment, or SAFE Circular 13, which became effective on June 1, 2015 and partially repealed on December 30, 2019.
Biggest changeBy contrast, the conversion of Renminbi into other currencies and remittance of the converted foreign currency outside the PRC to pay capital expenses such as the repayment of foreign currency-denominated loans, or if foreign currency is to be remitted into China under the capital account such as a capital increase or foreign currency loans to our PRC subsidiaries, prior approval from or registration with appropriate regulatory authorities is required. 99 Pursuant to the Circular of Further Improving and Adjusting Foreign Exchange Administration Policies on Foreign Direct Investment, or SAFE Circular 59 promulgated by the SAFE on November 19, 2012, which became effective on December 17, 2012, and were further amended on May 4, 2015, October 10, 2018 and December 30, 2019, the opening of various special purpose foreign exchange accounts, such as pre-establishment expenses accounts, foreign exchange capital accounts and guarantee accounts, the reinvestment of Renminbi proceeds by foreign investors in the PRC, and remittance of foreign exchange profits and dividends by a foreign invested enterprise to its foreign shareholders no longer require the approval or verification of the SAFE.
As a new music content consumption channel, IoT enhances our ability to effectively roll out and promote new music content to a wider audience in a broader set of use cases in users’ daily lives, making our services more accessible and more convenient to our users.
As a new music content consumption channel, IoT enhances our ability to effectively roll out and promote music content to a wider audience in a broader set of use cases in users’ daily lives, making our services more accessible and more convenient to our users.
We license musical recording rights and/or music publishing rights underlying music content mainly on terms ranging from one to three years from domestic and international music labels. • We pay for music labels for licensed music content based on licensing fee and revenue-sharing incentive royalties.
We license musical recording rights and/or music publishing rights underlying music content mainly on terms ranging from one to three years from domestic and international music labels. • We pay music labels for licensed music content based on licensing fee and revenue-sharing incentive royalties.
Branding, Marketing and Sales The focus of our marketing efforts is to further strengthen our brands, including QQ Music , Kugou Music , Kuwo Music , WeSing , and Lazy Audio , and to expand our entertainment ecosystem to connect more users, artists and content providers.
Branding, Marketing and Sales The focus of our marketing efforts is to further strengthen our brands, including QQ Music , Kugou Music , Kuwo Music , WeSing , and Lazy Audio , and to expand our music entertainment ecosystem to connect more users, artists and content providers.
If we, our PRC subsidiaries and the VIEs fail to obtain the relevant approval or complete other review or filing procedures for any future offshore offering or listing, we, our PRC subsidiaries and the VIEs may face sanctions by the CSRC or other PRC regulatory authorities, which may include fines and penalties on our operations in China, limitations on our operating privileges in China, restrictions on or prohibition of the payments or remittance of dividends by our subsidiaries in China, restrictions on or delays to our future financing transactions offshore, or other actions that could have a material and adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our ADSs and/or Class A ordinary shares.
If we, our PRC subsidiaries and the VIEs fail to obtain the relevant approval or complete other review or filing procedures for any future offshore offering or listing, we, our PRC subsidiaries and the VIEs may face sanctions by the CSRC or other PRC regulatory authorities, which may include fines and penalties on our operations in China, limitations on our operating privileges in China, restrictions on or prohibition of the payments or remittance of dividends by our subsidiaries in China, restrictions on or delays to our future financing transactions offshore, or other actions that could have a material and adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of the ADSs and/or our Class A ordinary shares.
On June 4, 2009, the Ministry of Culture and the MOFCOM jointly issued the Circular on Strengthening the Administration of Online Game Virtual Currency, or the Virtual Currency Circular.
On June 4, 2009, the Ministry of Culture and the MOFCOM jointly issued the Circular on Strengthening the Administration of Online Game Virtual Currency, or the Online Game Virtual Currency Circular.
The Virtual Currency Circular requires businesses that (a) issue online game virtual currency (in the form of prepaid cards or pre-payment or prepaid card points), or (b) offer online game virtual currency trading services, to apply for approval from the Ministry of Culture through its provincial branches.
The Online Game Virtual Currency Circular requires businesses that (a) issue online game virtual currency (in the form of prepaid cards or pre-payment or prepaid card points), or (b) offer online game virtual currency trading services, to apply for approval from the Ministry of Culture through its provincial branches.
Under the Virtual Currency Circular, online games virtual currency trading service provider refers to business that provides platform services related to trading virtual currency of online games among game users. The Virtual Currency Circular further requires an online game virtual currency trading service provider to comply with relevant e-commerce regulations issued by the MOFCOM.
Under the Online Game Virtual Currency Circular, online games virtual currency trading service provider refers to business that provides platform services related to trading virtual currency of online games among game users. The Online Game Virtual Currency Circular further requires an online game virtual currency trading service provider to comply with relevant e-commerce regulations issued by the MOFCOM.
In addition to the foregoing, pursuant to the Notice of the State Administration of Foreign Exchange on Further Promoting the Facilitation of Cross-border Trade and Investment, or the SAFE Circular 28, which was promulgated by the SAFE on October 23, 2019 and came into effect on the same date our PRC subsidiaries established in the pilot regions, which refers to Guangdong-Hong Kong-Macao Greater Bay Area and Hainan province, are not required to register each of their foreign debts with the SAFE or its local branches but to complete foreign debts registration with the SAFE or its local branches in the amount of 200% of the net assets of the 101 relevant PRC subsidiary.
In addition to the foregoing, pursuant to the Notice of the State Administration of Foreign Exchange on Further Promoting the Facilitation of Cross-border Trade and Investment, or the SAFE Circular 28, which was promulgated by the SAFE on October 23, 2019 and came into effect on the same date, our PRC subsidiaries established in the pilot regions, which refers to Guangdong-Hong Kong-Macao Greater Bay Area and Hainan province, are not required to register each of their foreign debts with the SAFE or its local 101 branches but to complete foreign debts registration with the SAFE or its local branches in the amount of 200% of the net assets of the relevant PRC subsidiary.
Further, where a PRC domestic company, after fulfilling relevant procedures, provides to securities companies, securities service providers and other entities with any documents and materials that contain state secrets or working secrets of government agencies, or any other documents and materials that will be detrimental to national security or public interest if leaked, a non-disclosure agreement shall be signed between the provider and receiver of such 105 information according to the Law of the PRC on Guarding State Secrets, other laws and regulations and the Archives Rules.
Further, where a PRC domestic company, after fulfilling relevant procedures, provides to securities companies, securities service providers and other entities with any documents and materials that contain state secrets or working secrets of government agencies, or any other documents and materials that will be detrimental to 105 national security or public interest if leaked, a non-disclosure agreement shall be signed between the provider and receiver of such information according to the Law of the PRC on Guarding State Secrets, other laws and regulations and the Archives Rules.
We generally seek to maintain the revenue sharing ratio at a level that we believe is comparable to those of our peers in the industry. • Our agreements with live streaming performers (and their talent agencies, if applicable) will specify certain qualitative and quantitative requirements that they must meet in order to be entitled to their share of the revenue. • Live streaming performers (and their talent agencies, if applicable) own the intellectual property rights of the live streaming content they create, and we are permitted to use such content on our platforms pursuant to our agreements.
We generally seek to maintain the revenue sharing ratio at a level that we believe is comparable to those of our peers in the industry. 74 • Our agreements with live streaming performers (and their talent agencies, if applicable) will specify certain qualitative and quantitative requirements that they must meet in order to be entitled to their share of the revenue. • Live streaming performers (and their talent agencies, if applicable) own the intellectual property rights of the live streaming content they create, and we are permitted to use such content on our platforms pursuant to our agreements.
To curtail online games that involve online gambling while addressing concerns that virtual currency might be used for money laundering or illicit trade, the circular (a) prohibits online game operators from charging commissions in the form of virtual currency in connection with winning or losing of games; (b) requires online game operators to impose limits on use of virtual currency in guessing and betting games; (c) bans the conversion of virtual currency into real currency or property; and (d) prohibits services that enable game players to transfer virtual currency to other players.
To curtail online games that involve online gambling while addressing concerns that virtual currency might be used for money laundering or illicit trade, the circular (a) prohibits online game operators from charging commissions in the form of virtual currency in connection with winning or losing of games; (b) requires online game operators to 88 impose limits on use of virtual currency in guessing and betting games; (c) bans the conversion of virtual currency into real currency or property; and (d) prohibits services that enable game players to transfer virtual currency to other players.
Pursuant to the Arrangement Between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Incomes, or the Double Tax Avoidance 98 Arrangement and other applicable PRC laws, if a Hong Kong resident enterprise is determined by the competent PRC tax authority to have satisfied the relevant conditions and requirements under such Double Tax Avoidance Arrangement and other applicable laws, the 10% withholding tax on the dividends the Hong Kong resident enterprise receives from a PRC resident enterprise may be reduced to 5%.
Pursuant to the Arrangement Between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Incomes, or the Double Tax Avoidance Arrangement and other applicable PRC laws, if a Hong Kong resident enterprise is determined by the competent PRC tax authority to have satisfied the relevant conditions and requirements under such Double Tax Avoidance Arrangement and other applicable laws, the 10% withholding tax on the dividends the Hong Kong resident enterprise receives from a PRC resident enterprise may be reduced to 5%.
Our content generally spans five different types: • Songs . • Features songs performed by both established and aspiring artists in China and around the world. • Underpinned by a comprehensive original content production system leverages our technology capabilities and deep understanding of music as well as internal and external resources to systematically create, evaluate and promote music. • Represents a variety of themes such as latest top hits, internet hits, time favorites and movie soundtracks. • Covers a broad range of music genres, including pop, rock, indie, hip hop, R&B, classical, jazz and electronic music in various languages including Mandarin, Cantonese, English, Korean and Japanese. • Categorized by listening habits, settings and moods, such as workout, travel, study and work, relaxation and many more. • Adapts to the preferences of younger music users by covering a wide range of genres such as urban, EDM, animation, comic and gaming, as well as Chinese Ancient Style. • Live streaming of music performances .
Our content generally spans five different types: • Songs . • Features songs performed by both established and aspiring artists in China and around the world. • Underpinned by a comprehensive original content production system that leverages our technology capabilities and deep understanding of music as well as internal and external resources to systematically create, evaluate and promote music. • Represents a variety of themes such as latest top hits, internet hits, time favorites and movie soundtracks. • Covers a broad range of music genres, including pop, rock, indie, hip hop, R&B, classical, jazz and electronic music in various languages including Mandarin, Cantonese, English, Korean and Japanese. • Categorized by listening habits, settings and moods, such as workout, travel, study and work, relaxation and many more. • Adapts to the preferences of younger music users by covering a wide range of genres such as urban, EDM, animation, comic and gaming, as well as Chinese Ancient Style. 71 • Live streaming of music performances .
All the tracks that we license from music labels are generally available to users across our online music apps and, to the extent permitted by the terms of our licensing agreements with the licensors, our social entertainment products, except under certain circumstances where the artists or rights owners require us to publish their content under specific subscription packages or in a specific format.
All the tracks that we license from music labels are generally available to users across our online music apps and, to the extent permitted by the terms of our licensing agreements with the licensors, our social entertainment and IoT products, except under certain circumstances where the artists or rights owners require us to publish their content under specific subscription packages or in a specific format.
The SEC also maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding registrants that make electronic filings with the SEC using its EDGAR system. Such information can also be found on the Company’s investor relations website at https://ir.tencentmusic.com. 4.B. Business Overview Who We Are Music is a universal passion.
The SEC also maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding registrants that make electronic filings with the SEC using its EDGAR system. Such information can also be found on the Company’s investor relations website at https://ir.tencentmusic.com. 65 4.B. Business Overview Who We Are Music is a universal passion.
Social Insurance and Housing Fund According to the Social Insurance Law of the PRC promulgated by the Standing Committee of National People’s Congress of the PRC on October 28, 2010, effective since July 1, 2011 and amended on December 29, 2018, together with other relevant laws and regulations, the PRC establishes a social insurance system including basic pension insurance, basic medical insurance, occupational injury insurance, unemployment insurance and maternity insurance.
Social Insurance and Housing Fund According to the Social Insurance Law of the PRC promulgated by the Standing Committee of National People’s Congress of the PRC on October 28, 2010, effective since July 1, 2011 and amended on December 29, 2018, together with other relevant laws and regulations, the PRC establishes a social insurance system including basic pension insurance, basic medical insurance, occupational 102 injury insurance, unemployment insurance and maternity insurance.
Risk Factors — Risks Related to the Group’s Corporate Structure.” 107 Equity Interests Pledge Agreement Pursuant to the equity interests pledge agreements dated December 5, 2022 by and among Yeelion Online, Beijing Kuwo and the shareholders of Beijing Kuwo, the shareholders of Beijing Kuwo pledged all of their equity interests in Beijing Kuwo to Yeelion Online, to guarantee Beijing Kuwo’s and its shareholders’ performance of their obligations under, where applicable, the exclusive option agreement, exclusive technical service agreement and voting trust agreement.
Risk Factors — Risks Related to the Group’s Corporate Structure.” Equity Interests Pledge Agreement Pursuant to the equity interests pledge agreements dated December 5, 2022 by and among Yeelion Online, Beijing Kuwo and the shareholders of Beijing Kuwo, the shareholders of Beijing Kuwo pledged all of their equity interests in Beijing Kuwo to Yeelion Online, to guarantee Beijing Kuwo’s and its shareholders’ performance of their obligations under, where applicable, the exclusive option agreement, exclusive technical service agreement and voting trust agreement.
Our failure to obtain and maintain requisite licenses or permits or to respond to any changes in policies, laws or regulations may materially and adversely impact our business, financial condition and results of operation.” 86 Regulations on Online Live Streaming On November 4, 2016, the CAC issued the Administrative Regulations on Online Live Streaming Services, or the Online Live Streaming Regulations, which came into effect on December 1, 2016.
Our failure to obtain and maintain requisite licenses or permits or to respond to any changes in policies, laws or regulations may materially and adversely impact our business, financial condition and results of operation.” Regulations on Online Live Streaming On November 4, 2016, the CAC issued the Administrative Regulations on Online Live Streaming Services, or the Online Live Streaming Regulations, which came into effect on December 1, 2016.
The Class A ordinary shares listed on the Main Board of the Hong Kong Stock Exchange are fully fungible with the ADSs listed on the NYSE. 65 Corporate Information Our corporate headquarters is located at Unit 3, Building D, Kexing Science Park, Kejizhongsan Avenue, Hi-Tech Park, Nanshan District, Shenzhen, 518057, the People’s Republic of China.
The Class A ordinary shares listed on the Main Board of the Hong Kong Stock Exchange are fully fungible with the ADSs listed on the NYSE. Corporate Information Our corporate headquarters is located at Unit 3, Building D, Kexing Science Park, Kejizhongsan Avenue, Hi-Tech Park, Nanshan District, Shenzhen, 518057, the People’s Republic of China.
We also encourage users to create their own playlists to share, thereby further amplifying their exposure within our online music community. Our interactive playlists can be jointly built and edited by multiple users, 68 allowing users to break through the barriers of time and place while dynamically integrating listening with social interaction. • Official music accounts .
We also encourage users to create their own playlists to share, thereby further amplifying their exposure within our online music community. Our interactive playlists can be jointly built and edited by multiple users, allowing users to break through the barriers of time and place while dynamically integrating listening with social interaction. • Official music accounts .
Text, images and videos are screened by our content monitoring team, aided by systems that periodically filter our platform. For example, our video recognition technology enables us to effectively monitor live streaming for content violations. We have also developed an effective copyright infringement monitoring system that detects potential copyright infringement by other platforms or our users.
Text, images and videos are screened by our content monitoring team, aided by systems that periodically filter our platform. For example, our video recognition technology enables us to effectively monitor live streaming for content violations. We have developed an effective copyright infringement monitoring system that detects potential copyright infringement by other platforms or our users.
In addition, the State Council promulgated the Implementing Rules of the Patent Law in 2001, as amended in 2002 and 2010 respectively, pursuant to which a patentable invention and utility model must meet three conditions: novelty, inventiveness and practical applicability, and designs must be obviously different from current designs or combinations thereof.
In addition, the State Council promulgated the Implementing Rules of the Patent Law in 2001, as amended in 2002, 2010 and 2023 respectively, pursuant to which a patentable invention and utility model must meet three conditions: novelty, inventiveness and practical applicability, and designs must be obviously different from current designs or combinations thereof.
In addition, in the event that the spouse obtains any equity interest in the applicable VIEs held by his or her spouse for any reason, he or she agrees to be bound by and sign any legal documents substantially similar to the contractual arrangements entered into by his or her spouse, as may be amended from time to time. 4.D.
In addition, in the 108 event that the spouse obtains any equity interest in the applicable VIEs held by his or her spouse for any reason, he or she agrees to be bound by and sign any legal documents substantially similar to the contractual arrangements entered into by his or her spouse, as may be amended from time to time. 4.D.
This motivated us to provide a venue for performers to express themselves, share their creative work and for audiences to enjoy a completely different, interactive music entertainment experience. 70 We offer live streaming of music performances primarily through the “Live Streaming” tab on QQ Music , Kugou Music , Kuwo Music , WeSing , Kugou Live and Kuwo Live .
This motivated us to provide a venue for performers to express themselves, share their creative work and for audiences to enjoy a completely different, interactive music entertainment experience. We offer live streaming of music performances primarily through the “Live Streaming” tab on QQ Music , Kugou Music , Kuwo Music , WeSing , Kugou Live and Kuwo Live .
We also use direct marketing tools deployed through our platform interfaces to convert our users into paying users. Content Monitoring We are committed to complying with the applicable laws and regulations regarding the provision of content through the internet. We leverage our technology to implement procedures to monitor and remove inappropriate or illegal content from our platform.
We also use direct marketing tools deployed through our platform interfaces to convert our users into paying users. 76 Content Monitoring We are committed to complying with the applicable laws and regulations regarding the provision of content through the internet. We leverage our technology to implement procedures to monitor and remove inappropriate or illegal content from our platform.
To legally engage in commercial performances, a performance brokerage agency shall have three or more full-time 89 performance brokers and funds for the relevant business, and file an application with the culture administrative department of the people’s government of a province, autonomous region or municipality directly under central government.
To legally engage in commercial performances, a performance brokerage agency shall have three or more full-time performance brokers and funds for the relevant business, and file an application with the culture administrative department of the people’s government of a province, autonomous region or municipality directly under central government.
Relevant files shall be kept for not less than three years from the date of termination of the advertisement release. Internet advertising operators and publishers are required to set up advertisement reviewers familiar with advertising laws and regulations or establish a special department responsible for the review of internet advertisements.
Relevant files shall be kept for not less than three years from the date of termination of the advertisement release. Internet advertising operators and publishers are required to set up advertisement 90 reviewers familiar with advertising laws and regulations or establish a special department responsible for the review of internet advertisements.
Online Music Services We deliver our online music services primarily through QQ Music , Kugou Music and Kuwo Music , each of which has attracted a large and avid user base. We purposely built these mobile apps to serve the different user demographics across China with music that suits their differentiated tastes and preferences.
Online Music Services We deliver our online music services primarily through QQ Music , Kugou Music and Kuwo Music , each of which has attracted a large and avid user base. We purposely built these apps to serve the different user demographics across China with music that suits their differentiated tastes and preferences.
