Financial

2020 Annual Report

Published by Tencent

Summary

Tencent’s 2020 annual report details a period of robust financial expansion and strategic consolidation, characterized by a 28% year-on-year revenue increase to RMB 482.1 billion. Profit attributable to equity holders surged by 71% to RMB 159.8 billion, a performance bolstered by strong growth in online gaming—led by titles such as Honour of Kings and PUBG Mobile—and significant gains from the valuation and disposal of investee companies. The company’s investment portfolio reached a fair value of RMB 1.2 trillion for listed stakes, underscoring its role as a major global technology investor. Operationally, the company maintained its market leadership through its expansive ecosystem, most notably WeChat, which reached 1.225 billion monthly active users. To navigate regulatory restrictions on foreign investment in Chinese telecommunications and online gaming, the company continued its reliance on structured contracts. While these arrangements remain critical to the group’s revenue, management acknowledged ongoing regulatory uncertainty and implemented a rigorous risk management framework based on the COSO model to mitigate compliance, competitive, and information security challenges. The company’s commitment to sustainability and corporate governance was a central theme of the year. Tencent integrated environmental, social, and governance (ESG) metrics into its core operations, achieving carbon neutrality targets and improving energy efficiency in its data centers. Furthermore, the company prioritized data privacy through its "privacy by design" framework and expanded its "Tech for Good" initiatives. Supported by a stable liquidity position and a net cash balance of RMB 11.1 billion, the company continued to incentivize its workforce through structured share-based compensation schemes, ensuring long-term alignment between personnel and corporate objectives. Independent auditors provided an unqualified opinion on the financial statements, confirming the integrity of the company’s reporting and valuation methodologies.

From the report

CONTENTS 2 CORPORATE INFORMATION 3 FINANCIAL SUMMARY 4 CHAIRMAN’S STATEMENT 10 MANAGEMENT DISCUSSION AND ANALYSIS 28 DIRECTORS’ REPORT 72 CORPORATE GOVERNANCE REPORT 102 ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT 155 INDEPENDENT AUDITOR’S REPORT 164 CONSOLIDATED INCOME STATEMENT 165 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 166 CONSOLIDATED STATEMENT OF FINANCIAL POSITION 169 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 173 CONSOLIDATED STATEMENT OF CASH FLOWS 175 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 305 DEFINITION

Corporate Information DIRECTORS NOMINATION COMMITTEE PRINCIPAL PLACE OF BUSINESS Executive Directors Ma Huateng (Chairman) IN HONG KONG Ma Huateng (Chairman) Li Dong Sheng 29/F., Three Pacific Place Lau Chi Ping Martin Iain Ferguson Bruce No. 1 Queen’s Road East Ian Charles Stone Wanchai Non-Executive Directors Charles St Leger Searle Hong Kong Jacobus Petrus (Koos) Bekker REMUNERATION COMMITTEE CAYMAN ISLANDS PRINCIPAL Charles St Leger Searle Ian Charles Stone (Chairman) SHARE REGISTRAR AND Independent Non-Executive Directors Li Dong Sheng TRANSFER OFFICE Li Dong Sheng Jacobus Petrus (Koos) Bekker Suntera (Cayman) Limited Iain Ferguson Bruce AUDITOR Suite 3204, Unit 2A Ian Charles Stone Block 3, Building D Yang Siu Shun PricewaterhouseCoopers P.O. Box 1586 Ke Yang Certified Public Accountants Gardenia Court Camana Bay AUDIT COMMITTEE Yang Siu Shun (Chairman) Iain Ferguson Bruce Ian Charles Stone Charles St Leger Searle PRINCIPAL BANKERS Grand Cayman, KY1-1100 Cayman Islands Bank of China Limited HONG KONG BRANCH SHARE The Hongkong and Shanghai Banking Corporation Limited REGISTRAR AND TRANSFER OFFICE CORPORATE GOVERNANCE REGISTERED OFFICE Computershare Hong Kong Investor COMMITTEE Cricket Square Services Limited Hutchins Drive, P.O. Box 2681 Shops 1712-1716, 17th Floor Charles St Leger Searle (Chairman) Grand Cayman KY1-1111 Hopewell Centre Iain Ferguson Bruce Cayman Islands 183 Queen’s Road East Ian Charles Stone Wan Chai, Hong Kong Yang Siu Shun TENCENT GROUP HEAD OFFICE Ke Yang Tencent Binhai Towers COMPANY WEBSITE

