Financial

Annual Report 2010: Tencent Holdings Limited

Published by Tencent

Summary

Tencent Holdings Limited delivered a robust fiscal year in 2010, reporting consolidated revenue of RMB 19.65 billion—an increase of nearly 58% over 2009—and net profit attributable to equity holders of RMB 8.05 billion, up 56% year‑on‑year. Growth was driven primarily by the online gaming segment, which generated RMB 15.48 billion in revenue (up 62%) and by a rapidly expanding user base, with instant‑messaging accounts reaching 647.6 million and Qzone users at 492 million. Mobile services, value‑added telecom offerings, and advertising also contributed to the revenue mix, while operating margins improved to 50% of earnings. Liquidity and capital structure remained strong. Total financial resources rose to RMB 22.1 billion, with cash and equivalents at RMB 10.4 billion and net financial resources of RMB 17.8 billion after short‑term borrowings. Capital expenditures doubled to RMB 2.01 billion, reflecting investment in infrastructure and new platforms. Share‑based compensation was significant; the company granted 4.85 million award shares in 2010, with no director awards, and maintained a share‑option pool of roughly 43 million shares. Governance structures were reinforced through independent remuneration, audit, and investment committees, and the board maintained a majority of non‑executive directors. Financial risk exposure was dominated by foreign‑exchange and interest‑rate sensitivities, with a 5 % currency swing estimated to affect profit by RMB 83 million. The gearing ratio increased from 30% to 39%, driven largely by bank borrowings, while fair‑value assets—primarily equity securities—remained level 2 instruments. Overall, Tencent’s 2010 performance underscored its ability to scale user engagement and diversify revenue streams while maintaining solid liquidity, disciplined capital allocation, and robust governance practices.

From the report

Tencent ifl Tencent Holdings Limited Incorporated in the Cayman Islands with limited liability 騰訊控股有限公司於開曼群島註冊成立的有限公司 (Stock Code 股份代號 : 700) QQ.com ANNUAL REPORT 2010 smart communication inspires

Annual Report 2010 Contents 2 Corporate Information 3 Financial Summary 4 Chairman’s Statement 12 Management Discussion and Analysis 24 Directors’ Report 47 Corporate Governance Report 62 Independent Auditor’s Report 64 Consolidated Statement of Financial Position 67 Statement of Financial Position 69 Consolidated Income Statement 71 Consolidated Statement of Comprehensive Income 72 Consolidated Statement of Changes in Equity 74 Consolidated Statement of Cash Flows 76 Notes to the Consolidated Financial Statements 190 Definitions

Annual Report 2010 Corporate Information DIRECTORS AUDITOR CAYMAN ISLANDS PRINCIPAL Executive Directors PricewaterhouseCoopers SHARE REGISTRAR Ma Huateng (Chairman) Certified Public Accountants AND TRANSFER OFFICE Lau Chi Ping Martin Butterfield Fulcrum Group (Cayman) Zhang Zhidong PRINCIPAL BANKER Limited Butterfield House Non-Executive Directors The Hongkong and Shanghai Banking 68 Fort Street, P.O. Box 609 Corporation Limited Grand Cayman KY1-1107 Antonie Andries Roux REGISTERED OFFICE Cayman Islands Charles St Leger Searle Cricket Square HONG KONG BRANCH Independent Non-Executive Hutchins Drive, P.O. Box 2681 SHARE REGISTRAR Directors Grand Cayman KY 1-1111 AND TRANSFER OFFICE Li Dong Sheng Cayman Islands Computershare Hong Kong Investor Iain Ferguson Bruce HEAD OFFICE AND PRINCIPAL Services Limited Ian Charles Stone PLACE OF BUSINESS Shops 1712-1716, 17th Floor AUDIT COMMITTEE Hopewell Centre Tencent Building 183 Queen’s Road East Iain Ferguson Bruce (Chairman) Kejizhongyi Avenue Wan Chai, Hong Kong Ian Charles Stone Hi-tech Park Charles St Leger Searle Nanshan District COMPANY WEBSITE REMUNERATION Shenzhen, 518057 www.tencent.com The PRC COMMITTEE (Chairman) PRINCIPAL PLACE OF BUSINESS STOCK CODE Antonie Andries Roux IN HONG KONG 700 Li Dong Sheng Ian Charles Stone Room 3002, 30th Floor Far East Finance Centre 16 Harcourt Road Hong Kong

