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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark One)
☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR 12(G) OF THE SECURITIES EXCHANGE ACT OF 1934
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2020
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
Date of event requiring this shell company report……………
Commission file number 001-36614
For the transition period from to
Alibaba Group Holding Limited
(Exact name of Registrant as specified in its charter)
Cayman Islands
(Jurisdiction of incorporation or organization)
26/F Tower One, Times Square
1 Matheson Street, Causeway Bay
Hong Kong
(Address of principal executive offices)
Timothy A. Steinert, Esq., Company Secretary
Telephone: +852-2215-5100
Facsimile: +852-2215-5200
Alibaba Group Holding Limited
26/F Tower One, Times Square
1 Matheson Street, Causeway Bay
Hong Kong
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class
Ordinary Shares, par value US$0.000003125 per share
American Depositary Shares, each representing
eight Ordinary Shares
Trading Symbol(s)
9988
BABA
Name of each exchange on which registered
The Stock Exchange of Hong Kong Limited
New York Stock Exchange
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 21,491,994,944 Ordinary Shares
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
⌧ Yes ◻ No
◻ Yes ⌧ No
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
⌧ Yes ◻ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was required to submit such files).
⌧ Yes ◻ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated
filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ⌧
Accelerated filer ◻
Non-accelerated filer ◻
Emerging growth company ☐
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with
any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act ◻
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the
Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
International Financial Reporting Standards as issued
by the International Accounting Standards Board ◻
U.S. GAAP ⌧
Other ◻
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).
◻ Item 17 ◻ Item 18
☐ Yes ⌧ No
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities
under a plan confirmed by a court.
◻ Yes ◻ No
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TABLE OF CONTENTS
LETTER FROM OUR CHAIRMAN AND CEO TO SHAREHOLDERS
CONVENTIONS THAT APPLY TO THIS ANNUAL REPORT ON FORM 20-F
FORWARD-LOOKING STATEMENTS
PART I
ITEM 1.
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
ITEM 3. KEY INFORMATION
ITEM 4.
INFORMATION ON THE COMPANY
ITEM 4A. UNRESOLVED STAFF COMMENTS
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
ITEM 8.
FINANCIAL INFORMATION
ITEM 9.
THE OFFER AND LISTING
ITEM 10. ADDITIONAL INFORMATION
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS
AND USE OF PROCEEDS
ITEM 15. CONTROLS AND PROCEDURES
ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERT
ITEM 16B.CODE OF ETHICS
ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICES
ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT
COMMITTEES
ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
PURCHASERS
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
ITEM 16G.CORPORATE GOVERNANCE
ITEM 16H.MINE SAFETY DISCLOSURE
ITEM 17. FINANCIAL STATEMENTS
ITEM 18. FINANCIAL STATEMENTS
ITEM 19. EXHIBITS
PART III
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LETTER FROM OUR CHAIRMAN AND CEO TO SHAREHOLDERS
Dear Shareholders,
Thank you for your continued help, support and trust in Alibaba Group.
This is my first letter to you as the Chairman of Alibaba Group. More than half of 2020 will have passed by the time you
read this and all that has happened over the last six months has been an unprecedented test on all of us. We can already
see the profound impact on the future of our economy and society.
There remains intense global uncertainty due to the unexpected endurance of the COVID-19 pandemic. It is clear that
participants in the market, whether organizations or individuals, need to look beyond their own personal welfare. No one
can defeat the pandemic alone and it is a challenge that we must face collectively as a global community. But, even in a
highly uncertain world, we can always find some certainty. We know without doubt that the ongoing digital
transformation of our economy and society will be unstoppable. COVID-19 has made us fundamentally re-evaluate our
relationship with the world around us. It has catalyzed development of brand-new digital solutions in life, work,
education, business management and public services. Today, digitalization is the new norm.
This past year, we celebrated Alibaba’s 20th anniversary. Over the last 20 years, Alibaba has benefited from the
supercharged evolution of the Chinese Internet landscape as well as the prosperity of the China economy. The trajectories
of Alibaba and China are inextricably linked. Over the last 20 years, Alibaba has been preparing for the arrival of the
digital economy era. We have assembled a digital economy that encompasses commerce, finance, logistics and big data
powered by cloud computing. Along the way, a dynamic and rich ecosystem made up of hundreds of millions of
consumers and tens of millions of merchants, service providers and partners emerged. Not only did we forge an entirely
new commercial ecosystem online, we also helped traditional businesses to embrace digital transformation and find
innovative hybrid models that integrate online with offline. We are the provider of utility services for global digital
commerce, and became the essential infrastructure for businesses pursuing digital transformation across all industries.
COVID-19 forced all of us to develop a deeper and more concrete understanding of “infrastructure.” During the
pandemic, Alibaba mobilized the full spectrum of our digital infrastructure to contribute to the global fight against
COVID-19, to meet the essential needs of our communities and to provide support for economic recovery. Alibaba owes
its growth and development over the past 20 years to society and to the era that we belong. We believe the best way to
show our gratitude is to help address the challenges that we collectively face and drive progress to the benefit of the
whole society. In the face of the hardships created by the pandemic, it was our duty and responsibility to give back.
During this past fiscal year, despite the impact of the pandemic, Alibaba still delivered on a strategic goal that we had
established five years ago, which was to surpass US$1 trillion in GMV. This was an important milestone for Alibaba,
especially in the context of US$6 trillion in total annual retail sales of consumer goods in China today. Our next goal is to
serve more than 1 billion consumers in China and facilitate more than RMB10 trillion of consumption on our platforms
in the next five years as we continue on the path of globalization. Our longer-term goals are to serve 2 billion consumers
globally, create 100 million jobs and provide the necessary infrastructure to support 10 million small businesses to
become profitable on our platforms by 2036. We will continue to pursue our three strategic pillars of globalization, China
domestic consumption and big data powered by cloud computing. Globalization is our long-term battle; Chinese
domestic consumption is our cornerstone battle and big data powered by cloud computing is our battle for the future.
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This past year, we also celebrated a series of momentous events. Alibaba migrated its core system onto the public cloud,
paving the way to build a cloud-native infrastructure for the future. We came home to Hong Kong for a secondary listing.
Wang Jian became the first representative from a private Chinese enterprise appointed to the Chinese Academy of
Engineering. He is the pride of all Aliren, and his appointment represents a validation of the commitment and investment
made by Alibaba engineers over the years.
True creativity is original. Alibaba prioritized self-innovation and incubation of new ideas above all else over the past 20
years. From Taobao to Alipay to Cainiao to Alibaba Cloud, from DingTalk to Freshippo to Taobao Live – all of these
new “animals” helped to improve the lives of consumers, advance development of commerce and drive progress in
society. We have re-defined management of consumer lifestyles and business operations. Our digital economy
infrastructure – from digital commerce to digital finance to logistics to cloud computing – empowers the whole society
with the potential and opportunity to innovate and incubate even more new ideas.
Over the past 20 years, Alibaba has grown up surrounded by competition. Competition has made us better. Competition
has strengthened our creativity and innovation. Competition has inspired us to become a “future shaper”. Only those who
have experienced zero to one, created something from nothing, and possess the stamina to continually create value for
customers through innovation will stand the test of time in this fast-moving world of digitalization. Alibaba is unique in
our commitment to being true to ourselves and in our firm belief that customer value creation should be at the root of all
innovation. Alibaba’s past 20 years has been defined by our own continuous self-innovation, and helping our customers
and partners to foster new ideas. We will continue to build and develop the infrastructure for the digital economy. We
will continue to invest for the future. We will continue to incubate for the future. We want Alibaba’s innovations to
contribute to a better tomorrow for everyone.
On the eve of our 20th anniversary, we laid out our vision to be a good company for 102 years. We are standing at an
important intersection in history and our mission is being tested. Alibaba’s ultimate goal is to create value for society and
help find solutions for society’s challenges. We want to convert Alibaba’s resources into fuel for small and medium
businesses, which will in turn support the advancement of the whole society. We want our society to be better because of
Alibaba’s contributions. We believe that once our society is better, once our economy is better, and once people’s lives
are better, then Alibaba will be better!
Daniel Zhang
Chairman and Chief Executive Officer
Alibaba Group Holding Limited
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CONVENTIONS THAT APPLY TO THIS ANNUAL REPORT ON FORM 20-F
Unless the context otherwise requires, references in this annual report on Form 20-F to:
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“2019 PRC Foreign Investment Law” are to the PRC Foreign Investment Law, promulgated by the National
People’s Congress in March 2019, which became effective on January 1, 2020;
“ADSs” are to the American depositary shares, each of which represents eight Shares;
“AI” are to artificial intelligence;
“Alibaba,” “Alibaba Group,” “company,” “our company,” “we,” “our” or “us” are to Alibaba Group
Holding Limited, a company incorporated in the Cayman Islands with limited liability on June 28, 1999
and, where the context requires, its consolidated subsidiaries and its affiliated consolidated entities,
including its variable interest entities and their subsidiaries, from time to time;
“Alibaba Health” are to Alibaba Health Information Technology Limited, a company incorporated in
Bermuda on March 11, 1998 and the shares of which are listed on the Main Board of the Hong Kong Stock
Exchange (Stock Code: 0241), and, except where the context otherwise requires, its consolidated
subsidiaries;
“Alibaba Pictures” are to Alibaba Pictures Group Limited, a company incorporated in Bermuda with
limited liability on January 6, 1994, the shares of which are listed on the Main Board of the Hong Kong
Stock Exchange (Stock Code: 1060) and also have a secondary listing on the Singapore Exchange
Securities Trading Limited (SGX-ST) (Stock Code: S91) and, except where the context otherwise requires,
its consolidated subsidiaries; on June 18, 2020, Alibaba Pictures announced the proposed voluntary
delisting of its shares from the main board of the SGX-ST, subject to certain conditions;
“Alipay” are to Alipay.com Co., Ltd., a company incorporated under the laws of the PRC on December 8,
2004, with which we have a long-term contractual relationship and which is a wholly-owned subsidiary of
Ant Group or, where the context requires, its predecessor entities;
“Altaba” are to Altaba Inc. (formerly known as Yahoo! Inc.) and where the context requires, its
consolidated subsidiaries;
“Amap” are to AutoNavi Holdings Limited, a company incorporated under the laws of the Cayman Islands
on June 2, 2006 and our indirect wholly-owned subsidiary, and, except where the context otherwise
requires, all of its consolidated subsidiaries and (if applicable) its affiliated consolidated entities, including
its variable interest entities and their subsidiaries; where the context requires, also refers to our business in
providing mobile digital map, navigation and real time traffic information under the Amap brand;
“Analysys” are to Analysys, a research institution;
“annual active consumers” are to user accounts that placed one or more confirmed orders through the
relevant platform during the previous twelve months, regardless of whether or not the buyer and seller settle
the transaction;
“annual active users” or “AAUs” for Ant Group are to the user accounts that accessed one or more services
provided by Ant Group and/or its investees during the previous twelve months; in the context of global
AAUs, it refers to annual active users of Alipay in China and overseas annual active payment users served
by Ant Group and/or its strategic local e-wallet partners;
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“Ant Group” are to Ant Small and Micro Financial Services Group Co., Ltd., a company organized under
the laws of the PRC on October 19, 2000 and, as context requires, its consolidated subsidiaries; starting
from September 2019, we have held a 33% equity interest in Ant Group (formerly known as Ant Financial);
“Articles” or “Articles of Association” are to our Articles of Association (as amended and restated from
time to time), adopted on September 2, 2014;
“board” or “board of directors” are to our board of directors, unless otherwise stated;
“Bulletin 7” are to the Bulletin on Issues of Enterprise Income Tax on Indirect Transfers of Assets by Non-
PRC Resident Enterprises, issued by the STA on February 3, 2015;
“Bulletin 37” are to Announcement on Issues Concerning the Withholding of Enterprise Income Tax at
Source on Non-PRC Resident Enterprises, issued by the STA on October 17, 2017;
“business day” are to any day (other than a Saturday, Sunday or public holiday) on which banks in relevant
jurisdictions are generally open for business;
“Cainiao Network” are to Cainiao Smart Logistics Network Limited, a company incorporated on May 20,
2015 under the laws of the Cayman Islands and our consolidated subsidiary, together with its subsidiaries;
“CCASS” are to the Central Clearing and Settlement System established and operated by Hong Kong
Securities Clearing Company Limited, a wholly-owned subsidiary of Hong Kong Exchange and Clearing
Limited;
“China” and the “PRC” are to the People’s Republic of China;
“Circular 82” are to the Notice Regarding the Determination of Chinese-Controlled Offshore-Incorporated
Enterprises as PRC Tax Resident Enterprises on the basis of de facto management bodies, issued on April
22, 2009 and further amended on December 29, 2017;
“Companies (WUMP) Ordinance” are to the Companies (Winding Up and Miscellaneous Provisions)
Ordinance (Chapter 32 of the Laws of Hong Kong), as amended or supplemented from time to time;
“CRM” are to customer relationship management;
“CSRC” are to the China Securities Regulatory Commission of the PRC;
“Damai” are to Pony Media Holdings Inc., a company incorporated under the laws of the British Virgin
Islands on December 17, 2004 and our indirect wholly-owned subsidiary, and, except where the context
otherwise requires, all of its consolidated subsidiaries and its affiliated consolidated entities, including its
variable interest entities and their subsidiaries; where the context requires, Damai also refers to our online
ticketing platform under the Damai brand;
“Deposit Agreement” are to the deposit agreement, dated as of September 24, 2014, as amended, among us,
Citibank, N.A. and our ADS holders and beneficial owners from time to time;
“director(s)” are to member(s) of our board, unless otherwise stated;
“DTC” are to The Depository Trust Company, the central book-entry clearing and settlement system for
equity securities in the United States and the clearance system for our ADSs;
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“EIT” are to enterprise income tax under the EIT Law;
“EIT Law” are to the PRC Enterprise Income Tax Law;
“Ele.me” are to Rajax Holding, a company incorporated under the laws of the Cayman Islands on June 8,
2011 and our consolidated subsidiary, and, except where the context otherwise requires, its consolidated
subsidiaries and its affiliated consolidated entities, including its variable interest entities and their
subsidiaries; where the context requires, also refers to our on-demand delivery and local services platform
under the Ele.me brand;
“ERP” are to enterprise resource planning;
“EU” are to the European Union;
“FMCG” are to fast-moving consumer goods;
“foreign private issuer” are to such term as defined in Rule 3b-4 under the U.S. Exchange Act;
“Gartner” are to Gartner, Inc.; the Gartner content described herein (the “Gartner Content”) represent(s)
research opinion or viewpoints published, as part of a syndicated subscription service, by Gartner, Inc.
(“Gartner”), and are not representations of fact; Gartner Content speaks as of its original publication date
(and not as of the date of this annual report), and the opinions expressed in the Gartner Content are subject
to change without notice;
“GDP” are to gross domestic product;
“GDPR” are to the EU General Data Protection Regulation;
“GMV” or “Gross Merchandise Value” are to the value of confirmed orders of products and services on our
marketplaces, regardless of how, or whether, the buyer and seller settle the transaction; unless otherwise
stated, GMV in reference to our marketplaces includes only GMV transacted through our China retail
marketplaces; our calculation of GMV for our China retail marketplaces includes shipping charges paid by
buyers to sellers; as a prudential matter aimed at eliminating any influence on our GMV of potentially
fraudulent transactions, we exclude from our calculation of GMV transactions in certain product categories
over certain amounts and transactions by buyers in certain product categories over a certain amount per
day;
“HK$” or “Hong Kong dollars” or “HK dollars” are to Hong Kong dollars, the lawful currency of Hong
Kong;
“Hong Kong” or “HK” or “Hong Kong S.A.R.” are to the Hong Kong Special Administrative Region of the
PRC;
“Hong Kong Listing Rules” are to the Rules Governing the Listing of Securities on The Stock Exchange of
Hong Kong Limited, as amended or supplemented from time to time;
“Hong Kong Share Registrar” are to Computershare Hong Kong Investor Services Limited;
“Hong Kong Stock Exchange” are to The Stock Exchange of Hong Kong Limited;
“IaaS” are to infrastructure-as-a-service;
“ICP(s)” are to Internet content provider(s);
“IDC” are to International Data Corporation, a research institution;
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“Internet Advertising Measures” are to the Interim Administrative Measures on Internet Advertising,
promulgated by the SAIC on July 4, 2016;
“Intime” are to Intime Retail (Group) Company Limited, a company incorporated under the laws of the
Cayman Islands on November 8, 2006 and our consolidated subsidiary and, except where the context
otherwise requires, its consolidated subsidiaries;
“IoT” are to Internet of things;
“IT” are to information technology;
“Junao” are to Hangzhou Junao Equity Investment Partnership, a limited liability partnership incorporated
under the laws of the PRC;
“Junhan” are to Hangzhou Junhan Equity Investment Partnership, a limited liability partnership
incorporated under the laws of the PRC;
“Kaola” are to HQG, Inc., a company incorporated under the laws of the Cayman Islands on September 30,
2014 and our indirect wholly-owned subsidiary, and, except where the context otherwise requires, its
consolidated subsidiaries and affiliated consolidated entities; where the context requires, Kaola also refers
to our import e-commerce platform in China under the Kaola brand;
“Koubei” are to Koubei Holding Limited, a company incorporated under the laws of the Cayman Islands on
March 29, 2006 and our consolidated subsidiary, and, except where the context otherwise requires, its
consolidated subsidiaries and its affiliated consolidated entities, including its variable interest entities and
their subsidiaries; where the context requires, Koubei also refers to our restaurant and local services guide
platform for in-store consumption;
“Lazada” are to Lazada Group S.A., a company incorporated under the laws of Luxembourg on March 6,
2015 and our consolidated subsidiary, and, except where the context otherwise requires, its consolidated
subsidiaries and affiliated consolidated entities;
“M&A Rules” are to the Rules on the Merger and Acquisition of Domestic Enterprises by Foreign Investors
jointly issued by MOFCOM, SASAC, STA, CSRC, SAIC and SAFE on August 8, 2006, effective on
September 8, 2006 and further amended on June 22, 2009 by the MOFCOM;
“Main Board” are to the stock market (excluding the option market) operated by the Hong Kong Stock
Exchange which is independent from and operated in parallel with the Growth Enterprise Market of the
Hong Kong Stock Exchange;
“major subsidiaries” and “major variable interest entities” refer to the entities identified in our corporate
structure chart in “Item 4. Information on the Company — C. Organizational Structure”;
“Memorandum” or “Memorandum of Association” are to our memorandum of association (as amended
from time to time);
“MIIT” are to the Ministry of Industry and Information Technology;
“mobile MAUs” in a given month, are to the number of unique mobile devices that were used to visit or
access certain of our mobile apps at least once during that month;
“MOF” are to the Ministry of Finance of the PRC;
“MOFCOM” are to the Ministry of Commerce of the PRC;
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“National Security Law” are to the PRC National Security Law, promulgated by the PRC National People’s
Congress Standing Committee on July 1, 2015;
“NDRC” are to the National Development and Reform Commission;
“Negative List” are to the Special Administrative Measures (Negative List) for Foreign Investment Access,
the currently effective version of which was jointly promulgated by the MOFCOM and the NDRC on June
30, 2019 and which became effective on July 30, 2019, as amended, supplemented or otherwise modified
from time to time; the most recent amendment of the Negative List was promulgated on June 23, 2020 and
will take effect on July 23, 2020;
“NYSE” are to the New York Stock Exchange;
“orders” unless the context otherwise requires, are to each confirmed order from a transaction between a
buyer and a seller for products and services on the relevant platform, even if the order includes multiple
items, during the specified period, whether or not the transaction is settled;
our “China retail marketplaces” are to Taobao Marketplace and Tmall, collectively;
our “wholesale marketplaces” or “B2B business” are to 1688.com and Alibaba.com, collectively;
“P4P” are to pay-for-performance;
“PaaS” are to platform-as-a-service;
“PBOC” are to the People’s Bank of China;
“PCAOB” are to the Public Company Accounting Oversight Board;
“PRC Government” or “State” are to the central government of the PRC, including all political subdivisions
(including provincial, municipal and other regional or local government entities) and its organs or, as the
context requires, any of them;
“Principal Share Registrar” are to Maples Fund Services (Cayman) Limited;
“QuestMobile” are to QuestMobile, a research institution;
“RMB” or “Renminbi” are to Renminbi, the lawful currency of the PRC;
“RSU(s)” are to restricted share unit(s);
“SAFE” are to the State Administration of Foreign Exchange of the PRC, the PRC governmental agency
responsible for matters relating to foreign exchange administration, including local branches, when
applicable;
“SAFE Circular 37” are to the Circular on Relevant Issues Concerning Foreign Exchange Control on
Domestic Residents’ Offshore Investment and Financing and Roundtrip Investment through Special
Purpose Vehicles promulgated by SAFE with effect from July 4, 2014;
“SAIC” are to State Administration for Industry and Commerce of the PRC, currently known as SAMR;
“SAMR” are to the PRC State Administration for Market Regulation (formerly known as the SAIC);
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“SAPA” are to a share and asset purchase agreement by and among us, Ant Group, Altaba, SoftBank and
the other parties named therein, dated August 12, 2014, together with all subsequent amendments;
“SASAC” are to State-owned Assets Supervision and Administration Commission of the PRC State
Council;
“SEC” are to the United States Securities and Exchange Commission;
“SFC” are to the Securities and Futures Commission of Hong Kong;
“SFO” are to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), as amended
or supplemented from time to time;
“Share Split” are to the subdivision of each ordinary share into eight Shares, pursuant to which the par
value of our Shares was correspondingly changed from US$0.000025 per Share to US$0.000003125 per
Share, with effect from July 30, 2019; immediately after the Share Split became effective, our authorized
share capital became US$100,000 divided into 32,000,000,000 Shares of par value US$0.000003125 per
Share;
“shareholder(s)” are to holder(s) of Shares and, where the context requires, ADSs;
“Share(s)” or “ordinary share(s)” are to ordinary share(s) in our capital with par value of US$0.000003125
each;
“SMEs” are to small and medium-sized enterprises;
“SoftBank” are to SoftBank Group Corp. (formerly known as SoftBank Corp.), and, except where the
context otherwise requires, its consolidated subsidiaries;
“STA” are to the State Taxation Administration of the PRC;
“Sun Art” are to Sun Art Retail Group Limited, a company incorporated under the laws of Hong Kong on
December 13, 2000 with limited liability, the shares of which are listed on the Main Board of the Hong
Kong Stock Exchange (Stock Code: 6808);
“Takeovers Codes” are to Hong Kong’s Codes on Takeovers and Mergers and Share Buy-backs issued by
the SFC;
“UK” are to the United Kingdom of Great Britain and Northern Ireland;
“U.S.” or “United States” are to the United States of America, its territories, its possessions and all areas
subject to its jurisdiction;
“US$” or “U.S. dollars” are to the lawful currency of the United States;
“U.S. Exchange Act” are to the United States Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder;
“U.S. GAAP” are to accounting principles generally accepted in the United States;
“U.S. Securities Act” are to the United States Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder;
●
“USTR” are to the Office of the U.S. Trade Representative;
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●
●
●
“variable interest entities” or “VIE(s)” are to our variable interest entities that are 100% owned by PRC
citizens or by PRC entities owned by PRC citizens, where applicable, that hold the ICP licenses, or other
business operation licenses or approvals, and generally operate the various websites and/or mobile apps for
our Internet businesses or other businesses in which foreign investment is restricted or prohibited, and are
consolidated into our consolidated financial statements in accordance with U.S. GAAP as if they were our
wholly-owned subsidiaries;
“VAT” are to value-added tax; all amounts are exclusive of VAT in this annual report except where
indicated otherwise;
“VIE structure” or “Contractual Arrangements” are to the variable interest entity structure;
“VIE Structure Enhancement” are to the process of enhancing the structure of our major variable interest
entities and certain other variable interest entities;
“Youku” are to Youku Tudou Inc., a company incorporated under the laws of the Cayman Islands on
September 20, 2005 and our consolidated subsidiary, and, except where the context otherwise requires, its
consolidated subsidiaries and its affiliated consolidated entities, including its variable interest entities and
their subsidiaries; where the context requires, Youku also refers to our online video platform under the
Youku brand; and
●
“Yunfeng Fund(s)” are to one or more Yunfeng investment funds established by Yunfeng Capital Limited
or its affiliates, in which Jack Ma currently holds minority interest in the general partners.
Exchange Rate Information
Our reporting currency is the Renminbi. This annual report contains translations of Renminbi and Hong Kong dollar
amounts into U.S. dollars at specific rates solely for the convenience of the reader. Unless otherwise stated, all
translations of Renminbi and Hong Kong dollars into U.S. dollars and from U.S. dollars into Renminbi in this annual
report were made at a rate of RMB7.0808 to US$1.00 and HK$7.7513 to US$1.00, the respective exchange rates on
March 31, 2020 set forth in the H.10 statistical release of the Federal Reserve Board. We make no representation that any
Renminbi, Hong Kong dollar or U.S. dollar amounts referred to in this annual report could have been, or could be,
converted into U.S. dollars, Renminbi or Hong Kong dollars, as the case may be, at any particular rate or at all. On July
2, 2020, the noon buying rate for Renminbi and Hong Kong dollars was RMB7.0660 to US$1.00 and HK$7.7501 to
US$1.00, respectively.
The U.S. dollar amounts of annual GMV for fiscal year 2020 represent the sum of GMV in U.S. dollars for the quarters
ended June 30, September 30 and December 31, 2019 and March 31, 2020, each converted from the RMB amounts at the
average daily exchange rate for each relevant quarter.
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FORWARD-LOOKING STATEMENTS
This annual report on Form 20-F contains forward-looking statements. These statements are made under the “safe
harbor” provision under Section 21E of the U.S. Exchange Act, and as defined in the Private Securities Litigation Reform
Act of 1995. Forward-looking statements can be identified by words or phrases such as “may,” “will,” “expect,”
“anticipate,” “future,” “aim,” “estimate,” “intend,” “seek,” “plan,” “believe,” “potential,” “continue,” “ongoing,”
“target,” “guidance,” “is/are likely to” or other similar expressions. The forward-looking statements included in this
annual report relate to, among others:
●
●
●
●
●
●
●
●
●
●
●
●
our growth strategies and business plans;
our future business development, results of operations and financial condition;
trends in commerce, the overall technology and the other industries in which we operate, both in China and
globally;
competition in our industries;
fluctuations in general economic and business conditions in China and globally;
expected changes in our revenues and certain cost and expense items and our operating margins;
the completion of our investment transactions and regulatory approvals as well as other conditions that
must be met in order to complete investment transactions;
the completion of our VIE Structure Enhancement;
international trade policies, protectionist policies and other policies (including those relating to export
control and economic or trade sanctions) that could place restrictions on economic and commercial activity;
the regulatory environment in which we and companies integral to our digital economy operate in China
and globally;
impacts of the COVID-19 pandemic; and
assumptions underlying or related to any of the foregoing.
Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to
differ materially from those contained in any forward-looking statement. The global and China Internet, retail, wholesale,
online and mobile commerce, cloud computing, and digital media and entertainment industries or markets may not grow
at the rates projected by market data, or at all. The failure of these industries or markets to grow at the projected rates
may have a material adverse effect on our business, financial condition and results of operations and the market price of
our ADSs and Shares. If any one or more of the assumptions underlying the industry or market data turns out to be
incorrect, actual results may differ from the projections based on these assumptions. You should not place undue reliance
on these forward-looking statements. Please also see “Item 3. Key Information—D. Risk Factors.”
The forward-looking statements made in this annual report relate only to events or information as of the date on which
the statements are made in this annual report and are based on current expectations, assumptions, estimates and
projections. We undertake no obligation to update any forward-looking statements to reflect events or circumstances after
the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this
annual report and the documents that we have referred to in this annual report completely and with the understanding that
our actual future results may be materially different from what we expect.
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PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not Applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not Applicable.
ITEM 3. KEY INFORMATION
A. Selected Financial Data
The selected consolidated statements of operations data for the years ended March 31, 2018, 2019 and 2020, and the
selected consolidated balance sheet data as of March 31, 2019 and 2020 have been derived from our audited consolidated
financial statements included in this annual report. Our selected consolidated statements of operations data for the years
ended March 31, 2016 and 2017 and the selected consolidated balance sheet data as of March 31, 2016, 2017 and 2018
have been derived from our audited consolidated financial statements not included in this annual report. Our financial
statements have been prepared in accordance with generally accepted accounting principles in the United States, or
U.S. GAAP.
The following selected consolidated financial data for the periods and as of the dates indicated are qualified by reference
to and should be read in conjunction with our audited consolidated financial statements and related notes and “Item 5.
Operating and Financial Review and Prospects,” both of which are included in this annual report.
Our historical results for any prior period do not necessarily indicate our results to be expected for any future period.
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Table of Contents
Consolidated Statements of Operations Data:
2016
2017
2018
2019
2020
RMB RMB RMB RMB RMB US$
Year ended March 31,
101,143
(34,355)
(13,788)
(11,307)
(9,205)
(2,931)
(455)
29,102
52,254
(1,946)
2,058
81,468
(8,449)
(1,730)
71,289
171
71,460
—
71,460
(in millions, except per share data)
158,273
(59,483)
(17,060)
(16,314)
(12,239)
(5,122)
—
48,055
8,559
(2,671)
6,086
250,266
(107,044)
(22,754)
(27,299)
(16,241)
(7,120)
(494)
69,314
30,495
(3,566)
4,160
376,844
(206,929)
(37,435)
(39,780)
(24,889)
(10,727)
—
57,084
44,106
(5,190)
221
509,711
(282,367)
(43,080)
(50,673)
(28,197)
(13,388)
(576)
91,430
72,956
(5,180)
7,439
60,029
(13,776)
(5,027)
41,226
2,449
100,403
(18,199)
(20,792)
61,412
2,681
96,221
(16,553)
566
80,234
7,652
166,645
(20,562)
(5,733)
140,350
9,083
43,675
—
43,675
64,093
(108)
63,985
87,886
(286)
87,600
149,433
(170)
149,263
71,985
(39,878)
(6,085)
(7,156)
(3,982)
(1,891)
(81)
12,912
10,303
(731)
1,051
23,535
(2,904)
(810)
19,821
1,283
21,104
(24)
21,080
3.63
3.49
2.19
2.12
3.13
3.06
4.24
4.17
7.10
6.99
1.00
0.99
29.07
27.89
17.52
16.97
25.06
24.51
33.95
33.38
56.82
55.93
8.02
7.90
Revenue
Cost of revenue
Product development expenses
Sales and marketing expenses
General and administrative expenses
Amortization and impairment of intangible assets
Impairment of goodwill
Income from operations
Interest and investment income, net
Interest expense
Other income, net
Income before income tax and share of results of
equity investees
Income tax expenses
Share of results of equity investees
Net income
Net loss attributable to noncontrolling interests
Net income attributable to Alibaba Group Holding
Limited
Accretion of mezzanine equity
Net income attributable to ordinary shareholders
Earnings per share attributable to ordinary
shareholders(1):
Basic
Diluted
Earnings per ADS attributable to ordinary
shareholders(1):
Basic
Diluted
Weighted average number of shares used in
computing earnings per ordinary share
(million shares)(1):
Basic
Diluted
Supplemental information:(2)
Adjusted EBITDA
Adjusted EBITA
Marketplace-based core commerce adjusted EBITA
Non-GAAP net income
Non-GAAP diluted earnings per share(1)
Non-GAAP diluted earnings per ADS(1)
Free cash flow
19,663
20,497
19,941
20,579
20,425
20,881
20,640
20,988
21,017
21,346
52,340
48,570
N/A
42,791
2.10
16.77
51,279
74,456
69,172
N/A
57,871
2.93
23.44
71,318
105,792
97,003
122,883
83,214
4.11
32.86
99,996
121,943
106,981
161,589
93,407
4.80
38.40
104,478
157,659
137,136
192,771
132,479
6.62
52.98
130,914
22,266
19,367
27,224
18,710
0.93
7.48
18,489
(1)
Each ADS represents eight Shares. For the years ended March 31, 2016, 2017, 2018 and 2019, weighted average number of
shares and earnings per share have been retrospectively adjusted for the Share Split that became effective on July 30, 2019.
(2)
See “Non-GAAP Measures” below.
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Non-GAAP Measures
We use adjusted EBITDA (including adjusted EBITDA margin), adjusted EBITA (including adjusted EBITA margin),
marketplace-based core commerce adjusted EBITA, non-GAAP net income, non-GAAP diluted earnings per share/ADS
and free cash flow, each a non-GAAP financial measure, in evaluating our operating results and for financial and
operational decision-making purposes.
We believe that adjusted EBITDA, adjusted EBITA, marketplace-based core commerce adjusted EBITA, non-GAAP net
income and non-GAAP diluted earnings per share/ADS help identify underlying trends in our business that could
otherwise be distorted by the effect of certain income or expenses that we include in income from operations, net income
and diluted earnings per share/ADS. We believe that these non-GAAP measures provide useful information about our
core operating results, enhance the overall understanding of our past performance and future prospects and allow for
greater visibility with respect to key metrics used by our management in its financial and operational decision-making.
We present three different income measures, namely adjusted EBITDA, adjusted EBITA and non-GAAP net income, as
well as one measure that provides supplemental information on our core commerce segment, namely marketplace-based
core commerce adjusted EBITA, in order to provide more information and greater transparency to investors about our
operating results.
We consider free cash flow to be a liquidity measure that provides useful information to management and investors about
the amount of cash generated by our business that can be used for strategic corporate transactions, including investing in
our new business initiatives, making strategic investments and acquisitions and strengthening our balance sheet.
Adjusted EBITDA, adjusted EBITA, marketplace-based core commerce adjusted EBITA, non-GAAP net income, non-
GAAP diluted earnings per share/ADS and free cash flow should not be considered in isolation or construed as an
alternative to income from operations, adjusted EBITA for core commerce, net income, diluted earnings per share/ADS,
cash flows or any other measure of performance or as an indicator of our operating performance. These non-GAAP
financial measures presented here do not have standardized meanings prescribed by U.S. GAAP and may not be
comparable to similarly-titled measures presented by other companies. Other companies may calculate similarly-titled
measures differently, limiting their usefulness as comparative measures to our data.
Adjusted EBITDA represents net income before (i) interest and investment income, net, interest expense, other income,
net, income tax expenses and share of results of equity investees, (ii) certain non-cash expenses, consisting of share-based
compensation expense, depreciation of property and equipment, operating lease cost relating to land use rights,
amortization and impairment of intangible assets and impairment of goodwill and (iii) settlement of a U.S. federal class
action lawsuit, which we do not believe are reflective of our core operating performance during the periods presented.
Adjusted EBITA represents net income before (i) interest and investment income, net, interest expense, other income,
net, income tax expenses and share of results of equity investees, (ii) certain non-cash expenses, consisting of share-based
compensation expense, amortization and impairment of intangible assets and impairment of goodwill and (iii) settlement
of a U.S. federal class action lawsuit, which we do not believe are reflective of our core operating performance during the
periods presented.
Marketplace-based core commerce adjusted EBITA represents adjusted EBITA for core commerce excluding the effects
of (i) local consumer services, (ii) Lazada, (iii) New Retail and direct import and (iv) Cainiao Network. Marketplace-
based core commerce adjusted EBITA reflects the performance of our most established businesses, namely, those of our
China retail marketplaces and wholesale marketplaces, which primarily adopt a marketplace-based approach. By
excluding certain businesses that are in the earlier stages of their development and with business approaches that continue
to evolve, marketplace-based core commerce adjusted EBITA enables investors to clearly evaluate the performance of
our most established businesses on a like-for-like basis.
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Non-GAAP net income represents net income before share-based compensation expense, amortization and impairment of
intangible assets, impairment of investments and goodwill, gain or loss on deemed disposals/disposals/revaluation of
investments, gain in relation to the receipt of the 33% equity interest in Ant Group, settlement of a U.S. federal class
action lawsuit, amortization of excess value receivable arising from the restructuring of commercial arrangements with
Ant Group, immediate recognition of unamortized professional fees and upfront fees upon early repayment/termination
of bank borrowings and others, as adjusted for the tax effects on non-GAAP adjustments.
Non-GAAP diluted earnings per share represents non-GAAP net income attributable to ordinary shareholders divided by
the weighted average number of shares outstanding during the periods on a diluted basis. Non-GAAP diluted earnings per
ADS represents non-GAAP diluted earnings per share after adjustment to the ordinary share-to-ADS ratio.
Free cash flow represents net cash provided by operating activities as presented in our consolidated cash flow statement
less purchases of property and equipment (excluding acquisition of land use rights and construction in progress relating
to office campuses), licensed copyrights and other intangible assets, as well as adjustments to exclude from net cash
provided by operating activities the consumer protection fund deposits from merchants on our China retail marketplaces
and changes in loan receivables relating to micro loans of our SME loan business (which we transferred to Ant Group in
February 2015) and others. We deduct certain items of cash flows from investing activities in order to provide greater
transparency into cash flow from our revenue-generating business operations. We exclude “acquisition of land use rights
and construction in progress relating to office campuses” because the office campuses are used by us for corporate and
administrative purposes and is not directly related to our revenue-generating business operations. We also exclude
consumer protection fund deposits from merchants on our China retail marketplaces because these deposits are restricted
for the purpose of compensating consumers for claims against merchants. We present the adjustment for changes in loan
receivables because these receivables are reflected under cash flows from operating activities, whereas the secured
borrowings and other bank borrowings used to finance them are reflected under cash flows from financing activities, and
accordingly, the adjustment is made to show cash flows from operating activities net of the effect of changes in loan
receivables.
The following table sets forth a reconciliation of our net income to adjusted EBITA and adjusted EBITDA for the periods
indicated:
Net income
Less: Interest and investment income, net
Add: Interest expense
Less: Other income, net
Add: Income tax expenses
Add: Share of results of equity investees
Income from operations
Add: Share-based compensation expense
Add: Amortization and impairment of intangible assets
Add: Impairment of goodwill
Add: Settlement of U.S. federal class action lawsuit(1)
Adjusted EBITA
Add: Depreciation of property and equipment, and operating lease cost
relating to land use rights
Adjusted EBITDA
Year ended March 31,
2016
2017
2018
2019
2020
RMB RMB RMB RMB RMB US$
(in millions)
71,289
(52,254)
1,946
(2,058)
8,449
1,730
29,102
16,082
2,931
455
—
48,570
41,226
(8,559)
2,671
(6,086)
13,776
5,027
48,055
15,995
5,122
—
—
69,172
61,412
(30,495)
3,566
(4,160)
18,199
20,792
69,314
20,075
7,120
494
—
97,003
80,234
(44,106)
5,190
(221)
16,553
(566)
57,084
37,491
10,727
—
1,679
106,981
140,350
(72,956)
5,180
(7,439)
20,562
5,733
91,430
31,742
13,388
576
—
137,136
19,821
(10,303)
731
(1,051)
2,904
810
12,912
4,483
1,891
81
—
19,367
3,770
52,340
5,284
74,456
8,789
105,792
14,962
121,943
20,523
157,659
2,899
22,266
(1)
For a description of the relevant U.S. federal class action lawsuit and settlement, see “Item 8. Financial Information — A.
Consolidated Statements and Other Financial Information — Legal and Administrative Proceedings.”
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The following table sets forth a reconciliation of adjusted EBITA for core commerce to marketplace-based core
commerce adjusted EBITA for the periods indicated:
Year ended March 31,
2018
2019
2020
RMB RMB RMB US$
(in millions)
Adjusted EBITA for core commerce
114,100
136,167
165,800
23,415
Less: Effects of local consumer services, Lazada,
New Retail and direct import and Cainiao
Network
Marketplace-based core commerce adjusted EBITA
8,783
122,883
25,422
161,589
26,971
192,771
3,809
27,224
The following table sets forth a reconciliation of our net income to non-GAAP net income for the periods indicated:
2016
2017
2018
2019
2020
RMB RMB RMB RMB RMB US$
Year ended March 31,
(in millions)
Net income
71,289
41,226
61,412
80,234
140,350
19,821
Add: Share-based compensation
expense
Add: Amortization and
impairment of intangible
assets
Add: Impairment of investments
and goodwill
Less: Gain on deemed
disposals/disposals/revaluation
of investments and others
Less: Gain in relation to the
receipt of the 33% equity
interest in Ant Group
Add: Settlement of U.S. federal
class action lawsuit(1)
Add: Amortization of excess
value receivable arising from
the restructuring of
commercial arrangements with
Ant Group
Add: Immediate recognition of
unamortized professional fees
and upfront fees upon early
repayment/termination of bank
borrowings
Adjusted for tax effects on non-
16,082
15,995
20,075
37,491
31,742
4,483
2,931
5,122
7,120
10,727
13,388
1,891
2,319
2,542
20,463
11,360
25,656
3,623
(50,435)
(7,346)
(25,945)
(47,525)
(4,764)
(673)
—
—
—
— (71,561)
(10,106)
—
—
—
1,679
—
—
264
264
264
264
97
14
—
—
92
—
—
—
GAAP adjustments(2)
Non-GAAP net income
341
42,791
68
57,871
(267)
83,214
(823)
93,407
(2,429)
132,479
(343)
18,710
(1)
(2)
For a description of the relevant U.S. federal class action lawsuit and settlement, see “Item 8. Financial Information — A.
Consolidated Statements and Other Financial Information — Legal and Administrative Proceedings.”
Tax effects on non-GAAP adjustments primarily comprised of tax effects relating to share-based compensation expense,
certain gains and losses from investments and amortization and impairment of intangible assets.
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The following table sets forth a reconciliation of our diluted earnings per share/ADS to non-GAAP diluted earnings per
share/ADS for the periods indicated:
Year ended March 31,
2016
2017
2018
2019
2020
RMB RMB RMB RMB RMB US$
(in millions, except per share data)
Net income attributable to ordinary
shareholders
Less: Dilution effect on earnings
arising from share-based
awards operated by subsidiaries
and equity investees
Net income attributable to ordinary
shareholders for computing
diluted earnings per share/ADS
Add: Non-GAAP adjustments to
71,460
43,675
63,985
87,600
149,263
21,080
—
(11)
(21)
(42)
(48)
(7)
71,460
43,664
63,964
87,558
149,215
21,073
net income(1)
(28,498)
16,645
21,802
13,173
(7,871)
(1,111)
Non-GAAP net income
attributable to ordinary
shareholders for computing non-
GAAP diluted earnings per
share/ADS
Weighted average number of
shares on a diluted basis (million
shares)(2)
Diluted earnings per share(2)(3)
Add: Non-GAAP adjustments to
net income per share(2)(4)
Non-GAAP diluted earnings per
share(2)(5)
Diluted earnings per ADS(3)
Add: Non-GAAP adjustments to
42,962
60,309
85,766
100,731
141,344
19,962
20,497
3.49
20,579
2.12
20,881
3.06
20,988
4.17
21,346
6.99
0.99
(1.39)
0.81
1.05
0.63
(0.37)
(0.06)
2.10
27.89
2.93
16.97
4.11
24.51
4.80
33.38
6.62
55.93
0.93
7.90
net income per ADS(4)
(11.12)
6.47
8.35
5.02
(2.95)
(0.42)
Non-GAAP diluted earnings per
ADS(5)
16.77
23.44
32.86
38.40
52.98
7.48
(1)
(2)
(3)
(4)
(5)
See the table above regarding the reconciliation of net income to non-GAAP net income for more information of these non-
GAAP adjustments.
For the years ended March 31, 2016, 2017, 2018 and 2019, weighted average number of shares and earnings per share have
been retrospectively adjusted for the Share Split that became effective on July 30, 2019.
Diluted earnings per share is derived from net income attributable to ordinary shareholders for computing diluted earnings
per share divided by weighted average number of shares on a diluted basis. Diluted earnings per ADS is derived from the
diluted earnings per share after adjustment to the ordinary share-to-ADS ratio.
Non-GAAP adjustments to net income per share is derived from non-GAAP adjustments to net income divided by weighted
average number of shares on a diluted basis. Non-GAAP adjustment to net income per ADS is derived from the non-GAAP
adjustment to net income per share after adjustment to the ordinary share-to-ADS ratio.
Non-GAAP diluted earnings per share is derived from non-GAAP net income attributable to ordinary shareholders for
computing non-GAAP diluted earnings per share divided by weighted average number of shares on a diluted basis. Non-
GAAP diluted earnings per ADS is derived from the non-GAAP diluted earnings per share after adjustment to the ordinary
share-to-ADS ratio.
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The following table sets forth a reconciliation of net cash provided by operating activities to free cash flow for the
periods indicated:
Net cash provided by operating
activities(1)
Less: Purchase of property and
equipment (excluding land use
rights and construction in
progress relating to office
campuses)
Less: Acquisition of licensed
copyrights and other intangible
assets
Less: Changes in the consumer
protection fund deposits
Add: Changes in loan
receivables, net and others
Free cash flow
2016
2017
2018
2019
2020
RMB RMB RMB RMB RMB US$
Year ended March 31,
(in millions)
56,836
82,854
125,805
150,975
180,607
25,507
(4,722)
(5,680)
(15,601)
(32,336)
(24,662)
(3,483)
(716)
(6,540)
(10,208)
(14,161)
(12,836)
(1,813)
—
—
—
— (12,195)
(1,722)
(119)
51,279
684
71,318
—
99,996
—
104,478
—
130,914
—
18,489
(1) We adopted ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash,” beginning in the first quarter of
fiscal year 2019. As a result of adopting this new accounting update, we retrospectively adjusted the consolidated statements
of cash flows to include restricted cash and escrow receivables in cash and cash equivalents when reconciling the beginning-
of-period and end-of-period total amounts shown on the consolidated statements of cash flows. The impact of our
retrospective reclassification on cash flows from operating activities for the years ended March 31, 2016, 2017 and 2018 was
an increase of nil, RMB2,528 million and RMB634 million, respectively.
Consolidated Balance Sheet Data:
2016
2017
As of March 31,
2019
2018
2020
RMB RMB RMB RMB
RMB
US$
(in millions)
Cash and cash equivalents
and short‑term investments
111,518
146,747
205,395
193,238
358,981
50,698
Investment securities and
investments in equity
investees(1)
Property and equipment, net
Goodwill and intangible
assets, net
Total assets
Accrued expenses, accounts
payable and other
liabilities(2)
Deferred tax liabilities
Bank borrowings(3)
Unsecured senior notes(4)
Total liabilities
Total Alibaba Group
Holding Limited
shareholders’ equity
Total equity
125,031
13,629
155,874
20,206
182,707
66,489
251,471
92,030
355,195
103,387
50,164
14,601
87,015
364,245
139,528
506,812
189,614
717,124
333,211
965,076
337,729
1,312,985
47,696
185,429
29,491
6,480
6,175
51,391
114,356
48,269
10,361
36,907
54,825
182,691
83,210
19,312
40,181
85,372
277,685
123,898
22,517
42,783
91,517
349,674
186,799
43,898
44,814
80,616
433,334
26,380
6,200
6,329
11,385
61,198
216,987
249,539
278,799
321,129
365,822
436,438
492,257
608,583
755,401
870,548
106,683
122,945
(1)
Includes both current and non-current investment securities and investments in equity investees.
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(2)
(3)
(4)
Includes both current and non-current other liabilities.
Includes both current and non-current portion of bank borrowings.
Includes both current and non-current portion of unsecured senior notes.
Selected Operating Data
Annual active consumers
The table below sets forth the number of annual active consumers of our China retail marketplaces for the periods
indicated:
Jun 30, Sep 30, Dec 31, Mar 31, Jun 30, Sep 30, Dec 31, Mar 31,
2018
2018
2018
2019
2019
2019
2019
2020
Twelve months ended
Annual active consumers
576
601
636
(in millions)
654
674
693
711
726
Mobile MAUs
The table below sets forth the mobile MAUs on our various mobile apps that access our China retail marketplaces for the
periods indicated:
Jun 30, Sep 30, Dec 31, Mar 31, Jun 30, Sep 30, Dec 31, Mar 31,
2018
2018
2018
2019
2019
2019
2019
2020
The month ended
Mobile MAUs
634
666
699
(in millions)
721
755
785
824
846
GMV
The table below sets forth the GMV in respect of our China retail marketplaces for the periods indicated:
Year ended March 31,
2018 2019 2020
(in billions of RMB)
3,115
2,612
5,727
2,689
2,131
4,820
3,387
3,202
6,589
Taobao Marketplace GMV
Tmall GMV
Total GMV
B. Capitalization and Indebtedness
Not Applicable.
C. Reasons for the Offer and Use of Proceeds
Not Applicable.
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D. Risk Factors
Risks Related to Our Business and Industry
Maintaining the trusted status of our digital economy is critical to our success and growth, and any failure to do so
could severely damage our reputation and brand, which would have a material adverse effect on our business,
financial condition, results of operations and prospects.
We have established a strong brand name and reputation for our digital economy. Any loss of trust in our digital economy
or platforms could harm our reputation and the value of our brand, and could result in consumers, merchants, brands,
retailers and other participants reducing their levels of activity in our digital economy, which could materially reduce our
revenue and profitability. Our ability to maintain trust in our digital economy and platforms is based in large part upon:
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the quality, value and functionality of products and services as well as the quality and appeal of content
available through our digital economy;
the reliability and integrity of our company and our platforms, as well as of the merchants, software
developers, logistics providers, service providers and other participants in our digital economy;
our commitment to high levels of service;
the safety, security and integrity of the data on our systems, and those of other participants in our digital
economy;
the effectiveness and fairness of rules governing our marketplaces, various platforms and overall digital
economy;
the strength of our measures to protect consumers and intellectual property rights owners; and
our ability to provide reliable and trusted payment and escrow services through our arrangements
with Alipay.
Sustained investment in our business, strategic acquisitions and investments, as well as our focus on long-term
performance, and on maintaining the health of our digital economy, may negatively affect our margins and our
net income.
We focus on the long-term interests of the participants in our digital economy. We may continue to increase our spending
and investments in our business, including developing and growing new businesses within our company, strategic
acquisitions and other initiatives.
Investments in our business include:
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expanding and enhancing our core commerce offerings, including our logistics network and capacities,
local consumer services business, our New Retail initiatives, direct sales and cross-border and international
businesses;
strengthening and expanding various facilities and increasing our employee headcount;
researching and developing new technologies and improving our technological infrastructure and cloud
computing capacity;
developing and acquiring content for our digital media and entertainment business; and
incubating new innovation initiatives.
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Many of these and other newly-developed businesses have lower or negative margins, and others are in the early stages
of exploring, establishing and optimizing appropriate monetization models, many of which are less efficient in attracting
and converting paying merchants, subscribers or other participants as compared with certain of the marketplaces and
other businesses we operate. We believe these investments are crucial to our success and future growth, but they will
have the effect of increasing our costs and lowering our margins and profit, and this effect may be significant in the short
term and potentially over longer periods. We expect our margins will decrease as we continue to make these and similar
investments. Many of these businesses also involve additional costs and risks, including price competitions, increased
personnel costs, potential labor disputes, as well as industry and regulatory changes that may result in significant
additional compliance costs, or require us to change our operation and business models. For example, the growth of our
digital media and entertainment business requires substantial and long-term investments in high quality content, which
has been and may continue to be subject to losses, impairments or write-offs due to changes in regulatory requirements or
viewer preferences and other reasons. In addition, we expect that our margin will continue to be affected by the
continuing shift in our revenue mix to self-operated New Retail and direct sales businesses.
We have also made, and intend to continue to make, strategic investments and acquisitions to further strengthen our
digital economy. We may make strategic investments and acquisitions in a range of areas either directly related to one or
more of our businesses, or related to the infrastructure, technology, services or products that support our businesses and
digital economy. Our strategic investments and acquisitions may adversely affect our financial results, at least in the short
term. For example, acquisitions of, and continued investments in, businesses with lower margins or which are loss-
making, such as our acquisitions of Kaola and Lazada, a controlling stake in Cainiao Network, and the integration of our
local consumer services business, have negatively affected our margins and net income. Acquired businesses that are
loss-making may continue to sustain losses and may not become profitable in the near future or at all. The performance
of our current and future equity investees and investment areas may also adversely affect our net income. There can be no
assurance that we will be able to grow our acquired or invested businesses, or realize returns, benefits of synergies and
growth opportunities we expect in connection with these investments and acquisitions. Also refer to “— We face risks
relating to our acquisitions, investments and alliances.”
We may not be able to maintain or grow our revenue or our business.
We have experienced significant growth in revenue and in our business in recent years. Our ability to continue to grow
our revenue depends on a number of factors. See “Item 5. Operating and Financial Review and Prospects — A. Operating
Results — Factors Affecting Our Results of Operations — Our Ability to Create Value for Our Users and Generate
Revenue” and “— Our Monetization Model.”
Our revenue growth also depends on our ability to continue to grow our core businesses, newly-developed businesses, as
well as businesses we have acquired or which we consolidate. We are exploring and will continue to explore in the future
new business initiatives, including in industries and markets in which we have limited or no experience, as well as new
business models, that may be untested. Developing new businesses, initiatives and models requires significant
investments of time and resources, and may present new and difficult technological, operational and compliance
challenges. Particularly in the commerce space, we face various challenges while facilitating the convergence of online
and offline retail and digitalization of offline business operations. Many of these challenges may be specific to business
areas with which we do not have sufficient experience. Also, as we continue to grow our direct sales businesses, we face
new and increased risks, such as risks relating to inventory procurement and management, including failure to stock
sufficient inventory to meet demands or additional costs or write-offs resulting from overstocking, supply chain
management, accounts receivable and related potential impairment charges, as well as new and heightened regulatory
requirements and increased liabilities to which we are subject as operators of direct sales businesses, including those
relating to consumer protection, customs and permits and licenses. We may encounter difficulties or setbacks in the
execution of various growth strategies, including our New Retail initiatives, which we expect to be an important driver of
our future growth, and this and the other growth strategies may not generate the returns we expect within the timeframe
we anticipate, or at all.
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In addition, our overall or segment revenue growth may slow or our revenues may decline for other reasons, including
decreasing consumer spending, increasing competition and slowing growth of China’s retail industry, disruptions to
China’s economy or the global economy from pandemics, natural disasters or other events, as well as changes in the
geopolitical landscape, government policies or general economic conditions. As our revenue grows to a higher base level,
our revenue growth rate may slow in the future. Furthermore, due to the size and scale we have achieved, our user base
may not continue to grow as quickly or at all.
If we are unable to compete effectively, our business, financial condition and results of operations would be materially
and adversely affected.
We face increasingly intense competition, principally from established Chinese Internet companies, such as Tencent, and
their respective affiliates, as well as global and regional e-commerce players, such as Amazon, other providers of local
consumer services, and in the cloud computing and digital media and entertainment areas. These areas of our business are
subject to rapid market change, the introduction of new business models, and the entry of new and well-funded
competitors. Increased investments made and lower prices offered by our competitors may require us to divert significant
managerial, financial and human resources in order to remain competitive, and ultimately may reduce our market share
and negatively impact the profitability of our business. We mainly compete to:
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attract, engage and retain consumers and increase their spending based on the variety, quality and value of
products, services and content offered within our digital economy, the overall user experience and the
effectiveness of our consumer protection measures;
attract and retain merchants, brands and retailers based on the effectiveness of the various technologies,
infrastructure, products and services we offer to them, as well as the return on their investments;
●
attract and retain marketers, publishers and agency-operated demand-side platforms;
● maintain and grow local delivery capabilities to provide convenient and efficient delivery services;
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attract and retain a wide range of businesses as users of our cloud service offerings;
attract other participants to our digital economy based on access to business opportunities created by the
large scale of economic activity, infrastructure and technologies in our digital economy and on
our platforms;
optimize the usefulness of the data and technologies we provide and maintain high-quality customer
service;
identify, bid for, and execute strategic investments and thrive in new industries as we acquire new
businesses and expand, bringing us into competition with major players in these and other industries;
innovate and develop new growth initiatives and technologies; and
attract motivated and capable employees, including engineers and product developers.
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Our ability to compete depends on a number of other factors as well, some of which may be beyond our control,
including alliances, acquisitions or consolidations within our industries that may result in stronger competitors, and
changes in the regulatory environment in the markets we operate. Existing and new competitors may leverage their
established platforms or market positions, or introduce innovative business models, to launch highly-engaging content,
products or services that may attract a large user base and achieve rapid growth, which may materially and adversely
affect our business expansion and results of operations. As we continue to expand into markets outside of China, we
increasingly face competition from domestic and international players operating in these markets, as well as potential
political measures, regulatory challenges and protectionist policies that may support domestic players in those markets.
As we develop our platforms and other businesses, such as our New Retail initiatives and other direct sales businesses,
we may also be perceived to compete with other participants in our digital economy, such as certain merchants and
retailers, which may negatively affect our relationships with them.
If we are not able to compete effectively, the level of economic activity and user engagement in our digital economy may
decrease and our market share and profitability may be negatively affected, which could materially and adversely affect
our business, financial condition and results of operations, as well as our reputation and brand.
We may not be able to maintain and improve the network effects of our digital economy, which could negatively affect
our business and prospects.
Our ability to maintain a healthy and vibrant digital economy that creates strong network effects among consumers,
merchants, brands, retailers and other participants is critical to our success. The extent to which we are able to maintain
and strengthen these network effects depends on our ability to:
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offer secure and open platforms for all participants and balance the interests of these participants;
provide a wide range of high-quality product, service and content offerings to consumers;
attract and retain consumers, merchants, brands and retailers of all sizes;
provide effective technologies, infrastructure and services that meet the evolving needs of consumers,
merchants, brands, retailers and other businesses;
arrange secure and trusted payment settlement and escrow services;
address user concerns with respect to data security and privacy measures;
improve our logistics data platform and coordinate fulfillment and delivery services with logistics service
providers;
attract and retain third-party service providers that are able to provide quality services on commercially
reasonable terms to our merchants, brands, retailers and other businesses;
● maintain the quality of our customer service; and
●
continue adapting to the changing demands of the market.
In addition, changes to current operations we may make to enhance and improve our digital economy or to comply with
regulatory requirements may be viewed positively from one participant group’s perspective, such as consumers, but may
have negative effects from another group’s perspective, such as merchants. If we fail to balance the interests of all
participants in our digital economy, consumers, merchants, brands, retailers and other participants may spend less time,
mind-share and resources on our platforms and may conduct fewer transactions or use alternative platforms, any of which
could result in a material decrease in our revenue and net income.
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We may not be able to maintain our culture, which has been a key to our success.
Since our founding, our culture has been defined by our mission, vision and values, and we believe that our culture has
been critical to our success. In particular, our culture has helped us serve the long-term interests of our customers, attract,
retain and motivate employees and create value for our shareholders. We face a number of challenges that may affect our
ability to sustain our corporate culture, including:
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failure to identify, attract, promote and retain people who share our culture, mission, vision and values in
leadership positions;
failure to execute an effective management succession plan;
challenges of effectively incentivizing and motivating employees, including members of senior
management, and in particular those who have gained a substantial amount of personal wealth related to
share-based incentives;
the increasing size, complexity, geographic coverage and cultural diversity of our businesses
and workforce;
challenges in managing a workforce that is expanding through organic growth and acquisitions, in
providing effective training to this workforce, and in promoting a culture of compliance with laws and
regulations and preventing misconduct among our employees and participants in our digital economy;
competitive pressures to move in directions that may divert us from our mission, vision and values;
the pressure from the public markets to focus on short-term results instead of long-term value creation; and
the increasing need to develop expertise in new areas of business, such as New Retail, local consumer
services and expansion of our logistics network services, that affect us.
If we are not able to maintain our culture or if our culture fails to deliver the long-term results we expect to achieve, our
reputation, business, financial condition, results of operations and prospects could be materially and adversely affected.
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If we are not able to continue to innovate or if we fail to adapt to changes in our industry, our business, financial
condition and results of operations would be materially and adversely affected.
Our industries are characterized by rapidly changing technology, evolving industry standards, new mobile apps and
protocols, new products and services, new media and entertainment content – including user-generated content – and
changing user demands and trends. Furthermore, our domestic and international competitors are continuously developing
innovations in personalized search and recommendation, online shopping and marketing, communications, social
networking, entertainment, logistics and other services, to enhance user experience. As a result, we continue to invest
significant resources in our infrastructure, research and development and other areas in order to enhance our businesses
and operations, as well as to explore new growth strategies and introduce new high-quality products and services. Our
investments in innovations and new technologies, which may be significant, may not increase our competitiveness or
generate financial returns in the short term, or at all, and we may not be successful in adopting and implementing new
technologies, such as AI. Our investments and projects to develop new growth initiatives and technologies may be
hindered by political measures, regulatory scrutiny or other protectionist policies, on national security grounds or for
other reasons. The changes and developments taking place in our industry may also require us to re-evaluate our business
model and adopt significant changes to our long-term strategies and business plans. Our failure to innovate and adapt to
these changes and developments would have a material adverse effect on our business, financial condition and results of
operations. Even if we timely innovate and adopt changes in our strategies and plans, we may nevertheless fail to realize
the anticipated benefits of these changes or even generate lower levels of revenue as a result.
Our failure to manage the significant management, operational and financial challenges involved in growing our
business and operations could harm us.
Our business has become increasingly complex as the scale, diversity and geographic coverage of our business and our
workforce continue to expand. This expansion increases the complexity of our operations and places a significant strain
on our management, operational and financial resources. The challenges involved in expanding our businesses require
our employees to handle new and expanded responsibilities and duties. If our employees fail to adapt to the expansion or
if we are unsuccessful in hiring, training, managing and integrating new employees or retraining and expanding the roles
of our existing employees, our business, financial condition and results of operations may be materially harmed.
Moreover, our current and planned staffing, systems, policies, procedures and controls may not be adequate to support
our future operations. To effectively manage continuing expansion and growth of our operations and workforce, we will
need to continue to improve our personnel management, transaction processing, operational and financial systems,
policies, procedures and controls, which could be particularly challenging as we acquire new operations with different
and incompatible systems in new industries or geographic areas. These efforts will require significant managerial,
financial and human resources. There can be no assurance that we will be able to effectively manage our growth or to
implement all these systems, policies, procedures and control measures successfully. If we are not able to manage our
growth effectively, our business and prospects may be materially and adversely affected.
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We face risks relating to our acquisitions, investments and alliances.
We have acquired and invested in a large number and a diverse range of businesses, including those in different countries
and regions, technologies, services and products in recent years. We have also made investments of varying sizes in joint
ventures. From time to time, we may have a number of pending investments and acquisitions that are subject to closing
conditions. See “Item 5. Operating and Financial Review and Prospects — A. Operating Results — Recent Investment,
Acquisition and Strategic Alliance Activities.” We expect to continue to evaluate and consider a wide array of potential
strategic transactions as part of our overall business strategy, including business combinations, acquisitions and
dispositions of businesses, technologies, services, products and other assets, as well as strategic investments, joint
ventures and alliances. At any given time we may be engaged in discussing or negotiating a range of these types of
transactions. These transactions involve significant challenges and risks, including:
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difficulties in, and significant and unanticipated additional costs and expenses resulting from, integrating
into our business the large number of personnel, operations, products, services, technology, internal
controls and financial reporting of the businesses we acquire;
disruption of our ongoing business, distraction of and significant time and attention required from our
management and employees and increases in our expenses;
departure of skilled professionals and proven management teams of acquired businesses, as well as the loss
of established client relationships of those businesses we invest in or acquire;
for investments over which we may not obtain management and operational control, we may lack influence
over the controlling partners or shareholders, or may not have aligned interests with those of our partners or
other shareholders;
additional or conflicting regulatory requirements, heightened restrictions on and scrutiny of investments,
acquisitions and foreign ownership in other jurisdictions, on national security grounds or for other reasons,
regulatory hurdles such as filings and approvals under the anti-monopoly and competition laws, rules and
regulations, the risk that acquisitions or investments may fail to close, due to political and regulatory
challenges or protectionist policies, as well as related compliance and publicity risks;
actual or alleged misconduct, unscrupulous business practices or non-compliance by us or any company we
acquire or invest in or by its affiliates or current or former employees, whether before, during or after our
acquisition or investments;
difficulties in identifying and selecting appropriate targets and strategic partners, including potential loss of
opportunities for strategic transactions with competitors of our investee companies and strategic partners;
difficulties in conducting sufficient and effective due diligence on potential targets and unforeseen or
hidden liabilities or additional incidences of non-compliance, operating losses, costs and expenses that may
adversely affect us following our acquisitions or investments or other strategic transactions;
negative impact on our cash and credit profile from loans to or guarantees for the benefit of equity
investees; and
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●
actual or potential impairment charges or write-offs of investments in equity investees or intangible assets
(including intellectual property we acquire), and goodwill recorded in connection with invested businesses,
particularly investments in publicly traded companies, in the event that a decline in fair value below the
carrying value of our equity method investments is other-than-temporary, or the carrying amount of a
reporting unit to which goodwill is allocated exceeds its fair value. See “Item 5. Operating and Financial
Review and Prospects — A. Operating Results — Critical Accounting Policies and Estimates —
Impairment Assessment on Investments in Equity Investees” and “—Impairment Assessment on Goodwill
and Intangible Assets.”
These and other risks could lead to negative publicity, litigation, government inquiries, investigations or actions against
the companies we invest in or acquire, or even against our other businesses, and may force us to incur significant
additional expenses and allocate significant management and human resources to rectify or improve these companies’
corporate governance standards, disclosure controls and procedures or internal controls and systems. As we continue to
implement our New Retail strategy, among other initiatives, and further expand our digital economy, we expect that our
acquisition and investment activity will continue at a rapid pace, with a large number and diverse range of target
companies, and we will continue to face significant challenges, including unanticipated ones, in integrating these
businesses into our existing businesses.
We may face challenges in expanding our international and cross-border businesses and operations.
In addition to risks that generally apply to our acquisitions and investments, we face risks associated with expanding into
an increasing number of markets where we have limited or no experience, we may be less well-known or have fewer
local resources and we may need to localize our business practices, culture and operations. We may also face
protectionist policies that could, among other things, hinder our ability to execute our business strategies and put us at a
competitive disadvantage relative to domestic companies in other jurisdictions. The expansion of our international and
cross-border businesses will also expose us to risks and challenges inherent in operating businesses globally, including:
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challenges in replicating or adapting our company policies and procedures to operating environments
different from that of China, including technology and logistics infrastructure;
challenges of maintaining efficient and consolidated internal systems, including IT infrastructure, and of
achieving customization and integration of these systems with the other parts of our digital economy;
lack of acceptance of our product and service offerings, and challenges of localizing our offerings to appeal
to local tastes;
●
protectionist or national security policies that restrict our ability to:
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●
●
invest in or acquire companies;
develop, import or export certain technologies, such as the national AI initiative proposed by the
U.S. government;
utilize technologies that are deemed by local governmental regulators to pose a threat to their national
security; or
●
obtain or maintain the necessary licenses and authorizations to operate our businesses;
●
●
the need for increased resources to manage regulatory compliance across our international businesses;
failure to attract and retain capable talent with international perspectives who can effectively manage and
operate local businesses;
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●
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compliance with privacy laws and data security laws, including the GDPR, and compliance costs across
different legal systems;
heightened restrictions and barriers on the transfer of data between different jurisdictions;
differing, complex and potentially adverse customs, import/export laws, tax rules and regulations or other
trade barriers or restrictions, including significant delays in or even suspensions of customs clearance,
which may be applicable to transactions conducted through our international and cross-border platforms,
related compliance obligations and consequences of non-compliance, and any new developments in
these areas;
availability, reliability and security of international and cross-border payment systems and logistics
infrastructure;
exchange rate fluctuations; and
political instability and general economic or political conditions in particular countries or regions, including
territorial or trade disputes, war and terrorism.
In addition, compliance with cross-border e-commerce tax laws that apply to our businesses will also affect a number of
our businesses, increase our compliance costs and subject us to additional risks. Failure to manage these risks and
challenges could negatively affect our ability to expand our international and cross-border businesses and operations as
well as materially and adversely affect our business, financial condition and results of operations.
Our business operations and financial position may be materially and adversely affected by any economic slowdown
in China as well as globally.
Our revenue and net income are impacted to a significant extent by economic conditions in China and globally, as well as
economic conditions specific to our business. The global economy, markets and levels of spending by businesses and
consumers are influenced by many factors beyond our control, including pandemics and other natural disasters.
The growth of the PRC economy has slowed in recent years compared to prior years. According to the National Bureau
of Statistics of China, China’s real GDP growth rate decreased from 6.9% in 2017 to 6.6% in 2018, and further to 6.1% in
2019. There have also been concerns about the relationships among China and other Asian countries, the relationship
between China and the United States, as well as the relationship between the United States and certain other Asian
countries such as North Korea, which may result in or intensify potential conflicts in relation to territorial, regional
security and trade disputes. See “— Changes in international trade or investment policies and barriers to trade or
investment, and the ongoing trade conflict, may have an adverse effect on our business and expansion plans.” Recently,
the COVID-19 pandemic has severely disrupted business operations, supply chain and workforce availability across the
world, leading to substantial declines in business activities that have negatively impacted and may continue to negatively
impact our business, financial condition and results of operations. See “—An occurrence of widespread health epidemic
or other outbreaks or natural disasters could have a material adverse effect on our business, financial condition and
results of operations.” Any disruptions or continuing or worsening slowdown, whether as a result of trade conflicts, the
COVID-19 pandemic or other reasons, could significantly reduce commerce activities in China and globally, which could
lead to significant reduction in merchants’ demand for and spending on the various services we offer, such as our
marketing services and cloud computing services. An economic downturn, whether actual or perceived, a further
decrease in economic growth rates or an otherwise uncertain economic outlook in China or any other market in which we
may operate could have a material adverse effect on business and consumer spending and, as a result, adversely affect our
business, financial condition and results of operations.
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In addition, because we hold a significant amount of cash and cash equivalents and short-term investments, if financial
institutions and issuers of financial instruments that we hold become insolvent or if the market for these financial
instruments become illiquid as a result of a severe economic downturn, our business and financial condition could be
materially and adversely affected.
Our results of operations fluctuate significantly from quarter to quarter which may make it difficult to predict our
future performance.
Our results of operations generally are characterized by seasonal fluctuations due to various reasons, including seasonal
buying patterns and economic cyclical changes, as well as promotions on our marketplaces. Historically, the fourth
quarter of each calendar year generally contributes the largest portion of our annual revenues due to a number of factors,
such as merchants allocating a significant portion of their online marketing budgets to the fourth calendar quarter,
promotions, such as the 11.11 global shopping festival, and the impact of seasonal buying patterns in respect of certain
categories such as apparel. The first quarter of each calendar year generally contributes the smallest portion of our annual
revenues, primarily due to a lower level of allocation of marketing budgets by merchants at the beginning of the
calendar year and the Chinese New Year holiday, during which time consumers generally spend less and businesses in
China are generally closed. We may also introduce new promotions or change the timing of our promotions in ways that
further cause our quarterly results to fluctuate and differ from historical patterns. In addition, seasonal weather patterns
may affect the timing of buying decisions. The performance of our equity investees and of major businesses in which we
have made investments may also result in fluctuations in our results of operations. Fluctuations in our results of
operations related to our investments may also result from the accounting implication of re-measurement of fair values of
certain equity investments and financial instruments, particularly those that are publicly-traded, share-based awards and
previously held equity interests upon the loss of control of a subsidiary or step acquisitions. Given that the fair value
movements are beyond our control, the magnitude of the related accounting impact is unpredictable and may
significantly affect our results of operations.
Our results of operations will likely fluctuate due to these and other factors, some of which are beyond our control. In
addition, our growth in the past may have masked the seasonality that might otherwise be apparent in our results of
operations. As the rate of growth of our business declines in comparison to prior periods, we expect that the seasonality
in our business may become more pronounced. Moreover, as our business grows, we expect that our fixed costs and
expenses will continue to increase, which will result in operating leverage in seasonally strong quarters but can
significantly pressure operating margins in seasonally weak quarters.
To the extent our results of operations are below the expectations of public market analysts and investors in the future, or
if there are significant fluctuations in our financial results, the market price of our ADSs and/or Shares could fluctuate
significantly.
An occurrence of widespread health epidemic or other outbreaks or natural disasters could have a material adverse
effect on our business, financial condition and results of operations.
Our business could be materially and adversely affected by the outbreak of a widespread health epidemic, such as swine
flu, avian influenza, severe acute respiratory syndrome, or SARS, Ebola, Zika, COVID-19, natural disasters, such as
snowstorms, earthquakes, fires or floods, or other events, such as wars, acts of terrorism, environmental accidents, power
shortage or communication interruptions. The occurrence of a disaster or a prolonged outbreak of an epidemic illness or
other adverse public health developments in China or elsewhere in the world could materially disrupt our industry and
our business and operations, and have a material adverse effect on our business, financial condition and results of
operations. For example, these events could cause a temporary closure of the facilities we use for our operations or
severely impact consumer behaviors and the operations of merchants, business partners and other participants in our
digital economy. Our operations could also be disrupted if any of our employees or employees of our business partners
were suspected of contracting an epidemic disease, since this could require us or our business partners to quarantine some
or all of these employees or disinfect the facilities used for our operations. In addition, our revenue and profitability could
be materially reduced to the extent that a natural disaster, health epidemic or other outbreak harms the global or PRC
economy in general.
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In particular, the global outbreak of COVID-19 is having a significant negative impact on the global economy and our
business and financial results. Starting in late January 2020, the COVID-19 pandemic triggered a series of lock-downs,
social distancing requirements and travel restrictions that drastically reduced business activities in China. This substantial
decline in business activities in China negatively affected most of our domestic core commerce businesses, including our
China retail marketplaces and local consumer services business, as well as other businesses that involve travel,
transportation and offline entertainment, such as Fliggy, Alibaba Pictures, Damai and Amap. Our key international
commerce businesses also began to experience a negative impact in February 2020. While the growth of our domestic
businesses started to recover in March 2020, the timing of recovery for our international commerce businesses remains
uncertain as demand in countries outside of China remains soft. The COVID-19 pandemic also presented and may
continue to present challenges to our business operations as well as our merchants, business partners and other
participants in our digital economy, such as closure of offices and facilities, disruptions to or even suspensions of normal
business and logistics operations, as well as restrictions on travel. It is not possible to determine the ultimate impact of
the COVID-19 pandemic on our business operations and financial results, which is highly dependent on numerous
factors, including the duration and spread of the pandemic and any resurgence of COVID-19 in China or elsewhere,
actions taken by governments, domestically and in international relations, the response of businesses and individuals to
the pandemic, the impact of the pandemic on business and economic conditions in China and globally, consumer
demand, our ability and the ability of merchants, retailers, logistics service providers and other participants in our digital
economy to continue operations in areas affected by the pandemic and our efforts and expenditures to support merchants
and partners and ensure the safety of our employees. The COVID-19 pandemic may continue to adversely affect our
business and results of operations.
Failure to maintain or improve our technology infrastructure could harm our business and prospects.
We are continuously upgrading our platforms to provide increased scale, improved performance, additional capacity and
additional built-in functionality, including functionality related to security. Adopting new products and maintaining and
upgrading our technology infrastructure require significant investments of time and resources. Any failure to maintain
and improve our technology infrastructure could result in unanticipated system disruptions, slower response times,
impaired user experience and delays in reporting accurate operating and financial information. The risks of these events
occurring are even higher during certain periods of peak usage and activity, such as on or around the 11.11 global
shopping festival or other promotional events, when user activity and transactions are significantly higher on our
marketplaces compared to other days of the year. In addition, much of the software and interfaces we use are internally
developed and proprietary technology. If we experience problems with the functionality and effectiveness of our
software, interfaces or platforms, or are unable to maintain and continuously improve our technology infrastructure to
handle our business needs, our business, financial condition, results of operations and prospects, as well as our reputation
and brand, could be materially and adversely affected.
In addition, our technology infrastructure and services, including our cloud product and service offerings, incorporate
third-party-developed software, systems and technologies, as well as hardware purchased or commissioned from outside
and overseas suppliers. As our technology infrastructure and services expand and become increasingly complex, we face
increasingly serious risks to the performance and security of our technology infrastructure and services that may be
caused by these third-party-developed components, including risks relating to incompatibilities among these components,
service failures or delays or back-end procedures on hardware and software. We also need to continuously enhance our
existing technology. Otherwise, we face the risk of our technology infrastructure becoming unstable and susceptible to
security breaches. This instability or susceptibility could create serious challenges to the security and uninterrupted
operation of our platforms and services, which would materially and adversely affect our business and reputation.
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Security breaches and attacks against our systems and network, and any potentially resulting breach or failure to
otherwise protect personal, confidential and proprietary information, could damage our reputation and negatively
impact our business, as well as materially and adversely affect our financial condition and results of operations.
Our cybersecurity measures may not detect, prevent or control all attempts to compromise our systems, including
distributed denial-of-service attacks, viruses, Trojan horses, malicious software, break-ins, phishing attacks, third-party
manipulation, security breaches, employee misconduct or negligence or other attacks, risks, data leakage and similar
disruptions that may jeopardize the security of data stored in and transmitted by our systems or that we otherwise
maintain. Breaches of our cybersecurity measures could result in unauthorized access to our systems, misappropriation of
information or data, deletion or modification of user information, or a denial-of-service or other interruption to our
business operations. As techniques used to obtain unauthorized access to or sabotage systems change frequently and may
not be known until launched against us or our third-party service providers, there can be no assurance that we will be able
to anticipate, or implement adequate measures to protect against, these attacks.
We have in the past and are likely again in the future to be subject to these types of attacks, breaches and data leakage,
although to date no attack, breach or data leakage has resulted in any material damage or remediation cost. In addition,
we could be subject to an attack, breach or leakage, which we do not discover at the time or the consequences of which
are not apparent until a later point in time, that could result in material damages or remediation costs. If we are unable to
avert these attacks and security breaches, we could be subject to significant legal and financial liability, our reputation
would be harmed and we could sustain substantial revenue loss from lost sales and customer dissatisfaction. We may not
have the resources or technical sophistication to anticipate or prevent rapidly-evolving cyber-attacks. Cyber-attacks may
target us, our merchants, consumers, users, customers, key service providers or other participants in our digital economy,
or the communication infrastructure on which we depend. We only carry limited cybersecurity insurance, and actual or
anticipated attacks and risks may cause us to incur significantly higher costs, including costs to deploy additional
personnel and network protection technologies, train employees, and engage third-party experts and consultants.
Cybersecurity breaches would not only harm our reputation and business, but also could materially decrease our revenue
and net income.
The successful operation of our business depends upon the performance, reliability and security of the Internet
infrastructure in China and other countries in which we operate.
Our business depends on the performance, reliability and security of the telecommunications and Internet infrastructure
in China and other countries in which we operate. Substantially all of our computer hardware and a majority of our cloud
computing services are currently located in China. Almost all access to the Internet in China is maintained through state-
owned telecommunication operators under the administrative control and regulatory supervision of the MIIT. In addition,
the national networks in China are connected to the Internet through state-owned international gateways, which are the
only channels through which a domestic user can connect to the Internet outside of China. We may face similar or other
limitations in other countries in which we operate. We may not have access to alternative networks in the event of
disruptions, failures or other problems with the Internet infrastructure in China or elsewhere. In addition, the Internet
infrastructure in the countries in which we operate may not support the demands associated with continued growth in
Internet usage.
The failure of telecommunications network operators to provide us with the requisite bandwidth could also interfere with
the speed and availability of our websites and mobile apps. We have no control over the costs of the services provided by
the telecommunications operators. If the prices that we pay for telecommunications and Internet services rise
significantly, our margins could be adversely affected. In addition, if Internet access fees or other charges to Internet
users increase, our user base may decrease, which in turn may significantly decrease our revenues.
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Moreover, if the security of domain names is compromised, we will be unable to use the domain names in our business
operations, which could materially and adversely affect our business operations, reputation and brand image. If we fail to
implement adequate encryption of data transmitted through the networks of the telecommunications and Internet
operators we rely upon, there is a risk that telecommunications and Internet operators or their business partners may
misappropriate our data, which could materially and adversely affect our business operations and reputation.
Our digital economy could be disrupted by network interruptions.
Our digital economy depends on the efficient and uninterrupted operation of our computer and communications systems.
System interruptions and delays may prevent us from efficiently processing the large volume of transactions on our
marketplaces and other businesses we operate. In addition, a large number of merchants and customers maintain their
important systems, such as ERP and CRM, systems on our cloud computing platform, which contain substantial
quantities of data that enables them to operate and manage their businesses. Increasing media and entertainment content
on our platforms also requires additional network capacity and infrastructure to process. Consumers expect our media and
entertainment content to be readily available online, and any disruptions or delay to the delivery of content could affect
the attractiveness and reputation of our media and entertainment platforms.
We and other participants in our digital economy, including Ant Group, have experienced, and may experience in the
future, system interruptions and delays that render websites, mobile apps and services (such as cloud services and
payment services) temporarily unavailable or slow to respond. Although we have prepared for contingencies through
redundancy measures and disaster recovery plans and also carry business interruption insurance, these preparations and
insurance coverage may not be sufficient. Despite any precautions we may take, the occurrence of a natural disaster or
other unanticipated problems at our facilities or the facilities of Ant Group and other participants in our digital economy,
including power outages, system failures, telecommunications delays or failures, construction accidents, break-ins to IT
systems, computer viruses or human errors, could result in delays in or temporary outages of our platforms or services,
loss of our, consumers’ and customers’ data and business interruption for us and our customers. Any of these events
could damage our reputation, significantly disrupt our operations and the operations of the participants in our digital
economy and subject us to liability, heightened regulatory scrutiny and increased costs, which could materially and
adversely affect our business, financial condition and results of operations.
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Changes in international trade or investment policies and barriers to trade or investment, and the ongoing trade
conflict, may have an adverse effect on our business and expansion plans.
In recent years, international market conditions and the international regulatory environment have been increasingly
affected by competition among countries and geopolitical frictions. Changes to national trade or investment policies,
treaties and tariffs, fluctuations in exchange rates or the perception that these changes could occur, could adversely affect
the financial and economic conditions in the jurisdictions in which we operate, as well as our international and cross-
border operations, our financial condition and results of operations. The U.S. administration under President Donald
Trump has advocated for and taken steps toward restricting trade in certain goods, particularly from China. From 2018 to
late 2019, the United States announced several tariff increases that applied to products imported from China, totaling
over US$550 billion. After several rounds of trade talks between China and the United States, the United States
temporarily delayed an increase in tariffs on US$250 billion of products imported from China, and in September and
October 2019, the United States announced several tariff exemptions for certain qualified Chinese products. By the end
of 2019, the United States and China announced that they had reached a phase one trade deal, under which both countries
agreed, among other things, to the rollback of tariffs and the United States agreed not to proceed with certain tariff
increases scheduled to take effect from December 2019. However, the progress of trade talks between China and the
United States are subject to uncertainties, and there can be no assurance as to whether the Unites States will maintain or
reduce tariffs, or impose additional tariffs on Chinese products in the near future. Furthermore, in August 2019, the U.S.
Treasury Department labelled China as a currency manipulator, which label was officially dropped by the U.S. Treasury
Department in January 2020. However, it is uncertain whether the U.S. government may issue any similar announcement
in the future. As a result of such announcement, the United States may take further actions to eliminate perceived unfair
competitive advantages created by alleged manipulating actions. In addition, the United States is considering ways to
limit U.S. investment portfolio flows into China. For example, in May 2020, under pressure from U.S. administration
officials, the independent Federal Retirement Thrift Investment Board suspended its implementation of plans to change
the benchmark of one of its retirement asset funds to an international index that includes companies in emerging markets,
including China. Trade tension between China and the United States may intensify and the United States may adopt even
more drastic measures in the future.
China and other countries have retaliated and may further retaliate in response to new trade policies, treaties and tariffs
implemented by the United States. For instance, in response to the tariffs announced by the United States, in 2018 and
2019, China announced it would stop buying U.S. agricultural products and imposed tariffs on over US$185 billion worth
of U.S. goods. In response to the tariff announcements by the United States in August 2019, China would not rule out
import tariffs on newly-purchased U.S. agricultural products. Since late 2019, as a result of ongoing negotiations with the
United States, China unveiled several tariff exemptions for U.S. products, including various agricultural products. Under
the phase one trade deal agreed with the United States by the end of 2019, China released additional exemptions from
tariffs and agreed to purchase at least an additional US$200 billion worth of U.S. goods and services by the end of 2021.
It is uncertain whether there will be any further material changes to China’s tariff policies. Any further actions to increase
existing tariffs or impose additional tariffs could result in an escalation of the trade conflict, which would have an adverse
effect on manufacturing levels, trade levels and industries, including logistics, retail sales and other businesses and
services that rely on trade, commerce and manufacturing, as well as on our marketplaces that rely upon imports.
Changes in laws and policy could negatively affect, for example, both export-focused businesses on AliExpress and
Alibaba.com, as well as import-focused businesses on Tmall, Tmall Global and Kaola. In addition, if international
players gain greater access to the China market, certain of our businesses, such as our cloud business and digital media
and entertainment businesses, could be subject to greater competition and pricing pressure, which could reduce our
margins or otherwise negatively affect our results of operations. Any further escalation in trade tensions or a trade war, or
news and rumors of any escalation, could affect activity levels within our digital economy and have a material and
adverse effect on our business, results of operations and trading price of our ADSs and/or Shares. Any restrictions
imposed by the United States or other countries on capital flows into China or China-based companies may prevent
potential investors from investing in us, and the trading price and liquidity of our ADSs and/or Shares may suffer as a
result.
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Trade tensions and policy changes have also led to measures that could have adverse effects on China-based issuers,
including proposed legislation in the United States that would require listed companies whose audit reports and/or
auditors are not subject to review by the PCAOB to be subject to enhanced disclosure obligations and be subject to
delisting if they do not comply with the requirements. See “— Risks Related to Doing Business in the People’s Republic
of China — If our auditor is sanctioned or otherwise penalized by the PCAOB or the SEC as a result of failure to comply
with inspection or investigation requirements, our financial statements could be determined to be not in compliance with
the requirements of the U.S. Exchange Act or other laws or rules in the United States, which could ultimately result in
our ADSs being delisted.”
Export control, economic or trade sanctions and a heightened trend towards trade and technology “de-coupling”
could negatively affect our technology supply chain and ability to recruit talent and conduct technological
collaboration, and could subject us to regulatory investigations, fines, penalties or other actions and reputational
harm, which could materially and adversely affect our competitiveness and business operations, as well as lead to
significant decrease in the trading prices of our ADSs and/or Shares.
The United Nations and a number of countries and jurisdictions, including China, the United States and the EU, have
adopted various export control and economic or trade sanction regimes. Export control, economic and trade sanctions
have been threatened and/or imposed by the U.S. government on a number of China-based technology companies,
including ZTE Corporation, Huawei Technologies Co., Ltd., or Huawei, certain of their respective affiliates, and other
China-based technology companies. Actions have been brought against ZTE Corporation and Huawei and related persons
by the U.S. government. The United States has also in certain circumstances threatened to impose further export control,
sanctions, trade embargoes, and other heightened regulatory requirements on China and China-based companies. These
sanctions and actions have raised concerns that there may be increasing regulatory challenges or enhanced restrictions
against China and other China-based technology companies, including us, in a wide range of areas such as data security,
emerging technologies, “dual-use” commercial technologies that could be deployed for surveillance or military purposes,
import/export of technology or other business activities. For instance, in 2019 and 2020, the U.S. government announced
several orders effectively barring American firms from selling, exporting, re-exporting, or transferring U.S.-origin
technology, components and software, among other items, to, among others, Huawei and certain other China-based
technology companies and their respective affiliates. In response, Huawei has sought to reduce its reliance upon U.S.
technologies and components by eliminating them from certain of its products.
These restrictions, and similar or more expansive restrictions that may be imposed by the U.S. or other jurisdictions in the
future, may materially and adversely affect our and our technology partners’ abilities to acquire technologies, systems,
devices or components that may be critical to our technology infrastructure, service offerings and business operations. As
a result of heightened restrictions, we and our technology partners may be forced to develop equivalent technologies or
components, or obtain equivalent technologies or components from sources outside the U.S. We and they may not be able
to do so in a timely manner and on commercially favorable or acceptable terms, or at all. These restrictions or sanctions,
whether targeting specific entities related to us, could negatively affect our and our technology partners’ abilities to
recruit research and development talent or conduct technological collaboration with scientists and research institutes in
the U.S., Europe or other countries, which could significantly harm our competitiveness, as well as increase our
compliance costs and risks. There can be no assurance that current or future export controls or economic and trade
sanctions regulations or developments will not have a negative impact on our business or reputation.
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In addition, if any of our expanding network of investee companies, global business partners, joint venture partners or
other parties that have collaborative relationships with us or our affiliates were to become subject to sanctions or export
control restrictions, this might result in significant negative publicity, governmental investigations and reputational harm
to us. Some of such companies, partners and other parties, including some of our investee companies, have become
subject to sanctions or export control restrictions. Media reports on alleged violation of export control or economic and
trade sanctions laws, or on uses of the technologies, systems or innovations that we develop for purposes which could be
perceived as inappropriate or controversial, by us, our clients, business partners, investees or other parties not affiliated
with or controlled by us, even on matters not involving us, could nevertheless damage our reputation and lead to
regulatory investigations, fines and penalties against us. Such fines and penalties may be significant, and if we were
publicly named or investigated by any regulator on the basis of suspected or alleged violations of export control or
economic and trade sanctions laws and rules, even in situations where the potential amount or fine involved may be
relatively small, our reputation could be significantly harmed. Any of these circumstances may cause the trading prices of
our ADSs and/or Shares to decline significantly, and materially reduce the value of your investment in our ADSs and/or
Shares.
We may suffer reputational harm and the trading prices of our ADSs and/or Shares may decrease significantly due to
business dealings by, or connections of, merchants or consumers on our marketplaces with sanctioned countries or
persons.
The U.S. government imposes broad economic and trade restrictions on dealings with certain countries and regions,
including the Crimea, Cuba, Iran, North Korea and Syria, or the Sanctioned Countries, and numerous individuals and
entities, including those designated as having engaged in activities relating to terrorism, drug trafficking, cybercrime, the
rough diamond trade, proliferation of weapons of mass destruction or human rights violations, or the Sanctioned Persons.
The U.S. government also imposes more targeted sanctions on certain dealings with countries such as Russia and
Venezuela, among others. The U.S. government expanded or suggested that it will expand economic sanctions
concerning Iran, North Korea, Russia and Venezuela, and there are risks of further enhanced economic sanctions
concerning these countries, among others. It is not, however, possible to predict with a reasonable degree of certainty
how the regulatory environment concerning U.S. economic sanctions may develop. The United Nations, the EU, the UK,
and other countries also impose economic and trade restrictions, including on certain Sanctioned Countries and
Sanctioned Persons.
As a Cayman Islands company with the substantial majority of our subsidiaries and operations outside of the U.S., UK
and EU, we are generally not required to comply with U.S., UK, and EU sanctions to the same extent as U.S., UK or EU
entities. However, for companies like us, their U.S., UK, and EU subsidiaries, employees who are U.S. persons or UK or
EU nationals, activities in the U.S., UK, or EU, activities involving U.S.-origin goods, technology or services, and certain
conduct or dealings, among other activities, are subject to applicable sanctions requirements. We do not have employees
or operations in any of the Sanctioned Countries, and, although our websites are open and available worldwide, we do not
actively solicit business from the Sanctioned Countries or Sanctioned Persons. In the case of Alibaba.com, our aggregate
cash revenue from members in these Sanctioned Countries in fiscal year 2020 accounted for a negligible portion of our
total revenue. In the case of AliExpress and our China retail marketplaces, an insignificant percentage of orders have
been placed by consumers from the Sanctioned Countries, with a negligible amount of aggregate GMV in the twelve
months ended March 31, 2020 through transactions conducted voluntarily among merchants and consumers on these
marketplaces. As all transaction fees on AliExpress and our China retail marketplaces are paid by merchants, primarily
based in China, we do not earn any fees or commission from consumers in Sanctioned Countries in respect of
transactions conducted on these platforms.
We have established a compliance program that aims to ensure our compliance with these economic and trade
restrictions, as well as export control regimes. However, these laws and regulations are complex and subject to frequent
change, including with respect to jurisdictional reach and the lists of countries, entities, individuals and technologies
subject to sanctions and other regulatory controls. Hence, we may incur significant costs related to current, new or
changing sanctions, embargoes, export controls programs or other restrictions, as well as investigations, fines, fees or
settlements, which may be difficult to predict. We also could face increased compliance costs and risks as we expand
globally and into additional businesses, such as cloud computing.
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Certain institutional investors, including state and municipal governments in the United States and universities, as well as
financial institutions, have proposed or adopted divestment or similar initiatives regarding investments in companies that
do business with Sanctioned Countries. Accordingly, as a result of activities on our marketplaces or in connection with
other business we operate that may involve users based in the Sanctioned Countries, certain investors may not wish to
invest or may divest their investment in us, certain financial institutions may not wish to lend, extend credit or offer
ordinary banking services to us, or seek early repayment of loans made to us, and certain financial institutions and other
businesses with which we partner or may partner may seek to avoid business relationships with us. These divestment
initiatives and terminations of business services may negatively impact our reputation, business and results of operations,
and may materially and adversely affect the trading price of our ADSs and/or Shares.
Our business generates and processes a large amount of data, including personal data, and the improper use or
disclosure of data could harm our reputation and have a material adverse effect on the trading price of our ADSs
and/or Shares, our business and prospects.
Our business generates and processes a large quantity of personal, behavioral, transaction and demographic data. Our
privacy policies concerning the collection, use and disclosure of personal data are posted on our platforms. We face risks
inherent in handling and protecting large volumes of data, especially consumer data. In particular, we face a number of
challenges relating to data from transactions and other activities on our platforms, including:
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protecting the data in and hosted on our system, including against attacks on our system by outside parties
or fraudulent behavior or improper use by our employees;
addressing concerns, challenges, negative publicity and litigation related to data privacy, collection, use and
actual or perceived sharing (including sharing among our own businesses, with business partners or
regulators), safety, security and other factors that may arise from our existing businesses or new businesses
and technology, such as new forms of data (for example, biometric data, location information and other
demographic information); and
complying with applicable laws, rules and regulations relating to the collection, use, storage, transfer,
disclosure and security of personal information, including requests from data subjects and regulatory and
government authorities.
These challenges are heightened as we expand our business into jurisdictions with different legal and regulatory regimes,
such as the GDPR and the data localization rules to Federal Law on Personal Data of Russia. There have been reports of a
number of incidents relating to data security and unauthorized use of user data by high-profile Internet and technology
companies and their business partners. If our user data is improperly used or disclosed by any party, it could result in a
loss of users, businesses and other participants from our digital economy, loss of confidence or trust in our platforms,
litigation, regulatory investigations, penalties or actions against us, significant damage to our reputation, and have a
material adverse effect on the trading price of our ADSs and/or Shares, our business and prospects.
Pursuant to our data sharing agreement with Ant Group, which sets forth data security and confidentiality protocols, we
have agreed to a broad sharing of depersonalized data through a data sharing platform that we own and operate, subject to
compliance with relevant law. As permitted by our privacy policies and user agreements, we also grant expressly limited
access to specified data on our data platform to certain participants in our digital economy that provide services to
consumers, merchants, brands, retailers and other digital economy participants. These participants in our digital economy
face the same challenges inherent in handling and protecting large volumes of data. Any systems failure or security
breach or lapse on our or their part that results in the release of user data could harm our reputation and brand and,
consequently, our business, in addition to exposing us to potential legal liability or regulatory actions. This could also
attract negative publicity from media outlets, privacy advocates, our competitors or others and could adversely affect the
trading price of our ADSs and/or Shares.
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Our business is subject to complex and evolving domestic and international laws and regulations regarding privacy
and data protection. These laws and regulations can be complex and stringent, and many are subject to change and
uncertain interpretation, which could result in claims, changes to our data and other business practices, penalties,
increased cost of operations, or declines in user growth or engagement, or otherwise affect our business.
Regulatory authorities in China and around the world have implemented and are considering further legislative and
regulatory proposals concerning data protection, including measures to ensure that encryption of users’ data does not
hinder law enforcement agencies’ access to that data. New laws and regulations that govern new areas of data protection
or impose more stringent requirements may be introduced in China and other jurisdictions where we conduct business or
may expand into. In addition, the interpretation and application of consumer and data protection laws in China and
elsewhere are often uncertain and in flux. It is possible that existing or newly-introduced laws and regulations, or their
interpretation, application or enforcement, could significantly affect the value of our data and force us to change our data
and other business practices.
The PRC regulatory and enforcement regime with regard to privacy and data security is evolving. According to the PRC
Cybersecurity Law and relevant regulations, network operators, including us, are obligated to provide assistance and
support in accordance with the law for public security and national security authorities to protect national security or
assist with criminal investigations. In addition, the PRC Cybersecurity Law provides that personal information and
important data collected and generated by operators of critical information infrastructure in the course of their operations
in the PRC should be stored in the PRC, and the law imposes heightened regulation and additional security obligations on
operators of critical information infrastructure. According to the Cybersecurity Review Measures promulgated by the
Cyberspace Administration of China and certain other PRC regulatory authorities in April 2020, which became effective
in June 2020, operators of critical information infrastructure must pass a cybersecurity review when purchasing network
products and services which do or may affect national security. If we provide or were deemed to provide such network
products and services to critical information infrastructure operators, or we were deemed to be a critical information
infrastructure operator, we would be required to follow cybersecurity review procedures. There can be no assurance that
we would be able to complete the applicable cybersecurity review procedures in a timely manner, or at all, if we were
required to follow such procedures. Any failure or delay in the completion of the cybersecurity review procedures may
prevent us from using or providing certain network products and services, and may result in fines of up to ten times the
purchase price of such network products and services being imposed upon us, if we were to be deemed a critical
information infrastructure operator using network products or services without completing the required cybersecurity
review procedures. The PRC National Security Law covers various types of national security, including technology
security and information security. See “Item 4. Information on the Company — B. Business Overview — Regulation —
Regulation of Internet Security.” Compliance with the PRC Cybersecurity Law, the PRC National Security Law, as well
as additional laws and regulations that PRC regulatory bodies may enact in the future, may result in additional expenses
to us and subject us to negative publicity, which could harm our reputation among users and negatively affect the trading
price of our ADSs and/or Shares. There are also uncertainties with respect to how the PRC Cybersecurity Law and the
PRC National Security Law will be implemented and interpreted in practice. PRC regulators, including the Department
of Public Security, the MIIT, the SAMR and the Cyberspace Administration of China, have been increasingly focused on
regulation in the areas of data security and data protection, and are enhancing the protection of privacy and data security
by rule-making and enforcement actions at central and local levels. We expect that these areas will receive greater and
continued attention and scrutiny from regulators and the public going forward, which could increase our compliance costs
and subject us to heightened risks and challenges associated with data security and protection. If we are unable to manage
these risks, we could become subject to penalties, including fines, suspension of business and revocation of required
licenses, and our reputation and results of operations could be materially and adversely affected.
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As we further expand our operations into international markets, we will be subject to additional laws in other
jurisdictions where we operate and where our consumers, users, merchants, customers and other participants are located.
The laws, rules and regulations of other jurisdictions may be more comprehensive, detailed and nuanced in their scope,
and may impose requirements and penalties that conflict with, or are more stringent than, those in China. In addition,
these laws, rules and regulations may restrict the transfer of data across jurisdictions, which could impose additional and
substantial operational, administrative and compliance burdens on us, and may also restrict our business activities and
expansion plans, as well as impede our data-driven business strategies. Complying with laws and regulations for an
increasing number of jurisdictions could require significant resources and costs. Our continued expansion into cloud
computing services, both in China and elsewhere, will also increase the amount of data hosted on our system, as well as
increase the number of jurisdictions in which we have IT systems. This, as well as the increasing number of new legal
requirements in various jurisdictions, such as the GDPR and the data localization rules to Federal Law on Personal Data
of Russia, present increased challenges and risks in relation to policies and procedures relating to data collection, storage,
transfer, disclosure, protection and privacy, and will impose significant penalties for non-compliance. For example,
penalties calculated as a percentage of global revenue may be imposed under the GDPR. The compliance requirements of
the GDPR affect a number of our businesses, such as AliExpress and Alibaba Cloud.
Any failure, or perceived failure, by us to comply with the above and other regulatory requirements or privacy protection-
related laws, rules and regulations could result in reputational damages or proceedings or actions against us by
governmental entities, consumers or others. On the other hand, compliance with these laws and requirements in manners
that are perceived as harming privacy could also lead to significant damages to our reputation and similar proceedings
and actions against us by regulators and private parties. These proceedings or actions could subject us to significant
penalties and negative publicity, require us to change our data and other business practices, increase our costs and
severely disrupt our business, hinder our global expansion or negatively affect the trading price of our ADSs and/or
Shares.
We rely on Alipay to conduct substantially all of the payment processing and all of the escrow services on our
marketplaces. If Alipay’s services are limited, restricted, curtailed or degraded in any way, or become unavailable to
us or our users for any reason, our business may be materially and adversely affected.
Given the significant transaction volume on our platforms, Alipay provides convenient payment processing and escrow
services to us through contractual arrangements on preferential terms. These services are critical to our marketplaces and
the development of our digital economy. In the twelve months ended March 31, 2020, approximately 70% of the GMV of
our China retail marketplaces was settled through Alipay’s escrow and payment processing services. We rely on the
convenience and ease of use that Alipay provides to our users. If the quality, utility, convenience or attractiveness of
Alipay’s services declines for any reason, the attractiveness of our marketplaces could be materially and adversely
affected.
Alipay’s business is subject to a number of risks that could materially and adversely affect its ability to provide payment
processing and escrow services to us, including:
●
●
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●
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dissatisfaction with Alipay’s services or lower use of Alipay by consumers, merchants, brands and retailers;
increasing competition, including from other established Chinese Internet companies, payment service
providers and companies engaged in other financial technology services;
changes to rules or practices applicable to payment systems that link to Alipay;
breach of users’ privacy and concerns over the use and security of information collected from customers
and any related negative publicity relating thereto;
service outages, system failures or failure to effectively scale the system to handle large and growing
transaction volumes;
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increasing costs to Alipay, including fees charged by banks to process transactions through Alipay, which
would also increase our cost of revenues;
negative news about and social media coverage on Alipay, its business, its products and service offerings or
matters relating to Alipay’s data security and privacy; and
failure to manage user funds accurately or loss of user funds, whether due to employee fraud, security
breaches, technical errors or otherwise.
In addition, certain commercial banks in China impose limits on the amounts that may be transferred by automated
payment from users’ bank accounts to their linked accounts with third-party payment services. Although we believe the
impact of these restrictions has not been and will not be significant in terms of the overall volume of payments processed
for our China retail marketplaces, and automated payment services linked to bank accounts represent only one of many
payment mechanisms that consumers may use to settle transactions, we cannot predict whether these and any additional
restrictions that could be put in place would have a material adverse effect on our marketplaces.
Alipay’s business is highly regulated and faces challenges in managing its regulatory risks. Alipay is required to comply
with numerous complex and evolving laws, rules and regulations, particularly in the areas of online and mobile payment
services. In addition, as Alipay expands its businesses and operations into more international markets, it will become
subject to additional legal and regulatory risks and scrutiny. Furthermore, our commercial arrangements with Alipay may
be subject to anti-competition challenges. See “— We and Ant Group are subject to a broad range of laws and
regulations, and future laws and regulations may impose additional requirements and other obligations that could
materially and adversely affect our business, financial condition and results of operations,” and “Item 4. Information on
the Company — B. Business Overview — Regulation — Regulation Applicable to Alipay.”
If Alipay were not able to successfully manage the risks relating to its business, its ability to continue to deliver payment
services to us on preferential terms may be undermined. If we needed to migrate to another third-party payment service
or significantly expand our relationship with other third-party payment services, the transition would require significant
time and management resources, and the third-party payment service may not be as effective, efficient or well-received
by consumers, merchants, brands and retailers on our marketplaces. These third-party payment services also may not
provide escrow services, and we may not be able to receive commissions based on GMV settled through these systems.
We would also receive less, or lose entirely, the benefit of the commercial agreement with Ant Group and Alipay, which
provides us with preferential terms, and would possibly be required to pay more for payment processing and escrow
services than we currently pay. There can be no assurance that we would be able to reach an agreement with an
alternative online and mobile payment service provider on acceptable terms or at all.
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We do not control Alipay or its parent entity, Ant Group, over which Jack Ma effectively controls approximately 50%
of the voting interests. If conflicts that could arise between us and Alipay or Ant Group are not resolved in our favor,
our digital economy, business, financial condition, results of operations and prospects may be materially and
adversely affected.
We rely on Alipay to conduct substantially all of the payment processing and all of the escrow services on our
marketplaces. Starting from September 2019, we hold a 33% equity interest in Alipay’s parent, Ant Group and also have
the right to nominate two directors for election to the board of Ant Group. However, we do not hold a majority interest in
or control Ant Group or Alipay. Alipay provides payment services to us on preferential terms pursuant to our long-term
commercial agreement with Ant Group and Alipay. Following the 2011 divestment and subsequent equity holding
restructuring related to Ant Group, an entity wholly owned by Jack Ma, our director and former executive chairman,
became the general partner of Junhan and Junao, each a PRC limited partnership, which are two major equity holders of
Ant Group. Accordingly, Jack has an economic interest in Ant Group and is able to exercise the voting power of the
equity interest in Ant Group held by Junhan and Junao. We understand that through the exercise of his voting power over
Junhan and Junao, Jack continues to control approximately 50% of the voting interests in Ant Group.
If for any reason, Alipay sought to amend the terms of its agreements and arrangements with us, there can be no
assurance that Jack Ma, in light of his control of approximately 50% of the voting interests over Alipay’s parent, Ant
Group, would exercise his voting interests in a manner that is in our interests. Furthermore, if Alipay were required by
regulators to modify the commercial agreement under certain circumstances, Alipay may not have sufficient funds to
adequately compensate us for the impact of the adjustment. If we were to lose the preferential terms with Alipay, our
digital economy could be negatively affected, and our business, financial condition, results of operations and prospects
could be materially and adversely affected.
Ant Group also facilitates other financial services to participants in our digital economy, including wealth management,
financing (including consumer financing) and insurance, and may offer additional services in the future. Other conflicts
of interest between us, on the one hand, and Alipay and Ant Group, on the other hand, may arise relating to commercial
or strategic opportunities or initiatives. Although we and Ant Group have each agreed to certain non-competition
undertakings, Ant Group may provide services to our competitors from time to time and there can be no assurance that
Ant Group would not pursue other opportunities that would conflict with our interests. See “Item 7. Major Shareholders
and Related Party Transactions — B. Related Party Transactions — Agreements and Transactions Related to Ant Group
and Its Subsidiaries — Our Commercial Arrangements with Ant Group and Alipay — 2014 Restructuring of Our
Relationship with Ant Group and Alipay, Subsequent Amendments and 2019 Equity Issuance — Non-competition
Undertakings.” Jack Ma may not resolve these conflicts in a manner that is in our interests. Furthermore, our ability to
explore alternative payment services other than Alipay for our marketplaces may be constrained due to Jack’s
relationship with Ant Group.
In addition, we grant share-based awards to employees of Ant Group, and Junhan grants share-based awards linked to the
valuation of Ant Group to our employees, and Ant Group grants restricted share units and share appreciation rights tied to
the valuation of Ant Group to our employees. The provision of awards relating to Ant Group to our employees is
intended to enhance our strategic and financial relationship with Ant Group. See “Item 7. Major Shareholders and
Related Party Transactions — B. Related Party Transactions — Agreements and Transactions Related to Ant Group and
Its Subsidiaries — Equity-based Award Arrangements.” The share-based awards granted by Junhan and Ant Group to our
employees result in expenses that are recognized by us. We, Ant Group and Junhan have entered into equity-based
awards grant and settlement agreements pursuant to which the parties will settle with each other the cost associated with
the awards granted to each other’s employees. Subject to the approval of our audit committee, Jack (through his role with
us and his control over Junhan) and Ant Group could be in a position to propose and promote further share-based grants
that result in additional, and potentially significant, expenses to us. Conflicts of interest may also arise from our
management team members’ and other employees’ ownership of interests in Ant Group, which could represent a
substantial portion of their personal wealth. Accordingly, these and other potential conflicts of interest between us and
Ant Group or Alipay, and between us and Jack or Junhan or Junao, may not be resolved in our favor, which could have a
material adverse effect on our business, financial condition, results of operations and prospects.
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Moreover, because of our equity interest in and close association with Ant Group and overlapping user bases, events that
negatively affect Ant Group could also negatively affect customers’, regulators’ and other third parties’ perception of us.
In addition, any actual or perceived conflict of interest between us and Ant Group, or any other company integral to the
functioning of our digital economy, could also materially harm our reputation as well as our business and prospects.
We depend on key management as well as experienced and capable personnel generally, and any failure to attract,
motivate and retain our staff could severely hinder our ability to maintain and grow our business.
Our future success is significantly dependent upon the continued service of our key executives and other key employees,
particularly in new business areas we are expanding into, such as New Retail and local consumer services. If we lose the
services of any member of management or key personnel, we may not be able to locate suitable or qualified
replacements, and may incur additional expenses to recruit and train new staff. Jack Ma, our lead founder and one of our
directors, has been crucial to the development of our vision, culture and strategic direction. In September 2019, Daniel
Zhang, our current chief executive officer, succeeded Jack as our chairman. This and similar retirements and successions
could result in disruptions, or perceived disruptions, in our operations and the execution of our strategy.
As our business develops and evolves, it may become difficult for us to continue to retain our employees. A number of
our employees, including many members of management, may choose to pursue other opportunities outside of us. If we
are unable to motivate or retain these employees, our business may be severely disrupted and our prospects could suffer.
The size and scope of our digital economy also require us to hire and retain a wide range of capable and experienced
personnel who can adapt to a dynamic, competitive and challenging business environment. We will need to continue to
attract and retain experienced and capable personnel at all levels, including members of management, as we expand our
business and operations. Our various incentive initiatives may not be sufficient to retain our management and employees.
Competition for talent in our industry is intense, and the availability of suitable and qualified candidates in China and
elsewhere is limited. Competition for these individuals could cause us to offer higher compensation and other benefits to
attract and retain them. Even if we were to offer higher compensation and other benefits, there can be no assurance that
these individuals will choose to join or continue to work for us. Any failure to attract or retain key management and
personnel could severely disrupt our business and growth.
Failure to deal effectively with fraudulent or illegal activities by our employees would harm our business.
Illegal, fraudulent, corrupt or collusive activities or misconduct, whether actual or perceived, by our employees could
subject us to liability or negative publicity. We have a zero-tolerance policy towards fraudulent and illegal conduct, and
have dismissed and assisted in the arrests and prosecutions of employees who engaged in this kind of conduct. We have
implemented and continue to improve internal controls and policies with regard to the review and approval of merchant
accounts, sales activities, interactions with business partners and government officials and other relevant matters.
However, there can be no assurance that our controls and policies will prevent fraud or illegal activity or misconduct by
our employees or that similar incidents will not occur in the future. Any illegal, fraudulent, corrupt or collusive activity or
misconduct could severely damage our brand and reputation, which could drive users and consumers away from our
digital economy, and materially and adversely affect our business, financial condition and results of operations.
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If other third-party service providers in our digital economy fail to provide reliable or satisfactory services, our
reputation, business, financial condition and results of operations may be materially and adversely affected.
Ant Group and a number of other third-party participants, including retail operating partners, logistics service providers,
mobile app developers, ISVs, cloud-based developers, marketing affiliates and various professional service providers,
provide services to users on our platforms, including consumers, merchants, brands, retailers and users of our cloud
computing services. To the extent these service providers are unable to provide satisfactory services to our users on
commercially acceptable terms, or at all, or if we fail to retain existing or attract new quality service providers to our
platforms, our ability to retain, attract or engage our users may be severely limited, which may have a material and
adverse effect on our business, financial condition and results of operations. In addition, we share our user data with
certain of these third-party service providers in our digital economy in accordance with our privacy policies, agreements
and applicable laws. These third-party service providers also engage in a broad range of other business activities outside
of our platforms. If these third-party participants engage in activities that are negligent, fraudulent, illegal or otherwise
harm the trustworthiness and security of our digital economy, including, for example, the leak or negligent use of data,
the handling, transport and delivery of prohibited or restricted content or items, or if these participants fail to perform
their contractual obligations, or users are otherwise dissatisfied with their service quality on or off our platforms, we
could suffer reputational harm, even if these activities are not related to, attributable to or caused by us, or within
our control.
If logistics service providers used by our merchants fail to provide reliable logistics services, or the logistics data
platform operated by Cainiao Network were to malfunction, suffer an outage or otherwise fail, our business and
prospects, as well as our financial condition and results of operations, may be materially and adversely affected.
Our merchants use third-party logistics service providers to fulfill and deliver their orders. Cainiao Network cooperates
with a number of third-party logistics service providers to help merchants on our platforms fulfill orders and deliver their
products to consumers. We operate Cainiao Network’s logistics data platform that links our information system and those
of logistics service providers. Because of our platform model, interruptions to or failures in these third parties’ logistics
services, or in Cainiao Network’s logistics data platform, could prevent the timely or proper delivery of products to
consumers, which would negatively impact our competitive position as well as harm the reputation of our digital
economy and the businesses we operate. In addition, certain of our businesses, including Lazada, operate and provide
logistics services to merchants within our digital economy and may experience interruptions or failures to timely and
properly deliver products to consumers. These interruptions or failures may be due to events that are beyond the control
of any of our companies, Cainiao Network or these logistics service providers, such as inclement weather, natural
disasters, the COVID-19 pandemic, other pandemics or epidemics, accidents, transportation disruptions, including special
or temporary restrictions or closings of facilities or transportation networks due to regulatory or political reasons, or labor
unrest or shortages. These logistics services could also be affected or interrupted by business disputes, industry
consolidation, insolvency or government shut-downs. The merchants in our digital economy may not be able to find
alternative logistics service providers to provide logistics services in a timely and reliable manner, or at all. We do not
have agreements with third-party logistics service providers that require them to offer services to our merchants. If the
logistics data platform operated by Cainiao Network were to fail for any reason, the logistics service providers would be
severely hindered from or unable to connect with our merchants, and their services and the functionality of our digital
economy could be severely affected. If the products sold by merchants in our digital economy are not delivered in proper
condition, on a timely basis or at shipping rates that are commercially acceptable to marketplace participants, our
business and prospects, as well as our financial condition and results of operations could be materially and adversely
affected.
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We may be subject to liability for content available in our digital economy that is alleged to be socially destabilizing,
obscene, defamatory, libelous or otherwise unlawful.
Under PRC law and the laws of certain other jurisdictions in which we operate, we are required to monitor our websites
and the websites hosted on our servers and mobile interfaces, as well as our services and devices that generate or host
content, for items or content deemed to be socially destabilizing, obscene, superstitious or defamatory, as well as for
items, content or services that are illegal to sell online or otherwise in other jurisdictions in which we operate our
marketplaces and other businesses, and promptly take appropriate action with respect to the relevant items, content or
services. We may also be subject to potential liability in China or other jurisdictions for any unlawful actions of our
merchants, marketing customers or users of our websites or mobile interfaces, or for content we distribute or that is
linked from our platforms that is deemed inappropriate. Because discretion is often involved in determining whether
content is offensive, it may be difficult to determine the type of content that may result in liability to us. The nature and
scale of our websites and platforms, such as our cloud computing services, which allow users to upload and save massive
data on our cloud data centers, social communities on our marketplaces and DingTalk, such as live streams and other
interactive media content on Taobao and Tmall, and Youku, which allow users to upload videos and other content to our
websites and platforms, may make this even more difficult. If we are found to be liable, we may be subject to negative
publicity, fines, have our relevant business operation licenses revoked, or be prevented from operating our websites or
mobile interfaces in China or other jurisdictions.
In addition, claims may be brought against us for defamation, libel, negligence, copyright, patent or trademark
infringement, tort (including personal injury), other unlawful activity or other theories and claims based on the nature and
content of information posted on our platforms, including user-generated content, product reviews and message boards,
by our consumers, merchants and other participants.
Regardless of the outcome of any dispute or lawsuit, we may suffer from negative publicity and reputational damage as a
result of these actions.
We have been and may continue to be subject to allegations, lawsuits and negative publicity claiming that items listed
and content available in our digital economy are pirated, counterfeit or illegal.
We have been the subject in the past, and may continue to be the subject in the future, of allegations that items offered,
sold or made available through our online marketplaces by third parties or that content we make available through other
services, such as our online video and music platforms or through our smart devices, infringe third-party copyrights,
trademarks and patents or other intellectual property rights. Although we have adopted and continue to optimize
measures to proactively verify the products sold on our marketplaces for infringement and to minimize potential
infringement of third-party intellectual property rights through our intellectual property infringement complaint and take-
down procedures, these measures may not always be successful. In the event that alleged counterfeit or infringing
products are listed or sold on our marketplaces or allegedly infringing content are made available through our other
services, we could face claims and negative publicity relating to these activities or for our alleged failure to act in a
timely or effective manner in response to infringement or to otherwise restrict or limit these activities. We may also
choose to compensate consumers for any losses, although we are currently not legally obligated to do so. If, as a result of
regulatory developments, we are required to compensate consumers, we would incur additional expenses.
Measures we take to protect against these potential liabilities could require us to spend substantial additional resources
and/or experience reduced revenues. In addition, these measures may reduce the attractiveness of our digital economy to
consumers, merchants, brands, retailers and other participants. A merchant, brand, retailer or online marketer whose
content is removed or whose services are suspended or terminated by us, regardless of our compliance with the applicable
laws, rules and regulations, may dispute our actions and commence action against us for damages based on breach of
contract or other causes of action, make public complaints or allegations or organize group protests and publicity
campaigns against us or seek compensation. Any costs incurred as a result of liability or asserted liability relating to the
sale of unlawful goods or other infringement could harm our business.
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We also have been and may continue to be subject to allegations of civil or criminal liability based on allegedly unlawful
activities or unauthorized distribution of products or content carried out by third parties through our online marketplaces.
We have also acquired certain companies, such as Youku, Lazada and Ele.me, that from time to time are subject to
allegations and lawsuits regarding alleged infringement of third-party intellectual property or other rights, and we may
continue to acquire other companies that are subject to similar disputes.
In addition, we have been and may continue to be subject to significant negative publicity in China and other countries
based on similar claims and allegations. For example, in December 2016, January 2018, April 2019 and April 2020, the
USTR identified Taobao Marketplace as a “notorious market.” The USTR may continue to identify Taobao Marketplace
as a notorious market, and there can be no assurance that the USTR or other relevant authorities in the U.S. or other
countries will not identify Taobao Marketplace or any of our other businesses as notorious markets in the future. In
addition, government authorities have in the past accused, and may in the future accuse, us of perceived problems and
failures of our platforms, including alleged failures to crack down on the sale of counterfeit goods and other alleged
illegal activities on our China retail marketplaces. As a result of any claims or accusations by government authorities, by
industry watchdog organizations, including the U.S. Commission on the Theft of American Intellectual Property, by
brand and intellectual property rights holders or by enterprises, there may be a public perception that counterfeit or
pirated items are commonplace on our marketplaces or that we delay the process of removing these items. This
perception, even if factually incorrect, and existing or new litigation as well as regulatory pressure or action related to
intellectual property rights protection, could damage our reputation, harm our business, diminish the value of our brand
name and negatively affect trading price of our ADSs and/or Shares.
Failure to deal effectively with any fraud perpetrated and fictitious transactions conducted in our digital economy, and
other sources of customer dissatisfaction, would harm our business.
We face risks with respect to fraudulent activities on our marketplaces and in connection with other businesses we
operate, and we periodically receive complaints from consumers who may not have received the goods that they had
purchased, complaints from merchants who have not received payment for the goods that a consumer had contracted to
purchase, as well as other types of actual and alleged fraudulent activities. See “Item 4. Information on the Company —
B. Business Overview — Transaction Platform Safety Programs” for more details about the measures we have adopted
against fraudulent activities. Although we have implemented various measures to detect and reduce the occurrence of
fraudulent activities on our marketplaces and in connection with other businesses we operate, there can be no assurance
that these measures will be effective in combating fraudulent transactions or improving overall satisfaction among our
consumers, merchants and other participants. Additional measures that we take to address fraud could also negatively
affect the attractiveness of our marketplaces and other businesses we operate to consumers or merchants. In addition,
merchants on our marketplaces contribute to a fund to provide consumer protection guarantees. If our merchants do not
perform their obligations under these programs, we may use funds that have been deposited by merchants in a consumer
protection fund to compensate consumers. If the amounts in the fund are not sufficient, we may choose to compensate
consumers for losses, although currently we are not legally obligated to do so. If, as a result of regulatory developments,
we are required to compensate consumers, we would incur additional expenses. Although we have recourse against our
merchants for any amounts we incur, there can be no assurance that we would be able to collect these amounts from
our merchants.
In addition to fraudulent transactions with legitimate consumers, merchants may also engage in fictitious or “phantom”
transactions with themselves or collaborators in order to artificially inflate their own ratings on our marketplaces,
reputation and search results rankings, an activity sometimes referred to as “brushing.” This activity may harm other
merchants by enabling the perpetrating merchant to be favored over legitimate merchants, and may harm consumers by
deceiving them into believing that a merchant is more reliable or trusted than the merchant actually is.
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Government authorities, industry watchdog organizations or other third parties may issue reports or engage in other
forms of public communications concerning alleged fraudulent or deceptive conduct on our platforms. Negative publicity
and user sentiment generated as a result of these reports or allegations could severely diminish consumer confidence in
and use of our services, reduce our ability to attract new or retain current merchants, consumers and other participants,
damage our reputation, result in shareholder or other litigation, diminish the value of our brand, and materially and
adversely affect our business, financial condition and results of operations.
We may be subject to claims under consumer protection laws, including health and safety claims and product liability
claims, if property or people are harmed by the products and services sold through our platforms.
Due to several high-profile incidents involving safety, including food safety, and consumer complaints that have occurred
in China in recent years, the PRC government, media outlets and public advocacy groups are increasingly focused on
consumer protection. Government authorities in other countries where we operate also place high importance on
consumer protection. Moreover, as part of our growth strategy, we expect to increase our focus on food, food delivery,
food supplements and beverages, mother care, baby care, pharmaceutical and healthcare products and services, as well as
electronics products, both as a platform operator and as part of our directly operated business. We have also invested in
companies involved in these sectors. These activities pose increasing challenges to our internal control and compliance
systems and procedures, including our control over and management of third-party service personnel, and expose us to
substantial increasing liability, negative publicity and reputational damage arising from consumer complaints, harms to
personal health or safety or accidents involving products or services offered through our platforms or provided by us.
Operators of e-commerce platforms are subject to certain provisions of consumer protection laws even where the operator
is not the merchant of the product or service purchased by the consumer. In addition, if we do not take appropriate
remedial action against merchants or service providers for actions they engage in that we know, or should have known,
would infringe upon the rights and interests of consumers, we may be held jointly liable for infringement alongside the
merchant or service provider. We may also be held jointly liable with the merchants under the PRC E-commerce Law if
we fail to take necessary actions when we know or should have known that the products or services provided by the
merchants on our platforms do not meet personal and property security requirements, or otherwise infringe upon
consumers’ legitimate rights. Moreover, applicable consumer protection laws in China hold that trading platforms will be
held liable for failing to meet any undertaking that the platforms make to consumers with regard to products listed on
their websites. Furthermore, we are required to report to the SAMR, formerly known as the SAIC, or its local branches
any violation of applicable laws, regulations or SAMR rules by merchants or service providers, such as sales of goods
without proper license or authorization, and we are required to take appropriate remedial measures, including ceasing to
provide services to the relevant merchants or service providers. We may also be held liable if we fail to verify the
licenses or qualifications of merchants, or fail to safeguard consumers with respect to products or services affecting
consumers’ health or safety.
In addition, we are facing increasing levels of activist litigation in China by plaintiffs claiming damages based on
consumer protection laws. This type of activist litigation could increase in the future, and if it does, we could face
increased costs defending these suits and damages should we not prevail, which could materially and adversely affect our
reputation and brand and our results of operations.
We may also face increasing scrutiny from consumer protection regulators and activists, as well as increasingly become a
target for litigation, in the United States, Europe and other jurisdictions. For example, member groups of the European
Consumer Organization’s BEUC network have expressed concerns about certain consumer rights related to product
returns and dispute resolution with respect to transactions conducted on our AliExpress platform, and requested a review
of these consumer rights by their national consumer protection agencies. We only maintain product liability insurance for
certain businesses we operate, and do not maintain product liability insurance for products and services transacted on our
marketplaces, and our rights of indemnity from the merchants in our digital economy may not adequately cover us for
any liability we may incur. Consumer complaints and associated negative publicity could materially and adversely harm
our reputation and affect our business expansion. Claims brought against us under consumer protection laws, even if
unsuccessful, could result in significant expenditure of funds and diversion of management time and resources, which
could materially and adversely affect our business operations, net income and profitability.
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We may be accused of infringing intellectual property rights of third parties or violating content restrictions under
relevant laws.
Third parties may claim that our product and service offerings, the content on our platforms, including content available
through our digital media and entertainment business, search business, online reading platform, online music platform,
news feed features and IoT devices or our technology infringe upon their intellectual property rights or are provided
beyond the authorized scope. Although we have not in the past faced material litigation involving direct claims of
infringement by us, the possibility of intellectual property claims against us, whether in China or other jurisdictions,
increases as we continue to grow, particularly internationally. The establishment of, and issuance of reports by, the
Commission on the Theft of American Intellectual Property also highlights the current focus of the United States on
investigating, preventing and taking action against alleged misappropriation of intellectual property, that may result in
increased scrutiny, investigations, enforcement actions and litigation relating to intellectual property infringement. In
addition, in April 2019, the U.S. administration issued an executive order instructing the U.S. Department of Homeland
Security to coordinate with other federal agencies working to combat the counterfeiting of goods. In response, in January
2020, the U.S. Department of Homeland Security issued a report outlining a series of recommended government actions.
This executive order and the report from the U.S. Department of Homeland Security aim to, among other things, demand
more accountability from intermediary online marketplaces, such as ours, for the availability and sale of counterfeit
goods on their marketplaces. To that end, it specifically made recommendations of best practices that marketplaces could
utilize to fight counterfeiting. We have also acquired businesses, such as Youku, that have been, and may continue to be,
subject to liabilities for infringement of third-party intellectual property rights or other allegations based on the content
available on their websites and mobile apps or the services they provide. In addition, we expect our digital economy to
involve more and more user-generated content, including the entertainment content on Youku and our smart speakers, the
interactive media content displayed on Taobao Marketplace and Tmall, including live streams and short-form videos, as
well as the data generated, uploaded and saved by users of our cloud computing services, over which we have limited
control and we may be subject to claims for infringement of third-party intellectual property rights, or subject us to
additional scrutiny by the relevant government authorities. These claims or scrutiny, whether or not having merit, may
result in our expenditure of significant financial and management resources, injunctions against us or payment of
damages. We may need to obtain licenses from third parties who allege that we have infringed their rights, but these
licenses may not be available on terms acceptable to us or at all. These risks have been amplified by the increase in the
number of third parties whose sole or primary business is to assert these claims.
China has enacted laws and regulations governing Internet access and the distribution of products, services, news,
information, audio-video programs and other content through the Internet. The PRC government has prohibited the
distribution of information through the Internet that it deems to be in violation of PRC laws and regulations, impairs the
national dignity of China or the public interest, or is obscene, superstitious, fraudulent or defamatory. Users of certain of
our websites and platforms, including Youku, can upload content to these websites, mobile apps and platforms, which is
generally referred to as user-generated content. Due to the significant amount of content uploaded by our users, we may
not be able to identify all the videos or other content that may violate relevant laws and regulations. If any of the
information disseminated through our marketplaces, websites, mobile apps or other businesses we operate, including
videos and other content (including user-generated content) displayed on Youku’s or our other websites, mobile apps or
on our Tmall set-top boxes, smart speakers and smart televisions, or any content that we have produced or acquired, were
deemed by the PRC government to violate any content restrictions, we would not be able to continue to display or
distribute this content and could suffer losses or become subject to penalties, including confiscation of income, fines,
suspension of business and revocation of required licenses, which could materially and adversely affect our business,
financial condition and results of operations. The outcome of any claims, investigations and proceedings is inherently
uncertain, and in any event defending against these claims could be both costly and time-consuming, and could
significantly divert the efforts and resources of our management and other personnel. An adverse determination in any of
these litigation matters or proceedings could cause us to pay damages, incur legal and other costs, limit our ability to
conduct business or require us to change the manner in which we operate and harm our reputation. As we expand our
operations internationally, we expect that we will become subject to similar laws and regulations in other jurisdictions.
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We may not be able to protect our intellectual property rights.
We rely on a combination of trademark, fair trade practice, patent, copyright and trade secret protection laws in China
and other jurisdictions, as well as confidentiality procedures and contractual provisions, to protect our intellectual
property rights. We also enter into confidentiality agreements with our employees and any third parties who may access
our proprietary information, and we rigorously control access to our proprietary technology and information. In addition,
as our business expands and we increase our acquisition of and management of content, we expect to incur greater costs
to acquire, license and enforce our rights to content.
Intellectual property protection may not be sufficient in the jurisdictions in which we operate. Confidentiality agreements
may be breached by counterparties, and there may not be adequate remedies available to us for these breaches.
Accordingly, we may not be able to effectively protect our intellectual property rights or to enforce our contractual rights
in China or elsewhere. In addition, policing any unauthorized use of our intellectual property is difficult, time-consuming
and costly and the steps we have taken may be inadequate to prevent the misappropriation of our intellectual property. In
the event that we resort to litigation to enforce our intellectual property rights, this litigation could result in substantial
costs and a diversion of our managerial and financial resources. There can be no assurance that we will prevail in any
litigation. In addition, our trade secrets may be leaked or otherwise become available to, or be independently discovered
by, our competitors. Any failure in protecting or enforcing our intellectual property rights could have a material adverse
effect on our business, financial condition and results of operations.
We and Ant Group are subject to a broad range of laws and regulations, and future laws and regulations may impose
additional requirements and other obligations that could materially and adversely affect our business, financial
condition and results of operations.
The industries in which we and Ant Group operate in the PRC and other countries, including online and mobile
commerce and payments, financial services, cloud computing and digital media and entertainment and other online
content offerings, are highly regulated. Government authorities in the PRC and other countries are likely to continue to
issue new laws, rules and regulations governing the industries in which we and Ant Group operate in the PRC and other
countries and enhance enforcement of existing laws, rules and regulations. They have imposed, and may continue to
impose, requirements relating to, among other things, new and additional licenses, permits and approvals or governance
or ownership structures on us or certain of our businesses, Ant Group and our users.
For example, the E-commerce Law as promulgated imposes a series of requirements on e-commerce operators including
e-commerce platform operators, merchants operating on the platform and the individuals and entities carrying out
business online. See “Item 4. Information on the Company — B. Business Overview — Regulation — Regulation of
Online and Mobile Commerce.” Certain third-party platforms, although offering products and services competing with
our marketplaces, may not be deemed as e-commerce operators and may be subject to less stringent requirements with
respect to merchant regulation and consumer protection. The platform governance measures we adopt in response to the
enhanced regulatory requirements may fail to meet these requirements and may lead to penalties or our loss of merchants
to those platforms, or to complaints or claims made against us by merchants on our platforms. New regulations governing
various aspects of e-commerce platform operations, including those that may limit an e-commerce platform operator’s
ability to provide consumers with personalized shopping recommendations, could materially and adversely affect our
operating results.
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We have from time to time been subject, and are likely again in the future to be subject, to PRC and foreign government
inquiries and investigations, including those relating to online content, alleged third-party intellectual property
infringement, cybersecurity and privacy laws, and securities laws and regulations. We also face scrutiny, and have been
subject, and continue to be subject, to inquiries and investigations, from PRC and foreign governmental bodies that focus
on cross-border trade, tax, intellectual property protection, our investment activities, human rights, user privacy and data
protection matters and allegedly fraudulent or other criminal transactions. We may also face protectionist policies and
regulatory scrutiny, on national security grounds or for other reasons, in foreign countries in which we conduct business
or investment activities. None of these inquiries and investigations has resulted in significant restrictions on our business
operations. However, as we continue to grow in scale and significance, we expect to face increased scrutiny, which will,
at a minimum, result in our having to continue to increase our investment in compliance and related capabilities and
systems.
Ant Group, which through Alipay provides the substantial majority of the payment processing services on our
marketplaces as well as facilitating other financial and value-added services, such as wealth management, financing and
insurance, is subject to various laws, rules and regulations in the PRC and other countries where it operates, including
those governing banking, privacy, cross-border and domestic money transmission, anti-money laundering, counter-
terrorist financing and consumer protection laws, rules and regulations. See “Item 4. Information on the Company — B.
Business Overview — Regulation — Regulation Applicable to Alipay.” These laws, rules and regulations are highly
complex, constantly evolving and could change or be reinterpreted to be burdensome, difficult or impossible for Ant
Group to comply with.
As we and Ant Group further expand into international markets, we and Ant Group will increasingly become subject to
additional legal and regulatory compliance requirements as well as political and regulatory challenges, including scrutiny
on data privacy and security and anti-money laundering compliance, or on national security grounds or for other reasons,
to our business and investment activities in these markets. In addition, Alipay or its affiliates are required to maintain
payment business licenses in the PRC and are also required to obtain and maintain other applicable payment, money
transmitter or other related licenses and approvals in other countries or regions where they operate. In certain
jurisdictions where Alipay currently does not have the required licenses, Alipay provides payment processing and escrow
services through third-party service providers. If Alipay or its partners fail to obtain and maintain all required licenses
and approvals or otherwise fail to comply with applicable laws, rules and regulations, if new laws, rules or regulations
come into effect that impact Alipay or its partners’ businesses, or if any of Alipay’s partners ceases to provide services to
Alipay, its services could be suspended or severely disrupted, and our business, financial condition and results of
operations would be materially and adversely affected.
Tightening of tax compliance efforts that affect our merchants could materially and adversely affect our business,
financial condition and results of operations.
Tax legislation relating to the digital economy is still developing. Governments, both in China and in other jurisdictions,
may promulgate or strengthen the implementation of tax regulations that impose obligations on e-commerce companies,
which could increase the costs to consumers and merchants and make our platforms less competitive in these
jurisdictions. Governments may require operators of marketplaces, such as us, to assist in the enforcement of tax
registration requirements and the collection of taxes with respect to the revenue or profit generated by merchants from
transactions conducted on their platforms. We may also be requested by tax authorities to supply information about our
merchants, such as transaction records and bank account information, and assist in the enforcement of other tax
regulations, including the payment and withholding obligations against our merchants. As a result of more stringent tax
compliance requirements and liabilities, we may lose existing merchants and potential merchants might not be willing to
open storefronts on our marketplaces, which could in turn negatively affect us. Stricter tax enforcement by tax authorities
may also reduce the activities by merchants on our platforms and result in liability to us.
Any heightened tax law enforcement against participants in our digital economy (including imposition of reporting or
withholding obligations on operators of marketplaces with respect to VAT of merchants and stricter tax enforcement
against merchants generally) could have a material adverse effect on our business, financial condition and results
of operations.
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We may be subject to material litigation and regulatory proceedings.
We have been involved in a high volume of litigation in China and a small volume of potentially high-value litigation
outside of China relating principally to securities law class actions, third-party and principal intellectual property
infringement claims, contract disputes involving merchants and consumers on our platforms, consumer protection claims,
claims relating to data and privacy protection, employment related cases and other matters in the ordinary course of our
business. As our digital economy expands, including across jurisdictions and through the addition of new businesses, we
have encountered and may face an increasing number and a wider variety of these claims, including those brought against
us pursuant to anti-monopoly or unfair competitions laws or involving high amounts of alleged damages. Laws, rules and
regulations may vary in their scope and overseas laws and regulations may impose requirements that are more stringent
than, or which conflict with, those in China. We have acquired and may acquire companies that have been subject to or
may become subject to litigation, as well as regulatory proceedings. In addition, in connection with litigation or
regulatory proceedings we may be subject to in various jurisdictions, we may be prohibited by laws, regulations or
government authorities in one jurisdiction from complying with subpoenas, orders or other requests from courts or
regulators of other jurisdictions, including those relating to data held in or with respect to persons in these jurisdictions.
Our failure or inability to comply with the subpoenas, orders or requests could subject us to fines, penalties or other legal
liability, which could have a material adverse effect on our reputation, business, results of operations and the trading
price of our ADSs and/or Shares.
As publicly-listed companies, we and certain of our subsidiaries face additional exposure to claims and lawsuits inside
and outside of China. We will need to defend against these lawsuits, including any appeals should our initial defense be
successful. The litigation process may utilize a material portion of our cash resources and divert management’s attention
away from our day-to-day operations, all of which could harm our business. There can be no assurance that we will
prevail in any of these cases, and any adverse outcome of these cases could have a material adverse effect on our
reputation, business and results of operations. In addition, although we have obtained directors’ and officers’ liability
insurance, the insurance coverage may not be adequate to cover our obligations to indemnify our directors and officers,
fund a settlement of litigation in excess of insurance coverage or pay an adverse judgment in litigation.
In early 2016, the SEC informed us that it had initiated an investigation into whether there have been any violations of
the federal securities laws. The SEC has requested that we voluntarily provide it with documents and information relating
to, among other things, our consolidation policies and practices (including our prior practice of accounting for Cainiao
Network as an equity method investee), our policies and practices applicable to related party transactions in general, and
our reporting of operating data from the 11.11 global shopping festival. We are cooperating with the SEC and, through
our legal counsel, have been providing the SEC with requested documents and information. The SEC advised us that the
initiation of a request for information should not be construed as an indication by the SEC or its staff that any violation of
the federal securities laws has occurred. This matter is ongoing, and, as with any regulatory proceeding, we cannot
predict when it will be concluded.
The existence of litigation, claims, investigations and proceedings may harm our reputation, limit our ability to conduct
our business in the affected areas and adversely affect the trading price of our ADSs and/or Shares. The outcome of any
claims, investigations and proceedings is inherently uncertain, and in any event defending against these claims could be
both costly and time-consuming, and could significantly divert the efforts and resources of our management and other
personnel. An adverse determination in any litigation, investigation or proceeding could cause us to pay damages, incur
legal and other costs, limit our ability to conduct business or require us to change the manner in which we operate.
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Anti-monopoly and unfair competition claims or regulatory actions against us may result in our being subject to fines,
constraints on our business and damage to our reputation.
The PRC anti-monopoly enforcement agencies have in recent years strengthened enforcement under the PRC Anti-
monopoly Law, including levying significant fines, with respect to concentration of undertakings and cartel activity,
mergers and acquisitions, as well as abusive behavior by companies with market dominance. In March 2018, the SAMR
was formed as a new governmental agency to take over, among other things, the anti-monopoly enforcement functions
from the relevant departments under the MOFCOM, the NDRC and the SAIC, respectively. The SAMR stated that its
tasks are to safeguard consumer interests, and to ensure quality and safety through enhanced market regulation. The
SAMR has said that it will adopt an encouraging and cautious approach in regulating new technology, new industries,
new business models and new practices, with a goal of stimulating market viability and innovation, promoting
development and creating room for future growth.
Since its inception, the SAMR has continued to strengthen its anti-monopoly enforcement. The SAMR issued a new set
of guidelines with respect to merger control review in September 2018, and issued the Notice on Anti-monopoly
Enforcement Authorization on December 28, 2018, which grants authorizations to the SAMR’s province-level branches
for anti-monopoly enforcement within their respective jurisdictions. The SAMR also imposed several administrative
penalties on various companies for failing to duly make filings as to their transactions subject to merger control review
by the SAMR. The scope of the companies that were penalized is broad, and covers a variety of different industries. On
several recent occasions, including at administrative guidance meetings attended by Internet platform companies
including our company, the SAMR has indicated its view that certain business arrangements adopted by e-commerce
platforms, including arrangements seen as exclusivity arrangements, may constitute violation of the anti-monopoly and
unfair competition laws. The SAMR also indicated its intention of initiating investigations into these arrangements.
The PRC Anti-monopoly Law provides a private right of action for competitors, business partners or customers to bring
anti-monopoly claims against companies. In recent years, an increased number of companies have been exercising their
right to seek relief under the PRC Anti-monopoly Law. Some of these companies, including our competitors, business
partners and customers, have resorted to and may continue making public allegations or media campaigns against us,
submitting complaints to regulators or initiating private litigation that targets our prior and current business practices,
such as our market approach with traffic resource allocation on our e- commerce platforms, which we base on multiple
factors, and our alleged prior narrowly-deployed exclusive partnerships. Although we believe that our business practices
do not violate anti-monopoly or unfair competition laws, due to our large scale of business and close media attention,
there can be no assurance that regulators will not initiate anti-monopoly investigations into specific business practices we
have adopted.
Any anti-monopoly lawsuit, regulatory investigations or administrative proceedings initiated against us could also result
in our being subject to regulatory actions and constraints on our investments and acquisitions, which could include forced
termination of any agreements or transactions that may be determined by governmental authorities to be in violation of
anti-monopoly laws or the relevant filing requirements, required divestitures, limitations on certain pricing and business
practices and/or significant fines. As a result, we may be subject to significant difficulties in pursuing our investment and
acquisition strategy.
These allegations, claims, actions or proceedings, regardless of their merits, have, and may continue to, cause us to
change some of our business practices and hinder our business operations, which could decrease the popularity of our
businesses, products and services, cause our revenue and net income to decrease materially, and could lead to additional
regulatory inquiries, investigations or actions against us, such as profit disgorgement, heavy fines and various restrictions
on our businesses or investment activities. Any of the above circumstances could materially and adversely affect our
business, operations, reputation, brand and the trading price of our ADSs and/or Shares.
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We may increasingly become a target for public scrutiny, including complaints to regulatory agencies, negative media
coverage, including social media and malicious reports, all of which could severely damage our reputation and brand
and materially and adversely affect our business and prospects.
We process an extremely large number of transactions on a daily basis on our marketplaces and other businesses we
operate, and the high volume of transactions taking place in our digital economy and publicity about our business creates
the possibility of heightened attention from the public, regulators, the media and participants in our digital economy.
Changes in our services or policies have resulted and could result in objections by members of the public, the media,
including social media, participants in our digital economy or others. From time to time, these objections or allegations,
regardless of their veracity, may result in public protests or negative publicity, which could result in government inquiry
or harm our reputation and brand.
Corporate transactions we or related parties undertake, such as our partnership with the International Olympic
Committee, our consolidation of Ele.me and Koubei, our 33% equity interest in Ant Group, and other initiatives to
implement our New Retail strategy, grow our local consumer services business and expand into international markets,
may also subject us to increased media exposure and public scrutiny. There can be no assurance that we would not
become a target for regulatory or public scrutiny in the future or that scrutiny and public exposure would not severely
damage our reputation and brand as well as our business and prospects.
In addition, our directors, management and employees have been, and continue to be, subject to scrutiny by the media
and the public regarding their activities in and outside Alibaba Group, which may result in negative, unverified,
inaccurate or misleading information about them being reported by the press. Negative publicity about our founders,
directors, management or employees, even if unrelated to the products or services we offer, or even if untrue or
inaccurate, may harm our reputation and brand.
Our reputation, our brand and our business may be harmed by aggressive marketing and communications strategies
of our competitors.
Due to intense competition in our industry, we have been and may be the target of incomplete, inaccurate and false
statements and complaints about us and our products and services that could damage our reputation and brand and
materially deter consumers and customers from spending in our digital economy. In addition, competitors have used, and
may continue to use, methods such as lodging complaints with regulators, initiating frivolous and nuisance lawsuits, and
other forms of attack litigation and “lawfare” that attempt to harm our reputation and brand, hinder our operations, force
us to expend resources on responding to and defending against these claims, and otherwise gain a competitive advantage
over us by means of litigious and accusatory behavior. Our ability to respond on share price-sensitive information to our
competitors’ misleading marketing efforts, including lawfare, may be limited during our self-imposed quiet periods
around quarter ends consistent with our internal policies or due to legal prohibitions on permissible public
communications by us during certain other periods.
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Failure to comply with the terms of our indebtedness or enforcement of our obligations as a guarantor of other
parties’ indebtedness could have an adverse effect on our cash flow and liquidity.
As of March 31, 2020, we had US$11.45 billion in aggregate principal amount of unsecured senior notes and a
US$4 billion term loan outstanding, as well as a US$5.15 billion revolving credit facility that we have not yet drawn.
Under the terms of our indebtedness and under any debt financing arrangement that we may enter into in the future, we
are, and may be in the future, subject to covenants that could, among other things, restrict our business and operations. If
we breach any of these covenants, our lenders under our credit facilities and holders of our unsecured senior notes will be
entitled to accelerate our debt obligations. Any default under our credit facilities or unsecured senior notes could require
that we repay these debts prior to maturity as well as limit our ability to obtain additional financing, which in turn may
have a material adverse effect on our cash flow and liquidity. We also provided a guarantee for a term loan facility of
HK$7.7 billion (US$1.0 billion) in favor of Hong Kong Cingleot Investment Management Limited, a company that is
partially owned by Cainiao Network, in connection with a logistics center development project at the Hong Kong
International Airport. As of July 2, 2020, this entity has drawn down HK$618 million under this facility. In the event of
default by this entity under the loan facility, we may be required to repay the full amount or a portion of the outstanding
loan and interests and undertake the borrower’s other obligations under the loan facility. Enforcement against us under
this guarantee and other similar arrangements we may enter into in the future could materially and adversely affect our
cash flow and liquidity.
We may need additional capital but may not be able to obtain it on favorable terms or at all.
We may require additional cash resources due to future growth and development of our business, including any
investments or acquisitions we may decide to pursue. If our cash resources are insufficient to satisfy our cash
requirements, we may seek to issue additional equity or debt securities or obtain new or expanded credit facilities. Our
ability to obtain external financing in the future is subject to a variety of uncertainties. Offshore incorporated companies
deemed to be directly or indirectly controlled by individual PRC residents are required to complete filings before the
launch of any offshore debt issuance with a term of more than one year in accordance with applicable laws and
regulations. The filing procedure takes time which may result in our missing the best market windows for debt issuances
in the future. In addition, incurring indebtedness would subject us to increased debt service obligations and could result in
operating and financial covenants that would restrict our operations. Our ability to access international capital and
lending markets may be restricted at a time when we would like, or need, to do so, especially during times of increased
volatility and reduced liquidity in global financial markets and stock markets, including due to policy changes and
regulatory restrictions, which could limit our ability to raise funds. There can be no assurance that financing will be
available in a timely manner or in amounts or on terms acceptable to us, or at all. Any failure to raise needed funds on
terms favorable to us, or at all, could severely restrict our liquidity as well as have a material adverse effect on our
business, financial condition and results of operations. Moreover, any issuance of equity or equity-linked securities could
result in significant dilution to our existing shareholders.
We are subject to interest rate risk in connection with our indebtedness.
We are exposed to interest rate risk related to our indebtedness. The interest rates under certain of our offshore credit
facilities are based on a spread over LIBOR. As a result, the interest expenses associated with this indebtedness will be
subject to the potential impact of any fluctuation in LIBOR. Any increase in LIBOR could impact our financing costs if
not effectively hedged. Our Renminbi-denominated bank borrowings are also subject to interest rate risk. Although from
time to time, we use hedging transactions in an effort to reduce our exposure to interest rate risk, these hedges may not
be effective.
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In addition, on July 27, 2017, the United Kingdom Financial Conduct Authority, or the FCA, which regulates LIBOR,
announced that it intends to stop persuading or compelling banks to submit rates for the calculation of LIBOR to the
administrator of LIBOR after 2021, or the FCA Announcement. The FCA Announcement indicates that the continuation
of LIBOR on the current basis is not guaranteed after 2021. Uncertainties surrounding changes to the basis on which
LIBOR is calculated or the phase-out of LIBOR, which may cause a sudden and prolonged increase or decrease in
LIBOR, could adversely affect our operating results and financial condition, as well as our cash flows. There can be no
assurance that any hedging transactions we use will be effective in protecting us against adverse changes in interest rates
or that our bank counterparties will be able to perform their obligations. Once LIBOR is not available, the terms of
certain of our offshore credit facilities will require alternative determination procedures, which may result in an interest
rate differing from our expectations and could materially affect the cost of these facilities to us.
We may not have sufficient insurance coverage to cover our business risks.
We have obtained insurance to cover certain potential risks and liabilities, such as property damage, business
interruptions, public liabilities and product liability insurance for certain businesses we operate. However, insurance
companies in China and other jurisdictions in which we operate may offer limited business insurance products. As a
result, we may not be able to acquire any insurance for all types of risks we face in our operations in China and
elsewhere, and our coverage may not be adequate to compensate for all losses that may occur, particularly with respect to
loss of business or operations. We do not maintain product liability insurance for products and services transacted on our
marketplaces or other businesses we operate, and our rights of indemnity from the merchants in our digital economy may
not adequately cover us for any liability we may incur. We also do not maintain key-man life insurance. This potentially
insufficient coverage could expose us to potential claims and losses. Any business disruption, litigation, regulatory
action, outbreak of epidemic disease or natural disaster could also expose us to substantial costs and diversion of
resources. There can be no assurance that our insurance coverage is sufficient to prevent us from any loss or that we will
be able to successfully claim our losses under our current insurance policy on a timely basis, or at all. If we incur any loss
that is not covered by our insurance policies, or the compensated amount is significantly less than our actual loss, our
business, financial condition and results of operations could be materially and adversely affected.
Risks Related to Our Corporate Structure
The Alibaba Partnership and related voting agreements limit the ability of our shareholders to nominate and elect
directors.
Our Articles of Association allow the Alibaba Partnership to nominate or, in limited situations, appoint a simple majority
of our board of directors. If at any time our board of directors consists of less than a simple majority of directors
nominated or appointed by the Alibaba Partnership for any reason, including because a director previously nominated by
the Alibaba Partnership ceases to be a member of our board of directors or because the Alibaba Partnership had
previously not exercised its right to nominate or appoint a simple majority of our board of directors, the Alibaba
Partnership will be entitled (in its sole discretion) to nominate or appoint such number of additional directors to the board
as necessary to ensure that the directors nominated or appointed by the Alibaba Partnership comprise a simple majority of
our board of directors.
In addition, we have entered into a voting agreement pursuant to which SoftBank, Altaba, Jack Ma and Joe Tsai have
agreed to vote their Shares in favor of the Alibaba Partnership director nominees at each annual general shareholders
meeting for so long as SoftBank owns at least 15% of our outstanding ordinary shares. Furthermore, the voting
agreement provides that SoftBank has the right to nominate one director to our board until SoftBank owns less than 15%
of our outstanding ordinary shares, and that right is also reflected in our Articles. In addition, pursuant to the voting
agreement, Altaba, Jack Ma and Joe Tsai have agreed to vote their shares (including shares for which they have voting
power) in favor of the election of the SoftBank director nominee at each annual general shareholders meeting in which
the SoftBank nominee stands for election.
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Moreover, subject to certain exceptions, pursuant to the voting agreement SoftBank and Altaba have agreed to give Jack
and Joe a proxy over, with respect to SoftBank, any portion of its shareholdings exceeding 30% of our outstanding shares
and, with respect to Altaba, all of its shareholdings up to a maximum of 972 million of our ordinary shares, after having
accounted for the subdivision of each of our ordinary shares into eight ordinary shares, with effect from July 30, 2019,
which we refer to as the Share Split. Based on publicly disclosed information, as of the date of this annual report, Altaba
no longer holds any Shares. These proxies will remain in effect until Jack Ma owns less than 1% of our ordinary shares
on a fully diluted basis or we materially breach the voting agreement.
This governance structure and contractual arrangement limit the ability of our shareholders to influence corporate
matters, including any matters determined at the board level. In addition, the nomination right granted to the Alibaba
Partnership will remain in place for the life of the Alibaba Partnership unless our Articles are amended to provide
otherwise by a vote of shareholders representing at least 95% of shares that vote at a shareholders meeting. The
nomination rights of the Alibaba Partnership will remain in place notwithstanding a change of control or merger of our
company. These provisions and agreements could have the effect of delaying, preventing or deterring a change in control
and could limit the opportunity of our shareholders to receive a premium for the ADSs and/or Shares they hold, and could
also materially decrease the price that some investors are willing to pay for our ADSs and/or Shares. As of July 2, 2020,
the parties to the voting agreement and the partners of the Alibaba Partnership held in the aggregate more than 30% of
our outstanding ordinary shares (including shares underlying vested and unvested awards). See “Item 6. Directors, Senior
Management and Employees — A. Directors and Senior Management — Alibaba Partnership.”
The interests of the Alibaba Partnership may conflict with the interests of our shareholders.
The nomination and appointment rights of the Alibaba Partnership limit the ability of our shareholders to influence
corporate matters, including any matters to be determined by our board of directors. The interests of the Alibaba
Partnership may not coincide with the interests of our shareholders, and the Alibaba Partnership or its director nominees
may make decisions with which they disagree, including decisions on important topics such as compensation,
management succession, acquisition strategy and our business and financial strategy. Since the Alibaba Partnership will
continue to be largely comprised of members of our management team, the Alibaba Partnership and its director
nominees, consistent with our operating philosophy, may focus on the long-term interests of participants in our digital
economy at the expense of our short-term financial results, which may differ from the expectations and desires of
shareholders unaffiliated with the Alibaba Partnership. To the extent that the interests of the Alibaba Partnership differ
from the interests of any of our shareholders, our shareholders may be disadvantaged by any action that the Alibaba
Partnership may seek to pursue.
Our Articles of Association contain anti-takeover provisions that could adversely affect the rights of holders of our
ordinary shares and ADSs.
