Cloud and Other Business Services
202,435
151,740
Current liabilities
332,573
286,303
225,006
164,879
125,839
Non-current liabilities
876,693
778,043
488,824
356,207
277,093
Total equity
70,394
74,059
56,118
32,697
21,019
Non-controlling interests
806,299
703,984
432,706
323,510
256,074
Equity attributable to equity holders of the Company
Equity and liabilities
1,612,364
240,156
269,079
403,098
Total liabilities
2021
quarter
year 30 September
change
2020
2021
31 December
31 December
As at Quarter-on-
Year-on-
As at
As at
OPERATING INFORMATION
The Group's non-IFRS profit attributable to equity holders of the Company for the year ended 31 December 2021 was
RMB123,788 million, an increase of 1% compared with the results for the previous year. Non-IFRS basic and diluted EPS for
the year ended 31 December 2021 were RMB12.992 and RMB12.698, respectively.
The Group's audited profit attributable to equity holders of the Company for the year ended 31 December 2021 was
RMB224,822 million, an increase of 41% compared with the results for the previous year. Basic and diluted EPS for the year
ended 31 December 2021 were RMB23.597 and RMB23.164, respectively.
1,333,425
RESULTS
Chairman's Statement
3
Annual Report 2021
1,612,364
1,333,425
953,986
723,521
554,672
Total equity and liabilities
735,671
555,382
465,162
367,314
277,579
I am pleased to present our annual report for the year ended 31 December 2021 to the shareholders.
change
953,986
554,672
114,601
92,481
82,023
Non-IFRS operating profit
200,323
277,834
116,670
66,339
78,218
equity holders of the Company
Total comprehensive income attributable to
200,390
281,173
119,901
67,760
79,061
Total comprehensive income for the year
224,822
159,847
93,310
78,719
71,510
Profit attributable to equity holders of the Company
227,810
160,125
95,888
79,984
72,471
Profit for the year
149,404
159,539
Non-IFRS profit attributable to
equity holders of the Company
484,812
317,647
253,968
217,080
178,446
1,127,552
1,015,778
700,018
506,441
376,226
Total assets
Current assets
Non-current assets
Assets
723,521
2021
RMB'Million
RMB'Million
RMB'Million
RMB'Million
2020
2019
2018
2017
As at 31 December
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
123,788
122,742
94,351
77,469
65,126
RMB'Million
248,062
(in millions, unless specified)
1,268.2
(89,847)
(33,758)
(40,594)
57,131
149,467
6,957
6,650
221,532
245,944
(260,532)
(314,174)
482,064
560,118
(RMB in millions)
2020
Year ended 31 December
2021
Operating profit
General and administrative expenses
Selling and marketing expenses
Other gains, net
Interest income
Gross profit
Cost of revenues
Revenues
The following table sets forth the comparative figures for the years ended 31 December 2021 and 2020:
YEAR ENDED 31 DECEMBER 2021 COMPARED TO YEAR ENDED 31 DECEMBER 2020
Management Discussion and Analysis
Tencent Holdings Limited
8
(67,625)
271,620
184,237
Finance costs, net
Annual Report 2021
122,742
123,788
149,404
159,539
160,125
227,810
278
2,988
159,847
224,822
160,125
227,810
(19,897)
00
(20,252)
Non-IFRS operating profit
Non-controlling interests
Equity holders of the Company
Attributable to:
Profit for the year
Income tax expense
180,022
248,062
Profit before income tax
3,672
(16,444)
Share of (loss)/profit of associates and joint ventures, net
(7,887)
(7,114)
Non-IFRS profit attributable to equity holders of the Company
Combined MAU of Weixin and WeChat
00
Ma Huateng
Chairman
We are cultivating our key IP franchises more deeply and broadly. For example, we are developing new games, animated series
and a movie based on Honour of Kings' characters. We provided events tied into the Winter Olympics in Peacekeeper Elite, QQ
Speed Mobile and QQ Dancer Mobile, delivering lifelike sports experience across multiple genres.
Domestic Games
Our fee-based VAS subscriptions grew 8% year-on-year to 236 million. Tencent Video increased its subscription counts 1%
year-on-year to 124 million, and cemented its number one position in China with diversified content across animated series,
drama series and sports. In view of the latest market conditions, we are implementing a cost optimisation process to reduce
financial losses at Tencent Video while maintaining its leading position. For music, we grew subscription counts 36% year-on-
year to 76 million, benefitting from expanded sales channels and high-quality content and services.
Digital Content
QQ integrated Unreal Engine's graphics capabilities to enable real-time rendering and physics simulation, providing more
attractive visuals and lifelike interactions for users. We are testing an application of Unreal Engine in Super QQ Show, which
allows users to customise and dress up their 3D virtual avatars, for use in various social scenarios.
Weixin Video Accounts' time spent per user and total video views more than doubled year-on-year as we enriched content
diversity and enhanced our product experience. Video Accounts Live Streaming achieved significant breakthroughs in
user reach and engagement, exclusively hosting popular boy band Westlife's first-ever online concert, which drew 27
million viewers. While our current focus is primarily on user engagement, we believe Video Accounts will provide significant
monetisation opportunities, including short video feeds advertisements, live streaming tipping and live streaming eCommerce.
Weixin Mini Programs facilitated independent merchants to thrive within their own private domains, with their physical goods
GMV doubling in 2021. Our Health Code has served 1.3 billion users making 180 billion visits, becoming the most-used ePass
for verifying health and travel status during the pandemic.
Communication and Social
Chairman's Statement
Tencent Holdings Limited
4
00
2021 was a challenging year, in which we embraced changes and implemented certain measures that reinforced the
Company's long-term sustainability, but had the effect of slowing our revenue growth. Despite financial headwinds, we
continued to make strategic headway, including driving widespread adoption of our enterprise software and productivity
tools, increasing content creation and consumption in our Video Accounts, and expanding our International Games business.
We believe the China Internet industry is structurally shifting to a healthier mode characterised by a re-focus on user value,
technology innovation, and social responsibility. We are proactively adapting to the new environment by managing costs,
increasing efficiency, sharpening our focus on key strategic areas, and repositioning ourselves for sustainable long-term
growth. Below are some highlights from our key products and business lines during the reporting quarter:
Strategic Progress and Outlook
BUSINESS REVIEW AND OUTLOOK
0.4%
235.4
7.7%
219.5
236.3
Fee-based VAS registered subscriptions
-3.8%
0.4%
1,262.6
573.7
-7.2%
594.9
552.1
Smart device MAU of QQ
3.5%
1,225.0
Our industry-leading efforts in restricting time spent and spending by Minors yielded effective results. In the fourth quarter of
2021, total time spent by Minors reduced by 88% year-on-year, and contributed 0.9% of the total time spent on our Domestic
Games. Total grossing receipts from Minors reduced by 73% year-on-year, and contributed 1.5% of the total grossing receipts
of our Domestic Games.
Looking ahead, we expect to fully digest the impact of Minor protection measures in the second half of 2022. We believe we
will benefit from more new game launches when there are new releases of Banhao.
Annual Report 2021
5
On behalf of the Board, I would like to thank wholeheartedly our staff and management team for their dedication and
professionalism, which have been the cornerstone of the Group's sustainable development. Further, I would like to extend our
gratitude to all our shareholders and stakeholders for their continuous support and trust. We will continue to adhere to our
strategy of promoting sustainable innovations for social value, alongside nurturing the consumer Internet and embracing the
industrial Internet, and contribute more to the common good and value of our society.
APPRECIATION
On 23 December 2021, the Board resolved to declare a special interim dividend in the form of a distribution in specie of
approximately 457 million Class A ordinary shares of JD.com indirectly held by the Company to the shareholders whose names
appeared on the register of members of the Company on 25 January 2022 in proportion to their then respective shareholdings
in the Company on the basis of 1 Class A ordinary share of JD.com for every 21 Shares held by the shareholders, being
rounded down to the nearest whole number of Class A ordinary shares of JD.com.
The Board has recommended the payment of a final dividend of HKD1.60 per share (2020: HKD1.60 per share) for the year
ended 31 December 2021, subject to the approval of the shareholders at the 2022 AGM. Such proposed dividend will be
payable on 6 June 2022 to the shareholders whose names appear on the register of members of the Company on 25 May
2022.
DIVIDENDS
Chairman's Statement
7
Annual Report 2021
Supplementing risk management and internal control policies we already have in place, we enhanced our internal anti-
trust compliance system in 2021, including establishing a dedicated compliance department, updating guidelines for all our
businesses, and strengthening staff training. We also updated our policies on anti-money laundering and sanctions compliance
to closely follow domestic and global regulatory requirements and trends. Our corporate culture supports diversity and
inclusion. We collaborated with the United Nation Development Programme (UNDP) to produce videos and articles promoting
women leadership in the technology industry.
Governance
In 2021, we established the Sustainable Social Value (SSV) Organisation and announced our commitment to common
prosperity initiatives. We upgraded our charitable fundraising platform, extending the reach of our annual "99 Giving Day" to
engage 69 million donations and 12,000 enterprises. Leveraging Internet of Things solutions and Weixin Mini Programs, we
built a public emergency response platform which connects emergency control centres with volunteers and locates nearby
Automated External Defibrillator equipment for offering first aid. We adapted many of our apps to provide elderly-oriented
and barrier-free services for senior citizens. We set up dedicated funds to support basic scientific research, as well as critical
healthcare and environmental technologies.
Social
We announced our commitment to achieve carbon neutrality in our own operations and supply chain, and to use green power
for 100% of all electricity consumed by 2030. In our inaugural Tencent Carbon Neutrality Target and Roadmap Report, we
outlined key approaches in reaching the net zero goal for scopes 1, 2 and 3. We will improve our power efficiency through
technology innovations, increase our usage of renewable energy, actively participate in green power trading, and explore
investments in renewable energy projects. We joined the Science-Based Carbon Targets initiative (SBTi) to facilitate the
transition to a zero-carbon operation.
Environment
Hong Kong, 23 March 2022
We are committed to harnessing technology to build a sustainable future for our consumers, enterprises, and society at large.
Chairman's Statement
Tencent Holdings Limited
6
00
In view of the changes in market environment, we are repositioning our focus for laaS and PaaS from revenue growth at all
costs to customer value creation and quality of growth. We believe that the change in focus will benefit our customers, as well
as our margins, over the longer term.
For communication and collaboration SaaS, we upgraded the integration among WeCom, Tencent Meeting and Tencent
Docs to provide enhanced solutions for enterprises. We also enabled differentiated CRM functions in WeCom via deepened
connection with Weixin. While we are currently prioritising scale expansion before significant revenue generation, the
monetisation success of critical enterprise SaaS such as CRM software in international markets, as well as the significant size
and fast growth of domestic PaaS spending, validate the monetisation potential of critical enterprise SaaS in China.
We strengthened our payment ecosystem by enhancing user security, upgrading transaction and customer management
functions for SMEs, as well as reducing merchants' transaction friction via tools such as Weixin Pay Score. We now support
e-CNY as an additional funding option within Weixin Pay, as part of the PBOC's e-CNY pilot phase.
FinTech
We continued to enhance our differentiated advertising solutions, while adapting to regulatory changes and the evolving
macroeconomic environment. For the fourth quarter of 2021, Weixin's daily active advertisers expanded by over 30% year-
on-year. Over one-third of Moments' advertising revenue was generated from advertisements using Mini Programs as landing
pages and advertisements connecting users to customer service representatives via WeCom. We expect our advertising
business to resume growth in late 2022, as we adapt to the new environment and further upgrade our advertising solutions.
Online Advertising
Going forward, we aim to grow further our existing titles via deepening market penetration, product enhancements and
operational optimisation. In addition, we will continue to release new titles, which we expect to drive additional growth,
particularly for 2023 and beyond.
We achieved notable progress across different platforms and genres. Among international mobile games, we developed
and operate 5 out of the top 10 titles measured by DAU. League of Legends' animated series, Arcane, topped Netflix's
English-language TV series viewership chart during the week following its release. League of Legends World Championship
consolidated its leadership as the world's most popular eSports tournament, attracting a record-high of approximately 74
million peak concurrent viewers for its Finals. Clash Royale released one of the biggest updates in its history, boosting daily
active users and grossing receipts. We launched our global game publishing brand, Level Infinite, to support our studios and
partners in delivering games to international gamers.
International Games
Chairman's Statement
Environmental, Social and Governance ("ESG") Initiatives
9
180,022
94,466
Non-Executive Directors
Jacobus Petrus (Koos) Bekker
Charles St Leger Searle
Independent Non-Executive Directors
Li Dong Sheng
lan Charles Stone
Yang Siu Shun
Ke Yang
lain Ferguson Bruce
(retired with effect from
20 May 2021)
AUDIT COMMITTEE
Yang Siu Shun (Chairman)
lan Charles Stone
Charles St Leger Searle
Lau Chi Ping Martin
lain Ferguson Bruce
CORPORATE GOVERNANCE
COMMITTEE
Charles St Leger Searle (Chairman)
lan Charles Stone
Yang Siu Shun
Ke Yang
lain Ferguson Bruce
(retired with effect from
20 May 2021)
INVESTMENT COMMITTEE
Lau Chi Ping Martin (Chairman)
Ma Huateng
Charles St Leger Searle
NOMINATION COMMITTEE
Ma Huateng (Chairman)
Li Dong Sheng
lan Charles Stone
Yang Siu Shun
(retired with effect from
20 May 2021)
Ma Huateng (Chairman)
Executive Directors
DIRECTORS
Tencent 腾讯
Tencent Holdings Limited
109,400
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)
smart communication inspires
2021
智慧溝通 靈感無限
Annual Report
CONTENTS
2
CORPORATE INFORMATION
3
FINANCIAL SUMMARY
4
CHAIRMAN'S STATEMENT
Corporate Information
311 DEFINITION
180 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
178 CONSOLIDATED STATEMENT OF CASH FLOWS
174 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
171 CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(appointed with effect from
170 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
160 INDEPENDENT AUDITOR'S REPORT
110 ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT
CORPORATE GOVERNANCE REPORT
77
30 DIRECTORS' REPORT
9 MANAGEMENT DISCUSSION AND ANALYSIS
169 CONSOLIDATED INCOME STATEMENT
20 May 2021)
Charles St Leger Searle
lain Ferguson Bruce
(retired with effect from
20 May 2021)
Incorporated in the Cayman Islands with limited liability
lan Charles Stone (Chairman)
Li Dong Sheng
STOCK CODE
00
2
Tencent Holdings Limited
700
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Financial Summary
Year ended 31 December
2017
2018
RMB'Million
RMB'Million
2019
RMB'Million
2020
2021
RMB'Million
RMB'Million
REMUNERATION COMMITTEE
88,215
245,944
221,532
167,533
142,120
www.tencent.com
116,925
560,118
482,064
377,289
312,694
237,760
Revenues
Gross profit
COMPANY WEBSITE
Profit before income tax
Shops 1712-1716, 17th Floor
Hopewell Centre
183 Queen's Road East
Wan Chai, Hong Kong
PricewaterhouseCoopers
Certified Public Accountants
PRINCIPAL BANKERS
Bank of China Limited
The Hongkong and Shanghai Banking
Corporation Limited
REGISTERED OFFICE
Cricket Square
Hutchins Drive, P.O. Box 2681
Grand Cayman KY1-1111
Cayman Islands
TENCENT GROUP HEAD OFFICE
Tencent Binhai Towers
No. 33 Haitian 2nd Road
Nanshan District
Shenzhen, 518054
AUDITOR
PRINCIPAL PLACE OF BUSINESS
Services Limited
The PRC
Computershare Hong Kong Investor
HONG KONG BRANCH SHARE
REGISTRAR AND TRANSFER
OFFICE
Grand Cayman, KY1-1100
Cayman Islands
Camana Bay
Gardenia Court
Jacobus Petrus (Koos) Bekker
Suntera (Cayman) Limited
Suite 3204, Unit 2A
Block 3, Building D
CAYMAN ISLANDS PRINCIPAL
SHARE REGISTRAR AND
TRANSFER OFFICE
Hong Kong
No. 1 Queen's Road East
Wanchai
P.O. Box 1586
29/F., Three Pacific Place
IN HONG KONG
Independent Views
Corporate Governance Report
Tencent Holdings Limited
The Nomination Committee will ensure that the Board has the appropriate balance of skills,
experience and diversity of perspectives that are required to support the execution of its business
strategy and in order for the Board to be effective.
92
Board appointments will be made on the basis of merit and fairness, with due regard to the
benefits of diversity on the Board. The Nomination Committee will continue to have primary
responsibility for identifying suitably qualified candidates to become members of the Board and,
in carrying out this responsibility, will give adequate consideration to the board diversity policy. In
forming its perspective on diversity, the Nomination Committee will also take into account factors
based on the Company's business model and specific needs from time to time, including without
limitation, skills, knowledge, experience, gender and background.
Measurable Objectives
The Company recognises the benefits of having a diverse Board, and views diversity at Board
level as a business imperative that will help the Company achieve its strategic objectives and
maintain a competitive advantage. A truly diverse Board will be achieved through a number of
factors, including but not limited to differences in skills, knowledge, experience and background.
Policy Statement
The board diversity policy aims to set out the approach to enable the Nomination Committee to
achieve diversity on the Board.
Purpose and Objectives
A summary of the board diversity policy is set out as follows:
00
In assessing whether a potential candidate is qualified to become an independent non-executive
director of the Company, the Nomination Committee and the Board will consider, among others,
whether the candidate is able to devote sufficient time on performing his/her duties as an
independent non-executive director of the Company, and the background and qualification of the
candidate, in order to assess whether such candidate is able to bring independent views to the
Board.
Monitoring, Reporting
The Company will ensure that there are channels (in addition to independent non-executive
directors) where independent views are available, including but not limited to availability of
access by directors of the Company to external independent professional advice to assist their
performance of duties.
and Review
The Nomination Committee will report annually on the Board's composition and make
appropriate disclosures regarding the board diversity policy in the Corporate Governance Report
of the Company's annual reports. It will also monitor the implementation of the board diversity
policy.
Annual Report 2021
Corporate Governance Report
Remuneration Committee
The Remuneration Committee comprises only non-executive directors. Its members are Mr lan Charles Stone, Mr Li Dong
Sheng (both are independent non-executive directors) and Mr Jacobus Petrus (Koos) Bekker (non-executive director). The
Remuneration Committee is chaired by Mr lan Charles Stone.
The Remuneration Committee met four times in 2021. Individual attendance of each Remuneration Committee member is set
out on page 85.
The Remuneration Committee has the delegated responsibility to determine the remuneration packages of each member of
the senior management team and make recommendations to the Board on the remuneration package of each director.
The Remuneration Committee's major work during the year 2021 includes the following:
reviewing and recommending to the Board in respect of the remuneration policies and structure of the Company by
benchmarking peer companies with a similar scale to ensure that the Company's remuneration packages are competitive
to recruit the best talents in the industry and to retain key staff;
reviewing and recommending to the Board on the remuneration packages for the directors;
Corporate Governance Report
assessing performance and, reviewing and approving adjustments to the remuneration packages for the members of the
senior management team;
In considering whether an independent non-executive director should be proposed for
re-election, the Nomination Committee and the Board will assess and evaluate the independent
non-executive director's contribution to the Board during the term, in particular, whether the
independent non-executive director is able to bring independent views to the Board.
93
the candidate or the re-elected director's reputation for integrity, accomplishment and
experience in the relevant sectors;
The Nomination Committee will report annually on the Board's composition and make
appropriate disclosures regarding the board diversity policy in the Corporate Governance Report
of the Company's annual reports.
reviewing and approving compensation awards granted to senior management team, recognising their contributions to
the Company and providing incentives for future performances;
A summary of the board nomination policy and related nomination procedures is set out as follows:
Purpose and Objectives
The board nomination policy aims to set out the approach to enable the Nomination Committee
to nominate a director to the Board.
Director Selection Criteria
00
90
In the determination of the suitability of a candidate, the Nomination Committee will consider
a range of factors, including but not limited to the following selection criteria, before making
recommendations to the Board:
(a) the Company's prevailing board diversity policy and the requirements under the Listing
Rules;
(b)
the independence of the independent non-executive directors and the independence
criteria set out in Rule 3.13 of the Listing Rules;
(c)
potential or actual conflicts of interest of the candidate or the re-elected director;
(d)
the expected contribution that the candidate would add to the Board and to ensure the
Board has a balance of skills, experience and diversity of perspectives appropriate to the
requirements of the Company's business;
(e)
(f)
the candidate or the re-elected director's ability to commit and devote sufficient time and
attention to the Company's affairs; and
(g)
other relevant factors which will be considered by the Nomination Committee on a case-by-
case basis.
The Nomination Committee has the discretion to nominate any person as it considers
appropriate.
Tencent Holdings Limited
Corporate Governance Report
Nomination Procedure by
Nomination Committee
The Nomination Committee will have a meeting at least once a year, and candidates, if any, will
be identified for consideration. Nomination from the human resources department, external
agencies, Board referrals, or shareholders, if appropriate, will be considered.
Where a retiring director, being eligible, offers himself/herself for re-election, the Nomination
Committee will review the overall contribution to the Company of the retiring director and will
also determine whether the retiring director continues to meet the selection criteria set out in the
board nomination policy.
The Nomination Committee will assess the eligibility of a candidate to become a director of the
Company taking into account factors, including without limitation his/her reputation, character,
knowledge and experience, and make recommendations for the Board's consideration and
approval.
The Board will consider and approve the appointment, if appropriate, based upon the
recommendation of the Nomination Committee.
Monitoring, Reporting
and Review
Annual Report 2021 91
reviewing and endorsing the amendments to the 2013 Share Award Scheme and the 2019 Share Award Scheme; and
Risk Management Process
In conducting its work in relation to the remuneration of directors and senior management team, the Remuneration Committee
ensured that no individual or any of his associates was involved in determining his own remuneration. It also ensured that
remuneration awards were determined by reference to the performance of the individual and the Company and were aligned
with the market practice and conditions, the Company's goals and strategies. The remuneration awards are designed to attract,
retain and motivate high performing individuals, and reflect the specifics of individual roles. For further details of emoluments
of the senior management by band, please refer to Note 13 to the consolidated financial statements.
Business and functional departments of each business group identify, assess and respond to risks in the course of
operation in a systematic manner, escalating concerns and communicating results to the IC;
The IC collects, analyses and consolidates a list of significant risks at the business level, and provides input on risk
response strategies and control measures for such risks. These significant risks as well as the corresponding risk
responses and control measures will be reviewed by management and subsequently by the Audit Committee before
reporting to the Board;
The IC analyses and evaluates the responses to significant risks from time to time, and reports to the Audit Committee at
least once a year; and
The Audit Committee, on behalf of the Board, assesses and determines the nature and level of the risks that the
Company is willing to take in order to achieve its business objectives and formulates appropriate response strategies
which include designating responsible departments for handling each significant risk. The Audit Committee provides
guidance to the Company's management to implement effective risk management system with support from the IC.
Annual Report 2021
97
Corporate Governance Report
Significant Risks of the Company
As the complexity of the Company's business increases and the external environment continues to evolve, the Company faces
significant risks, including but not limited to ESG risk. Through risk management analysis and evaluation, the management has
identified ten significant risks for the financial year 2021, nine of which remained the same as disclosed in financial year 2020.
Among the nine significant risks, the "Regulatory and compliance risk", "Crisis management, public relations and reputation
risk", "Information security risk" and "M&A and investment management risk” have increased while the other risks remain
at a similar level as last year. Meanwhile, considering the global macroeconomic uncertainty and volatility and the impact of
COVID-19 epidemic, one new significant risk, "Macroeconomic risk", is included in 2021.
On behalf of the Board, the Audit Committee supervises the overall risk status of the Company and assesses the change in
the nature and severity of the Company's major risks. The Audit Committee considers that management has taken appropriate
measures to address and manage the significant risks that they are responsible for at a level acceptable to the Board.
Below is a summary of the significant risks of the Company along with the applicable response strategies. The Company's risk
profile may change and the list below is not intended to be exhaustive.
1.
Regulatory and compliance risk
Regulatory authorities around the world have heightened the regulatory requirements for the Internet and technology
industry and have introduced new laws and regulations. As the Company continuously expands its businesses both
locally and overseas, it is required to keep up and comply with the relevant applicable laws and regulations in different
countries and jurisdictions, including but not limited to laws and regulations relating to privacy and data protection,
anti-trust, anti-unfair competition, IP, telecommunications and Internet, gaming, Internet finance, labour protection,
foreign investment, international trade, etc. In addition, the development of various industries around the world may be
impacted by global regulatory uncertainties and uncertainties in international relations.
The Company has set up dedicated compliance departments and compliance specialist teams, engaging external
professional consultants to work closely and communicate with management, communicating with regulatory authorities
in a timely manner, actively staying on top of the changes to relevant laws and regulations, adjusting strategies and taking
appropriate actions or measures, improving internal training and the understanding of the latest laws and regulations,
and enhancing the corresponding management system to ensure the Company is in compliance with such applicable
laws and regulations. The Company has taken practical steps to devote substantial resources in various areas to ensure
the Company's compliance with regulatory requirements.
00
98
Tencent Holdings Limited
2.
Macroeconomic risk
Corporate Governance Report
The Company's revenue generated from certain businesses is closely related to the macroeconomy and the overall
consumption environment. Global and regional economic uncertainties, COVID-19 epidemic and other factors may
reduce individual users' purchasing power and their willingness to consume, resulting in a decrease in corporates'
revenue and thereby leading to a reduction in the resources they invest in market and business development. All of the
above factors may adversely affect certain revenue streams of the Company. The changes in trading and investment
policies and market changes resulting from the changes in international circumstances and the epidemic may negatively
affect the Company's operation, market and collaboration with its business partners, which may in turn affect and
weaken the Company's competitiveness and growth potential.
In response to the macroeconomic uncertainties, the Company adjusts its business development strategy in a scientific,
flexible and reasonable manner to align with the macroeconomic environment, and to continuously seek opportunities for
business development. The Company attaches great importance to product and service solutions, achieves sustainable
business growth through the improvement of user experience, and builds long-term and stable relationships with its
existing customers. Despite an adverse macroeconomic environment where economic growth slows down, epidemic
remains volatile, and international relations remain uncertain, the Company will continue to provide product solutions
and digital services to assist corporates in further enhancing competitiveness and improving productivity during this
particular period, create value for its customers and business partners, and fulfill its social responsibility with the mission
of "Tech for Good".
3.
Crisis management, public relations and reputation risk
As an Internet and technology company with a diverse portfolio of businesses, products, users and business partners, as
well as increasingly complex business models, the Company draws attention from the public and media. The Company
needs to fully consider possible crisis and actively responds to them, to avoid the escalation of problems or crisis. The
Company also needs to disclose comprehensive and proper information to the public. Otherwise, it may damage the
Company's reputation, brand and image, and adversely affect the business and prospects of the Company.
In adherence to the principles of openness and transparency, the Company has communicated with the public in a
timely manner and disclosed comprehensive and proper information. In response to crisis, the Company has established
the corresponding emergency response mechanism, to follow up on the progression of crisis, assess risks, make
prompt decisions, and adjust its businesses to reduce the impact. The Company has set up professional public relations
department and teams for crisis management to continuously improve its crisis management and public relations
capabilities, with established emergency response and public relations management mechanisms, and to provide
training and guidance related to crisis management. The public relations teams have maintained close interaction with
management and business groups of the Company, to continuously gather public opinions, analyse relevant market
information for management to enable management timely respond and disclose comprehensive and proper information
to the public according to the Company's policies and procedures; and protect the Company's reputation.
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•
reviewing and approving the service contracts entered into by each executive director with the Group respectively.
Being an Internet and technology company with a wide variety of rapidly-changing businesses, the Company has adopted the
following dynamic risk management process in response to the ever-changing risk landscape:
The Company is committed to continuously improving its risk management system, including structure, process and culture,
and its risk management ability, to ensure long-term growth and sustainable development of the Company's business.
In respect of non-executive directors, the Remuneration Committee has reviewed the fees payable to them taking into account
the particular nature of their duties, relevant guidance available and the requirements of the Listing Rules.
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ACCOUNTS, RISK MANAGEMENT AND INTERNAL CONTROL
As part of the Board's responsibilities, the Board ensures that the assessment over the Group's performance and prospects
are clearly and comprehensively presented. The directors acknowledge that it is their ultimate responsibility to prepare
the accounts which give a true and fair view of the financial position of the Group on a going-concern basis and other
announcements and financial disclosures. To assist the Board in discharging their responsibilities, management provides
updates to the Board from time to time, including the Group's detailed business and financial position, in order to give
the directors a balanced, understandable and clear assessment of the performance, position and prospects of the Group.
Management also provides all necessary and relevant information to the Board, giving the directors sufficient explanation and
information they need to discharge their responsibilities and make an informed assessment of financial and other information
put before them for approval. The Auditor's statement in respect of their reporting responsibilities is set out in the "Independent
Auditor's Report" of this annual report.
Adequate and effective risk management and internal control systems are key to safeguarding the achievement of the
Company's strategic objectives. Risk management and internal control systems shall ensure the Company's effective business
operation, the accuracy and reliability of financial reporting, as well as the compliance with applicable laws, regulations and
policies.
The Board acknowledges that it is their responsibility to ensure that the Company has established and maintained adequate
and effective risk management and internal control systems. The Board delegates their responsibility to the Audit Committee
to review the practices of management with respect to risk management and internal control, including the design,
implementation and supervision of the risk management and internal control systems, on a quarterly basis. The Audit
Committee also reviews the effectiveness of the risk management and internal control systems on an annual basis. The
Board is responsible for overseeing the risk appetite of the Company including determining the Company's acceptable level
of risk, and proactively considering, analysing and formulating strategies to manage the Company's significant risks. The
risks mentioned above also include, but are not limited to, significant risks related to the environment, social and governance
aspects of the Company.
Under the supervision and guidance of the Board, the Company has adopted a risk management and internal control
structure, referred to as the "Three Lines of Defence" model, to ensure the effectiveness of its risk management and internal
control systems.
First Line of Defence - Operation and Management
Our First Line of Defence is mainly comprised of business and functional departments of each business group of the Company
who are responsible for the day-to-day operation and management. They are responsible for designing and implementing
controls to address the risks.
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Second Line of Defence - Risk Management
Our Second Line of Defence is mainly the IC. They are responsible for formulating policies related to the risk management
and internal control of the Company and for planning and implementing the establishment of integrated risk control systems.
To ensure the effective implementation of such systems, they also assist and supervise the first line of defence in the
establishment and improvement of risk management and internal control systems.
Third Line of Defence - Independent Assurance
Our Third Line of Defence is comprised of the IA and the Anti-fraud Investigation Department.
The IA holds a high degree of independence and is responsible for providing independent evaluation on the effectiveness
of the Company's risk management and internal control systems, and monitoring the Company's improvement on risk
management and internal controls.
The Company has formulated policies and established management systems to enhance and support the Company's
compliance with anti-corruption laws and regulations. The Anti-fraud Investigation Department is responsible for receiving
whistleblower reports through various channels and following up and investigating alleged fraudulent activities. It also assists
management in promoting the "Tencent Sunshine Code of Conduct" (the "Sunshine Code") and the value of integrity to all
employees of the Company.
The IA and the Anti-fraud Investigation Department have direct reporting lines to the Audit Committee.
The Three Lines of Defence model of the risk management and internal control systems are designed to manage rather than
eliminate the risk of failure to achieve business objectives of the Company, and can only provide reasonable but not absolute
assurance against material misstatement or loss.
The Board and management have always placed importance on the Company's risk management and internal control systems.
In 2021, the Company has invested more resources in the continuous improvement of the risk management and internal
control systems, which have also continuously increased the awareness of risk management among the employees. The
internal control function has continuously worked closely with and provided proactive support to the business groups in their
business development and risk management. Furthermore, the IA has also continued to promote the deployment of various
internal audit projects and continuous audits to provide more effective and timelier independent evaluations. The Anti-fraud
Investigation Department further strengthened the values of integrity among the employees, followed up and investigated the
alleged fraudulent activities. The connection and interaction among the three lines of defence have been further enhanced to
provide more effective support to the Company's development.
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Risk Management
The Company has established a risk management system (including the "Three Lines of Defence" internal monitoring model
as detailed above) which sets out the roles and responsibilities of each relevant party in the system as well as the relevant
risk management policies and processes. Each business group of the Company, on a regular basis, identifies and assesses
any risks that may negatively impact the achievement of its objectives, and formulates appropriate response measures. The
Company also provides risk management and internal control training for staff on a regular basis.
Corporate Governance Report
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Business continuity risk
The Company has a certain scale of investment activities in diverse fields. It is important for the Company to adopt
robust procedures in the formulation of investment strategies and strong treasury management, both at the investment
evaluation stage as well as the post-investment stage. Failure to promptly and effectively manage investment risks could
hinder the realisation of investment strategies and lead to probable financial loss of the Company.
Corporate Governance Report
M&A and investment management risk
6.
The Company's internal control systems clearly define the roles and responsibilities of each party as well as the authorisation
and approvals required for the key actions of each party. Policies and procedures are in place for the key business processes.
This information is clearly conveyed to employees in practice and emphasised the importance of the internal control systems.
All employees must strictly follow the policies which cover, amongst other things, financial, legal and operational issues that set
the control standards for the management of each business process.
In order to further strengthen the accountability of the management team in the internal control systems of the Company
and to assist in determining the effectiveness of such internal control systems, the management team of each business
group conducts self-assessment and confirms the internal control status of the business group for which it is responsible.
The IC assists management in preparing a self-assessment questionnaire according to the COSO Framework and guides
the management of each business group to carry out the self-assessment. The IC is also responsible for collecting
and summarising the results of self-assessment. The Chief Executive Officer of the Company reviews this summarised
self-assessment of each business group, assesses the general effectiveness of the internal control systems of the Company and
submits the written confirmation thereof on behalf of management to the Audit Committee and the Board.
In addition, the IC supervises the establishment of the risk management and internal control systems set up by management,
ensures that management has implemented appropriate measures and reports the general situation of risk management and
internal control of the Company to the Audit Committee on a quarterly basis. The IA, serving as the independent third line of
defence, conducts objective evaluation on the effectiveness of the Company's risk management and internal control systems
and reports the results to the Audit Committee.
The Company has also engaged independent professional consulting firms to perform a review of the Group's internal control
framework and an assessment of its internal audit quality to ensure their standards are in compliance with international best
practices.
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Corporate Governance Report
Effectiveness of Risk Management and Internal Control
The Audit Committee, on behalf of the Board, continuously reviews the risk management and internal control systems.
The review process comprises of, among other things, meetings with management of business groups, IA, IC, legal team, and
the external auditor, reviewing the relevant work reports and information of key performance indicators, the management's
self-assessment on internal control as detailed above and discussing the significant risks with senior management of the
Company.
The Board is of the view that throughout the year ended 31 December 2021, the risk management and internal control
systems of the Company are effective and adequate.
In addition, the Board believes that the Company's accounting and financial reporting functions as well as the ESG
performance and reporting functions have been performed by staff with the appropriate qualifications and experience and
that such staff receives appropriate and sufficient training and development. Based on the report of the Audit Committee, the
Board also believes that sufficient resources have been obtained for the Company's internal audit function and that its staff
qualifications and experience, training programmes and budgets etc., are sufficient.
SHAREHOLDERS
To enable our shareholders and other stakeholders to exercise their rights in an informed manner based on a good
understanding of the Group's operations, businesses and financial information, the Company adopted the shareholders
communication policy which aims to ensure that our shareholders and other stakeholders at large are provided with ready,
equal, regular and timely access to material information about the Group. The policy also sets out a number of ways to ensure
effective and efficient communication with our shareholders and other stakeholders is achieved, including but not limited to our
quarterly results announcements, webcasts, responses to shareholders' enquiries, corporate communications (in both English
and Chinese, to facilitate shareholders' understanding), posting of relevant information on the Company Website, shareholders'
meetings and investment market communications. To facilitate communication between the Company, our shareholders and
the investment community, investor and analyst briefings, one-on-one meetings, domestic and international roadshows, media
interviews and specialist industry forums are organised on a regular basis and are attended by our directors and designated
spokespersons. In addition, the Company Website has been adopted as the designated hub for publication of the Company's
announcements, press releases and other corporate communications including the shareholders communication policy and
the investor calendar which highlights important dates for Shareholders' information. Our dividend policy also set out in the
"Corporate Governance Report” on page 108 of this annual report and the historical information of dividend payout is available
on the "Interactive Share Price Chart & Dividend History" section on the Company Website.
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The Company also encourages shareholders' active participation in annual general meetings and other general meetings.
Notices to shareholders for annual general meetings are sent to shareholders at least 20 clear business days before the
meetings and at least 10 clear business days for all other general meetings to allow sufficient time for their consideration of
the proposed resolutions. Our shareholders communication policy also requires appropriate arrangements to be put in place
for the annual general meetings to encourage and facilitate shareholders' participation, and the process of the meetings is
monitored and reviewed on a regular basis to ensure that shareholders' needs are best served.
The Company's general meetings provide a transparent and open platform for the Company's shareholders to communicate
with the Board and the senior management team. The Chairman, other members of the Board and relevant members of the
senior management team, under normal circumstances, attend to answer questions raised and discuss matters in relation to
the Company in an open manner. Save as Mr Li Dong Sheng and Professor Ke Yang, all directors attended the 2021 AGM and
the 2021 EGM, with a view to understanding the views of the Company's shareholders. The company secretary provided the
minutes of the 2021 AGM and the 2021 EGM to all directors to have a thorough understanding of the views of the Company's
shareholders. The Company's external auditor will also attend the annual general meeting to answer questions relating to the
conduct of the audit, the auditor's report and auditor independence.
Pursuant to the Articles of Association, any one or more shareholder(s) of the Company holding at the date of deposit of the
requisition not less than one-tenth of the paid up capital of the Company carrying the right of voting at general meetings of
the Company shall at all times have the right, by written requisition to the Board or the company secretary, to require an
extraordinary general meeting to be called by the Board for the transaction of any business specified in such requisition.
Such requests must be sent to the Board or the company secretary at the Company's registered office at Cricket Square,
Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands, or by email to cosec@tencent.com, and such
meeting shall be held within two months after the deposit of such requisition. If a shareholder wishes to propose a person for
election as a director at a general meeting, he/she should provide a written requisition to the Board or the company secretary
to call an extraordinary meeting following the procedures set forth above, or lodge a written notice to nominate a person at the
Company's Hong Kong principal place of business at 29/F., Three Pacific Place, No. 1 Queen's Road East, Wanchai, Hong
Kong, or the Company's branch share registrar, Computershare Hong Kong Investor Services Limited at Shops 1712-1716,
17th Floor, Hopewell Centre, 183 Queen's Road East, Wan Chai, Hong Kong. Detailed Procedures for Shareholders to Propose
A Person for Election as A Director is also available on the Company Website.
In order to ensure that shareholders' interests and rights are adequately protected, a separate resolution will be proposed for
each substantially separate issue at the general meetings, and all resolutions will be voted by poll pursuant to the Articles of
Association and the Listing Rules. To ensure that the shareholders are familiar with the detailed procedures for conducting a
poll, detailed procedures for conducting a poll are explained at the commencement of the general meetings, and all questions
from shareholders on the voting procedures will be answered before the poll voting starts. An external scrutineer will be
appointed to monitor and count the votes cast by poll. Poll results will be posted on the Company Website and the Stock
Exchange's website after each general meeting.
Annual Report 2021 107
The Company takes the management of investment risks seriously and has established an Investment Committee
under the Board, dedicated an investment team to identify investment opportunities, appointed finance, legal and
other relevant professional teams to manage relevant risks, put in place the investment risk evaluation and approval
process, and conducted comprehensive analysis. The Company has also designated finance, legal and other relevant
professional teams to support and monitor the performance of the investee companies. These teams periodically analyse
and review relevant operating and financial information of the investee companies to ensure that they continue to satisfy
the Company's investment strategies. In addition, the Company has invested resources in internal audit and internal
control functions to continuously support the management of its controlling subsidiaries in establishing more sound risk
management and internal control systems.
Corporate Governance Report
7.
The Company has actively developed various ToB businesses related to Industrial Internet. With the rapid development
of the ToB business, if the Company fails to adjust its business strategy to respond to changes in industry trends and
market needs on a timely basis, to keep optimising its organisational structure with support from professional talent, to
improve its internal management system and processes for ToB business, to enhance its supply chain management
capabilities, and to improve its cooperation mechanisms with various business partners, it may face more managerial
challenges, and may affect the sustainable development of its ToB business and the realisation of the Company's
strategic goals.
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The Company, with its belief in the value of integrity, has zero tolerance for fraud, and is determined to fight against
any fraudulent activities. The Company has established effective internal control systems and is continuously improving
it. These systems have been strengthened by systematic, transparent control measures and procedures. To enhance
and promote integrity, the Company continuously conducts various training for its employees, suppliers, and business
partners. For employees, the Company has established the Sunshine Code that the employees shall strictly follow
during their employment and in the course of business dealing with suppliers and business partners. For suppliers and
business partners, the Company cooperates with them to create an ecosystem with integrity. The Company has signed
an Anti-commercial Bribery Declaration with its suppliers and business partners to alert the counterparts the importance
of ethical value and to build a healthy and transparent environment for business. Furthermore, the Company has set up
an Anti-fraud Investigation Department for years to proactively collect whistleblowing cases from various channels, and
to follow up and investigate alleged fraudulent cases on a timely basis. The Company will terminate the employment
immediately with any employee who has been found to be involved in any fraudulent activities. The Company may also
pass the relevant case to initiate legal proceeding according to the relevant laws and regulations under more serious
circumstances. Any supplier/business partner found to be involved in any fraudulent activities will be blacklisted and
deprived of the opportunity to work with the Company permanently. The Company will announce to the public those
criminal cases and serious abuse-of-power cases that were investigated and handled by the Company via the "Sunshine
Tencent" WeChat official platform. This shows the Company's determination to fight against corruption and fraud, as well
as its commitment towards creating a virtuous and honest atmosphere within the Company and the industry.
In recent years, fraudulent activities have occurred frequently in the Internet and technology industry and therefore
integrity has been an important concern. As the Company continues to develop its business, the form and complexity of
its business evolved, and consequently the fraud risk inevitably increased to a certain extent. For example, fraudulent
activities caused by collusion between suppliers/business partners and employees can have a negative impact on the
reputation and financial position of the Company.
Fraud risk
10.
Corporate Governance Report
Annual Report 2021 103
The Company is committed to promoting environmental sustainability and places environmental protection as one of
its top priorities. The Company continuously pays attention to the environment and climate change. The Company also
actively responds to China's goal in achieving carbon neutrality by announcing the launch of its carbon neutrality plan in
January 2021 and releasing Tencent Carbon Neutrality Target and Roadmap Report in February 2022. The Company
commits to carrying out green and low-carbon operations, introducing green and low-carbon concepts to the community
and advocating relevant practices, whilst using its digital capabilities to help its partners in achieving low-carbon
transformation and to jointly practice low-carbon development.
Together with several renowned scientists, the Company established and continues to fund the "Xplorer Prize" to
encourage the study and research of cutting-edge technologies and foundational science among young scientists. In
respect of protection of Minors, the Company upgrades the facial recognition strategies and enhances facial patrolling
mechanism on the established "Parental Guardian Platform" and "Healthy Gameplay System" to further prevent Minors
from being addicted to games. The Company also provides interest classes in technology to teenagers in less developed
areas to improve their Internet literacy. In respect of public emergencies, the Company established a public emergency
platform and improves the social capabilities of handling public emergencies through the donation of emergency
equipment, transfer of first-aid technical knowledge and cultivation of first-aid awareness. In respect of the supports
to elderly and disabled, the Company encourages “Digital Inclusion" by optimising products for the elderly and people
with disabilities under the philosophy of "Leave No One Behind" and "Information Accessibility". Meanwhile, the
Company also leverages digital technologies, social media and digital content platforms to provide digital solutions for the
preservation and inheritance of traditional culture.
As the first Internet and technology enterprise to establish a charity foundation in China, the Company continues
to make donations in various charitable fields, commits itself to providing digital support for charity fundraising and
donations, empowers the digitalisation of public welfare, and promotes the sustainable development of the public welfare
ecosystem.
The Company takes equal emphasis on technology innovation and industrial development, continuously enhances the
core capabilities such as cloud computing, Al, big data, security, etc., builds an open ecosystem, promotes industry
collaboration, supports the transformation of various industries including healthcare, transportation, tourism, retail,
and energy, etc., enhances its digital capabilities in supporting employment and entrepreneurship opportunities,
and facilitates the development of digital economy comprehensively. By utilising its core competencies of an Internet
company, the Company effectively supports rural governance, attracts talent to return to their villages and improves
productivity of villages through the establishment of the "WeCounty" platform. The Company has also launched initiatives
such as the "Cultivator Plan" for talent revitalisation, invested continuously in rural digital construction, and promoted
rural revitalisation and common prosperity.
The Company upholds its vision and mission of "Value for Users, Tech for Good", and constantly reviews its products
and platforms from the perspective of social responsibility. With a strategic enhancement in 2021, the Company
incorporated "Sustainable Innovations for Social Value" into its core strategy, and actively commits to social responsibility
and promotes social and environmental sustainability using Internet and other technologies.
Corporate Governance Report
Social responsibility and environmental sustainability risk
9.
102 Tencent Holdings Limited
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The Company continues to invest in its network infrastructure to enhance its established business recovery mechanism
to ensure network security in order to provide consistent support to business development. Meanwhile, the Company
has established dedicated teams to develop business contingency plans and to perform regular drills. All business
departments also implemented various emergency measures to ensure smooth business operation. In addition, an
independent dedicated team has been set up to perform regular checks on the effectiveness of the relevant emergency
mechanisms and measures, as well as the drills and its results. In terms of energy use, the Company continues to
increase the proportion of renewable energy, deploy rooftop solar PV system for data centers, build energy storage
stations, and participate in green power trading. In the post-pandemic era, the Company's emergency response team
continues to operate effectively, closely monitoring risks, keeping up with policy changes, and responding to both
risks and policy changes in a timely and appropriate manner. For example, the Company provides mobile working
solution plan and various functional support, to support the business group in responding to urgent needs through
adjusting resource allocation and timely deployment of emergency measures to ensure employee safety and continued
operations of the Company's business. The Company also performs emergency drills to improve business's capabilities
in responding to emergencies. Meanwhile, the Company also works closely with partners to seek solutions to application
scenarios during these special periods, and to jointly build an open, innovative and secured digital ecosystem to support
the economic recovery and business development in the post-pandemic era.
The stability of servers and network infrastructure for products and platforms of the Company is of vital importance for
the successful operation of the Company's business as well as the provision of high-quality user experience. Any material
functional defect, interruption, breakdown or other issues in connection are likely to adversely impact the Company's
businesses. In addition, the Company's operations may be affected by uncontrollable external factors such as natural
disasters, social security events, epidemic disease or energy supply. Relevant incidents may damage workplaces and
equipment that are vital to the Company and its business partners, and threaten the health of their employees, which
results in disruption of Company's normal operation.
Management of the Company is responsible for the design, implementation and maintenance of the effectiveness of internal
control systems. The Board and the Audit Committee are responsible for monitoring and overseeing the performance of
management over the internal control systems to ensure its appropriateness and effectiveness.
8.
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Annual Report 2021
The Company continues to accumulate and solidify its experience in the ToB business by analysing development trends
in different industries and changes in user needs. The Company has started to increase its footprints in the ToB business
by integrating cloud computing, Al, Internet of Things, security and other advanced technologies for deployments
in various industry-specific scenarios, to build a new, intelligent ecosystem that efficiently connects customers and
enterprises. This has been applied across many industries including social services, tourism, healthcare, industry,
agriculture, transport, energy, retail, financial services, etc. Furthermore, the Company is continuously developing its ToB
business, optimising its management over business structure, human resources, management policies and business
processes, and improving its supply chain management capabilities to ensure the effective operation of the ToB business
for rapid and sustainable development. Through continuous technological innovation, the Company continues to
enhance its ability to serve corporate clients and to promote the integration and development of the digital economy with
the real economy.
ToB business risk
Internal Control
Apart from participating in the Company's general meetings, shareholders and other stakeholders may at any time contact
or send enquiries and concerns to us via the Company Website, or by addressing them to the Investor Relations teams, and
sending them by post to the Investor Relations, Tencent Holdings Limited, at 29/F., Three Pacific Place, No. 1 Queen's Road
East, Wanchai, Hong Kong, or by email to ir@tencent.com. Shareholders may also contact the Company's Hong Kong branch
share registrar, Computershare Hong Kong Investor Services Limited, if they have any enquiries about their shareholdings and
entitlements to dividends.
The Company endeavours to maintain sufficient working capital to develop and operate the business of the Group and to
provide sustainable returns to the shareholders of the Company.
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DIVIDEND POLICY
Tencent Holdings Limited
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The Company stays on top of trends in market and industry development, as well as user needs, keeps up with the
technological development through innovation in frontier technology and explores application of technologies in new
scenarios. The Company stays focused on expectation changes in user experience, stays active in promoting the
incubation of new business, keeps exploring new forms of business, and recruits talent, optimises its organisational
structure, and enhances the innovation capabilities by improving talent quality with cultivating young talent. The
Company also continuously enhances its technical capabilities and innovation environment to develop products that
meet the expectations of the market, to continuously improve user experience and to maintain its competitiveness in the
market. The Company collaborates with its partners to jointly innovate, enhance its service capabilities, and create value
for users and the society.
The Internet and technology industry is highly competitive, innovative and ever-changing at all times. The development of
technologies brings evolutional changes to the existing business models; and the cross-sectoral expansion of non-Internet
and technology companies bring in more new players into the market. Users' expectations for innovative products and
services are also increasing. Therefore, how to create value for more users and promote innovative and sustainable social
values through innovation in technology, product and business model are the key challenges of the Company.
Market competition and innovation risk
5.
The Company strongly believes that protecting user and customer data is the key prerequisite for delivering secured
and high-quality products and user experience. With a strong commitment to protecting data privacy and security, the
Company strictly complies with applicable laws and regulations, and strives to provide the highest level of protection
on such information and data. In this regard, the Company has formulated and kept optimising control measures to
protect such information and data. Information security is ensured through effective management systems, encryption,
access restrictions and controls, the establishment of appropriate and effective management processes, and continuous
improvement of the business continuity and disaster recovery management. In addition, the Company arranges regular
reviews by independent specialists over the Company's data protection practices; and provides training for staff to
enhance their awareness of information security.
All countries and jurisdictions continue to heighten its supervision over cyber security and personal information
protection. Protecting and safeguarding user and customer data is the top priority of the Company. The Company
continues to pay attention to the laws and policies relating to user privacy and data protection in various jurisdictions and
is fully aware that any loss or leakage of such information could have a significant negative impact on the affected users
and customers. This could expose the Company to significant liability and significant reputational risk.
Information security risk
4.
Corporate Governance Report
Under the framework, if an employee is aware of any project, transaction, information or situation which he/she thinks could
potentially be inside information, he/she should contact the Head of Compliance and Transactions Department, the general
counsel and the company secretary as soon as possible. Legal analysis and consultations with the Company's directors and
senior executives will be made so as to identify whether any such information constitutes inside information and is required to
be disclosed to the public pursuant to the SFO. The framework and its effectiveness are subject to review on a regular basis
according to established procedures.
The Company has in place a framework for the handling and disclosure of inside information in compliance with the SFO. The
framework sets out the procedures and internal controls for the handling and dissemination of inside information in a timely
manner so as to allow all the shareholders and stakeholders to assess the latest position of the Group.
The Company has always valued the importance of the internal control systems and has implemented its internal control
systems according to the COSO Framework.
The statement of the external auditor of the Company about their reporting responsibilities for the financial statements is set
out in the "Independent Auditor's Report" on pages 160 to 168. During the year ended 31 December 2021, the remuneration
paid/payable to the Company's external auditor, PwC, was disclosed in Note 8 to the consolidated financial statements. The
audit and audit-related services conducted by the external auditor mainly comprise of statutory audits and reviews for the
Group and its certain subsidiaries. The non-audit services conducted by the external auditor mainly include tax advisory
services for our M&A and other corporate transactions, due diligence services and other services such as ESG assurance
service and services relating to risk management and internal control review. Please refer to Note 8 to the financial statements
for a breakdown of the fees paid for the key non-audit services.
Framework for Disclosure of Inside Information
Tencent Holdings Limited
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Each non-executive director, whether independent or not, is appointed for a term of one year and is subject to retirement
by rotation at least once every three years. A director appointed to fill a casual vacancy or as an addition to the Board will be
subject to re-election by shareholders at the first general meeting after his/her appointment.
Appointment Terms of Non-Executive Directors
The Company has adopted the Model Code. The Company has also adopted an insider dealing policy to govern and regulate
securities transactions by employees who are likely to be in possession of inside information relating to the Company, the terms
of which are no less exacting than those of the Model Code. The Company has made specific enquiries with the directors and
the directors have confirmed they have complied with the Model Code throughout 2021.
Model Code for Securities Transactions by Directors of Listed Issuers
Corporate Governance Report
Significant Change in the Constitutional Documents
The Company is required to disclose certain information pursuant to the Listing Rules and the CG Code. Set out below is the
information which has not been covered above.
DISCLOSURE OF OTHER INFORMATION
Under the current dividend policy of the Company, dividends may be declared out of the distributable earnings or reserves of
the Company. While the dividend payout ratio is not pre-determined, in proposing or declaring any dividend payout, the Board
shall take into account the Group's earnings performance, general financial position, debt covenants, future working capital
and investment requirements, and other factors that the Board considers relevant and appropriate.
Directors and Officers Liability Insurance
The Company has arranged appropriate directors and officers liability insurance in respect of legal action against the directors
and officers.
External Auditor and Auditor's Remuneration
There has not been any change to the Company's memorandum and articles of association during the year ended
31 December 2021.
9
14
8
Diversity and Equal Opportunity
Employee Health and Safety
12 Social Impact of Products & Services
11 Supply Chain Management
Impact on Tencent's Business
(Extremely Important)
22 Corporate Governance
21 Anti-corruption
20 Intellectual Property
19 Anti-trust
18 Support Common Prosperity
17 Community Investment
Digital Inclusion and Digital Literacy
16
Protection of Minors
15
Data Privacy and Cyber Security
14
13 Responsibility of Content
10 Labour Standards
MED
1.
23 Active Stakeholder Engagement
Including the construction emission reduction, such as Dachan Bay.
2
Details of Tencent's carbon neutrality goals can be found in the Tencent Carbon Neutrality Target and Roadmap
Report.
We will help mobilise the transition to a low-carbon society by leveraging the influence of our products and
technological capabilities. For our users, we will promote a low-carbon lifestyle. For our business partners, we will
assist them in their low-carbon transformation by providing innovative products and enabling technologies.
We followed the best practice of prioritising the use of active emissions reduction measures while keeping the use
of carbon offsets to a minimum. We will reduce or avoid emissions via a series of measures, including energy-
saving initiatives, technological and management innovations to increase power use efficiency², transition to green
power or renewable energy by procurement as well as building and investing in renewable energy projects. Steps
to achieve our targets can be found in the "Energy Management" section.
Scope 3: Indirect emissions generated from the supply chains (Scope 3) amounted to 2.743 million MtCO2e,
or 53.7% of the emissions.
Scope 2: Indirect emissions generated by purchased electricity and other purchased energy (Scope 2)
amounted to 2.349 million MtCO2e, or 45.9% of the emissions.
•
Scope 1: Direct emissions from operations owned or controlled by the Company (Scope 1) amounted to 0.019
million MtCO2e, or 0.4% of the emissions.
Based on the Greenhouse Gas ("GHG") Protocol, we began an internal review of our greenhouse gas emissions
and used 2021 as the base year to develop our carbon neutrality roadmap and decarbonisation pathways. Our
total emissions of 5.111 million metric tons of carbon dioxide equivalents includes:
We pledge to reach carbon neutrality across our operations and supply chains by 2030, and to switch our
electricity supply to 100% green power or renewable energy where feasible. We have signed on the Science-Based
Targets initiative ("SBTi") and will work to refine targets for our decarbonisation pathways in the following months.
Metrics and Targets
Environmental, Social and Governance Report
Annual Report 2021 117
In 2021, the Board and senior management evaluated the relative impacts of the climate-related risk factors,
including acute physical risk, chronic physical risk, policy & legal risk, technology risk, market risk, and
reputational risk on the business, and provided mitigation and adaptation responses. For acute physical risks, we
have taken extreme weather events, such as rainstorms, typhoons and high temperatures into consideration during
our site selection, construction, and operations of our data centres. We have also drafted corresponding mitigation
and adaptation measures to address the potential impacts of these events.
00
We have integrated ESG risks into the Company's overall risk assessment and management system, including
risks related to climate change. As part of our climate risk assessment, we consider the probability and the relative
impact of the risks on our Company.
118 Tencent Holdings Limited
6.2 Energy Management
2.
Annual Report 2021 119
We have always focused our efforts on improving resource efficiency and increasing the proportion of renewable
energy use in our data centres, which are pivotal to reducing our carbon footprint.
Energy Management in Data Centres
Our efforts in energy-saving at office buildings have earned certifications of international sustainable design
standards. Tencent Binhai Towers, Tencent Beijing Headquarters, and Chengdu Tencent Towers A and B have
obtained LEED Gold or Platinum certifications.
By establishing the "Management + Technology + Procedure" system, we have successfully improved our energy
use efficiency, thereby achieving our targets (shown in the Environmental Targets section).
Our energy-saving policy drives our day-to-day energy-saving measures. Office lights and air conditioners are
automatically turned on/off based on the schedule of employees. Whenever employees leave the workplace
or meeting rooms, they are also encouraged to manually switch them off. We also have stringent onsite office
management in place with routine inspections, where the property management companies closely monitor
the electricity consumption.
We continuously seek ways to improve our energy efficiency by regularly evaluating our office buildings'
energy consumption and optimising our energy consumption through innovative technologies. In 2021, we
executed energy-saving renovation projects in Tencent Binhai Towers: (i) we replaced LED lighting in our
public areas, optimised lighting duration for our underground car parks, and (ii) installed thermostats and
fan coil systems with automatic switches in our IT machine rooms and power distribution machine rooms.
We manage our office building's energy and water consumption, through an online Tencent Facility
Management system. In addition, we have introduced a real-time monitoring system for self-owned buildings,
which provides statistical analysis on electricity and water consumption.
•
•
.
Our "Management + Technology + Procedure" approach underpins our energy conservation measures, through
which:
Environmental considerations are incorporated into the design, construction, and operation of our office buildings.
All our new office buildings in China are designed and constructed to attain the Green Building Two Star standards.
Energy Management in Office Buildings
Environmental, Social and Governance Report
Employee Career Development
Risk Management
There are transition risks as well. In the context of accelerating the transition to a low-carbon economy, if we fail to
effectively control or reduce the carbon emissions generated from our operations and provide low-carbon services
and products, it may result in reputational damage, loss of users, or market share reduction. Our carbon neutrality
initiative follows the principle of "prioritising the use of active emissions reduction measures while keeping the
use of carbon offsets to a minimum". In addition to achieving our carbon neutrality goal, we aim to play a leading
role in the transition towards a low-carbon society by (i) fostering open innovation and knowledge sharing and (ii)
leveraging the reach and influence of our platforms and products.
•
Our values and culture, which crystallised into our mission to create “Value for Users, Tech for Good", has guided the
Company to incorporate social responsibility into our products and services, help industries digitally transform and
collaborate with stakeholders to contribute to the sustainable development of society. The Company has continued
to promote our culture and adopt various policies and initiatives to provide additional guidance to our employees. For
example:
Creativity means to push for breakthrough innovations, and explore the possibilities of the future.
Collaboration means to be inclusive and collaborative, and strive to progress and evolve; and
Proactivity means to pursue positive contributions, volunteer for responsibility and push for breakthroughs;
.
•
•
Integrity means to uphold principles, ethics, openness and fairness;
The Company is committed to strengthening our corporate culture, which is built upon our values, vision and purpose.
Our values are integrity, proactivity, collaboration and creativity.
OUR CULTURE
5.
The material topics which fell into the upper right quadrant of the matrix were defined as highly material to the Company.
These material ESG topics include Data Privacy and Cyber Security, Protection of Minors, Responsibility of Content,
Social Impact of Products & Services, Employee Health and Safety, Intellectual Property, Anti-corruption, Corporate
Governance, Labour Standards, Active Stakeholder Engagement, and Anti-trust.
Environmental, Social and Governance Report
114 Tencent Holdings Limited
We have developed the Tencent Sunshine Code of Conduct (the "Sunshine Code") which, amongst others, sets
the ethical standards and behaviour expected of our employees and prohibits activities that are not in compliance
with applicable laws and regulations, and published an Anti-fraud and whistleblowing Policy that outlines multiple
whistleblowing channels.
We believe that climate change has also brought various opportunities to Tencent. By improving the efficiencies
of energy consumption and water use at our office buildings and data centres, we could optimise operating costs
and minimise sensitivity to changes in carbon trading prices. We provide various products and services, including
Tencent Cloud, WeCom, Tencent Meeting to help our users reduce their carbon footprint and accelerate their
digital transformation.
We voluntarily pledged to reach carbon neutrality in our operations and supply chains, and to transition to 100%
green power by 2030.
We have developed technologies and solutions for social well-being, including but not limited to mobile applications
suitable for the silver generation, enhanced accessibility solutions for communities with activity limitations as well
as youth programmes that inspire creativity and teach coding skills.
In terms of physical risks, acute climate events caused by climate change, such as frequent typhoon weather and
rainstorms, may affect our operational continuity. On the other hand, chronic risks, such as high temperatures
and droughts may increase energy consumption and operating costs for our offices and data centres. Rising sea
or water levels may lead to loss of assets in certain regions. We have considered the impact of regional climate
when allocating assets and have formulated emergency measures for acute climate events to avoid and reduce
operational impacts or asset losses.
Environmental, Social and Governance Report
116 Tencent Holdings Limited
We acknowledge that climate change brings physical and transition risks and opportunities to our business. Our
physical risks primarily result from acute and chronic risks caused by climate change, while transition risks mainly
come from the market and policy changes that arise during the transition to a low-carbon economy. Reputational
risks are linked to the potential failure in fulfilling our commitment to developing into a low-carbon business. On
the other hand, climate change would also provide us with the opportunity to improve our energy efficiency and
develop low-carbon technologies and climate-resilient products and services.
Strategy
Climate-related risks and issues are considered and monitored by the Board via the Corporate Governance
Committee. Climate change is regarded as a specific issue for revision and discussion. During the reporting
period, the Corporate Governance Committee has reviewed the Company's carbon footprint, net-zero goal, and
decarbonisation pathways.
Governance
The risks and impacts of climate change are becoming increasingly significant. Tencent is committed to identifying
and mitigating the impacts of climate change on our strategy, business operations, and financial performance.
In 2021, we joined the global climate action (for example, achieving the objectives of the Paris Agreement and
China's "3060" goal) by pledging to achieve carbon neutrality in our operations and supply chains (including
Scope 1, 2 and 3 emissions) as well as transition to 100% green power by 2030.
6.1 Tackling Climate Change
00
From operating our platforms daily to building our network of data centres, we have considered energy conservation,
waste reduction, ecological impact, and climate-related risks in our decision-making process and policies. This has
enabled us to meet the applicable regulatory requirements in China, including the Energy Conservation Law of the
People's Republic of China and Environmental Protection Law of the People's Republic of China. In 2020, China
announced that the country would reach carbon neutrality by 2060 and may introduce new regulatory requirements to
ensure that this target can be met. The Company will closely monitor the latest developments and endeavour to tackle
climate change.
We are committed to protecting the environment and conserving natural resources to ensure sustainability for future
generations. In 2021, we voluntarily pledged to reach carbon neutral for our operations and supply chains by 2030, and
announced our commitment to fully transition to green power.
6. ENVIRONMENT
Environmental, Social and Governance Report
Annual Report 2021 115
We developed technologies and software-as-a-solution products, including but not limited to WeCom and Tencent
Meeting, to help industries reduce their carbon footprint and accelerate digital transformation.
7
Environmental, Social and Governance Report
6
• ESG Steering Team leads the Working Group to set out the Company's ESG strategy and priorities. Co-chaired by
the Chief Strategy Officer and Chief Financial Officer, it has a good representation of senior executives from various
business groups or functional lines covering specific ESG topics.
The ESG Working Group (the "Working Group") is a cross-functional body established in January 2022 and reports to
the Corporate Governance Committee twice a year. The Working Group, which is tasked to advance Tencent's overall
ESG performance and promotes internal coordination, operates on three levels:
In 2021, the Corporate Governance Committee expanded its focus to ESG oversight. It shall report regularly to the
Board relevant ESG issues as well as the progress of key performance indicators ("KPIs"). The Corporate Governance
Committee shall exercise oversight via inquiries, regular updates on the Company's ESG initiatives, reviewing and
approving annual ESG reports submitted by the ESG Working Group.
ESG governance at Tencent is overseen by the Board's Corporate Governance Committee and implemented by the
Company's ESG Working Group.
ESG GOVERNANCE STRUCTURE
2.
Our shareholders and stakeholders play an important role in our ESG strategy and implementation. The Company has
commissioned an independent consultant to conduct online surveys and interviews with our stakeholders, and integrated
their feedback into our materiality assessment. For details of our materiality assessment, overall ESG performance
and the assurance report, please refer to the standalone ESG report¹ to be disclosed on the Company's website:
www.tencent.com/esg.
Assist in driving the transition towards a low-carbon society via the promotion of a low-carbon lifestyle for
users, and technologies that enhance the management of climate change for enterprises.
•
Reduce our carbon footprint and increase renewable energy use, ultimately reaching net-zero in operations
and supply chains by 2030; and
Consider the environmental impact of our products and services during the development and operation
stages;
1
•
Environmental, Social and Governance Report
Annual Report 2021 111
Contribute to the advancement of the internet industry via open-source partnerships and open platform
collaboration.
Increase community investment, and leverage our platforms and technologies to implement “Tech for Good";
Create and promote a digitally inclusive environment; and
•
•
•
Community and industry
Combat illegal or unwarranted behaviours that are harmful to long-term business partnerships by
empowering our IC and Anti-Fraud Investigation Department.
Ensure fair and equitable treatment when dealing with our business partners; encourage them to give us
feedback on our business practices; and
.
5. Environment
•
Our standalone ESG report will be downloadable from our Company Website. We decided to distribute electronic versions only in favour
of nature conservation and carbon emissions reduction. Our ESG report will only be published on a standalone basis for the financial
years commencing on or after 1 January 2022.
112
Employee Rights & Benefits
To identify and understand various ESG topics that are of high priority to Tencent, we have engaged with an external
professional agency to conduct a materiality assessment. The assessment process is as follows:
Assessment on the Materiality of the ESG Topics
We regularly engage with our stakeholders to learn about their expectations and feedback on our ESG performance.
Our stakeholders include users, employees, government and regulatory bodies, investors, business partners, the media
and public, and non-governmental organisations ("NGOS"). Our communication channels include but are not limited to
regular meetings, investor and press conferences, satisfaction surveys and social media platforms.
Stakeholder Engagement
MATERIALITY
4.
Environmental, Social and Governance Report
00
(Extremely Important)
Impact on Stakeholders
00
(Important)
Annual Report 2021
During the reporting period, the Board has reviewed the Company's carbon neutrality plan, progress in certain
sustainable social value projects and the annual ESG report.