Annual Report 2010 Financial Summary CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Year ended 31 December 2006 2007 2008 2009 2010 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Revenues 2,800,441 3,820,923 7,154,544 12,439,960 19,646,031 Gross profit 1,983,379 2,703,366 4,984,123 8,550,492 13,325,831 Profit before income tax 1,116,771 1,534,503 3,104,895 6,040,731 9,913,133 Profit for the year 1,063,800 1,568,008 2,815,650 5,221,611 8,115,209 Profit attributable to equity holders of the Company 1,063,800 1,566,020 2,784,577 5,155,646 8,053,625 Total comprehensive income for the year 1,063,800 1,568,008 2,815,650 5,221,611 9,936,338 Total comprehensive income attributable to equity holders of the Company 1,063,800 1,566,020 2,784,577 5,155,646 9,874,754 CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION As at 31 December 2006 2007 2008 2009 2010 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Restated) Assets Non-current assets 916,138 2,090,312 3,359,696 4,348,823 10,456,373 Current assets 3,734,434 4,835,132 6,495,861 13,156,942 25,373,741 Total assets 4,650,572 6,925,444 9,855,557 17,505,765 35,830,114 Equity and liabilities Equity attributable to the Company’s equity holders 3,717,756 5,170,396 7,020,926 12,178,507 21,756,946 Non-controlling interests – 64,661 98,406 120,146 83,912 Total equity 3,717,756 5,235,057 7,119,332 12,298,653 21,840,858 Non-current liabilities 64,969 40,770 644,628 644,033 967,211 Current liabilities 867,847 1,649,617 2,091,597 4,563,079 13,022,045 Total liabilities 932,816 1,690,387 2,736,225 5,207,112 13,989,256

s – 64,661 98,406 120,146 83,912 Total equity 3,717,756 5,235,057 7,119,332 12,298,653 21,840,858 Non-current liabilities 64,969 40,770 644,628 644,033 967,211 Current liabilities 867,847 1,649,617 2,091,597 4,563,079 13,022,045 Total liabilities 932,816 1,690,387 2,736,225 5,207,112 13,989,256 Total equity and liabilities 4,650,572 6,925,444 9,855,557 17,505,765 35,830,114

Annual Report 2010 I am pleased to present our annual report for the year ended 31 December 2010 to the shareholders. RESULTS The Group’s audited profit attributable to equity holders of the Company for the year ended 31 December 2010 was RMB8,053.6 million, an increase of 56.2% compared with the results for the previous year. Basic and diluted earnings per share for the year ended 31 December 2010 were RMB4.432 and RMB4.328 respectively. BUSINESS REVIEW AND OUTLOOK 2010 witnessed another year of steady development in the Internet market in China. According to the CNNIC, the total number of Internet users increased by 19.1% on a year-on-year basis to 457.3 million at the end of 2010, compared to a growth rate of 28.9% in the previous year. Internet penetration increased to 34.3%, exceeding global average for the first time. Although the growth of China’s Internet user base has been slowing down as its scale continues to increase, the Internet has increasingly become an integral part of people’s everyday life as users spend more time online. We expect future growth of the industry to be increasingly driven by rising level of Internet usage by users and businesses, as opposed to user growth. In addition, advertising and e-commerce will become more important business models for the industry, in addition to revenue generated from users. The industry witnessed several significant developments during 2010. First of

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Type: Financial

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