Our articles of association contain certain provisions that could limit the ability of third parties to acquire control of our
company, including:
●
●
●
a provision that grants authority to our board of directors to establish from time to time one or more series
of preferred shares without action by our shareholders and to determine, with respect to any series of
preferred shares, the terms and rights of that series;
a provision that a business combination, if it may adversely affect the right of the Alibaba Partnership to
nominate or appoint a simple majority of our board of directors, including the protective provisions for this
right under our Articles, shall be approved upon vote of shareholders representing at least 95% of the votes
in person or by proxy present at a shareholders meeting; and
a classified board with staggered terms that will prevent the replacement of a majority of directors at
one time.
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These provisions could have the effect of delaying, preventing or deterring a change in control, and could limit the
opportunity for our shareholders to receive a premium for their ADSs and/or Shares, and could also materially decrease
the price that some investors are willing to pay for our ADSs and/or Shares.
SoftBank owns approximately 24.9% of our outstanding ordinary shares and its interests may differ from those of our
other shareholders.
As of July 2, 2020, SoftBank beneficially owned approximately 24.9% of our outstanding ordinary shares. Subject to
certain exceptions, SoftBank has agreed to grant the voting power of any portion of its shareholding exceeding 30% of
our outstanding ordinary shares to Jack Ma and Joe Tsai by proxy. Under the terms of the voting agreement we entered
into with SoftBank, SoftBank also has the right to nominate one member of our board of directors, and Altaba, Jack and
Joe have agreed to vote their shares (including shares for which they have voting power) in favor of the SoftBank director
nominees at each annual general shareholders meeting in which the SoftBank nominee stands for election until such time
as SoftBank holds less than 15% of our outstanding ordinary shares. SoftBank’s director nomination right is also
reflected in our Articles of Association. Except with regard to shareholder votes relating to the Alibaba Partnership
director nominees, SoftBank will have significant influence over the outcome of matters that require shareholder votes
and accordingly over our business and corporate matters. SoftBank may exercise its shareholder rights in a way that it
believes is in its own best interest, which may conflict with the interest of our other shareholders. These actions may be
taken even if SoftBank is opposed by our other shareholders.
For more information, see “Item 7. Major Shareholders and Related Party Transactions — B. Related Party
Transactions — Transactions and Agreements with SoftBank — Voting Agreement.”
If the PRC government deems that the contractual arrangements in relation to our variable interest entities do not
comply with PRC governmental restrictions on foreign investment, or if these regulations or the interpretation of
existing regulations changes in the future, we could be subject to penalties, or be forced to relinquish our interests in
those operations, which would materially and adversely affect our business, financial results and the trading price of
our ADSs and/or Shares.
Foreign ownership of certain types of Internet businesses, such as Internet information services, is subject to restrictions
under applicable PRC laws, rules and regulations. Under these laws and regulations, foreign investors are generally not
permitted to own more than 50% of the equity interests in a value-added telecommunication service provider. A major
foreign investor holding equity interests in a value-added telecommunications service provider in the PRC must also have
experience and a good track record in providing value-added telecommunications services overseas. Although foreign
investors are allowed to hold up to 100% of all equity interests in certain value-added telecommunications services in
China, including the online data processing and transaction processing business (operational e-commerce), other
requirements provided by the relevant rules (such as the track record and experience requirement for a major foreign
investor) still apply. See “Item 4. Information on the Company — B. Business Overview — Regulation — Regulation of
Telecommunications and Internet Information Services — Regulation of Telecommunication Services” and “Item 4.
Information on the Company — B. Business Overview — Regulation — Other Regulations — Regulation of Foreign
Investment.”
While the significant majority of our revenue in fiscal year 2020 was not generated by our variable interest entities, we
provide Internet information services in China, which are critical to our business, through a number of PRC incorporated
variable interest entities. Contractual arrangements between us and the variable interest entities and their equity holders
give us effective control over each of the variable interest entities and enable us to obtain substantially all of the
economic benefits arising from the variable interest entities as well as to consolidate the financial results of the variable
interest entities in our results of operations. Although the structure we have adopted is consistent with longstanding
industry practice, and is commonly adopted by comparable companies in China, the PRC government may not agree that
these arrangements comply with PRC licensing, registration or other regulatory requirements, with existing policies or
with requirements or policies that may be adopted in the future. We are in the process of enhancing the structure of our
variable interest entities. See “— We are in the process of enhancing the structure of some of our variable interest
entities, and its completion is subject to uncertainties.”
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In the opinion of Fangda Partners, our PRC counsel, the ownership structures of our major wholly-owned entities and
variable interest entities in China do not and will not violate any applicable PRC law, regulation or rule currently in
effect; and the contractual arrangements between our major variable interest entities, the corresponding wholly-owned
entities and the respective equity holders of our major variable interest entities governed by PRC law are valid, binding
and enforceable in accordance with their terms and applicable PRC laws and regulations currently in effect and will not
violate any applicable PRC law, rule or regulation currently in effect. However, Fangda Partners has also advised us that
there are substantial uncertainties regarding the interpretation and application of current PRC laws, rules and regulations.
Accordingly, the possibility that the PRC regulatory authorities and PRC courts may in the future take a view that is
contrary to the opinion of our PRC legal counsel cannot be ruled out.
It is uncertain whether any new PRC laws, rules or regulations relating to variable interest entity structures will be
adopted or if adopted, what they would provide. Please also see “— Substantial uncertainties exist with respect to the
interpretation and implementation of the PRC Foreign Investment Law and its implementing rules and how they may
impact the viability of our current corporate structure, business, financial condition and results of operations.”
If we or any of our variable interest entities are found to be in violation of any existing or future PRC laws, rules or
regulations, or fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities
would have broad discretion to take action in dealing with these violations or failures, including revoking the business
and operating licenses of our PRC subsidiaries or the variable interest entities, requiring us to discontinue or restrict our
operations, restricting our right to collect revenue, blocking one or more of our websites, requiring us to restructure our
operations or taking other regulatory or enforcement actions against us. The imposition of any of these measures could
result in a material adverse effect on our ability to conduct all or any portion of our business operations. In addition, it is
unclear what impact the PRC government actions would have on us and on our ability to consolidate the financial results
of any of our variable interest entities in our consolidated financial statements, if the PRC government authorities were to
find our legal structure and contractual arrangements to be in violation of PRC laws, rules and regulations. If the
imposition of any of these government actions causes us to lose our right to direct the activities of any of our variable
interest entities or otherwise separate from any of these entities and if we are not able to restructure our ownership
structure and operations in a satisfactory manner, we would no longer be able to consolidate the financial results of our
variable interest entities in our consolidated financial statements. Any of these events would have a material adverse
effect on our business, financial condition and results of operations.
We are in the process of enhancing the structure of some of our variable interest entities, and its completion is subject
to uncertainties.
In order to further improve our control over our variable interest entities, reduce key man risks associated with having
certain individuals be the equity holders of the variable interest entities, and address the uncertainty resulting from any
potential disputes between us and the individual equity holders of the variable interest entities that may arise, we are in
the process of the enhancing the structure of our variable interest entities, or the VIE Structure Enhancement.
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Prior to the completion of the VIE Structure Enhancement, the variable interest entities were owned, or are owned, by a
few PRC citizens who are our founders or employees or by PRC entities owned by these PRC citizens. After completion
of the VIE Structure Enhancement, those variable interest entities are, or will be, directly owned by PRC limited liability
companies that are indirectly held by selected members of the Alibaba Partnership or our management who are PRC
citizens through PRC limited partnerships jointly established by these individuals. We enter into contractual
arrangements, which are substantially similar to the contractual arrangements we have historically used for our variable
interest entities, with the above-mentioned multiple layers of legal entities and variable interest entity interest holders.
The contractual arrangements, both before and after the VIE Structure Enhancement, give us effective control over each
of those variable interest entities and enable us to obtain substantially all of the economic benefits arising from those
variable interest entities as well as to consolidate the financial results of those variable interest entities in our results of
operations. Please also see “Item 4. Information on the Company — C. Organizational Structure.”
While we believe the new structure following completion of the VIE Structure Enhancement is consistent with
longstanding industry practice, the PRC government may not agree that these arrangements comply with PRC licensing,
registration or other regulatory requirements, with existing policies or with requirements or policies that may be adopted
in the future. The VIE Structure Enhancement process is subject to a number of uncertainties, including registration of
the transfer of the equity interests, registration of the new equity pledges, and the receipt of required filings or approvals
of amendments to certain operating permits, including the Value-added Telecommunication Business Operation Permit,
Network Culture Permit and the License for Transmission of Audio-Visual Programs through Information Network. If
we are unable to successfully complete these processes involved in the VIE Structure Enhancement, or if these processes
are subsequently challenged, we will be unable to enjoy the benefits we expect, including the anticipated enhanced
control over those variable interest entities, or reduced key man risks or the uncertainty resulting from any potential
disputes among us and the individual equity holders of those variable interest entities as discussed above.
For further information, See “— If the PRC government deems that the contractual arrangements in relation to our
variable interest entities do not comply with PRC governmental restrictions on foreign investment, or if these regulations
or the interpretation of existing regulations changes in the future, we could be subject to penalties, or be forced to
relinquish our interests in those operations, which would materially and adversely affect our business, financial results
and the trading price of our ADSs and/or Shares” and “Item 4. Information on the Company — C. Organizational
Structure.”
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Substantial uncertainties exist with respect to the interpretation and implementation of the PRC Foreign Investment
Law and its implementing rules and how they may impact the viability of our current corporate structure, business,
financial condition and results of operations.
The VIE structure has been adopted by many China-based companies, including us and certain of our equity investees, to
obtain licenses and permits necessary to operate in industries that currently are subject to restrictions on or prohibitions
for foreign investment in China. The MOFCOM published a discussion draft of the proposed Foreign Investment Law in
January 2015, or the 2015 Draft PRC Foreign Investment Law, according to which, variable interest entities that are
controlled via contractual arrangements would be deemed as foreign-invested enterprises, if they are ultimately
“controlled” by foreign investors. In March 2019, the National People’s Congress promulgated the Foreign Investment
Law, or the 2019 PRC Foreign Investment Law. In December 2019, the PRC State Council promulgated the
Implementing Rules of the Foreign Investment Law of the People’s Republic of China, or the Implementing Rules, to
further clarify and elaborate upon relevant provisions of the 2019 PRC Foreign Investment Law. The 2019 PRC Foreign
Investment Law and the Implementing Rules both became effective on January 1, 2020 and replaced major former laws
and regulations governing foreign investment in the PRC. See “Item 4. Information on the Company — B. Business
Overview — Regulation — Other Regulations — Regulation of Foreign Investment.” The 2019 PRC Foreign Investment
Law and the Implementing Rules do not use the concept of “control” in determining whether a company should be
considered as a foreign-invested enterprise, nor do they explicitly classify the VIE structure as a method of foreign
investment. However, the 2019 PRC Foreign Investment Law has a catch-all provision that broadly defines “foreign
investments” as those made by foreign investors in China through other methods as specified in laws, administrative
regulations, or as stipulated by the PRC State Council. Due to this broad definition of “foreign investments,” since the
2019 PRC Foreign Investment Law and the Implementation Rules are newly adopted and relevant government authorities
may promulgate additional rules and regulations as to the interpretation and implementation of the 2019 PRC Foreign
Investment Law, there can be no assurance that the concept of “control” as reflected in the 2015 Draft PRC Foreign
Investment Law, will not be reintroduced, or that the VIE structure adopted by us will not be deemed as a method of
foreign investment by other laws, regulations and rules. Accordingly, there are substantial uncertainties as to whether our
VIE structure may be deemed as a method of foreign investment in the future. If our VIE structure were to be deemed as
a method of foreign investment under any future laws, regulations and rules, and if any of our business operations were to
fall under the “negative list” for foreign investment, we would need to take further actions in order to comply with these
laws, regulations and rules, which may materially and adversely affect our current corporate structure, business, financial
condition and results of operations.
Our contractual arrangements may not be as effective in providing control over the variable interest entities as direct
ownership.
We rely on contractual arrangements with our variable interest entities to operate part of our Internet businesses in China
and other businesses in which foreign investment is restricted or prohibited. For a description of these contractual
arrangements, see “Item 4. Information on the Company — C. Organizational Structure — Contractual Arrangements
among Our Wholly-Owned Entities, Variable Interest Entities and the Variable Interest Entity Equity Holders.” These
contractual arrangements may not be as effective as direct ownership in providing us with control over our variable
interest entities.
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If we had direct ownership of the variable interest entities, we would be able to exercise our rights as an equity holder
directly to effect changes in the boards of directors of those entities, which could effect changes at the management and
operational level. Under our contractual arrangements, we may not be able to directly change the members of the boards
of directors of these entities and would have to rely on the variable interest entities and the variable interest entity equity
holders to perform their obligations in order to exercise our control over the variable interest entities. The variable
interest entity equity holders may have conflicts of interest with us or our shareholders, and they may not act in our best
interests or may not perform their obligations under these contracts. Pursuant to the call options, we may replace the
equity holders of the variable interest entities at any time pursuant to the contractual arrangements. However, if any
equity holder is uncooperative in the replacement of the equity holders or there is any dispute relating to these contracts
that remains unresolved, we will have to enforce our rights under the contractual arrangements through the operations of
PRC law and arbitral or judicial agencies, which may be costly and time-consuming and will be subject to uncertainties
in the PRC legal system. See “— Any failure by our variable interest entities or their equity holders to perform their
obligations under the contractual arrangements would have a material adverse effect on our business, financial condition
and results of operations.” Consequently, the contractual arrangements may not be as effective in ensuring our control
over the relevant portion of our business operations as direct ownership.
Any failure by our variable interest entities or their equity holders to perform their obligations under the contractual
arrangements would have a material adverse effect on our business, financial condition and results of operations.
If our variable interest entities or their equity holders fail to perform their respective obligations under the contractual
arrangements, we may have to incur substantial costs and expend additional resources to enforce the arrangements.
Although we have entered into call option agreements in relation to each variable interest entity, which provide that we
may exercise an option to acquire, or nominate a person to acquire, ownership of the equity in that entity or, in some
cases, its assets, to the extent permitted by applicable PRC laws, rules and regulations, the exercise of these call options is
subject to the review and approval of the relevant PRC governmental authorities. We have also entered into equity pledge
agreements with the equity holders with respect to each variable interest entity, including the general partners and limited
partners of the PRC limited partnerships that indirectly hold our variable interest entities pursuant to the VIE Structure
Enhancement, to secure certain obligations of the variable interest entity or its equity holders to us under the contractual
arrangements. In addition, the enforcement of these agreements through arbitral or judicial agencies, if any, may be
costly and time-consuming and will be subject to uncertainties in the PRC legal system. Moreover, our remedies under
the equity pledge agreements are primarily intended to help us collect debts owed to us by the variable interest entities or
the variable interest entity equity holders under the contractual arrangements and may not help us in acquiring the assets
or equity of the variable interest entities.
In addition, with respect to the variable interest entities that are directly owned by individuals, although the terms of the
contractual arrangements provide that they will be binding on the successors of the variable interest entity equity holders,
as those successors are not a party to the agreements, it is uncertain whether the successors in case of the death,
bankruptcy or divorce of a variable interest entity equity holder will be subject to or will be willing to honor the
obligations of the variable interest entity equity holder under the contractual arrangements. If the relevant variable
interest entity or its equity holder (or its successor), as applicable, fails to transfer the shares of the variable interest entity
according to the respective call option agreement or equity pledge agreement, we would need to enforce our rights under
the call option agreement or equity pledge agreement, which may be costly and time-consuming and may not
be successful.
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The contractual arrangements are governed by PRC law and provide for the resolution of disputes through arbitration or
court proceedings in China. Accordingly, these contracts would be interpreted in accordance with PRC law and any
disputes would be resolved in accordance with PRC legal procedures. Uncertainties in the PRC legal system could limit
our ability to enforce the contractual arrangements. Under PRC law, if the losing parties fail to carry out the arbitration
awards or court judgments within a prescribed time limit, the prevailing parties may only enforce the arbitration awards
or court judgments in PRC courts, which would require additional expense and delay. In the event we are unable to
enforce the contractual arrangements, we may not be able to exert effective control over the variable interest entities, and
our ability to conduct our business, as well as our financial condition and results of operations, may be materially and
adversely affected.
We may lose the ability to use, or otherwise benefit from, the licenses, approvals and assets held by our variable
interest entities, which could severely disrupt our business, render us unable to conduct some or all of our business
operations and constrain our growth.
Although the significant majority of our revenues are generated, and the significant majority of our operational assets are
held, by our wholly-owned entities, which are our subsidiaries, our variable interest entities hold licenses and approvals
and assets that are necessary for our business operations, as well as equity interests in a series of our portfolio companies,
to which foreign investments are typically restricted or prohibited under applicable PRC law. The contractual
arrangements contain terms that specifically obligate variable interest entity equity holders to ensure the valid existence
of the variable interest entities and restrict the disposal of material assets of the variable interest entities. However, in the
event the variable interest entity equity holders breach the terms of these contractual arrangements and voluntarily
liquidate our variable interest entities, or any of our variable interest entities declares bankruptcy and all or part of its
assets become subject to liens or rights of third-party creditors, or are otherwise disposed of without our consent, we may
be unable to conduct some or all of our business operations or otherwise benefit from the assets held by the variable
interest entities, which could have a material adverse effect on our business, financial condition and results of operations.
Furthermore, if any of our variable interest entities undergoes a voluntary or involuntary liquidation proceeding, its
equity holder or unrelated third-party creditors may claim rights to some or all of the assets of the variable interest entity,
thereby hindering our ability to operate our business as well as constrain our growth.
The equity holders, directors and executive officers of the variable interest entities may have potential conflicts of
interest with us.
PRC laws provide that a director and an executive officer owes a fiduciary duty to the company he or she directs or
manages. The directors and executive officers of the variable interest entities, including the relevant members of the
Alibaba Partnership or our management, must act in good faith and in the best interests of the variable interest entities
and must not use their respective positions for personal gain. On the other hand, as a director of our company, the
relevant individuals have a duty of care and loyalty to us and to our shareholders as a whole under Cayman Islands law.
We control our variable interest entities through contractual arrangements and the business and operations of our variable
interest entities are closely integrated with the business and operations of our subsidiaries. Nonetheless, conflicts of
interests for these individuals may arise due to dual roles both as equity holders, directors and executive officers of the
variable interest entities and as our directors or employees.
There can be no assurance that these individual shareholders of our variable interest entities will always act in our best
interests should any conflicts of interest arise, or that any conflicts of interest will always be resolved in our favor. There
also can be no assurance that these individuals will ensure that the variable interest entities will not breach the existing
contractual arrangements. If we cannot resolve any of these conflicts of interest or any related disputes, we would have to
rely on legal proceedings to resolve these disputes and/or take enforcement action under the contractual arrangements.
There is substantial uncertainty as to the outcome of any of these legal proceedings. See “— Any failure by our variable
interest entities or their equity holders to perform their obligations under the contractual arrangements would have a
material adverse effect on our business, financial condition and results of operations.”
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The contractual arrangements with our variable interest entities may be subject to scrutiny by the PRC tax authorities.
Any pricing adjustment of a related party transaction could lead to additional taxes, and therefore substantially reduce
our consolidated net income and the value of your investment.
The tax regime in China is rapidly evolving and there is significant uncertainty for taxpayers in China as PRC tax laws
may be interpreted in significantly different ways. The PRC tax authorities may assert that we or our subsidiaries or the
variable interest entities or their equity holders are required to pay additional taxes on previous or future revenue or
income. In particular, under applicable PRC laws, rules and regulations, arrangements and transactions among related
parties, such as the contractual arrangements with our variable interest entities, may be subject to audit or challenge by
the PRC tax authorities. If the PRC tax authorities determine that any contractual arrangements were not entered into on
an arm’s length basis and therefore constitute a favorable transfer pricing, the PRC tax liabilities of the relevant
subsidiaries and/or variable interest entities and/or variable interest entity equity holders could be increased, which could
increase our overall tax liabilities. In addition, the PRC tax authorities may impose late payment interest. Our net income
may be materially reduced if our tax liabilities increase.
Risks Related to Doing Business in the People’s Republic of China
Changes in the political and economic policies of the PRC government may materially and adversely affect our
business, financial condition and results of operations and may result in our inability to sustain our growth and
expansion strategies.
Although we have operating subsidiaries located in various countries and regions, our operations in China currently
contribute the large majority of our revenue. Accordingly, our financial condition and results of operations are affected to
a significant extent by economic, political and legal developments in the PRC.
The PRC economy differs from the economies of most developed countries in many respects, including the extent of
government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. A
substantial portion of productive assets in China is still owned by the government. In addition, the PRC government
regulates industry development by imposing industrial policies. The PRC government also plays a significant role in
China’s economic growth by allocating resources, controlling payment of foreign currency-denominated obligations,
setting monetary policy, regulating financial services and institutions and providing preferential treatment to particular
industries or companies.
While the PRC economy has experienced significant growth in the past four decades, growth has been uneven, both
geographically and among various sectors of the economy. The PRC government has implemented various measures to
encourage economic growth and guide the allocation of resources. Some of these measures may benefit the overall PRC
economy, but may also have a negative effect on us. Our financial condition and results of operations could be materially
and adversely affected by government control over capital investments or changes in tax regulations that are applicable to
us. In addition, the PRC government has implemented in the past certain measures, including interest rate increases, to
control the pace of economic growth. These measures may cause decreased economic activity. Any prolonged slowdown
in the Chinese economy could lead to a reduction in demand for our services and consequently have a material adverse
effect on our businesses, financial condition and results of operations.
There are uncertainties regarding the interpretation and enforcement of PRC laws, rules and regulations.
Most of our operations are conducted in the PRC, and are governed by PRC laws, rules and regulations. Our PRC
subsidiaries are subject to laws, rules and regulations applicable to foreign investment in China. The PRC legal system is
a civil law system based on written statutes. Unlike the common law system, prior court decisions may be cited for
reference but have limited precedential value.
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China has not developed a fully integrated legal system, and recently enacted laws, rules and regulations may not
sufficiently cover all aspects of economic activities in China or may be subject to a significant degree of interpretation by
PRC regulatory agencies and courts. In particular, because these laws, rules and regulations are relatively new, and
because of the limited number of published decisions and the non-precedential nature of these decisions, and because the
laws, rules and regulations often give the relevant regulator significant discretion in how to enforce them, the
interpretation and enforcement of these laws, rules and regulations involve uncertainties and can be inconsistent and
unpredictable. Therefore, it is possible that our existing operations may be found not to be in full compliance with
relevant laws and regulations in the future. In addition, the PRC legal system is based in part on government policies and
internal rules, some of which are not published on a timely basis or at all, and which may have a retroactive effect. As a
result, we may not be aware of our violation of these policies and rules until after the occurrence of the violation.
Any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of
resources and management attention. Since PRC administrative and court authorities have significant discretion in
interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of
administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems.
These uncertainties may impede our ability to enforce the contracts we have entered into and could materially and
adversely affect our business, financial condition and results of operations.
PRC regulations regarding acquisitions impose significant regulatory approval and review requirements, which could
make it more difficult for us to pursue growth through acquisitions.
Under the PRC Anti-monopoly Law, companies undertaking certain investments and acquisitions relating to businesses
in China must notify the anti-monopoly enforcement agency, in advance of any transaction where the parties’ revenues in
the China market exceed certain thresholds and the buyer would obtain control of, or decisive influence over, the other
party. In addition, on August 8, 2006, six PRC regulatory agencies, including the MOFCOM, the SASAC, the STA, the
SAIC, the CSRC, and the SAFE, jointly adopted the M&A Rules, which came into effect on September 8, 2006 and was
amended on June 22, 2009. Under the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign
Investors, or the M&A Rules, the approval of MOFCOM must be obtained in circumstances where overseas companies
established or controlled by PRC enterprises or residents acquire domestic companies affiliated with PRC enterprises or
residents. Applicable PRC laws, rules and regulations also require certain merger and acquisition transactions to be
subject to security review.
Due to the level of our revenues, our proposed acquisition of control of, or decisive influence over, any company with
revenues within China of more than RMB400 million in the year prior to any proposed acquisition would be subject to
the SAMR merger control review. As a result of our size, many of the transactions we undertook and may undertake
could be subject to SAMR merger review. Complying with the requirements of the relevant regulations to complete these
transactions could be time-consuming, and any required approval processes, including approval from SAMR, may be
uncertain and could delay or inhibit our ability to complete these transactions, which could affect our ability to expand
our business maintain our market share or otherwise achieve the goals of our acquisition strategy.
According to the Regulations on Enterprise Outbound Investment issued by the NDRC in December 2017, which came
into effect on March 1, 2018, we may also need to report to the NDRC relevant information on overseas investments with
an amount of US$300 million or more in non-sensitive areas, and obtain the NDRC’s approval for our overseas
investments in sensitive areas, if any, before the closing of the investments. Accordingly, these regulations may restrict
our ability to make investments in some regions and industries overseas, and may subject any proposed investments to
additional delays and increased uncertainty, as well as heightened scrutiny, including after the investments have
been made.
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Our ability to carry out our investment and acquisition strategy may be materially and adversely affected by the
regulatory authorities’ current practice, which creates significant uncertainty as to the timing of receipt of relevant
approvals and whether transactions that we may undertake would subject us to fines or other administrative penalties and
negative publicity and whether we will be able to complete investments and acquisitions in the future in a timely manner
or at all.
PRC regulations relating to investments in offshore companies by PRC residents may subject our PRC-resident
beneficial owners or our PRC subsidiaries to liability or penalties, limit our ability to inject capital into our PRC
subsidiaries or limit our PRC subsidiaries’ ability to increase their registered capital or distribute profits.
SAFE promulgated the SAFE Circular 37 on July 4, 2014, which replaced the former circular commonly known as
“SAFE Circular 75” promulgated by SAFE on October 21, 2005. SAFE Circular 37 and its implementing rules require
PRC residents to register with banks designated by local branches of SAFE in connection with their direct establishment
or indirect control of an offshore entity, for the purpose of overseas investment and financing, with the PRC residents’
legally owned assets or equity interests in domestic enterprises or offshore assets or interests, referred to in SAFE
Circular 37 as a “special purpose vehicle.”
We notified substantial beneficial owners of ordinary shares who we know are PRC residents of their filing obligation,
and pursuant to the former SAFE Circular 75, we filed the above-mentioned foreign exchange registration on behalf of
certain employee shareholders who we know are PRC residents. However, we may not be aware of the identities of all of
our beneficial owners who are PRC residents. We do not have control over our beneficial owners, and there can be no
assurance that all of our PRC-resident beneficial owners will comply with relevant SAFE regulations. The failure of our
beneficial owners who are PRC residents to register or amend their SAFE registrations in a timely manner or the failure
of future beneficial owners of our company who are PRC residents to comply with the registration procedures set forth in
SAFE Circular 37 and subsequent implementation rules, may subject the beneficial owners or our PRC subsidiaries to
fines and legal sanctions.
Furthermore, since it is unclear how those SAFE regulations, and any future regulation concerning offshore or cross-
border transactions, will be further interpreted, amended and implemented by the relevant PRC government authorities,
we cannot predict how these regulations will affect our business operations or future strategy. Failure to register or
comply with relevant requirements may also limit our ability to contribute additional capital to our PRC subsidiaries and
limit our PRC subsidiaries’ ability to distribute dividends to our company. These risks may have a material adverse effect
on our business, financial condition and results of operations.
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Any failure to comply with PRC regulations regarding our employee equity incentive plans may subject the PRC
participants in the plans, us or our overseas and PRC subsidiaries to fines and other legal or administrative sanctions.
Pursuant to SAFE Circular 37, PRC residents who participate in share incentive plans in overseas non-publicly-listed
companies may, prior to the exercise of an option, submit applications to SAFE or its local branches for the foreign
exchange registration with respect to offshore special purpose companies. In the meantime, our directors, executive
officers and other employees who are PRC citizens or who are non-PRC citizens residing in the PRC for a continuous
period of not less than one year, subject to limited exceptions, and whom we or our overseas listed subsidiaries have
granted restricted share units, or RSUs, options or restricted shares, may follow the Notice on Issues Concerning the
Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas Publicly
Listed Company, issued by SAFE in February 2012, to apply for the foreign exchange registration. According to those
regulations, employees, directors and other management members participating in any stock incentive plan of an overseas
publicly listed company who are PRC citizens or who are non-PRC citizens residing in China for a continuous period of
not less than one year, subject to limited exceptions, are required to register with SAFE through a domestic qualified
agent, which may be a PRC subsidiary of the overseas listed company, and complete certain other procedures. Failure to
complete the SAFE registrations may subject them to fines and legal sanctions and may also limit their ability to make
payment under the relevant equity incentive plans or receive dividends or sales proceeds related thereto in foreign
currencies, or our ability to contribute additional capital into our domestic subsidiaries in China and limit our domestic
subsidiaries’ ability to distribute dividends to us. We also face regulatory uncertainties under PRC law that could restrict
our ability or the ability of our overseas listed subsidiaries to adopt additional equity incentive plans for our directors and
employees who are PRC citizens or who are non-PRC citizens residing in the PRC for a continuous period of not less
than one year, subject to limited exceptions.
In addition, the STA has issued circulars concerning employee RSUs, share options or restricted shares. Under these
circulars, employees working in the PRC whose RSUs or restricted shares vest, or who exercise share options, will be
subject to PRC individual income tax. The PRC subsidiaries of an overseas listed company have obligations to file
documents related to employee RSUs, share options or restricted shares with relevant tax authorities and to withhold
individual income taxes of those employees related to their RSUs, share options or restricted shares. Although we and our
overseas listed subsidiaries currently withhold individual income tax from our PRC employees in connection with the
vesting of their RSUs and restricted shares and their exercise of options, if the employees fail to pay, or the PRC
subsidiaries fail to withhold, their individual income taxes according to relevant laws, rules and regulations, the PRC
subsidiaries may face sanctions imposed by the tax authorities.
We rely to a significant extent on dividends, loans and other distributions on equity paid by our principal operating
subsidiaries in China.
We are a holding company and rely to a significant extent on dividends, loans and other distributions on equity paid by
our principal operating subsidiaries for our offshore cash and financing requirements, including the funds necessary to
pay dividends and other cash distributions to our shareholders, fund inter-company loans, service any debt we may incur
outside of China and pay our expenses. When our principal operating subsidiaries incur additional debt, the instruments
governing the debt may restrict their ability to pay dividends or make other distributions or remittances, including loans,
to us. Furthermore, the laws, rules and regulations applicable to our PRC subsidiaries and certain other subsidiaries
permit payments of dividends only out of their retained earnings, if any, determined in accordance with applicable
accounting standards and regulations.
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Under PRC laws, rules and regulations, each of our subsidiaries incorporated in China is required to set aside a portion of
its net income each year to fund certain statutory reserves. These reserves, together with the registered equity, are not
distributable as cash dividends. As a result of these laws, rules and regulations, our subsidiaries incorporated in China are
restricted in their ability to transfer a portion of their respective net assets to their shareholders as dividends. In addition,
registered share capital and capital reserve accounts are also restricted from withdrawal in the PRC, up to the amount of
net assets held in each operating subsidiary. As of March 31, 2020, these restricted net assets totaled RMB114.7 billion
(US$16.2 billion).
P4P services are considered, in part, to involve Internet advertisement, which subjects us to other laws, rules and
regulations as well as additional obligations.
On July 4, 2016, the SAIC promulgated the Interim Measures for Administration of Internet Advertising, or the Internet
Advertising Measures, which came into effect as of September 1, 2016 and defined Internet advertisements as any
commercial advertising that directly or indirectly promotes goods or services through Internet media in any form
including paid-for search results. See “Item 4. Information on the Company — B. Business Overview — Regulation —
Regulation of Advertising Services.”
There exist substantial uncertainties with respect to the interpretation and implementation in practice of the Internet
Advertising Measures by various government authorities. We derive a significant amount of our revenue from P4P
services and other related services. Our P4P services and other related services may be considered to, in part, involve
Internet advertisement. We may incur additional taxes in connection with our P4P and other related services. Moreover,
PRC advertising laws, rules and regulations require advertisers, advertising operators and advertising distributors to
ensure that the content of the advertisements they prepare or distribute is fair and accurate and is in full compliance with
applicable law. Violation of these laws, rules or regulations may result in penalties, including fines, confiscation of
advertising fees and orders to cease dissemination of the advertisements. In circumstances involving serious violations,
the PRC government may suspend or revoke a violator’s business license or license for operating an advertising business.
In addition, the Internet Advertising Measures require paid-for search results to be clearly distinguished from organic
search results so that consumers will not misunderstand the nature of these search results. Therefore, we are obligated to
distinguish from others the merchants who purchase the above-mentioned P4P and related services or the relevant listings
by these merchants. Complying with these requirements, including any penalties or fines for any failure to comply, may
significantly reduce the attractiveness of our platforms and increase our costs, and could have a material adverse effect on
our business, financial condition and results of operations.
In addition, for advertising content related to specific types of products and services, advertisers, advertising operators
and advertising distributors must confirm that the advertisers have obtained requisite government approvals, including
the advertiser’s operating qualifications, proof of quality inspection of the advertised products, and, with respect to
certain industries, government approval of the content of the advertisement and filing with the local authorities. Pursuant
to the Internet Advertising Measures, we are required to take steps to monitor the content of advertisements displayed on
our platforms. This requires considerable resources and time, and could significantly affect the operation of our business,
while also subjecting us to increased liability under the relevant laws, rules and regulations. The costs associated with
complying with these laws, rules and regulations, including fines or any other penalties for our failure to so comply if
required, could have a material adverse effect on our business, financial condition and results of operations. Any further
change in the classification of our P4P and other related services by the PRC government may also significantly disrupt
our operations and materially and adversely affect our business and prospects.
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We may be treated as a resident enterprise for PRC tax purposes under the PRC Enterprise Income Tax Law, and we
may therefore be subject to PRC income tax on our global income.
Under the PRC Enterprise Income Tax Law and its implementing rules, both of which came into effect on January 1,
2008, enterprises established under the laws of jurisdictions outside of China with “de facto management bodies” located
in China may be considered PRC tax resident enterprises for tax purposes and may be subject to the PRC enterprise
income tax at the rate of 25% on their global income. The STA issued Circular 82 on April 22, 2009. Circular 82
specifies certain criteria for determining whether the “de facto management body” of a Chinese-controlled, offshore-
incorporated enterprise is located in China. Although Circular 82 applies only to offshore enterprises controlled by PRC
enterprises, and does not apply to offshore enterprises controlled by foreign enterprises or individuals, the determining
criteria set forth in Circular 82 may reflect the PRC tax authorities’ general position on how the “de facto management
body” test should be applied in determining the tax resident status of offshore enterprises, regardless of whether they are
controlled by PRC enterprises. If we were to be considered a PRC resident enterprise, we would be subject to PRC
enterprise income tax at the rate of 25% on our global income. In this case, our profitability and cash flow may be
materially reduced as a result of our global income being taxed under the Enterprise Income Tax Law. We believe that
none of our entities outside of China is a PRC resident enterprise for PRC tax purposes. However, the tax resident status
of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the
interpretation of the term “de facto management body.”
Dividends payable to foreign investors and gains on the sale of our ADSs and/ or ordinary shares by our foreign
investors may become subject to PRC taxation.
Under the Enterprise Income Tax Law and its implementation regulations, a 10% PRC withholding tax is applicable to
dividends payable by a resident enterprise to investors that are non-resident enterprises, which do not have an
establishment or place of business in the PRC or which have an establishment or place of business but the dividends are
not effectively connected with the establishment or place of business, to the extent these dividends are derived from
sources within the PRC, subject to any reduction set forth in applicable tax treaties. Similarly, any gain realized on the
transfer of shares of a PRC resident enterprise by these investors is also subject to PRC tax at a current rate of 10%,
subject to any exemption set forth in relevant tax treaties. If we are deemed a PRC resident enterprise, dividends paid on
our ordinary shares or ADSs, and any gain realized by the non-resident enterprise investors from the transfer of our
ordinary shares or ADSs, may be treated as income derived from sources within the PRC and as a result be subject to
PRC taxation. See “Item 4. Information on the Company — B. Business Overview — Regulation — Other Regulations
— Tax Regulations — PRC Enterprise Income Tax.” Furthermore, if we are deemed a PRC resident enterprise, dividends
payable to individual investors who are non-PRC residents and any gain realized on the transfer of our ADSs and/or
ordinary shares by these investors may be subject to PRC tax at a current rate of 20%, subject to any reduction or
exemption set forth in applicable tax treaties. It is unclear if we or any of our subsidiaries established outside of China are
considered a PRC resident enterprise, whether holders of our ADSs and/or ordinary shares would be able to claim the
benefit of income tax treaties or agreements entered into between China and other countries or areas and claim foreign
tax credit if applicable. If dividends payable to our non-PRC investors, or gains from the transfer of our ADSs and/or
ordinary shares by these investors are subject to PRC tax, the value of your investment in our ADSs and/or ordinary
shares may decline significantly.
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Discontinuation of preferential tax treatments we currently enjoy or other unfavorable changes in tax law could result
in additional compliance obligations and costs.
Chinese companies operating in the high-technology and software industry that meet relevant requirements may qualify
for three main types of preferential treatment, which are high and new technology enterprises, software enterprises and
key software enterprises within the scope of the PRC national plan. For a qualified high and new technology enterprise,
the applicable enterprise income tax rate is 15%. The high and new technology enterprise qualification is re-assessed by
the relevant authorities every three years. Moreover, a qualified software enterprise is entitled to a tax holiday consisting
of a two-year tax exemption beginning from the first profit-making calendar year and a 50% tax reduction for the
subsequent three calendar years. The software enterprise qualification is subject to an annual assessment. For a qualified
key software enterprise within the scope of the PRC national plan, the applicable enterprise tax rate for a calendar year is
10%. The key software enterprise qualification is subject to an annual assessment.
A number of our China operating entities enjoy these preferential tax treatments. The discontinuation of any of the
various types of preferential tax treatment we enjoy could materially and adversely affect our results of operations. See
“Item 5. Operating and Financial Review and Prospects — A. Operating Results — Taxation — PRC Income Tax.”
We and our shareholders face uncertainties with respect to indirect transfers of equity interests in PRC resident
enterprises or other assets attributed to a PRC establishment of a non-PRC company.
On February 3, 2015, the STA issued Bulletin 7, which has been further amended by Bulletin 37, issued by the STA on
October 17, 2017 and amended on June 15, 2018. Pursuant to these bulletins, an “indirect transfer” of assets, including
equity interests in a PRC resident enterprise, by non-PRC resident enterprises may be re-characterized and treated as a
direct transfer of PRC taxable assets, if the arrangement does not have a reasonable commercial purpose and was
established for the purpose of avoiding payment of PRC enterprise income tax. As a result, gains derived from this
indirect transfer may be subject to PRC enterprise income tax.
There are uncertainties as to the application of Bulletin 7 and Bulletin 37. Bulletin 7 may be determined by the tax
authorities to be applicable to some of our offshore restructuring transactions or sale of the shares of our offshore
subsidiaries or investments where PRC taxable assets are involved. The transferors and transferees may be subject to the
tax filing and the transferees may be subject to withholding or tax payment obligation, while our PRC subsidiaries may
be requested to assist in the filing. Furthermore, we, our non-resident enterprises and PRC subsidiaries may be required to
spend valuable resources to comply with Bulletin 7 or to establish that we and our non-resident enterprises should not be
taxed under Bulletin 7, for our previous and future restructuring or disposal of shares of our offshore subsidiaries, which
may have a material adverse effect on our financial condition and results of operations.
The PRC tax authorities have the discretion under Bulletin 7 to make adjustments to the taxable capital gains based on
the difference between the fair value of the taxable assets transferred and the cost of investment. If the PRC tax
authorities make adjustments to the taxable capital gains of the transactions under Bulletin 7, our income tax costs
associated with potential acquisitions or disposals will increase, which may have an adverse effect on our financial
condition and results of operations.
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Restrictions on currency exchange or outbound capital flows may limit our ability to utilize our PRC revenue
effectively.
Substantially all of our revenue is denominated in Renminbi. The Renminbi is currently convertible under the “current
account,” which includes dividends, trade and service-related foreign exchange transactions, but requires approval from
or registration with appropriate government authorities or designated banks under the “capital account,” which includes
foreign direct investment and loans, including loans we may secure from our onshore subsidiaries or variable interest
entities. Currently, our PRC subsidiaries, that are foreign invested enterprises, may purchase foreign currency for
settlement of “current account transactions,” including payment of dividends to us, without the approval of SAFE by
complying with certain procedural requirements. However, the relevant PRC governmental authorities may limit or
eliminate our ability to purchase foreign currencies in the future for current account transactions.
Since 2016, PRC governmental authorities have imposed more stringent restrictions on outbound capital flows, including
heightened scrutiny over “irrational” overseas investments for certain industries, as well as over four kinds of “abnormal”
offshore investments, which are:
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investments through enterprises established for only a few months without substantive operation;
investments with amounts far exceeding the registered capital of onshore parent and not supported by its
business performance shown on financial statements;
investments in targets that are unrelated to onshore parent’s main business; and
investments with abnormal sources of Renminbi funding suspected to be involved in illegal transfer of
assets or illegal operation of underground banking.
On January 26, 2017, SAFE promulgated the Circular on Further Improving Reform of Foreign Exchange Administration
and Optimizing Genuineness and Compliance Verification, which, among other things, tightened the authenticity and
compliance verification of outbound investment transactions. In addition, the Outbound Investment Sensitive Industry
Catalog (2018) lists certain sensitive industries that are subject to NDRC pre-approval requirements prior to remitting
investment funds offshore, which subjects us to increased approval requirements and restrictions with respect to our
overseas investment activity. Since a significant amount of our PRC revenue is denominated in Renminbi, any existing
and future restrictions on currency exchange or outbound capital flows may limit our ability to utilize revenue generated
in Renminbi to fund our business activities outside of the PRC, make investments, service any debt we may incur outside
of China or pay dividends in foreign currencies to our shareholders, including holders of our ADSs.
Fluctuations in exchange rates could result in foreign currency exchange losses to us.
The value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other
things, changes in political and economic conditions and the foreign exchange policy adopted by the PRC government. In
2017, the value of the Renminbi appreciated by approximately 6.3% against the U.S. dollar; and in 2018, the Renminbi
depreciated by approximately 5.7% against the U.S. dollar. In 2019, the value of the Renminbi further depreciated by
approximately 1.3% against the U.S. dollar. It is difficult to predict how market forces or PRC or U.S. government
policy, including any interest rate increases by the Federal Reserve, may impact the exchange rate between the Renminbi
and the U.S. dollar in the future. There remains significant international pressure on the PRC government to adopt a more
flexible currency policy, including from the U.S. government. In August 2019, the U.S. Treasury Department announced
that it labelled China a “currency manipulator,” which was officially dropped by the U.S. Treasury Department in
January 2020. However, it is uncertain whether the U.S. government may issue any similar announcement in the future.
As a result of such announcement, the United States may take further actions to eliminate perceived unfair competitive
advantages created by alleged manipulating actions. Any actions taken by the U.S. Treasury Department in this regard as
well as China’s possible responses could result in greater fluctuation of the Renminbi against the U.S. dollar.
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A substantial percentage of our revenues and costs are denominated in Renminbi, and a significant portion of our
financial assets are also denominated in Renminbi while the majority of our debt is denominated in U.S. dollars. We are a
holding company and we rely on dividends, loans and other distributions on equity paid by our operating subsidiaries in
China. Any significant fluctuations in the value of the Renminbi may materially and adversely affect our liquidity and
cash flows. If we decide to convert our Renminbi into U.S. dollars for the purpose of repaying principal or interest
expense on our outstanding U.S. dollar-denominated debt, making payments for dividends on our ordinary shares or
ADSs or other business purposes, appreciation of the U.S. dollar against the Renminbi would have a negative effect on
the U.S. dollar amount we would receive. Conversely, to the extent that we need to convert U.S. dollars into Renminbi
for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi
amount we would receive. From time to time we enter into hedging activities with regard to exchange rate risk. There can
be no assurance that our hedging activities will successfully mitigate these risks adequately or at all or that our
counterparties will be able to perform their obligations, and in addition hedging activities may result in greater volatility
in our financial results.
If our auditor is sanctioned or otherwise penalized by the PCAOB or the SEC as a result of failure to comply with
inspection or investigation requirements, our financial statements could be determined to be not in compliance with
the requirements of the U.S. Exchange Act or other laws or rules in the United States, which could ultimately result in
our ADSs being delisted.
PricewaterhouseCoopers, our auditor, is required under U.S. law to undergo regular inspections by the PCAOB.
However, without approval from the Chinese government authorities, the PCAOB is currently unable to conduct
inspections of the audit work and practices of PCAOB-registered audit firms within the PRC on a basis comparable to
other non-U.S. jurisdictions. Since we have substantial operations in the PRC, our auditor and its audit work are currently
not fully inspected by the PCAOB.
Inspections of other auditors conducted by the PCAOB outside of China have at times identified deficiencies in those
auditors’ audit procedures and quality control procedures, which may be addressed as part of the inspection process to
improve future audit quality. The inability of the PCAOB to conduct full inspections of auditors in China makes it more
difficult to evaluate the effectiveness of our auditor’s audit procedures or quality control procedures as compared to
auditors outside of China that are subject to PCAOB inspections.
The SEC previously instituted proceedings against mainland Chinese affiliates of the “big four” accounting firms,
including the affiliate of our auditor, for failing to produce audit work papers under Section 106 of the Sarbanes-Oxley
Act because of restrictions under PRC law. Each of the “big four” accounting firms in mainland China agreed to a
censure and to pay a fine to the SEC to settle the dispute and stay the proceedings for four years, until the proceedings
were deemed dismissed with prejudice on February 6, 2019. It remains unclear whether the SEC will commence a new
administrative proceeding against the four mainland China-based accounting firms. Any such new proceedings or similar
action against our audit firm for failure to provide access to audit work papers could result in the imposition of penalties,
such as suspension of our auditor’s ability to practice before the SEC. If our independent registered public accounting
firm, or its affiliate, was denied, even temporarily, the ability to practice before the SEC, and it was determined that our
financial statements or audit reports were not in compliance with the requirements of the U.S. Exchange Act, we could be
at risk of delisting or become subject to other penalties that would adversely affect our ability to remain listed on the
NYSE.
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In recent years, U.S. regulators have continued to express their concerns about challenges in their oversight of financial
statement audits of U.S.-listed companies with significant operations in China. More recently, as part of increased
regulatory focus in the U.S. on access to audit information, on May 20, 2020, the U.S. Senate passed the Holding Foreign
Companies Accountable Act, or the HFCA Act, which includes requirements for the SEC to identify issuers whose audit
reports are prepared by auditors that the PCAOB is unable to inspect or investigate completely because of a restriction
imposed by a non-U.S. authority in the auditor’s local jurisdiction. If the HFCA Act or any similar legislation were
enacted into law, our securities may be prohibited from trading on the NYSE or other U.S. stock exchanges if our auditor
is not inspected by the PCAOB for three consecutive years, and this ultimately could result in our ADSs being delisted.
While we understand that there has been dialogue among the CSRC, the SEC and the PCAOB regarding the inspection of
PCAOB-registered accounting firms in China, there can be no assurance that our auditor or us will be able to comply
with requirements imposed by U.S. regulators. Delisting of our ADSs would force our U.S.-based shareholders to sell
their ADSs or convert them into Shares listed in Hong Kong. Although we are listed in Hong Kong, investors may face
difficulties in migrating their underlying ordinary shares to Hong Kong, or may have to incur increased costs or suffer
losses in order to do so. The market prices of our ADSs could be adversely affected as a result of anticipated negative
impacts of the HFCA Act upon, as well as negative investor sentiment towards, China-based companies listed in the
United States, regardless of whether the HFCA Act is enacted and regardless of our actual operating performance.
Furthermore, on June 4, 2020, the U.S. President issued a memorandum ordering the President’s Working Group on
Financial Markets to submit a report to the President within 60 days of the memorandum that includes recommendations
for actions that can be taken by the executive branch, the SEC, the PCAOB or other federal agencies and departments
with respect to Chinese companies listed on U.S. stock exchanges and their audit firms, in an effort to protect investors in
the United States. The recommendations are to include actions that could be taken under current laws and rules as well as
possible new rulemaking recommendations. Any resulting actions, proceedings or new rules could adversely affect the
listing and compliance status of China-based issuers listed in the United States, such as our company, and may have a
material and adverse impact on the trading prices of the securities of such issuers, including our ADSs and potentially our
Shares, and substantially reduce or effectively terminate the trading of our ADSs in the United States.
Risks Related to Our ADSs and Shares
The trading prices of our ADSs and Shares have been and are likely to continue to be volatile, which could result in
substantial losses to holders of our ADSs and/or Shares.
The trading prices of our ADSs and Shares have been and is likely to continue to be volatile and could fluctuate widely in
response to a variety of factors, many of which are beyond our control. For example, the high and low closing prices of
our ADSs on the NYSE in fiscal year 2020 were US$230.48 and US$149.26, respectively. Likewise, the high and low
closing prices of our Shares on the Hong Kong Stock Exchange during fiscal year 2020 since our listing in November
2019 were HK$223.60 and HK$170.00, respectively. In addition, the performance and fluctuation of the market prices of
other companies with business operations located mainly in China that have listed their securities in Hong Kong S.A.R.
and/or the United States may affect the volatility in the prices of and trading volumes for our ADSs and/or Shares. Some
of these companies have experienced significant volatility. The trading performances of these companies’ securities may
affect the overall investor sentiment towards other companies with business operations located mainly in China and listed
in Hong Kong S.A.R. and/or the United States and consequently may impact the trading performance of our ADSs and/or
Shares. In addition to market and industry factors, the prices and trading volumes for our ADSs and/or Shares may be
highly volatile for specific business reasons, including:
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variations in our results of operations or earnings that are not in line with market or securities research
analyst expectations or changes in financial estimates by securities research analysts;
publication of operating or industry metrics by third parties, including government statistical agencies, that
differ from expectations of industry or securities research analysts;
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announcements made by us or our competitors of new product and service offerings, acquisitions, strategic
relationships, joint ventures or capital commitments;
press and other reports, whether or not true, about our business, including negative reports published by
short sellers, regardless of their veracity or materiality to us;
litigation and regulatory allegations or proceedings that involve us;
changes in pricing we or our competitors adopt;
additions to or departures of our management;
actual or perceived general industry, regulatory, economic and business conditions and trends in China and
globally, due to various reasons, including changes in geopolitical landscape;
some investors or analysts may invest in or value our ADSs and/or Shares based on the economic
performance of the Chinese economy, which may not be correlated to our financial performance;
political or market instability or disruptions, pandemics or epidemics and other disruptions to China’s
economy or the global economy, and actual or perceived social unrest in the United States, Hong Kong
S.A.R. or other jurisdictions;
fluctuations of exchange rates among the Renminbi, the Hong Kong dollar and the U.S. dollar;
sales or perceived potential sales or other dispositions of existing or additional ADSs and/or Shares or other
equity or equity-linked securities; and
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the creation by our major shareholders of vehicles that hold our Shares.
Any of these factors may result in large and sudden changes in the volume and trading price of our ADSs and/or Shares.
In addition, the stock market has from time to time experienced significant price and volume fluctuations that are
unrelated to the operating performance of particular companies and industries. These fluctuations may include a so-called
“bubble market” in which investors temporarily raise the price of the stocks of companies in certain industries, such as
the technology industry, to unsustainable levels. These market fluctuations may significantly affect the trading price of
our ADSs and/or Shares. In the past, following periods of volatility in the market price of a company’s securities,
shareholders have often instituted securities class action litigation against that company. We were named as a defendant
in certain purported shareholder class action lawsuits described in “Item 8. Financial Information — A. Consolidated
Statements and Other Financial Information — Legal and Administrative Proceedings.” The litigation process may
utilize a material portion of our cash resources and divert management’s attention from our day-to-day operations, all of
which could harm our business. If adversely determined, the class action suits may have a material adverse effect on our
financial condition and results of operations.
An active trading market for our ordinary shares on the Hong Kong Stock Exchange might not be sustained and
trading prices of our ordinary shares might fluctuate significantly.
Since our listing in Hong Kong in 2019, we have consistently been one of the most actively-traded companies on the
Hong Kong Stock Exchange. However, we cannot assure you that an active trading market for our ordinary shares on the
Hong Kong Stock Exchange will be sustained. The trading price or liquidity for our ADSs on the NYSE and the trading
price or liquidity for our ordinary shares on the Hong Kong Stock Exchange in the past might not be indicative of those
of our ordinary shares on the Hong Kong Stock Exchange in the future. If an active trading market of our ordinary shares
on the Hong Kong Stock Exchange is not sustained, the market price and liquidity of our ordinary shares could be
materially and adversely affected.
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In 2014, the Hong Kong, Shanghai and Shenzhen Stock Exchanges collaborated to create an inter-exchange trading
mechanism called Stock Connect that allows international and mainland Chinese investors to trade eligible equity
securities listed in each other’s markets through the trading and clearing facilities of their home exchange. Stock Connect
allows certain mainland Chinese investors to trade directly in eligible equity securities listed on the Hong Kong Stock
Exchange, known as Southbound Trading. If a company’s shares are not considered eligible, they cannot be traded
through Stock Connect. It is unclear whether and when the ordinary shares of our company will be eligible to be traded
through Stock Connect, if at all. The ineligibility of our ordinary shares for trading through Stock Connect will affect
certain mainland Chinese investors’ ability to trade our ordinary shares.
The different characteristics of the capital markets in Hong Kong S.A.R. and the U.S. may negatively affect the
trading prices of our ADSs and Shares.
As a dual-listed company, we are subject to Hong Kong and NYSE listing and regulatory requirements concurrently. The
Hong Kong Stock Exchange and the NYSE have different trading hours, trading characteristics (including trading
volume and liquidity), trading and listing rules, and investor bases (including different levels of retail and institutional
participation). As a result of these differences, the trading prices of our ADSs and our Shares may not be the same, even
allowing for currency differences. Fluctuations in the price of our ADSs due to circumstances peculiar to the U.S. capital
markets could materially and adversely affect the price of the Shares, or vice versa. Certain events having significant
negative impact specifically on the U.S. capital markets may result in a decline in the trading price of our Shares
notwithstanding that such event may not impact the trading prices of securities listed in Hong Kong generally or to the
same extent, or vice versa.
Substantial future sales or perceived potential sales of our ADSs, Shares, or other equity or equity-linked securities in
the public market could cause the price of our ADSs and/or Shares to decline significantly.
Sales of our ADSs, Shares, or other equity or equity-linked securities in the public market, or the perception that these
sales could occur, could cause the market price of our ADSs and/or Shares to decline significantly. All of our Shares
represented by ADSs are freely transferable by persons other than our affiliates without restriction or additional
registration under the U.S. Securities Act. The Shares held by our affiliates and other shareholders are also available for
sale, subject to volume and other restrictions as applicable under Rules 144 and 701 under the U.S. Securities Act, under
sales plans adopted pursuant to Rule 10b5-1 or otherwise.
On March 23, 2020, SoftBank, one of our principal shareholders, announced that it intends to sell or monetize up to
US$41 billion of assets held by it and use the sale proceeds to, among other things, repurchase up to US$18 billion of its
common stock over the next four quarters. In April and May 2020, certain wholly-owned subsidiaries of SoftBank
entered into several derivative arrangements with financial institutions with the intent of monetizing up to US$11.5
billion of our ADSs or Shares held by them, based on information publicly disclosed by SoftBank. SoftBank and its
subsidiaries could sell or monetize more of our ADSs or Shares in the future. As SoftBank divests or engages in
derivative or other financing arrangements with respect to our ADSs or Shares, the price of our ADSs and/or Shares
could decline significantly. Additional divestures in the future of our ADSs and/or Shares by shareholders,
announcements of any plan to divest our ADSs and/or Shares, or hedging activities by third-party financial institutions in
connection with similar derivative or other financing arrangements entered into by shareholders, could also cause the
price of our ADSs and/or Shares to decline.
Certain major holders of our ordinary shares have the right to cause us to register under the U.S. Securities Act the sale of
their shares. Registration of these shares under the U.S. Securities Act would result in ADSs representing these shares
becoming freely tradable without restriction under the U.S. Securities Act immediately upon the effectiveness of the
registration. Sales of these registered shares in the form of ADSs in the public market could cause the price of our ADSs
and/or Shares to decline significantly.
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We may in the future conduct a public offering and listing of our equity securities in Shanghai or Shenzhen, which
may result in increased regulatory scrutiny and compliance costs as well as increased fluctuations in the prices of our
ADSs and Shares.
We may conduct a public offering and/or listing of our equity securities on a stock exchange in Shanghai or Shenzhen in
the future. We have not set a specific timetable or decided on any specific form for an offering in Shanghai or Shenzhen
and may not ultimately conduct an offering and listing. The precise timing of the offering and/or listing of our equity
securities in Shanghai or Shenzhen would depend on a number of factors, including relevant regulatory developments and
market conditions. If we complete a public offering or listing in Shanghai or Shenzhen, we would become subject to the
applicable laws, rules and regulations governing public companies listed in Shanghai or Shenzhen, in addition to the
various laws, rules and regulations that we are subject to in the United States and Hong Kong S.A.R. as a dual-listed
company. The listing and trading of our equity securities in multiple jurisdictions and multiple markets may lead to
increased compliance costs for us, and we may face the risk of significant intervention by regulatory authorities in these
jurisdictions and markets.
In addition, under current PRC laws, rules and regulations, the ADSs and Shares, will not be interchangeable or fungible
with any equity securities we may decide to list on a stock exchange in Shanghai or Shenzhen, and there is no trading or
settlement between either the NYSE or the Hong Kong Stock Exchange and stock exchanges in Shanghai or Shenzhen.
Furthermore, the NYSE, the Hong Kong Stock Exchange and stock exchanges in Shanghai or Shenzhen have different
trading characteristics and investor bases, including different levels of retail and institutional participation. As a result of
these differences, the trading prices of our ADSs and Shares, accounting for the ADS ratio, may not be the same as the
trading prices of any equity securities we may decide to offer and/or list in Shanghai or Shenzhen. The issuance of a
separate class of shares and fluctuations in its trading price may also lead to increased volatility in, and may otherwise
materially decrease, the prices of our ADSs and Shares.
Our shareholders may face difficulties in protecting their interests, and the ability of our shareholders, the SEC, the
U.S. Department of Justice, and other U.S. authorities to bring actions against us may be limited in the foreign
jurisdictions where we operate.
We are incorporated in the Cayman Islands and conduct substantially all of our operations in China through our wholly-
owned entities and variable interest entities. Most of our directors and substantially all of our executive officers reside
outside the United States and Hong Kong S.A.R. and a substantial portion of their assets are located outside of the United
States and Hong Kong S.A.R. As a result, it may be difficult or impossible for our shareholders (including holders of our
ADSs and Shares) to bring an action against us or against these individuals in the Cayman Islands or in China in the
event that they believe that their rights have been infringed under the securities laws of the United States, Hong Kong
S.A.R. or otherwise. Even if shareholders are successful in bringing an action of this kind, the laws of the Cayman
Islands and China may render them unable to enforce a judgment against our assets or the assets of our directors and
officers. There is no statutory recognition in the Cayman Islands of judgments obtained in the United States, Hong Kong
S.A.R. or China, although the courts of the Cayman Islands will generally recognize and enforce a non-penal judgment of
a foreign court of competent jurisdiction without retrial on the merits.
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Our corporate affairs are governed by our Memorandum and Articles of Association, and by the Companies Law (2020
Revision) as well as common law of the Cayman Islands. The rights of shareholders to take legal action against us and
our directors, actions by minority shareholders and the fiduciary duties of our directors are to a large extent governed by
the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively
limited judicial precedent in the Cayman Islands as well as from English common law, which provides persuasive, but
not binding, authority in a court in the Cayman Islands. The rights of our shareholders and the fiduciary duties of our
directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedents in
the United States and Hong Kong S.A.R. In particular, the Cayman Islands has a less developed body of securities laws
than the United States and Hong Kong S.A.R. and provides significantly less protection to investors. In addition,
shareholders in Cayman Islands companies may not have standing to initiate a shareholder derivative action in U.S.
federal courts or Hong Kong courts.
Our Articles provide that in the event that any shareholder initiates or asserts any claim or counterclaim against us, or
joins, offers substantial assistance to or has a direct financial interest in any claim or counterclaim against us, and does
not obtain a judgment on the merits in which the initiating or asserting party prevails, then the shareholder will be
obligated to reimburse us for all fees, costs and expenses (including, but not limited to, all reasonable attorneys’ fees and
other litigation expenses) that we may incur in connection with such claim or counterclaim. These fees, costs and
expenses that may be shifted to a shareholder under this provision are potentially significant and this fee-shifting
provision is not limited to specific types of actions, but is rather potentially applicable to the fullest extent permitted
by law.
Our fee-shifting provision may dissuade or discourage our shareholders (and their attorneys) from initiating lawsuits or
claims against us or may impact the fees, contingency or otherwise, required by attorneys to represent our shareholders.
Fee-shifting provisions such as ours are relatively new and untested. There can be no assurance that we will or will not
invoke our fee-shifting provision in any particular dispute, or that we will be successful in obtaining fees if we choose to
invoke the provision.
In addition, our Articles are specific to us and include certain provisions that may be different from common practices in
Hong Kong, such as the absence of requirements that the appointment, removal and remuneration of auditors must be
approved by a majority of our shareholders, and the minimum shareholding required to requisition an extraordinary
general meeting is one-third of the voting rights of our issued shares which are entitled to vote at general meetings, as
opposed to the threshold of 10% voting rights in Hong Kong.
Furthermore, due to jurisdictional limitations, matters of comity and various other factors, the ability of U.S. authorities,
such as the SEC and the U.S. Department of Justice, or the DOJ, to investigate and bring enforcement actions against
companies may be limited in foreign jurisdictions, including China. Local laws may constrain our and our directors’ and
officers’ ability to cooperate with such an investigation or action. For example, according to Article 177 of the newly
amended PRC Securities Law, which became effective in March 2020, no overseas securities regulator is allowed to
directly conduct investigations or evidence collection activities within the territory of the PRC. Accordingly, without the
consent of the competent PRC securities regulators and relevant authorities, no organization or individual may provide
documents or materials relating to securities business activities to overseas parties.
As a result of the foregoing, our public shareholders may have more difficulty in protecting their interests through actions
against us, our management, our directors, our officers or our major shareholders, than they otherwise would with respect
to a corporation incorporated in a jurisdiction in the United States or Hong Kong S.A.R. Shareholder protection through
actions by the SEC, DOJ and other U.S. authorities also may be limited.
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As a foreign private issuer in the U.S., we are permitted to and we will, rely on exemptions from certain NYSE
corporate governance standards applicable to domestic U.S. issuers. This may afford less protection to holders of our
ADSs.
We are exempted from certain corporate governance requirements of the NYSE by virtue of being a foreign private issuer
in the U.S. We are required to provide a brief description of the significant differences between our corporate governance
practices and the corporate governance practices required to be followed by domestic U.S. companies listed on the
NYSE. The standards applicable to us are considerably different than the standards applied to domestic U.S. issuers. For
instance, we are not required to:
●
●
●
●
have a majority of the board be independent (although all of the members of the audit committee must be
independent under the U.S. Exchange Act);
have a compensation committee or a nominating or corporate governance committee consisting entirely of
independent directors;
have regularly scheduled executive sessions for non-management directors; or
have executive sessions of solely independent directors each year.
We have relied on and intend to continue to rely on some of these exemptions. As a result, holders of our ADSs may not
be provided with the benefits of certain corporate governance requirements of the NYSE.
As a foreign private issuer in the U.S., we are exempt from certain disclosure requirements under the U.S. Exchange
Act, which may afford less protection to holders of our ADSs than they would enjoy if we were a domestic U.S.
company.
As a foreign private issuer in the U.S., we are exempt from, among other things, the rules prescribing the furnishing and
content of proxy statements under the U.S. Exchange Act and the rules relating to selective disclosure of material
nonpublic information under Regulation FD under the U.S. Exchange Act. In addition, our executive officers, directors
and principal shareholders are exempt from the reporting and short-swing profit and recovery provisions contained in
Section 16 of the U.S. Exchange Act. We are also not required under the U.S. Exchange Act to file periodic reports and
financial statements with the SEC as frequently or as promptly as domestic U.S. companies with securities registered
under the U.S. Exchange Act. For example, in addition to annual reports with audited financial statements, domestic U.S.
companies are required to file with the SEC quarterly reports that include interim financial statements reviewed by an
independent registered public accounting firm and certified by the companies’ principal executive and financial officers.
By contrast, as a foreign private issuer, we are not required to file such quarterly reports with the SEC or to provide
quarterly certifications by our principal executive and financial officers. As a result, holders of our ADSs may be
afforded less protection than they would under the U.S. Exchange Act rules applicable to domestic U.S. companies.
We adopt different practices as to certain matters as compared with many other companies listed on the Hong Kong
Stock Exchange.
We completed our public offering in Hong Kong in November 2019 and the trading of our Shares on the Hong Kong
Stock Exchange commenced on November 26, 2019 under the stock code “9988.” As a company listed on the Hong
Kong Stock Exchange pursuant to Chapter 19C of the Hong Kong Listing Rules, we are not subject to certain provisions
of the Hong Kong Listing Rules pursuant to Rule 19C.11, including, among others, rules on notifiable transactions,
connected transactions, share option schemes, content of financial statements as well as certain other continuing
obligations. In addition, in connection with the listing of our Shares on the Hong Kong Stock Exchange, we have been
granted a number of waivers and/or exemptions from strict compliance with the Hong Kong Listing Rules, the
Companies (WUMP) Ordinance, the Takeovers Codes and the SFO. As a result, we will adopt different practices as to
those matters, including with respect to the content and presentation of our annual reports and interim reports, as
compared with other companies listed on the Hong Kong Stock Exchange that do not enjoy those exemptions or waivers.
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Furthermore, if 55% or more of the total worldwide trading volume, by dollar value, of our Shares and ADSs over our
most recent fiscal year takes place on the Hong Kong Stock Exchange, the Hong Kong Stock Exchange will regard us as
having a dual primary listing in Hong Kong and we will no longer enjoy certain exemptions or waivers from strict
compliance with the requirements under the Hong Kong Listing Rules, the Companies (WUMP) Ordinance, the
Takeovers Codes and the SFO, which could result in our needing to undertake additional compliance activities, to devote
additional resources to comply with new requirements, and our incurring of incremental compliance costs.
The voting rights of holders of our ADSs are limited by the terms of the Deposit Agreement.
Holders of our ADSs may exercise their voting rights with respect to the ordinary shares underlying their ADSs only in
accordance with the provisions of the Deposit Agreement. Upon receipt of voting instructions from them in the manner
set forth in the Deposit Agreement, the depositary for our ADSs will endeavor to vote their underlying ordinary shares in
accordance with these instructions. Under our Articles of Association, the minimum notice period required for convening
a general meeting is ten days. When a general meeting is convened, holders of our ADSs may not receive sufficient
notice of a shareholders’ meeting to permit them to withdraw their ordinary shares to allow them to cast their votes with
respect to any specific matter at the meeting. In addition, the depositary and its agents may not be able to send voting
instructions to holders of our ADSs or carry out their voting instructions in a timely manner. We will make all reasonable
efforts to cause the depositary to extend voting rights to holders of our ADSs in a timely manner, but they may not
receive the voting materials in time to ensure that they can instruct the depositary to vote the ordinary shares underlying
their ADSs. Furthermore, the depositary and its agents will not be responsible for any failure to carry out any instructions
to vote, for the manner in which any vote is cast or for the effect of any vote. As a result, holders of our ADSs may not be
able to exercise their rights to vote and they may lack recourse if the ordinary shares underlying their ADSs are not voted
as they requested.
The depositary for our ADSs will give us a discretionary proxy to vote our ordinary shares underlying the ADSs if
holders of these ADSs do not give voting instructions to the depositary, except in limited circumstances, which could
adversely affect the interests of holders of our ordinary shares and ADSs.
Under the Deposit Agreement for our ADSs, the depositary will give us a discretionary proxy to vote the ordinary shares
underlying the ADSs at shareholders’ meetings if holders of these ADSs do not give voting instructions to the depositary,
unless:
● we have failed to timely provide the depositary with our notice of meeting and related voting materials;
● we have instructed the depositary that we do not wish a discretionary proxy to be given;
● we have informed the depositary that there is substantial opposition as to a matter to be voted on at
the meeting;
●
●
a matter to be voted on at the meeting would have a material adverse impact on shareholders; or
voting at the meeting is made on a show of hands.
The effect of this discretionary proxy is that, if holders of our ADSs fail to give voting instructions to the depositary, they
cannot prevent our ordinary shares underlying their ADSs from being voted, absent the situations described above, and it
may make it more difficult for shareholders to influence our management. Holders of our ordinary shares are not subject
to this discretionary proxy.
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Holders of our ADSs may be subject to limitations on transfer of their ADSs.
ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or
from time to time when it deems expedient in connection with the performance of its duties. In addition, the depositary
may refuse to deliver, transfer or register transfers of ADSs generally when our books or the books of the depositary are
closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or of any
government or governmental body, or under any provision of the Deposit Agreement, or for any other reason.
Holders of our ADSs may not receive distributions on our ordinary shares or any value for them if it is illegal or
impractical to make them available to them.
The depositary of our ADSs has agreed to pay holders of our ADSs the cash dividends or other distributions it or the
custodian for our ADSs receives on our ordinary shares or other deposited securities after deducting its fees and
expenses. Holders of our ADSs will receive these distributions in proportion to the number of our ordinary shares that
their ADSs represent. However, the depositary is not responsible for making these payments or distributions if it is
unlawful or impractical to make a distribution available to any holders of ADSs. For example, it would be unlawful to
make a distribution to a holder of ADSs if it consists of securities that require registration under the U.S. Securities Act
but that are not properly registered or distributed pursuant to an applicable exemption from registration. The depositary is
not responsible for making a distribution available to any holders of ADSs if any government approval or registration
required for the distribution cannot be obtained after reasonable efforts made by the depositary. We have no obligation to
take any other action to permit the distribution of our ADSs, ordinary shares, rights or anything else to holders of our
ADSs. This means that holders of our ADSs may not receive the distributions we make on our ordinary shares or any
value for them if it is illegal or impractical for us to make them available. These restrictions may materially reduce the
value of the ADSs.
Exchange between our Shares and our ADSs may adversely affect the liquidity and/or trading price of each other.
Our ADSs are currently traded on the NYSE. Subject to compliance with U.S. securities law and the terms of the Deposit
Agreement, holders of our Shares may deposit Shares with the depositary in exchange for the issuance of our ADSs. Any
holder of ADSs may also withdraw the Shares underlying the ADSs pursuant to the terms of the Deposit Agreement for
trading on the Hong Kong Stock Exchange. In the event that a substantial number of Shares are deposited with the
depositary in exchange for ADSs or vice versa, the liquidity and trading price of our Shares on the Hong Kong Stock
Exchange and our ADSs on the NYSE may be adversely affected.
The time required for the exchange between ADSs and Shares might be longer than expected and investors might not
be able to settle or effect any sale of their securities during this period, and the exchange of Shares into ADSs involves
costs.
There is no direct trading or settlement between the NYSE and the Hong Kong Stock Exchange on which our ADSs and
the Shares are respectively traded. In addition, the time differences between Hong Kong S.A.R. and New York and
unforeseen market circumstances or other factors may delay the deposit of Shares in exchange of ADSs or the withdrawal
of Shares underlying the ADSs. Investors will be prevented from settling or effecting the sale of their securities during
such periods of delay. In addition, there is no assurance that any exchange of Shares into ADSs (and vice versa) will be
completed in accordance with the timelines investors may anticipate.
Furthermore, the depositary for the ADSs is entitled to charge holders fees for various services including for the issuance
of ADSs upon deposit of Shares, cancelation of ADSs, distributions of cash dividends or other cash distributions,
distributions of ADSs pursuant to share dividends or other free share distributions, distributions of securities other than
ADSs and annual service fees. As a result, shareholders who exchange Shares into ADSs, and vice versa, may not
achieve the level of economic return the shareholders may anticipate.
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There could be adverse United States federal income tax consequences to United States investors if we were or were to
become a passive foreign investment company.
While we do not believe we are or will become a passive foreign investment company, or PFIC, there can be no
assurance that we were not a PFIC in the past and will not become a PFIC in the future. The determination of whether or
not we are a PFIC is made on an annual basis and will depend on the composition of our income and assets from time to
time. Specifically, we will be classified as a PFIC for United States federal income tax purposes if either: (i) 75% or more
of our gross income in a taxable year is passive income, or (ii) the average percentage of our assets by value in a
taxable year that produce or are held for the production of passive income (which includes cash) is at least 50%. The
calculation of the value of our assets will be based, in part, on the quarterly market value of our ADSs, which is subject to
change. See “Item 10. Additional Information — E. Taxation — Material United States Federal Income Tax
Considerations — Passive Foreign Investment Company.”
Although we do not believe we were or will become a PFIC, it is not entirely clear how the contractual arrangements
between us and our variable interest entities will be treated for purposes of the PFIC rules. If it were determined that we
do not own the stock of our variable interest entities for United States federal income tax purposes (for example, because
the relevant PRC authorities do not respect these arrangements), we may be treated as a PFIC. See “Item 10. Additional
Information — E. Taxation — Material United States Federal Income Tax Considerations — Passive Foreign Investment
Company.”
If we were or were to become a PFIC, adverse United States federal income tax consequences to our shareholders that are
United States investors could result. For example, if we are a PFIC, our United States investors will become subject to
increased tax liabilities under United States federal income tax laws and regulations and will become subject to
burdensome reporting requirements. There can be no assurance that we were not or will not become a PFIC for any
taxable year. You are urged to consult your own tax advisors concerning United States federal income tax consequence
on the application of the PFIC rules. See “Item 10. Additional Information — E. Taxation — Material United States
Federal Income Tax Considerations — Passive Foreign Investment Company.”
There is uncertainty as to whether Hong Kong stamp duty will apply to the trading or conversion of our ADSs.
In connection with the public offering of our ordinary shares in Hong Kong in November 2019, or the Hong Kong IPO,
we established a branch register of members in Hong Kong, or the Hong Kong share register. Our ordinary shares that are
traded on the Hong Kong Stock Exchange, including those issued in the Hong Kong IPO and those that may be converted
from ADSs, are registered on the Hong Kong share register, and the trading of these ordinary shares on the Hong Kong
Stock Exchange are subject to the Hong Kong stamp duty. To facilitate ADS-ordinary share conversion and trading
between the NYSE and the Hong Kong Stock Exchange, we have moved a portion of our issued ordinary shares from our
Cayman share register to our Hong Kong share register.
Under the Hong Kong Stamp Duty Ordinance, any person who effects any sale or purchase of Hong Kong stock, defined
as stock the transfer of which is required to be registered in Hong Kong, is required to pay Hong Kong stamp duty. The
stamp duty is currently set at a total rate of 0.2% of the greater of the consideration for, or the value of, shares transferred,
with 0.1% payable by each of the buyer and the seller.
To the best of our knowledge, Hong Kong stamp duty has not been levied in practice on the trading or conversion of
ADSs of companies that are listed in both the United States and Hong Kong S.A.R. and that have maintained all or a
portion of their ordinary shares, including ordinary shares underlying ADSs, in their Hong Kong share registers.
However, it is unclear whether, as a matter of Hong Kong law, the trading or conversion of ADSs of these dual-listed
companies constitutes a sale or purchase of the underlying Hong Kong-registered ordinary shares that is subject to Hong
Kong stamp duty. We advise investors to consult their own tax advisors on this matter. If Hong Kong stamp duty is
determined by the competent authority to apply to the trading or conversion of our ADSs, the trading price and the value
of your investment in our ADSs or ordinary shares may be affected.
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ITEM 4. INFORMATION ON THE COMPANY
A. History and Development of the Company
Alibaba Group Holding Limited is a Cayman Islands holding company established under the Companies Law of the
Cayman Islands (as amended) on June 28, 1999, and we conduct our business through our subsidiaries and variable
interest entities. We are listed on the NYSE under the symbol “BABA” and on the Hong Kong Stock Exchange under the
stock code “9988.”
Our significant subsidiaries, as that term is defined under Section 1-02 of Regulation S-X under the U.S. Securities Act,
include the following entities:
●
●
●
●
Taobao Holding Limited, an exempted company incorporated with limited liability under the laws of the
Cayman Islands, which is our wholly-owned subsidiary and the indirect holding company of the PRC
subsidiaries relating to Taobao Marketplace and Tmall.
Taobao China Holding Limited, a limited liability company incorporated under the laws of Hong Kong,
which is the direct wholly-owned subsidiary of Taobao Holding Limited and the direct holding company of
certain PRC subsidiaries relating to Taobao Marketplace and Tmall.
Taobao (China) Software Co., Ltd., a limited liability company incorporated under the laws of the PRC,
which is an indirect subsidiary of Taobao Holding Limited and one of our wholly-owned entities, and
provides software and technology services for Taobao Marketplace.
Zhejiang Tmall Technology Co., Ltd., a limited liability company incorporated under the laws of the PRC,
which is an indirect subsidiary of Taobao Holding Limited and one of our wholly-owned entities, and
provides software and technology services for Tmall.
● Alibaba (Beijing) Software Services Co. Ltd., a limited liability company incorporated under the laws of
the PRC, which is a direct wholly-owned subsidiary of Zhejiang Tmall Technology Co., Ltd., and provides
online marketing-related software and technical services for our China retail marketplaces.
● Alibaba Investment Limited, a company incorporated with limited liability under the laws of the British
Virgin Islands, which is our wholly-owned subsidiary and a holding company for our strategic investments.
● Alibaba.com Investment Holding Limited, a company incorporated with limited liability under the laws of
the British Virgin Islands, which is our wholly-owned subsidiary and a holding company for subsidiaries
relating to AliExpress, Alibaba.com and 1688.com.
The principal executive offices of our main operations are located at 969 West Wen Yi Road, Yu Hang District,
Hangzhou 311121, People’s Republic of China. Our telephone number at this address is +86-571-8502-2088. Our
registered office in the Cayman Islands is located at the offices of Trident Trust Company (Cayman) Limited, Fourth
Floor, One Capital Place, P.O. Box 847, George Town, Grand Cayman, Cayman Islands. Our agent for service of process
in the United States is Corporation Service Company located at 1180 Avenue of the Americas, Suite 210, New York,
New York 10036. Our corporate website is www.alibabagroup.com.
We have a demonstrated track record of successful organic business creation. In addition to organic growth, we have
made, or have entered into agreements to make strategic investments, acquisitions and alliances that are intended to
further our strategic objectives. See “Item 5. Operating and Financial Review and Prospects — A. Operating Results —
Recent Investment, Acquisition and Strategic Alliance Activities” for more information.
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Share Repurchase Program
In May 2019, our board of directors authorized a share repurchase program for an amount of up to US$6.0 billion over a
period of two years. As of the date of this annual report, we have not made any repurchases under this share repurchase
program.
B. Business Overview
Our Mission
Our mission is to make it easy to do business anywhere.
Our founders started our company to champion small businesses, in the belief that the Internet would level the playing
field by enabling small enterprises to leverage innovation and technology to grow and compete more effectively in
domestic and global economies. We believe that concentrating on customer needs and solving their problems – whether
those customers are consumers, merchants or enterprises – ultimately will lead to the best outcome for our business. We
have developed a large digital economy that enables participants to create and share value on our platforms. Our
decisions are guided by how they serve our mission over the long term, not by the pursuit of short-term gains.
Our Vision
We aim to build the future infrastructure of commerce. We envision that our customers will meet, work and live at
Alibaba, and that we will be a good company that lasts for 102 years.
Meet @ Alibaba. We enable commercial and social interactions among hundreds of millions of users, between consumers
and merchants, and among businesses every day.
Work @ Alibaba. We empower our customers with the fundamental infrastructure for commerce and new technology, so
that they can build businesses and create value that can be shared among our digital economy participants.
Live @ Alibaba. We strive to expand our products and services to become central to the everyday lives of our customers.
As we continue to expand our businesses from commerce to cloud computing, digital media and entertainment, among
other sectors, Alibaba has evolved into a digital economy that is unique, energetic and innovative. We have set five-year
goals to continue to expand our globalization efforts, serve more than one billion Chinese consumers, and facilitate more
than RMB10 trillion of consumption on our platforms. We believe the five-year goals put us closer to achieving our
vision for 2036: serve 2 billion global consumers, enable 10 million businesses to be profitable and create 100 million
jobs.
102 Years. We do not pursue size or power; we aspire to be a good company that will last for 102 years. For a company
that was founded in 1999, lasting for 102 years means we will have spanned three centuries, an achievement that few
companies can claim. Our culture, business models and systems are built to last, so that we can achieve sustainability in
the long run.
Our Values
Our values are fundamental to the way we operate and how we recruit, evaluate and compensate our people.
Our six values are:
● Customers first, employees second, shareholders third – This reflects our choice of what’s important, in
order of priority. Only by creating sustained customer value can employees grow and shareholders achieve
long-term benefit.
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●
Trust makes everything simple – Trust is both the most precious and fragile thing in the world. The story
of Alibaba is a story of building and cherishing trust. Complexity begets complexity, and simplicity breeds
simplicity. Aliren (阿里人) are straightforward – what you see is what you get. With trust, there is no
second-guessing or suspicion, and the result is simplicity and efficiency.
● Change is the only constant – Whether you change or not, the world is changing, our customers are
changing and the competitive landscape is changing. We must face change with respect and humility.
Otherwise, we will fail to see it, fail to respect it, fail to understand it and fail to catch up with it. Whether
you change yourself or create change, both are the best kinds of change. Embracing change is the most
unique part of our DNA.
●
●
●
Today’s best performance is tomorrow’s baseline – In Alibaba’s most challenging times, this spirit has
helped us overcome difficulties and survive. In bad times, we know how to motivate ourselves; in good
times, we dare to set “dream targets” (stretch goals). Face the future, or we regress. We must shoot for the
moon, challenge ourselves, motivate ourselves and exceed ourselves.
If not now, when? If not me, who? – This was a tagline in Alibaba’s first job advertisement and became
our first proverb. It is not a question, but a call of duty. This proverb symbolizes the sense of ownership that
each Aliren must possess.
Live seriously, work happily – Work is now, life is forever. What you do in your job is up to you, but you
have responsibility to the ones who love you. Enjoy work as you enjoy life; treat life seriously as you do
work. If you live with purpose, you will find reward. You make Alibaba different and make your loved
ones proud. Everyone has their own view of work and life; we respect each person’s choice. Whether you
live by this value depends on how you live your life.
Company Overview
To fulfill our mission “to make it easy to do business anywhere,” we enable businesses to transform the way they market,
sell and operate and improve their efficiencies. We provide the technology infrastructure and marketing reach to help
merchants, brands and other businesses to leverage the power of new technology to engage with their users and
customers and operate in a more efficient way.
Our businesses are comprised of core commerce, cloud computing, digital media and entertainment, and innovation
initiatives. In addition, Ant Group, an unconsolidated related party, provides payment services and offers financial
services for consumers and merchants on our platforms. A digital economy has developed around our platforms and
businesses that consists of consumers, merchants, brands, retailers, third-party service providers, strategic alliance
partners and other businesses. The Alibaba digital economy generated RMB7,053 billion (US$1 trillion) in GMV in the
twelve months ended March 31, 2020, which mainly included GMV of RMB6,589 billion (US$945 billion) transacted
through our China retail marketplaces, as well as GMV transacted through our international retail marketplaces and local
consumer services. The U.S. dollar amounts of annual GMV for fiscal year 2020 represent the sum of GMV in U.S.
dollars for the quarters ended June 30, September 30 and December 31, 2019 and March 31, 2020, each converted from
the RMB amounts at the average daily exchange rate for each relevant quarter.
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Core Commerce
Retail Commerce – China
We are the largest retail commerce business in the world in terms of GMV in the twelve months ended March 31, 2020,
according to Analysys. We operate China retail marketplaces, consisting of Taobao Marketplace, China’s largest mobile
commerce destination with a large and growing social community, and Tmall, the world’s largest third-party online and
mobile commerce platform for brands and retailers, in each case in terms of GMV in the twelve months ended March 31,
2020, according to Analysys. In fiscal year 2020, we generated approximately 65% of our revenue from our retail
commerce business in China.
We have introduced New Retail initiatives to reengineer the fundamentals of retail operations and transform the retail
landscape. New Retail represents the convergence of online and offline retail by leveraging digitalized operating systems,
in-store technology, supply chain systems, consumer insights and mobile ecosystem to provide a seamless shopping
experience for consumers. For example, we operate Freshippo (known as “Hema” in Chinese), our proprietary grocery
retail chain. Freshippo exemplifies the creation of a new shopping experience through the convergence of online and
offline activities by using retail stores to warehouse and fulfill online orders, in addition to offering a rich and fun
experience for customers who shop in-store.
Wholesale Commerce – China
1688.com, China’s leading integrated domestic wholesale marketplace in 2019 by revenue, according to Analysys,
connects wholesale buyers and sellers across a wide range of categories. Lingshoutong (零售通) connects FMCG brand
manufacturers and their distributors directly to small retailers in China by facilitating the digitalization of small retailers’
operation, who in turn are able to offer their customers broader selections of products.
Retail Commerce – Cross-border and Global
We operate Lazada, a leading and fast-growing e-commerce platform in Southeast Asia for SMEs, regional and global
brands. Lazada provides consumers with access to a broad range of offerings, serving over 70 million unique consumers
in the twelve months ended March 31, 2020. We also believe Lazada runs one of the largest e -commerce logistics
networks in the region. More than 75% of Lazada’s parcels went through its own facilities or first-mile fleet during the
same period. AliExpress, one of our global retail marketplaces, enables consumers from around the world to buy directly
from manufacturers and distributors in China and around the world. We also operate Tmall Taobao World, a Chinese-
language e-commerce platform, to allow overseas Chinese consumers to shop directly from Chinese domestic brands and
retailers. For import commerce, Tmall Global allows overseas brands and retailers to reach Chinese consumers, and is the
largest import e-commerce platform in China based on GMV in the twelve months ended March 31, 2020, according to
Analysys. In September 2019, we acquired Kaola, an import e-commerce platform in China, to further broaden our
offerings and strengthen our leadership in cross-border retail commerce and globalization initiatives. We also operate
Trendyol, a leading e-commerce platform in Turkey, and Daraz, a leading e-commerce platform across South Asia with
key markets in Pakistan and Bangladesh.
Wholesale Commerce – Cross-border and Global
We operate Alibaba.com, China’s largest integrated international online wholesale marketplace in 2019 by revenue,
according to Analysys. During fiscal year 2020, buyers on Alibaba.com who sourced business opportunities or completed
transactions were located in approximately 190 countries.
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Logistics Services
We operate Cainiao Network’s logistics data platform and global fulfillment network that primarily leverage the capacity
and capabilities of logistics partners. Cainiao Network offers domestic and international one-stop-shop logistics services
and supply chain management solutions, fulfilling various logistics needs of merchants and consumers at scale, serving
our digital economy and beyond. We use Cainiao Network’s data insights and technology to facilitate the digitalization of
the entire warehousing and delivery process, thereby improving efficiency across the logistics value chain. For example,
we provide real-time access to data for merchants to better manage their inventory and warehousing, for consumers to
track their orders, and for express courier companies to optimize delivery routes. Furthermore, consumers can pick up
their packages at Cainiao Post, our neighborhood delivery solutions that operate a network of community stations,
campus stations and smart pickup lockers. Consumers can also schedule pickups of packages for delivery within two
hours on the Cainiao Guoguo app. In addition, we operate Fengniao Logistics, Ele.me’s local on-demand delivery
network, to timely deliver food, beverages and groceries, among other products.
Consumer Services
We use mobile and online technology to enhance the efficiency, effectiveness and convenience of consumer services for
both service providers and their customers. We utilize this technology in Ele.me, a leading on-demand delivery and local
services platform, to enable consumers to order food and groceries anytime and anywhere. Koubei, a leading restaurant
and local services guide platform for in-store consumption, provides targeted marketing and digital operation and
analytics tools for merchants and allow consumers to discover local services content. Fliggy, a leading online travel
platform, provides comprehensive services to meet consumers’ travel needs.
Cloud Computing
Alibaba Group is the world’s third largest and Asia Pacific’s largest Infrastructure as a Service provider by revenue in
2019 in U.S. dollars, according to Gartner’s April 2020 report (Source: Gartner, Market Share: IT Services, 2019, Dean
Blackmore et al., April 13, 2020) (Asia Pacific refers to Mature Asia/Pacific, Greater China, Emerging Asia/Pacific and
Japan, and market share refers to Infrastructure as a Service and Managed Services and Cloud Infrastructure Services).
Alibaba Group is also China’s largest provider of public cloud services by revenue in 2019, including Platform as a
Service, or PaaS, and IaaS services, according to IDC (Source: IDC Semiannual Public Cloud Services Tracker, 2019).
Alibaba Cloud, our cloud computing business, offers a complete suite of cloud services, including elastic computing,
database, storage, network virtualization services, large scale computing, security, management and application services,
big data analytics, a machine learning platform and IoT services, serving our digital economy and beyond. Prior to the
11.11 global shopping festival in 2019, Alibaba Cloud enabled the migration of the core systems of our e-commerce
businesses onto our public cloud. We believe this migration is a major milestone that not only generates greater operating
efficiencies for Alibaba, but also will encourage more customers to adopt our public cloud infrastructure.
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Digital Media and Entertainment
Digital media and entertainment is a natural extension of our strategy to capture consumption beyond our core commerce
businesses. Insights we gain from our core commerce business and our proprietary data technology enable us to deliver
relevant digital media and entertainment content to consumers. This synergy delivers a superior entertainment
experience, increases customer loyalty and return on investment for enterprises, and improves monetization for content
providers across the digital economy.
Youku, the third largest online long-form video platform in China in terms of monthly active users in March 2020,
according to QuestMobile, serves as our key distribution platform for digital media and entertainment content. In
addition, Alibaba Pictures is an Internet-driven integrated platform that covers content production, promotion and
distribution, intellectual property licensing and integrated management, cinema ticketing management and data services
for the entertainment industry. Youku, Alibaba Pictures and our other content platforms, such as news feeds, literature,
and music, allow users to discover and consume content as well as interact with each other.
Innovation Initiatives
We continue to innovate and develop new service and product offerings with the goals of meeting the needs and
improving efficiency in the daily lives of our customers and creating synergies among our digital economy participants.
Amap, the largest provider of mobile digital map, navigation and real-time traffic information in China by monthly active
users in March 2020, according to QuestMobile, empowers our businesses and third-party mobile apps through its map
data technology. Amap also provides a simple one-stop access point to end users with services such as navigation, local
service and ride-hailing. DingTalk is our digital collaboration workplace that offers new ways of working, sharing and
collaborating for modern enterprises and organizations. DingTalk enables secure and reliable communication in multiple
formats, workflow management and network collaboration among team members and enterprises, all in a single interface.
According to QuestMobile, DingTalk was the largest business efficiency app in China by monthly active users in March
2020. Through Tmall Genie, the No. 1 smart speaker in China by shipments in 2019, according to IDC (Source: IDC
China Quarterly Smart Home Device Tracker, 2019), we have created a new and interactive interface for our customers
to easily access services offered by our digital economy participants.
Our Digital Economy
A digital economy has developed around our platforms and businesses that consists of consumers, merchants, brands,
retailers, third-party service providers, strategic alliance partners and other businesses. At the nexus of this digital
economy are our technology platform, our marketplace rules and the role we play in connecting these participants to
make it possible for them to discover, engage and transact with each other and manage their businesses anytime and
anywhere. Much of our effort, time and energy is spent on initiatives that are for the greater good of the digital economy
and on balancing the interests of its participants. We feel a strong responsibility for the continued development of the
digital economy and we take ownership in this development. Accordingly, we refer to this as “our digital economy.” Our
digital economy has strong self-reinforcing network effects benefitting its various participants, who are in turn invested
in our digital economy’s growth and success.
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The following chart sets forth the key businesses and services we and Ant Group,(1) our major cooperation partner,
provide.
Note:
(1) Ant Group provides payment services and offers financial services to consumers and merchants on our platforms. We currently hold a
33% equity interest in Ant Group and account for this investment in our financial statements using the equity method.
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Our Strategies
We will continue to innovate in the areas of business models, products and services, and technology to create value for
both consumers and businesses. We formulate and evolve strategies that aim to best serve consumers’ and businesses’
interests.
Drive User Growth and Engagement
We look at our businesses and service and product offerings through the lens of our users. To cater to each user’s
personal needs, we aim to expand and make available a broad range of products and services across our digital economy,
including physical and virtual goods, local consumer services, travel, media and entertainment, healthcare and financial
services, among others.
We intend to further address the consumption needs of users in less developed areas, and to provide individuals at
different income levels with access to quality merchandise and services suitable to their consumption capabilities.
We also intend to make our offerings available to more users outside of China as we implement our globalization
initiatives. Starting with Southeast Asia, we aim to serve users around the world with localized operations as well as
cross-border commerce with access to Chinese manufacturers and consumers.
Empower Businesses to Facilitate Digital Transformation and Improve Operational Efficiency
Our diverse commerce platforms and extensive consumer insights, combined with our cloud computing technologies,
New Retail supply chain management and sales and marketing systems, form a critical foundation that facilitates digital
transformation for businesses. We refer to this foundation as the Alibaba Business Operating System, or ABOS.
ABOS allows us to enable the participants in our digital economy with our proprietary capabilities and know-how. To
date, we have already enabled the transformation of the business operations, technology infrastructure and organizational
systems of many of our enterprise customers. The enterprises that have leveraged our ABOS have already benefited from
integrated online and offline operations, effective customer engagement, acquisition and retention, speedy delivery,
innovative utilization of retail space, enhanced operating efficiencies and new business models.
ABOS currently serves a wide variety of businesses in our digital economy. We intend to make ABOS available to a
broader range of enterprise customers in the future.
Continue to Innovate
We will continue to be an innovator in products and technology as well as an enabler of new business models.
Traditionally unstructured, undiscovered and underutilized data can now be captured, activated and leveraged as a new
source of intelligence that supports business growth and decisions, driving improved operating efficiency and targeted
offerings to meet consumer needs.
With cloud computing as an easily accessible and scalable service, and data as a value-enhancing resource, we believe
that new technology will play a fundamental role in social and commercial interactions. With a strong commitment to
data security and privacy, we will continue to apply machine learning technology to all aspects of our business and invest
in our cloud computing platform to support our own and our customers’ businesses.
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Our Initiatives in Response to the COVID-19 Pandemic
Starting in late January 2020, the COVID-19 pandemic has triggered a series of lockdowns, social distancing
requirements and travel restrictions that have drastically reduced economic activities in China and the rest of the world.
During the initial phase of the crisis in China, the most pressing concern of all enterprises was business continuity –
solving issues such as minimizing supply chain disruptions, reducing costs, identifying new revenue opportunities,
improving cash flow and managing a remote workforce. We helped our merchant customers to overcome these
challenges and took proactive measures to fulfill our mission.
Since February 2020, together with Ant Group, we have implemented a comprehensive set of financial and business
support measures to help alleviate the near-term challenges faced by our merchant customers and partners.
● Financial Support – We worked with Ant Group and other partners to advance approximately RMB130
billion to provide liquidity to our merchant customers and to facilitate over RMB12 billion in twelve-month
loans with preferential interest rates (each as of April 30, 2020) to these merchants.
● Business Support – Alibaba’s domestic and international businesses provided billions of Renminbi in value
in the form of subsidies and technical support to our merchants and users, including waivers of platform
technology fees, annual service fees and warehousing fees, reductions of commissions and logistics costs,
as well as free support for remote work and education programs through DingTalk.
●
2020 Spring Thunder Initiatives – Launched in April 2020, they aim to:
●
●
●
●
help export-oriented SMEs explore opportunities through our China retail marketplaces in domestic
markets, as well as expand into new markets through our international wholesale and retail
marketplaces, such as Alibaba.com and AliExpress;
develop digitalized manufacturing clusters;
accelerate the digital transformation of China’s agriculture sector; and
alleviate financing challenges faced by SMEs by working with Ant Group and its partners.
We believe it is our duty to help businesses around the world to better serve global consumers. Alibaba will continue to
leverage its resources and technology to enable and invest in the future success of SMEs around the world.
Our Businesses
Core Commerce
Our core commerce business is comprised of the following businesses:
● Retail commerce – China;
● Wholesale commerce – China;
● Retail commerce – cross-border and global;
● Wholesale commerce – cross-border and global;
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●
Logistics services; and
● Consumer services.
Retail Commerce – China
We operate the largest retail commerce business in the world in terms of GMV in the twelve months ended March 31,
2020, according to Analysys. Our retail commerce business in China, primarily consisting of China retail marketplaces,
which include Taobao Marketplace and Tmall, and New Retail initiatives, have become an important part of the everyday
lives of consumers in China. Empowered by our commerce technologies and services, we appeal to a massive base of
consumers by connecting them with diversified and comprehensive offerings in a highly engaging and social format.
● Consumers. We serve a large and growing consumer base, across both large cities and less developed areas.
In March 2020, there were 846 million mobile MAUs on our various mobile apps that accessed our China
retail marketplaces. Annual active consumers of China retail marketplaces reached 726 million in the
twelve months ended March 31, 2020. Our ability to offer and deliver value has driven increased consumer
engagement over time. Generally, the longer consumers have been with us, the larger number of orders they
tend to place, across a more diverse range of product categories, and as a result we experience increasing
average spend per user on our China retail marketplaces. In fiscal year 2019, more than 120 million annual
active consumers spent more than RMB10,000 through our China retail marketplaces and 98% of these
consumers continued to be active in fiscal year 2020. For the twelve months ended March 31, 2020, more
than 140 million annual active consumers spent more than RMB10,000 through our China retail
marketplaces. In addition, we believe our platforms appeal to a growing and increasingly-diversified
consumer base, including those at different income levels. In fiscal year 2020, over 70% of new annual
active consumers from our China retail marketplaces came from less-developed areas.
●
●
Products and Services. The Alibaba digital economy offers a comprehensive range of products and services
made available by tens of millions of merchants and digital economy partners to meet the diverse demands
of our massive consumer base across different segments. For example, consumers may look for branded
products on Tmall and imported products on Tmall Global and Kaola. They may also seek attractive value-
for-money branded product offerings on Juhuasuan (聚划算). Taobao Deals (特价版), which we recently
launched, connects consumers directly to manufacturers, enabling personalized experience from design,
sourcing and production to delivery. Through Idle Fish (闲鱼), our consumer-to-consumer community and
marketplace in China for long-tail products, consumers can find a variety of second-hand, recycled,
refurbished, for-rent and other long-tail products. Continuing to expand categories and secure new and
relevant products is key to appealing to different segments of our user base.
Engagement. In March 2020, over 300 million daily active users used our various mobile apps to access our
China retail marketplaces. The massive amount of user and merchant activities taking place every day on
our China retail marketplaces generates significant consumer insights. By leveraging proprietary AI and
data technologies, we are able to aggregate and build on deep consumer insights to provide more accurate
search results and relevant recommendation feeds that enhance the shopping experience for our consumers.
Our platforms also are becoming increasingly social and interactive. Through recommendation feeds, live
streaming, short-form videos, interactive games and microblogs, among others, merchants engage with
consumers more effectively and consumers interact with each other to form a highly social digital
community.
The following pages are visual presentations of select features that highlight our offerings and how we leverage our
consumer insights and technology to enable consumers and businesses to more effectively engage with each other and
among themselves.
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Consumers: Comprehensive Product and Service Offerings
The Taobao app offers consumers a comprehensive range of products and services and a unique social commerce
experience through highly relevant content, personalized shopping recommendations and interactive features that drive
social engagement
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Consumers: Theme-based Recommendation
Recommendation feeds of product listings and various theme-based content, enabled by our extensive
consumer insights and proprietary data technologies, provide our consumers with a relevant and engaging
content discovery process and shopping experience
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Consumers: Curated Product Recommendations
Consumers also come to the Taobao app to discover new trends and browse for ideas, where recommendations
are based on extensive user-generated content and empowered by our proprietary data technologies
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Businesses: New Product Release Platform for Brands and Retailers
Leveraging our data insights and technology, Tmall Hey Box is a dedicated platform
for brands and retailers to launch their new products
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Businesses: Enabling Merchants to Engage with Consumers
The Taobao app enables merchants to engage with consumers beyond their storefronts through live streaming, short-
form videos, social media and other interactive formats
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China Retail Marketplaces
Taobao Marketplace
Taobao means “search for treasure” in Chinese. Through the Taobao app and the website at www.taobao.com, we have
positioned Taobao Marketplace as the starting point and destination portal for the shopping journey. Consumers from
both large cities and less developed areas come to Taobao Marketplace to enjoy an engaging, personalized shopping
experience, optimized by our big data analytics and technology. Through highly relevant and engaging content and real-
time updates from merchants, consumers can learn about products and new trends. They can also interact with each other
and their favorite merchants and key opinion leaders. Taobao Marketplace has a broad offering of interactive features
such as live broadcast and short-form videos. Taobao Marketplace is China’s largest mobile commerce destination with a
large and growing social community, in terms of GMV for the twelve months ended March 31, 2020, according
to Analysys.
Taobao Marketplace provides a top-level traffic funnel that directs users to the various marketplaces, channels and
features within our digital economy. For example, a search result on Taobao Marketplace displays listings not only from
Taobao Marketplace merchants but also from Tmall merchants and brands, thereby generating traffic for Tmall. Through
Taobao Marketplace, consumers can also access platforms that focus on offering products at attractive price points, such
as Juhuasuan, which is a platform dedicated to offering value-for-money branded products. In addition to general
merchandise, through Taobao Marketplace consumers can also enter Idle Fish as well as other products and consumer
services platforms, which may also be accessed through their respective independent mobile apps.
Merchants on Taobao Marketplace are primarily individuals and small businesses. Merchants can create storefronts and
listings on Taobao Marketplace free of charge. The escrow payment services provided by Alipay are free of charge to
consumers and merchants unless payment is funded through a credit product such as a credit card, in which case Alipay
charges a fee to the merchant based on the related bank fees charged to Alipay. Taobao Marketplace merchants can
purchase P4P, in-feed marketing and display marketing services to direct traffic to their storefronts. In addition,
merchants can acquire additional traffic from third-party marketing affiliates. Taobao Marketplace merchants can also
pay for advanced storefront software that helps to upgrade, decorate and manage their online storefronts.
Tmall
Tmall caters to consumers’ ever-growing demand for high-quality products and premium shopping experience. A large
number of international and Chinese brands and retailers have established storefronts on Tmall. We have positioned
Tmall as a trusted platform for consumers in China and overseas to buy both homegrown and international-branded
products as well as products not available in traditional retail outlets. As the brands and offerings on Tmall continue to
grow and diversify, we continue to improve our ability to accurately target and meet different consumer demands. In the
twelve months ended March 31, 2020, Tmall was the largest third-party online and mobile commerce platform for brands
and retailers in the world in terms of GMV, according to Analysys, and continues to grow quickly. Tmall online physical
goods GMV, excluding unpaid orders, grew 23% year-over-year in the year ended March 31, 2020.
In 2009, Tmall pioneered the 11.11 global shopping festival. 11.11 has become the most important shopping event in
China and we believe it generated the highest one-day retail sales volume in the world in 2019. On November 11, 2019,
our China retail marketplaces, Lazada, AliExpress, Kaola, New Retail and consumer services platforms generated GMV
of RMB268.4 billion settled through Alipay within a 24-hour period, reflecting the strength of our infrastructure and the
scale of our entire digital economy in China and around the world.
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Tmall is the partner of choice for brands. Brands and retailers operate their own storefronts on the Tmall platform with
unique brand identities and look and feel, accompanied by full control over their own branding and merchandising. As of
March 31, 2020, there were over 250,000 brands and merchants on Tmall, including 80% of the consumer brands ranked
in the Forbes Top 100 World’s Most Valuable Brands for 2019. Because of the presence of a large number of global
brands and the stringent standards required for merchants, brands and retailers to join and operate on Tmall, a presence
on Tmall has become a validation of quality, allowing merchants, brands and retailers to take advantage of our significant
traffic to extend and build brand awareness and customer engagement. Major international brands that have physical
operations in China are well represented on Tmall.
Brands and retailers turn to Tmall not only for its broad user base, but also for its data insights and technology. Tmall has
driven the digitalization and transformation of brands and retailers by enabling them to digitalize their operations,
engage, acquire and retain consumers, increase brand recognition, innovate product offerings, manage supply chains and
enhance operational efficiency. In particular, Tmall offers a variety of one-stop brand marketing and promotional
products to help brands and retailers quickly acquire new users, enhance brand awareness and launch new products.
We also seek to build our mind-share among consumers to position Tmall as the premier shopping destination for
everyday items, highlighting value and convenience. Apparel, consumer electronics and FMCG are among Tmall’s most
popular product categories, which continue to grow quickly. We have also strengthened consumer recognition of Tmall’s
value proposition in consumer electronics and home appliances through promotional events and strategic partnerships.
Like merchants on Taobao Marketplace, brands and merchants on Tmall have access to P4P, in-feed marketing and
display marketing services as well as storefront software, which they can use to fully engineer, customize, and even code
the software behind their storefronts.
Branding and Monetization Platforms
Alimama
Alimama is our monetization platform. Using data technology, this platform matches the marketing demands of
merchants, brands and retailers with the media resources on our own platforms and third-party properties, and enables us
to monetize our core commerce, digital media and entertainment and other businesses. The platform supports P4P
marketing services based on keyword search rankings, in-feed marketing targeting different groups of consumers, or
display marketing in fixed positions that are bid on through auctions, as well as cost per thousand impression (CPM)-
based, time-based marketing formats, or individual campaigns at fixed cost, through the display of photos, graphics,
videos and live streaming.
The ranking of P4P search results on our core commerce platforms is based upon proprietary algorithms that take into
account the bid price of keywords, the popularity of an item or merchant, customer feedback ranking of merchants and
quality of product displays. Our in-feed marketing takes these factors into consideration, along with other insights, to
further deliver an engaging and relevant content discovery process and shopping experience for our consumers. For
display marketing, the Alimama platform delivers marketing messages based on data insights generated across our digital
economy. The relevance and comprehensiveness of data based on commercial activity and user activity in our digital
economy provide a unique advantage for Alimama to deliver the most relevant information to users, which in turn
enables merchants to improve their marketing and operational efficiency.
Alimama also has an affiliate marketing program that places marketing displays on third-party apps and websites, thereby
enabling marketers, if they so choose, to extend their marketing and promotional reach to properties and users beyond our
own platforms. Our affiliate marketing program not only provides additional traffic to our core commerce platforms, but
also generates revenue to us.
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Alimama operates the Taobao Ad Network and Exchange, or TANX, one of the largest real-time online bidding
marketing exchanges in China. TANX helps publishers to monetize their media inventories both on mobile apps and web
properties. TANX automates the buying and selling of billions of marketing impressions on a daily basis. Participants on
TANX include publishers, marketers and demand-side platforms operated by agencies.
Marketing for Brands
Drawing on our big data capabilities, we have developed an approach that digitalizes consumer-brand relationships and
empowers brands to build robust relationships with consumers throughout their lifecycles in our digital economy. We
aim to help brands reach consumers by leveraging our marketplaces, Youku, strategic partners in our digital economy, as
well as other major third-party Internet properties in China. We intend to become the key partner for brand building by
creating an open, inclusive and transparent platform where brands and marketing agencies can design, execute, track and
optimize their brand building activities using our data insights and tools.
Commerce Technologies and Services
We provide commerce technologies and services to enable merchants, brands and retailers on Taobao Marketplace and
Tmall to enhance their online and offline operational capabilities. With our commerce technologies, innovative services
and data capabilities, merchants, brands and retailers can acquire, retain and further deepen their engagement with
consumers in an efficient and effective manner, thereby enhancing merchants’, brands’ and retailers’ loyalty to our
platforms. These commerce technologies and services include the following key components:
Core Operations Control Panel
We provide an integrated online control panel that allows merchants, brands and retailers to conduct core operations
through a unified interface. It offers essential business tools, such as an operations dashboard and direct messaging,
access to business software marketplace and access to a wide range of offline services such as fashion modeling and
photography, among others.
Merchants on our China retail marketplaces use this control panel to conduct day-to-day operations, such as managing
storefronts and product listings, fulfilling orders, managing inventory and transactions, conducting sales and marketing
activities, servicing customers, managing procurement process, interacting and collaborating with other businesses and
seeking credit financing facilitated by Ant Group.
Big Data Support and Engagement Platform
Equipped with our New Retail solutions, which are designed to improve offline retail operations, brands on our secure
cloud-based data insights platform have access to sophisticated analytics services that consolidate online and offline data.
These services help brands gain insights into each stage of the consumer journey and provide a personalized online and
offline shopping experience for consumers by facilitating effective interaction between consumers and merchants, brands
and retailers.
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Knowledge Graph
We are the largest retail commerce business in the world in terms of GMV in the twelve months ended March 31, 2020,
according to Analysys. In March 2020, over 300 million daily active users used our various mobile apps to access our
China retail marketplaces, which feature extensive listings. Empowered by our AI technology, we develop significant
insights from our digital economy. These insights give us a comprehensive understanding of how to correlate diverse
profiles of products and services with our consumers’ needs. They also deepen our product insights and enhance
recognition of similar profiles and consumer patterns throughout our digital economy. We then aggregate and build on
these insights to design standardized, themed and interconnected product categorization frameworks throughout our
marketplaces that digitalize and standardize product listings effectively on behalf of merchants. As a result, we help our
merchants streamline their daily operations, generate more accurate search results and recommendation feeds across our
platforms, and offer better shopping experiences to our consumers.
New Retail Initiatives
We have introduced New Retail initiatives to innovate models for retail businesses and reengineer and transform the
fundamentals of traditional retail operations. New Retail represents the convergence of online and offline retail by
leveraging digitalized operating systems, in-store technology, supply chain systems, consumer insights and the mobile
ecosystem to provide a seamless shopping experience for consumers. We believe the lack of real-time consumer insights
is one of the key issues facing China’s traditional retailers today. Through consumer insights and technology, our New
Retail initiatives not only incubate new business models, but also enable traditional retailer partners to reinvigorate their
businesses by digitalizing their operations and increasing their catchment area online and offline, thereby improving sales
productivity. We are also empowering retailers with our new technology to significantly improve operating efficiency
and allow them to react to consumer demands on a real-time basis.
● Creating a New Shopping Experience through Innovative Supply Chain Management – Freshippo.
Freshippo (known as “Hema” in Chinese), our proprietary grocery retail chain, exemplifies the creation of a
new shopping experience through the convergence of online and offline activities by using retail stores to
warehouse and fulfill online orders, in addition to offering a rich and fun experience for customers who
shop in-store. Its proprietary fulfillment system enables 30-minute delivery to customers living within a
three-kilometer radius of a Freshippo store. Freshippo offers a mobile app that allows consumers to search
for products and place orders while browsing in store. To improve consumer experience, Freshippo uses
transaction data to personalize recommendations and geographic data to help plan the most efficient
delivery routes. Freshippo is also shortening its sourcing process and increasing its supply chain
transparency and visibility through data technology. As of March 31, 2020, we had 207 self-operated
Freshippo stores, primarily located in tier-one and tier-two cities in China.
●
Transforming the Traditional Retail Model – Sun Art and Taoxianda (淘鲜达). Taoxianda, our online-
offline retail integration service solution for FMCG and grocery retail partners with physical stores, puts us
at the forefront of transforming the retail industry by digitalizing all aspects of store-based operations. By
digitalizing Sun Art’s hypermarket stores, Taoxianda has contributed to an increase in Sun Art’s online
revenue. In addition, Taoxianda continues to sign up new grocery partners and had enabled the
digitalization of 320 offline retail stores of these partners as of March 31, 2020.
In addition to Taoxianda, we also operate Tmall Supermarket to implement various New Retail initiatives across
comprehensive FMCG categories. Tmall Supermarket utilizes both marketplace and retail model to offer consumers a
broad range of high-quality daily necessities. By leveraging its technology capabilities and user insights, Tmall
Supermarket facilitates the digital transformation of its offline partners, enhancing their supply chain management
capabilities and consumer behavior analysis.
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We are also pursuing New Retail initiatives in other product categories, such as home furnishings and electronics, among
others. Since our investment in Red Star Macalline Group Corporation Limited and Easyhome New Retail Group Co.,
Ltd. in May 2019 and March 2018, respectively, each of which is a leading retail chain for home-improvement supplies
and furniture in China, we have digitalized over 320 of their stores, providing the businesses with data visibility and
analytics of their offline operations.
Wholesale Commerce - China
1688.com
1688.com, China’s leading integrated domestic wholesale marketplace in 2019 by revenue, according to Analysys,
provides sourcing and online transaction services by connecting manufacturers and wholesale sellers to wholesale buyers
in China. They typically trade in apparel, general merchandise, accessories, home decoration, furnishing materials and
packaging materials, among others. Sellers may purchase a China TrustPass membership for an annual subscription fee to
list items on 1688.com, reach customers, provide quotations and transact on the marketplace without any additional
charges. Paying members may also pay for additional services, such as premium data analytics and upgraded storefront
management tools, as well as customer management services, such as P4P marketing services from the website and app.
As of March 31, 2020, 1688.com had approximately 900,000 paying members.
Lingshoutong (零售通 )
Lingshoutong helps FMCG brands and their distributors connect directly with small retailers, primarily mom-and-pop
stores, in China, by facilitating the digitalization of small retailers. With Lingshoutong’s commerce technologies and data
insights, FMCG brands and distributors can distribute their products to small retailers efficiently and small retailers can
offer broader selections of FMCG products to their customers, digitalize their offline operations, gain access to digital
financing services facilitated by Ant Group and expand their scope of business, such as delivery of groceries to their
consumers.
Retail Commerce – Cross-border and Global
In the twelve months ended March 31, 2020, Lazada, AliExpress, Trendyol and Daraz together served a total of more
than 180 million annual active consumers overseas.
Lazada
We operate Lazada, a leading and fast-growing e-commerce platform in Southeast Asia for SMEs, regional and global
brands. Lazada provides consumers with access to a broad range of offerings, serving over 70 million unique consumers
in the twelve months ended March 31, 2020. We also believe Lazada runs one of the largest logistics networks in the
region. More than 75% of Lazada’s parcels went through its own facilities or first-mile fleet during the same period.
In Indonesia, the largest economy in Southeast Asia according to the World Bank, we believe Lazada continues to gain
market share. For the twelve months ended March 31, 2020, orders grew more than 170% year-on-year and we believe
this outpaces the competition by a significant margin. Lazada continues to implement innovative consumer engagement
strategies, backed by world-class technology from our digital economy. Lazada has seen large demand in particular in the
apparel, accessories and FMCG categories, where AI recommendations and an efficient search engine have been key
drivers for growth.
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China Cross-border Business
Export Commerce: AliExpress and Tmall Taobao World
AliExpress is a global marketplace targeting consumers from around the world and enabling them to buy directly from
manufacturers and distributors in China and around the world. In addition to the global English-language version, the
AliExpress platform is also available in 17 other languages, including Russian, Portuguese, Spanish and French.
Consumers can access the marketplace through the AliExpress app or its websites. Top consumer markets where
AliExpress is popular are Russia, the United States, Brazil, Spain and France. AliExpress’ Russia business has been an
important part of AliExpress’ business. To further implement our globalization strategies, in October 2019, we
contributed AliExpress’ Russia business into AliExpress Russia Holding Pte. Ltd., an unconsolidated joint venture set up
by us, Mail.ru Group, MegaFon and Russian Direct Investment Fund.
Tmall Taobao World, a Chinese-language e-commerce platform, allows overseas Chinese consumers to conveniently
shop for products from China. By leveraging our commerce infrastructure, Tmall Taobao World aims to fulfill the
shopping needs of tens of millions of overseas Chinese consumers.
Import Commerce: Tmall Global and Kaola
Tmall Global addresses increasing Chinese consumer demand for international products and brands. Tmall Global serves
as the premier platform through which overseas brands and retailers reach Chinese consumers, build brand awareness and
gain valuable consumer insights in forming their overall China strategy, without the need for physical operations in
China. According to Analysys, Tmall Global was the largest import e-commerce platform in China in the twelve months
ended March 31, 2020, in terms of GMV. In addition, Kaola operates an import e-commerce business under an
independent app, with meaningful consumer mind-share in China. It offers high-quality imported products, premium
services and an interactive shopping experience to consumers.
Wholesale Commerce – Cross-border and Global
Alibaba.com is China’s largest integrated international online wholesale marketplace in 2019 by revenue, according to
Analysys. It connects Chinese and overseas suppliers to overseas wholesale buyers, who are typically trade agents,
wholesalers, retailers, manufacturers and SMEs engaged in the import and export business, and provides sourcing, online
transaction, digital marketing, digital supply chain fulfillment and financial services to them.
Sellers on Alibaba.com may purchase an annual Gold Supplier membership to reach customers, provide quotations and
transact on the marketplace. Sellers may also purchase an upgraded membership package to receive value-added services
such as upgraded storefront management tools and P4P services. In the twelve months ended March 31, 2020, over 20
million buyers from approximately 190 countries had sourced business opportunities or completed transactions at
Alibaba.com. As of March 31, 2020, Alibaba.com had approximately 190,000 paying members from China and around
the world.
Logistics Services
Through Cainiao Network, we are committed to further strengthening the capabilities of our global logistics network. Our
logistics vision is to fulfill consumer orders within 24 hours in China and within 72 hours anywhere else in the world. To
realize this vision, Cainiao Network continues to build and operates a global fulfillment network together with logistics
partners. It offers domestic and international one-stop-shop logistics services and supply chain management solutions,
addressing various logistics needs of merchants and consumers at scale.
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Enhanced Point-to-Point Network and On-demand Delivery
Cainiao Network uses data insights and technology to digitalize the entire logistics process and empower logistics
partners, thereby improving efficiency across the logistics value chain. For example, powered by large-scale computing
and machine learning capabilities, Cainiao Network’s e-shipping label and value-added services optimize delivery routes
and improve efficiencies for express delivery couriers, leading to more accurate and speedy delivery to consumers. As an
important complement to the last-mile delivery network of Cainiao Network’s express delivery partners, Cainiao
Network has also developed neighborhood delivery solutions with a combination of community and campus stations and
residential self-pickup lockers, which we call Cainiao Post. Consumers can pick up packages from stations around urban
communities, college campuses and smart pick-up lockers, as well as schedule a pickup to send packages within two
hours after placing the order on the Cainiao Guoguo app. In addition, we also operate Fengniao Logistics, Ele.me’s local
on-demand delivery network, to deliver food, beverages, groceries, among other products, to consumers on a timely
basis.
Through technology innovation and open collaboration, Cainiao Network has strengthened its strategic partnership with
major express delivery companies. As of March 31, 2020, Cainiao Network’s 12 strategic express courier partners
employed over 1.6 million delivery personnel in more than 700 cities and 31 provinces in China, according to data
provided by these partners. Collectively these partners operate more than 220,000 hubs and sorting stations as of March
31, 2020. For the twelve months ended March 31, 2020, Cainiao Network and its logistics partners enabled the delivery
of approximately 29.5 billion packages that originated from our China retail marketplaces.
Scalable Fulfillment Network
The vast geographical area of China and wide distribution of Chinese consumers and merchants require a large and
distributed logistics infrastructure. Cainiao Network has established a scalable fulfillment network that consists of
fulfillment hubs at key strategic locations, package sorting and distribution centers, which are owned, leased or partnered
with logistics partners. The fulfillment network is connected by Cainiao Network’s proprietary logistics data platform. To
facilitate the execution of our New Retail strategy, Cainiao Network provides a full-fledged fulfillment network at
provincial, city, and county levels to offer integrated supply chain management solutions to medium-sized and large
brands and merchants. This network allows them to place inventory across multiple locations in advance based on sales
forecasts to optimize supply chain efficiency and provide fast delivery to consumers.
International Logistics
Cainiao Network and the logistics arm of Lazada have developed a strong and growing network of assets and partners to
support our cross-border and global retail commerce businesses (mainly Lazada, AliExpress and Tmall Taobao World).
For example, from a China import standpoint, Cainiao Network is focused on developing cross-border fulfillment
solutions for Tmall Global, utilizing a combination of bonded warehouses in China and direct shipment from markets
outside mainland China.
Consumer Services
Our consumer services businesses consist of:
Ele.me (饿了么) (which means “Are you hungry?” in Chinese), a leading on-demand delivery and local services platform
in China, enables consumers to use the Ele.me, Alipay, Taobao and Koubei mobile apps to order meals, snacks,
beverages, fresh food and groceries online. In addition, Fengniao Logistics, our on-demand delivery network, is highly
synergistic with our digital economy and provides last-mile logistics services to facilitate New Retail initiatives,
including delivery services for Freshippo, as well as Alibaba Health.
Koubei, one of China’s leading restaurant and local services guide platforms for in-store consumption, provides targeted,
data-driven marketing tools and integrated digital operational and store management services for restaurants and local
services providers.
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Ele.me and Koubei operate under a single management team. Our strategy is for the combined business to leverage our
China retail marketplaces, Alipay and our data technology to expand our offerings from shopping to services, further
tapping into new addressable markets for consumption in China. For the twelve months ended March 31, 2020, more than
40% of new transacting users on Ele.me were from Alipay.
Fliggy, a leading online travel platform in China, provides comprehensive reservation services for airline tickets, train
tickets, accommodation, car rental, package tours and local attractions. Fliggy enhances user experience through data
technology that enables partner hotels to identify travelers with good credit and provide travel privileges such as zero-
deposit hotel bookings, express check-out and automatic post-stay billing.
Alibaba Health
Alibaba Health is our flagship vehicle for bringing innovative solutions to the pharmaceutical and healthcare industries.
Alibaba Health engages in pharmaceutical and healthcare product sales business, establishes Internet healthcare platforms
and explores digital health using cloud computing and big data technologies.
Cloud Computing
Alibaba Group is the world’s third largest and Asia Pacific’s largest Infrastructure as a Service provider by revenue in
2019 in U.S. dollars, according to Gartner’s April 2020 report (Source: Gartner, Market Share: IT Services, 2019, Dean
Blackmore et al., April 13, 2020) (Asia Pacific refers to Mature Asia/Pacific, Greater China, Emerging Asia/Pacific and
Japan, and market share refers to Infrastructure as a Service and Managed Services and Cloud Infrastructure Services).
Alibaba Group is also China’s largest provider of public cloud services by revenue in 2019, including PaaS and IaaS
services, according to IDC (Source: IDC Semiannual Public Cloud Services Tracker, 2019). The technologies that power
Alibaba Cloud, the cloud computing business of Alibaba, grew out of our own need to operate at the massive scale and to
address the complexity of our core commerce business, including related payments and logistics elements. In 2009, we
founded Alibaba Cloud to make these technologies available to third-party customers.
Ahead of the 11.11 global shopping festival in 2019, Alibaba Cloud enabled the migration of the core systems of our e-
commerce businesses onto our public cloud. Its public cloud infrastructure and technologies enabled us to process over
544,000 orders per second at peak and 970 petabytes of data without disruption for the full 24-hour period during the
festival. This year’s shopping festival showcased the strength of our leading cybersecurity technology in the public cloud
environment, which is a key priority of many of our public sector and industry customers. We believe the migration of
the core systems of Alibaba’s e-commerce businesses onto the public cloud is a major milestone that not only is
generating greater operating efficiencies for Alibaba but also will encourage more customers to adopt our public cloud
infrastructure.
Alibaba Cloud offers a complete suite of cloud services to customers worldwide, including elastic computing, database,
storage, network virtualization services, large-scale computing, security, management and application services, big data
analytics, a machine learning platform and IoT services. Products that differentiate Alibaba Cloud from our domestic
peers include proprietary security and middleware products, large-scale computing services and analytic capabilities
supported by our big data analytics platform. These products not only enable customers to quickly build IT infrastructure
services online without on-premises work, but also equip them with leading big data analytics capabilities, providing
deep data insights by efficiently handling the complex computing tasks of hundreds of millions of data dimensions. We
also operate data centers in multiple countries around the world.
As a major part of our partnership with the International Olympic Committee, we unveiled Alibaba Cloud sports-related
intelligent capabilities, built on Alibaba Cloud’s high-performance infrastructure of world-class data centers, network
virtualization services and market-leading security services, which integrate data intelligence and machine learning to re-
define engagement between fans, organizers, venues and athletes.
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Digital Media and Entertainment
Our digital media and entertainment business leverages our deep data insights to serve the broader interests of consumers
through our key distribution platform, Youku, and through Alibaba Pictures and our other diverse content platforms that
provide online videos, films, live events, news feeds, literature and music, among other areas.
Key Distribution Platform
Youku
Youku is the third largest online long-form video platform in China in terms of monthly active users in March 2020,
according to QuestMobile. It enables users to search, view and share high-quality video content quickly and easily across
multiple devices. The Youku brand is among the most-recognized online video brands in China.
Insights we gain from our retail commerce business and our proprietary data technology enable Youku to deliver relevant
digital media and entertainment content to its users. At the same time, Youku helps drive customer loyalty to our core
commerce business in the form of complementary content offerings for users. For example, a loyalty program member of
our core commerce business can purchase a Youku membership at a preferential rate or be rewarded a membership free
of charge. Youku is also the exclusive online video platform to live stream major events of our core commerce business
such as the countdown gala celebration for the 11.11 global shopping festival, which is supported by interactive features
to drive consumer engagement. In fiscal year 2020, Youku’s average daily paying subscribers increased by over 50%
from the prior fiscal year.
Key Content Platforms
We offer a diverse range of digital media and entertainment content using a sustainable production and acquisition
approach. First, we provide self-produced content. Second, we also jointly produce content through arrangements with
studios that commission them to produce and distribute some or all of their content exclusively on our platforms. Third,
we acquire rights to display content on our digital media and entertainment platforms pursuant to licensing agreements
with rights holders. Last, we offer an open-platform on which user-generated content and professionally-generated
content are generated and distributed. Our digital media and entertainment offerings include online videos, films, live
events, news feeds, literature and music.
Alibaba Pictures is an Internet-driven integrated platform that covers content production, promotion and distribution,
intellectual property licensing and integrated management, cinema ticketing management and data services for the
entertainment industry. Alibaba Pictures was involved in the production, promotion and distribution of a number of
highly popular films in the twelve months ended March 31, 2020. For example, the movie 1917 won the 2020 Oscar
Academy Award for Best Cinematography, Best Visual Effects and Sound Mixing. The Captain, developed and
published by Alibaba Pictures, has generated more than RMB2.9 billion in ticket sales since its opening in September
2019. Through Damai, a leading online ticketing platform for live events in China, we provide users with ticketing
services for popular concerts, plays and sporting events. Shuqi is our online literature distribution and reading platform
and it offers content for use in derivative works or tie-in entertainment. Our music platform provides music streaming
and digital music online publishing services, as well as enabling the discovery and support of independent musicians.
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Innovation Initiatives
Amap
Amap is the largest provider of mobile digital map, navigation and real-time traffic information in China by monthly
active users in March 2020, according to QuestMobile. Amap leverages its big data-enabled digital mapping technology
to empower major mobile apps across different industries including local services, ride-hailing service and social
networking, which end users can access directly through Amap’s leading open platform in China. On October 1, 2019,
the first day of the week-long National Day holiday in China, the Amap app achieved a record high of 118 million daily
active users. In addition, Amap provides digital map data, navigation software and real-time traffic information to
aftermarket consumers in China, international and domestic automobile manufacturers. Amap also empowers major
platforms and infrastructural service providers in our digital economy, including our China retail marketplaces, Cainiao
Network and Alipay.
DingTalk
DingTalk is our digital collaboration workplace that offers new ways of working, sharing and collaborating for modern
enterprises and organizations, including schools and education institutions. Millions of enterprises and users use
DingTalk to stay connected and work remotely.
DingTalk delivers the following value to enterprises and organizations.
●
Real-time Communication. DingTalk offers secure and reliable one-on-one and group communication, as
well as audio and video conferencing, live streaming features, and integration with clients’ internal email
system.
● Digital Organization Management. DingTalk facilitates the digital transformation of the organizational
management for enterprises and organizations.
●
Efficient Collaboration. DingTalk users have easy access to network collaboration tools including data
storage, calendars, workflow management, and shared documents. DingTalk enables users to interact with
anyone throughout the organization easily and improves management efficiency.
● Operations Enhancement. On DingTalk, enterprise users are offered many applications and services to
better manage businesses and relationships including identity and access management, office automation
and CRM.
●
Vibrant Ecosystem. DingTalk’s open platform supports independent software developers and enterprise
service providers to develop apps and services that are seamlessly integrated. DingTalk’s ecosystem also
offers smart hardware for the workplace.
According to QuestMobile, DingTalk is the largest business efficiency app in China by monthly active users in March
2020.
Tmall Genie
Tmall Genie, our AI-powered smart speaker, is the No. 1 smart speaker in China by shipments in 2019, according to IDC
(Source: IDC China Quarterly Smart Home Device Tracker, 2019). It connects our customers with services offered by
digital economy participants in an interactive way. Tmall Genie is our gateway to link customers with new services and
experiences to be generated by IoT and smart home appliances. It offers extensive content for families in order to
broaden its user base and drive their engagement with their devices.
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Ant Group – Financial Technology Services
Ant Group is a technology company that provides comprehensive digital payment services and offers digital financial
services and digital daily life services for consumers and small and micro businesses, or SMBs, in China and across the
world. It collaborates with global partners to bring sustainable, inclusive financial services to unserved and underserved
users. Innovation has always been at the core of Ant Group’s fundamental philosophy, as it continuously pursues various
new initiatives, including the commercial applications of blockchain. During the twelve months ended March 31, 2020,
the number of global AAUs served by Ant Group and its nine local e-wallet partners reached approximately 1.3 billion.
Ant Group is an unconsolidated related party in which we have held a 33% equity interest since September 2019.
China Platform
Through the Alipay app, Ant Group, together with its partners, primarily offers convenient digital payment and digital
financial services, as well as a broad spectrum of digital daily life services to consumers and SMBs in China.
Digital Payment Services
Ant Group provides digital payment services to facilitate online and offline transactions, supports merchants to stay
engaged with their customers and accelerates the digital transformation of merchants’ offline businesses. For the twelve
months ended March 31, 2020, Ant Group experienced significant growth in payment transactions, which was
predominantly driven by continuous expansion of user and merchant coverage, as well as higher transaction frequency.
Ant Group continues to be the leader of the digital payment market, with credit payments becoming increasingly popular
among its users.
Digital Financial Services
Ant Group facilitates a broad spectrum of digital financial services including wealth management, micro financing and
insurance, primarily through partnerships with third-party financial institutions. During the twelve months ended March
31, 2020, the vast majority of Ant Group’s digital payment users were also digital financial services users. As these users
stayed longer on the Alipay platform, their assets and liabilities managed through Ant Group continued to grow notably.
For the twelve months ended March 31, 2020, digital financial services contributed more than 50% of Ant Group’s
overall revenues. Digital financial services in China primarily consist of three categories:
● Wealth management. Ant Group partners with financial institutions, such as fund management and
insurance companies, to offer comprehensive wealth management products, including money market funds,
fixed income products and equity investment products through Ant Fortune, its wealth management
platform. As of March 31, 2020, Ant Fortune facilitated more than RMB4.0 trillion of assets under
management for its partners.
● Micro financing. Ant Group partners with banks and other lenders to provide small-amount, flexible-term
credit services to consumers and SMBs. Through extensive technology and risk management capabilities,
Ant Group enables its partners to deliver greater credit access to the unserved and underserved populations.
●
Insurance. Ant Group partners with insurance companies to provide a full suite of insurance product
offerings, including innovative insurance products to meet users’ unserved insurance needs for e-commerce
and other daily life use cases, as well as healthcare and life insurance products jointly developed with
insurance company partners. For the twelve months ended March 31, 2020, total insurance premiums
facilitated by Ant Group more than doubled compared to the same period in the prior year.
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Globalization
Ant Group seeks to leverage its leading technology capabilities to serve global consumers and merchants. As of March
31, 2020, Ant Group had entered into strategic partnerships with nine local partners in Bangladesh, Hong Kong S.A.R.,
India, Indonesia, Korea, Malaysia, Pakistan, the Philippines and Thailand. It further advanced its global network
initiatives to facilitate and optimize cross-border transactions, as well as to enable merchants to sell globally and
consumers to buy globally. Ant Group’s global network is differentiated in that it is inclusive, fully digitalized, open and
a techfin enabler. Ant Group continues to expand use cases to better serve its users. For example, foreign credit card
holders can now utilize mobile payments in China through the Alipay app. Ant Group also provides one-stop payment
solutions in online and offline cross-border use cases. For example, Apple’s iTunes Store now accepts mobile wallet
payments from Ant Group’s local partners in Korea, the Philippines and Thailand; and Alipay Hong Kong wallet users
are now able to make offline payments in several regions outside of Hong Kong.
Innovative Technology
Ant Group has pioneered various technology services, including the commercial application of blockchain. As of March
31, 2020, Ant Group’s proprietary blockchain technology had been applied to a wide range of commercial use cases, such
as supply chain financing, product provenance as well as electronic bill issuance and circulations.
For additional details on our commercial relationship with Ant Group and Alipay, see “Item 7. Major Shareholders and
Related Party Transactions — B. Related Party Transactions — Agreements and Transactions Related to Ant Group and
Its Subsidiaries.”
Customer Services for China Retail Marketplaces
Our customer service representatives serve consumers and merchants on our marketplaces through telephone hotlines,
real-time instant messaging and online inquiry systems. In addition, we provide service 24 hours a day, seven days a
week through an AI chat robot. Merchants on our platforms serve their customers with commerce technologies and
services we provide. By leveraging big data analytics, we facilitate the resolution of customer disputes, many of which
are handled automatically by our system. The majority of disputes are handled in real-time.
With certain exceptions, consumers on our China retail marketplaces may return the purchased goods within seven days
from receipt. Alipay’s escrow payment services ensure efficient refunds. In addition, for qualified consumers with good
credit record, we may accelerate the refund procedure by making the refund payment upon the buyer’s submission of a
refund application and proof of shipment for the returned goods.
Consumer Protection
We believe every consumer has the right to protection from false and misleading claims and harmful products. We
encourage our merchants to make product quality a priority and have established various safeguard mechanisms. All
Tmall merchants are required to contribute to and maintain a fund deposit for the benefit of consumers. Fund deposit
requirements vary by product category and typically range from RMB10,000 to RMB1,000,000 per storefront. For Tmall
Global merchants, the fund deposit requirement typically ranges from RMB50,000 to RMB800,000 for standard
storefronts. In most circumstances, Taobao Marketplace merchants maintain individual fund deposit with minimum
amounts ranging from RMB1,000 to RMB100,000. All Tmall and Taobao Marketplace merchants are required to sign
agreements with us authorizing us to deduct fund deposit from their consumer protection fund accounts in the event of
confirmed consumer claims. Merchants who have failed to maintain a minimum amount in their fund deposit are blocked
from showing product listings in our P4P, recommendation feeds and search results, among others.
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Many merchants on Tmall and Taobao Marketplace provide a larger deposit than required and make additional service
commitments, such as expedited shipment, free maintenance for electronics and installation services for furniture
purchases, to demonstrate to their customers their confidence in the quality of their services and products. In addition,
Alipay’s escrow payment services offer consumers further protection by only releasing the relevant payment upon
consumer confirming the receipt of the merchandise, unless specified otherwise.
Transaction Platform Safety Programs
Preserving the integrity of our marketplaces is fundamental to our business. We are committed to protecting intellectual
property rights and eliminating counterfeit merchandise and fictitious activities. Infringement of intellectual property,
both online and offline, is an industry-wide issue globally. By working with rights holders, trade associations and
governments around the world, we have made significant progress in combating the issue of intellectual property rights
infringement. As of March 31, 2020, there were over 250,000 brands on Tmall, including 80% of the consumer brands
among the Forbes Top 100 World’s Most Valuable Brands for 2019, a demonstration of the trust these brands place in the
integrity of our marketplaces.
Product Authenticity
We are committed to offering authentic, high-quality products across our marketplaces, including premium overseas
products on Tmall Global, as well as grocery and daily consumption products on Tmall Supermarket. At the same time,
we are proactive in partnering with rights holders and law enforcement authorities both online and offline to monitor
product authenticity and protect intellectual property. We have called for collective efforts in the fight against
counterfeiting that include stronger law enforcement measures and harsher penalties for those found to be engaged in
criminal activities. In addition, we also initiate civil actions against counterfeiters using our platforms. In May 2019,
Alibaba Group was awarded World Trademark Review’s Asia Pacific Team of the Year for its work in brand protection.
Our product authenticity initiatives have produced effective results. As part of our commitment to allow only authentic
product listings on our platforms, we employ big data and technology to proactively identify and shut down storefronts
selling infringing products and remove suspicious product listings. Our offline product authenticity initiatives also have
borne tangible results as we regularly provide law enforcement authorities with evidence to successfully track down and
arrest violators of intellectual property rights.
By leveraging our advanced technologies, as well as engaging in close collaboration with stakeholders, including rights
holders, trade associations and government bodies, we have implemented the following best practices around a three-
pronged strategy:
● World-class notice-and-takedown system. We operate a rigorous notice-and-takedown system that allows rights
holders to request the removal of potentially infringing listings from our platforms with ease via the Alibaba
Intellectual Property Protection (IPP) portal. We also offer qualified rights holders a simplified takedown
program pursuant to which we expedite claims and simplify evidentiary requirements.
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●
Proactive monitoring powered by big data. We utilize our proprietary algorithms to proactively detect the
presence of suspicious goods and remove them from our marketplaces without requiring the notice of a rights
holder. To enable proactive monitoring at its best, we have developed the capability to perform real-time
scanning of suspicious product specifications during a merchant’s listing creation process, which helps us
prevent merchants from uploading infringing content in the first place. For example, we employ Optical
Character Recognition (OCR) and logo recognition technologies to conduct text and logo detection on images
used in product listings in order to detect the brands being sold and flag any potential issues. Our detection
technology continuously improves through machine learning, which means we become quicker and more
efficient at removing problematic products all the time. Furthermore, to support this effort, an increasing
number of rights holders also contribute information about their products and online trends they observe so we
can further optimize our algorithms and detection methods.
● Offline enforcement. We also work closely with brands and law enforcement authorities to assist in their offline
investigations against counterfeiting. With insights drawn from our data analytics, we help law enforcement
authorities to identify manufacturers and dealers of suspicious goods so they can be brought to justice.
Alibaba Anti-Counterfeiting Alliance, or AACA
In January 2017, Alibaba, along with 30 domestic and international intellectual property rights holders, founded the
AACA, the first alliance of its kind. Owners of famous global consumer brands, such as 3M, Amway, Ford, Johnson &
Johnson, Mars, Procter & Gamble, and Spalding, have participated as founding members in the AACA. By March 31,
2020, AACA membership had expanded to 179 rights holder members, representing over 550 brands from 17 different
countries and regions, and now encompasses 14 industries, such as electronics, automotive, pharmaceuticals and luxury
goods, which regularly collaborate through Industry Working Groups, or IWGs.
Alibaba contributes its Internet technology to support the AACA through a number of cooperation programs that rights
holders can opt into. The cooperation programs encourage rights holders, e-commerce platforms, and law enforcement
agencies to work collaboratively to protect intellectual property rights through increased communication and the
exchange of information. The AACA facilitates sharing of best practices among its members, as well as with wider
society via educational programs for public bodies and consumers about the damage counterfeit products cause, including
with respect to health, the environment and safety.
The AACA has also established an Advisory Board consisting of rights owners from all IWGs that acts as a channel for
rights holders to provide feedback on significant intellectual property enforcement-related strategies and policies to each
other, Alibaba, and other parties. The Advisory Board acts as a leading industry forum to discuss new trends in online
intellectual property infringement activities, litigation and platform practices.
Combating Fictitious Transactions
We have and will continue to invest significant resources in protecting the trust and credit systems we have built on our
marketplaces. Measures to prevent, detect and reduce the occurrence of fictitious transactions on our China retail
marketplaces that we have implemented include:
●
●
●
requiring the use of merchants’ real identities when opening accounts;
analyzing transaction patterns to identify anomalies;
enabling consumers and merchants to report suspicious transactions;
● maintaining a “blacklist” of merchants who have previously been involved in fictitious transactions; and
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●
collaborating with law enforcement authorities to combat fictitious activities by merchants and websites
and mobile apps that enable fictitious activities.
Penalties
We aim to protect consumers by excluding suspicious merchandise and fictitious transactions from ranking systems,
credit systems and transaction volume statistics. When these activities are confirmed, we penalize the parties involved,
based on the severity of the violation, through a number of means, including but not limited to:
●
●
●
●
permanently banning merchants from opening accounts on our marketplaces,
closing down storefronts,
limiting merchants’ ability to add listings, and/or
imposing restrictions on participation in promotional activities on our marketplaces.
Our Technology
Technology is key to our success in achieving efficiency, improving user experience, and enabling innovation. Our
world-class proprietary technology supports peak order volumes of up to hundreds of thousands per second, delivers tens
of billions of online marketing impressions per day, and enables tens of millions of merchants, brands and other
businesses to conduct their operations efficiently and effectively. The uniqueness of our technology lies in the
unparalleled large-scale application environment due to the scale of our businesses. By constantly applying our
technology across our businesses, we generate knowledge and innovations that drive improvements and further
technological development.
Members of our research and development team play key roles in various international standardization organizations in
areas such as e-commerce, security and IoT. In addition, we are also active in open source communities. In October 2017,
we established DAMO Academy, a global research program in cutting-edge technology that aims to integrate science
with industry and speed up information exchange between them. It encourages a collaborative environment where
scientific discoveries can be more quickly applied to real-life problems.
Key components of our technology include those described below:
Technology Infrastructure
Our data centers utilize leading technologies in distributed structure, innovative cooling techniques, distributed power
technology and intelligent monitoring, and we believe our data centers are among the most efficient in the world as
indicated by their better power utilization rates. The multi-region availability of our transaction system data centers
provides scalability and stable redundancy.
Cloud Operating System
Apsara, our cloud computing operating system, is a proprietary general purpose distributed computing operating system
that provides Alibaba Cloud customers and our core businesses with enhanced computing power to support their and our
business growths in the new technology era.
Database
We have developed the next generation cloud native database, POLARDB, which enables our customers to meet their
requirements for on-demand storage and computation, pay-per-use elasticity and scalability. POLARDB significantly
increases the throughput and performance of transaction and query processing as compared to other open-source
relational database management systems. We have also developed a distributed online analytics database, AnalyticDB,
which supports real-time interactive and complex analytics over massive data.
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Big Data Analytics Platform
We have developed a distributed data analytics platform that can efficiently handle the complex computing tasks of
hundreds of petabytes of data per day, providing deep data insights capabilities to our businesses and our cloud
computing customers. Our big data analytics platform includes: MaxCompute, a data storage and computing platform;
Blink, a real-time data computing platform; an interactive analysis engine; Dataworks, a one-stop development platform;
and OneData, a data integration and management system.
Artificial Intelligence
We believe we are one of the few companies in the world with a proprietary, distributed deep learning platform that has
access to consumer insights across diverse businesses involving a rich variety of consumer experiences. As a result, we
believe we are in a unique position to develop large-scale commercial use of AI. We have applied various AI
technologies across our digital economy to enhance consumer experience and business operational efficiency. These
enhancements include personalized search results and shopping recommendations empowered by deep learning and data
analytics, speech recognition, image and video analysis technologies adopted in search functions, as well as intelligent
customer service. In addition, our AI capabilities enable us to introduce innovative products, such as Tmall Genie, our
AI-powered smart speaker.
Internet of Things
We are engaged in the development of a wide range of IoT technologies, such as PaaS, microchip design and
development framework, operating systems and cloud computing capabilities for retail, logistics, community, home,
mobile, public and industrial applications. Our IoT PaaS and data allow hardware to work in more application scenarios
and solutions as well as applications to have more hardware options.
Security
We have established a comprehensive situational awareness and security system that spans across our entire
infrastructure and business systems, covering our hardware, systems, network, apps, data services and end users. Our
back-end security system handles hundreds of millions of instances of malicious attacks each day to provide effective
security for our commerce and cloud platforms.
Sales and Marketing
As Taobao Marketplace is China’s largest mobile commerce destination, with a large and growing social community and
an exceptionally wide range of product offerings, and Tmall is the world’s largest third-party online and mobile
commerce platform for brands and retailers, we have wide consumer recognition of our brands and enjoy significant
organic traffic through word-of-mouth. We believe the reputation and ubiquitous awareness of our brands and platforms
in China and, increasingly, abroad provide us with the best and most cost-efficient marketing channel. In addition, we
also use other marketing initiatives to promote our platforms. In January 2017, we launched a historic long-term
partnership with the International Olympic Committee that will last through 2028. Joining The Olympic Partner
worldwide sponsorship program, Alibaba has become the official “E-Commerce Services” Partner and “Cloud Services”
Partner and a founding partner of the Olympic Channel through the 2028 Games in Los Angeles. During the most recent
fiscal year, we increased our marketing efforts, such as a highly coordinated marketing and promotional campaign for the
11.11 global shopping festival, to expand our user base. We expect to continue to leverage our resources in future
marketing activities. We also expect to enhance our monetization capability through leveraging our data technologies to
develop and offer more personalized and innovative services, so as to improve customer experience and wallet share.
Furthermore, our major business segments and other elements in our digital economy provide synergetic advantages and
create cross-promotional opportunities. For example, the large number of consumers on our marketplaces attracts a large
number of merchants who become customers for our online marketing services, while an increasing number of key
opinion leaders are actively producing content to engage with consumers and fans on our platforms, thereby driving
revenue for merchants, brands and retailers.
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Socially Responsible Mindset
At Alibaba, we believe acting in a socially responsible way is an integral part of our business model. Since our company
was founded in 1999, we have been highly committed to supporting and participating in charitable and socially
responsible projects that align with our core values and mission, and to establishing an inclusive technology-driven
digital economy to extend the benefits of our technological capabilities to the community at large.
Our major corporate social responsibility initiatives include:
Alibaba Digital Economy Goes “All-in” to Fight the COVID-19 Pandemic
Given the scale of our digital economy and the capabilities of our technology platforms, we believe that we should play
an active role in China and globally to assist public organizations, businesses and individuals during times of crisis. We
had dedicated over RMB3.3 billion in value of funds and other benefits as of March 31, 2020 to support the fight against
the pandemic in China and around the world, of which over RMB2.0 billion was used for procurement and transportation
of medical equipment and the development of vaccines. At the same time, we are bringing together the power of our
digital economy to go “all-in” to support the recovery of the economy and social life, standing arm-in-arm with SMEs
and providing support to them during this challenging time.
During the pandemic, approximately 10,000 of our employees participated in initiatives related to fighting COVID-19, of
which employees 40% are engineers, who used their technological skills in virus prevention and business recovery-
related initiatives.
Procure, Donate and Transport Medical Supplies Through Collaborative Efforts Across Multiple Businesses
Since January 2020, employees from across many of our businesses, including Alibaba.com, 1688.com, Lazada, Tmall
Global, and Tmall Supermarket, have worked collaboratively to procure medical supplies globally and delivered them to
those in need, including frontline medical staff in China and around the world.
As of June 30, 2020, the Alibaba Foundation, Jack Ma Foundation and Joe and Clara Tsai Foundation had jointly donated
over 200 million units of medical supplies to China and over 150 countries and regions, including all continents except
Antarctica.
Cainiao Network has played an important role in facilitating the delivery of medical supplies. Cainiao Network, together
with its global and China-based logistics partners, launched an initiative to transport medical supplies to China for free
shortly after the lockdown in Wuhan started. As of March 31, 2020, we and our partners had delivered medical supplies
to 200 hospitals and institutions in Hubei and other provinces in China. Furthermore, Cainiao Network also arranged
chartered flights to deliver medical supplies from China to other countries, to alleviate shortages of medical supplies in
affected areas.
Using Advanced Technology as a Force to Fight the COVID-19 Pandemic
We have established the Global MediXchange for Combating COVID-19 Platform, an online platform to facilitate
stakeholders globally by sharing knowledge and technologies to battle the COVID-19 pandemic. Specifically, we have
adopted a three-pronged approach to leverage our technological capabilities to help different stakeholders.
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First, we believe it is essential to slow down the spread of the pandemic. Alibaba Cloud has made its computing power
available for free to public research institutions to accelerate the discovery of drugs and vaccines. Furthermore, Alibaba
Cloud has offered cloud-based AI technology applications developed by our DAMO Academy, such as CT Image
Analytics Solution to improve COVID-19 testing accuracy and detection efficiency, Epidemic Prediction Solution model
to predict size, peak time and duration of the epidemic in particular regions, and Genome Sequencing Solution to
accelerate COVID-19 diagnosis. We have been working with local partners, hospitals and global research institutions to
customize these applications.
Second, we believe it is important to share lessons learned from China’s COVID-19 battle with frontline medical
professionals around the world. Based on our partnership with several hospitals in China, as of June 30, 2020, we had
published nine handbooks in multiple languages with topics ranging from treatment and prevention of COVID-19 to
construction of emergency hospitals. Furthermore, Alibaba Cloud and DingTalk have facilitated real-time conversations
between doctors in China and medical professionals in other countries through livestream or video conferences.
Third, we have used technology to bring education to students while schools are closed during the pandemic. DingTalk,
recognized by The United Nations Educational, Scientific and Cultural Organization as a digital learning solution,
launched an Online Classroom initiative shortly after China postponed the start of the new academic semester in January
2020. This initiative has provided schools with free digital tools, such as live streaming, online examinations and grading
features. DingTalk’s user base expanded significantly in the education sector as a result. In March 2020, DingTalk
facilitated an average of over one million active classroom sessions each workday.
Supporting Locals at Severely-impacted Locations and Businesses Affected by COVID-19
To support the community in Wuhan, Hubei Province, Freshippo, Lingshoutong and Ele.me continued to operate
throughout the lockdown in Wuhan. Our businesses ensured there were sufficient groceries and daily necessities for the
public, who were quarantined at home for nearly two months.
We believe it is important to focus on customer needs and problems during this difficult period. Starting in February
2020, together with Ant Group, we implemented a comprehensive set of financial and business support measures,
including interest-free working capital loans and exempting a portion of annual services fees for 2020 for Tmall
merchants to help alleviate near-term challenges faced by our customers and partners. In April 2020, we launched our
“2020 Spring Thunder” initiatives to help export-focused SMEs expand into new markets through AliExpress, Lazada
and Tmall Taobao World; develop digitalized manufacturing clusters; accelerate the digital transformation of China’s
agriculture sector and continue to help alleviate financing challenges faced by SMEs by working with Ant Group and its
partners.
We will continue to deploy the power of commerce and technologies that we have harnessed over the past 20 years to
play a part in resolving key challenges in our societies.
Creating Job Opportunities and Enabling Small Businesses
The breadth of our digital economy and the range of service providers needed within it create substantial employment
opportunities. In addition to providing direct business and job opportunities for merchants, our digital economy has
created new opportunities for service providers in logistics, marketing, consulting, operations outsourcing, training,
services and other online and mobile commerce professions. According to a report published in 2019 by China’s Renmin
University, we contributed to the creation of about 40 million direct and indirect job opportunities in China via our China
retail marketplaces alone. Similarly, the international expansion of our business also creates job opportunities by enabling
merchants from different parts of the world to do business online.
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With the power of new digital technologies, our platforms have leveled the playing fields for businesses in many
respects, helping to foster an inclusive economy where everyone and SMEs can thrive and prosper. The digital economy
has enhanced the varieties and diversification of scenarios for employment and women can obtain more inclusive
employment opportunities. Female sellers represented approximately half of the sellers who had one or more orders
confirmed by a consumer on our China retail marketplaces in fiscal year 2020, as declared by these sellers.
Supporting Poverty Relief and Rural Development in China
We are committed to contributing to China’s poverty relief initiatives. Apart from using our own resources, we also
leverage our platforms’ reach to maximize our influence and our technological capabilities to increase the efficiency of
these initiatives.
In December 2017, we launched the Alibaba Poverty Relief Foundation that focuses on education, rural commerce
advancement, women empowerment, healthcare and environmental sustainability. We aim to leverage the power of our
digital economy to discover sustainable and replicable ways to work with impoverished communities to break the poverty
cycle. To advance rural commerce, we sent eleven employees as “poverty relief ambassadors” to be stationed in
impoverished counties over a period of time to build commerce capabilities for local villagers. To reduce
intergenerational poverty through better healthcare, we had provided health insurance to cover major illnesses to over
four million people in over 70 impoverished counties for twelve months ending December 31, 2019. To empower
women, we have developed a comprehensive insurance plan that covers women’s education, pregnancy and illness in
impoverished counties, affording young women opportunities to be educated without worrying about their families’
financial situation.
Contributing to Environmental Sustainability
We are committed to raising public awareness of environmental issues and promoting an eco-friendly mindset among the
public. In 2011, we established the Alibaba Foundation, a charity fund that primarily focuses on supporting
environmental protection in China. The Alibaba Foundation has provided capital and technical support for environmental
conservation and natural environment education projects, including funding to protect China’s drinking water sources and
to promote the development of the environmental protection industry.
We also work with enterprises to implement environmentally-sustainable business models across various sectors, such as
manufacturing, retail, logistics and cloud computing. The technology of Alibaba Cloud not only helps enterprises reduce
their need for computing hardware, but also promotes environmental sustainability. For example, we launched a data
center featuring an innovative cooling system that uses fresh water from a nearby lake to reduce energy consumption.
