Financial

2008 Annual Report

Published by Tencent

Summary

Tencent Holdings Limited delivered a landmark year in 2008, with total revenues surging 87 % to RMB 7.15 billion and operating profit more than doubling to RMB 3.25 billion, reflecting a 45 % operating margin. Growth was concentrated in Internet value‑added services (95 % rise) and mobile/telecom services (73 % increase), while online advertising also expanded 68 %. The instant‑messaging platform QQ grew to 376.6 million active users, and portal traffic peaked during high‑profile events such as the Beijing Olympics. Despite a global financial downturn that pressured ad spend, Tencent’s diversified platform model and robust user base insulated it from broader market volatility. Profit attributable to equity holders rose 78 % to RMB 2.78 billion, supported by a strong cash position of RMB 5.13 billion and no interest‑bearing debt. Capital expenditures climbed to RMB 1.45 billion, and the company repurchased 9.22 million shares to enhance shareholder value. Share‑based compensation and dividend payouts increased equity outflows, yet the company maintained a healthy liquidity profile with cash equivalents of RMB 3.06 billion and minimal credit exposure. Governance structures remained solid, with a balanced board of executive, non‑executive and independent directors overseeing strategy, audit and remuneration committees. Internal controls aligned with COSO principles passed review without material discrepancies, and the audit committee maintained independence from external auditors. The company adhered to IFRS updates, with no significant changes anticipated for 2008, and prepared for forthcoming standards. Overall, Tencent’s 2008 performance underscored its dominant position in China’s internet and mobile services market, delivering robust revenue growth, profitability, and shareholder returns amid a challenging macroeconomic backdrop.

From the report

Tencent Holdings Limited Incorporated in the Cayman Islands with limited liability Stock Code : 700 2008 Annual

HOME ABOUT TENCENT PRODUCTS & SERVICES INVESTOR RELATIONS CULTURE otherstes Ro 2008 QQ+4M&1 CONTENTS Page Corporate Information 2 Financial Summary 3 Chairman’s Statement 4 Management Discussion and Analysis 9 Directors’ Report 20 Corporate Governance Report 39 Independent Auditor’s Report 49 Consolidated Balance Sheet 51 Balance Sheet 53 Consolidated Income Statement 54 Consolidated Statement of Changes in Shareholders’ Equity 55 Consolidated Cash Flow Statement 56 Notes to the Consolidated Financial Statements 58

CORPORATE INFORMATION DIRECTORS HEAD OFFICE AND PRINCIPAL PLACE OF BUSINESS Executive Directors 5th to 10th Floors FIYTA Hi-tech Building Ma Huateng (Chairman) Gaoxinnanyi Avenue Lau Chi Ping Martin Southern District of Hi-tech Park Zhang Zhidong Shenzhen, 518057 The PRC Non-Executive Directors Antonie Andries Roux PRINCIPAL PLACE OF BUSINESS IN HONG KONG Charles St Leger Searle Room 3002, 30th Floor Independent Non-Executive Directors Far East Finance Centre 16 Harcourt Road Li Dong Sheng Hong Kong Iain Ferguson Bruce Ian Charles Stone CAYMAN ISLANDS PRINCIPAL SHARE REGISTRAR AND TRANSFER OFFICE AUDIT COMMITTEE Butterfield Fulcrum Group (Cayman) Limited Iain Ferguson Bruce (Chairman) Butterfield House Ian Charles Stone 68 Fort Street, P.O. Box 609 Charles St Leger Searle Grand Cayman KY1-1107, Cayman Islands REMUNERATION COMMITTEE HONG KONG BRANCH SHARE REGISTRAR AND Antonie Andries Roux (Chairman) TRANSFER OFFICE Li Dong Sheng Computershare Hong Kong Investor Services Limited Ian Charles Stone Shops 1712-1716, 17th Floor, Hopewell Centre 183 Queen’s Road East AUDITORS Wan Chai, Hong Kong PricewaterhouseCoopers WEBSITE Certified Public Accountants www.tencent.com PRINCIPAL BANKER The Hongkong and Shanghai Banking Corporation STOCK CODE Limited 700 REGISTERED OFFICE Cricket Square Hutchins Drive, P.O. Box 2681 Grand Cayman KY 1-1111 Cayman Islands 2 Tencent Holdings Limited