We place links to the featured music in the articles to provide users with even more choices of content. 72 Our Content Strategies Partnering with Music Labels and Leading Industry Players Currently, we primarily license top hits and premium content from major domestic and international music labels for a broad audience base.
We place links to the featured music in the articles to provide users with even more choices of content. Our Content Strategies Partnering with Music Labels and Leading Industry Players Currently, we primarily license top hits and premium content from major domestic and international music labels for a broad audience base.
See “— Intellectual Property — Copyright.” 77 Due to the massive amount of content displayed on our platform, we may not always be able to promptly identify content that is illegal, improper or may otherwise be found objectionable by the regulatory authorities. See “Item 3. Key Information — 3.D.
See “— Intellectual Property — Copyright.” Due to the massive amount of content displayed on our platform, we may not always be able to promptly identify content that is illegal, improper or may otherwise be found objectionable by the regulatory authorities. See “Item 3. Key Information — 3.D.
According to these regulations, to legally engage in commercial performances, a culture and arts performance group shall have full-time performers and equipment in line with its performing business, and file an application with the culture administrative department of the people’s government at the county level for approval.
According to these regulations, to legally engage in commercial performances, a culture and arts performance group shall have full-time performers and equipment in line with its 89 performing business, and file an application with the culture administrative department of the people’s government at the county level for approval.
As required by the Telecom Regulations, a commercial telecommunications services provider in the PRC shall obtain an operating license from the MIIT, or its counterparts at provincial level prior to its commencement of operations. 84 The Telecom Regulations categorize all telecommunication businesses in the PRC as either basic or value-added.
As required by the Telecom Regulations, a commercial telecommunications services provider in the PRC shall obtain an operating license from the MIIT, or its counterparts at provincial level prior to its commencement of operations. The Telecom Regulations categorize all telecommunication businesses in the PRC as either basic or value-added.
These facilities are currently accommodating our management headquarters, most of our product development, content acquisition and management, sales and marketing, as well as general and administrative activities. Our main IT infrastructure includes internet data centers (IDC) and content delivery networks (CDN). We lease all of the facilities that we currently occupy.
These facilities are currently accommodating our management headquarters, most of our product development, content acquisition and management, sales and marketing, as well as general and administrative activities. Our main IT infrastructure includes internet data centers (IDC) and content delivery networks (CDN). We lease substantially all of the facilities that we currently occupy.
Once a take-down notice is served or a legal proceeding initiated, our copyright system starts to track the relevant platforms to check if the infringing content has been timely removed. Other Intellectual Property In addition to copyrights of our content, other intellectual property is also critical to our business.
Once a take-down notice is served or a legal proceeding initiated, our copyright system starts to track the relevant platforms to check if the infringing content has been timely removed. 79 Other Intellectual Property In addition to copyrights of our content, other intellectual property is also critical to our business.
Risk Factors — Risks Related to Our Business and Industry — Failure to protect our intellectual property could substantially harm our business, operating results and financial condition.” 80 Permissions Required from the PRC Authorities for Our Operations The Group conducts its business primarily through our subsidiaries and the VIEs in China.
Risk Factors — Risks Related to Our Business and Industry — Failure to protect our intellectual property could substantially harm our business, operating results and financial condition.” Permissions Required from the PRC Authorities for Our Operations The Group conducts its business primarily through our subsidiaries and the VIEs in China.
We also offer comprehensive long-form audio content including audiobooks, podcasts and talk shows, as well as music-oriented video content including music videos, live performances and short videos. • Social entertainment services allow our users to sing, watch and socialize on our platform.
We also offer comprehensive long-form audio content including audiobooks, podcasts and talk shows, as well as music-oriented video content including music videos, live performances and short videos. 66 • Social entertainment services allow our users to sing, watch and socialize on our platform.
In addition, we have collaborated with leading music charts and magazines worldwide to increase the exposure of Chinese artists and songs globally. Built on our collaborations with Billboard, we have announced the integration of TME UNI Chart as the only music chart from mainland China on Billboard.
In addition, we have collaborated with leading music charts and magazines worldwide to increase the exposure of Chinese artists and songs globally. Built on our collaborations with Billboard, we have announced the integration of TME UNI Chart as the only music chart from the Chinese mainland on Billboard.
In addition, we have adopted an incident response plan, which provides a well-defined, organized approach for handling any potential threat to servers and data, as well as taking appropriate actions when the data breach concerns personal information.
In addition, we have adopted an incident response plan, which provides a well-defined, organized approach for handling any potential threat to servers and data, as well as taking appropriate actions when the 78 data breach concerns personal information.
Specifically, the overseas securities offering and listing of any issuer will be deemed as indirect overseas offering by PRC domestic companies if the following conditions are met: (i) 50% or more of any of the issuer’s operating revenue, total profit, total assets or net assets as documented in its audited consolidated financial statements for the most recent fiscal year is accounted for by PRC domestic companies; and (ii) the main parts of the issuer’s business activities are conducted in mainland China, or its main place(s) of business are located in mainland China, or the majority of senior management staff in charge of its business operations and management are PRC citizens or have their usual place(s) of residence located in mainland China.
Specifically, the overseas securities offering and listing of any issuer will be deemed as indirect overseas offering by PRC domestic companies if the following conditions are met: (i) 50% or more of any of the issuer’s operating revenue, total profit, total assets or net assets as documented in its audited consolidated financial statements for the most recent fiscal year is accounted for by PRC domestic companies; and (ii) the main parts of the issuer’s business activities are conducted in the Chinese mainland, or its main place(s) of business are located in the Chinese mainland, or the majority of senior management staff in charge of its business operations and management are PRC citizens or have their usual place(s) of residence located in the Chinese mainland.
The Audio-Video Program Provisions defines “internet audio-video program services” as producing, editing and integrating audio-video programs, supplying audio-video programs to the public via the internet, and providing audio-video programs uploading and transmission services to a third party. Entities providing internet audio-video programs services must obtain an Audio and Video Service Permission, or AVSP.
The Audio-Video Program Provisions 85 defines “internet audio-video program services” as producing, editing and integrating audio-video programs, supplying audio-video programs to the public via the internet, and providing audio-video programs uploading and transmission services to a third party. Entities providing internet audio-video programs services must obtain an Audio and Video Service Permission, or AVSP.
We also offer users the option to purchase 76 virtual items which provide them with certain privileges or recognized status over a period of time, such as badges displayed for a certain period of time on the users’ profile pages.
We also offer users the option to purchase virtual items which provide them with certain privileges or recognized status over a period of time, such as badges displayed for a certain period of time on the users’ profile pages.
If Beijing Kuwo or any of its shareholders breach their contractual obligations under these agreements, Yeelion Online will be entitled to certain rights, including but not limited to the rights to auction or sell the pledged equity interests.
If Beijing Kuwo or any of its shareholders breach 107 their contractual obligations under these agreements, Yeelion Online will be entitled to certain rights, including but not limited to the rights to auction or sell the pledged equity interests.
Through our vibrant community, technologies, and visual and interactive features, we enhance our user experience, engagement and retention. • Online music services , primarily our QQ Music , Kugou Music and Kuwo Music , enable users to discover, enjoy and share music in personalized ways.
Through our vibrant community, technologies, and visual and interactive features, we endeavor to enhance our user experience, engagement and retention. • Online music services , primarily our QQ Music , Kugou Music and Kuwo Music , enable users to discover, enjoy and share music in personalized ways.
Our music-centric social entertainment services include online karaoke social community and live streaming of music performances. Online Karaoke Social Community Karaoke is a popular way of enjoying music in China, whether at a weekend party, a family event or a simple social gathering.
Our music-centric social entertainment services include online karaoke social community and live streaming of music performances and events. Online Karaoke Social Community Karaoke is a popular way of enjoying music in China, whether at a weekend party, a family event or a simple social gathering.
See “— Our Content Strategies — Cultivating Aspiring Artists” for more information about Tencent Musician Platform , an online service designed to nurture aspiring individual artists. • We typically pay these individual artists performance-based licensing fees.
See “— Our Content Strategies — Cultivating Aspiring Artists” for more information about Tencent Musician Platform , an online service designed to nurture aspiring individual artists. • We typically pay individual artists performance-based licensing fees.
We currently require users to register with and access services and functions on WeSing using their 69 Weixin or QQ accounts, as WeSing is primarily used by users to socialize with their friends on Weixin or QQ through music.
We currently require users to register with and access services and functions on WeSing using their Weixin or QQ accounts, as WeSing is primarily used by users to socialize with their friends on Weixin or QQ through music.
Pursuant to the Radio and TV Programs Regulations, entities engaging in the production of radio and television programs must obtain a License for Production and Operation of Radio and TV Programs from the SARFT or its counterparts at the provincial level.
Pursuant to the Radio and TV Programs Regulations, entities engaging in the 87 production of radio and television programs must obtain a License for Production and Operation of Radio and TV Programs from the SARFT or its counterparts at the provincial level.
The Telecom License Measures further prescribes types of VATS Licenses required for operation of different value-added telecommunications services together with qualifications and procedures for obtaining such VATS Licenses.
The 84 Telecom License Measures further prescribes types of VATS Licenses required for operation of different value-added telecommunications services together with qualifications and procedures for obtaining such VATS Licenses.
The Virtual Currency Circular regulates, among others, the amount of virtual currency a business can issue, the retention period of user records, the function of virtual currency and the return of unused virtual currency upon the termination of online services.
The Online Game Virtual Currency Circular regulates, among others, the amount of virtual currency a business can issue, the retention period of user records, the function of virtual currency and the return of unused virtual currency upon the termination of online services.
We adopt a dual engine content-and-platform strategy to constantly enrich content offerings on our platform, while empowering 66 content creation and distribution and delivering a compelling user experience.
We adopt a dual engine content-and-platform strategy to constantly enrich content offerings on our platform, while empowering content creation and distribution and delivering a compelling user experience.
We believe that all of these initiatives are strategic, long-term investments that will improve our user experience, attract more customers to contribute to more user-generated content on our platform, driving a virtuous cycle for sustained growth and monetization. Explore Innovative Content Forms We constantly innovate brand new forms of content that our users love.
We believe that all of these initiatives are strategic, long-term investments will improve our user experience, attract more users to contribute to more user-generated content on our platform, driving a virtuous cycle for sustained growth and monetization. 73 Explore Innovative Content Forms We constantly innovate brand new forms of content that our users love.
Sanctions against such violations include an order to cease the relevant activities, and confiscation of illegal gains and fines (from 1% to 10% of sales revenue in the preceding year, or a fine up to RMB500,000 if the intended monopolistic agreement has not been performed); • Abuse of dominant market position.
Sanctions against such violations include an order to cease the relevant activities, and confiscation of illegal gains and fines (from 1% to 10% of sales revenue in the preceding year, or a fine up to RMB3,000,000 if the intended monopolistic agreement has not been performed); • Abuse of dominant market position.
Additionally, we offer live streaming of more professionally organized online concerts and music events for more established artists. • Recorded video and audio .
Additionally, we offer live streaming of more professionally organized online and offline concerts and music events for more established artists. • Recorded video and audio .
Our data analytics technology enable us to provide recommendations of relevant live streaming content based on what our users are listening to or singing on our platform. For example, when a live streaming performer on Kugou Live performs a song, a message bubble pops up instantaneously on Kugou Music notifying users listening to the same song.
Our data analytics technology enables us to provide recommendations of relevant live streaming content based on what our users are listening to or singing on our platform. For example, when a live streaming performer on Kugou Live performs a song, a message bubble pops up instantaneously on Kugou Music notifying users listening to the same song.
Beijing Kuwo and a subsidiary of the Group, Guangzhou Fanxing Entertainment Information Technology Co., Ltd. (“Fanxing”), have been recognized as HNTE by relevant government authorities and were entitled to a preferential tax rate of 15% for the years ended December 31, 2020, 2021 and 2022.
Beijing Kuwo and a subsidiary of the Group, Guangzhou Fanxing Entertainment Information Technology Co., Ltd. (“Fanxing”), have been recognized as HNTE by relevant government authorities and were entitled to a preferential tax rate of 15% for the years ended December 31, 2021, 2022 and 2023.
Our scale, technology, commitment to copyright protection, and ability to promote original works have made us a preferred partner for musicians and content owners. We are the largest online music entertainment platform in China in terms of MAU as of December 31, 2022.
Our scale, technology, commitment to copyright protection, and ability to promote original works have made us a preferred partner for musicians and content owners. We are the largest online music entertainment platform in China in terms of MAU as of December 31, 2023.
We also rolled out a voice synthesis technology, Lingyin Engine , to quickly and vividly replicate singers’ voices for use in original songs of any style and language. See “— Technology and Data Capabilities — Technology” for details.
For instance, we rolled out a voice synthesis technology, Lingyin Engine , to quickly and vividly replicate singers’ voices for use in original songs of any style and language. See “— Technology and Data Capabilities — Technology” for details.
We have also upgraded WeSing ’s online karaoke rooms to offer a broader suite of online singing experience, including different party sizes ranging from solo and duet to small and large groups, as well as catering to different needs, such as singing-on-demand, sing along on demand, singing practice and cross-room activities. • Online singing groups .
WeSing ’s online karaoke rooms also offer a broader suite of online singing experience, including different party sizes ranging from solo and duet to small and large groups, as well as catering to different needs, such as singing-on-demand, sing along on demand, singing practice and cross-room activities. • Online singing groups .
We aim to deliver best-in-class entertainment content and services in order to garner strong word-of-mouth referrals and enhance our brand recognition. We primarily rely on word-of-mouth referrals and benefit from our strong brands to attract users to our platform. We also engage in diverse marketing activities both online and offline to enhance brand awareness.
We aim to deliver best-in-class music entertainment content and services in order to generate strong word-of-mouth referrals and enhance our brand recognition. We primarily rely on word-of-mouth referrals and benefit from our strong brands to attract users to our platform. We also engage in diverse marketing activities both online and offline to enhance brand awareness.
While users may access our basic karaoke functions free of charge, they can also purchase virtual gifts to send to their favorite singers and subscribe for memberships that come with value-added functions, such as higher soundtrack resolution, additional app themes and access to singing tutorial programs. • Multi-media content enrichment .
While users may access our basic karaoke functions free of charge, they can also purchase virtual gifts to send to their favorite singers and subscribe for memberships that come with value-added functions, such as higher soundtrack resolution, additional app themes and access to singing tutorial programs.
We issue different virtual currencies and prepaid tokens to users on our platform for them to purchase various virtual gifts to be used in live streaming or online game platforms; however, our service does not constitute virtual currency trading services because users may not transfer or trade virtual currency among themselves.
We issue different virtual currencies and prepaid tokens to users on our platform for them to purchase various virtual gifts to be used in live streaming or online game platforms; however, we believe that our service does not constitute virtual currency trading services because we are not online game operator, and our users may not transfer or trade virtual currency among themselves.
On November 28, 2019, the CAC, the MIIT, the Ministry of Public Security and the SAMR jointly issued the Methods of Identifying Illegal Acts of Apps to Collect and Use Personal Information which further illustrates certain common illegal practices of apps operators in terms of personal information protection, including “failure to publicize rules for collecting and using personal information,” “failure to expressly state the purpose, manner and scope of collecting and using personal information,” “collection and use of personal information without consent of users of such App,” “collecting personal information irrelevant to the services provided by such app in violation of the principle of necessity,” “provision of personal information to others without users’ consent,” “failure to provide the function of deleting or correcting personal information as required by laws” and “failure to publish information such as methods for complaints and reporting.” Furthermore, the Provisions on the Cyber Protection of Children’s Personal Information issued by the CAC came into effect on October 1, 2019, which require, among others, that network operators who collect, store, use, transfer and disclose personal information of children under the age of 14 establish special rules and user agreements for the protection of children’s personal information, inform the children’s guardians in a noticeable and clear manner and shall obtain the consent of the children’s guardians. 93 On May 28, 2020, the National People’s Congress adopted the PRC Civil Code, which came into effect on January 1, 2021.
On November 28, 2019, the CAC, the MIIT, the Ministry of Public Security and the SAMR jointly issued the Methods of Identifying Illegal Acts of Apps to Collect and Use Personal Information which further illustrates certain common illegal practices of apps operators in terms of personal information protection, including “failure to publicize rules for collecting and using personal information,” “failure to expressly state the purpose, manner and scope of collecting and using personal information,” “collection and use of personal information without consent of users of such App,” “collecting personal information irrelevant to the services provided by such app in violation of the principle of necessity,” “provision of personal information to others without users’ consent,” “failure to provide the function of deleting or correcting personal information as required by laws” and “failure to publish information such as methods for complaints and reporting.” 93 Furthermore, the Provisions on the Cyber Protection of Children’s Personal Information issued by the CAC came into effect on October 1, 2019, which require, among others, that network operators who collect, store, use, transfer and disclose personal information of children under the age of 14 establish special rules and user agreements for the protection of children’s personal information, inform the children’s guardians in a noticeable and clear manner and shall obtain the consent of the children’s guardians.
Professional artists and other performers alike can stream their singing and other performance to a vast online audience, fostering a vibrant online social music entertainment community. We offer users the option to register with and access our live streaming services using their Weixin or QQ accounts.
Professional artists and other performers alike can stream their singing and other performance to a vast online audience, fostering a vibrant online social music entertainment community. 70 We offer users the option to register with and access our live streaming services using their Weixin , QQ accounts, or their mobile phone numbers.
Risk Factors — Risks Related to the Group’s Corporate Structure — The approval, filing or other requirements of the China Securities Regulatory Commission or other PRC regulatory authorities may be required under PRC law in connection with any future issuance of securities overseas, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing.” Competition We compete for users and their time and attention mainly with other online music and audio entertainment providers in China.
Risk Factors — Risks Related to the Group’s Corporate Structure — The approval, filing or other requirements of the China Securities 80 Regulatory Commission or other PRC regulatory authorities may be required under PRC law in connection with any future issuance of securities overseas, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing.” Competition We primarily compete with other online music and audio entertainment providers in China for users’ time and attention.
Our award-winning proprietary audio setting, Kugou Viper Sound , as well as QQ Music Premium Sound and WeSing Super Voice audio settings, not only bring superior sound quality and a best-in-class listening experience to users, but also foster a large, growing online community for them to share user feedback about our sound effects.
Our award-winning proprietary audio setting, Kugou Viper 3D , as well as QQMUSIC AUDIO and WeSing Super Voice audio settings, not only bring superior sound quality and a best-in-class listening experience to users, but also foster a large, growing online community for them to share user feedback about our sound effects.
For live streaming, selected live streaming performers can produce and sell their own digital albums through our platform if they share a portion of their revenues with us.
For live streaming, selected live streaming performers can produce and sell their own digital albums through our platform and share a portion of their revenues therefrom with us.
We have a comprehensive content library with over 150 million music and audio tracks as of December 31, 2022. Diverse Content Library We offer a diverse range of professional as well as user-generated recorded and live content across various formats.
We have a comprehensive content library with over 200 million music and audio tracks as of December 31, 2023. Diverse Content Library We offer a diverse range of professional as well as user-generated recorded and live content across various formats.
We also developed innovative ways for users to enjoy personalized content by consistently improving our music content tagging process and analyzing our platform’s data repository to better fulfill users’ music tastes and preferences.
We also developed innovative ways for users to enjoy personalized content by consistently improving our music content tagging process and recommendation capabilities, as well as analyzing our platform’s data repository to better fulfill users’ music tastes and preferences.