Furthermore, Cainiao Network actively spearheads and promotes “green” initiatives with its courier partners and within
our digital economy. Key initiatives include “green packages” and “green delivery.” “Green packages” refers to
promoting the use of biologically degradable courier bags and reusable packages, minimizing repackaging of products
and using algorithms to optimize package size and materials used. These measures contribute to reducing the amounts of
materials needed for packaging. Cainiao Network further promotes “green delivery” not only through the use of electric
delivery vehicles, but also through its neighborhood delivery solutions and fully-fledged multi-location fulfillment
network. These measures significantly shorten the package delivery distances from warehouses, thereby reducing the
carbon footprint of the logistics industry.
Charitable Contributions and Community Service
We have consistently been active, and also have always encouraged our employees to be active, in participating in
community service.
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Since 2010, we have established a special fund to encourage environmental awareness and conservation as well as other
corporate social responsibility initiatives. In addition, since September 2015, we have encouraged our employees to
perform a minimum of three hours of community service every year. In fiscal year 2020, the partners of the Alibaba
Partnership performed an average of 44 hours of community service.
“Reunion,” a platform that our employees created during their free time, connects our mobile apps and our partners’
mobile apps to help locate missing children across China. Since its initial launch in May 2016 and up to May 15, 2020,
“Reunion” has helped law enforcement authorities solve 98.2% of cases of missing children announced through the
platform, successfully finding over 4,300 children.
Over the years, Alibaba partners have initiated five charity foundations which support various social needs. For example,
the “Hupan Modou” (湖畔魔豆) charity foundation, established by twelve female partners from the Alibaba Partnership, is
a charity that supports mothers to provide systematic parenting skills to children in rural China, allowing their children to
have equitable development opportunities. In 2019, the fund established 23 parenting and childcare education centers and
service stations for parents with children under the age of three in Ningshan County, an impoverished county in Shaanxi
Province, China. We have successfully replicated this model to another impoverished county in Shaanxi Province.
We also leverage our digital economy to extend the reach of our charitable initiatives and encourage merchants,
consumers and other digital economy participants to engage in community service. For instance, in support of the United
Nation’s annual International Day of Charity on September 5 each year, we hosted the “95 Philanthropy Week,” where
we initiated multiple public charity activities.
Charitable organizations can also set up storefronts on our marketplaces to raise funds and engage with volunteers.
Merchants on China retail marketplaces and Tmall Global can designate a percentage of their sales proceeds generated on
our platforms to go to charitable organizations. Consumers can contribute to charitable causes by purchasing public
interest products, participating in charity auctions hosted on our platforms or directly making donations. Through our
China retail marketplaces, we supported over 2.5 million merchants and over 480 million users to participate in funding
domestic and overseas charitable projects and enabled charitable organizations to raise approximately RMB610 million
in fiscal year 2020, which benefited over 6 million disadvantaged people.
Competition
We face competition principally from established Chinese Internet companies, such as Tencent, and their respective
affiliates, global and regional e-commerce players, cloud computing service providers, such as Amazon, and digital
media and entertainment providers. Although foreign e-commerce companies currently have a limited presence in China,
we face significant competition from them in the areas of cross-border commerce. These competitors generate significant
traffic and have established strong brand recognition, robust technological capabilities and significant financial resources.
The areas in which we compete primarily include:
● Consumers – We compete to attract, engage and retain consumers based on the variety and value of
products and services listed on our platforms, the engagement of digital media and entertainment content
available on our platforms, the overall user experience of our products and services and the effectiveness of
our consumer protection measures.
● Merchants, Brands, Retailers and other Businesses – We compete to attract and retain merchants, brands
and retailers based on the size and the engagement of consumers on our platforms and the effectiveness of
our products and services to help them build brand awareness and engagement, acquire and retain
customers, complete transactions, expand service capabilities, protect intellectual property rights and
enhance operating efficiency. In addition, we compete to attract and retain businesses of different sizes
across various industries based on the effectiveness of our cloud service offerings to help them enhance
operating efficiency and realize their digitalization transformation ambitions.
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● Marketers – We compete to attract and retain marketers, publishers and demand side platforms operated by
agencies based on the reach and engagement of our properties, the depth of our consumer insights and the
effectiveness of our branding and marketing solutions.
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Talent – We compete for motivated and capable talent, including engineers and product developers to build
compelling apps, tools, and functions and to provide services for all participants in our digital economy.
As we acquire new businesses and expand into new industries and sectors, we face competition from major players in
these industries and sectors. In addition, as we expand our businesses and operations into an increasing number of
international markets, such as Southeast Asia, India and Russia, we increasingly face competition from domestic and
international players operating in these markets. See “Item 3. Key Information — D. Risk Factors — Risks Related to
Our Business and Industry — If we are unable to compete effectively, our business, financial condition and results of
operations would be materially and adversely affected.”
Seasonality
Our overall operating results fluctuate from quarter to quarter as a result of a variety of factors, including seasonal factors
and economic cycles that influence consumer spending as well as promotions.
Historically, we have experienced the highest levels of revenues in the fourth calendar quarter of each year due to a
number of factors, including merchants allocating a significant portion of their online marketing budgets to the fourth
calendar quarter, promotions, such as the 11.11 global shopping festival, and the impact of seasonal buying patterns in
respect of certain merchandise categories such as apparel. We also have experienced lower levels of revenues in the first
calendar quarter of each year due to a lower level of operating activities by merchants early in the calendar year and
during the Chinese New Year holiday, during which time consumers generally spend less and businesses in China are
generally closed. Moreover, as our fixed costs and expenses, such as payroll and benefits, bandwidth and location fees,
grow at a relatively stable rate compared to our revenue growth, we expect to enjoy increased operating leverage in
seasonally strong quarters, but will face significant margin pressure in seasonally weak quarters.
Regulation
We operate in an increasingly complex legal and regulatory environment. We and our key service provider, Ant Group,
are subject to a variety of PRC and foreign laws, rules and regulations across a number of aspects of our business. As we
have expanded our operations to other countries, we have become increasingly subject to applicable regulations in these
jurisdictions. This section primarily summarizes the principal PRC laws, rules and regulations that we believe have the
most significant impact on our business and operations within the PRC, because the PRC remains the country where we
conduct the substantial majority of our business and generate the substantial majority of our revenues. Other jurisdictions
where we conduct business have their own laws and regulations that cover many of the areas covered by PRC laws and
regulations, but their focus, specifics and approaches may differ considerably. Areas in which we are subject to laws,
rules and regulations outside of the PRC mainly include data protection and privacy, consumer protection, content
regulation, intellectual property, competition, cross-border trade, taxation, anti-money laundering and anti-corruption.
We may also face protectionist policies and regulatory scrutiny on national security grounds in foreign countries in which
we conduct business or investment activities. See “Item 3. Key Information — D. Risk Factors — Risks Related to Our
Business and Industry — We and Ant Group are subject to a broad range of laws and regulations, and future laws and
regulations may impose additional requirements and other obligations that could materially and adversely affect our
business, financial condition and results of operations.”
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Our online and mobile commerce businesses are classified as value-added telecommunication businesses by the PRC
government. Current PRC laws, rules and regulations generally restrict foreign ownership in value-added
telecommunication services. As a result, we operate our online and mobile commerce businesses and other businesses in
which foreign investment is restricted or prohibited through variable interest entities, each of which is owned by PRC
citizens or by PRC entities owned by PRC citizens, and holds all licenses associated with these businesses.
The applicable PRC laws, rules and regulations governing value-added telecommunication services may change in the
future. We may be required to obtain additional approvals, licenses and permits and to comply with any new regulatory
requirements adopted from time to time. Moreover, substantial uncertainties exist with respect to the interpretation and
implementation of these PRC laws, rules and regulations. See “Item 3. Key Information — D. Risk Factors — Risks
Related to Doing Business in the People’s Republic of China — There are uncertainties regarding the interpretation and
enforcement of PRC laws, rules and regulations.”
Regulation of Telecommunications and Internet Information Services
Regulation of Telecommunication Services
Under the Telecommunications Regulations of the PRC, or the Telecommunications Regulations, promulgated on
September 25, 2000 by the State Council of the PRC and most recently amended in February 2016, a telecommunication
service provider in China must obtain an operating license from the MIIT, or its provincial counterparts. The
Telecommunications Regulations categorize all telecommunication services in China as either basic telecommunications
services or value-added telecommunications services. Our online and mobile commerce businesses, as well as Youku’s
online video businesses, are classified as value-added telecommunications services. The Administrative Measures for
Telecommunications Business Operating License, promulgated by the MIIT in September 2017, set forth more specific
provisions regarding the types of licenses required to operate value-added telecommunications services, the qualifications
and procedures for obtaining the licenses and the administration and supervision of these licenses.
Foreign investment in telecommunications businesses is governed by the PRC State Council’s Administrative Rules for
Foreign Investment in Telecommunications Enterprises, or the Foreign Investment Telecommunications Rules, issued by
the PRC State Council on December 11, 2001 and most recently amended in February 2016, under which a foreign
investor’s beneficial equity ownership in an entity providing value-added telecommunications services in China is not
permitted to exceed 50%. In addition, any major foreign investor holding equity interest in a business providing value-
added telecommunications services in China must demonstrate a positive track record and experience in providing these
services. Although the Negative List allows foreign investors to hold more than 50% equity interests in a value-added
telecommunications service provider engaging in e-commerce, domestic multi-party communication, storage-and-
forward and call center businesses, other requirements provided by the Foreign Investment Telecommunications Rules
shall still apply.
The MIIT’s Notice Regarding Strengthening Administration of Foreign Investment in Operating Value-Added
Telecommunication Businesses, or the MIIT Notice, issued on July 13, 2006 prohibits holders of these services licenses
from leasing, transferring or selling their licenses in any form, or providing any resource, sites or facilities, to any foreign
investors intending to conduct this type of businesses in China. In addition to restricting dealings with foreign investors,
the MIIT Notice contains a number of detailed requirements applicable to holders of value-added telecommunications
services licenses, including that license holders or their shareholders must directly own the domain names and trademarks
used in their daily operations and each license holder must possess the necessary facilities for its approved business
operations and maintain its facilities in the regions covered by its license, including maintaining its network and
providing Internet security in accordance with the relevant regulatory standards. The MIIT or its provincial counterparts
have the power to require corrective actions after they discover any non-compliance by license holders, and where license
holders fail to take those steps, the MIIT or its provincial counterparts have the power to revoke the value-added
telecommunications services licenses.
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On December 28, 2016, the MIIT promulgated the Notice on Regulating Telecommunication Services Agreement
Matters, or the Telecommunication Services Agreement Notice, which came into effect on February 1, 2017. According
to the Telecommunication Services Agreement Notice, telecommunication service providers must require their users to
present valid identification certificates and verify the users’ identification information before provision of services.
Telecommunication service providers are not permitted to provide services to users with unverifiable identity or who
decline identity verification.
Regulation of Internet Information Services
As a subsector of the telecommunications industry, Internet information services are regulated by the Administrative
Measures on Internet Information Services, or the ICP Measures, promulgated on September 25, 2000 by the PRC State
Council and amended on January 8, 2011. “Internet information services” are defined as services that provide
information to online users through the Internet. Internet information service providers, also called ICPs, that provide
commercial services are required to obtain an operating license from the MIIT or its provincial counterpart.
To the extent the Internet information services provided relate to certain matters, including news, publication, education
or medical and healthcare (including pharmaceutical products and medical equipment), approvals or filings must also be
obtained from the relevant industry regulators in accordance with the laws, rules and regulations governing those
industries.
Regulation of Advertising Services
The principal regulations governing advertising businesses in China are:
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the Advertising Law of the PRC (2018, as amended);
the Advertising Administrative Regulations (1987);
the Administrative Regulations on Internet Information Search Services (2016); and
the Internet Advertising Measures (2016).
These laws, rules and regulations require companies such as ours that engage in advertising activities to obtain a business
license that explicitly includes advertising in the business scope from the SAMR, formerly the SAIC, or its
local branches.
Applicable PRC advertising laws, rules and regulations contain certain prohibitions on the content of advertisements in
China (including prohibitions on misleading content, superlative wording, socially destabilizing content or content
involving obscenities, superstition, violence, discrimination or infringement of the public interest). Advertisements for
anesthetic, psychotropic, toxic or radioactive drugs are prohibited, and the dissemination of advertisements of certain
other products, such as tobacco, patented products, pharmaceuticals, medical instruments, agrochemicals, foodstuff,
alcohol and cosmetics, are also subject to specific restrictions and requirements. Advertisers, advertising operators or
advertising distributors may be subject to civil liability if they infringe the legal rights and interests of third parties, such
as infringement of intellectual proprietary rights, unauthorized use of a name or portrait and defamation.
On June 25, 2016, the Cyberspace Administration of China promulgated the Administrative Regulations on Internet
Information Search Services, or the Internet Search Regulations, which came into effect on August 1, 2016. According to
the Internet Search Regulations, Internet search service providers must verify paid-search service customers’
qualifications, limit the ratio of paid-search results on each web page, and clearly distinguish paid-search results from
natural search results.
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The Internet Advertising Measures, which were promulgated by the SAIC on July 4, 2016 and came into effect on
September 1, 2016 set out, among other things, the following requirements for Internet advertising activities:
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online advertisements for prescription medicine or tobacco are not allowed, while advertisements for
special commodities or services such as medical treatment, pharmaceuticals, food for special medical
purposes, medical instruments, agrochemicals, veterinary medicine and other health foods must be
reviewed by competent authorities before online publication;
Internet advertisements must be visibly marked as “advertisement,” while paid-search results must be
obviously distinguished from natural search results; and
Internet advertisements must not affect users’ normal use of the Internet; “pop-up ads” must be clearly
marked with a “close” sign and be closable with one click; and no deceptive means may be used to lure
users into clicking on advertisements.
According to the Internet Advertising Measures, Internet information service providers must prevent those
advertisements they know or should have known to be illegal from being published through their information services.
Furthermore, according to the Internet Advertising Measures, Internet advertisers are responsible for the authenticity of
the content of Internet advertisements, while Internet advertisement publishers and advertisement agencies are required to
verify the identities of Internet advertisers and their qualifications, review the content of Internet advertisement, and
employ inspectors who are familiar with PRC laws and regulations governing Internet advertising.
Regulation of Online and Mobile Commerce
China’s online and mobile commerce industry is at an early stage of development and there are few PRC laws,
regulations or rules specifically regulating this industry. The SAIC adopted the Administrative Measures for Online
Trading on January 26, 2014, which became effective on March 15, 2014. On December 24, 2014, the MOFCOM
promulgated the Provisions on the Procedures for Formulating Transaction Rules of Third Party Online Retail Platforms
(Trial) to regulate the formulation, revision and enforcement of transaction rules for online retail marketplace platforms.
These measures impose more stringent requirements and obligations on online trading or service operators as well as
marketplace platform providers. For example, marketplace platform providers are obligated to make public and file their
transaction rules with MOFCOM or its respective provincial counterparts, examine the legal status of each third-party
merchant selling products or services on their platforms and display on a prominent location on a merchant’s web
page the information stated in the merchant’s business license or a link to its business license, and group buying website
operators must only allow a third-party merchant with a proper business license to sell products or services on their
platforms. Where marketplace platform providers also act as online distributors, these marketplace platform providers
must make a clear distinction between their online direct sales and sales of third-party merchant products on their
marketplace platforms.
Since the promulgation of the Administrative Measures for Online Trading, the SAIC had issued a number of guidelines
and implementing rules aimed at adding greater specificity to these regulations. The relevant governmental authorities
continue to consider and issue guidelines and implementing rules, and we expect that regulation in this industry will
further develop. For example, three PRC governmental authorities (the MOF, General Administration of Customs and
STA) issued a notice on March 24, 2016 to regulate cross-border e-commerce trading which had experienced rapid
growth in recent years. The New Tax Notice on Cross-Border E-commerce, which became effective on April 8, 2016,
introduced the concept of the Cross-Border E-Commerce Retail Importation Goods Inventory, or the Cross-Border E-
Commerce Goods Inventory, which is to be issued and updated by the three authorities together with other relevant
authorities from time to time. Goods outside the scope of the Cross-Border E-commerce Goods Inventory will have no
tax codes and be effectively removed from cross-border e-commerce platforms. The most recent version of the Cross-
Border E-Commerce Goods Inventory was issued on November 20, 2018.
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Cosmetics imported for the first time, nutrition supplements and other special food products required to be registered
with the National Medical Products Administration, formerly known as State Drug Administration or State Food and
Drug Administration, are excluded from the Cross-Border E-Commerce Goods Inventory and will not be able to be sold
on the relevant cross-border e-commerce platforms. However, pursuant to a transition policy issued by the General
Administration of Customs, goods that have been imported to or in transit to the bonded areas and special regulated areas
of customs before April 8, 2016 can still be sold on the cross-border e-commerce platforms no matter whether these
goods are included in the Cross-Border E-Commerce Goods Inventory or not. This transition policy was further extended
to the end of 2018, during which period cross-border e-commerce retail import goods were to be temporarily regulated as
personal items in certain pilot areas. On November 28, 2018, the MOFCOM, the NDRC, and the MOF jointly issued the
Notice on Improving the Supervision over Cross-border E-commerce Retail Imports, which came into effect on January
1, 2019. According to this notice, the transitional policy continued to be adopted in 37 cross-border e-commerce pilot
areas, which means the retail goods imported on cross-border e-commerce platforms will still be regulated as personal
items, and the registration or filing requirements for goods imported for the first time will not apply, except for goods that
are temporarily prohibited from being imported from epidemic areas and goods for which risk emergency response is
initiated to address major risks in product quality and safety.
On August 31, 2018, the Standing Committee of the National People’s Congress promulgated the E-commerce Law,
which came into effect on January 1, 2019. The E-commerce Law imposes a series of requirements on e-commerce
operators including e-commerce platform operators, merchants operating on the platform and the individuals and entities
carrying out business online. According to the E-commerce Law, e-commerce operators who provide search results based
on consumers’ characteristics such as hobbies and consumption habits shall also provide consumers with options that are
not targeted at their personal characteristics at the same time, respect and fairly protect the legitimate interests of the
consumers. The E-commerce Law requires the e-commerce platform operators to, among other things, verify and register
the identities, addresses, contacts and licenses of merchants who apply to provide goods or services on its platform,
establish registration archives and update this information on a regular basis; submit the identification information of the
merchants on its platform to market regulatory administrative authorities as required and remind the merchants to
complete the registration with market regulatory administrative authorities; submit identification information and tax-
related information to tax authorities as required in accordance with the laws and regulations regarding the administration
of tax collection and remind the individual merchants to complete the tax registration; and establish intellectual property
rights protection rules, and take necessary measures against infringement of intellectual property rights by merchants on
its platform.
In addition, e-commerce platform operators are not allowed to impose unreasonable restrictions over or add unjustified
conditions to transactions concluded on their platforms by merchants, or charge merchants operating on its platform any
unreasonable fees.
According to the E-commerce Law, e-commerce platform operators are required to assume joint liability with the
merchants and may be subject to warnings and fines up to RMB2,000,000 where (i) they fail to take necessary actions
when they know or should have known that the products or services provided by the merchants on the platform do not
meet personal and property security requirements, or otherwise infringe upon consumers’ legitimate rights; or (ii) they
fail to take necessary actions, such as deleting and blocking information, disconnecting, terminating transactions and
services, when they know or should have known that the merchants on the platform infringe upon the intellectual
property rights of others. With respect to products or services affecting consumers’ health and safety, e-commerce
platform operators will be held liable if they fail to review the qualifications of merchants or fail to safeguard the interests
of consumers, and may be subject to warnings and fines up to RMB2,000,000.
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Regulation of Mobile Apps
On June 28, 2016, the Cyberspace Administration of China promulgated the Regulations for the Administration of
Mobile Internet Application Information Services, which came into effect on August 1, 2016, requiring ICPs who provide
information services through mobile Internet applications, or “Apps,” to, among other things, verify the real identities of
registered users through mobile phone numbers or other similar channels; establish and improve procedures for
protection of user information; and establish and improve procedures for information content censorship.
If an ICP who provides information services through Apps violates these regulations, mobile app stores through which
the ICP distributes its Apps may issue warnings, suspend the release of its Apps, or terminate the sale of its Apps, and/or
report the violations to governmental authorities.
Regulation of Internet Content
The PRC government has promulgated measures relating to Internet content through various ministries and agencies,
including the MIIT, the News Office of the PRC State Council, the Ministry of Culture and Tourism and the General
Administration of Press and Publication. In addition to various approval and license requirements, these measures
specifically prohibit Internet activities that result in the dissemination of any content that is found to contain
pornography, promote gambling or violence, instigate crimes, undermine public morality or the cultural traditions of the
PRC or compromise State security or secrets. ICPs must monitor and control the information posted on their websites. If
any prohibited content is found, they must remove the content immediately, keep a record of it and report to the relevant
authorities. If an ICP violates these measures, the PRC government may impose fines and revoke any relevant business
operation licenses.
Regulations on Broadcasting Audio/Video Programs through the Internet
On December 20, 2007, the State Administration of Radio, Film, and Television, or the SARFT and the MIIT jointly
issued the Rules for the Administration of Internet Audio and Video Program Services, commonly known as Circular 56,
which came into effect on January 31, 2008 and was amended on August 28, 2015. Among other things, Circular 56
requires all online audio/video service providers to be either wholly state-owned or state-controlled. According to
relevant official answers to press questions published on the SARFT’s website dated February 3, 2008, officials from the
SARFT and the MIIT clarified that online audio/video service providers that already had been operating lawfully prior to
the issuance of Circular 56 may re-register and continue to operate without becoming state-owned or controlled, provided
that the providers have not engaged in any unlawful activities. This exemption will not be granted to online audio/video
service providers established after Circular 56 was issued. These policies have been reflected in the Application
Procedure for Audio/Video Program Transmission License.
In 2014, the General Administration of Press and Publication, Radio, Film and Television, or GAPPRFT (which was split
into the National Radio and Television Administration, or NRTA, and the State Administration of News and Publication
in March 2018) released a Supplemental Notice on Improving the Administration of Online Audio/Video Content
Including Internet Drama and Micro Films. This notice stresses that entities producing online audio/video content, such
as Internet dramas and micro films, must obtain a permit for radio and television program production and operation, and
that online audio/video content service providers should not release any Internet dramas or micro films that were
produced by any entity lacking the permit. For Internet dramas or micro films produced and uploaded by individual users,
the online audio/video service providers transmitting this content will be deemed responsible as the producer.
Furthermore, under this notice, online audio/video service providers can only transmit content uploaded by individuals
whose identity has been verified and the content must comply with the relevant content management rules. This notice
also requires that online audio/video content, including Internet drama and micro films, be filed with the relevant
authorities before release.
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On September 2, 2014, the GAPPRFT promulgated a Notice on Further Implementing the Relevant Provisions for the
Administration of Broadcasting Foreign Films and TV dramas. The notice stresses that any foreign film or TV drama
must have a License for Film Publication or a TV drama Issuance License before being broadcast online, and that the
annual total number of foreign films and TV dramas broadcast by a website must not exceed 30% of the total amount of
domestic films and TV dramas broadcast by the relevant website in the preceding year. Furthermore, online video
operators are required to report their annual plans for the import of foreign films and TV dramas to the GAPPRFT before
the end of the preceding year. If the online video operators’ import plans are approved, the samples, contracts, copyright
certificates, plot summaries and other materials relevant to the foreign films and TV dramas are subject to further content
examination before the issuance of Licenses for Film Publication or the TV drama Issuance Licenses. The notice also
requires these online video operators to upload information about the foreign films and TV dramas to be broadcast to a
unified platform for registration before March 31, 2015. Since April 1, 2015, unregistered foreign films and TV dramas
are no longer allowed to be broadcast online.
On March 16, 2018, the GAPPRFT promulgated the Notice on Further Regulating the Transmission of Internet
Audio/Video Programs, which requires that, among other things, audio/video platforms must: (i) not re-edit, re-dub, re-
caption or otherwise ridicule classic works, radio and television programs, or original Internet audio/video programs
without authorization, (ii) not broadcast clips and trailers of audio/video programs without due approval or those already
sanctioned by the GAPPRFT, (iii) not transmit re-edited programs that unfairly distort the original content, (iv) strictly
monitor the adapted content uploaded by platform users and not provide transmission channels for illicit content, and
(v) immediately take down unauthorized content upon receipt of complaints from copyright owners, radio and television
stations, or film and television production institutions.
Regulations on Internet Publication
The SARFT is responsible for nationwide supervision and administration of publishing activities in China. On
February 4, 2016, the GAPPRFT, the SARFT’s predecessor, and the MIIT jointly promulgated the Online Publication
Service Administration Rules, or the Online Publication Rules, which took effect on March 10, 2016.
Pursuant to the Online Publication Rules, an online publication service provider must obtain the Online Publication
Service License from the GAPPRFT. The term “online publication service” is defined as the provision of online
publications to the public through information networks. The term “online publications” is defined as digital works
characteristic of publishing such as editing, production or processing provided to the public through information
networks.
The Online Publication Rules expressly prohibit foreign invested enterprises from providing online publication services.
In addition, if an online publication service provider intends to cooperate for an online publication services project with
foreign invested enterprises, overseas organizations or overseas individuals, it must report to the GAPPRFT and obtain an
approval in advance. Also, an online publication service provider is prohibited from lending, leasing, selling or otherwise
transferring the Online Publication Service License, or to allow any other online information service provider to provide
online publication services in its name.
Regulations on Internet Drug Information Service
The State Food and Drug Administration, or the SFDA, the predecessor of the National Medical Products Administration,
promulgated the Administrative Measures on Internet Drug Information Service in July 2004 and further amended the
same in November 2017. Since the promulgation of the Administrative Measures on Internet Drug Information Service,
the SFDA had issued certain implementing rules and notices aimed at adding specificity to these regulations. These
measures set out regulations governing the classification, application, approval, content, qualifications and requirements
for Internet drug information services. An ICP service operator that provides information regarding drugs or medical
equipment must obtain an Internet Drug Information Service Qualification Certificate from the applicable provincial
level counterpart of the National Medical Products Administration.
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Regulations on Internet News Information Services
On May 2, 2017, the Cyberspace Administration issued the Administrative Provisions on Internet News Information
Services, which came into effect on June 1, 2017 and define news information as reports and commentary on political,
economic, military, diplomatic and other social and public affairs, as well as reports and commentary on emergency
social events. Pursuant to these provisions, the Cyberspace Administration and its local counterparts replaced the PRC
State Council Information Office as the government department in charge of supervision and administration of Internet
news information. Furthermore, an ICP operator must obtain approval from the Cyberspace Administration in order to
provide Internet news information services, including through websites, applications, forums, blogs, microblogs, public
accounts, instant messaging tools, and webcasts.
Regulations on Internet Culture Activities
On February 17, 2011, the Ministry of Culture, the predecessor of the Ministry of Culture and Tourism, promulgated the
Internet Culture Administration Tentative Measures, or the Internet Culture Measures, which was most recently amended
in December 2017. The Internet Culture Measures require ICP operators engaging in “Internet culture activities” to
obtain a permit from the Ministry of Culture and Tourism. The term “Internet culture activities” includes, among other
things, online dissemination of Internet cultural products (such as audio-video products, gaming products, performances
of plays or programs, works of art and cartoons) and the production, reproduction, importation, publication and
broadcasting of Internet cultural products.
On August 12, 2013, the Ministry of Culture promulgated the Notice on Implementing the Administrative Measures for
the Content Self-examination of Internet Culture Business Entities. According to this notice, any cultural product or
service shall be reviewed by the provider before being released to the public and the review process shall be done by
persons who have obtained the relevant content review certificate.
On October 23, 2015, the Ministry of Culture promulgated the Notice on Further Strengthening and Improving the
Content Review of Online Music, which took effect on January 1, 2016 and stipulated that ICPs shall carry out self-
examination in respect of the content management of online music, which shall be regulated by the cultural
administration departments in process or afterwards. According to this notice, ICP operators are required to submit their
content administrative system, review procedures, and work standards to the provincial culture administrative department
where they are located for filing within a prescribed period.
Regulations on Producing Audio/Video Programs
On July 19, 2004, the SARFT promulgated the Administrative Measures on the Production and Operation of Radio and
Television Programs, effective as of August 20, 2004 and amended on August 28, 2015. These Measures provide that
anyone who wishes to produce or operate radio or television programs must first obtain an operating permit for
their business.
On December 25, 2001, the PRC State Council promulgated the Regulations for the Administration of Films, or the Film
Regulations, which became effective on February 1, 2002. The Film Regulations set forth the general regulatory
guidelines for China’s film industry and address practical issues with respect to production, censorship, distribution and
screening. They also establish the SARFT as the sector’s regulatory authority, and serve as the foundation for all other
legislation promulgated in this area. The Film Regulations provide the framework for an industry-wide licensing system
operated by the SARFT, under which separate permits (and permit application procedures) apply.
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Regulation of Express Delivery Services
The PRC Postal Law, which took effect in October 2009 and was most recently amended in 2015, sets forth the
fundamental rules on the establishment and operation of an express delivery company. According to the Postal Law, an
enterprise that operates and provides express delivery services is required to obtain a Courier Service Operation Permit.
Pursuant to the Postal Law, “delivery” refers to delivery of correspondence, parcels, printed materials and other items to
specific individuals or entities according to the names and addresses on the envelopes or packages, including mail
acceptance, sorting, transportation, delivery, and “express delivery” refers to rapid mail “delivery” within a specified
time limit.
The PRC Postal Law also requires that a company operating express delivery services must apply for and obtain the
Courier Service Operation Permit prior to applying for its business license. Pursuant to the Administrative Measures on
Courier Service Operation Permits, which were promulgated by the Ministry of Transport in June 2015 and amended in
October 2018, any entity engaging in express delivery services is required to obtain a Courier Service Operation Permit
from the State Post Bureau or its local counterpart and is subject to their supervision and regulation. The express delivery
business must be operated within the permitted scope and the valid term of the Courier Service Operation Permit.
On March 2, 2018, the PRC State Council promulgated the Provisional Regulations for Express Delivery, or the
Provisional Regulations, which came into effect on May 1, 2018 and was amended on March 2, 2019. The Provisional
Regulations reiterate that a company operating express delivery services must obtain the Courier Service Operation
Permit and sets forth specific rules and security requirements for express delivery operations.
Regulation of Internet Security
The Decision in Relation to Protection of Internet Security enacted by the Standing Committee of the National People’s
Congress of China on December 28, 2000, as amended, provides that the following activities conducted through the
Internet are subject to criminal punishment:
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gaining improper entry into a computer or system of strategic importance;
disseminating politically disruptive information or obscenities;
leaking State secrets;
spreading false commercial information; or
infringing intellectual property rights.
The Administrative Measures on the Security Protection of Computer Information Network with International
Connections, issued by the Ministry of Public Security on December 16, 1997 and amended on January 8, 2011, prohibit
the use of the Internet in a manner that would result in the leakage of State secrets or the spread of socially destabilizing
content. The Provisions on Technological Measures for Internet Security Protection, or the Internet Security Protection
Measures, promulgated on December 13, 2005 by the Ministry of Public Security require all ICPs to keep records of
certain information about their users (including user registration information, log-in and log-out time, IP address, content
and time of posts by users) for at least 60 days and submit the above information as required by laws and regulations.
Under these measures, value-added telecommunications services license holders must regularly update information
security and content control systems for their websites and must also report any public dissemination of prohibited
content to local public security authorities. If a value-added telecommunications services license holder violates these
measures, the Ministry of Public Security and the local security bureaus may revoke its operating license and shut down
its websites.
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The Communication Network Security Protection Administrative Measures, which were promulgated by the MIIT on
January 21, 2010, require that all communication network operators, including telecommunications service providers and
Internet domain name service providers, divide their own communication networks into units. These communication
network units shall be rated in accordance with degree of damage to national security, economic operation, social order
and public interest in the event a unit is damaged. Communication network operators must file the division and ratings of
their communication networks with MIIT or its local counterparts. If a communication network operator violates these
measures, the MIIT or its local counterparts may order rectification or impose a fine up to RMB30,000 in case a violation
is not duly rectified.
Internet security in China is also regulated and restricted from a national security standpoint. On July 1, 2015, the
National People’s Congress Standing Committee promulgated the National Security Law, which took effect on the same
date and replaced the former National Security Law promulgated in 1993. According to the National Security Law, the
state shall ensure that the information system and data in important areas are secure and controllable. In addition,
according to the National Security Law, the state shall establish national security review and supervision institutions and
mechanisms, and conduct national security reviews of key technologies and IT products and services that affect or may
affect national security. There are uncertainties on how the National Security Law will be implemented in practice.
On November 7, 2016, the National People’s Congress Standing Committee promulgated the Cybersecurity Law, which
came into effect on June 1, 2017, and applies to the construction, operation, maintenance and use of networks as well as
the supervision and administration of cybersecurity in China. The Cybersecurity Law defines “networks” as systems that
are composed of computers or other information terminals and relevant facilities used for the purpose of collecting,
storing, transmitting, exchanging and processing information in accordance with certain rules and procedures. “Network
operators,” who are broadly defined as owners and administrators of networks and network service providers, are subject
to various security protection-related obligations including:
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complying with security protection obligations in accordance with tiered cybersecurity system’s protection
requirements, which include formulating internal security management rules and manual, appointing
cybersecurity responsible personnel, adopting technical measures to prevent computer viruses and
cybersecurity endangering activities, adopting technical measures to monitor and record network operation
status, cybersecurity events, retaining user logs for at least six months and adopting measures such as data
classification, key data backup and encryption, for the purpose of securing networks from interference,
vandalism, or unauthorized visit and preventing network data from leakage, theft or tampering;
verifying user’s identities before signing agreements or providing services such as network access, domain
name registration, landline telephone or mobile phone access, information publishing or real-time
communication services;
formulating cybersecurity emergency response plans, timely handling security risks, initiating emergency
response plans, taking appropriate remedial measures and reporting to regulatory authorities; and
providing technical assistance and support for public security and national security authorities for
protection of national security and criminal investigations in accordance with the law.
According to the Cybersecurity Law, network service providers must inform users about and report to the relevant
authorities any known security defects and bugs, and must provide continuous security maintenance services for their
products and services. Network products and service providers shall not contain or provide malware.
Network service providers who do not comply with the Cybersecurity Law may be subject to fines, suspension of their
businesses, shutdown of their websites, and revocation of their business licenses.
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On May 2, 2017, the Cyberspace Administration issued the Measures for Security Review of Cyber Products and
Services, or the Cybersecurity Review Measures, which came into effect on June 1, 2017. According to the Cybersecurity
Review Measures, the following cyber products and services are subject to cybersecurity review:
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important cyber products and services purchased by networks and information systems related to national
security; and
the purchase of cyber products and services by operators of critical information infrastructure in important
industries and fields such as public communications and information services, energy, transportation, water
resources, finance, public service and electronic administration, and other critical information
infrastructure, which may affect national security.
The Cyberspace Administration is responsible for organizing and implementing cybersecurity reviews, while the
competent departments in key industries such as finance, telecommunications, energy and transport shall be responsible
for organizing and implementing security review of cyber products and services in their respective industries or fields.
On November 15, 2018, the Cyberspace Administration issued the Provisions on Security Assessment of the Internet
Information Services with Public Opinion Attributes or Social Mobilization Capacity, which came into effect on
November 30, 2018. The provisions require ICPs to conduct security assessments on their Internet information services if
their services include forums, blogs, microblogs, chat rooms, communication groups, public accounts, short-form videos,
online live streaming, information sharing, mini programs or other functions that provide channels for the public to
express opinions or have the capability of mobilizing the public to engage in specific activities. ICPs must conduct self-
assessment on, among other things, the legality of new technology involved in the services and the effectiveness of
security risk prevention measures, and file the assessment report with the local competent cyberspace administration
authority and public security authority.
Regulation of Privacy Protection
Under the ICP Measures, ICPs are prohibited from producing, copying, publishing or distributing information that is
humiliating or defamatory to others or that infringes upon the lawful rights and interests of others.
Depending on the nature of the violation, ICPs may face criminal charges or sanctions by PRC public security authorities
for these acts, and may be ordered to suspend temporarily their services or have their licenses revoked.
Under the Several Provisions on Regulating the Market Order of Internet Information Services, issued by the MIIT on
December 29, 2011, ICPs are also prohibited from collecting any personal user information or providing any information
to third parties without the consent of the user. The Cybersecurity Law provides an exception to the consent requirement
where the information is anonymous, not personally identifiable and unrecoverable. ICPs must expressly inform the users
of the method, content and purpose of the collection and processing of user personal information and may only collect
information necessary for its services. ICPs are also required to properly maintain the user personal information, and in
case of any leak or likely leak of the user personal information, ICPs must take remedial measures immediately and
report any material leak to the telecommunications regulatory authority.
In addition, the Decision on Strengthening Network Information Protection promulgated by the Standing Committee of
the National People’s Congress on December 28, 2012 emphasizes the need to protect electronic information that
contains individual identification information and other private data. The decision requires ICPs to establish and publish
policies regarding the collection and use of personal electronic information and to take necessary measures to ensure the
security of the information and to prevent leakage, damage or loss. Furthermore, MIIT’s Rules on Protection of Personal
Information of Telecommunications and Internet Users promulgated on July 16, 2013 contain detailed requirements on
the use and collection of personal information as well as the security measures to be taken by ICPs.
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The PRC government retains the power and authority to order ICPs to provide an Internet user’s personal information if a
user posts any prohibited content or engages in any illegal activities through the Internet.
According to the Cybersecurity Law, individuals may request that network operators make corrections to or delete their
personal information in case the information is wrong or was collected or used beyond an individuals’ agreement with
network operators.
Regulation of Consumer Protection
Our online and mobile commerce business is subject to a variety of consumer protection laws, including the PRC
Consumer Rights and Interests Protection Law, as amended and effective as of March 15, 2014, and the Administrative
Measures for Online Trading, both of which have imposed stringent requirements and obligations on business operators,
including Internet business operators and platform service providers like us. For example, consumers are entitled to
return goods purchased online, subject to certain exceptions, within seven days upon receipt of goods for no reason. On
January 6, 2017, the SAIC issued the Interim Measures for No Reason Return of Online Purchased Commodities within
Seven Days, which came into effect on March 15, 2017, further clarifying the scope of consumers’ rights to make returns
without a reason, including exceptions, return procedures and online marketplace platform providers’ responsibility to
formulate seven-day no-reason return rules and related consumer protection systems, and supervise the merchants for
compliance with these rules. To ensure that merchants and service providers comply with these laws and regulations, we,
as platform operators, are required to implement rules governing transactions on our platform, monitor the information
posted by merchants and service providers, and report any violations by merchants or service providers to the relevant
authorities. In addition, online marketplace platform providers may, pursuant to PRC consumer protection laws, be
subject to liabilities if the lawful rights and interests of consumers are infringed in connection with consumers’ purchase
of goods or acceptance of services on online marketplace platforms and the platform service providers fail to provide
consumers with the contact information of the merchant or manufacturer. In addition, platform service providers may be
jointly and severally liable with merchants and manufacturers if they are aware or should be aware that the merchant or
manufacturer is using the online platform to infringe upon the lawful rights and interests of consumers and fail to take
measures necessary to prevent or stop this activity.
Failure to comply with these consumer protection laws could subject us to administrative sanctions, such as the issuance
of a warning, confiscation of illegal income, imposition of a fine, an order to cease business operations, revocation of
business licenses, as well as potential civil or criminal liabilities.
Regulation of Pricing
In China, the prices of a very small number of products and services are guided or fixed by the government. According to
the PRC Pricing Law, business operators must, as required by the government departments in charge of pricing, mark the
prices explicitly and indicate the name, production origin, specifications, and other related particulars clearly. Business
operators may not sell products at a premium or charge any fees that are not explicitly indicated. Business operators must
not commit the specified unlawful pricing activities, such as colluding with others to manipulate the market price,
providing fraudulent discounted price information, using false or misleading prices to deceive consumers to transact, or
conducting price discrimination against other business operators. Failure to comply with the Pricing Law or other rules or
regulations on pricing may subject business operators to administrative sanctions such as warning, orders to cease
unlawful activities, payment of compensation to consumers, confiscation of illegal gains, and/or fines. The business
operators may be ordered to suspend business for rectification, or have their business licenses revoked if the
circumstances are severe. Merchants on Tmall and Taobao Marketplace undertake the primary obligation under the
Pricing Law. However, in some cases, we have been and may in the future be held liable and be subject to fines or other
penalties if the authorities determine that, as the platform operator, our guidance for platform-wide promotional activities
resulted in unlawful pricing activities by the merchants on our platforms or if the pricing information we provided for
platform-wide promotional activities was determined to be untrue or misleading.
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Other Regulations
Regulation of Foreign Investment
On March 15, 2019, the National People’s Congress promulgated the 2019 PRC Foreign Investment Law, which became
effective on January 1, 2020 and replaced the major former laws and regulations governing foreign investment in the
PRC. Pursuant to the 2019 PRC Foreign Investment Law, “foreign investments” refer to investment activities conducted
by foreign investors directly or “indirectly” in the PRC, which include any of the following circumstances: (i) foreign
investors setting up foreign-invested enterprises in the PRC solely or jointly with other investors, (ii) foreign investors
obtaining shares, equity interests, property portions or other similar rights and interests of enterprises within the PRC,
(iii) foreign investors investing in new projects in the PRC solely or jointly with other investors, and (iv) investment of
other methods as specified in laws, administrative regulations, or as stipulated by the PRC State Council.
According to 2019 PRC Foreign Investment Law and its implementing rules, China adopts a system of pre-entry national
treatment plus negative list with respect to foreign investment administration, and the negative list will be proposed by
the competent investment department of the PRC State Council in conjunction with the competent commerce department
of the PRC State Council and other relevant departments, and be reported to the PRC State Council for promulgation, or
be promulgated by the competent investment department or competent commerce department of the PRC State Council
after being reported to the PRC State Council for approval. Foreign investment beyond the negative list will be granted
national treatment. Foreign investors shall not invest in the prohibited industries as specified in the negative list, while
foreign investment must satisfy certain conditions stipulated in the negative list for investment in the restricted industries.
The current industry entry clearance requirements governing investment activities in the PRC by foreign investors are set
out in two categories, namely the Negative List and the Encouraged Industry Catalogue for Foreign Investment (2019
version), or the 2019 Encouraged Industry Catalogue, both of which were promulgated by the NDRC and the MOFCOM
and took effect in July 2019. Industries not listed in these two categories are generally deemed “permitted” for foreign
investment unless otherwise restricted by other PRC laws. Among our major subsidiaries, Taobao (China) Software Co.,
Ltd., Zhejiang Tmall Technology Co., Ltd., Zhejiang Alibaba Cloud Computing Ltd., Alibaba (Beijing) Software
Services Co., Ltd. and Beijing Youku Technology Co., Ltd. are registered in China and mainly engaged in software
development, technical services and consultations, and Hangzhou Cainiao Supply Chain Management Co., Ltd. is also
registered in China and mainly engaged in logistics services and supply chain solutions, all of which fall into the
encouraged or permitted category. These major subsidiaries have obtained all material approvals required for their
business operations. The Negative List does not apply to our major subsidiaries that are registered and domiciled in Hong
Kong S.A.R., the British Virgin Islands or the Cayman Islands, and operate outside of China. The businesses of our other
PRC subsidiaries – including PRC subsidiaries of our major subsidiaries – are generally software development, technical
services and consulting, which fall into the encouraged or permitted category. Industries such as value-added
telecommunication services, including Internet information services, are generally restricted to foreign investment
pursuant to the Negative List. We conduct business operations that are restricted or prohibited to foreign investment
through our variable interest entities.
Regulation of Anti-counterfeiting
According to the Trademark Law of the PRC, counterfeit or unauthorized production of the label of another person’s
registered trademark, or sale of any label that is counterfeited or produced without authorization will be deemed as an
infringement of the exclusive right to use a registered trademark. The infringing party will be ordered to cease
infringement immediately, a fine may be imposed and the counterfeit goods will be confiscated. The infringing party may
also be held liable for damages suffered by the owner of the intellectual property rights, which will be equal to the gains
obtained by the infringing party or the losses suffered by the owner as a result of the infringement, including reasonable
expenses incurred by the owner in connection with enforcing its rights.
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Under the Tort Liability Law of the PRC, an Internet service provider may be subject to joint liability if it is aware that an
Internet user is infringing upon the intellectual property rights of others through its Internet services, such as selling
counterfeit products, and fails to take necessary measures to stop that activity. If an Internet service provider receives a
notice from an infringed party regarding an infringement, the Internet service provider is required to take certain
measures, including deleting, blocking and unlinking the infringing content, in a timely manner.
In addition, under the Administrative Measures for Online Trading issued by the SAIC on January 26, 2014, as an
operator of an online trading platform, we must adopt measures to ensure safe online transactions, protect consumers’
rights and prevent trademark infringement.
Tax Regulations
PRC Enterprise Income Tax
The PRC enterprise income tax, or EIT, is calculated based on the taxable income determined under the applicable EIT
Law and its implementation rules, both of which became effective on January 1, 2008 and were most recently amended
on December 29, 2018 and April 23, 2019, respectively. The EIT Law generally imposes a uniform enterprise income tax
rate of 25% on all resident enterprises in China, including foreign-invested enterprises.
The EIT Law and its implementation rules permit certain High and New Technologies Enterprises, or HNTEs, to enjoy a
reduced 15% enterprise income tax rate if they meet certain criteria and are officially acknowledged. In addition, the
relevant EIT laws and regulations also provide that entities recognized as Software Enterprises are able to enjoy a tax
holiday consisting of a two-year-exemption commencing from their first profitable calendar year and a 50% reduction in
ordinary tax rate for the following three calendar years. Entities qualified as Key Software Enterprises can enjoy a
preferential EIT rate of 10%. A number of our PRC subsidiaries and operating entities enjoy these types of preferential
tax treatment.
PRC Business Tax and VAT
Before August 2013 and pursuant to applicable PRC tax regulations, any entity or individual conducting business in the
service industry is generally required to pay a business tax at the rate of 5% on the revenues generated from providing
services. However, if the services provided are related to technology development and transfer, the business tax may be
exempted subject to approval by the relevant tax authorities.
From May 1, 2016, VAT replaced business tax in all industries on a nationwide basis. On November 19, 2017, the PRC
State Council further amended the Interim Regulation of the People’s Republic of China on Value Added Tax to reflect
the normalization of the pilot program. A VAT rate of 6% applies to revenue derived from the provision of certain
services. Unlike business tax, a taxpayer is allowed to offset the qualified input VAT paid on taxable purchases against
the output VAT chargeable on the revenue from services provided.
On March 20, 2019, the MOF, the STA and the General Administration of Customs issued the Announcement on Policies
for Deepening the VAT Reform, or Announcement 39, which came into effect on April 1, 2019, to further slash VAT
rates. According to Announcement 39, (i) the 16% or 10% VAT previously imposed on sales and imports by general
VAT taxpayers is reduced to 13% or 9% respectively; (ii) the 10% purchase VAT credit rate allowed for the procured
agricultural products is reduced to 9%; (iii) the 13% purchase VAT credit rate allowed for the agricultural products
procured for production or commissioned processing is reduced to 10%; and (iv) the 16% or 10% export VAT refund rate
previously granted to the exportation of goods or labor services is reduced to 13% or 9%, respectively.
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PRC Import Tax
Consumer goods imported through cross-border e-commerce platforms used to be characterized as “personal baggage or
postal articles” under the Notice on Pilot Program for Bonded Import of Online Shopping Goods Through Cross-Border
E-Commerce Services issued by PRC General Administration of Customs on March 4, 2014. A personal baggage/postal
articles tax, whose rates included 10%, 20%, 30% and 50% applicable to different goods, was levied and collected on the
imported goods before they were released from the customs for delivery to Chinese consumers. Tax exemption was
available if the tax amount due was less than RMB50. In general, if a purchase order exceeded RMB1,000, the goods
contained in that purchase order could no longer be characterized as “personal baggage or postal articles”; instead, they
would be regarded as “normal goods” and be subject to VAT, consumption tax and tariff applicable to normal goods.
The above-mentioned notice was abolished pursuant to the New Tax Notice on Cross-Border E-commerce which took
effect on April 8, 2016. From then on, the goods imported through cross-border e-commerce platforms have been treated
as normal goods subject to VAT, consumption tax and tariff. In general, a VAT at the rate of 17% (before May 1, 2018)
or 16% (from May 1, 2018 to March 31, 2019) or 13% (from April 1, 2019 onwards) is levied on most goods imported
via cross-border e-commerce platforms and a 15% consumption tax on high-end cosmetics, while no consumption tax is
levied on skin care products, maternity and baby care products. As a preferential tax treatment, the Notice on Improving
the Tax Policies on Cross-Border E-Commerce Retail Imports, which was issued on November 29, 2018 and took effect
on January 1, 2019 provides that, if the goods imported through cross-border e-commerce platforms are within the quota
of RMB5,000 per purchase order and RMB26,000 per year per buyer, there is a 30% discount off the applicable VAT and
the consumption tax, and the tariff is waived.
PRC Export Tax
According to the Notice on the Taxation Policies for Cross-border E-Commerce Retail Export, or the E-Commerce
Export Taxation Notice, which was jointly issued by the MOF and the STA and took effect as of January 1, 2014, an e-
commerce export enterprise may be exempt from or refunded with consumption tax and VAT upon satisfaction of certain
conditions or requirements under such notice. However, third-party e-commerce platforms providing transaction services
for e-commerce export enterprises are not eligible for a tax refund or exemption under the E-Commerce Export Taxation
Notice.
Regulation of Foreign Exchange and Dividend Distribution
Foreign Exchange Regulation
The principal regulations governing foreign currency exchange in China are the Regulations on Foreign Exchange
Administration of the PRC. Under the PRC foreign exchange regulations, payments of current account items, such as
profit distributions and trade and service-related foreign exchange transactions, may be made in foreign currencies
without prior approval from SAFE by complying with certain procedural requirements. By contrast, approval from or
registration with appropriate government authorities is required where RMB is to be converted into foreign currency and
remitted out of China to pay capital expenses such as the repayment of foreign currency-denominated loans or foreign
currency is to be remitted into China under the capital account, such as a capital increase or foreign currency loans to our
PRC subsidiaries.
In June 2016, SAFE issued the Circular on Reforming and Regulating Policies on the Control over Foreign Exchange
Settlement of Capital Accounts, or Circular 16, which took effect on the same day. Circular 16 provides that discretionary
foreign exchange settlement applies to foreign exchange capital, foreign debt offering proceeds and remitted foreign
listing proceeds, and the corresponding Renminbi obtained from foreign exchange settlement are not restricted from
extending loans to related parties or repaying the inter-company loans (including advances by third parties).
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On January 26, 2017, SAFE promulgated the Circular on Further Improving Reform of Foreign Exchange Administration
and Optimizing Genuineness and Compliance Verification, or Circular 3, which took effect on the same day. Circular 3
sets out various measures, including the following:
●
relaxing the policy restriction on foreign exchange inflow to further enhance trade and investment
facilitation, including:
●
●
●
●
expanding the scope of foreign exchange settlement for domestic foreign exchange loans,
allowing the capital repatriation for offshore financing against domestic guarantee,
facilitating the centralized management of foreign exchange funds of multinational companies, and
allowing offshore institutions within pilot free trade zones to settle foreign exchange in domestic
foreign exchange accounts; and
●
tightening genuineness and compliance verification of cross-border transactions and cross-border capital
flow, including:
●
●
●
●
improving the statistics of current account foreign currency earnings deposited offshore,
requiring banks to verify board resolutions, tax filing form, and audited financial statements before
wiring foreign invested enterprises’ foreign exchange distribution above US$50,000,
strengthening genuineness and compliance verification of foreign direct investments, and
implementing full scale management of offshore loans in Renminbi and foreign currencies by requiring
the total amount of offshore loans be no higher than 30% of the onshore lender’s equity shown on its
audited financial statements of the last year.
On October 23, 2019, SAFE issued Circular 28, which took effect on the same day. Circular 28 allows non-investment
foreign-invested enterprises to use their capital funds to make equity investments in China, provided that such
investments do not violate the negative list and the target investment projects are genuine and in compliance with laws.
Since Circular 28 was issued only recently, its interpretation and implementation in practice are still subject to substantial
uncertainties
We typically do not need to use our offshore foreign currency to fund our PRC operations. In the event we need to do so,
we will apply to obtain the relevant approvals of SAFE and other PRC government authorities as necessary. Our PRC
subsidiaries’ distributions to their offshore parents and our cross-border foreign exchange activities are required to
comply with the various requirements under the relevant foreign exchange rules.
Regulation of Dividend Distribution
The principal laws, rules and regulations governing dividend distribution by foreign-invested enterprises in the PRC are
the Company Law of the PRC, as amended, which applies to both PRC domestic companies and foreign-invested
companies, and the 2019 PRC Foreign Investment Law and its implementation rules, which apply to foreign-invested
companies. Under these laws, rules and regulations, foreign-invested enterprises may pay dividends only out of their
accumulated profit, if any, as determined in accordance with PRC accounting standards and regulations. Both PRC
domestic companies and wholly-foreign owned PRC enterprises are required to set aside as general reserves at least 10%
of their after-tax profit, until the cumulative amount of their reserves reaches 50% of their registered capital. A PRC
company is not permitted to distribute any profits until any losses from prior fiscal years have been offset. Profits
retained from prior fiscal years may be distributed together with distributable profits from the current fiscal year.
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Labor Laws and Social Insurance
Pursuant to the PRC Labor Law and the PRC Labor Contract Law, employers must execute written labor contracts with
full-time employees. All employers must comply with local minimum wage standards. Violations of the PRC Labor
Contract Law and the PRC Labor Law may result in the imposition of fines and other administrative and criminal liability
in the case of serious violations.
In addition, according to the PRC Social Insurance Law and the Regulations on the Administration of Housing Funds,
employers in China must provide employees with welfare schemes covering pension insurance, unemployment insurance,
maternity insurance, work-related injury insurance, medical insurance and housing funds.
Regulation Applicable to Alipay
Regulation of Non-financial Institution Payment Services
According to the Administrative Measures for the Payment Services Provided by Non-financial Institutions, or the
Payment Services Measures, promulgated by the PBOC on June 14, 2010 and effective as of September 1, 2010, as
amended, a payment institution, a non-financial institution providing monetary transfer services as an intermediary
between payees and payers, including online payment, issuance and acceptance of prepaid cards or bank cards, and other
payment services specified by the PBOC, is required to obtain a payment business license. Any non-financial institution
or individual engaged in the payment business without this license may be ordered to cease its payment services and be
subject to administrative sanctions and even criminal liabilities. Applications for payment business licenses are examined
by the local branches of the PBOC and then submitted to the PBOC for approval. The registered capital of an applicant
that engages in a nationwide payment business must be at least RMB100 million, while that of an applicant engaging in a
payment business within a province must be at least RMB30 million.
A payment institution is required to conduct its business within the scope of business indicated in its payment business
license, and may not undertake any business beyond that scope or outsource its payment business. No payment institution
may transfer, lease or lend its payment business license. On April 29, 2019, the SAFE promulgated the Administrative
Measures for the Foreign Exchange Business of Payment Institutions, which allowed payment institutions to engage in
foreign exchange payment services after completing the directory registration with the SAFE branches.
On December 28, 2015, the PBOC promulgated the Administrative Measures for the Online Payment Business of Non-
bank Payment Institutions, or the Online Payment Measures, which came into effect on July 1, 2016. The Online
Payment Measures require online payment institutions to conduct “know your client” checks and implement the real
name system for payment accounts. The Online Payment Measures classify online payment accounts into three categories
and require online payment institutions to impose real-name based, classified management, including imposing limits on
annual payment volume with respect to different categories of online payment accounts. In addition, a payment account
can only be opened by a payment institution with Internet payment business license at the request of customers.
On January 13, 2017, the PBOC issued the Notice on Matters Related to Implementation of Centralized Custody of
Clients’ Reserve Funds of Payment Institutions, which requires that from April 17, 2017, payment institutions transfer a
portion of customer reserve funds to a specifically designated bank account upon the request of the PBOC and that no
interest shall accrue upon the transferred customer reserve funds. On June 29, 2018, the PBOC issued the Notice on
Matters Related to Fully-centralized Custody of Clients’ Reserve Funds of Payment Institutions, which requires payment
institutions to deposit 100% of their customer reserve funds by January 14, 2019.
We rely on Alipay to provide payment services on our marketplaces and Alipay has obtained a payment business license
from the PBOC and completed the directory registration with the local SAFE branch for cross-border foreign exchange
payment services.
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Anti-money Laundering Regulations
The PRC Anti-money Laundering Law, which became effective on January 1, 2007, sets forth the principal anti-money
laundering requirements applicable to both financial and non-financial institutions with anti-money laundering
obligations, such as Alipay, including the adoption of precautionary and supervisory measures, establishment of various
systems for client identification, preservation of clients’ identification information and transactions records, and reports
on block transactions and suspicious transactions. The Payment Services Measures also require that the payment
institution follow the rules associated with anti-money laundering and comply with their anti-money laundering
obligations.
In addition, the PBOC promulgated the Administrative Measures for Payment Institutions Regarding Anti-money
Laundering and Counter Terrorism Financing on March 5, 2012, or the Anti-money Laundering Measures, according to
which the payment institution must establish and improve unified anti-money laundering internal control systems and file
their systems with the local branch of the PBOC. The Anti-money Laundering Measures also require the payment
institution to set up an anti-money laundering department or designate an internal department to be responsible for anti-
money laundering and counter terrorism financing work.
Alipay is in the process of expanding its business internationally, and it may become subject to additional laws, rules and
regulations of the jurisdictions in which it chooses to operate. These regulatory regimes may be complex and require
extensive time and resources to ensure compliance.
Data Protection Regulation in Europe
On May 25, 2018, EU Directive 95/46/EEC was replaced by the GDPR on the protection of natural persons with regard
to the processing and free movement of personal data. The GDPR applies directly in all EU member states from May 25,
2018 and applies to companies with an establishment in the European Economic Area, or the EEA, and to certain other
companies not in the EEA that offer or provide goods or services to individuals located in the EEA or monitor individuals
located in the EEA. The GDPR implements more stringent operational requirements for controllers of personal data,
including, for example, expanded disclosures about how personal information is to be used, limitations on retention of
information and pseudonymized data, increased cybersecurity requirements, mandatory data breach notification
requirements and higher standards for controllers to demonstrate that they have obtained a valid legal basis for certain
data processing activities.
The activities of data processors will be regulated for the first time, and companies undertaking processing activities are
required to offer certain guarantees in relation to the security of processing and the handling of personal data. Contracts
with data processors will also need to be updated to include certain terms prescribed by the GDPR, and negotiating these
updates may not be fully successful in all cases. Failure to comply with EU laws, including failure under the GDPR and
other laws relating to the security of personal data may result in fines up to €20,000,000 or up to 4% of the total
worldwide annual turnover of the preceding financial year, if greater, and other administrative penalties including
criminal liability.
Disclosure of Iranian Activities under Section 13(r) of the U.S. Exchange Act
Section 219 of the U.S. Iran Threat Reduction and Syria Human Rights Act of 2012 added Section 13(r) to the U.S.
Exchange Act. Section 13(r) requires an issuer to disclose in its annual or quarterly reports, as applicable, whether it or
any of its affiliates knowingly engaged in certain activities, including, among other matters, transactions or dealings
relating to the government of Iran. Disclosure is required even where the activities, transactions or dealings are conducted
outside the U.S. by non-U.S. affiliates in compliance with applicable law, and whether or not the activities are
sanctionable under U.S. law.
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SoftBank is one of our substantial shareholders. During fiscal year 2020, SoftBank, through one of its non-
U.S. subsidiaries, provided roaming services in Iran through Telecommunications Services Company (MTN Irancell),
which is or may be a government-controlled entity. During fiscal year 2020, SoftBank had no gross revenues from these
services and no net profit was generated. This subsidiary also provided telecommunications services in the ordinary
course of business to accounts affiliated with the Embassy of Iran in Japan. During fiscal year 2020, SoftBank estimates
that gross revenues and net profit generated by these services were both under US$16,000. We were not involved in, and
did not receive any revenue from, any of these activities. These activities have been conducted in accordance with
applicable laws and regulations, and they are not sanctionable under U.S. or Japanese law. Accordingly, with respect to
Telecommunications Services Company (MTN Irancell), the relevant SoftBank subsidiary intends to continue these
activities. With respect to services provided to accounts affiliated with the Embassy of Iran in Japan, the relevant
SoftBank subsidiary is obligated under contract to continue these services.
In addition, during fiscal year 2020, SoftBank, through one of its non-U.S. indirect subsidiaries, provided office supplies
to the Embassy of Iran in Japan. SoftBank estimates that gross revenue and net profit generated by these services were
under US$7,000 and US$1,400, respectively. We were not involved in, and did not receive any revenue from any of these
activities. The relevant SoftBank subsidiary intends to continue these activities.
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C. Organizational Structure
Like many large scale, multinational companies with businesses around the world and across industries, we conduct our
business through a large number of Chinese and foreign operating entities as we continue to expand through organic
growth and acquisitions and consolidations of new businesses. The chart below summarizes our corporate structure and
identifies our significant subsidiaries, as that term is defined under Section 1-02 of Regulation S-X under the U.S.
Securities Act, and other subsidiaries and variable interest entities that are representative of our major businesses, which
we collectively refer to as our major subsidiaries and major variable interest entities:
(1) A holding company for our strategic investments.
(2) Holding company for subsidiaries relating to AliExpress, Alibaba.com and 1688.com.
(3) Primarily involved in the operation of Taobao Marketplace.
(4) Primarily involved in the operation of Tmall.
(5) Provides online marketing-related software and technical services for our China retail marketplaces.
(6) Primarily involved in the operation of Cainiao Network’s business.
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(7) Primarily involved in the operation of our cloud computing business.
(8) Primarily involved in the operation of Youku’s business.
(9) A variable interest entity.
Contractual Arrangements among Our Wholly-Owned Entities, Variable Interest Entities and the Variable
Interest Entity Equity Holders
Due to legal restrictions on foreign ownership and investment in, among other areas, value-added telecommunications
services, which include the operations of ICPs, we, similar to all other entities with foreign-incorporated holding
company structures operating in our industry in China, operate our Internet businesses and other businesses in which
foreign investment is restricted or prohibited in the PRC through various contractual arrangements with VIEs that are
incorporated and 100% owned by PRC citizens or by PRC entities owned and/or controlled by PRC citizens. The relevant
variable interest entities hold the ICP licenses and other regulated licenses and operate our Internet businesses and other
businesses in which foreign investment is restricted or prohibited. Specifically, our variable interest entities that are
material to our business are Zhejiang Taobao Network Co., Ltd., Zhejiang Tmall Network Co., Ltd., Alibaba Cloud
Computing Ltd. and Youku Information Technology (Beijing) Co., Ltd. We have entered into certain contractual
arrangements, as described in more detail below, which collectively enable us to exercise effective control over the
variable interest entities and realize substantially all of the economic risks and benefits arising from the variable interest
entities. As a result, we include the financial results of each of the variable interest entities in our consolidated financial
statements in accordance with U.S. GAAP as if they were our wholly-owned subsidiaries.
Other than the ICP licenses and other licenses and approvals for businesses in which foreign ownership is restricted or
prohibited that are held by our variable interest entities, we hold our material assets in, conduct our material operations
and generate the significant majority of revenues through, our wholly-owned entities, which primarily provide
technologies and other services to our customers. We primarily generate our revenue directly through our wholly-owned
entities, which directly capture the profits and associated cash flow from operations without having to rely on contractual
arrangements to transfer cash flow from the variable interest entities to our wholly-owned entities.
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VIE Structure Enhancement
Overview
The following diagram is a simplified illustration of the typical ownership structure and contractual arrangements for
variable interest entities:
We are in the process of enhancing the structure we use to hold our variable interest entities so that we can better ensure
the stability and proper governance of our variable interest entities as an integral part of our company, or the VIE
Structure Enhancement. The VIE Structure Enhancement maintains the primary legal framework that we and many peer
companies in our industry have adopted to operate businesses in which foreign investment is restricted or prohibited in
the PRC. We have completed the VIE Structure Enhancement for all of our major variable interest entities.
Upon the completion of the VIE Structure Enhancement for each VIE, the equity interest of each variable interest entity
will, instead of being held by a few individuals, be directly held by a PRC limited liability company, which in turn will be
indirectly held (through a layer of PRC limited partnerships) by selected members of the Alibaba Partnership or our
management who are PRC citizens. For our major variable interest entities, these individuals are Daniel Yong Zhang,
Jessie Junfang Zheng, Xiaofeng Shao, Judy Wenhong Tong and Angel Ying Zhao (with respect to each of Zhejiang
Taobao Network Co., Ltd., Zhejiang Tmall Network Co., Ltd. and Alibaba Cloud Computing Ltd.), and Sophie Minzhi
Wu, Trudy Shan Dai, Jeff Jianfeng Zhang, Fan Jiang and Winnie Jia Wen (with respect to Youku Information
Technology (Beijing) Co., Ltd.). This new structure institutionalizes the governance framework of our VIEs.
Compared with the existing VIE shareholder structure we and many peer companies in our industry have adopted, which
uses natural persons to serve as direct or indirect equity holders of the variable interest entity, we have designed the VIE
Structure Enhancement to:
●
●
reduce the key man and succession risks associated with natural person VIE equity holders, through a new
structure that has widely dispersed interests among natural person interest holders;
create a VIE ownership structure that is more stable and self-sustaining, by distancing the natural person
interest holders with the VIE with multiple layers of legal entities, including a partnership structure; and
●
further enhance our control over the VIEs through multiple layers of contractual arrangements.
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VIE equity holders after the VIE Structure Enhancement
Pursuant to the VIE Structure Enhancement, a variable interest entity will typically be held by a PRC limited liability
company. This PRC limited liability company will in turn be directly or indirectly owned by two PRC limited
partnerships, each of which will hold 50% of the equity interest. Each of these partnerships is comprised of (i) a PRC
limited liability company, as general partner (which is formed by a number of selected members of the Alibaba
Partnership and our management who are PRC citizens), and (ii) the same group of natural persons, as limited partners.
Under the terms of the relevant partnership agreements, the natural person limited partners must be members of the
Alibaba Partnership or our management who are PRC citizens and as designated by the general partner of the partnership.
We may also create additional holding structures in the future in connection with the VIE Structure Enhancement.
The following diagram is a simplified illustration of the typical ownership structure and contractual arrangements of the
VIEs following the VIE Structure Enhancement.
(1)
Selected members of the Alibaba Partnership or our management who are PRC citizens.
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Following the VIE Structure Enhancement, the designated wholly-owned entity, on the one hand, and the corresponding
VIE and the multiple layers of legal entities above the VIE, as well as the natural persons described above, on the other
hand, will enter into contractual arrangements, which are substantially similar to the contractual arrangements we have
historically used for our variable interest entities. See “— Contracts that Give Us Effective Control of the Variable
Interest Entities” and “— Contracts that Enable Us to Receive Substantially All of the Economic Benefits from the
Variable Interest Entities” below.
Although we believe the VIE Structure Enhancement will further improve our control over our variable interest entities,
there continue to be risks associated with the VIE structure in general, as well as with the completion of the VIE
Structure Enhancement. See “Item 3. Key Information — D. Risk Factors — Risks Related to Our Corporate Structure.”
The following is a summary of our typical contractual arrangements.
Contracts that Give Us Effective Control of the Variable Interest Entities
Loan Agreements
Pursuant to the relevant loan agreement, our respective wholly-owned entity has granted a loan to the relevant variable
interest entity equity holders, which may only be used for the purpose of its business operation activities agreed by our
wholly-owned entity. Our wholly-owned entity may require acceleration of repayment at its absolute discretion. When
the variable interest entity equity holders make early repayment of the outstanding amount, our wholly-owned entity or a
third-party designated by it may purchase the equity interests in the variable interest entity at a price equal to the
outstanding amount of the loan, subject to any applicable PRC laws, rules and regulations. The variable interest entity
equity holders undertake not to enter into any prohibited transactions in relation to the variable interest entity, including
the transfer of any business, material assets, intellectual property rights or equity interests in the variable interest entity to
any third-party. The parties to the loan agreement for each of our major variable interest entities are the relevant PRC
limited liability company, on the one hand, and Taobao (China) Software Co., Ltd., Zhejiang Tmall
Technology Co., Ltd., Zhejiang Alibaba Cloud Computing Ltd. and Beijing Youku Technology Co., Ltd., our respective
wholly-owned entity, on the other hand.
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Exclusive Call Option Agreements
The variable interest entity equity holder has granted our wholly-owned entity an exclusive call option to purchase its
equity interest in the variable interest entity at an exercise price equal to the higher of (i) the paid-in registered capital in
the variable interest entity; and (ii) the minimum price as permitted by applicable PRC laws. Each relevant variable
interest entity has further granted our relevant wholly-owned entity an exclusive call option to purchase its assets at an
exercise price equal to the book value of the assets or the minimum price as permitted by applicable PRC law, whichever
is higher. Following the VIE Structure Enhancement, each relevant variable interest entity and its equity holders will also
jointly grant our relevant wholly-owned entity (A) an exclusive call option to request the relevant variable interest entity
to decrease its registered capital at an exercise price equal to the higher of (i) the paid-in registered capital in the relevant
variable interest entity and (ii) the minimum price as permitted by applicable PRC law, or the capital decrease price, and
(B) an exclusive call option to subscribe for the increased capital of relevant variable interest entity at a price equal to the
sum of the capital decrease price and the unpaid registered capital, if applicable, as of the capital decrease. Our wholly-
owned entity may nominate another entity or individual to purchase the equity interest or assets, or to subscribe for the
relevant increased capital, if applicable, under the call options. Execution of each call option shall not violate the
applicable PRC laws, rules and regulations. Each variable interest entity equity holders has agreed that the following
amounts, to the extent in excess of the original registered capital that they contributed to the variable interest entity (after
deduction of relevant tax expenses), belong to and shall be paid to our relevant wholly-owned entities: (i) proceeds from
the transfer of its equity interests in the variable interest entity, (ii) proceeds received in connection with a capital
decrease in the variable interest entity, and (iii) distributions or liquidation residuals from the disposal of its equity
interests in the variable interest entity upon termination or liquidation. Moreover, any profits, distributions or dividends
(after deduction of relevant tax expenses) received by the variable interest entity equity holder also belong to and shall be
paid to our wholly-owned entity. The exclusive call option agreements remain in effect until the equity interest or assets
that are the subject of these agreements are transferred to our wholly-owned entity. The parties to the exclusive call
option agreement for each of our major variable interest entities are the relevant variable interest entity equity holders,
the relevant variable interest entity and its corresponding wholly-owned entity.
Proxy Agreements
Pursuant to the relevant proxy agreement, each of the variable interest entity equity holders irrevocably authorizes any
person designated by our wholly-owned entity to exercise his rights as the equity holder of the variable interest entity,
including without limitation the right to vote and appoint directors. The parties to the proxy agreement for each of our
major variable interest entities are the relevant variable interest entity equity holder, the relevant variable interest entity
and its corresponding wholly-owned entity.
Equity Pledge Agreements
Pursuant to the relevant equity pledge agreement, the relevant variable interest entity equity holders have pledged all of
their interests in the equity of the variable interest entity as a continuing first priority security interest in favor of the
corresponding wholly-owned entity to secure the outstanding amounts advanced under the relevant loan agreements
described above and to secure the performance of obligations by the variable interest entity and/or its equity holders
under the other structure contracts. Each wholly-owned entity is entitled to exercise its right to dispose of the variable
interest entity equity holders’ pledged interests in the equity of the variable interest entity and has priority in receiving
payment by the application of proceeds from the auction or sale of the pledged interests, in the event of any breach or
default under the loan agreement or other structure contracts, if applicable. These equity pledge agreements remain in
force until the later of (i) the full performance of the contractual arrangements by the relevant parties, and (ii) the full
repayment of the loans made to the relevant variable interest entity equity holders. The parties to the equity pledge
agreement for each of our major variable interest entities are the relevant variable interest entity equity holders, the
relevant variable interest entity and its corresponding wholly-owned entity.
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Contracts that Enable Us to Receive Substantially All of the Economic Benefits from the Variable Interest Entities
Exclusive Technology Services Agreements or Exclusive Services Agreements
Each relevant variable interest entity has entered into an exclusive technology services agreement or, following the VIE
Structure Enhancement, an exclusive service agreement with the respective wholly-owned entity, pursuant to which our
relevant wholly-owned entity provides exclusive services to the variable interest entity. In exchange, the variable interest
entity pays a service fee to our wholly-owned entity, the amount of which shall be determined, to the extent permitted by
applicable PRC laws as proposed by our wholly-owned entity, resulting in a transfer of substantially all of the profits
from the variable interest entity to our wholly-owned entity.
The exclusive call option agreements described above also entitle our wholly-owned entity to all profits, distributions or
dividends (after deduction of relevant tax expenses) to be received by the variable interest entity equity holder, and the
following amounts, to the extent in excess of the original registered capital that they contributed to the variable interest
entity (after deduction of relevant tax expenses) to be received by each variable interest entity equity holder: (i) proceeds
from the transfer of its equity interests in the variable interest entity, (ii) proceeds received in connection with a capital
decrease in the variable interest entity, and (iii) distributions or liquidation residuals from the disposal of its equity
interests in the variable interest entity upon termination or liquidation.
In the opinion of Fangda Partners, our PRC legal counsel:
●
●
the ownership structures of our major wholly-owned entities and our major variable interest entities in
China do not and will not violate any applicable PRC law, regulation, or rule currently in effect; and
the contractual arrangements between our major wholly-owned entities, our major variable interest entities
and the variable interest entity equity holders governed by PRC laws are valid, binding and enforceable in
accordance with their terms and applicable PRC laws, rules, and regulations currently in effect, and will not
violate any applicable PRC law, regulation, or rule currently in effect.
However, we have been further advised by our PRC legal counsel, Fangda Partners, that there are substantial
uncertainties regarding the interpretation and application of current and future PRC laws, rules and regulations.
Accordingly, the possibility that the PRC regulatory authorities and PRC courts may in the future take a view that is
contrary to the opinion of our PRC legal counsel cannot be ruled out. We have been further advised by our PRC legal
counsel that if the PRC government finds that the agreements that establish the structure for operating our Internet-based
business do not comply with PRC government restrictions on foreign investment in the aforesaid business we engage in,
we could be subject to severe penalties including being prohibited from continuing operations. See “Item 3. Key
Information — D. Risk Factors — Risks Related to Our Corporate Structure.”
D. Property, Plant and Equipment
As of March 31, 2020, we occupied facilities around the world with an aggregate gross floor and land area of office
buildings, logistics warehouses, retail space, data centers and other facilities owned by us totaling approximately
8.7 million square meters, reflecting the continuous expansion of our business through organic growth and acquisitions
and consolidation of new businesses. We maintain offices in many countries and regions, including mainland China,
Hong Kong S.A.R., Singapore and the United States. In addition, we maintain data centers in a number of countries
including China, Indonesia, Malaysia, India, Australia, Singapore, Dubai, Germany, the UK, Japan, and the U.S.
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ITEM 4A. UNRESOLVED STAFF COMMENTS
Not Applicable.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
A. Operating Results
The following discussion and analysis of our financial condition and results of operations should be read in conjunction
with our audited consolidated financial statements and the related notes included in this annual report and in particular,
“Item 4. Information on the Company — B. Business Overview.” This discussion contains forward-looking statements
that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those
anticipated in these forward-looking statements as a result of various factors, including those set forth under “Item 3. Key
Information — D. Risk Factors” and elsewhere in this annual report. We have prepared our financial statements in
accordance with U.S. GAAP. Our fiscal year ends on March 31 and references to fiscal years 2018, 2019 and 2020 are to
the fiscal years ended March 31, 2018, 2019 and 2020, respectively.
Overview
We achieved significant growth and strong operating results in fiscal year 2020. Our total revenue increased by 51% from
RMB250,266 million in fiscal year 2018 to RMB376,844 million in fiscal year 2019, and further increased by 35% to
RMB509,711 million (US$71,985 million) in fiscal year 2020. Our net income increased by 31% from RMB61,412
million in fiscal year 2018 to RMB80,234 million in fiscal year 2019, and further increased by 75% to RMB140,350
million (US$19,821 million) in fiscal year 2020.
Our non-GAAP net income, which excludes the effect of disposal and revaluation gains, share-based compensation and
certain other items, increased by 12% from RMB83,214 million in fiscal year 2018 to RMB93,407 million in fiscal year
2019, and further increased by 42% to RMB132,479 million (US$18,710 million) in fiscal year 2020. For further
information on non-GAAP financial measures we use in evaluating our operating results and for financial and operational
decision-making purposes, see “Item 3. Key Information — A. Selected Financial Data — Non-GAAP Measures.”
Our Operating Segments
We organize and report our business in four operating segments:
● Core commerce;
● Cloud computing;
● Digital media and entertainment; and
●
Innovation initiatives and others.
This presentation reflects how we manage our business to maximize efficiency in allocating resources. This presentation
also provides further transparency to our various businesses that are executing different phases of growth and operating
leverage trajectories.
We present segment information after elimination of inter-company transactions. In general, revenue, cost of revenue and
operating expenses are directly attributable, and are allocated, to each segment. We allocate costs and expenses that are
not directly attributable to individual segments, such as those that support infrastructure across different operating
segments, to different operating segments mainly on the basis of usage, revenue or headcount, depending on the nature of
the relevant costs and expenses.
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In discussing the operating results of these four segments, we present each segment’s revenue, income from operations
and adjusted earnings before interest, taxes and amortization, or adjusted EBITA.
Our reported segments are described below:
● Core commerce. The core commerce segment is comprised of platforms operating in retail and wholesale
commerce in China, retail and wholesale commerce – cross-border and global, logistics services, local
consumer services and others.
● Cloud computing. The cloud computing segment is comprised of Alibaba Cloud, which offers a complete
suite of cloud services to customers worldwide, including elastic computing, database, storage, network
virtualization services, large scale computing, security, management and application services, big data
analytics, a machine learning platform and IoT services.
● Digital media and entertainment. The digital media and entertainment businesses leverage our deep data
insights to serve the broader interests of consumer through our key distribution platform, Youku, and
through Alibaba Pictures and our other diverse content platforms that provide online videos, films, live
events, news feeds, literature and music, among other areas.
●
Innovation initiatives and others. The innovation initiatives and others segment includes businesses such
as Amap, DingTalk, Tmall Genie and others.
The table below sets forth supplemental financial information of our reported segments for fiscal year 2020:
Year ended March 31, 2020
Core
commerce
Cloud
computing
RMB RMB
436,104
40,016
Innovation
initiatives
and others Unallocated(1)
Digital media
and
entertainment
RMB
(in millions, except percentages)
26,948
RMB
6,643
RMB
Consolidated
RMB US$
—
509,711
71,985
138,631
(7,016)
(14,937)
(12,951)
(12,297)
91,430
12,912
15,427
5,577
2,444
4,050
4,244
31,742
4,483
11,742
25
1,377
86
158
13,388
1,891
—
—
—
—
576
576
81
165,800
(1,414)
(11,116)
(8,815)
(7,319)
137,136
19,367
38%
(4)%
(41)%
(133)%
27%
Revenue
Income (loss)
from
operations
Add: Share-
based
compensation
expense
Add:
Amortization
and
impairment of
intangible
assets
Add:
Impairment of
goodwill
Adjusted
EBITA
Adjusted
EBITA
margin
(1)
Unallocated expenses are primarily related to corporate administrative costs and other miscellaneous items that are not
allocated to individual segments.
Our Monetization Model
Our marketplaces and businesses are highly synergetic which create a digital economy that enables consumers,
merchants, brands, retailers, other businesses, third party service providers and strategic partners to interconnect and
interact with each other. We leverage our leading technologies to provide various value propositions to participants in our
digital economy and realize monetization by offering different services and creating value under each of our business
segments.
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We derive most of our revenue from our core commerce segment, which accounted for 86%, 86% and 86% of our total
revenue in fiscal year 2018, 2019 and 2020, respectively, while cloud computing, digital media and entertainment, and
innovation initiatives and others contributed in aggregate 14%, 14% and 14% in fiscal year 2018, 2019 and 2020,
respectively.
The following table sets forth the principal components of our revenue for the periods indicated:
2018
% of
RMB
revenue
Year ended March 31,
2019
% of
RMB
revenue
(in millions, except percentages)
RMB
2020
% of
US$
revenue
Core commerce:
China commerce retail
China commerce wholesale
International commerce
retail
International commerce
wholesale
Cainiao logistics services
Local consumer services
Others
Total core commerce
Cloud computing
Digital media and entertainment
Innovation initiatives and others
Total
176,559
7,164
71% 247,615
9,988
3%
66% 332,750
12,427
3%
46,993
1,755
65%
3%
14,216
6%
19,558
5%
24,323
3,435
5%
6,625
6,759
—
2,697
214,020
13,390
19,564
3,292
250,266
8,167
2%
3%
14,885
— 18,058
5,129
1%
86% 323,400
24,702
5%
24,077
8%
4,665
1%
100% 376,844
9,594
2%
22,233
4%
25,440
5%
9,337
1%
86% 436,104
40,016
7%
26,948
6%
6,643
1%
100% 509,711
1,355
3,140
3,593
1,319
61,590
5,651
3,806
938
71,985
2%
4%
5%
2%
86%
8%
5%
1%
100%
Our monetization and profit model primarily consists of the following elements:
Core Commerce
Our core commerce segment is primarily comprised of our China commerce retail, China commerce wholesale, retail
commerce – cross-border and global, wholesale commerce – cross-border and global, logistics services, local consumer
services and others. The marketplaces of our core commerce business attract and retain a large number of consumers and
merchants. We primarily generate revenue from merchants.
China Commerce Retail
We generate revenue from merchants by leveraging our data technology and consumer insights which enable brands and
merchants to attract, retain and engage consumers, complete transactions, improve their branding, enhance operating
efficiency, and offer various services.
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The revenue model of our China commerce retail business is primarily performance-based marketing services that are
typically set by market-based bidding systems. Revenue from this model primarily consists of customer management
revenue, commission and other revenue. The following table sets forth the revenue from our China commerce retail
business, in absolute amounts and as percentages of our total revenue, for the fiscal years presented:
2018
RMB
% of
revenue
Year ended March 31,
2019
% of
RMB
revenue
RMB
(in millions, except percentages)
2020
% of
US$
revenue
114,285
46,525
15,749
176,559
46% 145,684
61,847
19%
6%
40,084
71% 247,615
39% 175,396
71,086
16%
11%
86,268
66% 332,750
24,771
10,039
12,183
46,993
34%
14%
17%
65%
China commerce retail
Customer management
Commission
Others
Total
Customer management
We derive a majority of our China commerce retail revenue from customer management, which primarily consists of:
●
●
P4P marketing services, where merchants primarily bid for keywords that match product or service listings
appearing in search results through our online auction system on a cost-per-click, or CPC, basis. Whether
and where the listing will be displayed, and the corresponding prices for the display are determined by the
algorithm of our online auction system based on a number of factors with various weights and through a
market-based bidding mechanism.
In-feed marketing services, where merchants primarily bid to market to groups of consumers with similar
profiles that match product or service listings appearing in browser results through our online auction
system on a cost-per-click, or CPC, basis. Whether and where the listing will be displayed, and the
corresponding prices for the display are determined by the algorithm of our online auction system based on
a number of factors with various weights and through a market-based bidding mechanism.
● Display marketing services, where merchants bid for display positions at fixed prices or prices established
by a market-based bidding system on a cost-per-thousand impression, or CPM, basis.
In addition to the above-mentioned P4P marketing services, in-feed marketing services and display marketing services
directly provided on our marketplaces, we also provide these services through collaboration with other third-party
marketing affiliates. These third parties are primarily third-party online media, such as search engines, news feeds and
video entertainment websites and mobile apps. These third-party online media enter into agreements with us to connect
their designated online resources to our online auction system so that the merchants’ listings or other marketing
information can be displayed on those third-party online resources.
●
Taobaoke program, where we collaborate with shopping guide platforms, medium- and small-sized
websites and mobile apps, individuals and other third parties, collectively “Taobaokes,” to offer marketing
services. Taobaokes display the marketing information of our merchants on their media which facilitate our
merchants to market and transact. Merchants pay commissions to the Taobaokes based on a percentage of
transaction value generated from users under the Taobaoke program. Commissions to the Taobaokes are set
by the merchants.
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Commissions on transactions
In addition to purchasing customer management services, merchants also pay a commission based on a percentage of
transaction value generated on Tmall and certain other marketplaces. The commission percentages typically range from
0.3% to 5.0% depending on the product category.
Others
Other revenue from our China commerce retail is primarily generated by our New Retail and direct sales businesses,
mainly Freshippo, Tmall Supermarket, direct import and Intime, and primarily consists of revenue from product sales,
commissions on transactions and software service fees.
China Commerce Wholesale
We generate revenue from our China commerce wholesale business primarily through membership fees, value-added
services and customer management services. Revenue from membership fees are primarily fixed annual fees from the
sale of China TrustPass memberships for paying members to reach customers, provide quotations and transact. Paying
members may also purchase additional value-added services, such as premium data analytics and upgraded storefront
management tools, the prices of which are determined based on the types and duration of the value-added services.
Revenue from customer management services is primarily derived from P4P marketing services.
International Commerce Retail
We generate revenue from our international commerce retail businesses primarily through direct sales, commissions,
logistics and customer management services from Lazada and AliExpress. Merchants pay a commission based on a
percentage of the transaction value they generate, mainly on AliExpress. The commissions on AliExpress are typically
5% to 8% of the transaction value. In addition, we generate revenue from logistics services provided by Lazada and
customer management services, primarily from AliExpress’s collaboration with third-party websites and mobile apps.
International Commerce Wholesale
We generate revenue from our wholesale commerce – cross-border and global primarily through membership fees, value-
added services and customer management services. Revenue from membership fees are primarily fixed annual fees from
the sale of Gold Supplier memberships for paying members to reach customers, provide quotations and transact. Revenue
from value-added services primarily consists of fees for services such as customs clearance services, the prices of which
are determined based on the types, usage and duration of the value-added services. Revenue from customer management
services is primarily derived from P4P marketing services.
Logistics Services
We charge merchants and third-party logistics service providers fees based on the number of contracted orders completed
and other value-added services we provide.
Local Consumer Services
We generate revenue from local consumer services primarily through platform commissions and on-demand delivery
service fees by Ele.me.
Cloud Computing
We primarily generate cloud computing revenue from enterprise customers based on the duration and usage of
the services.
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Digital Media and Entertainment
Revenue from digital media and entertainment business is primarily comprised of customer management services and
membership subscription fees. Customer management services fees are generally generated from businesses and
advertising agencies and the monetization model is substantially similar to the customer management services fees for
our China commerce retail business. Membership subscription fees are mainly generated from paying consumers.
Innovation Initiatives and Others
In this segment we primarily generate revenue from consumers and enterprise customers. For example, Amap charges a
software service fee to enterprise customers, and Tmall Genie generates revenue from product sale. Other revenue
includes annual fees payable by Ant Group or its affiliates in relation to the SME loans business that we transferred to
Ant Group in February 2015. See “Item 7. Major Shareholders and Related Party Transactions — B. Related Party
Transactions — Agreements and Transactions Related to Ant Group and Its Subsidiaries.”
Factors Affecting Our Results of Operations
Our Ability to Create Value for Our Users and Generate Revenue. Our ability to create value for our users and generate
revenue is driven by the factors described below:
● Number and engagement of consumers. Consumers are attracted to our platforms by the breadth of
curated products and services, personalized content and the interactive user experience these platforms
offer. Our platforms include a comprehensive selection of product and service offerings as well as engaging
content, such as recommendation feeds on our Taobao app and entertainment content on Youku.
Consumers enjoy an engaging social experience by interacting with each other and with merchants, brands
and key opinion leaders on our platforms. We leverage our data insights to further optimize the relevance of
this rich content we provide to our users. The engagement of consumers in our digital economy is affected
by our ability to continue to enhance and expand our product and service offerings and improve user
experience.
● Broader value offered to merchants, brands, retailers and other businesses. Merchants, brands, retailers
and other businesses use our products and services to help them reach, acquire and retain customers, build
brand awareness and engagement, complete transactions, and enhance their operating efficiency. We offer
merchants and retailers a complete suite of services and tools, powered by our consumer insights, to help
them effectively engage consumers, efficiently manage their operations and provide a seamless online and
offline consumer experience. With our proprietary data and technologies, we also facilitate the digital
transformation of traditional merchants and retailers. In addition, we empower businesses of different sizes
across various industries through our comprehensive enterprise cloud service offerings.
● Empowering data and technology. Our ability to engage consumers and empower merchants, brands,
retailers and other businesses is affected by the breadth and depth of our consumer insights, such as the
accuracy of our shopping recommendations and of our targeted marketing, and our technology capabilities
and infrastructure, such as cloud computing, and our continued ability to develop scalable products and
services that adapt to the quickly evolving industry trends and consumer preferences.
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Operating Leverage of Our Business Model. Our primary business model has significant operating leverage and our
digital economy enables us to realize structural cost savings. For example, Taobao Marketplace drives significant traffic
to Tmall as Tmall product listings also appear on Taobao Marketplace search result pages. Furthermore, the large number
of consumers on our marketplaces attracts a large number of merchants, who become customers for our customer
management and storefront services. In addition, the vast consumer base of our digital economy presents cross-selling
opportunities across our various platforms. For example, we can offer consumer services, such as Ele.me, and promote
our digital media and entertainment services, including Youku, to consumers on our marketplaces. These network effects
allow for lower traffic acquisition costs and provide synergies across our businesses.
Our Investment in User Base, Technology, People, Infrastructure, and Innovative Business Model. We have made,
and will continue to make, significant investments in our platforms and digital economy to attract consumers and
merchants, enhance user experience and expand the capabilities and scope of our platforms. We expect our investments
will include expanding our core commerce offerings, implementing our New Retail initiatives, enhancing our cloud
computing business, acquiring content and users to further develop our digital media and entertainment business,
cultivating innovation initiatives and new technologies as well as executing our globalization strategy. Our operating
leverage and margin levels enable us to continue to invest in our people, particularly engineers, scientists and product
management personnel, as well as in our technology capabilities and infrastructure. Our investment in the above
mentioned new and existing businesses has and will continue to lower our margins but we believe the investment will
deliver overall long-term growth.
Strategic Investments and Acquisitions. We have made, and intend to make, strategic investments and acquisitions. We
do not make investments and acquisitions for purely financial reasons. Our investment and acquisition strategy is focused
on strengthening our digital economy, creating strategic synergies across our businesses, and enhancing our overall value.
Our strategic investments and acquisitions may affect our future financial results, including our margins and our net
income. For example, we expect that our acquisitions of Kaola, Youku, Lazada and controlling stakes in Cainiao
Network and Ele.me and our privatization of Intime will have a negative effect on our financial results, at least in the
short term. In addition, some of our acquisitions and investments may not be successful. We have incurred impairment
charges in the past and may incur impairment charges in the future.
Recent Investment, Acquisition and Strategic Alliance Activities
In addition to organic growth, we have made, or have entered into agreements to make, strategic investments,
acquisitions and alliances that are intended to further our strategic objectives. The financial results for these strategic
transactions that were completed are reflected in our operating results beginning with the period of their respective
completion. Investments in which we did not obtain control are generally accounted for under the equity method if we
have significant influence over the investee through investment in common stock or in-substance common stock.
Otherwise, investments are accounted for as investment securities based on our accounting policies over different
categories of investments and merger and acquisition activities. For the details of our accounting policies for each
category of our investments, see notes 2(d), 2(t) and 2(u) to our audited consolidated financial statements included in this
annual report.
We have developed focused investment strategies, targeting to invest, acquire or form alliances that will either
complement our existing businesses or drive innovation initiatives. For example, with the acquisition of Kaola, we aim to
further implement our globalization strategies and better position us to achieve our vision for 2036. In some cases, we
may take staged approach to our investment and acquisition strategy, by beginning with an initial minority investment
followed by business cooperation. When the business results, cooperation and the overall relationship established with
the management of the investee company show increasing value to our ongoing business strategy, we may increase our
investment or acquire the investee company completely.
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We have funded our strategic acquisitions and investments primarily from cash generated from our operations and
through debt and equity financing. Our debt financing primarily consists of unsecured senior notes and bank borrowings,
including an aggregate of US$8.0 billion unsecured senior notes issued in November 2014, of which US$3.55 billion was
repaid in 2017 and 2019, an additional aggregate US$7.0 billion unsecured senior notes issued in December 2017, a five-
year term loan facility of US$4.0 billion drawn down in fiscal year 2017, the maturity of which has been extended to May
2024 in May 2019, as well as a US$5.15 billion revolving credit facility which we have not yet drawn. Going forward,
we expect to fund additional investments through cash generated from our operations and through debt and equity
financing when opportunities arise in the future. Although we expect our margins to be negatively affected by
acquisitions of target companies with lower or negative margins, such as our acquisitions and consolidations of Youku,
Lazada, Intime, Cainiao Network, Ele.me and Kaola, we do not expect our investment activities to have any significant
negative impact on our liquidity or operations. We believe acquired businesses operating at a loss do not detract from our
total value because they bring clear strategic value to us in the long run. However, there can be no assurance that our
future financial results would not be materially and adversely affected if our strategic investments and acquisitions are
not successful. See “Item 3. Key Information — D. Risk Factors — Risks Related to Our Business and Industry —
Sustained investment in our business, strategic acquisitions and investments, as well as our focus on long-term
performance, and on maintaining the health of our digital economy, may negatively affect our margins and our net
income” and “Item 3. Key Information — D. Risk Factors — Risks Related to Our Business and Industry — We face
risks relating to our acquisitions, investments and alliances.”
Our significant strategic investments and acquisitions (including those that are under definitive agreement but have not
closed) in fiscal year 2020 and the period through the date of this annual report are set forth below. For those investments
and acquisitions described below that have not yet closed, there can be no assurance that the closing conditions will be
satisfied in a timely manner or at all.
Core Commerce and New Retail
Alibaba Health Information Technology Limited, or Alibaba Health, our consolidated subsidiary that engages in
pharmaceutical and healthcare product sales business, establishes Internet healthcare platforms and explores digital health
using cloud computing and big data technologies, and is listed on the Hong Kong Stock Exchange. In April 2020, we
transferred our business relating to certain pharmaceutical products, medical purpose food products, medical devices,
adult products, healthcare products, medical and healthcare services and certain regulated health food products on the
Tmall and/or Tmall Global platforms to Alibaba Health for an aggregate consideration of HK$8.1 billion (US$1.0
billion), which was settled through the issuance of approximately 861 million newly issued ordinary shares of Alibaba
Health. Upon the completion of this transaction, our equity interest in Alibaba Health increased to approximately 60%.
Meinian Onehealth Healthcare Holdings Co., Ltd., or Meinian, offers health examination, health evaluation, health
consulting, and other services and is listed on the Shenzhen Stock Exchange. In November to December 2019, we,
together with Ant Group, acquired new and existing shares of Meinian, representing an approximately 14% equity
interest in Meinian for a total cash consideration of RMB6,700 million (US$946 million).
HQG, Inc., or Kaola, an import e-commerce platform in China. In September 2019, we acquired a 100% equity interest in
Kaola from NetEase, Inc. for an aggregate purchase price of US$1,874 million, comprising cash and approximately 14.3
million of our newly issued ordinary shares (equivalent to approximately 1.8 million ADSs) valued at US$316 million.
With this acquisition, we aim to further elevate our import service and experience for Chinese consumers through
synergies across the Alibaba digital economy.
Red Star Macalline Group Corporation Limited, or Red Star, a leading home improvement and furnishings shopping
mall operator in China that is listed on both the Hong Kong Stock Exchange and the Shanghai Stock Exchange. In May
2019, we completed the subscription of exchangeable bonds issued by the controlling shareholder of Red Star for a cash
consideration of RMB4,359 million (US$616 million). The exchangeable bonds have a term of five years and are
exchangeable into ordinary shares of Red Star at an initial price of RMB12.28 per share. In addition, we acquired an
approximately 2% equity interest in Red Star for a total consideration of HK$447 million (US$58 million).
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Local Consumer Services
Local Services Holding Limited, or Local Services Holdco, our consolidated subsidiary that operates Ele.me (饿了么), a
leading on-demand delivery and local services platform in China, and Koubei, one of China’s leading restaurant and local
services guide platforms for in-store consumption. During fiscal year 2020 and through the date of this annual report, we
acquired additional equity interest in Local Services Holdco for a cash consideration of US$1,800 million. Upon the
completion of these transactions, our equity interest in Local Services Holdco was approximately 73%. Our local
consumer services business is an important part of our consumer-facing platform, which leverages our massive consumer
base to further penetrate the local consumer services market, increasing our ability to tap into China’s ongoing
consumption upgrade.
Cloud Computing
China TransInfo Technology Co., Ltd., or China TransInfo, a China-based smart city infrastructure and service provider
that is listed on the Shenzhen Stock Exchange, whose offerings include intelligent transportation operation services. In
June 2019, we acquired a 15% equity interest in China TransInfo for a cash consideration of RMB3,595 million (US$508
million).
Logistics
STO Express Co., Ltd., or STO Express, one of the leading express delivery services companies in China that is listed on
the Shenzhen Stock Exchange. In March 2019, we made a loan to the controlling shareholder of STO Express with a
principal amount of RMB5.0 billion for a term of three years. The controlling shareholder of STO Express has pledged a
portion of its equity interest in STO Express in relation to the loan. In July 2019, we acquired a 49% equity interest in an
investment vehicle which holds a 29.9% equity interest in STO Express (equivalent to an effective equity interest of
approximately 14.7% in STO Express) for a cash consideration of RMB4.7 billion (US$664 million). The investment
vehicle was established by the controlling shareholder of STO Express, and we subsequently entered into an option
agreement with this controlling shareholder. Under the terms of the agreement, we may elect to acquire an additional
effective equity interest of approximately 31.3% in STO Express through exercise of call options for a total consideration
of RMB10.0 billion (US$1.4 billion). We can exercise our options to acquire effective equity interests in STO Express at
any time during a three-year period beginning on December 28, 2019.
Cainiao Network, our consolidated subsidiary that operates a logistics data platform and global fulfillment network that
primarily leverage the capacity and capabilities of logistics partners. In September and November 2019, we purchased
additional equity interest in Cainiao Network for a cash consideration of US$3,482 million. In June 2020, we purchased
additional equity interest in Cainiao Network for a cash consideration of RMB3,921 million. Upon the completion of
these transactions, our equity interest in Cainiao Network increased from approximately 51% to approximately 66%. We
expect that Cainiao Network will help enhance the overall logistics experience for consumers and merchants across our
digital economy, and enable greater efficiencies and lower costs in the logistics sector in China.
International Expansion
AliExpress Russia Holding Pte. Ltd., or AliExpress Russia Joint Venture, a joint venture set up by us, Mail.ru Group
Limited, or Mail.ru Group, a leading Internet company in Russia, Public Joint Stock Company MegaFon, or MegaFon, a
Russian mobile telecommunications operator and Joint Stock Company “Managing Company of Russian Direct
Investment Fund,” or RDIF, a Russian sovereign wealth fund. In October 2019, we invested approximately US$100
million into the joint venture and contributed our AliExpress Russia businesses into the joint venture. The other
shareholders of the joint venture also made cash and non-cash contributions to the joint venture pursuant to the
transaction documents. We hold an approximately 56% equity interest and less-than-majority voting rights in the joint
venture. In connection with the transaction, we also entered into an option agreement with another shareholder of the
joint venture, allowing the transfer of equity interest in the joint venture between us and this shareholder in the future. As
part of the transaction, we have also acquired a minority stake in Mail.ru Group. In connection with the establishment of
the joint venture, we entered into a strategic cooperation agreement relating to, among other things, traffic and product
initiatives.
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Lazada, our consolidated subsidiary that operates a leading and fast-growing e-commerce platform in Southeast Asia for
SMEs, regional and global brands. During fiscal year 2020 and through the date of this annual report, we made additional
investments in Lazada amounting to an aggregate of US$2,306 million through acquisition of additional equity and
capital injections. Upon the completion of these transactions, we held substantially all of the equity interest in Lazada.
Others
Banma Network Technology Co., Ltd., or Banma, a China-based intelligent car operating system and solution provider.
We hold an approximately 36% effective equity interest in Banma on a fully diluted basis through an investment vehicle.
In May 2020, we and other shareholders of Banma signed certain agreements relating to the restructuring of Banma,
pursuant to which, in exchange for certain non-cash consideration, we will receive additional equity interest in Banma,
resulting in an approximately 50% effective equity interest in Banma on a fully diluted basis upon the completion of the
restructuring, which is subject to customary closing conditions.
Intangible Assets and Goodwill
When we make an acquisition, consideration that exceeds the fair value of the acquired assets and liabilities is allocated
to intangible assets and goodwill. We have and will continue to incur amortization expenses as we amortize intangible
assets over their estimated useful life on a straight-line basis. We do not amortize goodwill. We test intangible assets and
goodwill periodically or whenever necessary for impairment, and any impairment may materially and adversely affect
our financial condition and results of operations. Some of our acquisitions and investments may not be successful, and we
may incur impairment charges in the future. It should further be noted that most of our businesses grouped under the
digital media and entertainment segment, cloud computing segment, and innovation initiatives and others segment are
still in the early stage of development. While these businesses were loss-making for the year ended March 31, 2020, we
took a longer term view of the outlook of the businesses in our qualitative goodwill impairment assessments, and
concluded that it is more likely than not that the fair value of the reporting units under these segments exceeded their
carrying amount. For additional information, see “— Critical Accounting Policies and Estimates — Impairment
Assessment on Goodwill and Intangible Assets” and “Item 3. Key Information — D. Risk Factors — Risks Related to
Our Business and Industry — We face risks relating to our acquisitions, investments and alliances.”
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Components of Results of Operations
Revenue
The following table sets forth the principal components of our revenue for the periods indicated:
2018
RMB
% of
revenue
Year ended March 31,
2019
% of
RMB
revenue
RMB
(in millions, except percentages)
2020
% of
US$
revenue
176,559
71% 247,615
66% 332,750
46,993
65%
Core commerce:
China commerce retail
China commerce
wholesale
7,164
3%
9,988
3%
12,427
1,755
3%
International commerce
retail
14,216
6%
19,558
5%
24,323
3,435
5%
International commerce
wholesale
Cainiao logistics
services
Local consumer
services
Others
Total core commerce
Cloud computing
Digital media and
entertainment
Innovation initiatives and
others
Total
6,625
2%
8,167
2%
9,594
1,355
2%
6,759
3%
14,885
4%
22,233
3,140
4%
—
2,697
214,020
13,390
— 18,058
5,129
1%
86% 323,400
24,702
5%
5%
1%
25,440
9,337
86% 436,104
40,016
7%
3,593
1,319
61,590
5,651
5%
2%
86%
8%
19,564
8%
24,077
6%
26,948
3,806
5%
3,292
6,643
4,665
250,266 100% 376,844 100% 509,711
1%
1%
938
1%
71,985 100%
We generate most of our revenue from our core commerce segment. We also earn revenue from services associated with
our cloud computing segment, digital media and entertainment segment as well as innovation initiatives and others
segment. A substantial majority of our revenue is attributable to our businesses in China. See “— Our Monetization
Model” for additional information regarding our revenue.
Cost of Revenue
The principal components of our cost of revenue include: cost of inventories; logistics costs; expenses associated with the
operation of our mobile platforms and websites, such as depreciation and maintenance expenses for our servers and
computers, call centers and other equipment, as well as bandwidth and co-location fees; salaries, bonuses, benefits and
share-based compensation expense relating to customer service, mobile platform and platform operation personnel as
well as payment processing consultants; content acquisition costs paid to third parties and production costs of original
content for our online media properties; traffic acquisition costs paid to third-party marketing affiliates either at a fixed
price or on a revenue-sharing basis; payment processing fees paid to Alipay or other financial institutions; and other
miscellaneous costs.
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Product Development Expenses
Product development expenses primarily include salaries, bonuses, benefits and share-based compensation expense for
research and development personnel and other expenses that are directly attributable to the development of new
technologies and products for our businesses, such as the development of the Internet infrastructure, applications,
operating systems, software, databases and networks. We expense all of our product development costs as they
are incurred.
Sales and Marketing Expenses
Sales and marketing expenses primarily consist of online and offline advertising expenses, promotion expenses, salaries,
bonuses, benefits and share-based compensation expense for our employees engaged in sales and marketing functions,
and sales commissions paid for membership and user acquisition for our marketplaces and platforms.
General and Administrative Expenses
General and administrative expenses consist mainly of salaries, bonuses, benefits and share-based compensation expense
for our management and administrative employees, professional services fees, office facilities, other support overhead
costs, provision for doubtful debts on receivables, charitable contributions, as well as non-recurring items, such as
settlement of a U.S. federal class action lawsuit.
Interest and Investment Income, Net
Interest and investment income, net mainly consists of interest income, gain or loss on deemed disposals, disposals and
revaluation of our long term equity investments and impairment of equity investments. We obtained control over Cainiao
Network in fiscal year 2018 and Koubei and Alibaba Pictures in fiscal year 2019. We recognized gains of RMB22.4
billion in fiscal year 2018 and RMB27.8 billion in fiscal year 2019 from the revaluation of our previously held equity
interest in Cainiao Network, Koubei and Alibaba Pictures. In fiscal year 2020, we recognized one-time gains of
RMB71.6 billion (US$10.1 billion) and RMB10.3 billion (US$1.5 billion) in relation to the receipt of the 33% equity
interest in Ant Group and our contribution of the AliExpress Russia business into a joint venture we set up with Russian
partners, which resulted in our deconsolidation of these businesses, respectively. The gain related to the 33% equity
interest in Ant Group resulted from the transfer of certain intellectual property rights and assets to Ant Group as set forth
under the 2014 transaction agreements and the basis difference determined based on our share of Ant Group’s net assets,
net of its corresponding deferred tax effect.
Interest Expense
Our interest expense is comprised of interest payments and amortization of upfront fees and incidental charges primarily
associated with our US$8.0 billion unsecured senior notes issued in November 2014, of which US$3.55 billion was
repaid in 2017 and 2019, the US$4.0 billion five-year term loan facility drawn down in fiscal year 2017 and an additional
aggregate of US$7.0 billion unsecured senior notes issued in December 2017. In addition, in April 2017, we obtained a
new US$5.15 billion revolving credit facility, which we have not yet drawn as of the date of this annual report. Interest
expense in fiscal year 2019 was RMB5,190 million, an increase of 46% compared to RMB3,566 million in fiscal year
2018. The increase was primarily due to an increase in average debt outstanding in fiscal year 2019 as compared to fiscal
year 2018, reflecting primarily an additional US$7.0 billion of unsecured senior notes issued in December 2017.
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Other Income, Net
Other income, net, primarily consists of royalty fees and software technology service fees paid by Ant Group, exchange
gain or loss, as well as government grants. Ant Group pays us royalty fees and software technology service fees pursuant
to an intellectual property and software technology services agreement, as amended in August 2014, or the 2014 IPLA.
Exchange gain or loss, arising from our operations and treasury management activities, recognized in our income
statement is largely a result of appreciation or depreciation of RMB, respectively. Government grants primarily relate to
grants by central and local governments in connection with our contributions to technology development and investments
in local business districts. These grants may not be recurring in nature, and we recognize the income when the grants are
received and no further conditions need to be met. Following our receipt of the 33% equity interest in Ant Group in
September 2019, the profit share payments, consisting of the abovementioned royalty fee and software technology
service fee paid by Ant Group, have terminated. See “Item 7. Major Shareholders and Related Party Transactions — B.
Related Party Transactions — Agreements and Transactions Related to Ant Group and Its Subsidiaries — Our
Commercial Arrangements with Ant Group and Alipay — Alipay Intellectual Property License and Software Technology
Services Agreement” for further information on the arrangements between us and Ant Group.
Income Tax Expense
Our income tax expense is comprised primarily of current tax expense, mainly attributable to certain profitable
subsidiaries in China, and deferred tax expense, mainly including withholding tax on dividends to be distributed by our
major subsidiaries operating in China.
Taxation
Cayman Islands Tax
Under Cayman Islands law, our company is not subject to income, corporation or capital gains tax, and no withholding
tax is imposed upon the payment of dividends.
Hong Kong Profits Tax
Our company’s subsidiaries incorporated in Hong Kong were subject to Hong Kong profits tax at a rate of 16.5% in fiscal
years 2018, 2019 and 2020.
PRC Income Tax
Under the PRC Enterprise Income Tax Law, or EIT Law, the standard enterprise income tax rate is 25%.
Entities qualifying as High and New Technology Enterprises enjoy a preferential tax rate of 15%. Entities recognized as
Software Enterprises are exempt from the EIT for two years beginning from their first profitable calendar year and are
entitled to a 50% reduction in EIT for the following three calendar years. Furthermore, entities recognized as Key
Software Enterprises within the PRC national plan enjoy a preferential EIT rate of 10%.
Certain subsidiaries received the above preferential tax treatments during calendar years 2017, 2018, 2019 and 2020.
Three of our subsidiaries in China, Alibaba (China) Technology Co. Ltd., Taobao (China) Software Co. Ltd., and
Zhejiang Tmall Technology Co. Ltd., which are our wholly-owned entities primarily involved in the operations of
wholesale marketplaces, Taobao Marketplace and Tmall, respectively, were recognized as Key Software Enterprises in
calendar years of 2017 and 2018 and they were subject to an EIT rate of 10%.
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Key Software Enterprise (KSE) status is subject to review by the relevant authorities every year and the timing of annual
review and notification by the relevant authorities may vary from year to year. The related reduction in tax expense as a
result of official notification confirming KSE status is accounted for upon receipt of such notification. The annual review
and notification relating to the renewal of the KSE status for the calendar year of 2019 had not yet been obtained as of
March 31, 2020. Accordingly, Alibaba (China) Technology Co. Ltd., Taobao (China) Software Co. Ltd. and Zhejiang
Tmall Technology Co. Ltd. continued to apply an EIT rate of 15% as High and New Technology Enterprises for the
calendar year of 2019.
VAT and Other Levies
Our major PRC subsidiaries are subject to VAT on revenue earned for our services under a national VAT reform
program. In general, the applicable VAT rate on the revenue earned for services is 6% with companies entitled to credit
VAT paid on certain purchases against VAT on sales. Revenue is recognized net of VAT in our consolidated income
statement.
PRC Withholding Tax
Pursuant to the EIT Law, a 10% withholding tax is generally levied on dividends declared by companies in China to their
non-resident enterprise investors. A lower withholding tax rate of 5% is applicable for direct foreign investors
incorporated in Hong Kong with at least 25% equity interest in the PRC company and meeting the relevant conditions or
requirements pursuant to the tax arrangement between mainland China and Hong Kong S.A.R. As the equity holders of
our major subsidiaries in China are qualified Hong Kong incorporated companies, our deferred tax liabilities for
distributable earnings are calculated at a 5% withholding tax rate. As of March 31, 2020, we have fully accrued the
withholding tax on the earnings distributable by all of our subsidiaries in China, except for those being reserved for
permanent reinvestment in China of RMB107.2 billion (US$15.1 billion).
Share-based Compensation
We have various equity incentive plans pursuant to which the employees, consultants and directors of our company
and/or certain other companies, such as Ant Group, are awarded RSUs, restricted shares or granted options to acquire our
ordinary shares. We believe share-based awards are vital to attract, incentivize and retain our employees and consultants.
In addition to on-hire grants for new recruits above a specific job level, we also make performance grants on an annual
basis and promotion grants on a semi-annual basis to our top performing employees. RSUs and options granted in the
above categories are generally subject to a four-year vesting schedule. Depending on the nature and the purpose of the
grant, RSUs and options generally vest 25% upon the first anniversary of the vesting commencement date or 50% upon
the second anniversary of the vesting commencement date, and thereafter 25% every year. Certain RSUs and options
granted to our senior management members are subject to a six-year vesting schedule. We believe share-based awards are
the appropriate tool to align the interests of the grantees with those of our shareholders.
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In addition, since March 2014, Junhan has granted share-based awards linked to the valuation of Ant Group to certain of
our employees, and since April 2018 and July 2019, Ant Group has granted RSU awards and share appreciation rights to
certain of our employees respectively. The awards granted by Junhan will be settled by Junhan upon disposal of these
awards by the holders. The awards granted by Ant Group will be settled by Ant Group upon vesting or exercise of these
awards. These awards are generally subject to a four-year vesting schedule as determined by the administrator of the
plan. Depending on the nature and the purpose of the grant, these awards generally vest 25% or 50% upon the first or
second anniversary of the vesting commencement date, respectively, as provided in the grant agreement, and 25% every
year thereafter. Certain awards granted to our senior management members are subject to a six-year vesting schedule. We
had no obligation to reimburse Junhan and Ant Group for the cost associated with the awards granted during all the
periods presented. In June 2020, the parties entered into equity-based awards grant and settlement agreements pursuant to
which the parties will settle with each other the cost associated with the awards that will be granted to each other’s
employees. The payment amounts will depend on the relative values of the awards to be granted in the future. See “Item
7. Major Shareholders and Related Party Transactions — B. Related Party Transaction — Agreements and Transactions
Related to Ant Group and Its Subsidiaries — Equity-based Award Arrangements.”
We recognized share-based compensation expense of RMB20,075 million, RMB37,491 million and RMB31,742 million
(US$4,483 million) in fiscal years 2018, 2019 and 2020, respectively, representing 8%, 10% and 6% of our revenue in
those respective periods. The following table sets forth an analysis of share-based compensation expense by function for
the periods indicated.
Cost of revenue
Product development expenses
Sales and marketing expenses
General and administrative expenses
Total
Year ended March 31,
2018
2019
2020
RMB RMB RMB US$
(in millions)
5,505
7,374
2,037
5,159
20,075
8,915
15,378
4,411
8,787
37,491
7,322
13,654
3,830
6,936
31,742
1,034
1,928
541
980
4,483
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Share-based compensation expense decreased in fiscal year 2020 as compared to fiscal year 2019. It was because during
fiscal year 2019, Ant Group completed an equity financing at a higher valuation, which required us to recognize the
increase in value of these awards. The decrease was partially offset by the general increase in the average fair market
value of the awards granted by Alibaba Group, the increase in share-based awards granted by our subsidiaries and the
impact arising from the cash settlement of such awards in this year. The following table sets forth an analysis of share-
based compensation expense by type of awards:
Year ended March 31,
2018
2019
2020
RMB RMB RMB US$
(in millions)
Alibaba Group share-based awards(1)
Ant Group share-based awards granted to our employees(2)
Others(3)
Total share-based compensation expense
16,870
2,278
927
20,075
22,727
12,855
1,909
37,491
26,216
1,261
4,265
31,742
3,703
178
602
4,483
(1) This includes awards granted to our employees, employees of Ant Group and other consultants. Awards granted to
nonemployees were subject to mark-to-market accounting treatment until March 31, 2019. Beginning on April 1, 2019, we
adopted ASU 2018-07, “Compensation — Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based
Payment Accounting” under U.S. GAAP. As a result of adopting this new accounting update, these awards are no longer
subject to mark-to-market accounting treatment. Commencing upon the receipt of the 33% equity interest in Ant Group on
September 23, 2019, the expense relating to Alibaba Group share-based awards granted to Ant Group employees are
recognized in share of results of equity investees.
(2) Awards subject to mark-to-market accounting treatment.
(3) Others primarily relate to share-based awards underlying the equity of our subsidiaries.
The expense arising from share-based awards relating to Ant Group granted to our employees represents a non-cash
charge that did not result in any economic costs or equity dilution to our shareholders. We believe that the grant of these
equity awards to our employees will encourage mutually beneficial cooperation between us and Ant Group.
We expect that our share-based compensation expense will continue to be affected by changes in the fair value of our
shares, our subsidiaries’ share-based awards and the quantity of awards we grant to our employees and consultants in the
future. Furthermore, we expect that our share-based compensation expense will continue to be affected by any future
changes in the valuation of Ant Group. See “— Critical Accounting Policies and Estimates — Share-based Compensation
Expense and Valuation of the Underlying Awards” for additional information regarding our share-based compensation
expense.
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Results of Operations
The following table sets out our consolidated results of operations for the periods indicated:
Year ended March 31,
2018
2019
2020
RMB RMB RMB US$
(in millions, except per share data)
Revenue
Core commerce
Cloud computing
Digital media and entertainment
Innovation initiatives and others
Total
Cost of revenue
Product development expenses
Sales and marketing expenses
General and administrative expenses
Amortization and impairment of intangible assets
Impairment of goodwill
Income from operations
Interest and investment income, net
Interest expense
Other income, net
Income before income tax and share of results of
equity investees
Income tax expenses
Share of results of equity investees
Net income
Net loss attributable to noncontrolling interests
Net income attributable to Alibaba Group
Holding Limited
Accretion of mezzanine equity
Net income attributable to ordinary shareholders
Earnings per share attributable to ordinary
shareholders:(1)
Basic
Diluted
Earnings per ADS attributable to ordinary
shareholders:(1)
Basic
Diluted
214,020
13,390
19,564
3,292
250,266
(107,044)
(22,754)
(27,299)
(16,241)
(7,120)
(494)
69,314
30,495
(3,566)
4,160
323,400
24,702
24,077
4,665
376,844
(206,929)
(37,435)
(39,780)
(24,889)
(10,727)
—
57,084
44,106
(5,190)
221
436,104
40,016
26,948
6,643
509,711
(282,367)
(43,080)
(50,673)
(28,197)
(13,388)
(576)
91,430
72,956
(5,180)
7,439
61,590
5,651
3,806
938
71,985
(39,878)
(6,085)
(7,156)
(3,982)
(1,891)
(81)
12,912
10,303
(731)
1,051
100,403
(18,199)
(20,792)
61,412
2,681
96,221
(16,553)
566
80,234
7,652
166,645
(20,562)
(5,733)
140,350
9,083
23,535
(2,904)
(810)
19,821
1,283
64,093
(108)
63,985
87,886
(286)
87,600
149,433
(170)
149,263
21,104
(24)
21,080
3.13
3.06
4.24
4.17
7.10
6.99
1.00
0.99
25.06
24.51
33.95
33.38
56.82
55.93
8.02
7.90
(1) Each ADS represents eight Shares. For the years ended March 31, 2018 and 2019, earnings per share has been retrospectively
adjusted for the Share Split that became effective on July 30, 2019.
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Revenue
Core commerce
Cloud computing
Digital media and entertainment
Innovation initiatives and others
Total
Cost of revenue
Product development expenses
Sales and marketing expenses
General and administrative expenses
Amortization and impairment of intangible assets
Impairment of goodwill
Income from operations
Interest and investment income, net
Interest expense
Other income, net
Income before income tax and share of results of equity investees
Income tax expenses
Share of results of equity investees
Net income
Net loss attributable to noncontrolling interests
Net income attributable to Alibaba Group Holding Limited
Accretion of mezzanine equity
Net income attributable to ordinary shareholders
2018
%
Year ended
March 31,
2019
%
(as percentage of
revenue)
2020
%
86
5
8
1
100
(43)
(9)
(11)
(6)
(3)
—
28
12
(1)
1
40
(7)
(8)
25
1
26
—
26
86
7
6
1
100
(55)
(10)
(11)
(6)
(3)
—
15
12
(1)
—
26
(5)
—
21
2
23
—
23
86
8
5
1
100
(55)
(9)
(10)
(5)
(3)
—
18
15
(1)
1
33
(4)
(1)
28
1
29
—
29
Segment Information for Fiscal Years 2018, 2019 and 2020
The table below sets forth certain financial information of our operating segments for the periods indicated:
Year ended March 31, 2020
Digital media Innovation
Core
commerce
RMB
Cloud
computing
RMB
and
entertainment
RMB
(in millions, except percentages)
initiatives
and others Unallocated(1)
RMB
RMB
Consolidated
US$
RMB
Revenue
Income (loss)
from operations
Add: Share-based
compensation
expense
Add:
Amortization
and impairment
of intangible
assets
Add: Impairment
of goodwill
Adjusted EBITA
Adjusted EBITA
436,104
40,016
26,948
6,643
—
509,711 71,985
138,631
(7,016)
(14,937)
(12,951)
(12,297)
91,430 12,912
15,427
5,577
2,444
4,050
4,244
31,742
4,483
11,742
25
1,377
86
158
13,388
1,891
—
165,800
—
(1,414)
—
(11,116)
—
(8,815)
576
(7,319)
576
81
137,136 19,367
margin
38%
(4)%
(41)%
(133)%
27%
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Year ended March 31, 2019
Digital media Innovation
Core
commerce
RMB
Cloud
computing
RMB
and
entertainment
RMB
initiatives
and others Unallocated(1) Consolidated
RMB
RMB
RMB
(in millions, except percentages)
323,400
24,702
24,077
4,665
—
376,844
Revenue
Income (loss) from
operations
109,312
(5,508)
(20,046)
(11,795)
(14,879)
57,084
Add: Share-based
compensation
expense
Add: Amortization
17,694
4,332
2,988
5,774
6,703
37,491
of intangible assets
9,161
18
1,262
50
236
10,727
Add: Settlement of
U.S. federal class
action lawsuit(2)
Adjusted EBITA
Adjusted EBITA
margin
Revenue
Income (loss)
from operations
Add: Share-based
compensation
expense
Add:
Amortization of
intangible assets
Add: Impairment
of goodwill
Adjusted EBITA
Adjusted EBITA
—
136,167
—
(1,158)
—
(15,796)
—
(5,971)
1,679
(6,261)
1,679
106,981
42%
(5)%
(66)%
(128)%
28%
Year ended March 31, 2018
Digital media Innovation
Core
commerce
RMB
Cloud
computing
RMB
and
entertainment
RMB
initiatives and
others
RMB
Unallocated(1) Consolidated
RMB
RMB
(in millions, except percentages)
214,020
13,390
19,564
3,292
—
250,266
102,743
(3,085)
(14,140)
(6,901)
(9,303)
69,314
8,466
2,274
2,142
3,707
3,486
20,075
2,891
12
3,693
198
326
7,120
—
114,100
—
(799)
—
(8,305)
—
(2,996)
494
(4,997)
494
97,003
margin
53%
(6)%
(42)%
(91)%
39%
(1)
(2)
Unallocated expenses are primarily related to corporate administrative costs and other miscellaneous items that are not
allocated to individual segments.
For a description of the relevant U.S. federal class action lawsuit and settlement, see “Item 8. Financial Information —
A. Consolidated Statements and Other Financial Information — Legal and Administrative Proceedings.”
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Comparison of Fiscal Years 2019 and 2020
Revenue
Core commerce:
China commerce retail
China commerce wholesale
International commerce retail
International commerce wholesale
Cainiao logistics services
Local consumer services
Others
Total core commerce
Cloud computing
Digital media and entertainment
Innovation initiatives and others
Total revenue
Year ended March 31,
2019
2020
RMB RMB US$
% Change
(in millions, except percentages)
247,615
9,988
19,558
8,167
14,885
18,058
5,129
323,400
24,702
24,077
4,665
376,844
332,750
12,427
24,323
9,594
22,233
25,440
9,337
436,104
40,016
26,948
6,643
509,711
46,993
1,755
3,435
1,355
3,140
3,593
1,319
61,590
5,651
3,806
938
71,985
34%
24%
24%
17%
49%
41%
82%
35%
62%
12%
42%
35%
Total revenue increased by 35% from RMB376,844 million in fiscal year 2019 to RMB509,711 million (US$71,985
million) in fiscal year 2020. The increase was mainly driven by the robust revenue growth of our China commerce retail
business and cloud computing.
Core commerce segment
China commerce retail
Revenue
China commerce retail business
Customer management
Commission
Others(1)
Total
Year ended March 31,
2019
2020
RMB RMB US$
% Change
(in millions, except percentages)
145,684
61,847
40,084
247,615
175,396
71,086
86,268
332,750
24,771
10,039
12,183
46,993
20%
15%
115%
34%
(1)
“Others” revenue under China commerce retail business is primarily generated by our New Retail and direct sales businesses,
comprising mainly Freshippo, Tmall Supermarket, direct import and Intime.
Revenue from our China commerce retail business in fiscal year 2020 was RMB332,750 million (US$46,993 million), an
increase of 34% compared to RMB247,615 million in fiscal year 2019. Revenue from our China retail marketplaces
continued to see strong growth. Combined customer management and commission revenues grew 19% year-over-year,
which represents an increase of 20% in customer management revenue and an increase of 15% in commission revenue.
The growth of customer management revenue was primarily the result of an increase in the volume of paid clicks and an
increase in the average unit price per click.
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The growth of commission revenue was primarily due to strong 23% year-over-year growth of Tmall online physical
goods GMV, excluding unpaid orders. Commission revenue did not grow in proportion to the growth of Tmall online
physical goods GMV (excluding unpaid orders) primarily because of the revenue mix shift within Tmall Supermarket
from commission-based revenue towards direct sales, which is classified as “Others” revenue under China commerce
retail business, and also because more merchants under our merchant incentive program achieved annual GMV targets
and received preferential commission rates.
“Others” revenue in fiscal year 2020 was RMB86,268 million (US$12,183 million), a significant increase compared to
RMB40,084 million in fiscal year 2019, primarily driven by contributions from direct sales businesses, including Tmall
Supermarket and Freshippo, as well as our consolidation of Kaola starting in September 2019.
We expect that the proportion of revenue of our direct sales businesses will continue to increase as we further implement
our New Retail strategy.
China commerce wholesale
Revenue from our China commerce wholesale business in fiscal year 2020 was RMB12,427 million (US$1,755 million),
an increase of 24% compared to RMB9,988 million in fiscal year 2019. The increase was primarily due to an increase in
average revenue from paying members on 1688.com, our domestic wholesale marketplace, as well as an increase in
revenue from Lingshoutong, a digital sourcing platform that connects FMCG brand manufacturers and their distributors
directly to local mom-and-pop stores in China.
International commerce retail
Revenue from our international commerce retail business in fiscal year 2020 was RMB24,323 million (US$3,435
million), an increase of 24% compared to RMB19,558 million in fiscal year 2019. The increase was primarily due to an
increase in revenue from Lazada and Trendyol (which we consolidated in July 2018), as well as an increase in revenue
from AliExpress.
International commerce wholesale
Revenue from our international commerce wholesale business in fiscal year 2020 was RMB9,594 million (US$1,355
million), an increase of 17% compared to RMB8,167 million in fiscal year 2019. The increase was primarily due to an
increase in the number of paying members on Alibaba.com, our global wholesale marketplace.
Cainiao logistics services
Revenue from Cainiao Network’s logistics services, which represents revenue from its domestic and international one-
stop-shop logistics services and supply chain management solutions, after elimination of inter-company transactions, was
RMB22,233 million (US$3,140 million) in fiscal year 2020, an increase of 49% compared to RMB14,885 million in
fiscal year 2019, primarily due to the increase in the volume of orders fulfilled from our fast growing cross-border and
international commerce retail businesses.
Local consumer services
Revenue from local consumer services, which primarily represents platform commissions, fees from provision of
delivery services and other services provided by our on-demand delivery and local services platform Ele.me, was
RMB25,440 million (US$3,593 million) in fiscal year 2020, an increase of 41% compared to RMB18,058 million in
fiscal year 2019, primarily due to an increase in volume of orders delivered and an increase in average order value.
Cloud computing segment
Revenue from our cloud computing business in fiscal year 2020 was RMB40,016 million (US$5,651 million), an increase
of 62% compared to RMB24,702 million in fiscal year 2019, primarily driven by increased revenue contributions from
both our public cloud and hybrid cloud businesses.
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Digital media and entertainment segment
Revenue from our digital media and entertainment business in fiscal year 2020 was RMB26,948 million (US$3,806
million), an increase of 12% compared to RMB24,077 million in fiscal year 2019. The increase was primarily due to our
consolidation of Alibaba Pictures starting in March 2019.
Innovation initiatives and others segment
Revenue from innovation initiatives and others in fiscal year 2020 was RMB6,643 million (US$938 million), an increase
of 42% compared to RMB4,665 million in fiscal year 2019. The increase was primarily due to an increase in revenue
from online games and other business initiatives.
Cost of Revenue
Cost of revenue
Percentage of revenue
Share-based compensation expense included in cost of
revenue
Percentage of revenue
Cost of revenue excluding share-based compensation
expense
Percentage of revenue
Year ended March 31,
2019
2020
RMB RMB US$
% Change
(in millions, except percentages)
206,929
282,367
39,878
36%
55%
55%
8,915
2%
7,322
1%
1,034
(18)%
198,014
275,045
38,844
39%
53%
54%
Our cost of revenue increased by 36% from RMB206,929 million in fiscal year 2019 to RMB282,367 million
(US$39,878 million) in fiscal year 2020. The increase was primarily due to an increase of RMB42,954 million in cost of
inventory in relation to our New Retail and direct sales businesses, an increase of RMB15,994 million in logistics costs in
relation to the fulfillment and delivery services for our retail marketplaces and local consumer service businesses, and an
increase of RMB8,302 million in depreciation expenses and bandwidth and co-location fees as a result of our investments
in our cloud computing and core commerce businesses. Without the effect of share-based compensation expense, cost of
revenue as a percentage of revenue would have increased from 53% in fiscal year 2019 to 54% in fiscal year 2020. The
increase was primarily due to an increase in revenue mix shift towards direct sales businesses such as Tmall Supermarket
and New Retail, which resulted in increased cost of inventory, as well as our consolidation of Kaola, partly offset by a
decrease in content cost by Youku and efficiency gains from our technology and infrastructure. As we continue to invest
in New Retail and direct sales businesses, globalization, local consumer service, user acquisition, user experience and
infrastructure, we expect our cost of revenue will increase in absolute dollar amounts and will likely increase as a
percentage of revenue.
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Product Development Expenses
Product development expenses
Percentage of revenue
Share-based compensation expense included in product
development expenses
Percentage of revenue
Product development expenses excluding share-based
compensation expense
Percentage of revenue
Year ended March 31,
2019
2020
RMB RMB US$ % Change
(in millions, except percentages)
37,435
10%
15,378
4%
22,057
6%
43,080
6,085
15%
9%
13,654
1,928
(11)%
3%
29,426
4,157
33%
6%
Our product development expenses increased by 15% from RMB37,435 million in fiscal year 2019 to RMB43,080
million (US$6,085 million) in fiscal year 2020. The increase was primarily due to an increase in payroll and benefits
expenses. Without the effect of share-based compensation expense, product development expenses as a percentage of
revenue would have remained stable at 6% in fiscal year 2020 and 2019. We expect our product development expenses
will increase in absolute amounts and may increase as a percentage of revenue, as we increase our investments in
technology, research and development.
Sales and Marketing Expenses
Sales and marketing expenses
Percentage of revenue
Share-based compensation expense included in sales and
marketing expenses
Percentage of revenue
Sales and marketing expenses excluding share-based
compensation expense
Percentage of revenue
Year ended March 31,
2019
2020
RMB RMB US$ % Change
(in millions, except percentages)
39,780
11%
50,673
10%
7,156
27%
4,411
2%
3,830
1%
541
(13)%
35,369
9%
46,843
9%
6,615
32%
Our sales and marketing expenses increased by 27% from RMB39,780 million in fiscal year 2019 to RMB50,673 million
(US$7,156 million) in fiscal year 2020. The increase was primarily due to an increase in marketing and promotional
spending for user acquisition that led to the increase in annual active consumers and MAUs in fiscal year 2020. Without
the effect of share-based compensation expense, sales and marketing expenses as a percentage of revenue would have
remained stable at 9% in fiscal year 2020 and 2019. We expect our sales and marketing expenses will increase in absolute
amounts and may increase as a percentage of revenue as we continue to invest in marketing and promotion.
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General and Administrative Expenses
General and administrative expenses
Percentage of revenue
Share-based compensation expense included in general
and administrative expenses
Percentage of revenue
General and administrative excluding share-based
compensation expense
Percentage of revenue
Year ended March 31,
2019
2020
RMB RMB US$ % Change
(in millions, except percentages)
24,889
28,197
3,982
13%
6%
5%
8,787
2%
6,936
1%
980
(21)%
16,102
4%
21,261
4%
3,002
32%
Our general and administrative expenses increased by 13% from RMB24,889 million in fiscal year 2019 to RMB28,197
million (US$3,982 million) in fiscal year 2020. The increase was primarily due to an increase in provision for doubtful
debts on receivables and an increase in payroll and benefits expenses, partly offset by settlement of a U.S. federal class
action lawsuit of US$250 million in fiscal year 2019. Without the effect of share-based compensation expense, general
and administrative expenses as a percentage of revenue would have remained stable at 4% in fiscal year 2020 and 2019.
Amortization and impairment of Intangible Assets
Amortization and impairment of intangible assets
Percentage of revenue
Year ended March 31,
2019
2020
RMB RMB US$ % Change
(in millions, except percentages)
10,727
13,388
1,891
25%
3%
3%
Amortization and impairment of intangible assets increased by 25% from RMB10,727 million in fiscal year 2019 to
RMB13,388 million (US$1,891 million) in fiscal year 2020. This increase was primarily due to the full year impact of the
amortization of intangible assets acquired from business combinations of Koubei in December 2018. As we consolidate
newly acquired businesses, we expect that our amortization of intangible assets will increase in the future.
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Income from Operations and Operating Margin
Income from operations
Percentage of revenue
Share-based compensation expense included in income
from operations
Percentage of revenue
Settlement of U.S. federal class action lawsuit(1)
Percentage of revenue
Income from operations excluding share-based
compensation expense and settlement of U.S. federal
class action lawsuit(1)
Percentage of revenue
Year ended March 31,
2019
2020
RMB RMB US$
% Change
(in millions, except percentages)
57,084
15%
91,430
18%
12,912
60%
37,491
10%
1,679
0%
96,254
25%
31,742
4,483
(15)%
6%
—
—
—
N/A
123,172
17,395
28%
24%
(1)
For a description of the relevant U.S. federal class action lawsuit and settlement, see “Item 8. Financial Information — A.
Consolidated Statements and Other Financial Information — Legal and Administrative Proceedings.”
Our income from operations increased by 60% from RMB57,084 million, or 15% of revenue, in fiscal year 2019 to
RMB91,430 million (US$12,912 million), or 18% of revenue, in fiscal year 2020. Without the effect of share-based
compensation expense and settlement of the U.S. federal class action lawsuit, our income from operations would have
increased by 28% from RMB96,254 million, or 25% of revenue in fiscal year 2019 to RMB123,172 million (US$17,395
million), or 24% of revenue in fiscal year 2020.
Adjusted EBITA and adjusted EBITA margin
Adjusted EBITA and adjusted EBITA margin by segments are set forth in the table below. See the section entitled “—
Segment Information for Fiscal Years 2018, 2019 and 2020” above for a reconciliation of income from operations to
adjusted EBITA.
Year ended March 31,
2019
% of Segment
Revenue
RMB
US$
RMB
(in millions, except percentages)
2020
% of Segment
Revenue
Core commerce
Cloud computing
Digital media and entertainment
Innovation initiatives and others
136,167
(1,158)
(15,796)
(5,971)
42% 165,800
(5)%
(1,414)
(66)% (11,116)
(8,815)
(128)%
23,415
(199)
(1,570)
(1,245)
38%
(4)%
(41)%
(133)%
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Core commerce segment
Adjusted EBITA increased by 22% to RMB165,800 million (US$23,415 million) in fiscal year 2020, compared to
RMB136,167 million in fiscal year 2019, primarily due to an increase in marketplace-based core commerce adjusted
EBITA to RMB192,771 million (US$27,224 million). Adjusted EBITA margin decreased from 42% in fiscal year 2019
to 38% in fiscal year 2020 primarily due to a continuing revenue mix shift towards self-operated New Retail and direct
sales businesses, where revenue is recorded on a gross basis, including the cost of inventory, as well as the effects of our
consolidation of Kaola. We expect that our core commerce adjusted EBITA margin will continue to be affected by the
pace of our investments in new businesses and by a continuing revenue mix shift to self-operated New Retail and direct
sales businesses.
Cloud computing segment
Adjusted EBITA in fiscal year 2020 was a loss of RMB1,414 million (US$199 million), compared to a loss of
RMB1,158 million in fiscal year 2019. Adjusted EBITA margin improved to negative 4% in fiscal year 2020 from
negative 5% in fiscal year 2019.
Digital media and entertainment segment
Adjusted EBITA in fiscal year 2020 was a loss of RMB11,116 million (US$1,570 million), compared to a loss of
RMB15,796 million in fiscal year 2019. Adjusted EBITA margin improved to negative 41% in fiscal year 2020 from
negative 66% in fiscal year 2019, primarily due to reduced content cost by Youku as a result of our more disciplined
content spending policy.
Innovation initiatives and others segment
Adjusted EBITA in fiscal year 2020 was a loss of RMB8,815 million (US$1,245 million), compared to a loss of
RMB5,971 million in fiscal year 2019. The increase in adjusted EBITA loss was primarily due to the increased loss from
DingTalk and other new business initiatives, as well as our investments in technological research and innovation.
Interest and Investment Income, Net
Our interest and investment income, net, increased from RMB44,106 million in fiscal year 2019 to RMB72,956 million
(US$10,303 million) in fiscal year 2020. In fiscal year 2020, we recognized one-time gains of RMB71.6 billion (US$10.1
billion) and RMB10.3 billion (US$1.5 billion) in relation to the receipt of the 33% equity interest in Ant Group and our
deconsolidation of the AliExpress Russia businesses, respectively. In fiscal year 2019, we recognized one-time gains of
RMB22.0 billion and RMB5.8 billion arising from the revaluation of our previously held equity interest in Koubei and
Alibaba Pictures when we obtained control over these businesses in December 2018 and March 2019, respectively. The
increase in one-time gains in fiscal year 2020 was partly offset by net losses arising from changes in the fair values of our
equity investments, compared to net gains recorded on such fair value changes in fiscal year 2019.
The above-mentioned gains and losses were excluded from our non-GAAP net income.
Interest Expense
Our interest expense was RMB5,180 million (US$731 million) in fiscal year 2020, compared to RMB5,190 million in
fiscal year 2019.
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Other Income, Net
Our other income, net in fiscal year 2020 was RMB7,439 million (US$1,051 million), compared to RMB221 million in
fiscal year 2019. The increase was primarily due to an increase in royalty fees and software technology service fees from
Ant Group and a decrease in exchange loss. Royalty fees and software technology service fees under our profit sharing
arrangement with Ant Group amounted to RMB3,835 million (US$542 million) in fiscal year 2020, as compared to
RMB517 million in fiscal year 2019. The profit sharing arrangement was terminated in September 2019 upon our receipt
of the 33% equity interest in Ant Group.
Income Tax Expenses
Our income tax expenses increased by 24% from RMB16,553 million in fiscal year 2019 to RMB20,562 million
(US$2,904 million) in fiscal year 2020. Our effective tax rate decreased to 12% in fiscal year 2020 from 17% in fiscal
year 2019. Excluding the one-time gain in relation to the receipt of the 33% equity interest in Ant Group, share-based
compensation expense, revaluation and disposal gains/losses of investments, impairment of investments and goodwill, as
well as the deferred tax effects arising from our share of results of equity investees, our effective tax rate would have
remained stable at 17% in fiscal year 2020 and 2019.
Share of Results of Equity Investees
Share of results of equity investees in fiscal year 2020 was a loss of RMB5,733 million (US$810 million), compared to a
profit of RMB566 million in fiscal year 2019. We record our share of results of equity investees one quarter in arrears.
Share of results of equity investees in fiscal years 2019 and 2020 consisted of the following:
Share of profit of equity investees:
Ant Group (1)
Others
Impairment loss
Dilution loss
Others(2)
Total
Year ended March 31,
2019
2020
RMB RMB US$
(in millions)
—
2,997
(493)
(185)
(1,753)
566
5,324
3,332
(11,824)
(108)
(2,457)
(5,733)
752
470
(1,670)
(15)
(347)
(810)
(1) We received the 33% equity interest in Ant Group on September 23, 2019. Similar to other equity investees, we record our
share of results of Ant Group one quarter in arrears. As such, the share of profit of Ant Group in fiscal year 2020 reflects our
share of profit of Ant Group for the period from the day following receipt of the equity interest to the end of the quarter on
December 31, 2019.
(2)
Others mainly include amortization of intangible assets of equity investees and share-based compensation expense.
The year-over-year decrease in share of results of equity investees was mainly due to impairment loss of RMB11,824
million (US$1,670 million) with respect to certain equity investees as a result of their prolonged decline in market values
against our carrying values, partly offset by our share of profits in Ant Group. The COVID-19 pandemic has caused
widespread disruptions to the economy and the businesses of our equity investees may be adversely affected, which could
negatively impact our share of results of equity investees in future periods.
Net Income
As a result of the foregoing, our net income increased by 75% from RMB80,234 million in fiscal year 2019 to
RMB140,350 million (US$19,821 million) in fiscal year 2020.
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Comparison of Fiscal Years 2018 and 2019
For a discussion of our results of operations for the fiscal year ended March 31, 2018 compared with the fiscal year ended
March 31, 2019, see “Item 5. Operating and Financial Review and Prospects — A. Operating Results — Comparison of
Fiscal Years 2018 and 2019” of our annual report on Form 20-F for the fiscal year ended March 31, 2019, filed with the
SEC on June 5, 2019.
B. Liquidity and Capital Resources
We fund our operations and strategic investments from cash generated from our operations and through debt and equity
financing. We generated RMB125,805 million, RMB150,975 million and RMB180,607 million (US$25,507 million) of
cash from operating activities for fiscal years 2018, 2019 and 2020, respectively. As of March 31, 2020, we had cash and
cash equivalents and short-term investments of RMB330,503 million (US$46,676 million) and RMB28,478 million
(US$4,022 million), respectively. Short-term investments consist primarily of investments in fixed deposits with
maturities between three months and one year and investments in money market funds or other investments whereby we
have the intention to redeem within one year.
In November 2014, we issued unsecured senior notes, including floating rate and fixed rate notes, with varying maturities
for an aggregate principal amount of US$8.0 billion. Interest on the unsecured senior notes is payable in arrears, quarterly
for the floating rate notes and semi-annually for the fixed-rate notes. We used the proceeds from the issuance of the
unsecured senior notes to refinance our previous syndicated loan arrangements in the same amount. We are not subject to
any financial covenant or other significant operating covenants under the unsecured senior notes. See note 21 to our
audited consolidated financial statements included in this annual report for further information.
In March 2016, we signed a five-year US$3.0 billion syndicated loan agreement with a group of eight lead arrangers,
which we subsequently drew down in April 2016. The loan was upsized from US$3.0 billion to US$4.0 billion in
May 2016 through a general syndication and the upsized portion was subsequently drawn down in August 2016. The loan
had a five-year bullet maturity and was priced at 110 basis points over LIBOR. In May 2019, we amended the pricing of
the loans to 85 basis points over LIBOR and extended the maturity to May 2024. The use of proceeds of the loan is for
general corporate and working capital purposes (including funding our acquisitions).
In April 2017, we entered into a revolving credit facility agreement with certain financial institutions for an amount of
US$5.15 billion, which we have not yet drawn down. The interest rate for this credit facility is calculated based on
LIBOR plus 95 basis points. This loan facility is reserved for future general corporate and working capital purposes
(including funding our acquisitions).
In November 2017 and November 2019, we repaid US$3.55 billion of our US$8.0 billion unsecured senior notes that
became due. In December 2017, we issued an additional aggregate of US$7.0 billion unsecured senior notes.
As of March 31, 2020, we also had other bank borrowings of RMB16,603 million (US$2,345 million), primarily used for
our capital expenditures in relation to the construction of corporate campuses, office facilities and infrastructure for
logistics business, and for other working capital purposes. See note 20 to our audited consolidated financial statements
included in this annual report for further information.
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We believe that our current levels of cash and cash flows from operations will be sufficient to meet our anticipated cash
needs for at least the next twelve months. However, we may need additional cash resources in the future if we find and
wish to pursue opportunities for investment, acquisition, strategic cooperation or other similar actions, which may include
investing in technology, infrastructure, including data management and analytics solutions, or related talent. If we
determine that our cash requirements exceed our amounts of cash on hand or if we decide to further optimize our capital
structure, we may seek to issue additional debt or equity securities or obtain credit facilities or other sources of funding.
The following table sets out a summary of our cash flows for the periods indicated:
Year ended March 31,
2018
2019
2020
RMB RMB RMB US$
(in millions)
Net cash provided by operating activities(1)
Net cash used in investing activities(1)
Net cash provided by (used in) financing activities
125,805
(83,764)
20,359
150,975
(151,060)
(7,392)
180,607
(108,072)
70,853
25,507
(15,263)
10,006
(1) We adopted ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash,” beginning in the first quarter of fiscal
year 2019. As a result of adopting this new accounting update, we retrospectively adjusted the consolidated statements of
cash flows to include restricted cash and escrow receivables in cash and cash equivalents when reconciling the beginning-of-
period and end-of-period total amounts shown on the consolidated statements of cash flows. The impact of our retrospective
reclassification on cash flows from operating activities for the year ended March 31, 2018 was an increase of RMB634
million and the impact of our retrospective reclassification on cash flows from investing activities for the year ended March
31, 2018 was an increase of RMB126 million.
Cash Flows from Operating Activities
Cash provided by operating activities in fiscal year 2020 was RMB180,607 million (US$25,507 million) and primarily
consisted of net income of RMB140,350 million (US$19,821 million), as adjusted for non-cash items and the effects of
changes in working capital and other activities. Adjustments for non-cash items primarily included gain in relation to the
receipt of the 33% equity interest in Ant Group of RMB71,561 million (US$10,106 million), share-based compensation
expense of RMB31,742 million (US$4,483 million), amortization of intangible assets and licensed copyrights of
RMB21,904 million (US$3,093 million) and depreciation of property and equipment, and operating lease cost relating to
land use rights of RMB20,523 million (US$2,899 million). Changes in working capital and other activities primarily
consisted of an increase of RMB56,690 million (US$8,006 million) in accrued expenses, accounts payable and other
liabilities mainly as a result of the growth of our business as well as the consumer protection fund deposits received from
merchants on our China retail marketplaces, and an increase of RMB7,914 million (US$1,118 million) in deferred
revenue and customer advances, partially offset by an increase of RMB43,386 million (US$6,128 million) in
prepayments, receivables and other assets, mainly as a result of the growth of our business. The increase in accrued
expenses, accounts payable and other liabilities and prepayments, receivables and other assets were also attributable to
the adoption of new lease standard which resulted in the recognition of operating lease liabilities and right-of-use assets
on the balance sheet.
Cash provided by operating activities in fiscal year 2019 was RMB150,975 million and primarily consisted of net income
of RMB80,234 million, as adjusted for non-cash items and the effects of changes in working capital and other activities.
Adjustments for non-cash items primarily included share-based compensation expense of RMB37,491 million,
revaluation gain on previously held equity interests of RMB30,187 million, amortization of intangible assets and licensed
copyrights of RMB22,118 million, realized and unrealized gain of RMB16,082 million related to investment securities
and depreciation of property and equipment, and operating lease cost relating to land use rights of RMB14,962 million.
Changes in working capital and other activities primarily consisted of an increase of RMB24,355 million in accrued
expenses, accounts payable and other liabilities as a result of the growth of our business and an increase of RMB8,639
million in deferred revenue and customer advances, partially offset by an increase of RMB10,185 million in
prepayments, receivables and other assets.
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Cash Flows from Investing Activities
Cash used in investing activities was RMB108,072 million (US$15,263 million) in fiscal year 2020 and was primarily
attributable to RMB56,873 million (US$8,032 million) in acquisition of investment securities and equity investments
mainly held for strategic purposes, including Meinian Onehealth Healthcare, Red Star Macalline, STO Express and China
TransInfo, and cash paid for business combinations, net of cash acquired, including Kaola, capital expenditures and
acquisition of licensed copyrights and other intangible assets of RMB45,386 million (US$6,410 million) primarily in
connection with the purchase of computer equipment and licensed copyrights, as well as the continued expansion of our
corporate campuses and our investments in infrastructure of logistics and New Retail businesses and data centers, an
increase in short-term investments by RMB24,907 million (US$3,518 million), partially offset by proceeds from disposal
of subsidiaries, equity investees and investment securities of RMB18,769 million (US$2,651 million). In addition, in
connection with the receipt of the 33% equity interest in Ant Group, the net cash impact is minimal because the
consideration paid was fully funded by the amount we received for the transfer of certain intellectual property and assets
to Ant Group.
Cash used in investing activities was RMB151,060 million in fiscal year 2019 and was primarily attributable to
RMB119,766 million in acquisition of investment securities and equity investments mainly held for strategic purposes,
including Focus Media and ZTO Express, and cash paid for business combinations, net of cash acquired, including
Ele.me, capital expenditures and acquisition of licensed copyrights and other intangible assets of RMB49,643 million
primarily in connection with the purchase of computer equipment and licensed copyrights, as well as our investments in
data centers and infrastructure for logistics and New Retail businesses, partially offset by proceeds from disposal of
subsidiaries, equity investees and investment securities of RMB10,329 million.
Cash Flows from Financing Activities
Cash provided by financing activities was RMB70,853 million (US$10,006 million) in fiscal year 2020, and was
primarily attributable to net proceeds of RMB90,546 million (US$12,788 million) from the issuance of shares in
connection with our global offering and secondary listing in Hong Kong and cash injection from noncontrolling interests
of RMB11,049 million (US$1,560 million), partly offset by repayment of unsecured senior notes of US$2,250 million
and cash used to acquire additional shares of Cainiao Network from a third party.
Cash used in financing activities was RMB7,392 million in fiscal year 2019, and was primarily attributable to cash used
in share repurchase of RMB10,872 million and net repayment of borrowings of RMB4,231 million, partly offset by cash
injection from noncontrolling interests of RMB8,706 million.
Capital Expenditures
Our capital expenditures have been incurred primarily in relation to (1) the acquisition of computer equipment and
construction of data centers relating to our cloud computing business and the operation of our mobile platforms and
websites; (2) the acquisition of land use rights and construction of corporate campuses and office facilities and (3)
infrastructure for logistics and New Retail businesses. In fiscal years 2018, 2019 and 2020, our capital expenditures
totaled RMB19,628 million, RMB35,482 million and RMB32,550 million (US$4,597 million), respectively. In addition,
our acquisitions of licensed copyrights and other intangible assets in fiscal years 2018, 2019 and 2020 were RMB10,208
million, RMB14,161 million and RMB12,836 million (US$1,813 million), respectively.
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Holding Company Structure
We are a holding company with no operation other than ownership of operating subsidiaries in mainland China, Hong
Kong S.A.R., and elsewhere that own and operate our marketplaces and other businesses as well as a portfolio of
intellectual property rights. As a result, we rely on dividends and other distributions paid by our operating subsidiaries,
including funds to pay dividends to our shareholders or to service our outstanding debts. If our operating subsidiaries
incur additional debt on their own behalf in the future, the instruments governing the debt may restrict the ability of our
operating subsidiaries to pay dividends or make other distributions to us. In addition, applicable PRC law permits
payment of dividends to us by our operating subsidiaries in China only out of their retained earnings, if any, determined
in accordance with PRC accounting standards and regulations. Moreover, our operating subsidiaries in China are also
required to set aside a portion of their net income, if any, each year to fund general reserves for appropriations until this
reserve has reached 50% of the related subsidiary’s registered capital. These reserves are not distributable as cash
dividends. In addition, registered share capital and capital reserve accounts are also restricted from distribution. As of
March 31, 2020, these restricted net assets totaled RMB114.7 billion (US$16.2 billion). See note 23 to our audited
consolidated financial statements included in this annual report.
Our holding company structure differs from some of our peers in that we hold our material assets and operations, except
for ICP and other licenses for regulated activities as well as certain equity investments in restricted businesses, in our
wholly-owned entities and most of our revenue is generated directly by our wholly-owned entities. As revenue is
generated directly by our wholly-owned entities, our wholly-owned entities directly capture the profits and associated
cash flow from operations, without having to rely on contractual arrangements to transfer cash flow from the variable
interest entities to our wholly-owned entities. In fiscal years 2018, 2019 and 2020, the significant majority of our
revenues were generated by our wholly owned-entities in China. See “Item 4. Information on the Company — C.
Organizational Structure” for a description of these contractual arrangements and the structure of our company.
Inflation
Inflation in China has not materially impacted our results of operations in recent years. According to the National Bureau
of Statistics of China, the year-over-year increase in the consumer price index in calendar years 2017, 2018 and 2019 was
1.6%, 2.1% and 2.9%, respectively. Although we have not been materially affected by inflation in the past, we can
provide no assurance that we will not be affected in the future by higher inflation rates in China.
Critical Accounting Policies and Estimates
Our significant accounting policies are set forth in note 2 to our audited consolidated financial statements included in this
annual report. The preparation of our consolidated financial statements requires our management to make estimates and
assumptions that affect the amounts reported in the consolidated financial statements. Our management periodically re-
evaluates these estimates and assumptions based on historical experience and other factors, including expectations of
future events that they believe to be reasonable under the circumstances. We considered the economic implications of the
COVID-19 pandemic on our significant judgments and estimates. Given the impact and other unforeseen effects on the
global economy from the COVID-19 pandemic, these estimates required increased judgment, and actual results may
differ significantly from these estimates and assumptions. We have identified the following accounting policies as the
most critical to an understanding of our financial position and results of operations, because the application of these
policies requires significant and complex management estimates, assumptions and judgment, and the reporting of
materially different amounts could result if different estimates or assumptions were used or different judgments were
made.
