Financial

Annual Report 2005

Published by Tencent

Summary

Tencent Holdings reported a robust 2005 performance, with revenue rising 24.7 % to RMB1.426 billion driven by a 79.2 % increase in Internet value‑added services and a 105.9 % jump in online advertising, while mobile‑telecom services declined 19.3 %. Net profit climbed 10 % to RMB485 million, yielding earnings per share of RMB0.274 (basic) and RMB0.267 (diluted). The QQ instant‑messaging platform expanded to over 200 million active users, and new services such as Qzone, QQ Pet, and the MMOG QQ Fantasy contributed to revenue growth. Operating profit margin improved modestly to 33.8 % in Q4, though full‑year operating profit increased only 3.3 % due to higher selling, marketing and general administrative costs. Financially, the group’s assets grew from RMB2.863 billion to RMB3.427 billion, largely through increases in cash and held‑to‑maturity investments. R&D expenditure surged to RMB162.5 million, while employee‑benefit costs more than doubled to RMB344.5 million. A net tax benefit of RMB48.3 million offset a modest tax expense, reflecting favorable Chinese enterprise income‑tax incentives. The company recorded a foreign‑exchange loss of RMB47 million on U.S. dollar investments, and no dividends were paid to equity holders during the year. Governance structures remained transparent: a balanced board of five directors, independent audit and remuneration committees, and compliance with Hong Kong listing rules (except for the chairman/CEO dual role). Share‑option schemes were detailed, allowing up to 40.5 million shares post‑IPO with a ten‑year life and board‑determined vesting periods. No material conflicts of interest or significant director‑held contracts were disclosed. The report covered IFRS adoption, noting minimal impact from revised standards; IAS 39 reclassified certain financial assets to fair value, IFRS 2 introduced share‑based compensation charges, and IAS 38 governed goodwill from acquisitions. Accounting policies for financial instruments, derivatives, inventory, receivables, and employee benefits were outlined, ensuring consistency with IFRS. Overall, Tencent’s 2005 results demonstrate strong growth in core internet services, disciplined financial management, and robust corporate governance within the Chinese market.

From the report

Tencent Holdings Limited TBA Incorporated in the Ca man Islands with limited liabilit BAH##A Stock Code 700 RFTUR Qa.com wiil PelpaTIH SHOW Gi nT T# #P smart communication inspires SoSOM ‡#&

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CORPORATE INFORMATION DIRECTORS HEAD OFFICE AND PRINCIPAL PLACE OF BUSINESS Executive Directors 5th to 10th Floor Ma Huateng FIYTA Hi-tech Building Zhang Zhidong Gaoxinnanyi Avenue Southern District of Hi-tech Park Shenzhen, 518057 Non-Executive Directors The PRC Antonie Andries Roux Charles St Leger Searle PRINCIPAL PLACE OF BUSINESS IN HONG KONG Independent Non-Executive Directors Room 3002, 30th Floor Far East Finance Centre Li Dong Sheng 16 Harcourt Road Iain Ferguson Bruce Hong Kong Ian Charles Stone CAYMAN ISLANDS PRINCIPAL SHARE REGISTRAR AUDIT COMMITTEE AND TRANSFER OFFICE Iain Ferguson Bruce (Chairman) Butterfield Fund Services (Cayman) Limited Ian Charles Stone Butterfield House Charles St Leger Searle 68 Fort Street, P.O. Box 705, George Town Grand Cayman, Cayman Islands REMUNERATION COMMITTEE Antonie Andries Roux (Chairman) HONG KONG BRANCH SHARE REGISTRAR AND Li Dong Sheng TRANSFER OFFICE Ian Charles Stone Computershare Hong Kong Investor Services Limited Shops 1712-1716, 17th Floor, Hopewell Centre AUDITORS 183 Queen’s Road East PricewaterhouseCoopers Hong Kong Certified Public Accountants WEBSITE PRINCIPAL BANKER www.tencent.com The Hongkong and Shanghai Banking Corporation Limited STOCK CODE REGISTERED OFFICE 700 Century Yard, Cricket Square Hutchins Drive, P.O. Box 2681 GT, George Town Grand Cayman, Cayman Islands Tencent Holdings Limited

> **[Chart page]** This page contains visual data — view in PDF for the best experience. MANAGEMENT DISCUSSION AND ANALYSIS FINANCIAL SUMMARY CONDENSED CONSOLIDATED INCOME STATEMENTS Year ended 31 December 2001 2002 2003 2004 2005 (Restated) RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Revenues 49,076 263,107 734,957 1,143,533 1,426,395 Gross profit 31,032 191,433 505,409 725,408 956,526 Profit before income tax 10,216 143,765 338,209 463,653 437,055 Profit for the year 10,216 140,707 322,196 441,119 485,362 CONDENSED CONSOLIDATED BALANCE SHEETS As at 31 December 2001 2002 2003 2004 2005 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 ASSETS Non-current assets 16,868 38,851 91,139 309,454 763,495 Current assets 48,674 174,815 484,577 2,553,867 2,663,627 Total assets 65,542 213,666 575,716 2,863,321 3,427,122 EQUITY AND LIABILITIES Shareholders’ equity 48,324 197,950 471,957 2,652,238 2,928,413 Non-current liabilities — 3,058 988 — 810 Current liabilities 17,218 12,658 102,771 211,083 497,899 Total liabilities 17,218 15,716 103,759 211,083 498,709 Total equity and liabilities 65,542 213,666 575,716 2,863,321 3,427,122 Annual Report 2005 3

Pages: 116
Words: 42,610
Type: Financial

Topics

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CHAIRMAN’S STATEMENT LIQUIDITY AND FINANCIAL RESOURCES Gen T ga BR gI00m o0.com HHE 00.20m1 MMS T Mobil Zone Ma Huateng Chairman I am pleased to present our annual report for the year ended 31 December 2005 to the shareholders. OPERATING RESULTS Total revenues for the year ended 31 December 2005 increased by 24.7% to RMB1,426.4 million compared with the same period last year. Revenues from our Internet value-added services (“IVAS”) increase by 79.2% to RMB786.7 million, revenues from our mobile and telecommunications value-added services (“MVAS”) decreased by 19.3% to RMB517.3 million and revenues from online advertising increased by 105.9% to RMB112.8 million. The Group’s audited profit after tax for the year ended 31 December 2005 was RMB485.4 million, an increase of 10.0% compared with the results for the year ended 31 December 2004. Basic and diluted earnings per share for the year ended 31 December 2005 were RMB0.274 and RMB0.267 respectively. BUSINESS REVIEW Our R&D investment and the successful execution of product strategies in 2005 have laid solid foundation for the long term growth of our businesses. In 2005, we achieved new records for peak simultaneous online user accounts for our Instant Messaging (“IM”) platform and QQ Game portal, as well as drove significant traffic growth on QQ.com portal and our 2.5G/3G WAP portal. We have also broadened monetization by rolling out a large collection of value-added service, including online identities products such as Qzone and QQ Pet; online games such as our first self-developed advanced casual game, QQ Tang, and our first self-developed Massive Multi-player Online Game (“MMOG”), QQ Fantasy.

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