Property, Plant and Equipment Our principal executive offices are located in Shenzhen, China. We also have offices in Beijing, Guangzhou and some other cities in China with an aggregate of approximately 91,205 square meters.
Property, Plant and Equipment Our principal executive offices are located in Shenzhen, China. We also have offices in Beijing, Guangzhou and some other cities in China with an aggregate of approximately 84,222 square meters.
Payments under the licenses are generally made in installments throughout the duration of the licenses. • Our licensing agreements with music labels and music copyright owners are on a non-exclusive basis. • The licensing agreements will specify whether we have the right to sublicense the content we source from music labels and copyright owners. • Our licensing agreements with music labels and copyright owners generally expire upon the end of the term, which typically range from one to three years, unless otherwise terminated earlier pursuant to the relevant provisions in certain circumstances, such as a material breach of contract. • Individual artists • We also enter into licenses with individual artists or their agencies to bring a broader and more diverse range of content offerings on our platform.
Payments under the licenses are generally made in installments throughout the duration of the licenses. • Our licensing agreements with music labels and music copyright owners are on a non-exclusive basis. • The licensing agreements will specify whether we have the right to sublicense the content we source from music labels and copyright owners. • Our licensing agreements with music labels and copyright owners generally expire upon the end of the term, unless otherwise terminated earlier pursuant to the relevant provisions in certain circumstances, such as a material breach of contract. • Individual artists • We enter into licensing agreements and, in some cases, commissioned content creation agreements with individual artists or their agencies to bring a broader and more diverse range of content offerings on our platform.
Content Sourcing Arrangements Content is the foundation of our platform. We license from, and pay royalties to, the following major rights holders to obtain the vast majority of the music content offered on our platform. 74 • Music labels and music copyright owners • We have strong partnerships with a wide range of music labels and other copyright owners.
We license from, and pay royalties to, the following major rights holders to obtain the vast majority of the music content offered on our platform. • Music labels and music copyright owners • We have strong partnerships with a wide range of music labels and other copyright owners.
Pursuant to the PRC EIT Law, a qualified software enterprise, or SE, is entitled to an exemption from income tax for the first two years, commencing from the first profitable year, and a reduction of half tax rate for the next three years. Yeelion Online Network Technology (Tianjin) Co., Ltd. (“Yeelion Online Tianjin”) and Guangzhou Shiyinlian Software Technology Co., Ltd.
Pursuant to the PRC EIT Law, a qualified software enterprise, or SE, is entitled to an exemption from income tax for the first two years, commencing from the first profitable year, and a reduction of half tax rate for the next three years. Guangzhou Shiyinlian Software Technology Co., Ltd.
The macro-prudential adjustment parameter was further increased from 1 to 1.25 on October 25, 2022. Therefore, as of the date of this annual report, the upper limit of risk-weighted outstanding cross-border financing of a PRC enterprise is 250% of its net assets, or Net Asset Limits.
The macro-prudential adjustment parameter was increased from 1 to 1.25 on October 25, 2022, and further increased from 1.25 to 1.5 on July 20, 2023. Therefore, as of the date of this annual report, the upper limit of risk-weighted outstanding cross-border financing of a PRC enterprise is 300% of its net assets, or Net Asset Limits.
Advertising Services We offer various advertising services to advertisers across our platforms, and we endeavor to continue to innovate and expand our advertising service portfolio. Our advertising offerings mainly include full-screen display ads that automatically appear when a user opens our mobile apps, industry standard banner ads of various sizes and placements on the interfaces of our platform.
Advertising Services We offer various advertising services to advertisers across our platforms, and we seek to continuously optimize our advertising service portfolio. Our advertising offerings mainly include full-screen display ads that automatically appear when a user opens our mobile apps, industry standard banner ads of various sizes and placements on the interfaces of our platform.
If users have not obtained all necessary copyright licenses in connection with such uploaded content, we may be subject to potential disputes and liabilities.” • Our agreements with live streaming performers or their agencies are either on an exclusive or non-exclusive basis. • Our agreements with live streaming performers (and their talent agencies, if applicable) generally expire upon the end of the term, which usually ranges from one to three years, unless otherwise terminated earlier pursuant to the relevant provisions in certain events, such as a material breach of contract. 75 How We Generate Revenues We generate revenues primarily from (i) online music services and (ii) social entertainment services and others.
If users have not obtained all necessary copyright licenses in connection with such uploaded content, we may be subject to potential disputes and liabilities.” • Our agreements with live streaming performers or their agencies are either on an exclusive or non-exclusive basis. • Our agreements with live streaming performers (and their talent agencies, if applicable) generally expire upon the end of the term, which usually ranges from one to three years, unless otherwise terminated earlier pursuant to the relevant provisions in certain events, such as a material breach of contract.
If we are unable to compete successfully, we may lose market share to our competitors.” 81 Insurance We do not maintain any liability insurance or property insurance policies covering our equipment and facilities for injuries, death or losses due to fire, earthquake, flood or any other disaster.
If we are unable to compete successfully, we may lose market share to our competitors.” Insurance We do not maintain any liability insurance or property insurance policies covering our equipment and facilities for injuries, death or losses due to fire, earthquake, flood or any other disaster. We do not maintain business interruption insurance, nor do we maintain key-man life insurance.
In order to provide users a consistent and cohesive listening experience, we started to forge Internet of Things (“IoT”) partnerships with leading manufacturers of cars, smart speakers and smart watches in 2019, which provided further channels for user acquisition.
In particular, in order to provide users a consistent and cohesive listening experience, we started to forge IoT partnerships with leading manufacturers of cars, TVs, smart speakers and smart watches in 2019, which provided further channels for user acquisition.
Users can record their karaoke songs in audio and video formats. They can not only sing alone, but also sing duets with celebrities or other users and then make a complete song to share with their friends. Users also receive a system-generated assessment of their performance which helps them continue improving their singing.
They can not only sing alone, but also sing duets with celebrities or other users and then make a complete song to share with their friends. Users also receive a system-generated assessment of their performance which helps them continue improving their singing.
Live streaming performers on our platform include professional artists and aspiring performers, as well as ordinary people who want to share their music. We seek to establish and maintain stable, mutually beneficial relationships with live streaming performers.
We encourage our live streaming performers to sing and engage in other music performance on our platform. Live streaming performers on our platform include professional artists and aspiring performers, as well as ordinary people who want to share their music. We seek to establish and maintain stable, mutually beneficial relationships with live streaming performers.

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Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

101 edited+27 added−28 removed72 unchanged
Biggest changeFor the Year Ended December 31, 2020 2021 2022 RMB RMB RMB US$ (in millions, except for share and per share data) Profit for the year 4,176 3,215 3,839 557 Adjustments: Amortization of intangible and other assets arising from acquisitions (1) 392 484 498 72 Share-based compensation 570 753 834 121 (Gains)/losses from investments (2) (101 ) 51 (141 ) (20 ) Fair value change on puttable shares (3) 37 — — — Income tax effects (4) (103 ) (171 ) (123 ) (18 ) Adjusted profit for the year (Non-IFRS financial measure) 4,971 4,332 4,907 711 Attributable to Non-IFRS equity holders of the Company 4,950 4,146 4,745 688 Non-controlling interests 21 186 162 23 Earnings per share for Class A and Class B ordinary shares (Non-IFRS financial measure) Basic 1.49 1.25 1.48 0.21 Diluted 1.47 1.23 1.47 0.21 Shares used in earnings per Class A and Class B ordinary share computation Basic 3,313,527,847 3,321,067,177 3,203,995,973 3,203,995,973 Diluted 3,360,460,759 3,363,045,757 3,234,507,356 3,234,507,356 Earnings per ADS (Non-IFRS financial measure) (5) Basic 2.99 2.50 2.96 0.43 Diluted 2.95 2.47 2.93 0.43 ADS used in earnings per ADS computation Basic 1,656,763,924 1,660,533,589 1,601,997,986 1,601,997,986 Diluted 1,680,230,380 1,681,522,878 1,617,253,678 1,617,253,678 Notes : (1) Represents the amortization of identifiable assets, including intangible assets and prepayments for music content, resulting from acquisitions.
Biggest changeFor the Year Ended December 31, 2021 2022 2023 RMB RMB RMB US$ (in millions, except for share and per share data) Profit for the year 3,215 3,839 5,220 735 Adjustments: Amortization of intangible and other assets arising from acquisitions (1) 484 498 445 63 Share-based compensation 753 834 736 104 Losses/(gains) from investments (2) 51 (141 ) (7 ) (1 ) Income tax effects (3) (171 ) (123 ) (171 ) (24 ) Adjusted profit for the year (Non-IFRS financial measure) 4,332 4,907 6,223 876 Attributable to: Non-IFRS equity holders of the Company 4,146 4,745 5,923 834 Non-controlling interests 186 162 300 42 IFRS Earnings per share for Class A and Class B ordinary shares Basic 0.91 1.15 1.58 0.22 Diluted 0.90 1.14 1.55 0.22 Earnings per share for Class A and Class B ordinary shares (Non-IFRS financial measure) Basic 1.25 1.48 1.90 0.27 Diluted 1.23 1.47 1.87 0.26 Shares used in earnings per Class A and Class B ordinary share computation Basic 3,321,067,177 3,203,995,973 3,121,653,686 3,121,653,686 Diluted 3,363,045,757 3,234,507,356 3,168,386,031 3,168,386,031 IFRS Earnings per ADS (2 Class A shares equal to 1 ADS) Basic 1.82 2.30 3.15 0.44 Diluted 1.80 2.27 3.11 0.44 Earnings per ADS (Non-IFRS financial measure) (4) Basic 2.50 2.96 3.79 0.53 Diluted 2.47 2.93 3.74 0.53 ADS used in earnings per ADS computation Basic 1,660,533,589 1,601,997,986 1,560,826,843 1,560,826,843 Diluted 1,681,522,878 1,617,253,678 1,584,193,016 1,584,193,016 Notes : (1) Represents the amortization of identifiable assets, including intangible assets such as domain name, trademark, copyrights, supplier resources, corporate customer relationships and non-compete agreement etc., and fair value adjustment on music content (i.e., signed contracts obtained for the rights to access to the music content for which the amount was amortized over the contract period), resulting from business acquisitions or combination.
Our general and administrative expenses consist primarily of (i) R&D expenses, including salaries and other benefits paid to our R&D personnel; (ii) salaries and other benefits paid to our general and administrative personnel; (iii) fees and expenses associated with the legal, accounting and other professional services; and (iv) amortization of intangible assets resulting from acquisitions.
General and administrative expenses . Our general and administrative expenses consist primarily of (i) R&D expenses, including salaries and other benefits paid to our R&D personnel; (ii) salaries and other benefits paid to our general and administrative personnel; (iii) fees and expenses associated with the legal, accounting and other professional services; and (iv) amortization of intangible assets resulting from acquisitions.
Risk Factors — Risks Related to Doing Business in China — We may be classified as a ‘PRC resident enterprise’ for PRC enterprise income tax purposes, which could result in unfavorable tax consequences to us and our non-PRC shareholders and ADS holders and have a material adverse effect on our results of operations and the value of your investment.” The following table presents our selected consolidated cash flow data for the periods indicated.
Risk Factors — Risks Related to Doing Business in China — We may be classified as a ‘PRC resident enterprise’ for PRC enterprise income tax purposes, which could result in unfavorable tax consequences to us and our non-PRC shareholders and ADS holders and have a material adverse effect on our results of operations and the value of your investment.” 119 The following table presents our selected consolidated cash flow data for the periods indicated.
Such costs are used to support both our online music services and social entertainment services; (ii) fees paid to content creators pursuant to revenue sharing arrangements associated with our social entertainment services, including live streaming performers, their agencies and other users who perform on our platform; and (iii) content delivery costs relating primarily to server, cloud services and bandwidth costs paid to telecommunications carriers and other related service providers which are used to support both our online music services and social entertainment services.
Such costs are used to support both our online music services and social entertainment services; (ii) fees paid to content creators pursuant to revenue sharing arrangements associated with our social entertainment services, including live streaming performers, their agencies and other users who perform on 112 our platform; and (iii) content delivery costs relating primarily to server, cloud services and bandwidth costs paid to telecommunications carriers and other related service providers which are used to support both our online music services and social entertainment services.
We encourage investors and others to review our financial information in its entirety and not rely on a single financial measure. 118 Adjusted profit for the year represents profit for the year excluding amortization of intangible and other assets arising from acquisitions, share-based compensation, gains/losses from investments, fair value change on puttable shares, and income tax effects.
We encourage investors and others to review our financial information in its entirety and not rely on a single financial measure. Adjusted profit for the year represents profit for the year excluding amortization of intangible and other assets arising from acquisitions, share-based compensation, gains/losses from investments, fair value change on puttable shares, and income tax effects.
Forfeitures are estimated at the time of grant and revised in the subsequent periods if actual forfeitures differ from those estimates. 2014 Share Incentive Plan The 2014 Share Incentive Plan was approved by the then board of directors of our company in October 2014 prior to Tencent’s acquisition of CMC.
Forfeitures are estimated at the time of grant and revised in the subsequent periods if actual forfeitures differ from those estimates. 123 2014 Share Incentive Plan The 2014 Share Incentive Plan was approved by the then board of directors of our company in October 2014 prior to Tencent’s acquisition of CMC.
The following summarizes major factors affecting our applicable tax rates in the Cayman Islands, Hong Kong and the PRC. Cayman Islands We are incorporated in the Cayman Islands. Under the current laws of the Cayman Islands, we are not subject to tax on income or capital gains in the Cayman Islands.
The following summarizes major factors affecting our applicable tax rates in the Cayman Islands, Hong Kong and the PRC. 113 Cayman Islands We are incorporated in the Cayman Islands. Under the current laws of the Cayman Islands, we are not subject to tax on income or capital gains in the Cayman Islands.
Material Cash Requirements Our material cash requirements as of December 31, 2022 and any subsequent interim period primarily include our capital expenditures, commitments, share repurchase and long-term debt obligation under our 2025 Notes and 2030 Notes. 2025 Notes represents future maximum commitment relating to the principal amount and interests in connection with the issuance of US$300 million in aggregate principal amount of senior notes bearing an annual interest rate of 1.375% which will mature on September 3, 2025. 2030 Notes represents future maximum commitment relating to the principal amount and interests in connection with the issuance of US$500 million in aggregate principal amount of senior notes bearing an annual interest rate of 2.000%, which will mature on September 3, 2030.
Material Cash Requirements Our material cash requirements as of December 31, 2023 and any subsequent interim period primarily include our capital expenditures, commitments, share repurchase and long-term debt obligation under our 2025 Notes and 2030 Notes. 2025 Notes represents future maximum commitment relating to the principal amount and interests in connection with the issuance of US$300 million in aggregate principal amount of senior notes bearing an annual interest rate of 1.375% which will mature on September 3, 2025. 2030 Notes represents future maximum commitment relating to the principal amount and interests in connection with the issuance of US$500 million in aggregate principal amount of senior notes bearing an annual interest rate of 2.000%, which will mature on September 3, 2030.
The maximum term of any issued stock option is ten years from the grant date. 124 2017 Option Plan and 2017 Restricted Share Scheme Binomial model is used to measure the fair value of equity awards granted pursuant to the 2017 Option Plan and 2017 Restricted Share Scheme.
The maximum term of any issued stock option is ten years from the grant date. 2017 Option Plan and 2017 Restricted Share Scheme Binomial model is used to measure the fair value of equity awards granted pursuant to the 2017 Option Plan and 2017 Restricted Share Scheme.
Trend Information Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the year ended December 31, 2022 that are reasonably likely to have a material and adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future results of operations or financial condition. 5.E.
Trend Information Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the year ended December 31, 2023 that are reasonably likely to have a material and adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future results of operations or financial condition. 5.E.
There are other items within our financial statements that require estimation but are not deemed critical, as defined above. Changes in estimates used in these and other items could have a material impact on our financial statements.
There are other items within our financial statements that require estimation but are not deemed critical, as defined above. Changes in estimates used in these and other items could have a material 122 impact on our financial statements.
Pursuant to the Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income, the withholding tax rate in respect to the payment of dividends by a PRC enterprise to a Hong Kong enterprise may be reduced to 5% from a standard rate of 10% if the Hong Kong enterprise directly holds at least 25% of the PRC enterprise.
Pursuant to the Arrangement between the Chinese mainland and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income, the withholding tax rate in respect to the payment of dividends by a PRC enterprise to a Hong Kong enterprise may be reduced to 5% from a standard rate of 10% if the Hong Kong enterprise directly holds at least 25% of the PRC enterprise.
Such direct loans to the nominee shareholders would be eliminated in our consolidated financial statements against the VIE’s share capital. In 2022, our wholly-owned PRC subsidiaries only generated a minimal portion of our total revenues because substantially all of our businesses are subject to foreign investment restrictions under PRC law and therefore can only be conducted through the VIEs.
Such direct loans to the nominee shareholders would be eliminated in our consolidated financial statements against the VIE’s share capital. In 2023, our wholly-owned PRC subsidiaries only generated a minimal portion of our total revenues because substantially all of our businesses are subject to foreign investment restrictions under PRC law and therefore can only be conducted through the VIEs.
Beijing Kuwo and a subsidiary of the Group, Guangzhou Fanxing Entertainment Information Technology Co., Ltd. (“Fanxing”), have been recognized as HNTE by relevant government authorities and were entitled to a preferential tax rate of 15% for the years ended December 31, 2020, 2021 and 2022.
Beijing Kuwo and a subsidiary of the Group, Guangzhou Fanxing Entertainment Information Technology Co., Ltd. (“Fanxing”), have been recognized as HNTE by relevant government authorities and were entitled to a preferential tax rate of 15% for the years ended December 31, 2021, 2022 and 2023.
We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or product development services with us. We did not have any off-balance sheet arrangements as of December 31, 2022.
We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or product development services with us. We did not have any off-balance sheet arrangements as of December 31, 2023.
Furthermore, certain subsidiaries of the Group are subject to other preferential tax treatment for certain reduced tax rates ranging from 2.5% to 9%. As a Cayman Islands holding company, we may receive dividends from our PRC subsidiaries through Tencent Music Entertainment Hong Kong Limited.
Furthermore, certain subsidiaries of the Group are subject to other preferential tax treatment for certain reduced tax rates ranging from 3% to 9%. As a Cayman Islands holding company, we may receive dividends from our PRC subsidiaries through Tencent Music Entertainment Hong Kong Limited.
Year Ended December 31, 2021 Compared to Year Ended December 31, 2020 For a detailed description of the comparison of our operating results for the year ended December 31, 2021 to the year ended December 31, 2020, see “Item 5.A.
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 For a detailed description of the comparison of our operating results for the year ended December 31, 2022 to the year ended December 31, 2021, see “Item 5.A.
Had different assumptions and estimates been used, the resulting fair value of the share options and the resulting share-based compensation expenses could have been different. 125
Had different assumptions and estimates been used, the resulting fair value of the share options and the resulting share-based compensation expenses could have been different. 124
Our board of directors has recently authorized another share repurchase program under which we may repurchase up to US$500 million of our Class A ordinary shares in the form of ADSs during a two-year period commencing from March 2023 (the “2023 Share Repurchase Program”).