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Principles of Consolidation
A subsidiary is an entity in which (i) we directly or indirectly control more than 50% of the voting power; or (ii) we have
the power to appoint or remove the majority of the members of the board of directors or to cast a majority of votes at the
meetings of the board of directors or to govern the financial and operating policies of the investee pursuant to a statute or
under an agreement among the shareholders or equity holders. However, there are situations in which consolidation is
required even though these usual conditions of consolidation do not apply. Generally, this occurs when an entity holds an
interest in another business enterprise that was achieved through arrangements that do not involve voting interests, which
results in a disproportionate relationship between the entity’s voting interests in, and its exposure to the economic risks
and potential rewards of, the other business enterprise. This disproportionate relationship results in what is known as a
variable interest, and the entity in which we have the variable interest is referred to as a variable interest entity. We
consolidate a variable interest entity if we are determined to be the primary beneficiary of the variable interest entity. The
primary beneficiary has both (i) the power to direct the activities of the variable interest entity that most significantly
impact the entity’s economic performance, and (ii) the obligation to absorb losses or the right to receive benefits from the
variable interest entity that could potentially be significant to the variable interest entity.
For the entities that we invested in or are associated with but in which the usual conditions of consolidation mentioned
above do not apply, we continuously re-assess whether these entities possess any of the characteristics of a variable
interest entity and whether we are the primary beneficiary.
We consolidate our subsidiaries and the variable interest entities of which we are the primary beneficiary. On a periodic
basis, we reconsider the initial determination of whether a legal entity is a consolidated entity upon the occurrence of
certain events provided in Accounting Standards Codification (“ASC”) 810. We also continuously reconsider whether we
are the primary beneficiary of our affiliated entities as facts and circumstances change.
Recognition of Revenue
Revenue is principally comprised of customer management revenue, commissions on transactions, membership fees,
logistics services revenue, cloud computing services revenue, sales of goods and other revenue. Revenue represents the
amount of consideration we are entitled to upon the transfer of promised goods or services in the ordinary course of our
activities and is recorded net of VAT. Consistent with the criteria of ASC 606 “Revenue from Contracts with
Customers,” we recognize revenue when performance obligations are satisfied by transferring control of a promised good
or service to a customer. For performance obligations that are satisfied at a point in time, we also consider the following
indicators to assess whether control of a promised good or service is transferred to the customer: (i) right to payment,
(ii) legal title, (iii) physical possession, (iv) significant risks and rewards of ownership and (v) acceptance of the good or
service. For performance obligations satisfied over time, we recognize revenue over time by measuring the progress
toward complete satisfaction of a performance obligation.
The application of various accounting principles related to the measurement and recognition of revenue requires us to
make judgments and estimates. Specifically, complex arrangements with non-standard terms and conditions may require
relevant contract interpretation to determine the appropriate accounting treatment, including whether the promised goods
and services specified in a multiple element arrangement should be treated as separate performance obligations. Other
significant judgments include determining whether we are acting as the principal or the agent from an accounting
perspective in a transaction.
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For multiple element arrangements with customers, which primarily relate to the sale of proprietary cloud services
packages, which include hardware, software licenses, software installation services and maintenance services, significant
judgment is required to determine whether each good and service element is a distinct performance obligation and is
separately accounted for. To determine whether a performance obligation is distinct, we consider its level of integration,
customization, interdependence and interrelation with other elements within the arrangement. If an arrangement involves
multiple distinct performance obligations, each distinct performance obligation is separately accounted for and the total
consideration is allocated to each performance obligation based on the relative standalone selling prices at contract
inception. If directly observable standalone selling prices are not available, we need to apply significant judgment and
perform assessments on market conditions and entity-specific factors to estimate the standalone selling prices for each
element. Changes in the estimated standalone selling price may cause the amount of revenue to be recognized for each
performance obligation to differ, but the total amount of revenue to be recognized within a contract should not be
affected. We periodically re-assess the standalone selling price of the elements as a result of changes in market
conditions. Revenue recognition for P4P marketing service, in-feed marketing service and display marketing on our
China retail marketplaces does not require us to exercise significant judgment or estimate.
For certain arrangements, we apply significant judgment in determining whether we are acting as the principal or agent in
a transaction. We are acting as the principal if we obtain control over the goods and services before they are transferred to
customers. Generally, when we are primarily obligated in a transaction and are subject to inventory risk or have latitude
in establishing prices, or have several but not all of these indicators, we act as the principal and record revenue on a gross
basis. We act as the agent and record the net amount as revenue earned if we do not obtain control over the goods and
services before they are transferred to the customers. We record P4P marketing services revenue and display marketing
revenue generated through third-party marketing affiliate programs on a gross basis; and revenue relating to the
Taobaoke program generated through third-party marketing affiliate partners’ websites where we do not take inventory
risks on a net basis. In addition, revenue generated from certain platforms in which we operate as a principal is reported
on a gross basis.
Share-based Compensation Expense and Valuation of the Underlying Awards
Granting of share-based awards relating to our ordinary shares
We account for various types of share-based awards granted to the employees, consultants and directors of our Company,
our affiliates and/or certain other companies, such as Ant Group, in accordance with the authoritative guidance on share-
based compensation expense. Under the fair value recognition provision of this guidance and prior to April 1, 2019, the
effective date of Accounting Standards Update (“ASU”) 2018-07, compensation for share-based awards granted,
including RSUs, share options and restricted shares, was measured at the grant date, or at the future vesting dates in the
case of consultants or non-employee grantees, based on the fair value of the awards and was recognized as expense over
the requisite service period, which is generally the vesting period of the respective award, on an accelerated attribution
method. In the case of share-based awards granted to consultant or non-employees, the fair value of the unvested portion
was re-measured each period, with the resulting difference, if any, recognized as an expense during the period when the
related services are rendered. Upon the adoption of ASU 2018-07 beginning on April 1, 2019, the equity-classified share-
based awards granted to consultants or non-employees are no longer re-measured at each reporting date through the
vesting date and the accounting for these share-based awards to consultants or non-employees and employees will be
substantially aligned. Under the accelerated attribution method, each vesting installment of a graded vesting award is
treated as a separate share-based award, and accordingly each vesting installment is separately measured and attributed to
expense, resulting in accelerated recognition of share-based compensation expense.
Share-based compensation expense is recorded net of estimated forfeitures in our consolidated income statements and
accordingly is recorded only for those share-based awards that are expected to vest. We estimate the forfeiture rate based
on historical forfeitures of equity awards and adjust the rate to reflect changes when necessary. We revise our estimated
forfeiture rate if actual forfeitures significantly differ from the initial estimates.
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Determining the fair value of share-based awards requires significant judgment. The fair values of RSUs and restricted
shares are determined based on the fair value of our ordinary shares. The market price of our publicly traded ADSs is
used as an indicator of fair value for our ordinary shares.
We estimate the fair value of share options using the Black-Scholes valuation model, which requires inputs such as the
fair value of our ordinary shares, risk-free interest rate, expected dividend yield, expected life and expected volatility.
If the fair value of the underlying equity and any of the assumptions used in the Black-Scholes model changes
significantly, share-based compensation expense for future awards may differ materially compared with the awards
granted previously.
Subscription for rights or interests offered to acquire our restricted shares
Beginning in 2013, we offered selected members of the Alibaba Partnership rights or interests to acquire our restricted
shares. The fair value of the rights or interests is determined using the Black-Scholes valuation model. For the rights or
interests offered before 2016, a discount for post-vesting sales restriction was applied to arrive at the estimated value of
the restricted shares. We record share-based compensation expense equivalent to the entire fair value of these rights or
interests less the initial subscription price in the period of subscription. For the rights or interests offered since 2016, we
recognize share-based compensation expense equivalent to the entire fair value of these rights or interests over the
requisite service period.
Share-based awards relating to Ant Group
Since March 2014, Junhan has granted share-based awards linked to the valuation of Ant Group to certain of our
employees, and Ant Group has granted awards to certain of our employees since April 2018. The awards granted by
Junhan will be settled by Junhan upon disposal of these awards by the holders. The awards granted by Ant Group will be
settled by Ant Group upon vesting or exercise of these awards. Junhan and Ant Group have the right to repurchase the
vested awards (or any underlying equity for the settlement of the vested awards) granted by them, as applicable, from the
holders upon an initial public offering of Ant Group or the termination of the holders’ employment with us at a price to
be determined based on the then fair market value of Ant Group. We had no obligation to reimburse Junhan and Ant
Group for the cost associated with the awards granted during all the periods presented. In June 2020, the parties entered
into equity-based awards grant and settlement agreements pursuant to which the parties will settle with each other the
cost associated with the awards that will be granted to each other’s employees. The payment amounts will depend on the
relative values of the awards to be granted in the future.
These awards meet the definition of a financial derivative. The cost relating to these awards is recognized by us and the
related expense is recognized over the requisite service period in the consolidated income statements with a
corresponding credit to additional paid-in capital. Subsequent changes in the fair value of these awards are recorded in
the consolidated income statements. The expenses relating to the awards granted by Junhan are re-measured at the fair
value on each reporting date until their settlement dates. The expenses relating to the awards granted by Ant Group are
re-measured at the fair value on each reporting date until their vesting dates or settlement dates. See note 9(d) to our
audited consolidated financial statements included in this annual report. The fair values of the underlying equity are
primarily determined with reference to the business enterprise value, or BEV, of Ant Group which is based on the
contemporaneous valuation reports or recent financing transactions. Given that the determination of the BEV of Ant
Group requires judgments and is beyond our control, the magnitude of the related accounting impact is unpredictable and
may affect our consolidated income statements significantly.
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As of March 31, 2020, total unamortized share-based compensation expense related to our ordinary shares that we expect
to recognize was RMB27,728 million (US$3,916 million), with a weighted-average remaining requisite service period of
2.1 years. To the extent the actual forfeiture rate is different from what we have anticipated, share-based compensation
expense related to these awards will be different. Furthermore, share-based compensation expense was affected by
changes in the fair value of our shares, as certain share-based awards were granted to non-employees for which the
unvested portions of the awards were re-measured at each reporting date through the vesting dates before the adoption of
ASU 2018-07 which began on April 1, 2019. Subsequent to the receipt of 33% equity interest in Ant Group in September
2019, the share-based compensation expense related to our ordinary shares granted to employees of Ant Group is
recorded in “Share of results of equity investees” in the consolidated income statements. In addition, share-based
compensation expense will also be affected by changes in the fair value of awards granted to our employees by Junhan
and Ant Group.
See “Item 7. Major Shareholders and Related Party Transactions — B. Related Party Transactions — Agreements and
Transactions Related to Ant Group and Its Subsidiaries — Equity-based Award Arrangements.” The expenses associated
with these awards will be recognized across the functions in which the award recipients are employed and may continue
to be significant in future periods.
Recognition of Income Taxes and Deferred Tax Assets/Liabilities
We are mainly subject to income tax in China, but are also subject to taxation on profit arising in or derived from the tax
jurisdiction where our subsidiaries are domiciled and operate outside of China. Income taxes are assessed and determined
on an entity basis. There are transactions (including entitlement to preferential tax treatment and deductibility of
expenses) where the ultimate tax determination is uncertain until the final tax position is confirmed by relevant tax
authorities. In addition, we recognize liabilities for anticipated tax audit issues based on estimates of whether additional
taxes could be due. Where the final tax outcome of these matters is different from the amounts that were initially
recorded, the differences will impact the income tax and deferred tax provisions in the period in which the determination
is made.
Deferred income tax is recognized for all temporary differences, carry forward of unused tax credits and unused tax
losses, to the extent that it is probable that taxable profit will be available in the future against which the temporary
differences, the carry forward of unused tax credits and unused tax losses could be utilized. Deferred income tax is
provided in full, using the liability method. The deferred tax assets recognized are mainly related to the temporary
differences arising from amortization of licensed copyrights and accrued expenses, which are not deductible until paid
under the applicable PRC tax laws. We have also recognized deferred tax liabilities on the undistributed earnings
generated by our subsidiaries in China, which are subject to withholding taxes when they resolve to distribute dividends
to us. We have also recognized deferred tax in relation to the investment securities and certain of our equity investees. As
of March 31, 2020, we have accrued the withholding tax on substantially all of the distributable earnings of the PRC
subsidiaries, except for those undistributed earnings that we intend to invest indefinitely in the PRC. If our intent changes
or if these funds are in fact distributed outside of China, we would be required to accrue or pay the withholding tax on
some or all of these undistributed earnings and our effective tax rate would be adversely affected.
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Fair Value Determination Related to the Accounting for Business Combinations
A component of our growth strategy has been to acquire and integrate complementary businesses into our digital
economy. We complete business combinations from time to time that require us to perform purchase price allocations. In
order to recognize the fair value of assets acquired and liabilities assumed, mainly consisting of intangible assets and
goodwill, as well as the fair value of any contingent consideration to be recognized, we use valuation techniques such as
discounted cash flow analysis and ratio analysis with reference to comparable companies in similar industries under the
income approach, market approach and cost approach. Major assumptions used in determining the fair value of these
intangible assets include future growth rates and weighted average cost of capital. Most of the valuations of our acquired
businesses have been performed by independent valuation specialists under our management’s supervision. We believe
that the estimated fair value assigned to the assets acquired and liabilities assumed are based on reasonable assumptions
and estimates that market participants would use. However, these assumptions are inherently uncertain and actual results
could differ from those estimates.
Fair Value Determination Related to Financial Instruments Accounted for at Fair Value
We have a significant amount of financial instruments that are categorized within Level 2 and Level 3 according to ASC
820 “Fair Value Measurement.” The valuations for certain financial instruments categorized within Level 2, such as
interest rate swap contracts and certain call option agreements, are performed based on inputs derived from or
corroborated by observable market data. Convertible and exchangeable bonds that do not have a quoted price are
categorized within Level 3, of which the valuations are performed using valuation models such as the binomial model
with unobservable inputs including risk-free interest rate and expected volatility. The valuation of contingent
consideration categorized within Level 3 is performed using an expected cash flow method with unobservable inputs
including the probability to achieve the contingencies in connection with the contingent consideration arrangements.
Significant judgment is required to determine the appropriateness of those unobservable inputs.
Investments in privately held companies for which the company elected to record using the measurement alternative are
recorded at cost, less impairment, with subsequent adjustments for observable price changes resulting from orderly
transactions for identical or similar investments of the same issuer. The valuations of these investments are categorized
within Level 3, and are estimated based on valuation methods using the observable transaction price at the transaction
date and other unobservable inputs including volatility, as well as rights and obligations of the securities. The
determination of whether an observable transaction is orderly and similar to our investment, and the amount of
adjustment considering the rights and obligations of the investment, requires significant judgment.
Impairment Assessment on Goodwill and Intangible Assets
We test annually, or whenever events or circumstances indicate that the carrying value of assets exceeds the recoverable
amounts, whether goodwill and intangible assets have suffered any impairment in accordance with the accounting policy
stated in note 2 to our audited consolidated financial statements included in this annual report. For the impairment
assessment on goodwill, we have elected to perform a qualitative assessment to determine whether the two-step
impairment testing of goodwill is necessary. In this assessment, we identify the reporting units, consider factors such as
macroeconomic conditions, industry and market considerations, overall financial performance of the reporting units, and
other specific information related to the operations, business plans and strategies of the reporting units, including
consideration of the impact of the COVID-19 pandemic. Based on the qualitative assessment, if it is more likely than not
that the fair value of a reporting unit is less than the carrying amount, the quantitative impairment test is performed.
For the quantitative assessment of goodwill impairment, we compare the fair value of each reporting unit to its carrying
amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill is not considered
to be impaired and the second step will not be required. If the carrying amount of a reporting unit exceeds its fair value,
the second step compares the implied fair value of goodwill to the carrying value of the reporting unit’s goodwill.
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For intangible assets other than licensed copyrights, we perform an impairment assessment whenever events or changes
in circumstances indicate the carrying value of an asset may not be recoverable. These assessments primarily use cash
flow projections based on financial forecasts prepared by management and an estimated terminal value. The expected
growth in revenues and operating margin, timing of future capital expenditures, an estimate of weighted average cost of
capital and terminal growth rate are based on actual and prior year performance and market development expectations.
The periods of the financial forecasts generally range from three to five years or a longer period if necessary. Judgment is
required to determine key assumptions adopted in the cash flow projections and changes to key assumptions can
significantly affect these cash flow projections and the results of the impairment tests.
Impairment Assessment on Licensed Copyrights
We evaluate the program usefulness of licensed copyrights pursuant to the guidance in ASC 920 “Entertainment —
Broadcasters,” which provides that the rights be reported at the lower of unamortized cost or estimated net realizable
value. When there is a change in the expected usage of licensed copyrights, we estimate net realizable value of licensed
copyrights to determine if any impairment exists. The net realizable value of licensed copyrights is determined by
estimating the expected cash flows from advertising and membership fees, less any direct costs, over the remaining
useful lives of the licensed copyrights. We monetize our licensed copyrights with branding customers based on the
different content channels available on our entertainment distribution platforms. Therefore, we estimate these cash flows
for each category of content separately, such as movies, television series, variety shows, animations and other video
content. Estimates that impact these cash flows include anticipated levels of demand for our advertising services and the
expected selling prices of advertisements. Judgment is required to determine the key assumptions adopted in the cash
flow projections and changes to key assumptions can significantly affect these cash flow projections and the results of the
impairment tests.
Impairment Assessment on Investments in Equity Investees
We continually review our investments in equity investees to determine whether a decline in fair value below the
carrying value is “other-than-temporary.” The primary factors that we consider include:
●
●
●
●
the severity and length of time that the fair value of the investment is below its carrying value;
the stage of development, the business plan, the financial condition, the sufficiency of funding and the
operating performance of the investee companies; strategic collaboration with and the prospects of the
investee companies;
the geographic region, market and industry in which the investee companies operate, including
consideration of the impact of the COVID-19 pandemic; and
other entity specific information such as recent financing rounds completed by the investee companies and
post balance sheet date fair value of the investment.
Fair value of the listed securities is subject to volatility and may be materially affected by market fluctuations. Judgment
is required to determine the weighting and impact of the abovementioned factors and changes to this determination can
significantly affect the results of the impairment tests.
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Impairment Assessment on Equity Securities
Equity securities without readily determinable fair values that are accounted for using the measurement alternative are
subject to periodic impairment reviews. Our impairment analysis considers both qualitative and quantitative factors that
may have a significant effect on the fair value of these equity securities, including consideration of the impact of the
COVID-19 pandemic. Qualitative factors considered may include market environment and conditions, financial
performance, business prospects, and other relevant events and factors. When indicators of impairment exist, we perform
quantitative assessments of the fair value, which may include the use of market and income valuation approaches and the
use of estimates, which may include discount rates, investees’ liquidity and financial performance, and market data of
comparable companies in similar industries. Judgment is required to determine the appropriateness of the valuation
approaches and the weighting and impact of the abovementioned factors. Changes to this determination can significantly
affect the results of the quantitative assessments.
Depreciation and Amortization
The costs of property and equipment and intangible assets are charged ratably as depreciation and amortization expenses,
respectively, over the estimated useful lives of the respective assets using the straight-line method. We periodically
review changes in technology and industry conditions, asset retirement activity and residual values to determine
adjustments to estimated remaining useful lives and depreciation and amortization rates. Actual economic lives may
differ from estimated useful lives. Periodic reviews could result in a change in estimated useful lives and therefore
depreciation and amortization expenses in future periods.
Recent Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments — Credit Losses (Topic 326): Measurement on
Credit Losses on Financial Instruments,” and issued subsequent amendments to the initial guidance, transitional guidance
and other interpretive guidance between November 2018 and March 2020 within ASU 2018-19, ASU 2019-04, ASU
2019-05, ASU 2019-11, ASU 2020-02 and ASU 2020-03. ASU 2016-13 introduces new guidance for credit losses on
instruments within its scope. The new guidance introduces an approach based on expected losses to estimate credit losses
on certain types of financial instruments, including trade and other receivables, held-to-maturity debt securities, loans and
net investments in leases. The new guidance also modifies the impairment model for available-for-sale debt securities
and requires entities to determine whether all or a portion of the unrealized loss on an available-for-sale debt security is a
credit loss. Further, the new guidance indicates that entities may not use the length of time a security has been in an
unrealized loss position as a factor in concluding whether a credit loss exists. The new guidance is effective for us for the
year ending March 31, 2021 and interim reporting periods during the year ending March 31, 2021. The cumulative
impact of these adjustments on retained earnings as of April 1, 2020 was not material.
In January 2017, the FASB issued ASU 2017-04, “Intangibles — Goodwill and Other (Topic 350): Simplifying the Test
for Goodwill Impairment,” which simplifies how an entity is required to test goodwill for impairment by eliminating step
two from the goodwill impairment test. Step two of the goodwill impairment test measures a goodwill impairment loss by
comparing the implied fair value of a reporting unit’s goodwill with its carrying amount. The new guidance is effective
prospectively for us for the year ending March 31, 2021 and interim reporting periods during the year ending March 31,
2021. We do not expect that the adoption of this guidance will have a material impact on our financial position, results of
operations and cash flows.
In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework —
Changes to the Disclosure Requirements for Fair Value Measurement,” which eliminates, adds and modifies certain
disclosure requirements for fair value measurements as part of the FASB’s disclosure framework project. The new
guidance is effective for us for the year ending March 31, 2021 and interim reporting periods during the year ending
March 31, 2021. We do not believe that the adoption of this guidance will have a material impact on the fair value
disclosure in the consolidated financial statements.
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In November 2018, the FASB issued ASU 2018-18, “Collaborative Arrangements (Topic 808): Clarifying the Interaction
Between Topic 808 and Topic 606,” which clarifies that elements of collaborative arrangements could qualify as
transactions with customers in the scope of ASC 606. The amendments require the application of existing guidance to
determine the units of account in collaborative arrangement for purposes of identifying transactions with customers. For
transactions outside the scope of ASC 606, companies can apply elements of ASC 606 or other relevant guidance by
analogy, or apply a reasonable accounting policy if there is no appropriate analogy. ASU 2018-18 is effective
retrospectively for us for the year ending March 31, 2021 and interim reporting periods during the year ending March 31,
2021. We do not expect that the adoption of this guidance will have a material impact on our financial position, results of
operations and cash flows.
In March 2019, the FASB issued ASU 2019-02, “Entertainment — Films — Other Assets — Film Costs (Subtopic 926-
20) and Entertainment — Broadcasters — Intangibles — Goodwill and Other (Subtopic 920-350),” which aligns the
accounting guidance for production costs for (1) films and (2) episodic content produced for television series and
streaming services. This new guidance also clarifies when an entity should test films and license agreements for program
material for impairment at the film-group level, amends the presentation and disclosure requirements for produced or
licensed content and addresses statement of cash flows classification for license arrangements. The new guidance is
effective prospectively for us for the year ending March 31, 2021 and interim reporting periods during the year ending
March 31, 2021. We believe that the adoption of this guidance will result in a change in the presentation of our
consolidated statements of cash flows.
In April 2019, the FASB issued ASU 2019-04, “Codification Improvements to Topic 326, Financial Instruments —
Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments,” which provides narrow-scope
amendments to clarify and improve guidance within the standards on credit losses, hedging, and recognition and
measurement of financial instruments. Apart from the amendments to ASU 2016-13 mentioned above, the ASU also
included subsequent amendments to ASU 2016-01 “Financial Instruments — Overall (Subtopic 825-10): Recognition
and Measurement of Financial Assets and Financial Liabilities,” which we adopted in April 2018. The guidance in
relation to the amendments to ASU 2016-01 is effective for us for the year ending March 31, 2021 and interim reporting
periods during the year ending March 31, 2021.We do not expect that the adoption of this guidance will have a material
impact on our financial position, results of operations and cash flows.
In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income
Taxes,” which simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions
to the general principles in ASC 740 and also clarifies and amends existing guidance to improve consistent application.
The new guidance is effective for us for the year ending March 31, 2022 and interim reporting periods during the year
ending March 31, 2022. Early adoption is permitted. We are evaluating the effects, if any, of the adoption of this
guidance on our financial position, results of operations and cash flows.
In January 2020, the FASB issued ASU 2020-01, “Investments — Equity Securities (Topic 321), Investments — Equity
Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) — Clarifying the Interactions between
Topic 321, Topic 323, and Topic 815 (a consensus of the FASB Emerging Issues Task Force),” which clarifies the
interactions of the accounting for certain equity securities under ASC 321, investments accounted for under the equity
method of accounting in ASC 323, and the accounting for certain forward contracts and purchased options accounted for
under ASC 815. ASU 2020-01 could change how an entity accounts for (i) an equity security under the measurement
alternative and (ii) a forward contract or purchased option to purchase securities that, upon settlement of the forward
contract or exercise of the purchased option, would be accounted for under the equity method of accounting or the fair
value option in accordance with ASC 825 “Financial Instruments.” These amendments improve current U.S. GAAP by
reducing diversity in practice and increasing comparability of the accounting for these interactions. The new guidance is
effective prospectively for us for the year ending March 31, 2022 and interim reporting periods during the year ending
March 31, 2022. Early adoption is permitted. We are evaluating the effects, if any, of the adoption of this guidance on our
financial position, results of operations and cash flows.
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In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of
Reference Rate Reform on Financial Reporting,” which provides optional expedients and exceptions for applying U.S.
GAAP on contract modifications and hedge accounting to contracts, hedging relationships, and other transactions that
reference LIBOR or another reference rate expected to be discontinued because of reference rate reform, if certain criteria
are met. These optional expedients and exceptions provided in ASU 2020-04 are effective for us from January 1, 2020
through December 31, 2022. We have elected the optional expedients for our certain existing interest rate swaps that are
designated as cash flow hedges, which did not have a material impact on our financial position, results of operations and
cash flows. We are evaluating the effects, if any, of the potential election of the optional expedients and exceptions
provided in this guidance on our financial position, results of operations and cash flows.
C. Research and Development, Patents and Licenses, etc.
Research and Development
We have built our core technologies for our online and mobile commerce and cloud computing businesses in-house. We
employ research and development personnel to build our technology platform and develop new online and mobile
products. We recruit top and experienced talent locally and overseas, and we have advanced training programs designed
specifically for new campus hires.
Intellectual Property
We believe the protection of our trademarks, copyrights, domain names, trade names, trade secrets, patents and other
proprietary rights is critical to our business. We rely on a combination of trademark, fair trade practice, copyright and
trade secret protection laws and patent protection in China and other jurisdictions, as well as confidentiality procedures
and contractual provisions to protect our intellectual property and our trademarks. We also enter into confidentiality and
invention assignment agreements with all of our employees, and we rigorously control access to our proprietary
technology and information. As of March 31, 2020, we had 7,845 issued patents and 14,503 publicly filed patent
applications in China and 3,993 issued patents and 11,800 publicly filed patent applications in various other countries and
jurisdictions globally. We do not know whether any of our pending patent applications will result in the issuance of
patents or whether the examination process will require us to narrow our claims.
D. Trend Information
Other than as disclosed in this annual report, we are not aware of any trends, uncertainties, demands, commitments or
events for the current fiscal year that are reasonably likely to have a material effect on our net revenues, income,
profitability, liquidity or capital reserves, or that caused the disclosed financial information to be not necessarily
indicative of future operating results or financial conditions.
E. Off-Balance Sheet Arrangements
We did not have any material off-balance sheet arrangements in fiscal years 2018, 2019 or 2020.
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F. Contractual Obligations
The following table sets forth our contractual obligations and commercial commitments as of March 31, 2020.
Payment due by period
Less than 1 – 3 3 – 5 More than
Contractual Obligations
Short-term borrowings(1)
Long-term borrowings(2)
US$4.0 billion syndicated loan
denominated in US$(3)
Unsecured senior notes(4)
Operating lease liabilities
Contractual Commitments
Purchase of property and equipment
Construction of corporate campuses
Investment commitments(5)
Other commitment(6)
Total
1 Year
Years
(in millions of RMB)
Years
5 Years
5,154
11,449
5,154
—
—
2,502
—
3,163
—
5,784
28,355
81,166
29,914
—
—
3,877
—
10,633
5,908
28,355
20,912
4,924
—
49,621
15,205
15,572
8,982
14,080
49,761
244,433
12,594
2,793
14,080
27,398
65,896
2,880
5,713
—
17,407
45,043
98
385
—
1,854
59,691
—
91
—
3,102
73,803
Total
(1)
(2)
(3)
(4)
(5)
(6)
Excluding estimated interest payments of RMB81 million assuming the applicable interest rates in effect as of March 31,
2020. The majority of the borrowings are subject to floating interest rates.
Excluding estimated interest payments of RMB3,084 million in total (RMB510 million, RMB938 million, RMB739 million
and RMB897 million over the periods of less than one year, one to three years, three to five years and more than five years
from April 1, 2020, respectively), assuming the applicable interest rates in effect as of March 31, 2020. Substantially all of
the borrowings are subject to floating interest rates.
Excluding estimated interest payments of RMB2,941 million in total (RMB705 million, RMB1,411 million and RMB825
million over the periods of less than one year, one to three years and three to five years from April 1, 2020, respectively),
assuming the applicable interest rate in effect as of March 31, 2020. The syndicated loan is subject to a floating interest rate.
Excluding estimated interest payments of RMB42,507 million in total (RMB2,881 million, RMB5,335 million, RMB4,886
million and RMB29,405 million over the periods of less than one year, one to three years, three to five years and more than
five years from April 1, 2020, respectively). The unsecured senior notes are subject to fixed interest rates.
Including the consideration for the investment in Focus Media and the remaining committed capital of certain investment
funds.
Including commitments relating to co-location and bandwidth fees, licensed copyrights and marketing expenses. As a
marketing initiative, we entered into a framework agreement with the International Olympic Committee and the United States
Olympic Committee for a long-term partnership arrangement through 2028. According to our partnership arrangement with
the International Olympic Committee, we committed to provide at least US$815 million worth of cash, cloud infrastructure
services and cloud computing services, as well as marketing and media support through 2028, in connection with various
Olympic initiatives, events and activities, including the Olympic Games and the Winter Olympic Games.
In May 2019, Hong Kong Cingleot Investment Management Limited (“Cingleot”), a company that is partially owned by
Cainiao Network, entered into a facility agreement for a term loan of HK$7.7 billion (US$1.0 billion) to fund a logistics
center project at Hong Kong International Airport. Alibaba acts as a guarantor for the term loan. As of July 2, 2020,
Cingleot has drawn down HK$618 million under this facility.
G. Safe Harbor
See “Forward-Looking Statements.”
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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. Directors and Senior Management
The following table sets forth certain information relating to our directors and executive officers.
Name
Age
Position/Title
Daniel Yong ZHANG†(1)(b)
Jack Yun MA†(1)(c)
Joseph C. TSAI†(2)(a)
J. Michael EVANS†(2)(a)
Eric Xiandong JING†(2)(a)
Chee Hwa TUNG(2)(b)
Walter Teh Ming KWAUK(2)(c)
Jerry YANG(2)(b)
E. Börje EKHOLM(2)(a)
Wan Ling MARTELLO(2)(b)
Maggie Wei WU(2)
Judy Wenhong TONG(1)
Li CHENG(1)
Jeff Jianfeng ZHANG(1)
Sophie Minzhi WU(1)
Sara Siying YU(1)
Jessie Junfang ZHENG(1)
Chris Pen-hung TUNG(1)
Trudy Shan DAI(1)
Fan JIANG(1)
Luyuan FAN(1)
Independent director
Independent director
Independent director
Independent director
Independent director
48 Chairman and Chief Executive Officer
55 Founder and Director
56 Executive Vice Chairman
62 Director and President
47 Director
83
67
51
57
62
52 Chief Financial Officer
49 Chief People Officer
45 Chief Technology Officer
47 President, Alibaba Cloud Intelligence
44 Chief Customer Officer
45 General Counsel
46 Chief Risk Officer and Chief Platform
Governance Officer
50 Chief Marketing Officer
44 President, B2B Business
34 President, Taobao and Tmall
47 President, Digital Media and
Entertainment Group
†
(a)
(b)
(c)
(1)
(2)
Director nominated by the Alibaba Partnership.
Group I directors. Current term of office will expire at our 2021 annual general meeting.
Group II directors. Current term of office will expire at our 2022 annual general meeting.
Group III directors. Current term of office will expire at our 2020 annual general meeting.
969 West Wen Yi Road, Yu Hang District, Hangzhou 311121, the People’s Republic of China.
26/F Tower One, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong S.A.R., the People’s Republic of China.
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Biographical Information
Daniel Yong ZHANG (张勇张勇) has served as our chairman since September 2019, has been our chief executive officer
since May 2015 and our director since September 2014. He is a founding member of the Alibaba Partnership. Daniel is
also currently a member of Ant Group’s investment committee. Prior to his current role, he served as our chief operating
officer from September 2013 to May 2015. He joined our company in August 2007 as chief financial officer of Taobao
Marketplace and served in this position until June 2011. He took on the additional role of general manager for Tmall.com
in August 2008, which he performed concurrently until his appointment as president of Tmall.com in June 2011 when
Tmall.com became an independent platform. Prior to joining Alibaba, Daniel served as chief financial officer of Shanda
Interactive Entertainment Limited, an online game developer and operator then listed on Nasdaq, from September 2005
to August 2007. From 2002 to 2005, he was a senior manager of PricewaterhouseCoopers’ Audit and Business Advisory
Division in Shanghai. Daniel is the chairman of Sun Art, a company listed on the Main Board of the Hong Kong Stock
Exchange. He also serves on the board of Weibo, a company listed on the Nasdaq. He is a member of the WEF
International Business Council, the vice co-chair of the board of Consumer Goods Forum and the co-chair of the China
board of the Consumer Goods Forum. Daniel received a bachelor’s degree in finance from Shanghai University of
Finance and Economics.
Jack Yun MA (马云马云) founded Alibaba Group in 1999 and served as our executive chairman from 1999 to September
2019, and currently serves as our director. He is a member of the Alibaba Partnership. He served as our chief executive
officer from 1999 to May 2013. Jack currently serves as a member of the Board of Trustees of the World Economic
Forum, president of the General Association of Zhejiang Entrepreneurs and chairman of the China Entrepreneur Club. He
has been appointed by the United Nations Secretary General António Guterres as co-chair of the UN High-Level Panel
on Digital Cooperation since 2018. Jack graduated from Hangzhou Normal University with a Bachelor of Arts degree in
English education.
Joseph C. TSAI (蔡崇信蔡崇信) joined our company in 1999 as a member of the Alibaba founding team and has served on our
board of directors since our inception. He was chief financial officer until 2013 and is currently our executive vice
chairman. He serves on our investment committee and Ant Group’s investment committee, and is a founding member of
Alibaba Partnership. From 1995 to 1999, he was a private equity investor based in Hong Kong with Investor AB, the
main investment vehicle of Sweden’s Wallenberg family. Prior to that, he was general counsel of Rosecliff, Inc., a
management buyout firm based in New York. From 1990 to 1993, Joe was an associate attorney in the tax group of
Sullivan & Cromwell LLP, a New York-based international law firm. Joe is qualified to practice law in the State of New
York. He received his bachelor’s degree in Economics and East Asian Studies from Yale College and a juris doctor
degree from Yale Law School.
J. Michael EVANS has been our president since August 2015 and our director since September 2014. Mike served as
Vice Chairman of The Goldman Sachs Group, Inc. from February 2008 until his retirement in December 2013.
Mike served as chairman of Asia operations at Goldman Sachs from 2004 to 2013 and was the global head of Growth
Markets at Goldman Sachs from January 2011 to December 2013. He also co-chaired the Business Standards Committee
of Goldman Sachs from 2010 to 2013. Mike joined Goldman Sachs in 1993, became a partner of the firm in 1994 and
held various leadership positions within the firm’s securities business while based in New York and London, including
global head of equity capital markets and global co-head of the equities division, and global co-head of the securities
business. Mike is a board member of City Harvest. He is also a trustee of the Asia Society and a member of the Advisory
Council for the Bendheim Center for Finance at Princeton University. In August 2014, Mike joined the board of Barrick
Gold Corporation. Mike received his bachelor’s degree in politics from Princeton University in 1981.
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Eric Xiandong JING (井贤栋井贤栋) has been our director since September 2016. He has served as chairman of Ant Group
since April 2018. He previously served as the chief executive officer of Ant Group from October 2016 to December
2019, president of Ant Group from June 2015 to October 2016, and chief operating officer of Ant Group from October
2014 to June 2015. Prior to that, he served as Alipay’s chief financial officer. Before joining Alipay in September 2009,
he was senior corporate finance director and corporate finance vice president of Alibaba.com from 2007 to 2009.
Previously, Eric was the chief financial officer of Guangzhou Pepsi Cola Beverage Co. from 2004 to 2006. He also held
management positions in several Coca-Cola bottling companies across China. Currently, Eric also serves as a director of
Hundsun Technologies, a company listed on the Shanghai Stock Exchange. Eric received an MBA degree from the
Carlson School of Management at the University of Minnesota and a bachelor’s degree in economics from Shanghai Jiao
Tong University.
Chee Hwa TUNG (董建华董建华) has been our director since September 2014 and is the Vice Chairman of the Thirteenth
National Committee of the Chinese People’s Political Consultative Conference of the PRC, which is an important
institution of multiparty cooperation and political consultation in the PRC. Mr. Tung is the Founding Chairman of the
China-United States Exchange Foundation, which is a non-profit organization registered in Hong Kong to promote
understanding and strengthening relationships between China and the United States. Mr. Tung is also the chairman of
Our Hong Kong Foundation Limited, a non-government, non-profit organization dedicated to promoting the long-term
and overall interests of Hong Kong. Mr. Tung also serves in various public sector and advisory positions, including as a
member of the J.P. Morgan International Council, the China Development Bank International Advisory Committee and
the Advisory Board of the Schwarzman Scholars Program at Tsinghua University. Prior to these appointments, Mr. Tung
served as the First Chief Executive of the Hong Kong Special Administrative Region from July 1997 to March 2005. Mr.
Tung had a successful and distinguished career in business, including serving as the Chairman and Chief Executive
Officer of Orient Overseas (International) Limited, a company listed on the Hong Kong Stock Exchange with its
principal business activities in container transport and logistics services on a global scale. Mr. Tung received a bachelor’s
degree in science from the University of Liverpool.
Walter Teh Ming KWAUK (郭德明郭德明) has been our director since September 2014. He previously served as an
independent non-executive director and chairman of the audit committee of Alibaba.com Limited, one of our
subsidiaries, which was listed on the Hong Kong Stock Exchange, from October 2007 to July 2012. Walter is currently a
senior adviser of Motorola Solutions (China) Co., Ltd. and serves as an independent non-executive director and chairman
of the audit committee of each of Sinosoft Technology Group Limited, a company listed on the Hong Kong Stock
Exchange, and WuXi Biologics (Cayman) Inc., a company listed on the Hong Kong Stock Exchange and Hua Medicine,
a company listed on the Hong Kong Stock Exchange, and as a director of several private companies. Walter was a vice
president of Motorola Solutions, Inc. and its director of corporate strategic finance and tax, Asia Pacific from 2003 to
2012. Walter served with KPMG from 1977 to 2002 and held a number of senior positions, including the general
manager of KPMG’s joint venture accounting firm in Beijing, the managing partner in KPMG’s Shanghai office and a
partner in KPMG’s Hong Kong Office. He is a member of the Hong Kong Institute of Certified Public Accountants.
Walter received a bachelor’s degree in science and a licentiate’s degree in accounting from the University of British
Columbia.
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Jerry YANG (杨致远杨致远) has been our director since September 2014. Jerry previously served as our director from
October 2005 to January 2012. Since March 2012, Jerry has served as the founding partner of AME Cloud Ventures, a
venture capital firm. Jerry is a co-founder of Yahoo! Inc., and served as Chief Yahoo! and as a member of its board of
directors from March 1995 to January 2012. In addition, he served as Yahoo!’s Chief Executive Officer from June 2007
to January 2009. From January 1996 to January 2012, Jerry served as a director of Yahoo! Japan. Jerry also served as an
independent director of Cisco Systems, Inc. from July 2000 to November 2012. He is currently an independent director of
Workday Inc., a company listed on the NYSE, and Lenovo Group Ltd., a company listed on the Hong Kong Stock
Exchange. He also serves as a director of various private companies and foundations. Jerry received a bachelor’s degree
and a master’s degree in electrical engineering from Stanford University, where he is serving on the University’s Board
of Trustees beginning in October 2017. He was previously on Stanford’s Board of Trustees from 2005 to 2015, including
being a vice chair.
E. Börje EKHOLM has been our director since June 2015. Börje is since January 2017 the president and Chief
Executive Officer of Ericsson. Prior to his current position, Börje was head of Patricia Industries, a newly created
division of Investor AB, a Swedish investment company, where he has held a variety of management positions since
joining the firm in 1992. Börje served as president and Chief Executive Officer and a member of the board of directors of
Investor AB from September 2005 to May 2015. Prior to becoming president and Chief Executive Officer, Börje was a
member of the management group of Investor AB. Previously, Börje worked at McKinsey & Co. Inc. Börje currently
serves as a member of the boards of Ericsson, Trimble, and the Swedish American Chamber of Commerce in New York.
Börje received a master’s degree in electrical engineering from KTH Royal Institute of Technology and a master’s degree
in business administration from INSEAD.
Wan Ling MARTELLO has been our director since September 2015. She is a co-founder and partner of BayPine, a
private equity firm based in Boston, U.S.A., a role she has held since February 2020. She served as the executive vice
president and chief executive officer of the Asia, Oceania, and sub-Saharan Africa region for Nestlé SA from May 2015
to December 2018. She was Nestlé’s global chief financial officer from April 2012 to May 2015, and executive vice
president from November 2011 to March 2012. Prior to Nestlé, Wan Ling was a senior executive at Walmart Stores Inc.
from 2005 to 2011. Her roles included executive vice president and chief operating officer for Global eCommerce, and
senior vice president, chief financial officer and strategy for Walmart International. Before Walmart, she was president,
U.S.A. at NCH Marketing Services Inc. She was with the firm from 1998 to 2005. She also worked at Borden Foods
Corporation and Kraft Inc. where she held various senior management positions. She is currently a director of Uber
Technologies, Inc., a company listed on the NYSE. Wan Ling received a master’s degree in business administration
(management information systems) from the University of Minnesota and a bachelor’s degree in business administration
and accountancy from the University of the Philippines.
Maggie Wei WU (武卫武卫) has been our chief financial officer since May 2013 and head of strategic investments since June
2019. Maggie joined our company in July 2007 as chief financial officer of Alibaba.com. She was voted best CFO in
FinanceAsia’s annual poll for Asia’s Best Managed Companies in 2010. In 2018, she was named one of the world’s 100
most powerful women by Forbes. Before joining Alibaba, Maggie was an audit partner at KPMG in Beijing. Maggie is a
member of the Association of Chartered Certified Accountants (ACCA). She received a bachelor’s degree in accounting
from Capital University of Economics and Business.
Judy Wenhong TONG (童文红童文红) has been our chief people officer since January 2017. Since joining our company in
2000, she has served as director and senior director in various departments in our company, including administration,
customer service and human resources. Between 2007 and 2013, she served as vice president and senior vice president in
various departments, including construction, real estate and procurement. Starting in 2013, Judy led the formation of
Cainiao Network and served at various times as chief operating officer, president, chief executive officer and non-
executive chairwoman, overseeing the operations of the company. Judy is a graduate of Zhejiang University.
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Li CHENG (程立程立) has been our chief technology officer since December 2019. Prior to joining our company, Li Cheng
was the chief technology officer of Ant Group from 2014 to 2019, chief operating officer of Ant Group’s global business
group from 2018 to 2019, chief software architect of Alipay from 2007 to 2014 and founding engineer of Alipay from
2005 to 2007. Prior to joining Alipay in 2005, Li Cheng was a doctorate student in the computer science faculty of
Shanghai Jiao Tong University. Li Cheng holds a master’s degree in applied computer studies and a bachelor’s degree in
computer software from Shanghai University.
Jeff Jianfeng ZHANG (张建锋张建锋) has served as the president of Alibaba Cloud Intelligence since November 2018. Jeff was
our chief technology officer from April 2016 to March 2020. He was president of China retail marketplaces from May
2015 to December 2015, president of Alibaba Group Middle Office business unit from December 2015 to March 2016,
and president of Taobao Marketplace and the wireless business division prior to that. He joined our company in July
2004 and has held various management positions, at different times leading Taobao Marketplace’s technology teams, the
B2C development team, Alibaba.com’s China operations, local services, 1688.com, and Tmall.com. Jeff studied
computer science at Zhejiang University.
Sophie Minzhi WU (吴敏芝吴敏芝) has been our chief customer officer since January 2017. Prior to her current position,
Sophie served as president of Alibaba.com and 1688.com, our international and China wholesale marketplaces. From
October 2014 to February 2015, she also led the Rural Taobao team. Before October 2014, she was vice president of
Alibaba.com’s supplier service division, responsible for optimizing service to China Gold Supplier members and
enhancing supplier quality. In July 2012, she started to head international operations of Alibaba.com and 1688.com.
Sophie joined our company in November 2000 and has taken on management roles in several sales divisions, including
regional sales, China Gold Supplier sales, and China TrustPass sales. Before joining Alibaba Group, Sophie was sales
and customer manager at a technology development company wholly owned by Zhejiang University. She holds a
bachelor’s degree in international trade from Zhejiang University and an EMBA degree from China Europe International
Business School.
Sara Siying YU (俞思瑛俞思瑛) has been our general counsel since April 2020. Ms. Yu joined our company in April 2005 and
became one of the first partners of the Alibaba Partnership. Prior to her current role, she served as deputy general
counsel, responsible for domestic legal affairs. Before joining Alibaba, she worked in various law firms and government
departments. Sara received a bachelor’s of law degree from East China University of Political Science and Law.
Jessie Junfang ZHENG (郑俊芳郑俊芳) has been our chief risk officer since December 2017, responsible for data and
information security across our platforms, and our chief platform governance officer since December 2015, responsible
for the governance of our retail and wholesale marketplaces. Prior to her current position, she served as our deputy chief
financial officer from November 2013 to June 2016, and financial vice president of Alibaba.com from December 2010 to
October 2013. Before joining our company, Jessie was an audit partner at KPMG. Jessie received a bachelor’s degree in
accounting from Northeastern University in China.
Chris Pen-hung TUNG (董本洪董本洪) joined our company as chief marketing officer in January 2016. He was also president
of Alimama from November 2017 to November 2018. Prior to his current position, he was the chief executive officer of
VML China, a marketing agency, from October 2010 to January 2016. Prior to joining VML, he was at PepsiCo China
from October 2004 to October 2010 where he served as vice president of marketing. Prior to that, Chris worked at
Proctor & Gamble from 1995 to 1998, Gigamedia from 1998 to 2001 and L’Oréal from 2001 to 2003 in various senior
management positions. He is currently a director of Ruhnn Holding Limited, a company listed on Nasdaq. He received a
bachelor’s degree in electrical engineering from Taiwan University and a master’s degree in industrial engineering from
University of Michigan, Ann Arbor.
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Trudy Shan DAI (戴珊戴珊) joined our company in 1999 as a member of the founding team. Since January 2017, she has
served as president of Alibaba’s B2B business, overseeing Alibaba.com, an international wholesale marketplace,
1688.com, a China wholesale marketplace, AliExpress, a global retail marketplace, Alibaba’s LST system, as well as our
digital agriculture and rural development businesses. From December 2019, Trudy has also been overseeing Alibaba’s
New Retail grocery chain, Freshippo. Prior to her current position, Trudy was our chief customer officer from June 2014
to January 2017. She also served as senior vice president of human resources and administration of Taobao and
Alibaba.com as well as our deputy chief people officer and chief people officer from 2009 to 2014. She was general
manager of Alibaba.com from 2007 to 2008. Prior to that, she was vice president of human resources of Yahoo China and
the first general manager of Alibaba.com’s Guangzhou branch, in charge of field and telephone sales, marketing and
human resources in Guangdong Province. From 2002 to 2005, Trudy served as senior sales director of TrustPass. Trudy
received a bachelor’s degree in engineering from Hangzhou Institute of Electrical Engineering.
Fan JIANG (蒋凡蒋凡) has served as president of Taobao since December 2017, president of Tmall since March 2019 and
president of Alimama since December 2019. Prior to his current position, he had been responsible for the Taobao app
since joining our company in August 2013. Previously, he founded and served as the chief executive officer of Umeng, a
provider of mobile app analytics solutions for developers which we acquired. Before founding Umeng in 2010, he
worked in product development at Google China. Fan Jiang received a bachelor’s degree in computer science from Fudan
University.
Luyuan FAN (樊路远樊路远) has served as president of our Digital Media & Entertainment Group since November 2018. He
has been an executive director of Alibaba Pictures since January 2016, and currently serves as the chief executive officer
and chairman of Alibaba Pictures. He joined Alipay in 2007, where he served in a number of senior management
positions, including the president of Alipay and the president of Ant Group’s wealth management business. Luyuan Fan
holds an executive master’s degree in business administration from Cheung Kong Graduate School of Business.
Alibaba Partnership
Since our founders first gathered in Jack Ma’s apartment in 1999, they and our management have acted in the spirit of
partnership. We view our culture as fundamental to our success and our ability to serve our customers, develop our
employees and deliver long-term value to our shareholders. In July 2010, in order to preserve this spirit of partnership
and to ensure the sustainability of our mission, vision and values, we decided to formalize our partnership as Lakeside
Partners, named after the Lakeside Gardens residential community where Jack and our other founders started our
company. We refer to the partnership as the Alibaba Partnership.
We believe that our partnership approach has helped us to better manage our business, with the peer nature of the
partnership enabling senior managers to collaborate and override bureaucracy and hierarchy. The Alibaba Partnership
currently has 36 members. The number of partners in the Alibaba Partnership may change from time to time due to the
election of new partners, the retirement of partners and the departure of partners for other reasons.
Our partnership is a dynamic body that rejuvenates itself through admission of new partners each year, which we believe
enhances our excellence, innovation and sustainability. Unlike dual-class ownership structures that employ a high-vote
class of shares to concentrate control in a few founders, our approach is designed to embody the vision of a large group of
management partners. This structure is our solution for preserving the culture shaped by our founders while at the same
time accounting for the fact that founders will inevitably retire from the company.
Consistent with our partnership approach, all partnership votes are made on a one-partner-one-vote basis.
The partnership is governed by a partnership agreement and operates under principles, policies and procedures that have
evolved with our business and are further described below.
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Nomination and Election of Partners
The Alibaba Partnership elects new partners annually after a nomination process whereby existing partners propose
candidates to the partnership committee, or the partnership committee, as described below. The partnership committee
reviews the nominations and determines whether the nomination of a candidate will be proposed to the entire partnership
for election. Election of new partners requires the approval of at least 75% of all of the partners.
To be eligible for election, a partner candidate must have demonstrated the following attributes:
●
●
●
●
a high standard of personal character and integrity;
continued service with Alibaba Group, our affiliates and/or certain companies with which we have a
significant relationship, such as Ant Group, for not less than five years;
a track record of contribution to the business of Alibaba Group; and
being a “culture carrier” who shows a consistent commitment to, and traits and actions consonant with, our
mission, vision and values.
We believe the criteria and process of the Alibaba Partnership applicable to the election of new partners, as described
above, promote accountability among the partners as well as to our customers, employees and shareholders. In order to
align the interests of partners with the interests of our shareholders, we require that each partner maintain a meaningful
level of equity interests in our company during his or her tenure as a partner. Since a partner nominee must have been our
employee or an employee of one of our related companies or affiliates for at least five years, as of the time he or she
becomes a partner, he or she will typically already own or have been awarded a personally meaningful level of equity
interest in our company through our equity incentive and share purchase or investment plans.
Duties of Partners
The main duty of partners in their capacity as partners is to embody and promote our mission, vision and values. We
expect partners to be evangelists for our mission, vision and values, both within our organization and externally to
customers, business partners and other participants in our digital economy.
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Partnership Committee
The partnership committee must consist of at least five but no more than seven partners, including partnership committee
continuity members, and is currently comprised of Jack Ma, Joe Tsai, Daniel Zhang, Lucy Peng, Eric Jing and Jian
Wang. The partnership committee is responsible for administering partner elections and allocating the relevant portion of
the annual cash bonus pool for all partner members of management, with any amounts payable to partners who are our
executive officers or directors or members of the partnership committee subject to approval of the compensation
committee of our board of directors. Either one or two partners may be designated as partnership committee continuity
partners, and currently the partnership committee continuity members consist of Jack Ma and Joe Tsai. Other than
partnership committee continuity members, the partnership committee members serve for a term of five years and may
serve multiple terms. Elections of partnership committee members are held once every five years. Partnership committee
continuity members are not subject to election, and may serve until they cease to be partners, retire from the partnership
committee or are unable to discharge duties as partnership committee members as a result of illness or permanent
incapacity. A replacement partnership committee continuity partner is either designated by a retiring or, as the case may
be, the remaining, partnership committee continuity member. Prior to each election, the partnership committee will
nominate a number of partners equal to the number of partnership committee members that will serve in the next
partnership committee term plus three additional nominees less the number of the serving partnership committee
continuity members. Each partner votes for a number of nominees equal to the number of partnership committee
members that will serve in the next partnership committee term less the number of the serving partnership committee
continuity members, and all except the three nominees who receive the least votes from the partners are elected to the
partnership committee.
Director Nomination and Appointment Rights
Pursuant to our Articles of Association, the Alibaba Partnership has the exclusive right to nominate or, in limited
situations, appoint up to a simple majority of the members of our board of directors.
The election of each director nominee of the Alibaba Partnership will be subject to the director nominee receiving a
majority vote from our shareholders voting at an annual general meeting of shareholders. If an Alibaba Partnership
director nominee is not elected by our shareholders or after election departs our board of directors for any reason, the
Alibaba Partnership has the right to appoint a different person to serve as an interim director of the class in which the
vacancy exists until our next scheduled annual general meeting of shareholders. At the next scheduled annual general
meeting of shareholders, the appointed interim director or a replacement Alibaba Partnership director nominee (other
than the original nominee) will stand for election for the remainder of the term of the class of directors to which the
original nominee would have belonged.
If at any time our board of directors consists of less than a simple majority of directors nominated or appointed by the
Alibaba Partnership for any reason, including because a director previously nominated by the Alibaba Partnership ceases
to be a member of our board of directors or because the Alibaba Partnership had previously not exercised its right to
nominate or appoint a simple majority of our board of directors, the Alibaba Partnership will be entitled (in its sole
discretion and without the need for any additional shareholder action) to appoint such number of additional directors to
the board as necessary to ensure that the directors nominated or appointed by the Alibaba Partnership comprise a simple
majority of our board of directors.
In determining the Alibaba Partnership director nominees who will stand for election to our board, the partnership
committee will propose director nominees who will be voted on by all of the partners, and those nominees who receive a
simple majority of the votes of the partners will be selected for these purposes. The director nominees of the Alibaba
Partnership may be partners of the Alibaba Partnership or other qualified individuals who are not affiliated with the
Alibaba Partnership.
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The Alibaba Partnership’s right to nominate or appoint up to a simple majority of our directors is conditioned on the
Alibaba Partnership being governed by the partnership agreement in effect as of the completion of our initial public
offering in September 2014, or as may be amended in accordance with its terms from time to time. Any amendment to
the provisions of the partnership agreement relating to the purpose of the partnership, or to the manner in which the
Alibaba Partnership exercises its right to nominate a simple majority of our directors, will be subject to the approval of
the majority of our directors who are not nominees or appointees of the Alibaba Partnership and are “independent
directors” within the meaning of Section 303A of the NYSE Listed Company Manual. The provisions relating to
nomination rights and procedures described above are incorporated in our Articles. Pursuant to our Articles, the Alibaba
Partnership’s nomination rights and related provisions of our Articles may only be changed upon the vote of shareholders
representing 95% of the votes present in person or by proxy at a general meeting of shareholders.
Our board of directors currently consists of ten members, and five of these directors are Alibaba Partnership nominees.
Pursuant to its right to nominate or appoint directors as discussed above, the Alibaba Partnership is entitled to nominate
or appoint one additional director to our board, which would increase the total number of directors to eleven. We have
entered into a voting agreement pursuant to which both SoftBank and Altaba have agreed to vote their shares in favor of
the Alibaba Partnership director nominees at each annual general shareholders meeting so long as SoftBank owns at least
15% of our outstanding ordinary shares. See “Item 7. Major Shareholders and Related Party Transactions — B. Related
Party Transactions — Transactions and Agreements with SoftBank — Voting Agreement.”
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Current Partners
The following table sets forth the names, in alphabetical order by surname, and other information regarding the current
partners of the Alibaba Partnership as of the date of this annual report.
Name
Age Gender
Jingxian CAI (蔡景现)
Li CHENG (程立)
Trudy Shan DAI (戴珊)
Luyuan FAN (樊路远)
Yongxin FANG (方永新)
Felix Xi HU (胡喜)
Simon Xiaoming HU (胡晓明)
Jane Fang JIANG (蒋芳)
Jiangwei JIANG (蒋江伟)
Eric Xiandong JING (井贤栋)
†
Zhenfei LIU (刘振飞)
Jack Yun MA (马云)†
Xingjun NI (倪行军)
Lucy Lei PENG (彭蕾)†
Sabrina Yijie PENG (彭翼捷)
Xiaofeng SHAO (邵晓锋)
Jie SONG (宋洁)
Lijun SUN (孙利军)
Judy Wenhong TONG (童文
红)
Joseph C. TSAI (蔡崇信)†
Jian WANG (王坚)†
Lei WANG (王磊)
Shuai WANG (王帅)
Winnie Jia WEN (闻佳)
Sophie Minzhi WU (吴敏芝)
Maggie Wei WU (武卫)
Eddie Yongming WU (吴泳
铭)
Zeming WU (吴泽明)
Sara Siying YU (俞思瑛)
Yongfu YU (俞永福)
Sam Songbai ZENG (曾松柏)
Jeff Jianfeng ZHANG (张建
锋)
Daniel Yong ZHANG (张勇)†
Yu ZHANG (张宇)
Angel Ying ZHAO (赵颖)
Jessie Junfang ZHENG (郑俊
芳)
43
45
44
47
46
39
50
46
38
47
48
55
43
46
41
54
41
43
49
56
57
40
45
43
44
52
45
40
45
43
53
47
48
50
46
46
M
M
F
M
M
M
M
F
M
M
M
M
M
F
F
M
F
M
F
M
M
M
M
F
F
F
M
M
F
M
M
M
M
F
F
F
Year
Joined
Alibaba
Group
Current position with Alibaba Group or
related/affiliated companies
2000 Senior Researcher
2005 Chief Technology Officer
1999 President, B2B Business
2007 President, Digital Media and Entertainment Group
2000 Senior Director, DingTalk
2007 Vice President, Ant Group
2005 Director and Chief Executive Officer, Ant Group
1999 Deputy Chief People Officer
2008 Senior Researcher
2007 Executive Chairman, Ant Group
2006 President, Amap
1999 Founder and Director
2003 Chief Technology Officer, Ant Group
1999 Director, Ant Group
2000 Chief Marketing Officer, Ant Group
2005 Secretary-General
2000 Vice President
2002 General Manager of Social Responsibility
2000 Chief People Officer
1999 Executive Vice Chairman
2008 Chairman, Technology Steering Committee
2003 President, Local Services
2003 Chairman, Marketing and Public Relations
Committee
2007 Vice President, Office of the Chairman
2000 Chief Customer Officer
2007 Chief Financial Officer
1999 Senior Vice President
2004 President, New Retail Technology
2005 General Counsel
2014 Chairman, Amap
2012 Chief People Officer, Ant Group
2004 President, Alibaba Cloud Intelligence
2007 Chairman and Chief Executive Officer
2004 Vice President
2005 President of International Business, Ant Group
2010 Chief Risk Officer and Chief Platform
Governance Officer
†
Member of the partnership committee.
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Bonus Pool
Our board of directors, acting on the recommendation of our compensation committee, approves an annual cash bonus
pool for our management (which in fiscal year 2020 comprised over 425 individuals) equal to a percentage of our
adjusted pre-tax operating profits. Once the annual cash bonus pool is calculated, our compensation committee will then
first determine the proportion to be allocated to the non-partner members of our management. Any remaining portion will
then be available for the partner members of our management. The partnership committee will determine the allocation of
the relevant portion of the annual cash bonus pool for all partner members of management, with any amounts payable to
partners who are our executive officers or directors or members of the partnership committee subject to approval of the
compensation committee of our board of directors. We understand that a partner’s level of contribution to our business
and to the promotion of our mission, vision and values will be a key factor in determining his or her allocation from the
bonus pool. A portion of the annual cash bonus pool that is available to the partner members of management may, upon
the recommendation of the partnership committee and approval of our compensation committee, be deferred, with the
allocations of deferred payment determined by the partnership committee with any amounts payable to our executive
officers or directors who are partners or members of the partnership committee subject to approval of the compensation
committee of our board of directors. We understand that participation in deferred distributions, other than post-retirement
payments funded out of the deferred pool, is conditioned on a partner’s continued employment with us, our affiliates
and/or certain companies with which we have a significant relationship, such as Ant Group.
Retirement and Removal
Partners may elect to retire from the partnership at any time. All partners except continuity partners are required to retire
upon reaching the age of sixty or upon termination of their qualifying employment. Jack Ma and Joe Tsai are designated
as continuity partners, who may remain partners until they reach the age of seventy (and this age limit may be extended
by a majority votes of all partners), elect to retire from the partnership, die or are incapacitated or are removed as
partners. Any partner, including continuity partners, may be removed upon the vote of a simple majority of all partners
present at a duly-called meeting of partners for violations of certain standards set forth in the partnership agreement,
including failure to actively promote our mission, vision and values, fraud, gross misconduct or gross negligence. As with
other partners, continuity partners must maintain the shareholding levels required by us of all partners as described
below. Partners who retire from the partnership upon meeting certain age and service requirements may be designated as
honorably retired partners by the partnership committee. Honorably retired partners may not act as partners, but may be
entitled to allocations from the deferred portion of the annual cash bonus pool described below as post-retirement
payments. Continuity partners will not be eligible to receive allocations from the annual cash bonus pool if they cease to
be our employees even if they remain partners, but may be entitled to receive allocations from the deferred bonus pool if
they are honorably retired partners.
Restrictive Provisions
Under our Articles of Association, in connection with any change of control, merger or sale of our company, the partners
and other holders of our ordinary shares shall receive the same consideration with respect to their ordinary shares in
connection with any of these types of transactions. In addition, our Articles provide that the Alibaba Partnership may not
transfer or otherwise delegate or give a proxy to any third-party with respect to its right to nominate directors, although it
may elect not to exercise its rights in full. In addition, as noted above, our Articles also provide that the amendment of
certain provisions of the Alibaba Partnership agreement relating to the purpose of the partnership or the manner in which
the partnership exercises its rights to nominate or appoint a majority of our board of directors will require the approval of
a majority of directors who are not appointees of the Alibaba Partnership and are “independent directors” within the
meaning of Section 303A of the NYSE Listed Company Manual.
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Amendment of Alibaba Partnership Agreement
Pursuant to the partnership agreement, amendment of the partnership agreement requires the approval of 75% of the
partners in attendance at a meeting of the partners at which not less than 75% of all the partners are in attendance, except
that the general partner may effect certain administrative amendments. In addition, certain amendments relating to the
purposes of the Alibaba Partnership or the manner in which it exercises its nomination rights with respect to our directors
require the approval of a majority of our independent directors not nominated or appointed by the Alibaba Partnership.
Alibaba Group Equity Interest Holding Requirements for Partners
Each of the partners holds his or her equity interests in our company directly as an individual or through his or her
affiliates. We have entered into share retention agreements with each partner. These agreements provide that a period of
three years from the date on which a person becomes a partner, which ranges from January 2014 to January 2019 for our
existing partners, we require that each partner retain at least 60% of the equity interests (including shares underlying
vested and unvested awards) that he or she held on the starting date of the three-year period. Following the initial three-
year holding period and for so long as he or she remains a partner, we require that the partner retain at least 40% of the
equity interests (including shares underlying vested and unvested awards) that he or she held on the starting date of the
initial three-year holding period. Exceptions to the holding period rules described in the share retention agreements must
be approved by a majority of the independent directors.
Weighted Voting Rights (WVR) Structure
We have one class of Shares, and each holder of our Shares is entitled to one vote per Share. Pursuant to our Articles of
Association, the Alibaba Partnership has the exclusive right to nominate or, in limited situations, appoint, up to a simple
majority of the members of our board of directors. These rights are categorized as a weighted voting rights structure, or
WVR structure, under the Hong Kong Listing Rules. As a result, we are deemed as a company with a WVR structure. For
further information about the risks associated with our WVR structure, see “Item 3. Key Information — D. Risk Factors
— Risks Related to Our Corporate Structure.”
B. Compensation
Compensation of Directors and Executive Officers
For fiscal year 2020, we paid and accrued aggregate fees, salaries and benefits (excluding equity-based grants) of
approximately RMB467 million (US$66 million) to our directors and executive officers as a group and granted RSUs,
options and rights or interests to acquire an aggregate of 31,712,000 ordinary shares (equivalent to 3,964,000 ADSs) to
our directors and executive officers.
The board, acting on the recommendation of our compensation committee, may determine the remuneration to be paid to
non-employee directors. We do not provide employee directors with any additional remuneration for serving as directors
other than their remuneration as our employees. Pursuant to our service agreements with our directors, neither we nor our
subsidiaries provide benefits to directors upon termination of employment. We do not separately set aside any amounts
for pensions, retirement or other benefits for our executive officers, other than pursuant to relevant statutory
requirements. Management members who are partners of the Alibaba Partnership may receive retirement payments from
the deferred portion of the annual cash bonus pool available to the Alibaba Partnership.
Mr. Chee Hwa Tung has indicated to us his intention to donate all cash compensation and equity-based awards he
receives from us as an independent director to one or more non-profit or charitable organizations to be designated by him.
For information regarding equity-based grants to directors and executive officers, see “— Equity Incentive Plans.”
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Employment Agreements
We have entered into employment agreements with each of our executive officers. We may terminate their employment
at any time, with cause, and we are not required to provide any prior notice of the termination. We may also terminate
their employment in circumstances prescribed under and in accordance with the requirements of applicable labor law,
including notice and payment in lieu. Executive officers may terminate their employment with us at any time upon
written notice. Although our employment agreements with our executive officers do not provide for severance pay, where
severance pay is mandated by law, our executive officers will be entitled to severance pay in the amount mandated by
law when his or her employment is terminated. We have been advised by our PRC counsel, Fangda Partners, that we may
be required to make severance payments upon termination without cause to comply with the PRC Labor Law, the PRC
Labor Contract Law and other relevant PRC regulations, which entitle employees to severance payments in case of early
termination of “de facto employment relationships” by PRC entities without statutory cause regardless of whether there
exists a written employment agreement with these entities.
Our grant letter agreements under our equity incentive plans also contain, among other rights, restrictive covenants that
enable us to terminate grants and repurchase shares at par or the exercise price paid for the shares in the event of a
grantee’s termination for cause for breaching these covenants. See “— Equity Incentive Plans” below.
Equity Incentive Plans
We have adopted a number of equity incentive plans since our inception. The following equity incentive plans are those
currently in effect:
●
●
2011 Equity Incentive Plan, or the 2011 Plan; and
2014 Post-IPO Equity Incentive Plan, or the 2014 Plan (which we amended and restated in February 2020
to reflect the Share Split and other administrative changes).
Currently, awards are only available for issuance under our 2014 Plan. If an award under the 2011 Plan terminates,
expires or lapses, or is canceled for any reason, ordinary shares subject to the award become available for the grant of a
new award under the 2014 Plan. As of March 31, 2020, there were:
●
●
●
523,671,696 ordinary shares issuable upon vesting of outstanding RSUs;
51,146,424 ordinary shares issuable upon exercise of outstanding options; and
265,848,704 ordinary shares authorized for issuance under the 2014 Plan.
Following the Share Split, which became effective on July 30, 2019, eight ordinary shares are issuable upon the vesting
of one outstanding RSU or the exercise of one outstanding share option. In addition, starting from April 1, 2015 and on
each anniversary thereof, an additional amount equal to the lesser of 200,000,000 ordinary shares and such lesser number
of ordinary shares as is determined by our board of directors will be included in the shares available for issuance of
awards under our 2014 Plan.
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Our equity incentive plans provide for the granting of RSUs, incentive and non-statutory stock options, restricted shares,
dividend equivalents, share appreciation rights and share payments to any directors, employees, and consultants of ours,
our affiliates and/or certain other companies, such as Ant Group. RSUs and share options granted are generally subject to
a four-year vesting schedule as determined by the administrator of the respective plans. Depending on the nature and the
purpose of the grant, RSUs and share options in general vest 25% upon the first anniversary of the vesting
commencement date for annual incentive awards or 50% upon the second anniversary of the vesting commencement date
for on-hire awards, and 25% every year thereafter. Certain RSUs and share options granted to our senior management
members are subject to a six-year vesting schedule. We believe equity-based awards are vital to attract, motivate and
retain our directors, employees and consultants, and those of certain of our affiliates and other companies, such as Ant
Group, and are the appropriate tool to align their interests with our shareholders. Accordingly, we will continue to grant
equity-based awards to the employees, consultants and directors of our company, our affiliates and/or certain other
companies as an important part of their compensation packages.
In addition, our equity incentive award agreements generally provide that, in the event of a grantee’s termination for
cause or violation of a non-competition undertaking, we will have the right to repurchase the shares acquired by the
grantee, generally at par or the exercise price paid for the shares.
The following paragraphs summarize other key terms of our equity incentive plans.
Plan Administration
Subject to certain limitations, our equity incentive plans are generally administered by the compensation committee of
the board (or a subcommittee thereof), or another committee of the board to which the board has delegated power to act;
provided, that in the absence of any committee, our equity incentive plans will be administered by the board. Grants to
any executive directors of the board must be approved by the disinterested directors of our board.
Types of Awards
The equity incentive plans provide for the granting of RSUs, incentive and non-statutory stock options, restricted shares,
dividend equivalents, share appreciation rights, share payments and other rights or interests.
Award Agreements
Generally, awards granted under the equity incentive plans are evidenced by an award agreement providing for the
number of ordinary shares subject to the award, and the terms and conditions of the award, which must be consistent with
the relevant plan.
Eligibility
Any employee, consultant or director of our company, our affiliates or certain other companies, such as Ant Group, is
eligible to receive grants under the equity incentive plans, but only employees of our company, our affiliates and/or
certain other companies, such as Ant Group, are eligible to receive incentive stock options.
Term of Awards
The term of awards granted under our equity incentive plans are generally not to exceed ten years from the date of grant.
Acceleration, Waiver and Restrictions
The administrator of our equity incentive plans has sole discretion in determining the terms and conditions of any award,
any vesting acceleration or waiver of forfeiture restrictions, and any restrictions regarding any award or the ordinary
shares relating thereto.
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Change in Control
If a change in control of our company occurs, the plan administrator may, in its sole discretion:
●
●
●
accelerate the vesting, in whole or in part, of any award;
purchase any award for an amount of cash or ordinary shares of our company equal to the value that could
have been attained upon the exercise of the award or the realization of the plan participant’s rights had the
award been currently exercisable or payable or fully vested; or
provide for the assumption, conversion or replacement of any award by the successor corporation, or a
parent or subsidiary of the successor corporation, with other rights or property selected by the plan
administrator in its sole discretion, or the assumption or substitution of the award by the successor or
surviving corporation, or a parent or subsidiary of the surviving or successor corporation, with appropriate
adjustments as to the number and kind of shares and prices as the plan administrator deems, in its sole
discretion, reasonable, equitable and appropriate.
Amendment and Termination
Unless earlier terminated, our equity incentive plans continue in effect for a term of ten years. The board may at any time
terminate or amend a plan in any respect, including amendment of any form of any award agreement or instrument to be
executed, provided, however, that to the extent necessary and desirable to comply with applicable laws or stock exchange
rules, shareholder approval of any amendment to a plan shall be obtained in the manner and to the degree required.
Senior Management Equity Incentive Plan
We adopted the Senior Management Equity Incentive Plan in 2010, pursuant to which selected management of our
company subscribed for preferred shares in a special purpose vehicle, Alternate Solutions Management Limited, which
holds our ordinary shares. These preferred shares, subject to a non-compete provision, are redeemable by the holders
thereof for our ordinary shares upon the earlier to occur of an initial public offering of our shares (subject to statutory and
contractual lock-up periods), and five years from the respective dates of issuance of the preferred shares to the
participants. The maximum number of our ordinary shares redeemable upon the redemption of the preferred shares issued
under this plan by the participants is 120,000,000. The underlying ordinary shares have already been issued to the special
purpose vehicle. All preferred shares issued by the special purpose vehicle have been redeemed as of March 31, 2020.
The preferred shares are subject to forfeiture if a holder engages in certain activities that compete with us.
Partner Capital Investment Plan
We adopted the Partner Capital Investment Plan in 2013 to provide partners of the Alibaba Partnership an opportunity to
invest in interests in our ordinary shares in order to align further their interests with the interests of our shareholders.
Pursuant to the Partner Capital Investment Plan, eligible partners subscribed for or will receive rights or interests, issued
by two special purpose vehicles, to acquire or receive our ordinary shares. These rights or interests are subject to non-
compete provisions, transfer restrictions, exercise restrictions and/or vesting schedules, which are longer than the vesting
schedules under our equity incentive plans. The maximum number of our ordinary shares underlying these rights or
interests is 144,000,000. The underlying ordinary shares have already been issued by us to the special purpose vehicles
and are included in our total outstanding share number. The Partner Capital Investment Plan permits the issuance of
additional shares to the partners as the board may approve from time to time.
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Share-based Awards Held by Our Directors and Officers
The following table summarizes the outstanding RSUs, options and other rights or interests held as of March 31, 2020 by
our directors and executive officers, as well as by their affiliates, under our equity incentive plans, as well as equity held
through their investments or interests in our Partner Capital Investment Plan.
Shares
Number of
outstanding
RSUs/ options/
other rights
or interests
granted or
subscribed
underlying
Exercise price outstanding
RSUs/options/
other rights
or interests
granted or
subscribed
Name
Daniel Yong ZHANG
Jack Yun MA
Joseph C. TSAI
J. Michael EVANS
Eric Xiandong JING
Chee Hwa TUNG
Walter Teh Ming KWAUK
Jerry YANG
E. Börje EKHOLM
Wan Ling MARTELLO
Maggie Wei WU
Judy Wenhong TONG
Li CHENG
(US$ per RSU/
option/ other
right or
interest granted
or subscribed)
14.50
56.00
—
87.06
—
—
—
—
—
—
—
182.48
—
—
—
—
—
—
—
—
—
—
—
79.96
—
—
—
—
—
14.50
—
—
—
—
—
—
14.50
—
—
—
—
—
—
14.50
—
—
—
—
14.50
—
* (2)
* (3)
* (1)
* (3)
* (1)
* (1)
* (1)
* (1)
* (1)
* (1)
* (1)
* (3)
* (1)
25,000 (1)
50,000 (1)
50,000 (1)
50,000 (1)
40,000 (1)
15,000 (1)
17,500 (1)
13,334 (1)
10,000 (1)
8,000 (1)
* (3)
* (1)
* (1)
* (1)
* (1)
* (1)
* (2)
* (1)
* (1)
* (1)
* (1)
* (1)
* (1)
* (2)
* (1)
* (1)
* (1)
* (1)
* (1)
* (1)
* (2)
* (1)
* (1)
* (1)
* (1)
* (2)
* (1)
185
Date of grant(4)
Date of expiration
—
* (2) July 26, 2013
* (3) July 2, 2014
* (1) July 2, 2014
* (3) May 10, 2015
* (1) May 10, 2015
* (1) January 27, 2016
* (1) March 17, 2016
* (1) August 10, 2016
* (1) May 17, 2017
* (1) July 24, 2018
* (1) August 16, 2019
* (3) November 14, 2019 November 14, 2027
* (1) November 14, 2019 November 14, 2029
July 2, 2022
July 2, 2022
May 10, 2023
May 10, 2023
January 27, 2024
March 17, 2024
August 10, 2024
May 17, 2025
July 24, 2026
August 16, 2027
200,000 (1) January 27, 2016
400,000 (1) August 10, 2016
400,000 (1) May 17, 2017
400,000 (1) July 24, 2018
320,000 (1) August 16, 2019
120,000 (1) January 27, 2016
140,000 (1) August 10, 2016
106,672 (1) May 17, 2017
80,000 (1) July 24, 2018
64,000 (1) August 16, 2019
* (3) July 31, 2015
* (1) July 31, 2015
* (1) August 10, 2016
* (1) May 17, 2017
* (1) July 24, 2018
* (1) August 16, 2019
* (2) July 26, 2013
* (1) July 2, 2014
* (1) October 5, 2019
* (1) October 5, 2019
* (1) October 5, 2019
* (1) October 5, 2019
* (1) October 5, 2019
* (2) July 26, 2013
* (1) July 2, 2014
* (1) January 27, 2016
* (1) August 10, 2016
* (1) May 17, 2017
* (1) July 24, 2018
* (1) August 16, 2019
* (2) July 26, 2013
* (1) July 2, 2014
* (1) May 17, 2017
* (1) July 24, 2018
* (1) August 16, 2019
* (2) July 26, 2013
* (1) July 2, 2014
January 27, 2024
August 10, 2024
May 17, 2025
July 24, 2026
August 16, 2027
January 27, 2024
August 10, 2024
May 17, 2025
July 24, 2026
August 16, 2027
July 31, 2023
July 31, 2023
August 10, 2022
May 17, 2023
July 24, 2024
August 16, 2025
—
July 2, 2022
October 5, 2025
October 5, 2025
October 5, 2025
October 5, 2025
October 5, 2025
—
July 2, 2022
January 27, 2024
August 10, 2024
May 17, 2025
July 24, 2026
August 16, 2027
—
July 2, 2022
May 17, 2025
July 24, 2026
August 16, 2027
—
July 2, 2022
Table of Contents
Name
Jeff Jianfeng
ZHANG
Sophie Minzhi WU
Sara Siying YU
Jessie Junfang
ZHENG
Chris Pen-hung
TUNG
Trudy Shan DAI
Fan JIANG
Luyuan FAN
Shares
Number of
outstanding
RSUs/ options/
other rights
or interests
granted or
subscribed
underlying
Exercise price outstanding
RSUs/options/
other rights
or interests
granted or
subscribed
(US$ per RSU/
option/ other
right or
interest granted
or subscribed)
Date of grant(4)
Date of expiration
* (2)
* (1)
* (3)
* (1)
* (1)
* (1)
* (1)
* (1)
* (2)
* (1)
* (1)
* (1)
* (1)
* (1)
* (2)
* (1)
* (1)
* (1)
* (1)
* (1)
* (1)
* (1)
* (2)
* (1)
* (1)
* (1)
* (1)
* (3)
* (1)
* (1)
* (1)
* (1)
* (2)
* (1)
* (1)
* (1)
* (1)
* (1)
* (1)
* (1)
* (1)
* (1)
* (1)
* (1)
* (2)
* (2)
* (1)
* (1)
* (1)
14.50
—
69.54
—
—
—
—
—
14.50
—
—
—
—
—
14.50
—
—
—
—
—
—
—
23.00
—
—
—
—
67.28
—
—
—
—
14.50
—
—
—
—
—
—
—
—
—
—
—
26.00
14.50
—
—
—
—
—
July 2, 2022
May 17, 2025
July 24, 2026
* (2) July 26, 2013
* (1) July 2, 2014
* (3) January 27, 2016 January 27, 2024
* (1) January 27, 2016 January 27, 2024
* (1) August 10, 2016 August 10, 2024
* (1) May 17, 2017
* (1) July 24, 2018
* (1) August 16, 2019 August 16, 2027
* (2) July 26, 2013
* (1) July 2, 2014
* (1) January 27, 2016 January 27, 2024
* (1) August 10, 2016 August 10, 2024
* (1) July 24, 2018
* (1) August 16, 2019 August 16, 2027
* (2) July 26, 2013
* (1) July 2, 2014
* (1) February 21, 2016 February 21, 2024
* (1) September 3, 2016 September 3, 2024
* (1) July 3, 2017
* (1) July 30, 2018
* (1) September 1, 2019 September 1, 2027
* (1) March 2, 2020
July 3, 2025
July 30, 2026
March 2, 2028
July 24, 2026
July 2, 2022
July 2, 2022
—
May 23, 2027
* (2) May 23, 2016
* (1) August 10, 2016 August 10, 2024
* (1) May 17, 2017
* (1) July 24, 2018
* (1) August 16, 2019 August 16, 2027
May 17, 2025
July 24, 2026
May 17, 2023
July 24, 2024
* (3) February 21, 2016 February 21, 2022
* (1) February 21, 2016 February 21, 2022
* (1) May 17, 2017
* (1) July 24, 2018
* (1) August 16, 2019
* (2) July 26, 2013
* (1) July 2, 2014
* (1) January 27, 2016
* (1) August 10, 2016
* (1) May 17, 2017
* (1) July 24, 2018
* (1) August 16, 2019
* (1) May 16, 2016
* (1) May 22, 2017
* (1) October 1, 2017
* (1) July 24, 2018
* (1) August 16, 2019
* (2) October 1, 2019
* (2) July 26, 2013
* (1) July 2, 2014
* (1) July 30, 2018
* (1) August 16, 2019
August 16, 2025
—
July 2, 2022
January 27, 2024
August 10, 2024
May 17, 2025
July 24, 2026
August 16, 2027
May 16, 2022
May 22, 2023
October 1, 2023
July 24, 2024
August 16, 2027
October 1, 2030
—
July 2, 2022
July 30, 2026
August 16, 2027
*
(1)
(2)
The RSUs, options and other rights or interests under the Partner Capital Investment Plan to acquire ordinary shares in
aggregate held by each of these directors and executive officers and their affiliates represent less than 1% of our total
outstanding shares.
Represents RSUs.
Represents rights or interests under the Partner Capital Investment Plan. See note 9(c) to our audited consolidated financial
statements included in this annual report for further information.
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(3)
(4)
Represents options.
Date of grant represents the original grant date of the RSUs, options and other rights held by the respective director or
executive officer. RSUs and options granted prior to the adoption of our 2014 Plan that are not held by a U.S. resident were
canceled and replaced with a new grant under the terms of the 2014 Plan (as described herein) with terms and conditions that
are substantially similar to those that applied to the canceled awards.
C. Board Practices
Nomination and Terms of Directors
Pursuant to our Articles of Association, our board of directors is classified into three classes of directors designated as
Group I, Group II and Group III, each generally serving a three-year term unless earlier removed. The Group I directors
currently consist of Joe Tsai, Michael Evans, Eric Jing and E. Börje Ekholm; the Group II directors currently consist of
Daniel Zhang, Chee Hwa Tung, Jerry Yang and Wan Ling Martello; and the Group III directors currently consist of Jack
Ma and Walter Kwauk. The terms of office of the current Group I, Group II and Group III directors will expire,
respectively, at our 2021 annual general meeting, 2022 annual general meeting and 2020 annual general meeting. Unless
otherwise determined by the shareholders in a general meeting, our board will consist of not less than nine directors for
so long as SoftBank has a director nomination right. The Alibaba Partnership has the exclusive right to nominate up to a
simple majority of our board of directors, and SoftBank has the right to nominate one director for so long as SoftBank
owns at least 15% of our outstanding shares. If at any time our board of directors consists of less than a simple majority
of directors nominated or appointed by the Alibaba Partnership for any reason, including because a director previously
nominated by the Alibaba Partnership ceases to be a member of our board of directors or because the Alibaba Partnership
had previously not exercised its right to nominate or appoint a simple majority of our board of directors, the Alibaba
Partnership shall be entitled (in its sole discretion) to appoint such number of additional directors to the board as
necessary to ensure that the directors nominated or appointed by the Alibaba Partnership comprise a simple majority of
our board of directors. The remaining members of the board of directors will be nominated by the nominating and
corporate governance committee of the board. Director nominees will be elected by the simple majority vote of
shareholders at our annual general meeting.
If a director nominee is not elected by our shareholders or departs our board of directors for any reason, the party or
group entitled to nominate that director has the right to appoint a different person to serve as an interim director of the
class in which the vacancy exists until our next scheduled annual general meeting of shareholders. At the next scheduled
annual general meeting of shareholders, the appointed interim director or a replacement director nominee (who, in the
case of Alibaba Partnership nominees, cannot be the original nominee) will stand for election for the remainder of the
term of the class of directors to which the original nominee would have belonged.
For additional information, see “Item 6. Directors, Senior Management and Employees — A. Directors and Senior
Management — Alibaba Partnership” and “Item 7. Major Shareholders and Related Party Transactions — B. Related
Party Transactions — Transactions and Agreements with SoftBank — Voting Agreement.”
Code of Ethics and Corporate Governance Guidelines
We have adopted a code of ethics, which is applicable to all of our directors, executive officers and employees. Our code
of ethics is publicly available on our website.
In addition, our board of directors has adopted a set of corporate governance guidelines covering a variety of matters,
including approval of related party transactions. Our corporate governance guidelines also provide that any adoption of a
new equity incentive plan and any material amendments to those plans will be subject to the approval of our non-
executive directors and also provide that the director nominated by SoftBank is entitled to notices and materials for all
meetings of committees of our board of directors and, by giving prior notice, may attend, observe and participate in any
discussions at any committee meetings. The guidelines reflect certain guiding principles with respect to our board’s
structure, procedures and committees. The guidelines are not intended to change or interpret any applicable law, rule or
regulation or our Articles of Association.
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Duties of Directors
Under Cayman Islands law, all of our directors owe us fiduciary duties, including a duty of loyalty, a duty to act honestly
and a duty to act in good faith and in a manner they believe to be in our best interests. Our directors also have a duty to
exercise the skill they actually possess and the care and diligence that a reasonably prudent person would exercise in
comparable circumstances. In fulfilling their duty of care to us, our directors must ensure compliance with our Articles of
Association, as amended and restated from time to time. We have the right to seek damages if a duty owed by any of our
directors is breached.
Board Committees
Our board of directors has established an audit committee, a compensation committee and a nominating and corporate
governance committee. Our corporate governance guidelines provide that a majority of the members of our compensation
committee and nominating and corporate governance committee will be independent directors within the meaning of
Section 303A of the NYSE Listed Company Manual. All members of our audit committee are independent within the
meaning of Section 303A of the NYSE Listed Company Manual and meet the criteria for independence set forth in
Rule 10A-3 of the U.S. Exchange Act.
Audit Committee
Our audit committee currently consists of Walter Kwauk, E. Börje Ekholm and Wan Ling Martello. Mr. Kwauk is the
chairman of our audit committee. Mr. Kwauk satisfies the criteria of an audit committee financial expert as set forth
under the applicable rules of the SEC. Mr. Kwauk, Mr. Ekholm and Ms. Martello satisfy the requirements for an
“independent director” within the meaning of Section 303A of the NYSE Listed Company Manual and meet the criteria
for independence set forth in Rule 10A-3 of the U.S. Exchange Act.
The audit committee oversees our accounting and financial reporting processes and the audits of our financial statements.
Our audit committee is responsible for, among other things:
●
●
●
●
●
●
●
selecting, and evaluating the qualifications, performance and independence of, the independent auditor;
pre-approving or, as permitted, approving auditing and non-auditing services permitted to be performed by
the independent auditor;
considering the adequacy of our internal accounting controls and audit procedures;
reviewing with the independent auditor any audit problems or difficulties and management’s response;
reviewing and approving related party transactions between us and our directors, senior management and
other persons specified in Item 6B of Form 20-F as required by the U.S. Exchange Act;
reviewing and discussing the quarterly financial statements and annual audited financial statements with
management and the independent auditor;
establishing procedures for the receipt, retention and treatment of complaints received from our employees
regarding accounting, internal accounting controls or auditing matters and the confidential, anonymous
submission by our employees of concerns regarding questionable accounting or auditing matters;
● meeting separately, periodically, with management, internal auditors and the independent auditor; and
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●
reporting regularly to the full board of directors.
Compensation Committee
Our compensation committee currently consists of Jerry Yang, Walter Kwauk and Joe Tsai. Mr. Yang is the chairman of
our compensation committee. Mr. Yang and Mr. Kwauk satisfy the requirements for an “independent director” within the
meaning of Section 303A of the NYSE Listed Company Manual.
Our compensation committee is responsible for, among other things:
●
●
●
●
●
●
●
determining the amount of the annual cash bonus pool to be allocated to each executive officer and
determining the total proportions of the annual cash bonus pool to be allocated in aggregate to the non-
partner members of our management and in aggregate to the partners we employ;
reviewing, evaluating and, if necessary, revising our overall compensation policies;
reviewing and evaluating the performance of our directors and executive officers and determining the
compensation of our directors and executive officers;
reviewing and approving our executive officers’ employment agreements with us;
determining performance targets for our executive officers with respect to our incentive compensation plan
and equity-based compensation plans;
administering our equity-based compensation plans in accordance with the terms thereof; and
carrying out other matters that are specifically delegated to the compensation committee by our board of
directors from time to time.
Nominating and Corporate Governance Committee
Our nominating and corporate governance committee currently consists of Jack Ma, Chee Hwa Tung and Jerry Yang.
Jack is the chairman of our nominating and corporate governance committee. Mr. Tung and Mr. Yang satisfy the
“independence” requirements of Section 303A of the NYSE Listed Company Manual.
Our nominating and corporate governance committee is responsible for, among other things:
●
●
selecting the board nominees (other than the director nominees to be nominated by the Alibaba Partnership
and SoftBank) for election by the shareholders or appointment by the board;
periodically reviewing with the board the current composition of the board with regards to characteristics
such as independence, knowledge, skills, experience and diversity;
● making recommendations on the frequency and structure of board meetings and monitoring the functioning
of the committees of the board; and
●
advising the board periodically with regards to significant developments in corporate governance law and
practices as well as our compliance with applicable laws and regulations, and making recommendations to
the board on corporate governance matters.
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Committee Observer
In accordance with our Articles and the voting agreement entered into among us, Jack Ma, Joe Tsai, SoftBank and
Altaba, we have agreed that the director nominated by SoftBank is entitled to receive notices and materials for all
meetings of our committees and to join as an observer in meetings of the audit committee, the compensation committee,
the nominating and corporate governance committee and/or our other board committees we may establish upon notice to
the relevant committee.
D. Employees
As of March 31, 2018, 2019 and 2020, we had a total of 66,421, 101,958 and 117,600 full-time employees, respectively.
The increase in our employees was primarily due to our recent acquisitions and consolidation of certain businesses, as
well as our organic business growth. A substantial majority of our employees are based in China.
We believe that we have a good working relationship with our employees and we have not experienced any significant
labor disputes.
E. Share Ownership
For information regarding the share ownership of our directors and officers, see “Item 7. Major Shareholders and Related
Party Transactions — A. Major Shareholders.” For information as to stock options granted to our directors, executive
officers and other employees, see “Item 6. Directors, Senior Management and Employees — B. Compensation — Equity
Incentive Plans.”
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. Major Shareholders
The following table sets forth information with respect to beneficial ownership of our ordinary shares as of July 2, 2020,
except otherwise noted, by:
●
●
●
each of our directors and executive officers;
our directors and executive officers as a group; and
each person known to us to beneficially own 5% or more of our ordinary shares.
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Beneficial ownership is determined in accordance with the rules and regulations of the SEC and includes the power to
direct the voting or the disposition of the securities or to receive the economic benefit of the ownership of the securities.
In computing the number of shares beneficially owned by a person and the percentage ownership of that person, we have
included Shares underlying the ADSs and Shares in CCASS held by the person, as well as Shares that the person has the
right to acquire within 60 days of this annual report, including through the vesting of RSUs and the exercise of any
option, or other right or interest. These Shares, however, are not included in the computation of the percentage ownership
of any other person. The calculations of percentage ownership in the table below are based on 21,637,305,224 ordinary
shares outstanding as of July 2, 2020.
Name
Directors and Executive Officers:
Ordinary shares
beneficially owned
Percent
Daniel Yong ZHANG
Jack Yun MA(1)
Joseph C. TSAI(2)
J. Michael EVANS
Eric Xiandong JING
Chee Hwa TUNG
Walter Teh Ming KWAUK
Jerry YANG
E. Börje EKHOLM
Wan Ling MARTELLO
Maggie Wei WU
Judy Wenhong TONG
Li CHENG
Jeff Jianfeng ZHANG
Sophie Minzhi WU
Sara Siying YU
Jessie Junfang ZHENG
Chris Pen-hung TUNG
Trudy Shan DAI
Fan JIANG
Luyuan FAN
All directors and executive officers as a group
Greater than 5% Beneficial Owners:
SoftBank(3)
Notes:
*
1,043,831,112
347,617,584
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
1,596,978,496
*
4.8%
1.6%
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
7.4%
5,390,066,968
24.9%
*
This person beneficially owns less than 1% of our outstanding ordinary shares.
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(1)
(2)
(3)
Represents (i) 3,712,256 ordinary shares held directly by Jack Ma, (ii) 280,000,000 ordinary shares held by APN Ltd., a Cayman
Islands company with its registered address at Fourth Floor, One Capital Place, P.O. Box 847, Grand Cayman, KY1-1103,
Cayman Islands, in which Jack holds a 70% equity interest, which ordinary shares, together with Jack’s equity interest in APN
Ltd., have been pledged to us to support certain obligations under the SAPA, (iii) 68,847,192 ordinary shares held by Yun Capital
Limited, a British Virgin Islands company with its registered address at Woodbourne Hall, Road Town, Tortola, British Virgin
Islands, which has granted Jack a revocable proxy over these shares and which is wholly-owned by The Jack Ma Philanthropic
Foundation, (iv) 68,847,192 ordinary shares held by Ying Capital Limited, a British Virgin Islands company with its registered
address at Woodbourne Hall, Road Town, Tortola, British Virgin Islands, which has granted Jack a revocable proxy over these
shares and which is wholly owned by The Jack Ma Philanthropic Foundation, (v) 340,131,624 ordinary shares held by JC
Properties Limited, a British Virgin Islands company with its registered address at Woodbourne Hall, Road Town Tortola, British
Virgin Islands, which is wholly-owned by a trust the beneficiaries of which are Jack and his family and (vi) 282,292,848 ordinary
shares held by JSP Investment Limited, a British Virgin Islands company with the address of P.O. Box 916, Woodbourne Hall,
Road Town, Tortola, British Virgin Islands, which is wholly-owned by a trust the beneficiaries of which are Jack’s family.
Excludes shares held by SoftBank representing SoftBank’s share ownership in excess of 30% of our outstanding ordinary shares
as of the most recent record date with respect to any shareholders action, over which Jack and Joe will share voting power
pursuant to the voting agreement that we, Jack, Joe, SoftBank and Altaba entered into as described in “Item 7. Major
Shareholders and Related Party Transactions — B. Related Party Transactions — Transactions and Agreements with SoftBank —
Voting Agreement.” Jack has historically voted the ordinary shares held by the family trusts and he is deemed a beneficial owner
of the ordinary shares held by the family trusts. Jack does not have any pecuniary interests in the 137,694,384 ordinary shares
held by Yun Capital Limited and Ying Capital Limited. Jack’s business address is 969 West Wen Yi Road, Yu Hang District,
Hangzhou 311121, the People’s Republic of China.
Represents (i) 34,400 ordinary shares held directly by Joe Tsai, (ii) 120,000,000 ordinary shares held by APN Ltd., in which Joe
holds a 30% equity interest and serves as a director, which ordinary shares, together with Joe’s equity interest in APN Ltd., have
been pledged to us to support certain obligations under the SAPA, (iii) 32,658,344 ordinary shares held by Joe and Clara Tsai
Foundation Limited, a company incorporated under the law of the Island of Guernsey with its registered address at Helvetia
Court, South Esplanade, St. Peter Port, Guernsey GY1 4EE, that has granted Joe a revocable proxy over these shares and which is
wholly-owned by Joe and Clara Tsai Foundation, (iv) 153,385,672 ordinary shares held by Parufam Limited, a Bahamas
corporation with its registered address at Suite 200B, 2nd Floor, Centre of Commerce, One Bay Street, P.O. Box N-3944, Nassau,
Bahamas, and over which, Joe, as a director of Parufam Limited, has been delegated sole voting and disposition power and (v)
41,539,168 ordinary shares held by PMH Holding Limited, a British Virgin Islands corporation with its registered address at
Trident Chambers, P.O. Box 146, Road Town, Tortola, British Virgin Islands, and over which, Joe, as sole director of PMH
Holding Limited, has voting and dispositive power. Excludes shares held by SoftBank representing SoftBank’s share ownership
in excess of 30% of our outstanding ordinary shares as of the most recent record date with respect to any shareholders action, over
which Joe and Jack will share voting power pursuant to the voting agreement that we, Jack, Joe, SoftBank and Altaba have
entered into as described in “Item 7. Major Shareholders and Related Party Transactions — B. Related Party Transactions —
Transactions and Agreements with SoftBank — Voting Agreement.” Joe does not have any pecuniary interests in the 32,658,344
ordinary shares held by Joe and Clara Tsai Foundation Limited. Joe’s business address is 26/F Tower One, Times Square, 1
Matheson Street, Causeway Bay, Hong Kong S.A.R., the People’s Republic of China.
Represents (i) 2,558,316,568 ordinary shares owned by SoftBank Group Corp. with its registered office at 1-9-1 Higashi-
Shimbashi, Minato-ku, Tokyo 105-7303, Japan, (ii) 102,590,400 ordinary shares owned by West Raptor Holdings, LLC with its
registered office at 251 Little Falls Drive, Wilmington, New Castle County, DE 19808, (iii) 1,360,000,000 ordinary shares owned
by Skywalk Finance GK with its registered office at 1-9-1 Higashi-Shimbashi, Minato-ku, Tokyo 105-7303, Japan,
(iv) 532,468,840 ordinary shares owned by Skybridge LLC with its registered office at 103 Foulk Road, Suite 202, Wilmington,
Delaware 19803, (v) 108,160,000 ordinary shares owned by Skylark 2020 Holdings Limited with its registered office at Cayman
Corporate Centre, 27 Hospital Road, George Town, Grand Cayman KY1-9008, Cayman Islands, (vi) 288,000,000 ordinary shares
owned by West Raptor Holdings 2, LLC with its registered office at 103 Foulk Road, Suite 202, Wilmington, Delaware 19803,
and (vii) 440,531,160 ordinary shares owned by SoftBank Group Japan Corporation with its registered office at 1-9-1 Higashi-
Shimbashi, Minato-ku, Tokyo 105-7303, Japan.
We have one class of ordinary shares, and each holder of our ordinary shares is entitled to one vote per share.
As of July 2, 2020, 21,637,305,224 of our ordinary shares were outstanding. To our knowledge, 13,223,981,592 ordinary
shares, representing approximately 61% of our total outstanding shares, were held by 189 record shareholders with
registered addresses in the United States, including brokers and banks that hold securities in street name on behalf of their
customers. We are not aware of any arrangement that may at a subsequent date, result in a change of control of our
company.
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B. Related Party Transactions
Our Related Party Transaction Policy
In order to prevent risks of conflicts of interest or the appearance of conflicts of interest, all of our directors and
employees are subject to our code of business conduct and other policies which require, among other things, that any
potential transaction between us and an employee or director, their relatives and closely connected persons and certain
entities in which they, their relatives or closely connected persons have an interest be approved in writing by an
appropriate supervisor or compliance officer.
We have also adopted a related party transaction policy to which all of our directors, senior management and other key
management personnel, all close family members (as defined in the policy) of the foregoing individuals, Ant Group and
its subsidiaries as well as the Alibaba Partnership and certain other related entities are subject. Related party transactions
defined under this policy, as required by Form 20-F, include transactions with our directors, senior management and
major shareholders and their affiliates, as well as transactions with parties that do not pose risks of conflicts of interest,
such as transactions with our investee companies that are not otherwise affiliated with any of the foregoing individuals.
This policy is intended to supplement the procedures set forth in our code of business conduct and our other corporate
governance policies and does not exempt any person from more restrictive provisions that may exist in our existing
procedures and policies.
This related party transaction policy provides, among other things, that, unless otherwise pre-approved by our board
of directors:
●
●
each related party transaction, and any material amendment or modification to a related party transaction,
shall be adequately disclosed to, and reviewed and approved or ratified by, our audit committee or any
committee composed solely of disinterested independent directors or by the disinterested members of such
committee; and
any employment relationship or similar transaction involving our directors or senior management and any
related compensation shall be approved by the disinterested members of our compensation committee or
recommended by the disinterested members of the compensation committee to our board for its approval.
Our related party transaction policy, code of business conduct and our other corporate governance policies are subject to
periodic review and revision by our board.
Summary of Major Related Party Transactions
As disclosed in greater detail in the following paragraphs, the table below summarizes the major related party
transactions in fiscal years 2018, 2019 and 2020.
Related Party
SoftBank
Transaction Description
● Voting agreement among us, Jack Ma, Joe Tsai, SoftBank and Altaba
which, among others, provides that SoftBank, Altaba, Jack Ma and Joe
Tsai will vote their shares in favor of the Alibaba Partnership director
nominees, and provides SoftBank with the right to nominate a director.
● Various investments involving SoftBank.
Ant Group and its
● Alipay provides payment and escrow services to us.
affiliates
●
The SAPA, which was amended in 2018 and 2019, provides a series of
transactions, including our acquisition of the 33% equity interest in Ant
Group.
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Related Party
Transaction Description
●
The 2014 IPLA, an amendment to which was subsequently entered into
in 2019 upon our receipt of the 33% equity interest in Ant Group, or the
Amended IPLA, provides that we and our subsidiaries license to Ant
Group and/or its subsidiaries certain intellectual property rights and
provide various software technology services, and, prior to our receipt of
the 33% equity interest in Ant Group, Ant Group paid us profit share
payments; pursuant to the SAPA, a cross-license agreement was entered
into in September 2019 upon our receipt of the 33% equity interest in
Ant Group.
● We, Ant Group, our controlled affiliates and certain other affiliates,
contribute all data collected or generated (subject to applicable law,
industry rules and contractual requirements) to a data platform that we
operate and maintain, and to which all of the full data sharing
participants will have access.
● We and Ant Group cooperate with each other with respect to the
enforcement of each other’s rights and the provision of certain financial
services to our customers and merchants in connection with the SME
loan business.
● We granted Ant Group a license for it to continue to use certain
trademarks and domain names.
● We and Ant Group provide certain administrative and support services
to each other and our respective affiliates.
● We and Ant Group provide various other services to each other.
● Various investments involving Ant Group.
● We have awarded RSUs and granted options to acquire our ordinary
shares to employees of Ant Group; Junhan, a major equity holder of Ant
Group has granted share-based awards linked to the valuation of Ant
Group to certain of our employees; Ant Group, has granted RSUs and
share appreciation rights tied to the value of Ant Group to certain of our
employees.
●
In June 2020, we, Ant Group and Junhan entered into equity-based
awards grant and settlement agreements pursuant to which the parties
will settle with each other the cost associated with the equity-based
awards granted to each other’s employees.
Alibaba Pictures
● We subscribed for newly issued ordinary shares of Alibaba Pictures in
March 2019 and it became our consolidated subsidiary upon the
completion of the transaction.
Jack Ma, Joe Tsai,
and J. Michael
Evans
● We agreed to assume the cost of maintenance, crew and operation of
their respective personal aircrafts of these directors and officers where
the cost is allocated for business purposes.
Investment funds
● Various investments involving the Yunfeng Funds, investment funds
affiliated with Jack
Ma
affiliated with Jack Ma.
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Related Party
Jack Ma
Transaction Description
●
Jack Ma made certain commitments to us relating to his interest in Ant
Group, the Yunfeng Funds and other entities.
Cainiao Network
Before Cainiao Network became our consolidated subsidiary in October 2017:
● Cainiao Network provided logistics services to us; and
● We provided Cainiao Network with various administrative and support
services.
● We have commercial arrangements with certain of our investees and
other related parties to provide and receive certain cloud computing,
marketing, traffic acquisition, logistics and other services.
● We extended loans to and provided a guarantee for certain of our
investees.
● We have made co-investments with certain of our investees.
● We operate certain of our businesses in China through contractual
arrangements between our wholly-owned entities, our variable interest
entities and variable interest entity equity holders.
Investees
Variable interest
entities and
variable interest
entity equity
holders
Directors and
● We entered into indemnification agreements with our directors and
executive officers
executive officers.
● We entered into employment agreements with our directors and executive
officers.
● We grant equity incentive awards to our directors and executive officers.
The following table summarizes the services fees paid to certain related parties in fiscal years 2018, 2019 and 2020.
Related Party
Transaction
RMB RMB RMB US$
Year Ended March 31,
2018
2019
2020
Ant Group and its affiliates
Payment processing and
escrow services fee
Administrative and
support services
Marketplace software
technology services fee
and others (1)
Cainiao Network
Logistics service fee
(in millions)
6,295
8,252
8,723
1,232
84
80
124
18
1,248
1,810
3,437 N/A (2) N/A (2) N/A (2)
2,619
370
Notes:
(1)
(2)
Marketplace software technology services fee and others primarily relates to marketing support services in connection with
our retail marketplaces.
In October 2017, our equity interest in Cainiao Network increased to approximately 51% and it became one of our
consolidated subsidiaries. We currently own approximately 66% of the equity interest in Cainiao Network.
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Certain of our investees have entered into commercial arrangements with us in connection with certain logistics services
they provide to us. In fiscal years 2018, 2019 and 2020, we incurred costs and expenses of RMB5,608 million,
RMB12,933 million and RMB8,265 million (US$1,167 million), respectively, for these logistics services. In fiscal year
2020, these costs and expenses accounted for 2% of our costs and expenses.
Certain of our investees have also entered into commercial arrangements with us in connection with certain marketing
services they provide to our business. In fiscal years 2018, 2019 and 2020, we incurred costs and expenses of RMB760
million, RMB907 million and RMB1,146 million (US$162 million), respectively, for these marketing services. In fiscal
year 2020, these costs and expenses accounted for 0.3% of our costs and expenses.
Other than the foregoing, the aggregate service fees we paid to other related parties accounted for less than 1% of total
costs and expenses in each of fiscal years 2018, 2019 and 2020.
The following table summarizes the services fees received from related parties in fiscal year 2018, 2019 and 2020.
Related Party
Ant Group
Ant Group and its affiliates
Cainiao Network
Year Ended March 31,
2018
2019
2020
Transaction
RMB RMB RMB US$
(in millions)
Software technology
services fee and license fee
Reimbursement payment
for software technology
services fee
Annual fee for SME loan
business
Administrative and support
services
Cloud computing services
fee
Marketplace software
technology services fee and
others
Administrative and support
service fee
3,444
517
3,835
542
37
106
—
—
956
954
954
135
676
1,017
1,224
173
482
761
1,872
264
1,026
1,489
2,075
293
123 N/A (1) N/A (1) N/A (1)
Note:
(1)
In October 2017, our equity interest in Cainiao Network increased to approximately 51% and it became one of our
consolidated subsidiaries. We currently own approximately 66% of the equity interest in Cainiao Network.
We have entered into commercial arrangements with certain of our investees related to logistics services. In fiscal years
2018, 2019 and 2020, we recognized revenue of RMB72 million, RMB261 million and RMB1,400 million (US$198
million), respectively, in connection with these services. In fiscal year 2020, this revenue accounted for 0.3% of our
revenue.
We have also entered into commercial arrangement with certain of our investees related to cloud computing services. In
fiscal years 2018, 2019 and 2020, we recognized revenue of RMB689 million, RMB1,111 million and RMB1,548 million
(US$219 million), respectively, for these cloud computing services. In fiscal year 2020, this revenue accounted for 0.3%
of our revenue.
Other than the related party transactions summarized above, the aggregate payments we received from other related
parties accounted for less than 1% of total revenue in each of the fiscal years 2018, 2019 and 2020.
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Transactions and Agreements with SoftBank
Voting Agreement
We have entered into a voting agreement with Jack Ma, Joe Tsai, SoftBank and Altaba, which provides SoftBank with
the right to nominate one director to our board of directors who will, subject to certain conditions, have the right to
receive notices and materials for all meetings of our committees and to join these meetings as an observer, which rights
are also reflected in our Memorandum and Articles of Association. These nomination rights will terminate when
SoftBank’s shareholding declines below 15% of our outstanding shares. The voting agreement also contains provisions to
the effect that:
●
SoftBank agrees to:
●
●
vote its shares in favor of the election of the Alibaba Partnership’s director nominees at each annual
general shareholders meeting until SoftBank’s shareholding declines below 15% of our outstanding
shares, and
grant the voting power of any portion of its shareholdings exceeding 30% of our outstanding ordinary
shares to Jack and Joe by proxy;
●
Jack and Joe will vote their shares and any other shares over which they hold voting rights in favor of the
election of the SoftBank director nominee at each annual general shareholders meeting in which the
SoftBank nominee stands for election until SoftBank’s shareholding declines below 15% of our outstanding
ordinary shares;
● Altaba agrees to:
●
●
vote its shares in favor of the election of all of the Alibaba Partnership’s director nominees and the
SoftBank director nominee, if so standing for election, at each annual general shareholders meeting
until SoftBank’s shareholding declines below 15% of our outstanding shares, and
grant the voting power over any shares it owns, up to 972 million of our ordinary shares, to Jack and
Joe by proxy;
●
●
each party to the voting agreement will use its commercially reasonable efforts to cause any other person
with whom it jointly files a statement (or an amendment to a statement) on Schedule 13D or Schedule 13G
pursuant to the U.S. Exchange Act to become a party to the voting agreement and vote its shares in favor of
SoftBank’s and the Alibaba Partnership’s director nominees pursuant to the foregoing; and
SoftBank and Altaba will receive certain information rights in connection with the preparation of their
financial statements.
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SoftBank’s and Altaba’s proxy obligations described in the second sub-bullet under each of the first and third bullets
above, respectively, shall (a) not apply in respect of any proposal submitted to our shareholders that may result in an
issuance of shares or other equity interests of us, including securities exchangeable or convertible into shares, that would
increase the amount of our then-outstanding shares by 3% or more and (b) terminate when Jack owns less than 1% of our
outstanding shares on a fully diluted basis or if we materially breach the voting agreement. Based on publicly disclosed
information, as of the date of this annual report, Altaba no longer holds any Shares.
Investments Involving SoftBank
We have invested in businesses in which SoftBank or one or more of its affiliates is a shareholder or co-invested with
SoftBank or one or more of its affiliates in other businesses. SoftBank has also invested in businesses in which we or our
controlled entities are shareholders. For instance, in April 2017, SoftBank participated in a new round of equity financing
completed by Didi Chuxing, in which we hold an equity interest. In September 2017, we sold a portion of our investment
in Didi Chuxing to SoftBank for cash consideration of US$639 million. In December 2018, an investment fund affiliated
with SoftBank agreed to acquire a minority equity interest in our local services holding company. We may continue to
co-invest with SoftBank, invest in businesses in which SoftBank is already an existing investor, and may also bring
SoftBank as an investor into our new businesses or businesses in which we are an existing investor.
Agreements and Transactions Related to Ant Group and Its Subsidiaries
Ownership of Ant Group and Alipay
We originally established Alipay in December 2004 to operate our payment services business. In June 2010, the PBOC
issued new regulations that required non-bank payment companies to obtain a license in order to operate in China. These
regulations provided specific guidelines for license applications only for domestic PRC-owned entities. These regulations
stipulated that, in order for any foreign-invested payment company to obtain a license, the scope of business, the
qualifications of any foreign investor and any level of foreign ownership would be subject to future regulations to be
issued, which in addition would require approval by the PRC State Council. Furthermore, the regulations required that
any payment company that failed to obtain a license must cease operations by September 1, 2011. Although Alipay was
prepared to submit its license application in early 2011, at that time the PBOC had not issued any guidelines applicable to
license applications for foreign-invested payment companies. In light of the uncertainties relating to the license
qualification and application process for a foreign-invested payment company, our management determined that it was
necessary to restructure Alipay as a company wholly-owned by PRC citizens in order to avail Alipay of the specific
licensing guidelines applicable only to domestic PRC-owned entities. Accordingly, we divested all of our interest in and
control over Alipay in 2011, which resulted in deconsolidation of Alipay from our financial statements. This action
enabled Alipay to obtain a payment business license in May 2011 without delay and without any detrimental impact to
our China retail marketplaces or to Alipay.
Following the divestment of our interest in and control over Alipay, effective in the first calendar quarter of 2011, the
ownership structure of Alipay’s parent entity, Ant Group, was changed so that Jack Ma held a substantial majority of the
equity ownership interest in Ant Group. The ownership structure of Ant Group has subsequently been further
restructured. Ant Group has also completed several rounds of equity financing. Pursuant to the SAPA entered into in
August 2014 and amended in February 2018 and September 2019, we agreed to acquire a 33% equity interest in Ant
Group and terminate the profit share payments that we were receiving from Ant Group at the time, subject to the
satisfaction of closing conditions set forth in the SAPA. In September 2019, we received a newly issued 33% equity
interest in Ant Group following the satisfaction of the closing conditions set forth in the SAPA. As of March 31, 2020,
Junhan and Junao held approximately 50% of Ant Group’s equity interest, we held 33% and other shareholders held the
remaining equity interest.
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Economic interests of Ant Group through Junhan are owned by Jack Ma, Simon Xie and other employees of us and Ant
Group and its affiliates and investee companies. These economic interests are in the form of limited partnership interests
and interests similar to share appreciation rights tied to potential appreciation in the value of Ant Group. The economic
interests in Junao are held in the form of limited partnership interests by certain members of the Alibaba Partnership.
We understand that it is the intention of the shareholders of Ant Group that:
●
Jack Ma’s direct and indirect economic interest in Ant Group (for the avoidance of doubt, other than the
equity stake in Ant Group held by our company) will be reduced over time to a percentage that does not
exceed his and his affiliates’ interest in our company as of the time immediately prior to the completion of
our initial public offering (the percentage of our ordinary shares Jack and his affiliates beneficially owned
immediately prior to the completion of our initial public offering was 8.8%) and that this reduction will be
caused in a manner by which neither Jack nor any of his affiliates would receive any economic benefit. See
“— Commitments of Jack Ma to Alibaba Group.” We have been informed by Ant Group that the proposed
reduction of Jack’s economic interest is expected to be accomplished through a combination of future
equity-based incentive awards to employees and dilutive issuances of equity in Ant Group, among others;
●
from time to time, additional economic interests in Ant Group in the form of interests similar to share
appreciation rights issued by Junhan will be transferred to employees of Ant Group and our employees; and
● Ant Group may raise equity capital from investors in the future in order to finance its business expansion,
with the effect that the shareholding of Junao and Junhan in Ant Group will be reduced through dilution
(the amount of dilution would depend on future valuations and the amount of equity capital to be raised).
Jack Ma is able to exercise the voting power of Junao and Junhan, two of the major shareholders of Ant Group, because
he owns 100% of the general partner of both Junao and Junhan.
Our Commercial Arrangements with Ant Group and Alipay
After the divestment of our interest in and control over Alipay, we entered into a framework agreement in July 2011, or
the 2011 framework agreement, with SoftBank, Altaba, Alipay, Ant Group, Jack Ma and Joe Tsai and certain of their
affiliates. At the same time, we also entered into various implementation agreements that included a commercial
agreement, or the Alipay commercial agreement, an intellectual property license and software technology service
agreement, or the 2011 IPLA, and a shared services agreement, which together governed our financial and commercial
relationships with Ant Group and Alipay.
Alipay Commercial Agreement
Under the Alipay commercial agreement among us, Alipay and Ant Group, which agreement still remains in place
following the 2014 restructuring and the 2018 and 2019 amendments to our agreements with Ant Group, each as
described below, Alipay provides payment processing and escrow services to us. These services enable settlement of
transactions on our marketplaces through a secure payment platform and escrow process. We pay Alipay a fee for these
services on terms that are preferential to us. These preferential terms enable us, with certain exceptions, to make available
basic payment processing and escrow services to consumers and merchants on our marketplaces free of charge. We
believe that these services provide us with a competitive advantage that otherwise would be diminished without the
preferential terms of the Alipay commercial agreement.
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The fees that we pay Alipay are based on fee rates and actual payment volumes processed on our marketplaces. The fee
rates reflect, among other things, Alipay’s bank-processing costs and operating costs allocable to the services provided to
us, and accordingly are subject to adjustment on an annual basis to the extent these costs increase or decline. In
connection with the 2014 restructuring, the Alipay commercial agreement was amended to provide that a special
independent committee formed by our independent directors and the director designated by SoftBank, or the Independent
Committee, must approve the fee rates in advance on an annual basis. The fee rates for the immediately preceding year
remain in effect until such time as the annual approval by the Independent Committee has been obtained. In fiscal years
2018, 2019 and 2020, service fees in connection with the payment services provided by Alipay amounted to RMB6,295
million, RMB8,252 million and RMB8,723 million (US$1,232 million), respectively, under this agreement. The Alipay
commercial agreement has an initial term of 50 years, and is automatically renewable for further periods of 50 years,
subject to our right to terminate at any time upon one year’s prior written notice. If the Alipay commercial agreement is
required by applicable regulatory authorities, including under stock exchange listing rules, to be modified in certain
circumstances, a one-time payment may be payable to us by Ant Group to compensate us for the impact of the
adjustment. Certain conforming amendments were made to the Alipay commercial agreement as part of the relevant
amendments to our agreements with Ant Group and Alipay described below.
2014 Restructuring of Our Relationship with Ant Group and Alipay, Subsequent Amendments and 2019
Equity Issuance
On August 12, 2014, we entered into a share and asset purchase agreement, which together with all subsequent
amendments, we refer to as the SAPA, and entered into or amended certain ancillary agreements including an amendment
and restatement of the 2011 IPLA, or the 2014 IPLA. Pursuant to these agreements, we restructured our relationships
with Ant Group and Alipay and terminated the 2011 framework agreement. On February 1, 2018, we amended both the
SAPA and the Alipay commercial agreement, and agreed with Ant Group and certain other parties on forms of certain
ancillary agreements. On September 23, 2019, we further amended the SAPA. The relevant amendments were entered
into or agreed to facilitate our acquisition of a 33% equity interest in Ant Group.
Apart from the amended provisions described below, the key terms of our agreements with Ant Group and Alipay from
the 2014 Restructuring remain substantially unchanged.
Sale of SME Loan Business and Certain Other Assets
Pursuant to the SAPA, we sold certain securities and assets primarily relating to our SME loan business and other related
services to Ant Group in February 2015. In addition, pursuant to software system use and service agreements relating to
the know-how and related intellectual property that we agreed to sell together with the SME loan business and related
services, we will receive annual fees for a term of seven years, commencing in 2015. These fees, which are recognized as
other revenue, are determined as follows: for calendar years 2015 to 2017, the entities operating the SME loan business
paid an annual fee equal to 2.5% of the average daily balance of the SME loans provided by these entities, and in
calendar years 2018 to 2021, these entities will pay an annual fee equal to the amount of the fees paid in calendar year
2017. In fiscal years 2018, 2019 and 2020, the annual fees we received from Ant Group and its affiliates in connection
with the SME loan business amounted to RMB956 million, RMB954 million and RMB954 million (US$135 million),
respectively.
For regulatory reasons, we retained approximately RMB1,225 million of the existing SME loan portfolio upon the
completion of the transfer of the SME loan business. These loans have been repaid. We will not conduct any new SME
loan business going forward.
Issuance of Equity Interest
In September 2019, following the satisfaction of the closing conditions, we received through an onshore PRC subsidiary
the issuance of a 33% equity interest in Ant Group pursuant to the SAPA, or the Issuance. We believe that the acquisition
of the 33% equity interest in Ant Group will strengthen our strategic relationship pursuant to the series of agreements
initially reached with Ant Group in 2014.
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Pursuant to the SAPA, the consideration we paid to receive the newly issued 33% equity interest in Ant Group was fully
funded by payments from Ant Group and its subsidiaries to us in consideration for certain intellectual property and assets
that we transferred under the SAPA.
In connection with the receipt of the Issuance, we entered into a cross license agreement with Ant Group providing for a
license by each of Ant Group and us to each other of certain patents, trademarks, software and other technologies
(including but not limited to patents and software transferred at the Issuance closing). The cross license agreement also
contains provisions relating to cooperation and coordination between Ant Group and us on various intellectual property
matters, including prosecution, enforcement, acquisition, and joint defense arrangements, among other matters.
Upon closing of the Issuance, we entered into the previously agreed form of amendment and restatement of the 2014
IPLA, or the Amended IPLA, and the profit share payment arrangement under the 2014 IPLA automatically terminated.
For more information, see “— Alipay Intellectual Property License and Software Technology Services Agreement”
below.
Financial and Accounting Treatment Upon Issuance of Equity Interest in Ant Group
There is no material operational and economic impact on us as a result of our receipt of the 33% equity interest in Ant
Group, but we have changed our accounting for our relationship with Ant Group. The primary accounting impact and
changes in accounting treatment resulting from the completion of the Issuance consist of the following:
Termination of profit share and cash flow impact
Upon the Issuance, and our transfer of certain intellectual property to Ant Group and its subsidiaries, the profit share
arrangement under the 2014 IPLA was terminated. For the years ended March 31, 2018, 2019 and 2020, the profit share
payments recorded in “Other income, net” in our consolidated income statements amounted to RMB3,444 million,
RMB517 million and RMB3,835 million (US$542 million), respectively. Following our receipt of the Issuance, we will
no longer receive these cash inflows from Ant Group.
Equity method accounting
Upon the Issuance, we account for our equity interest in Ant Group under the equity method and record it in “Investment
in equity investees” on our consolidated balance sheet. In fiscal year 2020, we recognized a one-time gain of RMB71.6
billion (US$10.1 billion) in relation to the receipt of the 33% equity interest in Ant Group. Subsequent to the Issuance,
we will record our proportionate share of results of Ant Group in “Share of results of equity investees” in our
consolidated income statements on a one quarter in-arrears basis.
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Regulatory Unwind
The SAPA provides that, if a relevant governmental authority prohibits us from owning all or a portion of our equity
interest in Ant Group after the equity issuance has occurred through enactment of a law, rule or regulation, or explicitly
requires Ant Group to redeem this equity interest, and the prohibition or request is not subject to appeal and cannot
otherwise be resolved, then to the extent necessary, Ant Group will redeem the equity interest; the related intellectual
property and asset transfers, and ancillary transactions under the SAPA will be unwound; and the terms of the SAPA, the
2014 IPLA, and other related agreements will be restored, including the prior profit share payments and liquidity event
payment (which would be payable to us in the event of a qualified IPO of Ant Group or Alipay, in an amount equal to
37.5% of the equity value of Ant Group as a whole, immediately prior to the qualified IPO). If there is a partial unwind
where we retain a portion of our equity interest in Ant Group, but less than the full 33%, then pursuant to the terms of the
SAPA and the 2014 IPLA, the prior profit share payment arrangement and liquidity event payment amount will be
proportionately reduced based on the amount of equity interest retained by us.
Jack Ma and Joe Tsai contributed 280,000,000 and 120,000,000 of our Shares, after having accounted for the Share Split,
held by them to APN Ltd., a vehicle they established to hold these shares. The shares of APN Ltd., as well as the
400,000,000 Shares, after having accounted for the Share Split, held by APN Ltd., were pledged to us to secure the
liquidity event payment and certain other obligations of Ant Group under the SAPA and the Alipay commercial
agreement, as well as the direct liability of APN Ltd. for up to US$500 million of the liquidity event payment if any
liquidity event payment becomes due. These Shares remain pledged to us to secure certain obligations of Ant Group
under the SAPA and the Alipay commercial agreement.
Pre-emptive Rights
Following our receipt of equity interest in Ant Group, we have pre-emptive rights to participate in other issuances of
equity securities by Ant Group and certain of its affiliates prior to the time of a qualified IPO of Ant Group. These pre-
emptive rights entitle us to maintain the equity ownership percentage we hold in Ant Group immediately prior to any
such issuances. In connection with our exercise of our pre-emptive rights we are also entitled to receive certain payments
from Ant Group, effectively funding our subscription for these additional equity interests, up to a value of US$1.5 billion,
subject to certain adjustments, or the pre-emptive rights funded payments. In addition to these pre-emptive rights and the
pre-emptive rights funded payments, under the SAPA, in certain circumstances we are permitted to exercise pre-emptive
rights through an alternative arrangement that will further protect us from dilution.
Certain Restrictions on the Transfer of Ant Group Equity Interests
Under the SAPA and the Amended IPLA, certain parties thereto, including us in some cases, are subject to restrictions on
the transfer of equity interests in Ant Group, including:
●
following our receipt of the Issuance and until the earlier of a qualified IPO of Ant Group or the termination
of the independent director rights provided in the SAPA, none of Jack Ma, Joe Tsai (if he holds any equity
interest at that time), Junao, Junhan or Ant Group may knowingly transfer any equity in Ant Group to a
third-party who would thereby acquire more than 50% of the voting or economic rights in, or assets of, Ant
Group; and
●
any transfer of equity interests in Ant Group by Junao or Junhan, on the one hand, or our company, on the
other hand, will be subject to a right of first refusal by the other party.
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Non-competition Undertakings
Under the SAPA, subject to certain limitations and unless both parties agree, Ant Group may not engage in any business
conducted by us from time to time or logical extensions thereof, and we are restricted from engaging in specified
business activities within the scope of business of Ant Group, including the provision and distribution of credit facilities
and insurance, the provision of investment management and banking services, payment transaction processing and
payment clearing services, leasing, lease financing and related services, trading, dealing and brokerage with respect to
foreign exchange and financial instruments, distribution of securities, commodities, funds, derivatives and other financial
products and the provision of credit ratings, credit profiles and credit reports. Each party may, however, make passive
investments in competing businesses below specified thresholds, in some cases after offering the investment opportunity
to the other party.
Corporate Governance Provisions
The SAPA provides that we and Ant Group will recommend one independent nominee who Ant Group will nominate as
a member of its board, and Jack Ma, Joe Tsai (as long as he holds any equity interest in Ant Group), Junhan and Junao
will agree to vote the equity interests in Ant Group controlled by them in favor of the nomination. If this independent
director resigns or the director’s seat otherwise becomes vacant, so long as SoftBank owns at least 20% of our
outstanding ordinary shares, and certain other conditions are satisfied, SoftBank and Jack, acting jointly, will select on
our behalf the individual to be designated as a replacement director, subject to the approval of the Independent
Committee. This Independent Committee, which was formed pursuant to the SAPA, is required to approve certain actions
that we may take in connection with the SAPA and related agreements.
Upon the Issuance in September 2019, we nominated two of our officers who have been elected to the board of Ant
Group pursuant to our rights under the SAPA.
In each case, these director nomination rights will continue unless required to be terminated by applicable laws and
regulations or listing rules in connection with an Ant Group qualified IPO process or we cease to own a certain amount of
our post-issuance equity interests in Ant Group.
Additional Alibaba Rights
In addition to the rights discussed above, the SAPA provided us with certain other rights with respect to Ant Group.
These included, among others:
●
●
●
customary information rights;
approval rights over certain Ant Group or Alipay actions; and
rights to ensure our ability to participate in any qualified IPO of Ant Group.
Except as otherwise discussed “— Termination of Alibaba Rights” below, these rights have been substantially retained in
the SAPA. Following the Issuance in September 2019, the SAPA also provides the Independent Committee with
approval rights over:
●
increases to the size of the Ant Group board resulting in the number of board seats exceeding a certain
specific number; and
●
any Alipay IPO or equity issuance (other than in the context of an IPO).
Termination of Alibaba Rights
Under the SAPA certain of our rights with respect to Ant Group terminated upon our receipt of the Issuance.
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In addition, the SAPA provides that, in connection with Ant Group or Alipay commencing an IPO process, we and Ant
Group will discuss in good faith the amendment or termination of our rights to the extent necessary or advisable to
achieve an efficient and successful IPO. Certain of our rights that would be incremental to the rights of other shareholders
of Ant Group as of the consummation of the IPO (excluding, among other things, our information rights) will terminate if
required by a relevant stock exchange or governmental authority, or if necessary to obtain a legal opinion in connection
with the IPO application. If the IPO application is withdrawn or rejected by the relevant authorities, or if the IPO is not
consummated within a certain period of time, then any of our rights that were terminated or amended in anticipation of
the IPO will be restored.
Ancillary Agreements
In connection with our entry into the original SAPA in 2014, we also entered into the 2014 IPLA, a data sharing
agreement, an amended and restated shared services agreement, a SME loan cooperation framework agreement and a
trademark agreement, each of which is described below.
Pursuant to the SAPA, upon the Issuance we also entered into the Amended IPLA, a cross license agreement and various
intellectual property transfer agreements in connection with, and to implement, the contemplated intellectual property and
asset transfers described in “— Issuance of Equity Interest” above.
Alipay Intellectual Property License and Software Technology Services Agreement
2014 IPLA
Pursuant to the original 2011 framework agreement, we entered into the 2011 IPLA, pursuant to which we and our
subsidiaries licensed to Alipay certain intellectual property rights and provided various software technology services to
Alipay and its subsidiaries. In August 2014, we entered into the 2014 IPLA.
Under the 2011 IPLA, Alipay paid us a royalty and software technology services fee equal to the sum of an expense
reimbursement plus 49.9% of the consolidated pre-tax income of Alipay and its subsidiaries until a liquidity event of
Alipay or Ant Group. The calculation of the profit share percentage was subject to downward adjustments upon certain
dilutive equity issuances by Alipay or Ant Group. Under the 2014 IPLA, we received, in addition to a software
technology service fee, royalty streams related to Alipay and other current and future businesses of Ant Group, which we
refer to collectively as the profit share payments. The profit share payments were paid at least annually and equal the sum
of an expense reimbursement plus 37.5% of the consolidated pre-tax income of Ant Group (subject to certain
adjustments), including not only Alipay but all of Ant Group’s subsidiaries.
In fiscal years 2018, 2019 and 2020, under the 2014 IPLA, we recognized royalty and software technology services fees,
net of costs incurred by us, amounting to RMB3,444 million, RMB517 million and RMB3,835 million (US$542 million),
respectively, as other income, and the relevant expense reimbursement amounted to RMB37 million, RMB106 million
and nil, respectively, over the same periods.
Upon our receipt of the Issuance in September 2019, we entered into the Amended IPLA and terminated the 2014 IPLA.
Amended IPLA
Pursuant to the SAPA, we, Ant Group and Alipay entered into the Amended IPLA upon our receipt of the Issuance, at
which time we also transferred certain intellectual property and assets to Ant Group and its subsidiaries and the profit
share payment arrangement was terminated, as described in “— Issuance of Equity Interest” above.
While the profit share payments have terminated under the Amended IPLA, Ant Group may in certain circumstances
continue to make certain royalty payments to us (as agreed to by Ant Group and the Independent Committee), which may
be used as pre-emptive rights funded payments under the SAPA, as described in “— Pre-emptive Rights” above.
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Additionally, pursuant to the Amended IPLA, Ant Group and its subsidiaries will receive expanded rights to apply for,
register and manage certain intellectual property related to their businesses, subject to certain continuing restrictions and
our rights, and we will cease to provide certain software technology services to Ant Group and its subsidiaries.
The Amended IPLA will terminate upon the earliest of:
●
●
●
the full payment of all pre-emptive rights funded payments under the SAPA;
the closing of a qualified IPO of Ant Group or Alipay; and
our transfer to Ant Group of any remaining intellectual property we own that is exclusively related to the
business of Ant Group.
Data Sharing Agreement
We and Ant Group entered into a data sharing agreement in August 2014.
Pursuant to the data sharing agreement, we, our controlled affiliates and certain other affiliates, such as Ant Group, which
we refer to hereinafter as full data sharing participants, will contribute all data collected or generated as a result of the use
by users of our or their respective products or services (subject to applicable law, industry rules and contractual
requirements) to a data platform that we operate and maintain, and to which all of the full data sharing participants will
have access. A data platform management committee established by us and Ant Group may also approve noncontrolled
affiliates of us and Ant Group and unaffiliated third parties to have certain access to and contribute data to the platform,
subject to execution of a data platform participation agreement containing the terms and restrictions on access to and use
of the data sharing platform and shared data as the data management committee shall determine. No fees or other
compensation are required to be paid by any of the full data sharing participants for access to the data platform, other
than the obligation for participants to share in the costs of the operation of the data platform on a fair and reasonable
basis. The data sharing agreement provides that none of the participants may reproduce any of the data on the data
platform for transfer to their own servers, except that a participant may retain its own data that it has contributed to the
data platform.
The data sharing agreement initially had a minimum term of ten years. In May 2015, our board approved the extension of
the term of the agreement to a total of 50 years.
SME Loan Cooperation Framework Agreement
We and Ant Group entered into a SME loan cooperation framework agreement in August 2014, pursuant to which each
party agreed to cooperate with, and provide certain services with respect to, the other party’s enforcement of certain
rights of the other party against users of its platforms and services and with respect to the provision of certain financial
services to our customers and merchants. In particular, we agreed, upon Ant Group’s request, to close down or suspend
online storefronts and restrict marketing activities on our platforms of persons defaulting on loans made by Ant Group
and persons in violation of Alipay rules and regulations, and to publish notices on our platforms and provide information
regarding these persons, in each case in a manner to be further agreed upon from time to time. Ant Group agreed, upon
our request, to make loans and/or extensions of credit and related financial services available to our users, freeze and pay
over to us funds in accounts of users violating our rules and regulations or agreements with us, accelerate loans and
terminate credit facilities of these users, restrict marketing activities on its platforms by these users, and provide
information regarding these users, in each case in a manner to be further agreed upon from time to time. Neither party is
required to pay any fees in consideration for the services provided by the other party, and apart from the provision of
these services, there will be no other exchange of value in connection with this agreement. The cooperation agreement
has an initial term of five years, with automatic renewals upon expiry for additional five-year periods.
From time to time, we expect to enter into similar commercial arrangements with respect to cooperation matters and the
provision of services between us and Ant Group and to our respective customers.
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Trademark Agreement
We and Ant Group entered into a trademark agreement in August 2014, pursuant to which we granted Ant Group a non-
transferable, non-assignable and non-sublicensable (except to its subsidiaries) license for it and its sublicensed
subsidiaries to continue to use certain trademarks and domain names based on trademarks owned by us, in connection
with their payment services business and the SME loan business transferred by us to them, and in the same manner of use
as in August 2014, and a non-transferable, non-assignable and non-sublicensable (except to its subsidiaries) license to use
other trademarks and domain names based on trademarks owned by us, and in that manner, as we may agree to allow in
the future. Pursuant to the trademark agreement, each of the parties further agreed to the rights and limitations that each
would have to use the “Ali” name or prefix and the “e-commerce” (and its Chinese equivalent) name, prefix or logo as
part of a trademark or domain name in each party’s and its subsidiaries’ respective businesses. Neither party is required
to pay any fees under this agreement, and, apart from the licenses and rights set forth in the agreement, there will be no
other exchange of value in connection with this agreement. Pursuant to the SAPA, following our receipt of the Issuance,
we transferred to Ant Group ownership of several of the trademarks and domain names licensed by us to Ant Group.
However, the trademark agreement will remain in effect in accordance with its terms following the transaction to provide
for a continued license of other trademarks that we will continue to own.
Shared Services Agreement with Ant Group
We and Ant Group entered into a shared services agreement, which was amended and restated in August 2014 in
connection with the SAPA. Pursuant to the shared services agreement, we and Ant Group provide certain administrative
and support services to each other and our respective affiliates.
Service fees in connection with the administrative and support services provided by us to Ant Group and its affiliates
under the agreement amounted to RMB676 million, RMB1,017 million and RMB1,224 million (US$173 million) in
fiscal years 2018, 2019 and 2020, respectively. Service fees in connection with the administrative and support services
provided by Ant Group and its affiliates to us amounted to RMB84 million, RMB80 million and RMB124 million
(US$18 million) in fiscal years 2018, 2019 and 2020, respectively.
Other Commercial Arrangements with Ant Group
We also provide Ant Group and its affiliates with cloud computing services, marketplace software technology services
and other services. In fiscal years 2018, 2019 and 2020, under these arrangements, service fees in connection with
various services provided by us to Ant Group and its affiliates amounted to RMB1,503 million, RMB2,250 million and
RMB3,947 million (US$557 million), respectively. Meanwhile, Ant Group and its affiliates provide us with marketplace
software technology services and other services. In fiscal years 2018, 2019 and 2020, service fees in connection with the
marketplace software technology services and other services provided by Ant Group amounted to RMB1,810 million,
RMB1,248 million and RMB2,619 million (US$370 million), respectively.
Investments Involving Ant Group
We have invested in businesses in which Ant Group is a shareholder or co-invested with Ant Group in other businesses.
For instance, in September 2015, we established a joint venture under the brand name Koubei with Ant Group. We and
Ant Group injected certain related businesses into Koubei and each invested RMB3.0 billion in this joint venture. In
April and August 2017, we and Ant Group invested in the preferred shares of Ele.me, with our investment totaling
US$864 million. In December 2018, Ant Group participated in the integration of Ele.me and Koubei, and became a
minority shareholder of our local consumer services holding company. In addition, in May 2019, Ant Group agreed to
invest HK$454 million (US$59 million) for a 0.5% equity interest in Alibaba Health, our subsidiary listed on the Hong
Kong Stock Exchange. Ant Group is also a shareholder of both Paytm, a mobile payment platform in India, and Paytm
Mall, an e-commerce platform in India, both of which are our minority investees.
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Equity-based Award Arrangements
In order to encourage mutually beneficial cooperation, we have awarded RSUs and granted options to acquire our Shares
to employees of Ant Group. As of March 31, 2018, 2019 and 2020, there were 13,026,472, 15,051,708 and 15,655,840 of
our Shares, after having accounted for the Share Split, respectively, underlying unvested RSUs and outstanding options
held by employees of Ant Group.
We understand that Jack Ma, who effectively controls approximately 50% of the voting interest in Ant Group, believes
that providing equity-related awards to our employees tied to the success of Ant Group will enhance the value of our
business because of the strategic importance of Alipay to our marketplaces and because, through our strategic and
financial relationship with Ant Group, we have a significant participation in the profits and value accretion of Ant Group.
Since March 2014, Junhan, the general partner of which is an entity controlled by Jack Ma, has granted share-based
awards linked to the valuation of Ant Group to certain of our employees. In addition, Ant Group has granted RSUs and
share appreciation rights tied to the valuation of Ant Group to certain of our employees since April 2018. The awards
granted by Junhan will be settled by Junhan upon disposal of these awards by the holders. The awards granted by Ant
Group will be settled by Ant Group upon vesting or exercise of these awards. Junhan and Ant Group have the right to
repurchase the vested awards (or any underlying equity for the settlement of the vested awards) granted by them, as
applicable, from the holders upon an initial public offering of Ant Group or the termination of the holders’ employment
with us at a price to be determined based on the then fair market value of Ant Group.
Subsequent to our initial offering in 2014, we, Junhan and Ant Group entered into an arrangement, under which the
parties agreed that none of them had any obligation to pay any other party any expense relating to the cross-grant of
equity-based awards. In June 2020, we, Junhan and Ant Group entered into equity-based awards grant and settlement
agreements pursuant to which the parties will settle with each other the cost associated with the awards that will be
granted to each other’s employees. The payment amounts will depend on the relative values of Ant Group equity-based
awards that will be granted to our employees and our equity-based awards that will be granted to employees of Ant
Group under these arrangements.
Transactions with Alibaba Pictures
In March 2019, we subscribed for newly issued ordinary shares of Alibaba Pictures for a cash consideration of HK$1,250
million. Upon the completion of the transaction, our equity interest in Alibaba Pictures increased from approximately
49% to approximately 51%, and Alibaba Pictures became our consolidated subsidiary.
Transactions with Entities Affiliated with Our Directors and Officers
Jack Ma, one of our directors, Joe Tsai, our executive vice chairman, and J. Michael Evans, our president and director,
have purchased their own aircraft for both business and personal use. The use of the above-mentioned directors’ and
executive officers’ own aircrafts in connection with the performance of their duties is free of charge to us, and we have
agreed to assume the cost of maintenance, crew and operation of the aircraft where the cost is allocated for business
purposes.
Relationship with Investment Funds Affiliated with Jack Ma
Jack Ma currently holds minority interests in the general partners of a number of Yunfeng investment funds, in which he
is entitled to receive a portion of carried interest proceeds. We refer to these funds collectively as the Yunfeng Funds. He
also holds minority interests in certain investment advisor entities of certain Yunfeng Funds. In addition, Jack, his wife,
certain trusts established for the benefit of his family and certain entities controlled by Jack and his wife have committed,
or are expected to commit, funds to the general partners or as limited partners of certain Yunfeng Funds.
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Jack has either non-voting interests or has waived the exercise of his voting power with respect to his interests in each of
the investment advisor entities and the managing entities of certain Yunfeng Funds. Jack has also agreed to donate all
distributions of (x) carried interest proceeds he may receive in respect of the Yunfeng Funds and (y) dividends he may
receive with respect to his holdings of shares in any investment advisor entity of the Yunfeng Funds, which we
collectively refer to as the Yunfeng GP Distributions, to, or for the benefit of, the Alibaba Group Charitable Fund or other
entities identified by Jack that serve charitable purposes. In addition, Jack has agreed that, other than his income tax
obligations arising from recognition of income from Yunfeng GP Distributions, he will not claim any charitable
deductions with respect to donations of his Yunfeng GP Distributions against his other income tax obligations. See “—
Commitments of Jack Ma to Alibaba Group.” We believe that, through its expertise, knowledge base and extensive
network of contacts in private equity in China, Yunfeng Capital will assist us in developing a range of relevant strategic
investment opportunities.
The Yunfeng Funds have historically entered into co-investment transactions with us and third parties, such as our co-
investment in Beijing Easyhome Furnishing Chain Group Co., Ltd., one of the largest home improvement supplies and
furniture chains in the PRC (which subsequently became Easyhome New Retail Group Co., Ltd. following the
completion of a reverse takeover in December 2019). We have also invested in other businesses in which the Yunfeng
Funds are shareholders, such as our acquisition in March 2017 of all of the issued and outstanding shares of Damai, a
leading online ticketing platform for live events in China, in which an Yunfeng Fund was a shareholder.
Commitments of Jack Ma to Alibaba Group
Jack Ma, one of our directors, has confirmed the following commitments to our board of directors:
● He intends to reduce and thereafter limit his direct and indirect economic interest in Ant Group over time
(for the avoidance of doubt, other than the equity stake in Ant Group held by our company), to a percentage
that does not exceed his and his affiliates’ interest in our company immediately prior to our initial public
offering and that the reduction will occur in a manner by which neither Jack nor any of his affiliates would
receive any economic benefit;
● He will donate all of his Yunfeng GP Distributions to, or for the benefit of, the Alibaba Group Charitable
Fund or other entities identified by him that serve charitable purposes;
● Other than his income tax obligations arising from recognition of income from Yunfeng GP Distributions,
he will not claim any charitable deductions with respect to donations of his Yunfeng GP Distributions
against his other income tax obligations; and
●
If required by us, while he remains an Alibaba executive, he will assume for our benefit legal ownership of
investment vehicles, holding companies and variable interest entities that further our business interests in
Internet, media and telecom related businesses and, in this case, he will disclaim all economic benefits from
his ownership and enter into agreements to transfer any benefits to us (or as we may direct) when permitted
by applicable law.
Pledge for the Benefit of and Loan Arrangement with a Related Party
In May 2015, we entered into a pledge with a financial institution in the PRC in connection with certain wealth
management products with an aggregate principal amount of RMB7.3 billion we invested in to secure a RMB6.9 billion
financing provided by this financial institution to Simon Xie, one of our founders, to finance the minority investment by a
PRC limited partnership in Wasu, a company listed on the Shenzhen Stock Exchange and engaged in the business of
digital media broadcasting and distribution in China. In addition, we entered into a loan agreement for a principal amount
of up to RMB2.0 billion with Simon Xie in April 2015 to finance the repayment by Simon of the principal and interest
under this financing. These arrangements strengthened our strategic business cooperation with Wasu to enhance our
entertainment strategy. Our loan to Simon was made at an interest rate equal to SHIBOR as specified by us from time to
time and had a term of five years. The loan was secured by a pledge of Simon’s limited partnership interest in the PRC
limited partnership.
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In March 2020, the pledge on our wealth management products in favor of the financial institution, as well as the pledge
on Simon’s limited partnership interest in the PRC limited partnership in favor of us, have been removed upon repayment
by Simon Xie of the above loans. As of March 31, 2020, the balance of our loan to Simon was nil.
Transactions with Cainiao Network
In October 2017, our equity interest in Cainiao Network increased to approximately 51% and it became one of our
consolidated subsidiaries. We currently own approximately 66% of the equity interest in Cainiao Network.
Before Cainiao Network became our consolidated subsidiary in October 2017,
● we had commercial arrangements with Cainiao Network to receive certain logistics services that are
conducted on an arm’s length basis. Service fees in connection with the logistics services provided by
Cainiao Network in fiscal year 2018 (prior to its becoming our consolidated subsidiary) amounted to
RMB3,437 million; and
● we also provided Cainiao Network with various administrative and support services. Service fees in
connection with the administrative and support services we provided to Cainiao Network amounted to
RMB123 million in fiscal year 2018 (prior to its becoming our consolidated subsidiary), respectively.
Transactions with Other Investees
We have commercial arrangements with certain of our investees related to cloud computing services. Revenue
recognized in connection with the cloud computing services we provided to our investees amounted to RMB689 million,
RMB1,111 million and RMB1,548 million (US$219 million) in fiscal years 2018, 2019 and 2020, respectively.
We have commercial arrangements with certain of our investees related to marketing services. Cost of revenue and sales
and marketing expenses recognized in connection with the marketing services provided by these investees to us
amounted to RMB760 million, RMB907 million and RMB1,146 million (US$162 million) in fiscal years 2018, 2019 and
2020, respectively.
We have commercial arrangements with certain of our investees related to logistics services. Revenue recognized in
connection with the logistics services we provided to our investees amounted to RMB72 million, RMB261 million and
RMB1,400 million (US$198 million) in the period from the date of consolidation of Cainiao Network in October 2017 to
March 31, 2018, fiscal year 2019 and fiscal year 2020, respectively. Fees incurred in connection with the logistics service
provided by our investees to Cainiao Network, after it became one of our consolidated subsidiaries, and certain of our
other businesses in fiscal years 2018, 2019 and 2020 amounted to RMB5,608 million, RMB12,933 million and
RMB8,265 million (US$1,167 million), respectively.
We have extended loans to certain of our investees for working capital and other uses in conjunction with our
investments. As of March 31, 2020, the aggregate outstanding balance of these loans was RMB4,352 million (US$615
million), with durations generally ranging from one year to ten years and interest rates of up to 6% per annum.
We have agreed to provide a guarantee for a term loan facility of HK$7.7 billion (US$1.0 billion) in favor of Cingleot, a
company that is partially owned by Cainiao Network, in connection with a logistic center development project at the
Hong Kong International Airport. As of March 31, 2020, HK$358 million (US$46 million) was drawn down by that
entity under this facility.
We have also co-invested with certain of our investees in other businesses. For example, we have made co-investments
with Hangzhou Hanyun Xinling Equity Investment Fund Partnership and New Retail Strategic Opportunities Fund, L.P.
– both of which are our investees that focus on retail-related businesses – in a number of companies, including Red Star
Macalline Group Corporation Limited, Sun Art, Beijing Easyhome Furnishing Chain Group Co., Ltd. (which
subsequently became Easyhome New Retail Group Co., Ltd. following the completion of a reverse takeover in December
2019), ZTO Express (Cayman) Inc., and Focus Media Information Technology Co., Ltd.
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Other Commercial Transactions with Investees
Other than the transactions disclosed above, we also have commercial arrangements with certain of our investees and
other related parties in which:
● we recorded cost and expenses paid to investees for content acquisition, merchant commission rebate,
purchase of inventory, market services, traffic acquisition and various other services; and
● we recorded income generated from investees for providing marketing, cloud computing and other services.
The amounts relating to these services provided and received represent less than 1% of our revenue and total costs and
expenses, respectively, for the years ended March 31, 2018, 2019 and 2020.
Contractual Arrangements among Our Wholly-Owned Entities, Variable Interest Entities and the Variable
Interest Entity Equity Holders
Chinese law restricts foreign ownership in enterprises that provide value-added telecommunications services, which
includes the ICPs. As a result, we operate our Internet businesses and other businesses in which foreign investment is
restricted or prohibited in China through contractual arrangements between our wholly owned entities, our variable
interest entities, which, where applicable, hold the ICP licenses and other regulated licenses and generally operate our
Internet businesses and other businesses in which foreign investment is restricted or prohibited, and the variable interest
entity equity holders. For a description of these contractual arrangements, see “Item 4. Information on the Company —
C. Organizational Structure — Contractual Arrangements among Our Wholly-Owned Entities, Variable Interest Entities
and the Variable Interest Entity Equity Holders.”
Indemnification Agreements
We have entered into indemnification agreements with our directors and executive officers. These agreements require us
to indemnify these individuals, to the fullest extent permitted by law, for certain liabilities to which they may become
subject as a result of their affiliation with us.
Employment Agreements
See “Item 6. Directors, Senior Management and Employees — B. Compensation — Employment Agreements.”
Share Options
See “Item 6. Directors, Senior Management and Employees — B. Compensation — Equity Incentive Plans.”
C. Interests of Experts and Counsel
Not applicable.
ITEM 8. FINANCIAL INFORMATION
A. Consolidated Statements and Other Financial Information
See “Item 18. Financial Statements.”
Legal and Administrative Proceedings
We are involved from time to time, and may in the future be involved in, litigation, claims or other disputes in the
ordinary course of business regarding, among other things, contract disputes with our customers, copyright, trademark
and other intellectual property infringement claims, consumer protection claims, employment related cases and other
matters, as well as disputes between our merchants and consumers or pursuant to anti-monopoly or unfair competition
laws or involving high amounts of alleged damages. We have also been, and may in the future be, involved in litigation,
regulatory investigations or inquiries and administrative proceedings that may not necessarily arise from our ordinary
course of business, such as securities class action lawsuits and investigations or inquiries by securities regulators.
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We establish balance sheet provisions relating to potential losses from litigation based on estimates of the losses. For this
purpose, we classify potential losses as remote, reasonably possible or probable. We analyze potential outcomes from
current and potential litigation and proceedings as loss contingencies in accordance with U.S. GAAP.
Shareholder Class Action Lawsuits
In 2015, we and certain of our current and former officers and directors were named as a defendant in seven putative
shareholder class action lawsuits filed in the United States District Courts by shareholders asserting claims pursuant to
the U.S. Exchange Act and three putative shareholder class action lawsuits filed in the Superior Court of the State of
California by shareholders asserting claims pursuant to the U.S. Securities Act. The lawsuits allege that the registration
statement and prospectus filed in connection with our initial public offering and various other public statements contained
misrepresentations regarding our business operations and financial prospects, and failed to disclose, among other things,
regulatory scrutiny by the SAIC prior to our initial public offering.
The District Court lawsuits were centralized in the Southern District of New York under the master caption Christine
Asia Co., Ltd. et al. v. Alibaba Group Holding Limited et al., No. 1:15-md-02631-CM (S.D.N.Y.). In June 2016, the
Southern District of New York issued an order granting Defendants’ motion to dismiss without leave to amend. The order
held that Plaintiffs failed to plead that Defendants made actionable misstatements or omissions or that Defendants acted
with scienter. In December 2017, following an appeal by the plaintiffs, the Second Circuit Court of Appeals issued a
summary order vacating the Southern District of New York’s dismissal order and remanding the case to the Southern
District of New York for further proceedings. In May 2018, the Southern District of New York certified a class of all
persons and/or entities that purchased or otherwise acquired our ADSs or purchased call options or sold put options on
our ADSs between September 19, 2014 and January 28, 2015, inclusive, with certain exclusions. On April 29, 2019, we
announced that defendants had entered into a settlement agreement to resolve the lawsuits. Under the terms of the
settlement agreement, we agreed to pay US$250 million in exchange for a full release of all claims brought in the lawsuit.
The settlement agreement expressly provides that the settlement does not constitute an admission or finding that the
claims asserted had any merit. On October 16, 2019, the Southern District of New York entered a judgment approving
the settlement and dismissing the lawsuit.
The California lawsuits were consolidated under the caption Gary Buelow, et al. v. Alibaba Group Holding Limited,
et al., No. CIV-535692 (San Mateo Sup. Ct.). In December 2016, the Superior Court sustained our demurrer to the
complaint in part and denied it in part. In January 2017, we answered the consolidated complaint, asserting a general
denial as to all allegations and setting forth affirmative defenses. In March 2018, plaintiffs filed a motion for class
certification, requesting, among other things, that the Superior Court certify a class of all persons who purchased or
otherwise acquired our ADSs pursuant or traceable to the Registration Statement issued in connection with our IPO. This
motion was not ruled on by the Superior Court. On December 31, 2018, we announced that defendants had entered into a
settlement agreement to resolve the consolidated class action lawsuit. Under the terms of the settlement agreement, we
agreed to pay US$75 million to settle the lawsuit in exchange for a full release of all claims brought in the lawsuit. The
settlement agreement expressly provides that the settlement does not constitute an admission or finding that the claims
asserted in the lawsuit had any merit. The settlement was approved by the Superior Court on May 17, 2019 and a final
judgment concluding the lawsuit was entered that same date.