FINANCIAL SUMMARY CONDENSED CONSOLIDATED INCOME STATEMENTS Year ended 31 December 2004 2005 2006 2007 2008 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Restated) Revenues 1,143,533 1,426,395 2,800,441 3,820,923 7,154,544 Gross profit 725,408 956,526 1,983,379 2,703,366 4,984,123 Profit before income tax 463,653 437,055 1,116,771 1,534,503 3,104,895 Profit for the year 441,119 485,362 1,063,800 1,568,008 2,815,650 Profit attributable to equity holders of the Company 441,119 485,362 1,063,800 1,566,020 2,784,577 CONDENSED CONSOLIDATED BALANCE SHEETS As at 31 December 2004 2005 2006 2007 2008 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Restated) Assets Non-current assets 309,454 763,495 916,138 2,090,312 3,359,696 Current assets 2,553,867 2,663,627 3,734,434 4,835,132 6,495,861 Total assets 2,863,321 3,427,122 4,650,572 6,925,444 9,855,557 Equity and liabilities Equity attributable to the Company’s equity holders 2,652,238 2,928,413 3,717,756 5,170,396 7,020,926 Minority interests in equity ––– 64,661 98,406 Total equity 2,652,238 2,928,413 3,717,756 5,235,057 7,119,332 Non-current liabilities – 810 64,969 40,770 644,628 Current liabilities 211,083 497,899 867,847 1,649,617 2,091,597 Total liabilities 211,083 498,709 932,816 1,690,387 2,736,225 Total equity and liabilities 2,863,321 3,427,122 4,650,572 6,925,444 9,855,557 Tencent Holdings Limited 3

CHAIRMAN’S STATEMENT AX X QQ.com Anniversary Ma Huateng Chairman I am pleased to present our annual report for the year ended 31 December 2008 to the shareholders. RESULTS Total revenues for the year ended 31 December 2008 increased by 87.2% to RMB7,154.5 million, compared with the same period last year. Revenues from our Internet value-added services increased by 95.5% to RMB 4,915.0 million. Revenues from our mobile and telecommunications value-added services increased by 73.2% to RMB1,399.0 million and revenues from online advertising increased by 67.5% to RMB826.0 million. The Group’s audited profit attributable to equity holders of the Company for the year ended 31 December 2008 was RMB2,784.6 million, an increase of 77.8% compared with the results for the year ended 31 December 2007. Basic and diluted earnings per share for the year ended 31 December 2008 were RMB1.552 and RMB1.514 respectively. 4 Tencent Holdings Limited

CHAIRMAN’S STATEMENT BUSINESS REVIEW AND OUTLOOK 2008 was another exciting year for the Internet market in China. According to China Internet Network Information Center, total number of Internet users in China reached 298 million at the end of 2008, representing a year-on-year growth of 42%. While China has already surpassed the US and become the largest Internet market in the world by number of users, its Internet penetration was only 23% at the end of 2008. This is significantly lower than that for developed markets, reflecting that China is still a nascent market with strong potential for future growth. More importantly, Internet has increasingly become an indispensable part of everyday life for people in China, thanks to the increasing adoption of broadband and mobile Internet connectivity as well as the emergence of a broad range of applications that allow people to stay in touch with each other, to get entertained, to get access to information and to conduct business transactions. For Tencent, 2008 was a year of challenges and opportunities. The Sichuan earthquake shocked the whole nation and we immediately took action to play an active role in the reporting and relief of the tragedy, as well as orchestrated the largest ever online donation in China. During the Beijing Olympics, one of the most historically important events for China in recent history, we demonstrated solid execution and teamwork across the whole company, resulting in recordbreaking traffic and top positioning in terms of reach and unique users for Olympic-related content.

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Words: 55,754
Type: Financial

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