e, P.O. Box 2681 Shops 1712-1716, 17th Floor Charles St Leger Searle (Chairman) Grand Cayman KY1-1111 Hopewell Centre Iain Ferguson Bruce Cayman Islands 183 Queen’s Road East Ian Charles Stone Wan Chai, Hong Kong Yang Siu Shun TENCENT GROUP HEAD OFFICE Ke Yang Tencent Binhai Towers COMPANY WEBSITE INVESTMENT COMMITTEE No. 33 Haitian 2nd Road www.tencent.com Nanshan District Lau Chi Ping Martin (Chairman) Shenzhen, 518054 STOCK CODE Ma Huateng The PRC 700 Charles St Leger Searle 2 Tencent Holdings Limited

> **[Chart page]** This page contains visual data — view in PDF for the best experience. Financial Summary CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Year ended 31 December 2016 2017 2018 2019 2020 RMB’Million RMB’Million RMB’Million RMB’Million RMB’Million Revenues 151,938 237,760 312,694 377,289 482,064 Gross profit 84,499 116,925 142,120 167,533 221,532 Profit before income tax 51,640 88,215 94,466 109,400 180,022 Profit for the year 41,447 72,471 79,984 95,888 160,125 Profit attributable to equity holders of the Company 41,095 71,510 78,719 93,310 159,847 Total comprehensive income for the year 48,617 79,061 67,760 119,901 281,173 Total comprehensive income attributable to equity holders of the Company 48,194 78,218 66,339 116,670 277,834 Non-IFRS profit attributable to equity holders of the Company 45,420 65,126 77,469 94,351 122,742 CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION As at 31 December 2016 2017 2018 2019 2020 RMB’Million RMB’Million RMB’Million RMB’Million RMB’Million Assets Non-current assets 246,745 376,226 506,441 700,018 1,015,778 Current assets 149,154 178,446 217,080 253,968 317,647 Total assets 395,899 554,672 723,521 953,986 1,333,425 Equity and liabilities Equity attributable to equity holders of the Company 174,624 256,074 323,510 432,706 703,984 Non-controlling interests 11,623 21,019 32,697 56,118 74,059 Total equity 186,247 277,093 356,207 488,824 778,043 Non-current liabilities 108,455 125,839 164,879 225,006 286,303 Current liabilities 101,197 151,740 202,435 240,156 269,079 Total liabilities 209,652 277,579 367,314 465,162 555,382 Total equity and liabilities 395,899 554,672 723,521 953,986 1,333,425

ity 186,247 277,093 356,207 488,824 778,043 Non-current liabilities 108,455 125,839 164,879 225,006 286,303 Current liabilities 101,197 151,740 202,435 240,156 269,079 Total liabilities 209,652 277,579 367,314 465,162 555,382 Total equity and liabilities 395,899 554,672 723,521 953,986 1,333,425 Annual Report 2020 3

Chairman’s Statement I am pleased to present our annual report for the year ended 31 December 2020 to the shareholders. RESULTS The Group’s audited profit attributable to equity holders of the Company for the year ended 31 December 2020 was RMB159,847 million, an increase of 71% compared with the results for the previous year. Basic and diluted EPS for the year ended 31 December 2020 were RMB16.844 and RMB16.523, respectively. The Group’s non-IFRS profit attributable to equity holders of the Company for the year ended 31 December 2020 was RMB122,742 million, an increase of 30% compared with the results for the previous year. Non-IFRS basic and diluted EPS for the year ended 31 December 2020 were RMB12.934 and RMB12.689, respectively. OPERATING INFORMATION As at As at Year-on- As at Quarter-on- 31 December 31 December year 30 September quarter 2020 2019 change 2020 change (in millions, unless specified) Combined MAU of Weixin and WeChat 1,225.0 1,164.8 5.2% 1,212.8 1.0% Smart device MAU of QQ 594.9 647.0 -8.1% 617.4 -3.6% Fee-based VAS registered subscriptions 219.5 180.1 21.9% 213.4 2.9% BUSINESS REVIEW AND OUTLOOK Strategic Progress and Outlook While 2020 was an unprecedentedly challenging year, we believe our solid operational and financial results testify to our focus on user value and technology innovation. Below are some highlights from our key products and business lines: Communication and Social

Pages: 314
Words: 113,512
Type: Financial

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