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Pending SEC Inquiry
In early 2016, the SEC informed us that it had initiated an investigation into whether there have been any violations of
the federal securities laws. The SEC has requested that we voluntarily provide it with documents and information relating
to, among other things, our consolidation policies and practices (including our prior practice of accounting for Cainiao
Network as an equity method investee), our policies and practices applicable to related party transactions in general, and
our reporting of operating data from the 11.11 global shopping festival. We are voluntarily disclosing this SEC request
for information and cooperating with the SEC and, through our legal counsel, have been providing the SEC with
requested documents and information. We believe we have fully responded to the SEC’s inquiries. The SEC advised us
that the initiation of a request for information should not be construed as an indication by the SEC or its staff that any
violation of the federal securities laws has occurred.
Our management believes that the risk of loss in connection with this proceeding is currently remote and that this
proceeding will not have a material adverse effect on our financial condition. However, in light of the inherent
uncertainties involved in this and similar proceedings, some of which are beyond our control, the risk of loss may become
more likely and an adverse outcome could be material to our results of operations or cash flows for any particular
reporting period. See note 2 to our audited consolidated financial statements included in this annual report for more
information on our provisioning policy with regard to legal and administrative proceedings.
Dividend Policy
Since our inception, we have not declared or paid any dividends on our ordinary shares. We have no present plan to pay
any dividends on our ordinary shares in the foreseeable future. We intend to retain most, if not all, of our available funds
and any future earnings to operate and expand our business.
Any future determination to pay dividends will be made at the discretion of our board of directors and may be based on a
number of factors, including our future operations and earnings, capital requirements and surplus, general financial
condition, contractual restrictions and other factors that the board of directors may deem relevant. If we pay any
dividends, the depositary will pay our ADS holders to the same extent as holders of our ordinary shares, subject to the
terms of the Deposit Agreement, including the fees and expenses payable thereunder. Cash dividends on our ordinary
shares, if any, will be paid in U.S. dollars.
We are a holding company incorporated in the Cayman Islands. In order for us to distribute any dividends to our
shareholders and ADS holders, we rely on dividends, loans, and other distributions on equity paid by our operating
subsidiaries in China and on remittances, including loans, from our variable interest entities in China. Dividend
distributions from our PRC subsidiaries to us are subject to PRC taxes, such as withholding tax. In addition, regulations
in the PRC currently permit payment of dividends of a PRC company only out of accumulated distributable after-tax
profits as determined in accordance with its articles of association and the accounting standards and regulations in China.
See “Item 3. Key Information — D. Risk Factors — Risks Related to Doing Business in the People’s Republic of
China — We rely to a significant extent on dividends, loans and other distributions on equity paid by our principal
operating subsidiaries in China.”
B. Significant Changes
We have not experienced any significant changes since the date of our audited consolidated financial statements included
in this annual report.
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ITEM 9. THE OFFER AND LISTING
A. Offer and Listing Details
Our ADSs have been listed on the NYSE since September 19, 2014 under the symbol “BABA.” Each ADS represents
eight Shares.
Our Shares have been listed on the Hong Kong Stock Exchange since November 26, 2019 under the stock code “9988.”
B. Plan of Distribution
Not applicable.
C. Markets
Our ADSs have been listed on the NYSE since September 19, 2014 under the symbol “BABA.” Each ADS represents
eight Shares.
Our Shares have been listed on the Hong Kong Stock Exchange since November 26, 2019 under the stock code “9988.”
D. Selling Shareholders
Not applicable.
E. Dilution
Not applicable.
F. Expenses of the Issue
Not applicable.
ITEM 10. ADDITIONAL INFORMATION
A. Share Capital
Not applicable.
B. Memorandum and Articles of Association
We incorporate by reference into this annual report the description of our amended and restated Memorandum and
Articles of Association contained in our Registration Statement on Form F-1 (File No. 333-195736), as amended, initially
filed with the SEC on May 6, 2014. Our shareholders adopted our amended and restated Memorandum and Articles of
Association by a special resolution on September 2, 2014, and effective upon completion of our initial public offering of
ordinary shares represented by our ADSs.
C. Material Contracts
We have not entered into any material contracts other than in the ordinary course of business and other than those
described in “Item 4. Information on the Company,” “Item 5. Operating and Financial Review and Prospects” or
elsewhere in this annual report.
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D. Exchange Controls
See “Item 4. Information on the Company — B. Business Overview — Regulation — Regulation of Foreign Exchange
and Dividend Distribution — Foreign Exchange Regulation.”
E. Taxation
The following is a general summary of certain Cayman Islands, PRC, Hong Kong S.A.R. and United States federal
income tax consequences relevant to an investment in our ADSs and ordinary shares. The discussion is not intended to
be, nor should it be construed as, legal or tax advice to any particular prospective purchaser. The discussion is based on
laws and relevant interpretations thereof in effect as of the date of this annual report, all of which are subject to change or
different interpretations, possibly with retroactive effect. The discussion does not address U.S. state or local tax laws, or
tax laws of jurisdictions other than the Cayman Islands, the People’s Republic of China, Hong Kong S.A.R. and the
United States. You should consult your own tax advisors with respect to the consequences of acquisition, ownership and
disposition of our ADSs and ordinary shares. To the extent that this discussion relates to matters of Cayman Islands tax
law, it is the opinion of Maples and Calder (Hong Kong) LLP, our special Cayman Islands counsel. To the extent that the
discussion states definitive legal conclusions under PRC tax laws and regulations, it is the opinion of Fangda Partners,
our special PRC counsel.
Cayman Islands Taxation
The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or
appreciation and there is no taxation in the nature of inheritance tax or estate duty or withholding tax applicable to us or
to any holder of our ADSs or our ordinary shares. There are no other taxes likely to be material to us levied by the
Government of the Cayman Islands except for stamp duties that may be applicable on instruments executed in, or after
execution brought within, the jurisdiction of the Cayman Islands. No stamp duty is payable in the Cayman Islands on the
issue of shares by, or any transfers of shares of, Cayman Islands companies (except those which hold interests in land in
the Cayman Islands). The Cayman Islands is not party to any double tax treaties that are applicable to any payments made
to or by our company. There are no exchange control regulations or currency restrictions in the Cayman Islands.
Payments of dividends and capital in respect of our ADSs and ordinary shares will not be subject to taxation in the
Cayman Islands and no withholding will be required on the payment of a dividend or capital to any holder of our ADSs
or ordinary shares, as the case may be, nor will gains derived from the disposal of our ADSs or ordinary shares be subject
to Cayman Islands income or corporation tax.
People’s Republic of China Taxation
We are a holding company incorporated in the Cayman Islands and we gain substantial income by way of dividends from
our PRC subsidiaries. The EIT Law and its implementation rules, both of which became effective on January 1, 2008 and
were most recently amended on December 29, 2018 and April 23, 2019, respectively, provide that China-sourced income
of foreign enterprises, such as dividends paid by a PRC subsidiary to its equity holders that are non-resident enterprises,
will normally be subject to PRC withholding tax at a rate of 10%, unless any foreign investor’s jurisdiction of
incorporation has a tax treaty with China that provides for a lower withholding tax rate for which the foreign investor
is eligible.
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Under the EIT Law, an enterprise established outside of China with a “de facto management body” within China is
considered a “resident enterprise,” which means that it is treated in the same manner as a Chinese enterprise for
enterprise income tax purposes. Although the implementation rules of the EIT Law define “de facto management body”
as a managing body that exercises substantive and overall management and control over the production and business,
personnel, accounting books and assets of an enterprise, the only official guidance for this definition currently available
is set forth in Circular 82 issued by the STA, which provides guidance on the determination of the tax residence status of
a Chinese-controlled offshore incorporated enterprise, defined as an enterprise that is incorporated under the laws of a
foreign country or territory and that has a PRC enterprise or enterprise group as its primary controlling shareholder.
Although Alibaba Group Holding Limited does not have a PRC enterprise or enterprise group as our primary controlling
shareholder and is therefore not a Chinese-controlled offshore incorporated enterprise within the meaning of Circular 82,
in the absence of guidance specifically applicable to us, we have applied the guidance set forth in Circular 82 to evaluate
the tax residence status of Alibaba Group Holding Limited and its subsidiaries outside the PRC.
According to Circular 82, a Chinese-controlled offshore incorporated enterprise will be regarded as a PRC tax resident by
virtue of having a “de facto management body” in China and will be subject to PRC enterprise income tax on its
worldwide income only if all of the following criteria are met:
●
●
●
the primary location of the day-to-day operational management is in the PRC;
decisions relating to the enterprise’s financial and human resource matters are made or are subject to
approval by organizations or personnel in the PRC;
the enterprise’s primary assets, accounting books and records, company seals, and board and shareholders
meeting minutes are located or maintained in the PRC; and
●
50% or more of voting board members or senior executives habitually reside in the PRC.
We do not believe that we meet any of the conditions outlined in the immediately preceding paragraph. Alibaba Group
Holding Limited and its offshore subsidiaries are incorporated outside the PRC. As a holding company, our key assets
and records, including the resolutions and meeting minutes of our board of directors and the resolutions and meeting
minutes of our shareholders, are located and maintained outside the PRC. In addition, we are not aware of any offshore
holding companies with a corporate structure similar to ours that has been deemed a PRC “resident enterprise” by the
PRC tax authorities. Accordingly, we believe that Alibaba Group Holding Limited and our offshore subsidiaries should
not be treated as a “resident enterprise” for PRC tax purposes if the criteria for “de facto management body” as set forth
in Circular 82 were deemed applicable to us. However, as the tax residency status of an enterprise is subject to
determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto
management body” as applicable to our offshore entities, we will continue to monitor our tax status.
The implementation rules of the EIT Law provide that, (i) if the enterprise that distributes dividends is domiciled in the
PRC or (ii) if gains are realized from transferring equity interests of enterprises domiciled in the PRC, then the dividends
or capital gains are treated as China-sourced income. It is not clear how “domicile” may be interpreted under the EIT
Law, and it may be interpreted as the jurisdiction where the enterprise is a tax resident. Therefore, if we are considered a
PRC tax resident enterprise for PRC tax purposes, any dividends we pay to our overseas shareholders or ADS holders
that are non-resident enterprises as well as gains realized by those shareholders or ADS holders from the transfer of our
shares or ADSs may be regarded as China-sourced income and as a result become subject to PRC withholding tax at a
rate of 10%, unless any of the non-resident enterprises’ jurisdictions has a tax treaty with China that provides for a
preferential treatment.
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Furthermore, if we are considered a PRC resident enterprise and the competent PRC tax authorities consider dividends
we pay with respect to our shares or ADSs and the gains realized from the transfer of our shares or ADSs to be income
derived from sources within the PRC, the dividends we pay to our overseas shareholders or ADS holders who are non-
resident individuals, and gains realized by those shareholders or ADS holders from the transfer of our shares or ADSs,
may be subject to PRC individual income tax at a rate of 20%, unless any of the non-resident individuals’ jurisdictions
has a tax treaty with China that provides for a preferential tax rate or a tax exemption. It is also unclear whether, if we are
considered a PRC resident enterprise, holders of our shares or ADSs would be able to claim the benefit of income tax
treaties or agreements entered into between China and other countries or areas.
See “Item 3. Key Information — D. Risk Factors — Risks Related to Doing Business in the People’s Republic of
China — We may be treated as a resident enterprise for PRC tax purposes under the PRC Enterprise Income Tax Law,
and we may therefore be subject to PRC income tax on our global income.” and “Item 3. Key Information — D. Risk
Factors — Risks Related to Doing Business in the People’s Republic of China — Dividends payable to foreign investors
and gains on the sale of our ADSs and/or ordinary shares by our foreign investors may become subject to PRC taxation.”
Hong Kong Taxation
Our subsidiaries incorporated in Hong Kong were subject to Hong Kong profits tax at a rate of 16.5% in the fiscal years
ended March 31, 2018, 2019 and 2020.
Our principal register of members is maintained by our Principal Share Registrar in the Cayman Islands, and our Hong
Kong register of members is maintained by the Hong Kong Share Registrar in Hong Kong.
Dealings in our Shares registered on our Hong Kong share register are subject to Hong Kong stamp duty. The stamp duty
is charged to each of the seller and purchaser at the rate of 0.1% of the consideration for, or (if greater) the value of, our
Shares transferred. In other words, a total of 0.2% is currently payable on a typical sale and purchase transaction of our
Shares. In addition, a fixed duty of HK$5.00 is charged on each instrument of transfer (if required).
To facilitate ADS-ordinary share conversion and trading between the NYSE and the Hong Kong Stock Exchange, we
have moved a portion of our issued ordinary shares from our Cayman share register to our Hong Kong share register. It is
unclear whether, as a matter of Hong Kong law, the trading or conversion of ADSs constitutes a sale or purchase of the
underlying Hong Kong-registered ordinary shares that is subject to Hong Kong stamp duty. We advise investors to
consult their own tax advisors on this matter. See “Item 3. Key Information — D. Risk Factors — Risks Related to Our
ADSs and Shares — There is uncertainty as to whether Hong Kong stamp duty will apply to the trading or conversion of
our ADSs.”
Material United States Federal Income Tax Considerations
The following summary describes the material United States federal income tax consequences of the ownership of our
ordinary shares and ADSs as of the date of this annual report. The discussion set forth below is applicable only to
United States Holders. Except where noted, this summary deals only with ordinary shares and ADSs held as capital
assets. As used herein, the term “United States Holder” means a beneficial owner of an ordinary share or ADS that is for
United States federal income tax purposes:
●
●
an individual citizen or resident of the United States;
a corporation (or other entity treated as a corporation for United States federal income tax purposes) created
or organized in or under the laws of the United States, any state thereof or the District of Columbia;
●
an estate the income of which is subject to United States federal income taxation regardless of its source; or
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●
a trust if it is subject to the primary supervision of a court within the United States and one or more
United States persons has or have the authority to control all substantial decisions of the trust, or if it has a
valid election in effect under applicable United States Treasury regulations to be treated as a
United States person.
This summary does not represent a detailed description of the United States federal income tax consequences applicable
to you if you are subject to special treatment under the United States federal income tax laws, including if you are:
●
●
●
●
●
●
●
●
●
●
●
●
●
a dealer in securities or currencies;
a financial institution;
a regulated investment company;
a real estate investment trust;
an insurance company;
a tax-exempt organization;
a person holding our ordinary shares or ADSs as part of a hedging, integrated or conversion transaction, a
constructive sale or a straddle;
a trader in securities that has elected the mark-to-market method of accounting for your securities;
a person liable for alternative minimum tax;
a person who owns or is deemed to own 10% or more of our stock (by vote or value);
a person required to accelerate the recognition of any item of gross income with respect to our ordinary
shares or ADSs as a result of such income being recognized on an applicable financial statement;
a partnership or other pass-through entity for United States federal income tax purposes; or
a person whose “functional currency” is not the U.S. dollar.
The discussion below is based upon the provisions of the Internal Revenue Code of 1986, as amended, or the Code, and
regulations, rulings and judicial decisions thereunder as of the date of this annual report, and the relevant authorities may
be replaced, revoked or modified so as to result in United States federal income tax consequences different from those
discussed below. In addition, this summary is based, in part, upon representations made by the depositary to us and
assumes that the Deposit Agreement, and all other related agreements, will be performed in accordance with their terms.
If a partnership holds our ordinary shares or ADSs, the tax treatment of a partner will generally depend upon the status of
the partner and the activities of the partnership. If you are a partner of a partnership holding our ordinary shares or ADSs,
you should consult your tax advisors.
This summary does not contain a detailed description of all the United States federal income tax consequences to you in
light of your particular circumstances and does not address the Medicare tax on net investment income, or the effects of
any state, local or non-United States tax laws. If you are considering the purchase, ownership or disposition of our
ordinary shares or ADSs, you should consult your own tax advisors concerning the United States federal income tax
consequences to you in light of your particular situation as well as any consequences arising under the laws of any other
taxing jurisdiction.
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ADSs
If you hold ADSs, for United States federal income tax purposes, you generally will be treated as the owner of the
underlying ordinary shares that are represented by the ADSs. Accordingly, deposits or withdrawals of ordinary shares for
ADSs will not be subject to United States federal income tax.
Taxation of Dividends
Subject to the discussion under “— Passive Foreign Investment Company” below, the gross amount of distributions on
the ADSs or ordinary shares (including any amounts withheld to reflect PRC withholding taxes) will be taxable as
dividends, to the extent paid out of our current or accumulated earnings and profits, as determined under United States
federal income tax principles. The income (including withheld taxes) will be includable in your gross income as ordinary
income on the day actually or constructively received by you, in the case of the ordinary shares, or by the depositary, in
the case of ADSs. The dividends will not be eligible for the dividends received deduction allowed to corporations under
the Code. The following discussion assumes that all dividends will be paid in U.S. dollars.
With respect to non-corporate United States investors, certain dividends received from a qualified foreign corporation
may be subject to reduced rates of taxation. A foreign corporation is treated as a qualified foreign corporation with
respect to dividends received from that corporation on ordinary shares (or ADSs backed by such shares) that are readily
tradable on an established securities market in the United States. United States Treasury Department guidance indicates
that our ADSs (which are listed on the NYSE) are readily tradable on an established securities market in the
United States. Thus, we believe that dividends we pay on our ordinary shares that are represented by ADSs will meet the
conditions required for the reduced tax rates. Since we do not expect that our ordinary shares will be listed on an
established securities market in the United States, we do not believe that dividends that we pay on our ordinary shares
that are not represented by ADSs currently meet the conditions required for these reduced tax rates. There can be no
assurance that our ADSs will be considered readily tradable on an established securities market in subsequent years. A
qualified foreign corporation also includes a foreign corporation that is eligible for the benefits of certain income tax
treaties with the United States. In the event that we were deemed to be a PRC resident enterprise under the EIT Law,
although no assurance can be given, we might be eligible for the benefits of the income tax treaty between the
United States and the PRC, which is hereinafter referred to as the Treaty, and if we were eligible for such benefits,
dividends we pay on our ordinary shares, regardless of whether the shares are represented by ADSs, would be eligible for
the reduced rates of taxation. See “— People’s Republic of China Taxation.” Non-corporate United States Holders that
do not meet a minimum holding period requirement during which they are not protected from the risk of loss or that elect
to treat the dividend income as “investment income” pursuant to Section 163(d)(4) of the Code will not be eligible for the
reduced rates of taxation regardless of our status as a qualified foreign corporation. In addition, the rate reduction will not
apply to dividends if the recipient of a dividend is obligated to make related payments with respect to positions in
substantially similar or related property. This disallowance applies even if the minimum holding period has been met.
You should consult your own tax advisors regarding the application of these rules given your particular circumstances.
Non-corporate United States Holders will not be eligible for reduced rates of taxation on any dividends received from us
if we are a PFIC in the taxable year in which the dividends are paid or in the preceding taxable year. See “— Passive
Foreign Investment Company” below.
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In the event that we were deemed to be a PRC resident enterprise under the EIT Law, you might be subject to PRC
withholding taxes on dividends paid to you with respect to the ADSs or ordinary shares. See “— People’s Republic of
China Taxation.” In that case, subject to certain conditions and limitations, PRC withholding taxes on dividends would be
treated as foreign taxes eligible for credit against your United States federal income tax liability. For purposes of
calculating the foreign tax credit, dividends paid on the ADSs or ordinary shares will be treated as foreign-source income
and will generally constitute passive category income. However, in certain circumstances, if you have held the ADSs or
ordinary shares for less than a specified minimum period during which you are not protected from risk of loss, or are
obligated to make payments related to the dividends, you will not be allowed a foreign tax credit for any PRC
withholding taxes imposed on dividends paid on the ADSs or ordinary shares. If you are eligible for Treaty benefits, any
PRC taxes on dividends will not be creditable against your United States federal income tax liability to the extent
withheld at a rate exceeding the applicable Treaty rate. The rules governing the foreign tax credit are complex. You are
urged to consult your tax advisor regarding the availability of the foreign tax credit under your particular circumstances.
To the extent that the amount of any distribution exceeds our current and accumulated earnings and profits for a
taxable year, as determined under United States federal income tax principles, the distribution will first be treated as a
tax-free return of capital, causing a reduction in the adjusted basis of the ADSs or ordinary shares (thereby increasing the
amount of gain, or decreasing the amount of loss, to be recognized by you on a subsequent disposition of the ADSs or
ordinary shares), and the balance in excess of adjusted basis will be taxed as capital gain recognized on a sale or
exchange, as described below under “— Taxation of Capital Gains.” Consequently, any distributions in excess of our
current and accumulated earnings and profits would generally not give rise to foreign source income and you would
generally not be able to use the foreign tax credit arising from any PRC withholding tax imposed on those distributions
unless the credit can be applied (subject to applicable limitations) against United States federal income tax due on other
foreign source income in the appropriate category for foreign tax credit purposes. However, we do not expect to keep
earnings and profits in accordance with United States federal income tax principles. Therefore, you should expect that a
distribution will generally be treated as a dividend (as discussed above).
Distributions of ADSs, ordinary shares or rights to subscribe for ordinary shares that are received as part of a pro rata
distribution to all of our shareholders generally will not be subject to United States federal income tax. Consequently,
these distributions generally will not give rise to foreign source income and you generally will not be able to use the
foreign tax credit arising from any PRC withholding tax imposed on the distributions unless the credit can be applied
(subject to applicable limitations) against United States federal income tax due on other foreign source income in the
appropriate category for foreign tax credit purposes.
Passive Foreign Investment Company
Based on the projected composition of our income and assets and the valuation of our assets, including goodwill, we do
not expect to be a PFIC for our current taxable year, and we do not expect to become one in the future, although there can
be no assurance in this regard.
In general, we will be a PFIC for any taxable year in which:
●
●
at least 75% of our gross income is passive income; or
at least 50% of the value (determined on a quarterly basis) of our assets is attributable to assets that produce
or are held for the production of passive income.
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For this purpose, passive income generally includes dividends, interest, royalties and rents (other than royalties and rents
derived in the active conduct of a trade or business and not derived from a related person). If we own at least 25%
(by value) of the stock of another corporation, we will be treated, for purposes of the PFIC tests, as owning our
proportionate share of the other corporation’s assets and receiving our proportionate share of the other corporation’s
income. Although we do not expect to be a PFIC, it is not entirely clear how the contractual arrangements between us and
our variable interest entities will be treated for purposes of the PFIC rules. If it were determined that we do not own the
stock of our variable interest entities for United States federal income tax purposes (for instance, because the relevant
PRC authorities do not respect these arrangements), we may be treated as a PFIC.
The determination of whether we are a PFIC is made annually. Accordingly, it is possible that we may become a PFIC in
the current or any future taxable year due to changes in our asset or income composition. Because we have valued our
goodwill based on the market value of our ADSs, a decrease in the price of our ADSs may also result in our becoming a
PFIC. If we are a PFIC for any taxable year during which you hold our ADSs or ordinary shares, you will be subject to
special tax rules discussed below.
If we are a PFIC for any taxable year during which you hold our ADSs or ordinary shares and you do not make a timely
mark-to-market election (as discussed below), you will be subject to special tax rules with respect to any “excess
distribution” received and any gain realized from a sale or other disposition, including a pledge, of ADSs or ordinary
shares. Distributions received in a taxable year that are greater than 125% of the average annual distributions received
during the shorter of the three preceding taxable years or your holding period for the ADSs or ordinary shares will be
treated as excess distributions. Under these special tax rules:
●
●
●
the excess distribution or gain will be allocated ratably over your holding period for the ADSs or ordinary
shares;
the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which
we were a PFIC, will be treated as ordinary income; and
the amount allocated to each other year will be subject to tax at the highest tax rate in effect for that year
and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax
attributable to each relevant year.
In addition, non-corporate United States Holders will not be eligible for reduced rates of taxation on any dividends
received from us if we are a PFIC in the taxable year in which the dividends are paid or in the preceding taxable year.
You will generally be required to file Internal Revenue Service Form 8621 if you hold our ADSs or ordinary shares in
any year in which we are classified as a PFIC.
If we were a PFIC for any taxable year during which you hold our ADSs or ordinary shares and any of our non-
United States subsidiaries was also a PFIC, a United States Holder would be treated as owning a proportionate amount
(by value) of the shares of the lower-tier PFIC for purposes of the application of these rules. You are urged to consult
your tax advisors about the application of the PFIC rules to any of our subsidiaries.
In certain circumstances, in lieu of being subject to the excess distribution rules discussed above, you may make an
election to include gain on the stock of a PFIC as ordinary income under a mark-to-market method, provided that the
stock is regularly traded on a qualified exchange. Under current law, the mark-to-market election may be available to
United States Holders of ADSs since the ADSs are listed on the NYSE, which constitutes a qualified exchange, provided
the ADSs are “regularly traded” for purposes of the mark-to-market election (for which no assurance can be given). It
should also be noted that only the ADSs and not the ordinary shares are listed on the NYSE. Consequently, if you are a
United States Holder of ordinary shares that are not represented by ADSs, you generally will not be eligible to make a
mark-to-market election if we are or were to become a PFIC.
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If you make an effective mark-to-market election, you will include in each year that we are a PFIC as ordinary income
the excess of the fair market value of your ADSs at the end of the year over your adjusted tax basis in the ADSs. You will
be entitled to deduct as an ordinary loss in each relevant year the excess of your adjusted tax basis in the ADSs over their
fair market value at the end of the year, but only to the extent of the net amount previously included in income as a result
of the mark-to-market election. If you make an effective mark-to-market election, in each year that we are a PFIC any
gain you recognize upon the sale or other disposition of your ADSs will be treated as ordinary income and any loss will
be treated as ordinary loss, but only to the extent of the net amount previously included in income as a result of the mark-
to-market election.
Your adjusted tax basis in the ADSs will be increased by the amount of any income inclusion and decreased by the
amount of any deductions under the mark-to-market rules. If you make a mark-to-market election it will be effective for
the taxable year for which the election is made and all subsequent taxable years unless the ADSs are no longer regularly
traded on a qualified exchange or the Internal Revenue Service consents to the revocation of the election. You are urged
to consult your tax advisor about the availability of the mark-to-market election, and whether making the election would
be advisable in your particular circumstances.
Alternatively, you can sometimes avoid the rules described above by electing to treat a PFIC as a “qualified electing
fund” under Section 1295 of the Code. However, this option is not available to you because we do not intend to comply
with the requirements necessary to permit you to make this election.
You are urged to consult your tax advisors concerning the United States federal income tax consequences of holding
ADSs or ordinary shares if we are considered a PFIC in any taxable year.
Taxation of Capital Gains
For United States federal income tax purposes, you will recognize taxable gain or loss on any sale, exchange or other
disposition of ADSs or ordinary shares in an amount equal to the difference between the amount realized for the ADSs or
ordinary shares and your tax basis in the ADSs or ordinary shares. Subject to the discussion under “— Passive Foreign
Investment Company” above, this gain or loss will generally be capital gain or loss. Capital gains of individuals derived
with respect to capital assets held for more than one year are eligible for reduced rates of taxation. The deductibility of
capital losses is subject to limitations. Any gain or loss recognized by you will generally be treated as United States
source gain or loss. However, if we were treated as a PRC resident enterprise for EIT Law purposes and PRC tax were
imposed on any gain, and if you are eligible for the benefits of the Treaty, you may elect to treat this gain as PRC source
gain under the Treaty. If you are not eligible for the benefits of the Treaty or you fail to make the election to treat any
gain as PRC source, then you may not be able to use the foreign tax credit arising from any PRC tax imposed on the
disposition of our ADSs or ordinary shares unless the credit can be applied (subject to applicable limitations) against tax
due on other income derived from foreign sources. You will be eligible for the benefits of the Treaty if, for purposes of
the Treaty, you are a resident of the United States, and you meet other requirements specified in the Treaty. Because the
determination of whether you qualify for the benefits of the Treaty is fact-intensive and depends upon your particular
circumstances, you are specifically urged to consult your tax advisors regarding your eligibility for the benefits of the
Treaty. You are also urged to consult your tax advisor regarding the tax consequences in case any PRC tax is imposed on
gain on a disposition of our ADSs or ordinary shares, including the availability of the foreign tax credit and the election
to treat any gain as PRC source, under your particular circumstances.
Information Reporting and Backup Withholding
In general, information reporting will apply to dividends in respect of our ADSs or ordinary shares and the proceeds from
the sale, exchange or other disposition of our ADSs or ordinary shares that are paid to you within the United States
(and in certain cases, outside the United States), unless you are an exempt recipient. A backup withholding tax may apply
to these payments if you fail to provide a taxpayer identification number or certification of exempt status or, in the case
of dividend payments, if you fail to report in full dividend and interest income.
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Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against your
United States federal income tax liability provided the required information is furnished to the Internal Revenue Service
in a timely manner.
Under the Hiring Incentives to Restore Employment Act of 2010, certain United States Holders are required to report
information relating to ADSs or ordinary shares, subject to certain exceptions (including an exception for ADSs or
ordinary shares held in accounts maintained by certain financial institutions), by attaching a complete Internal Revenue
Service Form 8938, Statement of Specified Foreign Financial Assets, with their tax return for each year in which they
hold ADSs or ordinary shares. You are urged to consult your own tax advisors regarding information reporting
requirements relating to your ownership of the ADSs or ordinary shares.
F. Dividends and Paying Agents
Not applicable.
G. Statement by Experts
Not applicable.
H. Documents on Display
We have previously filed with the SEC our Registration Statement on Form F-1 (File No. 333-195736), as amended, with
respect to our ordinary shares and ADSs. As allowed by the SEC, in Item 19 of this annual report, we incorporate by
reference certain information we previously filed with the SEC. This means that we can disclose important information to
you by referring you to another document filed separately with the SEC. The information incorporated by reference is
considered to be part of this annual report.
You may read and copy this annual report, including the exhibits incorporated by reference in this annual report, at the
SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549 and at the SEC’s regional offices in
New York, New York and Chicago, Illinois. You can also request copies of this annual report, including the exhibits
incorporated by reference in this annual report, upon payment of a duplicating fee, by writing information on the
operation of the SEC’s Public Reference Room.
The SEC also maintains a website at www.sec.gov that contains reports and other information regarding registrants that
file electronically with the SEC. Our annual report and some of the other information submitted by us to the SEC may be
accessed through this website.
As a foreign private issuer, we are exempt from the rules under the U.S. Exchange Act prescribing the furnishing and
content of quarterly reports and proxy statements, and officers, directors and principal shareholders are exempt from the
reporting and short-swing profit recovery provisions contained in Section 16 of the U.S. Exchange Act.
In accordance with NYSE Rule 203.01, we will post this annual report on our website www.alibabagroup.com. In
addition, we will provide hardcopies of our annual report to shareholders, including ADS holders, free of charge
upon request.
I. Subsidiary Information
Not applicable.
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ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risks
Interest Rate Risk
Our main interest rate exposure relates to bank borrowings. We also have interest-bearing assets, including cash and cash
equivalents, short-term investments and restricted cash. We manage our interest rate exposure with a focus on reducing
our overall cost of debt and exposure to changes in interest rates. When considered appropriate, we use derivatives, such
as interest rate swaps, to manage our interest rate exposure.
As of March 31, 2020, approximately 35% of our total debt (including bank borrowings and unsecured senior notes)
carries floating interest rates and the remaining 65% carries fixed interest rates. We have entered into various agreements
with various financial institutions as counterparties to swap a certain portion of our floating interest rate debt to
effectively become fixed interest rate debt. After taking these interest rate swaps into consideration, approximately 21%
of our total debt carries floating interest rates and the remaining 79% carries fixed interest rates as of March 31, 2020. All
of the abovementioned interest rate derivatives are designated as cash flow hedges and we expect these hedges to be
highly effective. Certain of our indebtedness carries floating interest rates based on a spread over LIBOR. As a result, the
interest expenses associated with these indebtedness will be subject to the potential impact of any fluctuation in LIBOR.
The continuation of LIBOR on the current basis is not guaranteed after 2021. See “Item 3. Key Information — D. Risk
Factors — Risks Related to Our Business and Industry — We are subject to interest rate risk in connection with our
indebtedness.”
As of March 31, 2019 and 2020, if interest rates increased/decreased by 1%, with all other variables having remained
constant, and assuming the amount of interest-bearing assets and debts that bear floating interest were outstanding for the
entire respective years, our profit attributable to equity owners would have been RMB1,760 million and RMB3,486
million (US$492 million) higher/lower, respectively, mainly as a result of higher/ lower interest income from our cash
and cash equivalents and short-term investments. The analysis does not include floating interest rate debts whose
interests are hedged by interest rate swaps.
Foreign Exchange Risk
Foreign currency risk arises from future commercial transactions, recognized assets and liabilities and net investments in
foreign operations. Although we operate businesses in different countries, most of our revenue-generating transactions,
and a majority of our expense-related transactions, are denominated in Renminbi, which is the functional currency of our
major operating subsidiaries and the reporting currency of our financial statements. When considered appropriate, we
enter into hedging activities with regard to exchange rate risk.
The value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other
things, changes in political and economic conditions and the foreign exchange policy adopted by the PRC government.
For instance, in August 2015, the PBOC changed the way it calculates the mid-point price of Renminbi against the U.S.
dollar, requiring the market-makers who submit for reference rates to consider the previous day’s closing spot rate,
foreign-exchange demand and supply as well as changes in major currency rates. In 2018, the value of the Renminbi
depreciated by approximately 5.7% against the U.S. dollar; and in 2019, the Renminbi further depreciated by
approximately 1.3% against the U.S. dollar. From the end of 2019 through the end of May 2020, the value of the
Renminbi depreciated by approximately 2.5% against the U.S. dollar. It is difficult to predict how market forces or PRC
or U.S. government policy may impact the exchange rate between the Renminbi and the U.S. dollar in the future. There
remains significant international pressure on the PRC government to adopt a more flexible currency policy, which could
result in greater fluctuations of the Renminbi against the U.S. dollar.
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To the extent that we need to convert U.S. dollars into Renminbi for our operations, appreciation of the Renminbi against
the U.S. dollar would reduce the Renminbi amount we receive from the conversion. Conversely, if we decide to convert
Renminbi into U.S. dollars for the purpose of making payments for dividends on our ordinary shares or ADSs, servicing
our outstanding debts, or for other business purposes, appreciation of the U.S. dollar against the Renminbi would reduce
the U.S. dollar amounts available to us.
As of March 31, 2019, we had Renminbi-denominated cash and cash equivalents and short-term investments of
RMB139,017 million and U.S. dollar-denominated cash and cash equivalents and short-term investments of
US$7,607 million. Assuming we had converted RMB139,017 million into U.S. dollars at the exchange rate of
RMB6.7112 for US$1.00 as of March 29, 2019, our total U.S. dollar cash balance would have been US$28,321 million.
If the Renminbi had depreciated by 10% against the U.S. dollar, our U.S. dollar cash balance would have been
US$26,438 million.
As of March 31, 2020, we had Renminbi-denominated cash and cash equivalents and short-term investments of
RMB194,004 million and U.S. dollar-denominated cash and cash equivalents and short-term investments of US$22,729
million. Assuming we had converted RMB194,004 million into U.S. dollars at the exchange rate of RMB7.0808 for
US$1.00 as of March 31, 2020, our total U.S. dollar cash balance would have been US$50,128 million. If the Renminbi
had depreciated by 10% against the U.S. dollar, our U.S. dollar cash balance would have been US$47,637 million.
Market Price Risk
We are exposed to market price risk primarily with respect to investment securities carried at fair value that are publicly
traded. A substantial portion of our investments in equity investees are held for long-term appreciation or for strategic
purposes, which are accounted for under equity method and are not subject to market price risk. We are not exposed to
commodity price risk. The sensitivity analysis is determined based on the exposure of these investment securities at fair
value to market price risks at the end of each reporting period.
In fiscal year 2019 and 2020, if the market price of the respective instruments held by us had been 1% higher/lower as of
March 31, 2019 and 2020, these investment securities would have been approximately RMB665 million and RMB803
million (US$113 million) higher/lower, respectively, all of which would be recognized as income or loss during the
respective period.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
A. Debt Securities
Not applicable.
B. Warrants and Rights
Not applicable.
C. Other Securities
Not applicable.
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D. American Depositary Shares
Fees Paid by Our ADS Holders
As an ADS holder, you will be required to pay the following service fees to the depositary, Citibank, N.A.:
Persons depositing or withdrawing
shares or ADS holders must pay:
Up to US$5.00 per 100 ADSs (or
fraction thereof)
●
For:
Issuance of ADSs upon deposit of Shares (excluding
issuances as a result of distributions of ADSs pursuant
to (i) stock dividends or other free stock distributions,
or (ii) exercise of rights to purchase additional ADSs).
● Delivery of Shares against surrender of ADSs.
● Distribution of cash dividends or other cash
distributions.
● Distribution of ADSs pursuant to (i) stock dividends
or other free stock distributions, or (ii) exercise of
rights to purchase additional ADSs.
● Distribution of securities other than ADSs or rights to
purchase additional ADSs.
Up to US$5.00 per 100 ADS per
calendar year
● ADS services
As an ADS holder you will also be responsible to pay certain fees and expenses incurred by the depositary and certain
taxes and governmental charges such as:
●
●
●
●
●
taxes (including applicable interest and penalties) and other governmental charges;
fees for the transfer and registration of Shares charged by the registrar and transfer agent for the Shares in
the Cayman Islands (i.e., upon deposit and withdrawal of Shares);
expenses incurred for converting foreign currency into U.S. dollars;
expenses for cable, telex and fax transmissions and for delivery of securities;
fees and expenses as are incurred by the depositary in connection with compliance with applicable
exchange control regulations; and
●
fees and expenses incurred in connection with the delivery or servicing of Shares on deposit.
Depositary fees payable upon the issuance and cancellation of ADSs are typically paid to the depositary bank by the
brokers (on behalf of their clients) receiving the newly issued ADSs from the depositary bank and by the brokers
(on behalf of their clients) delivering the ADSs to the depositary bank for cancellation. The brokers in turn charge these
fees to their clients. Depositary fees payable in connection with distributions of cash or securities to ADS holders and the
depositary services fee are charged by the depositary bank to the holders of record of ADSs as of the applicable ADS
record date.
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The Depositary fees payable for cash distributions are generally deducted from the cash being distributed. In the case of
distributions other than cash (i.e., stock dividend, rights), the depositary bank charges the applicable fee to the ADS
record date holders concurrent with the distribution. In the case of ADSs registered in the name of the investor (whether
certificated or uncertificated in direct registration), the depositary bank sends invoices to the applicable record date ADS
holders. In the case of ADSs held in brokerage and custodian accounts (via DTC), the depositary bank generally collects
its fees through the systems provided by DTC (whose nominee is the registered holder of the ADSs held in DTC) from
the brokers and custodians holding ADSs in their DTC accounts. The brokers and custodians who hold their clients’
ADSs in DTC accounts in turn charge their clients’ accounts the amount of the fees paid to the depositary banks.
In the event of refusal to pay the depositary fees, the depositary bank may, under the terms of the Deposit Agreement,
refuse the requested service until payment is received or may set off the amount of the depositary fees from any
distribution to be made to the ADS holder.
Note that the fees and charges you may be required to pay may vary over time and may be changed by us and by the
depositary. You will receive prior notice of these changes.
Fees and Payments from the Depositary to Us
Our depositary has agreed to share with us certain fees payable to the depositary by holders of ADSs. For fiscal year
2020, the depositary shared with us US$31.9 million, after deduction of applicable U.S. taxes.
Conversion between ADSs and Shares
Dealings and Settlement of Shares in Hong Kong
Our Shares trade on the Hong Kong Stock Exchange in board lots of 100 Shares. Dealings in our Shares on the Hong
Kong Stock Exchange are conducted in Hong Kong dollars.
The transaction costs of dealings in our Shares on the Hong Kong Stock Exchange include:
● Hong Kong Stock Exchange trading fee of 0.005% of the consideration of the transaction, charged to each
of the buyer and seller;
●
●
●
●
●
●
●
SFC transaction levy of 0.0027% of the consideration of the transaction, charged to each of the buyer and
seller;
trading tariff of HK$0.50 on each and every purchase or sale transaction. The decision on whether or not to
pass the trading tariff onto investors is at the discretion of brokers;
transfer deed stamp duty of HK$5.00 per transfer deed (if applicable), payable by the seller;
ad valorem stamp duty at a total rate of 0.2% of the value of the transaction, with 0.1% payable by each of
the buyer and the seller;
stock settlement fee, which is currently 0.002% of the gross transaction value, subject to a minimum fee of
HK$2.00 and a maximum fee of HK$100.00 per side per trade;
brokerage commission, which is freely negotiable with the broker; and
the Hong Kong Share Registrar will charge between HK$2.50 to HK$20.00, depending on the speed of
service (or such higher fee as may from time to time be permitted under the Hong Kong Listing Rules), for
each transfer of Shares from one registered owner to another, each share certificate canceled or issued by it
and any applicable fee as stated in the share transfer forms used in Hong Kong.
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Investors must settle their trades executed on the Hong Kong Stock Exchange through their brokers directly or through
custodians. For an investor who has deposited his or her Shares in his or her stock account or in his or her designated
Central Clearing and Settlement System participant’s stock account maintained with the Central Clearing and Settlement
System, or CCASS, settlement will be effected in CCASS in accordance with the General Rules of CCASS and CCASS
Operational Procedures in effect from time to time. For an investor who holds the physical certificates, settlement
certificates and the duly executed transfer forms must be delivered to his broker or custodian before the settlement date.
Conversion between Shares Trading in Hong Kong and ADSs
In connection with the listing of our Shares on the Hong Kong Stock Exchange, we have established a branch register of
members in Hong Kong, or the Hong Kong share register, which is maintained by our Hong Kong Share Registrar,
Computershare Hong Kong Investor Services Limited. Our principal register of members, or the Cayman share register,
is maintained by our Principal Share Registrar.
All Shares offered in our Hong Kong public offering are registered on the Hong Kong share register in order to be listed
and traded on the Hong Kong Stock Exchange. As described in further detail below, holders of Shares registered on the
Hong Kong share register are able to convert these Shares into ADSs, and vice versa.
In connection with the Hong Kong public offering, and to facilitate fungibility and conversion between ADSs and Shares
and trading between the NYSE and the Hong Kong Stock Exchange, we moved a portion of our issued Shares that are
represented by ADSs from our Cayman share register to our Hong Kong share register.
Our ADSs
Our ADSs are traded on the NYSE. Dealings in our ADSs on the NYSE are conducted in U.S. Dollars.
ADSs may be held either:
●
directly, by having a certificated ADS, or an American Depositary Receipt, or ADR, registered in the
holder’s name, or by holding in the direct registration system, pursuant to which the depositary may register
the ownership of uncertificated ADSs, which ownership shall be evidenced by periodic statements issued
by the depositary to the ADS holders entitled thereto; or
●
indirectly, through the holder’s broker or other financial institution.
The depositary for our ADSs is Citibank, N.A., whose office is located at 388 Greenwich Street, New York, New York
10013, United States. The depositary’s custodian in Hong Kong is Citibank, N.A. – Hong Kong branch, whose office is
located at 9/F Citi Tower, One Bay East, 83 Hoi Bun Road, Kwun Tong, Kowloon, Hong Kong.
Converting Shares Trading in Hong Kong into ADSs
An investor who holds Shares registered in Hong Kong and who intends to convert them to ADSs to trade on the NYSE
must deposit or have his or her broker deposit the Shares with the depositary’s Hong Kong custodian, Citibank, N.A.,
Hong Kong, or the custodian, in exchange for ADSs.
A deposit of Shares trading in Hong Kong in exchange for ADSs involves the following procedures:
●
If Shares have been deposited with CCASS, the investor must transfer Shares to the depositary’s account
with the custodian within CCASS by following the CCASS procedures for transfer and submit and deliver a
duly completed and signed conversion form to the depositary via his or her broker.
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●
If Shares are held outside CCASS, the investor must arrange to deposit his or her Shares into CCASS for
delivery to the depositary’s account with the custodian within CCASS, submit and deliver a request for
conversion form to the custodian and after duly completing and signing such conversion form, deliver such
conversion form to the custodian.
● Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer
taxes or fees, if applicable, the depositary will issue the corresponding number of ADSs in the name(s)
requested by an investor and will deliver the ADSs to the designated DTC account of the person(s)
designated by an investor or his or her broker.
For Shares deposited in CCASS, under normal circumstances, the above steps generally require two business days. For
Shares held outside CCASS in physical form, the above steps may take 14 business days, or more, to complete.
Temporary delays may arise. For example, the transfer books of the depositary may from time to time be closed to ADS
issuances. The investor will be unable to trade the ADSs until the procedures are completed.
Converting ADSs to Shares Trading in Hong Kong
An investor who holds ADSs and who intends to convert his/her ADSs into Shares to trade on the Hong Kong Stock
Exchange must cancel the ADSs the investor holds and withdraw Shares from our ADS program and cause his or her
broker or other financial institution to trade such Shares on the Hong Kong Stock Exchange.
An investor that holds ADSs indirectly through a broker should follow the broker’s procedure and instruct the broker to
arrange for cancelation of the ADSs, and transfer of the underlying Shares from Citibank’s account on the CCASS
system to the investor’s Hong Kong stock account.
For investors holding ADSs directly, the following steps must be taken:
●
To withdraw Shares from our ADS program, an investor who holds ADSs may turn in such ADSs at the
office of the depositary (and the applicable ADR(s) if the ADSs are held in certificated form), and send an
instruction to cancel such ADSs to the depositary.
● Upon payment or net of its fees and expenses and of any taxes or charges, such as stamp taxes or stock
transfer taxes or fees, if applicable, the depositary will instruct the custodian to deliver Shares underlying
the canceled ADSs to the CCASS account designated by an investor.
●
If an investor prefers to receive Shares outside CCASS, he or she must receive Shares in CCASS first and
then arrange for withdrawal from CCASS. Investors can then obtain a transfer form signed by HKSCC
Nominees Limited (as the transferor) and register Shares in their own names with the Hong Kong Share
Registrar.
For Shares to be received in CCASS, under normal circumstances, the above steps generally require two business days.
For Shares to be received outside CCASS in physical form, the above steps may take 14 business days, or more, to
complete. The investor will be unable to trade the Shares on the Hong Kong Stock Exchange until the procedures are
completed.
Temporary delays may arise. For example, the transfer books of the depositary may from time to time be closed to ADS
cancellations. In addition, completion of the above steps and procedures is subject to there being a sufficient number of
Shares on the Hong Kong share register to facilitate a withdrawal from the ADS program directly into the CCASS
system. We are not under any obligation to maintain or increase the number of Shares on the Hong Kong share register to
facilitate such withdrawals.
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Depositary Requirements
Before the depositary issues ADSs or permits withdrawal of Shares, the depositary may require:
●
●
production of satisfactory proof of the identity and genuineness of any signature or other information it
deems necessary; and
compliance with procedures it may establish, from time to time, consistent with the Deposit Agreement,
including presentation of transfer documents.
The depositary may refuse to deliver, transfer, or register issuances, transfers and cancelations of ADSs generally when
the transfer books of the depositary or our Hong Kong Share Registrar are closed or at any time if the depositary or we
determine it advisable to do so.
All costs attributable to the transfer of Shares to effect a withdrawal from or deposit of Shares into our ADS program will
be borne by the investor requesting the transfer. In particular, holders of Shares and ADSs should note that the Hong
Kong share registrar will charge between HK$2.50 to HK$20.00, depending on the speed of service (or such higher fee
as may from time to time be permitted under the Hong Kong Listing Rules), for each transfer of Shares from one
registered owner to another, each share certificate canceled or issued by it and any applicable fee as stated in the share
transfer forms used in Hong Kong. In addition, holders of Shares and ADSs must pay US$5.00 (or less) per 100 ADSs
for each issuance of ADSs and for each cancelation of ADSs, as the case may be, in connection with the deposit of
Shares into, or withdrawal of Shares from, our ADS program.
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ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
PART II
None.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE
OF PROCEEDS
See “Item 10. Additional Information” for a description of the rights of securities holders, which remain unchanged.
ITEM 15. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be
disclosed in reports filed under the U.S. Exchange Act is recorded, processed, summarized and reported within the
specified time periods and accumulated and communicated to our management, including our chief executive officer and
chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Our management, under the supervision and with the participation of our principal executive officer and our principal
financial officer, evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-
15(e) or 15d-15(e) promulgated under the U.S. Exchange Act, at March 31, 2020. Based on that evaluation, our principal
executive officer and principal financial officer have concluded that our disclosure controls and procedures are effective
in ensuring that information required to be disclosed in the reports that we file or submit under the U.S. Exchange Act is
recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that
information required to be disclosed in the reports that we file or submit under the U.S. Exchange Act is accumulated and
communicated to our management, including our chief executive officer and chief financial officer, to allow timely
decisions regarding required disclosure.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as
defined in Rules 13a-15(f) and 15d-15(f) under the U.S. Exchange Act. As required by Rule 13a-15(c) of the U.S.
Exchange Act, our management conducted an evaluation of our company’s internal control over financial reporting as of
March 31, 2020 based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management concluded that our
internal control over financial reporting was effective as of March 31, 2020.
Our company completed the acquisition of HQG, Inc. and its subsidiaries (“Kaola”) on September 6, 2019. Our
management has excluded Kaola from its assessment of internal control over financial reporting as of March 31, 2020
because Kaola was acquired by us in a business combination during the fiscal year ended March 31, 2020. The total
assets and total revenue of Kaola represented less than 1% and 2%, respectively, of our related consolidated financial
statement amounts as of and for the year ended March 31, 2020.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness of our internal control over financial reporting to future periods are
subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Our independent registered public accounting firm, PricewaterhouseCoopers, has audited the effectiveness of our internal
control over financial reporting as of March 31, 2020, as stated in its report, which appears on page F-2 of this annual
report.
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Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the period covered by this
annual report on Form 20-F that have materially affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
Our board of directors has determined that Mr. Walter Kwauk, an independent director within the meaning of
Section 303A of the NYSE Listed Company Manual and a member of our audit committee, qualifies as “audit committee
financial expert” as defined in Item 16A of Form 20-F.
ITEM 16B. CODE OF ETHICS
Our board of directors has adopted a code of ethics that applies to all of our directors, executive officers and employees.
We have filed our code of ethics as an exhibit to our registration statement on Form F-1 (File Number 333-195736), as
amended, initially filed with the Commission on May 6, 2014. The code is also available on our official website under the
investor relations section at www.alibabagroup.com.
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets forth the aggregate fees by categories specified below in connection with certain professional
services rendered by PricewaterhouseCoopers, our principal external auditors, for the periods indicated. We did not pay
any other fees to our auditors during the periods indicated below.
Audit Fees(1)
Audit-related Fees(2)
Tax Fees(3)
All Other Fees(4)
Total
Year ended
March 31,
2019
2020
(in thousands of RMB)
149,298
87,545
4,424
14,212
708
—
8,082
5,982
162,512
107,739
(1)
(2)
(3)
(4)
“Audit Fees” represents the aggregate fees billed or to be billed for each of the fiscal years listed for professional services
rendered by our principal auditors for the audit of our annual financial statements, issuance of comfort letters in connection
with our global offering and secondary listing of our Shares on the Hong Kong Stock Exchange, as well as assistance with
and review of documents filed with the SEC and other statutory and regulatory filings.
“Audit-related Fees” represents the aggregate fees billed in each of the fiscal years listed for the assurance and related
services rendered by our principal auditors that are reasonably related to the performance of the audit or review of our
financial statements and not reported under “Audit Fees.”
“Tax Fees” represents the aggregate fees billed in each of the fiscal years listed for the professional tax services rendered by
our principal auditors.
“All Other Fees” represents the aggregate fees billed in each of the fiscal years listed for services rendered by our principal
auditors other than services reported under “Audit Fees,” “Audit-related Fees” and “Tax Fees.”
The policy of our audit committee is to pre-approve all audit and non-audit services provided by
PricewaterhouseCoopers, including audit services, audit-related services, tax services and other services as described
above, other than those for de minimis services that are approved by the audit committee prior to the completion of
the audit.
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
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ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
In May 2019, our board of directors authorized a share repurchase program for an amount of up to US$6.0 billion over a
period of two years. As of the date of this annual report, we have not made any repurchases under this share repurchase
program.
In addition, our equity incentive award agreements generally provide that, in the event of a grantee’s termination for
cause or violation of a non-competition undertaking, we will have the right to repurchase the shares acquired by the
grantee, generally at par or the exercise price paid for these shares. See “Item 6. Directors, Senior Management and
Employees — B. Compensation — Equity Incentive Plans.” In addition, when an employee leaves our company, we
repurchase any shares acquired by the employee pursuant to early-exercised but unvested options.
The table below summarizes the repurchases we made in the periods indicated.
Month
April 2019
May 2019
June 2019
July 2019
August 2019
September 2019
October 2019
November 2019
December 2019
January 2020
February 2020
March 2020
Total Number of
Ordinary
Shares
Purchased(1)
—
100,000
31,976
—
—
2,144
—
—
12,160
—
—
11,280
Total Price
Paid(1)
(US$)
—
231,250
—
—
—
—
—
—
—
—
—
—
Average Price
Paid Per
Ordinary
Share(2)
(US$)
Total Number of
Ordinary
Shares
Purchased as
Part of Share
Repurchase
Program
—
2.31
Par value
—
—
Par value
—
—
Par value
—
—
Par value
—
—
—
—
—
—
—
—
—
—
—
—
(1)
(2)
Includes, after having accounted for the Share Split, an aggregate of 157,560 ordinary shares, including 100,000 ordinary
shares underlying unvested awards, we repurchased pursuant to our equity incentive award agreements.
Ordinary shares we repurchased pursuant to our equity incentive award agreements were generally repurchased at par or the
exercise price paid by the grantee for these shares.
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
Not applicable.
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ITEM 16G. CORPORATE GOVERNANCE
We are a “foreign private issuer” (as such term is defined in Rule 3b-4 under the U.S. Exchange Act), and our ADSs,
each representing eight ordinary shares, are listed on the NYSE. Under Section 303A of the NYSE Listed Company
Manual, NYSE listed companies that are foreign private issuers are permitted to follow home country practice in lieu of
the corporate governance provisions specified by the NYSE with limited exceptions. The following summarizes some
significant ways in which our corporate governance practices differ from those followed by domestic companies under
the listing standards of the NYSE.
Under the NYSE Listed Company Manual, or the NYSE Manual, U.S. domestic listed companies are required to have a
majority independent board, which is not required under the Companies Law of the Cayman Islands, our home country.
Currently, our board of directors is composed of ten members, five of whom are independent directors. In addition, the
NYSE Manual requires U.S. domestic listed companies to have a compensation committee and a nominating/corporate
governance committee, each composed entirely of independent directors, which are not required under the Companies
Law of the Cayman Islands. Currently, our compensation committee is composed of three members, only two of whom
are independent directors. Our nominating and corporate governance committee is composed of three members, only two
of whom are independent directors. In addition, the NYSE Manual requires shareholder approval for certain matters, such
as requiring that shareholders must be given the opportunity to vote on all equity compensation plans and material
revisions to those plans, which is not required under the Cayman Islands law. We intend to comply with the requirements
of Cayman Islands law only in determining whether shareholder approval is required.
Under Rule 19C.11 of the Hong Kong Listing Rules, we are exempt from certain corporate governance requirements of
the Hong Kong Stock Exchange, including Appendix 14 of the Hong Kong Listing Rules (Corporate Governance Code
and Corporate Governance Report) and Appendix 16 of the Hong Kong Listing Rules (Disclosure of Financial
Information).
In connection with our listing on the Hong Kong Stock Exchange, the Hong Kong Stock Exchange and the SFC granted
certain waivers and exemptions from strict compliance with the relevant provisions of the Hong Kong Listing Rules and
the SFO, respectively, and the SFC also granted a ruling under the Takeovers Codes.
Not a Public Company in Hong Kong
Section 4.1 of the Takeovers Codes provides that the Takeovers Codes applies to takeovers, mergers and share
repurchases affecting public companies in Hong Kong and companies with a primary listing in Hong Kong. According to
the Note to Section 4.2 of the Introduction to the Takeovers Codes, a Grandfathered Greater China Issuer within the
meaning of Rule 19C.01 of the Hong Kong Listing Rules with a secondary listing on the Hong Kong Stock Exchange
will not normally be regarded as a public company in Hong Kong under Section 4.2 of the Introduction to the Takeovers
Codes.
The SFC granted a ruling that we are not a “public company in Hong Kong” for the purposes of Section 4.2. Therefore,
the Takeovers Codes does not apply to us. This ruling may be reconsidered by the SFC in the event that the bulk of
trading in our Shares migrates to Hong Kong such that we would be treated as having a dual-primary listing pursuant to
Rule 19C.13 of the Hong Kong Listing Rules or in the event of a material change in information provided to the SFC.
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Disclosure of Interests under Part XV of SFO
Part XV of the SFO imposes duties of disclosure of interests in Shares. Under the U.S. Exchange Act, which we are
subject to, any person (including directors and officers of the company concerned) who acquires beneficial ownership, as
determined in accordance with the rules and regulations of the SEC and which includes the power to direct the voting or
the disposition of the securities, of more than 5% of a class of equity securities registered under Section 12 of the U.S.
Exchange Act must file beneficial owner reports with the SEC, and such person must promptly report any material
change in the information provided (including any acquisition or disposition of 1% or more of the class of equity
securities concerned), unless exceptions apply. Therefore, compliance with Part XV of the SFO would subject our
corporate insiders to a second level of reporting, which would be unduly burdensome to them, would result in additional
costs and would not be meaningful, since the statutory disclosure of interest obligations under the U.S. Exchange Act that
apply to us and our corporate insiders would provide our investors with sufficient information relating to the
shareholding interests of our significant shareholders.
The SFC granted a partial exemption under section 309(2) of the SFO from the provisions of Part XV of the SFO (other
than Divisions 5, 11 and 12 of Part XV of the SFO), on the conditions that (i) the bulk of trading in the Shares is not
considered to have migrated to Hong Kong on a permanent basis in accordance with Rule 19C.13 of the Hong Kong
Listing Rules; (ii) the disclosures of interest filed in the SEC are also filed with the Hong Kong Stock Exchange as soon
as practicable, which will then publish such disclosure in the same manner as disclosures made under Part XV of the
SFO; and (iii) we will advise the SFC if there is any material change to any of the information which has been provided
to the SFC, including any significant changes to the disclosure requirements in the U.S. and any significant changes in
the volume of our worldwide share turnover that takes place on the Hong Kong Stock Exchange. This exemption may be
reconsidered by the SFC in the event there is a material change in information provided to the SFC.
The U.S. Exchange Act and the rules and regulations promulgated thereunder require disclosure of interests by
shareholders that are broadly equivalent to Part XV of the SFO. For relevant disclosure in respect of the substantial
shareholder’s interests, see “Item 7. Major Shareholders and Related Party Transactions — A. Major Shareholders.”
We undertook to file with the Hong Kong Stock Exchange, as soon as practicable, any declaration of shareholding and
securities transactions filed with the SEC. We further undertook to disclose in present and future listing documents any
shareholding interests as disclosed in an SEC filing and the relationship between our directors, officers, members of
committees and their relationship to any controlling shareholder.
Corporate Communication
Rule 2.07A of the Hong Kong Listing Rules provides that a listed issuer may send or otherwise make available to the
relevant holders of its securities any corporate communication by electronic means, provided that either the listed issuer
has previously received from each of the relevant holders of its securities an express, positive confirmation in writing or
the shareholders of the listed issuer have resolved in a general meeting that the listed issuer may send or supply corporate
communications to shareholders by making them available on the listed issuer’s own website or the listed issuer’s
constitutional documents contain provision to that effect, and certain conditions are satisfied.
Since our listing on the Hong Kong Stock Exchange, we made the following arrangements:
● We issue all corporate communications as required by the Hong Kong Listing Rules on our own website in
English and Chinese, and on the Hong Kong Stock Exchange’s website in English and Chinese.
● We continue to provide printed copies of notice including the proxy materials to our shareholders at no
costs.
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● We have added to the “Investor Relations” page of our website which directs investors to all of our filings
with the Hong Kong Stock Exchange.
The Hong Kong Stock Exchange granted us a waiver from strict compliance with the requirements under Rule 2.07A of
the Hong Kong Listing Rules.
Monthly Return
Rule 13.25B of the Hong Kong Listing Rules requires a listed issuer to publish a monthly return in relation to movements
in its equity securities, debt securities and any other securitized instruments, as applicable, during the period to which the
monthly return relates. Pursuant to the Joint Policy Statement Regarding the Listing of Overseas Companies, or Joint
Policy Statement, we sought a waiver from Rule 13.25B subject to satisfying the waiver condition that the SFC has
granted a partial exemption from strict compliance with Part XV of the SFO (other than Divisions 5, 11 and 12 of Part
XV of the SFO) in respect of disclosure of shareholders’ interests. As we have obtained a partial exemption from the
SFC, the Hong Kong Stock Exchange granted a waiver from strict compliance with Rule 13.25B of the Hong Kong
Listing Rules. We disclose information about share repurchases, if any, in our quarterly earnings releases and annual
reports on Form 20-F which are furnished or filed with the SEC in accordance with applicable U.S. rules and regulations.
ITEM 16H. MINE SAFETY DISCLOSURE
Not applicable.
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PART III
ITEM 17. FINANCIAL STATEMENTS
We have provided financial statements pursuant to Item 18.
ITEM 18. FINANCIAL STATEMENTS
The following financial statements are filed as part of this annual report, together with the report of the independent
auditor:
● Report of Independent Registered Public Accounting Firm
● Consolidated Income Statements for the years ended March 31, 2018, 2019 and 2020
● Consolidated Statements of Comprehensive Income for the years ended March 31, 2018, 2019 and 2020
● Consolidated Balance Sheets as of March 31, 2019 and 2020
● Consolidated Statements of Changes in Shareholders’ Equity for the years ended March 31, 2018, 2019
and 2020
● Consolidated Statements of Cash Flows for the years ended March 31, 2018, 2019 and 2020
● Notes to the Consolidated Financial Statements
ITEM 19. EXHIBITS
Exhibit
1.1
2.1(1)
2.2(2)
2.3(2)
2.4(3)
2.5(3)
2.6(4)
2.7(4)
2.8(4)
2.9(4)
Amended and Restated Memorandum and Articles of Association of the Registrant as currently in effect
Number Description of Document
Registrant’s Form of Ordinary Share Certificate
Deposit Agreement, dated as of September 24, 2014, between the Registrant, the depositary and holders and
beneficial holders of American Depositary Shares evidenced by American Depositary Receipts issued
thereunder, including the form of American Depositary Receipt
Form of American depositary receipt evidencing American depositary shares (included in Exhibit 2.2)
Amended and Restated Registration Rights Agreement among the Registrant and the persons whose names
are set out in Schedule I thereto, dated September 18, 2012
Voting Agreement by and among the Registrant, Yahoo! Inc., SoftBank Corp., the Management Members
as defined therein and certain other shareholders of the Registrant
Indenture, dated as of November 28, 2014 between the Registrant and Bank of New York Mellon as Trustee
Fourth Supplemental Indenture, dated as of November 28, 2014 between the Registrant and Bank of New
York Mellon as Trustee
Fifth Supplemental Indenture, dated as of November 28, 2014 between the Registrant and Bank of New
York Mellon as Trustee
Sixth Supplemental Indenture, dated as of November 28, 2014 between the Registrant and Bank of New
York Mellon as Trustee
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Exhibit
2.10(4)
2.11(4)
2.12(4)
2.13(5)
2.14(5)
2.15(5)
2.16(5)
2.17(5)
2.18(5)
2.19(5)
2.20(5)
2.21(5)
2.22(5)
2.23(5)
2.24(6)
2.25
4.1(3)
4.2(3)
4.3(3)
4.4(3)
4.5
4.6(3)
4.7(3)
4.8(3)
4.9
4.10(3)
Number Description of Document
Form of 3.125% Senior Notes Due 2021 (included in Exhibit 2.7)
Form of 3.600% Senior Notes Due 2024 (included in Exhibit 2.8)
Form of 4.500% Senior Notes Due 2034 (included in Exhibit 2.9)
Indenture, dated as of December 6, 2017, between the Registrant and Bank of New York Mellon as Trustee
First Supplemental Indenture, dated as of December 6, 2017 between the Registrant and Bank of New York
Mellon as Trustee
Second Supplemental Indenture, dated as of December 6, 2017 between the Registrant and Bank of New
York Mellon as Trustee
Third Supplemental Indenture, dated as of December 6, 2017 between the Registrant and Bank of New
York Mellon as Trustee
Fourth Supplemental Indenture, dated as of December 6, 2017 between the Registrant and Bank of New
York Mellon as Trustee
Fifth Supplemental Indenture, dated as of December 6, 2017 between the Registrant and Bank of New York
Mellon as Trustee
Form of 2.800% Senior Notes Due 2023 (included in Exhibit 2.14)
Form of 3.400% Senior Notes Due 2027 (included in Exhibit 2.15)
Form of 4.000% Senior Notes Due 2037 (included in Exhibit 2.16)
Form of 4.200% Senior Notes Due 2047 (included in Exhibit 2.17)
Form of 4.400% Senior Notes Due 2057 (included in Exhibit 2.18)
Amendment to the Amended and Restated Registration Rights Agreement among the Registrant and the
persons whose names are set out in Schedule I thereto, dated January 24, 2018
Description of Securities Registered under Section 12 of the U.S. Exchange Act
2011 Equity Incentive Plan of the Registrant
Partner Capital Investment Plan
Form of Indemnification Agreement between the Registrant and its directors and executive officers
Form of Employment Agreement between the Registrant and its executive officers
Schedules of Material Differences of Contractual Arrangements of Major Variable Interest Entities of the
Registrant
Share and Asset Purchase Agreement by and among the Registrant, Zhejiang Ant Small and Micro
Financial Services Group Co., Ltd., Yahoo! Inc., SoftBank Corp. and the other Parties named therein, dated
August 12, 2014
Data Sharing Agreement by and between the Registrant and Zhejiang Ant Small and Micro Financial
Services Group Co., Ltd., dated August 12, 2014
English Translation of Software System Use and Service Agreement between Alibaba (China) Co., Ltd. and
Chongqing Alibaba Small Loan Co. Ltd., dated August 12, 2014
Amended and Restated 2014 Post-IPO Equity Incentive Plan
Form of Share Retention Agreement between the Registrant and certain members of management
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Exhibit
4.11(7)
4.12(7)
4.13(5)
4.14(5)
4.15(5)
4.16(5)
4.17(5)
4.18(5)
4.19(8)
4.20(8)
4.21(9)
4.22(9)
4.23(9)
4.24(9)
Number Description of Document
US$3,000,000,000 Facility Agreement between the Registrant and other parties named therein, dated March
9, 2016
Syndication and Amendment Agreement, dated May 3, 2016, in respect of a US$3,000,000,000 Facility
Agreement dated March 9, 2016
US$5,150,000,000 Facility Agreement between the Registrant and other parties named therein, dated April
7, 2017
English translation of Loan Agreement, between Hangzhou Zhenxi Investment Management Co., Ltd. and
Zhejiang Tmall Technology Co., Ltd., dated January 10, 2018
English translation of Exclusive Call Option Agreement entered into by and among Hangzhou Zhenxi
Investment Management Co., Ltd., Zhejiang Tmall Technology Co., Ltd. and Zhejiang Tmall Network Co.,
Ltd., dated January 10, 2018
English translation of Shareholder’s Voting Rights Proxy Agreement entered into by and among Hangzhou
Zhenxi Investment Management Co., Ltd., Zhejiang Tmall Technology Co., Ltd. and Zhejiang Tmall
Network Co., Ltd., dated January 10, 2018
English translation of Equity Pledge Agreement entered into by and among Hangzhou Zhenxi Investment
Management Co., Ltd., Zhejiang Tmall Technology Co., Ltd. and Zhejiang Tmall Network Co., Ltd., dated
January 10, 2018
English translation of Exclusive Services Agreement entered into between Zhejiang Tmall Network Co.,
Ltd. and Zhejiang Tmall Technology Co., Ltd., dated January 10, 2018
Amendment to Share and Asset Purchase Agreement by and among the Registrant, Ant Small and Micro
Financial Services Group Co., Ltd. (formerly known as Zhejiang Alibaba E-Commerce Co., Ltd.), SoftBank
Group Corp., Jack Ma, Joseph C. Tsai, and the other Parties named therein, dated February 1, 2018
Amended and Restated Commercial Agreement by and among the Registrant, Zhejiang Ant Small and
Micro Financial Services Group Co., Ltd. (formerly known as Zhejiang Alibaba E-Commerce Co., Ltd.)
and Alipay.com Co., Ltd., dated February 1, 2018
Amendment and Restatement Agreement, dated May 29, 2019, in respect of US$4,000,000,000 Facility
Agreement dated March 9, 2016
Facility Agreement relating to a HK$7,653,750,000 term loan facility between the Registrant, as Guarantor,
and the other parties named therein, dated May 17, 2019
English translation of Asset Management Contract of Huatai Securities Asset Management Single Asset
Management Plan No. 6 as Part of the Securities Industry’s Support for the Development of Private-owned
Enterprises, by and among Alibaba (China) Technology Co., Ltd., Huatai Securities (Shanghai) Asset
Management Co., Ltd. and China Merchants Bank Co., Ltd. Suzhou Branch, dated March 26, 2019
English translation of Asset Management Contract of Huatai Securities Asset Management Single Asset
Management Plan No. 7 as Part of the Securities Industry’s Support for the Development of Private-owned
Enterprises, by and among Alibaba (China) Technology Co., Ltd., Huatai Securities (Shanghai) Asset
Management Co., Ltd. and China Merchants Bank Co., Ltd. Suzhou Branch, dated March 26, 2019
4.25(10)
Second Amendment to Share and Asset Purchase Agreement by and among the Registrant, Ant Small and
Micro Financial Services Group Co., Ltd. and SoftBank Group Corp., dated September 23, 2019
238
Table of Contents
Exhibit
4.26(10)
4.27(10)
8.1
11.1(3)
12.1
12.2
13.1(11)
13.2(11)
15.1
15.2
15.3
Number Description of Document
Second Amended and Restated Intellectual Property License and Software Technology Services Agreement
by and among the Registrant, Ant Small and Micro Financial Services Group Co., Ltd. and Alipay.com Co.,
Ltd., dated September 23, 2019
Cross License Agreement by and between the Registrant and Ant Small and Micro Financial Services
Group Co., Ltd., dated September 23, 2019
List of Subsidiaries and Consolidated Entities of the Registrant
Code of Ethics of the Registrant
Principal Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Principal Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Principal Executive Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Principal Financial Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Consent of PricewaterhouseCoopers — Independent Registered Public Accounting Firm
Consent of Fangda Partners
Consent of Maples and Calder (Hong Kong) LLP
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (embedded within the Inline XBRL document)
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
Previously filed on Form 6-K, dated November 20, 2019 and incorporated herein by reference.
Previously filed with the Registration Statement on Form F-6 (File No. 333-231579), dated May 17, 2019 and incorporated
herein by reference.
Previously filed with the Registration Statement on Form F-1 (File No. 333-195736), initially filed on May 6, 2014 and
incorporated herein by reference.
Previously filed with our Annual Report on Form 20-F for the Fiscal Year Ended on March 31, 2015 (File No. 001-36614),
filed on June 25, 2015 and incorporated herein by reference.
Previously filed with our Annual Report on Form 20-F for the Fiscal Year Ended on March 31, 2018 (File No. 001-36614),
filed on July 27, 2018 and incorporated herein by reference.
Previously filed on Form 6-K, dated February 26, 2018 and incorporated herein by reference.
Previously filed with our Annual Report on Form 20-F for the Fiscal Year Ended on March 31, 2016 (File No. 001-36614),
filed on May 24, 2016 and incorporated herein by reference.
Previously filed on Form 6-K, dated February 2, 2018 and incorporated herein by reference.
Previously filed with our Annual Report on Form 20-F for the Fiscal Year Ended on March 31, 2019 (File No. 001-36614),
filed on June 5, 2019 and incorporated herein by reference.
(10) Previously filed with the Registration Statement on Form F-3 (File No. 333-234662), dated November 13, 2019 and
incorporated herein by reference.
(11) Furnished with this annual report on Form 20-F.
239
Table of Contents
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and
authorized the undersigned to sign this annual report on its behalf.
SIGNATURES
Date: July 9, 2020
Alibaba Group Holding Limited
By:
/s/ Daniel Yong Zhang
Name: Daniel Yong Zhang
Title: Chairman and Chief Executive Officer
240
Table of Contents
ALIBABA GROUP HOLDING LIMITED
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Consolidated Income Statements for the Years Ended March 31, 2018, 2019 and 2020
Consolidated Statements of Comprehensive Income for the Years Ended March 31, 2018, 2019 and
2020
Consolidated Balance Sheets as of March 31, 2019 and 2020
Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended March 31, 2018,
2019 and 2020
Consolidated Statements of Cash Flows for the Years Ended March 31, 2018, 2019 and 2020
Notes to Consolidated Financial Statements
Page
F-2
F-7
F-8
F-9
F-11
F-14
F-17
F-1
Table of Contents
To the Board of Directors and Shareholders of Alibaba Group Holding Limited
Report of Independent Registered Public Accounting Firm
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Alibaba Group Holding Limited and its subsidiaries
(the “Company”) as of March 31, 2019 and 2020, and the related consolidated income statements, consolidated
statements of comprehensive income, changes in shareholders’ equity and cash flows for each of the three years in the
period ended March 31, 2020, including the related notes (collectively referred to as the “consolidated financial
statements”). We also have audited the Company’s internal control over financial reporting as of March 31, 2020, based
on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of March 31, 2019 and 2020, and the results of its operations and its cash flows for each of
the three years in the period ended March 31, 2020 in conformity with accounting principles generally accepted in the
United States of America (“U.S. GAAP”). Also in our opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of March 31, 2020, based on criteria established in Internal Control
— Integrated Framework (2013) issued by the COSO.
Change in Accounting Principle
As discussed in Note 2(t) to the consolidated financial statements, the Company changed the manner in which it accounts
for its investments in equity securities for the year ended March 31, 2019.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting,
included in Management’s Annual Report on Internal Control over Financial Reporting appearing under the section of
“Controls and Procedures” in the Company’s annual report. Our responsibility is to express opinions on the Company’s
consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We
are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB)
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was
maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design
and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our
opinions.
F-2
Table of Contents
As described in Management’s Annual Report on Internal Control over Financial Reporting, management has excluded
HQG, Inc. and its subsidiaries (“Kaola”) from its assessment of internal control over financial reporting as of March 31,
2020, because it was acquired by the Company in a business combination during the year ended March 31, 2020. We
have also excluded Kaola from our audit of internal control over financial reporting. Kaola is wholly owned by the
Company, and its total assets and total revenue, which were excluded from management’s assessment and our audit of
internal control over financial reporting, represented less than 1% and 2%, respectively, of the related consolidated
financial statement amounts as of and for the year ended March 31, 2020.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies
and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated
financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to
accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially
challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our
opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit
matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they
relate.
Impairment Assessment on Goodwill Allocated to Reporting Units under the Digital Media and Entertainment Segment
As described in Note 2(z) and Note 17 to the consolidated financial statements, the Company’s balance of goodwill
allocated to reporting units under the Digital Media and Entertainment Segment as of March 31, 2020 was RMB58,673
million. During the year ended March 31, 2020, the Company recorded an impairment charge of RMB576 million on
goodwill allocated to one of those reporting units. Goodwill is tested for impairment on an annual basis, or more
frequently if events or changes in circumstances indicate that it might be impaired. The Company has elected to first
perform a qualitative assessment to determine whether the two-step quantitative goodwill impairment testing is
necessary. In the qualitative assessment, the Company considers factors such as macroeconomic conditions, industry and
market considerations, overall financial performance of the reporting units, and other specific information related to the
operations, business plans and strategies of the reporting units, including consideration of the impact of the COVID-19
pandemic. Based on the qualitative assessment, if it is more likely than not that the fair value of a reporting unit is less
than its carrying amount, the quantitative impairment test is performed.
F-3
Table of Contents
The principal considerations for our determination that performing procedures relating to the impairment assessment on
goodwill allocated to reporting units under the Digital Media and Entertainment Segment is a critical audit matter are that
there was significant judgment and estimation by management when performing the qualitative assessment, which in turn
led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence
relating to the factors considered in management’s qualitative assessment.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our
overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls
relating to management’s impairment assessment on goodwill allocated to reporting units under the Digital Media and
Entertainment Segment, including controls over management’s evaluation of the factors considered in the qualitative
assessment. These procedures also included, among others, testing management’s qualitative assessment, which included
evaluating the factors considered by management, such as macroeconomic conditions, industry and market
considerations, overall financial performance of the reporting units, implied value of the reporting units with reference to
quoted market price of comparable companies, and other specific information related to the operations, business plans
and strategies of the reporting units, including consideration of the impact of the COVID-19 pandemic.
Valuation of Intangible Assets Acquired in Connection with Business Combinations
As described in Note 2(x) and Note 16 to the consolidated financial statements, the Company recorded RMB5,626
million of intangible assets that were acquired in connection with business combinations during the year ended March 31,
2020, which were measured at fair value upon acquisition primarily using valuation techniques under the income
approach. Major assumptions used in determining the fair value of these intangible assets include future growth rates and
weighted average cost of capital.
The principal considerations for our determination that performing procedures relating to the valuation of intangible
assets acquired in connection with business combinations is a critical audit matter are that there was significant judgment
and estimation by management when determining the fair values of these intangible assets, which in turn led to a high
degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence relating to the
valuation techniques and the significant assumptions used by management in determining the fair value of these
intangible assets, including future growth rates and weighted average cost of capital.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our
overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls
relating to the acquisition accounting in connection with business combinations, including controls over management’s
identification of the intangible assets and controls over the development of the significant assumptions related to the
valuation of these intangible assets. These procedures also included, among others, reading the share purchase
agreements and testing the fair values of the intangible assets acquired in connection with business combinations as
determined by management, which included (i) evaluating the appropriateness of the valuation techniques, (ii) testing the
completeness, mathematical accuracy and relevance of the underlying data in management’s cash flow projections
adopted in the income approach, and (iii) evaluating the significant assumptions, including future growth rates and
weighted average cost of capital. Evaluating the reasonableness of the future growth rates for the forecast period involved
considering the past performance of the acquired businesses as well as economic and industry forecasts. The weighted
average cost of capital was evaluated by considering the cost of capital of comparable businesses and other industry
factors. Professionals with specialized skill and knowledge were used to assist in evaluating the reasonableness of the
future growth rate for terminal value and the weighted average cost of capital used by management.
F-4
Table of Contents
Fair Value Determination Related to Investments in Privately Held Companies Accounted for Using the Measurement
Alternative
As described in Note 2(t) and Note 12 to the consolidated financial statements, the Company’s investments in privately
held companies accounted for using the measurement alternative were RMB80,939 million as of March 31, 2020. The
Company recorded these investments at cost, less impairment, with subsequent adjustments for observable price changes
resulting from orderly transactions for identical or similar investments of the same issuer. The fair value of these
investments with observable price changes is determined based on valuation methods using the observable transaction
price at the transaction date and other unobservable inputs including volatility, as well as rights and obligations of the
securities.
The principal considerations for our determination that performing procedures relating to the fair value determination
related to investments in privately held companies accounted for using the measurement alternative is a critical audit
matter are that there was significant judgment and estimation by management when determining the fair value of these
investments, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and
evaluating audit evidence relating to management’s assessment of whether the observable transaction is orderly and
similar to the Company’s investment and management’s determination of the fair value adjustments.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our
overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls
relating to fair value determination of these investments in privately held companies, including controls over
management’s assessment of whether the observable transaction is orderly and similar to the Company’s investment and
controls over the determination of the fair value adjustments. These procedures also included, among others, testing the
fair value of these investments as determined by management, which included (i) evaluating whether the observable
transaction is orderly and similar to the Company’s investment, (ii) testing the completeness, mathematical accuracy and
relevance of key underlying data used in the valuation, and (iii) evaluating the unobservable inputs, including volatility as
well as rights and obligations of the securities, as used in the valuation. The volatility was evaluated by considering the
external market and industry data of comparable businesses. The rights and obligations of the securities were evaluated
by reading the investment agreements. Professionals with specialized skill and knowledge were used to assist in
evaluating the reasonableness of the volatility used by management as well as the rights and obligations of the securities.
F-5
Table of Contents
Investment in Ant Small and Micro Financial Services Group Co., Ltd. (“Ant Group”)
As described in Note 4(l) to the consolidated financial statements, following the satisfaction of the closing conditions in
September 2019, the Company received the 33% equity interest in Ant Group pursuant to the share and asset purchase
agreement (together with all subsequent amendments, the “SAPA”). Under the SAPA, the consideration to acquire the
newly issued 33% equity interest in Ant Group was fully funded by concurrent payments from Ant Group to the
Company in consideration for certain intellectual property rights and assets that the Company transferred to Ant Group
upon the issuance of the equity interest. The Company accounts for its equity interest in Ant Group under the equity
method. Upon the receipt of the equity interest in September 2019, the investment was initially measured at cost, with an
upward adjustment determined based on the fair value of the Company’s share of Ant Group’s net assets as of the
completion date of the transaction. Upon the completion, the Company recorded the 33% equity interest in Ant Group
with a carrying value amounting to RMB90.7 billion in investment in equity investees, other cost reimbursement of
RMB0.6 billion from Ant Group to the Company pursuant to the SAPA and the deferred tax effect of RMB19.7 billion,
with a corresponding gain of RMB71.6 billion recorded in interest and investment income, net in the year ended March
31, 2020. The application of accounting principles related to the measurement of the 33% equity interest in Ant Group
and the recognition of the upward adjustment require significant management judgment, which included (i) determination
of the contract inception date of the SAPA for the initial measurement of the 33% equity interest in Ant Group and (ii)
determination of the accounting treatment for the difference between the Company’s share of the fair value of Ant
Group’s net assets acquired and the cost of investment when the former is greater than the latter. Management considered
the relevant U.S. GAAP guidance, and focused on the legal enforceability of the agreement, and determined that the
contract inception date was in 2014. In the absence of specific guidance and with the diversity in practice, management
assessed various views derived from the interpretations of relevant U.S. GAAP and made reference to the relevant
guidance of other international accounting framework, and recognized the difference under interest and investment
income, net with a corresponding increase to the initial carrying value of the investment in Ant Group.
The principal considerations for our determination that performing procedures relating to the investment in Ant Group is
a critical audit matter are that there was significant judgment and estimation by management in applying accounting
principles related to the measurement of the 33% equity interest in Ant Group and recognizing the related gain, which in
turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit
evidence relating to management’s determination of the contract inception date and the accounting treatment for the
difference between the Company’s share of the fair value of Ant Group’s net assets acquired and the cost of investment
when the former is greater than the latter.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our
overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls
relating to the measurement of the 33% equity interest in Ant Group, including controls over management’s application
of accounting principles related to the measurement of the 33% equity interest in Ant Group and the recognition of the
related gain. These procedures also included, among others, testing management’s determination of the contract inception
date and the accounting treatment for the difference between the Company’s share of the fair value of Ant Group’s net
assets acquired and the cost of investment. Evaluating management’s determination of the contract inception date
included (i) evaluating management’s assessment of when the legally enforceable right first exists and (ii) evaluating Ant
Group’s obligation and commitment to pursue the regulatory approvals relevant to the transaction. Evaluating the
accounting treatment for the difference between the Company’s share of the fair value of Ant Group’s net assets acquired
and the cost of investment included obtaining and examining management’s evaluation of the transaction. Professionals
with specialized skill and knowledge were used to assist in evaluating the accounting treatment for the difference
between the Company’s share of the fair value of Ant Group’s net assets acquired and the cost of investment as
determined by management.
/s/ PricewaterhouseCoopers
PricewaterhouseCoopers
Hong Kong, July 9, 2020
We have served as the Company’s auditor since 1999.
F-6
Table of Contents
ALIBABA GROUP HOLDING LIMITED
CONSOLIDATED INCOME STATEMENTS
Revenue
Cost of revenue
Product development expenses
Sales and marketing expenses
General and administrative expenses
Amortization and impairment of intangible
assets
Impairment of goodwill
Income from operations
Interest and investment income, net
Interest expense
Other income, net
Income before income tax and share of
results of equity investees
Income tax expenses
Share of results of equity investees
Net income
Net loss attributable to noncontrolling
interests
Net income attributable to Alibaba Group
Holding Limited
Accretion of mezzanine equity
Net income attributable to ordinary
shareholders
Earnings per share attributable to
ordinary shareholders (Note)
Basic
Diluted
Earnings per ADS attributable to
ordinary shareholders (one ADS equals
eight ordinary shares)
Basic
Diluted
Weighted average number of shares used
in computing earnings per share (million
shares) (Note)
Basic
Diluted
Notes
5, 22
22
22
22
22
16
17
6, 22
Year ended March 31,
2018
2019
2020
RMB RMB RMB US$
(in millions, except per share data)
(Note 2(a))
250,266
(107,044)
(22,754)
(27,299)
(16,241)
376,844
(206,929)
(37,435)
(39,780)
(24,889)
509,711
(282,367)
(43,080)
(50,673)
(28,197)
71,985
(39,878)
(6,085)
(7,156)
(3,982)
(7,120)
(494)
69,314
30,495
(3,566)
4,160
(10,727)
—
57,084
44,106
(5,190)
221
(13,388)
(576)
91,430
72,956
(5,180)
7,439
8
14
100,403
(18,199)
(20,792)
61,412
96,221
(16,553)
566
80,234
166,645
(20,562)
(5,733)
140,350
(1,891)
(81)
12,912
10,303
(731)
1,051
23,535
(2,904)
(810)
19,821
2,681
7,652
9,083
1,283
64,093
(108)
87,886
(286)
149,433
(170)
21,104
(24)
63,985
87,600
149,263
21,080
3.13
3.06
4.24
4.17
7.10
6.99
1.00
0.99
25.06
24.51
33.95
33.38
56.82
55.93
8.02
7.90
20,425
20,881
20,640
20,988
21,017
21,346
10
10
10
Note: Basic and diluted earnings per share and the number of shares for the years ended March 31, 2018 and 2019 have
been retrospectively adjusted for the Share Subdivision and the ADS Ratio Change that were effective on July 30, 2019
as detailed in Note 2(a).
The accompanying notes form an integral part of these consolidated financial statements.
F-7
Table of Contents
ALIBABA GROUP HOLDING LIMITED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net income
Other comprehensive (loss) income:
- Foreign currency translation:
Change in unrealized (losses) gains
- Available-for-sale securities:
Change in unrealized gains
Reclassification adjustment for losses recorded in
net income
Tax effect
Net change
- Share of other comprehensive income of equity
method investees:
Change in unrealized (losses) gains
- Interest rate swaps under hedge accounting and others:
Year ended March 31,
2018
2019
2020
RMB RMB RMB US$
(in millions)
(Note 2(a))
61,412 80,234 140,350
19,821
(805)
1,068
3,058
432
769
57
385
1,211
—
—
—
—
—
—
—
—
(930)
582
(546)
—
—
—
—
(77)
(72)
—
283
20,104
Change in unrealized gains (losses)
143
(295)
(507)
- Forward exchange contracts under hedge accounting:
Change in unrealized losses
Other comprehensive (loss) income
Total comprehensive income
Total comprehensive loss attributable to noncontrolling
(85)
(466)
—
2,005
60,946 81,589 142,355
—
1,355
interests
2,215
6,637
8,615
1,217
Total comprehensive income attributable to ordinary
shareholders
63,161 88,226 150,970
21,321
The accompanying notes form an integral part of these consolidated financial statements.
F-8
Table of Contents
ALIBABA GROUP HOLDING LIMITED
CONSOLIDATED BALANCE SHEETS
Notes
As of March 31,
2020
2019
RMB
RMB
US$
(Note 2(a))
(in millions)
Assets
Current assets:
Cash and cash equivalents
Short-term investments
Restricted cash and escrow receivables
Investment securities
Prepayments, receivables and other assets
Total current assets
Investment securities
Prepayments, receivables and other assets
Investments in equity investees
Property and equipment, net
Intangible assets, net
Goodwill
Total assets
Liabilities, mezzanine equity and shareholders’
equity
Current liabilities:
Current bank borrowings
Current unsecured senior notes
Income tax payable
Escrow money payable
Accrued expenses, accounts payable and other
liabilities
Merchant deposits
Deferred revenue and customer advances
Total current liabilities
Deferred revenue
Deferred tax liabilities
Non-current bank borrowings
Non-current unsecured senior notes
Other liabilities
Total liabilities
2(q)
11
12
13
2(p) 189,976
3,262
8,518
9,927
58,590
270,273
12 157,090
28,018
13
84,454
14
15
92,030
68,276
16
17 264,935
330,503
28,478
15,479
4,234
84,229
462,923
161,329
57,985
189,632
103,387
60,947
276,782
965,076 1,312,985
20
21
11
7,356
15,110
17,685
8,250
2(ad)
18
19 117,711
10,762
30,795
207,669
1,467
22,517
35,427
76,407
6,187
349,674
18
8
20
21
19
5,154
—
20,190
3,014
161,536
13,640
38,338
241,872
2,025
43,898
39,660
80,616
25,263
433,334
46,676
4,022
2,186
598
11,895
65,377
22,784
8,189
26,782
14,601
8,607
39,089
185,429
728
—
2,851
426
22,813
1,926
5,415
34,159
286
6,200
5,601
11,385
3,567
61,198
The accompanying notes form an integral part of these consolidated financial statements.
F-9
Table of Contents
ALIBABA GROUP HOLDING LIMITED
CONSOLIDATED BALANCE SHEETS (CONTINUED)
Commitments and contingencies
Mezzanine equity
Shareholders’ equity:
Ordinary shares, US$0.000003125 par value;
32,000,000,000 shares authorized as of March 31,
2019 and 2020; 20,696,476,576 and 21,491,994,944
shares issued and outstanding as of March 31, 2019
and 2020, respectively (Note)
Additional paid-in capital
Treasury shares, at cost
Restructuring reserve
Subscription receivables
Statutory reserves
Accumulated other comprehensive loss
Cumulative translation adjustments
Unrealized gains (losses) on interest rate swaps and
others
Retained earnings
Total shareholders’ equity
Noncontrolling interests
Total equity
Total liabilities, mezzanine equity and equity
As of March 31,
2020
2019
RMB
RMB
US$
(Note 2(a))
(in millions)
Notes
24, 25
—
6,819
—
9,103
—
1,286
1
1
—
231,783
—
(97)
(49)
5,068
343,707
—
—
(51)
6,100
48,541
—
—
(7)
861
2(ag)
2(ah)
(2,592)
(387)
(55)
(256)
257
406,287
257,886
755,401
492,257
115,147
116,326
608,583
870,548
965,076 1,312,985
(36)
57,379
106,683
16,262
122,945
185,429
Note: Par value per share and the number of shares as of March 31, 2019 have been retrospectively adjusted for the Share
Subdivision and the ADS Ratio Change that were effective on July 30, 2019 as detailed in Note 2(a).
The accompanying notes form an integral part of these consolidated financial statements.
F-10
Table of Contents
ALIBABA GROUP HOLDING LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Accumulated other
comprehensive income (loss)
Ordinary shares
Share
(Note)
Additional
paid-in
Amount capital
RMB
RMB
Treasury Restructuring Subscription Statutory
Cumulative
translation
shares
RMB
reserve
RMB
receivables reserves adjustments
RMB
RMB
RMB
Unrealized
gains (losses) on
available-for-sale
securities, interest
rate swaps and
others
RMB
Total
Retained shareholders’ Noncontrolling
earnings
RMB
equity
RMB
interests
RMB
Total
equity
RMB
Balance as of
April 1, 2017 20,234,913,512
1
164,585
(2,823)
(624)
(63)
4,080
(3,618)
8,703
108,558
278,799
42,330 321,129
(in millions, except share data)
Foreign currency
translation
adjustment
Net change in
unrealized
gains on
available-for-
sale securities
Share of
additional
paid-in capital
and other
comprehensive
income of
equity method
investees
Change in fair
value of
forward
exchange
contracts
under hedge
accounting
Change in fair
value of
interest rate
swaps under
hedge
accounting
Net income for
the year
Acquisition of
subsidiaries
Issuance of
shares,
including
exercise of
share options
and vesting of
early exercised
options and
RSUs,
including
repayment of
related
employee
loans
Transactions with
noncontrolling
interests
Amortization of
compensation
cost
Partial disposal of
the Company’s
shares by
Suning.com
Co., Ltd.
Appropriation to
statutory
reserves
Others
Balance as of
March 31,
2018
—
—
—
—
—
—
—
—
—
—
14
—
24
(366)
—
(328)
(463)
(791)
—
—
—
1,212
—
1,212
(1)
1,211
—
—
(525)
—
—
—
—
—
(930)
—
(1,455)
—
(1,455)
—
—
—
—
—
—
—
—
(85)
—
(85)
—
(85)
—
—
—
—
—
—
—
—
—
—
—
—
340,525,232
—
—
—
3,945
(186)
—
—
—
—
19,053
—
—
—
—
590
—
—
—
—
—
(108)
—
—
—
—
—
—
—
—
—
—
263
—
—
—
—
—
—
—
—
—
143
—
143
—
143
—
64,093
64,093
(1,751)
62,342
—
—
—
40,087
40,087
(114)
—
—
—
—
—
—
—
—
—
3,831
—
3,831
(186)
(10,513)
(10,699)
—
—
—
—
—
19,053
1,039
20,092
—
—
—
—
298
—
—
—
—
—
—
590
—
590
—
—
(298)
—
—
155
—
(112)
—
43
20,575,438,744
1
186,764
(2,233)
(361)
(163)
4,378
(3,594)
8,677
172,353
365,822
70,616
436,438
Note: The number of shares has been retrospectively adjusted for the Share Subdivision and the ADS Ratio Change that were
effective on July 30, 2019 as detailed in Note 2(a).
The accompanying notes form an integral part of these consolidated financial statements.
F-11
Table of Contents
ALIBABA GROUP HOLDING LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (CONTINUED)
Accumulated other
comprehensive income (loss)
Ordinary shares
Share
(Note)
Additional
paid-in
Amount capital
RMB
RMB
Treasury Restructuring Subscription Statutory
Cumulative
translation
shares
RMB
reserve
RMB
receivables reserves adjustments
RMB
RMB
RMB
Unrealized
gains (losses) on
available-for-sale
securities, interest
rate swaps and
others
RMB
Total
Retained shareholders’ Noncontrolling
earnings
RMB
equity
RMB
interests
RMB
Total
equity
RMB
20,575,438,744
1
186,764
(2,233)
(361)
(163)
4,378
(3,594)
8,677
172,353
365,822
70,616
436,438
(in millions, except share data)
—
—
—
—
April 1, 2018 20,575,438,744
1
186,764
(2,233)
—
(361)
—
—
(32)
(8,164)
8,196
—
—
—
(163)
4,378
(3,626)
513
180,549
365,822
70,616 436,438
—
—
—
—
—
(12)
—
452
39
—
479
577
1,056
—
—
142
—
—
—
—
582
—
—
724
—
724
—
—
—
—
—
—
—
—
7,515
228
(1,013)
3,412
35,015
208,011,512
(86,973,680)
—
—
—
—
—
—
—
—
—
—
—
—
—
2,233
—
(280)
20,696,476,576
1
231,783
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(295)
—
(295)
—
(295)
—
87,886
87,886
(7,214)
80,672
—
—
7,515
49,805
57,320
—
—
—
-
—
—
264
126
—
—
—
—
—
—
—
—
—
—
—
690
—
—
—
—
—
—
—
—
—
—
354
—
354
—
(9,859)
(10,872)
— (10,872)
—
—
—
—
—
—
—
—
3,412
406
3,818
35,015
2,586
37,601
2,233
—
2,233
(690)
—
—
(16)
—
(450)
—
(466)
(97)
(49)
5,068
(2,592)
257
257,886
492,257
116,326 608,583
Balance as of
March 31,
2018
Cumulative effect
of change in
accounting
principle (Note
2(t))
Balance as of
Foreign currency
translation
adjustment
Share of
additional
paid-in capital
and other
comprehensive
income of
equity method
investees
Change in fair
value of
interest rate
swaps under
hedge
accounting and
others
Net income for
the year
Acquisition of
subsidiaries
Issuance of
shares,
including
vesting of
RSUs and
early exercised
options and
exercise of
share options
Repurchase and
retirement of
ordinary
shares
Transactions with
noncontrolling
interests
Amortization of
compensation
cost
Disposal of the
Company’s
shares by
Suning.com
Co., Ltd.
Appropriation to
statutory
reserves
Others
Balance as of
March 31,
2019
Note: The number of shares has been retrospectively adjusted for the Share Subdivision and the ADS Ratio Change that were
effective on July 30, 2019 as detailed in Note 2(a).
The accompanying notes form an integral part of these consolidated financial statements.
F-12
Table of Contents
ALIBABA GROUP HOLDING LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (CONTINUED)
Accumulated other
comprehensive income (loss)
Ordinary shares
Share
(Note)
Additional
paid-in
Amount capital
RMB
RMB
Treasury Restructuring Subscription Statutory
Cumulative
translation
shares
RMB
reserve
RMB
receivables reserves adjustments
RMB
RMB
RMB
Unrealized
gains (losses) on
interest
Total
rate swaps and Retained shareholders’ Noncontrolling
others
RMB
earnings
RMB
equity
RMB
interests
RMB
Total
equity
RMB
Balance as of
April 1, 2019 20,696,476,576
1
231,783
—
—
—
—
—
(in millions, except share data)
(49)
5,068
(2,592)
257
257,886
492,257
116,326 608,583
(2)
—
2,711
3
—
2,712
344
3,056
(97)
—
Foreign currency
translation
adjustment
Share of
additional
paid-in capital
and other
comprehensive
income of
equity method
investees
Change in fair
value of
interest rate
swaps under
hedge
accounting and
others
Net income for
the year
Acquisition of
subsidiaries
Issuance of
shares,
including
vesting of
RSUs and
early exercised
options and
exercise of
share options
Issuance of
shares – global
offering, net of
issuance costs
Repurchase and
retirement of
ordinary
shares
Transactions with
noncontrolling
interests
Amortization of
compensation
cost
Appropriation to
statutory
reserves
Others
Balance as of
March 31,
2020
—
—
(186)
—
—
—
—
(537)
(9)
—
(732)
—
(732)
—
—
14,329,896
—
—
—
—
—
2,252
—
—
—
206,246,032
—
960
—
575,000,000
—
91,112
—
(57,560)
—
—
—
—
—
—
—
—
—
—
—
(9,629)
27,584
—
(169)
—
—
—
—
21,491,994,944
1
343,707
—
—
—
—
—
—
—
—
—
—
97
—
—
—
—
—
—
—
—
—
—
(507)
—
(507)
—
(507)
— 149,433
149,433
(8,959)
140,474
—
—
2,252
(501)
1,751
—
—
—
—
—
960
—
960
—
—
—
—
—
91,112
—
91,112
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,032
—
—
—
—
31
—
—
—
—
—
—
(9,629)
4,138
(5,491)
27,584
4,009
31,593
(1,032)
—
—
(41)
—
(210)
—
(251)
(51)
6,100
(387)
(256)
406,287
755,401
115,147 870,548
Note: The number of shares has been retrospectively adjusted for the Share Subdivision and the ADS Ratio Change that were
effective on July 30, 2019 as detailed in Note 2(a).
The accompanying notes form an integral part of these consolidated financial statements.
F-13
Table of Contents
ALIBABA GROUP HOLDING LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by
operating activities:
Revaluation gain on previously held equity interest
Gain on disposals of equity investees
Realized and unrealized (gain) loss related to investment
securities
Change in fair value of other assets and liabilities
Gain in relation to the receipt of the 33% equity interest in Ant
Group (Note 4(l))
(Gain) Loss on disposals of subsidiaries
Depreciation of property and equipment, and operating lease cost
relating to land use rights
Amortization of intangible assets and licensed copyrights
Share-based compensation expense
Impairment of cost method investees, investment securities and
other assets
Impairment of goodwill, intangible assets and licensed
copyrights
(Gain) Loss on disposals of property and equipment
Amortization of restructuring reserve
Share of results of equity investees
Deferred income taxes
Allowance for doubtful accounts
Changes in assets and liabilities, net of effects of acquisitions and
disposals:
Prepayments, receivables and other assets
Income tax payable
Escrow money payable
Accrued expenses, accounts payable and other liabilities
Merchant deposits
Deferred revenue and customer advances
Net cash provided by operating activities
Cash flows from investing activities:
(Increase) Decrease in short-term investments, net
Payments for settlement of forward exchange contracts
Acquisitions of investment securities
Disposals of investment securities
Acquisitions of equity investees
Disposals of equity investees
Disposals of intellectual property rights and assets (Note 4(l))
Acquisitions of:
Land use rights and construction in progress relating to office
campuses
Other property and equipment
Licensed copyrights and other intangible assets
Cash paid for business combinations, net of cash acquired
Deconsolidation and disposal of subsidiaries, net of cash proceeds
Loans to employees, net of repayments
Net cash used in investing activities
Year ended March 31,
2018
2019
2020
RMB RMB RMB US$
(in millions)
(Note 2(a))
61,412
80,234 140,350
19,821
(24,436)
(2,971)
(30,187)
(42)
(1,538)
(1)
(70)
1,415
(16,082)
(1,422)
4,439
1,661
(217)
—
627
235
—
(14)
— (71,561)
(10,042)
4
(10,106)
(1,418)
8,789
13,231
20,075
14,962
22,118
37,491
20,523
21,904
31,742
1,816
10,867
13,256
1,295
(95)
264
20,792
976
601
2,843
55
264
(566)
(2,197)
383
4,104
(24)
97
5,733
(3,443)
1,989
(14,765)
6,610
643
23,158
1,389
5,690
(43,386)
2,538
(5,216)
56,690
2,878
7,914
125,805 150,975 180,607
(10,185)
3,060
5,197
24,355
1,184
8,639
(730)
(582)
(11,872)
7,223
(53,742)
6,185
—
8,028
(15)
(72,472)
10,057
(11,860)
282
—
(24,907)
(193)
(29,944)
18,798
(24,488)
78
12,648
(4,027)
(15,601)
(10,208)
(515)
(27)
132
(7,888)
(24,662)
(12,836)
(14,536)
(107)
(35)
(83,764) (151,060) (108,072)
(3,146)
(32,336)
(14,161)
(35,434)
(10)
7
2,899
3,093
4,483
1,872
579
(3)
14
810
(486)
281
(6,128)
358
(737)
8,006
406
1,118
25,507
(3,518)
(27)
(4,229)
2,655
(3,458)
11
1,786
(1,114)
(3,483)
(1,813)
(2,053)
(15)
(5)
(15,263)
The accompanying notes form an integral part of these consolidated financial statements.
F-14
Table of Contents
ALIBABA GROUP HOLDING LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Cash flows from financing activities:
Issuance of ordinary shares
Repurchase of ordinary shares
Acquisition of additional equity interests in non-
wholly owned subsidiaries
Payment for settlement of contingent consideration
Dividends paid by non-wholly owned subsidiaries to
noncontrolling interests
Capital injection from noncontrolling interests
Proceeds from bank and other borrowings
Repayment of bank borrowings
Proceeds from unsecured senior notes
Repayment of unsecured senior notes
Upfront fee payment for a revolving credit facility and
syndicated loan
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash
Year ended March 31,
2018
2019
2020
RMB RMB RMB US$
(in millions)
(Note 2(a))
399
—
354 91,506
—
(10,872)
12,923
—
(13,627)
(770)
(1,123)
—
(15,402)
—
(2,175)
—
(112)
(226)
(278)
11,049
8,706
1,124
26,824 12,116 15,788
(15,943)
(30,414)
(16,347)
—
45,817
—
— (15,798)
(8,602)
(39)
1,560
2,230
(2,252)
—
(2,231)
(280)
20,359
—
(7,392)
(69)
70,853
(10)
10,006
equivalents, restricted cash and escrow receivables
(6,065)
3,245
4,100
579
Increase (Decrease) in cash and cash equivalents,
restricted cash and escrow receivables
56,335
(4,232) 147,488
20,829
Cash and cash equivalents, restricted cash and escrow
receivables at beginning of year
146,391 202,726 198,494
28,033
Cash and cash equivalents, restricted cash and escrow
receivables at end of year
202,726 198,494 345,982
48,862
The accompanying notes form an integral part of these consolidated financial statements.
F-15
Table of Contents
ALIBABA GROUP HOLDING LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Supplemental disclosures of cash flow information:
Payment of income tax
Income tax paid was RMB10,058 million, RMB15,713 million and RMB21,474 million for the years ended March 31,
2018, 2019 and 2020, respectively.
Payment of interest
Interest paid was RMB2,884 million, RMB4,972 million and RMB5,066 million for the years ended March 31, 2018,
2019 and 2020, respectively.
Business combinations
Cash paid for business combinations
Cash acquired in business combinations
2018
2020
Year ended March 31,
2019
(in millions of RMB)
(17,300) (48,206) (16,022)
1,486
16,785 12,772
(515) (35,434) (14,536)
The accompanying notes form an integral part of these consolidated financial statements.
F-16
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
1. Organization and principal activities
Alibaba Group Holding Limited (the “Company”) is a limited liability company, which was incorporated in the
Cayman Islands on June 28, 1999. The Company is a holding company and conducts its businesses primarily
through its subsidiaries. In these consolidated financial statements, where appropriate, the term “Company” also
refers to its subsidiaries as a whole. The Company provides the technology infrastructure and marketing reach to
help merchants, brands and other businesses to leverage the power of new technology to engage with their users and
customers and operate in a more efficient way. SoftBank Group Corp. (together with its subsidiaries, “SoftBank”) is
a major shareholder of the Company.
The Company has four operating and reportable segments, namely core commerce, cloud computing, digital media
and entertainment, and innovation initiatives and others.
The Company’s core commerce segment is mainly comprised of (i) the retail and wholesale commerce businesses,
(ii) the logistics services business and (iii) the consumer services business. Retail commerce businesses in the
People’s Republic of China (the “PRC” or “China”) primarily include the mobile commerce destination (“Taobao
Marketplace”) and the third-party online and mobile commerce platform for brands and retailers (“Tmall”). Retail
commerce businesses – cross-border and global include the e-commerce platform in Southeast Asia operated by
Lazada (Note 4(a)), the global retail marketplace enabling consumers from around the world to buy directly from
manufacturers and distributors in China and around the world (“AliExpress”), the import e-commerce platform that
allows overseas brands and retailers to reach Chinese consumers (“Tmall Global”) and Kaola (Note 4(b)), an import
e-commerce platform in China. Wholesale commerce businesses in China include the integrated domestic wholesale
marketplace (“1688.com”). Wholesale commerce businesses – cross-border and global include the integrated
international online wholesale marketplace (“Alibaba.com”). Logistics services business includes a logistics data
platform and global fulfillment network operated by Cainiao Network (Note 4(g)). Consumer services business
includes the on-demand delivery and local services platform operated by Ele.me (Note 4(d)) and the restaurant and
local services guide platform for in-store consumption operated by Koubei (Note 4(d)).
The Company’s cloud computing segment is comprised of Alibaba Cloud, which offers a complete suite of cloud
services including elastic computing, database, storage, network virtualization services, large scale computing,
security, management and application services, big data analytics, a machine learning platform and Internet of
Things (“IoT”) services.
The Company’s digital media and entertainment segment leverages the Company’s deep data insights to serve the
broader interests of consumers through the Company’s key distribution platform, Youku, and through Alibaba
Pictures (Note 4(c)) and the Company’s other diverse content platforms that provide online videos, films, live
events, news feeds, literature and music, among other areas.
The Company’s innovation initiatives and others segment includes businesses such as Amap, DingTalk, Tmall Genie
and others.
Prior to September 2019, the Company had a profit sharing arrangement with Ant Small and Micro Financial
Services Group Co., Ltd. (together with its subsidiaries including Alipay.com Co., Ltd. (“Alipay”), “Ant Group”,
formerly known as Ant Financial). Ant Group provides payment services and offers financial services for consumers
and merchants on the Company’s platforms. In September 2019, the Company received a 33% equity interest in Ant
Group and the profit sharing arrangement with Ant Group was terminated (Note 4(l)).
F-17
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
1. Organization and principal activities (Continued)
The Company’s American depositary shares (“ADSs”) have been listed on the New York Stock Exchange (“NYSE”)
under the symbol of “BABA”. On November 26, 2019, the Company completed its global offering and the
Company’s shares have been listed on the Hong Kong Stock Exchange (“HKSE”) under the code “9988”. The
Company issued 575,000,000 ordinary shares, including 75,000,000 ordinary shares under an over-allotment option,
at Hong Kong Dollar (“HK$”)176 per share. Net proceeds raised by the Company from the global offering after
deducting underwriting discounts and commissions and other offering expenses amounted to Renminbi
(“RMB”)90,442 million.
2. Summary of significant accounting policies
(a) Basis of presentation
The accompanying consolidated financial statements are prepared in accordance with accounting principles
generally accepted in the United States of America (“U.S. GAAP”).
Effective on July 30, 2019, the Company subdivided each of its issued and unissued ordinary shares into eight
ordinary shares (the “Share Subdivision”). Following the Share Subdivision, the Company’s authorized share capital
became US$100,000 divided into 32,000,000,000 ordinary shares of par value US$0.000003125 per share. The
number of issued and unissued ordinary shares as disclosed elsewhere in these consolidated financial statements are
presented on a basis after taking into account the effects of the Share Subdivision and have been retrospectively
adjusted, where applicable.
Simultaneously with the Share Subdivision, the change in ratio of the Company’s ADS to ordinary share (the “ADS
Ratio Change”) also became effective. Following the ADS Ratio Change, each ADS now represents eight ordinary
shares. Previously, each ADS represented one ordinary share. Given that the ADS Ratio Change was exactly
proportionate to the Share Subdivision, no new ADSs were issued to any ADS holder and the total number of the
Company’s outstanding ADSs remains unchanged immediately after the Share Subdivision and the ADS Ratio
Change became effective.
Translations of balances in the consolidated balance sheet, consolidated income statement, consolidated statement of
comprehensive income and consolidated statement of cash flows from RMB into the United States Dollar (“US$”) as
of and for the year ended March 31, 2020 are solely for the convenience of the readers and are calculated at the rate
of US$1.00=RMB7.0808, representing the exchange rate set forth in the H.10 statistical release of the Federal
Reserve Board on March 31, 2020. No representation is made that the RMB amounts could have been, or could be,
converted, realized or settled into US$ at this rate, or at any other rate.
(b) Use of estimates
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires the Company to
make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenue and
expenses during the reporting period. The Company bases its estimates on historical experience and on various other
assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the
carrying values of assets and liabilities. As of March 31, 2020, the Company considered the economic implications
of the COVID-19 pandemic on its significant judgments and estimates. Given the impact and other unforeseen
effects on the global economy from the COVID-19 pandemic, these estimates required increased judgment, and
actual results could differ from these estimates.
F-18
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
2. Summary of significant accounting policies (Continued)
(c) Consolidation
The consolidated financial statements include the financial statements of the Company and its subsidiaries, which
include the PRC-registered entities directly or indirectly wholly owned by the Company (“WFOEs”) and variable
interest entities (“VIEs”) over which the Company is the primary beneficiary. All transactions and balances among
the Company and its subsidiaries have been eliminated upon consolidation. The results of subsidiaries acquired or
disposed of are recorded in the consolidated income statements from the effective date of acquisition or up to the
effective date of disposal, as appropriate.
A subsidiary is an entity in which (i) the Company directly or indirectly controls more than 50% of the voting power;
or (ii) the Company has the power to appoint or remove the majority of the members of the board of directors or to
cast a majority of votes at the meeting of the board of directors or to govern the financial and operating policies of
the investee pursuant to a statute or under an agreement among the shareholders or equity holders. A VIE is required
to be consolidated by the primary beneficiary of the entity if the equity holders in the entity do not have the
characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its
activities without additional subordinated financial support from other parties.
Due to legal restrictions on foreign ownership and investment in, among other areas, value-added
telecommunications services, which include the operations of Internet content providers, the Company operates its
Internet and other businesses in which foreign investment is restricted or prohibited in the PRC through certain PRC
domestic companies. The equity interests of these PRC domestic companies are held by PRC citizens or by PRC
entities owned and/or controlled by PRC citizens. Specifically, these PRC domestic companies that are material to
the Company’s business are Zhejiang Taobao Network Co., Ltd., Zhejiang Tmall Network Co., Ltd., Alibaba Cloud
Computing Ltd. and Youku Information Technology (Beijing) Co., Ltd. The registered capital of these PRC
domestic companies was funded by the Company through loans extended to the equity holders of these PRC
domestic companies.
The Company has entered into certain exclusive technical services agreements with these PRC domestic companies,
which entitle it to receive a majority of their residual returns and make it obligatory for the Company to absorb a
majority of the risk of losses from their activities. In addition, the Company has entered into certain agreements with
the equity holders of these PRC domestic companies, including loan agreements that require them to contribute
registered capital to those PRC domestic companies, exclusive call option agreements to acquire the equity interests
in these companies when permitted by the PRC laws, rules and regulations, equity pledge agreements of the equity
interests held by those equity holders, and proxy agreements that irrevocably authorize individuals designated by the
Company to exercise the equity owner’s rights over these PRC domestic companies.
F-19
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
2. Summary of significant accounting policies (Continued)
(c) Consolidation (Continued)
Details of the typical structure of the Company’s significant VIEs are set forth below:
(i) Contracts that give the Company effective control of VIEs
Loan agreements
Pursuant to the relevant loan agreements, the respective WFOEs have granted loans to the equity holders of the
VIEs, which may only be used for the purpose of its business operation activities agreed by the WFOEs. The
WFOEs may require acceleration of repayment at their absolute discretion. When the equity holders of the VIEs
make early repayment of the outstanding amount, the WFOEs or a third-party designated by the WFOEs may
purchase the equity interests in the VIEs at a price equal to the outstanding amount of the loan, subject to any
applicable PRC laws, rules and regulations. The equity holders of the VIEs undertake not to enter into any
prohibited transactions in relation to the VIEs, including the transfer of any business, material assets, intellectual
property rights or equity interests in the VIEs to any third party.
Exclusive call option agreements
The equity holders of the VIEs have granted the WFOEs exclusive call options to purchase their equity interest
in the VIEs at an exercise price equal to the higher of (i) the paid-in registered capital in the VIEs; and (ii) the
minimum price as permitted by applicable PRC laws. Each relevant VIE has further granted the relevant WFOE
an exclusive call option to purchase its assets at an exercise price equal to the book value of the assets or the
minimum price as permitted by applicable PRC laws, whichever is higher. Certain VIEs and their equity holders
will also jointly grant the WFOEs (A) exclusive call options to request the VIEs to decrease their registered
capital at an exercise price equal to the higher of (i) the paid-in registered capital in the VIEs and (ii) the
minimum price as permitted by applicable PRC laws (the “Capital Decrease Price”), and (B) exclusive call
options to subscribe for the increased capital of the VIEs at a price equal to the sum of the Capital Decrease
Price and the unpaid registered capital, if applicable, as of the capital decrease. The WFOEs may nominate
another entity or individual to purchase the equity interest or assets, or to subscribe for the increased capital, if
applicable, under the call options. Execution of each call option shall not violate the applicable PRC laws, rules
and regulations. Each equity holder of the VIE has agreed that the following amounts, to the extent in excess of
the original registered capital that they contributed to the VIE (after deduction of relevant tax expenses), belong
to and shall be paid to the WFOEs: (i) proceeds from the transfer of its equity interests in the VIE, (ii) proceeds
received in connection with a capital decrease in the VIE, and (iii) distributions or liquidation residuals from the
disposal of its equity interests in the VIE upon termination or liquidation. Moreover, any profits, distributions or
dividends (after deduction of relevant tax expenses) received by the VIEs also belong to and shall be paid to the
WFOEs. The exclusive call option agreements remain in effect until the equity interest or assets that are the
subject of these agreements are transferred to the WFOEs.
Proxy agreements
Pursuant to the relevant proxy agreements, the equity holders of the VIEs irrevocably authorize any person
designated by the WFOEs to exercise their rights as the equity holders of the VIEs, including without limitation
the right to vote and appoint directors.
F-20
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
2. Summary of significant accounting policies (Continued)
(c) Consolidation (Continued)
Equity pledge agreements
Pursuant to the relevant equity pledge agreements, the equity holders of the VIEs have pledged all of their
interests in the equity of the VIEs as a continuing first priority security interest in favor of the corresponding
WFOEs to secure the outstanding amounts advanced under the relevant loan agreements described above and to
secure the performance of obligations by the VIEs and/or the equity holders under the other structure contracts.
Each WFOE is entitled to exercise its right to dispose of the pledged interests in the equity of the VIE held by
the equity holders and has priority in receiving payment by the application of proceeds from the auction or sale
of the pledged interests, in the event of any breach or default under the loan agreement or other structure
contracts, if applicable. These equity pledge agreements remain in force until the later of (i) the full performance
of the contractual arrangements by the relevant parties, and (ii) the full repayment of the loans made to the
equity holders of the VIEs.
(ii) Contracts that enable the Company to receive substantially all of the economic benefits from the VIEs
Exclusive technology services agreements or exclusive services agreements
Each relevant VIE has entered into an exclusive technology services agreement or an exclusive services
agreement with the respective WFOE, pursuant to which the relevant WFOE provides exclusive services to the
VIE. In exchange, the VIE pays a service fee to the WFOE, the amount of which shall be determined, to the
extent permitted by applicable PRC laws as proposed by the WFOE, resulting in a transfer of substantially all of
the profits from the VIE to the WFOE.
Other arrangements
The exclusive call option agreements described above also entitle the WFOEs to all profits, distributions or
dividends (after deduction of relevant tax expenses) to be received by the VIEs, and the following amounts, to
the extent in excess of the original registered capital that they contributed to the VIEs (after deduction of
relevant tax expenses) to be received by each equity holder of the VIEs: (i) proceeds from the transfer of its
equity interests in the VIEs, (ii) proceeds received in connection with a capital decrease in the VIEs, and (iii)
distributions or liquidation residuals from the disposal of its equity interests in the VIEs upon termination or
liquidation.
Based on these contractual agreements, the Company believes that the PRC domestic companies as described above
should be considered as VIEs because the equity holders do not have significant equity at risk nor do they have the
characteristics of a controlling financial interest. Given that the Company is the primary beneficiary of these PRC
domestic companies, the Company believes that these VIEs should be consolidated based on the structure as
described above.
F-21
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
2. Summary of significant accounting policies (Continued)
(c) Consolidation (Continued)
The following financial information of the VIEs in the PRC was recorded in the accompanying consolidated
financial statements:
Cash and cash equivalents and short-term investments
Investments in equity investees and investment securities
Accounts receivable, net of allowance
Amounts due from non-VIE subsidiaries of the Company
Prepayment for licensed copyrights
Property and equipment and intangible assets
Others
Total assets
Amounts due to non-VIE subsidiaries of the Company
Accruals for purchase of licensed copyrights
Accrued expenses, accounts payable and other liabilities
Deferred revenue and customer advances
Total liabilities
As of March 31,
2020
2019
(in millions of RMB)
16,862
15,019
28,071
28,230
14,130
9,540
18,110
6,398
2,828
2,633
6,573
6,161
10,474
5,992
97,048
73,973
76,101
60,273
3,327
3,498
23,190
15,042
7,213
10,518
86,026 113,136
2018
Year ended March 31,
2019
(in millions of RMB)
2020
Revenue (i)
Net loss
Net cash provided by (used in) operating activities
Net cash used in investing activities
Net cash provided by financing activities
32,898 66,674
(7,063)
(6,167)
4,163
5,547
(20,366)
(8,503)
14,286 12,373
81,742
(1,757)
(253)
(7,289)
9,887
(i) Revenue generated by the VIEs are primarily from cloud computing services, digital media and entertainment
services, local consumer services and others.
The VIEs did not have any material related party transactions except for the related party transactions which are
disclosed in Note 22 or elsewhere in these consolidated financial statements, and those transactions with other
subsidiaries that are not VIEs, which were eliminated upon consolidation.
Under the contractual arrangements with the VIEs, the Company has the power to direct activities of the VIEs and
can have assets transferred out of the VIEs under its control. Therefore, the Company considers that there is no asset
in any of the VIEs that can be used only to settle obligations of the VIEs, except for registered capital and PRC
statutory reserves. As all VIEs are incorporated as limited liability companies under the Company Law of the PRC,
creditors of the VIEs do not have recourse to the general credit of the Company for any of the liabilities of the VIEs.
F-22
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
2. Summary of significant accounting policies (Continued)
(c) Consolidation (Continued)
Currently there is no contractual arrangement which requires the Company to provide additional financial support to
the VIEs. However, as the Company conducts its businesses primarily based on the licenses and approvals held by
its VIEs, the Company has provided and will continue to provide financial support to the VIEs considering the
business requirements of the VIEs, as well as the Company's own business objectives in the future.
Unrecognized revenue-producing assets held by the VIEs include certain Internet content provision and other
licenses, domain names and trademarks. The Internet content provision and other licenses are required under
relevant PRC laws, rules and regulations for the operation of Internet businesses in the PRC, and therefore are
integral to the Company’s operations. The Internet content provision licenses require that core PRC trademark
registrations and domain names are held by the VIEs that provide the relevant services.
(d) Business combinations and noncontrolling interests
The Company accounts for its business combinations using the acquisition method of accounting in accordance with
Accounting Standards Codification (“ASC”) 805 “Business Combinations.” The cost of an acquisition is measured
as the aggregate of the acquisition date fair value of the assets transferred to the sellers, liabilities incurred by the
Company and equity instruments issued by the Company. Transaction costs directly attributable to the acquisition
are expensed as incurred. Identifiable assets acquired and liabilities assumed are measured separately at their fair
values as of the acquisition date, irrespective of the extent of any noncontrolling interests. The excess of (i) the total
costs of acquisition, fair value of the noncontrolling interests and acquisition date fair value of any previously held
equity interest in the acquiree over (ii) the fair value of the identifiable net assets of the acquiree is recorded as
goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the
difference is recognized directly in the consolidated income statements. During the measurement period, which can
be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and
liabilities assumed with the corresponding offset to goodwill. Subsequent to the conclusion of the measurement
period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any
further adjustments are recorded in the consolidated income statements.
In a business combination achieved in stages, the Company re-measures the previously held equity interest in the
acquiree immediately before obtaining control at its acquisition date fair value and the re-measurement gain or loss,
if any, is recognized in the consolidated income statements.
When there is a change in ownership interests or a change in contractual arrangements that results in a loss of control
of a subsidiary, the Company deconsolidates the subsidiary from the date control is lost. Any retained noncontrolling
investment in the former subsidiary is measured at fair value and is included in the calculation of the gain or loss
upon deconsolidation of the subsidiary.
For the Company’s non-wholly owned subsidiaries, a noncontrolling interest is recognized to reflect the portion of
equity that is not attributable, directly or indirectly, to the Company. When the noncontrolling interest is
contingently redeemable upon the occurrence of a conditional event, which is not solely within the control of the
Company, the noncontrolling interest is classified as mezzanine equity. The Company accretes changes in the
redemption value over the period from the date that it becomes probable that the mezzanine equity will become
redeemable to the earliest redemption date using the effective interest method. Consolidated net income in the
consolidated income statements includes net income (loss) attributable to noncontrolling interests and mezzanine
equity holders when applicable.
F-23
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
2. Summary of significant accounting policies (Continued)
(d) Business combinations and noncontrolling interests (Continued)
Net loss attributable to mezzanine equity holders is included in net loss attributable to noncontrolling interests in the
consolidated income statements, while it is excluded from the consolidated statements of changes in shareholders’
equity. During the years ended March 31, 2018, 2019 and 2020, net loss attributable to mezzanine equity holders
amounted to RMB930 million, RMB438 million and RMB124 million, respectively. The cumulative results of
operations attributable to noncontrolling interests, along with adjustments for share-based compensation expense
arising from outstanding share-based awards relating to subsidiaries’ shares, are also recorded as noncontrolling
interests on the Company’s consolidated balance sheets. Cash flows related to transactions with noncontrolling
interests are presented under financing activities in the consolidated statements of cash flows.
(e) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision maker (the “CODM”), which is comprised of certain members of the Company’s management team. The
Company had four operating and reportable segments during the periods presented as set out in Notes 1 and 26.
(f) Foreign currency translation
The functional currency of the Company is US$. The Company’s subsidiaries with operations in mainland China, the
Hong Kong Special Administrative Region of the PRC (“Hong Kong” or “Hong Kong S.A.R.”), the United States
and other jurisdictions generally use their respective local currencies as their functional currencies. The reporting
currency of the Company is RMB as the major operations of the Company are within the PRC. The financial
statements of the Company’s subsidiaries, other than the subsidiaries with the functional currency of RMB, are
translated into RMB using the exchange rate as of the balance sheet date for assets and liabilities and the average
daily exchange rate for each month for income and expense items. Translation gains and losses are recorded in
accumulated other comprehensive income or loss as a component of shareholders’ equity.
In the financial statements of the Company’s subsidiaries, transactions in currencies other than the functional
currency are measured and recorded in the functional currency using the exchange rate in effect at the date of the
transaction. At the balance sheet date, monetary assets and liabilities that are denominated in currencies other than
the functional currency are translated into the functional currency using the exchange rate at the balance sheet date.
All gains and losses arising from foreign currency transactions are recorded in the consolidated income statements
during the year in which they occur.
(g) Revenue recognition
In April 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts
with Customers (Topic 606),” including related amendments and implementation guidance within ASU 2015-14,
ASU 2016-08, ASU 2016-10, ASU 2016-12 and ASU 2016-20 (collectively, including ASU 2014-09, “ASC 606”),
issued by the Financial Accounting Standards Board (“FASB”).
ASC 606 supersedes the revenue recognition requirements in ASC 605 and requires entities to recognize revenue in
a way that depicts the transfer of promised goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for those goods or services. The Company
adopted ASC 606 beginning on April 1, 2018 using the modified retrospective method applied to those contracts
with the customers which were not completed as of April 1, 2018.
F-24
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
2. Summary of significant accounting policies (Continued)
(g) Revenue recognition (Continued)
Results for reporting periods beginning on April 1, 2018 are presented under ASC 606, while prior period amounts
have not been adjusted and continue to be reported in accordance with ASC 605. The impact of adopting the new
revenue standard was not material to the consolidated financial statements and there was no adjustment to the
beginning retained earnings on April 1, 2018.
Revenue is principally comprised of customer management revenue, commissions on transactions, membership fees,
logistics services revenue, cloud computing services revenue, sales of goods and other revenue. Revenue represents
the amount of consideration the Company is entitled to upon the transfer of promised goods or services in the
ordinary course of the Company’s activities and is recorded net of value-added tax (“VAT”). Consistent with the
criteria of ASC 606 “Revenue from Contracts with Customers,” the Company recognizes revenue when performance
obligations are satisfied by transferring control of a promised good or service to a customer. For performance
obligations that are satisfied at a point in time, the Company also considers the following indicators to assess
whether control of a promised good or service is transferred to the customer: (i) right to payment, (ii) legal title, (iii)
physical possession, (iv) significant risks and rewards of ownership and (v) acceptance of the good or service. For
performance obligations satisfied over time, the Company recognizes revenue over time by measuring the progress
toward complete satisfaction of a performance obligation.
For revenue arrangements with multiple distinct performance obligations such as the sale of proprietary cloud
services packages, which include hardware, software license, software installation service, and maintenance service,
each distinct performance obligation is separately accounted for and the total consideration is allocated to each
performance obligation based on the relative standalone selling price at contract inception.
The Company evaluates if it is a principal or an agent in a transaction to determine whether revenue should be
recorded on a gross or net basis. The Company is acting as the principal if it obtains control over the goods and
services before they are transferred to customers. When the Company is primarily obligated in a transaction, is
generally subject to inventory risk, has latitude in establishing prices, or has several but not all of these indicators,
the Company acts as the principal and revenue is recorded on a gross basis. When the Company is not primarily
obligated in a transaction, does not generally bear the inventory risk and does not have the ability to establish the
price, the Company acts as the agent and revenue is recorded on a net basis.
When services are exchanged or swapped for other services, revenue is recognized based on the estimated
standalone selling price of services promised to customer if the fair value of the services received cannot be
reasonably estimated. The amount of revenue recognized for barter transactions was not material for each of the
periods presented.
Practical expedients and exemptions
The Company applies the practical expedient to not disclose the value of unsatisfied performance obligations for
contracts with an original expected duration of one year or less and contracts for which revenue is recognized at the
amount to which the Company has the right to invoice for services performed.
The Company does not have any contracts where the period between the transfer of the promised goods or services
to the customer and payment by the customer exceeds one year. As a result, the Company applies the practical
expedient and does not adjust any of the transaction price for the time value of money.
F-25
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
2. Summary of significant accounting policies (Continued)
(g) Revenue recognition (Continued)
Revenue recognition policies by type are as follows:
(i) Customer management revenue
Within the core commerce segment, the Company provides the following customer management services to
merchants on the Company’s retail and wholesale marketplaces and certain third-party marketing affiliates’
websites:
Pay-for-performance (“P4P”) marketing services
P4P marketing services allow merchants to bid for keywords that match product or service listings appearing in
search results on the Company’s marketplaces. Merchants bid for keywords through an online auction system.
The positioning of the listings and the price for the positioning are determined through an online auction system,
which facilitates price discovery through a market-based mechanism. In general, merchants prepay for P4P
marketing services and the related revenue is recognized when a user clicks their product or service listings as
this is the point of time when the merchants benefit from the marketing services rendered.
In-feed marketing services
In-feed marketing services allow merchants to bid to market to groups of consumers with similar profiles that
match product or service listings appearing in browser results on the Company’s marketplaces. Merchants bid
for groups of consumers with similar profiles through an online auction system. The positioning of the listings
and the price for the positioning are determined through an online auction system, which facilitates price
discovery through a market-based mechanism. In general, merchants prepay for in-feed marketing services and
the related revenue is recognized when a user clicks their product or service listings as this is the point of time
when the merchants benefit from the marketing services rendered.
F-26
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
2. Summary of significant accounting policies (Continued)
(g) Revenue recognition (Continued)
Display marketing services
Display marketing services allow merchants to place advertisements on the Company’s marketplaces, at fixed
prices or prices established by a market-based bidding system and in particular formats. In general, merchants
need to prepay for display marketing which is accounted for as customer advances and revenue is recognized
either ratably over the period in which the advertisement is displayed as the merchants simultaneously consume
the benefits as the advertisement is displayed or when an advertisement is viewed by users, depending on the
type of marketing services selected by the merchants.
The Company also places P4P marketing services content and display marketing content through the third-party
marketing affiliate program. A substantial portion of customer management revenue generated through the
third-party marketing affiliate program represented P4P marketing services revenue. In delivery of these
customer management services, the Company, through the third-party marketing affiliate program, places the
P4P marketing services content of the participating merchants on third-party online resources in the forms of
picture or text links through contextual relevance technology to match merchants’ marketing content to the
textual content of the third-party online resources and the users’ attributes based on the Company’s systems and
algorithms. When the links on third-party online resources are clicked, users are diverted to a landing page of
the Company’s marketplaces where listings of the participating merchant as well as similar products or services
of other merchants are presented. In limited cases, the Company may embed a search box for one of its
marketplaces on the third-party online resources, and when a keyword is input into the search box, the user will
be diverted to the Company’s marketplaces where search results are presented. Revenue is recognized when the
users further click on the P4P marketing content on the landing pages. The Company places display marketing
content on third-party online resources in a similar manner. In general, merchants need to prepay for display
marketing which is accounted for as customer advances and revenue is recognized ratably over the period in
which the advertisement is displayed as merchants simultaneously consume the benefits as the advertisement is
displayed.
P4P marketing services revenue, in-feed marketing services revenue, as well as display marketing revenue
generated on the Company’s marketplaces or through the third-party marketing affiliate program are recorded
on a gross basis when the Company is the principal to the merchants in the arrangements. For third-party
marketing affiliates with whom the Company has an arrangement to share the revenue, traffic acquisition cost is
also recognized at the same time if the P4P marketing content on the landing page clicked by the users is from
merchants participating in the third-party marketing affiliate program.
F-27
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
2. Summary of significant accounting policies (Continued)
(g) Revenue recognition (Continued)
Taobaoke services
In addition, the Company offers the Taobaoke program which generates commissions from merchants for
transactions completed by consumers sourced from certain third-party marketing affiliates’ websites and mobile
apps. The commission rates on Taobaoke are set by the merchants. The Company’s portion of commission
revenue is recognized at the time when the underlying transaction is completed and is recorded on a net basis
principally because the Company is not the principal as it does not have latitude in establishing prices or does
not have inventory risk. In certain occasions where the Company is the principal of the arrangement (such as
arrangements where the Company is obligated to pay for website inventory costs in fixed amounts to third-party
marketing affiliates regardless of whether commission revenue is generated from these marketing affiliates), the
commission revenue is recorded on a gross basis.
Within the digital media and entertainment segment, the Company offers P4P marketing services to merchants
and marketers on websites and mobile media operated by UCWeb. Revenue is recognized when a user clicks
their product or service listings as this is the point of time when the merchants benefit from the marketing
services rendered. In addition, marketers can also place advertisements on websites and mobile media operated
by UCWeb and Youku’s platforms in different formats, including video, banners, links, logos and buttons.
Revenue is recognized ratably over the period in which the advertisement is displayed as the merchants
simultaneously consume the benefits as the advertisement is displayed or when an advertisement is clicked or
viewed by users, depending on the type of marketing services selected by the merchants.
(ii) Commissions on transactions
The Company earns commissions from merchants when transactions are completed on Tmall and certain other
retail marketplaces of the Company. The commissions are generally determined as a percentage based on the
value of merchandise being sold by the merchants. The commission revenue includes merchant deposits that are
expected to be non-refundable and is accounted for as variable consideration (Note 2(ad)). The variable
consideration is estimated at contract inception and updated at the end of each reporting period if additional
information becomes available. Revenue related to commissions is recognized in the consolidated income
statements based on the expected value when the performance obligation is satisfied. Changes to the estimated
variable consideration were not material for each of the periods presented.
F-28
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
2. Summary of significant accounting policies (Continued)
(g) Revenue recognition (Continued)
(iii) Membership fees
The Company earns membership fees revenue from wholesale sellers in respect of the sale of membership
packages and subscriptions that allow them to host premium storefronts on the Company’s wholesale
marketplaces, as well as the provision of other value-added services, and from customers in respect of the sale
of membership packages which allow them to access premium content on Youku’s paid content platforms.
These service fees are paid in advance for a specific contracted service period. All these fees are initially
deferred as deferred revenue and customer advances when received and revenue is recognized ratably over the
term of the respective service contracts as the services are provided.
(iv) Logistics services revenue
The Company earns logistics services revenue from domestic and international one-stop-shop logistics services
and the supply chain management solutions provided by Cainiao Network as well as on-demand delivery
services provided by Ele.me. Revenue is recognized at the time when the logistics services are provided.
(v) Cloud computing services revenue
The Company earns cloud computing services revenue from the provision of services such as elastic computing,
database, storage, network virtualization services, large scale computing, security, management and application
services, big data analytics, a machine learning platform and IoT services. These cloud computing services
allow customers to use hosted software over the contract period without taking possession of the software.
Cloud computing services are mainly charged on either a subscription or consumption basis. Revenue related to
cloud services charged on a subscription basis is recognized ratably over the contract period. Revenue related to
cloud services charged on a consumption basis, such as the quantity of storage or elastic computing services
used in a period, is recognized based on the customer utilization of the resources.
(vi) Sales of goods
Revenue from the sales of goods is mainly generated from Freshippo, a unique proprietary grocery retail format
and new retail pathfinder in the fast-moving consumer goods category, Tmall Supermarket, direct import,
Lazada and Intime. Revenue from the sales of goods is recognized when the control over the promised goods is
transferred to customers. Receipts of fees in respect of all other incidental goods or services provided by the
Company that are distinct performance obligations are recognized when the control of the underlying goods or
services is transferred to the customers. The amounts relating to these incidental services are not material to the
Company’s total revenue for each of the periods presented.
(h) Cost of revenue
Cost of revenue consists primarily of cost of inventories, logistics costs, expenses associated with the operation of
the Company’s mobile platforms and websites (such as depreciation and maintenance expenses for servers and
computers, call centers and other equipment, and bandwidth and co-location fees), staff costs and share-based
compensation expense, content costs, traffic acquisition costs, payment processing fees and other related incidental
expenses that are directly attributable to the Company’s principal operations.
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
2. Summary of significant accounting policies (Continued)
(i) Product development expenses
Product development expenses consist primarily of staff costs and share-based compensation expense for research
and development personnel and other expenses that are directly attributable to the development of new technologies
and products for the businesses of the Company, such as the development of the Internet infrastructure, applications,
operating systems, software, databases and networks.
The Company expenses all costs that are incurred in connection with the planning and implementation phases of
development and costs that are associated with repair or maintenance of the existing websites or the development of
software and website content. Costs incurred in the development phase are capitalized and amortized over the
estimated product life. However, since the inception of the Company, the amount of costs qualified for capitalization
has been insignificant. As a result, all website and software development costs have been expensed as incurred.
(j) Sales and marketing expenses
Sales and marketing expenses consist primarily of online and offline advertising expenses, promotion expenses, staff
costs and share-based compensation expense, sales commissions and other related incidental expenses that are
incurred directly to attract or retain consumers and merchants.
The Company expenses the costs of producing advertisements at the time production occurs, and expenses the costs
of delivering advertisements in the period in which the advertising space or airtime is used. Advertising and
promotional expenses totaled RMB16,814 million, RMB22,013 million and RMB30,949 million during the years
ended March 31, 2018, 2019 and 2020, respectively.
(k) Share-based compensation
Share-based awards granted are measured at fair value on grant date and share-based compensation expense is
recognized (i) immediately at the grant date if no vesting conditions are required, or (ii) using the accelerated
attribution method, net of estimated forfeitures, over the requisite service period. The fair values of restricted share
units (“RSUs”) and restricted shares are determined with reference to the fair value of the underlying shares and the
fair value of share options is generally determined using the Black-Scholes valuation model. The value is recognized
as an expense over the respective service period, net of estimated forfeitures. Share-based compensation expense,
when recognized, is charged to the consolidated income statements with the corresponding entry to additional paid-
in capital, liability or noncontrolling interests as disclosed in Note 2(d).
On each measurement date, the Company reviews internal and external sources of information to assist in the
estimation of various attributes to determine the fair value of the share-based awards granted by the Company,
including the fair value of the underlying shares, expected life and expected volatility. The Company recognizes the
impact of any revisions to the original forfeiture rate assumptions in the consolidated income statements, with a
corresponding adjustment to equity.
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
2. Summary of significant accounting policies (Continued)
(k) Share-based compensation (Continued)
In April 2019, the Company adopted ASU 2018-07, “Compensation – Stock Compensation (Topic 718):
Improvements to Nonemployee Share-Based Payment Accounting”, which expands the scope of ASC 718 to include
share-based payment transactions for acquiring goods and services from non-employees. The amendments specify
that ASC 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be
used or consumed in a grantor’s own operations by issuing share-based payment awards. Upon the adoption of this
guidance, the Company no longer re-measures equity-classified share-based awards granted to consultants or non-
employees at each reporting date through the vesting date and the accounting for these share-based awards to
consultants or non-employees and employees will be substantially aligned. The adoption of this guidance did not
have a material impact on the Company’s financial position, results of operations and cash flows. The consolidated
financial statements for the years ended March 31, 2018 and 2019 were not retrospectively adjusted.
(l) Other employee benefits
The Company’s subsidiaries in the PRC participate in a government-mandated multi-employer defined contribution
plan pursuant to which certain retirement, medical and other welfare benefits are provided to employees. The
relevant labor regulations require the Company’s subsidiaries in the PRC to pay the local labor and social welfare
authorities monthly contributions based on the applicable benchmarks and rates stipulated by the local government.
The relevant local labor and social welfare authorities are responsible for meeting all retirement benefits obligations
and the Company’s subsidiaries in the PRC have no further commitments beyond their monthly contributions. The
contributions to the plan are expensed as incurred. During the years ended March 31, 2018, 2019 and 2020,
contributions to the plan amounting to RMB3,587 million, RMB5,608 million and RMB6,317 million, respectively,
were charged to the consolidated income statements.
The Company also makes payments to other defined contribution plans and defined benefit plans for the benefit of
employees employed by subsidiaries outside of the PRC. Amounts contributed during the years ended March 31,
2018, 2019 and 2020 were insignificant.
(m) Income taxes
The Company accounts for income taxes using the liability method, under which deferred income taxes are
recognized for future tax consequences attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected
to be recovered or settled. The effect on deferred taxes of a change in tax rates is recognized as income or expense in
the period that includes the enactment date. Valuation allowance is provided on deferred tax assets to the extent that
it is more likely than not that the asset will not be realizable in the foreseeable future.
Deferred taxes are recognized on the undistributed earnings of subsidiaries, which are presumed to be transferred to
the parent company and are subject to withholding taxes, unless there is sufficient evidence to show that the
subsidiary has invested or will invest the undistributed earnings indefinitely or that the earnings will be remitted in a
tax-free liquidation. Deferred taxes are also recognized in relation to certain equity investees and investment
securities.
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
2. Summary of significant accounting policies (Continued)
(m) Income taxes (Continued)
The Company adopts ASC 740 “Income Taxes” which prescribes a more likely than not threshold for financial
statement recognition and measurement of a tax position taken or expected to be taken in a tax return. It also
provides guidance on derecognition of income tax assets and liabilities, classification of current and deferred income
tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income
taxes in interim periods and income tax disclosures. The Company did not have significant unrecognized uncertain
tax positions or any unrecognized liabilities, interest or penalties associated with unrecognized tax benefit as of and
for the years ended March 31, 2018, 2019 and 2020.
(n) Government grants
Government grants are recognized as income in other income, net or as a reduction of specific costs and expenses for
which the grants are intended to compensate. Such amounts are recognized in the consolidated income statements
upon receipt and when all conditions attached to the grants are fulfilled.
(o) Leases
In April 2019, the Company adopted ASU 2016-02, “Leases (Topic 842)”, including certain transitional guidance
and subsequent amendments within ASU 2018-01, ASU 2018-10, ASU 2018-11, ASU 2018-20 and ASU 2019-01
(collectively, including ASU 2016-02, “ASC 842”).
ASC 842 supersedes the lease requirements in ASC 840 “Leases”, and generally requires lessees to recognize
operating and finance lease liabilities and corresponding right-of-use assets on the balance sheet and to provide
enhanced disclosures surrounding the amount, timing and uncertainty of cash flows arising from leasing
arrangements. Leases that transfer substantially all of the benefits and risks incidental to the ownership of assets are
accounted for as finance leases as if there was an acquisition of an asset and incurrence of an obligation at the
inception of the lease. All other leases are accounted for as operating leases. The Company has no significant finance
leases.
The Company adopted the new lease standard using the modified retrospective method by applying the new lease
standard to all leases existing as of April 1, 2019, the date of initial application, and no adjustments were made to the
comparative periods. Upon the initial application of ASC 842 on April 1, 2019, land use rights, net with a total
carrying amount of RMB6,419 million were identified as operating lease right-of-use assets (Note 13). Such amount
is included in the opening balance of operating lease right-of-use assets as of April 1, 2019 with no adjustments
made to the comparative periods.
The Company elected the package of practical expedients permitted under the transition guidance, which allowed the
Company to carry forward previous lease classification, the assessment on whether a contract was or contained a
lease, and the initial direct costs for any leases that existed prior to April 1, 2019. Adoption of the new standard
resulted in the recognition of operating lease right-of-use assets of approximately RMB24.9 billion and operating
lease liabilities of approximately RMB19.4 billion on the consolidated balance sheet as of April 1, 2019. The
adoption of the new lease standard does not have any significant impact on the consolidated statements of
comprehensive income and cash flows and there was no adjustment to the beginning retained earnings on April 1,
2019.
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
2. Summary of significant accounting policies (Continued)
(o) Leases (Continued)
Under ASC 842, the Company determines if an arrangement is a lease at inception. Operating lease right-of-use
assets are included in non-current prepayments, receivables and other assets (Note 13), and operating lease liabilities
are included in current accrued expenses, accounts payable and other liabilities and other non-current liabilities
(Note 19) on the consolidated balance sheets. Operating lease right-of-use assets and operating lease liabilities are
initially recognized based on the present value of future lease payments at lease commencement. The operating lease
right-of-use asset also includes any lease payments made prior to lease commencement and the initial direct costs
incurred by the lessee and is recorded net of any lease incentives received. As the interest rates implicit in most of
the leases are not readily determinable, the Company uses the incremental borrowing rates based on the information
available at lease commencement to determine the present value of the future lease payments. Operating lease
expenses are recognized on a straight-line basis over the term of the lease.
The Company elected to combine the lease and non-lease components for leases of certain asset classes such as
shops and malls and equipment leases. Lease and non-lease components for leases of other asset classes are
accounted for separately. The Company also elected not to recognize short-term leases with an initial lease term of
twelve months or less.
(p) Cash and cash equivalents
The Company considers all short-term, highly liquid investments with an original maturity of three months or less,
when purchased, to be cash equivalents. Cash and cash equivalents primarily represent bank deposits, fixed deposits
with maturities of less than three months and investments in money market funds.
(q) Short-term investments
Short-term investments consist primarily of investments in fixed deposits with maturities between three months and
one year and investments in money market funds or other investments that the Company has the intention to redeem
within one year. As of March 31, 2019 and 2020, the investments in fixed deposits that were recorded as short-term
investments amounted to RMB961 million and RMB19,147 million, respectively.
(r) Accounts receivable
Accounts receivable represents the amounts that the Company has an unconditional right to consideration. The
Company maintains an allowance for doubtful accounts to reserve for potentially uncollectible receivable amounts.
The allowance for doubtful accounts is estimated based upon the Company’s assessment of various factors including
historical experience, the age of the accounts receivable balances, current economic conditions and other factors that
may affect the customers’ ability to pay.
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
2. Summary of significant accounting policies (Continued)
(s) Inventories
Inventories mainly consist of merchandise available for sale. They are accounted for using the weighted average cost
and stated at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the
ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the
sale.
(t) Investment securities
Investment securities represent the Company’s investments in equity securities that are not accounted for under the
equity method, as well as other investments which primarily consist of debt investments.
(i) Equity securities
Equity securities not accounted for using the equity method are carried at fair value with unrealized gains and
losses recorded in the consolidated income statements, according to ASC 321 “Investments — Equity
Securities”. The Company elected to record a majority of equity investments in privately held companies using
the measurement alternative at cost, less impairment, with subsequent adjustments for observable price changes
resulting from orderly transactions for identical or similar investments of the same issuer.
Equity investments in privately held companies accounted for using the measurement alternative are subject to
periodic impairment reviews. The Company’s impairment analysis considers both qualitative and quantitative
factors that may have a significant effect on the fair value of these equity securities, including consideration of
the impact of the COVID-19 pandemic.
In computing realized gains and losses on equity securities, the Company determines cost based on amounts
paid using the average cost method. Dividend income is recognized when the right to receive the payment is
established.
Prior to the adoption of ASU 2016-01, “Financial Instruments — Overall (Subtopic 825-10): Recognition and
Measurement of Financial Assets and Financial Liabilities”, equity securities that have readily determinable fair
values and were not accounted for using the equity method were classified as available-for-sale, and were
carried at fair value with unrealized gains and losses recorded in accumulated other comprehensive income
(loss) as a component of shareholders’ equity. In addition, the cost method was used to account for certain
equity investments in privately held companies that were not accounted for using the equity method. Upon the
adoption of ASU 2016-01 in April 2018, the Company carries these equity securities at fair value with
unrealized gains and losses recorded in the consolidated income statements. Unrealized gains recorded in
accumulated other comprehensive income as of March 31, 2018 related to equity securities previously classified
as available-for-sale, in the amount of RMB8,196 million, net of tax, were reclassified into retained earnings as
of April 1, 2018.
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
2. Summary of significant accounting policies (Continued)
(t) Investment securities (Continued)
(ii) Debt investments
Debt investments are generally stated at amortized cost. The maturities of these debt investments generally
range from one to ten years. In addition, the Company has elected the fair value option for certain investments
including convertible and exchangeable bonds subscribed. The fair value option permits the irrevocable election
on an instrument-by-instrument basis at initial recognition or upon an event that gives rise to a new basis of
accounting for that instrument. The investments accounted for under the fair value option are carried at fair
value with unrealized gains and losses recorded in the consolidated income statements. Interest income from
debt investments is recognized using the effective interest method which is reviewed and adjusted periodically
based on changes in estimated cash flows.
(u) Investments in equity investees
The Company applies the equity method to account for equity investments in common stock or in-substance
common stock, according to ASC 323 “Investments — Equity Method and Joint Ventures”, over which it has
significant influence but does not own a controlling financial interest, unless the fair value option is elected for an
investment.
An investment in in-substance common stock is an investment in an entity that has risk and reward characteristics
that are substantially similar to that entity’s common stock. The Company considers subordination, risks and rewards
of ownership and obligation to transfer value when determining whether an investment in an entity is substantially
similar to an investment in that entity’s common stock.
Under the equity method, the Company’s share of the post-acquisition profits or losses of the equity investee is
recognized in the consolidated income statements and its share of post-acquisition movements in accumulated other
comprehensive income is recognized in other comprehensive income. The Company records its share of the results
of the equity investees on a one quarter in arrears basis. The excess of the carrying amount of the investment over the
underlying equity in net assets of the equity investee generally represents goodwill and intangible assets acquired.
When the Company’s share of losses of the equity investee equals or exceeds its interest in the equity investee, the
Company does not recognize further losses, unless the Company has incurred obligations or made payments or
guarantees on behalf of the equity investee.
The Company continually reviews its investments in equity investees to determine whether a decline in fair value
below the carrying value is other-than-temporary. The primary factors the Company considers in its determination
include the financial condition, operating performance and the prospects of the equity investee; other company
specific information such as recent financing rounds; the geographic region, market and industry in which the equity
investee operates, including consideration of the impact of the COVID-19 pandemic; and the length of time that the
fair value of the investment is below its carrying value. If the decline in fair value is deemed to be other-than-
temporary, the carrying value of the equity investee is written down to fair value.
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
2. Summary of significant accounting policies (Continued)
(v) Property and equipment, net
Property and equipment are stated at cost less accumulated depreciation and any impairment loss. Depreciation is
computed using the straight-line method with no residual value based on the estimated useful lives of the various
classes of assets, which range as follows:
Computer equipment and software
Furniture, office and transportation equipment
Buildings
Property improvements
3 – 5 years
3 – 10 years
20 – 50 years
shorter of remaining lease period or
estimated useful life
Construction in progress represents buildings and related premises under construction, which is stated at actual
construction cost less any impairment loss. Construction in progress is transferred to the respective category of
property and equipment when completed and ready for its intended use.
Costs of repairs and maintenance are expensed as incurred and asset improvements are capitalized. The cost and
related accumulated depreciation of assets disposed of or retired are removed from the accounts, and any resulting
gain or loss is reflected in the consolidated income statements.
(w) Land use rights
Land use rights represent lease prepayments to the local government authorities. Prior to the initial application of
ASC 842 on April 1, 2019, land use rights were carried at cost less accumulated amortization and any impairment
loss. The cost of lease prepayments is amortized on a straight-line basis over a period of 30 – 50 years. As of March
31, 2019, land use rights were presented under prepayments, receivables and other assets (Note 13) on the
consolidated balance sheet.
Upon the adoption of ASC 842 (Note 2(o)), land use rights, net with a total carrying amount of RMB6,419 million
(Note 13) were identified as operating lease right-of-use assets. Such amount is included in the opening balance of
operating lease right-of-use assets as of April 1, 2019 with no adjustments made to the comparative periods. As of
March 31, 2020, operating lease right-of-use assets were also presented under prepayments, receivables and other
assets (Note 13) on the consolidated balance sheet.
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
2. Summary of significant accounting policies (Continued)
(x) Intangible assets other than licensed copyrights
Intangible assets mainly include those acquired through business combinations and purchased intangible assets.
Intangible assets acquired through business combinations are recognized as assets separate from goodwill if they
satisfy either the “contractual-legal” or “separability” criterion. Intangible assets arising from business combinations
are measured at fair value upon acquisition using valuation techniques such as discounted cash flow analysis and
ratio analysis with reference to comparable companies in similar industries under the income approach, market
approach and cost approach. Major assumptions used in determining the fair value of these intangible assets include
future growth rates and weighted average cost of capital. Purchased intangible assets are initially recognized and
measured at cost upon acquisition. Separately identifiable intangible assets that have determinable lives continue to
be amortized over their estimated useful lives using the straight-line method as follows:
User base and customer relationships
Trade names, trademarks and domain names
Developed technology and patents
Non-compete agreements
1 – 16 years
3 – 20 years
2 – 7 years
over the contracted term of up to 6 years
(y) Licensed copyrights
Licensed copyrights related to titles to movies, television series, variety shows, animations and other video content
acquired from external parties are carried at the lower of unamortized cost or net realizable value. The amortization
period for the licensed content vary depending on the type of content, which typically ranges from six months to ten
years. Licensed copyrights are presented on the consolidated balance sheets as current assets under prepayments,
receivables and other assets, or non-current assets under intangible assets, net, based on estimated time of usage.
Licensed copyrights are generally amortized using an accelerated method based on historical viewership
consumption patterns. Estimates of the consumption patterns for licensed copyrights are reviewed periodically and
revised if necessary. For the years ended March 31, 2018, 2019 and 2020, amortization expenses in connection with
the licensed copyrights of RMB6,111 million, RMB11,391 million and RMB9,390 million were recorded in cost of
revenue within the Company’s digital media and entertainment segment.