The Board was involved in the materiality assessment and prioritisation of key ESG topics of Tencent, which was
conducted by an independent professional consultancy. The Board has participated in surveys and interviews that solicit
views and recommendations on ESG topics that may have significant influence on the Company's long-term sustainability
(please refer to the sections titled "Stakeholder Engagement” and “Assessment on the Materiality of the ESG Topics" for
more details). Key ESG risks have been incorporated into the Company's comprehensive risk management system. From
principal business leaders to senior management, the Group has formulated risk response measures by considering
the possibility, impact, and trends of key ESG risks. The Board has regularly reviewed these key risks at the Board and
Corporate Governance Committee meetings and has made recommendations to the measures taken.
The Board oversees ESG matters via the Corporate Governance Committee and is engaged in formulating and
implementing the Company's ESG strategy. The Corporate Governance Committee supported the Company's decision to
strengthen ESG governance via the establishment of the ESG Working Group, where the ESG Coordination Office serves
as the secretariat.
BOARD STATEMENT
3.
We will review the composition of the Working Group from time and time to ensure the Corporate Governance Committee
is kept abreast of the Company's ESG initiatives and overall performance.
ESG Champions comprise of employee representatives from various business groups and functional teams covering
specific ESG topics. Leveraging their respective areas of expertise, ESG Champions drive the implementation of the
Company's ESG initiatives and provide regular updates to the ESG Coordination Office.
ESG Coordination Office supports the ESG Steering Team in identifying ESG objectives and collaborating with
various business and functional teams to develop action plans and track progress. In addition, it serves as the
secretariat of the Working Group and reports the Company's ESG matters to the Corporate Governance Committee
regularly.
Environmental, Social and Governance Report
Tencent Holdings Limited
113
Assist industries, especially small and medium-sized enterprises, in managing digital transformation;
(Important)
4.
Identify key concerns via interviews and online surveys across stakeholder groups, including the Board members,
senior executives, employees, customers (users and business partners), suppliers, investors, governments and
regulators, academics, media and NGOs.
3. Prioritise relevant material ESG topics through materiality mapping.
MED
LOW
Ο
00
11
17
OO 16
00
23
Identify a list of potential ESG material topics by taking into consideration: (i) common issues raised by internal and
external stakeholders, and (ii) topics highlighted in recognised reporting frameworks, including the ESG Reporting
Guide, the Task Force on Climate-Related Financial Disclosures ("TCFD"), the Global Reporting Initiative ("GRI")
standards, and the Sustainability Accounting Standards Board ("SASB") standards.
19
15
1
Climate Change & Greenhouse Gas Emissions
2
Waste Management
3
Water Management
Energy Use
•
Environmental Impact of Products & Services
5
HIGH
1. ENVIRONMENTAL, SOCIAL AND GOVERNANCE STRATEGY
4
•
Tencent's Environmental, Social and Governance ("ESG") strategy is guided by our long-established mission and vision,
"Value for Users, Tech for Good”. The mission and vision, in which our employees respond to what they like most
about Tencent in the annual employee surveys, is the driving force behind the incorporation of ESG considerations into
our products, services and business operations. In view of the rapid changes in societal and business environments,
including the COVID-19 pandemic, extreme weather, macroeconomic challenges, regulatory tightening, mobile internet
ubiquity and new enabling technologies, as well as the digital upgrade of local economies, we have strengthened our
capabilities to manage the associated risks and nurture new opportunities. Since April 2021, we have taken an innovative
and coordinated approach to create value for our users, business partners and the society, and to strengthen our
foundation in ESG governance. Specifically:
Protect our users, especially Minors and content creators; take responsibility for the content on our online
platforms.
Business partners
.
•
•
Users
3.
2.
Provide our employees a safe, inclusive and equitable work environment; empower them to pursue
professional growth.
Operate business with integrity and protect the interests of shareholders and stakeholders; and
Operate in compliance with applicable laws and regulations;
Protect the privacy of our users and the security of their data and digital properties;
•
We upgraded our corporate strategy to promote "Sustainable Innovations for Social Value" alongside our existing
consumer internet and industrial internet strategies.
•
We integrated our corporate social responsibility and charitable activities to form a new Sustainable Social Value
("SSV") organisation. SSV is funded with an initial capital of RMB50 billion to invest in key areas, including
research in basic sciences, education innovation, rural revitalisation, carbon neutrality, primary healthcare,
philanthropic platform, assisting with public emergencies, technologies enabling the silver generation, enhanced
accessibility, and digitalisation of culture. We allocated an additional RMB50 billion to support the "Common
Prosperity" initiative in China.
We established a new ESG governance structure to support the Board's expanded oversight on the Company's
ESG matters, coordinate internal priorities and engage stakeholders via the ESG Working Group and the ESG
Coordination Office.
Our ESG strategy focuses on the management of risks and the pursuit of opportunities, unlocked by the ongoing
convergence of physical and virtual worlds as well as the digital transformation enabling industries to extend their
presence online and expand globally. The implementation of our ESG strategy can be summarised as follows:
00
Listen to feedback from users and actively respond to their needs, enquiries and complaints, based on which
we continuously enhance the quality of our products and services; and
110
Tencent Holdings Limited
Environmental, Social and Governance Report
1.
Business operations
0.019
Scope 1 emissions (million MtCO2e) 2,3
5.111
Total GHG emissions (Scope 1, 2, 3) (million MtCO2e) 1,2,3
31 December 2021
As at
Environmental, Social and Governance Report
Indicators
Environmental Performance
122
For any given year, at least one additional data
centre will obtain ISO 50001 or GB/T 23331
energy management system certification.
00
has been achieved.
The target for 2021
Waste Management
The target for 2021
The target for 2021
has been achieved.
• For any given year, all destroyed hard
drive components and waste lead-acid
accumulators will be collected by qualified
vendors for harmless disposal.
Scope 2 emissions (million MtCO2e) 2,3,4
For any given year, all Tencent-owned office
buildings in the Mainland of China will
categorise waste.
Tencent Holdings Limited
has been achieved.
29,850
Scope 3 emissions (million MtCO2e) 2,3,5
Indirect energy consumption: Purchased electricity (MWh)2,10
•
3,111,654
Natural gas (m³)
3,261,448
Diesel (L)⁹
34,160
Including: Gasoline (L)
66,293
Direct energy consumption (MWh)
2.349
4,375,253
0.053
Non-hazardous waste per unit of revenue (tonnes/RMB Million)
Non-hazardous waste (tonnes)
0.00058
Hazardous waste per unit of revenue (tonnes/RMB Million)
324
Hazardous waste (tonnes)6
9.12
Total GHG emissions per unit of revenue (MtCO2e/RMB Million)
2.743
Total energy consumption (MWh) 2,8
Energy Management in Data
Centres
Unless otherwise specified, the following environmental targets and performance data cover Tencent's office
buildings and data centres in the Mainland of China and Hong Kong.
For any given year, the average annual PUE of
self-built data centres will not be greater than
1.35.
Our impacts on the environment and natural resources primarily come from greenhouse gas emissions, energy
consumption and waste production, where relevant policies and measures can be found in the previous sections.
This section elucidates our strategies around water and other emission management.
6.4 Water and Other Emission Management
We have entered into agreements that guarantee 100% of our hazardous waste will be handled in strict
compliance with relevant regulations. These types of wastes include lead-acid accumulators and destroyed hard
drive components from data centres and waste toner and waste ink cartridges from office printers.
We have implemented an electronic waste recycling and disposal programme at our data centres. The programme
first examines whether old servers can be reused before they are dissembled. Otherwise, obsolete servers and
other electronic waste, including waste computers, notebooks and monitors will be recycled and reused by
qualified second-hand vendors.
In response to the national call and local policy on garbage classification, we reinforced recycling practices by
educating our employees on waste management. On-site inspections are performed to ensure proper garbage
classification. Waste generated in office buildings is categorised and transferred to a government-authorised waste
treatment agency. In 2021, we strengthened the waste management of Tencent-owned offices by tracking and
monitoring our generated waste.
6.3 Waste Management
Environmental, Social and Governance Report
Tencent Holdings Limited
120
00
Lowest PUE achieved in the Qingyuan pilot site.
3
In terms of building green data centres, we have completed environmental impact assessments on all self-built
data centres and have obtained approvals or filings in accordance with the Law of the People's Republic of China
on Environmental Impact Appraisal. We also pursued third-party building certifications to validate our commitment.
In 2021, Tencent Tianjin Data Centre earned a LEED Platinum certification.
To increase the proportion of renewable energy use, we actively participate in green power trading and explore
distributed energy systems. In 2021, we explored the feasibility of green power trading with our newly assembled
team of green energy professionals. In September 2021, we made our first attempt in purchasing 60 million kWh
hydropower for our Chongqing Cloud Data Centre, allowing the data centre to be supported by 100% renewable
energy from August to December 2021. At the Tencent Qingyuan Qingxin Data Centre campus, we built a rooftop
photovoltaic power generation system that has generated over 2 million kWh of electricity from September to
December 2021.
In terms of operations and management systems, our proprietary Al platform can automatically and
accurately monitor energy data in real-time and conduct refined classification, statistics, and scientific
modelling to provide emission reduction solutions.
Environmental, Social and Governance Report
We consider the green aspects of our self-built data centres, beginning from site selection, design and technologies
to operations and management systems. Each data centre implements the applicable resource conservation and
emission regulation measures outlined in its Operational Policy, which includes reducing GHG emissions, water
consumption, and the process to handle hazardous and non-hazardous waste appropriately. In terms of energy
conservation, we implemented the following measures:
•
.
.
4,308,960
We have implemented water-saving measures across our office buildings, including utilising water-saving
appliances, monitoring daily water consumption, setting water-use targets, and educating employees on water
conservation. To accelerate the efforts around water conservation at our data centres, we are preparing to kickstart
a few research projects on water cooling and recycling.
For Tencent Binhai Towers and Beijing Headquarters, we monitor the levels of air pollutants, including PM2.5,
PM10, carbon monoxide, and carbon dioxide inside and outside the buildings with an online monitoring system,
which is backed up by a manual measuring system. A smart ventilation system is installed to respond to the
changing carbon monoxide and carbon dioxide levels in our underground car park and office spaces. For our office
cafeterias, the cooking ventilation comprises a fire-resistant environmental exhaust hood that removes oil droplets,
activated carbon filtration and air ionisation.
Environmental Performance Summary
Annual Report 2021
Energy Management in Office
Buildings
Tackling Climate Change
Section with Detailed Steps
to Achieve the Targets
The interim target
for 2021 has been
achieved.
The interim target
for 2021 has been
achieved.
The target for 2021
has been achieved.
The target for 2021
has been achieved.
Target and baseline
have been set recently.
Target has been set
recently.
Progress Updates
in 2021
Using the electricity consumption per capita
in 2019 as a benchmark, the electricity
consumption per capita in all Tencent-owned
office buildings in the Mainland of China will
be reduced by 15% by the end of 2025.
Using the water consumption per capita in
2019 as a benchmark, the water consumption
per capita in all Tencent-owned office
buildings in the Mainland of China will be
reduced by 15% by the end of 2025.
The target for 2021
has been achieved.
• By the end of 2021, Tencent Beijing
Headquarters would have obtained LEED Gold
certification.
For any given year, the property management
companies of all Tencent-owned office
buildings in the Mainland of China will obtain
the environmental management system (EMS)
Using green power for 100% of all electricity
consumed by 2030.
Achieving carbon neutrality by 2030 across
our operations and supply chains.
•
•
Targets
In 2021, we formulated environmental targets. The progress is shown in the following table.
Environmental Targets
Environmental, Social and Governance Report
121
certification.
Total energy consumption per unit of revenue (MWh/RMB Million)
We value our relationship with our employees and handle employee departure strictly in accordance with the
applicable local laws and regulations. An exit interview is conducted with each departing employee to understand
the reasons for their departure and where we can improve as an employer.
Renewable energy purchased (MWh)
We strive to provide employees with a wide variety of health-related benefits. For more details related to the specific
benefits, please refer to the "Health and Safety" section.
In November 2021, we announced the introduction of a new benefit scheme to reward long-serving employees to
be implemented in 2022. On top of the statutory retirement plan, our employees will be provided with a package
which includes customised souvenirs, a long-service gratuity, and a retirement honorarium when they legally
retire from Tencent. Incumbent employees who have served the Company for over 5 years will be provided with
long-term health insurance. Incumbent employees who have worked for over 10 years will be given customised
souvenirs and an additional 10-day leave. Incumbent employees who have worked for over 15 years will be offered
lifetime health insurance and the option to retire early with a retirement package. Employees who have worked for
over 20 years will receive a tailor-made commemoration gift package and customised employee badge.
We have put in place housing benefit programmes, namely the Tencent Anju Plan and Yiju Plan. Since 2011,
Tencent Anju Plan has provided interest-free loans to certain employees in the Mainland of China, where the
skyrocketing property price misinformation has placed a lot of pressure on first-time home buyers. The Yiju Plan,
launched in 2016, provides recent graduates with a rental subsidy to help reduce their financial burden as they
start their careers. In 2021, we raised the upper limit of interest-free loans under the Tencent Anju Plan and
increased the rental subsidy under the Tencent Yiju Plan.
Under our leave scheme, employees can enjoy fully-paid annual leave and sick leave, half-paid personal leave,
and a fully-paid Chinese New Year leave, which are above the statutory standards. New fathers and mothers are
entitled to take fully-paid paternity or maternity leave. For parents with children under the age of three, our updated
leave scheme provides fully-paid parental leave each year. In addition, all employees are entitled to one day of
fully-paid volunteer leave per year.
Environmental, Social and Governance Report
126 Tencent Holdings Limited
The primary benefits system complies with the relevant laws, regulations, and current market practices. On this
basis, we offer a well-established and distinctive welfare programme for employees.
We offer our employees an equitable and competitive compensation and benefits package. It aims to attract,
motivate, and retain talents as they develop their long-term career with the Company. Our remuneration and bonus
system, which includes salary, special and year-end bonuses, and share option and share reward schemes, is
performance-based and designed to reward employees for their outstanding performance.
Compensation and Benefits
In 2021, we received the annual China's Best Employer Award organised by Zhaopin and Peking University Social
Survey Research Centre, and the Most Caring Employer for Women Award by Lagou.com, a popular job-seeking
platform in China.
We provide applicants and employees access to grievance procedures, where job applicants can raise issues
related to discrimination through surveys after interviews, and employees can report workplace discrimination
through email and our internal grievance platform. In case of such a report, an independent investigation will
follow, and remedies will be implemented accordingly.
We support employees who are starting a family with appropriate benefits, including maternity/paternity leave,
breastfeeding leave, parental leave, flexible working hours, maternity allowance and family insurance.
Our corporate culture supports diversity and inclusion. Employees and management are provided with cross-
cultural training and workshops. To foster a community where women can be empowered by each other, we have
launched the Women's Leadership and Empowerment initiative, which calls on outstanding female employees to
share their stories in the workplace. In 2021, we collaborated with the United Nations Development Programme
("UNDP") to produce inspiring videos and articles about women in the technology industry. By the end of 2021,
25% of our managerial positions were held by female employees. We are committed to inspiring and promoting
women in leadership across multiple functions and management levels.
In addition to regulatory requirements, the protection of human rights and fundamental freedoms have been
codified and enforced through our internal policies, including the Sunshine Code. We condemn and prohibit
discrimination against any employees and job applicants on the basis of their nationality, race, religion, sex (sexual
orientation and gender identity), age, or disability.
Equality, Diversity and Inclusion
00
Environmental, Social and Governance Report
125
Annual Report 2021
In the site selection phase, we prioritise areas with abundant renewable and clean energy to power our data
centres. For example, the sites in Zhangjiakou Huailai are rich in wind and solar resources, and the sites
in Qingyuan, Chongqing, and Guian have strong hydropower and other forms of clean energy. With the
development of these data centres, we continue to invest in a wide range of renewable energy technologies,
such as photovoltaic systems, hydropower, and wind power technologies.
Our employment practice complies with relevant national and regional legislations such as the Labour Law of the
People's Republic of China on working hours, training, social insurance and welfare, and health and safety. We
offer a flexible work schedule for our employees so that they can achieve greater work-life balance and autonomy.
We strictly prohibit child labour and any forms of forced labour. All applicants are asked to provide proof of their
educational backgrounds, qualifications, and work experiences. To ensure the legitimacy of the information, a due
diligence agent will review and verify the details. Our Group Procurement Department requires suppliers to sign
the Corporate Social Responsibility Commitment and operate in accordance with our requirements concerning
child labour and forced labour. In the case of any violation of the rules, measures and investigations will be taken
immediately in accordance with the applicable laws and regulations. In 2021, there were no violations related to
child labour and forced labour.
Communication
We engage with our employees through various communication channels, including annual gatherings, internal
forums and emails. Our objective is to foster a culture where employees are encouraged to freely express their
views. We also respond and address employees' concerns throughout their career development and learning
process. Every year, we conduct a company-wide anonymous employee engagement and satisfaction survey
through an independent third-party agency. Based on the survey analysis, our Human Resources Department
works with managers to develop action plans to strengthen the overall performance and development accordingly.
In 2021, a total of 46,437 employees responded to the annual survey, which revealed greater engagement and
overall satisfaction rates. The top three aspects employees were most satisfied with were "Culture/Values", "Tech
for Good", and "Company's Future Development". For three consecutive years, “Culture/Values" received the
highest recognition from our employees, scoring over 85% satisfaction rate.
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Annual Report 2021 129
We are committed to supporting the well-being of our employees. To prevent accidents and reduce occupational
hazards in the workplace, we have established a framework that complies with international guidelines, applicable
laws, and regulations, such as the Guidelines on Occupational Health and Safety Management Systems by the
International Labour Organisation and Law of the People's Republic of China on the Prevention and Control of
Occupational Diseases. We have employed a Safety Management Policy and Public Emergency Management
Policy.
7.3 Health and Safety
In 2021, we increased the transparency of the review process by encouraging colleagues to attend promotion
presentations given by individuals from similar professions. We believe the events can help employees develop a
deeper understanding of relevant career trajectories and requirements.
In case of disagreement on the performance and promotion assessment results, employees can appeal through
our grievance procedure and request a re-assessment via our independent internal promotion management
platform.
Employees may apply for promotion after their interim and year-end performance reviews, provided that they
satisfy the requirements with regard to the length of service and performance. Depending on the work scope, the
promotion will be reviewed and considered by the relevant internal committee.
To encourage continuous growth and development, employees receive regular objective and fair assessments
regarding their performance. A merit-based incentive and performance management system are in place to
streamline our assessment processes and ensure consistency across the Company. Employees are expected to
write their self-evaluation twice per year, followed by comprehensive feedback provided by their direct supervisor.
In addition to the bi-annual evaluation, we encourage supervisors to communicate with their subordinates regularly
in order to help employees grow and succeed.
Performance Evaluation and Promotion
Tencent Academy invited experts to share their knowledge on scientific innovation, technology, and product design
at the Tencent Technology Week in October 2021 and Tencent Design Week in December 2021, as well as other
professional events. We believe that these opportunities can inspire and help employees gain new perspectives
for their personal growth. In the spirit of sharing, we have an internal interactive platform for senior employees
or domain experts to share their experiences with employees. To promote capacity building within our industry's
value chain, we have made some of our training resources available to certain business partners and investee
companies.
Environmental, Social and Governance Report
Labour Practices
Tencent Holdings Limited
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To help employees of different positions address various professional needs, Tencent Academy offers courses on
products, operational skills, technology, data analysis, marketing, design, risk management, customer engagement,
and many more. As of 2021, Tencent Academy has offered 784 types of courses, of which 111 of them were
recently added. These courses were offered all year round and added up to 12,000 classes in total. The average
training hours and participation rate were over 40 hours and 99.61% respectively.
Established in 2007, Tencent Academy runs a suite of training programmes such as on-boarding, on-the-job
training and leadership training to support employees at every stage of their careers. As employees gradually gain
work experience and promotion opportunities, we offer them a curated series of relevant courses to complement
their development and learning goals. The Academy also offers employees qualification programmes and monetary
rewards for those who have successfully obtained certifications. In addition to on-site training, Tencent Academy
also provides an online learning platform that enables employees to learn anytime, anywhere.
Training Programmes
We have also built a mechanism for employees who wish to pursue a new direction in their careers within
Tencent's diverse business portfolio. Huoshui Programme ("HSP"), an internal talent transfer portal, was launched
in 2012. Employees can apply for a role across various functions and regions after their first year of employment. In
2021, HSP facilitated over 4,000 internal transfers. It greatly boosted the vitality of the Company as it brought more
talents from different backgrounds to our core products and fast-growing businesses. For those who are planning
to relocate to another city or country, HSP can be an alternative option for them without leaving the Company. Our
effective talent allocation programme was used as a case study by the Harvard Business School previously and
was included in the case library of Tsinghua School of Economics and Management in 2021.
There are two internal career development channels, namely a professional channel and a management channel.
The professional channel branches out to multiple fields of expertise, and each field further diversifies into various
development paths with built-in tiers of seniority. The management channel is more streamlined. Our employees
can choose to take the development channel that is most suitable for their career at Tencent. These approaches
enable our employees to develop their careers in a thoughtful manner and be recognised for their contributions to
the Company.
Career Path System
We provide a career development system and professional training for our employees as they build their careers
at Tencent. In 2019, we updated our Employee Career Development Management Policy to better support the
development of our employees.
7.2 Growth and Development
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7.81
7.1 Rights and Benefits
OUR PEOPLE
3.
We expand the 2021 reporting scope of our environmental performance to cover all office buildings and data centres in
the Mainland of China and Hong Kong within our operational control. Leased data centres that we do not have operational
control are excluded. The reporting scope of 2020 covered only the main office buildings and main data centres in the
Mainland of China. We adjusted the reporting scope to align with industry best practices; such an adjustment is the
primary driver against the year-on-year increases of the environmental performance reported, while another key driver is
the organic growth of our businesses.
Due to the nature of the business, the material air emissions of the Company are GHG emissions, arising from fuels and
purchased electricity produced from fossil fuels.
2.
1.
Note:
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Annual Report 2021
1
Number of LEED certified data centres
11.07
887,700
LEED certified office space (m²)
Water consumption per unit of revenue (tonnes/RMB Million)
6,201,652
Water consumption (tonnes)2,12
1.32
Average PUE in data centre¹l
2,334
On-Site renewable energy (MWh)
63,000
GHG inventory includes carbon dioxide, methane and nitrous oxide. GHG emissions data as at 31 December 2021 is
presented in carbon dioxide equivalent. The GHG calculation methodology has been updated based on the 2006 IPCC
Guidelines for National Greenhouse Gas Inventories issued by the Intergovernmental Panel on Climate Change ("IPCC"),
the IPCC Fifth Assessment Report, and the provincial electricity emission factors published by the Ministry of Ecology and
Environment of China.
4.
5.
The adjusted Scope 2 emissions in 2020 is 1.71 million MtCO2e by applying the 2021 reporting scope.
Data regarding packaging materials are not applicable to the Company.
Water supply mainly comes from the municipal water supply and there is no issue in sourcing water. In January 2021,
we upgraded our capability in water management at our office buildings with the introduction of the Tencent Facility
Management system, which allowed us to track, record and analyse water consumption data every month. This upgrade
will lay a solid foundation for our expanded reporting scope in the future. Comparable historical numbers are not available
as we have only partly collected data at some of our leased sites, where the water usage was managed by third-party
property management companies in 2020.
13.
12.
PUE of data centres is a ratio of the total energy consumption to the energy consumption of IT equipment. During the
reporting period, the annual average PUE is calculated by considering all data centres within our operational control that
have operated for more than 12 months with a minimum utilisation rate of 30%.
11.
Environmental, Social and Governance Report
7.
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124
Employees are the most valuable asset of Tencent. We believe that fostering a sustainable working environment and
investing in the development of our employees are crucial to maintaining the long-term competitiveness of the Company.
Our employment practices comply with the United Nations Declaration of Human Rights, as well as applicable local laws
and regulations in the markets where we operate.
00
10.
Diesel is consumed by backup power generators.
9.
Total energy consumption is calculated based on the data of purchased electricity and fuel with reference to the
coefficients in the National Standards of the PRC General Principles for Calculation of the Comprehensive Energy
Consumption (GB/T 2589-2020).
8.
In 2021, we reported the actual weight of garbage collected at our office buildings and have enhanced waste accounting
for non-hazardous wastes. The garbage in 2020 was estimated with reference to the Handbook on Domestic Discharge
Coefficients for Towns in the First Nationwide Census on Contaminant Discharge published by the State Council of the
People's Republic of China in 2008. Non-hazardous wastes produced by data centres mainly includes obsolete servers.
Hazardous wastes produced at office buildings mainly includes waste toner cartridges and waste ink cartridges from our
printers. Hazardous wastes produced by data centres mainly includes waste lead-acid accumulators and destroyed hard
drive components.
7.
6.
Scope 3 emissions are calculated based on broad-based assumptions with emission factors published in the UK
Government GHG Conversion Factors for Company Reporting and EPA Emissions & Generation Resource Integrated
Database. The carbon footprint of leased data centres both in China and international markets, where we do not have
operational control, is included in Scope 3 accounting.
The adjusted total indirect energy consumption in 2020 is 3,128,144 MWh by applying the 2021 reporting scope.
Regarding innovative designs and technologies, Tencent's fourth-generation T-block data centre uses
energy-saving technologies that include (i) High Voltage Direct Current technology for electrical systems,
(ii) liquid cooling technology, and (iii) indirect evaporative cooling units. These have allowed us to lower the
power usage effectiveness ("PUE") to 1.063.
14.59%
To maintain a safe and comfortable workplace, we have a security system, fire safety system, and food safety
monitoring system in place. We invite third parties to conduct security risk audits on our premises every year to
identify hardware defects and deficiencies in the operation management system and address other hidden risks.
39.68
Female
44.12
Average training hours of employees by management level
Management
55.52
Non-management
39.53
Note: Training refers to in-person and online courses offered by the Company to employees.
Male
8. OPERATING PRINCIPLES AND PRACTICES
8.1 Anti-Corruption
We have developed robust systems and measures to prevent, detect, and deter corruption, bribery, or other
fraudulent activities while promoting integrity. High-risk business activities and management are subject to periodic
audits to assess the effectiveness of the internal control system and ensure the Group complies with the ethical
standards that we strive to uphold.
According to the Law Against Unfair Competition in the PRC, business operators shall not use monies, assets,
or other means to bribe an entity or individuals to obtain transaction opportunities or competitive advantage.
According to the Criminal Law of the People's Republic of China, corruption and bribery may constitute a serious
criminal offence. We strictly comply with the local anti-corruption and bribery laws and regulations.
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Environmental, Social and Governance Report
Risk Management and Internal Control Policy
•
•
We uphold the value of integrity, proactivity, cooperation, and creativity in our business operation. We comply with all
applicable laws and regulations to ensure sustainable development. To achieve business stability, we uphold ourselves to
the business ethics and practise risk prevention and control.
Average training hours of employees by gender
99.60%
Non-management
3.
Work-related fatality rate = (Total number of work-related fatalities / Total number of employees) * 100%.
The rate of work-related injuries = (Number of recordable work-related injuries / Number of hours worked) * 1,000,000 * 100%.
4.
The relatively high number of lost working days in 2019 was mainly due to the significant recovery time that we had
provided to the employees with fractures.
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Training Performance
Environmental, Social and Governance Report
As at
Indicators
Percentage of employees trained by gender
31 December 2021
Male
99.63%
Female
99.59%
Percentage of employees trained by management level
Management
99.79%
The first line of defence consists of business and functional departments. We provide targeted training and
guidance for relevant employees to help them identify potential risks in their daily work and report such risks
to their superiors.
2.
The second line of defence comprises of the IC. It establishes a list of major risks at the business level by
collecting, summarising, analysing various data, and ensuring that appropriate risk response strategies and
monitoring measures have been taken. The management first reviews the information. Then, it is submitted
to the Audit Committee for further revision before reporting to the Board. The IC performs timely analysis
and evaluation on the response to major risks and reports the results to the Audit Committee quarterly. The
Board entrusts the Audit Committee to (i) assess the nature and extent of the risks the Company is willing to
accept to achieve its corporate objectives, (ii) determine the major risk response strategies and responsible
departments, and (iii) promote the implementation of the response strategies from top-down, supported by
the IC.
Through the three lines of defence, we regularly provide targeted risk control training for employees from different
positions and businesses to enhance their overall awareness of risk management.
We are committed to competing in a fair way and respecting the relevant anti-trust laws and regulations of the
jurisdictions where we operate our business. In China, we are committed to complying with the Anti-monopoly Law
of the People's Republic of China, which took effect on 1 August 2008, the Anti-monopoly Guidelines of the Anti-
monopoly Commission of the State Council on Platform Economy promulgated on 7 February 2021, and other
antitrust-related laws, regulations and guidelines.
We advocate fair competition and have issued the Corporation Fair Competition Guidelines since 2016. It contains
a comprehensive introduction to the Anti-monopoly Law of the People's Republic of China, the implementing
regulations, and the enforcement practices. It also sets out compliance requirements corresponding to our
business practices. It serves as the basic guide to assist relevant employees in following the rules of fair competition
and conducting business activities in conformity with these laws and regulations. In 2016, we established a
Competition Policy Office, a specialised department with professional lawyers in charge of anti-trust compliance
matters. To the best of our knowledge, we are among the first in the industry to establish such a specialised
department.
In 2021, we further enhanced our anti-trust compliance system, which focuses on the following three main areas:
•
Establish a new specialised compliance department and strengthen daily compliance initiatives
In terms of organisational structure, in 2021, we set up a specialised Anti-Monopoly Compliance Department
("AMCD") that reports regularly to the senior management. The AMCD coordinates with relevant teams
and resources to strengthen our anti-trust compliance. The AMCD's work scope includes (i) providing anti-
monopoly compliance advice on daily operation, (ii) conducting merger filings, (iii) following up with the
domestic and global anti-monopoly legislation, rule-making progress, enforcement and judicial initiatives and
analysing impacts on the operation, (iv) training on anti-trust compliance, and (v) actively cooperating with
anti-trust regulators' requirements, if any. Our AMCD works closely with different business groups and other
stakeholders to continuously improve the formulation and implementation of the relevant compliance policies
and mechanisms (including but not limited to the daily compliance initiatives and merger filings). We aim to
strengthen our anti-trust compliance and help maintain a fair and competitive environment.
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8.2 Anti-Trust
Environmental, Social and Governance Report
Update anti-trust compliance guidelines for business
In the spirit of enhancing internal anti-trust scrutiny, we have upgraded and optimised our anti-monopoly
compliance system. In accordance with the latest anti-trust legislation, law enforcement and judicial
practices, we made revisions to the 2016 Corporation Fair Competition Guidelines and upgraded it to the
Group's Anti-trust Compliance Guidelines in 2021. For instance, the updated Guidelines provide more
specific compliance guidance for different business scenarios by referring to typical cases published by the
authorities.
•
Strengthen anti-trust compliance training and advocacy
We continue to strengthen the relevant compliance training across the Group. The training scheme aims
to continually enhance employees' awareness around anti-trust law compliance. We have also invited
professionals to host anti-trust related seminars to further advocate anti-trust compliance.
In the future, Tencent will continue to actively engage with the regulatory authorities and comply with relevant anti-
trust laws and regulations.
8.3 Anti-Money Laundering
The Group strictly abides by applicable laws and regulations related to anti-money laundering ("AML") and
counter-terrorist financing (“CTF") in the PRC and other countries and regions in which we provide payment
processing services. We monitor regulatory changes and respond in a timely manner by engaging in legal
interpretation, gap analysis and training, as well as with the assistance of external consultants. We fulfil all relevant
regulatory obligations under such applicable rules and regulations including but not limited to the Anti-Money
Laundering Law of the People's Republic of China and Administrative Measures for Anti-Money Laundering and
Anti-Terrorism Financing of Payment Institutions.
Annual Report 2021 139
•
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Environmental, Social and Governance Report
The Risk Management Policy sets out the roles and responsibilities of different stakeholders in risk management
and control (including those in relation to fraud). Such Policy emphasises that each business group is primarily
responsible for its department's risk management and internal control. If any fraudulent activity is detected, the
management of the relevant department shall improve their control procedures promptly to prevent the recurrence
of similar incidents. In 2021, our Anti-Fraud Investigation Department found more than 50 cases in violation of
Tencent's "high voltage line". Approximately 70 people have been dismissed, amongst which more than 10 people
suspected of crimes have been reported to relevant government authorities in accordance with applicable laws and
regulations.
Sunshine Code and Anti-Corruption Training
All employees of the Group are required to strictly follow and comply with the Sunshine Code. It prohibits all kinds
of fraudulent activities, bribery, embezzlement, misappropriation of the Company's assets, extortion, falsification
of information and any other activities that are not in compliance with the applicable laws and regulations. The
Sunshine Code is reviewed annually and updated against the ever-changing needs of the Group as appropriate.
That way, it could cater to our business development, reflect the applicable laws and regulations, and capture all
kinds of fraudulent activities. Our Sunshine Code was further enhanced in 2021 to (i) strengthen the enforcement
and punishment of Code violations, and (ii) revise the conflict-of-interest parameters.
In order to educate our employees about anti-corruption behaviours, we have provided them with mandatory
training on our Sunshine Code. We promote anti-corruption through emails, elevator pitch videos, and other
internal communication channels. In 2021, we updated the Sunshine Code related online video courses and
required the participation of all employees of the Group. For new hires and employees in sensitive positions,
we have provided them with a total of 76 face-to-face anti-fraud training courses, covering more than 10,000
participants. In 2021, 100% of our employees have received anti-corruption training.
In 2021, five directors participated in either the Audit Committee meeting, internal audit committee meeting, other
internal meetings, or study the Sunshine Code related online video courses to learn about the Risk Management
Policy, anti-fraud policies and measures, anti-corruption related laws and regulations, the Sunshine Code, as well
as internal corruption cases.
Annual Report 2021 135
Environmental, Social and Governance Report
00
Anti-Fraud and Whistleblowing Policy
We have published an Anti-Fraud and Whistleblowing Policy (the "Whistleblowing Policy"), which conveys the
message of our zero-tolerance in relation to fraudulent activities for all the employees and suppliers/business
partners. The Group encourages employees and suppliers/business partners to report any concerns that they may
have regarding any non-compliant or potentially fraudulent activities. The Whistleblowing Policy outlines multiple
whistleblowing channels and our whistle-blower protection system. We protect the safety of whistle-blowers by
ensuring that they do not receive unfair treatment or any form of retaliation during the process. Since 2016, we
have used our Weixin Official Account, "Sunshine Tencent" to raise employee's awareness of anti-fraud policies
and whistleblowing channels and provide our suppliers/business partners a means to file a formal report directly.
Employees, suppliers/business partners and other stakeholders can also report other violations (including but not
limited to employees' misconduct, deception, disclosure of trade secrets, or other breaches of business ethics)
through our open channels. We encourage the informants to leave their contact information so that we can conduct
follow-up investigations and provide them with updates on the progress. We guarantee that anonymous reports
that provide adequate information will be dealt with seriously. We guarantee the confidentiality of the submitted
information and the informant's identity and take measures to protect the informant from retaliation.
Fraud Detection and Corruption Prevention
When suspected fraudulent activities are discovered or when a report of suspected fraudulent activities is
received, the Anti-Fraud Investigation Department (consisting of professionals who used to be a part of the anti-
corruption function at a governmental authority or private enterprise and have profound knowledge in fraud risk
management and investigation) is assigned to handle the investigation independently. After the investigation has
been completed, the employee found and proven to have committed fraud shall be subject to immediate dismissal.
The department in question must, with the assistance of the IC, take corrective actions in response to the business
risk or loophole identified during the investigation. If we find that any suppliers or business partners have engaged
in serious corruption or fraudulent activities, we will terminate the contracts immediately and will never conduct
business with them. In the event that any fraudulent activity violates any relevant laws or regulations, such cases
shall be reported to appropriate government authorities. In 2021, we received the results of the four corruption-
related cases (including cases we transferred in previous years) that we have transferred to the authorities. Six
employees who were involved were dismissed and have faced criminal punishment. Because these cases were
discovered and handled in time, they did not incur much impact on the Company's business. After the occurrence
of these cases, according to the Sunshine Code, the direct and indirect managers of the employees involved bore
the management responsibilities and consequences, such as reprimand, decrease in performance appraisal rating,
demotion, dismissal and termination of labour contract. Relevant departments have also taken effective internal
control measures to prevent similar cases from recurring.
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Environmental, Social and Governance Report
With the Management Policy for Sensitive Positions (the "Management Policy") in place, we strengthened the
construction of the Company's integrity system by improving our corporate governance standards and supervision
requirements on risk management and internal control. The Management Policy also defines which positions
are regarded as sensitive, including those that are involved in procurement (supplies, services, and resources),
marketing, channel sales and resource management, external events, evaluation and selection of potential
partners, pricing, resource allocation, key decision-making and other high-risk duties. Corresponding management
measures are taken for these positions, including requiring regular job rotation, stripping sensitive responsibilities,
participating in various risk management training. The Management Policy also stipulates that the IA reserves the
right to audit all sensitive personnel positions and may conduct audits on current or former personnel in sensitive
positions at any time.
Our stance against fraud is clear. In order to convey a message regarding our determination to fight against fraud
and introduce our Whistleblowing Policy externally, we sent a letter to our suppliers and business partners and
requested them to complete a questionnaire annually since 2015. The questionnaire delineates our corporate
values, the Whistleblowing Policy and various reporting channels. By doing so, we learn from our suppliers and
business partners whether our employees have requested any gifts, cash, or other benefits and whether they have
been mistreated during the course of business. Upon receiving the feedback, we ensure that the questions or
concerns raised by our suppliers and our business partners are addressed promptly. The Anti-Fraud Investigation
Department will commence a formal investigation when necessary.
Our IC has established a procurement management control unit to optimise the Group's Supplier Management
System. Through the centralised system, the bidding process can be more standardised and transparent. The
Supplier Management System also provides communication channels for suppliers to collect their feedback or
complaints. Fraud complaints will be directly transferred to the Anti-Fraud Investigation Department for follow-
up. The goal is to ensure that suppliers' complaints and concerns can be resolved in a timely manner, thereby
minimising the risk of fraud.
The third line of defence is made up of the IA and the Anti-Fraud Investigation Department. The IA is highly
independent and responsible for providing independent evaluation and assurance regarding the effectiveness
of the Company's risk management and internal control system. It supervises the management team and
helps them improve their risk management and internal monitoring capability. The Anti-Fraud Investigation
Department is responsible for receiving reports from various channels and investigating suspected fraud
cases. It also assists the management in advocating integrity values by ensuring all employees understand
and fully acknowledge the Sunshine Code. Both the Internal Audit and the Anti-Fraud Investigation
Departments report directly to the Audit Committee.
Environmental, Social and Governance Report
The data refers to the work-related deaths and injuries from accidents reported by Tencent's Human Resources team and
verified by local relevant government authorities. In the Mainland of China, such cases, if any, are reported to the Human
Resources Department and verified by the Human Resources and Social Security Bureau.
Note:
31 December 2021
68,226
48,406
19,820
28,608
39,420
198
66,906
243
Other countries and regions
Management
Non-management
Formal employees
Other categories²
1,077
62,107
65,109
3,117
Total turnover rate³
Employee turnover rate by gender
Employee turnover rate by age group
Female
Under 30
30 to 50
6,119
Hong Kong, Macao and Taiwan
The Mainland of China
Above 50
We attend to the health and well-being of our employees by investing in various resources, including annual
medical check-ups, health seminars, fitness and mindfulness sessions, on-site as well as in-person counselling for
physical and mental health, and 24-hour telephone support from relevant professionals.
We also organise a wide variety of recreational clubs, such as running, photography, music, dance, language
classes, and celebratory activities, including work anniversaries and festival celebrations for our employees.
Wherever feasible, we reserve dedicated spaces for recreational facilities on our campuses. For example, in our
Shenzhen Headquarters, we have built a 300-meter running track, an indoor rock-climbing wall, table tennis
tables, pool tables, a badminton court and a basketball court.
There are various kinds of insurance available for employees, including social insurance, commercial medical
insurance, critical illness insurance, accident insurance, life insurance, and many more.
We formulate detailed emergency plans for fire safety, natural disasters, personal injury and other life-threatening
events, and conduct regular drills and simulation tests. In response to medical emergencies in the workplace,
we have formed an internal emergency rescue team and provided employees with first-aid training. We have
approximately 400 automated external defibrillators ("AED") across our 50-plus offices and data centres. In 2021,
our internal first-aid team hosted 150 in-person first-aid training sessions for 5,498 participants and provided
online first-aid training courses to 13,838 participants.
Over the past year, COVID-19 outbreaks resurged globally, bringing suffering to people and forcing local economies
to a halt. We continue to closely monitor the pandemic and inform employees to quarantine or work from home, if
needed. Surgical masks, hand disinfectants and personal protective equipment are provided at our offices, and to
employees in need. A continuously updated Tencent COVID-19 Response Guideline is used to provide guidance on
office management and promote anti-pandemic awareness among employees. We apply strict practices to ensure
a safe working environment, including enhanced cleaning and sanitation procedures, temperature monitoring,
social distancing, and other measures that can minimise transmission risks.
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Employment Data Summary
Employment Performance
Environmental, Social and Governance Report
As at
Indicators
Total number of employees¹
Number of employees by gender
Number of employees by age group
Number of employees by geographic region
Number of employees by management level
Number of employees by employment type
Male
Female
Under 30
30 to 50
12.37%
1.
Male
13.53%
2020
2019
0
0
0
0
0
0
32
2021
28
Number of injuries
Rate of work-related injuries
(number of injuries / million of hours worked)³
Working days lost due to work-related injury (days)
0.25
0.27
0.21
480
281
1,0584
18
Work-related fatality rate (%)²
Number of work-related fatalities¹
Indicators
10.89%
Above 50
19.39%
Employee turnover rate by geographic region
The Mainland of China
12.32%
Hong Kong, Macao and Taiwan
15.61%
Other countries and regions
15.00%
Note:
1.
2.
3.
The scope of employees includes the number of formal employees and employees of other categories in the businesses
directly operated and managed by the Company.
Other categories refer to consultants and interns engaged in the businesses directly operated and managed by the
Company.
Employee turnover rate = (Number of formal employees who left during the reporting year / Number of formal employees
at the end of the reporting year) * 100%. Employee turnover reflects the number of formal employees who have left (due
to voluntary resignations, dismissals, retirement).
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131
Environmental, Social and Governance Report
Health and Safety Performance¹
11.90%
134
In 2016, we updated the Risk Management and Internal Control Policy (the "Risk Management Policy") and
established a system comprising of three risk management lines of defence.
•
1,711
4,865
Note: The "number of suppliers" refers to the number of active suppliers in the supplier database during the reporting period,
and the "geographical region" refers to the place where the suppliers were registered.
PRODUCT RESPONSIBILITY
We strive to provide the best user experience with high-quality and reliable products and services. We focus our efforts
on protecting data security and user privacy, product health and safety, customer complaints, advertising content and IP
rights. We also conduct strict reviews of our products and services offered and related sales, marketing and advertising
strategies and materials to ensure compliance with applicable laws and regulations.
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Environmental, Social and Governance Report
9.1 User Privacy
At Tencent, user privacy and data security are our highest priorities. We believe that protecting the data privacy of
our users is essential to creating a safe and market-leading user experience, and that users should be in control of
their data and be well-informed of our data policies and practices. Our belief has followed through to our adoption
of "Privacy by Design" and "Privacy by Default" when developing our products and services.
Management Approach
Security, autonomy, compliance, and transparency laid the foundation of our privacy protection policy. Tencent is
privacy-focused on every level. Our dedicated privacy and legal teams work hand-in-hand with our product teams
to ensure that our products and services are built with privacy in mind from the ground up, and comply with all
applicable laws and regulations. Our product teams also work together with our engineering teams to ensure that
our data collection and use practices for products and services are transparent, and that users have control over
how their data is used.
We adhere to the following principles for user privacy protection and data security:
•
•
•
•
Security and reliability. We work to prevent user data leakage, damage and loss through reasonable and
effective data security technology and management.
Independent choice. We provide convenient data management options for users to make appropriate choices
and manage personal data.
Protect communication secrets. We strictly abide by laws and regulations, protect users' communication
secrets and provide secure communication services.
Reasonability and necessity. We only collect necessary data to provide better services to users.
Clarity and transparency. We strive to introduce the privacy policy on data processing to users in easy-to-
understand language.
•
Integrate privacy protection into product design.
Tencent complies with all applicable privacy protection and data security laws and regulations in the jurisdictions
we operate. To ensure the Company's products and business processes comply with the regulatory requirements,
we monitor the relevant regulations and laws in China and international markets closely, implement such new
requirements and upgrade our know-how in a timely manner.
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32,439
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Other countries and regions
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In view of the complex legal and regulatory compliance landscape across multiple jurisdictions, we continue to
improve our money laundering risk management.
•
In 2021, we updated our policy and released the second version of Tencent's Minimum Standards for
Anti-Money Laundering and Sanctions Compliance. The revised standard closely follows domestic and
global regulatory requirements and trends. It also re-examines the AML control measures based on the
development of the Group's business and products.
•
The Group's Anti-Money Laundering and Sanctions Compliance Department is responsible for (i)
coordinating the management of money laundering and sanctions risk at the Group level for all businesses,
(ii) fulfilling AML and sanctions requirements under relevant laws and regulations, and (iii) managing and
promoting the implementation of various AML and sanctions initiatives.
We have also published the Tencent Anti-Money Laundering Policy Statement and the Tencent Sanctions Policy
Statement on the Corporate Governance page of the Company Website.
In 2021, we sought strict compliance with all applicable AML and sanctions requirements and promoted initiatives
under the framework of the Tencent's Minimum Standards for Anti-Money Laundering and Sanctions Compliance.
We will continue to (i) increase staffing and better equip the team via on-the-job and professional training
periodically; (ii) improve and update our internal system and processes to comprehensively address all applicable
regulatory requirements; (iii) periodically carry out assessments on our systems and processes to enhance the
implementation of AML and sanctions compliance, including customer and product risk assessment, transaction
monitoring and suspicious transaction report compliance assessment, and list management systems inspection;
(iv) deepen cooperation with authorities to fight against money laundering and terrorist financing; and (v) actively
participate in international AML and CTF events to exchange industry best practices.
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8.4 Supply Chain Management
Having a sustainable supply chain is one of the fundamental factors for ensuring long-term business growth. We
have formulated the Tencent Supplier Management Policy together with the Supplier Management System to
provide effective and standardised management of our suppliers.
The Supplier Management Policy stipulates the requirements and practices for supplier legal and regulatory
compliance, supplier selection and evaluation. The Policy is also set to manage the ethical risks associated with
the relationships between our procurement employees and business partners. The Policy and the Sunshine Code
specify standardised processes for procurement employees when engaging in procurement activities. Suppliers
are required to declare any relationship they may have with our employees in written form. Suppliers must agree
to the terms of the Anti-Commercial Bribery Declaration, which requires suppliers to conduct business with the
Company in an ethical manner. As of 31 December 2021, all suppliers have been required to comply with the
Tencent Supplier Management Policy, and all suppliers in the Mainland of China have been required to sign the
Anti-Commercial Bribery Declaration.
The online Supplier Management System is used for managing qualified suppliers and the procurement lifecycle.
It covers the aspects of finding and selecting suppliers, evaluating supplier performance, and terminating the
engagement of suppliers. All details are recorded within the system.
•
Supplier selection: We have an internal policy that sets out the procedures and mechanisms for supplier
onboarding. The Procurement Department looks for qualified suppliers in the market and evaluates offers
based on the duration of the cooperation, order volume, and nature of the request. In principle, we will
ask for price quotations from at least three vendors whilst considering factors such as the delivery time,
operational and technical capabilities, and environmental and social responsibilities. If there is only one
vendor available for selection as it dominates the relevant market or it is the only vendor with access to the
required goods or services, the particular procurement arrangement will require special approval along with
a sufficient and reasonable justification. Before engaging with a supplier, we will conduct due diligence,
including qualification checks and site visits on the supplier. The findings and evaluation will be reported to
the Procurement Department for final decision.
Supplier evaluation: We regularly evaluate the performance of our suppliers and take appropriate steps
to address any issues concerning the quality of the suppliers. For underperforming suppliers, subject
to applicable contractual arrangements, we may (i) discuss with them about their remedial plans, (ii)
suspend the cooperation, (iii) reduce the order volume, (iv) impose penalties, or (v) suspend payment. The
Procurement Department may disqualify a supplier for the following events when (i) we suffer from material
economic losses due to the delayed delivery, quality issue, or breach of contract by the supplier; (ii) the
supplier has received the lowest rating on the rating scale for two consecutive quarters, and (iii) the supplier
is in serious breach of business ethics.
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Environmental, Social and Governance Report
9.
Suppliers, which the Group Procurement Department formally engages with, are also required to sign a Corporate
Social Responsibility Commitment. It is a declaration that covers labour rights, child labour-free and forced labour-
free practices, health and safety, and environmental protection. We prioritise environmentally friendly products and
services when selecting suppliers related to office buildings. We have required all property management companies
of our self-owned office buildings to obtain the ISO 14001 environmental management system certification, which
has been checked by the Administrative Department every year.
Number of Suppliers
The Mainland of China
Hong Kong, Macao and Taiwan
As at
Tencent acts in accordance with applicable laws and follows the following general principles whenever we receive
requests to disclose data from government agencies and regulators:
Number of suppliers by geographical region
We respond to valid legal requests consistently and fairly across all jurisdictions where we offer our products
and services, subject to applicable laws and regulations and our interpretation of potential differences
between jurisdictions;
In September 2021, we established the Security Technology Committee to enhance the internal coordination of
security technologies development and application. We have also strengthened the comprehensive systems by
applying various incident analysis mechanisms and risk protocols, enabling us to respond to various information
security threats and incidents appropriately and swiftly.
We keep the personal information of users collected and used during the provision of our services strictly
confidential and shall not leak, distort, damage, sell or illegally provide such information to others. We establish
and improve the user information protection system by hierarchically managing the access rights of internal staff to
ensure data security and prevent any leakage, damage, or loss of information. We provide an easy-to-use channel
for employees to look up the Company's data security policy through internal communication tools to timely confirm
whether their behaviour meets the Company's security policy requirements. When employees discover potential
data security violations, they can report the cases through the internal communication tools or reporting system;
once the violations are verified, the Company will take strict disciplinary measures, including but not limited to
notice of criticism and corresponding punishment. We provide privacy protection and data security training to all
employees, including full-time, part-time and interns, to instill a long-term data security protection culture.
FinTech
We provide a variety of security solutions for enhancing users' account security. We continue to conduct self-
assessment, optimisation and standardisation of our financial products in accordance with applicable laws
and regulations, including the Measures for the Supervision and Administration of Publicly-offered Securities
Investment Fund Distributors, the Circular on Standardising the Retrospective Administration of Online Insurance
Sales Practices, and the Measures for the Regulation of Internet Insurance Business. Our risk control system
provides real-time monitoring 24/7 to ensure the safety of account funds. Users will be informed of any changes in
the amount of funds immediately via mobile phone messages, email, and other means.
"Percentage of the total number of products sold or shipped subject to recalls for health and safety reasons” and “recall procedures"
are not closely relevant to the Company's main businesses.
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Tencent Cloud
Tencent Cloud has established an efficient internal control system and strengthened its foundation in data security
from the aspects of system process and control activities. Our Cloud Security Management System has also
received accreditations globally.
We apply our internal best practices in data security to Tencent Cloud's security products and services, including
the intelligent gateway, cloud firewall, DDoS (distributed denial-of-service) protection, network intrusion protection,
and anti-fraud. It has achieved all-rounded security by identifying and deploying protection measures on physical
security, virtualisation security, network security, host security, data security, application security, business
security, security audit and security management. With the evolution of cloud computing and security technologies,
Tencent Cloud will continue to build an efficient security internal control system, enhance security compliance
capabilities, and upgrade cloud security and big data security standards.
9.3 User Protection
Protection of Minors
Tencent has always attached great importance to protecting and promoting the healthy development of Minors,
which can be demonstrated through our products and services. We utilise technological innovations to upgrade
the protection system for Minors and create a series of programmes to support their growth and development. With
the Law of the People's Republic of China on the Protection of Minors that came into effect in June 2021, which
stipulates the responsibilities and obligations of internet service providers, we have rolled out Minors protection
programmes in our various products and fully implemented such measures as required.
9.2 Data Security4
00
As one of the leading companies in the game industry, Tencent is committed to creating a healthy game-playing
environment for many years. In China, we work with the industry to explore various measures for building a healthy
game-playing environment for Minors. We have implemented the real-name system and anti-addiction system in
accordance with the regulatory requirements of the PRC. We have also leveraged various advanced technologies
within the industry to further enhance our protection system for Minors. In recent years, we have introduced the
following measures:
•
•
•
Pioneered a system for parents to manage their children's playtime in February 2017;
Introduced the strictest measures in the industry, with mandatory real-name verification and limits on game
time and spending in September 2018;
Prevented in-game spending by players aged under 12 since August 2021;
Minors can only play games between 8-9 pm on Fridays, Saturdays, Sundays, and statutory holidays since
1 September 2021. Industry-leading measures were taken to prevent Minors from using adult accounts.
For example, we (i) upgraded our screening system to identify misused adult accounts; and (ii) proactively
cracked down on illegal transactions of adult accounts; and
In the fourth quarter of 2021, total time spent by Minors reduced by 88% year-on-year and contributed 0.9%
of the total time spent on our Domestic Games. Total grossing receipts from Minors reduced by 73% year-
on-year and contributed 1.5% of the total grossing receipts of our Domestic Games.
Besides the measures on healthy gameplay, we also pay close attention to the usage habits of the Minors in our
entertainment and social products. We launched “underage mode" in a number of products, including but not
limited to Tencent Video, Weishi, and Weixin, or developed alternative versions of these products suitable for
Minors. When the "underage mode" is activated by the guardian or the minor in Tencent Video and Weishi, viewers
will have their screen time set on a limit and reminded to take breaks. In addition, we updated Weixin in 2021
with a variety of functions to protect Minors, including (i) parental control over their children's access to videos,
subscriptions and Mini Programmes; (ii) curated content for teenagers in Weixin Video Accounts; (iii) closed live
broadcast portal to Minors, where they are not allowed to initiate a live broadcast or use the tipping function within;
and (iv) disabled access to Q coins top-up, credit card repayment and other services that are not suitable for
Minors.
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.
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148 Tencent Holdings Limited
Tencent Holdings Limited
Whenever possible and subject to applicable laws, we are transparent with our users in the actions that
we take in response to valid legal requests, to provide affected users with an opportunity to respond to the
request; and
4
We carefully review all requests to ensure that we comply with all applicable laws and regulations in our
response, while respecting our users' rights. That may include taking sufficient internal and third-party
professional advice.
Oversight
The Board and Management have always attached great importance to the protection of our users' personal data.
Tencent's Management is committed to a privacy-first governance approach and has institutionalised a robust
internal evaluation process to ensure that all products are fully assessed to comply with all applicable data privacy
laws and that all data collected are securely transmitted and stored. From top-down, to bottom-up, data privacy is
an organisational effort.
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We believe that users should be able to manage their own data. Therefore, our products and services are designed
to the maximal extent that restricts the collection of and access to user data by Tencent or anyone else. While
using our products and services, users can manage the scope and extent to which their data is collected, used,
and shared. These features have been researched, designed, and implemented over many years in order to protect
users' privacy and allow them to directly manage their data.
Our approach to data protection follows the widely recognised "Privacy by Design" concept, which dictates that
all our products and services are designed with privacy protection from the outset and that we continuously think
about privacy protection throughout the product lifecycle. Our approach to "Privacy by Design" is encapsulated in
three words: "Person-Button-Data".
"Person" refers to how the needs of our users are central to everything we do. Core to this is the notion of
transparency and our commitment to letting users know how their data is used. Privacy remains our highest
priority in all that we do. Users can manage their personal data, and we facilitate this in line with applicable
laws and regulations. We only collect the minimum amount of data required to power our products and
services. We do not provide users' data to third parties without a clear legal basis, and users are informed as
to what data is shared, how it is shared, and with whom it is shared.
"Button" symbolises a reminder of our commitment to providing users with the ability to manage their data in
an easy, seamless fashion - like the click of a button. Our products and services generally include a privacy
control suite or centre where users are empowered to access their data, obtain a copy of their data, request
for deletion of their data, or for its migration, in accordance with applicable laws.
"Data" refers to user data we safeguard with our thorough and cutting-edge cybersecurity technology and
management protocols. Our round-the-clock Security Platform Department comprises some of the world's
leading data security experts who collaborate with external security researchers and partners worldwide
through our online Tencent Security Response Centre Platform to create a more robust and secure digital
environment. Together, these provide world-class threat monitoring, defence, and response mechanisms to
safeguard user data and enable prompt detection and remedy of security incidents.
Approach and Procedures
Tencent has comprehensive systems in place to empower our teams to respond rapidly and effectively to all types
of information security incidents, including attacks from attrition, ransomware, the web, email, impersonation,
improper usage, system outages and deletion, loss, or theft of data. Our main goals are to continuously ensure the
cybersecurity of our platforms, to protect the information entrusted to us by users, and to ensure our operations
meet the applicable laws and regulations. We also use various incident analysis mechanisms and risk protocols to
ensure that Tencent responds appropriately and swiftly to any threat detected.
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Privacy Impact Assessments and follow-up
As part of our privacy-focused work, we regularly undertake Privacy Impact Assessments ("PIAS") for our products
and services. These PIAS evaluate the privacy-related risks of our products and services in the relevant jurisdictions
where we operate. Our dedicated privacy legal team is trained to identify, highlight, and manage privacy risks,
minimise potential impacts to individual rights, and address other adverse privacy issues.
Our privacy protection policy is also published on the product's official website and app, which is also accessible
on the Tencent Privacy Protection Platform. Users can also submit complaints or make inquiries through the
feedback button on the website, app and privacy feedback email (Dataprivacy@tencent.com).
Incident Management
146
Culture and Responsibility
00
We are committed to a privacy-conscious culture and making the protection of user privacy our top priority. We
believe that ensuring privacy is a shared responsibility for all Tencent employees, regardless of their roles or ranks
at Tencent. We regularly provide comprehensive and company-wide privacy education and awareness training
programmes to all our employees. These programmes are designed to provide employees with an understanding
of general privacy and data protection considerations, including "Privacy Protection in Design" and "Privacy
Protection by Default," how to build privacy-centric user interfaces, how to identify privacy issues in mergers and
acquisitions, how to respect the rights of data subjects and handle related requests, and the risks of cross-border
data transfers. We systematically communicate our privacy protection and cybersecurity guidelines and procedures
to all employees and strictly enforce safeguards across our products and services at all levels.
Our Data Protection Officer undertakes the related responsibilities according to laws, including communicating
with regulators and providing advice to management on related compliance requirements in different jurisdictions.
The Data Protection Officer is supported by a team of qualified privacy protection professionals and is available
to address any questions regarding Tencent's privacy practices, or any product-specific privacy policy, at
Dataprotection@tencent.com.
Over the last decade, the Tencent Volunteer's Association has been involved and contributed to the areas of online
charity, promotion of unhindered Internet access, information technology popularisation, cybersecurity, emergency
support, poverty relief, environmental protection, care for the elderly and children with special needs, as well as
animal protection.
As of 31 December 2021, the Tencent Volunteers' Association has participated in approximately 200,000 hours of
voluntary services from approximately 18,000 volunteers.
To ensure our community investments carry a long-term impact, we engage with experts on various social or
environmental topics to better understand the needs of different communities. We have explored and developed
various tools and systems that are related to social investment, so as to guide and manage our investment and
evaluate impacts in the following ways: (i) identify opportunity and problem to solve within key issue areas; (ii)
design solutions and partner with right stakeholders; (iii) monitor and evaluate performance to ensure outcome and
impact; and (iv) advocate and scale evidence-based solutions to enable system change.
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Since April 2012, volunteers were granted one day of fully-paid leave per year. From 1 January 2022, a new
matching donation programme will come into effect. For every donation our employee makes, the Company
will match a donation to the same amount. For every qualified hour of voluntary work our employee serves, the
Company will donate RMB100 correspondingly.
10.3 Volunteering
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Initiated and operated by the Tencent Charity Foundation, Tencent Fundraising Platform is a public donation and
information platform open to qualified public charities for free. The platform uses internet technology and social
media to connect public charity organisations with internet users, enterprises and the media to build an interactive,
dynamic and transparent philanthropic online network. In 2021, Tencent Fundraising Platform supported over
26,000 public welfare projects in the Mainland of China and raised a total of RMB5.45 billion.
10.2 Charity Donation
Environmental, Social and Governance Report
In April 2021, the Company established its SSV division, which is a new core engine that drives sustainable
innovation for social value. With the initial funding of RMB50 billion, SSV division will promote social value
innovation in areas, including (i) research in basic sciences, (ii) education innovation, (iii) rural revitalisation, (iv)
carbon neutrality, (v) primary healthcare, (vi) philanthropic platform, (vii) assisting with public emergencies, (viii)
technologies enabling the silver generation, (ix) enhanced accessibility for communities with activity limitation,
and (x) digitalisation of culture. In August, we further dedicated another RMB50 billion to fund the "Common
Prosperity" initiatives in China. This will be mainly used to support low-income communities, improve health
care coverage, help rural economic development, and promote grassroots education. As of the end of 2021, SSV
division had spent a total of RMB695 million on the above initiatives.
Environmental, Social and Governance Report
In addition, Tencent has also developed technologies and solutions for social well-being, including but not limited
to developing mobile applications suitable and helpful for the silver generation, creating affordable and effective
hearing-aid devices for the hearing impaired, designing programmes to inspire creativity and teach coding skills.
The Group has donated in 2021 a total of RMB1.513 billion, in cash and materials, to Tencent Charity Foundation
(the Mainland of China) and RMB7.888 billion since 2007.
ESG APPENDIX 1. COMPILATION ILLUSTRATION
155
PricewaterhouseCoopers has been commissioned by the Company to conduct a limited assurance on the selected ESG KPIs
in accordance with the International Standard on Assurance Engagements - Assurance Engagements Other than Audits or
Reviews of Historical Financial Information (ISAE) 3000 (Revised). For more details regarding the assurance process and the
complete assurance report, please refer to the standalone ESG report to be disclosed on the Company Website.
Disclosure Requirements
10.1 Community Investment
Governance Structure
ESG APPENDIX 2. ESG INDICATOR INDEX
Environmental, Social and Governance Report
Annual Report 2021
you have any questions, please contact us at ESG@tencent.com.
Should
The ESG report is to be read together with this annual report, in particular the Corporate Governance Report within this annual
report, the ESG standalone report, as well as the section headed "ESG" on our Company's website.
Consistency: This year's ESG report has been prepared with the same method used in previous years. Changes that may affect
a meaningful comparison with previous reports have been explained in the corresponding section.
Balance: This report aims to provide a balanced representation of the Group's ESG efforts around the environment, our people,
operating principles and practices product responsibility and community.
Quantitative: We disclose measurable environmental and social KPIs and set quantitative performance targets where
applicable. The measurement standards, methodologies, assumptions and/or calculation tools of the KPIs in this report, as well
as the source of the conversion factors used, have been explained in the corresponding context (where applicable).
Materiality: We have conducted a detailed materiality assessment to identify and evaluate key ESG issues that are most
important to our business as well as our internal and external stakeholders. The information gathered from the materiality
assessment was then used to determine the disclosure content of this report. For details of the materiality assessment, please
refer to the chapter titled "Materiality".
The report is aligned with the principles of "materiality", "quantitative", "balance" and "consistency" as follows.
During the process of identifying the scope of the reporting boundary, we ensure that the report reflects our ESG impact and
performance. Unless otherwise specified, the report covers the ESG performance of the business activities directly operated
and managed by the Company during the reporting period from 1 January 2021 to 31 December 2021.
This ESG report is prepared in accordance with the ESG Reporting Guide. This report also references selected disclosures
from the GRI standards and the SASB standards. It also applies the disclosure recommendations developed by the TCFD
for climate-related disclosure in accordance with the Stock Exchange's requirements. For more details about our ESG
performance, please refer to the standalone ESG report to be disclosed on the Company's website: www.tencent.com/esg.
Tencent is always thinking about how we can assist social development through the synergistic efforts of our people,
platforms and technologies.
150
1 November 2017, which specifies rules on the ownership, protection period, registration method and legal
responsibility of trademark, patent, copyright and domain names.
Our Customer Service Department is responsible for handling and answering customers' complaints and inquiries
about our business. In 2021, Tencent customer service assisted approximately 470 million users and provided
services approximately 2.28 billion times. Regarding users' complaints received during our provision of services,
a dedicated team under Customer Service is responsible for conducting a comprehensive investigation of the
incident and providing solutions to the user. In 2021, a total of 2,009,210 user complaints were received, 99%
of the complaints were handled within three working days. In terms of the business types, there were 1,238,395
complaints related to games, accounting for 61.6%, 171,955 complaints related to payment, accounting for 8.6%,
289,661 complaints related to social networks, accounting for 14.4%, and 309,199 complaints related to other
businesses, accounting for 15.4%.
We have established an accessible and effective mechanism for our internet service for receiving and handling
feedback/complaints via our open reporting channels. Product Departments of the Company learn about users'
opinions through online surveys, questionnaires, social media platforms, phone calls with users and regular
product researches. We incorporate their suggestions accordingly during product design and product optimisation.
Internet services
9.4 Customer Service
According to the Advertising Law of the People's Republic of China and the Interim Measures for Administration of
Internet Advertising, advertising operators and advertising publishers shall verify all relevant business documents
pursuant to laws and administrative regulations and verify the advertising contents. We review the advertising
contents strictly in accordance with the above laws and regulations and require clients who intend to use the
Tencent Marketing Solution platform to publish advertisements to ensure the legality of the advertising content.
They must also show that they have valid qualifications to publish relevant advertisements and that the advertising
contents are proven to be genuine. After the review is approved, we conduct checks on the advertising content to
ensure its compliance through our automatic inspection system which is equipped with multiple capabilities along
with our professional inspectors. Once violations of laws and regulations or relevant rules of Tencent Marketing
Solution are found, we will take measures, such as refusing the release of illegal advertising materials, removing
illegal advertisements from the platforms, requiring the violator to bear liability for breach of contract. Meanwhile,
we strive to better protect the rights and interests of users and comply with the requirements of current laws and
regulations; for that, we continue to establish and improve the compliance assessment regarding the advertising
business, promote training and advocacy for employees and partners, enhance system capabilities so as to
continuously strengthen our compliance with the relevant laws for the advertising business. In 2021, the Group
strictly complied with the applicable laws and regulations.
Responsible Advertising
Environmental, Social and Governance Report
Tencent Holdings Limited
00
In order to help the silver generation and other vulnerable groups gain better access to the mobile internet, for
instance, Wexin and a number of products launched the "Easy Mode" in 2021, which offers big text fonts, large
icons and high contrast colours to enhance their product experience.