On March 21, 2023, our board of directors authorized another share repurchase program under which we may repurchase up to US$500 million of our Class A ordinary shares in the form of ADSs during a two-year period commencing from March 2023 (the “2023 Share Repurchase Program”).
For a detailed cashflow analysis for the years ended December 31, 2020 and 2021, see “5.B. Liquidity and Capital Resources” of our annual report on Form 20-F for the fiscal year ended December 31, 2021 filed with the Securities and Exchange Commission on April 26, 2022.
For a detailed cashflow analysis for the years ended December 31, 2021 and 2022, see “5.B. Liquidity and Capital Resources” of our annual report on Form 20-F for the fiscal year ended December 31, 2022 filed with the Securities and Exchange Commission on April 25, 2023.
Our board of directors has recently authorized the 2023 Share Repurchase Program under which we may repurchase up to US$500 million of our Class A ordinary shares in the form of ADSs during a two-year period commencing from March 2023.
On March 21, 2023, our board of directors authorized the 2023 Share Repurchase Program under which we may repurchase up to US$500 million of our Class A ordinary shares in the form of ADSs during a two-year period commencing from March 2023.
Granted in 2020 2021 2022 Risk free interest rate 0.71%-0.91% 1.22%-1.63% 2.15%-2.92% Expected dividend yield 0% 0% 0% Expected volatility range 40%-42.5% 43.5%-50% 55%-60% Exercise multiples 2.2-2.8 2.2-2.8 2.2-2.8 Contractual life 10 years 10 years 10 years Subsequent to our initial public offering in December 2018, the market price of our publicly traded ADSs is used as an indicator of fair value of our ordinary shares for purposes of recording share-based compensation in connection with the equity awards granted pursuant to the 2017 Option Plan and the 2017 Restricted Share Scheme.
Granted in 2021 2022 2023 Risk free interest rate 1.22%-1.63% 2.15%-2.92% 3.46%-3.83% Expected dividend yield 0% 0% 0% Expected volatility range 43.5%-50% 55%-60% 60% Exercise multiples 2.2-2.8 2.2-2.8 2.2-2.8 Contractual life 10 years 10 years 10 years Subsequent to our initial public offering in December 2018, the market price of our publicly traded ADSs is used as an indicator of fair value of our ordinary shares for purposes of recording share-based compensation in connection with the equity awards granted pursuant to the 2017 Option Plan and the 2017 Restricted Share Scheme.
Our ability to continue to maintain our user base and increase user engagement is driven by various factors, including our ability to increase the breadth and attractiveness of our content offerings, provide smart content recommendations, deliver a differentiated user experience; encourage users to use multiple services across our platform, improve the social interaction features of our platform, and enhance our brand reputation.
Our ability to continue to maintain our user base and increase user engagement depend on various factors, including our ability to increase the breadth and attractiveness of our content offerings, provide smart content recommendations, deliver a differentiated user experience, encourage users to use multiple services across our platform, improve the social interaction features of our platform, and enhance our brand reputation.
As of April 18, 2023, according to the 2014 Share Incentive Plan, 101,785,456 ordinary shares have been reserved to be issued to qualified employees, directors, non-employee directors and consultants as determined by the board of directors of our company.
As of April 10, 2024, according to the 2014 Share Incentive Plan, 101,785,456 ordinary shares have been reserved to be issued to qualified employees, directors, non-employee directors and consultants as determined by the board of directors of our company.
Risk Factors — Risks Related to Doing Business in China — We face risks related to accidents, disasters and public health challenges in China and globally.” Our ability to continue to deliver diverse, attractive and relevant content offerings We believe that users are attracted to our platform and choose to pay for our services primarily because of the diverse and attractive content we offer.
Risk Factors — Risks Related to Our Business and Industry — We face risks related to accidents, disasters and public health challenges in China and globally.” Our ability to continue to deliver diverse, attractive and relevant content offerings We believe that users are attracted to our platform and choose to pay for our services for the diverse and attractive content we offer.
We will continue to manage our general and administrative expenses as we continue to improve our operational efficiencies while continuously investing in research and development to expand our competitive advantages in product and technology innovations. Other gains, net Our other gains, net primarily include tax rebates, gains and losses from investments and fair value change, and government grants.
We will continue to improve our operational efficiencies while continuously investing in research and development to expand our competitive advantages in product and technology innovations. Other gains, net Our other gains, net primarily include tax rebates, gains and losses from investments and fair value change, and government grants.
The following table sets forth a breakdown of our revenues, in absolute amounts and as percentages of total revenues, for the periods indicated.
The following table sets forth a breakdown of our operating expenses, in absolute amounts and as percentages of total operating expenses, for the periods indicated.
We repurchased ADSs from the open markets at an aggregate consideration of approximately US$19 million, US$553 million and US$447 million under our share repurchase programs in 2020, 2021 and 2022.
We repurchased ADSs from the open markets at an aggregate consideration of approximately US$553 million, US$447 million and US$175 million, respectively, under our share repurchase programs in 2021, 2022 and 2023.
Organizational Structure — Contractual Arrangements with the VIEs and Their Respective Shareholders or Partners.” In 2020, 2021 and 2022, the amount of Service Charges paid to our PRC subsidiaries from the VIEs was RMB15,372 million, RMB17,743 million and RMB16,415 million (US$2,380 million), respectively.
Organizational Structure — Contractual Arrangements with the VIEs and Their Respective Shareholders or Partners.” In 2021, 2022 and 2023, the amount of Service Charges paid to our PRC subsidiaries from the VIEs was RMB17,743 million, RMB16,415 million and RMB16,610 million (US$2,339 million), respectively.
Operating Results — Results of Operations — Year Ended December 31, 2021 Compared to Year Ended December 31, 2020” of our annual report on Form 20-F for the fiscal year ended December 31, 2021 filed with the Securities and Exchange Commission on April 26, 2022.
Operating Results — Results of Operations — Year Ended December 31, 2022 Compared to Year Ended December 31, 2021” of our annual report on Form 20-F for the fiscal year ended December 31, 2022 filed with the Securities and Exchange Commission on April 25, 2023.
Dividends from Tencent Music Entertainment Hong Kong Limited is not subject to Hong Kong profits tax. 114 PRC Under the Corporate Income Tax (“CIT”) Law in the PRC, foreign invested enterprises and domestic enterprises are subject to a unified CIT rate of 25%, except for available preferential tax treatments, including tax concession for enterprise approved as “High and New Technology Enterprise” (“HNTE”) “Software Enterprise” (“SE”) and “Key Software Enterprise” (“KSE”), and enterprise established in certain special economic development zones.
PRC Under the Corporate Income Tax (“CIT”) Law in the PRC, foreign invested enterprises and domestic enterprises are subject to a unified CIT rate of 25%, except for available preferential tax treatments, including tax concession for enterprise approved as “High and New Technology Enterprise” (“HNTE”), “Software Enterprise” (“SE”) and “Key Software Enterprise” (“KSE”), and enterprise established in certain special economic development zones.
Appropriation is not required if the statutory surplus fund has reached 50% of the registered capital of our PRC subsidiaries and the VIEs.
Appropriation is not required if the statutory surplus fund has reached 50% of the registered capital of our PRC subsidiaries and the VIEs. Appropriation to discretionary surplus fund is made at the discretion of our PRC subsidiaries and the VIEs.
Appropriation to discretionary surplus fund is made at the discretion of our PRC subsidiaries and the VIEs. 122 As an offshore holding company, we are permitted under PRC laws and regulations to provide funding from the proceeds of our offshore fund raising activities to our PRC subsidiaries only through loans or capital contributions, and to the VIEs only through loans, in each case subject to the satisfaction of the applicable government registration and approval requirements.
As an offshore holding company, we are permitted under PRC laws and regulations to provide funding from the proceeds of our offshore fund raising activities to our PRC subsidiaries only through loans or capital contributions, and to the VIEs only through loans, in each case subject to the satisfaction of the applicable government registration and approval requirements. See “Item 3.
Under the current tax laws of Hong Kong, our subsidiaries in Hong Kong are exempted from income tax on their foreign-derived income and there is no withholding tax in Hong Kong on remittance of dividends.
Under the current tax laws of Hong Kong, our subsidiaries in Hong Kong are exempted from income tax on their foreign-derived income and there is no withholding tax in Hong Kong on remittance of dividends. Dividends from Tencent Music Entertainment Hong Kong Limited is not subject to Hong Kong profits tax.
(2) Includes the net losses/gains on deemed disposals/disposals of investments, fair value changes arising from investments, impairment provision of investments and other expenses in relation to equity transactions of investments. (3) Represents the fair value changes on the put liability of certain shares issued in 2018. (4) Represents the income tax effects of Non-IFRS adjustments.
(2) Includes the net losses/gains on deemed disposals/disposals of investments, fair value changes arising from investments, impairment provision of investments and other expenses in relation to equity transactions of investments. (3) Represents the income tax effects of Non-IFRS adjustments. (4) Each ADS represents two of our Class A ordinary shares.
For the Year Ended December 31, 2020 2021 2022 RMB % RMB % RMB US$ % (in millions, except for percentages) Cost of revenues Service costs 17,478 88.0 18,992 87.0 16,540 2,398 84.5 Other cost of revenues 2,373 12.0 2,848 13.0 3,026 439 15.5 Total cost of revenues 19,851 100.0 21,840 100.0 19,566 2,837 100.0 Our cost of revenues primarily includes service costs, which mainly comprise (i) content costs, which primarily consist of royalties paid to music labels and other content partners and our in-house production costs.
For the Year Ended December 31, 2021 2022 2023 RMB % RMB % RMB US$ % (in millions, except for percentages) Cost of revenues Service costs 18,992 87.0 16,540 84.5 14,176 1,997 78.9 Other cost of revenues 2,848 13.0 3,026 15.5 3,781 533 21.1 Total cost of revenues 21,840 100.0 19,566 100.0 17,957 2,529 100.0 Our cost of revenues primarily includes service costs, which mainly comprise (i) content costs, which primarily consist of royalties paid to music labels and other content partners and our in-house production costs.
If our existing cash is insufficient to meet our requirements, we may seek to issue debt or equity securities or obtain additional credit facilities. Financing may be unavailable in the amounts we need or on terms acceptable to us, if at all. Issuance of additional equity securities, including convertible debt securities, would dilute our earnings per share.
Financing may be unavailable in the amounts we need or on terms acceptable to us, if at all. Issuance of additional equity securities, including convertible debt securities, would dilute our earnings per share.
We had other gains, net, of RMB362 million, RMB553 million and RMB516 million (US$75 million) in 2020, 2021 and 2022, respectively. Taxation We had income tax expense of RMB456 million, RMB417 million and RMB534 million (US$77 million) in 2020, 2021 and 2022, respectively. We are subject to various rates of income tax under different jurisdictions.
We had other gains, net, of RMB553 million, RMB516 million and RMB230 million (US$32 million) in 2021, 2022 and 2023, respectively. Taxation We had income tax expense of RMB417 million, RMB534 million and RMB825 million (US$116 million) in 2021, 2022 and 2023, respectively. We are subject to various rates of income tax under different jurisdictions.
Up to the date of this annual report, we have repurchased ADSs from the open market for an aggregate amount of approximately US$19 million in cash pursuant to the 2019 Share Repurchase Program, approximately US$1 billion in cash pursuant to the 2021 Share Repurchase Program and nil pursuant to the 2023 Share Repurchase Program.
As of April 10, 2024, we have repurchased ADSs from the open market for an aggregate amount of approximately US$19 million in cash pursuant to the 2019 Share Repurchase Program, approximately US$1 billion in cash pursuant to the 2021 Share Repurchase Program and US$236 million pursuant to the 2023 Share Repurchase Program.
In addition, our subsidiaries in China are permitted to pay dividends to us only out of their retained earnings, if any, as determined in accordance with the Accounting Standards for Business Enterprise as promulgated by the Ministry of Finance, or PRC GAAP.
If our subsidiaries or any newly formed subsidiaries incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us. 121 In addition, our subsidiaries in China are permitted to pay dividends to us only out of their retained earnings, if any, as determined in accordance with the Accounting Standards for Business Enterprise as promulgated by the Ministry of Finance, or PRC GAAP.
We believe that adjusted profit for the year provides useful information about our results of operations, enhances the overall understanding of our past performance and future prospects and allows for greater visibility with respect to key metrics used by our management in its financial and operational decision-making.
We believe that adjusted profit for the year provides useful information about our results of operations, enhances the overall understanding of our past performance and future prospects and allows for greater visibility with respect to key metrics used by our management in its financial and operational decision-making. 117 Adjusted profit for the year should not be considered in isolation or construed as an alternative to operating profit, profit for the year or any other measure of performance or as an indicator of our operating performance.
Adjusted profit for the year presented here may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to our data.
Investors are encouraged to review adjusted profit for the year and the reconciliation to its most directly comparable IFRS measure. Adjusted profit for the year presented here may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to our data.
Our R&D expenses were RMB1,667 million, RMB2,339 million and RMB2,580 million (US$374 million) in 2020, 2021 and 2022, respectively. 5.D.
Our R&D expenses were RMB2,339 million, RMB2,580 million and RMB2,525 million (US$356 million) in 2021, 2022 and 2023, respectively. 5.D.
Risk Factors — Risks Related to Our Business and Industry — Our business operations may be adversely affected by the heightened regulatory oversight and scrutiny on live streaming platforms and performers.” We are working to increase our competitiveness through ongoing product innovations and by building additional verticals in social entertainment such as audio live streaming, international expansion and virtual interactive product offerings.
Risk Factors — Risks Related to Our Business and Industry — Our business operations may be adversely affected by the heightened regulatory oversight and scrutiny on live streaming platforms and performers.” We are striving to increase our competitive edge through ongoing product innovations and expanding into new areas of social entertainment such as interactive product offerings.
The decrease was mainly attributable to the decrease in fair value change of investments, government grants and tax rebates, partially offset by gains on step-up acquisition arising from business combination. Operating profits As a result of the foregoing, our operating profit for the year increased by 16.9% to RMB4,443 million (US$644 million) in 2022 from RMB3,800 million in 2021.
The decrease was mainly attributable to decrease in gains on step-up acquisition arising from business combination, tax rebates and government grants. Operating profits As a result of the foregoing, our operating profit for the year increased by 36.4% to RMB6,059 million (US$853 million) in 2023 from RMB4,443 million in 2022.
Operating margin increased to 15.7% in 2022 from 12.2% in 2021. Finance cost Our finance cost was RMB108 million (US$16 million) in 2022, as compared to RMB121 million in 2021. The decrease was primarily due to the fluctuation of foreign exchange rate.
Operating margin increased to 21.8% in 2023 from 15.7% in 2022. Finance cost Our finance cost was RMB141 million (US$20 million) in 2023, as compared to RMB108 million in 2022. The increase was primarily due to the fluctuation of foreign exchange rate.
For the Year Ended December 31, 2020 2021 2022 RMB RMB RMB US$ (in millions) Selected Consolidated Cash Flow Data: Net cash generated from operating activities 4,885 5,239 7,481 1,085 Net cash used in investing activities (14,206 ) (5,999 ) (1,446 ) (210 ) Net cash generated from/(used in) financing activities 5,292 (3,710 ) (3,419 ) (496 ) Net (decrease)/increase in cash and cash equivalents (4,029 ) (4,470 ) 2,616 379 Cash and cash equivalents at beginning of the year 15,426 11,128 6,591 956 Exchange differences on cash and cash equivalents (269 ) (67 ) 348 50 Cash and cash equivalents at end of the year 11,128 6,591 9,555 1,385 120 The paragraphs below set forth a detailed cashflow analysis for the year ended December 31, 2022.
For the Year Ended December 31, 2021 2022 2023 RMB RMB RMB US$ (in millions) Selected Consolidated Cash Flow Data: Net cash generated from operating activities 5,239 7,481 7,337 1,033 Net cash used in investing activities (5,999 ) (1,446 ) (1,863 ) (262 ) Net cash used in financing activities (3,710 ) (3,419 ) (1,538 ) (217 ) Net (decrease)/increase in cash and cash equivalents (4,470 ) 2,616 3,936 554 Cash and cash equivalents at beginning of the year 11,128 6,591 9,555 1,346 Exchange differences on cash and cash equivalents (67 ) 348 76 11 Cash and cash equivalents at end of the year 6,591 9,555 13,567 1,911 The paragraphs below set forth a detailed cashflow analysis for the year ended December 31, 2023.
For the Year Ended December 31, 2020 2021 2022 RMB % RMB % RMB US$ % (in millions, except for percentages) Operating expenses Selling and marketing expenses 2,475 44.4 2,678 40.0 1,144 166 20.6 General and administrative expenses (1) 3,101 55.6 4,009 60.0 4,413 640 79.4 Total operating expenses 5,576 100.0 6,687 100.0 5,557 806 100.0 Note: (1) Includes R&D expenses of RMB1,667 million, RMB2,339 million and RMB2,580 million (US$374 million) in 2020, 2021 and 2022, respectively.
For the Year Ended December 31, 2021 2022 2023 RMB % RMB % RMB US$ % (in millions, except for percentages) Operating expenses Selling and marketing expenses 2,678 40.0 1,144 20.6 897 126 17.9 General and administrative expenses (1) 4,009 60.0 4,413 79.4 4,121 580 82.1 Total operating expenses 6,687 100.0 5,557 100.0 5,018 707 100.0 Note: (1) Includes R&D expenses of RMB2,339 million, RMB2,580 million and RMB2,525 million (US$356 million) in 2021, 2022 and 2023, respectively.
The increase was primarily due to increased balances of our cash and cash equivalents and term deposits. 117 Other gains, net Our other gains, net, were RMB516 million (US$75 million) in 2022, as compared to other gains, net, of RMB553 million in 2021.
Interest income Our interest income was RMB1,052 million (US$148 million) in 2023, as compared to RMB711 million in 2022. The increase was primarily due to increased balances of our cash and cash equivalents and term deposits. Other gains, net Our other gains, net, were RMB230 million (US$32 million) in 2023, as compared to RMB516 million in 2022.
Operating activities Net cash generated from operating activities was RMB7,481 million (US$1,085 million) in 2022.
Operating activities Net cash generated from operating activities was RMB7,337 million (US$1,033 million) in 2023.
Recoverability of non-financial assets We test annually whether goodwill has suffered any impairment. Goodwill and other non-financial assets, mainly including property, plant and equipment, right-of-use assets, intangible assets, as well as investments accounted for using equity method are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
Goodwill and other non-financial assets, mainly including property, plant and equipment, right-of-use assets, intangible assets, as well as investments accounted for using equity method are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The recoverable amounts have been determined based on value-in-use calculations or fair value less costs to sell.
We adopt a holistic approach to operating our online music services and social entertainment services to foster the collaboration between them. We leverage our strong product functions and content recommendation and technology capabilities to further enhance product integration between these two services.
We adopt a holistic approach to operating our online music services and social entertainment services to foster the collaboration between them. We leverage our robust product features, content recommendations, and technological capabilities to facilitate seamless integration between these services.
For the Year Ended December 31, 2020 2021 2022 RMB % RMB % RMB US$ % (in millions, except for percentages) Revenues Online music services 9,349 32.1 11,467 36.7 12,483 1,810 44.0 Social entertainment services and others 19,804 67.9 19,777 63.3 15,856 2,299 56.0 Total revenues 29,153 100.0 31,244 100.0 28,339 4,109 100.0 Online music services.