On a periodic basis, the Company evaluates the program usefulness of its licensed copyrights pursuant to the
guidance in ASC 920 “Entertainment — Broadcasters,” which provides that the rights be reported at the lower of
unamortized cost or estimated net realizable value. When there is a change in the expected usage of licensed
copyrights, the Company estimates the net realizable value of licensed copyrights to determine if any impairment
exists. The net realizable value of licensed copyrights is determined by estimating the expected cash flows from
advertising and membership fees, less any direct costs, over the remaining useful lives of the licensed copyrights.
The Company estimates these cash flows for each category of content separately. Estimates that impact these cash
flows include anticipated levels of demand for the Company’s advertising services and the expected selling prices of
the Company’s advertisements on the entertainment distribution platforms. For the years ended March 31, 2018,
2019 and 2020, impairment charges in connection with the licensed copyrights of RMB801 million, RMB2,843
million and RMB2,654 million were recorded in cost of revenue within the Company’s digital media and
entertainment segment.
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
2. Summary of significant accounting policies (Continued)
(z) Goodwill
Goodwill represents the excess of the purchase consideration over the fair value of the identifiable tangible and
intangible assets acquired and liabilities assumed from the acquired entity as a result of the Company’s acquisitions
of interests in its subsidiaries. Goodwill is not amortized but is tested for impairment on an annual basis, or more
frequently if events or changes in circumstances indicate that it might be impaired. The Company first assesses
qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment
test. In the qualitative assessment, the Company considers factors such as macroeconomic conditions, industry and
market considerations, overall financial performance of the reporting unit, and other specific information related to
the operations, business plans and strategies of the reporting unit, including consideration of the impact of the
COVID-19 pandemic. Based on the qualitative assessment, if it is more likely than not that the fair value of a
reporting unit is less than the carrying amount, the quantitative impairment test is performed.
In performing the two-step quantitative impairment test, the first step compares the fair value of each reporting unit
to its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount,
goodwill is not considered to be impaired and the second step will not be required. If the carrying amount of a
reporting unit exceeds its fair value, the second step compares the implied fair value of goodwill to the carrying
value of a reporting unit’s goodwill. The implied fair value of goodwill is determined in a manner similar to
accounting for a business combination with the allocation of the assessed fair value determined in the first step to the
assets and liabilities of the reporting unit. The excess of the fair value of the reporting unit over the amounts assigned
to the assets and liabilities is the implied fair value of goodwill. This allocation process is only performed for the
purposes of evaluating goodwill impairment and does not result in an entry to adjust the value of any assets or
liabilities. Application of a goodwill impairment test requires significant management judgment, including the
identification of reporting units, allocation of assets, liabilities and goodwill to reporting units, and determination of
the fair value of each reporting unit.
(aa) Impairment of long-lived assets other than goodwill and licensed copyrights
The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by
a comparison of the carrying amount of an asset to the future undiscounted net cash flows expected to be generated
by the asset. If the assets are considered to be impaired, the impairment recognized is measured by the amount by
which the carrying amount of the assets exceeds the fair value of the assets. Impairment of long-lived assets
recognized for the years ended March 31, 2018, 2019 and 2020 was nil, nil and RMB874 million, respectively.
(ab) Derivatives and hedging
All contracts that meet the definition of a derivative are recognized on the consolidated balance sheets as either
assets or liabilities and recorded at fair value. Changes in the fair value of derivatives are either recognized
periodically in the consolidated income statements or in other comprehensive income depending on the use of the
derivatives and whether they qualify for hedge accounting and are so designated as cash flow hedges, fair value
hedges or net investment hedges.
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
2. Summary of significant accounting policies (Continued)
(ab) Derivatives and hedging (Continued)
In April 2019, the Company adopted ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements
to Accounting for Hedging Activities”, including certain transitional guidance and subsequent amendments within
ASU 2019-04 (collectively, “ASU 2017-12”). ASU 2017-12 permits a qualitative effectiveness assessment for
certain hedges instead of a quantitative test after the initial qualification, if the Company can reasonably support an
expectation of high effectiveness throughout the term of the hedge. Also, for cash flow hedges and net investment
hedges, if the hedge is highly effective, all changes in the fair value of the derivative hedging instrument are
recorded in other comprehensive income. The adoption of this guidance did not have a material impact on the
Company’s financial position, results of operations and cash flows. The consolidated financial statements for the
years ended March 31, 2018 and 2019 were not retrospectively adjusted.
To qualify for hedge accounting, the hedge relationship is designated and formally documented at inception,
detailing the particular risk management objective and strategy for the hedge (which includes the item and risk that is
being hedged), the derivative that is being used and how hedge effectiveness is being assessed. A derivative has to
be effective in accomplishing the objective of offsetting either changes in fair value or cash flows for the risk being
hedged. The effectiveness of the hedging relationship is evaluated on a prospective and retrospective basis using
qualitative and quantitative measures of correlation. Qualitative methods may include comparison of critical terms of
the derivative to those of the hedged item. Quantitative methods include a comparison of the changes in the fair
value or discounted cash flow of the hedging instrument to that of the hedged item. A hedging relationship is
considered initially effective if the results of the hedging instrument are within a ratio of 80% to 125% of the results
of the hedged item.
Interest rate swaps
Interest rate swaps designated as hedging instruments to hedge against the cash flows attributable to recognized
assets or liabilities or forecasted payments may qualify as cash flow hedges. The Company entered into interest rate
swap contracts to swap floating interest payments related to certain borrowings for fixed interest payments to hedge
the interest rate risk associated with certain forecasted payments and obligations. For the years ended March 31,
2018 and 2019, the effective portion of changes in the fair value of interest rate swaps that were designated and
qualified as cash flow hedges was recognized in accumulated other comprehensive income. The gain or loss relating
to the ineffective portion was recognized immediately in interest and investment income, net in the consolidated
income statements. Upon the adoption of ASU 2017-12 beginning on April 1, 2019, all changes in the fair value of
interest rate swaps that are designated and qualify as cash flow hedges are recognized in accumulated other
comprehensive income. Amounts in accumulated other comprehensive income are reclassified into earnings in the
same period during which the hedged forecasted transaction affects earnings both before and after the adoption of
ASU 2017-12.
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
2. Summary of significant accounting policies (Continued)
(ab) Derivatives and hedging (Continued)
Forward exchange contracts
Forward exchange contracts designated as hedging instruments to hedge against the future changes in currency
exposure of net investments in foreign operations may qualify as net investment hedges. The Company entered into
forward exchange contracts to hedge the foreign currency risk associated with investments in net assets of certain
subsidiaries with operations in the PRC of which the functional currency is RMB. For the years ended March 31,
2018 and 2019, the effective portion of the changes in fair value of the forward exchange contracts that were
designated and qualified as net investment hedges was recognized in accumulated other comprehensive income to
offset the cumulative translation adjustments relating to those subsidiaries. The gain or loss relating to the ineffective
portion, which was measured based on changes in forward exchange rates, was recognized immediately in other
income, net in the consolidated income statements. Amounts accumulated are removed from accumulated other
comprehensive income and recognized in the consolidated income statements upon disposal of those subsidiaries.
Once the hedge becomes ineffective, hedge accounting is discontinued prospectively. During the year ended March
31, 2020, there were no forward exchange contracts that were designated and qualified as net investment hedges.
Changes in the fair value of the derivatives not qualified for hedge accounting are reported in the consolidated
income statements. The estimated fair value of the derivatives is determined based on relevant market information.
These estimates are calculated with reference to the market rates using industry standard valuation techniques.
(ac) Bank borrowings and unsecured senior notes
Bank borrowings and unsecured senior notes are recognized initially at fair value, net of upfront fees, debt discounts
or premiums, debt issuance costs and other incidental fees. Upfront fees, debt discounts or premiums, debt issuance
costs and other incidental fees are recorded as a reduction of the proceeds received and the related accretion is
recorded as interest expense in the consolidated income statements over the estimated term of the facilities using the
effective interest method.
(ad) Merchant deposits
The Company collects deposits representing an annual upfront service fee from merchants on Tmall and AliExpress
before the beginning of each calendar year. These deposits are initially recorded as a liability by the Company. The
deposits are refundable to a merchant if the level of sales volume that is generated by that merchant on Tmall or
AliExpress meets the target during the period. If the transaction volume target is not met at the end of each calendar
year, the relevant deposits will become non-refundable. These merchant deposits are accounted for as variable
consideration at an amount that is estimated at contract inception. The estimate is updated at the end of each
reporting period and when there are changes in circumstances during the reporting period. Merchant deposits are
recognized as commission revenue in the consolidated income statements when the likelihood of refund to the
merchant is considered remote based on the patterns of sales volume generated by the merchant during the reporting
period.
(ae) Deferred revenue and customer advances
Deferred revenue and customer advances generally represent cash received from customers that relate to goods or
services to be provided in the future. Deferred revenue, mainly relating to membership fees and cloud computing
services revenue, is stated at the amount of service fees received less the amount previously recognized as revenue
upon the provision of the respective services to customers.
F-40
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
2. Summary of significant accounting policies (Continued)
(af) Commitments and contingencies
In the normal course of business, the Company is subject to contingencies, such as legal proceedings and claims
arising out of its business, that cover a wide range of matters. Liabilities for the contingencies are recorded when it is
probable that a liability has been incurred and the amount of the liability can be reasonably estimated.
Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a
loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The
Company assesses these contingent liabilities, which inherently involves judgment. In assessing loss contingencies
related to legal proceedings that are pending against the Company or unasserted claims that may result in legal
proceedings, the Company, in consultation with its legal counsel, evaluates the perceived merits of any legal
proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be
sought therein. If the assessment of a contingency indicates that it is probable that a material loss has been incurred
and the amount of the liability can be estimated, the estimated liability would be accrued in the consolidated
financial statements. If the assessment indicates that a potentially material loss contingency is not probable, or is
probable but cannot be estimated, the nature of the contingent liability, together with an estimate of the range of the
reasonably possible loss, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the
nature of the guarantee would be disclosed.
(ag) Treasury shares
The Company accounts for treasury shares using the cost method. Under this method, the cost incurred to purchase
the shares is recorded in the treasury shares account on the consolidated balance sheets. At retirement of the treasury
shares, the ordinary shares account is charged only for the aggregate par value of the shares. The excess of the
acquisition cost of treasury shares over the aggregate par value is allocated between additional paid-in capital (up to
the amount credited to the additional paid-in capital upon original issuance of the shares) and retained earnings. The
treasury shares account includes 149,903,376 ordinary shares (previously 18,737,922 ordinary shares before the
Share Subdivision as detailed in Note 2(a)) and 146,780,688 ordinary shares issued at par to wholly-owned
subsidiaries of the Company for the purpose of certain equity investment plans for management as of March 31,
2019 and 2020, respectively.
(ah) Statutory reserves
In accordance with the relevant regulations and their articles of association, subsidiaries of the Company
incorporated in the PRC are required to allocate at least 10% of their after-tax profit determined based on the PRC
accounting standards and regulations to the general reserve until the reserve has reached 50% of the relevant
subsidiary’s registered capital. Appropriations to the enterprise expansion fund and staff welfare and bonus fund are
at the discretion of the respective board of directors of the subsidiaries. These reserves can only be used for specific
purposes and are not transferable to the Company in the form of loans, advances or cash dividends. During the years
ended March 31, 2018, 2019 and 2020, appropriations to the general reserve amounted to RMB298 million,
RMB690 million and RMB1,032 million, respectively. No appropriations to the enterprise expansion fund and staff
welfare and bonus fund have been made by the Company.
F-41
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
3. Recent accounting pronouncements
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments — Credit Losses (Topic 326): Measurement
on Credit Losses on Financial Instruments”, and issued subsequent amendments to the initial guidance, transitional
guidance and other interpretive guidance between November 2018 and March 2020 within ASU 2018-19, ASU
2019-04, ASU 2019-05 , ASU 2019-11, ASU 2020-02 and ASU 2020-03. ASU 2016-13 introduces new guidance
for credit losses on instruments within its scope. The new guidance introduces an approach based on expected losses
to estimate credit losses on certain types of financial instruments, including trade and other receivables, held-to-
maturity debt securities, loans and net investments in leases. The new guidance also modifies the impairment model
for available-for-sale debt securities and requires entities to determine whether all or a portion of the unrealized loss
on an available-for-sale debt security is a credit loss. Further, the new guidance indicates that entities may not use
the length of time a security has been in an unrealized loss position as a factor in concluding whether a credit loss
exists. The new guidance is effective for the Company for the year ending March 31, 2021 and interim reporting
periods during the year ending March 31, 2021. The cumulative impact of these adjustments on retained earnings as
of April 1, 2020 was not material.
In January 2017, the FASB issued ASU 2017-04, “Intangibles — Goodwill and Other (Topic 350): Simplifying the
Test for Goodwill Impairment”, which simplifies how an entity is required to test goodwill for impairment by
eliminating step two from the goodwill impairment test. Step two of the goodwill impairment test measures a
goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with its carrying
amount. The new guidance is effective prospectively for the Company for the year ending March 31, 2021 and
interim reporting periods during the year ending March 31, 2021. The Company does not expect that the adoption of
this guidance will have a material impact on the financial position, results of operations and cash flows.
In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework —
Changes to the Disclosure Requirements for Fair Value Measurement”, which eliminates, adds and modifies certain
disclosure requirements for fair value measurements as part of the FASB’s disclosure framework project. The new
guidance is effective for the Company for the year ending March 31, 2021 and interim reporting periods during the
year ending March 31, 2021. The Company does not believe that the adoption of this guidance will have a material
impact on the fair value disclosure in the consolidated financial statements.
In November 2018, the FASB issued ASU 2018-18, “Collaborative Arrangements (Topic 808): Clarifying the
Interaction Between Topic 808 and Topic 606”, which clarifies that elements of collaborative arrangements could
qualify as transactions with customers in the scope of ASC 606. The amendments require the application of existing
guidance to determine the units of account in collaborative arrangement for purposes of identifying transactions with
customers. For transactions outside the scope of ASC 606, companies can apply elements of ASC 606 or other
relevant guidance by analogy, or apply a reasonable accounting policy if there is no appropriate analogy. ASU 2018-
18 is effective retrospectively for the Company for the year ending March 31, 2021 and interim reporting periods
during the year ending March 31, 2021. The Company does not expect that the adoption of this guidance will have a
material impact on the financial position, results of operations and cash flows.
F-42
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
3. Recent accounting pronouncements (Continued)
In March 2019, the FASB issued ASU 2019-02, “Entertainment — Films — Other Assets — Film Costs (Subtopic
926-20) and Entertainment — Broadcasters — Intangibles — Goodwill and Other (Subtopic 920-350)”, which aligns
the accounting guidance for production costs for (1) films and (2) episodic content produced for television series and
streaming services. This new guidance also clarifies when an entity should test films and license agreements for
program material for impairment at the film-group level, amends the presentation and disclosure requirements for
produced or licensed content and addresses statement of cash flows classification for license arrangements. The new
guidance is effective prospectively for the Company for the year ending March 31, 2021 and interim reporting
periods during the year ending March 31, 2021. The Company believes that the adoption of this guidance will result
in a change in the presentation of the consolidated statements of cash flows.
In April 2019, the FASB issued ASU 2019-04, “Codification Improvements to Topic 326, Financial Instruments —
Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments”, which provides narrow-
scope amendments to clarify and improve guidance within the standards on credit losses, hedging, and recognition
and measurement of financial instruments. Apart from the amendments to ASU 2016-13 mentioned above, the ASU
also included subsequent amendments to ASU 2016-01, which the Company adopted in April 2018 (Note 2(t)). The
guidance in relation to the amendments to ASU 2016-01 is effective for the Company for the year ending March 31,
2021 and interim reporting periods during the year ending March 31, 2021. The Company does not expect that the
adoption of this guidance will have a material impact on the financial position, results of operations and cash flows.
In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for
Income Taxes”, which simplify various aspects related to accounting for income taxes. ASU 2019-12 removes
certain exceptions to the general principles in ASC 740 and also clarifies and amends existing guidance to improve
consistent application. The new guidance is effective for the Company for the year ending March 31, 2022 and
interim reporting periods during the year ending March 31, 2022. Early adoption is permitted. The Company is
evaluating the effects, if any, of the adoption of this guidance on the financial position, results of operations and cash
flows.
In January 2020, the FASB issued ASU 2020-01, “Investments — Equity Securities (Topic 321),
Investments — Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging
(Topic 815) — Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (a consensus of the FASB
Emerging Issues Task Force)”, which clarifies the interactions of the accounting for certain equity securities under
ASC 321, investments accounted for under the equity method of accounting in ASC 323, and the accounting for
certain forward contracts and purchased options accounted for under ASC 815. ASU 2020-01 could change how an
entity accounts for (i) an equity security under the measurement alternative and (ii) a forward contract or purchased
option to purchase securities that, upon settlement of the forward contract or exercise of the purchased option, would
be accounted for under the equity method of accounting or the fair value option in accordance with ASC 825
“Financial Instruments”. These amendments improve current U.S. GAAP by reducing diversity in practice and
increasing comparability of the accounting for these interactions. The new guidance is effective prospectively for the
Company for the year ending March 31, 2022 and interim reporting periods during the year ending March 31, 2022.
Early adoption is permitted. The Company is evaluating the effects, if any, of the adoption of this guidance on the
financial position, results of operations and cash flows.
F-43
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
3. Recent accounting pronouncements (Continued)
In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of
Reference Rate Reform on Financial Reporting”, which provides optional expedients and exceptions for applying
U.S. GAAP on contract modifications and hedge accounting to contracts, hedging relationships, and other
transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate
reform, if certain criteria are met. These optional expedients and exceptions provided in ASU 2020-04 are effective
for the Company from January 1, 2020 through December 31, 2022. The Company has elected the optional
expedients for certain existing interest rate swaps that are designated as cash flow hedges, which did not have a
material impact on the financial position, results of operations and cash flows. The Company is evaluating the
effects, if any, of the potential election of the optional expedients and exceptions provided in this guidance on the
financial position, results of operations and cash flows.
4. Significant equity transactions, mergers and acquisitions and investments
Equity transactions
(a) Additional investment in Lazada Group S.A. (“Lazada”)
Lazada is a consolidated subsidiary of the Company and it operates a leading and fast-growing e-commerce platform
in Southeast Asia for small and medium-sized enterprises, regional and global brands. During the years ended March
31, 2018, 2019 and 2020, the Company made capital injections and acquired additional equity in Lazada amounting
to US$1,586 million (RMB10,579 million), US$790 million (RMB5,355 million) and US$2,056 million
(RMB14,368 million), respectively. These transactions resulted in a reduction of noncontrolling interests amounting
to RMB1,681 million, an addition of RMB400 million and a reduction of RMB466 million for the same periods,
respectively. In June 2020, the Company made an additional capital injection of US$250 million in Lazada. Upon
the completion of these transactions, the Company held substantially all of the equity interest in Lazada.
Mergers and acquisitions
(b) Acquisition of HQG, Inc. (“Kaola”)
Kaola is an import e-commerce platform in the PRC. In September 2019, the Company acquired a 100% equity
interest in Kaola from NetEase, Inc. for an aggregate purchase price of US$1,874 million (RMB13,326 million),
comprising cash and approximately 14.3 million newly issued ordinary shares (equivalent to approximately 1.8
million ADSs) of the Company valued at US$316 million (RMB2,252 million).
The allocation of the purchase price as of the date of acquisition is summarized as follows:
Net assets acquired (i)
Amortizable intangible assets (ii)
Trade names, trademarks and domain names
User base and customer relationships
Non-compete agreements
Developed technology and patents
Goodwill
Deferred tax liabilities
Total
F-44
Amounts
(in millions of RMB)
1,621
2,531
1,297
1,040
394
6,781
(338)
13,326
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
4. Significant equity transactions, mergers and acquisitions and investments (Continued)
(b) Acquisition of HQG, Inc. (“Kaola”) (Continued)
Total purchase price is comprised of:
- cash consideration
- share consideration
- contingent consideration (iii)
Total
Amounts
(in millions of RMB)
10,025
2,252
1,049
13,326
(i) Net assets acquired primarily included inventories of RMB1,943 million as of the date of acquisition.
(ii) Acquired amortizable intangible assets had estimated amortization periods not exceeding 13 years and a
weighted-average amortization period of 8.5 years.
(iii) Contingent consideration primarily includes cash consideration that is contingently payable upon the satisfaction
of certain non-compete provisions by the selling equity holders, and will not exceed RMB846 million.
The Company expected that the acquisition will further elevate the Company’s import service and experience for
consumers in the PRC through synergies across the Company’s digital economy. Goodwill arising from this
acquisition was attributable to the synergies expected from the combined operations of Kaola and the Company, the
assembled workforce and their knowledge and experience in the import e-commerce sector in the PRC. The
Company did not expect the goodwill recognized to be deductible for income tax purposes.
(c) Acquisition of Alibaba Pictures Group Limited (“Alibaba Pictures”)
Alibaba Pictures, a company that is listed on the HKSE, is an Internet-driven integrated platform that covers content
production, promotion and distribution, intellectual property licensing and integrated management, cinema ticketing
management and data services for the entertainment industry. In December 2017, the Company determined that the
decline in the market value against the carrying value of this equity method investment (Note 14) was other-than-
temporary and an impairment charge of RMB18,116 million was recorded in share of results of equity investees in
the consolidated income statement for the year ended March 31, 2018.
In March 2019, the Company subscribed for newly issued ordinary shares of Alibaba Pictures for a cash
consideration of HK$1,250 million (RMB1,069 million). Upon the completion of the transaction, the Company’s
equity interest in Alibaba Pictures increased from approximately 49% to approximately 51%, and Alibaba Pictures
became a consolidated subsidiary of the Company.
F-45
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
4. Significant equity transactions, mergers and acquisitions and investments (Continued)
(c) Acquisition of Alibaba Pictures Group Limited (“Alibaba Pictures”) (Continued)
The allocation of the purchase price as of the date of acquisition is summarized as follows:
Net assets acquired (i)
Amortizable intangible assets (ii)
User base and customer relationships
License
Developed technology and patents
Trade names, trademarks and domain names
Goodwill
Deferred tax liabilities
Noncontrolling interests (iii)
Total
Total purchase price is comprised of:
- cash consideration
- fair value of previously held equity interests
Total
Amounts
(in millions of RMB)
11,766
2,979
934
516
221
18,750
(969)
(16,899)
17,298
Amounts
(in millions of RMB)
1,069
16,229
17,298
(i) Net assets acquired primarily included cash, cash equivalents and short-term investments of RMB4,444 million
and investment securities of RMB5,065 million as of the date of acquisition.
(ii) Acquired amortizable intangible assets had estimated amortization periods not exceeding 15 years and a
weighted-average amortization period of 11.4 years.
(iii) Fair value of the noncontrolling interests was estimated with reference to the market price per share as of the
acquisition date.
A gain of RMB5,825 million in relation to the revaluation of the previously held equity interests was recorded in
interest and investment income, net in the consolidated income statement for the year ended March 31, 2019. The
fair value of the previously held equity interests was estimated with reference to the market price per share as of the
acquisition date.
The Company expected greater integration and synergies between Alibaba Pictures and the Company’s related
businesses on both content production and distribution to deliver high-quality entertainment experiences for
consumers in the PRC. Goodwill arising from this acquisition was attributable to the synergies expected from the
combined operations of Alibaba Pictures and the Company, the assembled workforce and their knowledge and
experience in the digital media and entertainment sector in the PRC. The Company did not expect the goodwill
recognized to be deductible for income tax purposes.
F-46
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
4. Significant equity transactions, mergers and acquisitions and investments (Continued)
(d) Acquisitions and integration of Rajax Holding (“Ele.me”) and Koubei Holding Limited (“Koubei”)
Ele.me
Ele.me is a leading on-demand delivery and local services platform in the PRC, which was previously owned by a
joint investment vehicle established by the Company and Ant Group. In April and August 2017, the joint investment
vehicle completed additional investments in newly issued preferred shares in Ele.me for a total investment amount of
US$1,200 million (RMB8,090 million), of which the Company’s investment was US$864 million (RMB5,824
million). As a result, the Company’s effective equity interest in Ele.me increased to approximately 27% on a fully
diluted basis. The investment was accounted for using the measurement alternative (Note 12).
In May 2018, the joint investment vehicle completed the acquisition of all outstanding shares of Ele.me that it did
not already own at a consideration of US$5,482 million (RMB34,923 million). Upon the completion of the
acquisition, Ele.me became a consolidated subsidiary of the Company.
The allocation of the purchase price as of the date of acquisition is summarized as follows:
Net liabilities assumed (i)
Amortizable intangible assets (ii)
User base and customer relationships
Trade names, trademarks and domain names
Non-compete agreements
Developed technology and patents
Goodwill
Deferred tax liabilities
Noncontrolling interests (iii)
Total
Total purchase price is comprised of:
‑ cash consideration
‑ contingent cash consideration (iv)
‑ fair value of previously held equity interests
Total
Amounts
(in millions of RMB)
(6,327)
13,702
5,764
4,188
1,415
34,572
(481)
(5,015)
47,818
Amounts
(in millions of RMB)
30,133
4,790
12,895
47,818
(i) Net liabilities assumed primarily included payables to merchants and other logistics providers of RMB4,259
million as of the date of acquisition.
(ii) Acquired amortizable intangible assets had estimated amortization periods not exceeding ten years and a
weighted-average amortization period of 5.8 years.
(iii) Fair value of the noncontrolling interests was estimated based on the equity value of Ele.me derived by the
purchase consideration, adjusted for a discount for control premium.
(iv) The amount is payable contingent upon the satisfaction of certain non-compete provisions by the respective
selling equity holders, and will not exceed RMB4,790 million.
F-47
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
4. Significant equity transactions, mergers and acquisitions and investments (Continued)
(d) Acquisitions and integration of Rajax Holding (“Ele.me”) and Koubei Holding Limited (“Koubei”)
(Continued)
A gain of RMB1,657 million in relation to the revaluation of the previously held equity interests was recorded in
interest and investment income, net in the consolidated income statement for the year ended March 31, 2019. The
fair value of the previously held equity interests was estimated based on the equity value of Ele.me derived by the
purchase consideration, adjusted for a discount for control premium.
The Company expected that the acquisition will deepen Ele.me’s integration into the Company’s digital economy
and advance the Company’s New Retail strategy to provide a seamless online and offline consumer experience in the
local consumer services sector. Goodwill arising from this acquisition was attributable to the synergies expected
from the combined operations of Ele.me and the Company, the assembled workforce and their knowledge and
experience in the local consumer services sector in the PRC. The Company did not expect the goodwill recognized
to be deductible for income tax purposes.
Integration of Ele.me and Koubei
Koubei is one of the PRC’s leading restaurant and local services guide platforms for in-store consumption, which
was previously set up by the Company and Ant Group. The investment in Koubei was previously accounted for
under the equity method (Note 14).
In December 2018, the Company completed the integration of Ele.me and Koubei under a newly established holding
company and paid a cash consideration of US$465 million (RMB3,196 million) in connection with the integration.
Immediately prior to the integration, the Company held an approximately 90% equity interest in Ele.me and an
approximately 38% equity interest in Koubei on a fully diluted basis. Upon the completion of the integration, the
Company held an approximately 72% equity interest in this new holding company (“Local Services Holdco”) which
owns substantially all of the equity interest in Ele.me and Koubei, resulting in an effective controlling equity interest
held by the Company in each of Ele.me and Koubei, and Koubei became a consolidated subsidiary of the Company.
Upon the completion of the integration, the Company’s effective equity interest in Ele.me decreased, resulting in an
increase in noncontrolling interests and additional paid-in capital amounting to RMB6,715 million and RMB7,515
million, respectively.
F-48
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
4. Significant equity transactions, mergers and acquisitions and investments (Continued)
(d) Acquisitions and integration of Rajax Holding (“Ele.me”) and Koubei Holding Limited (“Koubei”)
(Continued)
The allocation of the purchase price as of the date of acquisition of Koubei is summarized as follows:
Net assets acquired (i)
Amortizable intangible assets (ii)
User base and customer relationships
Trade names, trademarks and domain names
Developed technology and patents
Goodwill
Deferred tax liabilities
Noncontrolling interests (iii)
Total
Total purchase price is comprised of:
‑ cash consideration
‑ non-cash consideration
‑ fair value of previously held equity interests
Total
Amounts
(in millions of RMB)
3,261
18,330
1,158
322
36,817
(2,372)
(17,682)
39,834
Amounts
(in millions of RMB)
3,196
14,648
21,990
39,834
(i) Net assets acquired primarily included cash and cash equivalents of RMB4,475 million as of the date of
acquisition.
(ii) Acquired amortizable intangible assets had estimated amortization periods not exceeding 13 years and a
weighted-average amortization period of 6.3 years.
(iii) Fair value of the noncontrolling interests as of the acquisition date was estimated based on the purchase price to
acquire newly issued preferred shares of Local Services Holdco that was paid by new and existing investors in
December 2018, with certain adjustments made to reflect other factors that may affect the fair value estimation.
A gain of RMB21,990 million in relation to the revaluation of the previously held equity interests was recorded in
interest and investment income, net in the consolidated income statement for the year ended March 31, 2019. The
fair value of the previously held equity interests as of the acquisition date was estimated based on the purchase price
to acquire newly issued preferred shares of Local Services Holdco that was paid by new and existing investors in
December 2018, with certain adjustments made to reflect other factors that may affect the fair value estimation.
The Company expected that its commerce platform technology, know-how and infrastructure will deliver consumer
insights and digitized operational solutions to empower local merchants on the Koubei platform. Goodwill arising
from this acquisition was attributable to the synergies expected from the combined operations of Koubei and the
Company, the assembled workforce and their knowledge and experience in the local consumer services sector in the
PRC. The Company did not expect the goodwill recognized to be deductible for income tax purposes.
F-49
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
4. Significant equity transactions, mergers and acquisitions and investments (Continued)
(d) Acquisitions and integration of Rajax Holding (“Ele.me”) and Koubei Holding Limited (“Koubei”)
(Continued)
Subsequent to the integration, the Company acquired additional equity interest in Local Services Holdco for a cash
consideration of US$1,905 million (RMB13,082 million) in December 2018. Other investors, including SoftBank,
also acquired equity interests in Local Services Holdco. As a result, noncontrolling interests increased by RMB3,216
million.
During the year ended March 31, 2020, the Company subscribed for additional equity interest in Local Services
Holdco for a cash consideration of US$1,350 million (RMB9,399 million). Other investors, including SoftBank, also
acquired equity interests in Local Services Holdco. As a result, noncontrolling interests increased by RMB5,162
million. In May 2020, the Company subscribed for additional equity interest in Local Services Holdco for a cash
consideration of US$450 million. Upon the completion of these transactions, the Company’s equity interest in Local
Services Holdco was approximately 73%.
(e) Acquisition of DSM Grup Danışmanlık İletişim ve Satış Ticaret A.Ş. (“Trendyol”)
Trendyol is a leading e-commerce platform in Turkey. In July 2018, the Company acquired an approximately 85%
equity interest in Trendyol for a cash consideration of US$728 million (RMB4,980 million). In connection with the
transaction, the Company also entered into an agreement with the founders of Trendyol, allowing them to acquire
additional equity interests in Trendyol from the Company or sell a portion of their equity interests in Trendyol to the
Company in the future.
The allocation of the purchase price as of the date of acquisition is summarized as follows:
Net assets acquired (i)
Amortizable intangible assets (ii)
Trade names, trademarks and domain names
User base and customer relationships
Developed technology and patents
Goodwill
Deferred tax liabilities
Noncontrolling interests (iii)
Total
Amounts
(in millions of RMB)
1,009
660
388
30
3,938
(228)
(817)
4,980
(i) Net assets acquired primarily included cash and cash equivalents of RMB1,206 million as of the date of
acquisition.
(ii) Acquired amortizable intangible assets had estimated amortization periods not exceeding 15 years and a
weighted-average amortization period of 12.5 years.
(iii) Fair value of the noncontrolling interests was estimated with reference to the purchase price per share as of the
acquisition date, adjusted for a discount for control premium, and includes the fair value of an option granted to
the founders of Trendyol to acquire additional interests in Trendyol from the Company as of the date of
acquisition.
F-50
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
4. Significant equity transactions, mergers and acquisitions and investments (Continued)
(e) Acquisition of DSM Grup Danışmanlık İletişim ve Satış Ticaret A.Ş. (“Trendyol”) (Continued)
The acquisition of Trendyol underscored the Company’s commitment to international expansion. Goodwill arising
from this acquisition was attributable to the synergies expected from the combined operations of Trendyol and the
Company, the assembled workforce and their knowledge and experience in e-commerce. The Company did not
expect the goodwill recognized to be deductible for income tax purposes.
In December 2018, the Company purchased additional equity interest in Trendyol for a cash consideration of US$2
million (RMB16 million). The transaction resulted in a reduction of noncontrolling interest amounting to RMB14
million. In April 2020, the Company purchased additional equity interest in Trendyol for a cash consideration of
US$125 million. Upon the completion of these transactions, the Company’s equity interest in Trendyol was
approximately 86%.
(f) Acquisition of Kaiyuan Commerce Co., Ltd. (“Kaiyuan”)
Kaiyuan is one of the leading department store operators in the northwestern part of the PRC. In April 2018, the
Company acquired a 100% equity interest in Kaiyuan for a cash consideration of RMB3,362 million.
The allocation of the purchase price as of the date of acquisition is summarized as follows:
Net assets acquired (i)
Amortizable intangible assets (ii)
Trade names, trademarks and domain names
Goodwill
Deferred tax liabilities
Total
Amounts
(in millions of RMB)
2,750
203
1,047
(638)
3,362
(i) Net assets acquired primarily included property and equipment of RMB3,458 million and bank borrowings of
RMB651 million as of the date of acquisition.
(ii) Acquired amortizable intangible assets had estimated amortization periods of ten years.
The Company expected that Kaiyuan will complement the Company’s New Retail initiatives to reengineer the
fundamentals of retail operations and transform the retail landscape. Goodwill arising from this acquisition was
attributable to the synergies expected from the combined operations of Kaiyuan and the Company, the assembled
workforce and their knowledge and experience in the retail business in the PRC. The Company did not expect the
goodwill recognized to be deductible for income tax purposes.
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
4. Significant equity transactions, mergers and acquisitions and investments (Continued)
(g) Acquisition of Cainiao Smart Logistics Network Limited (“Cainiao Network”)
Cainiao Network operates a logistics data platform and global fulfillment network that primarily leverage the
capacity and capabilities of logistics partners. The Company previously held an approximately 47% equity interest in
Cainiao Network. The investment was accounted for under the equity method (Note 14).
In October 2017, the Company completed the subscription for newly issued ordinary shares of Cainiao Network for
a cash consideration of US$803 million (RMB5,322 million). Following the completion of the transaction, the
Company’s equity interest in Cainiao Network increased to approximately 51% and Cainiao Network became a
consolidated subsidiary of the Company.
The allocation of the purchase price as of the date of acquisition is summarized as follows:
Net assets acquired (i)
Amortizable intangible assets (ii)
User base and customer relationships
Trade names, trademarks and domain names
Developed technology and patents
Goodwill
Deferred tax assets
Deferred tax liabilities
Noncontrolling interests (iii)
Total
Total purchase price is comprised of:
‑ cash consideration
‑ fair value of previously held equity interests
Total
Amounts
(in millions of RMB)
23,937
9,344
4,965
459
32,418
920
(5,197)
(33,189)
33,657
Amounts
(in millions of RMB)
5,322
28,335
33,657
(i) Net assets acquired primarily included the cash consideration of RMB5,322 million, property and equipment of
RMB15,144 million and bank borrowings of RMB5,288 million as of the date of acquisition.
(ii) Acquired amortizable intangible assets had estimated amortization periods not exceeding 16 years and a
weighted-average amortization period of 14.3 years.
(iii) Fair value of the noncontrolling interests was estimated with reference to the purchase price per share as of the
acquisition date.
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
4. Significant equity transactions, mergers and acquisitions and investments (Continued)
(g) Acquisition of Cainiao Smart Logistics Network Limited (“Cainiao Network”) (Continued)
A gain of RMB22,442 million in relation to the revaluation of the previously held equity interests was recorded in
interest and investment income, net in the consolidated income statement for the year ended March 31, 2018. The
fair value of the previously held equity interests was estimated based on the purchase price per share of Cainiao
Network as of the acquisition date.
The Company expected that the acquisition of control over Cainiao Network will help enhance the overall logistics
experience for consumers and merchants across the Company’s digital economy, and enable greater efficiencies and
lower costs in the logistics sector in the PRC. Goodwill arising from this acquisition was attributable to the synergies
expected from the combined operations of Cainiao Network and the Company, the assembled workforce and their
knowledge and experience in the logistics sector in the PRC. The Company did not expect the goodwill recognized
to be deductible for income tax purposes.
In September and November 2019, the Company purchased additional equity interests in Cainiao Network for a cash
consideration of US$3,482 million (RMB24,415 million), which resulted in a reduction of noncontrolling interests
amounting to RMB4,367 million. Upon the completion of these transactions, the Company’s equity interest in
Cainiao Network increased from approximately 51% to approximately 63%.
In June 2020, the Company purchased additional equity interests in Cainiao Network for a cash consideration of
RMB3,921 million. Upon the completion of this transaction, the Company’s equity interest in Cainiao Network
increased to approximately 66%.
(h) Acquisition of Intime Retail (Group) Company Limited (“Intime”)
Intime is one of the leading department store operators in the PRC that was previously listed on the HKSE. The
Company previously owned an approximately 28% equity interest in Intime and the investment was accounted for
under the equity method (Note 14).
In May 2017, the Company and the founder of Intime completed the privatization of Intime, upon which all of the
issued and outstanding shares of Intime that the Company, the founder of Intime and certain other shareholders did
not own were canceled in exchange for a payment of HK$10.00 per share in cash. The Company paid a cash
consideration of HK$12,605 million (RMB11,131 million) in the privatization. Upon the completion of the
privatization, the Company increased its shareholding in Intime to approximately 74 % and Intime became a
consolidated subsidiary of the Company. Following the completion of the privatization, the listing of the shares of
Intime on the HKSE was withdrawn.
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
4. Significant equity transactions, mergers and acquisitions and investments (Continued)
(h) Acquisition of Intime Retail (Group) Company Limited (“Intime”) (Continued)
The allocation of the purchase price as of the date of acquisition is summarized as follows:
Net assets acquired (i)
Amortizable intangible assets (ii)
Trade names, trademarks and domain names
User base and customer relationships
Developed technology and patents
Goodwill
Deferred tax liabilities
Noncontrolling interests (iii)
Total
Total purchase price is comprised of:
- cash consideration
- fair value of previously held equity interests
Total
Amounts
(in millions of RMB)
20,920
1,131
72
16
4,757
(2,790)
(6,301)
17,805
Amounts
(in millions of RMB)
11,131
6,674
17,805
(i) Net assets acquired primarily included property and equipment of RMB23,492 million and bank borrowings of
RMB4,110 million as of the date of acquisition.
(ii) Acquired amortizable intangible assets had estimated amortization periods not exceeding eleven years and a
weighted-average amortization period of 10.1 years.
(iii) Fair value of the noncontrolling interests was estimated with reference to the purchase price of HK$10.00 per
share in the privatization.
A gain of RMB1,861 million in relation to the revaluation of the previously held equity interests was recorded in
interest and investment income, net in the consolidated income statement for the year ended March 31, 2018. The
fair value of the previously held equity interests was estimated with reference to the purchase price of HK$10.00 per
share in the privatization.
The Company expected Intime to support its strategy to transform conventional retail by leveraging its substantial
consumer reach, rich data and technology. Goodwill arising from this acquisition was attributable to the synergies
expected from the combined operations of Intime and the Company, the assembled workforce and their knowledge
and experience in the retail business in the PRC. The Company did not expect the goodwill recognized to be
deductible for income tax purposes.
In February 2018 and October 2018, the Company purchased additional ordinary shares of Intime from certain
minority shareholders for a cash consideration of HK$6,712 million (RMB5,428 million) and HK$203 million
(RMB180 million), respectively, which resulted in a reduction of noncontrolling interests amounting to RMB5,854
million and RMB162 million during the years ended March 31, 2018 and 2019, respectively. Upon the completion of
the purchase of additional ordinary shares in October 2018, the Company’s equity interest in Intime increased to
approximately 99%.
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
4. Significant equity transactions, mergers and acquisitions and investments (Continued)
(i) Other acquisitions
Other acquisitions that constitute business combinations are summarized in the following table:
Net (liabilities) assets
Identifiable intangible assets
Deferred tax liabilities
Noncontrolling interests and mezzanine equity
Net identifiable assets
Goodwill
Total purchase consideration
Fair value of previously held equity interests
Purchase consideration settled
Deferred consideration as of year end
Total purchase consideration is comprised of:
- cash consideration
- fair value of previously held equity interests
Total
Year ended March 31,
2018
2019
2020
(in millions of RMB)
(58) 2,133
411
(60)
293
(77)
216
618
834
(133)
(575)
126
2,560
(545)
4,148
(2,993)
1,155
6,465
7,620
(1,778)
(5,053)
789
846
364
(53)
1,157
(998)
159
7,840
7,999
(2,215)
(5,146)
638
701
133
834
5,842
1,778
7,620
5,784
2,215
7,999
In relation to the revaluation of previously held equity interests, the Company recognized a gain of RMB133 million,
RMB715 million and RMB1,538 million in the consolidated income statements for the years ended March 31, 2018,
2019 and 2020, respectively, for the other acquisitions that constitute business combinations.
Pro forma results of operations for these acquisitions have not been presented because they are not material to the
consolidated income statements for the years ended March 31, 2018, 2019 and 2020, either individually or in
aggregate.
Equity investments and others
(j) Investment in Meinian Onehealth Healthcare Holdings Co., Ltd. (“Meinian”)
Meinian, a company that is listed on the Shenzhen Stock Exchange, offers health examination, health evaluation,
health consulting, and other services. In November to December 2019, the Company, together with Ant Group,
acquired new and existing shares of Meinian, representing an approximately 14% equity interest in Meinian for a
total cash consideration of RMB6,700 million. Yunfeng, which is comprised of certain investment funds the general
partner of which the Company’s director and former executive chairman has equity interests in, is also an investor in
this transaction.
The investment in Meinian is accounted for under the equity method (Note 14) because the Company is able to
exercise significant influence over operating and financial policies of Meinian. Out of the total cash consideration,
RMB2,573 million was allocated to amortizable intangible assets, RMB4,579 million was allocated to goodwill,
RMB643 million was allocated to deferred tax liabilities and RMB191 million was allocated to net assets acquired.
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
4. Significant equity transactions, mergers and acquisitions and investments (Continued)
(k) Investment in AliExpress Russia Holding Pte. Ltd. (“AliExpress Russia Joint Venture”)
AliExpress Russia Joint Venture is a joint venture set up by the Company, Mail.ru Group Limited (“Mail.ru Group”,
a leading Internet company in Russia), Public Joint Stock Company MegaFon (“MegaFon”, a Russian mobile
telecommunications operator) and Joint Stock Company “Managing Company of Russian Direct Investment Fund”
(“RDIF”, a Russian sovereign wealth fund). In October 2019, the Company invested approximately US$100 million
into the joint venture and contributed the Company’s AliExpress Russia businesses into the joint venture. The other
shareholders of the joint venture also made cash and non-cash contributions to the joint venture pursuant to the
transaction documents. After the completion of the transaction, the Company holds an approximately 56% equity
interest and less-than-majority voting rights in the joint venture. In connection with the transaction, the Company
also entered into an option agreement with another shareholder of the joint venture, allowing the transfer of equity
interest in the joint venture between the Company and this shareholder in the future. As part of the transaction, the
Company has also acquired a minority stake in Mail.ru Group.
The contribution of the Company’s AliExpress Russia businesses into the joint venture resulted in the
deconsolidation of these businesses, and a one-time gain of RMB10.3 billion was recognized in interest and
investment income, net in the consolidated income statement for the year ended March 31, 2020.
The investment in the AliExpress Russia Joint Venture is accounted for under the equity method (Note 14). Out of
the total consideration, RMB2,325 million was allocated to amortizable intangible assets, RMB4,290 million was
allocated to goodwill, RMB116 million was allocated to deferred tax liabilities and RMB1,630 million was allocated
to net assets acquired.
(l) Investment in Ant Small and Micro Financial Services Group Co., Ltd. (“Ant Group”)
SAPA
In August 2014, the Company entered into a share and asset purchase agreement (together with all subsequent
amendments, the “SAPA”), and entered into or amended certain ancillary agreements including an amendment and
restatement of the intellectual property license agreement with Alipay (the “2014 IPLA”). Pursuant to these
agreements, the Company restructured its relationships with Ant Group and Alipay.
In February 2018, the Company amended both the SAPA and the Alipay commercial agreement, and agreed with
Ant Group and certain other parties on forms of certain ancillary agreements. In September 2019, the Company
further amended the SAPA and entered into a cross license agreement and certain ancillary agreements and
amendments, including the previously agreed form of amendment and restatement of the 2014 IPLA (“the Amended
IPLA”).
Apart from the amended provisions described below, the key terms of the agreements with Ant Group and Alipay
from the 2014 restructuring remain substantially unchanged.
Issuance of equity interest
In September 2019, following the satisfaction of the closing conditions, the Company received the 33% equity
interest in Ant Group pursuant to the SAPA.
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
4. Significant equity transactions, mergers and acquisitions and investments (Continued)
(l) Investment in Ant Small and Micro Financial Services Group Co., Ltd. (“Ant Group”) (Continued)
Under the SAPA, the consideration to acquire the newly issued 33% equity interest in Ant Group was fully funded
by concurrent payments from Ant Group to the Company in consideration for certain intellectual property rights and
assets that the Company transferred to Ant Group upon the issuance of the equity interest. Such consideration was
determined based on the fair values of the underlying assets exchanged in the transaction as described above at
contract inception in 2014, whereby the fair value of the intellectual property rights and assets approximated the fair
value of the equity interest at the time.
The Company accounts for its equity interest in Ant Group under the equity method (Note 14). Upon the receipt of
the equity interest in September 2019, this investment was initially measured at cost, with an upward adjustment
determined based on the fair value of the Company’s share of Ant Group’s net assets as of the completion date of the
transaction.
Upon the completion, the Company recorded the 33% equity interest in Ant Group with a carrying value amounting
to RMB90.7 billion in investment in equity investees, other cost reimbursement of RMB0.6 billion from Ant Group
to the Company pursuant to the SAPA and the deferred tax effect of RMB19.7 billion, with a corresponding gain of
RMB71.6 billion recorded in interest and investment income, net in the year ended March 31, 2020. The difference
between the carrying value of the 33% equity interest in Ant Group and the Company’s share of the carrying value
of Ant Group’s net assets upon completion is a basis difference, which mainly represents the fair value adjustments
of amortizable intangible assets and equity investments. These adjustments amounted to RMB24.5 billion and
RMB5.3 billion, respectively, both of which were net of their corresponding tax effects.
The application of accounting principles related to the measurement of the 33% equity interest in Ant Group and the
recognition of the upward adjustment require significant management judgment, which included (i) determination of
the contract inception date of the SAPA for the initial measurement of the 33% equity interest in Ant Group and (ii)
determination of the accounting treatment for the difference between the Company’s share of the fair value of Ant
Group’s net assets acquired and the cost of investment when the former is greater than the latter.
In relation to the determination of the contract inception date of the SAPA, management considered the relevant U.S.
GAAP guidance and focused on the legal enforceability of the agreement, and determined that the contract inception
date was in 2014.
In relation to the determination of the accounting treatment for the difference between the Company’s share of the
fair value of Ant Group’s net assets acquired and the cost of investment when the former is greater than the latter, in
the absence of specific guidance and with the diversity in practice, management assessed various views derived from
the interpretations of relevant U.S. GAAP and made reference to the relevant guidance of other international
accounting framework and recognized the difference under interest and investment income, net with a corresponding
increase to the initial carrying value of the investment in Ant Group.
Subsequent to the receipt of the equity interest in Ant Group, the proportionate share of results of Ant Group,
adjusted for the effects of the basis difference as described above, is recorded in share of results of equity investees
in the consolidated income statements on a one quarter in arrears basis.
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
4. Significant equity transactions, mergers and acquisitions and investments (Continued)
(l) Investment in Ant Small and Micro Financial Services Group Co., Ltd. (“Ant Group”) (Continued)
Pre-emptive rights
Following the receipt of equity interest in Ant Group, the Company has pre-emptive rights to participate in other
issuances of equity securities by Ant Group and certain of its affiliates prior to the time of Ant Group meeting certain
minimum criteria for a qualified IPO set forth in the SAPA (a “Qualified IPO”). These pre-emptive rights entitle the
Company to maintain the equity ownership percentage the Company holds in Ant Group immediately prior to any
such issuances. In connection with the exercise of the pre-emptive rights, the Company is also entitled to receive
certain payments from Ant Group, effectively funding the subscription for these additional equity interest, up to a
value of US$1.5 billion, subject to certain adjustments. In addition, under the SAPA, in certain circumstances the
Company is permitted to exercise pre-emptive rights through an alternative arrangement which will further protect
the Company from dilution. The value of the pre-emptive rights was considered to be insignificant.
Corporate governance provisions
Under the SAPA, in addition to an independent director, the Company has the right to nominate two officers or
employees of the Company for election to the board of Ant Group. In each case, these director nomination rights will
continue unless required to be terminated by applicable laws and regulations or listing rules in connection with an
Ant Group Qualified IPO process or the Company ceases to own a certain amount of its post-issuance equity interest
in Ant Group. In September 2019, the Company nominated two officers of the Company who have then been elected
to the board of Ant Group pursuant to these director nomination rights under the SAPA.
2014 IPLA and Amended IPLA
2014 IPLA
Under the 2014 IPLA, the Company received, in addition to a software technology service fee, royalty streams
related to Alipay and other current and future businesses of Ant Group (collectively, the “Profit Share Payments”).
The Profit Share Payments were paid at least annually and equaled the sum of an expense reimbursement plus 37.5%
of the consolidated pre-tax income of Ant Group, subject to certain adjustments. The expense reimbursement
represented the reimbursement for the costs and expenses incurred by the Company in the provision of software
technology services. The Company accounted for the Profit Share Payments in the periods when the services were
provided, where the payments were expected to approximate the estimated fair values of the services provided. Upon
the receipt of the equity interest in September 2019, the Company terminated the 2014 IPLA, and the Profit Share
Payments arrangement was terminated.
Income in connection with the Profit Share Payments, net of costs incurred by the Company, of RMB3,444 million,
RMB517 million and RMB3,835 million, was recorded in other income, net in the consolidated income statements
for the years ended March 31, 2018, 2019 and 2020, respectively (Notes 6 and 22).
Amended IPLA
Pursuant to the SAPA, the Company, Ant Group and Alipay entered into the Amended IPLA upon the receipt of the
33% equity interest in Ant Group in September 2019, at which time the Company also transferred certain intellectual
property and assets to Ant Group.
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
4. Significant equity transactions, mergers and acquisitions and investments (Continued)
(l) Investment in Ant Small and Micro Financial Services Group Co., Ltd. (“Ant Group”) (Continued)
The Amended IPLA will terminate upon the earliest of:
●
●
●
the full payment of all pre-emptive rights funded payments under the SAPA;
the closing of a Qualified IPO of Ant Group or Alipay; and
the transfer to Ant Group of intellectual property the Company owns that is exclusively related to the business
of Ant Group.
(m) Investment in China TransInfo Technology Co., Ltd. (“China TransInfo”)
China TransInfo, a company that is listed on the Shenzhen Stock Exchange, is a PRC-based smart city infrastructure
and service provider, whose offerings include intelligent transportation operation services. In June 2019, the
Company acquired a 15% equity interest in China TransInfo for a cash consideration of RMB3,595 million. The
investment is carried at fair value with unrealized gains and losses recorded in the consolidated income statements
(Note 12).
(n) Investment in Red Star Macalline Group Corporation Limited (“Red Star”)
Red Star, a company that is listed on both the HKSE and Shanghai Stock Exchange, is a leading home improvement
and furnishings shopping mall operator in the PRC. In May 2019, the Company completed the subscription of
exchangeable bonds issued by the controlling shareholder of Red Star for a cash consideration of RMB4,359 million.
The exchangeable bonds have a term of five years and are exchangeable into ordinary shares of Red Star at an initial
price of RMB12.28 per share. The exchangeable bonds are accounted for under the fair value option and recorded
under investment securities (Note 12). In addition, the Company acquired an approximately 2% equity interest in
Red Star for a total consideration of HK$447 million (RMB390 million). The equity interest in Red Star is carried at
fair value with unrealized gains and losses recorded in the consolidated income statements (Note 12). The Offshore
Retail Fund (Note 4(r)) is also an investor in this transaction.
(o) Investment in STO Express Co., Ltd. (“STO Express”)
STO Express, a company that is listed on the Shenzhen Stock Exchange, is one of the leading express delivery
services companies in the PRC. In March 2019, the Company made a loan to the controlling shareholder of STO
Express with a principal amount of RMB5.0 billion for a term of three years. The controlling shareholder of STO
Express has pledged a portion of its equity interest in STO Express in relation to the loan. The loan is accounted for
at amortized cost and is recorded under investment securities (Note 12) on the consolidated balance sheets.
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
4. Significant equity transactions, mergers and acquisitions and investments (Continued)
(o) Investment in STO Express Co., Ltd. (“STO Express”) (Continued)
In July 2019, the Company acquired a 49% equity interest in an investment vehicle which holds a 29.9% equity
interest in STO Express (equivalent to an effective equity interest of approximately 14.7% in STO Express) for a
cash consideration of RMB4.7 billion. The investment is accounted for under the fair value option and recorded
under investment securities (Note 12). The investment vehicle was established by the controlling shareholder of STO
Express, and the Company subsequently entered into an option agreement with this controlling shareholder. Under
the terms of the agreement, the Company may elect to acquire an additional effective equity interest of
approximately 31.3% in STO Express through a call option to acquire the remaining 51% equity interest in this
investment vehicle and another call option to acquire a 16.1% effective equity interest in STO Express for a total
consideration of RMB10.0 billion. The Company can exercise the options to acquire equity interests in the
investment vehicles or in STO Express at any time during the three-year period beginning on December 28, 2019.
These options are measured at fair value with unrealized gains and losses recorded in the consolidated income
statements (Note 12). Unrealized loss recorded in interest and investment income, net relating to these options
amounted to RMB1,766 million during the year ended March 31, 2020.
(p) Investment in Focus Media Information Technology Co., Ltd. (“Focus Media”)
Focus Media, a company that is listed on the Shenzhen Stock Exchange, operates a media network for
advertisements, including within cinemas, and advertising posters and displays in elevators of office and residential
buildings. During the year ended March 31, 2019, the Company acquired a total equity interest of approximately 7%
in Focus Media for a cash consideration of approximately RMB10.7 billion. The investment is carried at fair value
with unrealized gains and losses recorded in the consolidated income statements (Note 12). New Retail Strategic
Opportunities Fund, L.P. (the “Offshore Retail Fund”) (Note 4(r)) is also an investor in this transaction.
The Company has also entered into an agreement with Hangzhou Hanyun Xinling Equity Investment Fund
Partnership (the “Onshore Retail Fund”) (Note 4(r)) under which the Onshore Retail Fund will participate in the gain
and loss related to a certain portion of the equity interest in Focus Media held by the Company. The arrangement is
carried at fair value with unrealized gains and losses recorded in the consolidated income statements.
In addition, the Company agreed to acquire a 10% equity interest of an entity controlled by the founder and chairman
of Focus Media, which holds an approximately 23% equity interest in Focus Media, for a cash consideration of
US$511 million. This transaction has not been completed as of March 31, 2020. Such arrangement is carried at fair
value with unrealized gains and losses recorded in the consolidated income statements.
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
4. Significant equity transactions, mergers and acquisitions and investments (Continued)
(q) Investment in PT Tokopedia (“Tokopedia”)
Tokopedia operates one of the leading e-commerce platforms in Indonesia. During the year ended March 31, 2018,
the Company completed a minority investment in existing and newly issued preferred shares of Tokopedia for a total
cash consideration of US$445 million (RMB2,920 million). In connection with the initial investment, the Company
also agreed to subscribe for up to US$500 million in additional preferred shares of Tokopedia at the then fair market
value if so elected by Tokopedia during a 24-month period after the completion of the initial investment. Pursuant to
the agreement, the Company acquired additional newly issued preferred shares of Tokopedia for a total cash
consideration of US$500 million (RMB3,443 million) in December 2018. Upon the completion of this investment,
the Company held an approximately 29% equity interest in Tokopedia on a fully diluted basis. SoftBank is also an
existing shareholder of Tokopedia. The preferred shares are not considered in-substance common stock given that
the shares contain certain terms such as liquidation preference over ordinary shares. The investment is accounted for
using the measurement alternative (Note 12).
(r) Investments in Hangzhou Hanyun Xinling Equity Investment Fund Partnership (the “Onshore Retail Fund”)
and New Retail Strategic Opportunities Fund, L.P. (the “Offshore Retail Fund”)
The Onshore Retail Fund and the Offshore Retail Fund were set up to raise capital to invest in retail related
businesses in the PRC and internationally, respectively. The Company is able to exercise significant influence over
the investment decisions in both funds. In August 2017 and January 2018, the Company made a commitment to
invest RMB1.6 billion and US$200 million in the Onshore Retail Fund and the Offshore Retail Fund, relating to
which the Company has funded RMB462 million, RMB922 million and RMB867 million to the Onshore Retail
Fund as of March 31, 2018, 2019 and 2020, respectively; and US$77 million, US$78 million and US$84 million to
the Offshore Retail Fund as of March 31, 2018, 2019 and 2020, respectively. As of March 31, 2020, the Company
held an approximately 20% equity interest in the Onshore Retail Fund and an approximately 10% equity interest in
the Offshore Retail Fund. The investments are accounted for under the equity method (Note 14).
(s) Investment in Huatai Securities Co., Ltd. (“Huatai Securities”)
Huatai Securities, a company that is listed on both the Shanghai Stock Exchange and the HKSE, is a leading
integrated securities group in the PRC. In July 2018, the Company acquired an approximately 3% interest in Huatai
Securities for a cash consideration of RMB3.5 billion. The investment is carried at fair value with unrealized gains
and losses recorded in the consolidated income statements (Note 12).
(t) Investment in ZTO Express (Cayman) Inc. (“ZTO Express”)
ZTO Express, a company that is listed on the NYSE, is one of the leading express delivery services companies in the
PRC. In June 2018, the Company completed an investment in newly issued ordinary shares of ZTO Express for a
cash consideration of US$1,100 million (RMB7,114 million), representing an approximately 8% equity interest in
ZTO Express. The Offshore Retail Fund (Note 4(r)) is also an investor in this transaction. The investment is carried
at fair value with unrealized gains and losses recorded in the consolidated income statements (Note 12).
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
4. Significant equity transactions, mergers and acquisitions and investments (Continued)
(u) Investment in Huitongda Network Co., Ltd. (“Huitongda”)
Huitongda operates a rural online services platform in the PRC. In April 2018, the Company completed an
investment in existing and newly issued shares of Huitongda for a cash consideration of RMB4,500 million,
representing a 20% equity interest in Huitongda. The equity interest in Huitongda held by the Company is not
considered in-substance common stock given that the equity interest contains certain terms such as liquidation
preference over ordinary shares. As a result, the investment is accounted for using the measurement alternative (Note
12).
(v) Investment in Shiji Retail Information Technology Co., Ltd. (“Shiji Retail”)
Shiji Retail is engaged in the provision of retail information system solutions. In April 2018, the Company acquired
a 38% equity interest in Shiji Retail for a cash consideration of US$486 million (RMB3,062 million). The equity
interest in Shiji Retail held by the Company is not considered in-substance common stock given that the equity
interest contains certain terms such as liquidation preference over ordinary shares. As a result, the investment is
accounted for using the measurement alternative (Note 12).
(w) Investment in Wanda Film Holding Co., Ltd. (“Wanda Film”)
Wanda Film, a company that is listed on the Shenzhen Stock Exchange, is principally engaged in the investment and
management of cinemas and film distribution businesses. In March 2018, the Company completed an investment in
existing ordinary shares of Wanda Film for a cash consideration of RMB4,676 million, representing an
approximately 8% equity interest in Wanda Film. The investment is carried at fair value with unrealized gains and
losses recorded in the consolidated income statements (Note 12).
(x) Investment in Easyhome New Retail Group Co., Ltd. (“Easyhome”)
Easyhome is one of the largest home improvement supplies and furniture chains in the PRC. In March 2018, the
Company completed an investment in Beijing Easyhome Furnishing Chain Group Co., Ltd. for a cash consideration
of RMB3,635 million, representing a 10% equity interest. Yunfeng and the Onshore Retail Fund (Note 4(r)) are also
investors in this transaction. The investment was accounted for using the measurement alternative (Note 12). In
December 2019, Beijing Easyhome Furnishing Chain Group Co., Ltd. completed its reverse takeover of a company
listed on the Shenzhen Stock Exchange. All registered capital of Beijing Easyhome Furnishing Chain Group Co.,
Ltd. previously held by the Company was converted into newly issued ordinary shares of Easyhome, representing an
approximately 10% equity interest. Upon the completion of the reverse takeover, the investment is carried at fair
value with unrealized gains and losses recorded in the consolidated income statements (Note 12).
F-62
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
4. Significant equity transactions, mergers and acquisitions and investments (Continued)
(y) Investment in Sun Art Retail Group Limited (“Sun Art”)
Sun Art, a company that is listed on the HKSE, is a leading hypermarket operator in the PRC. In December 2017, the
Company completed investments in existing ordinary shares of Sun Art and existing ordinary shares of A-RT Retail
Holdings Limited, a limited liability company incorporated in Hong Kong that holds an approximately 51% equity
interest in Sun Art, for an aggregate consideration of HK$19,303 million (RMB16,264 million). In January 2018, the
Company acquired additional ordinary shares of Sun Art from public shareholders through a mandatory general offer
as required under Hong Kong regulations, for a cash consideration of HK$2 million (RMB2 million). After the
completion of these transactions, the Company’s effective equity interest in Sun Art was approximately 31%, which
is comprised of the direct equity interest of 21% and the indirect equity interest through its shareholding in A-RT
Retail Holdings Limited. The Offshore Retail Fund (Note 4(r)) is also an investor in this transaction.
The investment in Sun Art is accounted for under the equity method (Note 14). Out of the total cash consideration,
RMB2,499 million was allocated to amortizable intangible assets, RMB2,953 million was allocated to goodwill,
RMB2,187 million was allocated to deferred tax liabilities and RMB12,999 million was allocated to net assets
acquired.
(z) Investment in China United Network Communications Ltd. (“China Unicom”)
China Unicom, a company that is listed on the Shanghai Stock Exchange, is a major telecommunications company in
the PRC. In October 2017, the Company completed an investment in newly issued ordinary shares of China Unicom
for a cash consideration of RMB4,325 million, representing an approximately 2% equity interest in China Unicom.
The investment is carried at fair value with unrealized gains and losses recorded in the consolidated income
statements (Note 12).
(aa) Investment in BEST Inc. (formerly known as Best Logistics Technologies Limited) (“Best Logistics”)
Best Logistics is a provider of comprehensive supply chain solutions and services. In September 2017, in connection
with the completion of Best Logistics’ initial public offering on the NYSE, all preferred shares of Best Logistics held
by the Company were automatically converted into ordinary shares of Best Logistics. Concurrently, the Company
acquired additional equity interests in Best Logistics for a cash consideration of US$100 million (RMB657 million),
after which the equity interests in Best Logistics held by the Company increased to approximately 23%. Upon the
completion of the share conversion, the original investment with a carrying value of US$256 million (RMB1,679
million) was reclassified from a cost method investment to an equity method investment (Note 14). Out of the total
purchase price, which included the cash consideration and the carrying amount of the previously held interests in
Best Logistics, RMB1,072 million was allocated to amortizable intangible assets, RMB443 million was allocated to
goodwill, RMB214 million was allocated to deferred tax liabilities and RMB1,035 million was allocated to net assets
acquired.
Cainiao Network (Note 4(g)) is also an existing shareholder of Best Logistics with an approximately 5% equity
interest. Upon the consolidation of Cainiao Network in October 2017, the Company began to account for Cainiao
Network’s investment in Best Logistics under the equity method (Note 14), and the fair value of this investment at
the time amounting to US$215 million (RMB1,420 million) was recognized as the new investment cost. Out of this
amount, RMB652 million was allocated to amortizable intangible assets, RMB270 million was allocated to
goodwill, RMB131 million was allocated to deferred tax liabilities and RMB629 million was allocated to net assets
acquired.
F-63
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
4. Significant equity transactions, mergers and acquisitions and investments (Continued)
(aa) Investment in BEST Inc. (formerly known as Best Logistics Technologies Limited) (“Best Logistics”)
(Continued)
After the completion of these transactions, the Company’s equity interest in Best Logistics was approximately 28%.
In September 2019, the Company subscribed for convertible senior notes issued by Best Logistics for a cash
consideration of US$100 million. These convertible senior notes bear interest at a rate of 1.75% per annum and will
mature in October 2024. These convertible senior notes are accounted for under the fair value option and recorded
under investment securities (Note 12).
In June 2020, the Company subscribed for additional convertible senior notes issued by Best Logistics for a cash
consideration of US$150 million. These convertible senior notes bear interest at a rate of 4.50% per annum and will
mature in June 2025.
Transactions that were not completed as of March 31, 2020
(ab) Additional investment in Banma Network Technology Co., Ltd. (“Banma”)
Banma is a PRC-based intelligent car operating system and solution provider. The Company holds an approximately
36% effective equity interest in Banma on a fully diluted basis through an investment vehicle, which the Company
accounts for under the equity method (Note 14). Yunfeng is also an existing shareholder in Banma. In May 2020, the
Company and other shareholders of Banma signed certain agreements relating to the restructuring of Banma,
pursuant to which, in exchange for certain non-cash consideration, the Company will receive additional equity
interest in Banma, resulting in an approximately 50% effective equity interest in Banma on a fully diluted basis upon
the completion of the restructuring, which is subject to customary closing conditions.
(ac) Additional investment in Alibaba Health Information Technology Limited (“Alibaba Health”)
Alibaba Health, a consolidated subsidiary of the Company that is listed on the HKSE, engages in pharmaceutical and
healthcare product sales business, establishes Internet healthcare platforms and explores digital health using cloud
computing and big data technologies. In April 2020, the Company transferred its business relating to certain
pharmaceutical products, medical purpose food products, medical devices, adult products, healthcare products,
medical and healthcare services and certain regulated health food products on the Tmall and/or Tmall Global
platforms to Alibaba Health for an aggregate consideration of HK$8.1 billion, which was settled through the
issuance of approximately 861 million newly issued ordinary shares of Alibaba Health. Upon the closing of this
transaction, the Company’s equity interest in Alibaba Health increased to approximately 60%.
F-64
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
5. Revenue
Revenue by segment is as follows:
Core commerce:
China commerce retail (ii)
- Customer management
- Commission
- Others (iii)
China commerce wholesale (iv)
International commerce retail (v)
International commerce wholesale (vi)
Cainiao logistics services (vii)
Local consumer services (viii)
Others
Total core commerce
Cloud computing (ix)
Digital media and entertainment (x)
Innovation initiatives and others (xi)
Total
2018 (i)
Year ended March 31,
2019
(in millions of RMB)
2020
114,285
46,525
15,749
176,559
145,684
61,847
40,084
247,615
7,164
14,216
6,625
6,759
9,988
19,558
8,167
14,885
— 18,058
175,396
71,086
86,268
332,750
12,427
24,323
9,594
22,233
25,440
9,337
214,020 323,400 436,104
40,016
26,948
6,643
250,266 376,844 509,711
24,702
24,077
4,665
13,390
19,564
3,292
5,129
2,697
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
Revenue for the year ended March 31, 2018 has not been adjusted due to the adoption of ASC 606 under
the modified retrospective method (Note 2(g)).
Revenue from China commerce retail is primarily generated from the Company’s China retail marketplaces
and includes revenue from customer management, sales of goods and commissions.
“Others” revenue under China commerce retail is primarily generated by the Company’s New Retail and
direct sales businesses, mainly Freshippo, Tmall Supermarket, direct import and Intime.
Revenue from China commerce wholesale is primarily generated from 1688.com and includes revenue
from membership fees and customer management.
Revenue from international commerce retail is primarily generated from Lazada and AliExpress and
includes revenue from sales of goods, commissions, logistics services and customer management.
Revenue from international commerce wholesale is primarily generated from Alibaba.com and includes
membership fees and revenue from customer management.
Revenue from Cainiao logistics services represents revenue from the domestic and international one-stop-
shop logistics services and supply chain management solutions provided by Cainiao Network.
Revenue from local consumer services primarily represents platform commissions, revenue from the
provision of delivery services and other services provided by Ele.me.
Revenue from cloud computing is primarily generated from the provision of services, such as elastic
computing, database, storage, network virtualization services, large scale computing, security, management
and application services, big data analytics, a machine learning platform and IoT services.
F-65
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
5. Revenue (Continued)
(x)
(xi)
Revenue from digital media and entertainment is primarily generated from Youku and UCWeb and
includes revenue from customer management and membership fees.
Revenue from innovation initiatives and others is primarily generated from businesses such as online
games, Amap, Tmall Genie and other innovation initiatives. Other revenue also includes the SME Annual
Fee received from Ant Group and its affiliates (Note 22).
Revenue by type is as follows:
2018 (i)
Year ended March 31,
2019
(in millions of RMB)
2020
Customer management services
P4P, in-feed and display marketing
Other customer management services
Total customer management services
Commission
Membership fees
Logistics services
Cloud computing services
Sales of goods
Other revenue (ii)
Total
9,076
13,962
119,822 151,654 177,613
19,850
128,898 165,616 197,463
81,086 100,129
22,846
19,139
33,942
23,397
40,016
24,702
95,503
46,942
19,812
15,962
250,266 376,844 509,711
52,411
13,823
6,759
13,390
18,719
16,266
(i) Revenue for the year ended March 31, 2018 has not been adjusted due to the adoption of ASC 606 under the
modified retrospective method (Note 2(g)).
(ii) Other revenue includes other value-added services provided through various platforms and the SME Annual Fee
received from Ant Group and its affiliates (Note 22).
The amount of revenue recognized for performance obligations satisfied (or partially satisfied) in prior periods for
contracts with expected duration of more than one year during the years ended March 31, 2019 and 2020 were not
material.
6. Other income, net
2018
Year ended March 31,
2019
(in millions of RMB)
2020
Profit Share Payments (Note 4(l))
Government grants (i)
Amortization of restructuring reserve
Exchange differences
Others
Total
3,444
555
(264)
(1,679)
2,104
4,160
517
666
(264)
(1,950)
1,252
221
3,835
998
(97)
(514)
3,217
7,439
(i) Government grants mainly represent amounts received from central and local governments in connection with
the Company’s investments in local business districts and contributions to technology development.
F-66
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
7. Leases
The Company entered into operating lease agreements primarily for shops and malls, offices, warehouses and land.
Certain lease agreements contain an option for the Company to renew a lease for a term of up to five years or an
option to terminate a lease early. The Company considers these options in determining the classification and
measurement of the leases.
The leases may include variable payments based on measures such as the level of sales at a physical store, which are
expensed as incurred.
Components of operating lease cost are as follows:
Operating lease cost
Variable lease cost
Total operating lease cost
Year ended March 31, 2020
(in millions of RMB)
5,600
79
5,679
For the year ended March 31, 2020, cash payments for operating leases and the operating lease assets obtained in
exchange for operating lease liabilities amounted to RMB3,666 million and RMB6,001 million, respectively.
As of March 31, 2020, the Company’s operating leases had a weighted average remaining lease term of 10.8 years
and a weighted average discount rate of 5.5%. Future lease payments under operating leases as of March 31, 2020
are as follows:
For the year ending March 31,
2021
2022
2023
2024
2025
Thereafter
Less: imputed interest
Total operating lease liabilities (Note 19)
F-67
Amounts
(in millions of RMB)
3,877
3,140
2,768
2,542
2,382
15,205
29,914
(8,057)
21,857
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
8.
Income tax expenses
Composition of income tax expenses
2018
Year ended March 31,
2019
(in millions of RMB)
2020
Current income tax expense
Deferred taxation
17,223 18,750
(2,197)
18,199 16,553
976
24,005
(3,443)
20,562
Under the current laws of the Cayman Islands, the Company is not subject to tax on its income or capital gains. In
addition, upon payments of dividends by the Company to its shareholders, no Cayman Islands withholding tax is
imposed. The Company’s subsidiaries incorporated in Hong Kong were subject to the Hong Kong profits tax rate at
16.5% for the years ended March 31, 2018, 2019 and 2020. The Company’s subsidiaries incorporated in other
jurisdictions were subject to income tax charges calculated according to the tax laws enacted or substantially enacted
in the countries where they operate and generate income.
Current income tax expense primarily includes the provision for PRC Enterprise Income Tax (“EIT”) for
subsidiaries operating in the PRC and withholding tax on earnings that have been declared for distribution by PRC
subsidiaries to offshore holding companies. Substantially all of the Company’s income before income tax and share
of results of equity investees are generated by these PRC subsidiaries. These subsidiaries are subject to EIT on their
taxable income as reported in their respective statutory financial statements adjusted in accordance with the relevant
tax laws, rules and regulations in the PRC.
Under the PRC Enterprise Income Tax Law (the “EIT Law”), the standard enterprise income tax rate for domestic
enterprises and foreign invested enterprises is 25%. In addition, the EIT Law provides for, among others, a
preferential tax rate of 15% for enterprises qualified as High and New Technology Enterprises. Further, certain
subsidiaries were recognized as Software Enterprises and thereby entitled to full exemption from EIT for two years
beginning from their first profitable calendar year and a 50% reduction for the subsequent three calendar years. In
addition, a duly recognized Key Software Enterprise (“KSE”) within China’s national plan can enjoy a preferential
EIT rate of 10%. The KSE status is subject to review by the relevant authorities every year and the timing of the
annual review and notification by the relevant authorities may vary from year to year. The related reduction in tax
expense as a result of official notification confirming KSE status is accounted for upon receipt of such notification.
The tax status of the subsidiaries of the Company with major taxable profits is described below:
● Alibaba (China) Technology Co., Ltd. (“Alibaba China”) and Taobao (China) Software Co., Ltd. (“Taobao
China”), entities primarily engaged in the operations of the Company’s wholesale marketplaces and Taobao
Marketplace, respectively, obtained the annual review and notification relating to the renewal of the KSE status
for the taxation years of 2016, 2017 and 2018 in the quarters ended September 30, 2017, 2018 and 2019,
respectively. Accordingly, Alibaba China and Taobao China, which had qualified as High and New Technology
Enterprises and applied an EIT rate of 15% for the taxation years of 2016, 2017 and 2018, reflected the reduction
in tax rate to 10% for the taxation years of 2016, 2017 and 2018 in the consolidated income statements for the
years ended March 31, 2018, 2019 and 2020.
F-68
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
8.
Income tax expenses (Continued)
● Zhejiang Tmall Technology Co., Ltd. (“Tmall China”), an entity primarily engaged in the operations of Tmall,
was recognized as a High and New Technology Enterprise and also granted the Software Enterprise status and
was thereby entitled to an income tax exemption for two years beginning from its first profitable taxation year of
2012, and a 50% reduction for the subsequent three years starting from the taxation year of 2014. Accordingly,
Tmall China was entitled to an EIT rate of 12.5% during the taxation year of 2016. Tmall China obtained
notification of recognition as a KSE for the taxation years of 2016, 2017 and 2018 in the quarters ended
September 30, 2017, 2018 and 2019. Accordingly, Tmall China, which had applied an EIT rate of 12.5%, 15%
and 15% for the taxation years of 2016, 2017 and 2018, respectively, reflected the reduction in tax rate to 10%
for the taxation years of 2016, 2017 and 2018 in the consolidated income statements for the years ended March
31, 2018, 2019 and 2020.
The total tax adjustments for Alibaba China, Taobao China, Tmall China and certain other PRC subsidiaries of the
Company, amounting to RMB2,295 million, RMB4,656 million and RMB4,144 million, were recorded in the
consolidated income statements for the years ended March 31, 2018, 2019 and 2020, respectively.
The annual review and notification relating to the renewal of the KSE status for the taxation year of 2019 has not yet
been obtained as of March 31, 2020. Accordingly, Alibaba China, Taobao China and Tmall China continued to apply
an EIT rate of 15% for the taxation year of 2019 as High and New Technology Enterprises.
Most of the remaining PRC entities of the Company are subject to EIT at 25% for the years ended March 31, 2018,
2019 and 2020.
Pursuant to the EIT Law, a 10% withholding tax is levied on dividends declared by PRC companies to their foreign
investors. A lower withholding tax rate of 5% is applicable if direct foreign investors with at least 25% equity
interest in the PRC company are incorporated in Hong Kong and meet the relevant requirements pursuant to the tax
arrangement between mainland China and Hong Kong S.A.R. Since the equity holders of the major PRC subsidiaries
of the Company are Hong Kong incorporated companies and meet the relevant requirements pursuant to the tax
arrangement between mainland China and Hong Kong S.A.R., the Company has used 5% to provide for deferred tax
liabilities on retained earnings which are anticipated to be distributed. As of March 31, 2020, the Company had
accrued the withholding tax on substantially all of the distributable earnings of the PRC subsidiaries, except for those
undistributed earnings that the Company intends to invest indefinitely in the PRC which amounted to RMB107.2
billion.
F-69
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
8.
Income tax expenses (Continued)
Composition of deferred tax assets and liabilities
Deferred tax assets
Licensed copyrights
Tax losses carried forward and others (i)
Valuation allowance
Total deferred tax assets
Deferred tax liabilities
Identifiable intangible assets
Withholding tax on undistributed earnings (ii)
Equity investees and others (iii)
Total deferred tax liabilities
Net deferred tax liabilities
As of March 31,
2020
2019
(in millions of RMB)
2,475
21,896
24,371
(21,838)
2,533
3,148
33,210
36,358
(28,768)
7,590
(12,659)
(7,901)
(1,957)
(22,517)
(19,984)
(12,729)
(8,102)
(23,067)
(43,898)
(36,308)
(i) Others is primarily comprised of share-based compensation, fair value change of certain investment securities,
share of losses of certain equity investees, as well as accrued expenses which are not deductible until paid under
PRC tax laws.
(ii) The related deferred tax liabilities as of March 31, 2019 and 2020 were provided on the assumption that
substantially all of the distributable earnings of PRC subsidiaries will be distributed as dividends, except for
those undistributed earnings that the Company intends to invest indefinitely in the PRC which amounted to
RMB49.7 billion and RMB107.2 billion, respectively.
(iii) This amount primarily represents deferred tax liabilities in relation to certain equity investees, which includes
the deferred tax effect on the gain in relation to the receipt of the 33% equity interest in Ant Group of RMB19.7
billion (Note 4(l)), and investment securities.
Valuation allowances provided on the deferred tax assets mainly related to the tax losses carried forward due to the
uncertainty surrounding their realization. If events occur in the future that improve the certainty of realization, an
adjustment to the valuation allowances will be made and consequently income tax expenses will be reduced.
As of March 31, 2020, the accumulated tax losses of subsidiaries incorporated in Hong Kong S.A.R., Singapore and
Indonesia, subject to the agreement of the relevant tax authorities, of RMB5,840 million, RMB5,090 million and
RMB4,742 million, respectively, are allowed to be carried forward to offset against future taxable profits. The carry
forward of tax losses in Hong Kong S.A.R. and Singapore generally has no time limit, while the tax losses in
Indonesia will expire, if unused, in the years ending March 31, 2021 through 2025. The accumulated tax losses of
subsidiaries incorporated in the PRC, subject to the agreement of the PRC tax authorities, of RMB88,805 million as
of March 31, 2020 will expire, if unused, in the years ending March 31, 2021 through 2025.
F-70
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
8.
Income tax expenses (Continued)
Reconciliation of the differences between the statutory EIT rate applicable to profits of the consolidated entities and
the income tax expenses of the Company:
Income before income tax and share of result of equity investees
Income tax computed at statutory EIT rate (25%)
Effect of different tax rates available to different jurisdictions
Effect of tax holiday and preferential tax benefit on assessable
Year ended March 31,
2020
2019
2018
(in millions of RMB, except per
share data)
100,403
25,101
392
96,221 166,645
41,661
24,055
(1,085)
(1,568)
profits of subsidiaries incorporated in the PRC
(14,782)
(17,687)
(18,552)
Effect of the gain in relation to the receipt of the 33% equity
interest in Ant Group (Note 4(l))
Non-deductible expenses and non-taxable income, net (i)
Tax savings from additional deductions on certain research and
development expenses available for subsidiaries incorporated in
the PRC (ii)
Withholding tax on the earnings distributed and anticipated to be
remitted
Change in valuation allowance and others (iii)
Income tax expenses
Effect of tax holidays inside the PRC on basic earnings per share
(RMB)
Effect of tax holidays inside the PRC on basic earnings per ADS
(RMB)
—
1,780
— (17,890)
9,553
8,168
(2,330)
(5,774)
(7,219)
4,393
3,645
18,199
3,954
5,405
16,553
4,621
9,473
20,562
0.72
0.86
5.79
6.86
0.88
7.06
(i) Expenses not deductible for tax purposes and non-taxable income primarily represent share-based compensation
expense, investment income (loss), interest expense and exchange differences. Investment income (loss) during
the year ended March 31, 2018 includes gains from the revaluation of previously held equity interests relating to
the acquisitions of Cainiao Network (Note 4(g)) and Intime (Note 4(h)). Investment income (loss) during the
year ended March 31, 2019 includes gains from the revaluation of previously held equity interest relating to the
acquisitions of Koubei (Note 4(d)) and Alibaba Pictures (Note 4(c)). Investment income (loss) during the year
ended March 31, 2020 includes the gain from the deconsolidation of the Company’s AliExpress Russia
businesses (Note 4(k)).
(ii) This amount represents tax incentives relating to the research and development expenses of certain major
operating subsidiaries in the PRC.
(iii) This amount primarily represents valuation allowance against the deferred tax assets associated with operating
losses and amortization of licensed copyrights, as well as other tax benefits which were not previously
recognized.
F-71
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
9. Share-based awards
Share-based awards such as RSUs, incentive and non-statutory options, restricted shares, dividend equivalents, share
appreciation rights and share payments may be granted to any directors, employees and consultants of the Company
or affiliated companies under the equity incentive plan adopted in 2011, which govern the terms of the awards. In
September 2014, the Company adopted a post-IPO equity incentive plan (the “2014 Plan”) which has a ten-year
term. Share-based awards are only available for issuance under the 2014 Plan. If an award under the previous plan
terminates, expires or lapses, or is canceled for any reason, ordinary shares subject to the award become available for
the grant of a new award under the 2014 Plan. Starting from April 1, 2015 and on each anniversary thereof, an
additional amount equal to the lesser of (A) 200,000,000 ordinary shares (previously 25,000,000 ordinary shares
before the Share Subdivision as detailed in Note 2(a)), and (B) such lesser number of ordinary shares as determined
by the board of directors will become available for the grant of a new award under the 2014 Plan. All share-based
awards granted under the 2014 Plan are subject to dilution protection should the capital structure of the Company be
affected by a share split, reverse share split, share dividend or other dilutive action. The 2014 Plan has substantially
similar terms as the plan adopted in 2011 except that (i) the 2014 Plan is administered by the compensation
committee of the board (or a subcommittee thereof), or such other committee of the board to which the board has
delegated power to act, or the board in the absence of any such committee, and (ii) certain terms are adjusted for the
purposes of compliance with the Sarbanes-Oxley Act of 2002, U.S. Securities Act of 1933 and the regulations
thereunder, as amended from time to time and U.S. Securities Exchange Act of 1934 and the regulations thereunder,
as amended from time to time, among others. As of March 31, 2020, the number of shares authorized but unissued
was 265,848,704 ordinary shares.
RSUs and share options granted are generally subject to a four-year vesting schedule as determined by the
administrator of the plans. Depending on the nature and the purpose of the grant, RSUs and share options generally
vest 25% or 50% upon the first or second anniversary of the vesting commencement date, respectively, as provided
in the grant agreement, and 25% every year thereafter. No outstanding RSUs or share options will be subject to
vesting or exercisable after the expiry of a maximum of six years from the date of grant. Certain RSUs and share
options granted to the senior management members of the Company are subject to a six-year vesting schedule. No
outstanding RSUs or share options will be subject to vesting or exercisable after the expiry of a maximum of ten
years from the date of grant.
Following the Share Subdivision and the ADS Ratio Change that became effective on July 30, 2019 as detailed in
Note 2 (a), each ordinary share was subdivided into eight ordinary shares and each ADS represents eight ordinary
shares. Pro-rata adjustments have been made to the number of ordinary shares underlying each RSU and share option
granted, so as to give the participants the same proportion of the equity that they would have been entitled to prior to
the Share Subdivision. Prior to July 30, 2019, one ordinary share was issuable upon the vesting of one outstanding
RSU or the exercise of one outstanding share option, respectively. Subsequent to the Share Subdivision, eight
ordinary shares are issuable upon the vesting of one outstanding RSU or the exercise of one outstanding share
option, respectively. The Share Subdivision has no impact on the number of RSUs, the number of share options, the
weighted average grant date fair value per RSU and the weighted average exercise price per share option as stated
below.
F-72
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
9. Share-based awards (Continued)
(a) RSUs relating to ordinary shares of the Company
A summary of the changes in the RSUs relating to ordinary shares granted by the Company during the year ended
March 31, 2020 is as follows:
Awarded and unvested as of April 1, 2019
Granted
Vested
Canceled/forfeited
Awarded and unvested as of March 31, 2020
Expected to vest as of March 31, 2020 (i)
Weighted-
average
grant date
fair value
Number
of RSUs
64,346,493
29,250,126
(23,832,690)
(4,304,967)
65,458,962
53,984,254
US$
136.00
177.87
119.73
150.77
159.66
157.66
(i) RSUs expected to vest are the result of applying the pre-vesting forfeiture rate assumptions to total outstanding
RSUs.
During the years ended March 31, 2018 and 2019, the RSUs held by non-employees were subject to re-measurement
through each vesting date to determine the appropriate amount of the expense. Upon the adoption of ASU 2018-07
beginning on April 1, 2019, the Company no longer re-measures equity-classified share-based awards granted to
non-employees (Note 2(k)). As of March 31, 2019 and 2020, 1,878,835 and 2,531,102 outstanding RSUs were held
by non-employees, respectively.
As of March 31, 2020, there were RMB26,476 million of unamortized compensation costs related to these
outstanding RSUs, net of expected forfeitures and after re-measurement applicable to the awards granted to non-
employees before the adoption of ASU 2018-07 beginning on April 1, 2019. These amounts are expected to be
recognized over a weighted average period of 2.0 years.
During the years ended March 31, 2018, 2019 and 2020, the Company recognized share-based compensation
expense of RMB16,165 million, RMB22,137 million and RMB25,651 million, respectively, in connection with the
above RSUs.
F-73
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
9. Share-based awards (Continued)
(b) Share options relating to ordinary shares of the Company
A summary of the changes in the share options relating to ordinary shares granted by the Company during the year
ended March 31, 2020 is as follows:
Outstanding as of April 1, 2019
Granted
Exercised
Canceled/forfeited/expired
Outstanding as of March 31, 2020
Vested and exercisable as of March 31, 2020
Vested and expected to vest as of March 31, 2020 (i)
Number
of share
options
7,117,206
1,000,000
(1,706,403)
(17,500)
6,393,303
3,185,168
6,123,143
Weighted
average
exercise
price
US$
72.88
182.48
81.55
35.78
87.81
68.44
84.24
Weighted
average
remaining
contractual
life
(in years)
3.7
3.4
2.5
3.3
(i) Share options expected to vest are the result of applying the pre-vesting forfeiture rate assumptions to total
outstanding share options.
During the years ended March 31, 2018 and 2019, the share options held by non-employees were subject to re-
measurement through each vesting date to determine the appropriate amount of the expense. Upon the adoption of
ASU 2018-07 beginning on April 1, 2019, the Company no longer re-measures equity-classified share-based awards
granted to non-employees (Note 2(k)). As of March 31, 2019 and 2020, 76,550 and 56,550 outstanding share options
were held by non-employees, respectively.
As of March 31, 2020, the aggregate intrinsic value of all outstanding options was RMB4,834 million. As of the
same date, the aggregate intrinsic value of options that were vested and exercisable and options that were vested and
expected to vest was RMB2,846 million and RMB4,785 million, respectively.
During the years ended March 31, 2018, 2019 and 2020, the weighted average grant date fair value of share options
granted was nil, nil and US$57.33, respectively, and the total grant date fair value of options vested during the same
years was RMB452 million, RMB311 million and RMB295 million, respectively. During the same years, the
aggregate intrinsic value of share options exercised was RMB1,980 million, RMB708 million and RMB1,011
million, respectively.
Cash received from option exercises under the share option plans for the years ended March 31, 2018, 2019 and
2020 was RMB174 million, RMB220 million and RMB960 million, respectively.
F-74
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
9. Share-based awards (Continued)
(b) Share options relating to ordinary shares of the Company (Continued)
No share options were granted during the years ended March 31, 2018 and 2019. The fair value of each option grant
is estimated on the date of grant using the Black-Scholes model by applying the assumptions below:
Risk-free interest rate (i)
Expected dividend yield (ii)
Expected life (years) (iii)
Expected volatility (iv)
Year ended March 31,
2020
1.68%
0%
4.50
34.7%
(i) Risk-free interest rate is based on the yields of United States Treasury securities with maturities similar to the
expected life of the share options in effect at the time of grant.
(ii) Expected dividend yield is assumed to be nil as the Company has no history or expectation of paying a dividend
on its ordinary shares.
(iii) Expected life of share options is based on management’s estimate on timing of exercise of share options.
(iv) Expected volatility is assumed based on the historical volatility of the Company and the Company’s comparable
companies in the period equal to the expected life of each grant.
As of March 31, 2020, there were RMB285 million of unamortized compensation costs related to these outstanding
share options, net of expected forfeitures and after re-measurement applicable to the awards granted to non-
employees before the adoption of ASU 2018-07 beginning on April 1, 2019. These amounts are expected to be
recognized over a weighted average period of 2.7 years.
During the years ended March 31, 2018, 2019 and 2020, the Company recognized share-based compensation
expense of RMB270 million, RMB181 million and RMB140 million, respectively, in connection with the above
share options.
(c) Partner Capital Investment Plan relating to ordinary shares of the Company
Beginning in 2013, the Company offered selected members of the Alibaba Partnership rights or interests to acquire
restricted shares of the Company. For the rights or interests offered before 2016, these rights or interests and the
underlying restricted shares were subject to a non-compete provision, and each right or interest entitles the holder to
purchase eight restricted shares at an aggregate price of US$14.50, after the Share Subdivision as detailed in Note
2(a), during a four-year period. Upon the exercise of the rights or interests, the underlying ordinary shares may not
be transferred for a period of eight years from the date of subscription of the relevant rights or interests. For the
rights or interests offered since 2016, the rights or interests and the underlying restricted shares were subject to
certain service provisions that were not related to employment, and each right or interest entitles the holder to
purchase eight restricted shares at an aggregate price between US$23.00 and US$26.00, after the Share Subdivision
as detailed in Note 2(a), over a period of ten years from the vesting commencement date.
F-75
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
9. Share-based awards (Continued)
(c) Partner Capital Investment Plan relating to ordinary shares of the Company (Continued)
The number of ordinary shares underlying these rights or interests is 144,000,000 shares (previously 18,000,000
shares before the Share Subdivision as detailed in Note 2(a)). As of March 31, 2020, there are 16,029,648 shares
underlying these rights or interests available for offering (previously 2,003,706 shares before the Share Subdivision
as detailed in Note 2(a)). The rights or interests offered before 2016 were accounted for as noncontrolling interests of
the Company as these rights or interests were issued by the Company’s subsidiaries and classified as equity at the
subsidiary level. The rights or interests offered in the subsequent periods were accounted for as share options issued
by the Company.
As of March 31, 2020, there were RMB967 million of unamortized compensation costs related to these rights or
interests, net of expected forfeitures and after re-measurement applicable to the awards granted to non-employees
before the adoption of ASU 2018-07 beginning on April 1, 2019. These amounts are expected to be recognized over
a weighted average period of 4.4 years. Share-based compensation expense of RMB435 million, RMB409 million
and RMB425 million was recognized in connection with these rights or interests for the years ended March 31, 2018,
2019 and 2020, respectively.
The fair value of each right or interest to acquire restricted shares is estimated on the subscription date using the
Black-Scholes model by applying the assumptions below:
Year ended March 31,
Risk-free interest rate (i)
Expected dividend yield (ii)
Expected life (years) (iii)
Expected volatility (iv)
2018 2019
2020
2.07% 2.94% 1.64%
0%
0%
8.25
8.25
34.2% 33.0% 33.1%
0%
8.25
(i) Risk-free interest rate is based on the yields of United States Treasury securities with maturities similar to the
expected life of the share-based awards in effect at the time of grant.
(ii) Expected dividend yield is assumed to be nil as the Company has no history or expectation of paying a dividend
on its ordinary shares.
(iii) Expected life of the rights or interests is based on management’s estimate on timing of exercise of the rights or
interests.
(iv) Expected volatility is assumed based on the historical volatility of the Company’s comparable companies in the
period equal to expected life of each right or interest.
F-76
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
9. Share-based awards (Continued)
(d) Share-based awards relating to Ant Group
Since March 2014, Junhan, the general partner of which is a company wholly-owned by the Company’s director and
former executive chairman and a major equity holder of Ant Group, has made grants of share economic rights linked
to the valuation of Ant Group (the “SERs”) to certain employees of the Company. In addition, Ant Group has
granted RSUs and share appreciation rights (the “SARs”) to certain employees of the Company since April 2018 and
July 2019, respectively. The SERs will be settled by Junhan upon disposal of these awards by the holders. The RSUs
and SARs will be settled by Ant Group upon vesting or exercise of these awards. Junhan and Ant Group have the
right to repurchase the vested awards (or any underlying equity for the settlement of the vested awards) granted by
them, as applicable, from the holders upon an initial public offering of Ant Group or the termination of the holders’
employment with the Company at a price to be determined based on the then fair market value of Ant Group. These
awards are generally subject to a four-year vesting schedule as determined by the administrator of the plan.
Depending on the nature and the purpose of the grant, these awards generally vest 25% or 50% upon the first or
second anniversary of the vesting commencement date, respectively, as provided in the grant agreement, and 25%
every year thereafter. Certain awards granted to the senior management members of the Company are subject to a
six-year vesting schedule.
For accounting purposes, these awards meet the definition of a financial derivative. The cost relating to these awards
is recognized by the Company and the related expense is recognized over the requisite service period in the
consolidated income statements with a corresponding credit to additional paid-in capital. Subsequent changes in the
fair value of these awards are recorded in the consolidated income statements. The expenses relating to the SERs and
SARs are re-measured at the fair value on each reporting date until their settlement dates. The expenses relating to
the RSUs granted by Ant Group are re-measured at the fair value on each reporting date until their vesting dates.
During the years ended March 31, 2018, 2019 and 2020, the Company recognized expenses of RMB2,278 million,
RMB12,855 million and RMB1,261 million in respect of the share-based awards relating to Ant Group, respectively.
F-77
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
9. Share-based awards (Continued)
(d) Share-based awards relating to Ant Group (Continued)
The Company had no obligation to reimburse Junhan and Ant Group for the cost associated with the awards granted
during all the periods presented. In June 2020, the parties entered into equity-based awards grant and settlement
agreements pursuant to which the parties will settle with each other the cost associated with the awards that will be
granted to each other’s employees. The payment amounts will depend on the relative values of the awards to be
granted in the future.
(e) Share-based compensation expense by function
2018
Year ended March 31,
2019
(in millions of RMB)
2020
Cost of revenue
Product development expenses
Sales and marketing expenses
General and administrative expenses
Total
10. Earnings per share/ADS
8,915
5,505
7,374 15,378
4,411
2,037
8,787
5,159
20,075 37,491
7,322
13,654
3,830
6,936
31,742
Following the Share Subdivision and the ADS Ratio Change as detailed in Note 2(a), each ordinary share was
subdivided into eight ordinary shares and each ADS represents eight ordinary shares. The weighted average number
of ordinary shares used for the calculation of basic and diluted earnings per share/ADS for the years ended March
31, 2018 and 2019 have been retrospectively adjusted.
Basic earnings per share is computed by dividing net income attributable to ordinary shareholders by the weighted
average number of outstanding ordinary shares, adjusted for treasury shares. Basic earnings per ADS is derived from
the basic earnings per share after the ADS Ratio Change.
For the calculation of diluted earnings per share, net income attributable to ordinary shareholders for basic earnings
per share is adjusted by the effect of dilutive securities, including share-based awards, under the treasury stock
method. Potentially dilutive securities, of which the amounts are insignificant, have been excluded from the
computation of diluted net income per share if their inclusion is anti-dilutive. Diluted earnings per ADS is derived
from the diluted earnings per share after the ADS Ratio Change.
F-78
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
10. Earnings per share/ADS (Continued)
The following table sets forth the computation of basic and diluted net income per share/ADS for the following
periods:
2018
Year ended March 31,
2019
(in millions of RMB, except share
data and per share data)
2020
Earnings per share
Numerator:
Net income attributable to ordinary shareholders for computing net
income per ordinary share — basic
63,985
87,600
149,263
Dilution effect arising from share-based awards issued by subsidiaries
and equity investees
(21)
(42)
(48)
Net income attributable to ordinary shareholders for computing net
income per ordinary share — diluted
63,964
87,558
149,215
Shares (denominator):
Weighted average number of shares used in calculating net income per
ordinary share-basic (million shares) (Note)
Adjustments for dilutive RSUs and share options (million shares) (Note)
Weighted average number of shares used in calculating net income per
ordinary share-diluted (million shares) (Note)
Net income per ordinary share — basic (RMB) (Note)
Net income per ordinary share — diluted (RMB) (Note)
Earnings per ADS
Net income per ADS — basic (RMB)
Net income per ADS — diluted (RMB)
20,425
456
20,640
348
20,881
3.13
3.06
20,988
4.24
4.17
21,017
329
21,346
7.10
6.99
25.06
24.51
33.95
33.38
56.82
55.93
Note: Basic and diluted net income per ordinary share, weighted average number of shares and the adjustments for
dilutive RSUs and share options for the years ended March 31, 2018 and 2019 have been retrospectively
adjusted for the Share Subdivision and the ADS Ratio Change that were effective on July 30, 2019 as detailed in
Note 2(a).
11. Restricted cash and escrow receivables
Consumer protection fund deposits from merchants on China retail
marketplaces (i)
Money received or receivable on payment services offered by AliExpress
and others (ii)
As of March 31,
2020
2019
(in millions of RMB)
—
12,195
8,518
8,518
3,284
15,479
(i) The amount represents consumer protection fund deposits received from merchants on the Company’s China
retail marketplaces, which are restricted for the purpose of compensating consumers for claims against
merchants. A corresponding liability is recorded in other deposits and advances received under accrued
expenses, accounts payable and other liabilities (Note 19) on the consolidated balance sheets.
(ii) The amount mainly represents customer funds held by external payment networks outside the PRC relating to
AliExpress with a corresponding liability recorded under escrow money payable.
F-79
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
12. Investment securities and fair value disclosure
Equity securities:
As of March 31, 2019
Gross
Gross
Provision
Original
cost
unrealized unrealized for decline Carrying
gains
losses
(in millions of RMB)
in value
value
Listed equity securities
Investments in privately held companies
Debt investments (i)
57,121
81,894
23,843
162,858
15,968
14,107
44
30,119
(11,887)
(78)
(20)
(11,985)
(13,250)
(725)
— 61,202
82,673
23,142
(13,975) 167,017
Equity securities:
Listed equity securities
Investments in privately held companies
Debt investments (i)
As of March 31, 2020
Gross
Gross
Provision
Original
cost
unrealized unrealized for decline Carrying
gains
losses
(in millions of RMB)
in value
value
68,488
92,832
14,685
176,005
18,070
19,601
13
37,684
(20,255)
(815)
(1,555)
(22,625)
(24,065)
(1,436)
— 66,303
87,553
11,707
(25,501) 165,563
(i) Debt investments include convertible and exchangeable bonds accounted for under the fair value option, for
which the fair value as of March 31, 2019 and 2020 were RMB2,742 million and RMB4,704 million,
respectively. The aggregate fair value of these convertible and exchangeable bonds was higher (lower) than their
aggregate unpaid principal balance as of March 31, 2019 and 2020 by RMB197 million and RMB(1,576)
million, respectively. Unrealized gains (losses) recorded on these convertible and exchangeable bonds in the
consolidated income statements were RMB44 million and RMB(1,651) million during the years ended March
31, 2019 and 2020, respectively. As of March 31, 2019, debt investments also included investments in certain
wealth management products amounting to RMB6.9 billion. These investments were pledged to a financial
institution in the PRC to secure a financing provided by this financial institution amounting to RMB6.9 billion
to one of the Company’s founders and an equity holder in certain of the Company’s variable interest entities, to
support his minority investment through a PRC limited partnership in Wasu Media Holding Co., Ltd., a
company listed on the Shenzhen Stock Exchange. As of March 31, 2020, the pledge on these investments has
been removed and the investments have been redeemed.
Details of the significant additions during the years ended March 31, 2018, 2019 and 2020 are set out in Note 4.
F-80
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
12. Investment securities and fair value disclosure (Continued)
For equity securities, a summary of gains and losses, including impairment losses, recognized in interest and
investment income, net is as follows:
Year ended March 31,
2018 2019
2020
(in millions of RMB)
Net unrealized gains (losses) recognized during the period for equity
securities still held as of the end of the period
Net gains recognized during the period from disposals of equity
securities during the period
Net gains (losses) recognized during the period on equity securities
11
1
12
598
(15,264)
5,120
5,718
803
(14,461)
The Company elected to record a majority of equity investments in privately held companies over which the
Company neither has control nor significant influence through investment in common stock or in-substance common
stock using the measurement alternative (Note 2(t)). During the years ended March 31, 2019 and 2020, upward
adjustments of RMB15,474 million and RMB4,528 million were recorded in interest and investment income, net, in
the consolidated income statements, respectively. During the same periods, impairments and downward adjustments
of RMB10,404 million and RMB11,031 million were recorded in interest and investment income, net, in the
consolidated income statements, respectively. The Company’s impairment analysis considers both qualitative and
quantitative factors that may have a significant effect on the fair value of these equity securities. As of March 31,
2019 and 2020, the amount of investments in privately held companies for which the Company elected to record
using the measurement alternative amounted to RMB81,514 million and RMB80,939 million, respectively.
During the years ended March 31, 2018, 2019 and 2020, no realized gains or losses were recognized for the disposal
of debt investments. During the same periods, impairment losses on debt investments of RMB6 million, RMB546
million and RMB890 million were recorded in interest and investment income, net in the consolidated income
statements, respectively.
The carrying amount of debt investments approximates their fair value due to the fact that the related effective
interest rates approximate rates currently offered by financial institutions for similar debt instruments of comparable
maturities.
F-81
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
12. Investment securities and fair value disclosure (Continued)
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. To increase the comparability of fair value
measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:
Level 1 — Valuations based on unadjusted quoted prices for identical assets and liabilities in
active markets.
Level 2 — Valuations based on observable inputs other than quoted prices included in Level 1,
such as quoted prices for similar assets and liabilities in active markets, quoted prices
for identical or similar assets and liabilities in markets that are not active, or other
inputs that are observable or can be corroborated by observable market data.
Level 3 — Valuations based on unobservable inputs reflecting assumptions, consistent with
reasonably available assumptions made by other market participants. These valuations
require significant judgment.
Fair value of short-term investments and listed equity securities are based on quoted prices in active markets for
identical assets or liabilities. Certain other financial instruments, such as interest rate swap contracts and certain call
option agreements, are valued based on inputs derived from or corroborated by observable market data. Valuations
of convertible and exchangeable bonds that do not have a quoted price are performed using valuation models such as
the binomial model with unobservable inputs including risk-free interest rate and expected volatility. The valuation
of contingent consideration is performed using an expected cash flow method with unobservable inputs including the
probability to achieve the contingencies, which is assessed by the Company, in connection with the contingent
consideration arrangements. Investments in privately held companies for which the Company elected to record using
the measurement alternative are re-measured on a non-recurring basis, and are categorized within Level 3 under the
fair value hierarchy. The values are estimated based on valuation methods using the observable transaction price at
the transaction date and other unobservable inputs including volatility, as well as rights and obligations of the
securities.
F-82
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
12. Investment securities and fair value disclosure (Continued)
The following table summarizes the Company’s assets and liabilities that are measured at fair value on a recurring
basis and are categorized under the fair value hierarchy:
Assets
Short-term investments
Restricted cash and escrow receivables
Listed equity securities (i)
Convertible bonds (i)
Interest rate swap contracts (ii)
Others
Liabilities
Contingent consideration in relation to investments and
acquisitions (iii)
Assets
Short-term investments
Restricted cash and escrow receivables
Listed equity securities (i)
Convertible and exchangeable bonds (i)
Call option agreements (ii)
Others
Liabilities
Contingent consideration in relation to investments and
acquisitions (iii)
Interest rate swap contracts and others (iii)
As of March 31, 2019
Level 1 Level 2 Level 3 Total
(in millions of RMB)
3,262
8,518
61,202
244
—
604
73,830
—
—
—
—
331
1,444
1,775
3,262
—
8,518
—
— 61,202
2,742
2,498
331
—
1,159
3,207
3,657 79,262
—
—
5,122
—
— 5,122
5,122
5,122
As of March 31, 2020
Level 1 Level 2 Level 3 Total
(in millions of RMB)
28,414
64
—
15,479
—
66,303
—
709
— 1,521
5,114
35,758
144
81,990
— 28,478
— 15,479
— 66,303
4,704
1,666
8,110
124,740
3,995
145
2,852
6,992
—
—
—
— 4,400
338
156
4,738
156
4,400
494
4,894
(i)
Included in investments securities on the consolidated balance sheets.
(ii) Included in prepayments, receivables and other assets on the consolidated balance sheets.
(iii) Included in accrued expenses, accounts payable and other liabilities on the consolidated balance sheets.
F-83
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
12. Investment securities and fair value disclosure (Continued)
Convertible and exchangeable bonds categorized within Level 3 under the fair value hierarchy:
Balance as of April 1, 2018
Additions
Foreign currency translation adjustments
Balance as of March 31, 2019
Additions
Net decrease in fair value
Conversion or expiration
Foreign currency translation adjustments
Balance as of March 31, 2020
Amounts
(in millions of RMB)
1,256
1,153
89
2,498
5,508
(1,640)
(2,468)
97
3,995
Contingent consideration in relation to investments and acquisitions categorized within Level 3 under the fair value
hierarchy:
Balance as of April 1, 2018
Additions (i)
Net decrease in fair value
Foreign currency translation adjustments
Balance as of March 31, 2019
Additions (i)
Net decrease in fair value
Payment
Foreign currency translation adjustments
Balance as of March 31, 2020
Amounts
(in millions of RMB)
120
4,790
(45)
257
5,122
1,049
(55)
(2,093)
377
4,400
(i) Additions during the year ended March 31, 2019 were related to the acquisition of Ele.me (Note 4(d)).
Additions during the year ended March 31, 2020 were related to the acquisition of Kaola (Note 4(b)).
F-84
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
13. Prepayments, receivables and other assets
Current:
Accounts receivable, net of allowance
Inventories
VAT receivables, net of allowance
Amounts due from related companies (i)
Advances to/receivables from customers, merchants and others
Prepaid cost of revenue, sales and marketing and other expenses
Deferred direct selling costs (ii)
Interest receivables
Licensed copyrights (Note 2(y))
Others
Non-current:
Operating lease right-of-use assets (iii)
Film costs and prepayment for licensed copyrights and others
Deferred tax assets (Note 8)
Prepayment for acquisition of property and equipment
Deferred direct selling costs (ii)
Land use rights, net (iii)
Others
As of March 31,
2020
2019
(in millions of RMB)
13,771
8,534
7,347
7,445
4,689
7,049
1,990
867
1,126
5,772
58,590
—
7,205
2,533
7,643
281
6,419
3,937
28,018
19,786
14,859
11,826
11,029
8,231
7,547
2,000
984
780
7,187
84,229
34,660
8,517
7,590
3,503
275
—
3,440
57,985
(i) Amounts due from related companies primarily represent balances arising from transactions with Ant Group
(Notes 4(l) and 22). The balances are unsecured, interest free and repayable within the next twelve months.
(ii) The Company is obligated to pay certain costs upon the receipt of membership fees from merchants or other
customers, which primarily consist of sales commissions. The membership fees are initially deferred and
recognized as revenue in the consolidated income statements in the period in which the services are rendered.
As such, the related costs are also initially deferred and recognized in the consolidated income statements in the
same period as the related service fees are recognized.
(iii) Upon the initial application of ASC 842 on April 1, 2019, land use rights, net amounting to RMB6,419 million
were identified as operating lease right-of-use assets. Such amount was included in the opening balance of
operating lease right-of-use assets as of April 1, 2019 with no adjustments made to the comparative periods.
F-85
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
14. Investments in equity investees
Balance as of April 1, 2018
Additions (i)
Share of results, other comprehensive income and other reserves (ii)
Disposals and distributions received
Transfers (iii)
Impairment loss
Foreign currency translation adjustments
Balance as of March 31, 2019
Additions (i)
Share of results, other comprehensive income and other reserves (ii)
Disposals and distributions received
Transfers (iii)
Impairment loss (iv)
Foreign currency translation adjustments
Balance as of March 31, 2020
Amounts
(in millions of RMB)
79,758
14,360
1,905
(1,160)
(10,153)
(493)
237
84,454
103,832
5,634
(912)
8,060
(11,824)
388
189,632
(i) Details of the significant additions of the investments in equity investees are set out in Note 4. During the year
ended March 31, 2020, additions were primarily related to the 33% equity interest in Ant Group received
pursuant to the SAPA (Note 4(l)).
(ii) Share of results, other comprehensive income and other reserves include the share of results of the equity
investees, the gain or loss arising from the deemed disposal of the equity investees and the amortization of basis
differences. The amount excludes the expenses relating to the share-based awards underlying the equity of the
Company and Ant Group granted to employees of certain equity investees.
(iii) During the year ended March 31, 2019, transfers were primarily related to the consolidation of Alibaba Pictures
(Note 4(c)).
During the year ended March 31, 2020, transfers were primarily related to the deconsolidation of the Company’s
AliExpress Russia businesses, which were contributed to the AliExpress Russia Joint Venture (Note 4(k)).
(iv) Impairment loss recorded represents other-than-temporary decline in fair value below the carrying value of the
investments in equity investees. The valuation inputs for the fair value measurement with respect to the
impairments include the stock price for equity investees that are listed, as well as certain unobservable inputs
that are not subject to meaningful aggregation.
As of March 31, 2020, equity method investments with an aggregate carrying amount of RMB53,352 million that are
publicly traded have increased in value and the total market value of these investments amounted to RMB68,105
million. As of March 31, 2020, the Company’s retained earnings included undistributed earnings from equity
investees of RMB7,555 million.
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
14. Investments in equity investees (Continued)
For the years ended March 31, 2018, 2019 and 2020, equity method investments held by the Company in aggregate
have met the significance criteria as defined under Rule 4-08 (g) of Regulation S-X. As such, the Company is
required to present summarized financial information for all of its equity method investments as a group as follows:
Operating data:
Revenue
Cost of revenue
(Loss) Income from operations
Net income
Balance sheet data:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Noncontrolling interests and mezzanine equity
15. Property and equipment, net
Buildings and property improvements
Computer equipment and software
Construction in progress
Furniture, office and transportation equipment
Less: accumulated depreciation
Net book value
2018
Year ended March 31,
2019
(in millions of RMB)
2020
284,706
(242,068)
(7,072)
195
488,775
(405,074)
3,840
2,923
553,387
(443,198)
5,274
30,578
As of March 31,
2020
2019
(in millions of RMB)
257,502 602,212
222,484 513,773
205,272 451,951
34,191 134,030
19,958
10,151
As of March 31,
2020
2019
(in millions of RMB)
70,441
61,940
67,382
53,187
10,828
6,959
6,730
3,889
125,975 155,381
(33,945)
(51,994)
92,030 103,387
Depreciation expenses recognized for the years ended March 31, 2018, 2019 and 2020 were RMB8,654 million,
RMB14,818 million and RMB20,325 million, respectively.
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
16. Intangible assets, net
User base and customer relationships
Trade names, trademarks and domain names
Non-compete agreements
Developed technology and patents
Licensed copyrights (Note 2(y))
Others
Less: accumulated amortization and impairment
Net book value
As of March 31,
2020
2019
(in millions of RMB)
50,016
47,913
26,151
22,592
13,898
12,528
10,051
9,510
9,639
9,225
384
1,358
110,139
103,126
(49,192)
(34,850)
60,947
68,276
During the year ended March 31, 2020, the Company acquired intangible assets amounting to RMB5,626 million in
connection with business combinations, which were measured at fair value upon acquisition and were primarily
related to the acquisition of Kaola (Note 4(b)).
The estimated aggregate amortization expenses for each of the five succeeding fiscal years and thereafter are as
follows:
For the year ending March 31,
2021
2022
2023
2024
2025
Thereafter
F-88
Amounts
(in millions of RMB)
13,761
9,990
8,528
7,815
4,975
15,878
60,947
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
17. Goodwill
Changes in the carrying amount of goodwill by segment for the years ended March 31, 2019 and 2020 were as
follows:
Core
Cloud
Digital media
and
commerce computing entertainment
Innovation
initiatives and
others
Total
368
1,118
(in millions of RMB)
40,307
20,165
Balance as of April 1, 2018
Additions (i)
Foreign currency translation
adjustments
Balance as of March 31, 2019
Additions (i)
Deconsolidation of subsidiaries
Measurement period adjustments
(ii)
Impairment
Foreign currency translation
adjustments
Balance as of March 31, 2020
116,798
80,760
157
197,715
12,695
(299)
(532)
—
(25)
1,461
1,111
(85)
—
—
(46)
209,533
23
2,510
36
60,508
—
—
(1,292)
(576)
33
58,673
4,676
575
162,149
102,618
—
5,251
815
—
168
264,935
14,621
(384)
—
—
(1,824)
(576)
—
6,066
10
276,782
(i) During the year ended March 31, 2019, additions under the core commerce segment and the digital media and
entertainment segment were primarily related to the acquisitions of Koubei and Ele.me (Note 4(d)) and the
acquisition of Alibaba Pictures (Note 4(c)), respectively.
During the year ended March 31, 2020, additions under the core commerce segment included the acquisition of
Kaola (Note 4(b)).
(ii) During the year ended March 31, 2020, measurement period adjustments under the digital media and
entertainment segment were primarily related to the adjustments to the fair value of intangible assets and certain
other net assets acquired from the acquisition of Alibaba Pictures (Note 4(c)).
Gross goodwill balances were RMB268,879 million and RMB281,302 million as of March 31, 2019 and 2020,
respectively. Accumulated impairment losses were RMB3,944 million and RMB4,520 million as of March 31, 2019
and 2020, respectively.
In the annual goodwill impairment assessment, the Company concluded that the carrying amounts of certain
reporting units exceeded their respective fair values and recorded impairment losses of RMB494 million, nil and
RMB576 million during the years ended March 31, 2018, 2019 and 2020, respectively. The impairment losses were
resulted from a revision of long-term financial outlook and the change in business model of those reporting units.
The impairment loss was determined by comparing the carrying amounts of goodwill associated with the reporting
units with their respective implied fair values of the goodwill. The goodwill impairment is presented as an
unallocated item in the segment information (Note 26) because the CODM of the Company does not consider this as
part of the segment operating performance measure.
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
18. Deferred revenue and customer advances
Deferred revenue and customer advances primarily represent service fees prepaid by merchants or customers for
which the relevant services have not been provided. The respective balances are as follows:
Deferred revenue
Customer advances
Less: current portion
Non-current portion
As of March 31,
2020
2019
(in millions of RMB)
23,195
18,448
17,168
13,814
40,363
32,262
(38,338)
(30,795)
2,025
1,467
All service fees received in advance are initially recorded as customer advances. These amounts are transferred to
deferred revenue upon commencement of the provision of services by the Company and are recognized in the
consolidated income statements in the period in which the services are provided. In general, service fees received in
advance are non-refundable after the amounts are transferred to deferred revenue. Substantially all of the balances of
deferred revenue and customer advances are generally recognized as revenue within one year.
19. Accrued expenses, accounts payable and other liabilities
Current:
Payables and accruals for cost of revenue and sales and marketing expenses
Other deposits and advances received (i)
Accrued bonus and staff costs, including sales commission
Payable to merchants and third party marketing affiliates
Payables and accruals for purchases of property and equipment
Other taxes payable (ii)
Amounts due to related companies (iii)
Contingent and deferred consideration in relation to investments and
acquisitions
Operating lease liabilities (Note 7)
Accrued professional services and administrative expenses
Accrued donations
Accrual for interest expense
Others (iv)
Non-current:
Operating lease liabilities (Note 7)
Contingent and deferred consideration in relation to investments and
acquisitions
Others
F-90
As of March 31,
2020
2019
(in millions of RMB)
51,958
10,447
14,034
12,554
5,548
3,448
4,570
67,173
25,443
16,860
15,763
7,613
5,479
4,875
3,301
—
2,361
1,738
4,680
2,766
2,176
1,806
869
6,033
117,711 161,536
6,828
924
—
19,091
3,872
2,315
6,187
4,850
1,322
25,263
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
19. Accrued expenses, accounts payable and other liabilities (Continued)
(i) Other deposits and advances received as of March 31, 2020 include customer protection fund deposits received
from merchants on the Company’s China retail marketplaces (Note 11).
(ii) Other taxes payable primarily represent VAT and PRC individual income tax of employees withheld by the
Company.
(iii) Amounts due to related companies primarily represent balances arising from the transactions with Ant Group
(Note 22). The balances are unsecured, interest free and repayable within the next twelve months.
(iv) Other current liabilities as of March 31, 2019 include a settlement provision of US$250 million (RMB1,679
million) for a U.S. federal class action lawsuit that has been pending since January 2015 (Note 25(g)). The
amount has been paid as of March 31, 2020.
20. Bank borrowings
Bank borrowings are analyzed as follows:
Current portion:
Short-term other borrowings (i)
Non-current portion:
US$4.0 billion syndicated loan denominated in US$ (ii)
Long-term other borrowings (iii)
As of March 31
2019
2020
(in millions of RMB)
7,356
5,154
26,780
8,647
35,427
28,211
11,449
39,660
(i) As of March 31, 2019 and 2020, the Company had short-term borrowings from banks which were repayable
within one year or on demand and charged interest rates ranging from 2.9% to 19.0% and 0.9% to 16.5% per
annum, respectively. As of March 31, 2019 and 2020, the weighted average interest rate of these borrowings
was 4.1% and 3.4% per annum, respectively. The borrowings are primarily denominated in RMB or HK$.
(ii) As of March 31, 2019 and 2020, the Company had a five-year US$4.0 billion syndicated loan, which was
entered into with a group of eight lead arrangers. The loan has a five-year bullet maturity and was priced at 110
basis points over LIBOR. Certain related floating interest payments are hedged by certain interest rate swap
contracts entered into by the Company. The proceeds of the loan were used for general corporate and working
capital purposes (including acquisitions). In May 2019, the loan terms were modified such that the interest rate
of the loan was reduced to 85 basis points over LIBOR and the maturity of the loan was extended to May 2024.
(iii) As of March 31, 2019 and 2020, the Company had long-term borrowings from banks with weighted average
interest rates of 4.6% and 4.4% per annum, respectively. The borrowings are primarily denominated in RMB.
Certain other bank borrowings are collateralized by a pledge of certain buildings and property improvements,
construction in progress and land use rights in the PRC with carrying values of RMB18,314 million and RMB18,744
million, as of March 31, 2019 and 2020, respectively. As of March 31, 2020, the Company is in compliance with all
covenants in relation to bank borrowings.
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
20. Bank borrowings (Continued)
In April 2017, the Company obtained a revolving credit facility provided by certain financial institutions for an
amount of US$5.15 billion, which has not yet been drawn down. The interest rate on any outstanding utilized amount
under this new credit facility is calculated based on LIBOR plus 95 basis points. This facility is reserved for general
corporate and working capital purposes (including acquisitions).
As of March 31, 2020, the borrowings will be due according to the following schedule:
Within 1 year
Between 1 to 2 years
Between 2 to 3 years
Between 3 to 4 years
Between 4 to 5 years
Beyond 5 years
21. Unsecured senior notes
Principal amounts
(in millions of RMB)
5,154
879
1,623
684
30,834
5,784
44,958
In November 2014, the Company issued unsecured senior notes including floating rate and fixed rate notes with
varying maturities for an aggregate principal amount of US$8.0 billion (the “2014 Senior Notes”), of which US$1.3
billion was repaid in November 2017 and US$2.25 billion was repaid in November 2019. The 2014 Senior Notes are
senior unsecured obligations that are listed on the HKSE, and interest is payable in arrears, quarterly for the floating
rate notes and semiannually for the fixed-rate notes.
In December 2017, the Company issued another series of unsecured fixed rate senior notes with varying maturities
for an aggregate principal amount of US$7.0 billion (the “2017 Senior Notes”). The 2017 Senior Notes are senior
unsecured obligations that are listed on the Singapore Stock Exchange, and interest is payable in arrears
semiannually.
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
21. Unsecured senior notes (Continued)
The following table provides a summary of the Company’s unsecured senior notes as of March 31, 2019 and 2020:
As of March 31,
2020
2019
Effective
interest rate
US$2,250 million 2.500% notes due 2019
US$1,500 million 3.125% notes due 2021
US$700 million 2.800% notes due 2023
US$2,250 million 3.600% notes due 2024
US$2,550 million 3.400% notes due 2027
US$700 million 4.500% notes due 2034
US$1,000 million 4.000% notes due 2037
US$1,750 million 4.200% notes due 2047
US$1,000 million 4.400% notes due 2057
Carrying value
Unamortized discount and debt issuance costs
Total principal amounts of unsecured senior notes
Less: current portion of principal amounts of unsecured senior notes
Non-current portion of principal amounts of unsecured senior notes
4,946
(in millions of RMB)
15,110
—
10,044 10,604
4,687
15,061 15,891
16,989 17,929
4,650 4,906
6,663
7,028
11,655 12,291
7,021
6,658
91,517 80,616
589
550
92,106 81,166
(15,127)
76,979 81,166
—
—
3.26%
2.90%
3.68%
3.52%
4.60%
4.06%
4.25%
4.44%
The 2014 Senior Notes and the 2017 Senior Notes were issued at a discount with a total amount of US$47 million
(RMB297 million). The debt issuance costs of US$82 million (RMB517 million) were presented as a direct
deduction from the principal amount of the unsecured senior notes on the consolidated balance sheets. The effective
interest rates for the unsecured senior notes include the interest charged on the notes as well as amortization of the
debt discounts and debt issuance costs.
The 2014 Senior Notes and the 2017 Senior Notes contain covenants including, among others, limitation on liens,
consolidation, merger and sale of the Company’s assets. As of March 31, 2020, the Company is in compliance with
all these covenants. In addition, the 2014 Senior Notes and the 2017 Senior Notes rank senior in right of payment to
all of the Company’s existing and future indebtedness expressly subordinated in right of payment to the notes and
rank at least equally in right of payment with all of the Company’s existing and future unsecured unsubordinated
indebtedness (subject to any priority rights pursuant to applicable law).
The proceeds from issuance of the 2014 Senior Notes were used in full to refinance a previous syndicated loan in the
same amount. The proceeds from the issuance of the 2017 Senior Notes were used for general corporate purposes.
F-93
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
21. Unsecured senior notes (Continued)
As of March 31, 2020, the future principal payments for the Company’s unsecured senior notes will be due
according to the following schedule:
Within 1 year
Between 1 to 2 years
Between 2 to 3 years
Between 3 to 4 years
Between 4 to 5 years
Thereafter
Principal amounts
(in millions of RMB)
—
10,633
—
4,962
15,950
49,621
81,166
As of March 31, 2019 and 2020, the fair values of the Company’s unsecured senior notes, based on Level 2 inputs,
were US$13,679 million (RMB91,964 million) and US$12,725 million (RMB90,206 million), respectively.
22. Related party transactions
During the years ended March 31, 2018, 2019 and 2020, other than disclosed elsewhere, the Company had the
following material related party transactions:
Transactions with Ant Group and its affiliates
2018
Year ended March 31,
2019
(in millions of RMB)
2020
Amounts earned by the Company
Profit Share Payments (i)
Annual fee for SME loan business (ii)
Administrative and support services (iii)
Cloud computing revenue (iii)
Marketplace software technology services fee and other amounts
earned (iii)
Amounts incurred by the Company
Payment processing and escrow services fee (iv)
Other amounts incurred (iii)
3,444
956
676
482
1,026
6,584
6,295
1,894
8,189
517
954
1,017
761
1,489
4,738
3,835
954
1,224
1,872
2,075
9,960
8,252
1,328
9,580
8,723
2,743
11,466
(i)
In 2014, the Company entered into the 2014 IPLA with Ant Group. Under the 2014 IPLA, the Company
received the Profit Share Payments amounting to the sum of an expense reimbursement plus 37.5% of the
consolidated pre-tax income of Ant Group, subject to certain adjustments. Upon the receipt of 33% equity
interest in Ant Group in September 2019, the Company entered into the Amended IPLA and terminated the
2014 IPLA, and the Profit Share Payments arrangement was terminated (Note 4(l)).
F-94
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
22. Related party transactions (Continued)
Profit Share Payments were recognized in consolidated income statements, net of the costs incurred for the
provision of the software technology services reimbursed by Ant Group. The amounts reimbursed by Ant Group
to the Company were RMB37 million, RMB106 million and nil for the years ended March 31, 2018, 2019 and
2020, respectively.
(ii) Pursuant to the SAPA (Note 4(l)), the Company entered into software system use and service agreements with
Ant Group in 2014, under which the Company would receive annual fees for SME loan business for a term of
seven years. In calendar years 2018 to 2021, the Company received or will receive annual fees equal to the
amount received in calendar year 2017, which was equal to 2.5% of the average daily balance of the SME loans
made by Ant Group and its affiliates during that year.
(iii) The Company has other commercial arrangements, treasury management arrangements and cost sharing
arrangements with Ant Group and its affiliates on various sales and marketing, cloud computing, treasury
management, and other administrative and support services.
(iv) The Company and Alipay, among others, entered into a commercial agreement in 2011 whereby the Company
receives payment processing and escrow services in exchange for a payment for the services fee, which was
recognized in cost of revenue.
As of March 31, 2019 and 2020, the Company had certain amounts of cash held in accounts managed by Alipay in
connection with the provision of online and mobile commerce and related services for a total amount of RMB3,720
million and RMB6,486 million, respectively, which have been classified as cash and cash equivalents on the
consolidated balance sheets.
Transactions with Cainiao Network
The Company has commercial arrangements with Cainiao Network to receive certain logistics services. Expenses
incurred in connection with the logistics services provided by Cainiao Network of RMB3,437 million were recorded
in the consolidated income statement for the period from April 1, 2017 to the date of consolidation of Cainiao
Network in October 2017.
The Company also has cost sharing and other services arrangements with Cainiao Network and its subsidiaries
primarily related to various administrative and support services. In connection with these services provided by the
Company, RMB123 million were recorded in the consolidated income statement for the period from April 1, 2017 to
the date of consolidation of Cainiao Network in October 2017.
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
22. Related party transactions (Continued)
Transactions with other investees
The Company has commercial arrangements with certain investees of the Company related to cloud computing
services. In connection with these services provided by the Company, RMB689 million, RMB1,111 million and
RMB1,548 million were recorded in revenue in the consolidated income statements for the years ended March 31,
2018, 2019 and 2020, respectively.
The Company also has commercial arrangements with certain investees of the Company related to marketing
services. In connection with these services provided to the Company, RMB760 million, RMB907 million and
RMB1,146 million were recorded in cost of revenue and sales and marketing expenses in the consolidated income
statements for the years ended March 31, 2018, 2019 and 2020, respectively.
The Company, including Cainiao Network, which the Company consolidated in October 2017, has commercial
arrangements with certain investees of the Company related to logistics services. Revenues recognized in connection
with these services provided by the Company of RMB72 million, RMB261 million and RMB1,400 million were
recorded in the consolidated income statements for the years ended March 31, 2018, 2019 and 2020, respectively.
Expenses incurred in connection with these services provided to the Company of RMB5,608 million, RMB12,933
million and RMB8,265 million were recorded in the consolidated income statements for the same periods,
respectively.
The Company has extended loans to certain investees for working capital and other uses in conjunction with the
Company’s investments. As of March 31, 2019 and 2020, the aggregate outstanding balance of these loans was
RMB2,543 million and RMB4,352 million, respectively, with durations generally ranging from one month to ten
years and interest rates of up to 10% per annum as of March 31, 2019, and durations generally ranging from one year
to ten years and interest rates of up to 6% per annum as of March 31, 2020.
During the year ended March 31, 2020, the Company agreed to provide a guarantee for a term loan facility of
HK$7.7 billion in favor of Hong Kong Cingleot Investment Management Limited (“Cingleot”), a company that is
partially owned by Cainiao Network, in connection with a logistics center development project at the Hong Kong
International Airport. As of March 31, 2020, HK$358 million was drawn down by Cingleot under this facility.
Other transactions
The Company’s digital economy offers different platforms on which different enterprises operate and the Company
believes that all transactions on the Company’s platforms are conducted on terms obtained in arm’s length
transactions with similar unrelated parties.
Other than the transactions disclosed above or elsewhere in the consolidated financial statements, the Company has
commercial arrangements with SoftBank, its investees and other related parties to provide and receive certain
marketing, cloud computing and other services and products. The amounts relating to these services provided and
received represent less than 1% of the Company’s revenue and total costs and expenses, respectively, for the years
ended March 31, 2018, 2019 and 2020.
In addition, the Company has made certain acquisitions and equity investments together with related parties from
time to time during the years ended March 31, 2018, 2019 and 2020. The agreements for acquisitions and equity
investments were entered into by the parties involved and conducted on fair value basis. The significant acquisitions
and equity investments together with related parties are included in Note 4.
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
23. Restricted net assets
PRC laws and regulations permit payments of dividends by the Company’s subsidiaries incorporated in the PRC
only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and
regulations. In addition, the Company’s subsidiaries incorporated in the PRC are required to annually appropriate
10% of their net income to the statutory reserve prior to payment of any dividends, unless the reserve has reached
50% of their respective registered capital. Furthermore, registered share capital and capital reserve accounts are also
restricted from distribution. As a result of the restrictions described above and elsewhere under PRC laws and
regulations, the Company’s subsidiaries incorporated in the PRC are restricted in their ability to transfer a portion of
their net assets to the Company in the form of dividends. The restriction amounted to RMB114,715 million as of
March 31, 2020. Except for the above or disclosed elsewhere, there is no other restriction on the use of proceeds
generated by the Company’s subsidiaries to satisfy any obligations of the Company.
24. Commitments
(a) Capital commitments
Capital expenditures contracted for are analyzed as follows:
Contracted but not provided for:
Purchase of property and equipment
Construction of corporate campuses
As of March 31,
2020
2019
(in millions of RMB)
5,656
3,576
9,232
15,572
8,982
24,554
(b) Operating lease commitments for office facility and transportation equipment
The Company has leased office premises and transportation equipment under non-cancellable operating lease
agreements. These leases have different terms and renewal rights. As of March 31, 2019, the future aggregate
minimum lease payments under non-cancellable operating leases are as follows:
No later than 1 year
Later than 1 year and no later than 5 years
More than 5 years
Total
As of March 31,
2019
(in millions of RMB)
4,984
10,675
15,346
31,005
For the years ended March 31, 2018 and 2019, the Company incurred rental expenses under operating leases of
RMB2,279 million and RMB4,699 million, respectively. Upon the adoption of ASC 842 on April 1, 2019, operating
lease liabilities are initially recognized based on the present value of future lease payments at lease commencement
and the future lease payments under operating leases as of March 31, 2020 are disclosed in Note 7.
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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
24. Commitments (Continued)
(c) Investment commitments
The Company was obligated to pay up to RMB23,954 million and RMB14,080 million for business combinations
and equity investments under various arrangements as of March 31, 2019 and 2020, respectively. The commitment
balance as of March 31, 2019 primarily includes the consideration for the investment relating to STO Express (Note
4(o)), Focus Media (Note 4(p)) and the remaining committed capital of certain investment funds. The commitment
balance as of March 31, 2020 primarily includes the consideration for the investment in Focus Media (Note 4(p))
and the remaining committed capital of certain investment funds.
(d) Other commitments
The Company also has other commitments including commitments for co-location and bandwidth fees, licensed
copyrights and marketing expenses. These commitments are analyzed as follows:
No later than 1 year
Later than 1 year and no later than 5 years
More than 5 years
Total
As of March 31,
2020
2019
(in millions of RMB)
27,398
21,768
19,261
22,291
3,102
4,964
49,761
49,023
As a marketing initiative, the Company entered into a framework agreement with the International Olympic
Committee (the “IOC”) and the United States Olympic Committee in January 2017 for a long-term partnership
arrangement through 2028. Joining in The Olympic Partner worldwide sponsorship program, the Company has
become the official “E-Commerce Services” Partner and “Cloud Services” Partner of the IOC. In addition, the
Company has been granted certain marketing rights, benefits and opportunities relating to future Olympic Games
and related initiatives, events and activities. The Company committed to provide at least US$815 million worth of
cash, cloud infrastructure services and cloud computing services, as well as marketing and media support in
connection with various Olympic initiatives, events and activities, including the Olympic Games and the Winter
Olympic Games through 2028.
F-98
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
25. Risks and contingencies
(a) The Company is incorporated in the Cayman Islands and considered as a foreign entity under PRC laws. Due to
legal restrictions on foreign ownership and investment in, among other areas, value-added telecommunications
services, which include the operations of Internet content providers, the Company conducts its Internet
businesses and other businesses through various contractual arrangements with VIEs that are held by PRC
citizens or by PRC entities owned and/or controlled by PRC citizens. The VIEs hold the licenses and approvals
that are essential for their business operations in the PRC and the Company has entered into various agreements
with the VIEs and their equity holders such that the Company has the right to benefit from their licenses and
approvals and generally has control of the VIEs. In the Company’s opinion, the current ownership structure and
the contractual arrangements with the VIEs and their equity holders as well as the operations of the VIEs are in
substantial compliance with all existing PRC laws, rules and regulations. However, there may be changes and
other developments in PRC laws, rules and regulations. Accordingly, the Company gives no assurance that PRC
government authorities will not take a view in the future that is contrary to the opinion of the Company. If the
current ownership structure of the Company and its contractual arrangements with the VIEs and their equity
holders were found to be in violation of any existing or future PRC laws or regulations, the Company’s ability to
conduct its business could be impacted and the Company may be required to restructure its ownership structure
and operations in the PRC to comply with the changes in the PRC laws which may result in deconsolidation of
the VIEs.
(b) The PRC market in which the Company operates poses certain macro-economic and regulatory risks and
uncertainties. These uncertainties extend to the ability of the Company to operate or invest in online and mobile
commerce or other Internet related businesses, representing the principal services provided by the Company, in
the PRC. The information and technology industries are highly regulated. Restrictions are currently in place or
are unclear regarding what specific segments of these industries foreign owned enterprises, like the Company,
may operate. If new or more extensive restrictions were imposed on the segments in which the Company is
permitted to operate, the Company could be required to sell or cease to operate or invest in some or all of its
current businesses in the PRC.
(c) The Company’s sales, purchase and expense transactions are generally denominated in RMB and a significant
portion of the Company’s assets and liabilities are denominated in RMB. RMB is not freely convertible into
foreign currencies. In the PRC, foreign exchange transactions are required by law to be transacted only by
authorized financial institutions at exchange rates set by the People’s Bank of China (the “PBOC”).
Remittances in currencies other than RMB by the Company in the PRC must be processed through the PBOC or
other PRC foreign exchange regulatory bodies and require certain supporting documentation in order to effect
the remittance. If the foreign exchange control system prevents the Company from obtaining sufficient foreign
currencies to satisfy its currency demands, the Company may not be able to pay dividends in foreign currencies
and the Company’s ability to fund its business activities that are conducted in foreign currencies could be
adversely affected.
(d) Financial instruments that potentially subject the Company to significant concentration of credit risk consist
principally of cash and cash equivalents, short-term investments, restricted cash and investment securities. As of
March 31, 2018, 2019 and 2020, substantially all of the Company’s cash and cash equivalents, short-term
investments and restricted cash were held by major financial institutions located worldwide, including mainland
China and Hong Kong S.A.R. If the banking system or the financial markets deteriorate or become volatile, the
financial institutions and other issuers of financial instruments held by the Company could become insolvent
and the markets for these instruments could become illiquid, in which case the Company could lose some or all
of the value of its investments.
F-99
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
25. Risks and contingencies (Continued)
(e) During the years ended March 31, 2018, 2019 and 2020, the Company offered a trade assurance program on the
international wholesale marketplaces at no charge to the wholesale buyers and sellers. If the wholesale sellers
who participate in this program do not deliver the products in their stated specifications to the wholesale buyers
on schedule, the Company may compensate the wholesale buyers for their losses on behalf of the wholesale
sellers up to a pre-determined amount following a review of each particular case. In turn, the Company will seek
a full reimbursement from the wholesale sellers for the prepaid reimbursement amount, yet the Company is
exposed to a risk over the collectability of the reimbursement from the wholesale sellers. During the years ended
March 31, 2018, 2019 and 2020, the Company did not incur any material losses with respect to the
compensation provided under this program. Given that the maximum compensation for each wholesale seller is
pre-determined based on their individual risk assessments by the Company considering their credit profile or
other relevant information, the Company determined that the likelihood of material default on the payments are
not probable and therefore no provisions have been made in relation to this program.
(f)
(g)
In the ordinary course of business, the Company makes strategic investments to increase the service offerings
and expand capabilities. The Company continually reviews its investments to determine whether there is a
decline in fair value below the carrying value. Fair value of the listed securities is subject to volatility and may
be materially affected by market fluctuations.
In the ordinary course of business, the Company is from time to time involved in legal proceedings and
litigations relating to disputes relating to trademarks and other intellectual property, among others. As of March
31, 2019, the Company accrued a settlement provision of US$250 million (RMB1,679 million) for the
settlement of a U.S. federal class action lawsuit in exchange for a full release of all claims brought in the lawsuit
that has been pending since January 2015. The amount has been paid as of March 31, 2020 (Note 19). Except
for the above, there are no legal proceedings and litigations that have in the recent past had, or to the Company’s
knowledge, are probable to have, a material impact on the Company’s financial positions, results of operations
or cash flows. Except for the above, the Company did not accrue any other material loss contingencies in this
respect as of March 31, 2018, 2019 and 2020.
(h) The global outbreak of COVID-19 is having a significant negative impact on the global economy and the
Company’s business and financial results. Starting in late January 2020, the COVID-19 pandemic triggered a
series of lock-downs, social distancing requirements and travel restrictions that drastically reduced business
activities in China. This substantial decline in business activities in China negatively affected most of the
Company’s domestic core commerce businesses, including the Company’s China retail marketplaces and local
consumer services business, as well as other businesses that involve travel, transportation and offline
entertainment, such as Fliggy, Alibaba Pictures (Note 4(c)), Damai and Amap. The Company’s key international
commerce businesses also began to experience a negative impact in February 2020. While the growth of the
Company’s domestic businesses started to recover in March 2020, the timing of recovery for the Company’s
international commerce businesses remains uncertain as demand in countries outside of China remains soft. The
COVID-19 pandemic also presented and may continue to present challenges to the Company’s business
operations as well as the Company’s merchants, business partners and other participants in the Company’s
digital economy, such as closure of offices and facilities, disruptions to or even suspensions of normal business
and logistics operations, as well as restrictions on travel. It is not possible to determine the ultimate impact of
the COVID-19 pandemic on the Company’s business operations and financial results, which is highly dependent
on numerous factors, including the duration and spread of the pandemic and any resurgence of COVID-19 in
China or elsewhere, actions taken by governments, domestically and in international relations, the response of
businesses and individuals to the pandemic, the impact of the pandemic on business and economic conditions in
China and globally, consumer demand, the Company’s ability and the ability of merchants, retailers, logistics
service providers and other participants in the Company’s digital economy to continue operations in areas
affected by the pandemic and the Company’s efforts and expenditures to support merchants and partners and
ensure the safety of the Company’s employees. The COVID-19 pandemic may continue to adversely affect the
Company’s business and results of operations.
F-100
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
26. Segment information
The Company presents segment information after elimination of inter-company transactions. In general, revenue,
cost of revenue and operating expenses are directly attributable, or are allocated, to each segment. The Company
allocates costs and expenses that are not directly attributable to a specific segment, such as those that support
infrastructure across different segments, to different segments mainly on the basis of usage, revenue or headcount,
depending on the nature of the relevant costs and expenses. The Company does not allocate assets to its segments as
the CODM does not evaluate the performance of segments using asset information.
The following tables present the summary of each segment’s revenue, income from operations and adjusted earnings
before interest, taxes and amortization (“Adjusted EBITA”) which is considered as a segment operating performance
measure, for the years ended March 31, 2018, 2019 and 2020:
Revenue
Income (Loss)
from
operations
Add: share-
based
compensation
expense
Add:
amortization
of intangible
assets
Add:
impairment
of goodwill
Adjusted
EBITA (ii)
Adjusted
EBITA
margin (iii)
Core
Cloud
commerce computing entertainment
segments Unallocated (i) Consolidated
Digital media
and
Year ended March 31, 2018
Innovation
initiatives and
others
(in millions of RMB, except percentages)
Total
214,020
13,390
19,564
3,292
250,266
—
250,266
102,743
(3,085)
(14,140)
(6,901)
78,617
(9,303)
69,314
8,466
2,274
2,142
3,707
16,589
3,486
20,075
2,891
—
12
—
3,693
198
6,794
326
7,120
—
—
—
494
(4,997)
494
114,100
(799)
(8,305)
(2,996)
102,000
53%
(6)%
(42)%
(91)%
F-101
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
26. Segment information (Continued)
Core
Cloud
commerce computing entertainment
segments Unallocated (i) Consolidated
Digital media
and
Year ended March 31, 2019
Innovation
initiatives and
others
(in millions of RMB, except percentages)
Total
Revenue
Income (Loss)
from
operations
Add: share-
based
compensation
expense
Add:
amortization
of intangible
assets
Add: settlement
of U.S.
federal class
action lawsuit
Adjusted
EBITA (ii)
Adjusted
EBITA
margin (iii)
Revenue
Income (Loss)
from
operations
Add: share-
based
compensation
expense
Add:
amortization
and
impairment
of intangible
assets
Add:
impairment
of goodwill
Adjusted
EBITA (ii)
Adjusted
EBITA
margin (iii)
323,400
24,702
24,077
4,665
376,844
—
376,844
109,312
(5,508)
(20,046)
(11,795)
71,963
(14,879)
57,084
17,694
4,332
2,988
5,774
30,788
6,703
37,491
9,161
18
1,262
50
10,491
236
10,727
—
—
—
—
—
136,167
(1,158)
(15,796)
(5,971)
113,242
1,679
(6,261)
1,679
42%
(5)%
(66)%
(128)%
Core
Cloud
commerce computing entertainment
segments Unallocated (i) Consolidated
Digital media
and
Year ended March 31, 2020
Innovation
initiatives and
others
(in millions of RMB, except percentages)
Total
436,104
40,016
26,948
6,643
509,711
—
509,711
138,631
(7,016)
(14,937)
(12,951)
103,727
(12,297)
91,430
15,427
5,577
2,444
4,050
27,498
4,244
31,742
11,742
—
25
—
1,377
86
13,230
—
—
—
158
576
13,388
576
165,800
(1,414)
(11,116)
(8,815)
144,455
(7,319)
38%
(4)%
(41)%
(133)%
F-102
Table of Contents
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2018, 2019 AND 2020
26. Segment information (Continued)
The following table presents the reconciliation from the Adjusted EBITA to the consolidated net income for the
years ended March 31, 2018, 2019 and 2020:
2018
Year ended March 31,
2019
(in millions of RMB)
2020
Total Segments Adjusted EBITA
Unallocated (i)
Share-based compensation expense
Amortization and impairment of intangible assets
Impairment of goodwill
Settlement of U.S. federal class action lawsuit
Consolidated income from operations
Interest and investment income, net
Interest expenses
Other income, net
Income tax expenses
Share of results of equity investees
Consolidated net income
(4,997)
(20,075)
(7,120)
(494)
—
102,000 113,242 144,455
(7,319)
(31,742)
(13,388)
(576)
—
91,430
72,956
(5,180)
7,439
(20,562)
(5,733)
80,234 140,350
(6,261)
(37,491)
(10,727)
—
(1,679)
57,084
44,106
(5,190)
221
(16,553)
566
69,314
30,495
(3,566)
4,160
(18,199)
(20,792)
61,412
The following table presents the total depreciation of property and equipment, and operating lease cost relating to
land use rights by segment for the years ended March 31, 2018, 2019 and 2020:
Core commerce
Cloud computing
Digital media and entertainment
Innovation initiatives and others and unallocated (i)
Total depreciation of property and equipment, and operating lease
2020
2018
Year ended March 31,
2019
(in millions of RMB)
6,672
6,580
1,182
528
3,784
3,047
986
972
8,518
8,908
1,341
1,756
cost relating to land use rights
8,789
14,962
20,523
(i) Unallocated expenses are primarily related to corporate administrative costs and other miscellaneous items that
are not allocated to individual segments.
(ii) Adjusted EBITA represents net income before (i) interest and investment income, net, interest expense, other
income, net, income tax expenses and share of results of equity investees, (ii) certain non-cash expenses,
consisting of share-based compensation expense, amortization and impairment of intangible assets and
impairment of goodwill, and (iii) settlement of a U.S. federal class action lawsuit, which are not reflective of the
Company’s core operating performance.
(iii) Adjusted EBITA margin represents Adjusted EBITA divided by revenue.
Details of the Company’s revenue by segment are set out in Note 5. As substantially all of the Company’s long-lived
assets are located in the PRC and substantially all of the Company’s revenue is derived from within the PRC, no
geographical information is presented.
F-103
Exhibit 1.1
THE COMPANIES LAW (2013 REVISION)
OF THE CAYMAN ISLANDS
COMPANY LIMITED BY SHARES
AMENDED AND RESTATED
MEMORANDUM AND ARTICLES OF ASSOCIATION
OF
ALIBABA GROUP HOLDING LIMITED
阿里巴巴集团控股有限公司
(adopted by a Special Resolution passed on September 2, 2014 and effective on September 24, 2014, the closing date
of the Company's initial public offering of Ordinary Shares represented by American Depositary Shares)
ALIBABA GROUP HOLDING LIMITED
(Incorporated in the Cayman Islands)
(the “Company”)
TAKE NOTICE that the following resolution was passed by the Members of the Company on 15 July 2019 at the
Annual General Meeting of the Members of the Company held at the Company’s Office at 23/F Tower One, Time
Square, 1 Matheson Street, Causeway Bay, Hong Kong and that the effective date was determined by the board of
directors of the Company:
SHARE SUBDIVISION
IT WAS RESOLVED that with effect from 30 July 2019 (being the date determined at the discretion of the
board of directors of the Company), each issued and unissued Ordinary Share of a par value of US$0.000025
in the capital of the Company be subdivided into eight Ordinary Shares of a par value ofUS$0.000003125
each, such that the authorized share capital of the Company following the share subdivision shall be
US$100,000 divided into 32,000,000,000 Ordinary Shares with a par value of US$0.000003125 each.
/s/ Vanessa Sparrow
For the Registered Office
Trident Trust Company (Cayman) Limited
By: Vanessa Sparrow
Department Manager – Corporate Services
Date: 29th August 2019
ALIBABA GROUP HOLDING LIMITED
(Incorporated in the Cayman Islands)
(the “Company”)
CERTIFIED EXTRACT OF MINUTES OF THE ANNUAL GENERAL MEETING OF THE MEMBERS OF THE
COMPANY HELD AT THE COMPANY'S OFFICE AT 23/F TOWER ONE, TIMES SQUARE, 1 MATHESON STREET,
CAUSEWAY BAY,
HONG KONG, AT 9:00 P.M. ON JULY 15, 2019
(the “AGM Minutes”)
I. Share Subdivision
IT WAS RESOLVED that with effect from a date to be determined at the discretion of the board of directors of the
Company (which shall be no later than July 15, 2020, at which time this resolution shall lapse and be of no effect), each
issued and unissued Ordinary Share of a par value ofUS$0.000025 in the capital of the Company be subdivided into eight
Ordinary Shares of a par value ofUS$0.000003125 each, such that the authorized share capital of the Company following the
share subdivision shall be US$100,000 divided into 32,000,000,000 Ordinary Shares with a par value ofUS$0.000003125
each.
Certified as a true extract of the AGM Minutes
/s/ Timothy Alexander Steinert
Timothy Alexander Steinert
Secretary
Date: August 15, 2019
1
THE COMPANIES LAW (2013 REVISION)
OF THE CAYMAN ISLANDS
COMPANY LIMITED BY SHARES
AMENDED AND RESTATED MEMORANDUM OF ASSOCIATION
OF
ALIBABA GROUP HOLDING LIMITED
阿里巴巴集团控股有限公司
(adopted by a Special Resolution passed on September 2, 2014 and effective on September 24, 2014, the closing date
of the Company's initial public offering of Ordinary Shares represented by American Depositary Shares)
1. The English name of the Company is Alibaba Group Holding Limited and the Chinese name of the Company
is 阿里巴巴集团控股有限公司.
2. The Registered Office of the Company is situated at the offices of Trident Trust Company (Cayman) Limited,
Fourth Floor, One Capital Place, P.O. Box 847, George Town, Grand Cayman, Cayman Islands, or at such
other location within the Cayman Islands as the Directors may from time to time determine.
3. The objects for which the Company is established are unrestricted and the Company shall have full power and
authority to carry out any object not prohibited by the Companies Law or any other law of the Cayman
Islands.
4. The Company shall have and be capable of exercising all the functions of a natural person of full capacity
irrespective of any question of corporate benefit as provided by the Companies Law.
5. The Company shall not trade in the Cayman Islands with any person, firm or corporation except in
furtherance of the business of the Company carried on outside the Cayman Islands; provided that nothing in
this section shall be construed as to prevent the Company effecting and concluding contracts in the Cayman
Islands, and exercising in the Cayman Islands all of its powers necessary for the carrying on of its business
outside the Cayman Islands.
6. The liability of each Shareholder of the Company is limited to the amount, if any, unpaid on the Shares held
by such Shareholder.
7. The authorized share capital of the Company is US$100,000 divided into 4,000,000,000 Ordinary Shares of a
nominal or par value of US$0.000025 each. Subject to the Companies Law and the Articles of Association,
the Company shall have power to redeem or purchase any of its Shares and to sub-divide or consolidate the
said Shares or any of them and to issue all or any part of its capital whether original, redeemed, increased or
reduced with or without any preference, priority, special privilege or other rights or subject to any
postponement of rights or to any conditions or restrictions whatsoever and so that unless the conditions of
issue shall otherwise expressly provide every issue of shares whether stated to be ordinary, preference or
otherwise shall be subject to the powers on the part of the Company hereinbefore provided.
8. The Company has the power to deregister in the Cayman Islands and be registered by way of continuation in
some other jurisdiction.
9. Capitalized terms that are not defined in this Memorandum of Association bear the same meanings as those
given in the Articles of Association of the Company.
ARTICLE
PAGE
TABLE OF CONTENTS
INTERPRETATION
PRELIMINARY
SHARES
MODIFICATION OF RIGHTS
CERTIFICATES
FRACTIONAL SHARES
LIEN
CALLS ON SHARES
FORFEITURE OF SHARES
TRANSFER OF SHARES
TRANSMISSION OF SHARES
ALTERATION OF SHARE CAPITAL
REDEMPTION, PURCHASE AND SURRENDER OF SHARES
TREASURY SHARES
GENERAL MEETINGS
NOTICE OF GENERAL MEETINGS
PROCEEDINGS AT GENERAL MEETINGS
VOTES OF SHAREHOLDERS
CORPORATIONS ACTING BY REPRESENTATIVES AT MEETINGS
CLEARING HOUSES
DIRECTORS
POWERS AND DUTIES OF DIRECTORS
BORROWING POWERS OF DIRECTORS
THE SEAL
DISQUALIFICATION OF DIRECTORS
PROCEEDINGS OF DIRECTORS
PRESUMPTION OF ASSENT.