According to the relevant national laws and regulations, and agreements such as Wexin Software License and
Service Agreement, Wexin Official Accounts Platform Service Agreement and QQ Software License and Service
Agreement, if users spread unlawful information through Wexin personal account, Wexin Official Accounts, QQ and
Qzone, once found and proven, the platform will remove the unlawful content and take actions upon the relevant
accounts (such as warning, blocking and limiting some functions of the account). We continue to optimise the audit
standards and inspection mechanism of Mini Programmes and Mini Games access. We conduct reviews and tests
in accordance with legal and regulatory requirements on the developers and their submitted application contents
for gaining access to the Mini Programmes and Mini Games platform. Developers who offer services that involve
special industries, such as medical, finance and games, shall provide corresponding qualifications and approval
documents. If the developers fail to provide the relevant certificates, their request to publish their Mini Programmes
and Mini Games onto the platform will be consequently denied. We manage the platform in accordance with the
above-mentioned relevant agreements and platform rules, and take timely actions upon receiving users' complaints
and reports, as well as taking corresponding measures for developers who fail to operate legally. We attach great
importance to educating our users on various risk prevention topics, such as internet pornography and fraud
through the "Weixin Safety Centre", "QQ Security Centre" official accounts and other official channels. Weixin and
QQ each provides a mechanism for users to report any false or improper content published on their platforms. We
continue to improve the efficiency of handling users' complaints regarding infringement and promote access to the
reporting channels. We also provide guidance to users on filing complaints and reports on any violations of laws
and regulations, or violations of their legitimate rights and interests through prescribed channels on our platforms.
In 2021, Tencent released 3,189 articles on dispelling misinformation, which has been viewed more than 310
million times.
Responsible Content and Internet Community
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Reporting Principles
Employment Data Summary
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Cloud Services
The Administrative Measures for Internet Domain Names issued on 24 August 2017 and implemented on
Copyright Law of the People's Republic of China amended on 11 November 2020; and
•
•
Patent Law of the People's Republic of China amended on 17 October 2020;
Trademark Law of the People's Republic of China amended on 23 April 2019;
Major laws and regulations we follow include:
10. COMMUNITY
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00
Our dedicated IP team is mainly responsible for the day-to-day management of legal matters involving
trademark, patent, copyright, domain names and other IP rights. We began a comprehensive programme for
the management of IP since the early stages of our establishment, and have regularly applied for the registration
of IP rights. With the development of our business, we have expanded our global IP portfolio to cover more
than 100 countries and regions. As of 31 December 2021, we have obtained over 36,000 officially registered
trademarks and over 24,000 issued patents. Coupled with our creation of a vast amount of copyrighted content,
we have accumulated IP assets of considerable value. Our IP team has developed a comprehensive database
for our patents, trademarks and copyrights, and our strong data analytical skills enable us to manage and
monitor our IP rights in a meticulous and efficient manner. To combat infringement of IP rights, our IP team has
also established a comprehensive and efficient monitoring and maintenance system and has devised various
enforcement policies and measures to protect our IP rights. Please see further details on the Company's website
(https://www.tencent.com/legal/html/en-us/property.html).
Tencent protects the intellectual property rights of third-party platforms and its own platforms via our team of
dedicated intellectual property enforcement attorneys who are committed to fighting infringement.
9.5 Intellectual Property
With the expansion of Tencent Cloud business, the scale of services undertaken by Tencent Cloud has also
increased year by year, with 4.76 million number of services in 2021. In response to the users' complaints received
during our provision of service, Tencent Cloud has set up a dedicated handling team and a comprehensive process
to provide satisfactory solutions to better protect the rights of its users. In 2021, 320 complaints were received from
users and 85% of the complaints were handled within seven days.
Tencent provides global leading cloud computing, big data, Al and other technological products and services
to government agencies, corporations and individual developers. The Cloud Technology Operation Service
Department is supported by a professional team responsible for customer's pre-sales, after-sales, technical delivery
consultation and complaint handling.
Tencent Holdings Limited
Sections in this Report
Annual Report 2021 157
MATERIALITY
General Disclosure
COMMUNITY
Aspect B8:
Community Investment
B8.1
B8.2
Anti-Corruption
COMMUNITY
COMMUNITY
• Charity Donation
Volunteering
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159
OUR PEOPLE
Community Investment
OPERATING PRINCIPLES AND PRACTICES
Anti-Corruption
•
The "recall procedures" is not closely relevant to the
Company's main business
PRODUCT RESPONSIBILITY
User Privacy
Aspect B7:
General Disclosure
OPERATING PRINCIPLES AND PRACTICES
Anti-corruption
B7.1
B7.2
B7.3
Anti-Corruption
OPERATING PRINCIPLES AND PRACTICES
Anti-Corruption
OPERATING PRINCIPLES AND PRACTICES
B1.2
Employment Data Summary
OUR PEOPLE
B1.1
Climate Change
General Disclosure
Aspect A4:
A3.1
The Environment and Natural Resources
General Disclosure
Aspect A3:
ENVIRONMENT
Not closely relevant to the Company's main businesses
Environmental Targets
Water and Other Emission Management
•
ENVIRONMENT
Environmental Targets
•
Aspect B1:
User Protection
Employment
ENVIRONMENT
OUR PEOPLE
General Disclosure
Health and Safety
OUR PEOPLE
General Disclosure
Aspect B2:
Sections in this Report
Disclosure Requirements
Environmental, Social and Governance Report
ESG GOVERNANCE STRUCTURE
BOARD STATEMENT
B2.1
Tackling Climate Change
Tackling Climate Change
ENVIRONMENT
A4.1
•
ENVIRONMENT
• Energy Management
Data Security
User Privacy
Employment Data Summary
OUR PEOPLE
Employment Data Summary
General Disclosure
OUR PEOPLE
Aspect B4:
•
Labour Standards
B4.2
OUR PEOPLE
•
Rights and Benefits
OUR PEOPLE
Rights and Benefits
B4.1
OUR PEOPLE
B3.2
B3.1
B2.2
B2.3
OUR PEOPLE
•
Employment Data Summary
OUR PEOPLE
•
Employment Data Summary
OUR PEOPLE
Health and Safety
General Disclosure
OUR PEOPLE
Growth and Development
Aspect B3:
Development and Training
General Disclosure
OPERATING PRINCIPLES AND PRACTICES
Aspect B5:
Supply Chain Management
Aspect B6:
General Disclosure
PRODUCT RESPONSIBILITY
Product Responsibility
B6.1
B6.2
B6.3
B6.4
B6.5
Not closely relevant to the Company's main businesses
PRODUCT RESPONSIBILITY
Customer Service
PRODUCT RESPONSIBILITY
Intellectual Property
PRODUCT RESPONSIBILITY
.
Sections in this Report
•
Disclosure Requirements
Supply Chain Management
B5.1
Supply Chain Management
OPERATING PRINCIPLES AND PRACTICES
Supply Chain Management
B5.2
OPERATING PRINCIPLES AND PRACTICES
Supply Chain Management
B5.3
OPERATING PRINCIPLES AND PRACTICES
B5.4
00
158
Tencent Holdings Limited
Supply Chain Management
OPERATING PRINCIPLES AND PRACTICES
Environmental, Social and Governance Report
ENVIRONMENT
Health and Safety
A2.2
A1.6
• Waste Management
00
156
Environmental Targets
Disclosure Requirements
Aspect A2:
Use of Resources
Environmental, Social and Governance Report
General Disclosure
A2.1
A2.3
A2.4
A2.5
Sections in this Report
ENVIRONMENT
Energy Management
ENVIRONMENT
. Environmental Performance Summary
ENVIRONMENT
Environmental Performance Summary
ENVIRONMENT
Environmental Targets
Tencent Holdings Limited
ENVIRONMENT
COMPILATION ILLUSTRATION
Reporting Boundary
Aspect A1:
Emissions
COMPILATION ILLUSTRATION
Tackling Climate Change
ENVIRONMENT
A1.1
ENVIRONMENT
Environmental Performance Summary
A1.2
General Disclosure
Tackling Climate Change
Environmental Performance Summary
A1.3
ENVIRONMENT
Environmental Performance Summary
A1.4
ENVIRONMENT
Environmental Performance Summary
A1.5
ENVIRONMENT
For the year ended 31 December 2021
Others
FinTech and Business Services
Online Advertising
Value-added Services
Revenues
Year ended 31 December
2020
RMB'Million
Note
2021
291,572
RMB'Million
264,212
82,271
OPINION
172,195
128,086
7,685
7,495
Cost of revenues
Gross profit
Interest income
Other gains, net
Selling and marketing expenses
General and administrative expenses
58
Consolidated Income Statement
88,666
Tencent Holdings Limited
00
00
The directors of the Company are responsible for the preparation of the consolidated financial statements that give a true and
fair view in accordance with IFRSS and the disclosure requirements of the Hong Kong Companies Ordinance, and for such
internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are
free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the directors are responsible for assessing the Group's ability to continue as
a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting
unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group's financial reporting process.
AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. We report
our opinion solely to you, as a body, and for no other purpose. We do not assume responsibility towards or accept liability to
any other person for the contents of this report. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can
arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these consolidated financial statements.
6 18 00
166
Tencent Holdings Limited
Independent Auditor's Report
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism
throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient
and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from
fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal
control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by the directors.
Conclude on the appropriateness of the directors' use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt
on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required
to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the
date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going
concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the
disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a
manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities
within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction,
supervision and performance of the Group audit. We remain solely responsible for our audit opinion.
Annual Report 2021 167
Independent Auditor's Report
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to
bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.
From the matters communicated with those charged with governance, we determine those matters that were of most
significance in the audit of the consolidated financial statements of the current period and are therefore the key audit
matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the
matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report
because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such
communication.
The engagement partner on the audit resulting in this independent auditor's report is Tong Yu Keung.
PricewaterhouseCoopers
Certified Public Accountants
Hong Kong, 23 March 2022
168
560,118
(16,444)
(314,174)
160,125
Profit for the year
Attributable to:
Equity holders of the Company
Non-controlling interests
Earnings per share for profit attributable to equity holders
of the Company (in RMB per share)
- basic
- diluted
224,822
159,847
2,988
278
227,810
160,125
12(a)
23.597
16.844
12(b)
23.164
16.523
The notes on pages 180 to 310 are an integral part of these consolidated financial statements.
Annual Report 2021
169
(incorporated in the Cayman Islands with limited liability)
TO THE SHAREHOLDERS OF TENCENT HOLDINGS LIMITED
Independent Auditor's Report
227,810
(19,897)
(20,252)
11
(260,532)
245,944
221,532
6,650
6,957
7
149,467
57,131
(40,594)
(33,758)
8
(89,847)
(67,625)
482,064
Operating profit
184,237
Finance costs, net
Share of (loss)/profit of associates and joint ventures, net
10
19
(7,114)
(7,887)
RESPONSIBILITIES OF DIRECTORS AND THOSE CHARGED WITH GOVERNANCE FOR THE CONSOLIDATED
FINANCIAL STATEMENTS
3,672
Profit before income tax
248,062
180,022
Income tax expense
271,620
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of
assurance conclusion thereon.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
consolidated financial statements of the current period. These matters were addressed in the context of our audit of the
consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
Key audit matters identified in our audit are summarised as follows:
•
Revenue recognition on provision of online games value-added services - estimates of the lifespans of virtual items
Impairment assessments of goodwill, investments in associates and joint ventures
We are independent of the Group in accordance with the International Code of Ethics for Professional Accountants (including
International Independence Standards) issued by the International Ethics Standards Board for Accountants ("IESBA Code"),
and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code.
Fair value measurement of financial instruments, including financial assets at fair value through profit or loss, financial
assets at fair value through other comprehensive income and other financial liabilities
Independent Auditor's Report
Key Audit Matter
Revenue recognition on provision of online games value-added
services - estimates of the lifespans of virtual items
Refer to Notes 2.28(a), 4(a) and 5(b) to the consolidated
financial statements
The Group recognises revenue from sales of virtual items to
the users in respect of value-added services rendered on the
Group's online platforms. The relevant revenue is recognised
over the lifespans of the respective virtual items determined by
the management, on an item by item basis, with reference to
the expected users' relationship periods or the stipulated period
of validity of the relevant virtual items, depending on the terms
of the virtual items.
During the year ended 31 December 2021, majority of the
Group's revenue from value-added services was contributed by
online games and was predominately derived from the sales of
virtual items.
We focused on this area due to the fact that management
applied significant judgments in determining the expected
users' relationship periods for certain virtual items. These
judgments included (i) the determination of key assumptions
applied in the expected users' relationship periods, including
but not limited to historical users' consumption patterns, churn
rates and reactivity on marketing activities, games life-cycle,
and the Group's marketing strategy; and (ii) the identification
of events that may trigger changes in the expected users'
relationship periods.
Annual Report 2021
Independence
We conducted our audit in accordance with International Standards on Auditing ("ISAS"). Our responsibilities under those
standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section
of our report.
BASIS FOR OPINION
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our
knowledge obtained in the audit or otherwise appears to be materially misstated.
•
The consolidated financial statements of Tencent Holdings Limited (the "Company") and its subsidiaries (the "Group"), which
are set out on pages 169 to 310, comprise:
What we have audited
the consolidated statement of financial position as at 31 December 2021;
• the consolidated income statement for the year then ended;
•
the consolidated statement of comprehensive income for the year then ended;
•
the consolidated statement of changes in equity for the year then ended;
the consolidated statement of cash flows for the year then ended; and
the notes to the consolidated financial statements, which include significant accounting policies and other explanatory
information.
Our opinion
In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the Group
as at 31 December 2021, and of its consolidated financial performance and its consolidated cash flows for the year then ended
in accordance with International Financial Reporting Standards ("IFRSS") and have been properly prepared in compliance with
the disclosure requirements of the Hong Kong Companies Ordinance.
00
160 Tencent Holdings Limited
Independent Auditor's Report
How our audit addressed the Key Audit Matter
We discussed with management and evaluated their
judgments on key assumptions in determining the
estimated lifespans of the virtual items that were based on
the expected users' relationship periods.
161
We assessed, on a sample basis, the expected users'
relationship periods adopted by management by testing
the data integrity of historical users' consumption patterns
and calculation of the churn rates. We also evaluated the
consideration made by management in determining the
underlying assumptions for expected users' relationship
periods with reference to historical operating and marketing
data of the relevant games. We also assessed, on a
sample basis, the historical accuracy of the management's
estimation process by comparing the actual users'
relationship periods for the year against the original
estimation for selected virtual items.
164 Tencent Holdings Limited
In respect of the impairment assessments of cash
generating units that contain goodwill, investments
in associates and investments in joint ventures using
discounted cash flows, we assessed the key assumptions
adopted including revenue growth rates, profit margins,
discount rates and other assumptions by examining
the approved financial/business forecast models, and
comparing actual results for the year against the previous
period's forecasts and the applicable industry/business data
external to the Group. We assessed certain of these key
assumptions with the involvement of our internal valuation
experts. We considered that the key assumptions adopted
by management were in line with our expectation and
evidence obtained.
In respect of the impairment assessments of cash
generating units that contain goodwill, investments in
associates and investments in joint ventures using market
approach, we assessed the valuation assumptions including
the selection of comparable companies, recent market
transactions, and liquidity discount for lack of marketability,
etc. We assessed these key assumptions adopted by
management with the involvement of our internal valuation
experts based on our industry knowledge and independent
research performed by us. We considered that the key
assumptions adopted by management were in line with our
expectation and evidence obtained.
We independently tested, on a sample basis, the accuracy
of mathematical calculation applied in the valuation models
and the calculation of impairment charges. We did not
identify any material exceptions from our testing.
Independent Auditor's Report
Key Audit Matter
We tested, on a sample basis, key controls in respect of the
recognition of revenue from sales of virtual items, including
management's review and approval of (i) determination of
the estimated lifespans of new virtual items prior to their
launches; and (ii) changes in the estimated lifespans of
existing virtual items based on periodic reassessment on
any indications triggering such changes. We also assessed
the data generated from the Group's information system
supporting the management's review, tested the information
system logic for generation of reports, and checked, on
a sample basis, the monthly computation of revenue
recognised on selected virtual items generated directly from
the Group's information system.
Refer to Notes 3.3, 4(c), 24, 25 and 39 to the consolidated
financial statements
As at 31 December 2021, the Group's financial assets and
financial liabilities which were carried at fair value mainly
comprised financial assets at fair value through profit or loss,
financial assets at fair value through other comprehensive
income and other financial liabilities of approximately
RMB202,757 million, RMB250,257 million and RMB2,802
million, respectively, of which approximately RMB193,591
million of these financial assets and approximately RMB2,444
million of these financial liabilities were measured based on
significant unobservable inputs and classified as "Level 3
financial instruments".
We focused on this area due to the high degree of judgment
required in determining the respective fair values of Level 3
financial instruments, which do not have direct open market
quoted values, with respect to the adoption of applicable
valuation methodology and the application of appropriate
assumptions in the valuation.
How our audit addressed the Key Audit Matter
In respect of the fair value measurement of Level 3 financial
instruments, we tested the key controls, on a sample basis,
in relation to the valuation process including the adoption
of applicable valuation methodology and the application
of appropriate assumptions in different circumstances, by
inspection of the evidence of management's review, where
we found no material exceptions.
We involved our internal valuation experts to discuss with
management and assess the appropriateness of valuation
methodology and assumptions used. We tested, on a
sample basis, valuation of Level 3 financial instruments
as at 31 December 2021 by evaluating the underlying
assumptions and inputs including risk-free rates, expected
volatility, relevant underlying financial projections, and
market information of recent transactions (such as recent
fund raising transactions undertaken by the investees)
as well as underlying supporting documentation. We also
tested, on a sample basis, the arithmetical accuracy of
the valuation computation. We found that the valuation
methodology of Level 3 financial instruments was
acceptable and the assumptions made by management
were supported by available evidence.
Annual Report 2021 165
Independent Auditor's Report
OTHER INFORMATION
The directors of the Company are responsible for the other information. The other information comprises all of the information
included in the annual report other than the consolidated financial statements and our auditor's report thereon.
00
How our audit addressed the Key Audit Matter
Fair value measurement of financial instruments, including
financial assets at fair value through profit or loss, financial
assets at fair value through other comprehensive income and
other financial liabilities
Key Audit Matter
Impairment assessments of goodwill, investments in associates
and joint ventures (continued)
162
Tencent Holdings Limited
We found that the results of our procedures performed to
be materially consistent with management's assessment.
Independent Auditor's Report
Impairment assessments of goodwill, investments in associates
and joint ventures
Refer to Notes 2.12(a), 2.14, 4(b), 20, 21 and 22 to the
consolidated financial statements
We focused on this area due to the magnitude of the carrying
amounts of these assets and the fact that significant judgments
were required by management (i) to identify whether any
impairment indicators existed for any of these assets during the
year; (ii) to determine the appropriate impairment approaches,
i.e. fair value less costs of disposal or value in use; and (iii) to
select key assumptions to be adopted in the valuation models,
including discounted cash flows and market approach, for the
impairment assessments.
As at 31 December 2021, the Group held significant amounts
of goodwill, investments in associates and joint ventures
amounting to RMB112,173 million, RMB316,574 million and
RMB6,614 million, respectively. Impairment of RMB8,702
million, RMB15,391 million and RMB904 million had
been provided for against the carrying amounts of goodwill,
investments in associates and investments in joint ventures,
respectively, during the year ended 31 December 2021.
We tested management's assessment including periodic
impairment indications evaluation as to whether indicators
of impairment exist by corroborating with management and
market information.
We also tested, on a sample basis, key controls in respect
of the impairment assessments, including the determination
of appropriate impairment approaches, valuation models
and assumptions and the calculation of impairment
provisions, where we found no material exceptions.
Management adopted different valuation models, on
a case by case basis, in carrying out the impairment
assessments, mainly including discounted cash flows
and market approach. We assessed, on a sample basis,
the basis management used to identify separate groups
of cash generating units that contain goodwill, the
impairment approaches and the valuation models used in
management's impairment assessments, which we found
to be appropriate.
Annual Report 2021
163
Independent Auditor's Report
Key Audit Matter
How our audit addressed the Key Audit Matter
00
for share
Retained
Other
RMB'Million
Share
Shares held
Non-controlling
Attributable to equity holders of the Company
Share
Total
interests
premium award schemes
RMB'Million
RMB'Million
RMB'Million
reserves
RMB'Million
earnings
RMB'Million
Total
For the year ended 31 December 2021
capital
Consolidated Statement of Changes in Equity
5,151
- value of employee services
RMB'Million
Share of other changes in net assets of
associates and joint ventures
3,320
3,320
(2)
3,318
Transfer of share of other changes in net assets
of associates to profit or loss upon disposal and
deemed disposal
(154)
(154)
(154)
00
176
Tencent Holdings Limited
Transactions with equity holders
Capital injection
Employee share option schemes:
- proceeds from shares issued
equity
RMB'Million
62
1,716
10,566
433
10,133
(1,865)
- shares withheld for share award schemes
13
413
9,720
- value of employee services
-
Employee share award schemes:
1,716
1,716
1,890
60
1,828
60
60
314
(1,865)
1,768
(1,865)
(1,209)
314
non wholly-owned subsidiaries
Acquisition of additional equity interests in
Disposal and deemed disposal of subsidiaries
business combinations
Non-controlling interests arising from
Dividends
(11,625)
(1,176)
(10,449)
(10,449)
(736)
736
Profit appropriations to statutory reserves
588
588
588
Tax benefit from share-based payments
1,209
- vesting of awarded shares
(5,151)
(2,090)
disposal of financial instruments to
Other fair value gains/(losses)
Share of other comprehensive income of associates and joint ventures
Transfer of share of other comprehensive loss/(income) to profit or loss
upon disposal and deemed disposal of associates and joint ventures
Currency translation differences
Items that may be subsequently reclassified to profit or loss
Other comprehensive income, net of tax:
Profit for the year
For the year ended 31 December 2021
Consolidated Statement of Comprehensive Income
RMB'Million
RMB'Million
RMB'Million
earnings
RMB'Million
Total
interests
equity
RMB'Million
RMB'Million
RMB'Million
35,271
(4,002)
16,786
Dilution of/changes in interests in subsidiaries
Items that will not be subsequently reclassified to profit or loss
384,651
Year ended 31 December
2020
125
Tencent Holdings Limited
170
00
The notes on pages 180 to 310 are an integral part of these consolidated financial statements.
Non-controlling interests
Equity holders of the Company
Attributable to:
Total comprehensive income for the year
Other fair value gains
Currency translation differences
Net (losses)/gains from changes in fair value of financial assets at
fair value through other comprehensive income
32
32
Gain from changes in fair value of assets held for distribution
Share of other comprehensive income of associates and joint ventures
160,125
227,810
RMB'Million
RMB'Million
Note
2021
retained earnings
432,706
488,824
127,873
127,873
2,652
130,525
-currency translation differences
(9,016)
(9,016)
469
(8,547)
- other fair value losses, net
(1,214)
(1,214)
(47)
(1,261)
Total comprehensive income for the year
117,987
159,847
277,834
3,339
281,173
Transfer of gains on disposal and deemed
comprehensive income
56.118
financial assets at fair value through other
(3)
Balance at 1 January 2020
Comprehensive income
Profit for the year
Other comprehensive income, net of tax:
- share of other comprehensive income/(loss)
of associates and joint ventures
347
42
159,847
159,847
278
160,125
347
133
(13)
334
- transfer of share of other comprehensive
income to profit or loss upon disposal and
deemed disposal of associates
(3)
(3)
- net gains from changes in fair value of
Changes in put option liabilities in respect
1,289
12,459
non wholly-owned subsidiaries
Dilution of/changes in interests in subsidiaries
(4,305)
(4,305)
(4,616)
(8,921)
205
205
736
941
Changes in put option liabilities in respect
of non-controlling interests
1,483
1,483
88
1,571
Lapses of put option liabilities in respect
of non-controlling interests
783
(33)
(33)
334
1,289
Payments for acquisition of financial assets at fair value through other
comprehensive income
(28,251)
(12,719)
Proceeds from disposals of financial assets at fair value through other
comprehensive income
33,521
7,648
Payments for acquisition of financial assets at fair value through profit or loss
Proceeds from disposals of financial assets at fair value through profit or loss
Payments for acquisition/settlements of other financial instruments
(79,350)
783
(60,066)
13,168
(2,202)
(859)
Proceeds from disposals of other financial assets
338
1,626
business combinations (Note 42)
Disposal and deemed disposal of subsidiaries
Acquisition of additional equity interests in
28,800
783
783
Recognition of put option liabilities arising from
73,901
669,911
806,299
70,394
876,693
Annual Report 2021
175
Consolidated Statement of Changes in Equity
For the year ended 31 December 2021
(4,843)
Attributable to equity holders of the Company
Share
Share
for share
Other
Retained
Non-controlling
Total
capital
premium award schemes
Shares held
1,383
67,330
(105,081)
business combinations
(1,289)
(1,289)
(1,289)
Transfer of equity interests of subsidiaries
to non-controlling interests
1,746
306
(2,323)
Balance at 31 December 2021
(271)
(261)
Total transactions with equity holders at their
capacity as equity holders for the year
18,537
(431)
(3,651)
(115,803)
(101,348)
(3,733)
10
Proceeds from disposals of investments in joint ventures
(247)
(364)
(6,472)
(4,699)
4,563
(136)
Total transactions with equity holders at their
capacity as equity holders for the year
13,522
(410)
(11,649)
246
(11,185)
14,604
4,882
Balance at 31 December 2020
48,793
(4,412)
121,139
538,464
703,984
74,059
(9,722)
778,043
1,527
Transfer of equity interests of subsidiaries
12,459
15
15
(2,795)
(2,795)
(3,180)
(5,975)
(684)
(684)
to non-controlling interests
1,407
(765)
(765)
(293)
(1,058)
Recognition of put option liabilities arising from
business combinations
(2,730)
(2,730)
(2,730)
723
of non-controlling interests
The notes on pages 180 to 310 are an integral part of these consolidated financial statements.
177
15
Purchase of property, plant and equipment, construction in progress
and investment properties
(29,302)
(34,070)
Proceeds from disposals of property, plant and equipment
191
Purchase of/prepayment for intangible assets
(31,159)
(15,097)
(27,182)
(1,704)
(5,347)
Payments for acquisition of investments in associates
(50,091)
(30,533)
Proceeds from disposals of investments in associates
4,035
2,208
Payments for acquisition of investments in joint ventures
Purchase of/prepayment for land use rights
Annual Report 2021
(21,944)
Payments for business combinations, net of cash acquired
Consolidated Statement of Cash Flows
For the year ended 31 December 2021
Cash flows from operating activities
Cash generated from operations
Income tax paid
Net cash flows generated from operating activities
Year ended 31 December
2021
Note
Net inflow of cash in respect of disposal of a subsidiary
RMB'Million
RMB'Million
43(a)
203,712
214,441
(28,526)
(20,322)
175,186
194,119
Cash flows from investing activities
2020
8
30
(19,392)
2,796
224,822
224,822
12
512
778,043
74,059
703,984
538,464
121,139
(4,412)
48,793
RMB'Million
RMB'Million
RMB'Million
equity
interests
Total
earnings
RMB'Million
reserves
RMB'Million
RMB'Million
RMB'Million
Total
Non-controlling
2,988
Retained
227,810
512
2,796
90
2,706
2,706
- other fair value gains, net
(19,950)
(1,918)
(18,032)
(18,032)
-currency translation differences
(16,166)
(1,093)
(15,073)
(15,073)
other comprehensive income
financial assets at fair value through
- net losses from changes in fair value of
5,380
5,380
5,380
assets held for distribution
- gain from changes in fair value of
888
512
Other
for share
award schemes
premium
Total liabilities
269,079
403,098
102,451
15(b)
Dividends payable for distribution in specie
82,827
87,846
5(c)(i)
Deferred revenue
3,822
5,446
18
Lease liabilities
5,567
3,554
39
Other financial liabilities
2,149
2,240
12,134
12,506
14,242
735,671
555,382
Total equity and liabilities
1,612,364
capital
RMB'Million
Share
Share
Shares held
Attributable to equity holders of the Company
deemed disposal of associates and
joint ventures
-transfer of share of other comprehensive
loss to profit or loss upon disposal and
of associates and joint ventures
- share of other comprehensive income
Other comprehensive income, net of tax:
Profit for the year
Total comprehensive income for the year
Comprehensive income
For the year ended 31 December 2021
Consolidated Statement of Changes in Equity
173
Annual Report 2021
Director
Director
Lau Chi Ping Martin
Ma Huateng
The consolidated financial statements on pages 169 to 310 were approved by the Board of Directors on 23 March 2022 and
were signed on its behalf:
The notes on pages 180 to 310 are an integral part of these consolidated financial statements.
1,333,425
Balance at 1 January 2021
(24,499)
224,822
200,323
Total
RMB'Million
earnings
RMB'Million
RMB'Million
RMB'Million
RMB'Million
RMB'Million
reserves
premium award schemes
capital
Total
Non-controlling
Retained
Other
for share
Share
Share
Shares held
Attributable to equity holders of the Company
For the year ended 31 December 2021
Consolidated Statement of Changes in Equity
Employee share award schemes:
- proceeds from shares issued
- value of employee services
interests
RMB'Million
equity
RMB'Million
1,661
1,043
- vesting of awarded shares
(2,827)
19,501
(2,827)
(2,827)
- shares withheld for share award schemes
543
18,958
611
18,347
- value of employee services
Employee share option schemes:
-
1,768
54
43
54
412
612
1112
612
1,043
1,714
- 53 -
1,043
19,003
Capital injection
174 Tencent Holdings Limited
(12,683)
(1,015)
(13,698)
Dividends distribution in specie (Note 15(b))
(102,451)
(102,451)
(102,451)
Distributions from a non wholly-owned subsidiary
(1,401)
(1,401)
35
(35)
joint ventures
and deemed disposal of associates and
income to retained earnings upon disposal
Transfer of share of other comprehensive
22,393
(22,393)
retained earnings
disposal of financial instruments to
Transfer of gains on disposal and deemed
200,390
67
(12,683)
Cash dividends
(2,170)
(2,170)
00
(5,089)
(5,089)
(5,089)
loss upon disposal and deemed disposal
of associates and joint ventures to profit or
Transfer of share of other changes in net assets
8,430
1
8,429
8,429
Transactions with equity holders
associates and joint ventures
Tax benefit from share-based payments
462
4662
'
462
66%
Profit appropriations to statutory reserves
669
(669)
Repurchase and cancellation of shares
(2,170)
Share of other changes in net assets of
(3)
36
60,582
26,068
28
4
1,261
27
24,630
37,177
26
213,091
250,257
25
165,944
192,184
24
7,649
6,614
297,609
316,574
159,437
171,376
20
222222222
Term deposits
21,348
Deferred income tax assets
29
31,681
1,749
27
40,321
65,390
26
44,981
49,331
2,090
322 223
Assets held for distribution
Cash and cash equivalents
Restricted cash
Term deposits
Financial assets at fair value through profit or loss
Other financial assets
Prepayments, deposits and other assets
Accounts receivable
814
1,063
Inventories
Current assets
1,015,778
1,127,552
19,491
Other financial assets
Prepayments, deposits and other assets
Financial assets at fair value through other comprehensive income
2021
As at 31 December
As at 31 December 2021
Consolidated Statement of Financial Position
ASSETS
281,173
200,390
3,339
67
277,834
200,323
281,173
200,390
121,048
(27,420)
291
(1,285)
130,525
(16,166)
(558)
5,380
387
(1,552)
(7,262)
Note
RMB'Million
2020
RMB'Million
Financial assets at fair value through profit or loss
Investments in joint ventures
Investments in associates
583
517
Intangible assets
Investment properties
4,939
5,923
19
Construction in progress
1,133
12,929
18
Right-of-use assets
16,091
17,728
17
Land use rights
59,843
61,914
16
Property, plant and equipment
Non-current assets
20,468
24
10,573
6,593
16,501
18
Lease liabilities
16,061
13,142
28
Deferred income tax liabilities
9,254
5,912
39
Other financial liabilities
9,910
9,966
38
Non-controlling interests arising from
122,057
145,590
37
Notes payable
112,145
136,936
36
Borrowings
10,198
Deferred revenue
5(c)(i)
4,526
94,030
109,470
40
41
ུ # 9
Other tax liabilities
Current income tax liabilities
Borrowings
Other payables and accruals
Accounts payable
Current liabilities
Non-current liabilities
RMB'Million
RMB'Million
Note
2021
As at 31 December
As at 31 December 2021
Consolidated Statement of Financial Position
172 Tencent Holdings Limited
00
286,303
332,573
6,678
2020
54,308
778,043
74,059
Note
2021
As at 31 December
EQUITY
As at 31 December 2021
Consolidated Statement of Financial Position
171
Annual Report 2021
1,333,425
1,612,364
Total assets
317,647
484,812
102,451
152,798
167,966
31
2,520
2,476
31
68,487
83,813
29
RMB'Million
Equity attributable to equity holders of the Company
Share capital
33
70,394
703,984
806,299
538,464
669,911
121,139
73,901
34
(4,412)
(4,843)
33
876,693
48,793
33
RMB'Million
2020
LIABILITIES
Total equity
Non-controlling interests
ww ww
Retained earnings
Other reserves
Shares held for share award schemes
Share premium
67,330
Long-term payables
RMB'Million
(1,403)
Placement of term deposits with initial terms of over three months
(55,713)
(59,169)
Interest received
4,923
5,610
Dividends received
Net cash flows used in investing activities
3,324
2,153
(178,549)
(181,955)
00
178 Tencent Holdings Limited
Consolidated Statement of Cash Flows
For the year ended 31 December 2021
Cash flows from financing activities
Proceeds from short-term borrowings
Repayments of short-term borrowings
Proceeds from long-term borrowings
Repayments of long-term borrowings
32,177
Net proceeds from issuance of notes payable
55,140
484
reserves
(10,339)
Payments for loans to investees and others
179
Annual Report 2021
152,798
167,966
(6,004)
(3,089)
132,991
152,798
25,811
18,257
13,647
(1,079)
(11,251)
(1,755)
Loans repayments from investees and others
1,127
Receipt from maturity of term deposits with initial terms of over three months
Repayments of notes payable
21,620
Interest paid
(2,170)
1,043
1,716
(2,827)
(1,865)
Proceeds from issuance of additional equity of non wholly-owned subsidiaries
Proceeds from partial disposals of equity interests in non wholly-owned subsidiaries
Payments for acquisition of non-controlling interests in non wholly-owned
subsidiaries
727
600
110
Dividends paid to the Company's shareholders
Dividends paid to non-controlling interests
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Exchange losses on cash and cash equivalents
Cash and cash equivalents at end of the year
The notes on pages 180 to 310 are an integral part of these consolidated financial statements.
(9,199)
(9,263)
(12,503)
Principal elements of lease payments
(7,076)
(7,525)
Net cash flows generated from financing activities
(4,423)
Payments for repurchase of shares
(3,537)
Proceeds from issuance of ordinary shares as a result of exercise
of share options
Shares withheld for share award schemes
Year ended 31 December
RMB'Million
2020
RMB'Million
23,103
2021
(22,944)
(8,512)
33,348
26,323
(777)
(15,899)
27,060
(10,460)
5,090
47,948
The Group recognises its direct right to the assets, liabilities, revenues and expenses of joint operations and its
share of any jointly held or incurred assets, liabilities, revenues and expenses. These have been incorporated in the
financial statements under the appropriate headings.
Joint ventures
Joint ventures are accounted for using the equity method.
Under the equity method of accounting, interests in joint ventures are initially recognised at cost and adjusted
thereafter to recognise the Group's share of the post-acquisition profit or loss and movements in other
comprehensive income. Where the Group's share of losses in a joint venture equals or exceeds its interests in
the joint venture (which includes any other unsecured long-term receivables that, in substance, form part of the
Group's net investment in the joint venture), the Group does not recognise further losses, unless it has incurred
legal or constructive obligations or made payments on behalf of the joint venture.
Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the
Group's interests in the joint ventures. Unrealised losses are also eliminated unless the transaction provides
evidence of an impairment of the asset transferred. Accounting policies of the joint ventures have been changed
where necessary to ensure consistency with the policies adopted by the Group.
Notes to the Consolidated Financial Statements
The cost of associates/joint ventures acquired in stages, except for the change from an associate to a joint
venture, is measured as the sum of the fair value of the interests previously held plus the fair value of any
additional consideration transferred as of the date when they become associates/joint ventures. A gain or loss on
remeasurement of the previously held interests is taken to the consolidated income statement.
Annual Report 2021 187
For the year ended 31 December 2021
Joint operations
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)
2
2.5 Investments in associates/joint ventures achieved in stages
Under IFRS 11 investments in joint arrangements are classified as either joint operations or joint ventures
depending on the contractual rights and obligations of each investor.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group's
interests in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an
impairment of the asset transferred. Accounting policies of associates have been changed where necessary to
ensure consistency with the policies adopted by the Group.
For the year ended 31 December 2021
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)
2
Notes to the Consolidated Financial Statements
Tencent Holdings Limited
186
00
Gains or losses on dilution of equity interest in associates are recognised in the consolidated income statement.
If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate
share of the amounts previously recognised in other comprehensive income is reclassified to consolidated income
statement where appropriate.
The Group determines at each reporting date whether there is any objective evidence that investments accounted
for using the equity method, including investments in associates and joint arrangements (Note 2.4), are impaired.
If this is the case, the Group calculates the amount of impairment as the difference between the recoverable
amount of the investment and its carrying value and recognises the amount in "Other gains/(losses), net" in the
consolidated income statement.
The Group's share of its associates' post-acquisition profit or loss is recognised in the consolidated income
statement, and its share of post-acquisition movements in other comprehensive income is recognised in other
comprehensive income. Dividends received or receivable from associates are recognised as a reduction in the
carrying amount of the investment. Where the Group's share of losses in an associate equals or exceeds its
interests in the associate, including any other unsecured long-term receivables, the Group does not recognise
further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate.
Associates are all entities over which the Group has significant influence but not control or joint control, generally
but not necessarily accompanying a shareholding of between 20% and 50% of the voting rights. Investments
in associates are accounted for using the equity method of accounting and are initially recognised at cost. The
Group's investments in associates include underlying goodwill identified on acquisition, net of any accumulated
impairment loss.
2.6 Disposal of associates and joint ventures
2.3 Associates
2.4 Joint arrangements
When the Group ceases to continue equity accounting for an associate or joint venture because of a loss of
significant influence or joint control, it measures any retained investment at fair value. A gain or loss is recognised
at any difference between the fair value of any retained interest plus any proceeds from disposing part of the
interests in the associate or joint venture and the carrying amount of the investment at the date the equity method
of accounting was discontinued. The amounts previously recognised in other comprehensive income in respect of
an associate or joint venture should be reclassified to the consolidated income statement or transferred to another
category of equity as specified and permitted by applicable IFRSS when the Group ceases to continue equity
accounting for the associate or joint venture.
Assets and liabilities for each statement of financial position presented are translated at the closing rate
at the date of that statement of financial position;
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision-makers, who are responsible for allocating resources and assessing performance of the operating
segments and making strategic decisions. The chief operating decision-makers mainly include the executive
directors.
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)
189
Annual Report 2021
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and
liabilities of the foreign entity and translated at the closing rate. Currency translation differences arising are
recognised in other comprehensive income.
On consolidation, exchange differences arising from the translation of the net investment in foreign
operations, and of borrowings and other financial instruments designated as hedges of such investments, are
taken to other comprehensive income.
All resulting currency translation differences are recognised as a separate component of other
comprehensive income.
(iii)
Income and expenses for each income statement are translated at average exchange rates (unless
this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the
transaction dates, in which case income and expenses are translated at the rate on the dates of the
transactions); and
(ii)
(i)
The results and financial position of all the group entities (none of which has the currency of a hyper-
inflationary economy) that have a functional currency different from the presentation currency of RMB are
translated into the presentation currency as follows:
Group companies
(c)
Non-monetary items that are measured at fair value in foreign currency are translated using the exchange
rates at the date when the fair value was determined. Translation differences on non-monetary assets and
liabilities carried at fair value are reported as part of the fair value gain or loss. For example, translation
differences on non-monetary financial assets and liabilities such as equity instruments held at fair value
through profit or loss are recognised in the consolidated income statement as part of the fair value gain or
loss and translation differences on non-monetary financial assets, such as equity instruments classified as
FVOCI, are included in other comprehensive income.
(b) Transactions and balances (continued)
2.8 Foreign currency translation (continued)
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)
2
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
Tencent Holdings Limited
188
00
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing
at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of
such transactions and from the translation at year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the consolidated income statement.
Transactions and balances
(b)
Items included in the financial statements of each of the Group's entities are measured using the currency of
the primary economic environment in which the entity operates (the "functional currency"). The functional
currency of the Company and certain of its overseas subsidiaries is United States Dollars ("USD"). As the
major operations of the Group are within the PRC, the Group presents its consolidated financial statements
in Renminbi ("RMB"), unless otherwise stated.
(a) Functional and presentation currency
2.8 Foreign currency translation
2.7 Segment reporting
2
the right to ensure that Tencent Technology owns the valuable assets of the business through the assignment to
Tencent Technology of the principal present and future intellectual property rights of Tencent Computer; and
Notes to the Consolidated Financial Statements
Interest rate benchmark reform - phase 2 ("phase 2")
IFRS 4 and IFRS 16
Amendments to IFRS 9, IAS 39, IFRS 7,
The following amendments to standards have been adopted by the Group for the first time for the financial
year beginning on 1 January 2021:
Amendments to standards adopted by the Group
(a)
The preparation of financial statements in conformity with IFRSS requires the use of certain critical accounting
estimates. It also requires management to exercise its judgment in the process of applying the Group's accounting
policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates
are significant to the consolidated financial statements are disclosed in Note 4.
The consolidated financial statements of the Group have been prepared in accordance with all applicable
International Financial Reporting Standards ("IFRSS"). The consolidated financial statements have been prepared
under the historical cost convention, as modified by the revaluation of financial assets at fair value through profit or
loss ("FVPL"), financial assets at fair value through other comprehensive income ("FVOCI"), dividends payable for
distribution in specie, certain other financial assets and liabilities, which are carried at fair value.
2.1 Basis of preparation
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below.
These policies have been consistently applied to all the years presented, unless otherwise stated.
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES
2
Similar Structure Contracts were also executed for other PRC operating companies established by the Group similar to
Tencent Computer subsequent to 2000. All these PRC operating companies are treated as controlled structured entities
of the Company and their financial statements have also been consolidated by the Company. See details in Note 48.
As a result, Tencent Computer is accounted for as a controlled structured entity (see also Note 2.2(a) and Note 48)
and the formation of the Group in 2000 was accounted for as a business combination between entities under common
control under a method similar to the uniting of interests method for recording all assets and liabilities at predecessor
carrying amounts. This approach was adopted because in management's belief it best reflected the substance of the
formation.
GENERAL INFORMATION (continued)
1
For the year ended 31 December 2021
For the year ended 31 December 2021
1 GENERAL INFORMATION
Tencent Holdings Limited (the "Company") was incorporated in the Cayman Islands with limited liability. The address of
its registered office is Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands. The
shares of the Company have been listed on the Main Board of the Stock Exchange of Hong Kong Limited (the "Stock
Exchange") since 16 June 2004.
The Company is an investment holding company. The Company and its subsidiaries (collectively, the "Group") are
principally engaged in the provision of Value-added Services ("VAS"), Online Advertising services and FinTech and
Business Services.
The operations of the Group were initially conducted through Shenzhen Tencent Computer Systems Company Limited
("Tencent Computer"), a limited liability company established in the PRC by certain shareholders of the Company on 11
November 1998. Tencent Computer is legally owned by the core founders of the Company who are PRC citizens (the
"Registered Shareholders").
The PRC regulations restrict foreign ownership of companies that provide value-added telecommunications services,
which include activities and services operated by Tencent Computer. In order to enable the Company to own and control
the business of the Group, the Company established a subsidiary, Tencent Technology (Shenzhen) Company Limited
("Tencent Technology"), which is a wholly foreign owned enterprise incorporated in the PRC, on 24 February 2000.
Annual Report 2021 181
Under a series of contractual arrangements (collectively, “Structure Contracts") entered into among the Company,
Tencent Technology, Tencent Computer and the Registered Shareholders, the Company is able to effectively control,
recognise and receive substantially all the economic benefit of the business and operations of Tencent Computer. In
summary, the Structure Contracts provide the Company through Tencent Technology with, among other things:
the right to receive the cash received by Tencent Computer from its operations which is surplus to its requirements,
having regard to its forecast working capital needs, capital expenditure, and other short-term anticipated
expenditure through various commercial arrangements;
the right to control the management, financial and operating policies of Tencent Computer.
00
180
Tencent Holdings Limited
Notes to the Consolidated Financial Statements
•
Notes to the Consolidated Financial Statements
For the year ended 31 December 2021
2
Amendments to IFRSS
Amendments to IAS 37
IFRS 17
Amendments to IAS 1
Amendments to IAS 1 and
IFRS Practice Statement 2
1 January 2022
Amendments to IAS 8
2018-2020 Cycle
Insurance Contracts
Disclosure of Accounting Policies
1 January 2022
Onerous Contracts - Cost of Fulfilling a Contract
For the year ended 31 December 2021
Annual Improvements to IFRS Standards
Notes to the Consolidated Financial Statements
Reference to the Conceptual Framework
before Intended Use
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)
2.1
Basis of preparation (continued)
(a)
Amendments to standards adopted by the Group (continued)
(b)
Amendments to IFRS 3
The amendments are relevant to the Group given that it applies hedge accounting to its benchmark interest
rate exposures. The Group has floating rate debts, linked to USD LIBOR, including borrowings and senior
notes, whose cash flows are hedged by using interest rate swaps. The LIBOR benchmark in which the Group
continues to have hedging instrument is USD LIBOR. It is expected that the transition out of USD LIBOR
hedging derivatives will be completed before 30 June 2023, and no significant impact arose as a result of
applying those amendments during the year ended 31 December 2021.
The following new standards and amendments to standards have not come into effect for the financial year
beginning on 1 January 2021 and have not been early adopted by the Group in preparing the consolidated
financial statements. None of these is expected to have a significant effect on the consolidated financial
statements of the Group.
Effective for annual
periods beginning
Amendments to IAS 28
and IFRS 10
Amendments to IAS 16
Sale or Contribution of Assets between an Investor
and its Associate or Joint Venture
Property, Plant and Equipment: Proceeds
To be determined
1 January 2022
New standards and amendments to standards issued but not yet effective
1 January 2022
on or after
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer's
previously held equity interest in the acquiree is re-measured to fair value at the acquisition date; any
gains or losses arising from such re-measurement are recognised in profit or loss.
(i) Business combinations (continued)
(a) Consolidation (continued)
2.2 Subsidiaries (continued)
2 SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
183
The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition
basis. Non-controlling interests in the acquiree that are present ownership interests and entitle their
holders to a proportionate share of the entity's net assets in the event of liquidation are measured at
either fair value or the present ownership interests' proportionate share in the recognised amounts of
the acquiree's identifiable net assets.
Annual Report 2021
Business combinations
(i)
Intra-group transactions, balances and unrealised gains on transactions between group companies are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment
of the transferred asset. When necessary, amounts reported by subsidiaries have been adjusted to conform
with the Group's accounting policies.
Annual Report 2021 185
(a) Consolidation
Subsidiaries
2.2
The Group applies the acquisition method to account for business combinations. The consideration
transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities
incurred to the former owners of the acquiree and the equity interests issued by the Group. The
consideration transferred also includes the fair value of any asset or liability resulting from a contingent
consideration arrangement, which is recognised under "Other financial assets" or "Other financial
liabilities" in the consolidated financial statements. Identifiable assets acquired and liabilities and
contingent consideration assumed in a business combination are measured initially at their fair values
at the acquisition date.
The Group considers the lease as a single transaction in which the assets and liabilities are integrally linked.
There is no net temporary difference at inception. Subsequently, when differences on settlement of the
liabilities and the amortisation of right-of-use assets arise, there will be a net temporary difference on which
deferred income tax is recognised. Upon the effective date of amendments to IAS 12 on 1 January 2023, the
Group will need to recognise a deferred income tax asset and a deferred income tax liability for the temporary
differences arising on a lease on initial recognition.
Acquisition-related costs are expensed as incurred.
The excess of the total of consideration transferred, the amount of any non-controlling interest in the
acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the
fair value of the identifiable net assets acquired is recorded as goodwill. If the total of consideration
transferred, non-controlling interest recognised and previously held interest measured is less than the
fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference
is recognised directly in the consolidated income statement.
Investments in subsidiaries are accounted for at cost less impairment. Cost includes direct attributable
costs of investment. The results of subsidiaries are accounted for by the Company on the basis of dividends
received and receivable. In addition, the contribution to the Company's Share Scheme Trust (as defined in
Note 48(f)), a controlled structured entity, is stated at cost in "Contribution to Share Scheme Trust”, and will
be transferred to the "Shares held for share award schemes" under equity when the contribution is used for
the acquisition of the Company's shares.
(b) Separate financial statements
When the Group ceases to have control, any retained interest in the entity is re-measured to its
fair value at the date when control is lost, with the change in carrying amount recognised in the
consolidated income statement. The fair value is the initial carrying amount for the purposes of
subsequently accounting for the retained interest as an associate, a joint venture or a financial asset.
In addition, any amounts previously recognised in other comprehensive income in respect of that entity
are accounted for as if the Group had directly disposed of the related assets or liabilities. It means that
amounts previously recognised in other comprehensive income are reclassified to the consolidated
income statement or transferred to another category of equity as specified/permitted by applicable
IFRSS.
(iii) Disposal of subsidiaries
Transactions with non-controlling interests that do not result in a loss of control are accounted for
as equity transactions - that is, as transactions with the owners of the subsidiary in their capacity as
owners. The difference between fair value of any consideration paid and the relevant share acquired of
the carrying amount of net assets of the subsidiary is recorded in equity. Gains or losses on disposals
to non-controlling interests are also recorded in equity.
Changes in ownership interests in subsidiaries without change of control
(ii)
Any contingent consideration to be transferred by the Group is recognised at fair value at the
acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed
to be an asset or liability is recognised in profit or loss. Contingent consideration that is classified as
equity is not re-measured, and its subsequent settlement is accounted for within equity.
(a) Consolidation (continued)
For the year ended 31 December 2021
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)
2
Notes to the Consolidated Financial Statements
Tencent Holdings Limited
184
00
2.2 Subsidiaries (continued)
New standards and amendments to standards issued but not yet effective (continued)
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group
controls an entity where the Group is exposed to, or has rights to, variable returns from its involvement
with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are
consolidated from the date on which control is transferred to the Group. They are deconsolidated from the
date that control ceases.
(b)
1 January 2023
Classification of Liabilities as Current or Non-current
1 January 2023
Impairment testing of the investments in subsidiaries is required upon receiving dividends from these
investments if the dividends exceed the total comprehensive income of the subsidiaries in the period the
dividends are declared or if the carrying amount of the investments in the separate financial statements
exceeds the carrying amount in the consolidated financial statements of the investee's net assets including
goodwill.
1 January 2023
Definition of Accounting Estimates
1 January 2023
Deferred Tax related to Assets and Liabilities
1 January 2023
Amendments to IAS 12
00
182
Tencent Holdings Limited
Notes to the Consolidated Financial Statements
2
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)
2.1
Basis of preparation (continued)
arising from a Single Transaction
For the year ended 31 December 2021
Revenues
1,703
Gross profit
86,199
Cost of revenues
Profit attributable to equity holders of the Company. Profit attributable to equity holders of the Company increased by 60% to
RMB95.0 billion for the fourth quarter of 2021 on a year-on-year basis. Non-IFRS profit attributable to equity holders of the
Company decreased by 25% to RMB24.9 billion for the fourth quarter of 2021 as costs and expenses generally increased
faster than revenues, and as net associate contributions moved from profits to losses, for the reasons cited above.
FOURTH QUARTER OF 2021 COMPARED TO THIRD QUARTER OF 2021
Management Discussion and Analysis
17
Annual Report 2021
1,703
The following table sets forth the comparative figures for the fourth quarter of 2021 and the third quarter of 2021:
62,747
Three months ended
31 December
(79,621)
(86,371)
142,368
144,188
(RMB in millions)
2021
2021
30 September
Unaudited
Operating profit
General and administrative expenses
Interest income
Other gains, net
Selling and marketing expenses
57,817
Income tax expense. Income tax expense increased by 5% to RMB3.9 billion for the fourth quarter of 2021 on a year-on-year
basis.
36,869
Finance costs, net. Net finance costs decreased by 17% to RMB1.9 billion for the fourth quarter of 2021 on a year-on-year
basis, primarily due to foreign exchange gains recognised this quarter compared to losses for the fourth quarter of 2020, partly
offset by the increase in interest expenses as a result of increased indebtedness.
FinTech and Business Services
Others
17%
82,271
16%
88,666
Online Advertising
55%
264,212
52%
291,572
VAS
(RMB in millions, unless specified)
Amount
revenues
Amount
revenues
% of total
% of total
2020
2021
22,984
Year ended 31 December
Revenues. Revenues increased by 16% to RMB560.1 billion for the year ended 31 December 2021 on a year-on-year basis.
The following table sets forth our revenues by line of business for the years ended 31 December 2021 and 2020:
Management Discussion and Analysis
Management Discussion and Analysis
Cost of revenues for FinTech and Business Services increased by 27% to RMB34.9 billion for the fourth quarter
of 2021 on a year-on-year basis, reflecting increased transaction costs due to payment volume growth, and our
continuous investment in cloud computing talent and operations.
Other gains, net. We recorded net other gains of RMB86.2 billion for the fourth quarter of 2021, which were primarily non-IFRS
adjustment items such as net gains on deemed disposals and disposals of certain investee companies (including a RMB78.0
billion gain arising from the cessation of JD.com as an associate, due to the resignation of our board representative).
Selling and marketing expenses. Selling and marketing expenses increased by 16% to RMB11.6 billion for the fourth quarter
of 2021 on a year-on-year basis, reflecting increased marketing spending on games partly offset by decreased spending on
digital content services. As a percentage of revenues, selling and marketing expenses was 8% for the fourth quarter of 2021,
broadly stable compared to the fourth quarter of 2020.
General and administrative expenses. General and administrative expenses increased by 23% to RMB24.4 billion for the
fourth quarter of 2021 on a year-on-year basis, mainly driven by increased R&D expenses and staff costs, including higher
share-based compensation expenses, reflecting unusually intense competition for talent in 2020 and 2021, which we expect to
moderate in 2022. As a percentage of revenues, general and administrative expenses increased to 17% for the fourth quarter
of 2021 from 15% for the fourth quarter of 2020.
Share of loss/profit of associates and joint ventures, net. We recorded share of losses of associates and joint ventures of
RMB8.3 billion for the fourth quarter of 2021, compared to share of profits of RMB1.6 billion for the fourth quarter of 2020.
Non-IFRS share of losses of associates and joint ventures were RMB0.8 billion for the fourth quarter of 2021, compared to
non-IFRS share of profits of RMB2.7 billion for the fourth quarter of 2020, reflecting increased investments in community retail
initiatives by certain associates, and losses recognised from an associate in the transportation services vertical.
(11,616)
Non-IFRS operating profit
(24,380)
00
18
Tencent Holdings Limited
Management Discussion and Analysis
Revenues. Revenues increased by 1% to RMB144.2 billion for the fourth quarter of 2021 on a quarter-on-quarter basis.
Revenues from Online Advertising decreased by 4% to RMB21.5 billion for the fourth quarter of 2021, reflecting a
slower-than-usual seasonal spending upturn in advertiser categories such as eCommerce and consumer staples,
as well as weakness in categories such as Internet services, education, and games. Social and Others Advertising
revenues decreased by 4% to RMB18.3 billion, reflecting lower advertising revenues from Weixin and QQ properties,
as well as our mobile advertising network, partly offset by the consolidation of Sogou's advertising revenue. Media
Advertising revenues decreased by 8% to RMB3.2 billion, primarily due to lower advertising revenues from the Tencent
Video service.
Revenues from FinTech and Business Services increased by 11% to RMB48.0 billion for the fourth quarter of 2021,
reflecting seasonally higher revenues from cloud services due to year-end project deployments, as well as higher
revenues from payment services.
Annual Report 2021
19
172,195
73%
31 December 2020
% of
segment
% of
segment
Amount
revenues
Amount
revenues
34,942
FinTech and Business Services
Others
47%
11,520
57%
12,338
(RMB in millions, unless specified)
Online Advertising
49%
32,512
51%
31,751
(10,435)
24,880
40,828
(23,862)
109,723
53,137
Finance costs, net
(1,863)
(1,942)
Share of losses of associates and joint ventures, net
(8,267)
(5,668)
Profit before income tax
99,593
45,527
Income tax expense
Profit for the period
(3,888)
(5,452)
95,705
40,075
Attributable to:
Equity holders of the Company
94,958
39,510
Non-controlling interests
747
565
95,705
40,075
VAS
33,151
Non-IFRS profit attributable to equity holders of the Company
31%
138,636
27%
59,369
Non-IFRS operating profit
33,151
38,084
Non-IFRS profit attributable to equity holders of the Company
24,880
33,207
00
14
95,705
Tencent Holdings Limited
Revenues. Revenues increased by 8% to RMB144.2 billion for the fourth quarter of 2021 on a year-on-year basis. The
following table sets forth our revenues by line of business for the fourth quarter of 2021 and the fourth quarter of 2020:
Unaudited
Three months ended
31 December 2021
31 December 2020
% of total
% of total
Amount
revenues
Amount
Management Discussion and Analysis
67
747
Non-controlling interests
(19,779)
109,723
63,713
Finance costs, net
(1,863)
(2,253)
Share of (loss)/profit of associates and joint ventures, net
1,618
Profit before income tax
99,593
63,078
Income tax expense
Profit for the period
(3,888)
(3,709)
95,705
59,369
Attributable to:
Equity holders of the Company
94,958
59,302
revenues
(RMB in millions, unless specified)
VAS
71,913
Annual Report 2021
15
Management Discussion and Analysis
Revenues from FinTech and Business Services increased by 25% to RMB48.0 billion for the fourth quarter of 2021
on a year-on-year basis. FinTech Services revenue growth mainly reflected increasing commercial payment volume.
Business Services revenue growth was primarily driven by increased use of our services by Internet services, public
transportation and retail industries.
Cost of revenues. Cost of revenues increased by 15% to RMB86.4 billion for the fourth quarter of 2021 on a year-on-year
basis, driven by transaction costs to handle increased payment-related transaction volumes, cloud project deployment
costs, server and bandwidth costs, as well as content costs, partly offset by decreased channel and distribution costs. As a
percentage of revenues, cost of revenues increased to 60% for the fourth quarter of 2021 from 56% for the fourth quarter of
2020, reflecting costs growing faster than revenues in certain businesses and our continued investment in key strategic areas.
The following table sets forth our cost of revenues by line of business for the fourth quarter of 2021 and the fourth quarter of
2020:
Unaudited
Three months ended
31 December 2021
Tencent Holdings Limited
16
00
Cost of revenues for Online Advertising increased by 7% to RMB12.3 billion for the fourth quarter of 2021 on a year-on-
year basis, driven by increased server and bandwidth costs including those associated with our Video Accounts service,
as well as increased content costs, partly offset by decreased channel and distribution costs.
Cost of revenues for VAS increased by 13% to RMB36.9 billion for the fourth quarter of 2021 on a year-on-year basis,
mainly due to increased content and channel costs for games, as well as revenue sharing costs associated with our
Video Accounts live streaming service.
74,788
86,371
Total cost of revenues
91%
3,218
79%
2,222
72%
27,538
2 Mobile games VAS revenues (including mobile games revenues attributable to our Social Networks business) increased by 9% year-on-
year to RMB40.0 billion, while PC client games revenues grew by 4% year-on-year to RMB10.6 billion for the fourth quarter of 2021.
(24,380)
Revenues from Online Advertising decreased by 13% to RMB21.5 billion for the fourth quarter of 2021 on a year-
on-year basis. The year-on-year decrease in Online Advertising revenues reflected weakness in advertiser categories
including education, games and Internet services, partly offset by the consolidation of Sogou's advertising revenue.
Social and Others Advertising revenues decreased by 10% to RMB18.3 billion, primarily due to lower advertising
revenues from our mobile advertising network and Weixin Moments. Media Advertising revenues decreased by 25% to
RMB3.2 billion, reflecting lower advertising revenues from Tencent Video and Tencent News services.
100%
50%
66,979
50%
Online Advertising
21,518
15%
24,655
18%
FinTech and Business Services
Others
47,958
33%
38,494
29%
2,799
2%
3,541
3%
Total revenues
144,188
100%
133,669
Revenues from VAS2 increased by 7% to RMB71.9 billion for the fourth quarter of 2021 on a year-on-year basis.
Domestic Games revenues grew by 1% to RMB29.6 billion, driven by games including Honour of Kings, as well as
recently launched titles such as Fight of The Golden Spatula and League of Legends: Wild Rift, partly offset by the
decrease in revenues from Moonlight Blade Mobile and Peacekeeper Elite. International Games revenues grew by 34%
to RMB13.2 billion, reflecting new content for Valorant and Clash Royale, a true-up adjustment to revenue of Supercell
upon periodic review of our revenue deferral periods, and consolidation of Digital Extremes. Social Networks revenues
grew by 4% to RMB29.1 billion, driven by our Video Accounts live streaming service, video and music subscription
services.
128,086
(10,033)
32,936
revenues
Amount
(RMB in millions, unless specified)
VAS
48%
121,287
46%
Online Advertising
48,072
Amount
54%
49%
FinTech and Business Services
120,799
70%
91,835
72%
Others
6,667
87%
40,011
% of
segment
revenues
% of
segment
7,685
1%
7,495
1%
Total revenues
560,118
100%
482,064
100%
Revenues from VAS¹ increased by 10% to RMB291.6 billion for the year ended 31 December 2021 on a year-on-
year basis. Domestic Games revenues grew by 6% to RMB128.8 billion, driven by games including Honour of Kings,
Call of Duty Mobile and Moonlight Blade Mobile, partly offset by a decrease in revenues from DnF and Peacekeeper
Elite. We implemented a comprehensive set of measures for the protection of Minors within our Domestic Games,
which impacted revenue growth directly (less spending by Minors) and indirectly (developer resources focused on
implementation of new measures). International Games revenues grew by 31% to RMB45.5 billion, due to robust
performance of games including PUBG Mobile, Valorant, Brawl Stars and Clash of Clans. Social Networks revenues
increased by 8% to RMB117.3 billion, driven by our Video Accounts live streaming service, video subscription service,
and contribution from consolidation of HUYA since April 2020.
1
From the third quarter of 2021, we disclose revenues from Domestic Games and International Games as new sub-segments under
VAS, reflecting the increasing scale of our International Games business. Mobile games VAS revenues (including mobile games
revenues attributable to our Social Networks business) increased by 12% year-on-year to RMB164.8 billion, while PC client games
revenues grew by 2% year-on-year to RMB45.3 billion for the year ended 31 December 2021.
10
Tencent Holdings Limited
Management Discussion and Analysis
Revenues from Online Advertising increased by 8% to RMB88.6 billion for the year ended 31 December 2021 on a
year-on-year basis, with strong growth witnessed in the early half of the year, followed by significant slowdown and then
decline in the latter half of the year as our advertisers and our own advertising services adapted to the new economic
and regulatory environment, particularly in the third and fourth quarters. Online Advertising full year revenue growth
reflected the relative resilience of the consumer staples category, as well as consolidation of Bitauto's and Sogou's
advertising revenues, partly offset by headwinds from regulatory changes in advertiser categories including education,
property and insurance, as well as by regulatory measures on the online advertising industry itself, such as limitations
on launch screen advertisements. Social and Others Advertising revenues grew by 11% to RMB75.3 billion, driven by
increased advertiser demand for Weixin properties. Media Advertising revenues decreased by 7% to RMB13.3 billion,
mainly due to lower advertising revenues from our media platforms including Tencent News and Tencent Video amid
the challenging macro environment and delays to content launches.
Revenues from FinTech and Business Services increased by 34% to RMB172.2 billion for the year ended 31
December 2021 on a year-on-year basis. FinTech Services revenue growth primarily reflected increasing commercial
payment volume. Business Services revenues increased rapidly year-on-year, due to digitalisation of traditional
industries and videolisation of the Internet industry, as well as consolidation of Bitauto's Business Services revenue
since November 2020.
Cost of revenues. Cost of revenues increased by 21% to RMB314.2 billion for the year ended 31 December 2021 on a
year-on-year basis, primarily driven by transaction costs to handle increased payment-related transaction volumes, content
and infrastructure investments, cloud project deployment costs, as well as channel and distribution costs. As a percentage
of revenues, cost of revenues increased to 56% for the year ended 31 December 2021 from 54% for the year ended 31
December 2020, reflecting our continuous investment in key strategic areas, as well as a revenue mix shift toward currently
lower gross margin activities. The following table sets forth our cost of revenues by line of business for the years ended 31
December 2021 and 2020:
Year ended 31 December
2021
2020
7,399
99%
Total cost of revenues
314,174
Gross profit
Unaudited
Three months ended
31 December
31 December
2021
2020
(RMB in millions)
144,188
133,669
(86,371)
(74,788)
57,817
58,881
Interest income
1,703
1,708
Other gains, net
Selling and marketing expenses
General and administrative expenses
Operating profit
86,199
Cost of revenues
(11,616)
Revenues
FOURTH QUARTER OF 2021 COMPARED TO FOURTH QUARTER OF 2020
260,532
Annual Report 2021
11
Management Discussion and Analysis
Cost of revenues for VAS increased by 14% year-on-year to RMB138.6 billion for the year ended 31 December 2021,
due to revenue sharing costs associated with our Video Accounts live streaming service, increased channel and content
costs for games, as well as increased costs associated with the consolidation of HUYA.
Cost of revenues for Online Advertising increased by 20% year-on-year to RMB48.1 billion for the year ended 31
December 2021, driven by increased server and bandwidth costs including those associated with our Video Accounts
service, as well as increased content costs, primarily for our Tencent Video and Tencent Sports services.
Cost of revenues for FinTech and Business Services increased by 32% year-on-year to RMB120.8 billion for the
year ended 31 December 2021, reflecting increased transaction costs due to payment volume growth, as well as our
continuous investment in cloud computing talent and operations.
Other gains, net. We recorded net other gains of RMB149.5 billion for the year ended 31 December 2021, which were
primarily non-IFRS adjustment items such as net gains on deemed disposals and disposals of certain investee companies
(including a RMB78.2 billion gain from deemed disposal of JD.com), and net fair value gains from revaluation of certain
investee companies, partly offset by impairment provisions against certain investee companies reflecting revisions of their
financial outlooks and changes in their business environments.
Selling and marketing expenses. Selling and marketing expenses increased by 20% to RMB40.6 billion for the year ended 31
December 2021 on a year-on-year basis, reflecting greater marketing spending on games and Business Services, including
those associated with the consolidation of recently acquired subsidiaries. As a percentage of revenues, selling and marketing
expenses was 7% for the year ended 31 December 2021, broadly stable compared to the year ended 31 December 2020.
General and administrative expenses. General and administrative expenses increased by 33% to RMB89.8 billion for the year
ended 31 December 2021 on a year-on-year basis, mainly driven by increased R&D expenses and staff costs, including higher
share-based compensation expenses, reflecting unusually intense competition for talent in 2020 and 2021, which we expect to
moderate in 2022. As a percentage of revenues, general and administrative expenses increased to 16% for the year ended 31
December 2021 from 14% for the year ended 31 December 2020.