For the Year Ended December 31, 2021 2022 2023 RMB % RMB % RMB US$ % (in millions, except for percentages) Revenues Online music services 11,467 36.7 12,483 44.0 17,325 2,440 62.4 Social entertainment services and others 19,777 63.3 15,856 56.0 10,427 1,469 37.6 Total revenues 31,244 100.0 28,339 100.0 27,752 3,909 100.0 Online music services.
Payment due by period Total Less than 1 year 1 – 3 years 3 – 5 years More than 5 years RMB US$ RMB US$ RMB US$ RMB US$ RMB US$ (in millions) Operating commitments (1) 79 11 61 9 18 3 — — — — Content royalties (2) 2,093 304 1,743 253 344 50 6 1 — — Investment commitments (3) 13 2 13 2 — — — — — — Capital commitments 3 — 3 — — — — — — — Notes: (1) Represents our future minimum commitments under non-cancelable operating arrangements, which are mainly related to property management and other services.
Payment due by period Total Less than 1 year 1–3 years 3–5 years More than 5 years RMB US$ RMB US$ RMB US$ RMB US$ RMB US$ (in millions) Operating commitments (1) 43 6 31 4 12 2 — — — — Content royalties (2) 4,459 628 2,949 415 1,510 213 — — — — Investment commitments (3) 25 4 25 4 — — — — — — Capital commitments 1 0 1 0 — — — — — — Notes: (1) Represents our future minimum commitments under non-cancelable operating arrangements, which are mainly related to property management and other services.
For the Year Ended December 31, 2020 2021 2022 RMB % RMB % RMB US$ % (in millions, except for percentages) Revenues Online music services 9,349 32.1 11,467 36.7 12,483 1,810 44.0 Social entertainment services and others 19,804 67.9 19,777 63.3 15,856 2,299 56.0 Total revenues 29,153 100.0 31,244 100.0 28,339 4,109 100.0 Cost of revenues (1) (19,851 ) (68.1 ) (21,840 ) (69.9 ) (19,566 ) (2,837 ) (69.0 ) Gross profit 9,302 31.9 9,404 30.1 8,773 1,272 31.0 Operating expenses Selling and marketing expenses (1) (2,475 ) (8.5 ) (2,678 ) (8.6 ) (1,144 ) (166 ) (4.0 ) General and administrative expenses (1) (3,101 ) (10.6 ) (4,009 ) (12.8 ) (4,413 ) (640 ) (15.6 ) Total operating expenses (5,576 ) (19.1 ) (6,687 ) (21.4 ) (5,557 ) (806 ) (19.6 ) Interest income 622 2.1 530 1.7 711 103 2.5 Other gains, net 362 1.2 553 1.8 516 75 1.8 Operating profit 4,710 16.2 3,800 12.2 4,443 644 15.7 Share of net profit/(loss) of investments accounted for using equity method 19 0.1 (47 ) (0.2 ) 38 6 0.1 Finance cost (2) (97 ) (0.3 ) (121 ) (0.4 ) (108 ) (16 ) (0.4 ) Profit before income tax 4,632 15.9 3,632 11.6 4,373 634 15.4 Income tax expense (456 ) (1.6 ) (417 ) (1.3 ) (534 ) (77 ) (1.9 ) Profit for the year 4,176 14.3 3,215 10.3 3,839 557 13.5 Note: (1) Share-based compensation expenses were allocated as follows: For the Year Ended December 31, 2020 2021 2022 RMB RMB RMB US$ (in millions) Cost of revenues 41 56 74 11 Selling and marketing expenses 24 31 43 6 General and administrative expenses 504 665 706 102 Total 569 752 823 119 (2) Finance cost mainly comprises interest on notes we issued and lease liabilities.
For the Year Ended December 31, 2021 2022 2023 RMB % RMB % RMB US$ % (in millions, except for percentages) Revenues Online music services 11,467 36.7 12,483 44.0 17,325 2,440 62.4 Social entertainment services and others 19,777 63.3 15,856 56.0 10,427 1,469 37.6 Total revenues 31,244 100.0 28,339 100.0 27,752 3,909 100.0 Cost of revenues (1) (21,840 ) (69.9 ) (19,566 ) (69.0 ) (17,957 ) (2,529 ) (64.7 ) Gross profit 9,404 30.1 8,773 31.0 9,795 1,380 35.3 Operating expenses Selling and marketing expenses (1) (2,678 ) (8.6 ) (1,144 ) (4.0 ) (897 ) (126 ) (3.2 ) General and administrative expenses (1) (4,009 ) (12.8 ) (4,413 ) (15.6 ) (4,121 ) (580 ) (14.8 ) Total operating expenses (6,687 ) (21.4 ) (5,557 ) (19.6 ) (5,018 ) (707 ) (18.1 ) Interest income 530 1.7 711 2.5 1,052 148 3.8 Other gains, net 553 1.8 516 1.8 230 32 0.8 Operating profit 3,800 12.2 4,443 15.7 6,059 853 21.8 Share of net (loss)/profit of investments accounted for using equity method (47 ) (0.2 ) 38 0.1 127 18 0.5 Finance cost (2) (121 ) (0.4 ) (108 ) (0.4 ) (141 ) (20 ) (0.5 ) Profit before income tax 3,632 11.6 4,373 15.4 6,045 851 21.8 Income tax expense (417 ) (1.3 ) (534 ) (1.9 ) (825 ) (116 ) (3.0 ) Profit for the year 3,215 10.3 3,839 13.5 5,220 735 18.8 Note: (1) Share-based compensation expenses were allocated as follows: 115 For the Year Ended December 31, 2021 2022 2023 RMB RMB RMB US$ (in millions) Cost of revenues 56 74 57 8 Selling and marketing expenses 31 43 36 5 General and administrative expenses 665 706 577 81 Total 752 823 670 94 (2) Finance cost mainly comprises interest on notes we issued and lease liabilities.
Other cost of revenues increased by 6.3% from RMB2,848 million in 2021 to RMB3,026 million (US$439 million) in 2022, which was primarily attributable to higher payment channel fees. Gross profit As a result of the foregoing, our gross profit decreased by 6.7% from RMB9,404 million in 2021 to RMB8,773 million (US$1,272 million) in 2022.
Other cost of revenues increased by 25.0% from RMB3,026 million in 2022 to RMB3,781 million (US$533 million) in 2023, which was primarily attributable to higher advertising agency fee and payment channel fees. Gross profit As a result of the foregoing, our gross profit increased by 11.6% from RMB8,773 million in 2022 to RMB9,795 million (US$1,380 million) in 2023.
For the Year Ended December 31, 2020 2021 2022 Mobile MAUs (1) (in millions) Online music services 644 622 588 Social entertainment services 240 203 157 Paying users (1) (in millions) Online music services 49.4 68.6 84.2 Social entertainment services 11.7 10.3 7.8 Paying ratio (1) Online music services 7.7 % 11.0 % 14.3 % Social entertainment services 4.9 % 5.1 % 5.0 % Monthly ARPPU (1) (RMB) Online music services (2) 9.4 8.9 8.6 Social entertainment services (3) 141.1 160.0 169.4 Notes: (1) For definitions, see “Introduction.” (2) The revenues used to calculate the monthly ARPPU of online music services include revenues from subscriptions only.
For the Year Ended December 31, 2021 2022 2023 MAUs (1) (in millions) Online music services – MAUs 622 620 589 Social entertainment services – Mobile MAUs 203 157 126 Paying users (1) (in millions) Online music services 68.6 84.2 100.9 Social entertainment services 10.3 7.8 7.6 Paying ratio (1) Online music services 11.0 % 13.6 % 17.1 % Social entertainment services 5.1 % 5.0 % 6.0 % Monthly ARPPU (1) (RMB) Online music services (2) 8.9 8.6 10.0 Social entertainment services (3) 160.0 169.4 114.3 Notes: (1) For definitions of the metrics presented, see “Introduction.” Starting from the first quarter of 2023, online music MAUs began to include unique mobile and certain IoT devices.
Instead, non-resident enterprises and their withholding agents may, by self-assessment and on confirmation that the prescribed criteria to enjoy the tax treaty benefits are met, directly apply the reduced withholding tax rate, and file necessary forms and supporting documents when performing tax filings, which will be subject to post-tax filing examinations by the relevant tax authorities.
Instead, non-resident enterprises and their withholding agents may, by self-assessment and on confirmation that the prescribed criteria to enjoy the tax treaty benefits are met, directly apply the reduced withholding tax rate, and file necessary forms and supporting documents when performing tax filings, which will be subject to post-tax filing examinations by the relevant tax authorities. 114 Accordingly, Tencent Music Entertainment Hong Kong Limited may be able to benefit from the 5% withholding tax rate for the dividends it receives from its PRC subsidiaries, if it satisfies the conditions prescribed under SAT Circular 81 and other relevant tax rules and regulations.
We believe that our current cash and anticipated cash flow from operations will be sufficient to meet our anticipated cash needs, including our cash needs for working capital and capital expenditures, for at least the next 12 months. 119 On December 17, 2019, we announced a share repurchase program under which we may repurchase up to US$400 million of our Class A ordinary shares in the form of ADSs pursuant to relevant SEC rules during a twelve-month period commencing on December 15, 2019 (the “2019 Share Repurchase Program”).
On December 17, 2019, we announced a share repurchase program under which we may repurchase up to US$400 million of our Class A ordinary shares in the form of ADSs pursuant to relevant SEC rules during a twelve-month period commencing on December 15, 2019 (the “2019 Share Repurchase Program”).
We expect that our cost of revenues including, in particular, our service costs, will fluctuate in absolute amount in the foreseeable future as it is affected by various factors as discussed above.
For example, users may engage in online karaoke singing of a track that they discover through listening to music via our online music services. We expect that our cost of revenues including, in particular, our service costs, will fluctuate in absolute amount in the foreseeable future as it is affected by various factors as discussed above.
Risk Factors — Risks Related to Doing Business in China — We may be classified as a ‘PRC resident enterprise’ for PRC enterprise income tax purposes, which could result in unfavorable tax consequences to us and our non-PRC shareholders and ADS holders and have a material adverse effect on our results of operations and the value of your investment.” 115 Results of Operations The following table summarizes our consolidated results of operations and as percentages of total revenues for the periods presented.
Risk Factors — Risks Related to Doing Business in China — We may be classified as a ‘PRC resident enterprise’ for PRC enterprise income tax purposes, which could result in unfavorable tax consequences to us and our non-PRC shareholders and ADS holders and have a material adverse effect on our results of operations and the value of your investment.” In December 2021, the Organization for Economic Co-operation and Development published Pillar Two model rules, enabling jurisdictions to enact domestic tax laws to implement a globally agreed common approach.
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Revenues Our revenues decreased by 9.3% from RMB31,244 million in 2021 to RMB28,339 million (US$4,109 million) in 2022.
Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Revenues Our revenues decreased by 2.1% from RMB28,339 million in 2022 to RMB27,752 million (US$3,909 million) in 2023.
Our ability to increase paying ratio and strengthen our monetization capability Our results of operations depend on our ability to convert our vast user base into paying users and drive their spending on our platforms.
Our ability to increase paying ratio and strengthen our monetization capability Our results of operations depend on our ability to convert our vast user base into paying users and drive their spending on our platforms. The table below sets forth certain key operating metrics for our online music services and social entertainment services for the periods indicated.
Financing activities Net cash used in financing activities in 2022 was RMB3,419 million (US$496 million), which was mainly due to (i) payment for repurchase of ordinary shares of RMB3,127 million (US$453 million); (ii) payment for lease liabilities of RMB130 million (US$19 million); and (iii) payments for interests of RMB115 million (US$17 million).
Financing activities Net cash used in financing activities in 2023 was RMB1,538 million (US$217 million), which was mainly due to (i) payment for repurchase of ordinary shares of RMB1,249 million (US$176 million); (ii) payments for interests of RMB117 million (US$16 million); and (iii) payment for lease liabilities of RMB116 million (US$16 million).
In addition, we also generate online music revenues from: (i) offering display and performance-based advertising solutions on our platform with pricing arrangements based on various factors, including the form and size of the advertisements, level of sponsorship and popularity of the content; (ii) selling digital music singles and albums to users on our platform; (iii) providing long-form audio-related services.
We generate revenues from our online music services primarily from (i) subscriptions, namely from paid music and audio through sale of subscription packages for a fixed monthly fee; and (ii) offering display and performance-based advertising solutions on our platform with pricing arrangements based on various factors, including the form and size of the advertisements, level of sponsorship and popularity of the content.
In 2022, we paid an aggregate of US$14 million in interest payments related to these notes. We intend to finance our future working capital requirements and capital expenditures from cash generated from operating activities. We may, however, require additional cash due to changing business conditions or other future developments, including any investments or acquisitions we may decide to pursue.
In 2023, we paid an aggregate of US$14 million in interest payments related to these notes. We intend to finance our future working capital requirements and capital expenditures from cash generated from operating activities and potentially dividends from our subsidiaries.
We intend to fund our future capital expenditures with our existing cash balance and cash generated from operating activities. We will continue to make capital expenditures to meet the expected growth of our business. 121 Commitments The following table sets forth our commitments as of December 31, 2022.
Our capital expenditures were RMB2,758 million, RMB1,053 million and RMB1,164 million (US$164 million) in 2021, 2022 and 2023, respectively. We intend to fund our future capital expenditures with our existing cash balance and cash generated from operating activities. We will continue to make capital expenditures to meet the expected growth of our business.
For the years ended December 31, 2020 and 2021, Yeelion Online and TME Tech Shenzhen were entitled to a reduced tax rate of 12.5%. For the year ended December 31, 2022, Yeelion Online and TME Tech Shenzhen were recognized as HNTE by relevant government authorities and entitled to a preferential tax rate of 15%.
For the year ended December 31, 2022 and 2023, Yeelion Online Network Technology (Beijing) Co., Ltd. (“Yeelion Online”) and Tencent Music Entertainment Technology (Shenzhen) Co., Ltd. (“TME Tech Shenzhen”) were recognized as HNTE by relevant government authorities and entitled to a preferential tax rate of 15%. Guangzhou Shiyinlian Software Technology Co., Ltd.
Income tax expense We had an income tax expense of RMB534 million (US$77 million) and RMB417 million in 2022 and 2021, respectively. Our effective tax rate was 12.2% in 2022, as compared to 11.5% in 2021. The higher effective tax rate in 2022 was because some of our entities were entitled to different tax benefits in 2021 and 2022.
Income tax expense We had an income tax expense of RMB825 million (US$116 million) and RMB534 million in 2023 and 2022, respectively. Our effective tax rate was 13.6% in 2023, as compared to 12.2% in 2022.
Historically, users in China had a relatively lower willingness to pay for online music services as compared with more developed markets, and therefore we, in the past, mainly focused on providing attractive music content and functionalities for our online music services, with a view towards gradually cultivating users’ habits and willingness to pay in the long term.
As a result, we initially focused on providing attractive music content and features for our online music services, with a view towards gradually cultivating users’ habits and willingness to pay in the long term. With our sustained efforts, we have observed a shift in how users perceive music consumption.
(5) Each ADS represents two of our Class A ordinary shares. Recent Accounting Pronouncements For detailed discussion on recent accounting pronouncements, see Note 2.2 to the consolidated financial statements of Tencent Music Entertainment Group included elsewhere in this annual report. 5.B.
Recent Accounting Pronouncements For detailed discussion on recent accounting pronouncements, see Note 2.2 to the consolidated financial statements of Tencent Music Entertainment Group included elsewhere in this annual report. 118 5.B. Liquidity and Capital Resources Cash Flows and Working Capital Our principal sources of liquidity have been cash generated from operating activities.
The table below sets forth the number of mobile MAUs, paying users, paying ratio and monthly ARPPU for our online music services and social entertainment services for the periods indicated. These figures have not been adjusted to eliminate duplicate access of different products and services by the same user, if any, during any given period.
These figures have not been adjusted to eliminate duplicate access of different products and services by the same user, if any, during any given period.
Operating Results General Factors Affecting Our Results of Operations Our business and results of operations are affected by a number of general factors affecting China’s online music and audio entertainment industry, which include: • our growth strategies; • our future business development, financial condition and results of operations; • our ability to retain, grow and engage our user base and expand our content and experience offering; • expected changes in our revenues, content-related costs and operating margins; • the evolving regulatory environment; • our ability to retain key personnel and attract new talent; • competition in China’s online music and audio entertainment industry; and • general economic, political, demographic and business conditions in China and globally.
Operating Results General Factors Affecting Our Results of Operations Our business and results of operations are affected by a number of general factors affecting China’s online music and audio entertainment industry, which include the evolving regulatory environment, competition in China’s online music and audio entertainment industry, and general economic, political, demographic and business conditions in China and globally, among others.
In the meantime, we will also endeavor to maintain the competitiveness of our social entertainment services amid the increased market competition and regulatory scrutiny through continuous product innovations and a variety of new initiatives such as audio live streaming and virtual interactive product offerings. 110 Our ability to continue to monetize our user base is affected by a number of factors, such as our ability to enhance user engagement, our ability to cultivate users’ willingness to pay for online music services and social entertainment services, as well as our ability to integrate more monetization models including, for example, the pay-for-streaming model and advertising services, into the overall user experience on our platform.
Our ability to continue to monetize our user base is affected by a number of factors, such as our ability to enhance user engagement, our ability to cultivate users’ willingness to pay for online music services and social entertainment services, as well as our ability to integrate more monetization models including, for example, ad-supported mode and artist-related merchandise, into the overall user experience on our platform.
We generate our social entertainment and other services revenues through live streaming, online karaoke, sales of music-related merchandise and certain other services. We generate revenues from live streaming and online karaoke services primarily through sales of virtual gifts.
We expect our revenues from online music services to increase in both absolute amount and as a percentage of our total revenues in the foreseeable future. Social entertainment services and others. We generate our social entertainment and other services revenues through live streaming, online karaoke, sales of music-related merchandise and certain other services.
Our cash and cash equivalents consist primarily of bank deposits and highly liquid investments, which have original maturities of three months or less when purchased.
As of December 31, 2023, we had RMB13,567 million (US$1,911 million) in cash and cash equivalents. Our cash and cash equivalents consist primarily of bank deposits and highly liquid investments, which have original maturities of three months or less when purchased. In addition, we had RMB18,656 million (US$2,628 million) in term deposits as of December 31, 2023.
We expect that the amounts of such service fees and royalty payments will increase in the foreseeable future as our business continues to grow. If our subsidiaries or any newly formed subsidiaries incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us.
We expect that the amounts of such service fees and royalty payments will increase in the foreseeable future as our business continues to grow.
The difference between our profit before income tax of RMB4,373 million (US$634 million) and the net cash generated from operating activities was mainly due to (i) the increase in accounts payable and other liabilities of RMB1,322 million (US$192 million); (ii) depreciation and amortization of RMB1,160 million (US$168 million); (iii) the decrease in accounts receivable of RMB906 million(US$131 million);and (iv) non-cash share-based compensation expense of RMB665 million (US$96 million); partially offset by (i) the income tax paid of RMB733 million (US$106 million) and (ii) the step acquisition gain of RMB141 million(US$20 million).