DIVIDENDS
i
1
8
8
9
10
10
11
11
12
13
14
14
15
16
16
17
17
19
20
20
20
24
26
26
27
27
29
30
ACCOUNTS, AUDIT AND ANNUAL RETURN AND DECLARATION
CAPITALIZATION
SHARE PREMIUM ACCOUNT
NOTICES
INDEMNITY
NON-RECOGNITION OF TRUSTS
WINDING UP
AMENDMENT OF ARTICLES OF ASSOCIATION
MERGERS AND CONSOLIDATIONS
CLOSING OF REGISTER OR FIXING RECORD DATE
CLAIMS AGAINST THE COMPANY
REGISTRATION BY WAY OF CONTINUATION
DISCLOSURE
ii
31
32
33
33
35
36
36
37
37
37
38
38
38
THE COMPANIES LAW (2013 REVISION)
OF THE CAYMAN ISLANDS
COMPANY LIMITED BY SHARES
AMENDED AND RESTATED
ARTICLES OF ASSOCIATION
OF
ALIBABA GROUP HOLDING LIMITED
阿里巴巴集团控股有限公司
(adopted by a Special Resolution passed on September 2, 2014 and effective on September 24, 2014, the closing date
of the Company's initial public offering of Ordinary Shares represented by American Depositary Shares)
TABLE A
The Regulations contained or incorporated in Table 'A' in the First Schedule of the Law shall not apply to the
Company and the following Articles shall comprise the Articles of Association of the Company.
INTERPRETATION
1. In these Articles the following defined terms will have the meanings ascribed to them, if not inconsistent with
the subject or context:
“ADS”
means an American depositary share representing Ordinary Shares;
“Articles” or “Articles of
Association”
means these articles of association of the Company, as amended or
substituted from time to time;
“Articles Effectiveness
Date”
means on September 24, 2014, the date upon which these Articles
become effective;
“Attorney” or “Authorized
Signatory”
means any company, firm or Person or body of Persons, whether
nominated directly or indirectly by the Directors, appointed to be the
attorney or attorneys or authorized signatory of the Company;
“Board” or “Board of
means the directors of the Company for the time being or
1
Directors” or “Directors”
as the case may be, the directors assembled as a board or as a
committee thereof;
“Chairman”
means the chairman of the Board;
“Class” or “Classes”
means any class or classes of Shares as may from time to time be
issued by the Company;
“Commission”
means Securities and Exchange Commission of the United States of
agency for the time being
America or any other federal
administering the Securities Act;
“Companies Law” or
“Statute”
means the Companies Law (2013 Revision) of the Cayman Islands
and any statutory amendment or re-enactment thereof;
“Company”
means Alibaba Group Holding Limited, a Cayman Islands exempted
company;
“Company's Website”
means the website of the Company, the address or domain name of
which has been notified to Shareholders;
“Designated Stock
Exchanges”
“Designated Stock
Exchange Rules”
“electronic”
means The New York Stock Exchange in the United States for so
long as the Company’s Shares or ADSs are there listed and any other
stock exchange on which the Company’s Shares or ADSs are listed
for trading;
means the relevant code, rules and regulations, as amended, from
time to time, applicable as a result of the original and continued
listing of any Shares or ADSs on the Designated Stock Exchanges;
means the meaning given to it in the Electronic Transactions Law
and any amendment thereto or re-enactments thereof for the time
being in force and includes every other law incorporated therewith
or substituted therefor;
“electronic communication”means electronic posting to the Company’s Website, transmission to
any number, address or internet website or other electronic delivery
methods as otherwise decided and approved by not less than two-
thirds of the vote of the Board;
“Electronic Transactions
Law”
means the Electronic Transactions Law (2003 Revision) of the
Cayman Islands and any statutory amendment or re-enactment
thereof;
2
“Group I”
“Group II”
“Group III”
“Indemnified Person”
means the group of Directors that serves until the first annual general
meeting following the Articles Effectiveness Date and for each
successive three year term thereafter;
means the group of Directors that serves until the second annual
general meeting following the Articles Effectiveness Date and for
each successive three year term thereafter;
means the group of Directors that serves until the third annual
general meeting following the Articles Effectiveness Date and for
each successive three year term thereafter;
means every Director, Secretary, assistant secretary, or other officer
for the time being and from time to time of the Company (but not
including the Company's auditors) and the personal representatives
of the same;
“Independent Director”
means a Director who is an independent director as defined in the
Designated Stock Exchange Rules as determined by the Board;
“Interested Director”
means a Director who has a direct or indirect interest in any contract,
business or arrangement in which the Company or its affiliates is a
party or becomes a party to.
“Law”
“Memorandum of
Association” or
“Memorandum”
means the Companies Law and every other law and regulation of the
Cayman Islands for the time being in force concerning companies
and affecting the Company;
means the memorandum of association of the Company, as amended
or substituted from time to time;
“Month”
means calendar month;
“Ordinary Resolution”
means a resolution:
(a) passed by a simple majority of the votes cast by Shareholders
who, being entitled to do so, vote in person or, where proxies are
allowed, by proxy at a general meeting of the Company, regard
being had in computing a majority to the number of votes to
which each Shareholder is entitled; or
(b) approved in writing by all of the Shareholders entitled
3
to vote at a general meeting of the Company in one or more
instruments each signed by one or more of the Shareholders and
the effective date of the resolution so adopted shall be the date on
which the instrument, or the last of such instruments, if more than
one, is executed;
“Ordinary Shares”
means the ordinary shares in the capital of the Company;
“paid up”
“Partnership”
means paid up as to the par value in respect of the issue of any
Shares and includes credited as paid up;
means Lakeside Partners L.P., a Cayman Islands exempted limited
partnership;
“Partnership Agreement” means the agreement of partnership for the Partnership, dated
August 28, 2014;
“Partnership Condition” means that the Partnership is operating under the terms of the
Partnership Agreement, as amended from time to time, provided,
however, that any amendment to Clause 5 (Purpose, Business and
Powers), Clauses 17.1 through 17.6, 17.8 and Clause 17.9 (each
relating to the eligibility for, nomination of and procedures for the
election of new partners), Clause 19.2 (relating to the mandatory
retirement of partners), Clause 20 (Removal of Partners), Clause 21
(relating to the transfer of partnership interests),
Clause 22
(Selection and Removal of Partnership Directors), Clause 28.1 and
Clause 28.2(e) (relating to amendments to the Partnership
Agreement) of the Partnership Agreement or any other amendment,
modification or supplement to the Partnership Agreement having the
effect of amending or superseding such provisions has been
approved by a majority of the Independent Directors (excluding any
Independent Directors nominated or appointed by the Partnership).
Any amendment to Clause 5 (Purpose, Business and Powers),
Clauses 17.1 through 17.6, 17.8 and Clause 17.9 (each relating to the
eligibility for, nomination of and procedures for the election of new
partners), Clause 19.2 (relating to the mandatory retirement of
partners), Clause 20 (Removal of Partners), Clause 21 (relating to
the transfer of partnership interests), Clause 22 (Selection and
Removal of Partnership Directors), Clause 28.1 and Clause 28.2(e)
(relating to amendments to the Partnership Agreement) of the
Partnership Agreement or any other amendment, modification or
supplement to the Partnership
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Agreement having the effect of amending or superseding such
provisions without the approval of a majority of the Independent
Directors (excluding any Independent Directors nominated or
appointed by the Partnership) shall automatically be deemed a
failure of the Partnership Condition;
means any natural person, firm, company, joint venture, partnership,
corporation, association or other entity (whether or not having a
separate legal personality) or any of them as the context so requires;
means the register of members of the Company, which sets out
details of the Shareholders of the Company,
maintained in
accordance with the Companies Law;
“Person”
“Register”
“Registered Office”
means the registered office of the Company as required by the
Companies Law;
“Seal”
“Secretary”
“Share”
means the common seal of the Company (if adopted) including any
facsimile thereof;
means any Person appointed by the Directors to perform any of the
duties of the secretary of the Company;
means a share in the capital of the Company; all references to
“Shares” herein shall be deemed to be Shares of any or all Classes as
the context may require; and, for the avoidance of doubt, in these
Articles the expression “Share” shall include a fraction of a Share;
“Share Premium Account” means the share premium account established in accordance with
these Articles and the Companies Law;
“Shareholder”
“signed”
means a Person who is registered as the holder of Shares in the
Register;
means bearing a signature or representation of a signature affixed by
mechanical means or an electronic symbol or process attached to or
logically associated with an electronic communication and executed
or adopted by a Person with the intent to sign the electronic
communication;
“SoftBank”
means SoftBank Corp., a Japanese corporation;
“SoftBank Affiliate”
means (i) any wholly owned subsidiary of SoftBank and (ii) any
Person that directly or indirectly through one or
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more intermediaries, is controlled by, or under common control with
SoftBank, including but not limited to a subsidiary of SoftBank,
provided, however, that, in addition to such control or common
control SoftBank either (a) owns, directly or indirectly, share capital
or other equity interests representing more than 75% of the
outstanding voting securities or other equity interests (disregarding,
for the avoidance of doubt, any carried interest or similar economic
participation rights of any Person formed as a fund, provided such
interest or rights do not confer voting rights as to the governance of
such Person on the holder thereof) or (b) owns, directly or indirectly,
share capital or other equity interests representing more than 50% of
such outstanding voting securities or other equity interests and has
the right to designate at least two-thirds (2/3) of the directors of such
Person; “control” for the purposes of this definition means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of a Person, whether through
the ownership of voting securities, by contract or other arrangement,
as trustee or executor, or otherwise.
means, for so long as the Partnership Condition is satisfied, the
matters set out in Article 46(a), Article 57(f), Articles 83 to 94 and
Article 168 and the definitions of “Partnership”, “Partnership
Agreement”, “Partnership Condition”, “Special Partnership Matters”
and “Special Resolution” under these Articles;
“Special Partnership
Matter”
“Special Resolution”
means a special resolution of the Company passed in accordance
with the Law, being a resolution:
(a) passed by a majority of not less than three-fourths (or, in respect
of any resolution relating to a Special Partnership Matter, or in
any way having the effect of affecting a Special Partnership
Matter, including, without limitation, any amendment to the
provisions of the Memorandum or Articles which relate to a
Special Partnership Matter, by 95%; or in respect of a Special
Resolution passed pursuant to Article 163(c), by 100%) of the
votes cast by such Shareholders as, being entitled to do so, vote
in person or, where proxies are allowed, by proxy at a general
meeting of the Company of which notice specifying the intention
to propose the resolution as a special resolution has been duly
given, regard being had in computing a
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majority to the number of votes to which each Shareholder is
entitled; or
(b) approved in writing by all of the Shareholders entitled to vote at
a general meeting of the Company in one or more instruments
each signed by one or more of the Shareholders and the effective
date of the Special Resolution so adopted shall be the date on
which the instrument or the last of such instruments, if more than
one, is executed;
“Treasury Share”
means a Share held in the name of the Company as a treasury share
in accordance with the Statute;
“U.S. Securities Act”
means the Securities Act of 1933 of the United States of America, as
amended, or any similar federal statute and the rules and regulations
of the Commission thereunder, all as the same shall be in effect at
the time;
“United States”
means the United States of America, its territories, its possessions
and all areas subject to its jurisdiction;
“Voting Agreement”
means the Voting Agreement among the Company, Yahoo! Inc.,
SoftBank, the Management Members (as defined therein) and certain
other shareholders of the Company dated as of September 18, 2014,
as amended from time to time; and
“year”
means calendar year.
2. In these Articles, save where the context requires otherwise:
(a) words importing the singular number shall include the plural number and vice versa;
(b) words importing the masculine gender only shall include the feminine gender and any Person as the
context may require;
(c) the word “may” shall be construed as permissive and the word “shall” shall be construed as
imperative;
(d) reference to a U.S. dollar or U.S. dollars (or US$) and to a cent or cents is reference to dollars and
cents of the United States of America;
(e) reference to a statutory enactment shall include reference to any amendment or re- enactment thereof
for the time being in force;
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(f) reference to any determination by the Directors shall be construed as a determination by the Directors
in their sole and absolute discretion (subject, for the avoidance of doubt, to such determination being
in accordance with their fiduciary and other duties as Directors) and shall be applicable either
generally or in any particular case;
(g) reference to “in writing” shall be construed as written or represented by any means reproducible in
writing, including any form of print, lithograph, email, facsimile, photograph or telex or represented
by any other substitute or format for storage or transmission for writing or partly one and partly
another; and
(h) Sections 8 and 19 of the Electronic Transactions Law shall not apply.
3. Subject to the last two preceding Articles, any words defined in the Companies Law shall, if not
inconsistent with the subject or context, bear the same meaning in these Articles.
4. The business of the Company may be conducted as the Directors see fit.
PRELIMINARY
5. The Registered Office shall be at such address in the Cayman Islands as the Directors may from time to time
determine. The Company may in addition establish and maintain such other offices and places of business
and agencies in such places as the Directors may from time to time determine.
6. The expenses incurred in the formation of the Company and in connection with the offer for subscription and
issue of Shares shall be paid by the Company. Such expenses may be amortized over such period as the
Directors may determine and the amount so paid shall be charged against income and/or capital in the
accounts of the Company as the Directors shall determine.
7. The Directors shall keep, or cause to be kept, the Register at such place as the Directors may from time to
time determine and, in the absence of any such determination, the Register shall be kept at the Registered
Office.
SHARES
8. Subject to these Articles, all Shares for the time being unissued shall be under the control of the Directors
who may:
(a) issue, allot and dispose of the same to such Persons, in such manner, on such terms and having such
rights and being subject to such restrictions as they may from time to time determine; and
(b) grant options with respect to such Shares and issue warrants or similar instruments with respect
thereto;
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and, for such purposes, the Directors may reserve an appropriate number of Shares for the time being
unissued.
9. The Directors may authorize the division of Shares into any number of Classes and the different Classes shall
be authorized, established and designated (or re-designated as the case may be) and the variations in the
relative rights (including, without limitation, voting, dividend and redemption rights), restrictions,
preferences, privileges and payment obligations as between the different Classes (if any) may be fixed and
determined by the Directors or by a Special Resolution. The Directors may issue Shares with such preferred
or other rights, all or any of which may be greater than the rights of Ordinary Shares, at such time and on
such terms as they may think appropriate.
10. The Company may insofar as may be permitted by law, pay a commission to any Person in consideration of
his subscribing or agreeing to subscribe whether absolutely or conditionally for any Shares. Such
commissions may be satisfied by the payment of cash or the lodgement of fully or partly paid-up Shares or
partly in one way and partly in the other. The Company may also pay such brokerage as may be lawful on
any issue of Shares.
11. The Directors may refuse to accept any application for Shares, and may accept any application in whole or in
part, for any reason or for no reason.
12. The Company may not issue shares to bearer.
MODIFICATION OF RIGHTS
13. Whenever the capital of the Company is divided into different Classes the rights attached to any such Class
may, subject to any rights or restrictions for the time being attached to any Class, only be materially adversely
varied or abrogated with the consent in writing of the holders of a majority of not less than three-fourths of
the issued Shares of that Class or with the sanction of a Special Resolution passed at a separate meeting of the
holders of the Shares of that Class. To every such separate meeting all the provisions of these Articles relating
to general meetings of the Company or to the proceedings thereat shall, mutatis mutandis, apply, except that
the necessary quorum shall be one or more Persons at least holding or representing by proxy one-third in
nominal or par value amount of the issued Shares of the relevant Class (but so that if at any adjourned
meeting of such holders a quorum as above defined is not present, those Shareholders who are present shall
form a quorum) and that, subject to any rights or restrictions for the time being attached to the Shares of that
Class, every Shareholder of the Class shall have one vote for each Share of the Class held by him. For the
purposes of this Article the Directors may treat all the Classes or any two or more Classes as forming one
Class if they consider that all such Classes would be affected in the same way by the proposals under
consideration, but in any other case shall treat them as separate Classes.
14. The rights conferred upon the holders of the Shares of any Class issued with preferred or other rights shall
not, subject to any rights or restrictions for the time being attached to the Shares of that Class, be deemed to
be materially adversely varied or abrogated by,
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among other things, the creation, allotment or issue of further Shares ranking equally with or in priority or
subsequent to such existing Class or the redemption or purchase of any Shares of any Class by the Company.
The rights of the holders of Shares shall not be deemed to be materially adversely varied or abrogated by the
creation or issue of Shares with preferred or other rights including, without limitation, the creation of Shares
with enhanced or weighted voting rights.
CERTIFICATES
15. A Shareholder shall only be entitled to a share certificate if the Directors resolve that share certificates shall
be issued. Share certificates representing Shares, if any, shall be in such form as the Directors may determine.
Share certificates shall be signed by one or more Directors or other person authorised by the Directors. The
Directors may authorize certificates to be issued with the authorized signature(s) affixed by mechanical
process. All certificates for Shares shall be consecutively numbered or otherwise identified and shall specify
the Shares to which they relate. All certificates surrendered to the Company for transfer shall be cancelled
and subject to the Articles no new certificate shall be issued until the former certificate representing a like
number of relevant Shares shall have been surrendered and cancelled.
16. Every share certificate of the Company shall bear legends required under the applicable laws, including the
U.S. Securities Act.
17. Any two or more certificates representing Shares of any one Class held by any Shareholder may at the
Shareholder’s request be cancelled and a single new certificate for such Shares issued in lieu on payment (if
the Directors shall so require) of US$1.00 or such smaller sum as the Directors shall determine.
18. If a share certificate shall be damaged or defaced or alleged to have been lost, stolen or destroyed, a new
certificate representing the same Shares may be issued to the relevant Shareholder upon request subject to
delivery up of the old certificate or (if alleged to have been lost, stolen or destroyed) compliance with such
conditions as to evidence and indemnity and the payment of out-of-pocket expenses of the Company in
connection with the request as the Directors may think fit.
19. In the event that Shares are held jointly by several Persons, any request may be made by any one of the joint
holders and if so made shall be binding on all of the joint holders.
FRACTIONAL SHARES
20. The Directors may issue fractions of a Share and, if so issued, a fraction of a Share shall be subject to and
carry the corresponding fraction of liabilities (whether with respect to nominal or par value, premium,
contributions, calls or otherwise), limitations, preferences, privileges, qualifications, restrictions, rights
(including, without prejudice to the generality of the foregoing, voting and participation rights) and other
attributes of a whole Share. If more than one fraction of a Share of the same Class is issued to or acquired by
the same Shareholder such fractions shall be accumulated.
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LIEN
21. The Company has a first and paramount lien on every Share (whether or not fully paid) for all amounts
(whether presently payable or not) payable at a fixed time or called in respect of that Share. The Company
also has a first and paramount lien on every Share registered in the name of a Person indebted or under
liability to the Company (whether he is the sole registered holder of a Share or one of two or more joint
holders) for all amounts owing by him or his estate to the Company (whether or not presently payable). The
Directors may at any time declare a Share to be wholly or in part exempt from the provisions of this Article.
The Company's lien on a Share extends to any amount payable in respect of it.
22. The Company may sell, in such manner as the Directors in their absolute discretion think fit, any Share on
which the Company has a lien, but no sale shall be made unless an amount in respect of which the lien exists
is presently payable nor until the expiration of fourteen days after a notice in writing, demanding payment of
such part of the amount in respect of which the lien exists as is presently payable, has been given to the
registered holder for the time being of the Share, or the Persons entitled thereto by reason of his death or
bankruptcy.
23. For giving effect to any such sale the Directors may authorize some Person to transfer the Shares sold to the
purchaser thereof. The purchaser shall be registered as the holder of the Shares comprised in any such
transfer and he shall not be bound to see to the application of the purchase money, nor shall his title to the
Shares be affected by any irregularity or invalidity in the proceedings in reference to the sale.
24. The proceeds of the sale after deduction of expenses, fees and commission incurred by the Company shall be
received by the Company and applied in payment of such part of the amount in respect of which the lien
exists as is presently payable, and the residue shall (subject to a like lien for sums not presently payable as
existed upon the Shares prior to the sale) be paid to the Person entitled to the Shares immediately prior to the
sale.
CALLS ON SHARES
25. Subject to the terms of the allotment, the Directors may from time to time make calls upon the Shareholders
in respect of any amounts unpaid on their Shares by giving notice to such Shareholders at least fourteen days
prior to the specified time of payment, and each Shareholder shall pay to the Company at the time or times so
specified the amount called on such Shares.
26. The joint holders of a Share shall be jointly and severally liable to pay calls in respect thereof.
27. If a sum called in respect of a Share is not paid before or on the day appointed for payment thereof, the
Person from whom the sum is due shall pay interest upon the sum at the rate of 8% per annum from the day
appointed for the payment thereof to the time of the actual payment, but the Directors shall be at liberty to
waive payment of that interest wholly or in part.
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28. The provisions of these Articles as to the liability of joint holders and as to payment of interest shall apply in
the case of non-payment of any sum which, by the terms of issue of a Share, becomes payable at a fixed time,
whether on account of the amount of the Share, or by way of premium, as if the same had become payable by
virtue of a call duly made and notified.
29. The Directors may make arrangements on the issue of partly paid Shares for a difference between the
Shareholders, or the particular Shares, in the amount of calls to be paid and in the times of payment.
30. The Directors may, if they think fit, receive from any Shareholder willing to advance the same all or any part
of the moneys uncalled and unpaid upon any partly paid Shares held by him, and upon all or any of the
moneys so advanced may (until the same would, but for such advance, become presently payable) pay
interest at such rate (not exceeding without the sanction of an Ordinary Resolution, 8% per annum) as may be
agreed upon between the Shareholder paying the sum in advance and the Directors.
FORFEITURE OF SHARES
31. If a Shareholder fails to pay any call or installment of a call in respect of partly paid Shares on the day
appointed for payment, the Directors may, at any time thereafter during such time as any part of such call or
installment remains unpaid, serve a notice on him requiring payment of so much of the call or installment as
is unpaid, together with any interest which may have accrued.
32. The notice shall name a further day (not earlier than the expiration of fourteen days from the date of the
notice) on or before which the payment required by the notice is to be made, and shall state that in the event
of non-payment at or before the time appointed the Shares in respect of which the call was made will be liable
to be forfeited.
33. If the requirements of any such notice as aforesaid are not complied with, any Share in respect of which the
notice has been given may at any time thereafter, before the payment required by notice has been made, be
forfeited by a resolution of the Directors to that effect.
34. A forfeited Share may be sold or otherwise disposed of on such terms and in such manner as the Directors
think fit, and at any time before a sale or disposition the forfeiture may be cancelled on such terms as the
Directors think fit.
35. A Person whose Shares have been forfeited shall cease to be a Shareholder in respect of the forfeited Shares,
but shall, notwithstanding, remain liable to pay to the Company all moneys which at the date of forfeiture
were payable by him to the Company in respect of the Shares forfeited, but his liability shall cease if and
when the Company receives payment in full of the amount unpaid on the Shares forfeited.
36. A certificate in writing under the hand of a Director of the Company that a Share has been duly forfeited on a
date stated in the certificate, shall be conclusive evidence of the facts in the declaration as against all Persons
claiming to be entitled to the Share.
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37. The Company may receive the consideration, if any, given for a Share on any sale or disposition thereof
pursuant to the provisions of these Articles as to forfeiture and may execute a transfer of the Share in favour
of the Person to whom the Share is sold or disposed of and that Person shall be registered as the holder of the
Share, and shall not be bound to see to the application of the purchase money, if any, nor shall his title to the
Shares be affected by any irregularity or invalidity in the proceedings in reference to the disposition or sale.
38. The provisions of these Articles as to forfeiture shall apply in the case of non-payment of any sum which by
the terms of issue of a Share becomes due and payable, whether on account of the amount of the Share, or by
way of premium, as if the same had been payable by virtue of a call duly made and notified.
TRANSFER OF SHARES
39. The instrument of transfer of any Share shall be in writing and in any usual or common form or such other
form as the Directors may, in their absolute discretion, approve and be executed by or on behalf of the
transferor and if in respect of a nil or partly paid up Share, or if so required by the Directors, shall also be
executed on behalf of the transferee and shall be accompanied by the certificate (if any) of the Shares to
which it relates and such other evidence as the Directors may reasonably require to show the right of the
transferor to make the transfer. The transferor shall be deemed to remain a Shareholder until the name of the
transferee is entered in the Register in respect of the relevant Shares.
40. (a) The Directors may in their absolute discretion decline to register any transfer of Shares which is not
fully paid up or on which the Company has a lien.
(b) The Directors may also, but are not required to, decline to register any transfer of any Share unless:
(i) the instrument of transfer is lodged with the Company, accompanied by the certificate (if any)
for the Shares to which it relates and such other evidence as the Board may reasonably require
to show the right of the transferor to make the transfer;
(ii) the instrument of transfer is in respect of only one Class of Shares;
(iii) the instrument of transfer is properly stamped, if required;
(iv) in the case of a transfer to joint holders, the number of joint holders to whom the Share is to
be transferred does not exceed four;
(v) the Shares transferred are fully paid and free of any lien in favour of the Company; and
(vi) any applicable fee of such maximum sum as the Designated Stock Exchanges may determine
to be payable, or such lesser sum as the Board
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may from time to time require, related to the transfer is paid to the Company.
41. The registration of transfers may, on 14 days' notice being given by advertisement in such one or more
newspapers or by electronic means, be suspended and the Register closed at such times and for such periods
as the Directors may, in their absolute discretion, from time to time determine, provided always that such
registration of transfer shall not be suspended nor the Register of Members closed for more than 30 days in
any year.
42. All instruments of transfer that are registered shall be retained by the Company. If the Directors refuse to
register a transfer of any Shares, they shall within three months after the date on which the instrument of
transfer was lodged with the Company send to each of the transferor and the transferee notice of the refusal.
TRANSMISSION OF SHARES
43. The legal personal representative of a deceased sole holder of a Share shall be the only Person recognised by
the Company as having any title to the Share. In the case of a Share registered in the name of two or more
holders, the survivors or survivor, or the legal personal representatives of the deceased survivor, shall be the
only Person recognised by the Company as having any title to the Share.
44. Any Person becoming entitled to a Share in consequence of the death or bankruptcy of a Shareholder shall
upon such evidence being produced as may from time to time be required by the Directors, have the right
either to be registered as a Shareholder in respect of the Share or, instead of being registered himself, to make
such transfer of the Share as the deceased or bankrupt Person could have made; but the Directors shall, in
either case, have the same right to decline or suspend registration as they would have had in the case of a
transfer of the Share by the deceased or bankrupt Person before the death or bankruptcy.
45. A Person becoming entitled to a Share by reason of the death or bankruptcy of a Shareholder shall be entitled
to the same dividends and other advantages to which he would be entitled if he were the registered
Shareholder, except that he shall not, before being registered as a Shareholder in respect of the Share, be
entitled in respect of it to exercise any right conferred by membership in relation to meetings of the Company,
provided however, that the Directors may at any time give notice requiring any such Person to elect either to
be registered himself or to transfer the Share, and if the notice is not complied with within ninety days, the
Directors may thereafter withhold payment of all dividends, bonuses or other monies payable in respect of the
Share until the requirements of the notice have been complied with.
46. The Company may by Ordinary Resolution:
ALTERATION OF SHARE CAPITAL
(a) increase its share capital by such sum as the Ordinary Resolution shall prescribe and with such rights,
priorities and privileges annexed thereto, as the Company in
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general meeting may determine (provided that no such rights, priorities or privileges affect any right
of the Partnership under these Articles);
(b) consolidate and divide all or any of its share capital into Shares of larger amount than its existing
Shares;
(c) convert all or any of its paid-up Shares into stock, and reconvert that stock into paid-up Shares of any
denomination;
(d) by subdivision of its existing Shares or any of them divide the whole or any part of its share capital
into Shares of smaller amount than is fixed by the Memorandum or into Shares without par value; and
(e) cancel any Shares that at the date of the passing of the Ordinary Resolution have not been taken or
agreed to be taken by any Person and diminish the amount of its share capital by the amount of the
Shares so cancelled.
47. All new Shares created in accordance with the provisions of the preceding Article shall be subject to the same
provisions of the Articles with reference to the payment of calls, liens, transfer, transmission, forfeiture and
otherwise as the Shares in the original share capital.
48. Subject to the provisions of the Statute and the provisions of the Articles as regards the matters to be dealt
with by Ordinary Resolution, the Company may by Special Resolution:
(a) change its name;
(b) alter or add to the Articles;
(c) alter or add to the Memorandum with respect to any objects, powers or other matters specified
therein; and
(d) reduce its share capital or any capital redemption reserve fund.
REDEMPTION, PURCHASE AND SURRENDER OF SHARES
49. Subject to the provisions of the Statute, the Company may issue Shares that are to be redeemed or are liable
to be redeemed at the option of the Shareholder or the Company. The redemption of such Shares shall be
effected in such manner and upon such terms as the Board may determine before the issue of such Shares.
50. Subject to the provisions of the Statute, the Company may, by agreement with the relevant Shareholder,
repurchase its own Shares (including any redeemable Shares) provided that the manner and terms of such
purchase have been approved by the Directors or by Ordinary Resolution (provided further that no repurchase
may be made contrary to the terms or manner recommended by the Directors).
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51. The Company may make a payment in respect of the redemption or repurchase of its own Shares in any
manner permitted by the Statute, including out of capital.
52. The Directors may accept the surrender for no consideration of any fully paid Share.
TREASURY SHARES
53. The Directors may, prior to the purchase, redemption or surrender of any Share, determine that such Share
shall be held as a Treasury Share.
54. The Directors may determine to cancel a Treasury Share or transfer a Treasury Share on such terms as they
think proper (including, without limitation, for nil consideration).
GENERAL MEETINGS
55. All general meetings other than annual general meetings shall be called extraordinary general meetings.
56. (a) The Company may in each year hold a general meeting as its annual general meeting and shall
specify the meeting as such in the notices calling it. The annual general meeting shall be held at such
time and place as may be determined by the Directors.
(b) At these meetings the report of the Directors (if any) shall be presented.
57. (a) The Board or the Chairman may call general meetings, and they shall on a Shareholders’ requisition
forthwith proceed to convene an extraordinary general meeting of the Company.
(b) A Shareholders’ requisition is a requisition of Shareholders holding at the date of deposit of the
requisition in aggregate not less than one-third of the voting rights of such of the issued Shares of the
Company as at that date of the deposit carries the right of voting at general meetings of the Company.
(c) The requisition must state the objects of the meeting, set forth a form of any resolutions proposed by
the requisitionists for consideration at the meeting and must be signed by the requisitionists and
deposited at the Registered Office, and may consist of several documents in like form each signed by
one or more requisitionists.
(d) If the Directors do not within 21 days from the date of the deposit of the requisition duly proceed to
convene a general meeting to be held within a further 21 days, the requisitionists, or any of them
representing more than one-half of the total voting rights of all of them, may themselves convene a
general meeting, but any meeting so convened shall not be held after the expiration of three months
after the expiration of 21 days from the date of the deposit of the requisition.
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(e) A general meeting convened as aforesaid by requisitionists shall be convened in the same manner as
nearly as possible as that in which general meetings are to be convened by Directors.
(f) Notwithstanding any other provision of the Articles, the Shareholders who requisition a meeting:
(i) may propose only Ordinary Resolutions to be considered and voted upon at such meeting; and
(ii) shall have no right to propose any resolutions with respect to the election, appointment or
removal of Directors or with respect to the size of the Board.
(g) Save as set out in this Article 57, the Shareholders have no right to propose resolutions to be
considered or voted upon at annual general meetings or extraordinary general meetings of the
Company.
NOTICE OF GENERAL MEETINGS
58. At least 10 days’ advance notice but not more than 60 days' advance notice shall be given for any general
meeting. Every notice shall be exclusive of the day on which it is given or deemed to be given and of the day
for which it is given and shall specify the place, the day and the hour of the meeting as determined by the
Board and the general nature of the business and shall be given in the manner hereinafter mentioned or in
such other manner if any as may be prescribed by the Board, provided that a general meeting of the Company
shall, whether or not the notice specified in this Article has been given and whether or not the provisions of
these Articles regarding general meetings have been complied with, be deemed to have been duly convened if
it is so agreed:
(a) in the case of an annual general meeting by all the Shareholders (or their proxies) entitled to attend
and vote thereat; and
(b) in the case of an extraordinary general meeting by a majority in number of the Shareholders (or their
proxies) having a right to attend and vote at the meeting, being a majority together holding not less
than 95% in par value of the Shares giving that right.
59. The accidental omission to give notice of a meeting to or the non-receipt of a notice of a meeting by any
Shareholder shall not invalidate the proceedings at any meeting.
PROCEEDINGS AT GENERAL MEETINGS
60. No business shall be transacted at any general meeting unless a quorum of Shareholders is present at the time
when the meeting proceeds to business. The quorum required for a general meeting of Shareholders consists
of at least one Shareholder, present in person or by proxy and entitled to vote, holding in aggregate not less
than one-third of the voting power of the Shares in issue carrying a right to vote at such meeting.
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61. If within half an hour from the time appointed for the meeting a quorum is not present, the meeting, if
convened upon the requisition of Shareholders, shall be dissolved. In any other case it shall stand adjourned
to the same day in the next week, at the same time and place, and if at the adjourned meeting a quorum is not
present within half an hour from the time appointed for the meeting the Shareholder or Shareholders present
and entitled to vote shall form a quorum.
62. If the Directors wish to make this facility available for a specific general meeting or all general meetings of
the Company, participation in any general meeting of the Company may be by means of a telephone or
similar communication equipment by way of which all Persons participating in such meeting can
communicate with each other and such participation shall be deemed to constitute presence in person at the
meeting.
63. The Chairman, if any, of the Board shall preside as chairman at every general meeting of the Company.
64. If there is no Chairman, or if at any general meeting he is not present within sixty minutes after the time
appointed for holding the meeting or is unwilling to act as chairman, any Director or Person nominated by the
Directors shall preside as chairman, failing which the Shareholders present in person or by proxy shall choose
any Person present to be chairman of that meeting.
65. The chairman may with the consent of any general meeting at which a quorum is present (and shall if so
directed by the meeting) adjourn a meeting from time to time and from place to place, but no business shall
be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the
adjournment took place. When a meeting, or adjourned meeting, is adjourned for fourteen days or more,
notice of the adjourned meeting shall be given as in the case of an original meeting. Save as aforesaid it shall
not be necessary to give any notice of an adjournment or of the business to be transacted at an adjourned
meeting.
66. The Directors may cancel or postpone any duly convened general meeting at any time prior to such meeting,
except for general meetings requisitioned by the Shareholders in accordance with these Articles, for any
reason or for no reason, upon notice in writing to Shareholders. A postponement may be for a stated period of
any length or indefinitely as the Directors may determine.
67. At any general meeting a resolution put to the vote of the meeting shall be decided on a poll.
68. A poll shall be taken in such manner as the chairman directs and the result of the poll shall be deemed to be
the resolution of the meeting at which the poll was demanded.
69. In the case of an equality of votes, the chairman of the meeting shall be entitled to a second or casting vote.
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70. A poll on the election of a chairman of the meeting or on a question of adjournment shall be taken forthwith.
A poll demanded on any other question shall be taken at such time as the chairman of the meeting directs.
VOTES OF SHAREHOLDERS
71. Subject to any rights and restrictions for the time being attached to any Share, every holder of an Ordinary
Share and every Person representing a holder of an Ordinary Share by proxy shall have one (1) vote for each
Ordinary Share of which such Person or the Person represented by proxy is the holder.
72. In the case of joint holders the vote of the senior who tenders a vote whether in person or by proxy shall be
accepted to the exclusion of the votes of the other joint holders and for this purpose seniority shall be
determined by the order in which the names stand in the Register.
73. A Shareholder of unsound mind, or in respect of whom an order has been made by any court having
jurisdiction in lunacy, may vote in respect of Shares carrying the right to vote held by him, by his committee,
or other Person in the nature of a committee appointed by that court, and any such committee or other Person,
may vote in respect of such Shares by proxy.
74. No Shareholder shall be entitled to vote at any general meeting of the Company unless all calls, if any, or
other sums presently payable by him in respect of Shares carrying the right to vote held by him have been
paid.
75. Votes may be given either personally or by proxy.
76. The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly
authorized in writing or, if the appointor is a corporation, either under Seal or under the hand of an officer or
attorney duly authorized. A proxy need not be a Shareholder.
77. An instrument appointing a proxy may be in any usual or common form or such other form as the Directors
may approve.
78. The instrument appointing a proxy shall be deposited at the Registered Office or at such other place as is
specified for that purpose in the notice convening the meeting, or in any instrument of proxy sent out by the
Company.
79. If both a Shareholder who has appointed a proxy pursuant to the Voting Agreement and the proxy appointed
by that Shareholder attend a general meeting and the proxy casts a vote, the vote cast by the proxy, rather
than any vote cast by the Shareholder personally, shall be counted to the exclusion of any vote purportedly
cast by the Shareholder.
80. A resolution in writing signed by all the Shareholders for the time being entitled to receive notice of and to
attend and vote at general meetings of the Company (or being
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corporations by their duly authorized representatives) shall be as valid and effective as if the same had been
passed at a general meeting of the Company duly convened and held.
CORPORATIONS ACTING BY REPRESENTATIVES AT MEETINGS
81. Any corporation which is a Shareholder or a Director may by resolution of its directors or other governing
body authorize such Person as it thinks fit to act as its representative at any meeting of the Company or of any
meeting of holders of a Class or of the Directors or of a committee of Directors, and the Person so authorized
shall be entitled to exercise the same powers on behalf of the corporation which he represents as that
corporation could exercise if it were an individual Shareholder or Director.
CLEARING HOUSES
82. If a clearing house (or its nominee) is a Shareholder of the Company it may, by resolution of its directors or
other governing body or by power of attorney, authorize such Person or Persons as it thinks fit to act as its
representative or representatives at any general meeting of the Company or at any general meeting of any
class of Shareholders of the Company provided that, if more than one Person is so authorized, the
authorization shall specify the number and class of Shares in respect of which each such Person is so
authorized. A Person so authorized pursuant to this Article shall be entitled to exercise the same powers on
behalf of the clearing house (or its nominee) which he represents as that clearing house (or its nominee) could
exercise if it were an individual Shareholder holding the number and Class of Shares specified in such
authorization.
DIRECTORS
83. The Board shall consist of such number of Directors as the Board may determine from time to time, provided
that, unless otherwise determined by the Shareholders in a general meeting acting by Ordinary Resolution, the
Board shall consist of not less than nine Directors for so long as SoftBank has the right to nominate a
Director, and if SoftBank no longer has such right, not less than seven Directors. In no event shall the Board
consist of less than five Directors. The Board may expand the number of Directors on the Board, subject to
any maximum number determined from time to time by the Board with the approval of the Shareholders at a
general meeting acting by Ordinary Resolution.
84. In the event of a vacancy due to an increase in the size of the Board, the party entitled to designate a Director
nominee to stand for election with respect to such newly created seat on the Board at the next annual general
meeting of Shareholders pursuant to Article 90 hereof shall be entitled to appoint any Person as an interim
Director to fill such vacancy until the next annual general meeting of Shareholders after such appointment.
85. For so long as the Partnership Condition is satisfied, notwithstanding anything in Article 83 or Article 84 to
the contrary, if at any time the total number of Directors on the Board nominated or appointed by the
Partnership is less than a simple majority for any reason, including because a Director previously nominated
by the Partnership ceased to be a Director or because the Partnership had previously not exercised its right to
nominate or appoint a simple majority of the total number of Directors on the Board pursuant to
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Article 90 hereof, the Partnership shall be entitled (in its sole discretion) to nominate or appoint such number
of additional Directors to the Board as necessary to ensure that the Directors nominated or appointed by the
Partnership comprise a simple majority of the total number of Directors on the Board. The appointment of
additional Directors to the Board pursuant to this Article 85 shall become effective upon the delivery by the
Partnership of a written notice (duly executed by the Partnership’s General Partner on behalf of the
Partnership) to the Company, without the requirement for any further vote or approval by the Shareholders or
the Board and, if necessary, notwithstanding the provisions of Article 83, the number of Directors on the
Board shall automatically be increased to allow for the appointment of such additional Directors.
86. For so long as Shares or ADSs are listed on a Designated Stock Exchange, the Directors shall include at least
such number of Independent Directors as applicable law, rules or regulations or the Designated Stock
Exchange Rules require as determined by the Board.
87. The Board shall have a Chairman elected and appointed by a majority of the Directors then in office. The
period for which the Chairman shall hold office shall also be determined by a majority of all of the Directors
then in office. The Chairman shall preside as chairman at every meeting of the Board. To the extent the
Chairman is not present at a meeting of the Board within sixty minutes after the time appointed for holding
the same, the attending Directors may choose one of their number to be the chairman of the meeting.
88. The Board shall be divided into three groups designated as Group I, Group II and Group III, with, as nearly
equal a number of Directors in each group as possible. Subject to the preceding sentence, (i) the Partnership
shall have the right to determine the number of Directors in each group with respect to Directors added to the
Board pursuant to Article 85 hereof and (ii) the Board shall determine the number of Directors in each group
in all other circumstances. Directors assigned to Group I shall initially serve until the first annual general
meeting following the Articles Effectiveness Date. Directors assigned to Group II shall initially serve until
the second annual general meeting following the Articles Effectiveness Date; and Directors assigned to
Group III shall initially serve until the third annual general meeting following the Articles Effectiveness Date.
Commencing with the first annual general meeting following the Articles Effectiveness Date, Directors
elected to succeed those Directors of the group the term of which shall then expire shall be elected for a term
of office to expire at the third succeeding annual general meeting after their election. Upon the Articles
Effectiveness Date Joseph C. Tsai, Michael Evans and Jonathan Zhaoxi Lu shall be the initial Group I
Directors, Daniel Yong Zhang, Chee Hwa Tung and Jerry Yang shall be the initial Group II Directors and
Jack Yun Ma, Masayoshi Son and Walter Teh Ming Kwauk shall be the initial Group III Directors. At such
time, Jack Yun Ma, Jonathan Zhaoxi Lu, Joseph C. Tsai and Daniel Yong Zhang and shall be designated as
nominees of the Partnership and Masayoshi Son shall be designated as the nominee of SoftBank for all
purposes hereunder.
89. Each Director shall hold office until his successor is duly elected or appointed or his earlier resignation or
removal notwithstanding any agreement between the Company and such Director (but without prejudice to
any claim for damages under such agreement)
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90. Director nominees shall be elected by an Ordinary Resolution of Shareholders at each annual general meeting
of the Company to fill the seats of those Directors whose terms expire at such annual general meeting. The
persons to stand for election shall be nominated as follows:
(a) For so long as the Partnership Condition is satisfied, the Partnership shall have the right to nominate
up to such number of persons who shall stand for election as Directors as may be required to ensure
that Directors nominated or appointed by the Partnership shall constitute a simple majority of the total
number of Directors on the Board, with as equal a number of such nominated Directors assigned to
each group of Directors as possible.
(b) SoftBank shall have the right to nominate one Person to stand for election as a Director belonging to
Group III for so long as SoftBank, together with any SoftBank Affiliates, holds Ordinary Shares or
ADSs representing at least 15% of the outstanding Ordinary Shares.
(c) For so long as the Partnership Condition is satisfied, the nominating and corporate governance
committee shall have the right to nominate the Persons who shall stand for election as Directors for
the remainder of the places then available for election to the Board (including any vacancies resulting
for the failure of the Partnership to nominate or appoint the maximum number of Directors permitted
pursuant to subsection (a) of this Article) ;
(d) Upon a failure to satisfy the Partnership Condition (and subject to subsection (b) of this Article), the
Board shall have the right to nominate the Persons who shall stand for election as Directors for the
remainder of the places then available for election to the Board.
91. If a Director nominee is not elected by the Shareholders or a Director ceases to serve as a member of the
Board for any reason, the party entitled pursuant to Article 90 to nominate or appoint such person, as
applicable (regardless of whether such person was in fact nominated or appointed by such party), shall have
the right to appoint a different person to serve as an interim Director of the class in which the vacancy exists
until the next annual general meeting of the Company. At the next annual general meeting after such
appointment, the party entitled to appoint such interim Director (regardless of whether such person was in
fact nominated or appointed by such party) shall have the right to nominate a person (who, in the case of the
Partnership, cannot be the original nominee) to stand for election for the remainder of the term of the group of
Directors to which the original nominee would have belonged or the former Director belonged, as applicable.
92. All Director nominations and appointments by the Partnership, SoftBank, and the nominating and corporate
governance committee shall become effective upon the delivery by the nominating or appointing party of a
written notice (duly executed by the Partnership’s General Partner on behalf of the Partnership, an authorized
representative of SoftBank, or a majority of members of the nominating and corporate governance
22
committee, as the case may) be to the Company, without the requirement for any further vote or approval by
the Shareholders or the Board.
93. The Partnership may not transfer or otherwise delegate or give a proxy to any third party with respect to its
right to nominate Directors.
94. Subject to subsections (a) through (c) of Article 115:
(a) for so long as the Partnership Condition is satisfied, the Directors nominated or appointed by the
Partnership are subject to removal, with or without cause, only by the Partnership;
(b) for so long as SoftBank, together with any SoftBank Affiliates, holds Ordinary Shares or ADSs
representing at least 15% of the outstanding Ordinary Shares, the Director nominated or appointed by
SoftBank shall be subject to removal, with or without cause, only by SoftBank;
(c) except as described in subsections (a) and (b) of this Article, so long as the Partnership Condition is
satisfied any Director may be removed for cause only by a vote of the majority of the Board upon the
recommendation of the nominating and corporate governance committee; and
(d) Upon a failure to satisfy the Partnership Condition, any Director (subject to subsection (b) of this
Article) may be removed by Ordinary Resolution, with or without cause.
95. The Board may, from time to time, and except as required by applicable law or the Designated Stock
Exchange Rules, adopt, institute, amend, modify or revoke the corporate governance policies or initiatives of
the Company, which shall be intended to set forth the guiding principles and policies of the Company and the
Board on various corporate governance related matters as the Board shall determine by resolution from time
to time.
96. A Director shall not be required to hold any Shares in the Company by way of qualification. A Director who
is not a Shareholder of the Company shall nevertheless be entitled to attend and speak at general meetings.
97. The remuneration of the Directors shall be determined by the Board.
98. The Directors shall be entitled to be paid their travelling, hotel and other expenses properly incurred by them
in going to, attending and returning from meetings of the Directors, or any committee of the Directors, or
general meetings of the Company, or otherwise in connection with the business of the Company, or to receive
such fixed allowance in respect thereof as may be determined by the Directors from time to time, or a
combination partly of one such method and partly the other.
99. Any Director may in writing appoint another person to be his proxy to attend and vote on his behalf in
accordance with the provisions set forth in this Article at any meeting of the
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Board at which he is unable to be present. A proxy who attends such a meeting shall be counted in the
quorum. Every such proxy shall be entitled to attend and vote in such appointing Director’s place when the
appointing Director is not personally present at such meeting; provided, that, prior to each meeting of the
Board at which the proxy is to vote, the Director shall instruct the proxy as to the manner in which he is to
cast the vote and shall inform the Board accordingly and the proxy shall be entitled to cast a vote on behalf of
the Director only in accordance with such instructions. Where the proxy is a Director he shall be entitled to
have such separate vote on behalf of the Director for which he is acting as proxy in addition to his own vote.
A Director may at any time in writing revoke the appointment of a proxy appointed by him. Such proxy shall
not be an officer of the Company and shall be deemed to be the agent of the Director appointing him. The
remuneration of such proxy shall be payable out of the remuneration of the Director appointing him and the
proportion thereof shall be agreed between them. The signature of a proxy to any resolution in writing of the
Directors or a committee thereof shall, unless the terms of the appointment provides to the contrary, be as
effective as the signature of the Director appointing him as proxy. For the avoidance of doubt, any Director
that has the right to attend any meeting of a committee established by the Board pursuant to Article 106 or
Article 107 (including as a non-voting observer) may appoint a proxy to act in his place at such meeting
pursuant to this Article 99, and the terms of this Article 99 shall apply to such proxy without limitation.
Where the Director appointing a proxy is an Interested Director in respect of a matter to be considered at a
meeting of the Board, the Interested Director shall procure that the proxy declares the nature of his interest at
such meeting and the proxy may be counted in the quorum but shall not be entitled to vote on behalf of the
Interested Director in respect of any contract or proposed contract or arrangement in which such Interested
Director is interested. For the avoidance of doubt, a person who is appointed a proxy shall not in consequence
thereof become an Indemnified Person.
POWERS AND DUTIES OF DIRECTORS
100. Subject to the Companies Law and these Articles, the business of the Company shall be managed by the
Directors, who may pay all expenses incurred in setting up and registering the Company and may exercise all
powers of the Company.
101. The Directors may from time to time provide for the management of the affairs of the Company in such
manner as they shall think fit and the provisions contained in the three next following Articles shall not limit
the general powers conferred by this Article.
102. The Directors from time to time and at any time may establish any committees, local boards or agencies for
managing any of the affairs of the Company and may appoint any Person to be a member of such committees
or local boards and may appoint any managers or agents of the Company and may fix the remuneration of any
such Person.
103. Subject to these Articles, the Directors may from time to time appoint any Person, whether or not a Director,
to hold such office in the Company as the Directors may think necessary for the administration of the
Company, including but not limited to, the office of president, chief executive officer, chief financial officer,
chief operating officer, chief
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risk officer, chief technology officer, one or more vice-presidents, treasurer, assistant treasurer, manager or
controller, and for such term and at such remuneration (whether by way of salary or commission or
participation in profits or partly in one way and partly in another), and with such powers and duties as the
Directors may think fit. Any Person so appointed by the Directors may be removed by the Directors.
104. No resolution passed by the Company in general meeting shall invalidate any prior act of the Directors that
would have been valid if that resolution had not been passed.
105. The Directors may appoint any Person to be a Secretary (and if need be an assistant Secretary or assistant
Secretaries) who shall hold office for such term, at such remuneration and upon such conditions and with
such powers as they think fit. Any Secretary or assistant Secretary so appointed by the Directors may be
removed by the Directors or by the Company by Ordinary Resolution.
106. Subject to Article 107 hereof, the Board may establish and delegate any of its powers to committees
consisting of such Persons as it thinks fit; any committee so formed shall in the exercise of the powers so
delegated conform to any regulations that may be imposed on it by the Board; provided, that, for so long as
SoftBank has the right to nominate one Person to stand for election as a Director pursuant to Article 90(b),
the Director nominated or appointed by SoftBank shall be entitled to (a) receive the same notice of meetings
of each committee of the Board as is provided to members of such committees, (b) receive copies of all
materials distributed to committee members generally in connection with such meetings, in each case at the
same time that such notice and such materials are provided to committee members, and (c) upon prior notice
to the relevant committee, attend, observe and participate in any discussions (but not participate in any vote,
consent or other action) at any meeting of a committee to which such Director has not been appointed by the
Board; provided, further, that such Director may be excluded from any such committee meeting or portion
thereof and may be prohibited from receiving any related materials or portion thereof, to the extent (x)
required by Law, (y) any communication from counsel protected by attorney-client privilege will be delivered
during such meeting or in such materials and the presence or receipt, as applicable, of such Director would be
reasonably likely to cause such communication to not be privileged, or (z) the Board determines in good faith
that there exists, with respect to the subject matter of such committee meeting or related materials, an actual
or potential conflict of interest between such Director or SoftBank and the Company such that a similarly
positioned member of such committee would be recused from such matter in accordance with these Articles
or any corporate governance guidelines, charter of such committee, code of ethics, code of conduct, related
party transaction policy or other statement of governance or ethical principles adopted by the Company or the
Board.
107. The Board shall establish an audit committee, a compensation committee and a nominating and corporate
governance committee. Each of these committees shall be empowered to do all things necessary to exercise
the rights of such committee set forth in these Articles and shall have such powers as the Board may delegate
pursuant to Article 106. Each of the audit committee, the compensation committee and the nominating and
corporate governance committee shall consist of at least three Directors (or such larger
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minimum number as may be required from time to time by the Designated Stock Exchange Rules); provided,
that, for so long as SoftBank has the right to nominate one Person to stand for election as a Director pursuant
to Article 90(b), the observation rights granted to the Director nominated or appointed by SoftBank pursuant
to Article 106 shall apply to each of the audit committee, the compensation committee and the nominating
and corporate governance committee. The majority of the committee members on each of the compensation
committee and nominating and corporate governance committee shall be Independent Directors. The audit
committee shall be made up of such number of Independent Directors as required from time to time by the
Designated Stock Exchange Rules or otherwise required by applicable law.
108. The Directors may from time to time and at any time by power of attorney (whether under Seal or under
hand) or otherwise appoint an Attorney or Authorized Signatory for such purposes and with such powers,
authorities and discretion (not exceeding those vested in or exercisable by the Directors under these Articles)
and for such period and subject to such conditions as they may think fit, and any such power of attorney or
other appointment may contain such provisions for the protection and convenience of Persons dealing with
any such Attorney or Authorized Signatory as the Directors may think fit, and may also authorize any such
Attorney or Authorized Signatory to delegate all or any of the powers, authorities and discretion vested in
him.
109. The Directors from time to time and at any time may delegate to any such committee, local board, manager or
agent any of the powers, authorities and discretions for the time being vested in the Directors and may
authorize the members for the time being of any such local board, or any of them to fill any vacancies therein
and to act notwithstanding vacancies and any such appointment or delegation may be made on such terms and
subject to such conditions as the Directors may think fit and the Directors may at any time remove any Person
so appointed and may annul or vary any such delegation, but no Person dealing in good faith and without
notice of any such annulment or variation shall be affected thereby.
110. Any such delegates as aforesaid may be authorized by the Directors to sub-delegate all or any of the powers,
authorities, and discretion for the time being vested in them.
BORROWING POWERS OF DIRECTORS
111. The Directors may exercise all the powers of the Company to borrow money and to mortgage or charge its
undertaking, property and uncalled capital or any part thereof, to issue debentures, debenture stock and other
securities whenever money is borrowed or as security for any debt, liability or obligation of the Company or
of any third party.
THE SEAL
112. The Seal shall not be affixed to any instrument except by the authority of a resolution of the Directors
provided always that such authority may be given prior to or after the affixing of the Seal and if given after
may be in general form confirming a number of affixings of the Seal. The Seal shall be affixed in the
presence of a Director or a Secretary
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(or an assistant Secretary) or in the presence of any one or more Persons as the Directors may appoint for the
purpose and every Person as aforesaid shall sign every instrument to which the Seal is so affixed in their
presence.
113. The Company may maintain a facsimile of the Seal in such countries or places as the Directors may appoint
and such facsimile Seal shall not be affixed to any instrument except by the authority of a resolution of the
Directors provided always that such authority may be given prior to or after the affixing of such facsimile
Seal and if given after may be in general form confirming a number of affixings of such facsimile Seal. The
facsimile Seal shall be affixed in the presence of such Person or Persons as the Directors shall for this purpose
appoint and such Person or Persons as aforesaid shall sign every instrument to which the facsimile Seal is so
affixed in their presence and such affixing of the facsimile Seal and signing as aforesaid shall have the same
meaning and effect as if the Seal had been affixed in the presence of and the instrument signed by a Director
or a Secretary (or an assistant Secretary) or in the presence of any one or more Persons as the Directors may
appoint for the purpose.
114. Notwithstanding the foregoing, a Secretary or any assistant Secretary shall have the authority to affix the
Seal, or the facsimile Seal, to any instrument for the purposes of attesting authenticity of the matter contained
therein but which does not create any obligation binding on the Company.
115. The office of any Director shall be vacated, if the Director:
DISQUALIFICATION OF DIRECTORS
(a) becomes bankrupt or makes any arrangement or composition with his creditors generally;
(b) dies or is found to be of unsound mind;
(c) resigns his office by notice in writing to the Company;
(d) is removed from office pursuant to any other provision of these Articles.
PROCEEDINGS OF DIRECTORS
116. The Directors may meet together (either within or without the Cayman Islands) for the despatch of business,
adjourn, and otherwise regulate their meetings and proceedings as they think fit. Questions arising at any
meeting shall be decided by a majority of votes. At any meeting of the Directors, each Director present shall
be entitled to one vote. In case of an equality of votes the Chairman shall have a second or casting vote. A
Director may, and a Secretary or assistant Secretary on the requisition of a Director shall, at any time
summon a meeting of the Directors.
117. A Director may participate in any meeting of the Directors, or of any committee appointed by the Directors of
which such Director is a member, by means of telephone video-conference facility or similar communication
equipment by way of which all
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Persons participating in such meeting can communicate with each other and such participation shall be
deemed to constitute presence in person at the meeting.
118. The quorum necessary for the transaction of the business of the Directors may be fixed by the Board, and
unless so fixed at another number, the quorum shall be a majority of the Directors then in office.
119. Any Interested Director shall declare the nature of his interest at a meeting of the Directors. A general notice
given to the Directors by any Director to the effect that he is affiliated with any specified Person and is to be
regarded as interested in any contract which may thereafter be made with that Person shall be deemed a
sufficient declaration of interest in regard to any contract so made. An Interested Director shall be counted in
the quorum but shall not be entitled to vote in respect of any contract or proposed contract or arrangement in
which he is interested. Except with the prior approval of a majority of the non-Interested Directors, the
Company will not, and will cause each of its Subsidiaries not to, enter into or engage in any transaction or
agreement to which the Company or any of its Subsidiaries, on the one hand, and any such Interested Director
or Person affiliated with such Interested Director, on the other hand, are parties or receive any direct or
indirect economic or other benefits (except to the extent of their pro rata share in benefits accruing to other
Shareholders of the Company).
120. Subject to any corporate governance policies adopted by the Board, a Director may hold any other office or
place of profit under the Company (other than the office of auditor) in conjunction with his office of Director
for such period and on such terms (as to remuneration and otherwise) as the Directors may determine and no
Director or intending Director shall be disqualified by his office from contracting with the Company either
with regard to his tenure of any such other office or place of profit or as vendor, purchaser or otherwise, nor
shall any such contract or arrangement entered into by or on behalf of the Company in which any Director is
in any way interested, be liable to be avoided, nor shall any Director so contracting or being so interested be
liable to account to the Company for any profit realized by any such contract or arrangement by reason of
such Director holding that office or of the fiduciary relation thereby established. Subject to any corporate
governance policies adopted by the Board, a Director, notwithstanding his interest, may be counted in the
quorum present at any meeting of the Directors whereat he or any other Director is appointed to hold any
such office or place of profit under the Company or whereat the terms of any such appointment are arranged
and he may vote on any such appointment or arrangement.
121. The Directors shall cause minutes to be made for the purpose of recording:
(a) all appointments of officers made by the Directors;
(b) the names of the Directors present at each meeting of the Directors and of any committee of the
Directors; and
(c) all resolutions and proceedings at all meetings of the Company, and of the Directors and of
committees of Directors.
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122. When the Chairman and the Secretary of a meeting of the Directors signs the minutes of such meeting the
same shall be deemed to have been duly held notwithstanding that all the Directors have not actually come
together or that there may have been a technical defect in the proceedings, provided always that a proper
notice of the meeting (i) has been given to all Directors or (ii) has been waived or the Directors have
consented to holding the meeting, or minutes thereof have been approved, by such Director(s).
123. A resolution in writing signed by all the Directors or all the members of a committee of Directors entitled to
receive notice of a meeting of Directors or committee of Directors, as the case may be, shall be as valid and
effectual as if it had been passed at a duly called and constituted meeting of Directors or committee of
Directors, as the case may be. When signed a resolution may consist of several documents each signed by one
or more of the Directors.
124. The continuing Directors may act notwithstanding any vacancy in their body but if and for so long as their
number is reduced below the number fixed by or pursuant to these Articles as the necessary quorum of
Directors, the continuing Directors may act for the purpose of increasing the number, or of summoning a
general meeting of the Company, but for no other purpose.
125. The Directors may elect a chairman of their meetings and determine the period for which he is to hold office
but if no such chairman is elected, or if at any meeting the chairman is not present within fifteen minutes after
the time appointed for holding the meeting, the Directors present may choose one of their number to be
chairman of the meeting.
126. The Board shall designate a chairman of any committee established by Board. If no such chairman is elected,
or if at any meeting the chairman is not present within sixty minutes after the time appointed for holding the
meeting, the committee members present may choose one of their number to be chairman of the meeting.
127. A committee established by the Directors may meet and adjourn as it thinks proper. Subject to any
regulations imposed on it by the Directors, questions arising at any meeting shall be determined by a majority
of votes of the committee members present and in case of an equality of votes the chairman shall have a
second or casting vote.
128. All acts done by any meeting of the Directors or of a committee of Directors, or by any Person acting as a
Director, shall notwithstanding that it be afterwards discovered that there was some defect in the appointment
of any such Director or Person acting as aforesaid, or that they or any of them were disqualified, be as valid
as if every such Person had been duly appointed and was qualified to be a Director.
PRESUMPTION OF ASSENT
129. A Director of the Company who is present at a meeting of the Board at which action on any Company matter
is taken shall be presumed to have assented to the action taken unless his dissent shall be entered in the
minutes of the meeting or unless he shall file his written dissent from such action with the person acting as
the chairman or secretary of the meeting before the adjournment thereof or shall forward such dissent by
registered post
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to such person immediately after the adjournment of the meeting. Such right to dissent shall not apply to a
Director who voted in favour of such action.
DIVIDENDS
130. Subject to any rights and restrictions for the time being attached to any Shares, the Directors may from time
to time declare dividends (including interim dividends) and other distributions on Shares in issue and
authorize payment of the same out of the funds of the Company lawfully available therefor.
131. Subject to any rights and restrictions for the time being attached to any Shares, the Company by Ordinary
Resolution may declare dividends, but no dividend shall exceed the amount recommended by the Directors.
132. Except in so far as the rights attaching to, or the terms of issue of, any Share otherwise provide:
(a) all dividends shall be declared and paid according to the amounts paid up on the Shares in respect of
which the dividend is paid, but no amount paid up on a Share in advance of calls shall be treated for
the purposes of this Article as paid up on the Share; and
(b) all dividends shall be apportioned and paid pro rata according to the amounts paid up on the Shares
during any portion or portions of the period in respect of which the dividend is paid.
133. The Directors may, before recommending or declaring any dividend, set aside out of the funds legally
available for distribution such sums as they think proper as a reserve or reserves which shall, in the absolute
discretion of the Directors be applicable for meeting contingencies, or for equalizing dividends or for any
other purpose to which those funds may be properly applied and pending such application may in the absolute
discretion of the Directors, either be employed in the business of the Company or be invested in such
investments (other than Shares of the Company) as the Directors may from time to time think fit.
134. Any dividend payable in cash to the holder of Shares may be paid in any manner determined by the Directors.
If paid by check it shall be sent by mail addressed to the holder at his address in the Register, or addressed to
such Person and at such addresses as the holder may direct. Every such check or warrant shall, unless the
holder or joint holders otherwise direct, be made payable to the order of the holder or, in the case of joint
holders, to the order of the holder whose name stands first on the Register in respect of such Shares, and shall
be sent at his or their risk and payment of the check or warrant by the bank on which it is drawn shall
constitute a good discharge to the Company.
135. The Directors may determine that a dividend shall be paid wholly or partly by the distribution of specific
assets (which may consist of the shares or securities of any other company) and may settle all questions
concerning such distribution; provided, that the
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fair value of such specific assets shall be determined and fixed by a majority of the Independent Directors.
136. Subject to any rights and restrictions for the time being attached to any Shares, all dividends shall be declared
and paid according to the amounts paid up on the Shares, but if and for so long as nothing is paid up on any
of the Shares dividends may be declared and paid according to the par value of the Shares. No amount paid
on a Share in advance of calls shall, while carrying interest, be treated for the purposes of this Article as paid
on the Share.
137. If several Persons are registered as joint holders of any Share, any of them may give effectual receipts for any
dividend or other moneys payable on or in respect of the Share.
138. No dividend shall bear interest against the Company.
139. Any dividend unclaimed after a period of six years from the date of declaration of such dividend may be
forfeited by the Board and, if so forfeited, shall revert to the Company.
ACCOUNTS, AUDIT AND ANNUAL RETURN AND DECLARATION
140. The books of account relating to the Company's affairs shall be kept in such manner as may be determined
from time to time by the Directors.
141. The books of account shall be kept at the Registered Office, or at such other place or places as the Directors
think fit, and shall always be open to the inspection of the Directors.
142. The Directors may from time to time determine whether and to what extent and at what times and places and
under what conditions or regulations the accounts and books of the Company or any of them shall be open to
the inspection of Shareholders not being Directors, and no Shareholder (not being a Director) shall have any
right of inspecting any account or book or document of the Company except as conferred by applicable law
or authorized by the Directors or by Ordinary Resolution.
143. The accounts relating to the Company’s affairs shall be audited in such manner and with such financial year
end as may be determined from time to time by the Directors or failing any determination as aforesaid shall
not be audited.
144. The Directors may appoint an auditor of the Company who shall hold office until removed from office by a
resolution of the Directors and may fix his or their remuneration.
145. Every auditor of the Company shall have a right of access at all times to the books and accounts and vouchers
of the Company and shall be entitled to require from the Directors and Officers of the Company such
information and explanation as may be necessary for the performance of the duties of the auditors.
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146. Auditors shall, if so required by the Directors, make a report on the accounts of the Company during their
tenure of office at the next annual general meeting following their appointment, and at any time during their
term of office, upon request of the Directors or any general meeting of the Shareholders.
147. The Directors in each year shall prepare, or cause to be prepared, an annual return and declaration setting
forth the particulars required by the Companies Law and deliver a copy thereof to the Registrar of Companies
in the Cayman Islands.
148. Subject to the Companies Law, the Directors may:
CAPITALIZATION
(a) resolve to capitalize an amount standing to the credit of reserves (including a Share Premium
Account, capital redemption reserve and profit and loss account), whether or not available for
distribution;
(b) appropriate the sum resolved to be capitalized to the Shareholders in proportion to the nominal
amount of Shares (whether or not fully paid) held by them respectively and apply that sum on their
behalf in or towards:
(i) paying up the amounts (if any) for the time being unpaid on Shares held by them respectively,
or
(ii) paying up in full unissued Shares or debentures of a nominal amount equal to that sum,
and allot the Shares or debentures, credited as fully paid, to the Shareholders (or as they may direct) in
those proportions, or partly in one way and partly in the other, but the Share Premium Account, the
capital redemption reserve and profits which are not available for distribution may, for the purposes of
this Article, only be applied in paying up unissued Shares to be allotted to Shareholders credited as
fully paid;
(c) make any arrangements they think fit to resolve a difficulty arising in the distribution of a capitalised
reserve and in particular, without limitation, where Shares or debentures become distributable in
fractions the Directors may deal with the fractions as they think fit;
(d) authorize a Person to enter (on behalf of all the Shareholders concerned) into an agreement with the
Company providing for either:
(i) the allotment to the Shareholders respectively, credited as fully paid, of Shares or debentures
to which they may be entitled on the capitalisation, or
(ii) the payment by the Company on behalf of the Shareholders (by the application of their
respective proportions of the reserves resolved to be
32
capitalised) of the amounts or part of the amounts remaining unpaid on their existing Shares,
and any such agreement made under this authority being effective and binding on all those
Shareholders; and
(e) generally do all acts and things required to give effect to the resolution.
SHARE PREMIUM ACCOUNT
149. The Directors shall in accordance with the Companies Law establish a Share Premium Account and shall
carry to the credit of such account from time to time a sum equal to the amount or value of the premium paid
on the issue of any Share.
150. There shall be debited to any Share Premium Account on the redemption or purchase of a Share the
difference between the nominal value of such Share and the redemption or purchase price provided always
that at the discretion of the Directors such sum may be paid out of the profits of the Company or, if permitted
by the Companies Law, out of capital.
NOTICES
151. Except as otherwise provided in these Articles, and subject to the rules of the Designated Stock Exchanges,
any notice or document may be served by the Company or by the Person entitled to give notice to any
Shareholder either personally, or by posting it airmail or air courier service in a prepaid letter addressed to
such Shareholder at his address as appearing in the Register, or by electronic mail to any electronic mail
address such Shareholder may have specified in writing for the purpose of such service of notices, or by
facsimile or by placing it on the Company's Website should the Directors deem it appropriate provided that
the Company has obtained the Shareholder's prior express positive confirmation in writing to receive notices
in such manner. In the case of joint holders of a Share, all notices shall be given to that one of the joint
holders whose name stands first in the Register in respect of the joint holding, and notice so given shall be
sufficient notice to all the joint holders.
152. Notices posted to addresses outside the Cayman Islands shall be forwarded by prepaid airmail.
153. Any Shareholder present, either personally or by proxy, at any meeting of the Company shall for all purposes
be deemed to have received due notice of such meeting and, where requisite, of the purposes for which such
meeting was convened.
154. Any notice or other document, if served by:
(a) post, shall be deemed to have been served five days after the time when the letter containing the same
is posted;
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(b) facsimile, shall be deemed to have been served upon production by the transmitting facsimile
machine of a report confirming transmission of the facsimile in full to the facsimile number of the
recipient;
(c) recognized courier service, shall be deemed to have been served 48 hours after the time when the
letter containing the same is delivered to the courier service;
(d) electronic mail, shall be deemed to have been served immediately upon the time of the transmission
by electronic mail; or
(e) placing it on the Company's Website, shall be deemed to have been served 12 hours after the notice or
document is placed on the Company’s Website.
In proving service by post or courier service it shall be sufficient to prove that the letter containing the notice
or documents was properly addressed and duly posted or delivered to the courier service.
155. Any notice or document delivered or sent by post to or left at the registered address of any Shareholder in
accordance with the terms of these Articles shall notwithstanding that such Shareholder be then dead or
bankrupt, and whether or not the Company has notice of his death or bankruptcy, be deemed to have been
duly served in respect of any Share registered in the name of such Shareholder as sole or joint holder, unless
his name shall at the time of the service of the notice or document, have been removed from the Register as
the holder of the Share, and such service shall for all purposes be deemed a sufficient service of such notice
or document on all Persons interested (whether jointly with or as claiming through or under him) in the Share.
156. Notice of every general meeting of the Company shall be given to:
(a) all Shareholders holding Shares with the right to receive notice and who have supplied to the
Company an address, facsimile number or e-mail address for the giving of notices to them; and
(b) every Person entitled to a Share in consequence of the death or bankruptcy of a Shareholder, who but
for his death or bankruptcy would be entitled to receive notice of the meeting.
No other Person shall be entitled to receive notices of general meetings.
INFORMATION
157. The Board shall be entitled to release or disclose any information in its possession, custody or control
regarding the Company or its affairs to any of its Shareholders including, without limitation, information
contained in the Register and transfer books of the Company.
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INDEMNITY
158. Each Indemnified Person shall be indemnified and secured harmless against all actions, proceedings, costs,
charges, expenses, losses, damages or liabilities incurred or sustained by such Indemnified Person, other than
by reason of such Indemnified Person's own dishonesty, wilful default or fraud, in or about the conduct of the
Company's business or affairs (including as a result of any mistake of judgment) or in the execution or
discharge of his duties, powers, authorities or discretions, including without prejudice to the generality of the
foregoing, any costs, expenses, losses or liabilities incurred by such Indemnified Person in defending
(whether successfully or otherwise) any civil proceedings concerning the Company or its affairs in any court
whether in the Cayman Islands or elsewhere.
159. No Indemnified Person shall be liable:
(a) for the acts, receipts, neglects, defaults or omissions of any other Director or officer or agent of the
Company;
(b) for any loss on account of defect of title to any property of the Company;
(c) on account of the insufficiency of any security in or upon which any money of the Company shall be
invested;
(d) for any loss incurred through any bank, broker or other similar Person;
(e) for any loss occasioned by any negligence, default, breach of duty, breach of trust, error of judgement
or oversight on such Indemnified Person's part; or
(f) for any loss, damage or misfortune whatsoever which may happen in or arise from the execution or
discharge of the duties, powers, authorities, or discretions of such Indemnified Person's office or in
relation thereto;
unless the same shall happen through such Indemnified Person's own dishonesty, willful default or fraud.
160. The Directors, on behalf of the Company, may purchase and maintain insurance for the benefit of any
Director or other officer of the Company against any liability which, by virtue of any rule of law, would
otherwise attach to such person in respect of any negligence, default, breach of duty or breach of trust of
which such person may be guilty in relation to the Company.
161. Unless the Directors otherwise prescribe, the financial year of the Company shall end on the last day of
March in each year and shall begin on April 1 in each year.
FINANCIAL YEAR
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NON-RECOGNITION OF TRUSTS
162. No Person shall be recognised by the Company as holding any Share upon any trust and the Company shall
not, unless required by law, be bound by or be compelled in any way to recognise (even when having notice
thereof) any equitable, contingent, future or partial interest in any Share or (except only as otherwise provided
by these Articles or as the Companies Law requires) any other right in respect of any Share except an
absolute right to the entirety thereof in each Shareholder registered in the Register.
163. The Company may be wound up only as follows:
WINDING UP
(a) if the winding up is initiated by the Board, by a Special Resolution; or
(b) if the Company is unable to pay its debts as they fall due, by an Ordinary Resolution; or
(c) in any other case, by a Special Resolution, and, for the purposes of any such Special Resolution, the
requisite majority shall be 100%.
164. If the Company shall be wound up the liquidator shall apply the assets of the Company in satisfaction of
creditors' claims in such manner and order as such liquidator thinks fit. Subject to the rights attaching to any
Shares, in a winding up:
(a) if the assets available for distribution among the Shareholders shall be insufficient to repay the whole
of the Company's issued share capital, such assets shall be distributed so that, as nearly as may be, the
losses shall be borne by the Shareholders in proportion to the par value of the Shares held by them; or
(b) if the assets available for distribution among the Shareholders shall be more than sufficient to repay
the whole of the Company's issued share capital at the commencement of the winding up, the surplus
shall be distributed among the Shareholders in proportion to the par value of the Shares held by them
at the commencement of the winding up subject to a deduction from those Shares in respect of which
there are monies due, of all monies payable to the Company for unpaid calls or otherwise.
165. If the Company shall be wound up the liquidator may, subject to the rights attaching to any Shares and with
the sanction of a Special Resolution of the Company and any other sanction required by the Statute, divide
among the Shareholders in kind the whole or any part of the assets of the Company (whether such assets shall
consist of property of the same kind or not) and may for that purpose value any assets and determine how the
division shall be carried out as between the Shareholders or different classes of Shareholders. The liquidator
may, with the like sanction, vest the whole or any part of such assets in trustees upon such trusts for the
benefit of the Shareholders as the liquidator, with the like sanction, shall think fit, but so that no Shareholder
shall be compelled to accept any asset upon which there is a liability.
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AMENDMENT OF ARTICLES OF ASSOCIATION
166. Subject to the Companies Law, the Company may at any time and from time to time by Special Resolution
alter or amend these Articles in whole or in part.
MERGERS AND CONSOLIDATIONS
167. The Company shall, with the approval of a Special Resolution, have the power to merge or consolidate with
one or more constituent companies (as defined in the Statute), upon such terms as the Directors may
determine.
168. Any merger or consolidation that would adversely affect or alter the rights of the Partnership to nominate or
appoint Persons to serve as directors on the board of directors of the surviving company of such merger or
consolidation (including the protections of such rights contained in these Articles) shall be deemed a Special
Partnership Matter.
169. In connection with any distribution, dividend or other payment in respect of Ordinary Shares upon a merger,
consolidation, change of control, or sale, transfer, lease, exclusive license or other disposition of all or
substantially all of the assets of the Company, such distribution, dividend or payment shall be made ratably
on a per share basis to the Ordinary Shares.
CLOSING OF REGISTER OR FIXING RECORD DATE
170. For the purpose of determining those Shareholders that are entitled to receive notice of, attend or vote at any
meeting of Shareholders or any adjournment thereof, or those Shareholders that are entitled to receive
payment of any dividend, or in order to make a determination as to who is a Shareholder for any other
purpose, the Directors may provide that the Register shall be closed for transfers for a stated period which
shall not exceed in any case 40 calendar days. If the Register shall be so closed for the purpose of determining
those Shareholders that are entitled to receive notice of, attend or vote at a meeting of Shareholders, the
Register shall be so closed for at least ten days immediately preceding such meeting and the record date for
such determination shall be the date of the closure of the Register.
171. In lieu of or apart from closing the Register, the Directors may fix in advance a date as the record date for any
such determination of those Shareholders that are entitled to receive notice of, attend or vote at a meeting of
the Shareholders, and for the purpose of determining those Shareholders that are entitled to receive payment
of any dividend, the Directors may, at or within 90 days prior to the date of declaration of such dividend, fix a
subsequent date as the record date for such determination.
172. If the Register is not so closed and no record date is fixed for the determination of those Shareholders entitled
to receive notice of, attend or vote at a meeting of Shareholders or those Shareholders that are entitled to
receive payment of a dividend, the date on which notice of the meeting is posted or the date on which the
resolution of the Directors declaring such dividend is adopted, as the case may be, shall be the record date for
such determination of Shareholders. When a determination of those Shareholders that are
37
entitled to receive notice of, attend or vote at a meeting of Shareholders has been made as provided in this
Article, such determination shall apply to any adjournment thereof.
CLAIMS AGAINST THE COMPANY
173. Unless otherwise determined by a majority of the Board, in the event that (i) any Shareholder (the “Claiming
Party”) initiates or asserts any claim or counterclaim (“Claim”) or joins, offers substantial assistance to or
has a direct financial interest in any Claim against the Company and (ii) the Claiming Party (or the third party
that received substantial assistance from the Claiming Party or in whose Claim the Claiming Party had a
direct financial interest) does not obtain a judgment on the merits in which the Claiming Party prevails, then
each Claiming Party shall, to the fullest extent permissible by law, be obligated jointly and severally to
reimburse the Company for all fees, costs and expenses (including, but not limited to, all reasonable
attorneys’ fees and other litigation expenses) that the Company may incur in connection with such Claim.
REGISTRATION BY WAY OF CONTINUATION
174. The Company may by Special Resolution resolve to be registered by way of continuation in a jurisdiction
outside the Cayman Islands or such other jurisdiction in which it is for the time being incorporated, registered
or existing. In furtherance of a resolution adopted pursuant to this Article, the Directors may cause an
application to be made to the Registrar of Companies to deregister the Company in the Cayman Islands or
such other jurisdiction in which it is for the time being incorporated, registered or existing and may cause all
such further steps as they consider appropriate to be taken to effect the transfer by way of continuation of the
Company.
DISCLOSURE
175. The Directors, or any service providers (including the officers, the Secretary and the registered office agent of
the Company) specifically authorized by the Directors, shall be entitled to disclose to any regulatory or
judicial authority any information regarding the affairs of the Company including without limitation
information contained in the Register and books of the Company.
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Exhibit 2.25
DESCRIPTION OF THE REGISTRANT’S SECURITIES REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES
EXCHANGE ACT OF 1934
As of March 31, 2020, Alibaba Group Holding Limited. (the “company”, “we”, “us” and “our”) had the following series of securities registered
pursuant to Section 12(b) of the Securities Exchange Act of 1934, as amended, or the Exchange Act:
Ordinary shares, par value US$0.000003125 per share*
Title of each class
Trading symbol
9988
Name of each exchange on which registered
The Stock Exchange of Hong Kong Limited
American depositary shares, each representing
BABA
New York Stock Exchange
eight (8) ordinary shares
US$1,500 million 3.125% Senior Notes Due 2021
US$2,250 million 3.600% Senior Notes Due 2024
US$700 million 4.500% Senior Notes Due 2034
US$700 million 2.800% Senior Notes Due 2023
US$2,550 million 3.400% Senior Notes Due 2027
US$1,000 million 4.000% Senior Notes Due 2037
US$1,750 million 4.200% Senior Notes Due 2047
US$1,000 million 4.400% Senior Notes Due 2057
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Hong Kong Stock Exchange
Hong Kong Stock Exchange
Hong Kong Stock Exchange
Singapore Stock Exchange
Singapore Stock Exchange
Singapore Stock Exchange
Singapore Stock Exchange
Singapore Stock Exchange
* In connection with the listing on the New York Stock Exchange of American depositary shares; for trading only in Hong Kong.
Description of Ordinary Shares (Items 9.A.3, 9.A.5, 9.A.6, 9.A.7, 10.B.3, 10.B.4, 10.B.6, 10.B.7, 10.B.8, 10.B.9 and 10.B.10 of Form 20-F)
We are an exempted company incorporated in the Cayman Islands with limited liability and our affairs are governed by our memorandum and
articles of association, which we refer to below as our articles, the Companies Law (2020 Revision), as amended, of the Cayman Islands, which
we refer to below as the Companies Law, and the common law of the Cayman Islands.
As approved by our shareholders at the annual general meeting held on July 15, 2019, we subdivided each of our issued and unissued ordinary
shares into eight (8) ordinary shares, or the share subdivision, effective July 30, 2019.
Following this share subdivision, and as of March 31, 2020, our authorized share capital was US$100,000 consisting of
32,000,000,000 ordinary shares, par value US$0.000003125 per share. As of July 2, 2020, there are 21,637,305,224 ordinary shares issued,
fully-paid and outstanding.
Simultaneously with the share subdivision, a change in the ratio of our ADS to ordinary share also became effective. Following the ADS ratio
change, each ADS represents eight (8) ordinary shares. Previously, each ADS represented one (1) ordinary share.
The following are summaries of material provisions of our articles and the Companies Law insofar as they relate to the material terms of our
ordinary shares. The following summary is not complete, and you should read our articles, which are filed as exhibit 1.1 to our annual report on
Form 20-F (File No. 001-36614) for the fiscal year ended March 31, 2020.
Registered Office
Our registered office in the Cayman Islands is located at the offices of Trident Trust Company (Cayman) Limited, Fourth Floor, One Capital
Place, P.O. Box 847, George Town, Grand Cayman, Cayman Islands. Alibaba Group Holding Limited is a Cayman Islands holding company
established under the Companies Law of the Cayman Islands (as amended) on June 28, 1999.
Board of Directors
See "Item 6. Directors, Senior Management and Employees — C. Board Practices, Nomination and Terms of Directors" and "Item 6. Directors,
Senior Management and Employees — C. Board Practices, Nomination and Terms of Directors — Duties of Directors" in our annual report on
Form 20-F (File No. 001-36614) for the fiscal year ended March 31, 2020, as well as the relevant information in the documents that are filed
with or incorporated by reference into such annual report.
Ordinary Shares
General
All of our issued and outstanding ordinary shares are fully paid and non-assessable. Our ordinary shares are issued in registered form, and are
issued when registered in our register of shareholders. Each holder of our ordinary shares shall be entitled to receive a certificate in respect of
such ordinary shares only if our board of directors resolve that share certificates be issued. Our shareholders who are non-residents of the
Cayman Islands may freely hold and vote their ordinary shares. We may not issue shares to bearer.
Dividends
The holders of our ordinary shares are entitled to such dividends as may be declared by our board of directors. In addition, our shareholders may
by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by our directors. Under Cayman Islands law, a
Cayman Islands company may pay a dividend out of either profit or share premium account, provided that in no circumstances may a dividend
be paid if this would result in the company being unable to pay its debts as they fall due in the ordinary course of business.
Voting Rights
Each ordinary share is entitled to one vote on all matters upon which the ordinary shares are entitled to vote.
Voting at any meeting of shareholders is by poll.
An ordinary resolution to be passed by the shareholders requires the affirmative vote of a simple majority of the votes cast by the shareholders
entitled to vote who are present in person or by proxy at a general meeting, while a special resolution requires the affirmative vote of no less
than three-fourths of the votes cast by the shareholders entitled to vote who are present in person or by proxy at a general meeting (except for
certain matters described below which require a higher affirmative vote, in which cases the required majority to pass such a special resolution is
95%, and for certain types of winding up of the company, in which case the required majority to pass such a special resolution is 100%). Both
ordinary resolutions and special resolutions may also be passed by a unanimous written resolution signed by all the shareholders of our
company, as permitted by the Companies Law and our articles. A special resolution is required for important matters such as a change of name
and amendments to our articles. Our shareholders may effect certain changes by ordinary resolution, including increasing the amount of our
authorized share capital, consolidating and dividing all or any of our share capital into shares of larger amounts than our existing shares and
cancelling any authorized but unissued shares.
Our articles provide that a special resolution is required, and that for the purposes of any such special resolution, the affirmative vote of no less
than 95% of votes cast by the shareholders entitled to vote who are present in person or by proxy at a general meeting is required, in respect of
any resolution relating to any of the following matters,
2
including without limitation any amendments to any provisions of our articles that relate to any of the following matters:
· any increase of our authorized share capital;
· the limitations upon the resolutions which may be proposed by our shareholders who requisition a general meeting of
shareholders;
· the right of the Alibaba Partnership to nominate directors to our board as described below under "— Nomination, Election and
Removal of Directors;"
· any merger or consolidation that would adversely affect or alter the Alibaba Partnership's right to nominate persons to serve as
directors on our board of directors;
· the procedures regarding the election, appointment and removal of directors or the size of the board; and
· any alteration of the voting rights with respect to the above.
Transfer of Ordinary Shares
Subject to the restrictions contained in our articles, any of our shareholders may transfer all or any of his or her ordinary shares by an instrument
of transfer in any usual or common form or any other form approved by our board of directors, executed by or on behalf of the transferor (and,
if in respect of a nil or partly paid up share, or if so required by our directors, by or on behalf of the transferee).
Our board of directors may, in its absolute discretion, decline to register any transfer of any ordinary share that has not been fully paid up or is
subject to a company lien. Our board of directors may also decline to register any transfer of any ordinary share unless:
· the instrument of transfer is lodged with us, accompanied by the certificate for the ordinary shares to which it relates and such
other evidence as our board of directors may reasonably require to show the right of the transferor to make the transfer;
· the instrument of transfer is in respect of only one class of our shares;
· the instrument of transfer is properly stamped, if required;
· the ordinary share transferred is fully paid and free of any lien in favor of us;
· any fee related to the transfer has been paid to us; and
· the transfer is not to more than four joint holders.
If our directors refuse to register a transfer, they are required, within three months after the date on which the instrument of transfer was lodged,
to send to each of the transferor and the transferee notice of such refusal.
Liquidation
On a winding up of our company, if the assets available for distribution among the holders of our ordinary shares are more than sufficient to
repay the whole of the share capital at the commencement of the winding up, the surplus will be distributed among the holders of our ordinary
shares on a pro rata basis in proportion to the par value of the ordinary shares held by them. If our assets available for distribution are
insufficient to repay all of the paid-up
3
capital, the assets will be distributed so that the losses are borne by the holders of our ordinary shares in proportion to the par value of the
ordinary shares held by them.
The liquidator may, with the sanction of a special resolution of our shareholders and any other sanction required by the Companies Law, divide
amongst the shareholders in species or in kind the whole or any part of the assets of our company, and may for that purpose value any assets and
determine how the division is to be carried out as between our shareholders or different classes of shareholders.
We are a "limited liability" company registered under the Cayman Companies Law, and under the Companies Law, the liability of our
shareholders is limited to the amount, if any, unpaid on the shares respectively held by them. Our articles contain a declaration that the liability
of our shareholders is so limited.
Calls on Ordinary Shares and Forfeiture of Ordinary Shares
Our board of directors may from time to time make calls upon shareholders for any amounts unpaid on their ordinary shares. The ordinary
shares that have been called upon and remain unpaid are subject to forfeiture.
Redemption, Repurchase and Surrender of Ordinary Shares
We may issue shares on terms that such shares are subject to redemption, at our option or at the option of the holders thereof, on such terms and
in such manner as may be determined by our board of directors before the issue of such shares. Our company may also repurchase any of our
shares provided that the manner and terms of such purchase have been approved by our board of directors or by ordinary resolution of our
shareholders (but no repurchase may be made contrary to the terms or manner recommended by our directors), or as otherwise authorized by
our articles. Under the Companies Law, the redemption or repurchase of any share may be paid out of our company's profits or out of the
proceeds of a new issue of shares made for the purpose of such redemption or repurchase, or out of capital (including share premium account
and capital redemption reserve) if our company can, immediately following such payment, pay its debts as they fall due in the ordinary course
of business. In addition, under the Companies Law no such share may be redeemed or repurchased (a) unless it is fully paid up, (b) if such
redemption or repurchase would result in there being no shares outstanding, or (c) if the company has commenced liquidation. In addition, our
company may accept the surrender of any fully paid share for no consideration.
Variations of Rights of Shares
If at any time, our share capital is divided into different classes of shares, all or any of the rights attached to any class of shares may, subject to
any rights or restrictions for the time being attached to any class, only be materially adversely varied or abrogated with the consent in writing of
the holders of not less than three-fourths of the issued shares of that class or with the sanction of a special resolution passed at a general meeting
of the holders of the shares of that class. The rights conferred upon the holders of the shares of any class issued with preferred or other rights
will not, subject to any rights or restrictions for the time being attached to any class, be deemed to be materially adversely varied or abrogated
by, among other things, the creation, allotment or issue of further shares ranking equally with or in priority or subsequent to such existing class
of shares or the redemption or purchase of any shares of any class by our company. The rights of the holders of our shares shall not be deemed
to be materially adversely varied or abrogated by the creation or issue of shares with preferred or other rights including, without limitation, the
creation of shares with enhanced or weighted voting rights.
Notwithstanding the foregoing, our board of directors may issue preferred shares, without further action by the shareholders. See
"— Differences in Corporate Law — Directors' Power to Issue Shares."
General Meetings of Shareholders
Shareholders' meetings may be convened by a majority of our board of directors or our chairman. As a Cayman Islands exempted company, we
are not obligated by the Companies Law to call shareholders' annual general meetings; however, our corporate governance guidelines provide
that in each year we will hold an annual general
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meeting of shareholders. The annual general meeting shall be held at such time and place as may be determined by our board of directors.
The Companies Law provides shareholders with only limited rights to requisition a general meeting, and does not provide shareholders with any
right to put any proposal before a general meeting. However, these rights may be provided in a company's articles of association. Our articles
provide that upon the requisition of shareholders holding in aggregate not less than one-third of the voting rights of such of the issued shares of
our company that carries the right of voting at general meetings of our company, our board will convene an extraordinary general meeting and
put the resolutions so requisitioned to a vote at such meeting. However, shareholders may propose only ordinary resolutions to be put to a vote
at such meeting and have no right to propose resolutions with respect to the election, appointment or removal of directors or with respect to the
size of the board. Our articles provide no other right to put any proposals before annual general meetings or extraordinary general meetings.
Advance notice of at least 10 days but no more than 60 days is required for the convening of our annual general meeting and any other general
meeting of our shareholders. All general meetings of shareholders shall occur at such time and place as determined by our directors and set forth
in the notice for such meeting.
A quorum for a general meeting of shareholders consists of any one or more shareholders present in person or by proxy, holding in aggregate
not less than one-third of the voting power of our issued shares carrying a right to vote at such general meeting.
Nomination, Election and Removal of Directors
Our articles provide that persons standing for election as directors at a duly constituted general meeting with requisite quorum shall be elected
by an ordinary resolution of our shareholders, which requires the affirmative vote of a simple majority of the votes cast on the resolution by the
shareholders entitled to vote who are present in person or by proxy at the meeting. Our articles further provide that our board of directors is
divided into three groups designated as Group I, Group II and Group III with as nearly equal a number of directors in each group as possible.
Directors assigned to Group I shall serve their current term of office, which will expire at our 2021 annual general meeting; directors assigned
to Group II shall serve their current term of office, which will expire at our 2022 annual general meeting; and directors assigned to Group III
shall serve their current term of office, which will expire at our 2020 annual general meeting. The Group I directors currently consist of Joe
Tsai, J. Michael Evans, Eric Xiandong Jing and E. Börje Ekholm; the Group II directors currently consist of Daniel Zhang, Chee Hwa Tung,
Jerry Yang and Wan Ling Martello; and the Group III directors currently consist of Jack Ma and Walter Kwauk. Jack Ma, Joe Tsai, Daniel
Zhang, J. Michael Evans and Eric Xiandong Jing are designated Alibaba Partnership nominees; and Chee Hwa Tung, Walter Kwauk, Jerry
Yang, E. Börje Ekholm and Wan Ling Martello are deemed nominees of the nominating and corporate governance committee. At each annual
general meeting, directors elected to succeed those directors of the group the term of which shall then expire shall be elected for a term of office
to expire at the third succeeding annual general meeting after their election. Our articles provide that, unless otherwise determined by
shareholders in a general meeting, our board will consist of not less than nine directors, for so long as SoftBank has the right to nominate a
director and when SoftBank no longer has such right, not less than seven directors. Our articles further provide that in no event shall our board
should be comprised of less than five directors. We have no provisions relating to retirement of directors upon reaching any age limit.
Our articles provide that the Alibaba Partnership has the right to nominate such number of persons who shall stand for election as directors as
may be required to ensure that directors nominated or appointed by the Alibaba Partnership shall constitute a simple majority of the total
number of directors on our board of directors, with as equal a number of such nominated directors assigned to each group of directors as
possible. Our articles further provide that the Alibaba Partnership's nomination rights are conditioned on the Alibaba Partnership being
governed by the partnership agreement as currently in effect, or as may be amended in accordance with its terms from time to time. Any
amendment to the provisions relating to the purpose of the partnership, or to the manner in which the Alibaba Partnership exercises its right to
nominate a simple majority of our directors, will be subject to the approval of the majority of our directors who are not nominees or appointees
of the Alibaba Partnership and are "independent directors" within the meaning of Section 303A of the Corporate Governance Rules of the
New York Stock Exchange.
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A nominating and corporate governance committee of the board of directors has the right to determine the persons who shall stand for election
as directors for the remainder of the places available for election to our board of directors, subject to the right of SoftBank to nominate one
person to stand for election for so long as SoftBank holds ordinary shares or ADSs representing at least 15% of our outstanding shares pursuant
to the articles. Each of the compensation committee and the nominating and corporate governance committee must consist of at least three
directors and the majority of the committee members must be independent within the meaning of Section 303A of the Corporate Governance
Rules of the New York Stock Exchange. The audit committee must consist of at least three directors, all of whom must be independent within
the meaning of Section 303A of the Corporate Governance Rules of the New York Stock Exchange and meet the criteria for independence set
forth in Rule 10A-3 of the Exchange Act. The director nominated by SoftBank is entitled to receive notices and materials for all meetings of our
committees and upon notice to the relevant committee, to join as an observer in meetings of the audit committee, the compensation committee,
the nominating and corporate governance committee and other board committees we may establish.
In the event that the appointment of any person standing for election as a director fails to be approved by a simple majority of votes cast at a
duly constituted general meeting, the party that nominated such person to stand for election shall have the power to appoint a different person to
the board to serve as an interim director until the next annual general meeting of shareholders after such appointment. Such appointment shall
become effective upon the nominating party giving a written notice (duly signed by the general partner of the Alibaba Partnership, or by
majority of the members of the nominating and corporate governance committee, or by an authorized representative of SoftBank, as the case
may be) to the company, without the requirement for any further vote or approval by our shareholders or our board. If a director ceases to serve
as a member of our board for any reason (including without limitation due to the resignation, death or removal of such director), the party that
nominated or appointed such director shall have the right to appoint a person to serve as an interim director until the next annual general
meeting of shareholders after such appointment. The board of directors may expand the maximum number of directors on the board, subject to
any maximum number determined from time to time by the shareholders at a general meeting.
If at any time the total number of directors on our board of directors nominated or appointed by the Alibaba Partnership is less than a simple
majority for any reason, including because a director previously nominated by the Alibaba Partnership ceases to be a member of our board of
directors or because the Alibaba Partnership had previously not exercised its right to nominate or appoint a simple majority of our board of
directors, the Alibaba Partnership shall be entitled (in its sole discretion) to appoint such number of additional directors to the board as
necessary to ensure that the directors nominated or appointed by the Alibaba Partnership comprise a simple majority of our board of directors.
The appointment of such additional directors to our board shall become effective upon the delivery by the Alibaba Partnership of a written
notice (duly executed by the Alibaba Partnership’s general partner on behalf of the Alibaba Partnership) to our company, without the
requirement for any further vote or approval by our shareholders or our board.
A director will be removed from office automatically if, among other things, the director (1) becomes bankrupt or makes any arrangement or
composition with his creditors generally; or (2) dies or is found to be of unsound mind; or (3) resigns his office by notice in writing to our
company. In addition, the directors nominated or appointed by the Alibaba Partnership are, so long as the Alibaba Partnership is governed by
the partnership agreement as currently in effect and as may be amended in accordance with its terms from time to time, subject to removal, with
or without cause, only by the Alibaba Partnership, and the director nominated or appointed by SoftBank is, for so long as SoftBank together
with its affiliates holds ordinary shares or ADSs representing at least 15% of our outstanding ordinary shares, subject to removal, with or
without cause, only by SoftBank. Except as described in the preceding sentence, so long as the Alibaba Partnership is governed by the
partnership agreement as currently in effect or as may be amended in accordance with its terms from time to time, any director may be removed
for cause only by a vote of the majority of our board of directors upon the recommendation of the nominating and corporate governance
committee. After such time, any director (subject to the above provision relating to removal of the director nominated or appointed by SoftBank
only by SoftBank) may be removed by ordinary resolution, with or without cause.
6
Proceedings of Board of Directors
Our articles provide that our business shall be managed by our board of directors, who may exercise all powers of our company. The quorum
necessary for the transaction of business at meetings of our board may be fixed by the board and, unless so fixed at another number, is a
majority of the directors.
Our articles provide that our board may exercise all the powers of our company to borrow money and to mortgage or charge all or any part of
the undertaking, property and uncalled capital of our company and to issue debentures, debenture stock and other securities of our company,
whenever money is borrowed or as security for any debt, liability or obligation of our company or of any third party.
Inspection of Books and Records
Holders of our ordinary shares have no general right under Cayman Companies Law to inspect or obtain copies of our list of shareholders or our
corporate records.
Changes in Capital
Our shareholders may from time to time by ordinary resolution:
· increase the share capital by such sum, to be divided into shares of such classes and amount, as the resolution shall prescribe;
· consolidate and divide all or any of our share capital into shares of a larger amount than our existing shares;
· sub-divide our existing shares, or any of them into shares of a smaller amount, provided that in the subdivision the proportion
between the amount paid and the amount, if any, unpaid on each reduced share shall be the same as it was in case of the share
from which the reduced share is derived; or
· cancel any shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person and
diminish the amount of our share capital by the amount of the shares so can-celled.
Our shareholders may by special resolution, subject to any confirmation or consent required by the Cayman Companies Law, reduce our share
capital or any capital redemption reserve in any manner permitted by law.
Restrictive Provisions
Under our articles, in connection with any distribution, dividend or other payment in respect of our ordinary shares upon a merger,
consolidation,, change of control, or sale, transfer, lease, exclusive license or other disposition of all or substantially all of the assets of our
company, such distribution, dividend or payment shall be made ratably on a per share basis to our ordinary shares. In addition, our articles
provide that the Alibaba Partnership may not transfer or otherwise delegate or give a proxy to any third party with respect to its right to
nominate directors and that the consent of the independent members of our board of directors who are not nominees of the Alibaba Partnership
shall be needed for any amendment of the partnership agreement relating to the purpose of the partnership or the manner in which the
partnership exercises its rights to nominate or appoint a majority of our board of directors.
Exempted Company
We are an exempted company with limited liability under the Companies Law. The Companies Law distinguishes between ordinary resident
companies and exempted companies. Any company that is registered in the Cayman Islands but conducts business mainly outside of the
Cayman Islands may apply to be registered as an exempted company. The requirements for an exempted company are essentially the same as
for an ordinary company except for the exemptions and privileges listed below:
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· an exempted company does not have to file an annual return of its shareholders with the Registrar of Companies;
· an exempted company's register of members is not open to inspection;
· an exempted company does not have to hold an annual general meeting;
· an exempted company may issue no par value, negotiable or bearer shares;
· an exempted company may obtain an undertaking against the imposition of any future taxation (such undertakings are usually
given for 20 years in the first instance);
· an exempted company may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands;
· an exempted company may register as a limited duration company; and
· an exempted company may register as a segregated portfolio company.
"Limited liability" means that the liability of each shareholder is limited to the amount unpaid by the shareholder on the shares of the company.
We are subject to reporting and other informational requirements of the Exchange Act, as applicable to foreign private issuers. Except as
otherwise disclosed in our annual report on Form 20-F (File No. 001-36614) for the fiscal year ended March 31, 2020 and the documents
incorporated by reference therein, we currently intend to comply with the New York Stock Exchange rules in lieu of following home country
practice. The New York Stock Exchange rules require that every company listed on the New York Stock Exchange hold an annual general
meeting of shareholders. In addition, our articles allow directors to call an extraordinary general meeting of shareholders pursuant to the
procedures set forth therein.
Register of Members
Under the Cayman Companies Law, we must keep a register of members and there should be entered therein:
· the names and addresses of our members, together with a statement of the shares held by each member, which statement shall
confirm (i) the amount paid or agreed to be considered as paid, on the shares of each member, (ii) the number and category of
shares held by each member and (iii) whether each relevant category of shares held by a member carries voting rights under the
articles of association, and if so, whether such voting rights are conditional;
· the date on which the name of any person was entered on the register as a member; and
· the date on which any person ceased to be a member.
Under Companies Law, the register of members of our company is prima facie evidence of the matters set out therein (that is, the register of
members raises a presumption of fact on the matters referred to above unless rebutted) and a member registered in the register of members is
deemed as a matter of Companies Law to have legal title to the shares as set against its name in the register of members. The register of
members is updated to record and give effect to any issuance of shares by us to the Depositary (or its nominee) as the depositary. Once our
register of members has been updated, the shareholders recorded in the register of members will be deemed to have legal title to the shares set
against their name.
If the name of any person is incorrectly entered in or omitted from our register of members, or if there is any default or unnecessary delay in
entering on the register the fact of any person having ceased to be a member of our
8
company, the person or member aggrieved (or any member of our company or our company itself) may apply to the Grand Court of the Cayman
Islands for an order that the register be rectified, and the Court may either refuse such application or it may, if satisfied of the justice of the case,
make an order for the rectification of the register.
Differences in Corporate Law
The Cayman Companies Law is derived, to a large extent, from the older Companies Acts of England and Wales but does not follow recent
United Kingdom statutory enactments, and accordingly there are significant differences between the Cayman Companies Law and the current
Companies Act of England. In addition, the Cayman Companies Law differs from laws applicable to United States corporations and their
shareholders. Set forth below is a summary of certain significant differences between the provisions of the Cayman Companies Law applicable
to us and the comparable laws applicable to companies incorporated in the State of Delaware in the United States.
Mergers and Similar Arrangements
The Cayman Companies Law permits mergers and consolidations between Cayman Islands companies and between Cayman Islands companies
and non-Cayman Islands companies. For these purposes, (a) "merger" means the merging of two or more constituent companies and the vesting
of their undertaking, property and liabilities in one of such companies as the surviving company, and (b) a "consolidation" means the
combination of two or more constituent companies into a consolidated company and the vesting of the undertaking, property and liabilities of
such companies to the consolidated company. In order to effect such a merger or consolidation, the directors of each constituent company must
approve a written plan of merger or consolidation, which must then be authorized by (a) a special resolution of the shareholders of each
constituent company, and (b) such other authorization, if any, as may be specified in such constituent company's articles of association. The
plan must be filed with the Registrar of Companies together with a declaration as to the solvency of the consolidated or surviving company, a
list of the assets and liabilities of each constituent company and an undertaking that a copy of the certificate of merger or consolidation will be
given to the members and creditors of each constituent company and that notification of the merger or consolidation will be published in the
Cayman Islands Gazette. Court approval is not required for a merger or consolidation which is effected in compliance with these statutory
procedures.
Our articles provide that, in addition to the requirements described in the preceding paragraph, if the rights of the Alibaba Partnership as
described under "— Nomination, Election and Removal of Directors" are adversely impacted by the merger, the affirmative vote of at least 95%
of our shareholders voting at a general meeting of our shareholders is required.
A merger between a Cayman parent company and its Cayman subsidiary or subsidiaries does not require authorization by a resolution of
shareholders. For this purpose a parent company means a company that holds issued shares that together represent at least ninety per cent of the
votes at a general meeting of the subsidiary.
The consent of each holder of a fixed or floating security interest of a constituent company is required unless this requirement is waived by a
court in the Cayman Islands.
Except in certain limited circumstances, a dissenting shareholder of a Cayman Islands constituent company is entitled to payment of the fair
value of his or her shares upon dissenting from a merger or consolidation. The exercise of such dissenter rights will preclude the exercise by the
dissenting shareholder of any other rights to which he or she might otherwise be entitled by virtue of holding shares, except for the right to seek
relief on the grounds that the merger or consolidation is void or unlawful.
In addition, there are statutory provisions that facilitate the reconstruction and amalgamation of companies by way of schemes of arrangement,
provided that the arrangement is approved by a majority in number of each class of shareholders and creditors with whom the arrangement is to
be made, and who must, in addition, represent three-fourths in value of each such class of shareholders or creditors, as the case may be, that are
present and voting either in person or by proxy at a meeting, or meetings, convened for that purpose. The convening of the meetings and
subsequently the arrangement must be sanctioned by the Grand Court of the Cayman Islands. While a dissenting
9
shareholder has the right to express to the court the view that the transaction ought not to be approved, the court can be expected to approve the
arrangement if it determines that:
· the statutory provisions as to the required majority vote have been met;
· the shareholders have been fairly represented at the meeting in question and the statutory majority are acting bona fide without
coercion of the minority to promote interests adverse to those of the class;
· the arrangement is such that may be reasonably approved by an intelligent and honest man of that class acting in respect of his
interest; and
· the arrangement is not one that would more properly be sanctioned under some other provision of the Companies Law.
The Companies Law also contains a statutory power of compulsory acquisition which may facilitate the “squeeze out” of dissentient minority
shareholder upon a takeover offer. When a takeover offer is made and accepted by holders of 90% of the shares affected within four months the
offeror may, within a two-month period commencing on the expiration of such four month period, require the holders of the remaining shares to
transfer such shares on the terms of the offer. An objection can be made to the Grand Court of the Cayman Islands but this is unlikely to
succeed in the case of an offer which has been so approved unless there is evidence of fraud, bad faith or collusion.
If an arrangement and reconstruction by way of scheme of arrangement is thus approved, or if a takeover offer is made and accepted, in
accordance with the foregoing statutory procedures, a dissenting shareholder would have no rights comparable to appraisal rights, which would
otherwise ordinarily be available to dissenting shareholders of Delaware corporations, providing rights to receive payment in cash for the
judicially determined value of the shares.
Shareholders' Suits
In principle, we normally are the proper plaintiff to sue for a wrong done to us as a company and as a general rule, a derivative action may not
be brought by a minority shareholder. However, based on English law authorities, which would in all likelihood be of persuasive authority in
the Cayman Islands, the Cayman Islands courts can be expected to follow and apply the common law principles (namely the rule in Foss v.
Harbottle and the exceptions thereto) so that a non-controlling shareholder may be permitted to commence a class action against or derivative
actions in the name of the company to challenge:
· an act which is illegal or ultra vires with respect to the company and is therefore incapable of ratification by the shareholders;
· an act which, although not ultra vires, requires authorization by a qualified (or special) majority (that is, more than a simple
majority) which has not been obtained; and
· an act which constitutes a "fraud on the minority" where the wrongdoers are themselves in control of the company.
Indemnification of Directors and Executive Officers and Limitation of Liability
The Companies Law does not limit the extent to which a company's articles of association may provide for indemnification of officers and
directors, except to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide
indemnification against civil fraud or the consequences of committing a crime. Our articles provide that we shall indemnify our officers and
directors against all actions, proceedings, costs, charges, expenses, losses, damages or liabilities incurred or sustained by such directors or
officer, other than by reason of such person's dishonesty, willful default or fraud, in or about the conduct of our company's business or affairs
(including as a result of any mistake of judgment) or in the execution or discharge of his duties, powers, authorities or discretions, including
without prejudice to the generality of the foregoing, any costs, expenses, losses or liabilities incurred by such director or officer in defending
(whether successfully or
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otherwise) any civil proceedings concerning our company or its affairs in any court whether in the Cayman Islands or elsewhere. This standard
of conduct is generally the same as permitted under the Delaware General Corporation Law for a Delaware corporation. In addition, we have
entered into indemnification agreements with our directors and executive officers that provide such persons with additional indemnification
beyond that provided in our articles.
Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, or the Securities Act, may be permitted to our
directors, officers or persons controlling us under the foregoing provisions, we have been informed that, in the opinion of the Securities and
Exchange Commission, or the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore
unenforceable.
Anti-Takeover Provisions in Our Articles
Some provisions of our articles may discourage, delay or prevent a change in control of our company or management that shareholders may
consider favorable, including provisions that provide that any merger to which we are a party requires an affirmative vote of 95% of our
shareholders voting at a meeting of our shareholders in the event such merger would adversely affect the Alibaba Partnership's rights to
nominate or appoint persons to serve as directors on our board, limitations on shareholder rights to nominate or remove directors, as well as
provisions that authorize our board of directors to issue preference shares in one or more series and to designate the price, rights, preferences,
privileges and restrictions of such preference shares without any further vote or action by our shareholders.
Under the Companies Law, our directors may only exercise the rights and powers granted to them under our articles, as amended and restated
from time to time, for what they believe in good faith to be in the best interests of our company and for a proper purpose.
Directors' Fiduciary Duties
Under Delaware corporate law, a director of a Delaware corporation has a fiduciary duty to the corporation and its shareholders. This duty has
two components: the duty of care and the duty of loyalty. The duty of care requires that a director act in good faith, with the care that an
ordinarily prudent person would exercise under similar circumstances. Under this duty, a director must inform himself of, and disclose to
shareholders, all material information reasonably available regarding a significant transaction. The duty of loyalty requires that a director act in
a manner he or she reasonably believes to be in the best interests of the corporation. He or she must not use his or her corporate position for
personal gain or advantage. This duty prohibits self-dealing by a director and mandates that the best interests of the corporation and its
shareholders take precedence over any interest possessed by a director, officer or controlling shareholder and not shared by the shareholders
generally. In general, actions of a director are presumed to have been made on an informed basis, in good faith and in the honest belief that the
action taken was in the best interests of the corporation. However, this presumption may be rebutted by evidence of a breach of one of the
fiduciary duties. Should such evidence be presented concerning a transaction by a director, a director must prove the procedural fairness of the
transaction, and that the transaction was of fair value to the corporation.
As a matter of Cayman law, a director of a Cayman Islands company is in the position of a fiduciary with respect to the company and therefore
he owes the following duties to the company — a duty to act bona fide in the best interests of the company, a duty not to make a profit based on
his or her position as director (unless the company permits him to do so), a duty not to put himself in a position where the interests of the
company conflict with his or her personal interest or his or her duty to a third party, and a duty to exercise powers for the purpose for which
such powers were intended. A director of a Cayman Islands company owes to the company a duty to act with skill and care. It was previously
considered that a director need not exhibit in the performance of his or her duties a greater degree of skill than may reasonably be expected from
a person of his or her knowledge and experience. However, English and Commonwealth courts have moved towards an objective standard with
regard to the required skill and care and these authorities are likely to be followed in the Cayman Islands.
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Shareholder Proposals
Under the Delaware General Corporation Law, a shareholder has the right to put any proposal before the annual meeting of shareholders,
provided it complies with the notice provisions in the governing documents. The Delaware General Corporation Law does not provide
shareholders an express right to put any proposal before the annual meeting of shareholders, but in keeping with common law, Delaware
corporations generally afford shareholders an opportunity to make proposals and nominations provided that they comply with the notice
provisions in the certificate of incorporation or bylaws. A special meeting may be called by the board of directors or any other person
authorized to do so in the governing documents, but shareholders may be precluded from calling special meetings.
The Companies Law provides shareholders with only limited rights to requisition a general meeting, and does not provide shareholders with any
right to put any proposal before a general meeting. However, these rights may be provided in a company's articles of association. Our articles
allow our shareholders holding in aggregate not less than one-third of the voting rights of such of our issued shares as carry the right to vote at
general meetings of our company to requisition an extraordinary general meeting of our shareholders, in which case our board is obliged to
convene an extraordinary general meeting and to put the resolutions so requisitioned to a vote at such meeting. However, our shareholders may
propose only ordinary resolutions to be put to a vote at such meetings and have no right to propose resolutions with respect to the election,
appointment or removal of directors. Our articles provide no other right to put any proposals before annual general meetings or extraordinary
general meetings. As a Cayman Islands exempted company, we are not obligated by law to call shareholders' annual general meetings.
However, our corporate governance guidelines require us to call such meetings every year.
Cumulative Voting
Under the Delaware General Corporation Law, cumulative voting for elections of directors is not permitted unless the corporation's certificate
of incorporation specifically provides for it. Cumulative voting potentially facilitates the representation of minority shareholders on a board of
directors since it permits the minority shareholder to cast all the votes to which the shareholder is entitled on a single director, which increases
the shareholder's voting power with respect to electing such director. As permitted under the Companies Law, our articles do not provide for
cumulative voting. As a result, our shareholders are not afforded any less protections or rights on this issue than shareholders of a Delaware
corporation.
Removal of Directors
Under the Delaware General Corporation Law, a director of a corporation with a classified board may be removed only for cause with the
approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. Under our articles,
other than SoftBank's right to remove the director nominated by it, our shareholders generally do not have the right to remove directors.
Directors will be removed from office automatically if, among other things, the director (1) becomes bankrupt or makes any arrangement or
composition with his creditors generally; or (2) dies or is found to be of unsound mind; or (3) resigns his office by notice in writing to our
company. In addition, the directors nominated or appointed by the Alibaba Partnership are, so long as the Alibaba Partnership is governed by
the partnership agreement as currently in effect or as may be amended in accordance with its terms from time to time, subject to removal, with
or without cause, only by the Alibaba Partnership and the director nominated or appointed by SoftBank will, for so long as SoftBank together
with its affiliates holds ordinary shares or ADSs representing at least 15% of our outstanding ordinary shares, be subject to removal, with or
without cause, only by SoftBank. Except as described in the preceding sentence, so long as the Alibaba Partnership is governed by the
partnership agreement as currently in effect or as may be amended in accordance with its terms from time to time, any director may be removed
for cause only by a vote of the majority of the board of directors upon the recommendation of the nominating and corporate governance
committee. After such time, (subject to the above provision relating to removal of the director nominated or appointed by SoftBank only by
SoftBank) any director may be removed by ordinary resolution, with or without cause.
Transactions with Interested Shareholders
The Delaware General Corporation Law contains a business combination statute applicable to Delaware public corporations whereby, unless the
corporation has specifically elected not to be governed by such statute by
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amendment to its certificate of incorporation or bylaws that is approved by its shareholders, it is prohibited from engaging in certain business
combinations with an "interested shareholder" for three years following the date that such person becomes an interested shareholder. An
interested shareholder generally is a person or a group who or which owns or owned 15% or more of the target's outstanding voting stock or
who or which is an affiliate or associate of the corporation and owned 15% or more of the corporation's outstanding voting stock within the past
three years. This has the effect of limiting the ability of a potential acquirer to make a two-tiered bid for the target in which all shareholders
would not be treated equally. The statute does not apply if, among other things, prior to the date on which such shareholder becomes an
interested shareholder, the board of directors approves either the business combination or the transaction which resulted in the person becoming
an interested shareholder. This encourages any potential acquirer of a Delaware corporation to negotiate the terms of any acquisition transaction
with the target's board of directors.
The Companies Law has no comparable statute. As a result, we cannot avail ourselves of the types of protections afforded by the Delaware
business combination statute. However, although the Companies Law does not regulate transactions between a company and its significant
shareholders, it does provide that such transactions must be entered into bona fide in the best interests of the company and for a proper corporate
purpose and not with the effect of constituting a fraud on the minority shareholders.
Dissolution; Winding Up
Under the Delaware General Corporation Law, unless the board of directors approves the proposal to dissolve, dissolution must be approved by
shareholders holding 100% of the total voting power of the corporation. Only if the dissolution is initiated by the board of directors may it be
approved by a simple majority of the corporation's outstanding shares. Delaware law allows a Delaware corporation to include in its certificate
of incorporation a supermajority voting requirement in connection with dissolutions initiated by the board of directors.
Under our articles, our company may be wound up only (a) if the winding up is initiated by our board of directors, by a special resolution of our
members, or (b) if our company is unable to pay its debts as they fall due, by an ordinary resolution of our members, or (c) in any other case, by
a special resolution of our members, and for the purposes of any such special resolution, the requisite majority shall be 100% of the votes cast at
a general meeting of our shareholders. In addition, a company may be wound up by an order of the courts of the Cayman Islands. The court has
authority to order winding up in a number of specified circumstances including where it is, in the opinion of the court, just and equitable to
do so.
Variation of Rights of Shares
Under the Delaware General Corporation Law, a corporation may vary the rights of a class of shares with the approval of a majority of the
outstanding shares of such class, unless the certificate of incorporation provides otherwise. Under the Companies Law and our articles, if our
share capital is divided into more than one class of shares, we may materially adversely vary or abrogate the rights attached to any class only
with the consent in writing of the holders of not less than three-fourths of the issued shares of that class or with the sanction of a special
resolution passed at a separate meeting of the holders of the shares of that class.
Amendment of Governing Documents
Under the Delaware General Corporation Law, a corporation's certificate of incorporation may be amended only if adopted and declared
advisable by the board of directors and approved by a majority of the outstanding shares entitled to vote, and the bylaws may be amended with
the approval of a majority of the outstanding shares entitled to vote and may, if so provided in the certificate of incorporation, also be amended
by the board of directors. Under the Companies Law and our articles, our articles may only be amended by special resolution of our
shareholders, and in the case of amendments of certain provisions (as described in "— Ordinary Shares — Voting Rights" above), such special
resolution shall require the affirmative vote of at least 95% of the votes cast by shareholders at a general meeting of the shareholders.
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Rights of Non-Resident or Foreign Shareholders
There are no limitations imposed by our articles on the rights of non-resident or foreign shareholders to hold or exercise voting rights on our
shares. In addition, there are no provisions in our articles governing the ownership threshold above which shareholder ownership must
be disclosed.
Directors' Power to Issue Shares
Under our articles, our board of directors is empowered to issue or allot shares or grant options, restricted shares, RSUs, share appreciation
rights, dividend equivalent rights, warrants and analogous equity-based rights with or without preferred, deferred, qualified or other special
rights or restrictions. In particular, pursuant to our articles, our board of directors has the authority, without further action by the shareholders, to
issue all or any part of our capital and to fix the designations, powers, preferences, privileges, and relative participating, optional or special
rights and the qualifications, limitations or restrictions therefrom, including dividend rights, conversion rights, voting rights, terms of
redemption and liquidation preferences, any or all of which may be greater than the rights of our ordinary shares. Our board of directors,
without shareholder approval, may issue preferred shares with voting, conversion or other rights that could adversely affect the voting power
and other rights of holders of our ordinary shares. Subject to the directors' duty of acting in the best interest of our company, preferred shares
can be issued quickly with terms calculated to delay or prevent a change in control of us or make removal of management more difficult.
Additionally, the issuance of preferred shares may have the effect of decreasing the market price of the ordinary shares, and may adversely
affect the voting and other rights of the holders of ordinary shares.
Inspection of Books and Records
Holders of our ordinary shares have no general right under the Cayman Companies Law to inspect or obtain copies of our list of shareholders or
our corporate records. However, we provide our shareholders with annual audited financial statements.
Description of Warrants and Rights and Other Securities (Items 12.A, 12.B and 12.C of Form 20-F)
None.
Description of American Depositary Shares (Items 12.D.1 and 12.D.2 of Form 20-F)
Citibank, N.A., acts as the depositary for the ADSs. Each ADS represents an ownership interest in eight (8) ordinary shares deposited with
Citibank, N.A.-Hong Kong branch, as custodian for the depositary. Each ADS also represents an ownership interest in any other securities, cash
or other property which may be held by the depositary. The depositary's office is located at 388 Greenwich Street, New York, New York 10013.
We do not treat ADS holders as our shareholders and accordingly, ADS holders do not have shareholders' rights. Cayman Islands law governs
shareholders' rights in our company. The depositary is the holder of the ordinary shares underlying the ADSs. Holders of ADSs have ADS
holder's rights. A deposit agreement among us, the depositary and the holders and beneficial owners of ADSs sets out ADS holders' rights as
well as the rights and obligations of the depositary. The laws of the State of New York govern the deposit agreement and the ADSs.
The Direct Registration System, or DRS, enables the registration of the ownership of uncertificated ADSs, which ownership shall be evidenced
by periodic statements issued by the depositary to the ADS holders entitled thereto.
The following is a summary of the material provisions of the deposit agreement. For more complete information, you should read the entire
deposit agreement and the form of American Depositary Receipt. You can read a copy of the deposit agreement which is filed as exhibit 2.2 to
our annual report on Form 20-F (File No. 001-36614) for the fiscal year ended March 31, 2020. You may also obtain a copy of the deposit
agreement at the SEC's Public Reference Room which is located at 100 F Street, NE, Washington, DC 20549. You may obtain information on
the operation of the Public Reference Room by calling the SEC at 1-800-732-0330. You may also find the deposit agreement on the SEC's
website at http://www.sec.gov.
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Holding the ADSs
How may you hold your ADSs?
You may hold ADSs either (1) directly (a) by having an American Depositary Receipt, or ADR, which is a certificate evidencing a specific
number of ADSs, registered in your name, or (b) by holding ADSs in the DRS, or (2) indirectly through your broker or other financial
institution. If you hold ADSs directly, you are an ADS holder. This description assumes you hold your ADSs directly. If you hold ADSs
indirectly, you must rely on the procedures of your broker or other financial institution to assert the rights of ADS holders described in this
section. You should consult with your broker or financial institution to find out what those procedures are.
Dividends and Other Distributions
How will you receive dividends and other distributions on the ordinary shares?
The depositary has agreed to pay to you the cash dividends or other distributions it or the custodian receives on ordinary shares or other
deposited securities, after deducting its fees and expenses. You will receive these distributions in proportion to the number of ordinary shares
your ADSs represent as of the record date (which will be as close as practicable to the record date for the ordinary shares) set by the depositary
with respect to the ADSs.
· Cash. The depositary will convert any cash dividend or other cash distribution we pay on the ordinary shares or any net proceeds
from the sale of any ordinary shares, rights, securities or other entitlements into U.S. dollars if it may do so on a practicable basis,
and may transfer the U.S. dollars to the United States. If that is not possible or lawful or if any government approval is needed and
cannot be obtained, the deposit agreement allows the depositary to distribute the foreign currency only to those ADS holders to
whom it is possible to do so. It will hold the foreign currency it cannot convert for the account of the ADS holders who have not
been paid. It will not invest the foreign currency and it will not be liable for any interest.
Before making a distribution, any taxes or other governmental charges, together with fees and expenses of the depositary that
must be paid will be deducted. The depositary will distribute only whole U.S. dollars and cents and will round fractional cents
down to the nearest whole cent. If the exchange rates fluctuate during a time when the depositary cannot convert the foreign
currency, you may lose some or all of the value of the distribution.
· Shares. The depositary will distribute additional ADSs representing any ordinary shares we distribute as a dividend or free
distribution to the extent reasonably practicable and permissible under applicable law. The depositary will only distribute whole
ADSs. It will try to sell ordinary shares which would require it to deliver a fractional ADS and distribute the net proceeds in the
same way as it does with cash. If the depositary does not distribute additional ADSs, the outstanding ADSs will (to the extent
permitted by applicable law) represent the new ordinary shares. The depositary may sell a portion of the distributed ordinary
shares sufficient to pay its fees and expenses in connection with that distribution.
· Elective distributions in cash or shares. If we offer holders of the ordinary shares the option to receive dividends in either cash
or shares, the depositary, after consultation with us and having received timely notice of such elective distribution by us, will
determine whether it is lawful and practicable to make such elective distribution available to you as a holder of the ADSs. We
must first instruct the depositary to make such elective distribution available to you and furnish it with satisfactory evidence that it
is legal to do so. If the depositary determines that it is not lawful or practicable to make the elective distribution available to ADS
holders, then the depositary shall, on the basis of the same determination as is made in respect of the ordinary shares for which no
election is made, distribute either cash in the same way as it does in a cash distribution, or additional ADSs representing ordinary
shares in the same way as it does in a share distribution. The depositary is not obligated to make available to you a method to
receive the elective dividend in shares rather than in
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ADSs. There can be no assurance that you will be given the opportunity to receive elective distributions on the same terms and
conditions as the holders of ordinary shares.
· Rights to purchase additional shares. If we offer holders of the ordinary shares any rights to subscribe for additional shares, the
depositary may, after consultation with us and having received timely notice of such distribution by us, make these rights
available to you. We must first instruct the depositary to make such rights available to you and furnish the depositary with
satisfactory evidence that it is legal to do so. If the depositary decides it is not legal and practicable to make the rights available
but that it is practical to sell the rights, the depositary will use reasonable efforts to sell the rights and distribute the net proceeds in
the same way as it does with cash. The depositary will allow rights that are not distributed or sold to lapse. In that case, you will
receive no value for them.
If the depositary makes rights available to you, it will exercise the rights and purchase the shares on your behalf. The depositary
will then deposit the shares and deliver ADSs to you. It will only exercise rights if you pay it the exercise price and any other
charges the rights or the deposit agreement requires you to pay.
· Other distributions. Subject to receipt of timely notice from us with the request to make any such distribution available to you,
and provided the depositary has determined such distribution is lawful and practicable and in accordance with the terms of the
deposit agreement, the depositary will send to you anything else we distribute on deposited securities by any means it thinks is
legal and practicable. If it cannot make the distribution in that way, the depositary has a choice: it may decide to sell what we
distributed and distribute the net proceeds in the same way as it does with cash; or, it may decide to hold what we distributed, in
which case ADSs will also represent the newly distributed property. However, the depositary is not required to distribute any
securities (other than ADSs) to you unless it receives satisfactory evidence from us that it is legal to make that distribution. The
depositary may sell a portion of the distributed securities or property sufficient to pay its fees and expenses in connection with that
distribution.
The depositary is not responsible if it decides that it is unlawful or impracticable to make a distribution available to any ADS
holders. We have no obligation to register ADSs, shares, rights or other securities under the Securities Act in order to make a
distribution to ADS holders. We also have no obligation to take any other action to permit the distribution of ADSs, shares, rights
or anything else to ADS holders. This means that you may not receive the distributions we make on our shares or any value for
them if it is illegal or impracticable for us or for the depositary to make them available to you.
Deposit, Withdrawal and Cancellation
How are ADSs issued?
The depositary will deliver ADSs if you or your broker deposit ordinary shares or evidence of rights to receive ordinary shares with the
custodian and if we have not objected to the deposit of such ordinary shares. In such case, upon receipt of payment of its fees and expenses and
of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will register the appropriate number of ADSs in the
names you request and will deliver the ADSs to or upon the order of the person or persons entitled thereto.
How do ADS holders cancel an ADS?
You may request cancellation of your ADSs by surrendering your ADSs to the depositary or by providing appropriate instructions to your
broker. Upon receipt of payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the
depositary will deliver the ordinary shares and any other deposited securities underlying the ADSs to you or a person you designate at the office
of the custodian.
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How do ADS holders interchange between certificated ADSs and uncertificated ADSs?
You may surrender your ADR to the depositary for the purpose of exchanging your ADR for uncertificated ADSs. The depositary will cancel
that ADR and will send you a statement confirming that you are the owner of uncertificated ADSs. Alternatively, upon receipt by the depositary
of a proper instruction from a holder of uncertificated ADSs requesting the exchange of uncertificated ADSs for ADRs, the depositary will
execute and deliver to you an ADR evidencing those ADSs.
Voting Rights
How do you vote?
You may instruct the depositary to vote the deposited securities underlying your ADSs. Otherwise, you may not be able to exercise your right to
vote unless you withdraw the ordinary shares your ADSs represent. However, you may not know about the meeting sufficiently in advance to
withdraw the ordinary shares.
If we ask for your instructions, upon timely notice from us, the depositary will notify you of the upcoming vote and arrange to deliver our
voting materials to you. The materials will (1) describe the matters to be voted on and (2) explain how you may instruct the depositary to vote
the ordinary shares or other deposited securities underlying your ADSs as you direct, including an express indication that such instruction may
be given or deemed given to the depositary to give a discretionary proxy to a person designated by us in accordance with the next paragraph if
no instruction is received. For instructions to be valid, the depositary must receive them on or before the date specified. The depositary will try,
as far as practical, subject to the laws of the Cayman Islands and the provisions of our constitutive documents, to vote or to have its agents vote
the ordinary shares or other deposited securities in accordance with the voting instructions received from the holders of ADSs (including
deemed instructions to give a discretionary proxy to a person designated by us in accordance with the next paragraph). The depositary will only
vote or attempt to vote as you instruct.
If we timely requested the depositary to solicit your instructions but no instructions are received by the depositary from an owner with respect to
any of the deposited securities represented by the ADSs of that owner on or before the date established by the depositary for such purpose, the
depositary shall deem that owner to have instructed the depositary to give a discretionary proxy to a person designated by us with respect to
such deposited securities, and the depositary shall give a discretionary proxy to a person designated by us to vote such deposited securities.
However, no such instruction shall be deemed given and no such discretionary proxy shall be given with respect to any matter if we inform the
depositary we do not wish such proxy given, if substantial opposition exists or if the rights of holders of deposited securities may be materially
adversely affected.
We cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote the ordinary shares
underlying your ADSs. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for the manner
of carrying out voting instructions. This means that you may not be able to exercise your right to vote and there may be nothing you can do if
the ordinary shares underlying your ADSs are not voted as you requested.
In order to give you a reasonable opportunity to instruct the depositary as to the exercise of voting rights relating to deposited securities, if we
request the depositary to act, we will try to give the depositary notice of any such meeting and details concerning the matters to be voted upon
sufficiently in advance of the meeting date.
Fees and Expenses
As an ADS holder, you are required to pay the following fees under the terms of the deposit agreement:
Service
Issuance of ADSs upon deposit of ordinary shares (excluding issuances as a
result of distributions of ordinary shares)
Fees
Up to US$0.05 per ADS issued
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Cancellation of ADSs
Distribution of cash dividends or other cash distributions (i.e., sale of rights
and other entitlements)
Up to US$0.05 per ADS canceled
Up to US$0.05 per ADS held
Distribution of ADSs pursuant to (i) share dividends or other free share
distributions, or (ii) exercise of rights to purchase additional ADSs
Up to US$0.05 per ADS held
Distribution of securities other than ADSs or rights to purchase additional
ADSs (i.e., spin-off shares)
Up to US$0.05 per ADS held
ADS Services
Up to US$0.05 per ADS held on the applicable record
date(s) established by the depositary
As an ADS holder you are also responsible to pay certain charges such as:
· taxes (including applicable interest and penalties) and other governmental charges;
· the registration fees as may from time to time be in effect for the registration of ordinary shares or other deposited securities on
the share register and applicable to transfers of ordinary shares or other deposited securities to or from the name of the custodian,
the depositary or any nominees upon the making of deposits and withdrawals, respectively;
· certain cable, telex and facsimile transmission and delivery expenses;
· the expenses and charges incurred by the depositary in the conversion of foreign currency;
· the fees and expenses incurred by the depositary in connection with compliance with exchange control regulations and other
regulatory requirements applicable to ordinary shares, ADSs and ADRs; and
· the fees and expenses incurred by the depositary, the custodian, or any nominee in connection with the servicing or delivery of
deposited property.
ADS fees and charges payable upon (i) deposit of ordinary shares against issuance of ADSs and (ii) surrender of ADSs for cancellation and
withdrawal of ordinary shares are charged to the person to whom the ADSs are delivered (in the case of ADS issuances) and to the person who
delivers the ADSs for cancellation (in the case of ADS cancellations). In the case of ADSs issued by the depositary into The Depository Trust
Company, or DTC, or presented to the depositary via DTC, the ADS issuance and cancellation fees and charges are charged to the DTC
participant(s) receiving the ADSs or the DTC participant(s) surrendering the ADSs for cancellation, as the case may be, on behalf of the
beneficial owner(s) and will be charged by the DTC participant(s) to the account(s) of the applicable beneficial owner(s) in accordance with the
procedures and practices of the DTC participant(s) as in effect at the time. ADS fees and charges in respect of distributions and the ADS service
fee are charged to the holders as of the applicable ADS record date. In the case of distributions of cash, the amount of the applicable ADS fees
and charges is deducted from the funds being distributed. In the case of (i) distributions other than cash and (ii) the ADS service fee, holders as
of the ADS record date will be invoiced for the amount of the ADS fees and charges. For ADSs held through DTC, the ADS fees and charges
for distributions other than cash and the ADS service fee are charged to the DTC participants in accordance with the procedures and practices
prescribed by DTC and the DTC participants in turn charge the amount of such ADS fees and charges to the beneficial owners for whom they
hold ADSs.
In the event of refusal to pay the depositary fees, the depositary may, under the terms of the deposit agreement, refuse the requested service until
payment is received or may set off the amount of the depositary fees from any distribution to be made to the ADS holder. Note that the fees and
charges you may be required to pay may vary over time and may be changed by us and by the depositary. You will receive prior notice of such
changes. The depositary
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may reimburse us for certain expenses incurred by us in respect of the ADR program, by making available a portion of the ADS fees charged in
respect of the ADR program or otherwise, upon such terms and conditions as we and the depositary agree from time to time.
Payment of Taxes
You are responsible for any taxes or other governmental charges payable on your ADSs or on the deposited securities represented by any of
your ADSs. The depositary may refuse to register any transfer of your ADSs or allow you to withdraw the deposited securities represented by
your ADSs until such taxes or other charges are paid. It may apply payments owed to you or sell deposited securities represented by your ADSs
to pay any taxes owed and you will remain liable for any deficiency. If the depositary sells deposited securities, it will, if appropriate, reduce the
number of ADSs to reflect the sale and pay to you any net proceeds, or send to you any property, remaining after it has paid the taxes. You
agree to indemnify us, the depositary, the custodian and each of our and their respective agents, directors, employees and affiliates for, and hold
each of them harmless from, any claims with respect to taxes (including applicable interest and penalties thereon) arising from any tax benefit
obtained for you.
Reclassifications, Recapitalizations and Mergers
If we:
Change the nominal or par value of the ordinary shares
Then:
The shares received by the depositary will become deposited securities.
Reclassify, split up or consolidate any of the deposited securities
Each ADS will to the extent not prohibited by law represent its equal
share of the new deposited securities.
Distribute securities on the ordinary shares that are not
distributed to you or recapitalize, reorganize, merge, liquidate,
sell all or substantially all of our assets, or take any similar action
The depositary may to the extent not prohibited by law distribute some
or all of the cash, shares or other securities it received. It may also
deliver new ADSs or ask you to surrender your outstanding ADRs in
exchange for new ADRs identifying the new deposited securities.
Amendment and Termination
How may the deposit agreement be amended?
We may agree with the depositary to amend the deposit agreement and the form of ADR without your consent for any reason. If an amendment
adds or increases fees or charges, except for taxes and other governmental charges or expenses of the depositary for registration fees, facsimile
costs, delivery charges or similar items, including expenses incurred in connection with foreign exchange control regulations and other charges
specifically payable by ADS holders under the deposit agreement, or materially prejudices a substantial existing right of ADS holders, it will
not become effective for outstanding ADSs until 30 days after the depositary notifies ADS holders of the amendment. Any amendments to
ensure compliance with applicable laws, rules or regulations may become effective before the expiration of the 30-day notice period. At the
time an amendment becomes effective, you are considered, by continuing to hold your ADSs, to agree to the amendment and to be bound by the
ADRs and the deposit agreement as amended.
How may the deposit agreement be terminated?
The depositary will terminate the deposit agreement if we ask it to do so, in which case the depositary will give notice to you at least 30 days
prior to termination. The depositary may also terminate the deposit agreement if we have informed the depositary of its removal or the
depositary has told us that it would like to resign and we have not appointed a new depositary within 90 days. In such case, the depositary must
notify you at least 30 days before termination.
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After termination, the depositary and its agents will do the following under the deposit agreement but nothing else: collect distributions on the
deposited securities, sell rights and other property, and deliver ordinary shares and other deposited securities upon cancellation of ADSs after
payment of any fees, charges, taxes or other governmental charges. After termination, the depositary may sell any remaining deposited
securities by public or private sale. After that, the depositary will hold the money it received on the sale, as well as any other cash it is holding
under the deposit agreement, for the pro rata benefit of the ADS holders that have not surrendered their ADSs. It will not invest the money and
has no liability for interest. The depositary's only obligations will be to account for the money and other cash. After termination, our only
obligations will be to indemnify the depositary and to pay fees and expenses of the depositary that we agreed to pay.
Books of Depositary
The depositary maintains ADS holder records at its depositary office. You may inspect such records at such office during regular business hours
but solely for the purpose of communicating with other holders in the interest of business matters relating to the ADSs and the deposit
agreement.
The depositary maintains facilities in New York to record and process the issuance, cancellation, combination, split-up and transfer of ADRs.
These facilities may be closed from time to time, to the extent not prohibited by law or if any such action is deemed necessary or advisable by
the depositary or us, in good faith, at any time or from time to time because of any requirement of law, any government or governmental body
or commission or any securities exchange on which the ADRs or ADSs are listed, or under any provision of the deposit agreement or provisions
of, or governing, the deposited securities, or any meeting of our shareholders or for any other reason.
Limitations on Obligations and Liability
Limits on our Obligations and the Obligations of the Depositary; Limits on Liability to Holders of ADSs
The deposit agreement expressly limits our obligations and the obligations of the depositary. It also limits our liability and the liability of the
depositary. We and the depositary:
· are only obligated to take the actions specifically set forth in the deposit agreement without negligence or bad faith;
· are not liable if either of us is prevented or delayed from performing our obligations under the deposit agreement by reason of,
including, without limitation, requirements of any present or future law, regulation, governmental or regulatory authority or share
exchange of any applicable jurisdiction, any present or future provisions of our memorandum and articles of association, on
account of possible civil or criminal penalties or restraint, any provisions of or governing the deposited securities or any act of
God, war or other circumstances beyond our control as set forth in the deposit agreement;
· are not liable if either of us exercises, or fails to exercise, discretion permitted under the deposit agreement;
· are not liable for the inability of any holder of ADSs to benefit from any distribution on deposited securities that is not made
available to holders of ADSs under the terms of the deposit agreement, or for any consequential or punitive damages for any
breach of the terms of the deposit agreement;
· have no obligation to become involved in a lawsuit or other proceeding related to the ADSs or the deposit agreement on your
behalf or on behalf of any other party;
· may rely upon any documents we believe in good faith to be genuine and to have been signed or presented by the proper party;
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· disclaim any liability for any action/inaction in reliance on the advice or information of legal counsel, accountants, any person
presenting ordinary shares for deposit, holders and beneficial owners (or authorized representatives) of ADSs, or any person
believed in good faith to be competent to give such advice or information; and
· disclaim any liability for inability of any holder to benefit from any distribution, offering, right or other benefit made available to
holders of deposited securities but not made available to holders of ADSs.
The depositary and any of its agents also disclaim any liability for any failure to carry out any instructions to vote, the manner in which any vote
is cast or the effect of any vote or failure to determine that any distribution or action may be lawful or reasonably practicable or for allowing any
rights to lapse in accordance with the provisions of the deposit agreement, the failure or timeliness of any notice from us, the content of any
information submitted to it by us for distribution to you or for any inaccuracy of any translation thereof, any investment risk associated with the
acquisition of an interest in the deposited securities, the validity or worth of the deposited securities, the credit-worthiness of any third party, for
any tax consequences that may result from ownership of ADSs, ordinary shares or deposited securities or for any information provided (or not
provided) by DTC or DTC participants.
In the deposit agreement, we and the depositary agree to indemnify each other under certain circumstances.
Requirements for Depositary Actions
Before the depositary will issue, deliver or register a transfer of an ADS, make a distribution on an ADS, or permit withdrawal of ordinary
shares, the depositary may require:
· payment of stock transfer or other taxes or other governmental charges and transfer or registration fees charged by third parties for
the transfer of any ordinary shares or other deposited securities and payment of the applicable fees, expenses and charges of
the depositary;
· satisfactory proof of the identity and genuineness of any signature or other information it deems necessary; and
· compliance with regulations it may establish, from time to time, consistent with the deposit agreement, including presentation of
transfer documents.
The depositary may refuse to issue and deliver ADSs or register transfers of ADSs generally when the register of the depositary or our transfer
books are closed or at any time if the depositary or we think it is necessary or advisable to do so.
Your Right to Receive the Shares Underlying Your ADSs
You have the right to cancel your ADSs and withdraw the underlying ordinary shares at any time except:
· when temporary delays arise because: (1) the depositary has closed its transfer books or we have closed our transfer books; (2) the
transfer of ordinary shares is blocked to permit voting at a shareholders' meeting; or (3) we are paying a dividend on the ordinary
shares;
· when you owe money to pay fees, taxes and similar charges; or
· when it is necessary to prohibit withdrawals in order to comply with any laws or governmental regulations that apply to ADSs or
to the withdrawal of ordinary shares or other deposited securities.
This right of withdrawal may not be limited by any other provision of the deposit agreement.
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Pre-release of ADSs
The depositary has informed us that, notwithstanding the terms of the deposit agreement, the depositary does not presently engage in pre-release
transactions and has no intent to enter into pre-release transactions in the future.
Direct Registration System
The Profile Modification System, or Profile, is a system administered by DTC and applies to uncertificated ADSs. DRS enables the registration
of the ownership of uncertificated ADSs, which ownership shall be evidenced by periodic statements issued by the depositary to the ADS
holders entitled thereto. Profile allows a DTC participant, claiming to act on behalf of an ADS holder, to direct the depositary to register a
transfer of those uncertificated ADSs to DTC or its nominee and to deliver those ADSs to the DTC account of that DTC participant without
receipt by the depositary of prior authorization from the ADS holder to register such transfer.
In connection with and in accordance with the arrangements and procedures relating to DRS/Profile, the parties to the deposit agreement
understand that the depositary does not verify, determine or otherwise ascertain that the DTC participant which is claiming to be acting on
behalf of an ADS holder in requesting registration of transfer and delivery described in the paragraph above has the actual authority to act on
behalf of the ADS holder (notwithstanding any requirements under the New York Uniform Commercial Code). In the deposit agreement, the
parties agree that the depositary's reliance on, and compliance with, instructions received by the depositary through the DRS/Profile and in
accordance with the deposit agreement, shall not constitute negligence or bad faith on the part of the depositary.
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Conversion between Ordinary Shares Trading in Hong Kong and ADSs (Items 12.D.1 and 12.D.4 of Form 20-F)
In connection with the listing of our ordinary shares on the Hong Kong Stock Exchange, we have established a branch register of members in
Hong Kong, or the Hong Kong share register, which is maintained by our Hong Kong Share Registrar, Computershare Hong Kong Investor
Services Limited. Our principal register of members, or the Cayman share register, is maintained by our Principal Share Registrar.
All of our ordinary shares offered in our Hong Kong public offering are registered on the Hong Kong share register in order to be listed and
traded on the Hong Kong Stock Exchange. As described in further detail below, holders of Shares registered on the Hong Kong share register
are able to convert these ordinary shares into ADSs, and vice versa.
In connection with the Hong Kong public offering, and to facilitate fungibility and conversion between ADSs and ordinary shares and trading
between the NYSE and the Hong Kong Stock Exchange, we moved a portion of our issued ordinary shares that are represented by ADSs from
our Cayman share register to our Hong Kong share register.
Our ADSs
Our ADSs are traded on the NYSE. Dealings in our ADSs on the NYSE are conducted in U.S. Dollars. ADSs may be held either:
· directly, by having a certificated ADS, or an ADR, registered in the holder’s name, or by holding in the direct registration system,
pursuant to which the depositary may register the ownership of uncertificated ADSs, which ownership shall be evidenced by periodic
statements issued by the depositary to the ADS holders entitled thereto; or
· indirectly, through the holder’s broker or other financial institution.
The depositary for our ADSs is Citibank, N.A., whose office is located at 388 Greenwich Street, New York, New York 10013, United States.
The depositary’s custodian in Hong Kong is Citibank, N.A. – Hong Kong branch, whose office is located at 9/F Citi Tower, One Bay East, 83
Hoi Bun Road, Kwun Tong, Kowloon, Hong Kong.
Converting Ordinary Shares Trading in Hong Kong into ADSs
An investor who holds ordinary shares registered in Hong Kong and who intends to convert them to ADSs to trade on the NYSE must deposit
or have his or her broker deposit the ordinary shares with the depositary’s Hong Kong custodian, Citibank, N.A., Hong Kong, or the custodian,
in exchange for ADSs.
A deposit of ordinary shares trading in Hong Kong in exchange for ADSs involves the following procedures:
· If ordinary shares have been deposited with CCASS, the investor must transfer ordinary shares to the depositary’s account with the
custodian within CCASS by following the CCASS procedures for transfer and submit and deliver a duly completed and signed
conversion form to the depositary via his or her broker.
· If ordinary shares are held outside CCASS, the investor must arrange to deposit his or her ordinary shares into CCASS for delivery to
the depositary’s account with the custodian within CCASS, submit and deliver a request for conversion form to the custodian and after
duly completing and signing such conversion form, deliver such conversion form to the custodian.
· Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, if applicable,
the depositary will issue the corresponding number of ADSs in the name(s) requested by an investor and will deliver the ADSs to the
designated DTC account of the person(s) designated by an investor or his or her broker.
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For ordinary shares deposited in CCASS, under normal circumstances, the above steps generally require two business days. For ordinary shares
held outside CCASS in physical form, the above steps may take 14 business days, or more, to complete. Temporary delays may arise. For
example, the transfer books of the depositary may from time to time be closed to ADS issuances. The investor will be unable to trade the ADSs
until the procedures are completed.
Converting ADSs to Ordinary Shares Trading in Hong Kong
An investor who holds ADSs and who intends to convert his/her ADSs into Shares to trade on the Hong Kong Stock Exchange must cancel the
ADSs the investor holds and withdraw Shares from our ADS program and cause his or her broker or other financial institution to trade such
ordinary shares on the Hong Kong Stock Exchange.
An investor that holds ADSs indirectly through a broker should follow the broker’s procedure and instruct the broker to arrange for cancelation
of the ADSs, and transfer of the underlying ordinary shares from Citibank’s account on the CCASS system to the investor’s Hong Kong stock
account.
For investors holding ADSs directly, the following steps must be taken:
· To withdraw ordinary shares from our ADS program, an investor who holds ADSs may turn in such ADSs at the office of the
depositary (and the applicable ADR(s) if the ADSs are held in certificated form), and send an instruction to cancel such ADSs to the
depositary.
· Upon payment or net of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, if
applicable, the depositary will instruct the custodian to deliver ordinary shares underlying the canceled ADSs to the CCASS account
designated by an investor.
· If an investor prefers to receive ordinary shares outside CCASS, he or she must receive ordinary shares in CCASS first and then
arrange for withdrawal from CCASS. Investors can then obtain a transfer form signed by HKSCC Nominees Limited (as the
transferor) and register ordinary shares in their own names with the Hong Kong Share Registrar.
For ordinary shares to be received in CCASS, under normal circumstances, the above steps generally require two business days. For ordinary
shares to be received outside CCASS in physical form, the above steps may take 14 business days, or more, to complete. The investor will be
unable to trade the ordinary shares on the Hong Kong Stock Exchange until the procedures are completed.
Temporary delays may arise. For example, the transfer books of the depositary may from time to time be closed to ADS cancellations. In
addition, completion of the above steps and procedures is subject to there being a sufficient number of ordinary shares on the Hong Kong share
register to facilitate a withdrawal from the ADS program directly into the CCASS system.
We are not under any obligation to maintain or increase the number of ordinary shares on the Hong Kong share register to facilitate such
withdrawals.
Depositary Requirements
Before the depositary issues ADSs or permits withdrawal of ordinary shares, the depositary may require:
· production of satisfactory proof of the identity and genuineness of any signature or other information it deems necessary; and
· compliance with procedures it may establish, from time to time, consistent with the Deposit Agreement, including presentation of
transfer documents.
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The depositary may refuse to deliver, transfer, or register issuances, transfers and cancelations of ADSs generally when the transfer books of the
depositary or our Hong Kong Share Registrar are closed or at any time if the depositary or we determine it advisable to do so.
All costs attributable to the transfer of ordinary shares to effect a withdrawal from or deposit of ordinary shares into our ADS program will be
borne by the investor requesting the transfer. In particular, holders of ordinary shares and ADSs should note that the Hong Kong share registrar
will charge between HK$2.50 to HK$20.00, depending on the speed of service (or such higher fee as may from time to time be permitted under
the Hong Kong Listing Rules), for each transfer of ordinary shares from one registered owner to another, each share certificate canceled or
issued by it and any applicable fee as stated in the share transfer forms used in Hong Kong.
In addition, holders of Shares and ADSs must pay US$5.00 (or less) per 100 ADSs for each issuance of ADSs and for each cancelation of
ADSs, as the case may be, in connection with the deposit of Shares into, or withdrawal of ordinary shares from, our ADS program.
Description of Debt Securities (Items 12.A of Form 20-F)
In November 2014, we issued unsecured senior notes, including floating rate and fixed rate notes, with varying maturities for an aggregate
principal amount of US$8.0 billion (the “2014 Senior Notes”), of which US$1.3 billion was repaid in November 2017 and US$2.25 billion was
repaid in November 2019. The 2014 Senior Notes are senior unsecured obligations that are listed on The Hong Kong Stock Exchange, and
interest is payable in arrears, quarterly for the floating rate notes and semiannually for the fixed-rate notes. Each of the 2014 Senior Notes were
issued under an indenture, dated as of November 28, 2014, between Alibaba Group Holding Limited, as issuer, and The Bank of New York
Mellon, as trustee, principal paying agent and securities registrar, as supplemented and amended (the “2014 Indenture”). The 2014 Senior Notes
were issued in a private placement transaction that was not subject to the registration requirements of the Securities Act.
In October 2015, we commenced an exchange offer to exchange (i) up to US$300 million aggregate principal amount of our floating rate notes
due 2017, (ii) up to US$1,000 million aggregate principal amount of our 1.625% notes due 2017, (iii) up to US$2,250 million aggregate
principal amount of our 2.500% notes due 2019, (iv) up to US$1,500 million aggregate principal amount of our 3.125% notes due 2021, (v) up
to US$2,250 million aggregate principal amount of our 3.600% notes due 2024 and (vi) up to US$700 million aggregate principal amount of
our 4.500% notes due 2034, which are registered under the Securities Act, for equal principal amounts of corresponding tranches of the 2014
Senior Notes, including our outstanding floating rate notes due 2017, 1.625% notes due 2017, 2.500% notes due 2019, 3.125% notes due 2021,
3.600% notes due 2024 and 4.500% notes due 2034. The exchange offer expired in November 2015. As of December 3, 2015, holders of the
following tranches of 2014 Senior Notes had tendered their outstanding notes for exchange: (i) US$285,200,000, or 95.1%, of outstanding
floating rate notes due 2017, (ii) US$996,658,000, or 99.7%, of outstanding notes due 2017, (iii) US$2,217,290,000, or 98.5%, of outstanding
notes due 2019, (iv) US$1,473,138,000, or 98.2%, of outstanding notes due 2021, (v) US$2,233,431,000, or 99.3%, of outstanding notes due
2024 and (vi) US$697,670,000, or 99.7%, of outstanding notes due 2034.
In December 2017, we issued an additional aggregate of US$7.0 billion unsecured senior notes (the “2017 Senior Notes”). The 2017 Senior
Notes are senior unsecured obligations that are listed on the Singapore Stock Exchange, and interest is payable in arrears semiannually. Each of
the 2017 Senior Notes were issued under an indenture, dated as of December 6, 2017, between Alibaba Group Holding Limited, as issuer, and
The Bank of New York Mellon, as trustee, principal paying agent and securities registrar, as supplemented and amended (the “2017 Indenture,”
together with the 2014 Indenture, the “Indentures”).
The 2014 Senior Notes and the 2017 Senior Notes (collectively the “Notes”) contain covenants including, among others, limitation on liens,
consolidation, merger and sale of our assets, see “— 9. General Terms Applicable to Each Series of Notes — Particular Covenants of Us.” As
of March 31, 2020, we are in compliance with all these covenants. In addition, the Notes rank senior in right of payment to all of our existing
and future indebtedness expressly subordinated in right of payment to the notes and rank at least equally in right of payment with all of our
existing and future unsecured unsubordinated indebtedness (subject to any priority rights pursuant to applicable law).
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The proceeds from issuance of the 2014 Senior Notes were used in full to refinance a previous syndicated loan in the same amount. The
proceeds from the issuance of the 2017 Senior Notes were used for general corporate purposes.
The following table sets forth the dates of the registration statements, dates of the base prospectuses and date of issuance for each relevant series
of the Notes.
Notes
US$1,500 million 3.125%
Senior Notes Due 2021
US$2,250 million 3.600%
Senior Notes Due 2024
US$700 million 4.500%
Senior Notes Due 2034
US$700 million 2.800%
Senior Notes Due 2023
US$2,550 million 3.400%
Senior Notes Due 2027
US$1,000 million 4.000%
Senior Notes Due 2037
US$1,750 million 4.200%
Senior Notes Due 2047
US$1,000 million 4.400%
Senior Notes Due 2057
Registration Statement
Form F-4 (file number 333-206575)
Date of Base Prospectus
October 27, 2015
Date of Issuance
November 28, 2014*
Form F-4 (file number 333-206575)
October 27, 2015
November 28, 2014*
Form F-4 (file number 333-206575)
October 27, 2015
November 28, 2014*
Form F-3 (file number 333-221742)
November 24, 2017
December 6, 2017
Form F-3 (file number 333-221742)
November 24, 2017
December 6, 2017
Form F-3 (file number 333-221742)
November 24, 2017
December 6, 2017
Form F-3 (file number 333-221742)
November 24, 2017
December 6, 2017
Form F-3 (file number 333-221742)
November 24, 2017
December 6, 2017
* Date of original issuance in a private placement transaction that was not subject to the registration requirements of the Securities Act;
certain principal amounts of different tranches of notes registered under the Securities Act were subsequently exchanged for equal principal
amounts of corresponding tranches of the 2014 Senior Notes.