00
12
Tencent Holdings Limited
Management Discussion and Analysis
Finance costs, net. Net finance costs decreased by 10% to RMB7.1 billion for the year ended 31 December 2021 on a
year-on-year basis, primarily due to net exchange gains recognised for the year ended 31 December 2021 compared to
net exchange losses for the year ended 31 December 2020, partly offset by the increase in interest expenses as a result of
increased indebtedness.
Share of loss/profit of associates and joint ventures, net. We recorded share of losses of associates and joint ventures of
RMB16.4 billion for the year ended 31 December 2021, compared to share of profits of RMB3.7 billion for the year ended
31 December 2020. Non-IFRS share of losses of associates and joint ventures were RMB1.0 billion for the year ended 31
December 2021, compared to non-IFRS share of profits of RMB6.7 billion for the year ended 31 December 2020, reflecting
increased investments in community retail initiatives by certain associates, and losses recognised from an associate in the
transportation services vertical.
Income tax expense. Income tax expense increased by 2% to RMB20.3 billion for the year ended 31 December 2021 on a
year-on-year basis.
Profit attributable to equity holders of the Company. Profit attributable to equity holders of the Company increased by 41% to
RMB224.8 billion for the year ended 31 December 2021 on a year-on-year basis. Non-IFRS profit attributable to equity holders
of the Company increased by 1% to RMB123.8 billion for the year ended 31 December 2021.
Annual Report 2021
13
Management Discussion and Analysis
The following table sets forth the comparative figures for the fourth quarter of 2021 and the fourth quarter of 2020:
(8,267)
Revenues from VAS decreased by 4% to RMB71.9 billion for the fourth quarter of 2021. Domestic Games revenues
decreased by 12% to RMB29.6 billion due to lower revenues from several of our existing games reflecting seasonally
lower revenues in the fourth quarter as well as additional measures implemented in the quarter for the protection of
Minors. This weakness was partly offset by revenue contributions from recently launched titles including League of
Legends: Wild Rift and Fight of The Golden Spatula. International Games revenues increased by 16% to RMB13.2
billion, reflecting revenue growth from games such as Valorant, Brawl Stars, and Clash Royale, as well as a true-up
adjustment to revenue of Supercell upon periodic review of our revenue deferral periods. Social Networks revenues
decreased by 4% to RMB29.1 billion, due to the decrease in revenues from in-game item sales, partly offset by revenue
growth from our Video Accounts live streaming service.
The Group reclassifies debt investments when and only when its business model for managing those assets
changes.
Gains or losses relating to the effective portion of the change in intrinsic value of the options are recognised in the
cash flow hedge reserve within equity. The changes in the time value of the options that relate to the hedged item
("aligned time value") are recognised within other comprehensive income in the costs of hedging reserve within
equity.
00
196
Tencent Holdings Limited
Notes to the Consolidated Financial Statements
2
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)
For the year ended 31 December 2021
2.16 Derivative and hedging activities (continued)
Amounts accumulated in equity are accounted for, depending on the nature of the underlying hedged transaction,
as follows:
•
Where the hedged item subsequently results in the recognition of a non-financial asset, the amounts
accumulated in equity are removed from other reserves and included within the initial cost of the asset.
These deferred amounts are ultimately recognised in profit or loss as the hedged item affects profit or loss.
•
For any other cash flow hedges, the gain or loss relating to the effective portion of the derivatives is
reclassified to profit or loss at the same time when the hedged cash flows affects profit or loss.
When a hedging instrument expires, or is sold or terminated, or when a hedge no longer meets the criteria for
hedge accounting, any cumulative deferred gain or loss and deferred costs of hedging in equity at that time remain
in equity until the forecast transaction occurs. When the forecast transaction is no longer expected to occur, the
cumulative gain or loss and deferred costs of hedging included in equity are immediately reclassified to profit or
loss.
Hedge relationships
A hedging relationship qualifies for hedge accounting if it meets all of the hedge effectiveness requirements under
IFRS 9. The effective portion of changes in the fair value of derivatives that are designated and qualify as cash
flow hedges is recognised through other comprehensive income within equity, while any ineffective portion is
recognised immediately in profit or loss, within “Other gains/(losses), net".
The Group designates certain derivatives as hedges of a particular risk associated with the cash flows of a
recognised asset or liability or a highly probable forecast transaction (cash flow hedges). The Group documents
at the inception of the hedging relationship the economic relationship between hedging instruments and hedged
items including whether the hedging instrument is expected to offset changes in cash flows of hedged items. The
Group documents its risk management objective and strategy for undertaking various hedge transactions at the
inception of each hedge relationship.
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are
subsequently re-measured at fair value. Derivatives are carried as financial assets when the fair value is positive
and as financial liabilities when the fair value is negative, which are recognised under "Other financial assets'
and "Other financial liabilities” in the consolidated financial statements, respectively. The method of recognising
the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the
nature of the item being hedged.
2.16 Derivative and hedging activities
For the year ended 31 December 2021
2.15 Investments and other financial assets (continued)
(a) Classification and measurement (continued)
Equity instruments
The Group initially recognises and subsequently measures all equity investments at fair value. Upon initial
recognition, the Group's management can elect to classify irrevocably its equity investments as financial
assets at FVOCI when they meet the definition of equity instrument under IAS 32 and are not held for trading.
The classification is determined on an instrument-by-instrument basis.
Where the Group has made the irrevocable election to present fair value gains and losses on equity
investments in other comprehensive income, there is no subsequent reclassification of fair value gains and
losses to profit or loss following the derecognition of the investments. Dividends from such investments
continue to be recognised in profit or loss as “Other gains/(losses), net” when the Group's right to receive
payments is established. Equity instruments designated as FVOCI are not subject to impairment assessment.
FVPL include financial assets designated upon initial recognition at fair value through profit or loss and
financial assets that do not meet the criteria for amortised cost or FVOCI. Changes in the fair value of FVPL
are recognised in "Other gains/(losses), net" in the consolidated income statement.
(b)
The "phase 2" amendments address issues arising during interest rate benchmark reform, including specifying
when the Interest rate benchmark reform - phase 1 ("phase 1") amendments will cease to apply, when hedge
designations and documentation should be updated, and when hedges of the alternative benchmark rate as the
hedged risk are permitted.
Impairment
For accounts receivable and contract assets, the Group applies the simplified approach permitted by IFRS 9,
which requires expected lifetime losses to be recognised since initial recognition.
Impairment on deposits and other receivables is measured as either 12-month expected credit losses or
lifetime expected credit losses, depending on whether there has been a significant increase in credit risk
since initial recognition. If a significant increase in credit risk of a deposit or receivable has occurred since
initial recognition, the impairment is measured as lifetime expected credit losses.
Annual Report 2021
195
Notes to the Consolidated Financial Statements
For the year ended 31 December 2021
2
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)
The Group assesses on a forward-looking basis the expected credit losses associated with its debt
instruments carried at amortised cost and FVOCI. The impairment methodology applied depends on whether
there has been a significant increase in credit risk.
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)
The "phase 1" amendments provided temporary relief from applying specific hedge accounting requirements
to hedging relationships directly affected by Inter Bank Offered Rate ("IBOR") reform. The reliefs had the effect
that IBOR reform should not generally cause hedge accounting to terminate prior to contracts being amended.
However, any hedge ineffectiveness continued to be recorded in the income statement. Furthermore, the
amendments set out triggers for when the reliefs would end, which included the uncertainty arising from interest
rate benchmark reform no longer being present.
Annual Report 2021
2.21 Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or share
options are shown in equity as a deduction from the proceeds.
Where any Group company purchases the Company's equity instruments, the consideration paid, including
any directly attributable incremental costs, is deducted from equity attributable to the Company's equity holders
as treasury shares until the shares are cancelled or reissued. Where such shares are subsequently reissued,
any consideration received (net of any directly attributable incremental transaction costs) is included in equity
attributable to the Company's equity holders.
2.22 Accounts payable
Accounts payable are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest method.
2.23 Put option arrangements on non-controlling interest
Put options on non-controlling interest of the Group are financial instruments granted by the Group which permit
the holders to put back to the Group their shares in certain non wholly-owned subsidiaries of the Group for cash or
other financial instruments when certain conditions are met. If the Group does not have the unconditional right to
avoid delivering cash or other financial instruments under the put option, a financial liability is initially recognised
under "Other financial liabilities” in the consolidated financial statements at the present value of the estimated
future cash outflows on exercise under the put option. Subsequently, if the Group revises its estimates of payments,
the Group will adjust the carrying amount of the financial liability to reflect actual and revised estimated cash
outflows. The Group will recalculate the carrying amount based on the present value of revised estimated future
cash outflows at the financial instrument's original effective interest rate and the adjustment will be recognised in
the consolidated statement of changes in equity. In the event that the put option expires unexercised, the liability is
derecognised with a corresponding adjustment to equity.
The put option liabilities are current liabilities unless the put option first becomes exercisable 12 months after the
end of the reporting period.
Annual Report 2021 199
FVPL: Financial assets that do not meet the criteria for amortised cost or FVOCI are classified as and
measured at fair value through profit or loss. A gain or loss on a debt investment measured at fair
value through profit or loss which is not part of a hedging relationship is recognised in profit or loss and
presented in "Other gains/(losses), net" for the period in which it arises.
FVOCI: Financial assets that are held for collection of contractual cash flows and for selling the
financial assets, where the assets' cash flows represent solely payments of principal and interest, are
classified as and measured at FVOCI. Movements in the carrying amount of these financial assets
are taken through other comprehensive income, except for the recognition of impairment losses or
reversals, interest income and foreign exchange gains and losses which are recognised in profit or
loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in
other comprehensive income is reclassified from equity to profit or loss and recognised in "Other gains/
(losses), net" in the consolidated income statement. Interest income from these financial assets is
recognised using the effective interest method. Foreign exchange gains and losses are presented in
"Finance costs, net" and impairment losses or reversals are presented in "Other gains/(losses), net".
•
• Amortised cost: Financial assets that are held for collection of contractual cash flows where those cash
flows represent solely payments of principal and interest are classified as and measured at amortised
cost. A gain or loss on a debt investment measured at amortised cost which is not part of a hedging
relationship is recognised in profit or loss when the asset is derecognised or impaired. Interest income
from these financial assets is recognised using the effective interest method.
Initial recognition and subsequent measurement of debt instruments depend on the Group's business model
for managing the asset and the contractual cash flow characteristics of the asset. There are three categories
into which the Group classifies its debt instruments:
Debt instruments
00
Financial assets with embedded derivatives are considered in their entirety when determining whether their
cash flows are solely payments of principal and interest.
For the year ended 31 December 2021
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)
2
Notes to the Consolidated Financial Statements
197
Notes to the Consolidated Financial Statements
For the year ended 31 December 2021
2
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)
2.17 Offsetting financial instruments
Financial assets and liabilities are offset, and the net amount is reported in the consolidated statement of financial
position when there is a legally enforceable right to offset the recognised amounts and there is an intention to
settle on a net basis, or realise the assets and settle the liabilities simultaneously. The legally enforceable right
must not be contingent on future events and must be enforceable in the normal course of business and in certain
circumstances, such as default, insolvency, bankruptcy or the termination of a contract.
2.18 Inventories
The LIBOR benchmark in which the Group continues to have hedging instrument is USD LIBOR, for which
it is expected that the transition out will be completed before 30 June 2023. The Group will update its hedge
documentation to reflect the changes in designation (including designating an alternative benchmark rate
as a hedged risk, amending the description of the hedged item, and amending the description of hedging
instrument) by the end of the reporting period in which the changes are made. These amendments to the hedge
documentation do not require the Group to discontinue its hedge relationships.
Inventories, mainly consisting of merchandise for sale, are primarily accounted for using the weighted average
method and are stated at the lower of cost and net realisable value.
Accounts receivable are amounts due from customers or agents for services performed or merchandise sold in the
ordinary course of business. Accounts receivable are presented as current assets unless collection is not expected
within 12 months after the end of the reporting period.
Accounts receivable are recognised initially at the amount of consideration that is unconditional unless they contain
significant financing components, when they are recognised at fair value and subsequently measured at amortised
cost using the effective interest method, less provision for impairment that is subject to expected credit loss model
(Note 3.1(b)).
2.20 Cash and cash equivalents
Cash and cash equivalents mainly include cash on hand, deposits held at call with banks, and other short-term
highly liquid investments with initial maturities of three months or less.
The Group does not recognise cash amounts deposited with banks in the Mainland of China (which are received
under its payment business) under users' entrustment in the consolidated statement of financial position as the
Group holds these cash amounts as a custodian according to the relevant users' agreements.
00
198
Tencent Holdings Limited
2.19 Accounts receivable
2
Accounts payable are obligations to pay for services or goods that have been acquired in the ordinary course of
business from suppliers. Accounts payable are presented as current liabilities unless payment is not due within 12
months after the end of the reporting period.
Tencent Holdings Limited
00
190
Tencent Holdings Limited
Notes to the Consolidated Financial Statements
2
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)
For the year ended 31 December 2021
2.10 Investment properties
Investment properties are held for long-term rental yields and are not occupied by the Group. Investment
properties are carried at historical costs less accumulated depreciation and accumulated impairment charges.
Historical costs include expenditures that are directly attributable to the acquisition of the items.
Depreciation is calculated on the straight-line method to allocate their costs net of their residual values over their
estimated useful lives of 20-50 years. Investment properties' residual values and useful lives are reviewed, and
adjusted if appropriate, at the end of each reporting period.
Investment properties' carrying amounts are written down immediately to their recoverable amounts if their carrying
amounts are greater than their estimated recoverable amounts (Note 2.14).
2.11 Land use rights
Land use rights are up-front payments to acquire long-term interest in land. These payments are stated at cost and
charged to the consolidated income statement on a straight-line basis over the remaining period of the lease.
2.12 Intangible assets
(a)
Goodwill
Goodwill on acquisition of subsidiaries is recognised as described in Note 2.2(a) and included in "Intangible
assets" in the consolidated financial statements.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are
recognised in "Other gains/(losses), net" in the consolidated income statement.
An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is
greater than its estimated recoverable amount (Note 2.14).
Construction in progress represents buildings under construction, which is stated at actual construction costs less
any impairment loss. Construction in progress is transferred to property, plant and equipment when completed and
ready for use.
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting
period.
Notes to the Consolidated Financial Statements
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
2
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)
2.9 Property, plant and equipment
All property, plant and equipment are stated at historical costs less accumulated depreciation and accumulated
impairment charges. Historical costs include expenditures that are directly attributable to the acquisition of the
items.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate,
only when it is probable that future economic benefits associated with the items will flow to the Group and the cost
of the items can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs
and maintenance are charged to the consolidated income statement during the reporting period in which they are
incurred.
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of
the cash-generating units ("CGUs"), or groups of CGUs, that is expected to benefit from the synergies of the
combination. Each CGU or group of CGUs to which the goodwill is allocated represents the lowest level within
the entity at which the goodwill is monitored for internal management purposes.
20-50 years
Computer and other operating equipment
2~10 years
2-5 years
5 years
Shorter of their useful lives and the lease term
Furniture and office equipment
Motor vehicles
Leasehold improvements
Buildings
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in
circumstances indicate a potential impairment. The carrying amount of the CGU or group of CGUs including
the allocated goodwill is compared to the recoverable amount, which is the higher of value in use and the fair
value less costs of disposal. Any impairment is recognised immediately under "Other gains/(losses), net" and
is not subsequently reversed.
Depreciation is calculated using the straight-line method to allocate their cost net of their residual values over their
estimated useful lives, as follows:
191
2.15 Investments and other financial assets
(a) Classification and measurement
The Group classifies its financial assets in the following measurement categories:
•
those to be measured subsequently at fair value (either through other comprehensive income, or
through profit or loss); and
• those to be measured at amortised cost.
The classification depends on the Group's business model for managing the financial assets and the
contractual terms of the cash flows.
Except for accounts receivable, at initial recognition, the Group measures a financial asset at its fair value
plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly
attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value
through profit or loss are expensed in profit or loss.
Annual Report 2021
193
Notes to the Consolidated Financial Statements
For the year ended 31 December 2021
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)
2.15 Investments and other financial assets (continued)
Annual Report 2021
(a) Classification and measurement (continued)
194
Assets that have an indefinite useful life or are not yet available for use are not subject to amortisation and are
tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might
be impaired. Other assets are reviewed for impairment whenever events or changes in circumstances indicate that
the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's
carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value
less costs of disposal and value in use. For the purpose of assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than
goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.
2.14 Impairment of non-financial assets
2
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)
2.12 Intangible assets (continued)
For the year ended 31 December 2021
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
Media contents
Media contents mainly include game licenses, video and music contents, and literature copyrights. They are
initially recognised and measured at cost or estimated fair value as acquired through business combinations.
Media contents are amortised using a straight-line method or an accelerated method which reflects the
estimated consumption patterns.
(c) Other intangible assets
Other intangible assets mainly include trademarks, other copyrights, computer software and technology, non-
compete agreements, customer relationships and land with indefinite useful life. They are initially recognised
and measured at cost or estimated fair value of intangible assets acquired through business combinations.
Land with indefinite useful life is not subject to amortisation and impairment reviews are undertaken annually
or more frequently if events or changes in circumstances indicate a potential impairment. Other intangible
assets are amortised over their estimated useful lives (generally one to ten years) using the straight-line
method which reflects the pattern in which the intangible assets' future economic benefits are expected to
be consumed.
(b)
The consideration paid by the Share Scheme Trust (see Note 48(f)) for purchasing the Company's shares from
the market, including any directly attributable incremental cost, is presented as “Shares held for share award
schemes" and the amount is deducted from total equity.
2
Notes to the Consolidated Financial Statements
Tencent Holdings Limited
2.13 Shares held for share award schemes
2 SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)
When the Share Scheme Trust transfers the Company's shares to the awardees upon vesting, the related costs
of the awarded shares vested are credited to "Shares held for share award schemes", with a corresponding
adjustment made to "Share premium".
00
192
VAS (continued)
Where the contracts include multiple performance obligations, the Group allocates the transaction price to
each performance obligation on a relative stand-alone selling price basis, which is determined based on the
prices charged to or expected to recover from customers.
(b)
In respect of the Group's VAS directly delivered to the Group's customers and paid through various third-
party platforms, these third-party platforms collect the relevant service fees (the “Online Service Fees") on
behalf of the Group and they are entitled to a pre-determined percentage of platform provider fees (as part
of "Channel and distribution costs"). Such Channel and distribution costs are withheld and deducted from
the gross Online Service Fees collected by these platforms from the users, with the net amounts remitted
to the Group. The Group recognises the Online Service Fees as revenue on a gross or net basis depending
on whether the Group is acting as a principal or an agent in these transactions based on the assessment
according to the criteria stated in (e) below.
The Group also opens its online platforms to third-party game/application developers under certain co-
operation agreements, of which the Group pays to the third-party game/application developers a pre-
determined percentage of the fees paid by and collected from the users of the Group's online platforms for
the virtual items purchased. The Group recognises the related revenue on a gross or net basis depending on
whether the Group is acting as a principal or an agent in the transaction.
The Group adopts different revenue recognition methods based on its specific responsibilities/obligations in
different VAS offerings.
00
206
Tencent Holdings Limited
2
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)
For the year ended 31 December 2021
2.28 Revenue recognition (continued)
Online Advertising
Notes to the Consolidated Financial Statements
Annual Report 2021
2.28 Revenue recognition (continued)
For the year ended 31 December 2021
2.27 Provisions
Online Advertising revenues mainly comprise revenues derived from media advertisements and from social
and other advertisements, depending on the placement of advertising properties and inventories.
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events;
it is probable that an outflow of resources will be required to settle the obligation; and the amount can be reliably
estimated. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is
determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an
outflow with respect to any one item included in the same class of obligations may be small.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation
using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks
specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense.
2.28 Revenue recognition
The Group generates revenues primarily from provision of VAS, Online Advertising services, FinTech and Business
Services, and other online related services in the PRC. Revenue is recognised when the control of the goods
or services is transferred to a customer. Depending on the terms of the contract and the laws that apply to the
contract, control of the goods and services may be transferred over time or at a point in time.
(a) VAS
Revenues from VAS primarily include revenues from the provision of online games and social networks
services. Online games revenues are mainly derived from sales of in-game virtual items, and social networks
revenues are mainly derived from sales of virtual items such as VAS subscriptions across various online
platforms, and games revenues attributable to social networks business. The Group offers virtual items to
users on the Group's online platforms. The VAS fees are paid directly by end users mainly via online payment
channels.
Revenue from VAS is recognised when the Group satisfies its performance obligations by rendering services.
Given that there is an explicit or implicit obligation of the Group to maintain the virtual items operated on the
Group's platforms and allow users to gain access to them, revenue is recognised over the estimated lifespans
of the respective virtual items. The estimated lifespans of different virtual items are determined by the
management based on either the expected user relationship periods or the stipulated period of validity of the
relevant virtual items depending on the respective term of virtual items.
205
Notes to the Consolidated Financial Statements
For the year ended 31 December 2021
2 SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)
(a)
(c)
The Group reports the revenue on a gross or net basis depending on whether the Group is acting as a
principal or an agent in a transaction. The Group is a principal if it controls the specified product or service
before that product or service is transferred to a customer or it has a right to direct others to provide the
product or service to the customer on the Group's behalf. Indicators that the Group is a principal include
but are not limited to whether the Group (i) is the primary obligor in the arrangement; (ii) has latitude in
establishing the selling price; (iii) has discretion in supplier selection; (iv) changes the product or performs
part of the service, and (v) has involvement in the determination of product or service specifications.
Revenue from display-based advertising is recognised on number of display/impression basis or depending
on the contractual measures. Revenue from performance-based advertising is recognised when relevant
specific performance measures are fulfilled. Where the contracts include multiple performance obligations,
the Group allocates the transaction price to each performance obligation on a relative stand-alone selling
price basis, which is determined based on the prices charged to or expected to recover from customers.
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208
Tencent Holdings Limited
2
Notes to the Consolidated Financial Statements
For the year ended 31 December 2021
Contract costs include incremental costs of obtaining a contract and costs to fulfil a contract with the
customers. The contract costs are amortised using a method which is consistent with the pattern of
recognition of the respective revenues. The Group has applied the practical expedient to recognise the
contract cost relating to obtaining a contract as an expense when incurred, if otherwise the amortisation
period is one year or less.
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)
Interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial
asset except for financial assets that subsequently become credit-impaired. For credit-impaired financial assets
the effective interest rate is applied to the net carrying amount of the financial asset (after deduction of the loss
allowance). Interest income is presented as “Interest income" where it is mainly earned from financial assets that
are held for cash management purposes.
2.30 Dividend income
Dividends are received from FVPL and FVOCI. Dividends are recognised in "Other gains/(losses), net" in the
consolidated income statement when the right to receive payment is established. This applies even if they are paid
out of pre-acquisition profits, unless the dividend clearly represents a recovery of part of the cost of an investment.
In this case, the dividend is recognised in other comprehensive income if it relates to an investment measured at
FVOCI.
2.31 Government grants/subsidies
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)
Grants/Subsidies from government are recognised at their fair values where there is a reasonable assurance that
the grants/subsidies will be received and the Group will comply with all attached conditions.
2.29 Interest income
Advertising contracts are signed to establish the prices and advertising services to be provided based on
different arrangements, including display-based advertising that are display of ads for an agreed period of
time, and performance-based advertising that are based on actual performance measurement.
Contract liabilities and contract costs
Principal agent consideration
FinTech and Business Services
FinTech and Business Services revenues mainly comprise revenues derived from provision of FinTech and
cloud services.
FinTech service revenues mainly include commissions from payment, wealth management and other
FinTech services, which are generally determined as a percentage based on the value of transaction amount
or retention amount. Revenue related to such commissions is recognised upon a point in time when the
Group satisfies its performance obligations by rendering services.
Cloud services are mainly charged on either a subscription or consumption basis. For cloud service contracts
billed based on a fixed amount for a specified service period, revenue is recognised over the subscribed
period when the services are delivered to customers. For cloud service provided on a consumption basis,
revenue is recognised based on the customer utilisation of the resources. When a cloud-based service
includes multiple performance obligations, the Group allocates the transaction price to each performance
obligation on a relative stand-alone selling price basis, which is determined based on the prices charged to
or expected to recover from customers.
Annual Report 2021
207
(f)
Notes to the Consolidated Financial Statements
2 SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)
2.28 Revenue recognition (continued)
(d)
Other revenues
The Group's other revenues are primarily derived from production of and distribution of, films and television
programmes for third parties, copyrights licensing, merchandise sales and various other activities. The Group
recognises other revenues when the respective services are rendered, or when the control of the products is
transferred to customers.
(e)
For the year ended 31 December 2021
2
(a) Employee leave entitlements
Tencent Holdings Limited
2.25 Current and deferred income tax (continued)
Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However,
deferred income tax is not accounted for if it arises from initial recognition of goodwill or of an asset or liability in
a transaction other than a business combination that at the time of the transaction neither accounting nor taxable
profit or loss is affected. Deferred income tax is determined using tax rates (and laws) that have been enacted
or substantively enacted by the end of the reporting period and are expected to apply when the related deferred
income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be
available to utilise those temporary differences and tax losses.
Deferred income tax liabilities are provided on temporary differences arising from investments in subsidiaries,
associates and joint ventures, except for deferred income tax liability where the timing of the reversal of the
temporary differences is controlled by the Group and it is probable that the temporary difference will not reverse
in the foreseeable future. Generally, the Group is unable to control the reversal of the temporary difference for
associates and joint ventures. Only when there is an agreement in place that gives the Group the ability to control
the reversal of the temporary difference in the foreseeable future, deferred income tax liability in relation to taxable
temporary differences arising from the associates' and joint ventures' undistributed profit is not recognised.
Deferred income tax assets are recognised on deductible temporary differences arising from investments in
subsidiaries, associates and joint arrangements only to the extent that it is probable the temporary difference will
reverse in the future and there is sufficient taxable profit available against which the temporary difference can be
utilised.
Deferred income tax assets and liabilities are offset where there is a legally enforceable right to offset current tax
assets against current tax liabilities and where the deferred income tax assets and liabilities relate to income taxes
levied by the same taxation authority on either the taxable entity or different taxable entities where there is an
intention to settle the balances on a net basis.
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)
Annual Report 2021
Notes to the Consolidated Financial Statements
For the year ended 31 December 2021
2
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)
2.26 Employee benefits
Employee entitlements to annual leave are recognised when they are accrued to employees. A provision is
made for the estimated liability for annual leave as a result of services rendered by employees up to the end
of the reporting period. Employee entitlements to sick and maternity leave are not recognised until the time
of leave.
201
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
2
Under these circumstances, the grants/subsidies are recognised as income or matched with the associated costs
and expenses which the grants/subsidies are intended to compensate.
Notes to the Consolidated Financial Statements
For the year ended 31 December 2021
2 SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)
2.24 Borrowings, notes payable and borrowing costs
Borrowings and notes payable issued by the Group are recognised initially at fair value, net of transaction costs
incurred. They are subsequently carried at amortised cost. Any difference between proceeds (net of transaction
costs) and the redemption value is recognised in the consolidated income statement over their terms using the
effective interest method.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan facilities to the
extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the
draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn
down, the fee is capitalised as a prepayment for liquidity services and amortised over the term of the facility to
which it relates.
Borrowings and notes payable are classified as current liabilities unless the Group has an unconditional right to
defer settlement of the liability for at least 12 months after the end of the reporting period.
General and specific finance costs directly attributable to the acquisition and construction of qualifying assets,
which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are
added to the cost of those assets, until such time as the assets are substantially ready for their intended use or
sale. During the year ended 31 December 2021, finance cost capitalised was insignificant to the Group.
2.25 Current and deferred income tax
The income tax expense for the year comprises current and deferred income tax, which is recognised in the
consolidated income statement, except to the extent that it relates to items recognised in other comprehensive
income or directly in equity. In this case, the income tax is also recognised in other comprehensive income or in
equity, respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at
the end of the reporting period in the countries where the Company's subsidiaries operate and generate taxable
income. Management periodically evaluates positions taken in tax returns with respect to situations in which
applicable tax regulation is subject to interpretation and considers whether it is probable that a taxation authority
will accept an uncertain tax treatment. When it is not probable, the Group measures its tax balances either based
on the most likely amount or the expected value, depending on which method provides a better prediction of the
resolution of the uncertainty.
00
200
Tencent Holdings Limited
(b)
Notes to the Consolidated Financial Statements
Pension obligations
(c) Long-term employee benefit obligations
203
Notes to the Consolidated Financial Statements
For the year ended 31 December 2021
2 SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)
2.26 Employee benefits (continued)
(e) Share-based compensation benefits (continued)
Annual Report 2021
At each reporting period end, the Group revises the estimates of the number of options and awarded shares
that are expected to ultimately vest. It recognises the impact of the revision to original estimates, if any, in the
consolidated income statement of the Group, with a corresponding adjustment to equity.
If the Group repurchases vested equity instruments, the payments made to the employees and other
qualifying participants shall be accounted for as a deduction from equity, except to the extent that the
payment exceeds the fair value of the equity instruments repurchased, measured at the repurchase date.
Any such excess shall be recognised as an expense.
If the terms of an equity-settled award are modified, at a minimum an expense is recognised as if the terms
had not been modified. An additional expense is recognised for any modification that increases the total
fair value of the share-based payment arrangement, or is otherwise beneficial to the employees and other
qualifying participants, as measured at the date of modification.
Cash-settled share-based payment transactions are those arrangements which the terms provide the Group
to settle the transaction in cash. Upon the satisfaction of the vesting conditions, the Group shall account for
that transaction as a cash-settled share-based payment transaction if, and to the extent that, the Group has
incurred a liability to settle in cash.
For cash-settled share-based payments, a liability equal to the portion of the services received is recognised
at the current fair value determined at the end of the reporting period.
00
204
When the options are exercised, the proceeds received net of any directly attributable transaction costs
are credited to share capital (nominal value) and share premium. When the vested equity instruments are
later forfeited prior to expiry date, the amount previously recognised in share premium will be transferred to
retained earnings.
From the perspective of the Company, the grants of its equity instruments to employees of its subsidiaries are
made in exchange for their services related to the subsidiaries. Accordingly, the share-based compensation
expenses are treated as part of the “Investments in subsidiaries” or “Other receivables” in the Company's
statement of financial position.
Non-market performance and service conditions are included in assumptions about the number of options
that are expected to become vested.
For grant of share options, the total amount to be expensed is determined by reference to the fair value of
the options granted by using option-pricing model, “Enhanced FAS 123" binomial model (the “Binomial
Model"), which includes the impact of market performance conditions (such as the Company's share price)
but excludes the impact of service condition and non-market performance conditions. For grant of award
shares, the total amount to be expensed is determined by reference to the market price of the Company's
shares at the grant date. The Group also adopts valuation and actuarial techniques to assess the fair value of
other equity instruments of the Group granted under the share-based compensation plans as appropriate.
In addition to participating in the defined contribution plan as described above, the Group also provides
commercial health insurance benefits to certain eligible employees till their resignation or retirement. These
obligations are classified as non-current liabilities unless it is expected to be settled wholly within 12 months
after the end of the reporting period.
These long-term employee benefit obligations are measured as the present value of expected future
payments to be made in respect of services provided by employees up to the end of the reporting period
using the projected unit credit method. Expected future payments are discounted using market yields at the
end of the reporting period of high-quality corporate bonds with terms and currencies that match, as closely
as possible, the estimated future cash outflows. For currencies for which there is no deep market in such
high-quality corporate bonds, the market yields on government bonds denominated in that currency were
applied. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are
recognised in profit or loss.
00
202
Tencent Holdings Limited
Notes to the Consolidated Financial Statements
2
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)
For the year ended 31 December 2021
2.26 Employee benefits (continued)
(d) Long-term service awards
The Group recognises a liability and an expense for long-term service awards where cash is paid to retired
employees qualified for certain criteria as one-off retirement bonus and it was considered as defined benefit
plan. The method of accounting is similar to those used for long-term employee benefits as described above,
except that remeasurement gains and losses arising from experience adjustments and changes in actuarial
assumptions are recognised in other comprehensive income in the period in which they occur.
(e)
Share-based compensation benefits
The Group operates a number of share-based compensation plans (including share option schemes and
share award schemes), under which the Group receives services from employees and other qualifying
participants as consideration for equity instruments (including share options and awarded shares) of
the Group. The fair value of the employee services and other qualifying participants' services received in
exchange for the grant of equity instruments of the Group is recognised as an expense over the vesting
period, i.e. the period over which all of the specified vesting conditions are to be satisfied and credited to
equity.
The Group participates in various defined contribution retirement benefit plans which are available to
all relevant employees. These plans are generally funded through payments to schemes established by
governments or trustee-administered funds. A defined contribution plan is a pension plan under which the
Group pays contributions on a mandatory, contractual or voluntary basis into a separate fund. The Group
has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets
to pay all employees the benefits relating to employee services in the current and prior years. The Group's
contributions to the defined contribution plans are expensed as incurred and not reduced by contributions
forfeited by those employees who leave the plans prior to vesting fully in the contributions.
2.32 Leases
A contract liability is the Group's obligation to transfer goods or services to a customer for which the Group
has received consideration (or an amount of consideration is due) from the customer. The Group's contract
liabilities mainly comprise virtual items, unamortised pre-paid tokens or cards, Internet traffic and other
support to be offered to certain investee companies in the future periods measured at their fair value on the
inception dates, and customer loyalty incentives offered to the customers (Note 5(c)).
The Group leases land (Note 2.11), various buildings, computer and other operating equipment and others.
Rental contracts other than land are typically made for fixed periods of no longer than 10 years. Lease terms are
negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements
do not impose any covenants, but leased assets may not be used as security for borrowing purposes. A lease is
recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for
use by the Group. A right-of-use asset arising from land lease is presented as “Land use rights".
Annual Report 2021
209
3.1 Financial risk factors (continued)
Monetary liabilities, current
Monetary assets, non-current
• internal credit rating;
•
external credit rating (as far as available);
•
actual or expected significant adverse changes in business, financial economic conditions that are
expected to cause a significant change to the counterparty's ability to meet its obligations;
actual or expected significant changes in the operating results of the counterparty; and
significant changes in the expected performance and behavior of the counterparty, including changes
in the payment status of the counterparty.
(i)
Credit risk of cash and deposits
(!!)
To manage this risk, the Group only makes transactions with state-owned banks and financial
institutions in the PRC and reputable international banks and financial institutions outside of the PRC.
There has been no recent history of default in relation to these banks and financial institutions. The
expected credit loss is close to zero.
Credit risk of accounts receivable
The Group manages its foreign exchange risk by performing regular reviews of the Group's net foreign
exchange exposures.
As at 31 December 2021, the Group's major monetary assets and liabilities exposed to foreign
exchange risk are listed below:
USD
denominated
Non-USD
denominated
RMB'Million
(6,224)
RMB'Million
Monetary assets, current
11,059
4,587
219
Annual Report 2021
The Group applies the simplified approach to provide for expected credit losses prescribed by IFRS
9, which permits the use of the lifetime expected loss provision for all accounts receivable. In view of
the sound financial position and collection history of receivables due from these counterparties and
insignificant risk of default, to measure the expected credit losses, accounts receivable have been
grouped based on shared credit risk characteristics and the days past due.
As at 31 December 2021
(2,671)
(5,241)
The Group operates internationally and is exposed to foreign exchange risk arising from various
currency exposures, primarily with respect to Hong Kong Dollars ("HKD"), USD and Euro ("EUR").
Foreign exchange risk arises when future commercial transactions or recognised assets and
liabilities are denominated in a currency that is not the respective functional currency of the Group's
subsidiaries. The functional currency of the Company and majority of its overseas subsidiaries is USD
whereas the functional currency of the subsidiaries which operate in the PRC is RMB.
(6,663)
Monetary liabilities, non-current
(2,408)
(8,650)
Monetary liabilities, current
4
34
Monetary assets, non-current
3,902
10,238
Monetary assets, current
As at 31 December 2020
1,195
(406)
(721)
00
218
Stage 1: If the credit risk has not increased significantly since its initial recognition, the financial asset
is included in stage 1.
Stage 2: If the credit risk has increased significantly since its initial recognition but not yet deemed to
be credit-impaired, the financial instrument is included in stage 2.
Stage 3: If the financial instrument is credit-impaired, the financial instrument is included in stage 3.
Tencent Holdings Limited
Notes to the Consolidated Financial Statements
3
FINANCIAL RISK MANAGEMENT (continued)
For the year ended 31 December 2021
3.1 Financial risk factors (continued)
(b) Credit risk (continued)
The Group considers the credit risk characteristics of different financial instruments when determining if
there is significant increase in credit risk. For financial instruments with or without significant increase in
credit risk, lifetime or 12-month expected credit losses are provided respectively.
The Group considers the probability of default upon initial recognition of asset and whether there has been a
significant increase in credit risk on an ongoing basis throughout each of the years. To assess whether there
is a significant increase in credit risk, the Group compares risk of a default occurring on the assets as at
year end with the risk of default as at the date of initial recognition. In particular, the following indicators are
incorporated:
Monetary liabilities, non-current
For the year ended 31 December 2021
(i)
(1,021)
If a readily observable amortising loan rate is available to the individual lessee (through recent financing or market
data) which has a similar payment profile to the lease, then the Group entities use that rate as a starting point to
determine the incremental borrowing rate.
2.32 Leases (continued)
For the year ended 31 December 2021
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)
2
Notes to the Consolidated Financial Statements
210 Tencent Holdings Limited
00
makes adjustments specific to the lease, e.g. term, country, currency and security.
uses a build-up approach that starts with a risk-free rate adjusted for credit risk for leases held by the Group,
which does not have recent third-party financing; and
where possible, uses recent third-party financing received by the individual lessee as a starting point,
adjusted to reflect changes in financing conditions since third-party financing was received;
•
To determine the incremental borrowing rate, the Group:
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily
determined, which is generally the case for leases in the Group, the lessee's incremental borrowing rate is used,
being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of
similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.
payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
•
the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and
•
amounts expected to be payable by the lessee under residual value guarantees;
.
variable lease payments that are based on an index or a rate;
.
fixed payments (including in-substance fixed payments), less any lease incentives receivable;
•
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include
the net present value of the following lease payments:
2.32 Leases (continued)
2 SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over
the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for
each period.
Foreign exchange risk
Right-of-use assets are measured at cost comprising the following:
•
(a) Market risk
3.1 Financial risk factors (continued)
FINANCIAL RISK MANAGEMENT (continued)
3
Notes to the Consolidated Financial Statements
Tencent Holdings Limited
212
00
The Group's activities expose it to a variety of financial risks: market risk (including foreign exchange risk, price
risk and interest rate risk), credit risk and liquidity risk. The Group's overall risk management strategy seeks to
minimise the potential adverse effects on the financial performance of the Group. Risk management is carried out
by the management of the Group.
3.1 Financial risk factors
FINANCIAL RISK MANAGEMENT
3
Costs incurred on development projects (relating to the design and testing of new or improved products)
are capitalised when recognition criteria are fulfilled and tests for impairment are performed annually. Other
development expenditures that do not meet those criteria are recognised as expenses as incurred. Development
costs previously recognised as expenses are not recognised as assets in subsequent periods.
Research expenditure is recognised as an expense as incurred.
2.34 Research and development expenses
The non-cash assets to be distributed are presented as “Assets held for distribution" in the consolidated statement
of financial position.
In respect of a dividend by way of distribution of non-cash assets, the liability to distribute the non-cash assets
as a dividend is measured at the fair value of the assets to be distributed on the declaration date. At the end of
the reporting period and at the date of settlement, the Group reviews and adjusts the carrying amount of the
dividend liability, and any subsequent change in the fair value of the dividend liability is recognised in equity as an
adjustment to the amount of the dividend distribution. Upon settlement, the difference between the fair value of
the assets distributed, which is also the carrying amount of the dividend liability, and the carrying amount of the
assets distributed, if any, is recognised in profit or loss.
Dividends distribution to the Company's shareholders is recognised as a liability in the Group's and Company's
financial statements in the period in which the dividend is approved by the Company's shareholders or board of
directors where appropriate and no longer at the discretion of the Group.
2.33 Dividends distribution
2 SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (continued)
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
Annual Report 2021 211
Payments associated with short-term leases are recognised on a straight-line basis as an expense in profit or loss.
Short-term leases are leases with a lease term of 12 months or less without a purchase option.
A right-of-use asset is generally depreciated over the shorter of the asset's useful life and the lease term on a
straight-line basis. If the Group is reasonably certain to exercise a purchase option, the right-of-use asset is
depreciated over the underlying asset's useful life.
restoration costs.
any initial direct costs; and
•
any lease payments made at or before the commencement date less any lease incentives received;
• the amount of the initial measurement of lease liability;
(5,041)
477
Annual Report 2021
Measured at amortised cost
Assets and liabilities exposed to USD LIBOR
The LIBOR benchmark in the aforesaid floating-rate borrowings and notes payable in which the Group
continues to have hedging instrument is USD LIBOR. The following table contains details of all the
financial instruments that the Group held at 31 December 2021 which reference USD LIBOR and have
not yet transitioned to an alternative interest rate benchmark:
(iii) Interest rate risk (continued)
(a) Market risk (continued)
3.1 Financial risk factors (continued)
FINANCIAL RISK MANAGEMENT (continued)
3
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
Tencent Holdings Limited
216
00
As at 31 December 2021 and 2020, management considered that any reasonable changes in the
interest rates would not result in a significant change in the Group's results as the Group's exposure to
cash flow interest-rate risk arising from its borrowings and notes payable carried at floating rates after
considering the effect of hedging is considered to be insignificant.
Swaps currently in place covered majority of the floating-rate borrowings and notes payable principal
outstanding.
100,889
104,708
0.88%
0.77%
Notional amount directly impacted by IBOR reform
Weighted average hedged rate for the year
effectiveness
(1,552)
2,796
Change in value of hedged item used to determine hedge
since 1 January
(1,552)
2,796
1:1
Borrowings
Notes payable
Of which: Have not yet to
transitioned to an alternative
benchmark interest rate
as at 31 December 2021
Carrying amount at
31 December 2021
(b) Credit risk
The Group is exposed to credit risk in relation to its cash and deposits placed with banks and financial
institutions, accounts receivable, other receivables, as well as short-term investments measured at amortised
cost, at FVOCI and at FVPL. The carrying amount of each class of these financial assets represents the
Group's maximum exposure to credit risk in relation to the corresponding class of financial assets.
The majority of the balances of accounts receivable are due from online advertising customers and agencies,
content production related customers, FinTech and cloud customers and third party platform providers. To
manage the risk arising from accounts receivable, the Group has policies in place to ensure that revenues
of credit terms are made to counterparties with an appropriate credit history and the management performs
ongoing credit evaluations of its counterparties. The credit periods granted to these customers are disclosed
in Note 30 and the credit quality of these customers is assessed, which takes into account their financial
position, past experience and other factors. The Group has a large number of customers and there is no
significant concentration of credit risk.
Other receivables are mainly comprised of receivables related to financial services, interest receivables, loans
to investees and investees' shareholders, lease deposits and other receivables. Management manages the
loans by category, makes periodic assessments as well as individual assessment on the recoverability of
other receivables based on historical settlement records and past experience.
3
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
Annual Report 2021 217
Management is closely monitoring the progress of the alternative selection and assessing the potential
impacts on a continuous basis. It is expected that the transition will be completed before 30 June
2023, and no significant impact arose during the year ended 31 December 2021.
148,880
1,253
148,880
1,253
to USD LIBOR
1:1
Total assets and liabilities exposed
358
1,253
1,253
Other financial liabilities
Other financial assets
Measured at fair value
7,970
140,552
140,552
7,970
Liabilities
RMB'Million
Assets
Liabilities
RMB'Million
RMB'Million
Assets
358
2024/12/23
2026/2/24
2021/6/15 ~
The Group regularly monitors its interest rate risk to identify if there are any undue exposures to
significant interest rate movements and manages its cash flow interest rate risk by using interest rate
swaps, whenever considered necessary.
The Group's exposure to changes in interest rates is also attributable to its borrowings and notes
payable, details of which have been disclosed in Notes 36 and 37, representing a substantial portion
of the Group's debts. Borrowings and notes payable carried at floating rates expose the Group to cash
flow interest-rate risk whereas those carried at fixed rates expose the Group to fair value interest-rate
risk.
If the interest rate of term deposits with initial terms of over three months had been 50 basis points
higher/lower, the profit before income tax for the year ended 31 December 2021 would have been
RMB517 million (2020: RMB501 million) higher/lower. If the interest rate of cash and cash equivalents
had been 50 basis points higher/lower, the profit before income tax for the year ended 31 December
2021 would have been RMB840 million (2020: RMB764 million) higher/lower.
The Group's income and operating cash flows are substantially independent of changes in market
interest rates and the Group has no significant interest-bearing assets except for loans to investees and
investees' shareholders, term deposits with initial terms of over three months, restricted cash and cash
and cash equivalents, details of which have been disclosed in Notes 26, 29 and 31.
(iii) Interest rate risk
(a) Market risk (continued)
For the year ended 31 December 2021
Financial risk factors (continued)
3.1
FINANCIAL RISK MANAGEMENT (continued)
3
Notes to the Consolidated Financial Statements
Tencent Holdings Limited
Sensitivity analysis is performed by management to assess the exposure of the Group's financial
results to equity price risk of FVPL and FVOCI at the end of each reporting period. If prices of the
respective instruments held by the Group had been 5% (31 December 2020: 5%) higher/lower as
at 31 December 2021, profit for the year would have been approximately RMB9,815 million (2020:
RMB8,326 million) higher/lower as a result of gains/losses on financial instruments classified as at
FVPL, other comprehensive income would have been approximately RMB12,348 million (2020:
RMB10,529 million) higher/lower as a result of gains/losses on financial instruments classified as at
FVOCI.
The Group entered into certain interest rate swap contracts to hedge its exposure arising from
borrowings and senior notes carried at floating rates. Under these interest rate swap contracts, the
Group agreed with the counterparties to exchange, at specified interval, the difference between
fixed contract rates and floating-rate interest amounts calculated by reference to the agreed notional
amounts. These interest rate swap contracts had the economic effect of converting borrowings and
senior notes from floating rates to fixed rates and were qualified for hedge accounting. Details of the
Group's outstanding interest rate swap contracts as at 31 December 2021 are mainly disclosed in both
Note 27 and 39.
The Group is exposed to equity price risk mainly arising from investments held by the Group that
are classified either as FVPL (Note 24) or FVOCI (Note 25). To manage its price risk arising from
the investments, the Group diversifies its investment portfolio. The investments are made either for
strategic purposes, or for the purpose of achieving investment yield and balancing the Group's liquidity
level simultaneously. Each investment is managed by management on a case by case basis.
00
Price risk
(ii)
As at 31 December 2021, management considers that any reasonable changes in foreign exchange
rates of the above currencies against the two major functional currencies would not result in a
significant change in the Group's results, as the net carrying amounts of financial assets and liabilities
denominated in a currency other than the respective subsidiaries' functional currencies are considered
to be not significant. Accordingly, no sensitivity analysis is presented for foreign exchange risk.
During the year ended 31 December 2021, the Group reported exchange gains of approximately
RMB804 million (2020: exchange losses of approximately RMB438 million) within "Finance costs,
net" in the consolidated income statement.
Foreign exchange risk (continued)
(i)
(a) Market risk (continued)
3.1 Financial risk factors (continued)
FINANCIAL RISK MANAGEMENT (continued)
3
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
213
214
FINANCIAL RISK MANAGEMENT (continued)
Annual Report 2021
Notes to the Consolidated Financial Statements
2022/3/29 -
100,889
104,708
(1,937)
(249)
(109)
4
1,253
1
Changes in fair value of outstanding hedging instruments
Hedge ratio
Maturity date
Notional amount
Carrying amount (non-current liabilities)
215
Carrying amount (current liabilities)
Carrying amount (current assets)
RMB'Million
RMB'Million
2020
2021
Interest rate swaps
The effects of the interest rate swaps on the Group's financial position and performance are as follows:
(iii) Interest rate risk (continued)
(a) Market risk (continued)
3.1 Financial risk factors (continued)
FINANCIAL RISK MANAGEMENT (continued)
For financial assets whose impairment losses are measured using expected credit loss model, the Group
assesses whether their credit risk has increased significantly since their initial recognition, and applies a
three-stage impairment model to calculate their impairment allowance and recognise their expected credit
losses, as follows:
3
For the year ended 31 December 2021
Carrying amount (non-current assets)
RMB'Million
3,994
42,196
and 2 years
1 year
Between 2
Between 1
Notes payable
Less than
(c) Liquidity risk (continued)
3.1 Financial risk factors (continued)
110,160
00
3
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
221
Annual Report 2021
663,009
157,323
190,354
FINANCIAL RISK MANAGEMENT (continued)
5,529
15,609
Borrowings
Notes payable
Non-derivatives:
At 31 December 2020
RMB'Million
RMB'Million
RMB'Million
RMB'Million
RMB'Million
Total
Over 5 years
and 5 years
41,182
119,495
168,665
Long-term payables
3,486
6,551
120
10,157
36,617
14,268
278,715
172
9,541
5,192
5,877
Lease liabilities
161,494
6
131,505
9,046
3,711
20,937
10,060
51
4,092
3,994
5,917
Long-term payables
213,859
152,539
Borrowings
24,321
Other financial liabilities
3,795
77
109
Other financial liabilities
Derivatives:
102,451
102,451
in specie
Dividends payable for distribution
140,690
140,690
costs and welfare accruals)
customers and others, staff
prepayments received from
and accruals (excluding
Accounts payable, other payables
9,776
1,016
2,848
2,117
358
4,856
For the year ended 31 December 2021
131,300
3
Notes to the Consolidated Financial Statements
226 Tencent Holdings Limited
636
(113)
11,032
12,053
reporting period
to balances held at the end of the
recognised in profit or loss attributable
*Includes unrealised gains/(losses)
3,352
2,444
152,906
193,608
FINANCIAL RISK MANAGEMENT (continued)
Closing balance
3.3 Fair value estimation (continued)
For the year ended 31 December 2021
2021
2020
2021
RMB'Million
to fair value
Relationship of
unobservable inputs
Range of inputs
as at 31 December
Significant
unobservable inputs
Fair value
as at 31 December
Description
The following table summarises the quantitative information about the significant unobservable inputs used in level 3 fair value
measurements of investments in unlisted companies.
etc.
The components of the level 3 instruments mainly include investments in unlisted companies classified as FVPL or FVOCI,
other financial assets, and other financial liabilities. Other financial liabilities mainly include contingent consideration payable
related to certain business combinations. As these investments and instruments are not traded in an active market, the majority
of their fair values have been determined using applicable valuation techniques including comparable companies approach,
comparable transactions approach and other option pricing approach. These valuation approaches require significant judgments,
assumptions and inputs, including risk-free rates, expected volatility, relevant underlying financial projections, and market
information of recent transactions (such as recent fund-raising transactions undertaken by the investees) and other exposure,
The Group has a team of personnel who performs valuation on these level 3 instruments for financial reporting purposes. The
team performs valuation, or necessary updates, at least once every quarter, which coincides with the Group's quarterly reporting
dates. On an annual basis, the team adopts various valuation techniques to determine the fair value of the Group's level 3
instruments. External valuation experts may also be involved and consulted when it is necessary.
Valuation processes inputs and relationships to fair value (Level 3)
During the years ended 31 December 2021 and 2020, transfers from level 3 to level 1 were mainly due to the successful Initial
Public Offerings ("IPOS") of existing investees.
Note:
(52)
(161)
(7,916)
2,142
102
56,393
79,756
1,873
3,352
123,093
152,906
RMB'Million
RMB'Million
RMB'Million
RMB'Million
2020
2021
2020
10
(11,333)
(4,902)
(803)
(6,139)
Currency translation differences
635
(46)
25,748
52,076
Changes in fair value recognised in profit or loss*
2020
2,133
comprehensive income
Changes in fair value recognised in other
Transfers
Disposals/Settlements
(41,653)
(90,778)
(1,246)
17,120
RMB'Million
Investments in unlisted
185,774
For the year ended 31 December 2021
3.1 Financial risk factors (continued)
(c) Liquidity risk
The Group aims to maintain sufficient cash and cash equivalents and readily marketable securities, which
are classified as FVPL. Due to the dynamic nature of the underlying businesses, the Group maintains
flexibility in funding by maintaining adequate balances of such.
The table below analyses the Group's financial liabilities by relevant maturity groupings based on the
remaining period since the end of the reporting period to the contractual maturity date (or the earliest date
a financial liability may become payable in the absence of a fixed maturity date). The amounts disclosed in
the table are the contractual undiscounted cash flows or the carrying amount of the financial assets to be
delivered.
Less than
1 year
Between 1
and 2 years
Between 2
and 5 years
Over 5 years
Total
RMB'Million
RMB'Million
RMB'Million
RMB'Million
FINANCIAL RISK MANAGEMENT (continued)
3
Notes to the Consolidated Financial Statements
Tencent Holdings Limited
Notes to the Consolidated Financial Statements
For the year ended 31 December 2021
3
FINANCIAL RISK MANAGEMENT (continued)
3.1 Financial risk factors (continued)
(b)
Credit risk (continued)
2
(ii)
The expected loss rates are based on the payment profiles of revenue over 12 months before 31
December 2021 and the corresponding historical credit losses experienced within this period or
probability of a receivable progressing through successive stages of delinquency to write-off. The
historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic
factors affecting the ability of the customers to settle the receivables. The Group has identified the
Gross Domestic Product ("GDP") to be the most relevant factor. Various economic scenarios are
considered in generating the forward-looking adjustment, including the recent influences of the
coronavirus pandemic situation.
A default on accounts receivable occurs when the counterparty fails to make contractual payments
within 90 days when they fall due. To measure the expected credit losses, accounts receivable are
grouped on the basis of shared credit risk characteristics, such as industry, with the objective of
facilitating an analysis to identify significant increases in credit risk and recognition of loss allowance
on a timely basis. Accounts receivable are written off, in whole or in part, when it has exhausted all
practical recovery efforts and has concluded that there is no reasonable expectation of recovery.
Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of a
debtor to engage in a repayment plan within the Group, and a failure to make contractual payments for
a period of greater than 3 years past due.
Impairment losses on accounts receivables are presented as net impairment losses within operating
profit. Subsequent recoveries of amounts previously written off are credited against the same item.
(iii) Credit risk of other receivables
Management considers the credit risk of other receivables is insignificant when they have a low risk of
default and the issuer has a strong capacity to meet its contractual cash flow obligations in the near
term, and the loss allowance recognised is therefore limited to 12 months expected losses. In view
of insignificant risk of default and credit risk since initial recognition, management believes that the
expected credit loss under the 12 months expected losses method is immaterial.
00
220
Credit risk of accounts receivable (continued)
2021
Non-derivatives:
Judgment is required to identify any impairment indicators existing for any of the Group's goodwill and other non-
financial assets, to determine appropriate impairment approaches, i.e., fair value less costs of disposal or value
in use, for impairment review purposes, and to select key assumptions applied in the adopted valuation models,
including discounted cash flows and market approach. Changing the assumptions selected by management
in assessing impairment could materially affect the result of the impairment test and in turn affect the Group's
financial condition and results of operations. If there is a significant adverse change in the key assumptions
applied, it may be necessary to take additional impairment charge to the consolidated income statement.
Note: (continued)
3.3 Fair value estimation (continued)
FINANCIAL RISK MANAGEMENT (continued)
3
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
227
Annual Report 2021
-0.58%-5.39% 0.15%-5.35%
Risk-free rate
27% 63% Depends on rights and
restrictions of shares
held by the Group
FVPL and FVOCI
companies in
29%-70%
147,132 Expected volatility
For contingent consideration related to a business combination of a subsidiary, which is principally engaged in the television
series and film production business, the significant unobservable inputs are growth rate of net profit and expected volatility, which
are 10% (31 December 2020: 15%) and 30% (31 December 2020: 35%), respectively. The higher the growth rate, the higher
the fair value; and the higher the expected volatility, the lower the fair value.
For the fair value of the Group's investments in unlisted companies, the sensitivity analysis is performed by management, see
Note 3.1(a)(ii) for details.
For the fair value of contingent consideration related to business combination, if growth rate of net profit had been 5% higher or
lower as at 31 December 2021, the fair value would have increased by approximately RMB36 million (2020: RMB73 million) or
decreased by approximately RMB45 million (2020: RMB97 million). If the expected volatility had been 5% higher or lower as at
31 December 2021, the fair value would have decreased by approximately RMB37 million (2020: RMB66 million) or increased
by approximately RMB41 million (2020: RMB66 million).
4
The Group tests annually whether goodwill has suffered any impairment. Goodwill and other non-financial assets,
mainly including property, plant and equipment, construction in progress, other intangible assets, investment
properties, land use rights, right-of-use assets as well as investments in associates and joint ventures are reviewed
for impairment whenever events or changes in circumstances indicate that the carrying amount may not be fully
recoverable. The recoverable amounts have been determined based on value-in-use calculations or fair value less
costs of disposal. These calculations require the use of judgments and estimates.
(b) Recoverability of non-financial assets
The Group will continue to monitor the average lifespans of the virtual items. The results may differ from the
historical period, and any change in the estimates may result in the revenue being recognised on a different basis
from that in prior periods.
(a) The estimates of the lifespans of virtual items provided on the Group's online platforms (continued)
Significant judgments are required in determining the expected users' relationship periods, including but not
limited to historical users' consumption patterns, churn out rate and reactivity on marketing activities, games life-
cycle, and the Group's marketing strategy. The Group has adopted a policy of assessing the estimated lifespans
of virtual items on a regular basis whenever there is any indication of change in the expected users' relationship
periods.
CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS (continued)
4
For the year ended 31 December 2021
Annual Report 2021 229
Notes to the Consolidated Financial Statements
228
00
As mentioned in Note 2.28(a), the end users purchase certain virtual items provided on the Group's online
platforms and the relevant revenue is recognised based on the estimated lifespans of the virtual items. The
estimated lifespans of different virtual items are determined by the management based on either the expected
users' relationship periods or the stipulated period of validity of the relevant virtual items depending on the
respective terms of virtual items.
(a) The estimates of the lifespans of virtual items provided on the Group's online platforms
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by
definition, seldom equal to the related actual results. The estimates and assumptions that have a significant risk
of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are
addressed below:
Estimates and judgments are continually evaluated and are based on historical experience and other factors, including
expectations of future events that are believed to be reasonable under the circumstances.
CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
Tencent Holdings Limited
Financial liabilities
At 31 December 2021
Business combinations
122,057
145,590
126,387
155,939
RMB'Million
RMB'Million
2020
2021
As at 31 December
Note:
Total debts/Adjusted EBITDA ratio
Adjusted EBITDA (Note)
Total debts
Notes payable (Note 37)
Borrowings (Note 36)
301,529
248,444
194,798
183,314
Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs)
(level 3).
Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either
directly (that is, as prices) or indirectly (that is, derived from prices) (level 2); and
Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
•
•
The table below analyses the Group's financial instruments carried at fair value as at 31 December 2021 by level of
the inputs to valuation techniques used to measure fair value. Such inputs are categorised into three levels within a
fair value hierarchy as follows:
3.3 Fair value estimation
The Group assesses its creditworthiness based on its business and financial risk profile and monitors its capital by
regularly reviewing its debts to adjusted earnings before interest, tax, depreciation and amortisation ("EBITDA")
(Note) ratio, being the measure of the Group's ability to pay off all of its debts which in turn reflects the Group's
financial health and liquidity position. The total debts/adjusted EBITDA ratio calculated by dividing the total debts
by adjusted EBITDA is as follows:
FINANCIAL RISK MANAGEMENT (continued)
RMB'Million
Notes to the Consolidated Financial Statements
223
Annual Report 2021
Adjusted EBITDA represents operating profit less interest income and other gains/(losses), net, and adding back depreciation of
property, plant and equipment, investment properties as well as right-of-use assets, amortisation of intangible assets and land
use rights, and equity-settled share-based compensation expenses.
1.36
1.55
3
Level 1
Capital refers to equity and external debts (including borrowings and notes payable). In order to maintain or
adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to
shareholders, issue new shares, repurchase the Company's shares or raise/repay debts.
Lease liabilities
309
1,617
1,957
150,517
18,819
169,281
122,685
461,302
222 Tencent Holdings Limited
Notes to the Consolidated Financial Statements
3
FINANCIAL RISK MANAGEMENT (continued)
For the year ended 31 December 2021
Financial assets
3.2 Capital risk management
31
Other financial liabilities
Derivatives:
121,903
3,986
3,294
2,465
15,237
Other financial liabilities
4,994
2,207
The Group's objectives on managing capital are to safeguard the Group's ability to continue as a going concern
and support the sustainable growth of the Group in order to provide returns for shareholders and benefits for other
stakeholders and to maintain an optimal capital structure to enhance shareholders' value in the long term.
4,279
12,083
Accounts payable, other payables
and accruals (excluding
prepayments received from
customers and others, staff
costs and welfare accruals)
121,903
603
Level 2
5,492
RMB'Million
It represented the dividend liability resulting from distribution in specie which was measured at fair value of JD.com Inc. ("JD.
com") shares to be distributed (Note 15(b)).
For the year ended 31 December 2021
Note:
3.3 Fair value estimation (continued)
FINANCIAL RISK MANAGEMENT (continued)
3
Notes to the Consolidated Financial Statements
Tencent Holdings Limited
224
00
5,309
3,352
1,957
Other financial liabilities
1,129
The fair value of financial instruments traded in active markets is determined with reference to quoted market
prices at the end of the reporting period. A market is regarded as active if quoted prices are readily and regularly
available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices
represent actual and regularly occurring market transactions on an arm's length basis. These instruments are
included in level 1.
The fair value of financial instruments that are not traded in an active market is determined by using valuation
techniques. These valuation techniques maximise the use of observable market data where it is available and rely
as little as possible on entity specific estimates. If all significant inputs required for evaluating the fair value of a
financial instrument are observable, the instrument is included in level 2.
Opening balance
Specific valuation techniques used to value financial instruments mainly include:
Additions
RMB'Million
During the year ended 31 December 2021, there was no transfer between level 1 and 2 for recurring fair value
measurements. Transfers in and out of level 3 measurements are set out in the following table, which presents the
changes of financial instruments in level 3 for the years ended 31 December 2021 and 2020:
3.3 Fair value estimation (continued)
00
FINANCIAL RISK MANAGEMENT (continued)
3
9
For the year ended 31 December 2021
Annual Report 2021 225
instruments.
Other techniques, such as discounted cash flow analysis, are used to determine fair value for financial
The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows
based on observable yield curves; and
•
•
• Dealer quotes for similar instruments;
Notes to the Consolidated Financial Statements
1,120
If one or more of the significant inputs are not based on observable market data, the instrument is included in level 3.
213,091
Other financial assets
102,451
102,451 --
Assets held for distribution
250,257
22,469
FVOCI
Other financial liabilities
202,757
8,069
23,566
As at 31 December 2021
FVPL
RMB'Million
Other financial assets
Total
Level 3
RMB'Million
171,122
1,709
358
227,788
1,726
199,465
17
FVOCI
172,537
13,626
5,646
27,620
FVPL
139,271
102,451
102,451
in specie (Note)
Dividends payable for distribution
2,802
2,444
As at 31 December 2020
26,758
The reconciliation of gross profit to profit before income tax is shown in the consolidated income statement.
Annual Report 2021
233
Notes to the Consolidated Financial Statements
For the year ended 31 December 2021
5 SEGMENT INFORMATION AND REVENUES (continued)
The Company is domiciled in the Cayman Islands while the Group mainly operates its businesses in the Mainland
of China. During the years ended 31 December 2021 and 2020, breakdown of the total revenues by geographical
location is as follows:
RMB'Million
Revenues
- The Mainland of China
- Others
2021
448,165
2020
RMB'Million
513,688
2,329
00
30
482,064
17,771
Segment revenues
264,212
82,271
128,086
7,495
Gross profit
142,925
42,260
36,251
96
221,532
Cost of revenues
Depreciation
Amortisation
5,006
3,331
9,170
87
17,594
6,628
46,430
For the year ended 31 December 2021
560,118
61,894
- Europe
63,117
57,750
Others
23,795
13,681
1,612,364
1,333,425
234 Tencent Holdings Limited
Notes to the Consolidated Financial Statements
5
SEGMENT INFORMATION AND REVENUES (continued)
(a) Description of segments and principal activities (continued)
As at 31 December 2021, the total non-current assets other than financial instruments and deferred income tax
assets located in the Mainland of China and other regions amounted to RMB446,565 million (31 December 2020:
RMB400,877 million) and RMB182,612 million (31 December 2020: RMB177,427 million), respectively.
All the revenues derived from any single external customer were less than 10% of the Group's total revenues
during the years ended 31 December 2021 and 2020.
(b) Disaggregation of revenue from contracts with customers
In the following table, revenue of the Group from contracts with customers is disaggregated by revenue source.
The table also includes a reconciliation to the segment information (Note 5(a)).
RMB'Million
103,386
33,899
- Asia excluding the Mainland of China and Hong Kong
148,455
482,064
The Group also conducts operations in the North America, Europe and other regions, and holds investments
(including investments in associates, investments in joint ventures, FVPL, FVOCI and assets held for distribution) in
various territories. The geographical information on the total assets is as follows:
Operating assets
- The Mainland of China
- Others
As at 31 December
2021
2020
RMB'Million
RMB'Million
490,415
400,062
243,296
242,477
Investments
The Mainland of China and Hong Kong
539,900
415,685
- North America
141,876
RMB'Million
4 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS (continued)
RMB'Million
Notes to the Consolidated Financial Statements
For the year ended 31 December 2021
5 SEGMENT INFORMATION AND REVENUES
(a) Description of segments and principal activities
The chief operating decision-makers mainly include executive directors of the Company. They review the Group's
internal reporting in order to assess performance, allocate resources, and determine the operating segments based
on these reports.
The Group has the following reportable segments for the years ended 31 December 2021 and 2020:
00
VAS;
231
Online Advertising;
- Others.
The "Others" business segment consists of the financials of investment in, production of and distribution of, films
and television programmes for third parties, copyrights licensing, merchandise sales and various other activities.
The chief operating decision-makers assess the performance of the operating segments mainly based on segment
revenue and gross profit of each operating segment. The selling and marketing expenses and general and
administrative expenses are common costs incurred for these operating segments as a whole and therefore, they
are not included in the measure of the segments' performance which is used by the chief operating decision-
makers as a basis for the purpose of resource allocation and assessment of segment performance. Interest income,
other gains/(losses), net, finance costs, net, share of profit/(loss) of associates and joint ventures, net and income
tax expense are also not allocated to individual operating segment.
There were no material inter-segment sales during the years ended 31 December 2021 and 2020. The revenues
from external customers reported to the chief operating decision-makers are measured in a manner consistent with
that applied in the consolidated income statement.
Other information, together with the segment information, provided to the chief operating decision-makers, is
measured in a manner consistent with that applied in these consolidated financial statements. There were no
segment assets and segment liabilities information provided to the chief operating decision-makers.
232 Tencent Holdings Limited
Notes to the Consolidated Financial Statements
5
FinTech and Business Services; and
Annual Report 2021
The Group is required to reassess whether it controls the investee if facts and circumstances indicate a change to
one or more of the three factors of control.