The difference between our profit before income tax of RMB6,045 million (US$851 million) and the net cash generated from operating activities was mainly due to (i) depreciation and amortization of RMB1,004 million (US$141 million); (ii) the increase in other liabilities of RMB846 million (US$119 million); (iii) non-cash share-based compensation expense of RMB649 million (US$91 million); and (iv) the decrease in other operating assets of RMB85 million (US$12 million); partially offset by (i) the income tax paid of RMB825 million (US$116 million) and (ii) the increase in accounts receivable of RMB204 million(US$29 million); and (iii)the share of profit from associates and joint ventures RMB127 million(US$18 million).
Investing activities Net cash used in investing activities was RMB1,446 million (US$210 million) in 2022, which was primarily attributable to (i) placement of term deposits with initial terms of over three months of RMB33,919 million (US$4,918 million); (ii) purchase of land use right of RMB526 million(US$76 million); (iii) payments for equity investments of RMB473 million (US$69 million); (iv) purchase of intangible assets of RMB442 million (US$64 million); (v) and payments for business combinations of RMB165 million (US$24 million); partially offset by (i) receipt from maturity of term deposits with initial terms of over three months of RMB33,170 million (US$4,809 million); and (ii) receipt from short-term investments of RMB1,215 million (US$176 million).
Investing activities Net cash used in investing activities was RMB1,863 million (US$262 million) in 2023, which was primarily attributable to (i) placement of term deposits with initial terms of over three months of RMB13,663 million (US$1,924 million); (ii) purchase of land use right of RMB543 million(US$76 million); (iii) purchase of intangible assets of RMB456 million (US$64 million); and (iv) purchase of property, plant and equipment of RMB165 million (US$23 million); partially offset by (i) receipt from maturity of term deposits with initial terms of over three months of RMB12,828 million (US$1,807 million).
In the foreseeable future, we will continue to drive the paying user conversion and revenues of our online music services as the more important contributor to the overall monetization of our platform and we expect the revenues generated from our online music services to steadily increase.
In the foreseeable future, we intend to continue our focus on increasing the conversion of paying users and revenues of our online music services, as they are key to our overall 110 platform monetization. We expect a steady increase in the revenue from these services.

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Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeOrdinary Shares Underlying Equity Awards Granted Exercise Price (US$/Share) Date of Grant Date of Expiration Cussion Kar Shun Pang * 0 to 7.1411 various dates from June 16, 2017 to March 15, 2023 various dates from June 16, 2027 to March 15, 2033 Zhu Liang * 0 to 7.605 various dates from May 15, 2021 to March 15, 2023 various dates from May 15, 2031 to March 15, 2033 Zhenyu Xie * 0 to 7.1411 various dates from October 17, 2018 to March 15, 2023 various dates from October 17, 2028 to March 15, 2033 James Gordon Mitchell — — — — Brent Richard Irvin — — — — Matthew Yun Ming Cheng — — — — Edith Manling Ngan * 0 December 15, 2022 December 15, 2032 Adrian Yau Kee Mak * 0 November 15, 2022 November 15, 2032 Jeanette Kim Yum Chan * 0 October 15, 2022 October 15, 2032 Min Hu * 0 to 7.1411 various dates from December 20, 2017 to March 15, 2023 various dates from December 20, 2027 to March 15, 2033 Cheuk Tung Tony Yip * 0 to 7.1411 various dates from April 16, 2018 to March 15, 2023 various dates from April 16, 2028 to March 15, 2033 Linlin Chen * 0 to 7.1411 various dates from October 17, 2018 to March 15, 2023 various dates from October 17, 2028 to March 15, 2033 Lixue Shi * 0 to 7.1411 various dates from October 17, 2018 to March 15, 2023 various dates from October 17, 2028 to March 15, 2033 Tsai Chun Pan * 0 to 6.2 various dates from January 19, 2020 to March 15, 2023 various dates from January 19, 2030 to March 15, 2033 All directors and executive officers as a group * 0 to 7.605 Various dates from June 16, 2017 to March 15, 2023 Various dates from June 16, 2027 to March 15, 2033 Notes: *Less than 1% of our total outstanding shares.
Biggest changeOrdinary Shares Underlying Equity Awards Granted Exercise Price (US$/Share) Date of Grant Date of Expiration Cussion Kar Shun Pang * 0 to 7.1411 various dates from June 16, 2017 to March 15, 2024 various dates from June 16, 2027 to March 15, 2034 Zhu Liang * 0 to 7.605 various dates from May 15, 2021 to March 15, 2024 various dates from May 15, 2031 to March 15, 2034 Min Hu * 0 to 7.1411 various dates from December 20, 2017 to March 15, 2024 various dates from December 20, 2027 to March 15, 2034 James Gordon Mitchell — — — — Brent Richard Irvin — — — — Matthew Yun Ming Cheng — — — — Edith Manling Ngan * 0 December 15, 2023 December 15, 2033 Adrian Yau Kee Mak * 0 November 15, 2023 November 15, 2033 Jeanette Kim Yum Chan * 0 October 15, 2023 October 15, 2033 Linlin Chen * 0 to 7.1411 various dates from October 17, 2018 to March 15, 2024 various dates from October 17, 2028 to March 15, 2034 Tsai Chun Pan * 0 to 6.2 various dates from June 12, 2020 to March 15, 2024 various dates from June 12, 2030 to March 15, 2034 All directors and executive officers as a group * 0 to 7.605 Various dates from June 16, 2017 to March 15, 2024 Various dates from June 16, 2027 to March 15, 2034 Notes: *Less than 1% of our total outstanding shares.
Adrian Yau Kee Mak has served as a member of our board of directors, and, for purposes of the Hong Kong Listing Rules, an independent non-executive director, since October 2020, and is the chairman of the audit committee of the Board. Mr. Mak is primarily responsible for supervising and providing independent judgment to the Board.
Adrian Yau Kee Mak has served as a member of our board of directors, and, for purposes of the Hong Kong Listing Rules, an independent non-executive director, since October 2020, and is the chairman of the audit committee of the Board. Mr. Mak is primarily responsible for supervising and providing independent judgment to the Board. Mr.
The business address of Mr. Zhu Liang is FIYTA Hi-tech Building, Gaoxin South 1st Road, Nanshan District, Shenzhen City, Guangdong Province, China. The business address of Mr. James Gordon Mitchell and Mr. Brent Richard Irvin is Tencent Building, Kejizhongyi Road, Hi-tech Park, Nanshan District, Shenzhen, 518057, China. The business address of Mr.
Zhu Liang is FIYTA Hi-tech Building, Gaoxin South 1st Road, Nanshan District, Shenzhen City, Guangdong Province, China. The business address of Mr. James Gordon Mitchell and Mr. Brent Richard Irvin is Tencent Building, Kejizhongyi Road, Hi-tech Park, Nanshan District, Shenzhen, 518057, China. The business address of Mr.
The audit committee is responsible for, among other things: • reviewing and recommending to our board for approval, the appointment, reappointment or removal of the independent registered public accounting firm, after considering its annual performance evaluation of the independent registered public accounting firm; • approving the remuneration and terms of engagement of the independent registered public accounting firm and pre-approving all auditing and non-auditing services permitted to be performed by our independent registered public accounting firm; • obtaining a written report from our independent registered public accounting firm describing matters relating to its independence and quality control procedures; • reviewing with the independent registered public accounting firm any audit problems or difficulties and any significant disagreements with the management; • discussing with our independent registered public accounting firm, among other things, the audits of the financial statements, including whether any material information should be disclosed, and issues regarding accounting and auditing principles and practices; 134 • reviewing and approving all proposed related party transactions, including those to be entered into with Tencent entities, subject to further approvals by our board pursuant to the terms of the committee charter; • reviewing and recommending the financial statements for inclusion within our quarterly and interim earnings releases and to our board for inclusion in our annual reports; • discussing the annual audited financial statements with management and the independent registered public accounting firm; • reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any special steps taken to monitor and control major financial risk exposures; • reviewing and reassessing the adequacy of the committee charter; • at least annually, approving annual audit plans, and undertaking an annual performance evaluation of the internal audit function; • overseeing and evaluating procedures for the handling of complaints and whistleblowing; • meeting separately and periodically with management, the internal auditors (or other personnel responsible for the internal audit function) and the independent registered public accounting firm; • monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance and reporting on such compliance to our board of directors; and • reporting regularly to the board of directors.
The audit committee is responsible for, among other things: • reviewing and recommending to our board for approval, the appointment, reappointment or removal of the independent registered public accounting firm, after considering its annual performance evaluation of the independent registered public accounting firm; • approving the remuneration and terms of engagement of the independent registered public accounting firm and pre-approving all auditing and non-auditing services permitted to be performed by our independent registered public accounting firm; • obtaining a written report from our independent registered public accounting firm describing matters relating to its independence and quality control procedures; • reviewing with the independent registered public accounting firm any audit problems or difficulties and any significant disagreements with the management; • discussing with our independent registered public accounting firm, among other things, the audits of the financial statements, including whether any material information should be disclosed, and issues regarding accounting and auditing principles and practices; • reviewing and approving all proposed related party transactions, including those to be entered into with Tencent entities, subject to further approvals by our board pursuant to the terms of the committee charter; • reviewing and recommending the financial statements for inclusion within our quarterly and interim earnings releases and to our board for inclusion in our annual reports; • discussing the annual audited financial statements with management and the independent registered public accounting firm; • reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any special steps taken to monitor and control major financial risk exposures; • reviewing and reassessing the adequacy of the committee charter; • at least annually, approving annual audit plans, and undertaking an annual performance evaluation of the internal audit function; • overseeing and evaluating procedures for the handling of complaints and whistleblowing; 132 • meeting separately and periodically with management, the internal auditors (or other personnel responsible for the internal audit function) and the independent registered public accounting firm; • monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance and reporting on such compliance to our board of directors; and • reporting regularly to the board of directors.
A general notice given to the directors by any director to the effect that he or she is a member, shareholder, director, partner, officer or employee of any specified company or firm and is to be regarded as interested in any contract or transaction with that company or firm shall be deemed a sufficient declaration of interest for the purposes of voting on a resolution in respect to a contract or transaction in which he or she has an interest, and after such general notice it shall not be necessary to give special notice relating to any particular transaction.
A general notice given to the directors by any director to the effect that he or she is a member, shareholder, director, partner, officer or employee of any specified company or firm and is to 131 be regarded as interested in any contract or transaction with that company or firm shall be deemed a sufficient declaration of interest for the purposes of voting on a resolution in respect to a contract or transaction in which he or she has an interest, and after such general notice it shall not be necessary to give special notice relating to any particular transaction.
A director will be removed from office automatically if, among other things, the director (i) becomes bankrupt or makes any arrangement or composition with his creditors; (ii) dies or is found by our company to be of unsound mind; (iii) resigns by notice in writing to our company; (iv) is prohibited by law or the Corporate Governance Rules of NYSE from being a director; or (v) is removed from office pursuant to any other provisions of our Articles of Association. 6.D.
A director will be removed from office automatically if, among other things, the director (i) becomes bankrupt or 133 makes any arrangement or composition with his creditors; (ii) dies or is found by our company to be of unsound mind; (iii) resigns by notice in writing to our company; (iv) is prohibited by law or the Corporate Governance Rules of NYSE from being a director; or (v) is removed from office pursuant to any other provisions of our Articles of Association. 6.D.
Grant Letter . Each award under the 2017 Restricted Share Scheme shall be evidenced by a written grant letter issued by the scheme administrator. The grantees are required to confirm their acceptance of the award by returning to the scheme administrator a notice of acceptance duly executed by them within 28 days after the date of grant.
Each award under the 2017 Restricted Share Scheme shall be evidenced by a written grant letter issued by the scheme administrator. The grantees are required to confirm their acceptance of the award by returning to the scheme administrator a notice of acceptance duly executed by them within 28 days after the date of grant. Conditions of Award .
In fulfilling their duty of care to us, our directors must ensure compliance with our Articles of Association, and the class rights vested thereunder in the holders of the shares. Our company 135 has the right to seek damages if a duty owed by our directors is breached.
In fulfilling their duty of care to us, our directors must ensure compliance with our Articles of Association, and the class rights vested thereunder in the holders of the shares. Our company has the right to seek damages if a duty owed by our directors is breached.
Matthew Yun Ming Cheng is 37/F, Gateway Tower 5, 15 Canton Road, Tsim Sha Tsui, Hong Kong. The business address of Ms. Edith Manling Ngan is Wu Yee Sun College Master’s Lodge, Chinese University of Hong Kong, Shatin, Hong Kong. The business address of Mr.
Matthew Yun Ming Cheng is 37/F, Gateway Tower 5, 15 Canton Road, Tsim Sha Tsui, Hong Kong. The business address of Ms. Edith Manling Ngan is Wu Yee Sun College Master’s Lodge, Chinese University of Hong Kong, Shatin, Hong Kong. The business address of Ms.
Conditions of Award . The administrator of the 2017 Restricted Share Scheme shall determine the provisions, terms and conditions of each award, including, but not limited to, vesting schedule, number of restricted shares to be granted, exercise price and term of each award. 131 Protection against Dilution .
The administrator of the 2017 Restricted Share Scheme shall determine the provisions, terms and conditions of each award, including, but not limited to, vesting schedule, number of restricted shares to be granted, exercise price and term of each award. Protection against Dilution .
The plan administrator may determine, at the time of grant or thereafter, that an award shall become vested and exercisable, in full or in part, in the event that a change in control of the company occurs. 129 Protection against Dilution .
The plan administrator may determine, at the time of grant or thereafter, that an award shall become vested and exercisable, in full or in part, in the event that a change in control of the company occurs. Protection against Dilution .
Types of Awards . The 2014 Share Incentive Plan permits the awards of options (including incentive share options and non-statutory share options), share appreciation rights, share grants and restricted share units, or RSUs. Plan Administration . The 2014 Share Incentive Plan shall be administered by our board or a committee appointed by the board.
The 2014 Share Incentive Plan permits the awards of options (including incentive share options and non-statutory share options), share appreciation rights, share grants and restricted share units, or RSUs. Plan Administration . The 2014 Share Incentive Plan shall be administered by our board or a committee appointed by the board.
The compensation committee will assist the directors in reviewing and approving the compensation structure for the directors and the executive officers. 128 Employment Agreements and Indemnification Agreements We have entered into employment agreements with each of our executive officers.
The compensation committee will assist the directors in reviewing and approving the compensation structure for the directors and the executive officers. Employment Agreements and Indemnification Agreements We have entered into employment agreements with each of our executive officers.
In the event of any division or other distribution (whether in the form of cash, shares or other securities), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of shares or other securities of the company, issuance of warrants or other rights to purchase shares or other securities of the company, or other similar corporate transaction or event affecting the shares, or of changes in applicable laws, regulations or accounting principles, the plan distributor may make appropriate equitable adjustments to the outstanding awards as well as number and types of shares available for future awards to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the 2017 Option Plan. 130 Transfer Restrictions .
In the event of any division or other distribution (whether in the form of cash, shares or other securities), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of shares or other securities of the company, issuance of warrants or other rights to purchase shares or other securities of the company, or other similar corporate transaction or event affecting the shares, or of changes in applicable laws, regulations or accounting principles, the plan distributor may make appropriate equitable adjustments to the outstanding awards as well as number and types of shares available for future awards to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the 2017 Option Plan.
He received a degree from Oxford University and holds a Chartered Financial Analyst Certification. 126 Brent Richard Irvin has served as a member of our board of directors since July 2016. Mr. Irvin joined Tencent in January 2010 and currently serves as the corporate vice president and the general counsel of Tencent.
He received a degree from Oxford University and holds a Chartered Financial Analyst Certification. 125 Brent Richard Irvin has served as a member of our board of directors since July 2016. Mr. Irvin joined Tencent in January 2010 and currently serves as the corporate vice president and the general counsel of Tencent.
Any employee (whether full time or part time), executives or officers, directors (including executive, non-executive and independent non-executive directors), consultants, advisers or agents of any member of our group or any entity in which any member of our group holds an equity interest, have contributed or will contribute to the growth and development of our group or any of our invested entity, to the extent an offer of an award or a receipt of such award is permitted by applicable law, stock market or exchange rules and regulations or accounting or tax rules and regulations.
Any employee (whether full time or part time), executives or officers, directors (including executive, non-executive and independent non-executive directors), consultants, advisers or agents of any member of our group or any entity in which any member of our group holds an equity interest, have contributed or will contribute to the growth and development of our group or any of our invested entity, to the extent an offer of an award or a receipt of such award is permitted by applicable law, stock market or exchange rules and regulations or accounting or tax rules and regulations. 129 Grant Letter .
Except as may be permitted by the plan administrator or as specifically provided in an award agreement, no award and no right under any award shall be assignable, alienable, saleable or transferable by a grantee other than by will or by designating a beneficiary following procedures approved or accepted by the plan administrator.
Transfer Restrictions . Except as may be permitted by the plan administrator or as specifically provided in an award agreement, no award and no right under any award shall be assignable, alienable, saleable or transferable by a grantee other than by will or by designating a beneficiary following procedures approved or accepted by the plan administrator.
Mak obtained a bachelor’s degree in chemical engineering from the University of Birmingham in the United Kingdom in July 1983. 127 Jeanette Kim Yum Chan has served as a member of our board of directors, and, for purposes of the Hong Kong Listing Rules, an independent non-executive director, since September 2022. Ms.
Mak obtained a bachelor’s degree in chemical engineering from the University of Birmingham in the United Kingdom. Jeanette Kim Yum Chan has served as a member of our board of directors, and, for purposes of the Hong Kong Listing Rules, an independent non-executive director, since September 2022. Ms.
The 2017 Restricted Share Scheme permits the awards of restricted shares. Scheme Administration . The 2017 Restricted Share Scheme shall be administrated by the board and the management committee established by the board. The board and the management committee may appoint an independent trustee to assist in the administration of the 2017 Restricted Share Scheme. Eligibility .
Types of Awards . The 2017 Restricted Share Scheme permits the awards of restricted shares. Scheme Administration . The 2017 Restricted Share Scheme shall be administrated by the board and the management committee established by the board. The board and the management committee may appoint an independent trustee to assist in the administration of the 2017 Restricted Share Scheme.
She is an independent non-executive director of AirPower Technologies Limited. She has served as an independent non-executive director and a member of the audit committee, remuneration committee and nomination committee of Interra Acquisition Corporation. Ms. Chan is qualified to practice law in New York, British Columbia (Canada) and Hong Kong and is a non-practising solicitor of England and Wales.
She has served as an independent non-executive director and a member of the audit committee, remuneration committee and nomination committee of Interra Acquisition Corporation. Ms. Chan is qualified to practice law in New York, British Columbia (Canada) and Hong Kong and is a non-practising solicitor of England and Wales.
Zhu Liang, Mr. James Gordon Mitchell, Mr. Brent Richard Irvin, Mr. Matthew Yun Ming Cheng, Ms. Edith Manling Ngan, Mr. Adrian Yau Kee Mak and Ms. Jeanette Kim Yum Chan, the business address of our directors and executive officers is Unit 3, Building D, Kexing Science Park, Kejizhongsan Avenue, Hi-Tech Park, Nanshan District, Shenzhen, 518057, the People’s Republic of China.
Zhu Liang, Mr. James Gordon Mitchell, Mr. Brent Richard Irvin, Mr. Matthew Yun Ming Cheng, Ms. Edith Manling Ngan and Ms. Jeanette Kim Yum Chan, the business address of our directors and executive officers is Unit 3, Building D, Kexing Science Park, Kejizhongsan Avenue, Hi-Tech Park, Nanshan District, Shenzhen, 518057, the People’s Republic of China. The business address of Mr.