Consolidation is required only if control exists. The Group controls an investee when it has all the following: (i)
power over the investee; (ii) exposure, or rights, to variable returns from its involvement with the investee; and (iii)
the ability to use its power over the investee to affect the amount of the Group's returns. Power results from rights
that can be straightforward through voting rights or complicated in contractual arrangements. Variable returns
normally encompass financial benefits and risks, but in certain cases, they also include operational values specific
to the Group. These three factors cannot be considered in isolation by the Group in its assessment of control over
an investee. Where the factors of control are not apparent, significant judgement is applied in the assessment,
which is based on an overall analysis of all of the relevant facts and circumstances.
Notes to the Consolidated Financial Statements
For the year ended 31 December 2021
4
CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS (continued)
(c) Fair value measurement of FVPL, FVOCI and other financial liabilities
The fair value assessment of FVPL, FVOCI and other financial liabilities that are measured at level 3 fair value
hierarchy requires significant estimates, which include risk-free rates, expected volatility, relevant underlying
financial projections, market information of recent transactions (such as recent fund raising transactions
undertaken by the investees) and other assumptions. Changes in these assumptions and estimates could
materially affect the respective fair value of these investments.
(d) Share-based compensation arrangements
As mentioned in Note 2.26(e), the Group has granted share options to its employees and other qualifying
participants. The directors have adopted the Binomial Model to determine the total fair value of the options
granted, which is to be expensed over the respective vesting periods. Significant estimates and judgment on key
parameters, such as risk free rate, dividend yield and expected volatility, are required to be made by the directors
based on historical experience and other relevant factors in applying the Binomial Model (Note 35). Changes in
these estimates and judgments could materially affect the fair value of these options granted.
The fair value of share options granted to employees and other qualifying participants determined using the
Binomial Model was approximately HKD2,994 million (equivalent to approximately RMB2,513 million) in 2021
(2020: approximately HKD1,073 million (equivalent to approximately RMB976 million)).
The Group has to estimate the expected yearly percentage of grantees that will stay within the Group at the end
of vesting periods of the options and awarded shares (the “Expected Retention Rate") in order to determine the
amount of share-based compensation expenses charged to the consolidated income statement. Where the final
retention rate is different from the initial estimate, such difference will impact the share-based compensation
expenses in subsequent periods. As at 31 December 2021, the Expected Retention Rate of the Group's wholly-
owned subsidiaries was assessed to be not lower than 89% (31 December 2020: not lower than 91%).
00
230 Tencent Holdings Limited
Notes to the Consolidated Financial Statements
For the year ended 31 December 2021
2021
(e) Income taxes
The Group is subject to income taxes in numerous jurisdictions. Significant judgment is required in determining the
worldwide provision for income taxes. Where the final tax outcome of these matters is different from the amounts
that were initially recorded, such differences will impact current income tax and deferred income tax in the period
in which such determination is made.
(f)
Scope of consolidation
SEGMENT INFORMATION AND REVENUES (continued)
For the year ended 31 December 2021
(a) Description of segments and principal activities (continued)
The segment information provided to the chief operating decision-makers for the reportable segments for the years
ended 31 December 2021 and 2020 is as follows:
Cost of revenues
Depreciation
5,797
5,322
Amortisation
18,740
7,810
10,268
72
106
21,493
1,973
28,595
Year ended 31 December 2020
FinTech and
VAS
Online
Advertising
Business
Services
Others
Total
245,944
RMB'Million RMB'Million
1,018
40,594
FinTech and
Online
VAS
Advertising
Business
Services
Others
Total
RMB'Million
RMB'Million RMB'Million
RMB'Million
RMB'Million
Segment revenues
291,572
88,666
172,195
7,685
560,118
Gross profit
152,936
51,396
2020
Year ended 31 December 2021
RMB'Million
step down gain of approximately RMB78.0 billion arising from the investment in JD.com, details of which are
explained in Note 21(b)(i);
(ii)
(iii)
step down gain of approximately RMB11.6 billion arising from the transfer of an investee company engaged in
games development from associate to FVOCI as a result of retirement of board representatives (Note 25(v)); and
step up gain of approximately RMB3,807 million arising from the completion of privatisation of Sogou Inc. ("Sogou"),
an investment transferred from investment in an associate to a subsidiary (Note 42(a)).
During the year ended 31 December 2021, the net fair value gains on FVPL comprised net gains of approximately RMB47,424
million (2020: RMB37,257 million) as a result of increase in valuations of certain investee companies, and approximately
RMB136 million associated with treasury investments (2020: nil).
00
238 Tencent Holdings Limited
7
OTHER GAINS, NET (continued)
Note: (continued)
(c)
Notes to the Consolidated Financial Statements
For the year ended 31 December 2021
The impairment provision for investee companies, goodwill and other intangible assets arising from acquisitions mainly comprised
the following:
2021
2020
RMB'Million
RMB'Million
Investments in associates (Note 21)
15,391
5,254
Investments in joint ventures and others
(i)
924
aggregated net gains of approximately RMB99,405 million (2020: RMB8,898 million) on disposals, partial disposals or
other deemed disposals of various investments of the Group, which mainly comprised the following:
The disposal and deemed disposal gains of approximately RMB118,051 million recognised during the year ended 31 December
2021 comprised the following:
assets arising from acquisitions (Note (c))
Subsidies and tax rebates
Net fair value gains on other financial instruments
Donations (Note (d))
Dividend income
Others
Note:
(a)
(b)
(25,028)
(11,422)
8,888
7,922
157
1,652
(2,050)
(2,600)
660
1,765
1,229
(1,833)
149,467
57,131
net gains of approximately RMB18,646 million (2020: RMB 15,492 million) on dilution of the Group's equity interests
in certain associates due to new equity interests being issued by these associates (Note 21). These investee companies
are principally engaged in games development, finance, online video-sharing platform, eCommerce and Internet-related
businesses; and
1,388
Goodwill and other intangible assets arising from acquisitions (Note 20)
8,713
Depreciation of property, plant and equipment, investment properties and
right-of-use assets (Note 16 and Note 18)
26,166
21,458
Auditor's remuneration
- Audit and audit-related services
- Non-audit services
- Tax advisory
- Due diligence service
Other services
148
127
54
37
14
11
23
8
17
18
Annual Report 2021
239
RMB'Million
21,876
27,260
Bandwidth and server custody fees (excluding depreciation of right-of-use assets)
26,596
4,780
25,028
11,422
(d)
The donations mainly include RMB1,600 million of charity funds and RMB450 million for Sustainable Social Value and Common
Prosperity Programme ("SSV & CPP").
8 EXPENSES BY NATURE
2021
2020
RMB'Million
RMB'Million
Transaction costs (Note (a))
Impairment provision for investee companies, goodwill and other intangible
129,136
Employee benefits expenses (Note (b) and Note 13)
95,523
69,638
Content costs (excluding amortisation of intangible assets)
66,911
58,285
Amortisation of intangible assets (Note (c) and Note 20)
31,430
29,073
Promotion and advertising expenses
31,335
107,628
37,257
(a) Description of segments and principal activities (continued)
24,390
235
Notes to the Consolidated Financial Statements
For the year ended 31 December 2021
5
SEGMENT INFORMATION AND REVENUES (continued)
(c) Assets and liabilities related to contracts with customers
The Group has recognised the following liabilities related to contracts with customers under "Deferred revenue":
As at 31 December
2021
2020
RMB'Million
RMB'Million
Contract liabilities:
VAS
62,261
60,612
Online Advertising
2,588
4,797
FinTech and Business Services
Others
6,601
6,952
108
Annual Report 2021
482,064
560,118
7,495
Revenue from contracts with customers
47,560
- VAS
291,572
264,212
Games
174,314
Social networks
117,258
108,111
- Online Advertising
181
88,666
Social and others advertising
75,349
67,979
Media advertising
13,317
14,292
- FinTech and Business Services
172,195
128,086
- Others
7,685
82,271
Note:
156,101
Contract liabilities
3,034
5,636
1,783
181
137
65,044
47,984
As at 31 December 2021 and 2020, total capitalised contract costs to obtain or fulfill contracts with customers
were immaterial.
6
INTEREST INCOME
Interest income mainly represents interest income from bank deposits, including bank balance and term deposits.
Annual Report 2021 237
Notes to the Consolidated Financial Statements
For the year ended 31 December 2021
7
OTHER GAINS,
NET
2021
RMB'Million
RMB'Million
118,051
(i)
Net gains on disposals and deemed disposals of investee companies (Note (a))
Net fair value gains on FVPL (Note (b))
2,665
43,030
2020
Others
56,562
Contract liabilities mainly comprised virtual items, unamortised pre-paid tokens or cards, Internet traffic and other support
to be offered to certain investee companies in the future periods measured at their fair value on the relevant inception
dates, and customer loyalty incentives offered to the customers.
71,558
236
Tencent Holdings Limited
Notes to the Consolidated Financial Statements
5
SEGMENT INFORMATION AND REVENUES (continued)
(c) Assets and liabilities related to contracts with customers (continued)
Note: (continued)
(ii)
00
For the year ended 31 December 2021
FinTech and Business Services
Online Advertising
Revenue recognised in relation to contract liabilities
VAS
at the beginning of the year:
Revenue recognised that was included in the contract liability balance
72,542
RMB'Million
2020
2021
RMB'Million
The following table shows the extent of the revenue recognised in the current reporting period which relates to carried-
forward contract liabilities:
Notes to the Consolidated Financial Statements
729
466,665
464,262
2020
RMB'000
2021
RMB'000
HKD800,000,001 ~ HKD1,200,000,000
HKD1,200,000,001 ~ HKD2,000,000,000
HKD200,000,001 ~ HKD400,000,000
HKD400,000,001 ~ HKD800,000,000
HKD50,000,001 ~ HKD200,000,000
HKD8,000,000 - HKD50,000,000
The emoluments of the senior management fell within the following bands:
Share-based compensation expenses
Contributions to pension plans
Senior management includes directors, chief executive officer ("CEO"), president and other senior executives. The
aggregate compensation paid/payable to senior management for employee services excluding the directors and the
CEO, whose details have been reflected in Note 14(a), is as follows:
(a) Senior management's emoluments
13 EMPLOYEE BENEFITS EXPENSES (continued)
For the year ended 31 December 2021
713
Tencent Holdings Limited
Emolument bands
Salaries, bonuses, allowances and benefits in kind
Annual Report 2021 247
2,696,137
Allowances and benefits in kind
246
Share-based compensation expenses
Contributions to pension plans
Bonuses
Salaries
00
The five individuals whose emoluments were the highest in the Group did not include any director during the year
2021 (2020: included one director). All of these individuals have not received any emolument from the Group as
an inducement to join the Group during the years ended 31 December 2021 and 2020. The emoluments paid/
payable to the five (2020: remaining four) individuals during the years were as follows:
(b) Five highest paid individuals
4,591,385
13 EMPLOYEE BENEFITS EXPENSES (continued)
Notes to the Consolidated Financial Statements
2
1333 1
26312|
2020
2021
Number of individuals
3,163,515
5,056,376
For the year ended 31 December 2021
00
Contributions to pension plans (Note)
10.0-12.0%
RMB'Million
RMB'Million
2020
2021
13 EMPLOYEE BENEFITS EXPENSES
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
245
Annual Report 2021
Wages, salaries and bonuses
16.523
9,650
9,696
160
168
9,490
9,528
159,444
224,605
2021
RMB'000
23.164
61,058
48,192
5,630
0.25 1.5%
5.0-10.0%
12.0 20.0%
Percentage
Unemployment insurance
Housing fund
Medical insurance
Pension insurance
The majority of the Group's contributions to pension plans are related to the local employees in the PRC. All local employees of the
subsidiaries in the PRC participate in employee social security plans established in the PRC, which cover pension, medical and other
welfare benefits. The plans are organised and administered by the governmental authorities. Except for the contributions made to these
social security plans, the Group has no other material commitments owing to the employees. According to the relevant regulations,
the portion of premium and welfare benefit contributions that should be borne by the companies within the Group as required by the
above social security plans are principally determined based on percentages of the basic salaries of employees, subject to certain
ceilings imposed. These contributions are paid to the respective labour and social welfare authorities and are expensed as incurred.
The applicable percentages used to provide for these social security plans for the years ended 31 December 2021 and 2020 are listed
below:
Note:
69,638
95,523
111
143
Training expenses
4,679
6,470
Welfare, medical and other expenses (Note)
13,745
22,222
Share-based compensation expenses
2,911
The Group has announced policies which become effective on 1 January 2022, that, additional employee benefits will
be provided by the Group to certain employees, including (i) commercial health insurance benefits to certain eligible
employees who have completed a required period of service; and (ii) one-off retirement cash bonus upon the retirement
of the qualified employees. The financial impacts relating to these employee benefits for the year ended 31 December
2021 were immaterial.
2020
RMB'000
Ma Huateng (CEO)
30,241
lan Charles Stone
1,936
1,474
462
lain Ferguson Bruce
322,968
99
291,775
22,997
981
6,949
Lau Chi Ping Martin
44,135
24
110
35,522
7,331
1,148
(403)
(Note (i))
1,148
5,815
6,796
Li Dong Sheng
249
Annual Report 2021
388,550
123
309,326
110
58,519
14,280
6,192
3,034
2,298
6,037
5,056
981
736
Ke Yang
Yang Siu Shun
Charles St Leger Searle
Jacobus Petrus (Koos) Bekker
3,644
2,908
736
RMB'000
35,290
1,063,362
RMB'000
RMB'000
||2-||--
1
1
2020
2021
Number of individuals
248 Tencent Holdings Limited
HKD553,000,001 ~ HKD553,500,000
HKD590,000,001 ~ HKD590,500,000
HKD1,121,500,001 ~ HKD1,122,000,000
HKD1,155,500,001 ~ HKD1,156,000,000
HKD1,588,500,001 ~ HKD1,589,000,000
HKD1,599,000,001 ~ HKD1,599,500,000
HKD357,500,001 ~ HKD358,000,000
--| ||
HKD352,500,001 ~ HKD353,000,000
The emoluments of the above five individuals (2020: four) fell within the following bands:
2,515,110
3,993,668
156
163
1,957,518
3,846
10,455
2,884,398
523,349
Emolument bands
1
1
1
RMB'000
RMB'000
RMB'000
Total
in kind
plans expenses
Bonuses
Salaries
Fees
Name of director
and benefits
to pension compensation
Allowances
Share-based
Contributions
For the year ended 31 December 2021
During the year ended 31 December 2021:
The remuneration of every director and the CEO is set out below:
(a) Directors' and the chief executive's emoluments
14 BENEFITS AND INTERESTS OF DIRECTORS
Notes to the Consolidated Financial Statements
RMB'000
(217)
(b) Value-added tax and other taxes
224,822
(v)
Corporate income tax in other jurisdictions
(iv)
In addition, certain subsidiaries of the Company are entitled to other tax concessions, mainly including the
preferential policy of "2-year exemption and 3-year half rate concession" and the preferential tax rate of 15%
applicable to some subsidiaries located in certain areas of the Mainland of China upon fulfillment of certain
requirements of the respective local governments.
Certain subsidiaries of the Group in the Mainland of China were approved as High and New Technology
Enterprise and they were subject to a preferential corporate income tax rate of 15% for the years ended
31 December 2021 and 2020. Moreover, according to the announcement and circular issued by relevant
government authorities, a subsidiary was qualified as national key software enterprise and subject to a
preferential corporate income tax rate of 10%.
PRC CIT has been provided for at applicable tax rates under the relevant regulations of the PRC after
considering the available preferential tax benefits from refunds and allowances, and on the estimated
assessable profit of entities within the Group established in the Mainland of China for the years ended 31
December 2021 and 2020. The general PRC CIT rate is 25% in 2021 and 2020.
(iii) PRC CIT
(a) Income tax expense (continued)
11 TAXATION (continued)
Income tax on profit arising from other jurisdictions, including the United States, Europe, Asia and South
America, had been calculated on the estimated assessable profit for the year at the respective rates
prevailing in the relevant jurisdictions, ranging from 12.5% to 35%.
For the year ended 31 December 2021
241
Annual Report 2021
Hong Kong profits tax has been provided for at the rate of 16.5% on the estimated assessable profits for the
years ended 31 December 2021 and 2020.
(ii) Hong Kong profits tax
The Group was not subject to any taxation in the Cayman Islands and the British Virgin Islands for the years
ended 31 December 2021 and 2020.
Cayman Islands and British Virgin Islands corporate income tax
(i)
Income tax expense is recognised based on management's best knowledge of the income tax rates expected for
the financial year.
(a) Income tax expense
Notes to the Consolidated Financial Statements
11 TAXATION
Withholding tax
conditions.
The taxation on the Group's profit before income tax differs from the theoretical amount that would arise using the
tax rate of 25% for the year (2020: 25%), being the general tax rate of the major subsidiaries of the Group before
enjoying preferential tax treatments, as follows:
19,897
20,252
19,499
398
(5,787)
26,039
RMB'Million
2020
2021
According to applicable tax regulations prevailing in the PRC, dividends distributed by a company
established in the Mainland of China to a foreign investor with respect to profit derived after 1 January 2008
are generally subject to a 10% withholding tax. If a foreign investor is incorporated in Hong Kong, under the
double taxation arrangement between the Mainland of China and Hong Kong, the relevant withholding tax
rate applicable to such foreign investor will be reduced from 10% to 5% subject to the fulfilment of certain
For the year ended 31 December 2021
Current income tax
The income tax expense of the Group is analysed as follows:
(a) Income tax expense (continued)
11 TAXATION (continued)
Notes to the Consolidated Financial Statements
Tencent Holdings Limited
242
00
Dividends distributed from certain jurisdictions that the Group's entities operate in are also subject to
withholding tax at respective applicable tax rates.
Deferred income tax (Note 28)
3,672
(16,444)
(76)
Tencent Holdings Limited
240
00
During the year ended 31 December 2021, expenses incurred for regulatory fines in the Mainland of China and certain litigation
settlements were approximately RMB976 million (2020: nil), of which approximately RMB630 million (2020: nil) were included
in "Other gains, net".
During the year ended 31 December 2021, expenses incurred for SSV & CPP (excluding share-based compensation expenses)
were approximately RMB224 million (2020: nil).
During the year ended 31 December 2021, amortisation of intangible assets included the amortisation of intangible assets
resulting from business combinations of approximately RMB4,651 million (2020: RMB3,299 million).
(e)
(d)
Amortisation charges of intangible assets are mainly in respect of media content including video and music content, game
licenses, and other content. During the year ended 31 December 2021, amortisation of media content was approximately
RMB28,393 million (2020: RMB26,620 million).
9
No significant development expenses had been capitalised for the years ended 31 December 2021 and 2020.
During the year ended 31 December 2021, employee benefits expenses included the share-based compensation expenses of
approximately RMB22,222 million (2020: RMB13,745 million), which contained those incurred for SSV & CPP of approximately
RMB21 million (2020: nil).
During the year ended 31 December 2021, the Group incurred expenses for the purpose of research and development of
approximately RMB51,880 million (2020: RMB38,972 million), which comprised employee benefits expenses of approximately
RMB42,958 million (2020: RMB31,643 million).
(b)
Transaction costs primarily consist of bank handling fees, channel and distribution costs.
(a)
Note:
8 EXPENSES BY NATURE (continued)
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
(c)
FINANCE COSTS, NET
Interest and related expenses
Exchange (gains)/losses, net
3,748
(16,592)
148
RMB'Million
RMB'Million
2020
2021
Share of profit/(loss) of joint ventures (Note 22)
Share of (loss)/profit of associates (Note 21)
10 SHARE OF (LOSS)/PROFIT OF ASSOCIATES AND JOINT VENTURES, NET
7,887
7,114
438
(804)
7,449
7,918
RMB'Million
RMB'Million
2020
2021
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
2021
159,847
2020
RMB'Million
244
00
Basic EPS (RMB per share)
Weighted average number of ordinary shares in issue (million shares)
Profit attributable to equity holders of the Company (RMB'Million)
Basic earnings per share ("EPS") is calculated by dividing the profit attributable to equity holders of the Company
by the weighted average number of ordinary shares in issue during the year.
(a) Basic
12 EARNINGS PER SHARE
(i) Effective from 1 July 2019 and until 31 December 2024, the rate of cultural construction fee has been reduced by 50% in
certain regions, while during the period from 1 January 2020 to 31 December 2021, this fee is exempted.
Tencent Holdings Limited
Note:
5%
Educational surcharge
Net VAT payable amount
7%
City construction tax
(Note i)
3%
Cultural construction fee
offset by VAT on purchases
Taxable advertising income
Net VAT payable amount
Sales value of goods sold and services fee income,
2021
224,822
2020
2021
Diluted EPS (RMB per share)
Weighted average number of ordinary shares in issue (million shares)
Adjustments for share options and awarded shares (million shares)
Weighted average number of ordinary shares for the calculation of
diluted EPS (million shares)
the calculation of diluted EPS (RMB'Million)
Profit attributable to equity holders of the Company for
non wholly-owned subsidiaries and associates (RMB'Million)
Dilution effect arising from share-based awards issued by
Profit attributable to equity holders of the Company (RMB'Million)
2020
In addition, the profit attributable to equity holders of the Company (numerator) has been adjusted by the effect of
the share options and restricted shares granted by the Company's non wholly-owned subsidiaries and associates,
excluding those which have anti-dilutive effect on the Group's diluted EPS.
(b) Diluted
12 EARNINGS PER SHARE (continued)
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
16.844
23.597
9,490
9,528
159,847
The share options and awarded shares granted by the Company have potential dilutive effect on the EPS. Diluted
EPS is calculated by adjusting the weighted average number of ordinary shares outstanding by the assumption of
the conversion of all potential dilutive ordinary shares arising from share options and awarded shares granted by
the Company (collectively forming the denominator for computing the diluted EPS).
Basis of levy
6-13%
Value-added tax ("VAT")
(63)
Income not subject to tax
(3,466)
(4,945)
profits of subsidiaries incorporated in the Mainland of China
Effects of tax holiday and preferential tax benefits on assessable
(29,779)
(49,202)
Effects of different tax rates applicable to different subsidiaries of
the Group
(65)
44,087
Tax calculated at a tax rate of 25%
176,350
264,506
(3,672)
16,444
Share of loss/(profit) of associates and joint ventures, net
180,022
248,062
Profit before income tax
66,126
Expenses not deductible for tax purposes
1,539
1,555
Tax rate
Category
The operations of the Group are also mainly subject to the following taxes in the PRC:
11 TAXATION (continued)
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
243
Annual Report 2021
19,897
20,252
7
285
Income tax expense
Others
3,658
5,462
Unrecognised deferred income tax assets
3,900
1,050
(Note 28)
Withholding tax on earnings expected to be remitted by subsidiaries
RMB'Million
RMB'Million
Interest and related expenses mainly arose from borrowings, notes payable and lease liabilities disclosed in Notes 36, 37
and 18, respectively.
Amortisation
(465)
(484)
793
2,120
155
15,609
16,091
RMB'Million
RMB'Million
2020
2021
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
Closing net book amount
Currency translation differences
Impairment reversal
Amortisation
Additions
Business combinations
Opening net book amount
17 LAND USE RIGHTS
Tencent Holdings Limited
254
00
During the year ended 31 December 2021, depreciation of RMB 19,098 million (2020: RMB15,654 million), RMB257
million (2020: RMB256 million) and RMB2,142 million (2020: RMB1,748 million) were charged to cost of revenues,
selling and marketing expenses and general and administrative expenses, respectively.
59,843
1,355
70
988
6
46,202
(5)
17,728
(173)
(7)
(169)
(177)
(3,773)
(4,649)
5,991
12,365
320
10,847
12,929
180
RMB'Million
RMB'Million
2020
2021
Note:
Closing net book amount
Currency translation differences
Impairment
Reduction (Note)
Depreciation
Additions
Business combinations
Opening net book amount
Movement of right-of-use assets (excluding land use rights, disclosed in Note 17) is analysed as follows:
(a) Amounts recognised in the consolidated statement of financial position
18 LEASES (EXCLUDING LAND USE RIGHTS)
The land use rights mainly represented prepaid operating lease payments in respect of land in the Mainland of China
with remaining lease periods of 27 to 49 years.
16,091
(1)
(287)
11,228
(39)
(270)
(16,023)
(970)
Depreciation
(124)
(6)
(109)
(1)
Disposals
30,808
221
28
421
28,186
1,952
Additions
250
59
31
18
133
9
Business combinations
46,824
1,519
24
829
34,214
10,238
(384)
Net book amount
(17,658)
(199)
44
10
(91)
Currency translation differences
(47,278)
(1,854)
(42)
(1,218)
(40,653)
(3,511)
Accumulated depreciation and impairment
107,160
3,165
113
2,196
86,946
14,740
Cost
At 31 December 2020
59,843
1,355
70
988
46,202
11,228
Closing net book amount
(257)
(53)
(4)
Currency translation differences
20,468
12,929
The reduction of right-of-use assets for the years ended 31 December 2021 and 2020 mainly arose from the early termination
and modification of lease contracts.
(49)
168
257
(1)
2,106
Currency translation differences
(87,264)
(2,891)
(2,183)
(73,366)
(3,251)
(5,573)
Accumulated amortisation and impairment
244,220
5,965
12,015
107,271
6,879
112,090
Cost
At 1 January 2021
RMB'Million
RMB'Million RMB'Million RMB'Million RMB'Million
Total
Others
Trademarks
contents
technology
Goodwill
RMB'Million
2,481
Media
Net book amount
3,627
(3)
(1,120)
(2)
Disposals
31,598
52
7
30,759
780
Additions
30,130
3,402
954
1,595
4,920
19,259
Business combinations (Note 42)
159,437
3,025
10,000
34,162
3,627
108,623
Opening net book amount
Year ended 31 December 2021
159,437
3,025
10,000
34,162
108,623
software and
Computer
20 INTANGIBLE ASSETS
4,947
Expense relating to variable lease payments not included in lease liabilities
(included in cost of revenues and expenses)
1,475
1,721
Expense relating to short-term leases not included in lease liabilities
(included in cost of revenues and expenses)
Interest expense (included in finance costs, net)
559
719
3,773
4,649
19
24
1,972
2,422
1,782
2,203
RMB'Million
RMB'Million
2020
2021
Computer and other operating equipment
Others
Buildings
Depreciation charge of right-of-use assets
The consolidated income statement included the following amounts relating to leases (excluding the amortisation
of land use rights, disclosed in Note 17):
(b) Amounts recognised in consolidated income statement
18 LEASES (EXCLUDING LAND USE RIGHTS) (continued)
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
Annual Report 2021 255
3,983
Some leases of computer and other operating equipment contain variable lease payments. Variable payments are
used for a variety of reasons, including managing cash outflows and minimising the fixed costs. Variable lease
payments that depend on usage of bandwidth are recognised in profit or loss in the period in which the conditions
that trigger those payments occur. Variable lease payments relating to computer and other operating equipment
leases during the year ended 31 December 2021 were considered to be insignificant.
The total cash outflow in financing activities for leases during the year ended 31 December 2021 was
approximately RMB5,086 million (2020: RMB4,068 million), including principal elements of lease payments of
approximately RMB4,423 million (2020: RMB3,537 million) and related interest paid of approximately RMB663
million (2020: RMB531 million), respectively.
00
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
257
Annual Report 2021
As at 31 December 2021, construction in progress mainly comprised office buildings and data centers under
construction located in the PRC.
4,939
5,923
11
(10)
1
(2,415)
(3,180)
3,408
4,173
Opening net book amount
3,935
RMB'Million
RMB'Million
2020
2021
Closing net book amount
Currency translation differences
Business combinations
Transfer to property, plant and equipment
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
Additions
Opening net book amount
19 CONSTRUCTION IN PROGRESS
256 Tencent Holdings Limited
4,939
Year ended 31 December 2020
46,824
1,519
Currency translation differences
(1)
(91)
10
(1)
44
(39)
Net book amount
11,228
46,202
988
70
70
1,355
59,843
Year ended 31 December 2021
Opening net book amount
11,228
46,202
888
988
Business combinations
242
25
Additions
3,074
20,946
387
Disposals
(47,278)
(53)
(1,854)
(1,218)
Dividends payable for distribution in specie of approximately RMB97.1 billion was recognised on the Declaration
Date and measured at fair value using the market price of the JD.com Shares to be distributed. Subsequent
changes in the fair value of the said dividends payable as a result of the changes in the fair value of the JD.com
Shares to be distributed was recognised in equity as an adjustment to the amount of the dividend distribution
until its settlement. Fair value changes on the dividends payable amounting to approximately RMB5.4 billion were
recognised in equity since the Declaration Date up to 31 December 2021. As at 31 December 2021, the amount
of dividends payable for distribution in specie was approximately RMB102.5 billion.
The share certificates for the JD.com Shares to be distributed are dispatched to the qualifying shareholders in
March 2022.
252 Tencent Holdings Limited
Notes to the Consolidated Financial Statements
For the year ended 31 December 2021
16 PROPERTY, PLANT AND EQUIPMENT
Computer
and other
Furniture
Buildings
RMB'Million
operating
equipment
and office
equipment
Motor
vehicles improvements
Leasehold
Total
RMB'Million RMB'Million
RMB'Million
RMB'Million RMB'Million
At 1 January 2021
Cost
14,740
86,946
2,196
113
3,165
107,160
Accumulated depreciation and impairment
(3,511)
(40,653)
(42)
(1,508)
(5)
Depreciation
61,914
At 31 December 2021
Cost
17,767
102,278
2,545
137
3,860
126,587
Accumulated depreciation and impairment
(4,597)
(55,909)
(1,487)
(61)
(2,264)
(64,318)
Currency translation differences
(58)
(292)
(3)
(1)
(1)
(355)
Net book amount
13,112
46,077
1,055
75
1,595
1,595
75
1,055
46,077
(1,080)
(19,602)
(327)
(28)
23581
70
1,355
59,843
51
319
37
705
25,149
(5)
"
(10)
(460)
(21,497)
Impairment
(2)
(1)
(3)
Currency translation differences
(57)
(201)
(13)
(45)
(316)
Closing net book amount
13,112
(1,581)
(1,127)
These JD.com Shares to be distributed (Note 21(b)) are classified and presented as “Assets held for distribution'
upon the Declaration Date (Note 32).
As announced on 23 December 2021 (the “Declaration Date"), the Company resolved to declare a special interim
dividend in the form of a distribution in specie of approximately 457 million Class A ordinary shares of JD.com
("JD.com Shares") to the shareholders whose names appeared on the register of members of the Company on
25 January 2022 in proportion to their then respective shareholdings in the Company on the basis of 1 Class A
ordinary share of JD.com for every 21 shares held by the shareholders, being rounded down to the nearest whole
number of Class A ordinary shares of JD.com and fractional entitlements to the JD.com Shares will be distributed
in the form of cash-in-lieu payment, except that the net proceeds of less than HKD100 will not be distributed.
Accordingly, approximately 457 million Class A ordinary shares of JD.com are expected to be distributed ("JD.com
Shares to be distributed"), representing approximately 14.7% of the total number of issued shares of JD.com as at
the Declaration Date.
16 PROPERTY, PLANT AND EQUIPMENT (continued)
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
253
Notes to the Consolidated Financial Statements
For the year ended 31 December 2021
14 BENEFITS AND INTERESTS OF DIRECTORS (continued)
(a) Directors' and the chief executive's emoluments (continued)
During the year ended 31 December 2020:
Contributions Share-based
Allowances
to pension compensation and benefits
Name of director
Fees
Salaries
Bonuses
RMB'000
RMB'000 RMB'000
plans expenses
RMB'000
in kind
Total
RMB'000
RMB'000
RMB'000
(Note (i))
Ma Huateng (CEO)
1,174
6,706
50,746
Buildings
88
RMB'Million
Furniture
24
829
34,214
10,238
Net book amount
218
97
14
108
Currency translation differences
(33,067)
(1,508)
(32)
(973)
(27,988)
(2,566)
Accumulated depreciation and impairment
79,673
2,930
56
1,788
62,094
12,805
Cost
At 1 January 2020
RMB'Million
Total
Motor Leasehold
vehicles improvements
RMB'Million RMB'Million
and office
equipment
Computer
and other
operating
equipment
RMB'Million RMB'Million
24
58,738
Lau Chi Ping Martin
Note:
(i) Allowances and benefits in kind include leave pay, insurance premium and club membership.
(ii)
(iii)
During the year ended 31 December 2021, 3,374,630 options (2020: 4,399,815 options) were granted to one executive
director of the Company, out of which 843,657 options were voluntarily waived in February 2022, and 40,500 awarded
shares were granted to four independent non-executive directors of the Company (2020: 59,500 awarded shares were
granted to five independent non-executive directors of the Company).
No director received any emolument from the Group as an inducement to join or leave the Group or compensation for
loss of office. No director waived or has agreed to waive any emoluments during the years ended 31 December 2021 and
2020.
00
250
Tencent Holdings Limited
Notes to the Consolidated Financial Statements
For the year ended 31 December 2021
14 BENEFITS AND INTERESTS OF DIRECTORS (continued)
(b) Directors' termination benefits
No director's termination benefit subsisted at the end of the year or at any time during the year.
(c) Consideration provided to third parties for making available directors' services
No consideration provided to or receivable by third parties for making available directors' services subsisted at the
end of the year or at any time during the year.
(d) Information about loans, quasi-loans and other dealings in favour of directors, their controlled bodies and
connected entities
No loans, quasi-loans and other dealings in favour of directors, their controlled bodies corporate and connected
entities subsisted at the end of the year or at any time during the year.
(e) Directors' material interests in transactions, arrangements or contracts
No significant transactions, arrangements and contracts in relation to the Group's business to which the Company
was a party and in which a director of the Company had a material interest, whether directly or indirectly, subsisted
at the end of the year or at any time during the year.
15 DIVIDENDS
(a) Final dividends
The final dividends amounting to HKD15,238 million (2020: HKD11,378 million) were paid during the year ended
31 December 2021.
A final dividend in respect of the year ended 31 December 2021 of HKD1.60 per share (2020: HKD1.60 per
share) was proposed pursuant to a resolution passed by the Board on 23 March 2022 and subject to the approval
of the shareholders at the 2022 annual general meeting of the Company to be held on 18 May 2022 or any
adjournment thereof. This proposed dividend is not reflected as dividend payable in the consolidated financial
statements.
Annual Report 2021 251
Notes to the Consolidated Financial Statements
For the year ended 31 December 2021
15 DIVIDENDS (continued)
(b) Interim dividend by way of distribution in specie
506,860
109
402,287
88
1,174
6,499
33,616
386,340
85
427,714
lain Ferguson Bruce
1,010
3,630
4,640
lan Charles Stone
1,010
4,636
5,646
00
Li Dong Sheng
2,318
3,076
Jacobus Petrus (Koos) Bekker
Charles St Leger Searle
Yang Siu Shun
Ke Yang
926
757
3,919
4,845
1,444
2,201
6,809
13,205
84,362
758
61,914
Annual Report 2021
(28,393)
815
34,314
1
1,079
36,209
Disposals
(36)
(1,667)
(13)
(1,716)
Amortisation
(631)
(26,620)
(866)
(956)
(29,073)
Impairment provision
(4,205)
(92)
Additions
(92)
28,482
3,430
Net book amount
93,456
1,956
23,540
7,759
2,149
128,860
Year ended 31 December 2020
Opening net book amount
93,456
1,956
23,540
7,759
2,149
128,860
Business combinations
18,034
1,634
4,563
821
(483)
(4,872)
Currency translation differences
(73,366)
(2,183)
(2,891)
(87,264)
Currency translation differences
2,106
257
168
(49)
2,481
Net book amount
108,623
3,627
10,000
3,025
159,437
Annual Report 2021
259
(999)
(3,251)
(5,573)
Accumulated amortisation and impairment
244,220
1,338
(19)
124
159
(55)
1,547
Closing net book amount
108,623
3,627
934
34,162
3,025
159,437
At 31 December 2020
Cost
112,090
6,879
107,271
12,015
5,965
10,000
9
34,162
18
171,376
At 31 December 2021
Cost
131,347
12,679
125,114
12,977
9,354
291,471
Accumulated amortisation and impairment
(14,275)
(4,355)
(88,359)
(3,256)
(3,799)
(114,044)
Currency translation differences
(4,899)
(83)
5,398
(466)
9,275
8,241
(1,071)
133
(967)
(31,430)
(8,702)
(3)
9
(1)
(3)
(8,700)
Currency translation differences
(7,005)
(82)
(723)
(614)
(108)
(8,532)
Closing net book amount
112,173
36,289
(446)
Impairment (provision)/reversal
(1,906)
Total
RMB'Million
RMB'Million
At 1 January 2020
Cost
94,056
4,553
78,911
8,535
4,049
190,104
Accumulated amortisation and impairment
(1,368)
(2,615)
768
(55,504)
(785)
(62,178)
(157)
Others
Trademarks
RMB'Million
Currency translation differences
RMB'Million
Net book amount
(6,051)
112,173
8,241
36,289
RMB'Million RMB'Million
5,398
171,376
00
9,275
Tencent Holdings Limited
Media
contents
258
Goodwill
software and
technology
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
20 INTANGIBLE ASSETS (continued)
Computer
267
Annual Report 2021
409,098
586,049
102,451
Dividends payable for distribution in specie (Note 15(b))
Financial liabilities measured according to IFRIC 17:
5,309
21,947
Other financial liabilities (Note 39)
Financial liabilities at fair value:
27,873
31,220
customers and others, staff costs and welfare accruals) (Note 41)
Other payables and accruals (excluding prepayments received from
14,020
Lease liabilities (Note 18)
2,802
Notes to the Consolidated Financial Statements
2020
23 FINANCIAL INSTRUMENTS BY CATEGORY (continued)
9,000
94,030
Treasury investments and others
133,506
163,382
Investments in unlisted entities
23,554
19,802
For the year ended 31 December 2021
Investments in listed entities
RMB'Million
2021
As at 31 December
Included in non-current assets:
FVPL include the following:
00
24 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
The Group's exposure to various risks associated with the financial instruments is discussed in Note 3. The maximum
exposure to credit risk at the end of the reporting period is the carrying amount of each class of financial assets
mentioned above.
RMB'Million
100,168
Other financial assets (Note 27)
Accounts payable (Note 40)
FVOCI (Note 25)
172,537
202,757
FVPL (Note 24)
Financial assets at fair value:
8
1,284
Other financial assets (Note 27)
250,257
2,520
Restricted cash (Note 31(b))
152,798
167,966
Cash and cash equivalents (Note 31(a))
44,981
49,331
8,884
Accounts receivable (Note 30)
2,476
109,470
213,091
102,451
9,512
6,664
Other financial liabilities (Note 39)
9,910
9,966
Long-term payables (Note 38)
122,057
145,590
Assets held for distribution (Note 32)
Notes payable (Note 37)
155,939
Borrowings (Note 36)
Financial liabilities at amortised cost:
Financial liabilities
704,759
914,234
1,129
1,726
126,387
192,184
(i)
Included in current assets:
3,748
(16,592)
Share of (loss)/profit of associates (Note 10)
15,492
18,646
Dilution gains on deemed disposal (Note 7(a))
33,585
(19,731)
Share of other comprehensive income of associates
37,651
Transfers (Note (b))
Additions (Note (a))
213,614
269
Annual Report 2021
Management has assessed the level of influence that the Group exercises on certain FVPL with shareholding exceeding 20%.
Since these investments are either held in form of redeemable instruments or interests in limited life partnership without
significant influence, these investments have been classified as FVPL.
except as described in Note 21(b), transfers also mainly comprised certain investments with an aggregate amount of
approximately RMB27,233 million designated as FVOCI due to the conversion of preferred shares into ordinary shares
upon their IPOs.
new investments and additional investments with an aggregate amount of approximately RMB80,946 million in listed
and unlisted entities. These companies are principally engaged in express delivery, Internet platform, retail, eCommerce,
technology and other Internet-related businesses. None of the above investment was individually significant that triggers
any disclosure requirements pursuant to Chapter 14 of the Listing Rules at the time of inception; and
51,288
an additional investment in a social network platform of approximately USD531 million (equivalent to approximately
RMB3,432 million);
508
Share of other changes in net assets of associates
297,609
103,304
316,574
(2,329)
(3,548)
At end of the year
Currency translation differences
(5,254)
363
(15,391)
(2,227)
(3,238)
Disposals
(344)
(1,407)
Dividends
3,310
8,430
Impairment provision, net (Note (c))
165,944
(iii)
During the year ended 31 December 2021, the Group's additions and transfers mainly comprised the following:
RMB'Million
2020
2021
Movement of FVPL is analysed as follows:
24 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (continued)
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
268 Tencent Holdings Limited
RMB'Million
172,537
6,593
10,573
6,583
10,569
Treasury investments and others
10
4
Investments in listed entities
202,757
(ii)
At beginning of the year
135,936
(b)
(a)
Note:
172,537
202,757
At end of the year
(9,302)
(6,298)
172,537
Currency translation differences
(34,282)
Disposals and others
37,257
47,560
Changes in fair value (Note 7)
21,960
23,240
Additions and transfers (Note (a) and Note 21(b))
(13,314)
Term deposits (Note 29)
21 INVESTMENTS IN ASSOCIATES (continued)
32,682
(v)
(b)
the Group acquired additional ordinary shares of an existing investee, which is engaged in games development at a cash
consideration of approximately RMB2,795 million. Upon completion of the additional investment, the Group's equity
interests in the investee have been increased from 5% to 10%. Since there is no change in the assessment of significant
influence, this investment continues to be considered as an associate of the Group; and
the Group acquired 27% shares of a new investee engaged in games development at a cash consideration of
approximately USD540 million (equivalent to approximately RMB3,474 million);
the Group acquired additional ordinary shares of an existing investee, which is engaged in eCommerce at a cash
consideration of approximately RMB3,554 million. Upon completion of the additional investment, the Group's equity
interests in the investee have been increased from 5.23% to 6.26%. Since there is no change in the assessment of
significant influence, this investment continues to be considered as an associate of the Group;
(iv)
(iii)
(ii)
new associates and additional investments in existing associates with an aggregate amount of approximately RMB33,673
million during the year ended 31 December 2021, which are principally engaged in games development, eCommerce
platform and other Internet-related businesses.
a consortium (the "UMG Consortium") formed together with Tencent Music Entertainment Group ("TME"), a non wholly-
owned subsidiary of the Company, and certain global financial investors to acquire additional 10% equity interests in
Universal Music Group ("UMG") from its parent company, Vivendi S.A.. The Group's additional investment in the UMG
Consortium amounted to approximately EUR975 million (equivalent to approximately RMB7,792 million), and the
investment remained as an associate;
During the year ended 31 December 2021, the Group's additions to investments in associates mainly comprised the following:
(a)
Note:
21 INVESTMENTS IN ASSOCIATES (continued)
For the year ended 31 December 2021
297,609
At beginning of the year
RMB'Million
(i)
RMB'Million
During the year ended 31 December 2021, transfers mainly comprised the following:
(ii)
The associates of the Group have been accounted for by using equity method based on the financial information of the
associates prepared under the accounting policies generally consistent with those of the Group.
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
264 Tencent Holdings Limited
00
During the year ended 31 December 2021, an aggregate impairment loss of approximately RMB15,391 million (2020:
RMB5,254 million) has been recognised for associates with impairment indicators. The majority of these associates' recoverable
amounts were determined using fair value less costs of disposal where the fair value is determined according to the principle set
out in Note 3.3.
In respect of the recoverable amount using value in use, the discounted cash flows calculations were based on cash flow
projections estimated by management and the key assumptions adopted in these cash flow projections included revenue growth
rates, profit margins and discount rates. In respect of the recoverable amount based on fair value less costs of disposal, the
amount was calculated with reference to their respective market prices, or using certain key valuation assumptions including the
selection of comparable companies, recent market transactions and liquidity discount for lack of marketability.
Both external and internal sources of information of associates are considered in assessing whether there is any indication that
the investment may be impaired, including but not limited to financial position, business performance and market capitalisation.
The Group carries out impairment assessment on those investments with impairment indications, and the respective recoverable
amounts of investments are determined with reference to the higher of fair value less costs of disposal and value in use.
(i)
(c)
21 INVESTMENTS IN ASSOCIATES (continued)
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
Annual Report 2021 263
investments in associates of approximately RMB33,982 million transferred from FVPL mainly due to conversion of the
redeemable instruments into ordinary shares upon their IPOs or obtaining board representatives.
(iii)
investment in an existing associate engaged in games development of approximately RMB6.6 billion transferred to FVOCI
(Note 25(v)) as a result of retirement of board representative; and
the entire investment in JD.com of the Group with a carrying value of approximately RMB39.0 billion was transferred
from investment in an associate to financial instruments as a result of resignation of board representative and the Group
irrevocably designated it as FVOCI (Note 25(iv)) with step down gain of approximately RMB78.0 billion recognised in "Other
gains, net" (Note 7(a));
Note: (continued)
The Group's share of the results, the revenues, the aggregated assets (including goodwill) and liabilities of its associates,
as well as the fair value of its stakes in the associates which are listed entities, are shown in aggregate as follows:
2020
297,609
Impairment tests for goodwill (continued)
20 INTANGIBLE ASSETS (continued)
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
Tencent Holdings Limited
260
00
For goodwill attributable to the Group's online game business within VAS segment, fair value less costs of disposal was
primarily determined based on ratios of EV (enterprise value) divided by EBITDA of several comparable public companies
(range: 15-22x) (2020: range: 20-27x) multiplied by the EBITDA of the related CGU (or group of CGUs) and discounted
for lack of marketability at a range of 10% to 20% (2020: 10% to 20%). The comparable public companies were chosen
based on factors such as industry similarity, company size, profitability and financial risks etc.
For goodwill attributable to the Group's online music business and online literature business within VAS segment,
FinTech and Business Services segment and television series and film production within Others segment, value in use
using discounted cash flows was calculated, generally, based on five-year financial projections plus a terminal value
related to cash flows beyond the projection period extrapolated at an estimated terminal growth rate of generally not
more than 5% (2020: not more than 5%). Pre-tax discount rates ranging from 14% to 22% (2020: 13% to 23%) were
applied, which reflected assessment of time value and specific risks relating to the industries that the Group operates
in. Management leveraged their experiences in the industries and provided forecast based on past performance and
their anticipation of future business and market developments. Key parameters applied in the financial projections for
impairment review purpose also included revenue growth rates, on a compound annual basis, of not more than 25%
(2020: not more than 22%).
The key assumptions used for the calculation of the recoverable amounts of the CGUs (or groups of CGUs) under
impairment testing were as follows:
Goodwill was allocated to VAS segment with RMB101,345 million (31 December 2020: RMB104,688 million), Online
Advertising segment with RMB6,478 million (31 December 2020: nil), FinTech and Business Services segment with
RMB1,433 million (31 December 2020: RMB1,018 million) and Others segment with RMB2,917 million (31 December
2020: RMB2,917 million).
Impairment tests for goodwill
During the year ended 31 December 2021, impairment losses of RMB8,713 million (2020: RMB4,780 million) on
goodwill and other intangible assets arising from acquisitions were charged to the consolidated income statement under
"Other gains/(losses), net", and RMB13 million were reversed from (2020: RMB92 million were charged to) "Cost of
revenues".
During the year ended 31 December 2021, amortisation of RMB28,595 million (2020: RMB26,758 million) and
RMB2,835 million (2020: RMB2,315 million) were charged to cost of revenues and general and administrative
expenses, respectively.
20 INTANGIBLE ASSETS (continued)
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
The Group carries out its impairment testing on goodwill by comparing the recoverable amounts of CGUS or groups of
CGUS to their carrying amounts. For the purpose of goodwill impairment review, the recoverable amount of a CGU (or
groups of CGUS) is the higher of its fair value less costs of disposal and its value in use.
2021
Management has not identified any reasonably possible change in key assumptions that could cause carrying amounts
of the above CGUS (or groups of CGUS) to exceed the recoverable amounts.
In the CGUS related to interactive live video business and Online Advertising segment, the recoverable amounts were
determined using discounted cash flow calculations which derived from five-year period financial projections with
compound annual revenue growth rates of not more than 15% plus a terminal value calculated at a growth rate of not
more than 5%. Pre-tax discount rate of 15% was applied in the discounted cash flows calculations, which reflected time
value of money and the assessment of specific risks of the respective industries.
316,574
126,561
115,789
171,048
200,785
RMB'Million
RMB'Million
2020
In light of the economic, operating environment and market uncertainties at the financial year end, the carrying amounts
of the CGUS related to interactive live video business within VAS segment and Online Advertising segment have been
reduced to their respective recoverable amounts through recognition of impairment loss against goodwill of RMB4,012
million and RMB4,500 million respectively as a result of the impairment test performed as detailed below.
2021
- Unlisted entities
- Listed entities
Investments in associates
21 INVESTMENTS IN ASSOCIATES
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
Annual Report 2021 261
The remaining goodwill allocated to the CGUS (or groups of CGUs) after impairment related to Online Advertising
segment and interactive live video business was not material to the Group's consolidated financial statements and
therefore no sensitivity analysis was presented.
As at 31 December
17,527
Fair value
of stakes
in listed
Notes to the Consolidated Financial Statements
265
Annual Report 2021
As at 31 December 2021, listed entities of the investments in associates consist of directly and indirectly held listed equity interests.
Note:
4,111
363
3,748
For the year ended 31 December 2021
256,656
628,033
(305)
(186)
(119)
54,044
188,289
314,850
Non-listed entities
330,424
981,902
21 INVESTMENTS IN ASSOCIATES (continued)
There were no material contingent liabilities relating to the Group's interests in the associates.
Deposits and other receivables (Note 26)
Financial assets at amortised cost:
RMB'Million
RMB'Million
2020
2021
As at 31 December
Financial assets
Management has assessed the level of influence that the Group exercises on certain associates with the respective
shareholding below 20% and certain associates with shareholding over 50% (voting power is below 50%), with
total carrying amounts of RMB214,927 million and RMB18,675 million as at 31 December 2021, respectively (31
December 2020: RMB212,349 million and RMB15,936 million, respectively). Management determined that it has
significant influence thereon through the board representation or other arrangements made, and it has no control or
joint control over such investees as the Group has no power to direct relevant activities due to other arrangements made.
Consequently, these investments have been classified as associates.
As at 31 December 2021, the financial instruments of the Group are analysed as follows:
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
266 Tencent Holdings Limited
During the year ended 31 December 2021, the Group made an aggregate impairment provision of RMB904 million (2020:
RMB1,388 million) against the carrying amounts of the investments in joint ventures, based on the respective assessed
recoverable amounts.
Share of profit amounting to RMB148 million was recognised during the year ended 31 December 2021 (2020: share of
loss amounting to RMB76 million) (Note 10).
00
As at 31 December 2021, the Group's investments in joint ventures of RMB6,614 million (31 December 2020:
RMB7,649 million) mainly comprised an investee company that is a special purpose vehicle of which the Group has a
majority stake therein for the investment in one of the telecommunication carriers in the PRC and other joint venture
initiatives in new retail and entertainment-related businesses.
22 INVESTMENTS IN JOINT VENTURES
23 FINANCIAL INSTRUMENTS BY CATEGORY
(Loss)/profit
4,416
3,867
285,557
150,572
351,357
Listed entities (Note)
00
2021
RMB'Million
31 December
(13,956)
as at
Revenues
RMB'Million
Liabilities
RMB'Million
RMB'Million
Assets
associates
Total
Other
from
continuing comprehensive comprehensive
operation
income (loss)/income
RMB'Million RMB'Million RMB'Million
549
157
634,661
202,612
142,135
313,183
Listed entities
2020
(16,084)
508
(16,592)
(13,799)
339,926
643,552
(2,285)
351
(2,636)
54,369
176,406
292,195
Non-listed entities
326,978
262 Tencent Holdings Limited
Notes to the Consolidated Financial Statements
Annual Report 2021
Credited to consolidated statement of changes in equity
247
421
668
Currency translation differences
(79)
375
296
Set-off of deferred income tax assets/liabilities
(1,119)
1,119
At 31 December 2021
26,068
(13,142)
12,926
Deferred
Deferred
Business combinations
5,368
(12,841)
18,209
At 1 January 2020
RMB'Million
3,313
RMB'Million
net
liabilities
assets
Deferred
income tax,
income tax
income tax
RMB'Million
3,313
Withholding taxes paid
5,787
income tax
Deferred
The movements of the deferred income tax assets/liabilities account were as follows:
28 DEFERRED INCOME TAXES (continued)
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
Deferred
income tax
272 Tencent Holdings Limited
(19,718)
(17,918)
(1,727)
(1,299)
― to be recovered within 12 months
(17,991)
00
165
assets
Deferred
income tax,
net
232
5,555
Credited to consolidated income statement (Note 11)
(2,425)
(2,541)
116
liabilities
Business combinations
(16,061)
21,348
At 1 January 2021
RMB'Million
RMB'Million
RMB'Million
5,287
(16,619)
(1,985)
Credited/(charged) to consolidated income statement (Note 11)
expenses
RMB'Million
payments
and others
RMB'Million
Total
RMB'Million
(Note)
At 1 January 2021
7,167
297
10,458
7,083
25,005
Business combinations
13
84
19
116
Credited to consolidated income statement
8,267
At 31 December 2021
(79)
(115)
36
Currency translation differences
Tax losses
RMB'Million
247
Credited to consolidated statement of changes in equity
5,555
1,614
1,480
1,374
1,087
247
RMB'Million
assets
Accrued
(210)
35
(245)
Currency translation differences
(1,130)
(1,106)
Set-off of deferred income tax assets/liabilities
(24)
3,477
3,477
Withholding taxes paid
(398)
(5,129)
4,731
Charged to consolidated statement of changes in equity
(1,820)
(1,488)
At 31 December 2020
of intangible
Share-based
amortisation
Accelerated
Deferred income tax assets on temporary differences arising from
The movements of deferred income tax assets before offsetting were as follows:
1,488
28 DEFERRED INCOME TAXES (continued)
Notes to the Consolidated Financial Statements
273
Annual Report 2021
5,287
(16,061)
21,348
For the year ended 31 December 2021
1,707
― to be recovered after more than 12 months
25,005
(6,957)
(5,656)
(9,802)
250,257
213,091
During the year ended 31 December 2021, except as described in Note 24(a)(iii), the Group's additions and transfers mainly comprised
the following:
(i)
an additional investment in an eCommerce entity of approximately JPY72,406 million (equivalent to approximately RMB4,294
million);
(ii)
a new investment in a games development entity of approximately RMB2,616 million;
(iii)
new investments and additional investments with an aggregate amount of approximately RMB23,473 million. These companies
are principally engaged in publishing, Internet platform, technology, property management and other Internet-related businesses;
(iv)
(v)
transfer from investment in an associate in relation to the Class A ordinary shares of JD.com held by the Group to the extent of
approximately RMB15.2 billion (Note 21(b)(i)) (other than those held by the Group for the Distribution in Specie of approximately
RMB97.1 billion that were classified as "Assets held for distribution" (Note 32)); and
an existing investee company engaged in games development with carrying value of approximately RMB6.6 billion transferred
from investment in an associate to FVOCI due to retirement of board representative, resulting in step down gain of approximately
RMB11.6 billion (Note 7(a)(ii)).
00
Prepayments for capital transactions
15,415
18,518
Prepayments for media contents and game licences
RMB'Million
RMB'Million
(33,555)
2020
As at 31 December
Included in non-current assets:
26 PREPAYMENTS, DEPOSITS AND OTHER ASSETS
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
270 Tencent Holdings Limited
2021
131,655
(16,834)
16,474
Note:
At end of the year
Currency translation differences
Disposals
Changes in fair value
Additions and transfers (Note)
As at 31 December
At beginning of the year
Treasury investments
Equity investments in unlisted entities
Equity investments in listed entities
FVOCI include the following:
25 FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
For the year ended 31 December 2021
Movement of FVOCI is analysed as follows:
6,717
2021
RMB'Million
93,211
81,721
213,091
RMB'Million
RMB'Million
2020
2020
2021
250,257
13,626
22,392
77
199,465
227,788
RMB'Million
213,091
Deferred income tax liabilities:
889
4,058
65,390
40,321
102,567
64,951
Note:
(a)
As at 31 December 2021, the balances of loans to investees and investees' shareholders were mainly repayable within a period
of one to five years (included in non-current assets), or within one year (included in current assets), and are interest-bearing at
rates of not higher than 12.0% per annum (31 December 2020: not higher than 12.0% per annum).
(b)
Running royalty fees for online games comprised prepaid royalty fees, unamortised running royalty fees and deferred Online
Service Fees.
As at 31 December 2021, the carrying amounts of deposits and other assets (excluding prepayments and refundable
value-added tax) approximated their fair values. As at 31 December 2021, loss allowances made against the gross
amounts of deposits and other assets were not significant.
Annual Report 2021 271
Notes to the Consolidated Financial Statements
For the year ended 31 December 2021
27 OTHER FINANCIAL ASSETS
As at 31 December 2021, the Group's other financial assets mainly comprised the treasury investments measured at
amortised cost amounting to RMB1,284 million (31 December 2020: RMB8 million), and the outstanding interest rate
swap contracts measured at fair value amounting to RMB1,253 million (31 December 2020: RMB5 million) to hedge the
Group's exposure arising from borrowings and senior notes carried at floating rates.
28 DEFERRED INCOME TAXES
Deferred income taxes are calculated in full on temporary differences under the liability method using the tax rates which
are expected to apply at the time of reversal of the temporary differences.
30,844
11,873
12,966
13,132
17,878
RMB'Million
6,659
RMB'Million
2021
As at 31 December
- to be recovered within 12 months
- to be recovered after more than 12 months
Deferred income tax assets:
The analysis of deferred income tax assets and liabilities before offsetting is as follows:
2020
10,211
Others
182
15,795
Running royalty fees for online games (Note (b))
10,244
18,714
Prepayments and prepaid expenses
Included in current assets:
14,499
24,630
6,581
7,439
667
445
Running royalty fees for online games (Note (b))
Others
1,078
37,177
Loans to investees and investees' shareholders (Note (a))
Receivables related to financial services
3,700
1,128
Dividend and other investment-related receivables
865
1,151
Refundable value-added tax
258
10,343
1,154
966
1,290
Lease deposits and other deposits
2,948
5,604
Interest receivables
Loans to investees and investees' shareholders (Note (a))
12,022
8,848
30,844
83,813
68,487
103,304
100,168
Term deposits with initial terms of over three months were neither past due nor impaired. As at 31 December 2021, the
carrying amounts of the term deposits with initial terms of over three months approximated their fair values.
00
276
Tencent Holdings Limited
30 ACCOUNTS RECEIVABLE
Notes to the Consolidated Financial Statements
Accounts receivable from contracts with customers
Loss allowance
For the year ended 31 December 2021
Accounts receivable and their ageing analysis, based on recognition date, are as follows:
0-30 days
31 - 60 days
61 - 90 days
44,981
49,331
(3,892)
(4,129)
48,873
53,460
2,913
RMB'Million
2020
2021
As at 31 December
The majority of the Group's accounts receivable were denominated in RMB.
Over 90 days
~
RMB'Million
3,964
14,083
24,039
RMB term deposits
Included in non-current assets:
An analysis of the Group's term deposits by currencies is as follows:
29 TERM DEPOSITS
As at 31 December 2021, the Group recognised the relevant deferred income tax liabilities of RMB3,926 million (31
December 2020: RMB6, 188 million) on earnings anticipated to be remitted by certain subsidiaries in the foreseeable
future. No withholding tax had been provided for the earnings of approximately RMB96,262 million (31 December 2020:
RMB33,832 million) expected to be retained by the PRC subsidiaries and not to be remitted to a foreign investor in the
foreseeable future based on several factors, including management's estimation of overseas funding requirements.
28 DEFERRED INCOME TAXES (continued)
Other currencies
For the year ended 31 December 2021
275
Annual Report 2021
(19,718)
(300)
(3,845)
(928)
Notes to the Consolidated Financial Statements
As at 31 December
As at 31 December
RMB'Million
51,491
55,810
Other currencies
USD term deposits
RMB term deposits
Included in current assets:
2021
31,681
16
18
31,665
19,473
RMB'Million
2020
19,491
(3,561)
2021
RMB'Million
5,189
49,331
44,981
Some online advertising customers and agencies are usually granted with a credit period within 90 days immediately
following the month-end in which the relevant obligations under the relevant contracted advertising orders are delivered.
Third party platform providers usually settle the amounts due by them within 60 days. Other customers, mainly including
content production related customers and FinTech and cloud customers, are usually granted with a credit period within
90 days.
The Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised
from initial recognition of the assets. The provision matrix is determined based on historical observed default rates over
the expected life of the receivables with similar credit risk characteristics and is adjusted for forward-looking estimates.
The historical observed default rates are updated and changes in the forward-looking estimates are analysed at year end.
For the years ended 31 December 2021 and 2020, information about the impairment of accounts receivable and the
Group's exposure to credit risk and foreign exchange risk can be found in Note 3.1.
As at 31 December 2021, the carrying amounts of accounts receivable approximated their fair values.
00
278
Tencent Holdings Limited
31 BANK BALANCES AND CASH
(a) Cash and cash equivalents
Notes to the Consolidated Financial Statements
For the year ended 31 December 2021
2021
2020
RMB'Million
RMB'Million
On the Declaration Date, the JD.com Shares of approximately RMB97.1 billion designated as FVOCI were measured at
fair value and classified as assets held for distribution. Subsequent changes in the fair value of these JD.com Shares
amounting to approximately RMB5.4 billion were recorded in other comprehensive income during the year ended
31 December 2021.
As at 31 December 2021, assets held for distribution represented the JD.com Shares held by the Group to be distributed
in specie as the interim dividend declared on 23 December 2021 (Note 15(b) and Note 25(iv)).
32 ASSETS HELD FOR DISTRIBUTION
As at 31 December 2021, restricted deposits held at banks of RMB2,476 million (31 December 2020: RMB2,520
million) were mainly denominated in RMB, the majority of which were reserves provided for certain licensed
business under regulatory requirements.
(b) Restricted cash
Approximately RMB77,181 million (31 December 2020: RMB58,651 million) and RMB1,133 million (31
December 2020: RMB7,207 million) within the total balance of the Group's cash and cash equivalents were
denominated in RMB and placed with banks in the Mainland of China and Hong Kong, respectively.
5,621
152,798
67,565
83,156
Term deposits and highly liquid investments with initial terms
within three months
Bank balances and cash
85,233
84,810
167,966
5,580
4,324
5,416
Notes to the Consolidated Financial Statements
277
Annual Report 2021
44,981
49,331
9,900
For the year ended 31 December 2021
8,332
6,105
10,867
13,255
19,708
21,639
RMB'Million
4,506
2020
30 ACCOUNTS RECEIVABLE (continued)
FinTech and cloud customers
6,087
12,961
13,751
15,835
19,548
RMB'Million
The carrying amounts of accounts receivable of the Group's major agents/customers are as follows:
RMB'Million
2021
As at 31 December
Others
Content production related customers
Third party platform providers
Online advertising customers and agencies
2020
(6,188)
(4,896)
At 31 December 2020
Deferred income tax liabilities on temporary differences arising from
Withholding
Intangible
assets
tax on the
acquired
earnings
anticipated to
Changes in
fair value
Deemed
Accelerated
in business
be remitted by
of FVPL
disposals of
tax
combinations
subsidiaries
and FVOCI
(3,561)
(6,188)
(4,896)
At 1 January 2021
RMB'Million
RMB'Million
For the year ended 31 December 2021
RMB'Million
RMB'Million
RMB'Million RMB'Million
Total
Others
depreciation
investees
RMB'Million
The movements of deferred income tax liabilities before offsetting were as follows:
28 DEFERRED INCOME TAXES (continued)
Notes to the Consolidated Financial Statements
2,214
1,792
(387)
1,112
Credited/(charged) to consolidated income statement
165
4,731
165
20,378
4,973
8,666
684
6,055
At 1 January 2020
Business combinations
(928)
Charged to consolidated statement of changes in equity
(24)
Tencent Holdings Limited
274
00
The Group only recognises deferred income tax assets for cumulative tax losses if it is probable that future taxable profits will be
available to utilise those tax losses. Management will continue to assess the recognition of deferred income tax assets in future reporting
periods. As at 31 December 2021, the Group did not recognise deferred income tax assets of RMB2,922 million (31 December 2020:
RMB2,783 million) in respect of cumulative tax losses amounting to RMB13,412 million (31 December 2020: RMB12,690 million).
These tax losses in the Mainland of China will expire from 2022 to 2026.
Note:
25,005
(24)
7,083
297
7,167
At 31 December 2020
(245)
(245)
Currency translation differences
10,458
(3,845)
(300)
(19,718)
760
income statement
Credited/(charged) to consolidated
(1,985)
(20)
(1,965)
(3,900)
Business combinations
(227)
(2,746)
(886)
(1,743)
(5,781)
(3,627)
(15,010)
At 1 January 2020
(794)
(1,099)
35
(1,106)
82
16
(64)
Currency translation differences
(42)
(1,106)
Charged to consolidated statement of
3,477
3,477
Withholding tax paid
(5,129)
(54)
changes in equity
279
(17,918)
(3,655)
3,313
Withholding tax paid
232
(98)
190
(35)
3,313
263
962
income statement
Credited/(charged) to consolidated
(2,541)
(2,541)
Business combinations
(1,050)
(122)
Credited to consolidated statement of
421
(963)
(2,827)
(3,926)
(6,425)
At 31 December 2021
375
changes in equity
16
50
421
1280
(1)
50
Currency translation differences
276
As at 31 December
Notes to the Consolidated Financial Statements
associates and joint ventures
(2,090)
- shares vested from share award schemes and
transferred to the grantees (Note (d))
Repurchase and cancellation of shares (Note (e))
15,213,243
- shares allotted for share award schemes (Note (c))
(2,827)
(2,827)
18,347
18,347
- shares withheld for share award schemes (Note (b))
- value of employee services
Employee share award schemes:
1,043
1,661
1,043
4,834,315
1,661
- shares issued (Note (a))
- value of employee services
Employee share option schemes:
44,381
(4,412)
48,793
9,593,912,711
At 1 January 2021
RMB'Million
Total
for share
award schemes
RMB'Million
2,090
(5,581,800)
(2,170)
(2,170)
31,269
(4,002)
35,271
9,552,615,286
At 1 January 2020
Total
RMB'Million
for share
award schemes
RMB'Million
RMB'Million
Share capital Share premium
RMB'Million
paid ordinary
shares*
Shares held
Number of
issued and fully
33 SHARE CAPITAL, SHARE PREMIUM AND SHARES HELD FOR SHARE AWARD SCHEMES (continued)
Share premium
RMB'Million
For the year ended 31 December 2021
Tencent Holdings Limited
280
00
62,487
(4,843)
67,330
9,608,378,469
2,052
306
1,746
At 31 December 2021
non-controlling interests
Transfer of equity interests of subsidiaries to
Notes to the Consolidated Financial Statements
RMB'Million
Share capital
paid ordinary
shares*
(18,032)
8
(18,032)
Lapses of put option liability in respect of
non-controlling interests
783
783
Other fair value gains, net
2,706
2,706
Gain from changes in fair value of
assets held for distribution
5,380
5,380
8
Balance at 31 December 2021
102,223
14,743
(23,903)
4,929
8,004
589
73,901
Annual Report 2021
283
Notes to the Consolidated Financial Statements
For the year ended 31 December 2021
34
OTHER RESERVES (continued)
(32,684)
Employee share option schemes:
Currency translation differences
disposal of associates
Shares held
Number of
issued and fully
As at 31 December 2021 and 2020, the authorised share capital of the Company comprises 50,000,000,000 ordinary
shares with par value of HKD0.00002 per share.
33 SHARE CAPITAL, SHARE PREMIUM AND SHARES HELD FOR SHARE AWARD SCHEMES
For the year ended 31 December 2021
1,483
Dilution of/changes in interests
in subsidiaries
205
Profit appropriations to statutory reserves
Net losses from changes in fair
value of FVOCI
Share of other comprehensive income of
and joint ventures
Transfer of share of other comprehensive
upon disposal and deemed
(15,073)
12
512
(4,305)
(2,323)
(1,289)
1,483
205
669
669
(15,073)
512
loss to profit or loss
Investments
- value of employee services
1,768
joint ventures to profit or
net assets of associates and
Transfer of share of other changes in
8,429
(22,393)
8,429
associates and joint ventures
Share of other changes in net assets of
(22,393)
(Note (d))
instruments to retained earnings
deemed disposal of financial
Transfer of gains on disposal and
121,139
(2,117)
6,878
4,260
(5,871)
10,918
134,309
(27,238)
Balance at 1 January 2021
(Note (c))
(Note (b))
(Note (a))
Total
RMB'Million
Others
RMB'Million
loss upon disposal and deemed
disposal
(5,089)
(5,089)
of non-controlling interests
Changes in put option liabilities in respect
(1,289)
arising from business combinations
Recognition of put option liabilities
(2,323)
to non-controlling interests
Transfer of equity interests of subsidiaries
(4,305)
(Note (e))
in non wholly-owned subsidiaries
462
462
reserves
RMB'Million
53
611
611
53
(35)
(35)
Tax benefit from share-based payments
Acquisition of additional equity interests
- Employee share award schemes
- Employee share option schemes
Value of employee services:
of associates and joint ventures
disposal and deemed disposal
income to retained earnings upon
Transfer of share of other comprehensive
ទ≡
RMB'Million
RMB'Million
RMB'Million
Notes to the Consolidated Financial Statements
Annual Report 2021 281
As at 31 December 2021, the total number of issued ordinary shares of the Company included 69,902,440 shares (31 December
2020: 81,517,187 shares) held under the Share Award Schemes.
44,381
(4,412)
48,793
1,773
246
1,527
9,593,912,711
At 31 December 2020
non-controlling interests
1,209
For the year ended 31 December 2021
(1,209)
26,640,678
- shares allotted for share award schemes (Note (c))
(1,865)
(1,865)
9,720
9,720
- shares withheld for share award schemes (Note (b))
-value of employee services
Employee share award schemes:
1,716
1,768
1,716
14,656,747
- shares vested from share award schemes and
transferred to the grantees (Note (d))
Transfer of equity interests of subsidiaries to
- shares issued (Note (a))
33 SHARE CAPITAL, SHARE PREMIUM AND SHARES HELD FOR SHARE AWARD SCHEMES (continued)
(a)
RMB'Million
RMB'Million
reserves
differences
ventures
FVOCI
reserves
Share-based
compensation
PRC
statutory
translation
and joint
Capital
Currency
Note:
in associates
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
282 Tencent Holdings Limited
During the year ended 31 December 2021, the Company repurchased 5,581,800 of its own shares from the market which were
subsequently cancelled (2020: nil). The shares were acquired at prices ranging from HKD412.60 to HKD516.00, with an average
price of HKD465.58 per share.
During the year ended 31 December 2021, the Share Scheme Trust transferred 32,749,222 ordinary shares of the Company
(2020: 27,351,216 ordinary shares) to the share awardees upon vesting of the awarded shares (Note 35(b)).
(e)
(d)
During the year ended 31 December 2021, the Company allotted 15,213,243 ordinary shares (2020: 26,640,678 ordinary
shares) to the Share Scheme Trust for the purpose of granting awarded shares to the participants under the Share Award
Schemes.
(c)
00
During the year ended 31 December 2021, the Share Scheme Trust withheld 5,921,232 ordinary shares (2020: 4,259,939
ordinary shares) of the Company for an amount of approximately HKD3,394 million (equivalent to approximately RMB2,827
million) (2020: HKD2,108 million (equivalent to approximately RMB1,865 million)), which had been deducted from the equity.
During the year ended 31 December 2021, 4,834,315 Post-IPO options (2020: 15,656,921 Post-IPO options) with exercise
prices ranging from HKD116.40 to HKD546.50 (2020: HKD112.30 to HKD444.20) were exercised. In 2020, the right to
receive 1,000,174 options was surrendered by the grantees under the Post-IPO Option Scheme II to set off against the exercise
consideration and individual income tax payable by the grantees when they exercise their options.
(b)
Investments
in associates
34 OTHER RESERVES
PRC Share-based
The Pre-IPO Option Scheme, the Post-IPO Option Scheme I, the Post-IPO Option Scheme II and the Post-IPO
Option Scheme III expired on 31 December 2011, 23 March 2014, 16 May 2017 and 13 May 2019, respectively.
Upon the expiry of these schemes, no further options would be granted under these schemes, but the options
granted prior to such expiry continued to be valid and exercisable in accordance with provisions of the schemes.
As at 31 December 2021, there were no outstanding options exercisable of the Pre-IPO Option Scheme, the Post-
IPO Option Scheme I and the Post-IPO Option Scheme III.
The Company has adopted five share option schemes, namely, the Pre-IPO Option Scheme, the Post-IPO Option
Scheme I, the Post-IPO Option Scheme II, the Post-IPO Option Scheme III and the Post-IPO Option Scheme IV.
(a) Share option schemes
35 SHARE-BASED PAYMENTS
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
285
Annual Report 2021
In respect of the Post-IPO Option Scheme IV which continues to be in force, the Board may, at its discretion, grant
options to any qualifying participants to subscribe for shares in the Company, subject to the terms and conditions
stipulated therein. The exercise price must be in compliance with the requirement under the Listing Rules. In
addition, the option vesting period is determined by the Board provided that it is not later than the last day of a 7-year
period for the Post-IPO Option Scheme IV after the date of grant of option.
During the year ended 31 December 2021, the acquisition of additional equity interests in non wholly-owned subsidiaries mainly
comprised the additional acquisition of equity interest of Halti S.A. ("Halti"), a non wholly-owned subsidiary of the Group. The
Group acquired additional 12.81% equity interest of Halti based on the agreed purchase price. This transaction was accounted
for as transaction with non-controlling interest, and the excess of considerations over the aggregate carrying amounts of acquired
non-controlling interests of RMB2,409 million was recognised directly in equity.
(e)
(d)
Share-based compensation reserve arises from share option schemes and share award schemes adopted by the subsidiaries of
the Group (Note 35(d)).
With approvals obtained from respective boards of directors of these companies, the Reserve Fund can be used to offset
accumulated deficit or to increase capital.
In addition, in accordance with the Law of the PRC on Enterprises with Foreign Investments and the stipulated provisions of the
articles of association of wholly owned foreign subsidiaries in the PRC, appropriation from net profit (after offsetting accumulated
losses brought forward from prior years) should be made by these companies to their respective Reserve Fund. The percentage
of net profit to be appropriated to the Reserve Fund is not less than 10% of the net profit. When the balance of the Reserve Fund
reaches 50% of the registered capital, such transfer needs not to be made.
In accordance with the Companies Laws of the PRC and the stipulated provisions of the articles of association of subsidiaries
with limited liabilities in the PRC, appropriation of net profit (after offsetting accumulated losses from prior years) should be
made by these companies to their respective Statutory Surplus Reserve Funds and the Discretionary Reserve Funds before
distributions are made to the owners. The percentage of appropriation to Statutory Surplus Reserve Fund is 10%. The amount
to be transferred to the Discretionary Reserve Fund is determined by the equity owners of these companies. When the balance
of the Statutory Surplus Reserve Fund reaches 50% of the registered capital, such transfer needs not to be made. Both the
Statutory Surplus Reserve Fund and Discretionary Reserves Fund can be capitalised as capital of an enterprise, provided that the
remaining Statutory Surplus Reserve Fund shall not be less than 25% of the registered capital.
The capital reserve mainly arises from transactions undertaken with non-controlling interests.
(c)
The Group has elected to recognise changes in the fair value of certain investments in equity instruments in other comprehensive
income. These changes are accumulated with FVOCI reserve with equity. The Group transfers amounts from this reserve to
retained earnings when the relevant equity instruments are derecognised.
During the year ended 31 December 2021, the Company allowed certain grantees under the Post-IPO Option
Scheme II and the Post-IPO Option Scheme IV to surrender their rights to receive a portion of the underlying
shares (with equivalent fair value) to set off against the exercise price and/or individual income tax payable when
they exercised their options.
00
286
Lapsed/forfeited
HKD189.79 (2,278,079)
Exercised
Granted
HKD205.36
At 1 January 2021
No. of
options
No. of
options
Total
Post-IPO Option Scheme IV
No. of
Average
options exercise price
exercise price
Post-IPO Option Scheme II
Average
Movements in the number of share options outstanding and their related weighted average exercise prices
are as follows:
(i) Movements in share options
(a) Share option schemes (continued)
35 SHARE-BASED PAYMENTS (continued)
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
Tencent Holdings Limited
(b)
(a)
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
and deemed disposal of associates
347
127,873
736
736
(684)
(765)
(2,730)
(6,472)
(2,795)
588
588
413
413
60
60
(154)
347
(154)
Currency translation differences
HKD124.30
Other fair value losses, net
(3)
Note:
34 OTHER RESERVES (continued)
Tencent Holdings Limited
284
00
121,139
(2,117)
6,878
4,260
(5,871)
10,918
134,309
(27,238)
Balance at 31 December 2020
(1,214)
(1,214)
(9,016)
(9,016)
1
(3)
(10,938)
HKD380.50
HKD587.26
HKD321.25
HKD429.76
67,806,750 105,241,884
16,785,250 16,785,250
(2,556,236) (4,834,315)
(346,483) (357,421)
The outstanding share options as of 31 December 2021 were divided into one to four tranches on an equal
basis as at their grant dates. The first tranche can be exercised after a specified period ranging from one
month to five years from the grant date, and then the remaining tranches will become exercisable in each
subsequent year.
105,241,884
116,835,398
8,576,483
1,726,848
9,797,440
HKD502.50~HKD586.00
HKD606.30~HKD618.00
22,362,446
22,263,239
HKD403.16~HKD444.20
37,549,600
36,336,078
HKD334.20~HKD386.60
32,520,471
29,843,566
HKD225.44~HKD272.36
11,082,519
10,018,592
HKD112.30 HKD174.86
00
7 years commencing from
the date of grant of options
(Post-IPO Option Scheme II and
Post-IPO Option Scheme IV)
288
Notes to the Consolidated Financial Statements
Currency
Annual Report 2021 289
The expected volatility, measured as the standard deviation of expected share price returns, is determined based on the
average daily trading price volatility of the shares of the Company.
Note:
HKD396.24
0.27% 1.52%
0.23%
30.00% 31.00%
31.00% 32.00%
Expected volatility (Note)
HKD582.94
0.94% 1.35%
0.23%
Dividend yield
Risk free rate
Weighted average share price at the grant date
2020
2021
Other than the exercise price mentioned above, significant judgment on parameters, such as risk free rate,
dividend yield and expected volatility, are required to be made by the directors in applying the Binomial
Model, which are summarised as below.
The directors of the Company have used the Binomial Model to determine the fair value of the options as at
the respective grant dates, which is to be expensed over the relevant vesting period. The weighted average
fair value of options granted during the year ended 31 December 2021 was HKD178.35 per share (equivalent
to approximately RMB149.72 per share) (2020: HKD115.13 per share (equivalent to approximately
RMB104.72 per share)).
(iii) Fair value of options
(a) Share option schemes (continued)
35 SHARE-BASED PAYMENTS (continued)
For the year ended 31 December 2021
Tencent Holdings Limited
127,873
2020
Range of exercise price
HKD205.36
At 31 December 2020
50,358,800 HKD375.36 61,738,193 112,096,993
HKD396.39 9,318,989 9,318,989
HKD321.74 (2,737,705) (15,656,921)
HKD364.34 (512,727) (517,177)
(4,450)
HKD175.14
Lapsed/forfeited
HKD129.34 (12,919,216)
Exercised
Granted
HKD185.86
At 1 January 2020
HKD381.54 30,418,848 65,443,152
35,024,304
HKD206.36
Exercisable as at 31 December 2021
HKD424.63 81,689,281 116,835,398
35,146,117
HKD206.40
At 31 December 2021
37,435,134 HKD380.50
2021
67,806,750 105,241,884
HKD200.96
Expiry Date
31 December
31 December
Number of share options
Details of the expiry dates, exercise prices and the respective numbers of share options which remained
outstanding as at 31 December 2021 and 2020 are as follows:
Outstanding share options
(ii)
During the year ended 31 December 2021, 4,834,315 options (2020: 15,656,921 options) were exercised.
The weighted average price of the shares at the time these options were exercised was HKD559.01 per
share (equivalent to approximately RMB464.92 per share) (2020: HKD539.43 per share (equivalent to
approximately RMB464.09 per share)).
As a result of the Distribution in Specie (Note 15(b)), pursuant to the scheme rules of the Post-IPO Option
Scheme II and the Post-IPO Option Scheme IV, adjustments had been made to the exercise price of the
share options which remained outstanding thereunder as at the Ex-dividend Date. Please refer to the
announcement of the Company dated 14 March 2022 for details.
During the year ended 31 December 2021, 3,374,630 options (2020: 4,399,815 options) were granted to an
executive director of the Company, out of which 843,657 options were voluntarily waived in February 2022.
Movements in share options (continued)
(i)
(a) Share option schemes (continued)
35 SHARE-BASED PAYMENTS (continued)
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
Annual Report 2021 287
HKD376.39 20,038,030 50,692,601
30,654,571
Exercisable as at 31 December 2020
income to profit or loss upon disposal
37,435,134
Share of other comprehensive income of
3,524
5,817
(483)
16,786
Transfer of gains on disposal and
deemed disposal of financial
instruments to retained earnings
(Note (d))
(4,731)
(420)
(5,151)
Share of other changes in net assets of
associates and joint ventures
3,320
3,320
Transfer of share of other changes in
net assets of associates to profit or
loss upon disposal and deemed
disposal
Value of employee services:
- Employee share option schemes
- Employee share award schemes
Tax benefit from share-based payments
Acquisition of additional equity interests
in non wholly-owned subsidiaries
(2,795)
3,145
Transfer of equity interests of subsidiaries
7,408
(13,792)
Capital
and
translation
statutory
compensation
reserves
associates and joint ventures
Transfer of share of other comprehensive
joint ventures
differences
reserves
reserves
Others
RMB'Million
RMB'Million
RMB'Million
RMB'Million
RMB'Million
RMB'Million
RMB'Million
Total
RMB'Million
(Note (a))
(Note (b))
(Note (c))
Balance at 1 January 2020
11.167
to non-controlling interests
FVOCI
Recognition of put option liabilities
Net gains from changes in fair value of
FVOCI
Profit appropriations to statutory reserves
(684)
in subsidiaries
(765)
of non-controlling interests
Dilution of/changes in interests
(2,730)
arising from business combinations
(6,472)
Changes in put option liability in respect
Income tax
As
Impairment
Share-based
investee
Amortisation
of intangible
provisions/
reported compensation
companies
(a)
2,260
(36,149)
4,896
59,369
Profit for the period
38,084
4,394
885
losses from
(34,652)
63,713
Operating profit
(RMB in millions, unless specified)
Non-IFRS
effects
(reversals)
(d)
assets
(c)
(b)
3,744
Net (gains)/
33,151
Unaudited three months ended 31 December 2020
40,828
70
(633)
32,518
Profit attributable
to equity holders
39,510
10,063
(26,491)
2,719
6,452
70
70
(572)
31,751
EPS (RMB per share)
- basic
4.143
- diluted
4.074
Operating margin
37%
Net margin
28%
3.329
3.269
4,407
29%
23%
Adjustments
70
(329)
Profit attributable
Operating profit
(RMB in millions, unless specified)
=
(e)
(d)
(c)
(b)
(a)
Non-IFRS
effects
Others
CPP
(reversals)
assets
companies
271,620
compensation
22,222
4,651
Profit attributable
127,919
(3,291)
1,568
674
25,541
12,272
(167,471)
30,816
227,810
Profit for the year
159,539
976
674
25,028
(165,632)
reported
Income tax
SSV&
48%
Operating margin
6.112
- diluted
6.240
- basic
EPS (RMB per share)
33,207
(235)
4,407
1,926
(36,928)
4,735
59,302
to equity holders
Net margin
44%
3.494
3.413
provisions/
of intangible
investee
Share-based
As
Impairment
Amortisation
34,454
losses from
Adjustments
Year ended 31 December 2021
Management Discussion and Analysis
Tencent Holdings Limited
24
26%
28%
Net (gains)/
772
Profit for the period
3,093
00
183,314
194,798
46,533
49,257
42,267
investee
Adjusted EBITDA
12,634
21,625
3,661
6,574
5,699
Equity-settled share-based compensation
170,680
173,173
42,872
1,129
1,036
4,649
3,773
Amortisation of intangible assets
and land use rights
22 Tencent Holdings Limited
7,905
7,828
31,504
29,073
EBITDA
36,568
42,683
7,730
Management Discussion and Analysis
NON-IFRS FINANCIAL MEASURES
To supplement the consolidated results of the Group prepared in accordance with IFRS, certain additional non-IFRS financial
measures (in terms of operating profit, operating margin, profit for the period, net margin, profit attributable to equity holders
of the Company, basic EPS and diluted EPS) have been presented in this annual report. These unaudited non-IFRS financial
measures should be considered in addition to, not as a substitute for, measures of the Group's financial performance prepared
in accordance with IFRS. In addition, these non-IFRS financial measures may be defined differently from similar terms used by
other companies.
effects
Non-IFRS
(b)
(c)
(e)
(RMB in millions, unless specified)
Others
Operating profit
5,664
(100,349)
1,316
15,217
604
976
109,723
1,376
CPP
assets
The Company's management believes that the non-IFRS financial measures provide investors with useful supplementary
information to assess the performance of the Group's core operations by excluding certain non-cash items and certain
impact of M&A transactions. In addition, non-IFRS adjustments include relevant non-IFRS adjustments for the Group's major
associates based on available published financials of the relevant major associates, or estimates made by the Company's
management based on available information, certain expectations, assumptions and premises.
The following tables set forth the reconciliations of the Group's non-IFRS financial measures for the fourth quarter of 2021
and 2020, the third quarter of 2021, and the years ended 31 December 2021 and 2020 to the nearest measures prepared in
accordance with IFRS:
Unaudited three months ended 31 December 2021
Adjustments
Net (gains)/
losses from
to equity holders
(reversals)
Amortisation
As Share-based
reported compensation
investee
companies
of intangible
provisions/
SSV&
Income tax
Impairment
95,705
7,880
(98,046)
(reversals)
assets
companies
compensation
reported
Income tax
CPP
SSV&
of intangible
Share-based
As
Impairment
Amortisation
losses from
provisions/
Net (gains)/
effects
(a)
(26,781)
10,242
40,075
Profit for the period
6,389
1,149
Non-IFRS
(26,569)
53,137
Operating profit
(RMB in millions, unless specified)
B
(d)
(b)
6,652
6,452
Adjustments
Management Discussion and Analysis
604
15,573
3,010
(97,804)
7,776
94,958
1,567
to equity holders
25,758
(866)
1,568
604
15,573
3,340
Profit attributable
Unaudited three months ended 30 September 2021
(804)
EPS (RMB per share)
23
Annual Report 2021
18%
23%
2.547
2.609
24,880
66%
76%
Operating margin
9.788
- diluted
9.957
- basic
Net margin
224,822
intangible assets from acquisitions
(166,661)
(22,984)
(86,199)
Other gains, net
(6,957)
(6,650)
(1,708)
(1,703)
(1,703)
Interest income
184,237
271,620
63,713
53,137
109,723
(RMB in millions, unless specified)
2020
2021
Capital expenditures consist of additions (excluding business combinations) to property, plant and equipment, construction in
progress, investment properties, land use rights and intangible assets (excluding video and music content, game licences and other
content).
Annual Report 2021
21
Management Discussion and Analysis
The following table reconciles our operating profit to our EBITDA and Adjusted EBITDA for the periods presented:
Operating profit
Adjustments:
(32,936)
31 December
Year ended
2021
2021
31 December
2020
31 December
31 December
Unaudited
Three months ended
30 September
(149,467)
(57,131)
Depreciation of property, plant and equipment and
(148,077)
(145,590)
(167,551)
(155,939)
289,482
281,286
(20,243)
118,609
170,873
167,966
(RMB in millions)
2021
2021
Unaudited
30 September
113,320
Net (debt)/cash represents period end balance and is calculated as cash and cash equivalents, plus term deposits and others, minus
borrowings and notes payable.
(26,146)
As at 31 December 2021, the Group had net debt of RMB20.2 billion, compared to net debt of RMB26.1 billion as at 30
September 2021. The sequential improvement was mainly due to free cash flow generation and on-market divestitures of
certain listed securities, partly offset by our strategic investments in other companies.
investment properties
5,466
5,374
4,939
21,517
Depreciation of right-of-use assets
Management Discussion and Analysis
29
The Group had no material contingent liabilities outstanding as at 31 December 2021.
The Group assesses its creditworthiness based on its business and financial risk profile and monitors its capital by regularly
reviewing its debts to adjusted EBITDA ratio, being the measure of the Group's ability to pay off all of its debts which in
turn reflects the Group's financial health and liquidity position. Details are set out in Note 3.2 to the consolidated financial
statements.
The Group has floating rate debts, linked to USD LIBOR, including borrowings and senior notes, whose cash flows are hedged
by using interest rate swaps. The effects of the interest rate swaps on the Group's financial position and performance are set
out in Note 3.1 to the consolidated financial statements.
As at 31 December 2021, the Group's total debts comprised borrowings and notes payable. Particulars of the Group's
borrowings and notes payable are set out in Note 36 and Note 37 to the consolidated financial statements respectively.
As at 31 December 2021, bank balances and cash held at banks of the Group were mainly denominated in RMB. The Group
considers that any reasonable changes in foreign exchange rates of currencies against major functional currencies would not
result in a significant change in the Group's results, as the net carrying amounts of financial assets and liabilities denominated
in a currency other than the respective subsidiaries' functional currencies are considered to be not significant.
For the fourth quarter of 2021, the Group had free cash flow of RMB33.5 billion. This was a result of net cash flow generated
from operating activities of RMB51.3 billion, offset by payments for capital expenditures of RMB7.5 billion, payments for media
content of RMB8.8 billion, and payments for lease liabilities of RMB1.5 billion.
Annual Report 2021
(d)
(c)
Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by revenues.
31 December
30 September
2021
2021
31 December
2020
31 December
Year ended
31 December
2020
(RMB in millions, unless specified)
EBITDA (a)
36,568
42,683
42,872
2021
173,173
Three months ended
Management Discussion and Analysis
Management Discussion and Analysis
Cost of revenues. Cost of revenues increased by 8% to RMB86.4 billion for the fourth quarter of 2021 on a quarter-on-
quarter basis, reflecting increased investment in Business Services, content costs, and transaction costs of FinTech services,
partly offset by decreased channel and distribution costs. As a percentage of revenues, cost of revenues increased to 60%
for the fourth quarter of 2021 from 56% for the third quarter of 2021, reflecting costs growing faster than revenues in certain
businesses and seasonality.
Cost of revenues for VAS increased by 4% to RMB36.9 billion for the fourth quarter of 2021 primarily due to increased
content costs, including those associated with eSports events held in the quarter.
Cost of revenues for Online Advertising increased by 2% to RMB12.3 billion for the fourth quarter of 2021, driven by
increased bandwidth and server costs, including those associated with Video Accounts, partly offset by decreased
channel and distribution costs as well as content costs.
Cost of revenues for FinTech and Business Services increased by 13% to RMB34.9 billion for the fourth quarter of
2021, primarily due to increased investment in cloud computing talent and operations, costs associated with year-end
cloud project deployments, as well as increased transaction costs due to payment volume growth.
Selling and marketing expenses. Selling and marketing expenses increased by 11% to RMB11.6 billion for the fourth quarter
of 2021 on a quarter-on-quarter basis, due to increased marketing spending related to games (including expenses associated
with the global launch of the Arcane animated series), and Business Services, partly offset by decreased spending on user
acquisition for non-core areas.
Unaudited
General and administrative expenses. General and administrative expenses increased by 2% to RMB24.4 billion for the fourth
quarter of 2021 on a quarter-on-quarter basis.
Profit attributable to equity holders of the Company. Profit attributable to equity holders of the Company increased by 140% to
RMB95.0 billion for the fourth quarter of 2021 on a quarter-on-quarter basis. Non-IFRS profit attributable to equity holders of
the Company decreased by 22% to RMB24.9 billion for the fourth quarter of 2021.
00
20
20
Tencent Holdings Limited
OTHER FINANCIAL INFORMATION
Share of losses of associates and joint ventures, net. We recorded share of losses of associates and joint ventures of RMB8.3
billion for the fourth quarter of 2021, compared to share of losses of RMB5.7 billion for the third quarter of 2021. Non-IFRS
share of losses of associates and joint ventures were RMBO.8 billion for the fourth quarter of 2021, compared to non-IFRS
share of losses of RMBO.3 billion for the third quarter of 2021, reflecting increased losses recognised from certain associates
in verticals such as transportation services and local services.
31 December
170,680
42,267
(26,146)
11,063
(20,243)
11,063
Capital expenditures (d)
11,661
(20,243)
7,061
33,392
33,960
Note:
(a)
EBITDA is calculated as operating profit minus interest income and other gains/losses, net, and adding back depreciation of property,
plant and equipment, investment properties as well as right-of-use assets, and amortisation of intangible assets and land use rights.
Adjusted EBITDA is calculated as EBITDA plus equity-settled share-based compensation expenses.
(b)
9,659
Adjusted EBITDA (a)
Net (debt)/cash (c)
7,918
49,257
46,533
194,798
183,314
Adjusted EBITDA margin (b)
29%
7,449
35%
35%
38%
Interest and related expenses
2,188
2,092
1,766
35%
Audited
Tencent Holdings Limited
28
Profit attributable
126,983
(1,290)
12,684
7,723
(69,348)
to equity holders
17,089
Profit for the year
149,404
11,422
3,299
(63,299)
13,745
160,125
184,237
159,847
(69,473)
12.934
33%
Net margin
38%
Operating margin
16.523
16,228
- diluted
- basic
EPS (RMB per share)
122,742
(920)
10,673
6,387
16.844
12.689
Operating profit
(c)
Net margin
48%
Operating margin
23.164
- diluted
23.597
41%
- basic
123,788
(3,066)
1,567
674
25,534
10,848
EPS (RMB per share)
(RMB in millions, unless specified)
12.992
28%
Non-IFRS
effects
(reversals)
assets
Income tax
provisions/
12.698
investee of intangible
companies
Impairment
Amortisation
Net (gains)/
losses from
Adjustments
Year ended 31 December 2020
23%
As Share-based
reported compensation
30,070
31%
Annual Report 2021
47,717
Net fair value gains
24,390
118,051
Net gains on disposals and deemed disposals of investee companies
1,765
38,909
660
RMB'Million
RMB'Million
2020
2021
(Classified by nature of income)
Income of Principal Investment
Dividend income
Return from our investment portfolio amounted to RMB120,305 million for the year ended 31 December 2021, with an
increase of 123% compared to last year. Details of our return from investment portfolio are as follows:
Impairment provision for investee companies, goodwill and other
Amortisation of intangible assets resulting from acquisitions
00
Net debt
Notes payable
Borrowings
Cash and cash equivalents
Term deposits and others
Our cash and debt positions as at 31 December 2021 and 30 September 2021 were as follows:
Share of (loss)/profit of associates and joint ventures, net
LIQUIDITY AND FINANCIAL RESOURCES
(3,299)
(4,651)
3,672
(16,444)
(11,422)
(25,028)
We continue to closely monitor the performance of our investment portfolio and strategically make investments, M&A, and
explore opportunities in monetising some of the existing investments if appropriate opportunities in the market arise.
26%
Management Discussion and Analysis
Annual Report 2021
(f)
Mainly including donations and expenses incurred for the Group's SSV & CPP initiatives (excluding share-based compensation
expenses)
(e)
Impairment provisions/(reversals) for associates, joint ventures, goodwill and other intangible assets arising from acquisitions
(d)
Amortisation of intangible assets resulting from acquisitions
Mainly including expenses incurred for regulatory fines in the Mainland of China and certain litigation settlements
(c)
Including put options granted to employees of investee companies on their shares and shares to be issued under investee companies'
share-based incentive plans which can be acquired by the Group, and other incentives
(b)
(a)
Note:
Management Discussion and Analysis
25
Including net (gains)/losses on deemed disposals/disposals of investee companies, fair value changes arising from investee
companies, and other expenses in relation to equity transactions of investee companies
27
(g)
INVESTMENTS HELD
Save as disclosed herein, there were no material changes in our significant investment portfolio that need to be disclosed
under paragraph 32 of Appendix 16 to the Listing Rules.
On 23 December 2021, the Board resolved to declare the Distribution in Specie. The JD.com Shares to be distributed under
the Distribution in Specie were presented as “Assets held for distribution" in the consolidated statement of financial position
of the Group as at 31 December 2021. The share certificates of the JD.com Shares to be distributed are dispatched to the
qualifying shareholders in March 2022. Immediately following the completion of the Distribution in Specie, the Company's
beneficial ownership would be reduced to approximately 2.3% in JD.com (based on the total number of issued shares of
JD.com as at 31 December 2021). Please refer to the announcements of the Company dated 23 December 2021 and 25
March 2022 for further details in relation to the Distribution in Specie. Notwithstanding the Distribution in Specie, the Group
and JD.com will continue to maintain their business relationship in the ordinary course of business.
As at 31 December 2021, we held approximately 529 million shares in JD.com, a company operating an eCommerce platform
in China, representing approximately 17% of its total outstanding shares. The fair value of this investment was approximately
RMB118.5 billion, which accounted for approximately 7% of the Group's total assets as at 31 December 2021. This investment
was initially accounted for as investment in an associate and was then transferred to and accounted for as financial assets at
fair value through other comprehensive income on 23 December 2021, following the resignation of the Group's representative
on the board of JD.com, Mr Lau Chi Ping Martin, as a director of JD.com ("Board Representative's Resignation"). The cost
of our investment in JD.com was approximately RMB20.9 billion. During the year ended 31 December 2021, the Group did
not receive any dividends from JD.com, and there were deemed disposal gains of approximately RMB78.0 billion arising
from the Board Representative's Resignation and unrealised gains of approximately RMB6.2 billion arising from changes in
fair value under equity. The Group does not have nor does it exercise any managerial influence on JD.com after the Board
Representative's Resignation and regards the investment in JD.com as a passive investment. Except JD.com, there was no
other individual investment with a carrying value of 5% or more of the Group's total assets as at 31 December 2021.
Management Discussion and Analysis
Tencent Holdings Limited
26
Income tax effects of non-IFRS adjustments
00
The fair value of our shareholdings³ in listed investee companies (excluding subsidiaries) amounted to RMB982,835 million as
at 31 December 2021.
We manage our investment portfolio with a primary objective to strengthen our leading position in core businesses and
complement our "Connection" strategy in various industries, particularly in social and digital content, 020 and smart retail
sectors. We also invest in transportation, FinTech, cloud and other sectors.
Changes in respective items in the consolidated statement of financial position have been disclosed in the notes to the
consolidated financial statements in this annual report.
financial assets at fair value through profit or loss and through other comprehensive income (including assets held for
distribution).
investments in associates and joint ventures which are accounted for by using equity method; and
As at 31 December 2021, our investment portfolio amounted to approximately RMB878,653 million (31 December 2020:
RMB690,886 million) as recorded in the consolidated statement of financial position under various categories including:
3 Including those held via special purpose vehicles, on an attributable basis.
17,685
299
25,541
Measured at fair value:
9,512
6,664
RMB'Million
2020
RMB'Million
2021
As at 31 December
Redemption liability (Note (a))
Measured at amortised cost:
Contingent consideration
39 OTHER FINANCIAL LIABILITIES
Notes to the Consolidated Financial Statements
295
Annual Report 2021
9,910
9,966
2,169
104
133
1,018
615
For the year ended 31 December 2021
7,290
2,405
Interest rate swap (Note (b))
Others
It represented the Group's outstanding interest rate swap contracts measured at fair value amounting to RMB358 million (31
December 2020: RMB1,937 million). The aggregate notional principal amounts of the outstanding interest rate swap contracts
were USD2,825 million (equivalent to approximately RMB18,011 million) (31 December 2020: USD15,058 million (equivalent to
approximately RMB98,252 million)).
It mainly comprised redemption liability arising from put option arrangements with non-controlling shareholders of acquired
subsidiaries of approximately RMB6,664 million (31 December 2020: RMB9,512 million).
(b)
(a)
14,821
9,466
5,567
3,554
9,254
5,912
3,308
Note:
Non-current liabilities
Included in:
14,821
9,466
5,309
2,802
64
39
1,937
358
Current liabilities
7,049
RMB'Million
RMB'Million
The notes payable are repayable as follows:
37 NOTES PAYABLE (continued)
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
Tencent Holdings Limited
294
00
at floating rates. The Group's outstanding interest rate swap contracts as at 31 December 2021 are detailed in Note 27
and Note 39.
The Group had entered into certain interest rate swap contracts to hedge its exposure arising from its senior notes carried
1.375% 4.700%
Between 1 and 2 years
USD17,550
~
LIBOR + 0.605%
USD1,250
LIBOR + 0.605% ~
0.910%
4.700%
1.375% ~
USD21,700
USD notes payable
USD1,250
USD notes payable
(per annum)
0.910%
Between 2 and 5 years
More than 5 years
As at 31 December
2020
2021
As at 31 December
Others
Purchase consideration payables for investee companies
Cash-settled share-based compensation payables (Note 35(d))
Payables relating to media contents and running royalty fee for online games
38 LONG-TERM PAYABLES
As at 31 December 2021, the fair value of the notes payable amounted to RMB150,998 million (31 December 2020:
RMB132,037 million). The respective fair values were assessed based on the active market prices of these notes at the
reporting dates or by making reference to similar instruments traded in the observable market.
In April 2021, the Company issued four tranches of senior notes under the Programme with an aggregate principal
amount of USD4.15 billion from 10 years to 40 years, with interest rates ranging from 2.88% to 3.94%.
In April 2021, the Company updated the Global Medium Term Note Programme (the "Programme”) to include, among
other things, the Company's recent corporate and financial information.
All of these notes payable issued by the Group were unsecured.
122,057
145,590
91,485
106,153
30,572
29,883
9,554
RMB'Million
2020
RMB'Million
2021
00
296 Tencent Holdings Limited
Notes to the Consolidated Financial Statements
For the year ended 31 December 2021
Other assets
4,325
Cash and cash equivalents and term deposits
7,500
Intangible assets
Recognised amounts of identifiable assets acquired and liabilities assumed:
22,634
8,822
Fair value of the previously held interests
13,812
3,780
Cash consideration
RMB'Million
The following table summarises the purchase consideration, fair value of assets acquired and liabilities assumed as
at the acquisition date of Sogou.
Goodwill of approximately RMB10,978 million was recognised as a result of the transaction. It was mainly
attributable to the operating synergies and economies of scale expected to be derived from combining the
operations. None of the goodwill is expected to be deductible for income tax purpose.
On 23 September 2021, the Group completed the privatisation of Sogou, an existing listed associate (NYSE: SOGO;
with equity interests held of approximately 39%) of the Group, at a cash consideration of approximately USD2,135
million (equivalent to approximately RMB13,812 million) for all of the remaining interest ("Privatisation"). As a
result of the Privatisation, Sogou became a wholly-owned subsidiary of the Group. The existing equity interest (of
approximately 39%) held under investment in an associate was re-measured to fair value and resulted in step up
gain of approximately RMB3,807 million (Note 7(a)(iii)).
(a) Privatisation of Sogou
42 BUSINESS COMBINATIONS
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
Annual Report 2021 297
Others primarily consist of deposits from third parties, reserve for platform services, sundry payables and other accruals.
Total consideration:
Deferred income tax liabilities
(1,872)
Other payables and accruals
Annual Report 2021
The related transaction costs of these business combinations are not material to the Group's consolidated financial
statements.
The revenue and the results contributed by these acquired subsidiaries for the period since respective acquisition
date were insignificant to the Group. The Group's revenue and results for the year would not be materially different
if these acquisitions have occurred on 1 January 2021.
During the year ended 31 December 2021, the Group also acquired certain insignificant subsidiaries. The
aggregate considerations for these acquisitions were approximately RMB10,854 million, fair value of net assets
acquired (including identifiable intangible assets), non-controlling interests and goodwill recognised were
approximately RMB3,862 million, RMB1,289 million and RMB8,281 million, respectively.
(b) Other business combinations
The related transaction costs of the transaction are not material to the Group's consolidated financial information.
The Group's revenue for the year ended 31 December 2021 would be increased by not more than 5% and results for the year
ended 31 December 2021 would not be materially different should the transaction have occurred on 1 January 2021.
For the year ended 31 December 2021
Note:
(a) Privatisation of Sogou (continued)
42 BUSINESS COMBINATIONS (continued)
Notes to the Consolidated Financial Statements
Tencent Holdings Limited
298
00
22,634
10,978
11,656
Goodwill
Total identifiable net assets
(1,337)
Other liabilities
(740)
Note:
Interest rate
54,308
13,597
94,030
109,470
8,253
2,746
665
1,329
2,196
2,999
82,916
102,396
As at 31 December
RMB'Million
2020
2021
As at 31 December
41 OTHER PAYABLES AND ACCRUALS
Over 90 days
61 - 90 days
31 - 60 days
0-30 days
Accounts payable and their ageing analysis, based on invoice date, are as follows:
40 ACCOUNTS PAYABLE
RMB'Million
2021
2020
RMB'Million
15,878
Others (Note)
894
649
Prepayments received from customers and others
844
845
Purchase of land use rights and construction related costs
1,119
1,279
Interests payable
2,548
2,179
Purchase consideration payables for investee companies
2,750
3,371
General and administrative expenses accruals
7,015
7,668
Selling and marketing expense accruals
28,713
Staff costs and welfare accruals
RMB'Million
60,582
Amount
(Million)
1,498
(Million)
4
47
300
-
12
11
1,204
110,629
136,874
Non-current portion of long-term USD bank borrowings, unsecured (Note (a))
Non-current portion of long-term EUR bank borrowings, unsecured (Note (a))
Non-current portion of long-term EUR bank borrowings, secured (Note (a))
Non-current portion of long-term RMB bank borrowings, unsecured (Note (a))
Non-current portion of long-term JPY bank borrowings, unsecured (Note (a))
Non-current portion of long-term JPY bank borrowings, secured (Note (a))
Included in non-current liabilities:
RMB'Million
RMB'Million
2020
2021
As at 31 December
36 BORROWINGS
The Group has to estimate the expected yearly percentage of grantees that will stay within the Group at the end
of vesting periods of the options and awarded shares (the "Expected Retention Rate”) in order to determine
the amount of share-based compensation expenses charged to the consolidated income statement. As at 31
December 2021, the Expected Retention Rate of the Group's wholly-owned subsidiaries was assessed to be not
lower than 89% (31 December 2020: not lower than 91%).
(e) Expected retention rate of grantees
Included in current liabilities:
35 SHARE-BASED PAYMENTS (continued)
RMB bank borrowings, unsecured (Note (b))
Current portion of long-term USD bank borrowings, unsecured (Note (a))
Current portion of long-term RMB bank borrowings, unsecured (Note (a))
Current portion of long-term EUR bank borrowings, unsecured (Note (a))
Current portion of long-term EUR bank borrowings, secured (Note (a))
Current portion of long-term JPY bank borrowings, unsecured (Note (a))
Current portion of long-term JPY bank borrowings, secured (Note (a))
1
16
1
2
1,083
300
783
4,061
144
9,135
100
200
4,079
13,340
112,145
136,936
Tencent Holdings Limited
292
00
RMB bank borrowings, secured (Note (b))
USD bank borrowings, unsecured (Note (b))
HKD bank borrowings, secured (Note (b))
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
Annual Report 2021 291
37,196,540
Interest rate
(per annum)
76,615,755
82,594,936
2020
2021
Number of awarded shares
Vested but not transferred as at the end of the year
At end of the year
Vested and transferred
Lapsed/forfeited
Granted
At beginning of the year
Movements in the number of awarded shares for the years ended 31 December 2021 and 2020 are as follows:
The Company has adopted three share award schemes (the "Share Award Schemes") as of 31 December 2021,
which are administered by an independent trustee appointed by the Group. The vesting period of the awarded
shares is determined by the Board.
(b) Share award schemes
35 SHARE-BASED PAYMENTS (continued)
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
(5,586,066)
(3,866,143)
(32,749,222) (27,351,216)
121,314,396
Certain subsidiaries of the Group operate their own share-based compensation plans (share option and/or share
award schemes). Their exercise prices of the share options, as well as the vesting periods of the share options and
awarded shares are determined by the respective board of directors of these subsidiaries at their sole discretion
and in accordance with the relevant rules. The share options or restricted shares of the subsidiaries granted are
normally vested by several tranches. Participants of some subsidiaries have the right to request the Group to
repurchase their vested equity interests of the respective subsidiaries ("Repurchase Transaction"). The Group has
discretion to settle the Repurchase Transaction either by using equity instruments of the Company or by cash. For
the Repurchase Transaction which the Group has settlement options, the directors of the Company are currently of
the view that some of them would be settled by equity instruments of the Company. As a result, they are accounted
for using the equity-settled share-based payment method. For some of them settled in cash, they are accounted
for using cash-settled share-based payment method.
(d) Share options and share award schemes adopted by subsidiaries
The related share-based compensation expenses incurred for the years ended 31 December 2021 and 2020 were
insignificant to the Group.
For aligning the interests of key employees with the Group, the Group established several employees' investment
plans in the form of limited liability partnerships (the "EIS”) among which the six EISs approved/established in
2014, 2015, 2016, 2017 and 2021 are in effect as at 31 December 2021. According to the term of the EISS,
the Board may, at its absolute discretion, invite any qualifying participants of the Group, excluding any director
of the Company, to participate in the EISS by subscribing for the partnership interest at cash consideration. The
participating employees are entitled to the economic benefits generated by the EISS, if any, after a specified vesting
period under the respective EISS, ranging from four to seven years. Wholly-owned subsidiaries of the Company
acting as general partner of these EISS administer and in essence, control the EISs. These EISs are therefore
consolidated by the Company as structured entities.
(c) Employee investment schemes
The outstanding awarded shares as of 31 December 2021 were divided into one to five tranches on an equal basis
as at their grant dates. The first tranche can be exercised immediately or after a specified period ranging from one
month to five years from the grant date, and the remaining tranches will become exercisable in each subsequent
year.
(b) Share award schemes (continued)
35 SHARE-BASED PAYMENTS (continued)
For the year ended 31 December 2021
19,003
Notes to the Consolidated Financial Statements
290
00
The weighted average fair value of awarded shares granted during the year ended 31 December 2021 was
HKD569.60 per share (equivalent to approximately RMB476.25 per share) (2020: HKD481.61 per share
(equivalent to approximately RMB431.90 per share)).
The fair value of the awarded shares was calculated based on the market price of the Company's shares at the
respective grant date. The expected dividends during the vesting period have been taken into account when
assessing the fair value of these awarded shares.
As a result of the Distribution in Specie (Note 15(b)), pursuant to the scheme rules of the 2013 Share Award
Scheme and the 2019 Share Award Scheme, adjustments had been made to the number of shares subject to
share awards which remained unvested as at the Ex-dividend Date. Please refer to the announcement of the
Company dated 14 March 2022 for details.
During the year ended 31 December 2021, 40,500 awarded shares were granted to four independent non-
executive directors of the Company (2020: 59,500 awarded shares were granted to five independent non-executive
directors of the Company).
30,172
17,515
82,594,936
Tencent Holdings Limited
14,242
77,054,748
155,939
RMB4,179
USD1,400
HKD171
2.45% 5.10%
RMB13,540
(per annum)
Interest rate
Amount
(Million)
Interest rate
(per annum)
Amount
(Million)
31 December 2020
31 December 2021
112,929
USD bank borrowings
HKD bank borrowings
RMB bank borrowings
The aggregate principal amounts of short-term bank borrowings and applicable interest rates are as follows:
(b)
142,399
1
6
784
4,409
107,735
3.55% 5.22%
129,197
LIBOR + 0.45% - 0.50%
Annual Report 2021
Amount
31 December 2020
31 December 2021
The aggregate principal amounts of notes payable and applicable interest rates are as follows:
122,057
145,590
RMB'Million
RMB'Million
2020
As at 31 December
Non-current portion of long-term USD notes payable
Included in non-current liabilities:
37 NOTES PAYABLE
As at 31 December 2021, the carrying amounts of borrowings approximated their fair values.
The Group had entered into certain interest rate swap contracts to hedge its exposure arising from its long-term bank
borrowings carried at floating rates. The Group's outstanding interest rate swap contracts as at 31 December 2021 are
detailed in Note 27 and Note 39.
36 BORROWINGS (continued)
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
293
HIBOR+ 0.90% - 3.90%
5,463
7,733
2021
(a)
USD60
USD bank borrowings
USD22,045
USD bank borrowings
Interest rate
(per annum)
RMB'Million
(per annum)
(Million)
Amount
Interest rate
Amount
31 December 2020
31 December 2021
The aggregate principal amounts of long-term bank borrowings and applicable interest rates are as follows:
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
Note:
36 BORROWINGS (continued)
126,387
EUR bank borrowings
EUR152
(Million)
RMB300
RMB'Million
2020
2021
RMB bank borrowings
Over 5 years
Between 2 and 5 years
Between 1 and 2 years
Within 1 year
The long-term bank borrowings are repayable as follows:
As at 31 December
0.00% 2.50%
JPY1,234
JPY bank borrowings
0.52% 1.00%
5.70%
EUR151
RMB300
LIBOR + 0.70% ~ 1.27%
USD17,075
LIBOR + 0.80% ~ 1.27%
1.41%
0.52% 1.00%
5.70%
The zero interest rate of JPY borrowings was due to the special interest exemption for COVID-19 by Tokyo Metropolitan
Government.
Total equity and liabilities
267,087
138,680
333,788
184,632
00
306
(b) Reserve movement of the Company
Notes to the Consolidated Financial Statements
For the year ended 31 December 2021
46 FINANCIAL POSITION AND RESERVE MOVEMENT OF THE COMPANY (continued)
Retained
earnings
RMB'Million
Other
Annual Report 2021
309
Tencent Holdings Limited
Total liabilities
Design and production of
126,445
Current liabilities
140,528
on an outstanding basis
114
116,883
236
140,642
117,119
Amounts due to subsidiaries
22,796
20,481
Other payables and accruals
1,198
1,080
Dividends payable for distribution in specie
102,451
21,561
advertisement in the PRC
Cayman Islands,
100%
57.18%*
USD102,203
Established in the
China Literature Limited
limited liability company
online games in the United States
United States,
Development and operation of
99.88%
USD1,308
Established in the
Riot Games, Inc.
advertisement in the PRC
Other financial liabilities
100%
Provision of online literature services
in the PRC
Design and production of
limited liability company
Established in the
RMB5,000,000
Established in the PRC,
limited liability company
Shenzhen Tencent Culture Media
Company Limited
mobile games in Finland
Development and operation of
81.76%
EUR2,500
Established in Finland,
limited liability company
Supercell Oy
limited liability company
entertainment services in the PRC
Cayman Islands,
Provision of online music
50.18%*
USD280,030
TME (Note (b))
Notes payable
49,927
LIABILITIES
Intangible assets
Non-current assets
ASSETS
(a) Financial position of the Company
46 FINANCIAL POSITION AND RESERVE MOVEMENT OF THE COMPANY
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
Tencent Holdings Limited
304
00
Amounts due from subsidiaries
157,675
26,565
Prepayments, deposits and other receivables
10
As at 31 December
312
2021
2020
RMB5,000,000
Current assets
181,284
Contribution to Share Scheme Trust
Investments in associates
Investments in subsidiaries
81
9
76
359
157,481
180,881
37
35
RMB'Million
RMB'Million
Cash and cash equivalents
116
80
Share premium
67,330
48,793
Shares held for share award schemes
(4,843)
(4,412)
Other reserves (b)
3,708
(1,114)
Retained earnings (b)
506
2,685
Total equity
66,701
45,952
RMB'Million
RMB'Million
2020
2021
Assets held for distribution
102,451
152,504
26,957
Total assets
333,788
184,632
Non-current liabilities
Annual Report 2021
Notes to the Consolidated Financial Statements
For the year ended 31 December 2021
46 FINANCIAL POSITION AND RESERVE MOVEMENT OF THE COMPANY (continued)
(a) Financial position of the Company (continued)
EQUITY
Share capital
As at 31 December
305
Established in the PRC,
limited liability company
3,541
Beijing Tencent Culture Media
100%
USD2,000,000
Established in the PRC,
Tencent Technology
in the PRC
Internet advertisement services
(Note (a))
Provision of value-added services and
100%
RMB65,000,000
Established in the PRC,
limited liability company
Tencent Computer
by the Group (%) Principal activities and place of operation
capital
Proportion of
equity interest held
Development of softwares and provision
issued/paid-in
wholly foreign
of information technology services
in the PRC
owned enterprise
of information technology services
wholly foreign
Development of softwares and provision
100%
USD90,000,000
Established in the PRC,
Tencent Cyber (Tianjin) Company
Limited
services in the PRC
(Note (a))
Provision of Internet advertisement
100%
RMB11,000,000
Established in the PRC,
limited liability company
Shenzhen Shiji Kaixuan Technology
Company Limited
owned enterprise
in the PRC
Place of establishment and
nature of legal entity
Particulars of
Dividends
Profit for the year
At 1 January 2020
3,708
506
At 31 December 2021
(558)
5,380
Gain from changes in fair value of assets held for distribution
Currency translation differences
(115,134)
112,955
Dividends
Profit for the year
(1,114)
2,685
Currency translation differences
Name
At 31 December 2020
2,729
The following is a list of principal subsidiaries of the Company as at 31 December 2021:
48 SUBSIDIARIES AND CONTROLLED STRUCTURED ENTITIES
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
307
Other than the transactions and balances disclosed above or elsewhere in the consolidated financial statements, the
Group had no other material transactions with related parties during the years ended 31 December 2021 and 2020, and
no other material balances with related parties as at 31 December 2021 and 2020.
Annual Report 2021
On 4 January 2022, the Group has entered into a transaction to divest an aggregate of 14,492,751 Class A ordinary
shares of Sea Limited ("Sea"; NYSE: SE), an existing associate of the Group, and to convert its all supervoting Class B
ordinary shares to Class A ordinary shares (collectively, the "Transaction"). Upon the completion of the Transaction, the
Group's equity interest in Sea was reduced from 21.3% to 18.7% with its voting power reduced to less than 10%. In
connection with the Transaction, the Group is subject to a lockup period of six months for further disposal of shares of
Sea. The Transaction has been completed as of the date of this annual report.
Disposal of Equity Interests of Sea Limited
(1,114)
2,685
(1,285)
(10,449)
10,405
171
47 SUBSEQUENT EVENTS
Tencent Asset Management Limited
Established in the British
Virgin Islands,
limited liability company
USD100
Tencent Technology (Chengdu)
Company Limited
in the PRC
of information technology services
wholly foreign
owned enterprise
Development of softwares and provision
100%
USD5,000,000
Established in the PRC,
Tencent Technology (Shanghai)
Company Limited
by the Group (%) Principal activities and place of operation
Proportion of
equity interest held
issued/paid-in
capital
Place of establishment and
nature of legal entity
Name
Particulars of
Established in the PRC,
wholly foreign
owned enterprise
48 SUBSIDIARIES AND CONTROLLED STRUCTURED ENTITIES (continued)
USD220,000,000
Development of softwares and provision
integration services in the PRC
Provision of information system
100%
(Note (a))
limited liability company
Established in the PRC, RMB1,042,500,000
Tencent Cloud Computing (Beijing)
Company Limited
of information technology services
in the PRC
owned enterprise
wholly foreign
Development of softwares and provision
100%
USD30,000,000
Established in the PRC,
Tencent Technology (Wuhan)
Company Limited
of information technology services
in the PRC
100%
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
Tencent Holdings Limited
100%
(Note (a))
RMB10,290,000
Established in the PRC,
limited liability company
Nanjing Wang Dian Technology
Company Limited
services in the PRC
owned enterprise
provision of information technology
wholly foreign
Development and sale of softwares and
100%
USD1,000,000
Established in the PRC,
Tencent Technology (Beijing)
Company Limited
Asset management in Hong Kong
100%
Provision of value-added services
in the PRC
Beijing BIZCOM Technology
Company Limited
Beijing Starsinhand Technology
Company Limited
308
00
Development of softwares in the PRC
100%
USD30,000,000
in the PRC
Provision of value-added services
Company Limited
100%
(Note (a))
in the PRC
(Note (a))
Provision of value-added services
100%
RMB1,216,500,000
Established in the PRC,
limited liability company
Established in the PRC,
limited liability company
Established in the PRC,
wholly foreign
owned enterprise
Tencent Cyber (Shenzhen)
Company Limited
RMB10,000,000
During the year ended 31 December 2021, the Group had undertaken transactions relating to the provision of
various services such as FinTech services, business services and online advertising to certain associates and joint
ventures, which mainly engaged in various Internet businesses such as eCommerce, 020 platforms, FinTech
services under, among others, certain business co-operation arrangements. As at 31 December 2021, contract
liabilities relating to support to be offered to certain associates and joint ventures were RMB3,262 million (31
December 2020: RMB5,469 million).
reserves
RMB'Million
As at 31 December 2021, trade receivables and other receivables from related parties were RMB12,589 million
and RMB161 million, respectively (31 December 2020: RMB9,840 million and RMB67 million, respectively).
2,828
Other tax liabilities
(305)
886
Deferred revenue
Cash generated from operations
2,293
18,184
203,712
214,441
00
300
Tencent Holdings Limited
Notes to the Consolidated Financial Statements
(1,184)
For the year ended 31 December 2021
(b) Major non-cash transactions
Major non-cash transaction during the year ended 31 December 2021 was the dividend declared to be distributed
in specie of JD.com Shares (Note 15(b)).
(c) Net (debt)/cash reconciliation
This section sets out an analysis of net (debt)/cash and the movements in net (debt)/cash for each of the years
presented.
Net (debt)/cash
As at 31 December
2021
2020
RMB'Million
RMB'Million
Cash and cash equivalents
167,966
152,798
Term deposits and others
43 CONSOLIDATED CASH FLOW STATEMENT (continued)
Other payables and accruals
20,598
Accounts payable
7,449
Equity-settled share-based compensation expenses
21,625
12,634
Share of loss/(profit) of associates and joint ventures, net
16,444
(3,672)
Impairment provision for investments in associates, investments in
joint ventures and others
16,315
6,642
Net fair value gains on FVPL and other financial instruments
(47,717)
(38,909)
Net impairment of intangible assets, land use rights, right-of-use assets and
property, plant and equipment
8,704
117
(17,782)
Prepayments, deposits and other receivables
(95)
1,297
Inventories
113,320
(7,530)
Accounts receivable
Changes in working capital:
438
(804)
Exchange (gains)/losses, net
4,872
(4,026)
7,918
106,709
(19,003)
RMB'Million
RMB'Million
RMB'Million
RMB'Million
RMB'Million
Net cash as at 1 January 2021
152,798
106,709
(14,242)
(112,145)
(122,057)
11,063
Cash flows
18,257
Total
349
(33,346)
(27,060)
(41,184)
Exchange impacts
(3,089)
(871)
199
3,044
3,597
2,880
Other non-cash movements (Note)
7,133
(5,576)
As at 31 December 2021, trade payables and other payables to related parties were RMB2,257 million and
RMB172 million, respectively (31 December 2020: RMB3,719 million and RMB333 million, respectively).
616
1 year
1 year
1 year
(14,242)
Borrowings repayable after one year
(136,936)
(112,145)
Notes payable - repayable within one year
Notes payable - repayable after one year
(145,590)
(122,057)
Net (debt)/cash
(20,243)
11,063
Annual Report 2021
301
Notes to the Consolidated Financial Statements
For the year ended 31 December 2021
43 CONSOLIDATED CASH FLOW STATEMENT (continued)
(c) Net (debt)/cash reconciliation (continued)
due after
due within
Notes payable
Notes payable
Borrowings
due after
due within
1 year
Borrowings - repayable within one year
and others
RMB'Million
equivalents
deposits
cash
Borrowings
Term
Cash and
RMB'Million
Interest and related expenses
13,033
(6,650)
286
At 1 January 2021
3,337
RMB'Million
RMB'Million
2020
2021
As at 31 December
Capital investment in investees
Purchase of other property, plant and equipment
Construction/purchase of buildings and purchase of land use rights
Contracted:
Capital commitments as at 31 December 2021 and 2020 are analysed as follows:
(a) Capital commitments
44 COMMITMENTS
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
(2)
(59)
11,810
Net cash as at 31 December 2020
152,798
106,709
391
(14,242)
(122,057)
11,063
Note:
It mainly resulted from the reclassification from non-current to current and assets/liabilities acquired from business combinations.
00
302 Tencent Holdings Limited
(112,145)
427
12,798
16,421
(b) Year end balances with related parties
The Group has commercial arrangements with certain associates to purchase online game licenses and related
services, film and television content and related services, FinTech and Business Services and others. During the
year ended 31 December 2021, the amounts relating to these contents and services received from associates were
RMB8,278 million, RMB7,040 million, RMB4,335 million and RMB1,430 million, respectively (2020: RMB8,266
million, RMB5,285million, RMB3,058 million and RMB1,489 million, respectively).
The Group has commercial arrangements with certain associates and joint ventures to provide Online Advertising
services, FinTech and Business Services, and other services. During the year ended 31 December 2021, revenue
recognised in connection with these services provided to associates and joint ventures of RMB12,085 million,
RMB38,745 million and RMB3,599 million were recorded in the consolidated income statement, respectively (2020:
RMB11,554 million, RMB25,885 million and RMB2,629 million respectively).
(a) Significant transactions with related parties
45 RELATED PARTY TRANSACTIONS (continued)
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
Annual Report 2021 303
Except as disclosed in Note 13(a) (Senior management's emoluments), Note 13(b) (Five highest paid individuals), Note
14 (Benefits and interests of directors), Note 26 (Loans to investees and investees' shareholders) and Note 35 (Share-
based payments) to the consolidated financial statements, other significant transactions carried out between the Group
and its related parties during the years are presented as followings. The related party transactions were carried out in the
normal course of business and at terms negotiated between the Group and the respective related parties.
45 RELATED PARTY TRANSACTIONS
25,489
32,986
4,199
6,113
Later than five years
9,847
11,392
25,588
(b) Other commitments
The future aggregate minimum payments under non-cancellable bandwidth, online game licensing and media
contents agreements are as follows:
Contracted:
As at 31 December
2021
(6,957)
2020
RMB'Million
Not later than one year
15,481
11,443
Later than one year and not later than five
years
RMB'Million
(1,271)
21,656
Other non-cash movements (Note)
Notes to the Consolidated Financial Statements
For the year ended 31 December 2021
43 CONSOLIDATED CASH FLOW STATEMENT
(a) Reconciliation of net profit to cash inflow from operating activities:
Profit for the year
Adjustments for:
2021
2020
RMB'Million
RMB'Million
227,810
160,125
Income tax expense
Net gains on disposals and deemed disposals of investee companies
5,511
20,252
(118,051)
(24,390)
(660)
(1,765)
Depreciation of property, plant and equipment, investment properties and
right-of-use assets
26,166
21,458
Amortisation of intangible assets and land use rights
31,504
29,316
Net gains on disposals of intangible assets and property, plant and equipment
(35)
(120)
12,715
19,897
(70)
Dividend income
Interest income
23,938
9,105
(16,107)
10,460
(47,948)
Exchange impacts
25,811
(6,004)
619
7,792
76
9,277
6,998
9,546
(2,214)
Cash flows
5,259
(15,552)
Net debt as at 31 December 2021
113,320
(19,003)
(136,936)
(145,590)
(20,243)
Net debt as at 1 January 2020
167,966
72,270
(22,695)
(104,257)
(10,534)
(83,327)
132,991
"Awarded Share(s)"
"Auditor"
the audit committee of the Company
"Audit Committee"
the second amended and restated articles of association of the Company adopted
by special resolution passed on 13 May 2020
artificial intelligence
"Articles of Association"
13 November 2013, being the date on which the Company adopted the 2013
Share Award Scheme
25 November 2019, being the date on which the Company adopted the 2019
Share Award Scheme
"Adoption Date III"
13 December 2007, being the date on which the Company adopted the 2007
Share Award Scheme
the annual general meeting of the Company to be held on 18 May 2022 or any
adjournment thereof
"Adoption Date I"
"Adoption Date II"
"AI"
PricewaterhouseCoopers, the auditor of the Company
"Corporate Governance Committee"
Annual Report 2021
"2022 AGM"
"Company Website"
"Chongqing Tencent Information"
"China Literature"
"CG Code"
"Board"
Beijing Starsinhand Technology Company Limited
Beijing BIZCOM Technology Company Limited
"Bitauto"
"Beijing Starsinhand"
"Beijing BIZCOM"
Definition
Term
Definition
311
the share(s) of the Company awarded under the Share Award Schemes
"Company"
Note:
"2019 Share Award Scheme"
As at 31 December 2021, cash and cash equivalents, term deposits and restricted cash of the Group, amounting to
RMB152,662 million were held in the Mainland of China and they are subject to local exchange control and other financial and
treasury regulations. The local exchange control, and other financial and treasury regulations provide for restrictions, on payment
of dividends, share repurchase and offshore investments, other than through normal activities.
All subsidiaries' undertakings are included in the consolidation. The proportion of the voting rights in the subsidiary's
undertakings held directly by the parent company does not differ from its proportion of ordinary shares held. The parent company
does not have any shareholdings in the preference shares of subsidiary's undertakings included in the Group.
Significant restrictions
The directors of the Company considered that the non wholly-owned subsidiaries with non-controlling interests are not significant
to the Group, therefore, no summarised financial information of these non wholly-owned subsidiaries is presented separately.
In September 2020, TME issued two tranches of senior notes with an aggregate principal amount of USD800 million due in 5
years to 10 years, with interest rate ranging from 1.375% to 2.000%. As at 31 December 2021, the principal amount and net
book balance of its notes payable were USD800 million and USD794 million (equivalent to RMB5,101 million and RMB5,062
million), respectively.
As described in Note 1, the Company does not have legal ownership in equity of these structured entities or their subsidiaries.
Nevertheless, under certain contractual agreements entered into with the registered owners of these structured entities, the
Company and its other legally owned subsidiaries control these companies by way of controlling the voting rights, governing their
financial and operating policies, appointing or removing the majority of the members of their controlling authorities, and casting
the majority of votes at meetings of such authorities. In addition, such contractual agreements also transfer the risks and rewards
of these companies to the Company and/or its other legally owned subsidiaries. As a result, they are presented as controlled
structured entities of the Company.
(f)
(e)
(d)
(c)
(b)
(a)
48 SUBSIDIARIES AND CONTROLLED STRUCTURED ENTITIES (continued)
For the year ended 31 December 2021
Notes to the Consolidated Financial Statements
Bitauto Holdings Limited, a company incorporated in the Cayman Islands with
limited liability, which became a non wholly-owned subsidiary of the Company
following completion of its privatisation in November 2020
Consolidation of structured entities
the share award scheme adopted by the Company on Adoption Date III, as
amended from time to time
As mentioned in Note (a) above and Note 35(c), the Company has consolidated the operating entities within the Group without
any legal interests and the EISS out of which wholly-owned subsidiaries of the Company act as general partner. In addition,
due to the implementation of the share award schemes of the Group mentioned in Note 35(b), the Company has also set up a
structured entity ("Share Scheme Trust"), and its particulars are as follows:
Share Scheme Trust
the share award scheme adopted by the Company on Adoption Date II, as
amended from time to time
the share award scheme adopted by the Company on Adoption Date I, as
amended
Definition
"2013 Share Award Scheme"
"2007 Share Award Scheme"
Term
In this annual report, unless the context otherwise requires, the following expressions shall have the following meanings:
Definition
Tencent Holdings Limited
310
00
During the year ended 31 December 2021, the Company contributed approximately RMB2,827 million (2020: RMB1,865
million) to the Share Scheme Trust for financing its acquisition of the Company's shares.
As the Company has the power to govern the financial and operating policies of the Share Scheme Trust and can derive benefits
from the contributions of the eligible persons who are awarded with the shares by the schemes, the directors of the Company
consider that it is appropriate to consolidate the Share Scheme Trust.