The 2017 Restricted Share Scheme shall remain valid and effective unless and until being terminated on the earlier of: (i) the 10th anniversary date of the date it was adopted; or (ii) such date of early termination as determined by the scheme administrator provided that such termination does not affect any subsisting rights of any grantees. 132 The following table summarizes, as of April 18, 2023, the number of Class A ordinary shares under outstanding options, restricted shares and other equity awards that we granted to our directors and executive officers.
The 2017 Restricted Share Scheme shall remain valid and effective unless and until being terminated on the earlier of: (i) the 10th anniversary date of the date it was adopted; or (ii) such date of early termination as determined by the scheme administrator provided that such termination does not affect any subsisting rights of any grantees. 130 The following table summarizes, as of April 10, 2024, the number of Class A ordinary shares under outstanding options, restricted shares and other equity awards that we granted to our directors and executive officers.
Tencent is deemed to have economic interest in the foregoing 1,640,456,882 Class B ordinary shares held of record by Min River Investment Limited, representing approximately 47.8% of the total outstanding ordinary shares of our company as of April 18, 2023. The registered address of Min River Investment Limited is P.O.
Tencent is deemed to have economic interest in the foregoing 1,640,456,882 Class B ordinary shares held of record by Min River Investment Limited, representing approximately 47.8% of the total outstanding ordinary shares of our company as of April 10, 2024. The registered address of Min River Investment Limited is P.O.
We have adopted a charter for each committee. Each committee’s members and functions are described below. Audit Committee . Our audit committee consists of Mr. Adrian Yau Kee Mak and Ms. Edith Manling Ngan, and one nonvoting observer, namely Mr. Matthew Yun Ming Cheng, and is chaired by Mr. Adrian Yau Kee Mak. We have determined that each of Ms.
We have adopted a charter for each committee. Each committee’s members and functions are described below. Audit Committee . Our audit committee consists of Mr. Adrian Yau Kee Mak and Ms. Edith Manling Ngan, and is chaired by Mr. Adrian Yau Kee Mak. Mr. Matthew Yun Ming Cheng serves as a nonvoting observer. We have determined that each of Ms.
Ngan currently serves as an independent non-executive director of the board, Audit Committee Chair and a member of the remuneration committee for Blue Moon Group Holdings Limited (HKEX: 6993) since December 2020, an independent non-executive director, Audit Committee Chair and a member of the nomination committee, remuneration committee, risk committee and compliance committee for the Asia Financial Holdings Limited (HKEX: 0662) since May 2022, an independent non-executive director of Swire Pacific Limited (HKEX: 0019 and 0087) since June 2022, and an independent non-executive director, ESG Committee Chair and a member of the audit committee, nomination committee and remuneration committee for HKBN Ltd.
Ngan currently serves as an independent non-executive director of the board, audit committee chair and a member of the remuneration committee for Blue Moon Group Holdings Limited (HKEX: 6993) since December 2020, an independent non-executive director, audit committee chair and a member of the nomination committee, remuneration committee, risk committee and compliance committee for the Asia Financial Holdings Limited (HKEX: 0662) since May 2022, and an independent non-executive director of Swire Pacific Limited (HKEX: 0019 and 0087) since June 2022 and is a member of the audit committee since May 2023.
Ordinary Shares Beneficially Owned as of April 18, 2023 Class A Ordinary Shares Class B Ordinary Shares Total ordinary shares Percentage of aggregate voting power*** Number % Number % Number % Directors and Executive Officers† Cussion Kar Shun Pang * * — — * * — Zhu Liang * * — — * * — Zhenyu Xie * * * * * * * James Gordon Mitchell * * — — * * * Brent Richard Irvin * * — — * * * Matthew Yun Ming Cheng — — — — — — — Edith Manling Ngan * * — — * * * Adrian Yau Kee Mak — — — — — — — Jeanette Kim Yum Chan — — — — — — — Min Hu * * — — * * — Cheuk Tung Tony Yip * * — — * * — Linlin Chen * * * * * * * Lixue Shi * * * * * * * Tsai Chun Pan * * — — * * * All directors and executive officers as a group * * * * * * * Principal Shareholders: Tencent (1) 159,996,879 9.1 1,640,456,882 98.5 1,800,453,761 52.5 92.6 Spotify (2) 282,830,698 16.0 — — 282,830,698 8.2 — Notes: * Less than 1% of our total outstanding shares. ** For each person and group included in this table, percentage ownership is calculated by dividing the number of shares beneficially owned by such person or group by the sum of (i) 3,432,154,261, being the number of ordinary shares outstanding (consisting of 1,767,205,006 Class A ordinary shares and 1,664,949,255 Class B ordinary shares) as of April 18, 2023, and (ii) the number of ordinary shares underlying share options held by such person or group that are exercisable within 60 days after the date of this annual report. *** For each person and group included in this column, percentage of voting power is calculated by dividing the voting power beneficially owned by such person or group by the voting power of all of our ordinary shares as a single class. † Except for Mr.
Ordinary Shares Beneficially Owned as of April 10, 2024 Class A Ordinary Shares Class B Ordinary Shares Total ordinary shares Percentage of aggregate voting power*** Number % Number % Number % Directors and Executive Officers† Cussion Kar Shun Pang * * — — * * — Zhu Liang * * — — * * — Min Hu * * — — * * — James Gordon Mitchell * * — — * * * Brent Richard Irvin — — — — — — — Matthew Yun Ming Cheng — — — — — — — Edith Manling Ngan * * — — * * — Adrian Yau Kee Mak * * — — * * — Jeanette Kim Yum Chan * * — — * * — Linlin Chen * * * * * * * Tsai Chun Pan * * — — * * — All directors and executive officers as a group * * * * * * * Principal Shareholders: Tencent (1) 159,996,879 9.1 1,640,456,882 98.5 1,800,453,761 52.5 92.6 Spotify (2) 282,830,698 16.0 — — 282,830,698 8.2 — Notes: * Less than 1% of our total outstanding shares. ** For each person and group included in this table, percentage ownership is calculated by dividing the number of shares beneficially owned by such person or group by the sum of (i) 3,432,154,260, being the number of ordinary shares outstanding (consisting of 1,767,205,005 Class A ordinary shares and 1,664,949,255 Class B ordinary shares) as of April 10, 2024, and (ii) the number of ordinary shares underlying share options held by such person or group that are exercisable within 60 days after the date of this annual report. *** For each person and group included in this column, percentage of voting power is calculated by dividing the voting power beneficially owned by such person or group by the voting power of all of our ordinary shares as a single class. † Except for Mr.
Compensation Compensation In 2022, we paid an aggregate cash compensation of approximately RMB69 million (US$10 million) to our directors and executive officers. We have not set aside or accrued any amount to provide pension, retirement or other similar benefits to our directors and executive officers.
Compensation Compensation In 2023, we paid an aggregate cash compensation of approximately RMB68 million (US$10 million) to our directors and executive officers. We have not set aside or accrued any amount to provide pension, retirement or other similar benefits to our directors and executive officers.
We had 4,769, 5,966 and 5,805 full-time employees as of December 31, 2020, 2021 and 2022, respectively. Substantially all of our employees are based in China. The following table sets forth the number of our full-time employees as of December 31, 2022.
We had 5,966, 5,805 and 5,185 full-time employees as of December 31, 2021, 2022 and 2023, respectively. Substantially all of our employees are based in China. The following table sets forth the number of our full-time employees as of December 31, 2023.
ITEM 6. DIRE CTORS, SENIOR MANAGEMENT AND EMPLOYEES 6.A. Directors and Senior Management The following table sets forth information regarding our directors and executive officers as of April 18, 2023.
ITEM 6. DIRE CTORS, SENIOR MANAGEMENT AND EMPLOYEES 6.A. Directors and Senior Management The following table sets forth information regarding our directors and executive officers as of April 10, 2024.
Jeanette Kim Yum Chan is Suites 6308-10, 63/F, One Island East, 18 Westlands Road, Quarry Bay, Hong Kong. 137 (1) The number of ordinary shares beneficially owned represents the sum of (i) 1,640,456,882 Class B ordinary shares held by Min River Investment Limited, a company incorporated in the British Virgin Islands, which is beneficially owned and controlled by Tencent; (ii) 141,415,349 Class A ordinary shares, or 50% of the 282,830,698 Class A ordinary shares held of record by Spotify AB; the voting power of such 141,415,349 Class A ordinary shares held of record by Spotify AB is vested with Tencent pursuant to the Spotify Investor Agreement and the Tencent Voting Undertaking, therefore Tencent is deemed to beneficially own such ordinary shares (pursuant to the Spotify Investor Agreement, Spotify has given Tencent a sole and exclusive right to vote our securities beneficially owned by Spotify and its affiliates, while pursuant to the Tencent Voting Undertaking, Tencent is obligated to vote 50% of the securities subject to the foregoing proxy from Spotify in proportion to votes cast for and against by non-Spotify shareholders); and (iii) an aggregate of 18,581,530 Class A ordinary shares held of record by certain minority shareholders of our company; the voting power of these ordinary shares is vested with Tencent and therefore Tencent may be deemed to beneficially own these Class A ordinary shares.
(1) The number of ordinary shares beneficially owned represents the sum of (i) 1,640,456,882 Class B ordinary shares held by Min River Investment Limited, a company incorporated in the British Virgin Islands, which is beneficially owned and controlled by Tencent; (ii) 141,415,349 Class A ordinary shares, or 50% of the 282,830,698 Class A ordinary shares held of record by Spotify AB; the voting power of such 141,415,349 Class A ordinary shares held of record by Spotify AB is vested with Tencent pursuant to the Spotify Investor Agreement and the Tencent Voting Undertaking, therefore Tencent is deemed to beneficially own such ordinary shares (pursuant to the Spotify Investor Agreement, Spotify has given Tencent a sole and exclusive right to vote our securities beneficially owned by Spotify and its affiliates, while pursuant to the Tencent Voting Undertaking, Tencent is obligated to vote 50% of the securities subject to the foregoing proxy from Spotify in proportion to votes cast for and against by non-Spotify shareholders); and (iii) an aggregate of 18,581,530 Class A ordinary shares held of record by certain minority shareholders of our company; the voting power of these ordinary shares is vested with Tencent and therefore Tencent may be 135 deemed to beneficially own these Class A ordinary shares.
The 2017 Option Plan permits the awards of options. Plan Administration . The 2017 Option Plan shall be administrated by the board or the compensation committee of the board, or such other committee as may be designated by the board. Eligibility .
The following paragraphs summarize the terms of the 2017 Option Plan. Types of Awards . The 2017 Option Plan permits the awards of options. Plan Administration . The 2017 Option Plan shall be administrated by the board or the compensation committee of the board, or such other committee as may be designated by the board. 128 Eligibility .
See Note (2) above for a description of the voting proxy granted by Spotify AB with respect to such ordinary shares. The registered address of Spotify AB is Birger Jarlsgatan 61, 11356 Stockholm, Sweden.
See Note (2) above for a description of the voting proxy granted by Spotify AB with respect to such ordinary shares. The registered address of Spotify AB is Regeringsgatan 19, 111 53 Stockholm, Sweden.
Adrian Yau Kee Mak and Ms. Jeanette Kim Yum Chan. A director is not required to hold any shares in our company to qualify to serve as a director. The Corporate Governance Rules of the NYSE generally require that a majority of an issuer’s board of directors must consist of independent directors.
A director is not required to hold any shares in our company to qualify to serve as a director. The Corporate Governance Rules of the NYSE generally require that a majority of an issuer’s board of directors must consist of independent directors.
Share Ownership The following table sets forth information with respect to the beneficial ownership of our ordinary shares, as of April 18, 2023, by: • each of our directors and executive officers; • all of our directors and executive officers as a group; and • each person known to us to own beneficially more than 5% of our ordinary shares. 136 We have adopted a dual-class ordinary share structure.
Share Ownership The following table sets forth information with respect to the beneficial ownership of our ordinary shares, as of April 10, 2024, by: • each of our directors and executive officers; • all of our directors and executive officers as a group; and • each person known to us to own beneficially more than 5% of our ordinary shares.
Mitchell is Chief Strategy Officer and a Senior Executive Vice President of Tencent, where he has worked since July 2011. Mr. Mitchell also serves as the chairman and non-executive director of the board of China Literature Limited (HKEX: 0772) since June 2017. He is a director of certain other listed companies, including Frontier Developments Plc (AIM: FDEV), NIO Inc.
Mitchell is Chief Strategy Officer and a Senior Executive Vice President of Tencent, where he has worked since July 2011. Mr. Mitchell also serves as the chairman and non-executive director of the board of China Literature Limited (HKEX: 0772) since June 2017.
As of April 18, 2023, our employees other than members of our senior management as a group held options to purchase 27,556,806 ordinary shares, with exercise prices ranging from US$0.000076 per share to US$9.525 per share.
As of April 10, 2024, our employees other than members of our senior management as a group held options to purchase 22,785,426 ordinary shares, with exercise prices ranging from US$0.000076 per share to US$9.525 per share.
Directors and Executive Officers Age Position/Title Cussion Kar Shun Pang 49 Executive Chairman Zhu Liang 47 Chief Executive Officer, Director Zhenyu Xie 48 President, Chief Technology Officer, Director James Gordon Mitchell 49 Director Brent Richard Irvin 50 Director Matthew Yun Ming Cheng 53 Director Edith Manling Ngan 58 Independent Director Adrian Yau Kee Mak 62 Independent Director Jeanette Kim Yum Chan 64 Independent Director Min Hu 51 Chief Financial Officer Cheuk Tung Tony Yip 42 Chief Strategy Officer Linlin Chen 42 Group Vice President, Head of Kugou Business Unit Lixue Shi 48 Group Vice President, Head of Kuwo Business Unit Tsai Chun Pan 48 Group Vice President, Head of Content Cooperation Business Cussion Kar Shun Pang has served as our Executive Chairman since April 2021.
Directors and Executive Officers Age Position/Title Cussion Kar Shun Pang 50 Executive Chairman Zhu Liang 48 Director, Chief Executive Officer Min Hu 52 Director, Chief Financial Officer James Gordon Mitchell 50 Director Brent Richard Irvin 51 Director Matthew Yun Ming Cheng 54 Director Edith Manling Ngan 59 Independent Director Adrian Yau Kee Mak 63 Independent Director Jeanette Kim Yum Chan 65 Independent Director Linlin Chen 43 Group Vice President, Head of Kugou Business Unit Tsai Chun Pan 49 Group Vice President, Head of Content Cooperation Business Cussion Kar Shun Pang has served as our Executive Chairman since April 2021.
Function Number of employees Research and development 3,071 Content management and operation 1,518 Sales and marketing 475 Management and administration 741 Total 5,805 We enter into employment contracts with our full-time employees which contain standard confidentiality and non-compete provisions.
Function Number of employees Research and development 2,645 Content management and operation 1,233 Sales and marketing 506 Management and administration 801 Total 5,185 We enter into employment contracts with our full-time employees which contain standard confidentiality and non-compete provisions.
The maximum aggregate number of ordinary shares authorized to issue pursuant to equity awards granted under the 2017 Share Option Plan is 118,884,829 ordinary shares. As of April 18, 2023, options to purchase a total of 48,032,718 ordinary shares are outstanding under the 2017 Option Plan, and 18,547,090 of such options had vested and become exercisable.
The maximum aggregate number of ordinary shares authorized to issue pursuant to equity awards granted under the 2017 Share Option Plan is 118,884,829 ordinary shares. As of April 10, 2024, options to purchase a total of 41,259,102 ordinary shares are outstanding under the 2017 Option Plan, and 23,294,500 of such options had vested and become exercisable.
The calculations in the table below are based on 3,432,154,261 outstanding ordinary shares (consisting of 1,767,205,006 Class A ordinary shares and 1,664,949,255 Class B ordinary shares) as of April 18, 2023. Beneficial ownership is determined in accordance with the rules and regulations of the SEC.
We have adopted a dual-class ordinary share structure. The calculations in the table below are based on 3,432,154,260 outstanding ordinary shares (consisting of 1,767,205,005 Class A ordinary shares and 1,664,949,255 Class B ordinary shares) as of April 10, 2024. 134 Beneficial ownership is determined in accordance with the rules and regulations of the SEC.
For discussions of our accounting policies and estimates for awards granted pursuant to the 2014 Share Incentive Plan, 2017 Option Plan and the 2017 Restricted Share Scheme, see “Item 5. Operating and Financial Review and Prospects — 5.E.
For discussions of our accounting policies and estimates for awards granted pursuant to the 2014 Share Incentive Plan, 2017 Option Plan and the 2017 Restricted Share Scheme, see “Item 5. Operating and Financial Review and Prospects — 5.E. Critical Accounting Estimates — Share-based compensation expenses and valuation of our ordinary shares — Share-based compensation relating to TME Incentive Plans.” 6.C.
The maximum aggregate number of ordinary shares we are authorized to issue pursuant to equity awards granted under the 2017 Restricted Share Scheme is 216,329,580 ordinary shares. As of April 18, 2023, a total of 52,005,038 restricted shares are outstanding under the 2017 Restricted Share Scheme.
The maximum aggregate number of ordinary shares we are authorized to issue pursuant to equity awards granted under the 2017 Restricted Share Scheme is 216,329,580 ordinary shares. As of April 10, 2024, a total of 44,799,126 restricted shares are outstanding under the 2017 Restricted Share Scheme. The following paragraphs summarize the terms of the 2017 Restricted Share Scheme.
Mak was CFO of Global Digital Creations Holdings Limited (HKEX: 8271), a company listed on the GEM of the Stock Exchange of Hong Kong, between 2002 and 2004, and CFO of CyberCity Holdings Limited between 2000 and 2002. Between 1992 and 2000, Mr. Mak served as an associate director in the Corporate Finance Division at the Securities and Futures Commission.
Mak was CFO of Global Digital Creations Holdings Limited (HKEX: 8271) between 2002 and 2004 and CFO of CyberCity Holdings Limited between 2000 and 2002. Mr. Mak served as an associate director in the Corporate Finance Division at the Securities and Futures Commission from 1992 to 2000, and a deputy manager of audit with KPMG from 1983 to 1992. Mr.
(HKEX: 1310) since September 2022. She also sits on various investment committees of government funds.
She also sits on various investment committees of government funds.
Cheng joined the Tencent Group in November 2010, and currently serves as the corporate vice president of the Tencent Group. Mr. Cheng also currently serves as a non-executive director of China Literature Limited (HKEX: 0772) since November 2019. Prior to joining the Tencent Group, Mr.
Cheng joined the Tencent Group in November 2010, and currently serves as the corporate vice president of the Tencent Group. Prior to joining the Tencent Group, Mr.
Min Hu currently serves as our Chief Financial Officer, in charge of our finance and corporate IT functions. Ms. Hu served various controller roles in Tencent’s business groups, including the Interactive Entertainment Group, the Mobile Internet Group, the Social Network Group and the Technology and Engineering Group from 2007 to 2016. Prior to joining Tencent, Ms.
Hu served various controller roles in Tencent’s business groups, including the Interactive Entertainment Group, the Mobile Internet Group, the Social Network Group and the Technology and Engineering Group from 2007 to 2016. Prior to joining Tencent, Ms. Hu served as the director of internal audit department at Huawei Technology Co., Ltd.. Ms.