Administering and holding the Company's shares acquired for share award schemes
which are set up for the benefits of eligible persons of the Schemes
Principal activities
Structured entity
the board of directors of the Company
20 January 2022, being the date of commencement of dealing in the Shares on
an ex-entitlement basis following the declaration of interim dividend by way of the
Distribution in Specie as announced by the Company on 23 December 2021
China Literature Limited, a non wholly-owned subsidiary of the Company which is
incorporated in the Cayman Islands with limited liability and the shares of which
are listed on the Stock Exchange
Definition
research and development
in respect to a Selected Participant, the date of final approval by the Board of the
total number of shares of the Company to be awarded to the relevant Selected
Participant on a single occasion pursuant to the 2007 Share Award Scheme
the remuneration committee of the Company
the lawful currency of the PRC
"SaaS"
"Selected Participant(s)"
Software-as-a-Service
any Eligible Person(s) selected by the Board to participate in the respective Share
Award Schemes
"SFO"
the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) as
amended, supplemented or otherwise modified from time to time
"Shanghai Tencent Information"
Definition
"Share(s)"
Shanghai Tencent Information Technology Company Limited
ordinary share(s) of HKD0.00002 each in the share capital of the Company (or
of such other nominal amount as shall result from a sub-division, consolidation,
reclassification or reconstruction of the share capital of the Company from time to
time)
the 2007 Share Award Scheme, the 2013 Share Award Scheme and the 2019
Share Award Scheme
"Share Subdivision'
with effect from 15 May 2014, each existing issued and unissued share of
HKD0.0001 each in the share capital of the Company was subdivided into five
subdivided shares of HKD0.00002 each, after passing of an ordinary resolution at
the annual general meeting of the Company held on 14 May 2014 and granting
by the Stock Exchange of the listing of, and permission to deal in, the subdivided
shares
Annual Report 2021
317
Definition
Term
Definition
"Shenzhen Tencent Information"
"Share Award Schemes"
"RMB"
"
"Remuneration Committee'
"PaaS"
Platform-as-a-Service
"PBOC"
"PC"
"Post-IPO Option Scheme I"
"Post-IPO Option Scheme II"
"Post-IPO Option Scheme III"
"Post-IPO Option Scheme IV"
"PRC" or "China"
"PRC CIT"
People's Bank of China
personal computer
the corporate governance code as set out in Appendix 14 to the Listing Rules
the Post-IPO Share Option Scheme adopted by the Company on 16 May 2007
the Post-IPO Share Option Scheme adopted by the Company on 13 May 2009
the Post-IPO Share Option Scheme adopted by the Company on 17 May 2017
the People's Republic of China
PRC corporate income tax as defined in the "Corporate Income Tax Law of the
People's Republic of China"
the Pre-IPO Share Option Scheme adopted by the Company on 27 July 2001
"Pre-IPO Option Scheme"
"PUBG"
PlayerUnknown's Battlegrounds
00
316 Tencent Holdings Limited
Term
"R&D"
"Reference Date"
Shenzhen Tencent Information Technology Company Limited
online-to-offline, or offline-to-online
"Shenzhen Tencent Network"
"Shenzhen Tencent Tianyou"
"Tencent Enterprise Management"
Shenzhen Tencent Enterprise Management Limited
"Tencent Shanghai"
Tencent Technology (Shanghai) Company Limited
"Tencent Technology"
Tencent Technology (Shenzhen) Company Limited
"Tencent Wuhan"
Tencent Technology (Wuhan) Company Limited
"TME"
"ToB"
"Trust Deed I"
"Trust Deed II"
Shenzhen Tencent Computer Systems Company Limited
"Trust Deed III"
Definition
Tencent Music Entertainment Group (NYSE: TME), a non wholly-owned subsidiary
of the Company which is incorporated in the Cayman Islands with limited liability
and the shares of which are listed on the New York Stock Exchange
Product/Service provided to business customers
a trust deed entered into between the Company and the Trustee (as restated,
supplemented and amended from time to time) in respect of the appointment of
the Trustee for the administration of the 2007 Share Award Scheme
a trust deed entered into between the Company and the Trustee (as restated,
supplemented and amended from time to time) in respect of the appointment of
the Trustee for the administration of the 2013 Share Award Scheme
a trust deed entered into between the Company and the Trustee (as restated,
supplemented and amended from time to time) in respect of the appointment of
the Trustee for the administration of the 2019 Share Award Scheme
an independent trustee appointed by the Company for managing the Share Award
Schemes
"United States"
the United States of America
Annual Report 2021
319
"Trustee"
Definition
"Tencent Computer"
Term
Shenzhen Tencent Tianyou Technology Company Limited
"Shiji Kaixuan"
"SKT CFC"
"SKT Co-operation Committee”
"SMES"
“Sogou”
"SSV & CPP"
"Stock Exchange"
"Supercell"
"TCS CFC"
Shenzhen Shiji Kaixuan Technology Company Limited
the co-operation framework contract dated 28 February 2004 entered into
between Cyber Tianjin and Shiji Kaixuan
the co-operation committee established under the SKT CFC
small and medium enterprises
Sogou Inc., a company incorporated in the Cayman Islands with limited liability,
which became a wholly-owned subsidiary of the Company following completion of
its privatisation in September 2021
Sustainable Social Value and Common Prosperity Programme
The Stock Exchange of Hong Kong Limited
Supercell Oy, a private company incorporated in Finland
the co-operation framework contract dated 28 February 2004 entered into
between Tencent Technology and Tencent Computer
"TCS Co-operation Committee”
the co-operation committee established under the TCS CFC
"Tencent Beijing"
Tencent Technology (Beijing) Company Limited
"Tencent Chengdu❞
Tencent Technology (Chengdu) Company Limited
00
318 Tencent Holdings Limited
Shenzhen Tencent Network Information Technology Company Limited
the nomination committee of the Company
the Post-IPO Share Option Scheme adopted by the Company on 24 March 2004
"Nomination Committee"
"FPO"
earnings before interest, tax, depreciation and amortisation
any person(s) eligible to participate in the respective Share Award Schemes
earnings per share
the environmental, social and governance reporting guide as set out in Appendix 27
to the Listing Rules
financial technology
Follow-on Public Offering
"GMV"
gross merchandise value
Annual Report 2021
313
Definition
"FinTech"
Term
"Grant Date'
"Group"
"Guangzhou Tencent Technology"
in relation to any Awarded Share, the date on which the Awarded Share is, was or
is to be granted
the Company and its subsidiaries
Guangzhou Tencent Technology Company Limited
"Guian New Area Tencent Cyber"
Guian New Area Tencent Cyber Company Limited
"Hainan Network"
"HIBOR"
"HKD"
“Hong Kong”
"020"
"Ex-dividend Date"
"ESG Reporting Guide"
"EPS"
Chongqing Tencent Information Technology Company Limited
Tencent Holdings Limited, a limited liability company organised and existing
under the laws of the Cayman Islands and the Shares of which are listed on the
Stock Exchange
the website of the Company at www.tencent.com
the corporate governance committee of the Company
"COSO Framework"
"CRM"
the Internal Control Integrated Framework issued by the Committee of Sponsoring
Organisations
Customer Relationship Management
"Cyber Shenzhen"
Tencent Cyber (Shenzhen) Company Limited
"Cyber Tianjin"
"DAU"
0
Tencent Cyber (Tianjin) Company Limited
daily active user accounts
312 Tencent Holdings Limited
Term
Definition
Definition
"Distribution in Specie"
the distribution of a special interim dividend by the Company in the form of a
distribution in specie of the JD.com Shares held by the Group to the shareholders
whose names appeared on the register of members of the Company on 25
January 2022 in proportion to their then respective shareholdings in the Company
on the basis of 1 Class A ordinary share of JD.com for every 21 Shares held by
the shareholders
"DnF"
Dungeon and Fighter
"Domestic Games"
for the purpose of preparing financial and operating information, Domestic Games
refers to our games business in the PRC, excluding the Hong Kong Special
Administrative Region, the Macao Special Administrative Region and Taiwan
"EBITDA"
"Eligible Person(s)"
"HUYA"
"IA"
Definition
Hainan Tencent Network Information Technology Company Limited
intellectual property
"
initial public offering
JD.com, Inc., a company controlled through weighted voting rights and
incorporated in the Cayman Islands with limited liability, whose American
depositary shares are listed on NASDAQ (stock symbol: JD, ISIN Code:
US47215P1066) and whose Class A ordinary shares are listed on the Stock
Exchange (stock code: 9618)
the approximately 457 million Class A ordinary shares in the share capital of
JD.com with a par value of USD0.00002 each, held by the Group conferring a
holder of a Class A ordinary share to one vote per share on any resolution tabled
at JD.com's general meeting and which are to be distributed pursuant to the
Distribution in Specie
the lawful currency of Japan
London InterBank Offered Rate
"Listing Rules"
"M&A"
the Rules Governing the Listing of Securities on the Stock Exchange
mergers and acquisitions
"laas"
"LIBOR"
monthly active user accounts
315
Definition
Term
Definition
"MIH TC"
"Minor(s)"
"Model Code"
MIH TC Holdings Limited
players who are aged under 18
the Model Code for Securities Transactions by Directors of Listed Issuers set out
in Appendix 10 to the Listing Rules
"NASDAQ"
NASDAQ Global Select Market
Annual Report 2021
"JPY"
"MAU"
"JD.com"
"JD.com Shares'
Hong Kong InterBank Offered Rate
the lawful currency of Hong Kong
the Hong Kong Special Administrative Region, the PRC
HUYA Inc. (NYSE: HUYA), a non wholly-owned subsidiary of the Company which
is incorporated in the Cayman Islands with limited liability and the shares of which
are listed on the New York Stock Exchange
internal audit department of the Company
Infrastructure-as-a-Service
International Accounting Standards
"IC"
"IFRS"
risk management and internal control department of the Company
International Financial Reporting Standards
"IAS"
Instant Messaging
"IM"
"IP"
the investment committee of the Company
"Investment Committee"
for the purpose of preparing financial and operating information, International
Games refers to our games business other than our Domestic Games business
"International Games"
"IPO"
Definition
Term
Tencent Holdings Limited
314
00
Definition
Wuhan Tencent Information Technology Company Limited
"Wuhan Tencent Information"
Tencent Technology, Cyber Tianjin, Tencent Beijing, Shenzhen Tencent
Information, Tencent Chengdu, Chongqing Tencent Information, Shanghai
Tencent Information, Tencent Shanghai, Tencent Wuhan, Hainan Network,
Guangzhou Tencent Technology, Shenzhen Tencent Network, Guian New Area
Tencent Cyber, Cyber Shenzhen and Wuhan Tencent Information
Nanjing Wang Dian Technology Company Limited
value-added services
"VAS"
"Wang Dian"
the lawful currency of the United States
Definition
"USD"
00
"WFOES"
320 Tencent Holdings Limited
Definition
Website: www.tencent.com
Tencent Group Head Office
Tencent Binhai Towers, No. 33 Haitian 2nd Road
Nanshan District, Shenzhen, the PRC
Zipcode : 518054
Telephone: 86-755-86013388
Facsimile
: 86-755-86013399
Tencent Holdings Limited Hong Kong Office
29/F., Three Pacific Place
No. 1 Queen's Road East
Wanchai, Hong Kong
Telephone : 852-21795122
Facsimile
Tencent 腾讯
Term
Weixin Official Account for Investor Relations Tencent IR
852-25201148
23 Aug 2019
403.16
22 Jun 2019 to 21 Jun 2025 (Note 1)
22 Jun 2018
70,525
--- 70,525
403.16
22 Jun 2019 to 21 Jun 2025 (Note 2)
6 Jul 2018
4,093,568
39
Annual Report 2021
No options granted to the employees of the Group were cancelled during the year.
17.
As a result of the Distribution in Specie, pursuant to the scheme rules of the Post-IPO Option Scheme II and the Post-IPO Option
Scheme IV, adjustments had been made to the exercise price of the share options as shown above which remained outstanding as at
the Ex-dividend Date. Please refer to the announcement of the Company dated 14 March 2022 for details.
The weighted average closing price immediately before the date on which the options were exercised was HKD555.17 per Share, which
was adjusted to HKD538.852 per Share on the Ex-dividend Date.
The closing price immediately before the date on which the options were granted on 16 November 2021 was HKD491.8 per Share,
which was adjusted to HKD477.342 per Share on the Ex-dividend Date.
The closing price immediately before the date on which the options were granted on 14 July 2021 was HKD555.5 per Share, which was
adjusted to HKD539.169 per Share on the Ex-dividend Date.
The closing price immediately before the date on which the options were granted on 10 June 2021 was HKD603 per Share, which was
adjusted to HKD585.272 per Share on the Ex-dividend Date.
The closing price immediately before the date on which the options were granted on 30 March 2021 was HKD612 per Share, which
was adjusted to HKD594.008 per Share on the Ex-dividend Date.
16.
15.
14.
13.
12.
11.
13,055
13,055
22 Jun 2018
(Note 16)
Annual Report 2021
35
Directors' Report
Number of share options
Lapsed/
As at
Granted
Exercised
forfeited
As at
1 January
during
The first 33.33% (one-third) of the total options shall be vested and can be exercised on the dates as specified in the relevant grant
letters, and each 33.33% (one-third) of the total options will be vested and become exercisable in each subsequent year.
during
31 December
Exercise
Date of grant
2021
the year
the year
the year
2021
price
Exercise period
HKD
(Note 15)
during
The first 50% of the total options shall be vested and can be exercised on the dates as specified in the relevant grant letters, and the
remaining 50% of the total options will be vested and become exercisable in the subsequent year.
The first 25% of the total options shall be vested and can be exercised on the dates as specified in the relevant grant letters, and each
25% of the total options will be vested and become exercisable in each subsequent year.
10.
502.50
- 172,897
172,897
16 Nov 2021
5 Jul 2022 to 13 Jul 2028 (Note 8 and Note 13)
556.50
7,951,284
53,147
8,004,431
14 Jul 2021
15 May 2022 to 9 Jun 2028 (Note 10 and Note 12)
606.30
15 Sep 2022 to 15 Nov 2028 (Note 10 and Note 14)
-- 151,607
10 Jun 2021
5 Jul 2021 to 9 Jun 2028 (Note 8 and Note 12)
606.30
-- 11,778
11,778
10 Jun 2021
30 Mar 2022 to 29 Mar 2028 (Note 8 and Note 11)
618.00
3,867,841
3,867,841
30 Mar 2021
1 January
151,607
24 May 2019 to 23 May 2025 (Note 2)
16 Nov 2021
15,694
9.
8.
Subject to the satisfaction of certain conditions, the first 25% of the total options shall be vested and can be exercised on the dates as
specified in the relevant grant letters, and each 25% of the total options will be vested and become exercisable in each subsequent
year.
For options granted with exercisable date determined based on the grant date of options, 100% of the total options shall be vested and
can be exercised 5 years after the grant date.
7.
6.
Directors' Report
Tencent Holdings Limited
38
For options granted with exercisable date determined based on the grant date of options, the first 25% of the total options shall be
vested and can be exercised 3 years after the grant date, and each 25% of the total options will be vested and become exercisable in
each subsequent year.
For options granted with exercisable date determined based on the grant date of options, the first 25% of the total options shall be
vested and can be exercised 2 years after the grant date, and each 25% of the total options will be vested and become exercisable in
each subsequent year.
For options granted with exercisable date determined based on the grant date of options, the first 25% of the total options shall be
vested and can be exercised 1 year after the grant date, and each 25% of the total options will be vested and become exercisable in
each subsequent year.
15,694
For options granted with exercisable date determined based on the grant date of options, the first 33.33% (one-third) of the total options
shall be vested and can be exercised 1 year after the grant date, and each 33.33% (one-third) of the total options will be vested and
become exercisable in each subsequent year.
5.
4.
3.
2.
1.
Note:
93,338,573
357,421
85,119,689 13,410,620 4,834,315
Total:
15 Oct 2022 to 15 Nov 2028 (Note 10 and Note 14)
502.50
For options granted with exercisable date determined based on the grant date of options, the first 50% of the total options shall
be vested and can be exercised 1 year after the grant date, and the remaining 50% of the total options will be vested and become
exercisable in the subsequent year.
407.00
26,390
26,390
40,350
116.40
12 Dec 2016 to 11 Dec 2021 (Note 4)
2 Apr 2015
215,000
35,000
180,000
149.80
2 Apr 2016 to 1 Apr 2022 (Note 3)
10 Jul 2015
404,820
108,369
296,451
148.90
10 Jul 2016 to 9 Jul 2022 (Note 3)
21 Mar 2016
5,590,000
375,000
5,215,000
158.10
21 Mar 2017 to 20 Mar 2023 (Note 3)
6 Jul 2016
762,361
185,220
577,141
40,350
12 Dec 2014
10 Jul 2015 to 9 Jul 2021 (Note 3)
124.30
As at
Granted
Exercised
forfeited
As at
1 January
during
during
during
31 December
Exercise
Date of grant
174.86
2021
the year
the year
2021
price
Exercise period
(Note 15)
HKD
(Note 16)
10 Jul 2014
319,988
309,050
10,938
the year
6 Jul 2017 to 5 Jul 2023 (Note 3)
24 Mar 2017
942,365
71,190
419.60
23 Nov 2018 to 22 Nov 2024 (Note 2)
16 Jan 2018
144,050
12,000
132,050 444.20
16 Jan 2019 to 15 Jan 2025 (Note 2)
9 Apr 2018
1,948,915
75,840
1,873,075
71,190
410.00
9 Apr 2018
191,555
- 191,555
410.00
9 Apr 2019 to 8 Apr 2025 (Note 2)
9 Apr 2018
16,631,126
11,367
16,619,759
410.00
9 Apr 2019 to 8 Apr 2025 (Note 3)
24 May 2018
9 Apr 2019 to 8 Apr 2025 (Note 1)
Date of grant
23 Nov 2017
272.36
115,715
826,650
225.44
24 Mar 2018 to 23 Mar 2024 (Note 1)
24 Mar 2017
20,160,250
1,109,375
19,050,875
225.44
24 Mar 2018 to 23 Mar 2024 (Note 3)
10 Jul 2017
4,469
10 Jul 2019 to 9 Jul 2024 (Note 4)
4,469
10 Jul 2018 to 9 Jul 2024 (Note 2)
10 Jul 2017
6,144,941
- 1,407,612
39,243
4,698,086
272.36
10 Jul 2018 to 9 Jul 2024 (Note 3)
10 Jul 2017
18,446
4,960
13,486
272.36
(Note 16)
HKD
(Note 15)
111,510
111,510
8 Jan 2020
15 Nov 2020 to 1 Dec 2026 (Note 10)
335.84
17,664
17,500
35,164
2 Dec 2019
15 Aug 2020 to 22 Aug 2026 (Note 7)
334.20
213,990
213,990
23 Aug 2019
15 Aug 2020 to 22 Aug 2026 (Note 8)
334.20
43,585
24,210
67,795
603,278
15 Aug 2020 to 22 Aug 2026 (Note 10)
334.20
108,973
3,381,317
386.60
382.00
15 Dec 2020 to 7 Jan 2027 (Note 10)
8 Jan 2020
26,250
2021
the year
the year
the year
2021
Date of grant
Exercise
31 December
during
during
during
1 January
6 Jul 2019 to 5 Jul 2025 (Note 3)
As at
Exercised
Granted
As at
Lapsed/
Directors' Report
Number of share options
Tencent Holdings Limited
36
00
15 Jan 2021 to 7 Jan 2027 (Note 10)
382.00
26,250
forfeited
6 Jul 2018
8,050
2,000
4 Apr 2020 to 3 Apr 2026 (Note 3)
4 Apr 2019
17,500,000
- 17,500,000
376.00
4 Apr 2024 to 3 Apr 2026 (Note 6)
8 Jul 2019
665
-665 ..
359.04
8 Jul 2020 to 7 Jul 2026 (Note 1)
8 Jul 2019
376.00
1,952,356
58,317
1,740,226
359.04
8 Jul 2020 to 7 Jul 2026 (Note 3)
8 Jul 2019
12,005
12,005
359.04
8 Jul 2021 to 7 Jul 2026 (Note 4)
23 Aug 2019
19,740
9,870
153,813
price
2,283,120
4 Apr 2019
6,050
386.60
6 Jul 2020 to 5 Jul 2025 (Note 4)
6 Jul 2018
34,230
6,299
13,685
14,246
386.60
6 Jul 2021 to 5 Jul 2025 (Note 5)
24 Aug 2018
17,780
2,283,120
17,780
24 Aug 2019 to 23 Aug 2025 (Note 2)
24 Aug 2018
2,660
- 2,660
354.00
6 Jul 2019 to 23 Aug 2025 (Note 8)
4 Apr 2019
288,972
95,106
193,866
376.00
4 Apr 2020 to 3 Apr 2026 (Note 1)
354.00
Lapsed/
Exercise period
HKD
4,333
30 Mar 2021
8 Feb 2022 to 29 Mar 2028 (Note 8 and Note 11)
618.00
100,335
100,335
30 Mar 2021
8 Feb 2022 to 29 Mar 2028 (Note 9 and Note 11)
618.00
1,062,910
15,745
1,078,655
30 Mar 2021
15 Dec 2021 to 22 Dec 2027 (Note 10)
575.80
105,207
105,207
23 Dec 2020
15 Dec 2021 to 22 Dec 2027 (Note 9)
575.80
14,028
14,028
23 Dec 2020
15 Nov 2021 to 22 Nov 2027 (Note 8)
586.00
4,333
618.00
15 Feb 2022 to 29 Mar 2028 (Note 10 and Note 11)
30 Mar 2021
Exercise period
price
2021
the year
the year
the year
2021
Exercise
31 December
during
during
during
16,825
As at
Exercised
Granted
As at
Lapsed/
Number of share options
Directors' Report
37
Annual Report 2021
15 Feb 2022 to 29 Mar 2028 (Note 8 and Note 11)
618.00
3,049
3,049
forfeited
16,825
23 Nov 2020
15 Oct 2021 to 22 Nov 2027 (Note 10)
5 Jul 2021 to 9 Jul 2027 (Note 8)
546.50
1,360,471
51,172
16,539
1,428,182
10 Jul 2020
15 May 2021 to 21 May 2027 (Note 10)
429.52
- 49,840
49,840
22 May 2020
10 Jul 2020
20 Mar 2021 to 19 Mar 2027 (Note 8)
2,560,491
24,329
2,584,820
20 Mar 2020
21 Jan 2021 to 19 Mar 2027 (Note 9)
359.60
295,053
4,629
90,848
390,530
20 Mar 2020
(Note 16)
359.60
(Note 15)
3,507
546.50
586.00
8,855
8,855
23 Nov 2020
15 Oct 2021 to 22 Nov 2027 (Note 9)
586.00
108,708
1,572
110,280
23 Nov 2020
15 Aug 2021 to 20 Aug 2027 (Note 8)
518.00
3,507
4,964
21 Aug 2020
15 Aug 2021 to 20 Aug 2027 (Note 10)
518.00
10,535
10,535
21 Aug 2020
15 Jul 2021 to 20 Aug 2027 (Note 9)
518.00
24,465
24,465
21 Aug 2020
5 Jul 2022 to 9 Jul 2027 (Note 8)
4,964
Number of share options
Details of movements of share options granted to employees of the Group (apart from director(s) of the Company) during the
year ended 31 December 2021 are as follows:
Directors' Report
443.40
516.00
4,249,200
596,186,676
412.60
478.20
1,332,600
Total:
August
September
paid
HKD
HKD
HKD
consideration
Lowest
price paid
Highest
price paid
2,002,589,555
5,581,800
2,598,776,231
Save as disclosed above and in Note 33 to the consolidated financial statements, neither the Company nor any of its
subsidiaries has purchased, sold or redeemed any of the Company's listed securities during the year ended 31 December
2021.
HUYA
As at 31 December 2021, China Literature had fully utilised all net proceeds from its IPO.
The shares of China Literature were listed on the Stock Exchange on 8 November 2017 and the net proceeds raised by China
Literature during its IPO were approximately HKD7,235 million (equivalent to approximately RMB6,145 million).
China Literature
As at 31 December 2021, TME had used all net proceeds from its IPO in the manner set out in its IPO prospectus for content
acquisition, strategic investments, and other operating and investment purposes.
The American depositary shares of TME were listed on the New York Stock Exchange on 12 December 2018 and the net
proceeds raised by TME during its IPO were approximately USD509 million.
TME
Month of purchase in 2021
The use of proceeds from the IPO and FPO of TME, China Literature and HUYA, our non wholly-owned subsidiaries, are set
out below:
Directors' Report
Tencent Holdings Limited
32
00
Details of the issuance of debt securities are set out in Note 37 to the consolidated financial statements.
In April 2021, the Company issued four tranches of senior notes with an aggregate principal amount of USD4.15 billion under
the Global Medium Term Note Programme for the Company's general corporate purposes.
ISSUANCE OF DEBT SECURITIES
USE OF PROCEEDS FROM IPO AND FPO OF NON WHOLLY-OWNED SUBSIDIARIES
No. of Shares
Aggregate
Purchase consideration per Share
Tencent Holdings Limited
30
Details of the movements in the reserves of the Group and the Company during the year are set out in the consolidated
statement of changes in equity on pages 174 to 177, Note 33, Note 34 and Note 46 to the consolidated financial statements
respectively.
As at 31 December 2021, the Company had distributable reserves amounting to RMB66,701 million (2020: RMB45,952
million).
The Company may pay dividends out of share premium, retained earnings and any other reserves provided that immediately
following the payment of such dividends, the Company will be in a position to pay off its debts as they fall due in the ordinary
course of business.
RESERVES
On 23 December 2021, the Board resolved to declare a special interim dividend in the form of a distribution in specie of
approximately 457 million Class A ordinary shares of JD.com indirectly held by the Company to the shareholders whose names
appeared on the register of members of the Company on 25 January 2022 in proportion to their then respective shareholdings
in the Company on the basis of 1 Class A ordinary share of JD.com for every 21 Shares held by the shareholders, being
rounded down to the nearest whole number of Class A ordinary shares of JD.com.
Directors' Report
The Board has recommended the payment of a final dividend of HKD1.60 per share for the year ended 31 December 2021.
The dividend is expected to be payable on 6 June 2022 to the shareholders whose names appear on the register of members
of the Company on 25 May 2022. The total final dividend proposed for the year is HKD1.60 per share.
RESULTS AND APPROPRIATIONS
The analysis of the Group's revenues and contribution to results by business segments and the Group's revenues by
geographical area of operations is set out in Note 5 to the consolidated financial statements.
The principal activity of the Company is investment holding. The activities of the principal subsidiaries are set out in Note 48 to
the consolidated financial statements.
PRINCIPAL ACTIVITIES
The directors have pleasure in presenting their report together with the audited financial statements for the year ended
31 December 2021.
Directors' Report
9,870
The results of the Group for the year are set out in the consolidated statement of comprehensive income on page 170 of this
annual report.
The American depositary shares of HUYA were listed on the New York Stock Exchange on 11 May 2018 and the net proceeds
raised by HUYA during its IPO were approximately USD190 million. The net proceeds raised by HUYA in its FPO launched in
April 2019 were approximately USD314 million.
PROPERTY, PLANT AND EQUIPMENT
BUSINESS REVIEW AND DIVIDEND
During the year ended 31 December 2021, the Company repurchased 5,581,800 Shares on the Stock Exchange for an
aggregate consideration of approximately HKD2,598.8 million before expenses. The repurchased Shares were subsequently
cancelled. The repurchase was effected by the Board for the enhancement of shareholder value in the long term. Details of the
Shares repurchased are as follows:
PURCHASE, SALE OR REDEMPTION OF THE COMPANY'S LISTED SECURITIES
A summary of the condensed consolidated results and financial positions of the Group is set out on page 3 of this annual
report.
FINANCIAL SUMMARY
The donation made by the Group in the year was RMB2,050 million.
DONATION
Directors' Report
Details of the movements in property, plant and equipment of the Group during the year are set out in Note 16 to the
consolidated financial statements.
31
Particulars of the Group's borrowings and notes payable are set out in Note 36 and Note 37 to the consolidated financial
statements respectively.
BORROWINGS AND NOTES PAYABLE
Particulars of the Company's principal subsidiaries as at 31 December 2021 are set out in Note 48 to the consolidated
financial statements.
SUBSIDIARIES
Details of the movements in the share capital of the Company during the year are set out in Note 33 to the consolidated
financial statements.
SHARE CAPITAL
A fair review of the business of the Group, comprising a discussion and analysis of the Group's performance during the
year, an indication of likely future development in the business of the Group and the proposed dividend for the year
ended 31 December 2021 are set out in the "Chairman's Statement" on pages 4 to 8 of this annual report. Particulars of
important events affecting the Group that have occurred since the end of the financial year 2021 are set out in Note 47 to
the consolidated financial statements. An analysis using financial key performance indicators is set out in the "Management
Discussion and Analysis" on pages 9 to 29 of this annual report. Discussions on the Group's environmental policies and
performance, and an account of the Group's key relationships with its stakeholders are set out in the “Environmental, Social
and Governance Report" on pages 110 to 159 of this annual report. Details regarding the Group's compliance with the
relevant laws and regulations which have a significant impact on the Group are also set out in the "Environmental, Social and
Governance Report" on pages 110 to 159 and the "Corporate Governance Report" on pages 77 to 109 as well as on page
74 of this annual report. A description of the principal risks and uncertainties facing the Group is set out in the "Corporate
Governance Report" on pages 77 to 109 of this annual report. All such discussions form part of this annual report.
Annual Report 2021
As at 31 December 2021, HUYA had used all net proceeds from its IPO and USD29.6 million of the net proceeds from its FPO
for investing in overseas expansion and for general corporate purposes.
purchased
SHARE OPTION SCHEMES
3,374,630
(Note 2)
30 March 2021
19 March 2027 (Note 1)
20 March 2021 to
359.60
4,399,815
4,399,815
618.00
20 March 2020
4 April 2020 to
376.00
-- 3,506,580
3,506,580
4 April 2019
8 April 2025 (Note 1)
9 April 2019 to
3 April 2026 (Note 1)
410.00
30 March 2022 to
Total:
The remaining balance of the net proceeds was placed with banks. HUYA will apply the remaining net proceeds in the manner
as set out in its FPO prospectus.
34
00
the Ex-dividend Date. Please refer to the announcement of the Company dated 14 March 2022 for details.
As a result of the Distribution in Specie, pursuant to the scheme rules of the Post-IPO Option Scheme II and the Post-IPO Option
Scheme IV, adjustments had been made to the exercise price of the share options as shown above which remained outstanding as at
4.
No options granted to the director were exercised, cancelled or lapsed during the year.
29 March 2028 (Note 1)
3.
For options granted with exercisable date determined based on the grant date of options, the first 25% of the total options shall be
vested and can be exercised 1 year after the grant date, and each 25% of the total options will be vested and become exercisable in
each subsequent year.
2.
1.
Note:
23,496,825
3,374,630
20,122,195
The closing price immediately before the date on which the options were granted on 30 March 2021 was HKD612 per Share, which
was adjusted to HKD594.008 per Share on the Ex-dividend Date. Out of these 3,374,630 options, 843,657 options which would be
exercisable during the period between 30 March 2022 and 29 March 2028 were voluntarily waived by Mr Lau in February 2022.
- 3,215,800
3,374,630
Tencent Holdings Limited
the year
Exercise
during 31 December
As at
Exercised
Granted
during
1 January
2021
the year
Date of grant
As at
Number of share options
As at 31 December 2021, there were a total of 23,496,825 outstanding share options granted to a director of the Company,
details of which are as follows:
Directors' Report
33
Annual Report 2021
3,215,800
Name of director
2021
The Company has adopted five share option schemes, namely, the Pre-IPO Option Scheme, the Post-IPO Option Scheme I, the
Post-IPO Option Scheme II, the Post-IPO Option Scheme III and the Post-IPO Option Scheme IV. The Pre-IPO Option Scheme,
the Post-IPO Option Scheme I, the Post-IPO Option Scheme II and the Post-IPO Option Scheme III expired on 31 December
2011, 23 March 2014, 16 May 2017 and 13 May 2019 respectively. In respect of the Post-IPO Option Scheme IV, the Board
may, at its discretion, grant options to any qualifying participants to subscribe for shares in the Company, subject to the terms
and conditions stipulated therein.
Exercise period
price
23 March 2024 (Note 1)
24 March 2018 to
225.44
5,250,000
5,250,000
24 March 2017
20 March 2023 (Note 1)
9 April 2018
158.10
- 3,750,000
3,750,000
21 March 2016
Lau Chi Ping Martin
(Note 4)
HKD
21 March 2017 to
307,792
307,792
15 Dec 2021
15 Sep 2022 to 14 Sep 2031 (Note 4 and Note 5)
4.24
15 Jul 2022 to 14 May 2031 (Note 4 and Note 5)
254,952
5.29
15 Sep 2021
30 Jul 2022 to 29 Jul 2031 (Note 2 and Note 5)
6,327,742
243,126
6,570,868
30 Jul 2021
3.32
254,952
15 Dec 2022 to 14 Dec 2031 (Note 4 and Note 5)
278,801
26,806,285 8,543,982
6.37
1 Mar 2016 to 28 Feb 2025 (Note 1)
0.27
50,000
50,000
1 Mar 2015
1 Mar 2016 to 28 Feb 2025 (Note 1)
Sub-total:
0.000076
86,000
1 Mar 2015
(Note 7)
consultants
External
541,488 27,591,917
7,216,862
192,801
148,130
(Note 8)
15 Jul 2021
12 Jun 2021 to 11 Jun 2030 (Note 2)
6.20
4,093,832
110,540
81,198
4,285,570
12 Jun 2020
15 Aug 2020
14 Jun 2020 to 13 Jun 2029 (Note 2)
1,621,618
15,384
1,637,002
14 Jun 2019
Employees
(Note 6)
Sub-total:
7.05
148,130
208,790
7.56
15 May 2022 to 14 May 2031 (Note 2 and Note 5)
7.61
1,262,240
1,262,240
15 May 2021
15 Dec 2021 to 14 Dec 2030 (Note 4)
9.53
208,790
169,080
15 Dec 2020
15 Oct 2021 to 14 Oct 2030 (Note 4)
7.17
71,930
71,930
15 Oct 2020
15 Aug 2021 to 14 Aug 2030 (Note 4)
169,080
328,801
Tencent Holdings Limited
192,801
5,075,000
Sub-total:
12 Jul 2021 to 12 Jul 2031 (Note 1)
12 Jul 2021 to 12 Jul 2031 (Note 1)
82.85
82.85
2,175,000
2,175,000
12 Jul 2021
5,075,000
Hou Xiaonan
2,900,000
12 Jul 2021
Cheng Wu
Directors
Exercise period
price
HKD
(Note 3)
2,900,000
2021
Employees
949,914
Directors' Report
USD
42
00
7,811,453
7,811,453
Total:
12 Jul 2021
2,736,453
Sub-total:
12 Jul 2022 to 12 Jul 2032 (Note 2)
5 Nov 2022 to 5 Nov 2032 (Note 2)
82.85
53.14
1,786,539
1,786,539
5 Nov 2021
949,914
2,736,453
Exercise
during 31 December
the year
the year
7.
6.
5.
4.
3.
Directors' Report
41
8.
Annual Report 2021
The first 25% of the total options shall be vested and can be exercised 1 year after the commencement dates as specified in the
relevant grant letters, and each 12.5% of the total options will be vested and become exercisable in each subsequent six months.
2.
1.
Note:
541,488 27,784,718
27,135,086 8,543,982 7,352,862
Total:
Subject to the satisfaction of certain conditions, the first 25% of the total options shall be vested and can be exercised on the dates as
specified in the relevant grant letters, and each 25% of the total options will be vested and become exercisable in each subsequent
year.
9.
The first 25% of the total options shall be vested and can be exercised 2 years after the commencement date as specified in the
relevant grant letters, and each 25% of the total options will be vested and become exercisable in each subsequent year.
The first 33.33% (one-third) of the total options shall be vested and can be exercised 1 year after the commencement date as
specified in the relevant grant letters, and each 33.33% (one-third) of the total options will be vested and become exercisable in each
subsequent year.
2021
Date of grant
Name of director
during
1 January
As at
Exercised
Granted
As at
Number of share options
Details of movements of share options granted to directors and employees of China Literature under the share option plan
adopted by China Literature, a subsidiary of the Company, during the year ended 31 December 2021 are as follows:
No options granted to employees and certain external consultants of TME were cancelled during the year.
The expected volatility was estimated based on the historical volatility of the share prices of similar United States public companies for a period
equal to the expected life preceding the grant date.
The fair value of the options as at the respective grant date was determined using the "Enhanced FAS 123" binomial model which is to
be expensed over the relevant vesting period. The weighted average fair value of options granted during the year ended 31 December
2021 was USD2.65 per share. Other than the exercise price mentioned above, significant assumptions (which are subject to subjectivity
and uncertainty) used to estimate the fair value of the options include risk-free rate (1.22% -1.63%), dividend yield (nil) and expected
volatility* (43.5% - 50%).
The weighted average closing price immediately before the date on which the options were exercised by certain external consultants of
TME was USD9.96 per share.
The weighted average closing price immediately before the date on which the options were exercised by employees of TME was
USD10.26 per share.
The closing price immediately before the date on which the options were granted on 15 May 2021, 15 July 2021, 30 July 2021,
15 September 2021 and 15 December 2021, was USD7.61 per share, USD6.36 per share, USD5.32 per share, USD4.03 per share
and USD3.19 per share, respectively.
136,000
Exercise period
0.27
2021
297,598
700,882
30 Mar 2015
1 Mar 2016 to 28 Feb 2025 (Note 1)
0.27
179,020
238,390
403,284
417,410
1 Mar 2016 to 28 Feb 2025 (Note 1)
0.000076
292,744
167,476
460,220
1 Mar 2015
Employees
1 Mar 2015
USD
0.27
1 Oct 2015
0.27
50,745
57,144
107,889
1 Mar 2016
31 Dec 2016 to 30 Dec 2025 (Note 1)
0.27
30 Mar 2016 to 29 Mar 2025 (Note 1)
196,016
599,658
31 Dec 2015
1 Oct 2016 to 30 Sep 2025 (Note 1)
0.27
63,760
61,340
125,100
403,642
1 Mar 2017 to 28 Feb 2026 (Note 1)
(Note 6)
Exercise period
Directors' Report
2.
3.
4.
The first 25% of the total options shall be vested and can be exercised after the grant date, and each 25% of the total options will be
vested and become exercisable in each subsequent year.
The first 25% of the total options shall be vested and can be exercised 1 year after the grant date, and each 25% of the total options will
be vested and become exercisable in each subsequent year.
The closing price immediately before the date on which the options were granted on 12 July 2021 and 5 November 2021, was
HKD80.65 per share and HKD53.25 per share, respectively.
Details of movements of share options granted to employees and certain external consultants of TME under the share option
schemes adopted by TME, a subsidiary of the Company, during the year ended 31 December 2021 are as follows:
The fair value of the options as at the respective grant date was determined using the binomial model which is to be expensed over the
relevant vesting period. The weighted average fair value of options granted during the year ended 31 December 2021 was HKD20.26
per share. Other than the exercise price mentioned above, significant assumptions (which are subject to subjectivity and uncertainty)
used to estimate the fair value of the options include risk-free rate (1.6%), dividend yield (nil) and expected volatility* (25%).
5.
No options granted to directors and employees of China Literature were exercised, cancelled or lapsed during the year.
Details of movements of share options granted to employees of HUYA under the share option schemes adopted by HUYA, a
subsidiary of the Company, during the year ended 31 December 2021 are as follows:
Number of share options
Lapsed/
As at
1 January
The expected volatility, measured as the standard deviation of expected share price returns, is determined based on the average daily closing price
volatility of the shares of the comparative companies within an observation period which was commensurate with the maturity of the share options.
(Note 8)
Number of share options
As at
price
2021
the year
the year
the year
2021
Date of grant
Lapsed/
Exercise
during
during
1 January
As at
forfeited
Exercised
Granted
during 31 December
31 Mar 2016
98,938
26,304
40
00
12 Jul 2020 to 16 Oct 2028 (Note 3)
7.14
30,000 2,763,500
52,500
2,846,000
40
17 Oct 2018
7.14
125,000 1,696,500
1,821,500
17 Oct 2018
16 Apr 2019 to 15 Apr 2028 (Note 2)
4.04
325,000
12 Jul 2019 to 16 Oct 2028 (Note 2)
325,000
Tencent Holdings Limited
Directors' Report
the year
the year
the year
2021
Date of grant
Exercise
during 31 December
Number of share options
during
1 January
As at
forfeited
Exercised
Granted
As at
Lapsed/
during
650,000
16 Apr 2018
20 Dec 2018 to 19 Dec 2027 (Note 2)
364,230
367,892
16 Jun 2017
30 Jun 2017 to 29 Jun 2026 (Note 1)
0.27
1,540,774
1,522,590
3,662
3,063,364
30 Jun 2017 to 29 Jun 2026 (Note 1)
0.000076
81,638
81,638
30 Jun 2016
31 Mar 2017 to 30 Mar 2026 (Note 1)
72,634
30 Jun 2016
2.32
5 Jul 2017 to 15 Jun 2027 (Note 2)
16 Jun 2017
2.32
2,836,672
1,137,084
3,973,756
20 Dec 2017
31 Aug 2018 to 30 Aug 2027 (Note 1)
0.27
1,271,442
32,822
1,444,538
2,748,802
31 Aug 2017
31 Mar 2018 to 15 Jun 2027 (Note 2)
2.32
1,430,058
940,806
2,370,864
price
Granted
during
1.
Till 1 Jul 2028 (Note 2)
Post-IPO Option Scheme II
Directors' Report
Option period
5.
Maximum entitlement
of each participant
Details
Tencent Holdings Limited
44
00
The maximum number of Shares in respect
of which options may be granted under
the Post-IPO Option Scheme IV shall be
379,099,339 Shares, 4% of the relevant.
class of securities of the Company in
issue as at 17 May 2017. The maximum
number of Shares which may be issued
upon exercise of all outstanding options
granted and yet to be exercised under the
Post-IPO Option Scheme IV and any other
share option schemes, including the Pre-
IPO Option Scheme, the Post-IPO Option
Scheme I, the Post-IPO Option Scheme II
and the Post-IPO Option Scheme III, must
not in aggregate exceed 30% of the issued
shares of the Company from time to time
(Note 2).
of the Company from time to time (Note 1).
The maximum number of Shares in respect
of which options may be granted under
the Post-IPO Option Scheme II shall be
444,518,270 Shares (after the effect of the
Share Subdivision), 5% of the relevant class
of securities of the Company in issue as at
16 May 2007. The maximum number of
Shares which may be issued upon exercise
of all outstanding options granted and yet
to be exercised under the Post-IPO Option
Scheme II and any other share option
schemes, including the Pre-IPO Option
Scheme, the Post-IPO Option Scheme I,
the Post-IPO Option Scheme III and the
Post-IPO Option Scheme IV, must not in
aggregate exceed 30% of the issued shares
Maximum number
of Shares
3.
Any employee (whether full time or
part time), executive or officer, director
(including executive, non-executive and
independent non-executive directors) of
any member of the Group or any invested
entity, and any consultant, adviser or agent
of any member of the Board, who have
contributed or will contribute to the growth
and development of the Group or any
invested entity
Any employee (whether full time or
part time), executive or officer, director
(including executive, non-executive and
independent non-executive directors) of
any member of the Group or any invested
entity, which is any entity in which the
Group holds an equity interest, and any
consultant, adviser or agent of any member
of the Board, who have contributed or will
contribute to the growth and development
of the Group or any invested entity
To recognise the contribution that certain individuals have made to the Group, to attract
the best available personnel and to promote the success of the Group's business
Post-IPO Option Scheme IV
Post-IPO Option Scheme II
Qualifying participants
2.
1% of the issued shares of the Company
from time to time within any 12-month
period up to the date of the latest grant
The option period is determined by the
Board provided that it is not later than
the last day of the 7-year period after the
date of grant of the options. There is no
minimum period for which an option must
be held before it can be exercised.
Post-IPO Option Scheme IV
1% of the issued shares of the Company
from time to time within any 12-month
period up to the date of the latest grant
45
Annual Report 2021
The total number of Shares available for issue under the Post-IPO Option Scheme IV is 289,802,600, which represents approximately
3.01% of the issued shares of the Company as at the date of this annual report.
The Post-IPO Option Scheme II expired on 16 May 2017 and no further options will be granted under the scheme.
2.
1.
Note:
It shall be valid and effective for a period of
ten years commencing on 17 May 2017.
average closing price of the securities
as stated in the Stock Exchange's daily
quotations sheets for the five business days
immediately preceding the date of grant;
and (iii) the nominal value of the Share.
The exercise price must be at least the
higher of: (i) the closing price of the
securities as stated in the Stock Exchange's
daily quotations sheet on the date of grant,
which must be a business day; (ii) the
Purposes
Options granted must be accepted within
28 days of the date of grant, upon payment
of HKD1 per grant.
It expired on 16 May 2017.
Remaining life of
8.
The exercise price must be at least the
higher of: (i) the closing price of the
securities as stated in the Stock Exchange's
daily quotations sheet on the date of grant,
which must be a business day; (ii) the
average closing price of the securities
as stated in the Stock Exchange's daily
quotations sheets for the five business days
immediately preceding the date of grant;
and (iii) the nominal value of the Share.
Options granted must be accepted within
28 days of the date of grant, upon payment
of HKD1 per grant.
Exercise price
7.
Acceptance of offer
6.
The option period is determined by the
Board provided that it is not later than
the last day of the 7-year period after the
date of grant of the options. There is no
minimum period for which an option must
be held before it can be exercised.
the scheme
Directors' Report
1.
SUMMARY OF THE SHARE OPTION SCHEMES
2.55
159,000
47,238
206,238
9 Aug 2017
USD
(Note 1)
Exercise period
price
2021
the year
the year
the year
2021
Date of grant
Exercise
during 31 December
during
As at
forfeited
Exercised
Till 9 Aug 2027 (Note 2)
9 Aug 2017
Note:
577,502
Directors' Report
43
Annual Report 2021
No options granted to the employees of HUYA were cancelled during the year.
3.
All outstanding options were granted before HUYA became our subsidiary, and became vested and exercisable prior to or upon HUYA
becoming our subsidiary.
The weighted average closing price immediately before the date on which the options were exercised was USD12.98 per share.
2.
1.
Note:
Details
259,315
792,740
Total:
2.55
9,000
9,000
1 Jul 2018
Till 9 Aug 2027 (Note 2)
2.55
100,315
477,187
533,425
A summary of the share option plan of TME, which was approved by the Company's shareholders on 17 May 2017 (the "TME
Plan"), is set out below:
4.
Purpose
48
00
The total number of options available for grant under the China Literature Plan is 17,658,688, which represents approximately 1.73% of the
issued shares of China Literature as at the date of this annual report.
Note:
The China Literature Plan is valid and effective for a period of ten years commencing on
24 May 2021, unless the China Literature Plan is otherwise terminated earlier.
The subscription price shall be a price determined by the board of directors of China
Literature or the chairman of China Literature (as the case may be) and notified to grantee
and will be the highest of: (a) the closing price of a share as stated in the Stock Exchange's
daily quotations sheet on the grant date of the relevant options, which must be a business
day; (b) an amount equivalent to the average closing price of a share as stated in the Stock
Exchange's daily quotation sheets for the 5 business days immediately preceding the grant
date of the relevant options; and (c) the nominal value per share on the grant date.
An amount of RMB1.00 must be paid by the grantee to China Literature upon acceptance of
options within 3 days after such acceptance or other time as prescribed by China Literature,
and such remittance shall not be refundable and shall not be deemed to be a part payment
of the subscription price.
The board of directors of China Literature or the chairman of China Literature (as the case
may be) may specify the exercise period and the vesting schedule of the options in the grant
letter. Unless the options have been withdrawn and cancelled or been forfeited in whole or
in part, the grantee may exercise his rights under the China Literature Plan according to the
vesting schedule set out in the relevant grant letter. The option must be exercised no more
than 10 years from the grant date. There is no minimum period for which an option must be
held before it can be exercised.
No option may be granted to any eligible participant which, if exercised in full, would result
in the total number of shares issued and to be issued upon exercise of the options already
granted or to be granted to such eligible participant under the China Literature Plan (including
exercised, cancelled and outstanding options) in the 12-month period up to and including the
grant date of such new grant exceeding 1% in aggregate of the issued share capital of China
Literature as at the grant date of such new grant. Any grant of further options above this limit
shall be subject to the requirements provided under the Listing Rules.
The maximum number of shares which may be issued upon exercise of all outstanding
options granted and yet to be exercised under the China Literature Plan and any other
options granted and yet to be exercised under any other option scheme shall not exceed
30% of the issued share capital of China Literature from time to time.
China Literature may seek the approval of its shareholders in general meeting to grant
options which will result in the number of shares in respect of all the options granted
under the China Literature Plan and all the options granted under any other option scheme
exceeding 10% of the issued share capital of China Literature, provided that such options
are granted only to participants specifically identified by China Literature before the approval
of shareholders is sought.
Remaining life of
the scheme
8.
Subscription price
7.
Acceptance of offer
6.
Vesting schedule and
exercise period
of each eligible
participant
Maximum entitlement
(continued)
Tencent Holdings Limited
Directors' Report
MOVEMENTS IN THE SHARE OPTIONS
Details of the movements in the share options of the Company during the year are set out in Note 35 to the consolidated
financial statements.
49
Annual Report 2021
2% of the issued shares of the
Company as at the Adoption
Date III (i.e. 191,047,317
Shares (after the effect of the
Distribution in Specie))
3% of the issued shares of the
Company as at the Adoption
Date II (i.e. 278,937,260
Shares (after the effect of the
Share Subdivision and the
Distribution in Specie))
2% of the issued shares of the
Company as at the Adoption
Date (i.e. 178,776,160
Shares (after the effect of the
Share Subdivision))
It shall be valid and effective
unless and until being
terminated on the earlier of:
(i) the 15th anniversary date
of the Adoption Date III; and
(ii) such date of early
termination as determined by
the Board provided that such
termination does not affect
any subsisting rights of any
Selected Participant.
It shall be valid and effective
unless and until being
terminated on the earlier of:
(i) the 15th anniversary date
of the Adoption Date II; and
(ii) such date of early
termination as determined by
the Board provided that such
termination does not affect
any subsisting rights of any
Selected Participant.
It shall be valid and effective
for a period of 15 years from
the Adoption Date I.
To recognise the contributions and to attract, motivate and retain eligible participants (including
any director) of the Group
2019 Share Award Scheme
Scheme Limit and
maximum number
of shares which
may be issued
2013 Share Award Scheme
Maximum number of
Shares that can be
awarded
3.
Duration and Termination
2.
Purpose
1.
The Company adopted the following three Share Award Schemes with major terms and details set out below:
SHARE AWARD SCHEMES
Details of the valuation of share options of the Company during the year are set out in Note 35 to the consolidated financial
statements.
VALUATION OF SHARE OPTIONS
2007 Share Award Scheme
5.
1.
Scheme Limit,
refreshment of
The term of each option shall be fixed by the compensation committee of the board of
directors of TME or such other committee as may be designated by the board of directors
of TME but shall not exceed 10 years from the date of grant of such option. There is no
minimum period for which an option must be held before it can be exercised.
1% of the total outstanding shares of TME in issue from time to time within any 12-month
period up to the date of the latest grant unless TME obtains the approval of the Company's
shareholders.
The maximum number of Class A ordinary shares of TME available for issuance (as
refreshed by the Company's shareholders at the extraordinary general meeting held on
15 May 2019) upon exercise of options which may be granted under the TME Plan is
97,951,238, which represents 3.0% of the total issued shares of TME and 6.2% of the total
Class A ordinary shares of TME as at the date of this annual report, respectively.
Holders of options and other types of awards granted by a company acquired by TME
or with which TME combines with are eligible for grants of substitute awards under the
TME Plan to the extent permitted under applicable regulations of any stock exchange
on which TME is listed.
Any employee of TME or any other individual who provides services to TME or any of
its affiliates as determined by the compensation committee of the board of directors of
TME or such other committee as may be designated by the board of directors of TME
shall be eligible to receive an award under the TME Plan.
b)
a)
The purpose of the TME Plan is to motivate and reward its employees and other individuals
who are expected to contribute significantly to the success of TME and its subsidiaries to
perform at the highest level and to further the best interests of TME and its shareholders.
Remaining life of
the scheme
8.
Options granted must generally be accepted within 28 days of the date of grant as specified
in the award agreement. Grantees are not required to pay any premium for the acceptance
of options.
Exercise price
6.
Option period
5.
Maximum entitlement
of each participant
Maximum number
of shares
4.
3.
Eligible participants
2.
4.
7.
Exercise price shall be at least the higher of (i) the nominal value of a TME share; (ii) the
fair market value of a TME share of such option on the date of grant; and (iii) the average
fair market value of a TME share of such option for the five business days immediately
preceding the date of grant.
Acceptance of offer
Note:
3.
No options shall be granted after 17 May 2027, being the tenth anniversary of the effective
date, unless the TME Plan is otherwise terminated earlier.
Directors' Report
47
Annual Report 2021
China Literature may seek the approval of its shareholders in general meeting to refresh the
Scheme Limit such that the total number of shares which may be issued upon exercise of all
options that may be granted under the China Literature Plan and any other option scheme/
plan involving the issue or grant of options over shares or other securities by China Literature
under the limit as refreshed shall not exceed 10% of the issued share capital of China
Literature as at the date of approval of the refreshed limit.
A total of 25,470,141 shares may be granted under the China Literature Plan, representing
2.5% of the issued share capital as at the date of the adoption of the China Literature Plan
(the "Scheme Limit") and 2.5% of the issued share capital as at the date of this annual
report, respectively, unless otherwise permitted by the Listing Rules or China Literature
obtaining the approval of its shareholders to refresh the Scheme Limit.
The purpose of the China Literature Plan is to (i) provide incentives and rewards to the
directors, employees, advisors, consultants and business partners of China Literature and its
subsidiaries (the “China Literature Group") for their contributions to, and continuing efforts
to promote the interest of, China Literature; (ii) recognise the contributions that the eligible
participants have made to China Literature with an opportunity to acquire a proprietary
interest in China Literature; (iii) encourage and retain such individuals for the continual
operation and development of the China Literature Group; (iv) provide additional incentives
for them to achieve performance goals; (v) attract suitable personnel for further development
of the China Literature Group; (vi) motivate the participants to maximise the value of China
Literature for the benefits of both the eligible participants and China Literature, with a view
to achieving the objectives of increasing the value of the China Literature Group and aligning
the interests of the eligible participants directly to the shareholders of China Literature
through ownership of shares of China Literature.
refreshment of
Scheme Limit and
maximum number
of shares which
may be issued
Scheme Limit,
Eligible Participants
(i) any employee (whether full time or part time), executives or officers, directors (including
executive, non-executive and independent non-executive directors) of any member of the
China Literature Group; and (ii) any individual or entity that is (as applicable) either (a) a
business partner of ("Business Partner") of (1) any member of the China Literature Group or
(2) any entity in which any member of the China Literature Group holds an equity interest,
and shall, for the purpose of the China Literature Plan, exclude any members of the China
Literature Group ("Invested Entity"), (b) a consultant, adviser or agent of any member of
the China Literature Group, any Invested Entity or any Business Partner or (c) an employee
(whether full time or part time), executives or officers, directors (including executive,
non-executive and independent non-executive directors) of any Invested Entity or any
Business Partner who, in the sole opinion of the board of directors of China Literature, have
contributed or will contribute to the growth and development of the China Literature Group
or any Invested Entity.
2.
Purpose
1.
A summary of the share option plan of China Literature, which took effect on 24 May 2021 (the “China Literature Plan"), is set
out below:
Directors' Report
Tencent Holdings Limited
46
The total number of options available for grant under the TME Plan is 33,295,600, which represents approximately 1.01% and 2.11% of the
total issued shares and the total Class A ordinary shares of TME as at the date of this annual report, respectively.
3.
00
2007 Share Award Scheme
Tencent Holdings Limited
52
00
Subject to the satisfaction
of all vesting conditions as
prescribed in the 2019 Share
Award Scheme, the Selected
Participants will be entitled to
receive the Awarded Shares.
The vesting of the Awarded
Shares is subject to the
Selected Participant remaining
at all times after the Grant
Date and on the date of
vesting, an Eligible Person,
subject to the rules of the
2019 Share Award Scheme.
Awarded Shares and the
related income derived
therefrom are subject to a
vesting scale to be determined
by the Board at the date of
grant of the award. Vesting of
the Shares will be conditional
on the Selected Participant
satisfying all vesting conditions
specified by the Board at the
time of making the award
until and on each of the
relevant vesting dates and his/
her execution of the relevant
documents to effect the
transfer from the Trustee.
The vesting of the Awarded
Shares is subject to the
Selected Participant remaining
at all times after the Grant
Date and on the date of
vesting, an Eligible Person,
subject to the rules of the
2013 Share Award Scheme.
not required under the Listing
Rules); and (2) the deadline
for the Company to publish
its quarterly, interim or
annual results announcement
for any such period, and
ending on the date of such
announcement; or (iv) in
any other circumstances
where dealings by Selected
Participant (including
directors) are prohibited
under the Listing Rules, the
SFO or any other applicable
law or regulation or where
the requisite approval from
any applicable regulatory
authorities has not been
granted.
2013 Share Award Scheme
Directors' Report
2019 Share Award Scheme
not required under the Listing
Rules); and (2) the deadline
for the Company to publish
its quarterly, interim or
annual results announcement
for any such period, and
ending on the date of such
announcement; or (iv) in
any other circumstances
where dealings by Selected
Participant (including
directors) are prohibited
under the Listing Rules, the
SFO or any other applicable
law or regulation or where
the requisite approval from
any applicable regulatory
authorities has not been
granted.
Subject to the satisfaction
of all vesting conditions as
prescribed in the 2013 Share
Award Scheme, the Selected
Participants will be entitled to
receive the Awarded Shares.
2013 Share Award Scheme
Annual Report 2021
8.
Voting Rights
The Trustee shall not exercise
any voting rights in respect of
any Shares held pursuant to
the Trust Deed I (including
but not limited to the Awarded
Shares and any bonus Shares
and scrip Shares derived
therefrom).
The Trustee shall not exercise
any voting rights in respect
of any Shares held pursuant
to the Trust Deed II or as
nominee.
The Trustee shall not exercise
any voting rights in respect
of any Shares held pursuant
to the Trust Deed III or as
nominee.
The Company shall comply with the relevant Listing Rules when granting the Awarded Shares. If awards are made to the
directors or substantial shareholders of the Group, such awards shall constitute connected transaction under Chapter 14A of
the Listing Rules and the Company shall comply with the relevant requirements under the Listing Rules.
During the year, a total of 4,723,407 and 72,331,341 Awarded Shares were granted under the 2013 Share Award Scheme
and the 2019 Share Award Scheme respectively, out of which 40,500 Awarded Shares were granted to the independent non-
executive directors of the Company under the 2019 Share Award Scheme. Details of the movements in the Share Award
Schemes during the year are set out in Note 35 to the consolidated financial statements.
During the year, a total of 20,047,558 Shares were issued to option holders who exercised their share options granted under
the Post-IPO Option Scheme II and the Post-IPO Option Scheme IV, and pursuant to the Share Award Schemes.
53
Directors' Report
As at 31 December 2021, there were a total of 105,992 outstanding Awarded Shares granted to the directors of the Company,
details of which are as follows:
2007 Share Award Scheme
As at
Number of Awarded Shares
2019 Share Award Scheme
Vesting and Lapse
50
Restrictions (continued)
2013 Share Award Scheme
1 January
2019 Share Award Scheme
Maximum entitlement of
each participant
1% of the issued shares of the
Company as at the Adoption
Date I (i.e. 89,388,080
Shares (after the effect of the
Share Subdivision))
1% of the issued shares of the
Company as at the Adoption
Date II (i.e. 92,979,085
Shares (after the effect of the
Share Subdivision and the
Distribution in Specie))
1% of the issued shares of the
Company as at the Adoption
Date III (i.e. 95,523,658
Shares (after the effect of the
Distribution in Specie))
5.
Operation
50
The Board shall select
the Eligible Person(s) and
determine the number of
Shares to be awarded.
The Board shall, in respect
of each Selected Participant,
cause to be paid the relevant
amount from the Company's
resources into an account or
to the Trustee to be held on
trust for the relevant Selected
Participant for the purchase
and/or subscription of the
Awarded Shares as soon as
practicable after the Reference
Date.
The Board may, from time to
time, at its absolute discretion
select any Eligible Person
to be a Selected Participant
and grant to such Selected
Participant Awarded Shares.
The Board may at any time
at its discretion, in respect
of each Selected Participant,
cause to be paid the relevant
amount from the Company's
resources or any subsidiary's
resources into an account
for the purchase and/or
subscription of the Awarded
Shares after the Grant Date.
The Board may, from time to
time, at its absolute discretion
select any Eligible Person
to be a Selected Participant
and grant to such Selected
Participant Awarded Shares.
The Board may at any time
at its discretion, in respect
of each Selected Participant,
cause to be paid the relevant
amount from the Company's
resources or any subsidiary's
resources into an account
for the purchase and/or
subscription of the Awarded
Shares after the Grant Date.
Tencent Holdings Limited
6.
Directors' Report
51
Annual Report 2021
No award may be made by
the Board to any Selected
Participant: (i) where the
Company has information
that must be disclosed under
Rule 13.09 of the Listing
Rules or where the Company
reasonably believes there
is inside information which
must be disclosed under Part
XIVA of the SFO, until such
inside information has been
published on the websites of
the Stock Exchange and the
Company; (ii) after any inside
information in relation to the
securities of the Company has
occurred or has become the
subject of a decision, until
such inside information has
been published; (iii) within
the period commencing 60
days (in the case of yearly
results), or 30 days (in the
case of results for half-year,
quarterly or other interim
period) immediately preceding
the earlier of (1) the date of
a meeting of the Board (as
such date is first notified to
the Stock Exchange) for the
approval of the Company's
results for any year, half-year,
quarterly or other interim
period (whether or
is inside information which
must be disclosed under Part
XIVA of the SFO, until such
inside information has been
published on the websites of
the Stock Exchange and the
Company; (ii) after any inside
information in relation to the
securities of the Company has
occurred or has become the
subject of a decision, until
such inside information has
been published; (iii) within
the period commencing 60
days (in the case of yearly
results), or 30 days (in the
case of results for half-year,
quarterly or other interim
period) immediately preceding
the earlier of (1) the date of
a meeting of the Board (as
such date is first notified to
the Stock Exchange) for the
approval of the Company's
results for any year, half-year,
quarterly or other interim
period (whether or
7.
No award may be made by
the Board to any Selected
Participant: (i) where the
Company has information
that must be disclosed under
Rule 13.09 of the Listing
Rules or where the Company
reasonably believes there
2019 Share Award Scheme
Directors' Report
2013 Share Award Scheme
2007 Share Award Scheme
Restrictions
6.
No award shall be made by
the Board and no instructions
to acquire Shares and allot
new Shares shall be given
by the Board or the Trustee
under the 2007 Share Award
Scheme where any director is
in possession of unpublished
price-sensitive information
in relation to the Group or
where dealings by directors
are prohibited under any code
or requirement of the Listing
Rules and all applicable laws
from time to time.
20 March 2021 to
Granted
during
As at
14,000
14,000
30 March 2022 to
30 March 2025
Total:
41,250
14,000
16,750
38,500
Li Dong Sheng
24 March 2017
2,500
2,500
-
24 March 2018 to
24 March 2021
9 April 2018
2007 Share Award Scheme
8,500
20 March 2020
4 April 2023
4 April 2020 to
4,250
30 March 2021
2,125
4 April 2019
9 April 2022
9 April 2019 to
1,625
1,625
3,250
6,375
Vested
20 March 2024
12,750
during
31 December
Name of director
Date of grant
2021
the year
the year
2021
Vesting period
(Note)
lan Charles Stone
24 March 2017
5,000
5,000
24 March 2018 to
24 March 2021
9 April 2018
4,250
17,000
20 March 2020
4 April 2023
4 April 2020 to
8,500
20 March 2021 to
4,250
4 April 2019
9 April 2022
9 April 2019 to
3,250
3,250
6,500
12,750
Directors' Report
Executive Directors
00
2,125
The directors and senior management of the Company during the year and up to the date of this annual report were:
DIRECTORS AND SENIOR MANAGEMENT
Directors' Report
55
Annual Report 2021
As a result of the Distribution of Specie, pursuant to the scheme rules of the 2013 Share Award Scheme and the 2019 Share Award Scheme,
adjustments had been made to the number of Shares subject to share awards which remained unvested as at the Ex-dividend Date. Please
refer to the announcement of the Company dated 14 March 2022 for details.
105,992
40,621
40,500
106,113
Grand Total:
14,492
2,996
Ma Huateng (Chairman)
7,000
Total:
30 March 2025
7,000 30 March 2022 to
20 March 2024
20 March 2021 to
4,500
1,500
23 August 2023
23 August 2020 to
2,992
1,496
7,000
30 March 2021
6,000
10,488
Lau Chi Ping Martin
Non-Executive Directors
Jacobus Petrus (Koos) Bekker
59
Annual Report 2021
Ke Yang, age 66, has been an independent non-executive director since August 2019. Professor Ke is currently the Director
of Laboratory of Genetics of Peking University Cancer Hospital and an international member of the United States National
Academy of Medicine. Professor Ke is also Vice-president of the Peking University Alumni Association, President of the Peking
University Health Science Center Alumni Association, Vice-president of China Medical Women's Association, President of the
Health Professional Education Committee of the Chinese Association of Higher Education, Vice-chairperson of the Steering
Committee of Clinical Medicine of the Committee of Academic Degrees of the State Council, and Vice-president of Cancer
Foundation of China. Professor Ke's research focus is on the upper gastrointestinal tumors, including the cloning of gastric
cancer related genes and the functional study of such genes. Together with her team, she has also established the population
cohort in esophageal cancer high incidence regions in China, studied the etiology of esophageal cancer, and evaluated the
effects and economic efficacy of early screening of the disease. She has published more than 100 papers and had registered
patents and been granted awards at national and provincial levels for technological and educational achievements. Professor
Ke was a member of the 11th and 12th National Committee of the Chinese People's Political Consultative Conference, an
executive Vice-president of Peking University and of the Peking University Health Science Center (formerly known as Beijing
Medical College), a member of the Committee of Academic Degrees of the State Council, a member of the Healthcare Reform
Advisory Committee of the State Council, the Chairperson of the Working Committee for Graduate Medical and Pharmaceutical
Education of the Office of Academic Degrees of the State Council, and Vice-president of the 24th and 25th Chinese Medical
Association. Professor Ke graduated from the Peking University Health Science Center in 1982. From 1985 to 1988, Professor
Ke worked at the National Cancer Institute of the National Institutes of Health of the United States as a postdoctoral fellow.
Professor Ke is currently an independent non-executive director of Keymed Biosciences Inc. which is publicly listed on the
Stock Exchange.
Yang Siu Shun, age 66, has been an independent non-executive director since July 2016. Mr Yang is currently serving as a
Member of the 13th National Committee of the Chinese People's Political Consultative Conference, a Justice of the Peace in
Hong Kong, a Steward of the Hong Kong Jockey Club, and an independent non-executive director of Industrial and Commercial
Bank of China Limited which is publicly listed on the Stock Exchange and the Shanghai Stock Exchange. Mr Yang retired from
PricewaterhouseCoopers ("PwC") on 30 June 2015. Before his retirement, he served as the Chairman and Senior Partner of
PwC Hong Kong, the Executive Chairman and Senior Partner of PwC China and Hong Kong, one of the five members of the
Global Network Leadership Team of PwC and the PwC Asia Pacific Chairman. Mr Yang served as a Board Member and the
Audit Committee Chairman of The Hang Seng University of Hong Kong (formerly known as Hang Seng Management College),
up to 30 September 2018 and the Deputy Chairman of the Council of Hong Kong Metropolitan University ("HKMU") (formerly
known as The Open University of Hong Kong), up to 19 June 2019. Mr Yang also served as a Member of the Exchange Fund
Advisory Committee of the Hong Kong Monetary Authority, up to 31 August 2021. Mr Yang graduated from the London School
of Economics and Political Science in 1978 and was awarded the degree of Honorary Doctor of Social Sciences by HKMU in
2019. Mr Yang is a Fellow Member of the Institute of Chartered Accountants in England and Wales, the Hong Kong Institute of
Certified Public Accountants and the Chartered Institute of Management Accountants.
Directors' Report
Tencent Holdings Limited
58
00
lan Charles Stone, age 71, has been an independent non-executive director since April 2004. Mr Stone is currently an
independent advisor on Technology, Media and Telecoms after retiring from PCCW in Hong Kong in 2011. His career in the
last 32 years has been primarily in leading mobile telecoms businesses, and new wireless and Internet technology, during
which time he held senior roles in PCCW, SmarTone, First Pacific, Hong Kong Telecom and CSL, as Chief Executive or at
Director level, primarily in Hong Kong, and also in London and Manila. Since 2011, Mr Stone has provided telecoms advisory
services to telecom companies and investors in Hong Kong (China), the Mainland of China, South East Asia and the Middle
East and has more than 51 years of experience in the telecom and mobile industries. Mr Stone is also an independent director
of Summit Healthcare Acquisition Corp. that is listed on NASDAQ. Mr Stone is a fellow member of The Hong Kong Institute of
Directors.