She obtained a Bachelor of Arts from the University of Toronto in Canada in 1980, a Bachelor of Laws from the University of British Columbia in Canada in May 1983, and a Master’s degree in Law from Harvard University in the United States in June 1986.
She obtained a Bachelor of Arts from the University of Toronto in Canada in 1980, a Bachelor of Laws from the University of British Columbia in Canada in May 1983, and a Master’s degree in Law from Harvard University in the United States in June 1986. 126 Linlin Chen is one of the founding members of Kugou , who currently serves as our Group Vice President and oversees our Kugou business.
Under the 2014 Share Incentive Plan, the maximum aggregate number of ordinary shares we are authorized to issue pursuant to all awards is 101,785,456 ordinary shares. As of April 18, 2023, options to purchase a total of 1,108,152 ordinary shares are outstanding under the 2014 Share Incentive Plan. The following paragraphs summarize the terms of the 2014 Share Incentive Plan.
Under the 2014 Share Incentive Plan, the maximum aggregate number of ordinary shares we are authorized to issue pursuant to all awards is 101,785,456 ordinary shares.
Pang received a bachelor’s degree in mathematics (honors), business administration and information systems from University of Waterloo, Canada. Zhu Liang has served as our Chief Executive Officer and a member of our board of directors since April 2021, and oversees our QQ Music , Kugou Music , Kuwo Music , WeSing and long-form audio business. Prior to this appointment, Mr.
Zhu Liang has served as our Chief Executive Officer and a member of our board of directors since April 2021, and oversees our QQ Music , Kugou Music , Kuwo Music , WeSing and long-form audio business. Prior to this appointment, Mr. Liang joined Tencent (HKEX: 0700) in 2003 and served as the corporate vice president of Tencent since 2016.
Pang worked for a number of publicly listed companies in telecommunications, internet and media industries, such as PCCW Limited (HKEX: 0008). Mr. Pang is an internet industry leader with over 25 years of experience and serves as a Standing Council Member of the Internet Society of China. Mr.
Pang worked for a number of publicly listed companies in telecommunications, internet and media industries, such as PCCW Limited (HKEX: 0008). Mr. Pang is an internet industry leader with over 25 years of experience and he received a bachelor’s degree in mathematics (honors), business administration and information systems from University of Waterloo, Canada.
(NYSE: NIO, HKEX: 9866, SGX: NIO) and Universal Music Group (EURONEXT: UMG), and of various unlisted companies. Prior to joining Tencent, Mr. Mitchell was a managing director at Goldman Sachs.
He is a director of certain other listed companies, including Universal Music Group (EURONEXT: UMG), Frontier Developments Plc (AIM: FDEV), and of various unlisted companies. Prior to joining Tencent, Mr. Mitchell was a managing director at Goldman Sachs.
Shi graduated from Tsinghua University in 1998 with a bachelor’s degree in mechanical engineering. Tsai Chun Pan is currently responsible for the overall strategies and daily management of our content cooperation business. Prior to joining us as a Group Vice President, Mr.
Ms. Chen has extensive management experience in product operations, marketing and corporate governance. Ms. Chen holds an EMBA degree from Sun-Yat Sen University . Tsai Chun Pan is currently responsible for the overall strategies and daily management of our content cooperation business. Prior to joining us as a Group Vice President, Mr.
Liang joined Tencent (HKEX: 0700) in 2003 and served as the corporate vice president of Tencent since 2016. Prior to that role, Mr. Liang was the general manager of QQ Music from 2014 to 2016. Prior to joining Tencent, Mr. Liang worked for Huawei Technology Co., Ltd. Mr.
Prior to that role, Mr. Liang was the general manager of QQ Music from 2014 to 2016. Prior to joining Tencent, Mr. Liang worked for Huawei Technology Co., Ltd. Mr. Liang received a doctor’s degree in signal and information processing from Tianjin University in 2003. Min Hu has served as our Chief Financial Officer since July 2016.
He is also a fellow member of the Hong Kong Investor Relations Association. Mr.
Mak is a fellow member of the Institute of Chartered Accountants in England and Wales and the Hong Kong Institute of Certified Public Accountants. He is also a fellow member of the Hong Kong Investor Relations Association and a member of the Hong Kong Investment and Securities Institute. Mr.
As of April 18, 2023, 50,962,898 of our Class A outstanding ordinary shares were held by one record holder in the United States, which is the depositary of our ADS program, representing 1.5% of our total issued and outstanding ordinary shares as of such date.
As of April 10, 2024, to our knowledge, 55,973,424 of our Class A outstanding ordinary shares registered on our Cayman Islands share register were held by one shareholder in the United States, which is the depositary of our ADS program, representing approximately 1.6% of our total issued and outstanding ordinary shares as of such date. 6.F.
Hu served as the director of internal audit department at Huawei Technology Co., Ltd.. Ms. Hu has more than 20 years of comprehensive experience in finance, such as financial management, capital operation, operation management, mergers and acquisitions, internal control and internal audit. Ms.
Hu has more than 20 years of comprehensive experience in finance, such as financial management, capital operation, operation management, mergers and acquisitions, internal control and internal audit. Ms. Hu is a member of Chartered Institute of Management Accountants (CIMA), CPA Australia, China Institute of Certified Public Accountants (CICPA), and a Certified Internal Auditor (CIA). Ms.
Critical Accounting Estimates — Share-based compensation expenses and valuation of our ordinary shares — Share-based compensation relating to TME Incentive Plans.” 133 6.C. Board Practices Board of Directors Our board of directors consists of nine directors, including three independent directors within the meaning of Section 303A of the Corporate Governance Rules of the NYSE, namely Ms. Edith Manling Ngan, Mr.
Board Practices Board of Directors Our board of directors consists of nine directors, including three independent directors within the meaning of Section 303A of the Corporate Governance Rules of the NYSE, namely Ms. Edith Manling Ngan, Mr. Adrian Yau Kee Mak and Ms. Jeanette Kim Yum Chan.
Xie also served as a senior technical engineer from 1998 to 2001 at China Merchants Bank Co., Ltd. and graduated from Sun-Yat Sen University in 1997 with a bachelor’s degree in computer science. James Gordon Mitchell has served as a member of our board of directors since December 2018, and chairs the compensation committee of the Board. Mr.
Hu received a bachelor’s degree in Industrial Foreign Trade from Xi’an Jiaotong University in China and a master’s degree in system engineering from Beijing Jiaotong University in China. James Gordon Mitchell has served as a member of our board of directors since December 2018, and chairs the compensation committee of the Board. Mr.
He previously was the chief financial officer and the company secretary of Television Broadcasts Limited (HKEX: 0511) from 2004 until his retirement in December 2021. Prior to that, Mr.
Mak is also an independent director of Gome Finance Technology Co., Ltd. (HKEX: 0628) and a director of Shaw Trustee (Private) Limited which is the trustee of The Sir Run Run Shaw Charitable Trust. He previously was CFO and the company secretary of Television Broadcasts Limited (HKEX: 0511) from 2004 to 2021. Prior to that, Mr.
Removed
Liang received a doctor’s degree in signal and information processing from Tianjin University in 2003. Zhenyu Xie has served as our President and Chief Technology Officer and has been a member of our Board of Directors since April 2014 and currently oversees our Kugou business. Mr.
Added
She has been a member of our board of directors since March 2024. Ms. Hu is in charge of our finance and corporate IT functions. Prior to joining the Company , Ms.
Removed
Xie founded Kugou Music in 2004 and has been committed to Internet technology innovation and the development of the digital music industry for more than a decade. Before founding Kugou Music , he founded Shenzhen SoGua Network Technology Co., Ltd. in 2001, which was the first digital music search engine in China. Mr.
Added
As of April 10, 2024, options to purchase a total of 789,672 ordinary shares are outstanding under the 2014 Share Incentive Plan. 127 The following paragraphs summarize the terms of the 2014 Share Incentive Plan. Types of Awards .
Removed
Between 1983 and 1992, Mr. Mak served as a deputy manager of audit at various offices of KPMG (Hong Kong, London and Birmingham). Mr. Mak is a fellow member of the Institute of Chartered Accountants in England and Wales (FCA) and the Hong Kong Institute of Certified Public Accountants (FCPA).
Added
Jeanette Kim Yum Chan is Suites 6308-10, 63/F, One Island East, 18 Westlands Road, Quarry Bay, Hong Kong.
Removed
Hu is a member of Chartered Institute of Management Accountants (CIMA), CPA Australia, China Institute of Certified Public Accountants (CICPA), and a Certified Internal Auditor (CIA). Ms. Hu received a bachelor’s degree in Industrial Foreign Trade from Xi’an Jiaotong University in China and a master’s degree in system engineering from Beijing Jiaotong University in China.
Added
Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation None.
Removed
Cheuk Tung Tony Yip currently serves as our Chief Strategy Officer and is responsible for overseeing our overall strategic development, investment strategy, investor relations, and capital markets activities. Mr. Yip also oversees Ultimate Music, our business unit that provides online music services to smart device manufactures. Prior to joining us, Mr. Yip was vice president of Baidu, Inc.
Removed
(NASDAQ: BIDU, HKEX: 9888) since September 2015, where he served as the chief financial officer of Baidu’s search business group and Baidu’s head of investments, mergers and acquisitions. Mr. Yip served on the board of directors of Ctrip.com International, Ltd. (NASDAQ: TCOM, HKEX: 9961) from 2015 to 2017. Prior to that, Mr.
Removed
Yip worked at Goldman Sachs since 2007 and served as a managing director in technology, media and telecom investment banking. Mr. Yip has 20 years of experience in corporate finance and development including strategic partnerships, initial public offerings, mergers and acquisitions, divestitures, corporate restructurings, and equity and debt financings. Mr.
Removed
Yip obtained his bachelor of commerce degree in finance and accounting from University of Queensland in Australia. Linlin Chen is one of the founding members of Kugou , who currently serves as our Group Vice President and oversees our Kugou business. Ms. Chen has extensive management experience in product operations, marketing and corporate governance. Ms.
Removed
Chen holds an EMBA degree from Sun-Yat Sen University . Lixue Shi currently serves as our Group Vice President and currently oversees our Kuwo business and long-form audio business. Prior to joining us in November 2012, Mr. Shi served as the assistant general manager of the Online Media Group at Tencent from 2008 to 2012. Mr.
Removed
In April 2022, our board of directors authorized the reservation of an additional 20,933,591 Class A ordinary shares for future issuances under equity awards granted under the 2017 Share Option Plan, which has been approved by the board of directors and shareholders of Tencent. The following paragraphs summarize the terms of the 2017 Option Plan. Types of Awards .
Removed
In April 2022, our board of directors authorized the reservation of an additional 104,627,958 Class A ordinary shares for future issuances under equity awards granted under the 2017 Restricted Share Scheme, which has been approved by the board of directors of Tencent. The following paragraphs summarize the terms of the 2017 Restricted Share Scheme. Types of Awards .
Removed
Adrian Yau Kee Mak is Rm C, 9/F, 1 Homantin Hill, 1 Homantin Hill Road, Kowloon, Hong Kong. The business address of Ms.
Removed
We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company. 6.F. Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation Not applicable.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

10 edited+1 added−1 removed11 unchanged
Biggest changeIn connection with our investment in Spotify, on December 15, 2017, an investor agreement was entered into by and among Spotify, TME, TME Hong Kong, Tencent and a wholly owned subsidiary of Tencent (together with TME, TME Hong Kong and Tencent, the “Tencent Investors”) and certain Spotify parties, pursuant to which Spotify’s co-founder has the sole and exclusive right to vote, in his sole and absolute discretion, any of Spotify’s securities beneficially owned by the Tencent Investors or their controlled affiliates. 138 Co-investment in Universal Music Group In March 2020, through one of our wholly owned subsidiaries, we joined a consortium led by Tencent to acquire a 10% equity stake in Universal Music Group, or UMG, from its parent company, Vivendi S.A., at an enterprise value of EUR30 billion.
Biggest changeIn connection with our investment in Spotify, on December 15, 2017, an investor agreement was entered into by and among Spotify, TME, TME Hong Kong, Tencent and a wholly owned subsidiary of Tencent (together with TME, TME Hong Kong and Tencent, the “Tencent Investors”) and certain Spotify parties, pursuant to which Spotify’s co-founder has the sole and exclusive right to vote, in his sole and absolute discretion, any of Spotify’s securities beneficially owned by the Tencent Investors or their controlled affiliates.
In December 2020, the consortium in the Initial UMG Transaction exercised its call option to acquire an additional 10% equity interest in UMG from Vivendi S.A. at the same enterprise value of EUR30 billion as in the Initial UMG Transaction. This transaction is referred to in this annual report as the Second UMG Transaction.
In December 2020, the consortium in the Initial UMG Transaction exercised its call option to acquire an additional 10% equity interest in UMG from 136 Vivendi S.A. at the same enterprise value of EUR30 billion as in the Initial UMG Transaction. This transaction is referred to in this annual report as the Second UMG Transaction.
Compensation—Share Incentive Plans.” Other Related Party Transactions In the ordinary course of business, from time to time, we carry out transactions and enter into arrangements with related parties, none of which is considered to be material. The table below sets forth the major related parties and their relationships with us as of December 31, 2022.
Compensation—Share Incentive Plans.” Other Related Party Transactions In the ordinary course of business, from time to time, we carry out transactions and enter into arrangements with related parties, none of which is considered to be material. The table below sets forth the major related parties and their relationships with us as of December 31, 2023.
In September 2022, we updated the strategic partnership arrangement with China Literature, the residual minimum guarantee profit sharing payable amounted to RMB150 million was cancelled, and intangible assets was derecognized correspondingly. Amortization expense for the year ended December 31, 2020, 2021 and 2022 was included in the content royalties to Tencent Group presented above.
In September 2022, we updated the strategic partnership arrangement with China Literature, the residual minimum guarantee profit sharing payable amounted to RMB150 million was cancelled, and intangible assets was derecognized correspondingly. Amortization expense for the year ended December 31, 2021, 2022 and 2023 was included in the content royalties to Tencent Group presented above.
Name of related parties Relationship with the Group Tencent and its subsidiaries other than the entities controlled by the Group (“Tencent Group”) The Group’s principal owner China Literature Limited (“China Literature”) Tencent’s subsidiary 139 The table below sets forth our significant related party transactions for the periods indicated.
Name of related parties Relationship with the Group Tencent and its subsidiaries other than the entities controlled by the Group (“Tencent Group”) The Group’s principal owner China Literature Limited (“China Literature”) Tencent’s subsidiary 137 The table below sets forth our significant related party transactions for the periods indicated.
For the Year Ended December 31, 2020 2021 2022 RMB RMB RMB US$ (in millions) Short-term employee benefits 62 70 69 10 Share-based compensation 205 153 135 20 267 223 204 30 7.C. Interests of Experts and Counsel Not applicable.
For the Year Ended December 31, 2021 2022 2023 RMB RMB RMB US$ (in millions) Short-term employee benefits 70 69 68 10 Share-based compensation 153 135 95 13 223 204 163 23 7.C. Interests of Experts and Counsel Not applicable.
We then entered into a new master business cooperation agreement with Tencent, which became effective upon execution.
We then entered into a new master business cooperation agreement with Tencent, which became effective upon execution. This agreement was renewed in August 2023.
For the Year Ended December 31, 2020 2021 2022 RMB RMB RMB US$ (in millions) Revenues Online music services to Tencent Group (1) 277 364 338 49 Online music services to the Company’s associates and associates of Tencent Group 206 412 276 40 Social entertainment services and others to Tencent Group, the Company’s associates and associates of Tencent Group 213 170 71 10 Expenses Operation expenses recharged by Tencent Group (2) 1,082 1,260 1,272 184 Advertising agency cost to Tencent Group (3) 440 652 556 81 Content royalties to Tencent Group, the Company’s associates and associates of Tencent Group (4) 306 541 612 89 Other costs to the Company’s associates and associates of Tencent Group 48 176 68 10 Notes: (1) Primarily include revenue from content sublicensing, online advertising and subscriptions provided to Tencent Group pursuant to the Business Cooperation Agreement.
For the Year Ended December 31, 2021 2022 2023 RMB RMB RMB US$ (in millions) Revenues Online music services to Tencent Group (1) 364 338 172 24 Online music services to the Company’s associates and associates of Tencent Group 412 276 397 56 Social entertainment services and others to Tencent Group, the Company’s associates and associates of Tencent Group 170 71 55 8 Expenses Operation expenses recharged by Tencent Group (2) 1,260 1,272 1,188 167 Advertising agency cost to Tencent Group (3) 652 556 755 106 Content royalties to Tencent Group, the Company’s associates and associates of Tencent Group (4) 541 612 796 112 Other costs to the Company’s associates and associates of Tencent Group 176 68 26 4 Notes: (1) Primarily include revenue from content sublicensing, online advertising and subscriptions provided to Tencent Group pursuant to the Business Cooperation Agreement.
The consortium also has the option to purchase an additional 10% equity stake in UMG at the same enterprise value as in the Initial UMG Transaction pursuant to the terms of the transaction documents.
The foregoing transaction is referred to in this annual report as the Initial UMG Transaction and was closed in March 2020. The consortium also has the option to purchase an additional 10% equity stake in UMG at the same enterprise value as in the Initial UMG Transaction pursuant to the terms of the transaction documents.
As of December 31, 2020 2021 2022 RMB RMB RMB US$ (in millions) Included in accounts receivable from related parties: Tencent Group 1,993 2,510 1,760 255 The Company’s associates and associates of Tencent Group 48 90 84 12 Included in prepayments, deposits and other assets from related parties: Tencent Group 39 51 72 10 The Company’s associates and associates of Tencent Group 64 142 87 13 Included in accounts payable to related parties: Tencent Group 763 719 1,231 178 The Company’s associates and associates of Tencent Group 37 198 190 28 Included in other payables and accruals to related parties: Tencent Group 237 440 469 68 The Company’s associates and associates of Tencent Group 46 55 22 3 Outstanding balances are unsecured and are payable on demand. 140 The table below sets forth our key management personnel compensations for the periods indicated.
As of December 31, 2021 2022 2023 RMB RMB RMB US$ (in millions) Included in accounts receivable from related parties: Tencent Group 2,510 1,760 1,824 257 The Company’s associates and associates of Tencent Group 90 84 21 3 Included in prepayments, deposits and other assets from related parties: Tencent Group 51 72 54 8 The Company’s associates and associates of Tencent Group 142 87 121 17 Included in accounts payable to related parties: Tencent Group 719 1,231 667 94 The Company’s associates and associates of Tencent Group 198 190 269 38 Included in other payables and accruals to related parties: Tencent Group 440 469 491 69 The Company’s associates and associates of Tencent Group 55 22 2 0 Outstanding balances are unsecured and are payable on demand. 138 The table below sets forth our key management personnel compensations for the periods indicated.
Removed
We invested a 10% equity interest in the consortium. The foregoing transaction is referred to in this annual report as the Initial UMG Transaction and was closed in March 2020.
Added
Co-investment in Universal Music Group In March 2020, through one of our wholly owned subsidiaries, we joined a consortium led by Tencent to acquire a 10% equity stake in Universal Music Group, or UMG, from its parent company, Vivendi S.A., at an enterprise value of EUR30 billion. We invested a 10% equity interest in the consortium.

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