Li Dong Sheng, age 64, has been an independent non-executive director since April 2004. Mr Li is the Chairman and Chief
Executive Officer of TCL Technology Group Corporation that is listed on the Shenzhen Stock Exchange, and the strategic
development consultant of TCL Electronics Holdings Limited that is listed on the Stock Exchange, both of which produce
consumer electronic products. Mr Li graduated from South China University of Technology in 1982 with a Bachelor degree
in radio technology and has more than 27 years of experience in the information technology field. Mr Li was a non-executive
director of Fantasia Holdings Group Co., Limited, a leading property developer and property related service provider in China
that is listed on the Stock Exchange, up to 29 May 2020, and was the Chairman and an executive director of TCL Electronics
Holdings Limited, up to 9 August 2021.
Charles St Leger Searle, age 58, has been a non-executive director since June 2001. Mr Searle is currently the Chief Executive
Officer of Naspers Internet Listed Assets. He serves on the board of a number of companies associated with the Naspers
Group, and was a director of VK Company Limited (formerly known as Mail.ru Group Limited) that is listed on the London Stock
Exchange and the Moscow Exchange until his resignation on 4 March 2022. Mr Searle was a director of MakeMyTrip Limited
that is listed on NASDAQ, up to 30 August 2019. Prior to joining the Naspers Group, he held positions at Cable & Wireless plc
and at Deloitte & Touche in London and Sydney. Mr Searle is a graduate of the University of Cape Town and a member of the
Institute of Chartered Accountants in Australia and New Zealand. Mr Searle has more than 28 years of international experience
in the telecommunications and Internet industries. Mr Searle also serves as a director of certain subsidiaries of the Company.
Directors' Report
57
Annual Report 2021
Jacobus Petrus (Koos) Bekker, age 69, has been a non-executive director since November 2012. Koos led the founding team
of the M-Net/MultiChoice pay-television business in 1985. He was also a founder director of MTN in cellular telephony. Koos
headed the MIH group in its international and Internet expansions until 1997, when he became chief executive of Naspers,
which is listed on the Johannesburg Stock Exchange and London Stock Exchange. He serves on the boards of other companies
within the group and associates, as well as other bodies. In April 2015, he became non-executive chair. On 14 August 2019,
he was appointed as non-executive chair of Prosus N.V., which is listed on Euronext Amsterdam and on the Johannesburg
Stock Exchange. Academic qualifications include BA Hons and honorary doctorate in commerce (Stellenbosch University),
LLB (University of the Witwatersrand) and MBA (Columbia University, New York).
Lau Chi Ping Martin, age 48, is an executive director and President of the Company. Mr Lau joined the Company in 2005 as
the Chief Strategy and Investment Officer and was responsible for corporate strategies, investments, mergers and acquisitions
and investor relations. In 2006, Mr Lau was promoted to President of the Company to manage the day-to-day operation of
the Company. In 2007, he was appointed as an executive director of the Company. Prior to joining the Company, Mr Lau
was an executive director at Goldman Sachs (Asia) L.L.C.'s investment banking division and the Chief Operating Officer of its
Telecom, Media and Technology Group. Prior to that, he worked at McKinsey & Company, Inc. as a management consultant.
Mr Lau received a Bachelor of Science degree in Electrical Engineering from University of Michigan, a Master of Science
degree in Electrical Engineering from Stanford University and an MBA degree from Kellogg Graduate School of Management,
Northwestern University. Mr Lau is currently a non-executive director of Kingsoft Corporation Limited, an Internet based
software developer, distributor and software service provider, and Meituan, a leading eCommerce platform for services in
China, both of these companies are publicly listed on the Stock Exchange. Mr Lau is also a director of Vipshop Holdings
Limited, an online discount retailer company, TME, an online music entertainment platform in China, and DiDi Global Inc.,
a leading mobility technology platform in China, all of these companies are listed on the New York Stock Exchange. Mr Lau was
a director of Leju Holdings Limited, an online-to-offline real estate services provider in China that is listed on the New York
Stock Exchange, up to 18 August 2020, and JD.com, an online direct sales company in China that is listed on NASDAQ and
the Stock Exchange, up to 23 December 2021. Mr Lau also serves as a director/corporate representative of certain subsidiaries
of the Company.
Ma Huateng, age 50, is an executive director, Chairman of the Board and Chief Executive Officer of the Company. Mr Ma
has overall responsibilities for strategic planning and positioning and management of the Group. Mr Ma is one of the core
founders and has been employed by the Group since 1999. Prior to his current employment, Mr Ma was in charge of research
and development for Internet paging system development at China Motion Telecom Development Limited, a supplier of
telecommunications services and products in China. Mr Ma is a deputy to the 13th National People's Congress. Mr Ma has
a Bachelor of Science degree specialising in Computer and its Application obtained in 1993 from Shenzhen University and
more than 28 years of experience in the telecommunications and Internet industries. He is a director of Advance Data Services
Limited, which has an interest in the shares of the Company which would fall to be disclosed to the Company under the
provisions of Divisions 2 and 3 of Part XV of the SFO. Mr Ma also serves as a director of certain subsidiaries of the Company.
Charles St Leger Searle
Independent Non-Executive Directors
Li Dong Sheng
lan Charles Stone
Yang Siu Shun
Ke Yang
20 March 2020
lain Ferguson Bruce (retired with effect from 20 May 2021)
The Company has received from each independent non-executive director an annual confirmation of his/her independence
pursuant to Rule 3.13 of the Listing Rules and the Board considers them independent.
00
56
Tencent Holdings Limited
Directors' Report
BIOGRAPHICAL DETAILS AND OTHER INFORMATION OF DIRECTORS
In accordance with Article 87 of the Articles of Association, Mr Li Dong Sheng and Mr lan Charles Stone will retire at the 2022
AGM and, being eligible, will offer themselves for re-election.
Note:
4,488
23 August 2019
(Note)
Vesting period
2021
the year
the year
2021
Date of grant
Name of director
31 December
during
As at
Vested
Granted
during
Number of Awarded Shares
1 January
As at
Directors' Report
20 March 2024
30 March 2021
7,000
7,000
30 March 2022 to
30 March 2025
Yang Siu Shun
Total:
7,000
8,375
19,250
00
54
Tencent Holdings Limited
20,625
4.
24 March 2017
2,500
Ke Yang
33,750
12,500
12,500
33,750
Total:
30 March 2025
30 March 2022 to
12,500
12,500
30 March 2021
20 March 2024
20 March 2021 to
11,250
3,750
15,000
20 March 2020
24 March 2018 to
24 March 2021
9 April 2018
5,000
2,500
2,500
2,500
9 April 2019 to
4 April 2019
11,250
3,750
7,500
4 April 2020 to
4 April 2023
9 April 2022
6,375
(Note 4)
Tong Tao Sang, age 48, Senior Executive Vice President, President of Cloud and Smart Industries Group, is leading the
Industrial Internet strategy and the enterprise businesses for Tencent. Mr Tong manages the security labs, the multi-media
lab, and Youtu Al lab, and he is one of the co-chairs of Tencent's technology council. Mr Tong joined the Company as a
technical architect in 2005, and had previously led QQ, Qzone, QQshow, and their advertising and value-added services. Mr
Tong received a Bachelor of Science degree in Computer Engineering from University of Michigan, Ann Arbor and a Master of
Science degree in Electrical Engineering from Stanford University. Mr Tong currently serves as a director of certain subsidiaries
of the Company.
1.
2.
Pursuant to the TCS CFC, the parties shall co-operate in the provision of communications services. Tencent
Technology and its affiliates shall allow Tencent Computer to use its and its affiliates' assets and to provide services
to Tencent Computer. Tencent Computer shall transfer all of its Surplus Cash to Tencent Technology and its affiliates
as consideration. The parties also established the TCS Co-operation Committee according to this agreement. During
the year, revenue sharing amounting to approximately RMB132,913 million, RMB2,746 million, RMB17,476 million,
RMB47,796 million, RMB17,883 million, RMB1,738 million, RMB2,857 million, RMB2,635 million, RMB2,931 million,
RMB239 million, RMB1,058 million, RMB107 million, RMB1,042 million and RMB402 million were paid or payable
by Tencent Computer to Tencent Technology, Cyber Tianjin, Tencent Beijing, Tencent Chengdu, Tencent Shanghai,
Tencent Wuhan, Chongqing Tencent Information, Shenzhen Tencent Information, Hainan Network, Guangzhou Tencent
Technology, Shenzhen Tencent Network, Guian New Area Tencent Cyber, Cyber Shenzhen and Wuhan Tencent
Information respectively.
Pursuant to the SKT CFC, the parties shall co-operate in the provision of communications services. Cyber Tianjin and its
affiliates shall allow Shiji Kaixuan to use its and its affiliates' assets and to provide services to Shiji Kaixuan. Shiji Kaixuan
shall transfer all of its Surplus Cash to Cyber Tianjin and its affiliates as consideration. The parties also established the
SKT Co-operation Committee according to this agreement. During the year, no services were transacted under such
arrangements, save as disclosed elsewhere in this section.
3.
Pursuant to the amended and restated IP transfer agreement dated 28 February 2004 entered into between Tencent
Technology and Tencent Computer, Tencent Computer shall assign to Tencent Technology its principal present and
future IP rights, free from encumbrances (except for licences granted in the ordinary course of Tencent Computer's
business) in consideration of Tencent Technology's undertaking to provide certain technology and information services
to Tencent Computer. During the year, no IP transfer was transacted under such arrangements, save as disclosed
elsewhere in this section.
Annual Report 2021
69
0.003%
76,000
Personal*
Family*
lan Charles Stone
(Note 3)
0.0004%
36,375
Personal*
Li Dong Sheng
Transactions carried out during the year ended 31 December 2021, which have been eliminated in the consolidated financial
statements of the Group, are set out as follows:
(Note 2)
The Auditor had carried out procedures on the transactions conducted pursuant to the Structure Contracts and had provided
a letter to the Board confirming that such transactions had been approved by the Board and had been entered into, in all
material respects, in accordance with the relevant Structure Contracts and had been operated so as to transfer the Surplus
Cash of the OPCOS as at 31 December 2021 to the WFOES and that no dividends or other distributions had been made by the
OPCOS to the holders of their equity interests.
Directors' Report
54.29% by Ma Huateng
22.85% by Zhang Zhidong
11.43% by Xu Chenye
11.43% by Chen Yidan
Shiji Kaixuan
Tencent Computer
Provision of Internet advertisement services
in the PRC
Provision of value-added services in the PRC
Provision of value-added services in the PRC
Shiji Kaixuan
Provision of value-added services in the PRC
Tencent Enterprise Management
Provision of value-added services in the PRC
Shenzhen Tencent Tianyou*
Ultimate registered owners being Mr Ma Huateng and Mr Xu Chenye, both being founders, and a management team member, each
ultimately interested in 60%, 35% and 5% respectively of Tencent Enterprise Management.
The above OPCOs are significant to the Group as they hold relevant licences to provide Internet information services and
other value-added telecommunications services. The aggregate gross revenue and net asset value of the above OPCOS that
are subject to the Structure Contracts amounted to approximately RMB264 billion for the year ended 31 December 2021 and
approximately RMB46 billion as at 31 December 2021 respectively.
Review of the transactions carried out under the Structure Contracts during the financial year
The Company's independent non-executive directors had reviewed the Structure Contracts and confirmed that the transactions
carried out during the financial year had been entered into in accordance with the relevant provisions of the Structure Contracts
and, had been operated so as to transfer by the date of this annual report the Surplus Cash (as defined in the section "Our
History and Structure - Structure Contracts" of the IPO prospectus of the Company) of each of the OPCOS as at 31 December
2021 to Tencent Technology, Cyber Tianjin (formerly known as Shidai Zhaoyang Technology (Shenzhen) Company Limited in
the IPO prospectus of the Company), Tencent Beijing, Shenzhen Tencent Information, Tencent Chengdu, Chongqing Tencent
Information, Shanghai Tencent Information, Tencent Shanghai, Tencent Wuhan, Hainan Network, Guangzhou Tencent
Technology, Shenzhen Tencent Network, Guian New Area Tencent Cyber, Cyber Shenzhen and Wuhan Tencent Information.
00
68
Tencent Holdings Limited
The Company's independent non-executive directors had also confirmed that no dividends or other distributions had been
made by the OPCOS to the holders of their equity interests and the terms of any new Structure Contracts entered into, renewed
and/or cloned during the relevant financial period are fair and reasonable so far as the Group was concerned and in the
interests of the Company's shareholders as a whole. To this extent, similar Structure Contracts were entered into relating to the
New OPCOS.
Beijing Starsinhand
0.58%
8.38%
DIRECTORS' INTERESTS IN TRANSACTIONS, ARRANGEMENTS OR CONTRACTS
None of the directors who are proposed for re-election at the 2022 AGM has a service contract with the Company which is not
determinable by the Company within one year without payment of compensation, other than statutory compensation.
Each of Mr Ma Huateng and Mr Lau Chi Ping Martin has entered into a service contract with the Company for a term of three
years from 1 January 2022 to 31 December 2024. The term of their service contracts can be renewed upon expiry and the
Company may terminate their service contracts by three months' written notice.
DIRECTORS' SERVICE CONTRACTS
Directors' Report
Tencent Holdings Limited
62
00
Yeung Kwok On, age 60, Senior Management Adviser, joined the Company in 2008. He supports and facilitates organisational
innovation and leadership development within the Company and its key strategic partners. Mr Yeung also serves as Dean of
TencentX, a corporate learning platform that has approximately 500 entrepreneur alumni. Prior to joining the Company, Mr
Yeung, as a professor, had taught at University of Michigan and China Europe International Business School and also served
as Chief HR Officer of Acer Group from 1998 to 2002. Mr Yeung received a Bachelor's and a Master's degree from The
University of Hong Kong and a Doctoral degree from University of Michigan.
Xi Dan, age 46, Senior Vice President, joined the Company in 2002 and has been responsible for overseeing the Company's
talent development and functional management since May 2008. Prior to joining the Company, Mr Xi was responsible for
HR management in ZTE Corporation and has more than 26 years of experience in IT and Internet industries. Mr Xi received
a Bachelor of Science degree in Applied Computer Science from Shenzhen University in 1996 and an MBA degree from
Tsinghua University in 2005. Mr Xi currently serves as a director or officer of certain subsidiaries of the Company.
Guo Kaitian, age 49, Senior Vice President, joined the Company in 2002 and has been responsible for overseeing the
Company's functional divisions of legal affairs, administration, infrastructure, procurement, public strategy, information security
and corporate social responsibility. Mr Guo received a Bachelor of Law degree from Zhongnan University of Economics and
Law in 1996. Mr Guo currently serves as a director of a subsidiary of the Company.
John Shek Hon Lo, age 53, Chief Financial Officer and Senior Vice President, joined the Company in 2004 and was appointed
as Chief Financial Officer in May 2012. Prior to joining the Company, Mr Lo worked at PricewaterhouseCoopers. He is a Fellow
of the CPA Australia, a Fellow of the Hong Kong Institute of Certified Public Accountants, a Fellow of the Chartered Institute of
Management Accountants and a Member of the Association of Chartered Certified Accountants. Mr Lo received a Bachelor of
Business degree in Accounting from Curtin University and an EMBA degree from Kellogg Graduate School of Management,
Northwestern University and The Hong Kong University of Science and Technology. Mr Lo currently serves as a director of a
subsidiary of the Company.
Directors' Report
61
Annual Report 2021
Lin Ching-Hua, age 49, Senior Vice President, joined the Company in 2013 and has been responsible for the exploration
and development of the Company's Advertising and Smart Retail businesses. He also oversees strategic development of
the Company and drives the Group's strategic upgrade and business collaboration. In 2020, Mr Lin was promoted to Senior
Vice President. Prior to joining the Company, Mr Lin was a partner at McKinsey & Company and the managing partner of
its Taiwan office. Mr Lin received a Bachelor of Sociology degree from National Taiwan University and a Master of Business
Administration degree from Harvard University. Mr Lin currently serves as a director or officer of certain subsidiaries of the
Company.
Ma Xiaoyi, age 48, Senior Vice President, joined the Company in 2007 and has been responsible for international publishing
of Tencent Games, establishing and maintaining long-term business partnerships and cooperation for the Company since
November 2008. Prior to joining the Company, Mr Ma served as the General Manager of the games division of OPTIC
Communication Co., Ltd. Prior to that, Mr Ma worked as the General Manager in Shanghai EasyService Technology
Development Ltd. Mr Ma graduated from Shanghai Jiaotong University in 1997, and received an EMBA degree from Fudan
University in 2008. Mr Ma currently serves as a director of certain subsidiaries of the Company.
Save as disclosed in this annual report, no transaction, arrangement or contract of significance in relation to the Group's
business to which the Company or any of its subsidiaries was a party and in which a director of the Company or an entity
connected with a director of the Company had a material interest, whether directly or indirectly, subsisted at the end of the
year or at any time during the year.
56,064,651
PERMITTED INDEMNITY PROVISION
DIRECTORS' RIGHTS TO ACQUIRE SHARES OR DEBENTURES
804,859,700
(Note 7)
Approximate %
of shareholding
Number of shares/
underlying shares held
Personal*
Lau Chi Ping Martin
Corporate (Note 1)
Ma Huateng
Nature of interest
Name of director
(A) Long position in the shares and underlying shares of the Company
As at 31 December 2021, the interests and short positions of the directors and the chief executive of the Company in the
shares, underlying shares and debentures of the Company or its associated corporations (within the meaning of Part XV of the
SFO) which (a) were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV
of the SFO (including interests and short positions which they have taken, or are deemed to have taken, under such provisions
of the SFO); or (b) were required, pursuant to section 352 of the SFO, to be recorded in the register required to be kept by the
Company; or (c) were required, pursuant to the Model Code, to be notified to the Company and the Stock Exchange were as
follows:
DIRECTORS' INTERESTS IN SECURITIES
Directors' Report
63
Annual Report 2021
Save as disclosed in this annual report, neither the Company nor any of its subsidiaries was a party to any arrangements to
enable directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company
or any other body corporate at any time during the year or at the end of the year.
A permitted indemnity provision for the benefit of the directors of the Company is currently in force and was in force throughout
the financial year. The Company has taken out and maintained directors and officers liability insurance which provides
appropriate cover for, among others, directors of the Company.
Beijing BIZCOM
Wang Dian
Shiji Kaixuan
4.
The interest comprises 277,500 Shares and 38,500 underlying Shares in respect of the Awarded Shares granted pursuant to the
2013 Share Award Scheme and the 2019 Share Award Scheme. Details of the Awarded Shares granted to this director are set
out above under "Share Award Schemes".
5.
The interest comprises 5,224 Shares and 33,750 underlying Shares in respect of the Awarded Shares granted pursuant to the
2013 Share Award Scheme and the 2019 Share Award Scheme. Details of the Awarded Shares granted to this director are set
out above under "Share Award Schemes".
6.
The interest comprises 4,492 Shares and 14,492 underlying Shares in respect of the Awarded Shares granted pursuant to the
2013 Share Award Scheme and the 2019 Share Award Scheme. Details of the Awarded Shares granted to this director are set
out above under "Share Award Schemes".
7.
As at 31 December 2021, the total number of issued shares of the Company was 9,608,378,469.
*
Interests of beneficial owner
Interests of spouse or child under 18 as beneficial owner
(B) Long position in the shares of associated corporations of the Company
Name of director
Ma Huateng
Name of associated
corporation
Nature of interest
Number of shares and
class of shares held
The interest comprises 17,125 Shares and 19,250 underlying Shares in respect of the Awarded Shares granted pursuant to the
2013 Share Award Scheme and the 2019 Share Award Scheme. Details of the Awarded Shares granted to this director are set
out above under "Share Award Schemes".
Approximate %
of shareholding
The interest comprises 32,567,826 Shares and 23,496,825 underlying Shares in respect of the share options granted pursuant
to the Post-IPO Option Scheme II and the Post-IPO Option Scheme IV. Details of the share options granted to this director are set
out above under "Share Option Schemes".
2.
Yang Siu Shun
Personal*
38,974
0.0004%
(Note 5)
Ke Yang
Personal*
18,984
0.0002%
(Note 6)
00
64
Tencent Holdings Limited
Note:
Directors' Report
1.
Advance Data Services Limited, a British Virgin Islands company wholly-owned by Mr Ma Huateng, holds 709,859,700 Shares
directly and 95,000,000 Shares indirectly through its wholly-owned subsidiary, Ma Huateng Global Foundation.
3.
240,000
Personal
RMB35,285,705
Requirements related to Structure Contracts (other than relevant foreign ownership restrictions) include the Notice on Further
Strengthening the Administration of Pre-examination and Approval of Online Games and the Examination and Approval of
Imported Online Games (關於貫徹落實國務院《“三定”規定》和中央編辦有關解釋,進一步加強網絡遊戲前置審批和進口
GT)(the “Circular 13") jointly issued by PRC General Administration of Press and Publication, the
National Copyright Administration and the National Office of Combating Pornography and Illegal Publications in September
2009, which provides that foreign investors are not permitted to invest in online game-operating businesses in the PRC via
wholly-owned, equity joint venture or co-operative joint venture investments and further expressly prohibits foreign investors
from gaining control over or participating in domestic online game operators through indirect ways such as establishing other
joint venture companies or entering into contractual or technical arrangements with the Chinese licence holders.
However, the Circular 13 does not provide any interpretation of the term "foreign investors" or make a distinction between
foreign online game companies and companies under a corporate structure similar to the Group. Thus, it is unclear whether
the State General Administration of Press, Publication, Radio, Film and Television will deem the Group's structure and
operations to be in violation of these provisions.
In the view of the Company's PRC legal advisers, the arrangement of the Structure Contracts does not violate applicable
existing PRC laws and regulations as the Company indirectly operates the value-added telecommunication service business,
online and mobile games, online advertising and other Internet and wireless portals in the PRC through OPCOS that hold the
necessary licences for the existing lines of businesses.
However, the Company's PRC legal advisers also advised that there are substantial uncertainties regarding the interpretation
and application of the currently applicable PRC laws, rules and regulations. Accordingly, the PRC regulatory authorities and
PRC courts may in the future take a view that is contrary to the position of the Company's PRC legal advisers concerning the
Structure Contracts.
It is uncertain whether any new PRC laws, rules or regulations relating to Structure Contracts will be adopted or if adopted,
what they would provide. On 15 March 2019, the Standing Committee of National People's Congress promulgated Law of
Foreign Investment which became effective on 1 January 2020 (the "2019 Law of Foreign Investment"). While the 2019 Law of
Foreign Investment does not define Structure Contracts as a form of foreign investment explicitly, the Company cannot assure
that future laws and regulations will not provide for Structure Contracts as a form of foreign investment. Therefore, there can be
no assurance that the Company's control over OPCOs through Structure Contracts will not be deemed as foreign investment in
the future. If the Structure Contracts were to be deemed as a method of foreign investment under any future laws, regulations
and rules, and if any of the Company's business operations were to fall under the "negative list" for foreign investment, the
Company would need to take further actions in order to comply with these laws, regulations and rules, which may materially
and adversely affect its current corporate structure, business, financial condition and results of operations.
Annual Report 2021
67
Directors' Report
Particulars of the OPCOS
Set out below is the registered owners and business activities of the OPCOS which had entered into transactions with the Group
during the year ended 31 December 2021:
Registered owners
Name of the operating companies
as at 31 December 2021
Business activities
Tencent Computer
54.29% by Ma Huateng
22.85% by Zhang Zhidong
11.43% by Xu Chenye
11.43% by Chen Yidan
Provision of value-added services and
Internet advertisement services in the PRC
2021
Requirements related to Structure Contracts (other than relevant foreign ownership restrictions) as at 31 December
Directors' Report
Tencent Holdings Limited
(registered capital)
54.29%
Shiji Kaixuan
Personal
RMB5,971,427
(registered capital)
54.29%
Save as disclosed above, none of the directors or chief executive of the Company and their associates, had interests
or short positions in any shares, underlying shares or debentures of the Company and its associated corporations as at
31 December 2021.
Annual Report 2021
David A M Wallerstein, age 47, Chief exploration Officer and Senior Executive Vice President, joined the Company in 2001. He
drives the Company's active participation in emerging technologies, business areas, and ideas, with a passion for contributing
to a more resilient planet. Prior to joining the Company, Mr Wallerstein worked for Naspers in China. Mr Wallerstein received a
Bachelor's degree from University of Washington and a Master's degree from UC Berkeley. Mr Wallerstein currently serves as a
director of a subsidiary of the Company.
65
CONNECTED TRANSACTIONS
Reference is made to the waiver granted by the Stock Exchange regarding the compliance with the applicable disclosure,
reporting and shareholders' approval requirements under Chapter 14A of the Listing Rules when the Company was listed in
June 2004.
The reasons for using Structure Contracts
Current PRC laws and regulations limit foreign investment in businesses providing value-added telecommunications services
in China. As foreign-invested enterprises, the WFOEs do not have licences to provide Internet content or information services
and other telecommunications value-added services. Accordingly, the value-added telecommunications business of the
Group has been conducted through Tencent Computer, Shiji Kaixuan, Wang Dian, Beijing BIZCOM, Beijing Starsinhand and
Shenzhen Tencent Tianyou (Wang Dian, Beijing BIZCOM, Beijing Starsinhand and Shenzhen Tencent Tianyou are referred
herein as the "New OPCOS", and together with Tencent Computer and Shiji Kaixuan, the "OPCOS") by themselves or through
their subsidiaries under the Structure Contracts (as defined in the section "Our History and Structure - Structure Contracts"
of the IPO prospectus of the Company). As a result of the Structure Contracts, the Group is able to recognise and receive
the economic benefit of the business and operations of the OPCOs. The Structure Contracts are also designed to provide the
Company with effective control over and (to the extent permitted by PRC law) the right to acquire the equity interests in and/or
assets of the OPCOS.
For a summary of the major terms of the Structure Contracts, please refer to the sections headed "Our History and Structure"
and "Structure Contracts" in the IPO prospectus. During the year ended 31 December 2021, there was no material change
in the Structure Contracts and/or the circumstances under which they were adopted, and none of the Structure Contracts has
been unwound as none of the restrictions that led to the adoption of Structure Contracts has been removed.
00
99
66
Directors' Report
Lu Shan, age 47, Senior Executive Vice President and President of Technology and Engineering Group, joined the Company
in 2000 and had served as the General Manager for the IM Product Division, Vice President for the Platform Research and
Development System and Senior Vice President for the Operations Platform System. Since March 2008, Mr Lu has been
in charge of management of the Operations Platform System of the Company. Since May 2012, Mr Lu has been in charge
of management of the Technology and Engineering Group. Prior to joining the Company, he worked for Shenzhen Liming
Network Systems Limited. Mr Lu received a Bachelor of Science degree in Computer Science and Technology from University
of Science and Technology of China (USTC) in 1998. Mr Lu currently serves as a director or officer of certain subsidiaries of
the Company.
Tencent Computer
Directors' Report
316,000
Directors' Report
Xu Chenye, age 50, Chief Information Officer, oversees the strategic planning and development for the website properties and
communities, and customer relations of the Company. Mr Xu is one of the core founders and has been employed by the Group
since 1999. Prior to that, Mr Xu had experiences in software system design, network administration as well as marketing and
sales management in his previous position at Shenzhen Data Telecommunications Bureau. Mr Xu received a Bachelor of
Science degree in Computer Science from Shenzhen University in 1993 and a Master of Science degree in Computer Science
from Nanjing University in 1996. Mr Xu currently serves as a director or officer of certain subsidiaries of the Company.
Ren Yuxin, age 46, Chief Operating Officer and President of Platform & Content Group and Interactive Entertainment Group,
joined the Company in 2000 and had served as the General Manager for the Value-Added Services Development Division and
General Manager for the Interactive Entertainment Business Division. Since September 2005, Mr Ren has been responsible for
the research and development, operations, marketing and sales of gaming products for the Interactive Entertainment Business.
Since May 2012, Mr Ren has been appointed as Chief Operating Officer and is now in charge of the overall operation of the
Platform & Content Group and the Interactive Entertainment Group. Prior to joining the Company, Mr Ren worked at Huawei
Technologies Co., Ltd. Mr Ren received a Bachelor of Science degree in Computer Science and Engineering from University of
Electronic Science and Technology of China in 1998 and an EMBA degree from China Europe International Business School
(CEIBS) in 2008.
BIOGRAPHICAL DETAILS OF SENIOR MANAGEMENT
James Gordon Mitchell, age 48, Chief Strategy Officer and Senior Executive Vice President, joined the Company in 2011. He is
responsible for various functions, including the Company's strategic planning and implementation, investor relations, mergers
and acquisitions and investment activities. Prior to joining the Company, Mr Mitchell had worked in investment banking for 16
years. Most recently, Mr Mitchell was a managing director at Goldman Sachs in New York, leading the bank's Communications,
Media and Entertainment research team, which analysed Internet, entertainment and media companies globally. Mr Mitchell
received a degree from Oxford University and holds a Chartered Financial Analyst Certification. Mr Mitchell currently serves as
a director of certain subsidiaries of the Company.
00
60
Tencent Holdings Limited
Zhang Xiaolong, age 52, Senior Executive Vice President and President of Weixin Group, joined the Company in March
2005 and had served as the General Manager for the Guangzhou R&D Division and led the QQ Mail team to be the top mail
service provider in China. Later he was promoted to Corporate Vice President and since September 2012, Mr Zhang has
been appointed as Senior Vice President in charge of the product and team management of Weixin/WeChat and QQ Mail.
He is also responsible for the management and review of major innovation projects. In May 2014, Mr Zhang was promoted
to Senior Executive Vice President in charge of the Weixin Group. Prior to joining the Company, Mr Zhang developed Foxmail
independently in 1997 as the first generation of Internet software developer in China. He joined Boda China as Corporate Vice
President in 2000, responsible for corporate mail developing. Mr Zhang received a Master's degree in Telecommunications
from Huazhong University of Science and Technology in 1994.
Maintaining the highest standards of corporate governance and ethical business practices are core values of the Group. The
Board views effective corporate governance practices as a priority of the Group, with the aim of providing our investors with a
thorough understanding of the Group's management and how such management oversees and manages different businesses
of the Group. Our belief is that investors will realise significant long-term value when the Group's businesses are conducted
in an open and responsible manner. Ethical business practices go hand in hand with strong corporate governance, and we
believe that running our businesses in an ethical manner will lead to public trust and will ultimately create shareholder value
for the Group.
Hong Kong, 23 March 2022
00
76
Tencent Holdings Limited
Corporate Governance Report
CORPORATE GOVERNANCE PRACTICES
The Board has defined the business and governance issues for which it needs to be responsible, and these matters are
reviewed periodically to ensure that the Company maintains effective and up-to-date corporate governance practices. In this
regard, the Board:
The Board continues to monitor and review the Company's corporate governance practices and makes necessary changes
when appropriate.
BOARD OF DIRECTORS
Responsibilities
The Board's fundamental responsibility is to exercise its best judgment and to act in the best interests of the Company and
its shareholders. The Board oversees management's efforts to promote the Company's success while operating in an effective
and responsible manner. The Board also formulates the Company's overall business strategy and monitors management's
execution of such strategy.
Ma Huateng
Chairman
•
determines the Group's mission, provides its strategic direction and is responsible for the approval of strategic plans;
The Company's corporate governance practices are based on the code provisions as set out in the CG Code. The Board
believes that throughout the year ended 31 December 2021, the Company complied with the applicable code provisions set
out in the CG Code, except for the deviation from code provisions A.2.1 (now rearranged as C.2.1) regarding the segregation
of the roles of the chairman and chief executive and A.4.2 (now rearranged as B.2.2) regarding the retirement and re-election
of directors. The reasons for the deviations are further explained in the sub-sections headed “Chairman and Chief Executive
Officer" and "Appointments, Re-election and Removal" below.
On behalf of the Board
(A) Entitlement to Attend and Vote at the 2022 AGM
AUDITOR
PRE-EMPTIVE RIGHTS
There is no provision for pre-emptive rights under the Articles of Association, or the laws of the Cayman Islands, which would
oblige the Company to offer new shares on a pro rata basis to existing shareholders of the Company.
EMPLOYEE AND REMUNERATION POLICIES
As at 31 December 2021, the Group had 112,771 employees (2020: 85,858). The number of employees employed by the
Group varies from time to time depending on needs and employees are remunerated based on industry practice.
The remuneration policy and package of the Group's employees are periodically reviewed. Apart from pension funds and in-
house training programmes, discretionary bonuses, share awards and share options may be awarded to employees according
to the assessment of individual performance.
The total remuneration cost incurred by the Group for the year ended 31 December 2021 was RMB95,523 million (2020:
RMB69,638 million).
SUFFICIENCY OF PUBLIC FLOAT
The financial statements have been audited by PricewaterhouseCoopers who will retire and, being eligible, offer themselves for
re-appointment at the 2022 AGM.
As at the date of this annual report, based on information that is publicly available to the Company and within the knowledge
of its directors, the directors confirm that the Company has maintained during the year the amount of public float as required
under the Listing Rules.
75
Directors' Report
CLOSURE OF REGISTER OF MEMBERS
approves the annual business plan and budget proposed by management;
For the purpose of determining the shareholders' entitlement to attend and vote at the 2022 AGM, the register of
members of the Company will be closed from Friday, 13 May 2022 to Wednesday, 18 May 2022, both days inclusive,
during which period no transfer of Shares will be registered. In order to be entitled to attend and vote at the 2022 AGM,
all duly completed transfer forms accompanied by the relevant share certificates must be lodged with the Company's
branch share registrar, Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17th Floor, Hopewell
Centre, 183 Queen's Road East, Wan Chai, Hong Kong for registration not later than 4:30 p.m. on Thursday, 12 May
2022.
(B) Entitlement to the Proposed Final Dividend
For the purpose of determining the shareholders' entitlement to the proposed final dividend, the register of members of
the Company will be closed from Tuesday, 24 May 2022 to Wednesday, 25 May 2022, both days inclusive, during which
period no transfer of Shares will be registered. In order to qualify for the proposed final dividend, all duly completed
transfer forms accompanied by the relevant share certificates must be lodged with the Company's branch share registrar,
Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen's
Road East, Wan Chai, Hong Kong for registration not later than 4:30 p.m. on Monday, 23 May 2022.
Annual Report 2021
retains full and effective control over the Group and monitors management with regard to the implementation of the
approved annual business plan and budget;
approves the Company's financial statements and interim and annual reports;
77
reviews the Company's financial information;
exercises oversight of the Company's financial reporting system;
reviews the work done by the Company's management with respect to risk management and internal control systems;
oversees the risks undertaken by the Company including determining the level of risk the Company expects to and is
able to take; and
oversees the Group's anti-money laundering and sanctions compliance system.
Corporate Governance Committee
reviews the Company's corporate governance and makes recommendations to the Board;
handles the relationship with the Company's external auditor;
reviews and monitors the Company's policies and practices on its compliance with legal and regulatory requirements;
reviews the shareholders communication policy and makes recommendations to the Board where appropriate to
enhance effective communications between the Company and its shareholders;
reviews and monitors the evaluation and management of issues related to the Company's Environmental, Social and
Governance ("ESG") matters;
reviews and monitors the progress made against ESG-related goals and targets;
reviews the Company's compliance with the CG Code and disclosure in the Corporate Governance Report and the ESG
Report;
reviews the Company's ESG strategy and makes recommendations to the Board; and
reviews and monitors the training and continuous professional development of the directors and senior management
team.
Annual Report 2021
develops, reviews and monitors the code of conduct and compliance manual (if any) applicable to employees and
directors;
•
Audit Committee
The Company's governance structure of these committees can be summarised as follows:
Corporate Governance Report
appoints the Chief Executive Officer, who reports to the Board, and ensures that succession is planned;
The Company has adopted a code of conduct regarding directors' securities transactions on terms no less exacting than
the required standard set out in the Model Code. The directors of the Company have complied with such code of conduct
throughout the accounting year covered by this annual report.
determines the Group's communication policy;
determines directors' selection, orientation and evaluation;
ensures that the Group has appropriate risk management, internal control, internal audit and regulatory compliance
procedures in place and that it communicates adequately with shareholders and stakeholders;
establishes Board committees with clear terms of reference and responsibilities as appropriate;
defines levels of delegation in respect of specific matters, with required authority to Board committees and management;
monitors non-financial aspects pertaining to the businesses of the Group;
considers and, if appropriate, declares the payment of dividends to shareholders; and
regularly evaluates its own performance and effectiveness.
The Board delegates the responsibility of day-to-day business and operations to the Company's senior management team,
which includes its chief officers, the president and executive vice-presidents. The senior management team meets once
every two weeks or as frequently as necessary to formulate policies and make recommendations to the Board. The senior
management team administers, enforces, interprets and supervises compliance with the internal rules and operational
procedures of the Company as well as its subsidiaries and conducts regular reviews, recommends and advises on appropriate
amendments to such rules and procedures. The senior management team reports to the Board on a regular basis and
communicates with the Board whenever required.
To better serve the long-term interests of our stakeholders, the Board delegates certain matters requiring particular time,
attention and expertise to its committees. The Board has determined that these matters are better dealt with by the committees
as they require independent oversight and specialist input. As such, the Board has established five committees to assist the
Board: Audit Committee, Corporate Governance Committee, Investment Committee, Nomination Committee and Remuneration
Committee. Each of the committees has its terms of reference which clearly specifies its powers and authorities. All committees
report back to the Board and make recommendations to the Board if necessary.
00
78
Tencent Holdings Limited
Corporate Governance Report
Annual Report 2021
ADOPTION OF CODE OF CONDUCT REGARDING DIRECTORS' SECURITIES TRANSACTIONS
The Group is committed to minimising the impact on the environment from our business activities and the details of such
efforts are set out in the section headed "Environment" in the "Environmental, Social and Governance Report" in this annual
report. As far as the Board is aware, the Group has complied with the relevant laws and regulations that have a significant
impact on the Group in all material respects.
Tencent Holdings Limited
11.
Pursuant to the co-operation framework agreement entered into between each of the New OPCOS and one of the
WFOES, the parties shall cooperate in the provision of communications services. For each agreement, the WFOES shall
allow the New OPCOs to use its and its affiliates' assets and provide services to the New OPCOs. The New OPCOS shall
transfer all of its Surplus Cash to the WFOES and its affiliates as consideration. Co-operation committees have also been
established according to these agreements. During the year, (i) revenue sharing amounting to approximately RMBO.569
million, RMBO.969 million and RMB24 million was paid or payable by Wang Dian to Tencent Technology, Cyber Tianjin
and Tencent Beijing respectively; (ii) revenue sharing amounting to approximately RMBO.559 million and RMB5 million
was paid or payable by Beijing BIZCOM to Tencent Technology and Cyber Tianjin respectively; (iii) revenue sharing
amounting to approximately RMB0.463 million and RMBO.177 million was paid or payable by Beijing Starsinhand to
Cyber Tianjin and Tencent Beijing respectively; (iv) revenue sharing amounting to approximately RMB83 million, RMB1
million and RMB7 million was paid or payable by Shenzhen Tencent Tianyou to Tencent Technology, Tencent Shanghai,
and Hainan Network respectively.
Annual Report 2021
71
Directors' Report
The risks associated with Structure Contracts and the actions taken by the Company to mitigate the risks
Due to regulatory limitations restricting foreign investment in businesses providing value-added telecommunications services in
China, the Company conducts some of its business in the PRC through the OPCOs. These contractual arrangements may not
be as effective in providing control as direct ownership. Pursuant to the Structure Contracts, the arbitration tribunal is entitled
to decide compensation for the equity interests or property ownership of OPCOs, decide to implement enforceable remedy
(including mandatorily requiring OPCOs to transfer the equity interests of OPCOS to the WFOES, etc.) or order the bankruptcy of
OPCOS. Prior to the formation of the arbitration tribunal, the courts of the places where the major assets of OPCOS are situated
are entitled to implement interim remedies to ensure the enforcement of the future decisions of the arbitration tribunals.
Pursuant to the technical consultancy services agreement dated 28 February 2004 entered into between Tencent
Technology, as consultant, and Shiji Kaixuan, Tencent Technology shall provide specified technical consultancy services
to Shiji Kaixuan against payment of an annual consultancy service fee determined by the SKT Co-operation Committee
within a range of percentages of Shiji Kaixuan's annual revenues. During the year, no consultancy service was transacted
under such arrangements, save as disclosed elsewhere in this section.
The WFOES have been structured and located in order to benefit from preferential tax treatments offered to companies located
in designated economic zones and/or operating software-related businesses. Although the relevant governmental authority has
granted such preferential tax treatment to certain WFOES and OPCOS, there can be no assurance that the conditions under
which these treatments are provided will always be present. The relevant WFOEs and OPCOS would use their reasonable
endeavours to take all necessary actions, including but not limited to maintaining or acquiring their status as "High and New
Technology Enterprise" or "National Key Software Enterprise", in order to continue to enjoy the reduced income tax rate and
the other tax concessions.
For details of the risks associated with the Structure Contracts, please refer to the section headed “Risk factors - Risks relating
to our structure" in the IPO prospectus.
Other connected transactions
The Group entered into certain transactions with “related parties" as defined under applicable accounting standards during
the financial year ended 31 December 2021 which were disclosed in Note 13(a) (Senior management's emoluments), Note
13(b) (Five highest paid individuals), Note 14 (Benefits and interests of directors), Note 26 (Loans to investees and investees'
shareholders), Note 35 (Share-based payments) and Note 45 (Related party transactions) to the consolidated financial
statements. Save as the related parties transactions involving payment of remuneration to certain directors of the Group which
constitute continuing connected transactions fully exempt from the connected transaction requirements under Rule 14A.76(1)
or Rule 14A.95 of the Listing Rules, no related parties transactions disclosed in the consolidated financial statements
constitutes a connected transaction as defined under Chapter 14A of the Listing Rules.
72
Tencent Holdings Limited
Directors' Report
INTERESTS OF SUBSTANTIAL SHAREHOLDERS
Due to the legal constraints in relation to foreign investment in the telecommunications value-added services industry in the
PRC, a number of agreements have been entered into between members of the Group whereby the Company and the WFOES
derive substantially all their revenues from transactions with the OPCOs. The recognition of revenues outlined in these intra-
group contracts could be challenged by tax authorities and any adjustment in tax treatment could have a material and adverse
impact on the taxable profitability of the Group. As advised by the Company's PRC legal advisers, it is unlikely that the tax
treatment of revenues will be challenged by the PRC tax authorities, provided that the transactions under these intra-group
contracts represent bona fide transactions conducted on an arm's length basis. The Company will take all necessary actions to
ensure and monitor that relevant transactions are to be conducted on an arm's length basis to minimise the risks of adjustment
in tax treatment.
As at 31 December 2021, the following persons, other than the directors or chief executive of the Company, had interests or
short positions in the shares or underlying shares of the Company which would fall to be disclosed to the Company under the
provisions of Divisions 2 and 3 of Part XV of the SFO as recorded in the register required to be kept by the Company under
section 336 of the SFO, or who was, directly or indirectly, interested in 5% or more of the shares of the Company:
10.
9.
Directors' Report
4.
Pursuant to the IP transfer agreement dated 28 February 2004 entered into between Cyber Tianjin and Shiji Kaixuan,
Shiji Kaixuan shall assign to Cyber Tianjin its principal present and future IP rights, free from encumbrance (except
for licences granted in the ordinary course of Shiji Kaixuan's business) in consideration of Cyber Tianjin's undertaking
to provide certain technology and information services to Shiji Kaixuan. During the year, no IP transfer was transacted
under such arrangements, save as disclosed elsewhere in this section.
5.
Pursuant to the domain name licence agreement dated 28 February 2004 entered into between Tencent Technology,
as licensor, and Tencent Computer, as licensee, Tencent Technology shall grant to Tencent Computer a non-exclusive
licence to use specified domain names against payment of annual royalties determined by the TCS Co-operation
Committee within a range of percentages of Tencent Computer's annual revenues. During the year, no domain name
licence was transacted under such arrangements, save as disclosed elsewhere in this section.
6.
Pursuant to the domain name licence agreement dated 28 February 2004 entered into between Tencent Technology,
as licensor, and Shiji Kaixuan, as licensee, Tencent Technology shall grant to Shiji Kaixuan a non-exclusive licence to
use specified domain names against payment of annual royalties determined as a percentage of Shiji Kaixuan's annual
revenues (which may be adjusted pursuant to the agreement or the SKT CFC). During the year, no domain name licence
was transacted under such arrangements, save as disclosed elsewhere in this section.
Pursuant to the information consultancy services agreement dated 28 February 2004 entered into between Tencent
Technology, as consultant, and Tencent Computer, Tencent Technology shall provide specified information consultancy
services to Tencent Computer against payment of an annual consultancy service fee determined by the TCS Co-operation
Committee within a range of percentages of Tencent Computer's annual revenues. During the year, no consultancy
service was transacted under such arrangements, save as disclosed elsewhere in this section.
7.
8.
Pursuant to the trademark licence agreement dated 28 February 2004 entered into between Tencent Technology, as
licensor, and Shiji Kaixuan, as licensee, Tencent Technology shall grant to Shiji Kaixuan a non-exclusive licence to use
specified trademarks against payment of annual royalties determined as a percentage of Shiji Kaixuan's annual revenues
(which may be adjusted pursuant to the agreement or the SKT CFC). During the year, no trademark licence was
transacted under such arrangements, save as disclosed elsewhere in this section.
00
70
70
Tencent Holdings Limited
Directors' Report
Pursuant to the trademark licence agreement dated 28 February 2004 entered into between Tencent Technology, as
licensor, and Tencent Computer, as licensee, Tencent Technology shall grant to Tencent Computer a non-exclusive
licence to use specified trademarks against payment of annual royalties determined as a percentage of Tencent
Computer's annual revenues (which may be adjusted pursuant to the agreement or the TCS CFC). During the year, no
trademark licence was transacted under such arrangements, save as disclosed elsewhere in this section.
Directors' Report
Long/ short position in the shares of the Company
Long/ short position
3.
As at 31 December 2021, the total number of issued shares of the Company was 9,608,378,469.
Save as disclosed above, the Company had not been notified of any other persons (other than the directors or chief executive
of the Company) who, as at 31 December 2021, had interests or short positions in the shares and underlying shares of the
Company as recorded in the register required to be kept under section 336 of the SFO.
Annual Report 2021
73
Directors' Report
MANAGEMENT CONTRACTS
Advance Data Services Limited holds 709,859,700 Shares directly and 95,000,000 Shares indirectly through its wholly-owned
subsidiary, Ma Huateng Global Foundation. As Advance Data Services Limited is wholly-owned by Mr Ma Huateng, Mr Ma has an
interest in these shares as disclosed under the section of "Directors' Interests in Securities".
No contracts concerning the management and administration of the whole or any substantial part of the business of the
Company were entered into or existed during the year.
For the year ended 31 December 2021, the five largest customers of the Group accounted for approximately 7.15% of
the Group's total revenues while the largest customer of the Group accounted for approximately 3.05% of the Group's
total revenues. In addition, for the year ended 31 December 2021, the five largest suppliers of the Group accounted for
approximately 17.19% of the Group's total purchases while the largest supplier of the Group accounted for approximately 5.67%
of the Group's total purchases.
None of the directors, their close associates or any shareholder (which to the knowledge of the directors owns more than 5% of
the number of issued shares of the Company) had an interest in any of the major customers or suppliers noted above.
AUDIT COMMITTEE
The Audit Committee, together with the Auditor, has reviewed the Group's audited consolidated financial statements for the
year ended 31 December 2021. The Audit Committee has also reviewed the accounting principles and practices adopted by
the Group and discussed auditing, risk management, internal control and financial reporting matters.
ENVIRONMENT AND COMPLIANCE WITH LAWS
00
74
MAJOR CUSTOMERS AND SUPPLIERS
Name of shareholder
2.
1.
Nature of
interest/ capacity
Number of
shares/ underlying
Approximate %
shares held
of shareholding
(Note 3)
MIH TC
MIH TC is controlled by Naspers Limited and held through its non wholly-owned subsidiary, Prosus N.V., which in turn holds MIH TC
through MIH Internet Holdings B.V. MIH TC and MIH Internet Holdings B.V. are both wholly-owned subsidiaries of Prosus N.V. As such,
Naspers Limited, Prosus N.V., MIH Internet Holdings B.V. and MIH TC are deemed to be interested in the same block of 2,769,333,600
Shares under Part XV of the SFO.
Long position
Long position
Corporate (Note 1)
Corporate (Note 2)
2,769,333,600
28.82%
804,859,700
8.38%
Note:
Advance Data Services
Limited
79
Investment Committee
Annual Report 2021
The Board is the core of the Group's success, and with the appropriate composition of the Board, we can benefit from the right
set of skills, experience and diversity of perspectives to take the Company forward. Therefore, it is essential for the Company to
maintain a formal, considered and transparent procedure for the appointment of new directors to the Board. It is our corporate
governance practice and in accordance with the Articles of Association that all directors (except for the Chairman) should be
subject to re-election at regular intervals and the resignation and removal of any director should be explained with reasons.
At the 2021 AGM, Mr lain Ferguson Bruce retired with effect from the conclusion of the 2021 AGM and Mr Yang Siu Shun
retired and was re-elected.
Appointments, Re-election and Removal
As part of our corporate governance practice to provide transparency to the investor community and in compliance with the
Listing Rules and the CG Code, independent non-executive directors are identified as such in all corporate communications
containing the names of the directors. In addition, an updated list of directors identifying the independent non-executive
directors and the roles and functions of the directors is maintained on the Company Website and the Stock Exchange's
website.
Corporate Governance Report
83
Annual Report 2021
Further, in compliance with Rule 3.10 of the Listing Rules, one of our independent non-executive directors has the appropriate
professional qualifications of accounting or related financial management expertise, and provide valuable advice from time
to time to the Board. The Company has also received from each independent non-executive director a confirmation annually
of their independence and the Nomination Committee has conducted an annual review and considers that all independent
non-executive directors are independent, taking into account of the independence guidelines set out in Rule 3.13 of the Listing
Rules in the context of the length of service of each independent non-executive director.
The Board values the importance of professional judgment and advice provided by non-executive directors to safeguard the
interests of the shareholders. The non-executive directors contribute diversified qualifications and experience to the Group by
expressing their views in a professional, constructive and informed manner, and actively participate in Board and committee
meetings and bring professional judgment and advice on issues relating to the Group's strategies, policies, performance,
accountability, resources, key appointments, standards of conduct, conflicts of interests and management process, with
the shareholders' interests being the utmost important factor. The non-executive directors also take the lead where potential
conflicts of interests arise and exercise their professional judgment and utilise their expertise to scrutinise the Company's
performance in achieving agreed corporate goals, and monitor performance reporting.
In order to take advantage of the skills, experiences and diversity of perspectives of the directors and in order to ensure that the
directors give sufficient time and attention to the Group's affairs, we request each of the directors to disclose to the Company,
on a quarterly basis, the number and the nature of offices held in public companies or organisations and other significant
commitments. The Board's composition is in compliance with the requirement under Rule 3.10A of the Listing Rules that
the number of independent non-executive directors must represent at least one-third of the Board. The Board believes that
the balance between the executive directors and the non-executive directors is reasonable and adequate to provide sufficient
checks and balances that safeguard the interests of the shareholders and the Group.
A list of directors and their respective biographies which include their positions held at the Company and certain subsidiaries
are set out on pages 56 to 59 of this annual report. There is no relationship (including financial, business, family or other
material/relevant relationship(s)) among members of the Board.
As at the date of this annual report, the Board is comprised of eight directors, with two executive directors, two non-executive
directors and four independent non-executive directors. During the year ended 31 December 2021 and up to the date of
this annual report, there is no change to the composition of the Board except that Mr lain Ferguson Bruce has retired as an
independent non-executive director with effect from the conclusion of the 2021 AGM.
Composition
The Board is therefore of the view that there is an adequate balance of power and that appropriate safeguards are in place.
Nevertheless, the Board will continue to regularly monitor and review the Company's current structure and make necessary
changes when appropriate.
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82
00
Besides, all major decisions have been made in consultation with members of the Board and appropriate committees, as
well as the senior management team. Chief officers and senior executives are invited to attend Board meetings from time to
time to make presentations and answer the Board's enquiries. In addition, directors are encouraged to participate actively in
all Board and committee meetings of which they are members, and the Chairman ensures that all issues raised are properly
briefed at the Board meetings, and he works with the senior management team to provide adequate, accurate, clear, complete
and reliable information to members of the Board in a timely manner. Further, the Chairman ensures that adequate time is
available for discussion for all items at the Board meetings. During the year ended 31 December 2021, the Chairman held a
meeting with the independent non-executive directors without the presence of other directors as required by the Listing Rules.
In view of the ever-changing business environment in which our Group operates, the Chairman and Chief Executive Officer
must be technically sophisticated and sensitive to fast and rapid market changes, including changes in users' preferences,
in order to promote the different businesses of the Group. The Board thus considers that a segregation of the roles of the
Chairman and Chief Executive Officer may create unnecessary costs for the daily operation of the Group.
Mr Ma Huateng serves as the Chairman and Chief Executive Officer of the Company. This is at variance with code provision A.2.1
(now rearranged as C.2.1) of the CG Code, which provides that the roles of chairman and chief executive should be separate
and should not be performed by the same individual, and that the division of responsibilities between the chairman and chief
executive should be clearly established and set out in writing.
Chairman and Chief Executive Officer
informal updates from time to time and structured monthly updates on the Company's performance, position and
prospects are provided to the directors.
the company secretary who is an employee of the Company attends training in compliance with the Listing Rules
requirements; and
Code provision A.4.2 (now rearranged as B.2.2) of the CG Code provides that every director, including those appointed for a
specific term, should be subject to retirement by rotation at least once every three years.
training has been and will continue to be provided to the directors on a timely basis, including briefing the directors on
any updates to the Listing Rules and relevant laws;
The Chairman, in accordance with the Articles of Association, whilst holding such office is not subject to retirement by rotation
nor taken into account in determining the number of directors to retire in each year. Therefore, this is a deviation from code
provision A.4.2 (now rearranged as B.2.2) of the CG Code. The Chairman is one of the founders of the Group and he plays
a key role in the growth and development of the Group and his continuing presence in the Board is vital to the sustainable
development of the Group. Given the importance of the Chairman's role in the development of the Group, the Board considers
that the deviation from code provision A.4.2 (now rearranged as B.2.2) of the CG Code has no material impact on the operation
of the Group as a whole.
00
1/1
1/1
1/1
1/1
1/1
5/5
5/5
Lau Chi Ping Martin
Ma Huateng
Executive directors
Meeting
General
Annual Extraordinary
Governance Nomination Remuneration General
Committee Committee Committee Meeting
Committee
Board
Name of director
Audit
Corporate
The Board met five times in 2021. The attendance of each director at Board meetings, committee meetings, the annual
general meeting and the extraordinary general meeting, whether in person or by means of electronic communication, is
detailed in the table below:
Board Activity
Corporate Governance Report
Tencent Holdings Limited
84
As the re-election of Mr Li Dong Sheng, who was re-elected in 2018, was not considered at the 2021 AGM, there is a deviation
from code provision A.4.2 (now rearranged as B.2.2) of the CG Code. Notwithstanding Mr Li Dong Sheng was not subject to
retirement by rotation at the 2021 AGM, his biography and details of his emoluments are set out in the Directors' Report and
Note 14 to the consolidated financial statements respectively for shareholders' information. The Nomination Committee has
assessed and confirmed the independence of Mr Li Dong Sheng in 2021. Considering that the re-election of Mr Li Dong Sheng
will be considered at the 2022 AGM, the Board believes that such deviation does not have a material impact on the operation
of the Company as a whole.
review of the shareholders communication policy has been and will be conducted on a regular basis;
•
•
Lau Chi Ping Martin
Ma Huateng
Executive directors
Name of director
We believe education and training are important for maintaining an effective Board. New directors undergo an orientation
programme designed to provide a thorough understanding of the Group's operations and businesses, and also receive a
handbook outlining their responsibilities under the Listing Rules and applicable laws. Existing directors are provided with
tailored training programmes covering topics such as best practices in corporate governance, legal and regulatory trends
and, given the nature of our business, emerging technologies and products. Directors also regularly meet with the senior
management team to understand the Group's businesses, governance policies and regulatory environment. During the year
ended 31 December 2021, the Company arranged training on topics relating to corporate governance, legal and regulatory
updates and product trends which are relevant to the Group's businesses. The table below summarises the participation of
each of the directors in continuous professional development during the year ended 31 December 2021:
Corporate Governance Report
Tencent Holdings Limited
60
80
00
All directors have full and timely access to all relevant information as well as the advice and services of the Company's general
counsel and the company secretary, with a view to ensuring that Board procedures and all applicable rules and regulations
are followed. All directors may also obtain independent professional advice at the Company's expense for carrying out their
functions.
The major work of these committees during the year 2021 is set out on pages 87 to 94.
ensures that no director or any of his associates is involved in deciding his own remuneration.
ensures that these remuneration proposals are aligned to corporate goals and objectives; and
reviews and approves proposals about the policy and structure of remuneration of directors and senior management
team;
Remuneration Committee
reviews and monitors the implementation of the board diversity policy and the board nomination policy of the Company.
reviews and makes recommendations to the Board on individuals nominated to be directors by shareholders;
identifies suitable and qualified individuals and makes recommendations to the Board as to new Board members, by
taking into account the individual's experience, knowledge, skills, gender and background, as well as the Listing Rules
requirements;
reviews and monitors the structure, size, composition and diversity of the Board in light of the Company's strategy;
Nomination Committee
ensures compliance with the Listing Rules and any other relevant laws and regulations on any mergers, acquisitions and
disposals.
identifies, considers and makes recommendations on mergers, acquisitions and disposals; and
Non-executive directors
Jacobus Petrus (Koos) Bekker
Charles St Leger Searle
Independent non-executive directors
To stay abreast of the high level of corporate governance and maintain transparency of our corporate governance practices, we
have continued to adopt and foster the following corporate governance practices:
In addition, the Board has adopted various practices to bring the Group to a high level of corporate governance and
compliance with the CG Code.
A high level of corporate governance and integrity cannot be maintained only with the Board's efforts. Each of the Group's
employees plays a role in contributing to such cause. A code of conduct which emphasises integrity and respect is distributed
by the Company to all employees and it forms part of the employment agreement with each of the employees.
Corporate Governance Report
81
Annual Report 2021
Mr lain Ferguson Bruce retired as an independent non-executive director and ceased to be a member of the Audit Committee,
Corporate Governance Committee and Nomination Committee with effect from the conclusion of the annual general meeting of the
Company held on 20 May 2021 (the "2021 AGM").
2
Attended training/seminar/ conference arranged by the Company or other external parties or read relevant materials.
1
V
Non-executive directors
V
V
√
V
V
development¹
Participated in
continuous
professional
Ke Yang
Yang Siu Shun
lan Charles Stone
lain Ferguson Bruce²
Li Dong Sheng
V
Jacobus Petrus (Koos) Bekker
5/5
4/4
reviewing the adequacy of resources, qualifications and training of the Group's finance department; and
reviewing the plans (including those for 2021), resources and work of the Company's internal auditors;
in relation to the external auditor, reviewing their plans, reports and management letter, fees, involvement in non-audit
services, and their terms of engagement;
•
reviewing the dividend policy of the Company;
reviewing the status of compliance with the CG Code, the Listing Rules and relevant laws by the Group;
reviewing the 2021 first and third quarters results announcements;
reviewing the 2021 interim report and interim results announcement;
reviewing the 2020 annual report, including the Corporate Governance Report, the ESG Report, the Directors' Report
and the financial statements, as well as the related results announcement;
The Audit Committee's major work during the year 2021 includes the following:
The Audit Committee meets not less than four times a year; the Audit Committee met eight times in 2021. Individual
attendance of each Audit Committee member is set out on page 85. In addition to the members of the Audit Committee,
meetings were attended by the Chief Financial Officer, the Head of IA and the Head of IC, and the external auditor at the
invitation of the Audit Committee.
The Audit Committee comprises only non-executive directors. Its members are Mr Yang Siu Shun, Mr lan Charles Stone (both
are independent non-executive directors) and Mr Charles St Leger Searle (non-executive director). Mr Yang Siu Shun, who
chairs the Audit Committee, and Mr Charles St Leger Searle have appropriate professional qualifications and experiences in
financial matters.
Audit Committee
Corporate Governance Report
Tencent Holdings Limited
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00
As described above, the Board has established five committees, each of which has been delegated responsibilities and reports
back to the Board: Audit Committee, Corporate Governance Committee, Investment Committee, Nomination Committee and
Remuneration Committee. The roles and functions of these committees are set out in their respective terms of reference. The
terms of reference of each of these committees will be revised from time to time to ensure that they continue to meet the needs
of the Company and to ensure compliance with the CG Code. The terms of reference of the Audit Committee, the Nomination
Committee and the Remuneration Committee are available on the Company Website and the Stock Exchange's website.
THE COMMITTEES
The company secretary ensures that there is a good and timely flow of information to the Board. The company secretary
is responsible for taking minutes of all Board and committee meetings and ensuring that sufficient details of the matters
considered and decisions reached have been recorded. Draft and final version of the minutes of meetings are sent to the
directors for comments and records respectively within a reasonable time after each meeting, and final minutes with the
relevant board papers and related materials are kept by the company secretary and are available for review and inspection by
the directors at any time.
At the Board meetings, the Board discussed a wide range of matters, including the Group's overall strategies, financial and
operational performances, approved the annual, interim and quarterly results of the Group, the appointment of directors,
business prospects, regulatory compliance and corporate governance, and other significant matters. The company secretary, in
consultation with the Chairman and the senior management team, prepares the agenda for each meeting and all directors are
given the opportunity to include matters for discussion in the agenda. The company secretary also ensures that all applicable
rules and regulations in relation to the Board meetings are followed. The company secretary sends notice of the Board meeting
to each of the directors at least 14 days in advance of each regular Board meeting. The company secretary also sends the
agenda, board papers and relevant information relating to the Group to each of the directors at least 3 days in advance of each
regular Board meeting and committee meeting, and keeps the directors updated on the Group's financial performance and
latest developments. If any director raises any queries, steps will be taken to respond to such queries as promptly and fully
as possible. If there is potential or actual conflict of interests involving a substantial shareholder or a director, such director
will declare his/her interest and will abstain from voting on such matters. The directors may approach the Company's senior
management team when necessary. The directors may also seek independent professional advice at the Company's expense
in appropriate circumstances.
Corporate Governance Report
85
reviewing the effectiveness of the Company's financial reporting system, the system of internal controls in operation, risk
management system and associated procedures within the Group.
PricewaterhouseCoopers ("PwC") is the Company's external auditor. The Audit Committee annually reviews the relationship of
the Company with PwC. Having also reviewed the effectiveness of the external audit process as well as the independence and
objectivity of PwC, the Audit Committee is satisfied with this relationship. As such, the Audit Committee has recommended
their re-appointment at the 2022 AGM.
Annual Report 2021
87
During 2021, the Nomination Committee reviewed board composition and director succession, the board diversity policy
and the board nomination policy, and also considered and made recommendations to the Board on the re-appointment of
the retiring directors at the 2021 AGM. The board diversity policy was revised and adopted in March 2022. The Nomination
Committee has also assessed the independence of the independent non-executive directors and considers all of them to be
independent, taking into account of the independence guidelines set out in Rule 3.13 of the Listing Rules in the context of the
length of service of each independent non-executive director, and the perspectives, skills and experience that such director
can bring to the Board. The Company recognises the benefits of having a diverse Board, and views diversity at Board level as a
business imperative that will help the Company achieve its strategic objectives and maintain a competitive advantage. As such,
the Board has set measurable objectives for the implementation of the board diversity policy to ensure that the Board has the
appropriate balance of skills, experience and diversity of perspectives that are required to support the execution of its business
strategy and maintain the effectiveness of the Board. The Nomination Committee is satisfied that the board diversity policy
and the board nomination policy are successfully implemented with reference to the measurable objectives. The Nomination
Committee will continue to conduct periodic review and monitor the implementation of the board diversity policy and the board
nomination policy to ensure their continued effectiveness.
The Nomination Committee met once in 2021. Individual attendance of each Nomination Committee member is set out on
page 85.
The Nomination Committee comprises a majority of independent non-executive directors. Its members are Mr Ma Huateng,
Mr Li Dong Sheng, Mr lan Charles Stone, Mr Yang Siu Shun (appointed as a member of the Nomination Committee with effect
from the conclusion of the 2021 AGM) (all three are independent non-executive directors) and Mr Charles St Leger Searle
(non-executive director). The Nomination Committee is chaired by Mr Ma Huateng.
Nomination Committee
In 2021, the Investment Committee had considered and passed various resolutions on its decisions on the Group's acquisitions
and disposals.
The Investment Committee comprises a majority of executive directors. Its members are Mr Lau Chi Ping Martin,
Mr Ma Huateng and Mr Charles St Leger Searle. The Investment Committee is chaired by Mr Lau Chi Ping Martin.
Investment Committee
Corporate Governance Report
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Annual Report 2021
updating the terms of reference to specify the additional oversight role of the Corporate Governance Committee on the
Company's ESG matters and making recommendations to the Board.
Corporate Governance Report
considering the Company's environmental targets;
reviewing the Company's compliance with the ESG Reporting Guide and disclosure in the ESG Report;
reviewing the Company's compliance with the CG Code and disclosure in the Corporate Governance Report;
reviewing legal and regulatory compliance, including the insider dealing policy, the disclosure of inside information policy
and the shareholders communication policy. The insider dealing policy and the shareholders communication policy were
revised and adopted in March 2022;
reviewing the Company's policies and practices on corporate governance and ESG;
The Corporate Governance Committee's major work during the year 2021 and up to the date of this annual report includes the
following:
The Corporate Governance Committee met twice in 2021. Individual attendance of each Corporate Governance Committee
member is set out on page 85.
The Corporate Governance Committee comprises only non-executive directors. Its members are Mr Charles St Leger Searle
(non-executive director), Mr lan Charles Stone, Mr Yang Siu Shun and Professor Ke Yang (all of them are independent
non-executive directors). The Corporate Governance Committee is chaired by Mr Charles St Leger Searle.
Corporate Governance Committee
Corporate Governance Report
discussing the arrangements made for directors and senior management team to attend training sessions for continuous
professional development; and
89
Mr Yang Siu Shun has been appointed as a member of the Nomination Committee with effect from the conclusion of the 2021 AGM.
Mr lain Ferguson Bruce retired as an independent non-executive director and ceased to be a member of the Audit Committee,
Corporate Governance Committee and Nomination Committee with effect from the conclusion of the 2021 AGM.
1/1
4/4
€ 80 000
5/5
Yang Siu Shun³
5/5
lan Charles Stone
2/2
lain Ferguson Bruce²
5/5
Li Dong Sheng¹
Independent non-executive directors
1/1
==
1/1
1/1
1/1
==
1/1
2/2
8/8
5/5
Charles St Leger Searle
8/8
2/2
8/8
2/2
2
Mr Li Dong Sheng and Professor Ke Yang were not able to attend the 2021 AGM and the extraordinary general meeting of the Company
held on 20 May 2021 (the "2021 EGM") due to other prior business commitments.
1
0/1
0/1
2/2
5/5
Ke Yang¹
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assesses the independence of independent non-executive directors and the perspectives, skills and experience that such
director can bring to the Board; and