The following description of our Notes is a summary and does not purport to be complete and is qualified in its entirety by the full terms of each
of the Notes. For a complete description of the terms and provisions of the Notes, refer to the Indentures and the relevant supplemental
indentures filed with the SEC. The 2014 Indenture has been filed as Exhibit 2.6 to our annual report on Form 20-F (No. 001-36614) filed on
June 25, 2015 and the 2017 Indenture has been filed as Exhibit 2.15 to our annual report on Form 20-F (No. 001-36614) filed on July 27, 2018.
Please note that the descriptions in the following Items 1 to 8 should be read in conjunction with Item 9, which describes the terms applicable to
each series of Notes.
1. Description of the US$1,500 million 3.125% Senior Notes Due 2021
The following description of the terms and conditions of the above referenced debt securities is based on and qualified by the Indenture, dated
as of November 28, 2014, between Alibaba Group Holding Limited, as issuer, and The Bank of New York Mellon, as trustee, principal paying
agent and securities registrar, as supplemented and amended (the “2014 Indenture”) and the 3.125% Notes due 2021 (the “3.125% Notes”).
We initially appointed The Bank of New York Mellon located at 101 Barclay Street, New York, NY 10286, United States of America as paying
agent to receive all presentations, surrenders, notices and demands. For a complete description of the terms and provision of the 3.125% Notes,
please refer to the 2014 Indenture and the form of the 3.125% Notes filed as Exhibits 2.6 and 2.10 to our annual report on Form 20-F (No. 001-
36614) filed on June 25, 2015.
26
General
The 3.125% Notes constitute senior unsecured debt obligations of us and rank at least equal in right of payment to all of our other existing and
future unsecured and unsubordinated indebtedness (subject to any priority rights pursuant to applicable law). The 3.125% Notes were issued as
separate series of debt securities in registered form under the 2014 Indenture, dated as November 28, 2014, as amended, in denominations of
US$200,000 and integral multiples of US$1,000 in excess thereof. The Bank of New York Mellon serves as trustee, authenticating agent,
registrar and paying agent with respect to the 3.125% Notes.
The 3.125% Notes are initially limited to US$1,500,000,000 in aggregate principal amount and were issued at a price of 99.558% of the
principal amount thereof, other than any offering discounts pursuant to the initial offering and resale of the 3.125% Notes. We may from time to
time, without the consent of the holders of the 3.125% Notes, issue additional notes having the same terms and conditions as the initial 3.125%
Notes in all respects (or in all respects except for the issue date, the issue price or the first interest payment date). Any additional notes and the
initial notes shall constitute a single series under the 2014 Indenture, provided that if such additional notes are not fungible with the initial notes
for U.S. federal income tax purposes, such additional notes shall not have the same CUSIP, ISIN or other identifying number as the initial notes.
The 3.125% Notes do not have the benefit of any sinking fund.
Maturity and Interest
The entire outstanding principal of the 3.125% Notes will be payable on November 28, 2021 and bear interest at a rate of 3.125% per annum.
Interest payments on the 3.125% Notes are paid semi-annually on May 28 and November 28 of each year, to holders of record at the close of
business on the May 13 and November 13 prior to the applicable interest payment date and on the maturity date. The basis upon which interest
shall be calculated shall be that of a 360-day year consisting of twelve 30-day months.
Optional Redemption
We may, at any time prior to September 28, 2021 upon giving not less than 30 days nor more than 60 days’ notice to holders of the 3.125%
Notes (which notice shall be irrevocable), redeem such Notes, in whole or in part, at a redemption amount equal to the greater of (x) 100% of
the principal amount of the 3.125% Notes to be redeemed and (y) the Make Whole Amount (as defined below), plus, in each case, accrued and
unpaid interest and special interest, if any, to, but not including, the redemption date (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date); provided that the principal amount of a 3.125% Note remaining
outstanding after redemption in part shall be US$200,000 or an integral multiple of US$1,000 in excess thereof.
We may, from or after September 28, 2021 upon giving not less than 30 days nor more than 60 days’ notice to holders of the 3.125% Notes
(which notice shall be irrevocable), redeem such Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of such
Notes to be redeemed plus accrued and unpaid interest and special interest, if any, to, but not including, the redemption date (subject to the right
of holders of record on the relevant record date to receive interest due on the relevant interest payment date).
If the redemption date is on or after the relevant record date and on or before the related interest payment date, any accrued and unpaid interest
and special interest, if any, to the redemption date shall be paid on such interest payment date to the person in whose name a 3.125% Note is
registered at the close of business on such record date.
We or any of our controlled entities may, in accordance with all applicable laws and regulations, at any time purchase the 3.125% Notes in the
open market or otherwise at any price, so long as such purchase does not otherwise violate the terms of the 2014 Indenture. The 3.125% Notes
that we or our affiliates purchase may, in our discretion, be held, resold or canceled.
27
“Make Whole Amount” means an amount determined by the paying agent on the fifth business day before the redemption date that is equal to
the sum of (i) the present value of the principal amount of the 3.125% Notes to be redeemed, assuming a scheduled repayment thereof on the
maturity date for payment of principal on such Notes, plus (ii) the present value of the remaining scheduled payments of interest to and
including such maturity date for payment of principal on such Notes (exclusive of interest and Special Interest, if any, accrued to the
Redemption Date), in each case discounted to such redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-
day months and, in the case of an incomplete month, the actual number of days elapsed) at the Treasury Yield plus 20 basis points.
“Treasury Yield” means, with respect to any redemption date, the rate per annum equal to the semi-annual equivalent yield to maturity
(computed as of the fifth business day before such redemption date) of the Comparable Treasury Issue, calculated using a price for the
Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Redemption
Date.
“Comparable Treasury Issue” means the United States Treasury security selected by an independent investment banker as defined under the
2014 Indenture in connection with the 3.125% Notes that would be utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the 3.125% Notes to be redeemed.
“Comparable Treasury Price” means, with respect to any redemption date, (1) the average of the Reference Treasury Dealer Quotations for
such redemption date, after excluding the highest and lowest of such reference treasury dealer quotations, or (2) if we obtain fewer than three
such reference Treasury Dealer Quotations, the average of all quotations obtained.
“Reference Treasury Dealer” means each of any three investment banks of recognized standing that is a primary U.S. government securities
dealer in the United States, selected by the Company in good faith.
“Reference Treasury Dealer Quotation” means, with respect to each Reference Treasury Dealer and any redemption date, the average, as
determined by us, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount)
quoted in writing to us by such Reference Treasury Dealer as of 5:00 p.m., New York City time, on the fifth business day before such
redemption date.
Method of Payment
We shall pay interest and special interest, if any, on the 3.125% Notes (except defaulted interest), if any, to the persons in whose name such
Notes are registered at the close of business on the record date referred to on the face of the Note immediately preceding the related interest
payment date, even if such Notes are canceled, repurchased or redeemed on or after such record date and on or before such interest payment
date. Payment of interest and special interest, if any, on the 3.125% Notes shall be made, in the currency of the United States of America that at
the time is legal tender for payment of public and private debts, at the Corporate Trust Office or, at our option, by check mailed to the address of
the person entitled thereto as such address shall appear in the Register or, in accordance with arrangements satisfactory to the paying agent, by
wire transfer to an account designated by the Holder.
2. Description of the US$2,250 million 3.600% Senior Notes Due 2024
The following description of the terms and conditions of the above referenced debt securities is based on and qualified by the Indenture, dated
as of November 28, 2014, between Alibaba Group Holding Limited, as issuer, and The Bank of New York Mellon, as trustee, principal paying
agent and securities registrar, as supplemented and amended (the “2014 Indenture”) and the 3.600% Notes due 2024 (the “3.600% Notes”).
We initially appointed The Bank of New York Mellon located at 101 Barclay Street, New York, NY 10286, United States of America as paying
agent to receive all presentations, surrenders, notices and demands. For a complete description of the terms and provision of the 3.600% Notes,
please refer to the 2014 Indenture and the form of the 3.600% Notes filed as Exhibits 2.6 and 2.11 to our annual report on Form 20-F (No. 001-
36614) filed on June 25, 2015.
28
General
The 3.600% Notes constitute senior unsecured debt obligations of us and rank at least equal in right of payment to all of our other existing and
future unsecured and unsubordinated indebtedness (subject to any priority rights pursuant to applicable law). The 3.600% Notes were issued as
separate series of debt securities in registered form under the 2014 Indenture, dated as November 28, 2014, as amended, in denominations of
US$200,000 and integral multiples of US$1,000 in excess thereof. The Bank of New York Mellon serves as trustee, authenticating agent,
registrar and paying agent with respect to the 3.600% Notes.
The 3.600% Notes are initially limited to US$2,250,000,000 in aggregate principal amount and were issued at a price of 99.817% of the
principal amount thereof, other than any offering discounts pursuant to the initial offering and resale of the 3.600% Notes. We may from time to
time, without the consent of the holders of the 3.600% Notes, issue additional notes having the same terms and conditions as the initial 3.600%
Notes in all respects (or in all respects except for the issue date, the issue price or the first interest payment date). Any additional notes and the
initial notes shall constitute a single series under the 2014 Indenture, provided that if such additional notes are not fungible with the initial notes
for U.S. federal income tax purposes, such additional notes shall not have the same CUSIP, ISIN or other identifying number as the initial notes.
The 3.600% Notes do not have the benefit of any sinking fund.
Maturity and Interest
The entire outstanding principal of the 3.600% Notes will be payable on November 28, 2024 and bear interest at a rate of 3.600% per annum.
Interest payments on the 3.600% Notes are paid semi-annually on May 28 and November 28 of each year, to holders of record at the close of
business on the May 13 and November 13 prior to the applicable interest payment date and on the maturity date. The basis upon which interest
shall be calculated shall be that of a 360-day year consisting of twelve 30-day months.
Optional Redemption
We may, at any time prior to August 28, 2024 upon giving not less than 30 days nor more than 60 days’ notice to holders of the 3.600% Notes
(which notice shall be irrevocable), redeem such Notes, in whole or in part, at a redemption amount equal to the greater of (x) 100% of the
principal amount of the 3.600% Notes to be redeemed and (y) the Make Whole Amount (as defined below), plus, in each case, accrued and
unpaid interest and special interest, if any, to, but not including, the redemption date (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date); provided that the principal amount of a 3.600% Note remaining
outstanding after redemption in part shall be US$200,000 or an integral multiple of US$1,000 in excess thereof.
We may, from or after August 28, 2024 upon giving not less than 30 days nor more than 60 days’ notice to holders of the 3.600% Notes (which
notice shall be irrevocable), redeem such Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of such Notes
to be redeemed plus accrued and unpaid interest and special interest, if any, to, but not including, the redemption date (subject to the right of
holders of record on the relevant record date to receive interest due on the relevant interest payment date).
If the redemption date is on or after the relevant record date and on or before the related interest payment date, any accrued and unpaid interest
and special interest, if any, to the redemption date shall be paid on such interest payment date to the person in whose name a 3.600% Note is
registered at the close of business on such record date.
We or any of our controlled entities may, in accordance with all applicable laws and regulations, at any time purchase the 3.600% Notes in the
open market or otherwise at any price, so long as such purchase does not otherwise violate the terms of the 2014 Indenture. The 3.600% Notes
that we or our affiliates purchase may, in our discretion, be held, resold or canceled.
29
“Make Whole Amount” means an amount determined by the paying agent on the fifth business day before the redemption date that is equal to
the sum of (i) the present value of the principal amount of the 3.600% Notes to be redeemed, assuming a scheduled repayment thereof on the
maturity date for payment of principal on such Notes, plus (ii) the present value of the remaining scheduled payments of interest to and
including such maturity date for payment of principal on such Notes (exclusive of interest and Special Interest, if any, accrued to the
Redemption Date), in each case discounted to such redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-
day months and, in the case of an incomplete month, the actual number of days elapsed) at the Treasury Yield plus 20 basis points.
“Treasury Yield” means, with respect to any redemption date, the rate per annum equal to the semi-annual equivalent yield to maturity
(computed as of the fifth business day before such redemption date) of the Comparable Treasury Issue, calculated using a price for the
Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Redemption
Date.
“Comparable Treasury Issue” means the United States Treasury security selected by an independent investment banker as defined under the
2014 Indenture in connection with the 3.600% Notes that would be utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the 3.600% Notes to be redeemed.
“Comparable Treasury Price” means, with respect to any redemption date, (1) the average of the Reference Treasury Dealer Quotations for
such redemption date, after excluding the highest and lowest of such reference treasury dealer quotations, or (2) if we obtain fewer than three
such reference Treasury Dealer Quotations, the average of all quotations obtained.
“Reference Treasury Dealer” means each of any three investment banks of recognized standing that is a primary U.S. government securities
dealer in the United States, selected by the Company in good faith.
“Reference Treasury Dealer Quotation” means, with respect to each Reference Treasury Dealer and any redemption date, the average, as
determined by us, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount)
quoted in writing to us by such Reference Treasury Dealer as of 5:00 p.m., New York City time, on the fifth business day before such
redemption date.
Method of Payment
We shall pay interest and special interest, if any, on the 3.600% Notes (except defaulted interest), if any, to the persons in whose name such
Notes are registered at the close of business on the record date referred to on the face of the Note immediately preceding the related interest
payment date, even if such Notes are canceled, repurchased or redeemed on or after such record date and on or before such interest payment
date. Payment of interest and special interest, if any, on the 3.600% Notes shall be made, in the currency of the United States of America that at
the time is legal tender for payment of public and private debts, at the Corporate Trust Office or, at our option, by check mailed to the address of
the person entitled thereto as such address shall appear in the Register or, in accordance with arrangements satisfactory to the paying agent, by
wire transfer to an account designated by the Holder.
3. Description of the US$700 million 4.500% Senior Notes Due 2034
The following description of the terms and conditions of the above referenced debt securities is based on and qualified by the Indenture, dated
as of November 28, 2014, between Alibaba Group Holding Limited, as issuer, and The Bank of New York Mellon, as trustee, principal paying
agent and securities registrar, as supplemented and amended (the “2014 Indenture”) and the 4.500% Notes due 2034 (the “4.500% Notes”).
We initially appointed The Bank of New York Mellon located at 101 Barclay Street, New York, NY 10286, United States of America as paying
agent to receive all presentations, surrenders, notices and demands. For a complete description of the terms and provision of the 4.500% Notes,
please refer to the 2014 Indenture and the form of the 4.500% Notes filed as Exhibits 2.6 and 2.12 to our annual report on Form 20-F (No. 001-
36614) filed on June 25, 2015.
30
General
The 4.500% Notes constitute senior unsecured debt obligations of us and rank at least equal in right of payment to all of our other existing and
future unsecured and unsubordinated indebtedness (subject to any priority rights pursuant to applicable law). The 4.500% Notes were issued as
separate series of debt securities in registered form under the 2014 Indenture, dated as November 28, 2014, as amended, in denominations of
US$200,000 and integral multiples of US$1,000 in excess thereof. The Bank of New York Mellon serves as trustee, authenticating agent,
registrar and paying agent with respect to the 3.600% Notes.
The 4.500% Notes are initially limited to US$700,000,000 in aggregate principal amount and were issued at a price of 99.439% of the principal
amount thereof, other than any offering discounts pursuant to the initial offering and resale of the 4.500% Notes. We may from time to time,
without the consent of the holders of the 4.500% Notes, issue additional notes having the same terms and conditions as the initial 4.500% Notes
in all respects (or in all respects except for the issue date, the issue price or the first interest payment date). Any additional notes and the initial
notes shall constitute a single series under the 2014 Indenture, provided that if such additional notes are not fungible with the initial notes for
U.S. federal income tax purposes, such additional notes shall not have the same CUSIP, ISIN or other identifying number as the initial notes.
The 4.500% Notes do not have the benefit of any sinking fund.
Maturity and Interest
The entire outstanding principal of the 4.500% Notes will be payable on November 28, 2034 and bear interest at a rate of 4.500% per annum.
Interest payments on the 4.500% Notes are paid semi-annually on May 28 and November 28 of each year, to holders of record at the close of
business on the May 13 and November 13 prior to the applicable interest payment date and on the maturity date. The basis upon which interest
shall be calculated shall be that of a 360-day year consisting of twelve 30-day months.
Optional Redemption
We may, at any time prior to May 28, 2034 upon giving not less than 30 days nor more than 60 days’ notice to holders of the 4.500% Notes
(which notice shall be irrevocable), redeem such Notes, in whole or in part, at a redemption amount equal to the greater of (x) 100% of the
principal amount of the 4.500% Notes to be redeemed and (y) the Make Whole Amount (as defined below), plus, in each case, accrued and
unpaid interest and special interest, if any, to, but not including, the redemption date (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date); provided that the principal amount of a 4.500% Note remaining
outstanding after redemption in part shall be US$200,000 or an integral multiple of US$1,000 in excess thereof.
We may, from or after May 28, 2034 upon giving not less than 30 days nor more than 60 days’ notice to holders of the 4.500% Notes (which
notice shall be irrevocable), redeem such Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of such Notes
to be redeemed plus accrued and unpaid interest and special interest, if any, to, but not including, the redemption date (subject to the right of
holders of record on the relevant record date to receive interest due on the relevant interest payment date).
If the redemption date is on or after the relevant record date and on or before the related interest payment date, any accrued and unpaid interest
and special interest, if any, to the redemption date shall be paid on such interest payment date to the person in whose name a 4.500% Note is
registered at the close of business on such record date.
We or any of our controlled entities may, in accordance with all applicable laws and regulations, at any time purchase the 4.500% Notes in the
open market or otherwise at any price, so long as such purchase does not otherwise violate the terms of the 2014 Indenture. The 4.500% Notes
that we or our affiliates purchase may, in our discretion, be held, resold or canceled.
31
“Make Whole Amount” means an amount determined by the paying agent on the fifth business day before the redemption date that is equal to
the sum of (i) the present value of the principal amount of the 4.500% Notes to be redeemed, assuming a scheduled repayment thereof on the
maturity date for payment of principal on such Notes, plus (ii) the present value of the remaining scheduled payments of interest to and
including such maturity date for payment of principal on such Notes (exclusive of interest and Special Interest, if any, accrued to the
Redemption Date), in each case discounted to such redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-
day months and, in the case of an incomplete month, the actual number of days elapsed) at the Treasury Yield plus 25 basis points.
“Treasury Yield” means, with respect to any redemption date, the rate per annum equal to the semi-annual equivalent yield to maturity
(computed as of the fifth business day before such redemption date) of the Comparable Treasury Issue, calculated using a price for the
Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Redemption
Date.
“Comparable Treasury Issue” means the United States Treasury security selected by an independent investment banker as defined under the
2014 Indenture in connection with the 4.500% Notes that would be utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the 4.500% Notes to be redeemed.
“Comparable Treasury Price” means, with respect to any redemption date, (1) the average of the Reference Treasury Dealer Quotations for
such redemption date, after excluding the highest and lowest of such reference treasury dealer quotations, or (2) if we obtain fewer than three
such reference Treasury Dealer Quotations, the average of all quotations obtained.
“Reference Treasury Dealer” means each of any three investment banks of recognized standing that is a primary U.S. government securities
dealer in the United States, selected by the Company in good faith.
“Reference Treasury Dealer Quotation” means, with respect to each Reference Treasury Dealer and any redemption date, the average, as
determined by us, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount)
quoted in writing to us by such Reference Treasury Dealer as of 5:00 p.m., New York City time, on the fifth business day before such
redemption date.
Method of Payment
We shall pay interest and special interest, if any, on the 4.500% Notes (except defaulted interest), if any, to the persons in whose name such
Notes are registered at the close of business on the record date referred to on the face of the Note immediately preceding the related interest
payment date, even if such Notes are canceled, repurchased or redeemed on or after such record date and on or before such interest payment
date. Payment of interest and special interest, if any, on the 4.500% Notes shall be made, in the currency of the United States of America that at
the time is legal tender for payment of public and private debts, at the Corporate Trust Office or, at our option, by check mailed to the address of
the person entitled thereto as such address shall appear in the Register or, in accordance with arrangements satisfactory to the paying agent, by
wire transfer to an account designated by the Holder.
4. Description of the US$700 million 2.800% Senior Notes Due 2023
The following description of the terms and conditions of the above referenced debt securities is based on and qualified by the Indenture, dated
as of December 6, 2017, between Alibaba Group Holding Limited, as issuer, and The Bank of New York Mellon, as trustee, principal paying
agent and securities registrar, as supplemented and amended (the “2017 Indenture”) and the 2.800% Notes due 2023 (the “2.800% Notes”).
We initially appointed The Bank of New York Mellon located at 101 Barclay Street, New York, NY 10286, United States of America as paying
agent to receive all presentations, surrenders, notices and demands. For a complete description of the terms and provision of the 2.800% Notes,
please refer to the 2017 Indenture and the form of the 2.800% Notes attached to the first supplemental indenture filed as Exhibits 2.15 and 2.16
to our annual report on Form 20-F (No. 001-36614) filed on July 27, 2018.
32
General
The 2.800% Notes constitute senior unsecured debt obligations of us and rank at least equal in right of payment to all of our other existing and
future unsecured and unsubordinated indebtedness (subject to any priority rights pursuant to applicable law). The 2.800% Notes were issued as
separate series of debt securities in registered form under the 2017 Indenture, dated as December 6, 2017, as amended, in denominations of
US$200,000 and integral multiples of US$1,000 in excess thereof. The Bank of New York Mellon serves as trustee, authenticating agent,
registrar and paying agent with respect to the 2.800% Notes.
The 2.800% Notes are initially limited to US$700,000,000 in aggregate principal amount and were issued at a price of 99.853% of the principal
amount thereof, other than any offering discounts pursuant to the initial offering and resale of the 2.800% Notes. We may from time to time,
without the consent of the holders of the 2.800% Notes, issue additional notes having the same terms and conditions as the initial 2.800% Notes
in all respects (or in all respects except for the issue date, the issue price or the first interest payment date). Any additional notes and the initial
notes shall constitute a single series under the 2017 Indenture, provided that if such additional notes are not fungible with the initial notes for
U.S. federal income tax purposes, such additional notes shall not be issued. The aggregate principal amount of each of the additional notes shall
be unlimited.
The 2.800% Notes do not have the benefit of any sinking fund.
Maturity and Interest
The entire outstanding principal of the 2.800% Notes will be payable on June 6, 2023 and bear interest at a rate of 2.800% per annum.
Interest payments on the 2.800% Notes are paid semi-annually on June 6 and December 6 of each year, to holders of record at the close of
business on the May 21 and November 21 prior to the applicable interest payment date and on the maturity date. The basis upon which interest
shall be calculated shall be that of a 360-day year consisting of twelve 30-day months.
Optional Redemption
We may, at any time prior to May 6, 2023 upon giving not less than 30 days nor more than 60 days’ notice to holders of the 2.800% Notes
(which notice shall be irrevocable), redeem such Notes, in whole or in part, at a redemption amount equal to the greater of (x) 100% of the
principal amount of the 2.800% Notes to be redeemed and (y) the Make Whole Amount (as defined below), plus, in each case, accrued and
unpaid interest, if any, to, but not including, the redemption date (subject to the right of holders of record on the relevant record date to receive
interest due on the relevant interest payment date); provided that the principal amount of a 2.800% Note remaining outstanding after redemption
in part shall be US$200,000 or an integral multiple of US$1,000 in excess thereof.
We may, from or after May 6, 2023 upon giving not less than 30 days nor more than 60 days’ notice to holders of the 2.800% Notes (which
notice shall be irrevocable), redeem such Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of such Notes
to be redeemed plus accrued and unpaid interest, if any, to, but not including, the redemption date (subject to the right of holders of record on
the relevant record date to receive interest due on the relevant interest payment date).
If the redemption date is on or after the relevant record date and on or before the related interest payment date, any accrued and unpaid interest,
if any, to the redemption date shall be paid on such interest payment date to the person in whose name a 2.800% Note is registered at the close
of business on such record date.
We or any of our controlled entities may, in accordance with all applicable laws and regulations, at any time purchase the 2.800% Notes in the
open market or otherwise at any price, so long as such purchase does not otherwise violate the terms of the 2017 Indenture. The 2.800% Notes
that we or our affiliates purchase may, in our discretion, be held, resold or canceled.
“Make Whole Amount” means an amount determined by the paying agent on the fifth business day before the redemption date that is equal to
the sum of (i) the present value of the principal amount of the 2.800% Notes to be
33
redeemed, assuming a scheduled repayment thereof on the maturity date for payment of principal on such Notes, plus (ii) the present value of
the remaining scheduled payments of interest to and including such maturity date for payment of principal on such Notes (exclusive of interest
accrued to the redemption date), in each case discounted to such redemption date on a semi-annual basis (assuming a 360-day year consisting of
twelve 30-day months and, in the case of an incomplete month, the actual number of days elapsed) at the Treasury Yield plus 12.5 basis points.
“Treasury Yield” means, with respect to any redemption date, the rate per annum equal to the semi-annual equivalent yield to maturity
(computed as of the fifth business day before such redemption date) of the Comparable Treasury Issue, calculated using a price for the
Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Redemption
Date.
“Comparable Treasury Issue” means the United States Treasury security selected by an independent investment banker as defined under the
2017 Indenture in connection with the 2.800% Notes that would be utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the 2.800% Notes to be redeemed.
“Comparable Treasury Price” means, with respect to any redemption date, (1) the average of the Reference Treasury Dealer Quotations for
such redemption date, after excluding the highest and lowest of such reference treasury dealer quotations, or (2) if we obtain fewer than three
such reference Treasury Dealer Quotations, the average of all quotations obtained.
“Reference Treasury Dealer” means each of any three investment banks of recognized standing that is a primary U.S. government securities
dealer in the United States, selected by the Company in good faith.
“Reference Treasury Dealer Quotation” means, with respect to each Reference Treasury Dealer and any redemption date, the average, as
determined by us, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount)
quoted in writing to us by such Reference Treasury Dealer as of 5:00 p.m., New York City time, on the fifth business day before such
redemption date.
National Development and Reform Commission (“NDRC”) Post-issue Filing
We shall notify the trustee if we do not file or cause to be filed with the NDRC the requisite information and documents required to be filed
with the NDRC within ten PRC business days (means a day other than a Saturday, Sunday or a day on which banking institutions in the PRC
are authorized or obligated by law, regulation or executive order to remain closed) after the closing date in accordance with the Registration
Certificate of Enterprise Foreign Debt Filing issued by the General Office of the NDRC on October 24, 2017, pursuant to the Circular on
Promoting the Reform of the Administrative System on the Issuance by Enterprises of Foreign Debt Filings and Registrations issued by the
NDRC on September 14, 2015, the Approval of Foreign Debt Quota Administration Reform Trial Enterprise (Second Batch) for 2017 issued by
the NDRC on March 22, 2017, and any implementation rules as issued by the NDRC as in effect at such time (the “Post-Issuance Filing”). Such
notification to the trustee will be made within ten PRC business days after such failure to complete the Post-Issuance Filing.
Method of Payment
We shall pay interest on the 2.800% Notes (except defaulted interest, if any), to the persons in whose name such Notes are registered at the
close of business on the record date referred to on the face of such Note immediately preceding the related interest payment date, even if such
Notes are canceled, repurchased or redeemed on or after such record date and on or before such interest payment date. Payment of interest on
the 2.800% Notes shall be made, in the currency of the United States of America that at the time is legal tender for payment of public and
private debts, at the Corporate Trust Office or, at our option, by check mailed to the address of the person entitled thereto as such address shall
appear in the register or, in accordance with arrangements satisfactory to the paying agent, by wire transfer to an account designated by the
holder.
34
5. Description of the US$2,550 million 3.400% Senior Notes Due 2027
The following description of the terms and conditions of the above referenced debt securities is based on and qualified by the Indenture, dated
as of December 6, 2017, between Alibaba Group Holding Limited, as issuer, and The Bank of New York Mellon, as trustee, principal paying
agent and securities registrar, as supplemented and amended (the “2017 Indenture”) and the 3.400% Notes due 2027 (the “3.400% Notes”).
We initially appointed The Bank of New York Mellon located at 101 Barclay Street, New York, NY 10286, United States of America as paying
agent to receive all presentations, surrenders, notices and demands. For a complete description of the terms and provision of the 3.400% Notes,
please refer to the 2017 Indenture and the form of the 3.400% Notes attached to the second supplemental indenture filed as Exhibits 2.15 and
2.17 to our annual report on Form 20-F (No. 001-36614) filed on July 27, 2018.
General
The 3.400% Notes constitute senior unsecured debt obligations of us and rank at least equal in right of payment to all of our other existing and
future unsecured and unsubordinated indebtedness (subject to any priority rights pursuant to applicable law). The 3.400% Notes were issued as
separate series of debt securities in registered form under the 2017 Indenture, dated as December 6, 2017, as amended, in denominations of
US$200,000 and integral multiples of US$1,000 in excess thereof. The Bank of New York Mellon serves as trustee, authenticating agent,
registrar and paying agent with respect to the 3.400% Notes.
The 3.400% Notes are initially limited to US$2,550,000,000 in aggregate principal amount and were issued at a price of 99.396% of the
principal amount thereof, other than any offering discounts pursuant to the initial offering and resale of the 3.400% Notes. We may from time to
time, without the consent of the holders of the 3.400% Notes, issue additional notes having the same terms and conditions as the initial 3.400%
Notes in all respects (or in all respects except for the issue date, the issue price or the first interest payment date). Any additional notes and the
initial notes shall constitute a single series under the 2017 Indenture, provided that if such additional notes are not fungible with the initial notes
for U.S. federal income tax purposes, such additional notes shall not be issued. The aggregate principal amount of each of the additional notes
shall be unlimited.
The 3.400% Notes do not have the benefit of any sinking fund.
Maturity and Interest
The entire outstanding principal of the 3.400% Notes will be payable on December 6, 2027 and bear interest at a rate of 3.400% per annum.
Interest payments on the 3.400% Notes are paid semi-annually on June 6 and December 6 of each year, to holders of record at the close of
business on the May 21 and November 21 prior to the applicable interest payment date and on the maturity date. The basis upon which interest
shall be calculated shall be that of a 360-day year consisting of twelve 30-day months.
Optional Redemption
We may, at any time prior to September 6, 2027 upon giving not less than 30 days nor more than 60 days’ notice to holders of the 3.400% Notes
(which notice shall be irrevocable), redeem such Notes, in whole or in part, at a redemption amount equal to the greater of (x) 100% of the
principal amount of the 3.400% Notes to be redeemed and (y) the Make Whole Amount (as defined below), plus, in each case, accrued and
unpaid interest, if any, to, but not including, the redemption date (subject to the right of holders of record on the relevant record date to receive
interest due on the relevant interest payment date); provided that the principal amount of a 3.400% Note remaining outstanding after redemption
in part shall be US$200,000 or an integral multiple of US$1,000 in excess thereof.
We may, from or after September 6, 2027 upon giving not less than 30 days nor more than 60 days’ notice to holders of the 3.400% Notes
(which notice shall be irrevocable), redeem such Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of such
Notes to be redeemed plus accrued and unpaid interest, if any, to, but not including, the redemption date (subject to the right of holders of
record on the relevant record date to receive interest due on the relevant interest payment date).
35
If the redemption date is on or after the relevant record date and on or before the related interest payment date, any accrued and unpaid interest,
if any, to the redemption date shall be paid on such interest payment date to the person in whose name a 3.400% Note is registered at the close
of business on such record date.
We or any of our controlled entities may, in accordance with all applicable laws and regulations, at any time purchase the 3.400% Notes in the
open market or otherwise at any price, so long as such purchase does not otherwise violate the terms of the 2017 Indenture. The 3.400% Notes
that we or our affiliates purchase may, in our discretion, be held, resold or canceled.
“Make Whole Amount” means an amount determined by the paying agent on the fifth business day before the redemption date that is equal to
the sum of (i) the present value of the principal amount of the 3.400% Notes to be redeemed, assuming a scheduled repayment thereof on the
maturity date for payment of principal on such Notes, plus (ii) the present value of the remaining scheduled payments of interest to and
including such maturity date for payment of principal on such Notes (exclusive of interest accrued to the redemption date), in each case
discounted to such redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months and, in the case of an
incomplete month, the actual number of days elapsed) at the Treasury Yield plus 20 basis points.
“Treasury Yield” means, with respect to any redemption date, the rate per annum equal to the semi-annual equivalent yield to maturity
(computed as of the fifth business day before such redemption date) of the Comparable Treasury Issue, calculated using a price for the
Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Redemption
Date.
“Comparable Treasury Issue” means the United States Treasury security selected by an independent investment banker as defined under the
2017 Indenture in connection with the 3.400% Notes that would be utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the 3.400% Notes to be redeemed.
“Comparable Treasury Price” means, with respect to any redemption date, (1) the average of the Reference Treasury Dealer Quotations for
such redemption date, after excluding the highest and lowest of such reference treasury dealer quotations, or (2) if we obtain fewer than three
such reference Treasury Dealer Quotations, the average of all quotations obtained.
“Reference Treasury Dealer” means each of any three investment banks of recognized standing that is a primary U.S. government securities
dealer in the United States, selected by the Company in good faith.
“Reference Treasury Dealer Quotation” means, with respect to each Reference Treasury Dealer and any redemption date, the average, as
determined by us, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount)
quoted in writing to us by such Reference Treasury Dealer as of 5:00 p.m., New York City time, on the fifth business day before such
redemption date.
National Development and Reform Commission (“NDRC”) Post-issue Filing
We shall notify the trustee if we do not file or cause to be filed with the NDRC the requisite information and documents required to be filed
with the NDRC within ten PRC business days (means a day other than a Saturday, Sunday or a day on which banking institutions in the PRC
are authorized or obligated by law, regulation or executive order to remain closed) after the closing date in accordance with the Registration
Certificate of Enterprise Foreign Debt Filing issued by the General Office of the NDRC on October 24, 2017, pursuant to the Circular on
Promoting the Reform of the Administrative System on the Issuance by Enterprises of Foreign Debt Filings and Registrations issued by the
NDRC on September 14, 2015, the Approval of Foreign Debt Quota Administration Reform Trial Enterprise (Second Batch) for 2017 issued by
the NDRC on March 22, 2017, and any implementation rules as issued by the NDRC as in effect at such time (the “Post-Issuance Filing”). Such
notification to the trustee will be made within ten PRC business days after such failure to complete the Post-Issuance Filing.
36
Method of Payment
We shall pay interest on the 3.400% Notes (except defaulted interest, if any), to the persons in whose name such Notes are registered at the
close of business on the record date referred to on the face of such Note immediately preceding the related interest payment date, even if such
Notes are canceled, repurchased or redeemed on or after such record date and on or before such interest payment date. Payment of interest on
the 3.400% Notes shall be made, in the currency of the United States of America that at the time is legal tender for payment of public and
private debts, at the Corporate Trust Office or, at our option, by check mailed to the address of the person entitled thereto as such address shall
appear in the register or, in accordance with arrangements satisfactory to the paying agent, by wire transfer to an account designated by the
holder.
6. Description of the US$1,000 million 4.000% Senior Notes Due 2037
The following description of the terms and conditions of the above referenced debt securities is based on and qualified by the Indenture, dated
as of December 6, 2017, between Alibaba Group Holding Limited, as issuer, and The Bank of New York Mellon, as trustee, principal paying
agent and securities registrar, as supplemented and amended (the “2017 Indenture”) and the 4.000% Notes due 2037 (the “4.000% Notes”).
We initially appointed The Bank of New York Mellon located at 101 Barclay Street, New York, NY 10286, United States of America as paying
agent to receive all presentations, surrenders, notices and demands. For a complete description of the terms and provision of the 4.000% Notes,
please refer to the 2017 Indenture and the form of the 4.000% Notes attached to the third supplemental indenture filed as Exhibits 2.15 and 2.18
to our annual report on Form 20-F (No. 001-36614) filed on July 27, 2018.
General
The 4.000% Notes constitute senior unsecured debt obligations of us and rank at least equal in right of payment to all of our other existing and
future unsecured and unsubordinated indebtedness (subject to any priority rights pursuant to applicable law). The 4.000% Notes were issued as
separate series of debt securities in registered form under the 2017 Indenture, dated as December 6, 2017, as amended, in denominations of
US$200,000 and integral multiples of US$1,000 in excess thereof. The Bank of New York Mellon serves as trustee, authenticating agent,
registrar and paying agent with respect to the 4.000% Notes.
The 4.000% Notes are initially limited to US$1,000,000,000 in aggregate principal amount and were issued at a price of 99.863% of the
principal amount thereof, other than any offering discounts pursuant to the initial offering and resale of the 4.000% Notes. We may from time to
time, without the consent of the holders of the 4.000% Notes, issue additional notes having the same terms and conditions as the initial 4.000%
Notes in all respects (or in all respects except for the issue date, the issue price or the first interest payment date). Any additional notes and the
initial notes shall constitute a single series under the 2017 Indenture, provided that if such additional notes are not fungible with the initial notes
for U.S. federal income tax purposes, such additional notes shall not be issued. The aggregate principal amount of each of the additional notes
shall be unlimited.
The 4.000% Notes do not have the benefit of any sinking fund.
Maturity and Interest
The entire outstanding principal of the 4.000% Notes will be payable on December 6, 2037 and bear interest at a rate of 4.000% per annum.
Interest payments on the 4.000% Notes are paid semi-annually on June 6 and December 6 of each year, to holders of record at the close of
business on the May 21 and November 21 prior to the applicable interest payment date and on the maturity date. The basis upon which interest
shall be calculated shall be that of a 360-day year consisting of twelve 30-day months.
Optional Redemption
We may, at any time prior to June 6, 2037 upon giving not less than 30 days nor more than 60 days’ notice to holders of the 4.000% Notes
(which notice shall be irrevocable), redeem such Notes, in whole or in part, at a redemption amount equal to the greater of (x) 100% of the
principal amount of the 4.000% Notes to be redeemed
37
and (y) the Make Whole Amount (as defined below), plus, in each case, accrued and unpaid interest, if any, to, but not including, the
redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment
date); provided that the principal amount of a 4.000% Note remaining outstanding after redemption in part shall be US$200,000 or an integral
multiple of US$1,000 in excess thereof.
We may, from or after June 6, 2037 upon giving not less than 30 days nor more than 60 days’ notice to holders of the 4.000% Notes (which
notice shall be irrevocable), redeem such Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of such Notes
to be redeemed plus accrued and unpaid interest, if any, to, but not including, the redemption date (subject to the right of holders of record on
the relevant record date to receive interest due on the relevant interest payment date).
If the redemption date is on or after the relevant record date and on or before the related interest payment date, any accrued and unpaid interest,
if any, to the redemption date shall be paid on such interest payment date to the person in whose name a 4.000% Note is registered at the close
of business on such record date.
We or any of our controlled entities may, in accordance with all applicable laws and regulations, at any time purchase the 4.000% Notes in the
open market or otherwise at any price, so long as such purchase does not otherwise violate the terms of the 2017 Indenture. The 4.000% Notes
that we or our affiliates purchase may, in our discretion, be held, resold or canceled.
“Make Whole Amount” means an amount determined by the paying agent on the fifth business day before the redemption date that is equal to
the sum of (i) the present value of the principal amount of the 4.000% Notes to be redeemed, assuming a scheduled repayment thereof on the
maturity date for payment of principal on such Notes, plus (ii) the present value of the remaining scheduled payments of interest to and
including such maturity date for payment of principal on such Notes (exclusive of interest accrued to the redemption date), in each case
discounted to such redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months and, in the case of an
incomplete month, the actual number of days elapsed) at the Treasury Yield plus 20 basis points.
“Treasury Yield” means, with respect to any redemption date, the rate per annum equal to the semi-annual equivalent yield to maturity
(computed as of the fifth business day before such redemption date) of the Comparable Treasury Issue, calculated using a price for the
Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Redemption
Date.
“Comparable Treasury Issue” means the United States Treasury security selected by an independent investment banker as defined under the
2017 Indenture in connection with the 4.000% Notes that would be utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the 4.000% Notes to be redeemed.
“Comparable Treasury Price” means, with respect to any redemption date, (1) the average of the Reference Treasury Dealer Quotations for
such redemption date, after excluding the highest and lowest of such reference treasury dealer quotations, or (2) if we obtain fewer than three
such reference Treasury Dealer Quotations, the average of all quotations obtained.
“Reference Treasury Dealer” means each of any three investment banks of recognized standing that is a primary U.S. government securities
dealer in the United States, selected by the Company in good faith.
“Reference Treasury Dealer Quotation” means, with respect to each Reference Treasury Dealer and any redemption date, the average, as
determined by us, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount)
quoted in writing to us by such Reference Treasury Dealer as of 5:00 p.m., New York City time, on the fifth business day before such
redemption date.
National Development and Reform Commission (“NDRC”) Post-issue Filing
We shall notify the trustee if we do not file or cause to be filed with the NDRC the requisite information and documents required to be filed
with the NDRC within ten PRC business days (means a day other than a Saturday,
38
Sunday or a day on which banking institutions in the PRC are authorized or obligated by law, regulation or executive order to remain closed)
after the closing date in accordance with the Registration Certificate of Enterprise Foreign Debt Filing issued by the General Office of the
NDRC on October 24, 2017, pursuant to the Circular on Promoting the Reform of the Administrative System on the Issuance by Enterprises of
Foreign Debt Filings and Registrations issued by the NDRC on September 14, 2015, the Approval of Foreign Debt Quota Administration
Reform Trial Enterprise (Second Batch) for 2017 issued by the NDRC on March 22, 2017, and any implementation rules as issued by the
NDRC as in effect at such time (the “Post-Issuance Filing”). Such notification to the trustee will be made within ten PRC business days after
such failure to complete the Post-Issuance Filing.
Method of Payment
We shall pay interest on the 4.000% Notes (except defaulted interest, if any), to the persons in whose name such Notes are registered at the
close of business on the record date referred to on the face of such Note immediately preceding the related interest payment date, even if such
Notes are canceled, repurchased or redeemed on or after such record date and on or before such interest payment date. Payment of interest on
the 4.000% Notes shall be made, in the currency of the United States of America that at the time is legal tender for payment of public and
private debts, at the Corporate Trust Office or, at our option, by check mailed to the address of the person entitled thereto as such address shall
appear in the register or, in accordance with arrangements satisfactory to the paying agent, by wire transfer to an account designated by the
holder.
7. Description of the US$1,750 million 4.200% Senior Notes Due 2047
The following description of the terms and conditions of the above referenced debt securities is based on and qualified by the Indenture, dated
as of December 6, 2017, between Alibaba Group Holding Limited, as issuer, and The Bank of New York Mellon, as trustee, principal paying
agent and securities registrar, as supplemented and amended (the “2017 Indenture”) and the 4.200% Notes due 2047 (the “4.200% Notes”).
We initially appointed The Bank of New York Mellon located at 101 Barclay Street, New York, NY 10286, United States of America as paying
agent to receive all presentations, surrenders, notices and demands. For a complete description of the terms and provision of the 4.200% Notes,
please refer to the 2017 Indenture and the form of the 4.200% Notes attached to the fourth supplemental indenture filed as Exhibits 2.15 and
2.19 to our annual report on Form 20-F (No. 001-36614) filed on July 27, 2018.
General
The 4.200% Notes constitute senior unsecured debt obligations of us and rank at least equal in right of payment to all of our other existing and
future unsecured and unsubordinated indebtedness (subject to any priority rights pursuant to applicable law). The 4.200% Notes were issued as
separate series of debt securities in registered form under the 2017 Indenture, dated as December 6, 2017, as amended, in denominations of
US$200,000 and integral multiples of US$1,000 in excess thereof. The Bank of New York Mellon serves as trustee, authenticating agent,
registrar and paying agent with respect to the 4.200% Notes.
The 4.200% Notes are initially limited to US$1,750,000,000 in aggregate principal amount and were issued at a price of 99.831% of the
principal amount thereof, other than any offering discounts pursuant to the initial offering and resale of the 4.200% Notes. We may from time to
time, without the consent of the holders of the 4.200% Notes, issue additional notes having the same terms and conditions as the initial 4.200%
Notes in all respects (or in all respects except for the issue date, the issue price or the first interest payment date). Any additional notes and the
initial notes shall constitute a single series under the 2017 Indenture, provided that if such additional notes are not fungible with the initial notes
for U.S. federal income tax purposes, such additional notes shall not be issued. The aggregate principal amount of each of the additional notes
shall be unlimited.
The 4.200% Notes do not have the benefit of any sinking fund.
Maturity and Interest
The entire outstanding principal of the 4.200% Notes will be payable on December 6, 2047 and bear interest at a rate of 4.200% per annum.
39
Interest payments on the 4.200% Notes are paid semi-annually on June 6 and December 6 of each year, to holders of record at the close of
business on the May 21 and November 21 prior to the applicable interest payment date and on the maturity date. The basis upon which interest
shall be calculated shall be that of a 360-day year consisting of twelve 30-day months.
Optional Redemption
We may, at any time prior to June 6, 2047 upon giving not less than 30 days nor more than 60 days’ notice to holders of the 4.200% Notes
(which notice shall be irrevocable), redeem such Notes, in whole or in part, at a redemption amount equal to the greater of (x) 100% of the
principal amount of the 4.200% Notes to be redeemed and (y) the Make Whole Amount (as defined below), plus, in each case, accrued and
unpaid interest, if any, to, but not including, the redemption date (subject to the right of holders of record on the relevant record date to receive
interest due on the relevant interest payment date); provided that the principal amount of a 4.200% Note remaining outstanding after redemption
in part shall be US$200,000 or an integral multiple of US$1,000 in excess thereof.
We may, from or after June 6, 2047 upon giving not less than 30 days nor more than 60 days’ notice to holders of the 4.200% Notes (which
notice shall be irrevocable), redeem such Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of such Notes
to be redeemed plus accrued and unpaid interest, if any, to, but not including, the redemption date (subject to the right of holders of record on
the relevant record date to receive interest due on the relevant interest payment date).
If the redemption date is on or after the relevant record date and on or before the related interest payment date, any accrued and unpaid interest,
if any, to the redemption date shall be paid on such interest payment date to the person in whose name a 4.200% Note is registered at the close
of business on such record date.
We or any of our controlled entities may, in accordance with all applicable laws and regulations, at any time purchase the 4.200% Notes in the
open market or otherwise at any price, so long as such purchase does not otherwise violate the terms of the 2017 Indenture. The 4.200% Notes
that we or our affiliates purchase may, in our discretion, be held, resold or canceled.
“Make Whole Amount” means an amount determined by the paying agent on the fifth business day before the redemption date that is equal to
the sum of (i) the present value of the principal amount of the 4.200% Notes to be redeemed, assuming a scheduled repayment thereof on the
maturity date for payment of principal on such Notes, plus (ii) the present value of the remaining scheduled payments of interest to and
including such maturity date for payment of principal on such Notes (exclusive of interest accrued to the redemption date), in each case
discounted to such redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months and, in the case of an
incomplete month, the actual number of days elapsed) at the Treasury Yield plus 25 basis points.
“Treasury Yield” means, with respect to any redemption date, the rate per annum equal to the semi-annual equivalent yield to maturity
(computed as of the fifth business day before such redemption date) of the Comparable Treasury Issue, calculated using a price for the
Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Redemption
Date.
“Comparable Treasury Issue” means the United States Treasury security selected by an independent investment banker as defined under the
2017 Indenture in connection with the 4.200% Notes that would be utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the 4.200% Notes to be redeemed.
“Comparable Treasury Price” means, with respect to any redemption date, (1) the average of the Reference Treasury Dealer Quotations for
such redemption date, after excluding the highest and lowest of such reference treasury dealer quotations, or (2) if we obtain fewer than three
such reference Treasury Dealer Quotations, the average of all quotations obtained.
“Reference Treasury Dealer” means each of any three investment banks of recognized standing that is a primary U.S. government securities
dealer in the United States, selected by the Company in good faith.
40
“Reference Treasury Dealer Quotation” means, with respect to each Reference Treasury Dealer and any redemption date, the average, as
determined by us, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount)
quoted in writing to us by such Reference Treasury Dealer as of 5:00 p.m., New York City time, on the fifth business day before such
redemption date.
National Development and Reform Commission (“NDRC”) Post-issue Filing
We shall notify the trustee if we do not file or cause to be filed with the NDRC the requisite information and documents required to be filed
with the NDRC within ten PRC business days (means a day other than a Saturday, Sunday or a day on which banking institutions in the PRC
are authorized or obligated by law, regulation or executive order to remain closed) after the closing date in accordance with the Registration
Certificate of Enterprise Foreign Debt Filing issued by the General Office of the NDRC on October 24, 2017, pursuant to the Circular on
Promoting the Reform of the Administrative System on the Issuance by Enterprises of Foreign Debt Filings and Registrations issued by the
NDRC on September 14, 2015, the Approval of Foreign Debt Quota Administration Reform Trial Enterprise (Second Batch) for 2017 issued by
the NDRC on March 22, 2017, and any implementation rules as issued by the NDRC as in effect at such time (the “Post-Issuance Filing”). Such
notification to the trustee will be made within ten PRC business days after such failure to complete the Post-Issuance Filing.
Method of Payment
We shall pay interest on the 4.200% Notes (except defaulted interest, if any), to the persons in whose name such Notes are registered at the
close of business on the record date referred to on the face of such Note immediately preceding the related interest payment date, even if such
Notes are canceled, repurchased or redeemed on or after such record date and on or before such interest payment date. Payment of interest on
the 4.200% Notes shall be made, in the currency of the United States of America that at the time is legal tender for payment of public and
private debts, at the Corporate Trust Office or, at our option, by check mailed to the address of the person entitled thereto as such address shall
appear in the register or, in accordance with arrangements satisfactory to the paying agent, by wire transfer to an account designated by the
holder.
8. Description of the US$1,000 million 4.400% Senior Notes Due 2057
The following description of the terms and conditions of the above referenced debt securities is based on and qualified by the Indenture, dated
as of December 6, 2017, between Alibaba Group Holding Limited, as issuer, and The Bank of New York Mellon, as trustee, principal paying
agent and securities registrar, as supplemented and amended (the “2017 Indenture”) and the 4.400% Notes due 2057 (the “4.400% Notes”).
We initially appointed The Bank of New York Mellon located at 101 Barclay Street, New York, NY 10286, United States of America as paying
agent to receive all presentations, surrenders, notices and demands. For a complete description of the terms and provision of the 4.400% Notes,
please refer to the 2017 Indenture and the form of the 4.400% Notes attached to the fifth supplemental indenture filed as Exhibits 2.15 and 2.20
to our annual report on Form 20-F (No. 001-36614) filed on July 27, 2018.
General
The 4.400% Notes constitute senior unsecured debt obligations of us and rank at least equal in right of payment to all of our other existing and
future unsecured and unsubordinated indebtedness (subject to any priority rights pursuant to applicable law). The 4.400% Notes were issued as
separate series of debt securities in registered form under the 2017 Indenture, dated as December 6, 2017, as amended, in denominations of
US$200,000 and integral multiples of US$1,000 in excess thereof. The Bank of New York Mellon serves as trustee, authenticating agent,
registrar and paying agent with respect to the 4.400% Notes.
The 4.400% Notes are initially limited to US$1,000,000,000 in aggregate principal amount and were issued at a price of 99.813% of the
principal amount thereof, other than any offering discounts pursuant to the initial offering and resale of the 4.400% Notes. We may from time to
time, without the consent of the holders of the 4.400% Notes, issue additional notes having the same terms and conditions as the initial 4.400%
Notes in all respects (or in all respects except for the issue date, the issue price or the first interest payment date). Any additional notes and the
initial notes shall constitute a single series under the 2017 Indenture, provided that if such additional notes are not
41
fungible with the initial notes for U.S. federal income tax purposes, such additional notes shall not be issued. The aggregate principal amount of
each of the additional notes shall be unlimited.
The 4.400% Notes do not have the benefit of any sinking fund.
Maturity and Interest
The entire outstanding principal of the 4.400% Notes will be payable on December 6, 2057 and bear interest at a rate of 4.400% per annum.
Interest payments on the 4.400% Notes are paid semi-annually on June 6 and December 6 of each year, to holders of record at the close of
business on the May 21 and November 21 prior to the applicable interest payment date and on the maturity date. The basis upon which interest
shall be calculated shall be that of a 360-day year consisting of twelve 30-day months.
Optional Redemption
We may, at any time prior to June 6, 2057 upon giving not less than 30 days nor more than 60 days’ notice to holders of the 4.400% Notes
(which notice shall be irrevocable), redeem such Notes, in whole or in part, at a redemption amount equal to the greater of (x) 100% of the
principal amount of the 4.400% Notes to be redeemed and (y) the Make Whole Amount (as defined below), plus, in each case, accrued and
unpaid interest, if any, to, but not including, the redemption date (subject to the right of holders of record on the relevant record date to receive
interest due on the relevant interest payment date); provided that the principal amount of a 4.400% Note remaining outstanding after redemption
in part shall be US$200,000 or an integral multiple of US$1,000 in excess thereof.
We may, from or after June 6, 2057 upon giving not less than 30 days nor more than 60 days’ notice to holders of the 4.400% Notes (which
notice shall be irrevocable), redeem such Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of such Notes
to be redeemed plus accrued and unpaid interest, if any, to, but not including, the redemption date (subject to the right of holders of record on
the relevant record date to receive interest due on the relevant interest payment date).
If the redemption date is on or after the relevant record date and on or before the related interest payment date, any accrued and unpaid interest,
if any, to the redemption date shall be paid on such interest payment date to the person in whose name a 4.400% Note is registered at the close
of business on such record date.
We or any of our controlled entities may, in accordance with all applicable laws and regulations, at any time purchase the 4.400% Notes in the
open market or otherwise at any price, so long as such purchase does not otherwise violate the terms of the 2017 Indenture. The 4.400% Notes
that we or our affiliates purchase may, in our discretion, be held, resold or canceled.
“Make Whole Amount” means an amount determined by the paying agent on the fifth business day before the redemption date that is equal to
the sum of (i) the present value of the principal amount of the 4.400% Notes to be redeemed, assuming a scheduled repayment thereof on the
maturity date for payment of principal on such Notes, plus (ii) the present value of the remaining scheduled payments of interest to and
including such maturity date for payment of principal on such Notes (exclusive of interest accrued to the redemption date), in each case
discounted to such redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months and, in the case of an
incomplete month, the actual number of days elapsed) at the Treasury Yield plus 25 basis points.
“Treasury Yield” means, with respect to any redemption date, the rate per annum equal to the semi-annual equivalent yield to maturity
(computed as of the fifth business day before such redemption date) of the Comparable Treasury Issue, calculated using a price for the
Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Redemption
Date.
“Comparable Treasury Issue” means the United States Treasury security selected by an independent investment banker as defined under the
2017 Indenture in connection with the 4.400% Notes that would be utilized, at the time
42
of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to
the remaining term of the 4.400% Notes to be redeemed.
“Comparable Treasury Price” means, with respect to any redemption date, (1) the average of the Reference Treasury Dealer Quotations for
such redemption date, after excluding the highest and lowest of such reference treasury dealer quotations, or (2) if we obtain fewer than three
such reference Treasury Dealer Quotations, the average of all quotations obtained.
“Reference Treasury Dealer” means each of any three investment banks of recognized standing that is a primary U.S. government securities
dealer in the United States, selected by the Company in good faith.
“Reference Treasury Dealer Quotation” means, with respect to each Reference Treasury Dealer and any redemption date, the average, as
determined by us, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount)
quoted in writing to us by such Reference Treasury Dealer as of 5:00 p.m., New York City time, on the fifth business day before such
redemption date.
National Development and Reform Commission (“NDRC”) Post-issue Filing
We shall notify the trustee if we do not file or cause to be filed with the NDRC the requisite information and documents required to be filed
with the NDRC within ten PRC business days (means a day other than a Saturday, Sunday or a day on which banking institutions in the PRC
are authorized or obligated by law, regulation or executive order to remain closed) after the closing date in accordance with the Registration
Certificate of Enterprise Foreign Debt Filing issued by the General Office of the NDRC on October 24, 2017, pursuant to the Circular on
Promoting the Reform of the Administrative System on the Issuance by Enterprises of Foreign Debt Filings and Registrations issued by the
NDRC on September 14, 2015, the Approval of Foreign Debt Quota Administration Reform Trial Enterprise (Second Batch) for 2017 issued by
the NDRC on March 22, 2017, and any implementation rules as issued by the NDRC as in effect at such time (the “Post-Issuance Filing”). Such
notification to the trustee will be made within ten PRC business days after such failure to complete the Post-Issuance Filing.
Method of Payment
We shall pay interest on the 4.400% Notes (except defaulted interest, if any), to the persons in whose name such Notes are registered at the
close of business on the record date referred to on the face of such Note immediately preceding the related interest payment date, even if such
Notes are canceled, repurchased or redeemed on or after such record date and on or before such interest payment date. Payment of interest on
the 4.400% Notes shall be made, in the currency of the United States of America that at the time is legal tender for payment of public and
private debts, at the Corporate Trust Office or, at our option, by check mailed to the address of the person entitled thereto as such address shall
appear in the register or, in accordance with arrangements satisfactory to the paying agent, by wire transfer to an account designated by the
holder.
9. General Terms Applicable to Each Series of 2014 Senior Notes and 2017 Senior Notes
Particular Covenants of Us
We have agreed certain covenants under the Indentures, including, among others:
Payments of Principal, Premium and Interest. We, for the benefit of each series of Notes, shall duly and punctually pay or cause to be paid the
principal of, premium, if any, and interest on, each series of Notes, at the dates and place and in the manner provided in the Notes and in the
Indentures.
Merger, Consolidation and Sale of Assets. Except as otherwise provided as contemplated under the Indentures with respect to any series of
Notes: (a) We shall not consolidate with or merge into any other person in a transaction in which we are not the surviving entity, or convey,
transfer or lease its properties and assets substantially as an entirety to, any person, unless (i) any person formed by such consolidation or into or
with which we are merged or to whom we have conveyed, transferred or leased our properties and assets substantially as an entirety is a
corporation,
43
partnership, trust or other entity validly existing under the laws of the British Virgin Islands, the Cayman Islands, the PRC or Hong Kong and
such person expressly assumes by an indenture supplemental to the Indentures all the obligations of us under the Indentures and the Notes,
including the obligation to pay additional amounts with respect to any jurisdiction in which it is organized or resident for tax purposes; (ii)
immediately after giving effect to the transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become
an Event of Default, shall have occurred and be continuing; and (iii) we have delivered to the trustee an officer’s certificate and an opinion of an
independent legal counsel, each stating that such consolidation, merger, conveyance, transfer or lease and such supplemental indenture comply
with the Indentures and that all conditions precedent therein provided for relating to such transaction have been complied with. (b) Upon any
consolidation with or merger into any other entity, or any sale other than for cash, or any conveyance or lease, of all or substantially all of our
assets in accordance with this section, the successor entity formed by such consolidation or into or with which we are merged or to which we
are sold or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power
of, us under the Indentures with the same effect as if such successor entity had been named as us therein, and thereafter, except in the case of a
lease, the predecessor company shall be relieved of all obligations and covenants under the Indentures and the Notes, and from time to time
such successor entity may exercise each and every right and power of us under the Indentures, in the name of us, or in our own name; and any
act or proceeding by any provision of the Indentures required or permitted to be done by the board of directors or any officer of us may be done
with like force and effect by the like board of directors or officer of any entity that shall at the time be the successor of us thereunder. In the
event of any such sale or conveyance, but not any such lease, we (or any successor entity which shall theretofore have become such in the
manner described in this section) shall be discharged from all obligations and covenants under the Indentures and the Notes and may thereupon
be dissolved and liquidated.
Repurchase Upon Triggering Event. The following shall apply with respect to the Notes so long as any of the Notes remain outstanding:
(a) If a Triggering Event occurs, unless we have exercised our right to redeem all of the Notes of a particular series pursuant to the
Indentures, the Company shall make an offer to repurchase all or, at the holder’s option, any part (equal to US$200,000 for the 2014
Senior Notes or US$2,000 for 2017Senior Notes, or multiples of US$1,000 in excess thereof (or such other denominations in which such
Notes are issuable)) of each holder’s Notes pursuant to the offer described below (the “Triggering Event Offer”), at a purchase price in
cash equal to 101% of the aggregate principal amount of Notes repurchased plus accrued and unpaid interest, if any, on the Notes
repurchased to, but not including, the date of purchase (the “Triggering Event Payment”) (subject to the right of holders of record on the
relevant record date to receive interest due on the relevant interest payment date). Within 30 days following any Triggering Event, unless
we have exercised our right to redeem all of the outstanding Notes pursuant to the Indentures, we will send a notice of such Triggering
Event Offer to each holder or otherwise give notice in accordance with the applicable procedures, with a copy to the trustee, stating: (i)
that a Triggering Event Offer is being made pursuant to this section, including a description of the transaction or transactions that
constitute the Triggering Event, and that all Notes properly tendered pursuant to such Triggering Event Offer will be accepted for
purchase by us at a purchase price in cash equal to 101% of the aggregate principal amount of such Notes plus accrued and unpaid
interest, if any, on such Notes to the date of purchase (subject to the right of holders of record on the relevant record date to receive
interest due on the relevant interest payment date); (ii) the purchase date (which shall be no earlier than 30 days and no later than 60 days
from the date such notice is sent) (the “Triggering Event Payment Date”); (iii) that the Notes of any series must be tendered in amounts
of US$200,000 for the 2014 Senior Notes or US$2,000 for the 2017 Senior Notes, or multiples of US$1,000 in excess thereof (or such
other denominations in which such Notes are issuable), and any Note not properly tendered will remain outstanding and continue to
accrue interest; (iv) that, unless we default in the payment of the Triggering Event Payment, any Note accepted for payment pursuant to
the Triggering Event Offer will cease to accrue interest on and after the Triggering Event Payment Date; (v) that holders electing to have
any Notes purchased pursuant to a Triggering Event Offer will be required to surrender such Notes, with the form entitled “Option of
Holder to Elect Purchase” as attached to the Indentures on the reverse of such Notes completed, to the paying agent specified in the
notice at the address specified in the notice prior to the close of business on the third business day preceding the Triggering Event
Payment Date; (vi) that holders shall be entitled to withdraw their tendered Notes and their election to require us to purchase such
Notes; provided that the paying agent receives at the address specified in the notice, not later than the close of business on the 30th day
following
44
the date of the Triggering Event notice, a telegram, facsimile transmission or letter setting forth the name of the holder of the Notes, the
principal amount of Notes tendered for purchase, and a statement that such holder is withdrawing its tendered Notes and its election to
have such Notes purchased; (vii) that if a holder is tendering less than all of its Notes, such holder will be issued new Notes equal in
principal amount to the unpurchased portion of the Notes surrendered (the unpurchased portion of the Notes must be equal to
US$200,000 for the 2014 Senior Notes or US$2,000 for the 2017 Senior Notes or an integral multiple of US$1,000 in excess thereof (or
such other denominations in which such Securities are issuable)); and (viii) the other instructions, as determined by us consistent with
this section, that a holder must follow.
(b) On the Triggering Event Payment Date, we will, to the extent lawful: (i) accept for payment all Notes or portions of Notes (of
US$200,000 for the 2014 Senior Notes or US$2,000 for the 2017 Senior Notes or integral multiples of US$1,000 in excess thereof or
such other denominations for which such securities are issuable) properly tendered pursuant to the Triggering Event Offer; (ii) deposit
with the paying agent, one business day prior to the Triggering Event Payment Date, an amount of cash in U.S. Dollars equal to the
Triggering Event Payment in respect of all Notes or portions of Notes properly tendered at least three business days prior to the
Triggering Event Payment Date; and (iii) deliver or cause to be delivered to the paying agent for cancellation the Notes properly accepted
together with an officer’s certificate stating the aggregate principal amount of Notes or portions of Notes being purchased by us in
accordance with the terms of this section.
(c) The paying agent shall promptly send, to each holder who properly tendered Notes, the purchase price for such Notes properly
tendered, and the trustee shall promptly authenticate and send (or cause to be transferred by book-entry) to each such holder a new Note
equal in principal amount equal to any unpurchased portion of the Notes surrendered, if any; provided that each new Note will be in a
principal amount of US$2,000 for the 2014 Senior Notes or US$2,000 for the 2017 Senior Notes or a multiple of US$1,000 in excess
thereof (or such other denominations in which such Notes are issuable) (or, if less, the remaining principal amount thereof).
(d) If the Triggering Event Payment Date is on or after the relevant record date and on or before the related interest payment date, any
accrued and unpaid interest, if any, to the Triggering Event Payment Date shall be paid on such interest payment date to the person in
whose name a Note is registered at the close of business on such record date.
(e) We will not be required to make a Triggering Event Offer upon a Triggering Event if a third party makes such an offer in the manner,
at the times and otherwise in compliance with the requirements for an offer made by us and such third party purchases all Notes properly
tendered and not withdrawn under its offer. In the event that such third party terminates or defaults its offer, we will be required to make
a Triggering Event Offer treating the date of such termination or default as though it were the date of the Triggering Event.
(f) We shall comply with the requirements of Rule 14e-1 under the Exchange Act, to the extent applicable, and any other securities laws
and regulations thereunder to the extent those laws and regulations are applicable in connection with the repurchase of the Notes as a
result of a Triggering Event. To the extent that the provision of any such securities laws or regulations conflicts with the Triggering
Event Offer provisions of the Notes, we will comply with those securities laws and regulations and will not be deemed to have breached
its obligations under the Triggering Event Offer provisions of the Notes by virtue of any such conflict.
Additional Amounts
(a) All payments of principal, premium, if any, and interest made by us in respect of any Note shall be made without withholding or
deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature
(collectively, “Taxes”) imposed or levied by or within the Cayman Islands or the PRC (in each case, including any political subdivision
or any authority therein or thereof having power to tax) (each, a “Relevant Jurisdiction”), unless such withholding or deduction of such
Taxes is required by law. If we are required to make such withholding or deduction, we shall pay such additional amounts (“Additional
Amounts”) as will result in receipt by each holder of Notes of such amounts as would
45
have been received by such holder had no such withholding or deduction of such Taxes been required, except that no such Additional
Amounts shall be payable: (i) in respect of any such Taxes that would not have been imposed, deducted or withheld but for the existence
of any connection (whether present or former) between the holder or beneficial owner of a Note and the Relevant Jurisdiction other than
merely holding such Note or receiving principal, premium, if any, or interest, in respect thereof (including such holder or beneficial
owner being or having been a national, domiciliary or resident of such Relevant Jurisdiction or treated as a resident thereof or being or
having been physically present or engaged in a trade or business therein or having or having had a permanent establishment therein); (ii)
in respect of any Note presented for payment (where presentation is required) more than 30 days after the relevant date, except to the
extent that the holder thereof would have been entitled to such Additional Amounts on presenting the same for payment on the last day of
such 30-day period. For this purpose, the “relevant date” in relation to any Note means the later of (a) the due date for such payment or
(b) the date such payment was made or duly provided for; (iii) in respect of any Taxes that would not have been imposed, deducted or
withheld but for a failure of the holder or beneficial owner of a Note to comply with a timely request by us addressed to the holder or
beneficial owner to provide information concerning such holder’s or beneficial owner’s nationality, residence, identity or connection
with any Relevant Jurisdiction, if and to the extent that due and timely compliance with such request is required under the tax laws of
such jurisdiction in order to reduce or eliminate any withholding or deduction as to which Additional Amounts would have otherwise
been payable to such holder; (iv) in respect of any Taxes imposed as a result of a Note being presented for payment (where presentation
is required) in the Relevant Jurisdiction, unless such Security could not have been presented for payment elsewhere; (v) in respect of any
estate, inheritance, gift, sale, use, value added, excise, transfer, personal property, wealth, interest equalization or similar Taxes (other
than any value added Taxes imposed by the PRC or any political subdivision thereof if we were to be deemed a PRC tax resident); (vi) to
any holder of a Note that is a fiduciary, partnership or person other than the sole beneficial owner of any payment to the extent that such
payment would be required by the laws of the Relevant Jurisdiction to be included in the income, for tax purposes, of a beneficiary or
settlor with respect to the fiduciary, or a member of that partnership or a beneficial owner who would not have been entitled to such
Additional Amounts had that beneficiary, settlor, partner or beneficial owner been the holder thereof; (vii) with respect to any
withholding or deduction that is imposed in connection with Sections 1471-1474 of the Code and U.S. Treasury Regulations thereunder
(“FATCA”), any intergovernmental agreement between the United States and any other jurisdiction implementing or relating to FATCA
or any non-U.S. law, regulation or guidance enacted or issued with respect thereto; (viii) in respect of any such Taxes payable otherwise
than by deduction or withholding from payments under or with respect to any Note; or (xi) in respect of any combination of Taxes
referred to in the preceding clauses (i) through (viii) above.
(b) In the event that any withholding or deduction for or on account of any Taxes is required and Additional Amounts are payable with
respect thereto, at least 30 days prior to each date of payment of principal of, premium, if any, or interest, on the Notes, we shall furnish
to the trustee and the paying agent, if other than the trustee, an officer’s certificate specifying the amount required to be withheld or
deducted on such payments to holders, certifying that we shall pay such amounts required to be withheld to the appropriate governmental
authority and certifying to the fact that the Additional Amounts will be payable and the amounts so payable to each holder, and that we
will pay to the trustee or such paying agent the Additional Amounts required to be paid; provided that no such officer’s certificate will be
required prior to any date of payment of principal of, premium, if any, or interest, on such Notes if there has been no change with respect
to the matters set forth in a prior officer’s certificate. The trustee and each paying agent may rely on the fact that any officer’s certificate
contemplated by this section has not been furnished as evidence of the fact that no withholding or deduction for or on account of any
Taxes is required. We covenant to indemnify the trustee and any paying agent for and to hold them harmless against any loss or liability
incurred without fraud, gross negligence or willful misconduct on their part arising out of or in connection with actions taken or omitted
by any of them in reliance on any such officer’s certificate furnished pursuant to this section or on the fact that any officer’s certificate
contemplated by this section has not been furnished.
(c) Whenever in the Indentures there is mentioned, in any context, the payment of principal, premium, if any, or interest, in respect of
any Note, such mention shall be deemed to include the payment of Additional Amounts provided for in the Indentures, to the extent that,
in such context, Additional Amounts are, were or would be payable in respect thereof pursuant to the Indentures.
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Payment for Consent. We will not, and will not permit any of our controlled entities to, directly or indirectly, pay or cause to be paid any
consideration to or for the benefit of any holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions
of the Indentures or any series of the Notes unless such consideration is offered to be paid and is paid to all holders of such series of Notes as
may be affected thereby that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent,
waiver or amendment.
“Triggering Event” means (A) any change in or amendment to the laws, regulations and rules of the PRC or the official interpretation or official
application thereof (a “Change in Law) that results in (x) our Group (as in existence immediately subsequent to such Change in Law), as a
whole, being legally prohibited from operating substantially all of the business operations conducted by our Group (as in existence immediately
prior to such Change in Law) as of the last date of the period described in our consolidated financial statements for the most recent fiscal quarter
and (y) we being unable to continue to derive substantially all of the economic benefits from the business operations conducted by our Group
(as in existence immediately prior to such Change in Law) in the same manner as reflected in our consolidated financial statements for the most
recent fiscal quarter prior to such Change in Law and (B) we have not furnished to the trustee, prior to the date that is twelve months after the
date of the Change in Law, an opinion from an independent financial advisor or an independent legal counsel stating either that (1) we are able
to continue to derive substantially all of the economic benefits from the business operations conducted by our Group (as in existence
immediately prior to such Change in Law), taken as a whole, as reflected in our consolidated financial statements for the most recent fiscal
quarter prior to such Change in Law (including after giving effect to any corporate restructuring or reorganization plan of us) or (2) such
Change in Law would not materially adversely affect our ability to make principal, premium, if any, and interest payments on the Notes of any
series when due.
Limitation on Liens
(a) Subject to the exceptions set forth in section (b) below, we will not create or have outstanding, and we will ensure that none of its principal
controlled entities will create or have outstanding, any Lien upon the whole or any part of their respective present or future assets securing any
relevant indebtedness, or create or have outstanding any guarantee or indemnity in respect of any relevant indebtedness either of us or of any
principal controlled entity, without (x) at the same time or prior thereto securing or guaranteeing the Notes of any applicable series, as
applicable, equally and ratably therewith or (y) providing such other security or guarantees for the Notes of the applicable series as shall be
approved by an act of the holders of such series of Securities holding at least a majority of the principal amount of such series of Notes then
outstanding.
(b) The restriction set forth in section (a) above will not apply to: (i) any Lien arising or already arisen automatically by operation of law which
is timely discharged or disputed in good faith by appropriate proceedings; (ii) any Lien in respect of the obligations of any person which
becomes a principal controlled entity or which merges with or into us or a principal controlled entity after the date hereof which is in existence
at the date on which it becomes a principal controlled entity or merges with or into us or a principal controlled entity; (iii) any Lien created or
outstanding in favor of us or any Lien created by any of our controlled entities in favor of any of our other controlled entities; (iv) any Lien in
respect of relevant indebtedness of us or any principal controlled entity with respect to which we have or such principal controlled entity has
paid money or deposited money or securities with a paying agent, trustee or depository to pay or discharge in full the obligations of us or such
principal controlled entity in respect thereof (other than the obligation that such money or securities so paid or deposited, and the proceeds
therefrom, be sufficient to pay or discharge such obligations in full); (v) with respect to the 2017 Senior Notes only, any Lien created in
connection with relevant indebtedness of the Company or any Principal Controlled Entity denominated in Chinese Renminbi and initially
offered, marketed or issued primarily to Persons resident in the PRC; (vi) any Lien created in connection with a project financed with, or created
to secure, non-recourse obligations; or (vii) any Lien arising out of the refinancing, extension, renewal or refunding of any relevant indebtedness
secured by any Lien permitted by the foregoing clause (ii), (v), (vi) or (vii) of this section (b); provided that such relevant indebtedness is not
increased beyond the principal amount thereof (together with the costs of such refinancing, extension, renewal or refunding, including any
accrued interest and prepayment premiums or consent fees) and is not secured by any additional property or assets.
“Lien” means any mortgage, charge, pledge, lien or other form of encumbrance or security interest.
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Notice of Redemption
Notice of redemption shall be given by us, or, at our request (which may be rescinded or revoked at any time prior to the time at which the
trustee shall have given such notice to the holders), by the trustee in the name and at the expense of us, not less than 30 days nor more than 60
days prior to the redemption date, to the holders of the Notes of any series to be redeemed in whole or in part, in the manner provided in section;
provided that the trustee be provided with the draft notice at least 15 days (or such shorter period acceptable to the trustee) prior to sending such
notice of redemption. Any notice given in the manner herein provided shall be conclusively presumed to have been duly given, whether or not
the holder receives such notice. Failure to give such notice, or any defect in such notice to the holder of any Notes of a series designated for
redemption, in whole or in part, shall not affect the sufficiency of any notice of redemption with respect to the holder of any other Note of such
series.
All notices of redemption shall identify the Notes to be redeemed (including CUSIP, ISIN or other similar numbers, if available) and shall state:
(i) such election by us to redeem the Notes of such series pursuant to provisions contained in the Indentures or the terms of the Notes of such
series in a company order, officer’s certificate or a supplemental indenture establishing such series, if such be the case; (ii) the redemption date;
(iii) the redemption price (or the manner in which the redemption price will be calculated); (iv) if less than all outstanding Notes of any series
are to be redeemed, the identification (and, in the case of partial redemption, the principal amounts) of the Notes of such series to be redeemed;
(v) that on the redemption date the redemption price shall become due and payable upon each such Note to be redeemed, and that, if applicable,
interest thereon shall cease to accrue on and after said date; and (vi) (if the Notes are in certificated form) the place or places of payment where
such Securities are to be surrendered for payment of the redemption price.
Events of Default
Except where otherwise indicated by the context or where the term is otherwise defined for a specific purpose, the term “Event of Default” as
used in the Indentures with respect to Notes of any series shall mean one of the following described events unless it is either inapplicable to a
particular series or it is specifically deleted or modified in the manner contemplated in the Indentures: (a) we fail to pay principal or premium, if
any, in respect of a Note of such series by the due date for such payment (whether at stated maturity or upon repurchase, acceleration,
redemption or otherwise); (b) we fail to pay interest on a Security of such series within 30 days after the due date for such payment; (c) we
default in the performance of or breaches our obligations under section in connection with merger, consolidation and sale of assets under
particular covenants of us; (d) we default in the performance of or breaches any covenant or agreement in the Indentures or under the Notes of
such series (other than a default specified in clause (a), (b) or (c) above) and such default or breach continues for a period of 30 consecutive
days after written notice by the trustee or the holders of 25% or more in aggregate principal amount of the Notes of such series then outstanding;
(e) the entry by a court having jurisdiction in the premises of (i) a decree or order for relief in respect of us or any principal controlled entity of
us in an involuntary case or proceeding under any applicable bankruptcy, insolvency or other similar law or (ii) a decree or order adjudging us
or any principal controlled entity of us bankrupt or insolvent, or approving as final and nonappealable a petition seeking reorganization,
arrangement, adjustment, or composition of or in respect of us or any principal controlled entity of us under any applicable bankruptcy,
insolvency or other similar law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator, or other similar official of us or
any principal controlled entity of us or of any substantial part of our or their respective property, or ordering the winding up or liquidation of
their respective affairs (or any similar relief granted under any foreign laws), and in any such case the continuance of any such decree or order
for relief or any such other decree or order unstayed and in effect for a period of 90 consecutive days; (f) the commencement by us or any
principal controlled entity of us of a voluntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency or other
similar law or of any other case or proceeding to be adjudicated bankrupt or insolvent, or the consent by the Company or any Principal
Controlled Entity to the entry of a decree or order for relief in respect of us or any principal controlled entity of us in an involuntary case or
proceeding under any applicable bankruptcy, insolvency or other similar law or the commencement of any bankruptcy or insolvency case or
proceeding against us or any principal controlled entity, or the filing by us or any principal controlled entity of a petition or answer or consent
seeking reorganization or relief with respect to us or any principal controlled entity of us under any applicable bankruptcy, insolvency or other
similar law, or the consent by us or any principal controlled entity to the filing of such petition or to the appointment of or taking possession by
a custodian, receiver, liquidator, assignee, trustee, sequestrator, or other similar official of us or any principal controlled entity of us or of any
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substantial part of its or their respective property pursuant to any such law, or the making by us or any principal controlled entity of us of a
general assignment for the benefit of creditors in respect of any indebtedness as a result of an inability to pay such indebtedness as it becomes
due, or the admission by us or any principal controlled entity of us in writing of the inability of us to pay its debts generally as they become due,
or the taking of corporate action by us or any principal controlled entity of us that resolves to commence any such action; (g) the Notes of such
series or the Indentures is or becomes or is claimed by us to be unenforceable, invalid or ceases to be in full force and effect otherwise than is
permitted by the Indentures; or (h) the occurrence of any other Event of Default with respect to Notes of such series as provided in the
Indentures; provided, however, that a default under section (d) above will not constitute an Event of Default until the trustee or the holders of
25% or more in aggregate principal amount of the Notes of such series then outstanding provide written notice to us of the default and we do
not cure such default within the time specified in section (d) above after receipt of such written notice. In the case of such written notice given
to us by the holders, we will provide a copy of such written notice to the trustee.
Acceleration; Rescission and Annulment
Subject to the Indentures, any one or more of the above-described Events of Default (other than an Event of Default specified in sub-sections (e)
or (f)) shall occur and be continuing with respect to Notes any series at the time outstanding, then, and in each and every such case, during the
continuance of any such Event of Default, the trustee or the holders of not less than 25% in aggregate principal amount of the Notes of such
series then outstanding may, and the trustee upon written directions of holders of at least 25% in aggregate principal amount of the Notes of
such series outstanding shall (subject to being indemnified secured and/or pre-funded to its satisfaction), declare the unpaid principal (or such
portion of the unpaid principal amount as may be specified in the terms of that series) of and accrued but unpaid interest, if any, on (and any
Additional Amount payable in respect of) all the Notes of such series then outstanding to be due and payable by a notice in writing to us (and to
the trustee if given by holders), and upon receipt of such notice, such unpaid principal amount and accrued but unpaid interest, if any, shall
become immediately due and payable. If an Event of Default specified in sub-section (e) or (f) occurs and is continuing, then in every such case,
the unpaid principal amount of all of the Notes of that series then outstanding and all accrued and unpaid interest, if any, thereon shall
automatically, and without any declaration or any other action on the part of the trustee or any holder, become due and payable immediately.
Upon payment of such amounts in the currency in which such Notes are denominated subject to the Indentures, all obligations of us in respect
of the payment of principal of and interest on the Notes of such series shall terminate.
At any time after such a declaration of acceleration with respect to the Notes of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the trustee as hereinafter, the holders of at least a majority in aggregate principal amount of the
Notes of such series at the time outstanding may waive all past defaults and rescind and annul such acceleration if: (i) the rescission of the
acceleration with respect to the Notes of such series would not conflict with any judgment or decree of a court of competent jurisdiction; and (ii)
all Events of Default with respect to the Notes of such series, other than the non-payment of principal, premium, if any, or interest, on the Notes
of such series that became due solely because of such acceleration, have been cured or waived as provided in section entitled “Other Remedies”
below.
No rescission as provided in this section shall affect any subsequent default or impair any right consequent thereon.
For all purposes under the Indentures, if a portion of the principal of any Notes shall have been accelerated and declared due and payable
pursuant to the provisions hereof, then, from and after such declaration, unless such declaration has been rescinded and annulled, the principal
amount of such Notes shall be deemed, for all purposes hereunder, to be such portion of the principal thereof as shall be due and payable as a
result of such acceleration, and payment of such portion of the principal thereof as shall be due and payable as a result of such acceleration,
together with interest, if any, thereon and all other amounts owing thereunder, shall constitute payment in full of such Notes.
Other Remedies
If we shall fail for a period of 30 days to pay any installment of interest on the Notes of any series or shall fail to pay the principal of and
premium, if any, on any of the Notes of such series when and as the same shall become due and payable, whether at maturity, or by call for
redemption, by declaration as authorized by the Indentures, or otherwise, then, upon demand of the trustee, we shall pay to the paying agent, for
the benefit of the holders of Notes of such
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series then outstanding, the whole amount which then shall have become due and payable on all the Notes of such series, with interest on the
overdue principal and premium, if any, and (so far as the same may be legally enforceable) on the overdue installments of interest at the rate
borne by the Notes of such series, and all amounts owing the trustee and any predecessor trustee subject to the provisions in connection with
compensation and indemnity to the trustee under the Indentures.
In case we shall fail forthwith to pay such amounts upon such demand, the trustee, in its own name and as trustee of an express trust, shall be
entitled and empowered to institute any action or proceeding, judicial or otherwise for the collection of the sums so due and unpaid, and may
prosecute any such action or proceeding to judgment or final decree, and may enforce any such judgment or final decree against us or any other
obligor upon the Notes of such series, and collect the moneys adjudged or decreed to be payable out of the property of us or any other obligor
upon the Notes of such series, wherever situated, in the manner provided by law. Every recovery of judgment in any such action or other
proceeding, subject to the payment to the trustee of all amounts owing the trustee and any predecessor trustee subject to the provisions in
connection with compensation and indemnity to the trustee under the Indentures, shall be for the ratable benefit of the holders of such series of
Notes which shall be the subject of such action or proceeding. All rights of action upon or under any of the Notes or the Indentures may be
enforced by the trustee without the possession of any of the Notes and without the production of any thereof at any trial or any proceeding
relative thereto.
Satisfaction and Discharge of Indentures
The Indentures, with respect to the Notes of any series (if all series issued under the Indentures are not to be affected), shall cease to be of
further effect (except as to any surviving rights of registration of transfer or exchange of such Notes herein expressly provided for and rights to
receive payments of principal of, premium, if any, and interest on, such Notes) when: (i) either: (A) all Notes of such series that have been
authenticated, except (x) lost, stolen or destroyed Notes that have been replaced or paid and (y) Notes for whose payment money has been
deposited in trust and thereafter repaid to us, have been delivered to the paying agent for cancellation; or (B) all Notes of such series that have
not been delivered to the paying agent for cancellation have become due and payable by reason of the sending of a notice of redemption or
otherwise or will become due and payable within one year and we have irrevocably deposited or caused to be deposited with the trustee as trust
funds in trust solely for the benefit of the holders of such series of Notes, cash in U.S. Dollars, U.S. Government obligations, or a combination
of cash in U.S. Dollars and U.S. Government obligations, in amounts as will be sufficient (in the case of a deposit not entirely in cash, in the
opinion of an internationally recognized investment bank, appraisal firm or firm of independent public accountants), without consideration of
any reinvestment of interest, to pay and discharge the entire amount outstanding on such Notes not delivered to the paying agent for cancellation
for principal, premium, if any, and accrued interest, to the stated maturity or redemption date, as the case may be; (ii) no default or Event of
Default under the Indentures has occurred and is continuing with respect to Notes of such series on the date of the deposit (other than a default
or Event of Default resulting from the borrowing of funds to be applied to such deposit); (iii) we have paid or caused to be paid all sums payable
by it under the Indentures with respect to all Notes of such series; and (iv) we have delivered irrevocable instructions to the trustee under the
Indentures to apply the deposited money toward the payment of the Notes of such series at the stated maturity or redemption date, as the case
may be.
We must deliver an officer’s certificate and an opinion of an independent legal counsel (which may be subject to customary assumptions and
exclusions) to the trustee stating that all conditions precedent to satisfaction and discharge have been satisfied.
Notices to Note holders; Waiver
Any notice required or permitted to be given to Note holders shall be sufficiently given (unless otherwise herein expressly provided), if to
holders, if given in writing by first class mail, postage prepaid, to such holders at their addresses as the same shall appear on the register.
Notwithstanding the foregoing sentence, where the Indentures provide for notice of any event to a holder of a global security, such notice shall
be sufficiently given if given to the depository for such Note (or its designee), pursuant to the applicable procedures of the depository, not later
than the latest date, if any, and not earlier than the earliest date, if any, prescribed for the giving of such notice by the Indentures.
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(a) In the event of suspension of regular mail service or by reason of any other cause it shall be impracticable to give notice by mail, then such
notification as shall be given with the approval of the Trustee shall constitute sufficient notice for every purpose hereunder.
(b) Where the Indentures provide for notice in any manner, such notice may be waived in writing by the person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by holders shall be filed with the
trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance on such waiver. In any case where notice
to holders is given by mail, neither the failure to mail such notice nor any defect in any notice so mailed to any particular holder shall affect the
sufficiency of such notice with respect to other holders, and any notice that is mailed in the manner herein provided shall be conclusively
presumed to have been duly given. In any case where notice to holders is given by publication, any defect in any notice so published as to any
particular holder shall not affect the sufficiency of such notice with respect to other holders, and any notice that is published in the manner
herein provided shall be conclusively presumed to have been duly given.
Supplemental Indentures
Without consent of holders of the Notes. Subject to the Indentures, we and the trustee, at any time and from time to time, may enter into one or
more indentures supplemental, in form satisfactory to the trustee, for any one or more of or all the following purposes: (a) to cure any
ambiguity, omission, defect or inconsistency contained herein or in any supplemental indenture; provided, however, that such amendment does
not materially and adversely affect the rights of holders; (b) to evidence the succession of another corporation, partnership, trust or other entity
to us in accordance with the section in connection with merger, consolidation and sale of assets under the Indentures, or successive successions,
and the assumption by such successor of the covenants and obligations of us contained in the Notes of one or more series and in the indentures
or any supplemental indenture; (c) to comply with the rules of any applicable depository; (d) to secure any series of Notes; (e) to add to the
covenants and agreements of us, to be observed thereafter and during the period, if any, in such supplemental indenture or indentures expressed,
and to add Events of Default, in each case for the protection or benefit of the holders of all or any series of the Notes (and if such covenants,
agreements and Events of Default are to be for the benefit of fewer than all series of Notes, stating that such covenants, agreements and Events
of Default are expressly being included for the benefit of such series as shall be identified therein), or to surrender any right or power herein
conferred upon us; (f) to make any change in any series of Notes that does not adversely affect the legal rights under the Indentures of any
holder of such Notes in any material respect; (g) to evidence and provide for the acceptance of an appointment under the Indentures of a
successor trustee; provided that the successor trustee is otherwise qualified and eligible to act as such under the terms hereof; (h) to conform the
text of the Indentures or any series of the Notes to any provision of the section entitled “Description of the Debt Securities” in the prospectus
relating to the offering of the Notes to the extent that such provision in such prospectus was intended to be a verbatim recitation of a provision
of the Indentures or such series of the Notes as evidenced by an officer’s certificate; (i) to make any amendment to the provisions of the
Indentures relating to the transfer and legending of such series of Notes as permitted by the Indentures, including, but not limited to, facilitating
the issuance and administration of any series of the Notes or, if incurred in compliance with the Indentures, additional Notes; provided,
however, that (i) compliance with the Indentures as so amended would not result in such series of the Notes being transferred in violation of the
Securities Act, or any applicable securities law and (ii) such amendment does not materially and adversely affect the rights of holders to transfer
Notes; (j) to make any amendment to this Indenture necessary to qualify the Indentures under the Trust Indenture Act; (k) to establish the form
and terms of Notes of any series as permitted under the Indentures, or to provide for the issuance of additional Notes in accordance with the
limitations set forth in the Indentures or to add to the conditions, limitations or restrictions on the authorized amount, terms or purposes of issue,
authentication or delivery of the Notes of any series, as herein set forth, or other conditions, limitations or restrictions thereafter to be observed;
and (l) to add guarantors or co-obligors with respect to any series of Notes.
Subject to the Indentures, the trustee is authorized to join with us in the execution of any such supplemental indenture, to make the further
agreements and stipulations which may be therein contained and to accept the conveyance, transfer, assignment, mortgage or pledge of any
property or assets thereunder.
Any supplemental indenture authorized by the provisions of this section may be executed by us and the trustee without the consent of the
holders of any of the Notes at the time outstanding.
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With Consent of Holders of the Notes; Limitations.
(a) With the consent of the holders of a majority in aggregate principal amount of the outstanding Notes of each series affected by such
supplemental indenture voting separately, we and the trustee may, from time to time and at any time, enter into an indenture or indentures
supplemental for the purpose of adding any provisions to or changing in any manner or eliminating any provisions of the Indentures or of
modifying or changing in any manner the rights of the holders of the Notes of such series to be affected; provided, however, that no such
supplemental indenture shall, without the consent of the holder of each outstanding Note of each such series affected thereby, (i) change the
stated maturity of the principal of and premium, if any, or any installment of interest on any Note; (ii) reduce the principal amount of, payments
of interest, on or stated time for payment of interest, on any Note; (iii) change any obligation of us to pay Additional Amounts with respect to
any Note; (iv) change the currency in which the principal of and premium, if any, or interest on such Note is denominated or payable; (v) impair
the right to institute suit for the enforcement of any payment due on or with respect to any Note; (vi) reduce the percentage in principal amount
of the outstanding Note of any series, the consent of whose holders is required for any supplemental indenture; (vii) reduce the percentage in
principal amount of the outstanding Notes of any series, the consent of whose holders is required for any waiver of compliance with certain
provisions of the Indentures or certain defaults and their consequences provided for in the Indentures; (viii) modify any of the provisions of this
section and certain conditional waivers of holders of the Notes under the Indentures, except to increase any such percentage or provide that
certain other provisions of the Indentures cannot be modified or waived without the consent of the holder of each outstanding Note affected
thereby; provided, however, that this shall not be deemed to require the consent of any holder with respect to changes in the references to the
trustee and concomitant changes in this section and certain conditional waivers of holders of the Notes, or the deletion of this proviso; (ix)
amend, change or modify any provision of the Indentures or the related definitions affecting the ranking of any series of Notes in a manner
which adversely affects the holders of such Notes; or (x) reduce the amount of the premium payable upon the redemption or repurchase of any
Note or change the time at which any Note may be redeemed or repurchased subject to tax redemption pursuant to the Indentures.
(b) A supplemental indenture that changes or eliminates any provision of the Indentures which has expressly been included solely for the benefit
of one or more particular series of Notes or which modifies the rights of the holders of Notes of such series with respect to such covenant or
other provision, shall be deemed not to affect the rights under the Indentures of the holders of Notes of any other series.
(c) It shall not be necessary for the consent of the holders of the Notes under this section to approve the particular form of any proposed
supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof. Any such consent of holders given in
connection with a tender of such holders’ Notes of such series will not be rendered invalid by such tender.
(d) We may set a record date for purposes of determining the identity of the holders of each series of Notes entitled to give a written consent or
waive compliance by us as authorized or permitted by this section.
After the execution by us and the trustee of any supplemental indenture pursuant to the provisions of this section, we shall mail a notice, setting
forth in general terms the substance of such supplemental indenture, to the holders of Notes at their addresses as the same shall then appear in
the register. Any failure of us to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such
supplemental indenture.
Effect of Execution of Supplemental Indenture. Upon the execution of any supplemental indenture, the Indentures shall be deemed to be
modified and amended in accordance therewith and, except as herein otherwise expressly provided, the respective rights, limitations of rights,
obligations, duties and immunities under the Indentures of the trustee, us and the holders of all of the Notes or of the Notes of any series
affected, as the case may be, shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and
amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions
of the Indentures for any and all purposes.
Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to the provisions of this Article XIII shall conform to the
requirements of the Trust Indenture Act as then in effect.
Governing Law
The Indentures and the Notes shall be governed by, and construed in accordance with, the laws of the State of New York
52
Exhibit 4.5
Schedules of Material Differences of Contractual Arrangements of Major Variable Interest Entities and their Respective Equity
Holders
I. Loan Agreement Schedule
The material differences in the loan agreements by and among the VIE Shareholders and the WFOEs in connection with our major contractual
arrangements for the major variable interest entities and their respective equity holders are set forth below.
1. loan agreement entered into by Hangzhou Zhenxi Investment Management Co., Ltd. (the “VIE Shareholder”) and Taobao (China)
Software Co., Ltd. (the “WFOE”) on January 4, 2019; the agreement will terminate (i) 20 years from the effective date of the loan
agreement on January 4, 2019, (ii) upon the expiry of the business term of the WFOE, or (iii) the expiry of the business term of Zhejiang
Taobao Network Co., Ltd. (the “VIE”), whichever is earlier; the aggregate principal amount under the loan agreement is RMB65,032,517,
which shall only be used for operation activities approved by the WFOE; the VIE Shareholder made representations in the agreement that,
among other things, it shall not cause the VIE to borrow from a third party or assume any debt, except for indebtedness of no more than
RMB100,000, individually or in aggregate in six consecutive months, arising in the ordinary course of business;
2. loan agreement entered into by Hangzhou Zhenxi Investment Management Co., Ltd. (the “VIE Shareholder”) and Zhejiang Alibaba Cloud
Computing Ltd. (the “WFOE”) on July 19, 2018; the agreement will expire (i) 20 years from the effective date of the loan agreement on
July 16, 2018, (ii) upon the expiry of the business term of the WFOE, or (iii) upon the expiry of the business term of Alibaba Cloud
Computing Ltd. (the “VIE”), whichever is earlier; the aggregate principal amount under the loan agreement is RMB50,025,013, which
shall only be used for operation activities approved by the WFOE; the VIE Shareholder made representations in the agreement that, among
other things, it shall not cause the VIE to borrow from a third party or assume any debt, except for indebtedness of no more than
RMB100,000, individually or in aggregate in six consecutive months, arising in the ordinary course of business;
3. loan agreement entered into by Alibaba Culture & Entertainment Co., Ltd. (the “VIE Shareholder”) and Beijing Youku Technology Co.,
Ltd. (the “WFOE”) on July 24, 2019; the agreement will expire (i) 20 years from the effective date of the loan agreement on July 24, 2019,
(ii) upon the expiry of the business term of the WFOE, or (iii) upon the expiry of the business term of Youku Information Technology
(Beijing) Co., Ltd. (the “VIE”), whichever is earlier; the aggregate principal amount under the loan agreement is RMB60,010,005, which
shall only be used for operation activities approved by the WFOE; the VIE Shareholder made representations in the agreement that, among
other things, it shall not cause the VIE to borrow from a third party or assume any debt, except for indebtedness of no more than
RMB100,000, individually or in aggregate in six consecutive months, arising in the ordinary course of business;
4. loan agreement entered into by Hangzhou Zhenxi Investment Management Co., Ltd. (the “VIE Shareholder”) and Zhejiang Tmall
Technology Co., Ltd. (the “WFOE”) on January 10, 2018; the agreement will expire upon (i) 20 years from the effective date of the loan
agreement, (ii) upon the expiry of the business term of the WFOE, or (iii) upon the expiry of the business term of Zhejiang Tmall Network
Co., Ltd. (the “VIE”), whichever is earlier; the aggregate principal amount under the loan agreement is RMB10 million, which shall only
be used for operation activities approved by the WFOE; the VIE Shareholder made representations in the agreement that, among other
things, it shall not cause the VIE to borrow from a third party or assume any debt, except for indebtedness of no more than RMB100,000,
individually or in aggregate in six consecutive months, arising in the ordinary course of business;
5. (1) loan agreement entered into by Daniel Zhang, Jessie Zheng, Shao Xiaofeng, Judy Tong, and Angel Zhao (together with Daniel Zhang,
Jessie Zheng, Shao Xiaofeng and Judy Tong, the “Limited Partners”) and Taobao (China) Software Co., Ltd. on January 31, 2018; the
agreement will expire (i) 20 years from the execution date of the loan agreement, (ii) upon the expiry of the business term of the Taobao
(China) Software Co., Ltd., or (iii) upon the expiry of the business term of Hangzhou Zhenqiang Investment Management Partnership
(Limited Partnership) (the “LLP”), whichever is earlier; the aggregate principal amount under the loan agreement is RMB3 million, which
shall only be used for investment in the LLP; the Limited Partners made representations in the agreement that, among other things, they
shall not cause the LLP to borrow from a third party or assume any debt, except for indebtedness of no more than RMB100,000,
individually or in aggregate in six consecutive months, arising in the ordinary course of business;
(2) loan agreement entered into by Daniel Zhang, Jessie Zheng, Shao Xiaofeng, Judy Tong, and Angel Zhao (together with Daniel Zhang,
Jessie Zheng, Shao Xiaofeng and Judy Tong, the “Limited Partners”) and Taobao (China) Software Co., Ltd. on January 31, 2018; the
agreement will expire (i) 20 years from the execution date of the loan agreement, (ii) upon the expiry of the business term of the Taobao
(China) Software Co., Ltd., or (iii) upon the expiry of the business term of Hangzhou Zhensheng Investment Management Partnership
(Limited Partnership) (the “LLP”), whichever is earlier; the aggregate principal amount under the loan agreement is RMB3 million, which
shall only be used for investment in the LLP; the Limited Partners made representations in the agreement that, among other things, they
shall not cause the LLP to borrow from a third party or assume any debt, except for indebtedness of no more than RMB100,000,
individually or in aggregate in six consecutive months, arising in the ordinary course of business;
(3) loan agreement entered into by Daniel Zhang, Jessie Zheng, Shao Xiaofeng, Judy Tong, and Angel Zhao (together with Daniel Zhang,
Jessie Zheng, Shao Xiaofeng and Judy Tong, the “GP Shareholders”) and Taobao (China) Software Co., Ltd. on January 31, 2018; the
agreement will expire (i) 20 years from the execution date of the loan agreement, (ii) upon the expiry of the business term of the Taobao
(China) Software Co., Ltd., or (iii) upon the expiry of the business term of Hangzhou Zhenyue Enterprise Management Co., Ltd. (the
“GP”); the aggregate principal amount under the loan agreement is RMB250,000, which shall only be used for investment in the GP; the
GP Shareholders made representations in the agreement that, among other things, they shall not cause the LLP to borrow from a third party
or assume any debt, except for indebtedness of no more than RMB100,000, individually or in aggregate in six consecutive months, arising
in the ordinary course of business.
II. Exclusive Call Option Agreement Schedule
The material differences in the exclusive call option agreements by and among the VIE Shareholders, the VIEs and the WFOEs in connection
with our major contractual arrangements for the major variable interest entities and their respective equity holders are set forth below.
1. exclusive call option agreement entered into by Hangzhou Zhenxi Investment Management Co., Ltd. (the “VIE Shareholder”), Taobao
(China) Software Co., Ltd. (the “WFOE”) and Zhejiang Taobao Network Co., Ltd. (the “VIE”) on January 4, 2019; the agreement is
effective from January 4, 2019 and becomes null and void when all of equity interests and assets of the VIE have been transferred to the
WFOE and/or its designated entity(ies) or individual(s);
2. exclusive call option agreement entered into by Hangzhou Zhenxi Investment Management Co., Ltd. (the “VIE Shareholder”), Zhejiang
Alibaba Cloud Computing Ltd. (the “WFOE”) and Alibaba Cloud Computing Ltd. (the “VIE”) on July 19, 2018; the agreement is
effective from July 16, 2018 and
becomes null and void when all of the equity interests and assets of the VIE have been transferred to the WFOE and/or its designated
entity(ies) or individual(s);
3. exclusive call option agreement entered into by Alibaba Culture & Entertainment Co., Ltd. (the “VIE Shareholder”), Beijing Youku
Technology Co., Ltd. (the “WFOE”), and Youku Information Technology (Beijing) Co., Ltd. (the “VIE”) on July 24, 2019; the agreement
is effective from July 24, 2019 and becomes null and void when all of equity interests and assets of the VIE have been transferred to the
WFOE and/or its designated entity(ies) or individual(s);
4. exclusive call option agreement entered into by Hangzhou Zhenxi Investment Management Co., Ltd. (the “VIE Shareholder”), Zhejiang
Tmall Technology Co., Ltd. (the “WFOE”) and Zhejiang Tmall Network Co., Ltd. (the “VIE”) on January 10, 2018; the agreement is
effective upon signing and becomes null and void when all of the equity interests and assets of the VIE have been transferred to the WFOE
and/or its designated entity(ies) or individual(s);
5. (1) exclusive call option agreement entered into by Daniel Zhang, Jessie Zheng, Shao Xiaofeng, Judy Tong, and Angel Zhao (together
with Daniel Zhang, Jessie Zheng, Shao Xiaofeng and Judy Tong, the “Limited Partners”), Hangzhou Zhenyue Enterprise Management
Co., Ltd. (the “GP”, together with the “Limited Partners”, the “Partners”), Taobao (China) Software Co., Ltd. and Hangzhou Zhenqiang
Investment Management Partnership (Limited Partnership) (the “LLP”) on January 31, 2018; the agreement is effective from September 4,
2017 and becomes null and void until all of equity interests and assets of the LLP have been transferred to Taobao (China) Software
Co., Ltd. and/or its designated entity(ies) or individual(s);
(2) exclusive call option agreement entered into by Daniel Zhang, Jessie Zheng, Shao Xiaofeng, Judy Tong, and Angel Zhao (together
with Daniel Zhang, Jessie Zheng, Shao Xiaofeng and Judy Tong, the “Limited Partners”), Hangzhou Zhenyue Enterprise Management
Co., Ltd. (the “GP”, together with the “Limited Partners”, the “Partners”), Taobao (China) Software Co., Ltd. and Hangzhou Zhensheng
Investment Management Partnership (Limited Partnership) (the “LLP”) on January 31, 2018; the agreement is effective from October 27,
2017 and becomes null and void until all of equity interests and assets of the LLP have been transferred to Taobao (China) Software
Co., Ltd. and/or its designated entity(ies) or individual(s);
(3) exclusive call option agreement entered into by Daniel Zhang, Jessie Zheng, Shao Xiaofeng, Judy Tong, and Angel Zhao (together
with Daniel Zhang, Jessie Zheng, Shao Xiaofeng and Judy Tong, the “GP Shareholders”), Taobao (China) Software Co., Ltd. and
Hangzhou ZhenyueEnterprise Management Co., Ltd. (the “GP”) on January 31, 2018; the agreement is effective from August 11, 2017
and becomes null and void until all of equity interests and assets of the GP have been transferred to Taobao (China) Software Co., Ltd.
and/or its designated entity(ies) or individual(s).
III. Proxy Agreement Schedule
The material differences in the proxy agreements by and among the VIE Shareholders, the VIEs and the WFOEs in connection with our major
contractual arrangements for the major variable interest entities and their respective equity holders are set forth below.
1. proxy agreement entered into by Hangzhou Zhenxi Investment Management Co., Ltd., Taobao (China) Software Co., Ltd. and Zhejiang
Taobao Network Co., Ltd. on January 4, 2019; the agreement became effective on January 4, 2019 and has a term of 20 years, subject to
automatic renewal;
2. proxy agreement entered into by Hangzhou Zhenxi Investment Management Co., Ltd., Zhejiang Alibaba Cloud Computing Ltd. and
Alibaba Cloud Computing Ltd. on July 19, 2018; the agreement became effective on July 16, 2018 and has a term of 20 years, subject to
automatic renewal;
3. proxy agreement entered into by Alibaba Culture & Entertainment Co., Ltd., Beijing Youku Technology Co., Ltd. (the “WFOE”), and
Youku Information Technology (Beijing) Co., Ltd. (the “VIE”) on July 24, 2019; the agreement became effective on July 24, 2019 and has
a term of 20 years, subject to automatic renewal;
4. proxy agreement entered into by Hangzhou Zhenxi Investment Management Co., Ltd., Zhejiang Tmall Technology Co., Ltd. and Zhejiang
Tmall Network Co., Ltd. on January 10, 2018; the agreement has a term of 20 years, subject to automatic renewal;
5. (1) proxy agreement entered into by Daniel Zhang, Jessie Zheng, Shao Xiaofeng, Judy Tong, and Angel Zhao (together with Daniel
Zhang, Jessie Zheng, Shao Xiaofeng and Judy Tong, the “Limited Partners”), Hangzhou Zhenyue Enterprise Management Co., Ltd. (the
“GP”, together with the “Limited Partners”, the “Partners”), Taobao (China) Software Co., Ltd. and Hangzhou Zhenqiang Investment
Management Partnership (Limited Partnership) (the “LLP”) on January 31, 2018; the agreement has a term of 20 years from September 4,
2017, subject to automatic renewal;
(2) proxy agreement entered into by Daniel Zhang, Jessie Zheng, Shao Xiaofeng, Judy Tong, and Angel Zhao (together with Daniel
Zhang, Jessie Zheng, Shao Xiaofeng and Judy Tong, the “Limited Partners”), Hangzhou Zhenyue Enterprise Management Co., Ltd. (the
“GP”, together with the “Limited Partners”, the “Partners”), Taobao (China) Software Co., Ltd. and Hangzhou Zhensheng Investment
Management Partnership (Limited Partnership) (the “LLP”) on January 31, 2018; the agreement has a term of 20 years from October 27,
2017, subject to automatic renewal;
(3) proxy agreement entered into by Daniel Zhang, Jessie Zheng, Shao Xiaofeng, Judy Tong, and Angel Zhao (together with Daniel
Zhang, Jessie Zheng, Shao Xiaofeng and Judy Tong, the “GP Shareholders”), Taobao (China) Software Co., Ltd. and Hangzhou Zhenyue
Enterprise Management Co., Ltd. (the “GP”) on January 31, 2018; the agreement has a term of 20 years from August 11, 2017, subject to
automatic renewal.
IV. Equity Pledge Agreement Schedule
The material differences in the equity pledge agreements entered into by and among the VIE Shareholders, the VIEs and the WFOEs in
connection with our major contractual arrangements for the major variable interest entities and their respective equity holders are set forth
below.
1. equity pledge agreement entered into by Hangzhou Zhenxi Investment Management Co., Ltd. (the “VIE Shareholder” and the “pledgor”),
Taobao (China) Software Co., Ltd. (the “WFOE” and the “pledgee”) and Zhejiang Taobao Network Co., Ltd. (the “VIE”) on January 4,
2019, which secures the performance of the obligations of the VIE Shareholder under the contractual arrangements;
2. equity pledge agreement entered into by Hangzhou Zhenxi Investment Management Co., Ltd. (the “VIE Shareholder” and the “pledgor”),
Zhejiang Alibaba Cloud Computing Ltd. (the “WFOE” and the “pledgee”) and Alibaba Cloud Computing Ltd. (the “VIE”) on July 19,
2018, which secures the performance of the obligations of the VIE Shareholder under the contractual arrangements.
3. equity pledge agreement entered into by Alibaba Culture & Entertainment Co., Ltd.Liu (the “VIE Shareholder” and the “pledgor”),
Beijing Youku Technology Co., Ltd. (the “WFOE” and the “pledgee”), and Youku Information Technology (Beijing) Co., Ltd. on July 24,
2019, which secure the performance of the obligations of the VIE Shareholders under the contractual arrangements;
4. equity pledge agreement entered into by Hangzhou Zhenxi Investment Management Co., Ltd. (the “VIE Shareholder” and the “pledgor”),
Zhejiang Tmall Technology Co., Ltd. (the “WFOE” and the “pledgee”) and Zhejiang Tmall Network Co., Ltd. (the “VIE”) on January 10,
2018, which secures the performance of the obligations of the VIE Shareholder under the contractual arrangements;
5. (1) equity pledge agreement entered into by Daniel Zhang, Jessie Zheng, Shao Xiaofeng, Judy Tong, and Angel Zhao (together with
Daniel Zhang, Jessie Zheng, Shao Xiaofeng and Judy Tong, the “Limited Partners”), Hangzhou Zhenyue Enterprise Management Co., Ltd.
(the “GP”, together with the “Limited Partners”, the “Partners”), Taobao (China) Software Co., Ltd. and Hangzhou Zhenqiang Investment
Management Partnership (Limited Partnership) (the “LLP”) on January 31, 2018, which secures the performance of the obligations of the
Partners under the contractual arrangements;
(2) equity pledge agreement entered into by Daniel Zhang, Jessie Zheng, Shao Xiaofeng, Judy Tong, and Angel Zhao (together with
Daniel Zhang, Jessie Zheng, Shao Xiaofeng and Judy Tong, the “Limited Partners”), Hangzhou Zhenyue Enterprise Management Co., Ltd.
(the “GP”, together with the “Limited Partners”, the “Partners”), Taobao (China) Software Co., Ltd. and Hangzhou Zhensheng Investment
Management Partnership (Limited Partnership) (the “LLP”) on January 31, 2018, which secures the performance of the obligations of the
Partners under the contractual arrangements;
(3) equity pledge agreements entered into by each of Daniel Zhang, Jessie Zheng, Shao Xiaofeng, Judy Tong, and Angel Zhao (together
with Daniel Zhang, Jessie Zheng, Shao Xiaofeng and Judy Tong, the “GP Shareholders”), Taobao (China) Software Co., Ltd. and
Hangzhou Zhenyue Enterprise Management Co., Ltd. (the “GP”) on January 31, 2018, which secure the obligations of the GP
Shareholders under the contractual arrangements.
V. Exclusive Services Agreement Schedule
The material differences in the exclusive services agreements by and among the VIEs and the WFOEs in connection with our major contractual
arrangements for the major variable interest entities and their respective equity holders are set forth below.
1. exclusive services agreement entered into by Taobao (China) Software Co., Ltd. (the “WFOE”) and Zhejiang Taobao Network Co., Ltd.
(the “VIE”) on January 4, 2019; the agreement became effective on January 4, 2019 subject to automatic renewal; subject to compliance
with mandatory provisions of laws and regulations, the scope of services and the amount of service fees may be determined and adjusted
by the WFOE and the VIE based on suggestions made by the WFOE, which shall not be refused by the VIE without reasonable grounds,
from time to time; the service fees are payable on an annual basis in principle;
2. exclusive services agreement entered into by Zhejiang Alibaba Cloud Computing Ltd. (the “WFOE”) and Alibaba Cloud Computing Ltd.
(the “VIE”) on July 19, 2018; the agreement became effective on July 16, 2018 and has a term of 20 years subject to automatic renewal;
subject to compliance with mandatory provisions of laws and regulations, the scope of services and the amount of service fees may be
determined and adjusted by the WFOE and the VIE based on suggestions made by the WFOE, which shall not be refused by the VIE
without reasonable grounds, from time to time; the service fees are payable on an annual basis in principle;
3. exclusive services agreement entered into by Beijing Youku Technology Co., Ltd. (the “WFOE”) and Youku Information Technology
(Beijing) Co., Ltd. on July 24, 2019; the agreement became effective on July 24, 2019 and has a term of 20 years subject to automatic
renewal; subject to compliance with mandatory provisions of laws and regulations, the scope of services and the amount of service fees
may be determined and adjusted by the WFOE and the VIE based on suggestions made by the WFOE, which shall not be refused by the
VIE without reasonable grounds, from time to time; the service fees are payable on an annual basis in principle;
4. exclusive services agreement entered into by Zhejiang Tmall Technology Co., Ltd. (the “WFOE”) and Zhejiang Tmall Network Co., Ltd.
(the “VIE”) on January 10, 2018; the agreement became effective on January 10, 2018 and has a term of 20 years subject to automatic
renewal; subject to compliance with mandatory provisions of laws and regulations, the scope of services and the amount of service fees
may be determined and adjusted by the WFOE and the VIE based on suggestions made by the WFOE, which shall not be refused by the
VIE without reasonable grounds, from time to time; the service fees are payable on an annual basis in principle;
5. (1) exclusive services agreement entered into by Hangzhou Zhenqiang Investment Management Partnership (Limited Partnership) (the
“LLP”) and Taobao (China) Software Co., Ltd. on January 31, 2018; the agreement became effective on September 4, 2017 and has a term
of 20 years subject to automatic renewal; subject to compliance with mandatory provisions of laws and regulations, the scope of services
and the amount of service fees may be determined and adjusted by the LLP and Taobao (China) Software Co., Ltd. based on suggestions
made by Taobao (China) Software Co., Ltd., which shall not be refused by the VIE without reasonable grounds, from time to time; the
service fees are payable on an annual basis in principle;
(2) exclusive services agreement entered into by Hangzhou Zhensheng Investment Management Partnership (Limited Partnership) (the
“LLP”) and Taobao (China) Software Co., Ltd. on January 31, 2018; the agreement became effective on October 27, 2017 and has a term
of 20 years subject to automatic renewal; subject to compliance with mandatory provisions of laws and regulations, the scope of services
and the amount of service fees may be determined and adjusted by the LLP and Taobao (China) Software Co., Ltd. based on suggestions
made by Taobao (China)Software Co., Ltd., which shall not be refused by the VIE without reasonable grounds, from time to time; the
service fees are payable on an annual basis in principle;
(3) exclusive service agreement entered into by Hangzhou Zhenyue Enterprise Management Co., Ltd. (the “GP”) and Taobao (China)
Software Co., Ltd. on January 31, 2018; the agreement became effective on August 11, 2017 and has a term of 20 years subject to
automatic renewal; subject to compliance with mandatory provisions of laws and regulations, the scope of services and the amount of
service fees may be determined and adjusted by the GP and Taobao (China) Software Co., Ltd. based on suggestions made by Taobao
(China) Software Co., Ltd., which shall not be refused by the VIE without reasonable grounds, from time to time; the service fees are
payable on an annual basis in principle.
Exhibit 4.9
ALIBABA GROUP HOLDING LIMITED
AMENDED AND RESTATED 2014 POST-IPO EQUITY INCENTIVE PLAN
Amended and Restated effective on February 12, 2020
1. Purposes of the Plan.
The purposes of this Alibaba Group Holding Limited Amended and Restated 2014 Post-IPO Equity
Incentive Plan (the “Plan”) is to enable Alibaba Group Holding Limited, a Cayman Islands company (the
“Company”), to attract and retain the services of employees, directors and consultants considered essential to the
success of the Company and the Group Members (as defined below) (collectively, the “Group”) by providing
additional incentives to promote the success of the Group as a whole. Options granted under the Plan may be
“Incentive Stock Options” or “Nonstatutory Stock Options,” as determined by the Administrator (as defined below)
at the time of grant. Restricted Shares, Restricted Share Units, Dividend Equivalents, Share Appreciation Rights and
Share Payments (each as defined below) may also be granted under the Plan.
2. Definitions and Interpretation.
(a) Definitions. In this Plan, unless the context otherwise requires, the following expressions shall
have the following meanings:
“Administrator” means the Committee or in the absence of the Committee, the Board.
“Applicable Law” means the legal requirements relating to the Plan and the Awards under applicable
provisions of the corporate, securities, tax and other laws, rules, regulations and government orders, and the rules of
any applicable stock exchange or automated quotation system, of any jurisdiction applicable to Awards granted to
residents therein.
“Award” means a Dividend Equivalent, Option, Restricted Share, Restricted Share Unit, Share
Appreciation Right or Share Payment award granted to a Participant pursuant to the Plan.
“Award Agreement” means any written agreement, contract, or other instrument or document
evidencing an Award, including through electronic medium.
“Board” means the Board of Directors of the Company.
“Business” means any Person, which carries on activities for profit, and shall be deemed to include
any affiliate of such Person.
“Cause” means, with respect to a Participant:
other similar acts, or commission of a felony or a lesser crime involving moral turpitude;
(i) any commission of an act of theft, embezzlement, fraud, dishonesty, ethical breach or
(ii) any material breach of any agreement or understanding between the Participant and
any Group Member including, without limitation, any applicable intellectual property and/or invention assignment,
employment, non-competition, confidentiality or other similar agreement;
Participant’s employment with any Group Member or service as a Service Provider;
(iii) any material misrepresentation or omission of any material fact in connection with the
(iv) any material failure to perform the customary duties as an Employee, Consultant or
Director, to obey the reasonable directions of a supervisor or to abide by the policies or codes of conduct of any
Group Member; or
(v) any conduct that is materially adverse to the name, reputation or interests of the Group.
“Change in Control” means any of the following transactions:
(i) an amalgamation, arrangement, merger, consolidation or scheme of arrangement in
which the Company is not the surviving entity, except for a transaction the principal purpose of which is to change
the jurisdiction in which the Company is incorporated or which following such transaction the holders of the
Company’s voting securities immediately prior to such transaction own more than fifty percent (50%) of the voting
securities of the surviving entity;
Company (other than to a Subsidiary);
(ii) the sale, transfer or other disposition of all or substantially all of the assets of the
(iii) the completion of a voluntary or insolvent liquidation or dissolution of the Company;
(iv) any takeover, reverse takeover, scheme of arrangement, or series of related
transactions culminating in a reverse takeover or scheme of arrangement (including, but not limited to, a tender offer
followed by a takeover or reverse takeover) in which the Company survives but (A) the securities of the Company
outstanding immediately prior to such transaction are converted or exchanged by virtue of the transaction into other
property, whether in the form of securities, cash or otherwise, or (B) the securities possessing more than fifty percent
(50%) of the total combined voting power of the Company’s then outstanding securities are transferred to a person or
persons different from those who held such securities immediately prior to such transaction culminating in such
takeover, reverse takeover or scheme of arrangement, or (C) the Company issues new voting securities in connection
with any such transaction such that holders of the Company’s voting securities immediately prior to the transaction
no longer hold more than fifty percent (50%) of the voting securities of the Company after the transaction; or
(v) the acquisition in a single or series of related transactions by any person or related
group of persons (other than Employees of one or more Group Members or entities established for the benefit of the
Employees of one or more Group Members) of (A) control of the Board or the ability to appoint a majority of the
members of the Board, or (B) beneficial ownership (within the meaning of Rule 13d-3 under the U.S. Securities
Exchange Act) of securities possessing more than fifty percent (50%) of the total
2
combined voting power of the Company’s then outstanding securities.
“Code” means the United States Internal Revenue Code of 1986, as amended.
“Committee” means the Compensation Committee of the Board (or a subcommittee thereof), or such
other committee of the Board to which the Board has delegated power to act pursuant to the provisions of this Plan;
provided, that in the absence of any such committee, the term “Committee” shall mean the Board.
“Company” has the meaning set forth in Section 1.
“Competitor” means any Business that is engaged in or is about to become engaged in any activity of
any nature that competes with a product, process, technique, procedure, device or service of any Group Member. The
Administrator may determine in its sole discretion a list of Competitors applicable to the forfeiture provisions of the
Award Agreements from time to time.
“Consultant” means any Person who is engaged by a Group Member to render consulting or advisory
services to a Group Member who may be offered securities registrable on Form S-8 under the U.S. Securities Act or
pursuant to Rule 701 of the U.S. Securities Act, or any other available exemption, as applicable.
“Director” means a member of the board of directors of a Group Member.
“Disability” means a disability, whether temporary or permanent, partial or total, as determined by the
Administrator; provided, that for purposes of Incentive Stock Options, “Disability” means a “permanent and total
disability” as defined in Section 22(e)(3) of the Code.
“Dividend Equivalent” means a right to receive (in cash or other property or, subject to Section 11, a
reduction in exercise price or base price of the relevant outstanding Award) dividends paid on Shares underlying an
Award (or an amount equal to the dividends which would have been paid on such Shares, as if such Shares had been
issued and outstanding during the relevant period) as provided under Section 11.
“Effective Date” means September 19, 2014.
“Employee” means any person who has an employment relationship with any Group Member. A
Service Provider shall not cease to be an Employee in the case of (i) any leave of absence approved by the relevant
Group Member under Applicable Laws, or (ii) transfers between locations of Group Members.
“Fair Market Value” means, as of any date, the value of Shares determined as follows:
(i) if the Shares are listed on one or more established stock exchanges or traded on one or
more automated quotation systems, then, as the Administrator deems appropriate in its sole discretion, the Fair
Market Value shall be the closing sales price for such Shares as quoted on any such exchange or system on which the
Shares are listed or traded on the date of determination, as reported in Bloomberg or such other source as the
Administrator deems reliable unless otherwise prescribed by any Applicable Law, or, if the date of determination is
not a Trading Date, the closing sales price as quoted on such
3
exchange or system on which the Shares are listed or traded on the Trading Date immediately preceding the date of
determination, as reported in Bloomberg or such other source as the Administrator deems reliable unless otherwise
prescribed by any Applicable Law;
(ii) if depositary receipts representing the Shares are listed on one or more established
stock exchanges or traded on one or more automated quotation systems, then, as the Administrator deems appropriate
in its sole discretion, the Fair Market Value shall be the closing sales price for such depositary receipts as quoted on
any such exchange or system on the date of determination, as reported in Bloomberg or such other source as the
Administrator deems reliable unless otherwise prescribed by any Applicable Law, or, if the date of determination is
not a Trading Date, the closing sales price as quoted on such exchange or system on which the depositary receipts are
listed or traded on the Trading Date immediately preceding the date of determination, as reported in Bloomberg or
such other source as the Administrator deems reliable unless otherwise prescribed by any Applicable Law, and in
each case divided by the number of Shares that are represented by such depositary receipts;
(iii) if the Shares are regularly quoted by a recognized securities dealer but selling prices
are not reported, the Fair Market Value shall be the mean between the high bid and low asked prices for the Shares
on the date of determination; or
determined in good faith by the Administrator.
(iv) in the absence of an established market for the Shares, the Fair Market Value shall be
“Family Member” means (i) any person who is a “family member” of the Participant, as such term is
used in the instructions to Form S-8 under the U.S. Securities Act (collectively, the “Immediate Family Members”,
which includes any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling,
niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including
adoptive relationships, and any person sharing the Participant’s household (other than a tenant or employee); (ii) a
trust solely for the benefit of the Participant and his or her Immediate Family Members; or (iii) a partnership or
limited liability company whose only partners or shareholders are the Participant and his or her Immediate Family
Members; or (iv) any other transferee as may be approved either (A) by the Administrator in its sole discretion, or
(B) as provided in the applicable Award Agreement; provided, that the Participant gives the Administrator advance
written notice describing the terms and conditions of the proposed transfer and the Administrator notifies the
Participant in writing that such a transfer would comply with the requirements of the Plan.
“Group” has the meaning set forth in Section 1.
“Group Member” means the Company, any Subsidiary or any Related Entity.
“Incentive Stock Option” means an Option intended to qualify as an incentive stock option within the
meaning of Section 422 of the Code.
“Nonstatutory Stock Option” means an Option not intended to qualify as an Incentive Stock Option.
“Option” means an option to purchase one Share, or a fixed number of Shares, as determined by the
Administrator and set forth in the applicable Award Agreement granted
4
pursuant to the Plan.
“Participant” means the holder of an outstanding Award granted under the Plan.
“Person” means any natural person, firm, company, corporation, body corporate, partnership,
association, government, state or agency of a state, local, municipal or provincial authority or government body, joint
venture, trust, individual proprietorship, business trust or other enterprise, entity or organization (whether or not
having separate legal personality).
“Plan” has the meaning set forth in Section 1.
“Prior Plans” means, collectively, the Company’s 1999 Share Option Plan, the Company’s 2004 Share
Option Plan, the Company’s 2005 Share Option Plan, the Company’s 2007 Share Incentive Plan and the Company’s
2011 Share Incentive Plan.
“Related Entity” means any Person (including any subsidiary thereof) in or of which the Company or
a Subsidiary holds a substantial economic interest, or possesses the power to direct or cause the direction of the
management policies, directly or indirectly, through the ownership of voting securities, by contract, or other
arrangements as trustee, executor or otherwise, but which, for purposes of the Plan, is not a Subsidiary and which the
Administrator designates as a Related Entity. For purposes of the Plan, any Person in or of which the Company or a
Subsidiary owns, directly or indirectly, securities or interests representing twenty percent (20%) or more of its total
combined voting power of all classes of securities or interests shall be deemed a “Related Entity” unless the
Administrator determines otherwise.
“Restricted Share” means a Share subject to restrictions and repurchase rights granted pursuant to the
Plan.
“Restricted Share Unit” means the right to receive one Share, or a fixed number of Shares, as
determined by the Administrator and set forth in the applicable Award Agreement, at a future date granted pursuant
to the Plan.
“Service Provider” means any Person who is an Employee, a Consultant or a Director; provided, that
Awards shall not be granted to any Consultant or Director in any jurisdiction in which, pursuant to Applicable Laws,
grants to non-employees are not permitted. If any Person is a Service Provider by reason of being an Employee,
Director or Consultant to the Company, any Subsidiary or a Related Entity and such Person’s service is transferred to
the Company, another Subsidiary or a Related Entity, then the Administrator, in its sole discretion, may determine
that such Person’s service as a Service Provider has terminated as a result of such transfer for any or all purposes of
any Award, Award Agreement and the Plan.
“Share” means an ordinary share of the Company, par value US$0.000003125 per share, as adjusted
in accordance with Section 14(a) below.
“Share Appreciation Right” means a right to receive a payment equal to the excess of the Fair Market
Value of one Share, or a fixed number of Shares, as determined by the Administrator and set forth in the applicable
Award Agreement, on the date the Share
5
Appreciation Right is exercised over the base price as set forth in the applicable Award Agreement, granted pursuant
to the Plan.
“Share Payment” means a payment in the form of Shares, as part of any bonus, deferred compensation
or other cash compensation arrangement, made in lieu of all or any portion of such bonus, deferred compensation or
other cash compensation arrangement, granted pursuant to the Plan.
“Subsidiary” means any Person Controlled by the Company. “Control” means, with respect to any
Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management policies
of a Person whether through the ownership of the voting securities of such Person or by contract or otherwise;
provided, that for purposes of Incentive Stock Options, a Subsidiary shall mean only any Person of which a majority
of the outstanding voting securities or voting power is beneficially owned directly or indirectly by the Company. For
purposes of the Plan, any “variable interest entity” that is consolidated into the consolidated financial statements of
the Company under applicable accounting principles or standards as may apply to the consolidated financial
statements of the Company shall be deemed a Subsidiary.
“Tax” means any income, employment, social welfare or other tax withholding obligations (including
a Participant’s tax obligations) or any levies, stamp duties, charges or taxes required or permitted to be withheld or
otherwise payable under Applicable Laws with respect to any taxable event concerning a Participant arising as a
result of this Plan.
“Terminated for Cause” or “Termination for Cause” means, in the case of a Participant, (i) the
termination of the Participant’s status as a Service Provider for Cause; or (ii) the Participant’s termination without
Cause or voluntary resignation as a Service Provider if the Administrator determines at any time that, before or after
the Participant’s termination without Cause or resignation, a Group Member had Cause to terminate such
Participant’s status as a Service Provider.
“Trading Date” means any day on which the Shares or depositary receipts representing the Shares are
(i) publicly traded on one or more established stock exchanges or automated quotation systems under an effective
registration statement or similar document under Applicable Law, or (ii) quoted by a recognized securities dealer.
“U.S. Person” means each Person who is a “United States Person” within the meaning of Section
7701(a)(30) of the Code (i.e., a citizen or resident of the United States, including a lawful permanent resident, even if
such individual resides outside of the United States).
“U.S. Securities Act” means the United States Securities Act of 1933 and the regulations thereunder,
as amended from time to time.
“U.S. Securities Exchange Act” means the United States Securities Exchange Act of 1934 and the
regulations thereunder, as amended from time to time.
(b) Interpretation. Unless expressly provided otherwise, or the context otherwise requires:
6
interpretation;
plural, and vice versa;
(i) the headings in this Plan are for convenience only and shall not affect its
(ii) the terms defined in the singular shall have a comparable meaning when used in the
the phrase “without limitation”;
(iii) references to “include”, “includes” and “including” shall be deemed to be followed by
United States of America;
(iv) references to “dollars” or “US$” shall be deemed references to the lawful money of the
clauses, sub-clauses, paragraphs and sub-paragraphs of, and schedules to, this Plan;
(v) references to clauses, sub-clauses, paragraphs, sub-paragraphs and schedules are to
(vi) use of any gender includes the other genders;
same as it may have been, or may from time to time be, amended, modified or re-enacted;
(vii) a reference to any statute or statutory provision shall be construed as a reference to the
document as amended, varied, novated or supplemented at any time; and
(viii) a reference to any other document referred to in this Plan is a reference to that other
(ix) sections 8 and 19(3) of the Electronic Transactions Law (2003 Revision) of the
Cayman Islands shall not apply.
3. Shares Subject to the Plan.
(a) Subject to the provisions of Sections 14 and paragraph (b) of this Section 3, the maximum
aggregate number of Shares which may be subject to Awards under the Plan is (i) the number of Shares authorized
for issuance under the Prior Plans, in an amount equal to the sum of (A) the number of Shares that were not granted
under options, restricted shares, restricted share units, share purchase rights or other awards (or any portions thereof)
pursuant to Prior Plans, plus (B) the number of Shares that were granted under options, restricted shares, restricted
share units, share purchase rights or other awards (or any portions thereof) pursuant to the Prior Plans that have
terminated, expired, lapsed or been cancelled for any reason without having been exercised in full or would have
otherwise become available again for grant or award under such Prior Plans; plus (ii) on April 1, 2015 and each
anniversary thereof, an additional amount equal to the lesser of (A) 200,000,000 Shares, and (B) such lesser number
of Shares determined by the Board. Subject to Section 14 and paragraph (b) of this Section 3, the maximum number
of Incentive Stock Options that may be granted is 200,000,000. The Shares which may be subject to Awards are
authorized but unissued Shares of the Company.
(b) If an Award (or any portion thereof) terminates, expires or lapses or is cancelled for any
reason, any Shares subject to the Award (or such portion thereof) shall again be available for the grant of an Award
pursuant to the Plan (unless the Plan has terminated). If any Award (in whole or in part) is settled in cash or other
property in lieu of
7
Shares, then the number of Shares subject to such Award (or such portion of an Award) shall again be available for
grant pursuant to the Plan. However, Shares that have actually been issued under the Plan pursuant to Awards under
the Plan shall not be returned to the Plan and shall not become available for future distribution under the Plan, except
that (i) if any Restricted Shares are forfeited or the Company repurchases Restricted Shares pursuant to the terms of
the Award Agreement; or (ii) if the Company repurchases any Shares underlying any Award (or a portion thereof) in
the event of a Participant’s joining a Competitor or Termination for Cause, then such Restricted Shares or Shares
shall form part of the authorized but unissued share capital of the Company and may become available for future
grant under the Plan (to the extent permitted under Applicable Laws).
(c) Shares withheld or not issued by the Company upon the grant, exercise or vesting of any
Award under the Plan, in payment of the exercise or purchase price thereof or Tax obligation or withholding thereon,
may again be optioned, granted or awarded hereunder, subject to the limitations of Section 3(a).
4. Administration of the Plan.
(a) Administrator. The Plan shall be administered by the Administrator (except as otherwise
permitted herein).
(b) Duties and Powers of Administrator. It shall be the duty of the Administrator to conduct the
general administration of the Plan in accordance with its provisions. Subject to the provisions of the Plan, the
Administrator shall have the power and authority, in its discretion:
(i) to select the Service Providers to whom Awards may from time to time be granted
hereunder;
hereunder;
(ii) to determine the type or types of Awards to be granted to each Service Provider;
(iii) to determine Fair Market Value;
(iv) to determine the number of Shares to be covered by each such Award granted
(v) to prescribe the forms of Award Agreement for use under the Plan, which need not be
identical for each Participant and to amend any Award Agreement provided, that: (A) the rights or obligations of the
Participant holding the Award that is the subject of any such Award Agreement are not affected adversely by such
amendment; (B) the consent of the affected Participant is obtained; or (C) such amendment is otherwise permitted
under the Plan. Any such amendment of a grant or Award under the Plan need not be the same with respect to each
Participant;
(vi) to determine the terms and conditions of any Award granted hereunder (such terms
and conditions to include, but not be limited to, the exercise price, the time or times when Awards may be vested,
issued or exercised, as the case may be (which may be based on performance criteria), the times at which Shares are
deliverable under a Restricted Share Unit, whether any Award may be paid in cash or Shares, and any rules for
tolling the vesting of awards upon a leave of absence or suspension of employment, based in
8
each case on such factors as the Administrator, in its sole discretion, shall determine);
(vii) to determine any vesting acceleration or waiver of forfeiture or repurchase restrictions,
and any restriction or limitation regarding any Awards or the Shares relating thereto, based in each case on such
factors as the Administrator, in its sole discretion, shall determine);
(viii) to determine all matters and questions relating to whether a Participant’s status as a
Service Provider has been suspended or terminated, including without limitation if any termination was for Cause or
for Disability, and to determine the effective date of such suspension or termination (which it may determine to be
the date of notice of resignation or the date of an act or omission by such Participant) and all questions of whether
particular leaves of absence constitute a termination of the Service Provider;
(ix) to determine whether a Business is a Competitor of the Company;
(x) to prescribe, amend and rescind rules and regulations relating to the Plan and the
administration of the Plan and all Award Agreements, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred Tax treatment under the tax laws of any jurisdiction;
(xi) to allow the Participants to satisfy Tax obligations by having the Company withhold
from Awards (or a portion thereof), that number of Shares having a Fair Market Value equal to the amount required
to be withheld as set forth in Section 15(j) below;
(xii) to take any action, before or after an Award is made, that it deems advisable to obtain
approval or comply with Applicable Laws or any necessary local governmental regulatory exemptions or approvals
or listing requirements of any securities exchange or automated quotation system;
supply any omission in the terms of the Plan, the Award Agreement and Awards granted pursuant to the Plan; and
(xiii) to construe, interpret, reconcile any inconsistency in, correct any defect in and/or
or as the Administrator deems necessary or advisable to administer the Plan.
(xiv) make all other decisions and determinations that may be required pursuant to the Plan
(c) Action by the Administrator. The Administrator may act at a meeting or in writing signed by
all members in lieu of a meeting. The Administrator is entitled to, in good faith, rely or act upon any report or other
information furnished by any officer or other employee of any Group Member, the Company’s independent certified
public accountants, or any executive compensation consultant or other professional retained by the Company to assist
in the administration of the Plan.
(d) Effect of Administrator’s Decision. The Administrator’s interpretation of the Plan, any
Awards granted pursuant to the Plan and any Award Agreement, and all decisions, determinations and interpretations
of the Administrator shall be final, binding and conclusive for all purposes and upon all Participants.
9
(e) Delegation of Authority. To the extent permitted by Applicable Laws, the Administrator may
from time to time delegate to one or more officers of the Company the authority to grant or amend Awards or to take
other administrative actions pursuant to this Section 4. Any delegation hereunder shall be subject to the restrictions
and limits that the Administrator specifies at the time of such delegation, and the Administrator may at any time
rescind the authority so delegated or appoint a new delegate.
5. Eligibility.
(a) Subject to the terms of the Plan, all forms of Awards may be granted to any Service Provider.
Incentive Stock Options, however, may be granted only to employees of the Company or a Subsidiary. Except for
grants of Incentive Stock Options, for purposes of this Section 5(a), “Service Providers” shall include prospective
Service Providers to whom Awards are granted in connection with written offers of a service relationship with a
Group Member.
(b) An Option that is intended to be an Incentive Stock Option shall be so designated in the
Award Agreement.
(c) Neither the Plan nor any Award shall confer upon any Participant any right with respect to
continuing the Participant’s relationship as a Service Provider with any Group Member, nor shall it interfere in any
way with his or her right or any Group Member’s right to terminate such relationship at any time, with or without
cause.
(d) Unless the Administrator provides otherwise, vesting of Awards granted hereunder shall be
tolled during any unpaid leave of absence in accordance with such rules as the Administrator shall determine.
6. Terms of Awards.
(a) Term. The term of each Award shall be stated in the Award Agreement; provided, that the
term shall be no more than ten (10) years from the date of grant thereof. Subject to the foregoing, except as limited
by the requirements of Section 409A of the Code and regulations and rulings thereunder, the Administrator may
extend the term of any outstanding Award, and may extend the time period during which vested Awards may be
exercised, in connection with any termination of Participant’s status as a Service Provider, and may amend any other
term or condition of an Award relating to such termination.
(b) Timing of Granting of Awards. The date of grant of an Award shall, for all purposes, be the
date on which the Administrator makes the determination granting such Award or such other future date as is
determined by the Administrator. Notice of the determination shall be given to each Service Provider to whom an
Award is so granted within a reasonable time after the date of such grant.
(c) Stand-Alone and Tandem Awards. Awards granted pursuant to the Plan may, in the sole
discretion of the Administrator, be granted either alone, in addition to, or in tandem with, any other Award granted
pursuant to the Plan (or any other award granted pursuant to another compensation plan). Awards granted in addition
to or in tandem with
10
other Awards may be granted either at the same time as or at a different time from the grant of such other Awards (or
any other award granted pursuant to another compensation plan).
(d) Award Agreement. All Awards shall be evidenced by an Award Agreement setting forth the
number of Shares subject to the Award and the terms and conditions of the Award, which shall not be inconsistent
with the Plan; provided, that if necessary to comply with Section 409A of the Code, for each U.S. Person the Shares
subject to the Awards shall be “service recipient stock” within the meaning of Section 409A of the Code or the
Award shall otherwise comply with Section 409A of the Code.
(e) Vesting. The period during which an Award, in whole or in part, vests shall be set by the
Administrator, and the Administrator may determine that an Award may not vest in whole or in part for a specified
period after it is granted. Such vesting may be based on service with a Group Member or any other criteria selected
by the Administrator. At any time after grant of an Award, the Administrator may, in its sole discretion and subject to
whatever terms and conditions it selects, accelerate the period during which an Award vests. No portion of an Award
which is unvested or unexercisable at the termination of Participant’s status as a Service Provider shall thereafter
become vested or exercisable, except as may be otherwise provided by the Administrator either in the Award
Agreement or by action of the Administrator following the grant of the Award.
(f) Issuance of Shares. Shares issued upon grant, exercise or vesting of an Award (or any portion
thereof) shall be issued in the name of the Participant, or, if requested by the Participant and approved by the
Administrator, in the name of the Participant and his or her spouse, or in the name of Family Members.
(g) Termination of Relationship as a Service Provider. If a Participant’s status as a Service
Provider terminates, such Participant may exercise any unexercised Award (to the extent exercisable) within such
period of time as is specified in the Award Agreement to the extent that the Award is vested and exercisable on the
date of termination (but in no event later than the expiration of the term of the Award as set forth in the Award
Agreement). In the absence of a specified time in the Award Agreement, and except as provided in Sections 6(h), 6(i)
and 6(j), Awards shall remain exercisable for three (3) months following the Participant’s termination. Unless
otherwise specified in the Award Agreement or otherwise determined by the Administrator, if, on the date of
termination, the Participant is not vested as to his or her entire Award, the unvested portion of such Award shall be
deemed cancelled and the Shares covered by the unvested portion of the Award shall revert to the Plan and again be
available for grant or award under the Plan. If, after termination, the Participant does not exercise his or her Award
within the time specified by the Administrator, the Award shall terminate, and the Shares covered by such Award
shall revert to the Plan and again be available for grant or award under the Plan.
(h) Disability of Participant. If a Participant’s status as a Service Provider terminates as a result of
the Participant’s Disability, the Participant may exercise any unexercised Award (to the extent exercisable) within
such period of time as is specified in the Award Agreement to the extent the Award is vested and exercisable on the
date of termination (but in no event later than the expiration of the term of such Award as set forth in the Award
Agreement). In the absence of a specified time in the Award Agreement, the Award shall remain exercisable for
twelve (12) months following the Participant’s termination. Unless otherwise specified in the Award Agreement or
otherwise determined by the Administrator, if, on the date of termination, the Participant is not vested as to his or her
11
entire Award, the unvested portion of such Award shall be deemed cancelled and the Shares covered by the unvested
portion of the Award shall revert to the Plan and again be available for grant or award under the Plan. If, after
termination, the Participant does not exercise his or her Award within the time specified herein, the Award shall
terminate, and the Shares covered by such Award shall revert to the Plan and again be available for grant or award
under the Plan.
(i) Death of Participant. If a Participant dies while a Service Provider, any unexercised Award (to
the extent exercisable) may be exercised within such period of time as is specified in the Award Agreement to the
extent that the Award is vested on the date of death of the Participant (but in no event later than the expiration of the
term of such Award as set forth in the Award Agreement) by the Participant’s estate or by a person who acquires the
right to exercise the Award by bequest or inheritance. In the absence of a specified time in the Award Agreement, the
Award shall remain exercisable for twelve (12) months following the Participant’s death. Unless otherwise specified
in the Award Agreement or otherwise determined by the Administrator, if, at the time of death, the Participant is not
vested as to the entire Award, the unvested portion of such Award shall be deemed cancelled and the Shares covered
by the unvested portion of the Award shall immediately revert to the Plan and again be available for grant or award
under the Plan. If the Award is not so exercised within the time specified herein, the Award shall terminate, and the
Shares covered by such Award shall revert to the Plan and again be available for grant or award under the Plan.
(j) Termination for Cause. Subject to Applicable Law, if a Participant is Terminated for Cause,
(i) all unexercised Options or Share Appreciation Rights, whether vested or unvested, and all other unvested Awards,
shall be cancelled as of the date of such termination as determined by the Administrator in its sole discretion, (ii) and
all Shares acquired pursuant to an Award by such Participant shall be subject to a right of repurchase by the
Company at any time and from time to time at the lesser of (A) the original purchase price or exercise price paid for
the Shares, or in the event no payment was made or the price was paid in services, then the Shares will be forfeited
and cancelled without payment, and (B) the then Fair Market Value of such Shares or such other value of Shares as
determined by the Administrator or as set forth in the applicable Award Agreement, and (iii) all proceeds, gains or
other economic benefit actually or constructively received by the Participant upon any receipt or exercise of any
Awards (or a portion thereof) or upon the receipt or resale of any Shares underlying any Award or a portion thereof),
must be paid to the Company. Any Shares covered by cancelled Awards, and any Shares repurchased or forfeited (as
the case may be) pursuant to this Section 6(j), shall revert to the Plan and again be available for grant or award under
the Plan.
7. Options.
(a) Rights to Purchase. After the Administrator determines that it will offer Options under the
Plan, it shall advise the offeree in writing or electronically of the terms, conditions and restrictions related to such
Options, including, without limitation, the number of Shares subject to each Option.
(b) Exercise Price. The exercise price for each Option shall be determined by the Administrator
and set forth in the Award Agreement which, unless otherwise determined by the Administrator, may be a fixed or
variable price determined by reference to the Fair Market Value of the Shares over which such Option is granted;
provided, that no Option may be granted to a U.S. Person with an exercise price per Share which is less than
12
the Fair Market Value of such Shares on the date of grant (or date of adjustment pursuant to the following sentence),
without compliance with Section 409A of the Code; provided, further, that a Nonstatutory Stock Option may be
granted with an exercise price per Share lower than that set forth herein if such Option is granted pursuant to an
assumption or substitution for an option granted by another company, whether in connection with an acquisition of
such other company or otherwise; provided, further, that in the case of an Incentive Stock Option granted to an
employee who, at the time of the grant of such Option, owns stock representing more than 10% of the voting power
of all classes of stock of any member of the Company Group, the exercise price per share shall be no less than 110%
of the Fair Market Value per shares on the date of grant; and provided, further, that the exercise price per Share shall
not in any circumstances be less than the par value of the Share. The exercise price of an Option may be amended or
adjusted in the absolute discretion of the Administrator, provided, that such adjustment does not result in a materially
adverse impact to the Participant; and provided, further, that the exercise price per Share may not in any
circumstances be reduced to less than the par value of the Share. For the avoidance of doubt, to the extent not
prohibited by Applicable Laws, a downward adjustment of the exercise prices of Options mentioned in the preceding
sentence shall be effective without the approval of the Board or the Company’s shareholders or the approval of the
affected Participants. For the further avoidance of doubt, the exercise price per Share is the exercise price per Option
divided by the number of Shares for which the Option is exercisable.
(c) Consideration. The consideration to be paid for the Shares to be issued upon exercise of an
Option, including the method of payment, shall be determined by the Administrator (and, in the case of an Incentive
Stock Option, shall be determined at the time of grant). Such consideration may consist of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) if there is a public market for the Shares at such time, by means of a broker-assisted
“cashless exercise” pursuant to which the Company is delivered a copy of irrevocable instructions to a stockbroker to
sell the Shares otherwise deliverable upon the exercise of the Option and to deliver promptly to the Company an
amount equal to the exercise price;
(v) Shares having a Fair Market Value equal to the aggregate exercise price for the Shares
being purchased and satisfying such other reasonable requirements as may be imposed by the Administrator
(including by means of attestation of ownership of a sufficient number of Shares in lieu of actual delivery of such
Shares to the Company); provided, that such Shares have been held by the Participant for no less than six months (or
such other period as established from time to time by the Administrator in order to avoid adverse accounting
treatment applying generally accepted accounting principles);
(vi) by a “net exercise” method whereby the Company withholds from the delivery of
Shares for which the Option was exercised that number of Shares having a Fair Market Value equal to the aggregate
exercise price for the Shares for which the Option was exercised;
13
time to the extent permitted by Applicable Laws; or
(vii) by such other consideration as may be approved by the Administrator from time to
(viii) any combination of the foregoing methods of payment. In making its determination as
to the type of consideration to accept, the Administrator shall consider if acceptance of such consideration may be
reasonably expected to benefit the Company.
(d) Procedure for Exercise. Any Option granted hereunder shall be exercisable according to the
terms hereof at such times and under such conditions as determined by the Administrator and set forth in the Award
Agreement. An Option may not be exercised for a fraction of a Share. An Option shall be exercised when the
Company receives written or electronic notice of exercise (in accordance with the Award Agreement) from the
person entitled to exercise the Option and payment of the exercise price and Taxes which are required to be withheld
or paid by the relevant Group Member. Full payment may consist of any consideration and method of payment
permitted under Section 7(c) above.
(e) Rights as a Shareholder. Until the Shares subject to an Option are issued (by entry in the
Company’s register of members), no right to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Shares, notwithstanding the exercise of the Option. The Company shall issue (or cause to be
issued) such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as provided in Section 14.
(f) Substitution of Share Appreciation Rights. The Administrator may provide in the Award
Agreement evidencing the grant of an Option that the Administrator, in its sole discretion, shall have the right to
substitute a Share Appreciation Right for such Option at any time prior to or upon exercise of such Option; provided,
that such Share Appreciation Right shall be exercisable with respect to the same number of Shares for which such
substituted Option would have been exercisable.
8. Restricted Shares.
(a) Rights to Purchase. After the Administrator determines that it will offer Restricted Shares
under the Plan, it shall advise the offeree in writing or electronically of the terms, conditions and restrictions related
to such Restricted Shares.
(b) Restrictions. All Restricted Shares shall, in the terms of each individual Award Agreement, be
subject to such restrictions and vesting requirements as the Administrator shall provide. Restricted Shares may not be
sold or encumbered until all restrictions on such Restricted Shares are terminated or expire in accordance with the
terms of the relevant Award Agreement. All Restricted Shares shall be held by the Company in escrow for the
Participant until all restrictions on such Restricted Shares have been removed.
(c) Repurchase or Forfeiture of Restricted Shares. If the price for the Restricted Shares was paid
by the Participant in services, then upon termination as a Service Provider, the Participant shall no longer have any
right in the unvested Restricted Shares and such Restricted Shares shall be forfeited (and for these purposes, the
Participant shall be
14
deemed to have surrendered such Restricted Shares), and thereupon either cancelled or transferred to the Company
without consideration. If a purchase price was paid by the Participant for the Restricted Shares (other than in
services), then upon the Participant’s termination as a Service Provider, the Company shall have the right to
repurchase from the Participant the unvested Restricted Shares then subject to restrictions at a cash price per share
equal to the price paid by the Participant for such Restricted Shares or such other amount as may be specified in the
Award Agreement.
(d) Rights as a Shareholder. Once the Restricted Shares are issued, subject only to the restrictions
on such Restricted Shares as provided in the Award Agreement, the Participant shall have rights as a shareholder
which are equivalent to the rights of other holders of Shares, and shall be a shareholder when he or she is recorded as
the holder of such Restricted Shares upon entry in the Company’s register of members. No adjustment shall be made
for a dividend or other right in respect of any Restricted Share for which the record date is prior to the date the
Participant is entered on the Company’s register of members in respect of such Restricted Shares, except as provided
in Section 14 of the Plan.
9. Restricted Share Units.
(a) Rights to Purchase. After the Administrator determines that it will offer Restricted Shares
Units under the Plan, it shall advise the offeree in writing or electronically of the terms, conditions and restrictions
related to such Restricted Shares Units, including, without limitation, the number of Shares subject to each Restricted
Share Unit.
(b) Rights as a Shareholder. Until the applicable number of Shares are issued in settlement of a
Restricted Share Unit, the Participant shall not have any rights as a shareholder with respect to such Shares.
10. Share Appreciation Rights.
(a) Rights to Purchase. After the Administrator determines that it will offer Share Appreciation
Rights under the Plan, it shall advise the offeree in writing or electronically of the terms, conditions and restrictions
related to such Share Appreciation Rights, including, without limitation, the number of Shares subject to each Share
Appreciation Right.
(b) Base Price. The price over which the appreciation of each Share Appreciation Right is to be
measured shall be the base price as determined by the Administrator and set forth in the Award Agreement which,
unless otherwise determined by the Administrator, may be a fixed or variable price determined by reference to the
Fair Market Value of the Shares over which such Share Appreciation Right is granted; provided, that no Share
Appreciation Right may be granted to a U.S. Person with a base price per Share which is less than the Fair Market
Value of such Shares on the date of grant (or date of adjustment pursuant to the following sentence), without
compliance with Section 409A of the Code; provided, further, that Share Appreciation Rights may be granted with a
base price per Share lower than that set forth herein if such Share Appreciation Right is granted pursuant to an
assumption or substitution for a share appreciation right granted by another company, whether in connection with an
acquisition of such other company or otherwise; and provided, further, that the base price per Share shall not in any
circumstances be less than the par value of the Share. The base price so established for a Share Appreciation Right
may be increased or decreased in the absolute discretion of the Administrator, provided, that such adjustment
15
does not result in a materially adverse impact to the Participant; provided, further, that the base price per Share may
not in any circumstances be reduced to less than the par value of the Share. For the avoidance of doubt, to the extent
not prohibited by Applicable Laws, a downward adjustment in the base price mentioned in the preceding sentence
shall be effective without the approval of the Board or the Company’s shareholders or the approval of the affected
Participants.
(c) Payment. Payment by the Company for a Share Appreciation Right shall be in cash, in Shares
(based on the Fair Market Value of the Shares as of the date the Share Appreciation Right is exercised) or a
combination of both, as determined by the Administrator in the Award Agreement or, if the Award Agreement does
not specifically so provide, by the Administrator at the time of exercise. To the extent any payment is effected in
Shares, only that number of Shares actually issued in payment of the Share Appreciation Right shall be counted
against the maximum number of Shares which may be issued under Section 3.
(d) Procedure for Exercise. Any Share Appreciation Right granted hereunder shall be exercisable
according to the terms hereof at such times and under such conditions as determined by the Administrator and set
forth in the Award Agreement. A Share Appreciation Right shall be exercised when the Company receives written or
electronic notice of exercise (in accordance with the Award Agreement) from the person entitled to exercise the
Share Appreciation Right and payment of Taxes which are required to be withheld or paid by the relevant Group
Member. If Shares are issued upon exercise of a Share Appreciation Right, then such Shares shall be issued in the
name of the Participant or, if requested by the Participant and if approved by the Administrator in its sole discretion,
in the name of the Participant and in the name of one or more of his or her Family Members.
(e) Rights as a Shareholder. Until the Shares subject to a Share Appreciation Right are issued (by
entry in the Company’s register of members), no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Shares, notwithstanding the exercise of the Share Appreciation Right. The
Company shall issue (or cause to be issued) such Shares promptly after the Share Appreciation Right is exercised. No
adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are
issued, except as provided in Section 14.
11. Dividend Equivalents.
The Administrator is authorized to grant Dividend Equivalents on any Award and to any Service Provider.
Dividend Equivalents with respect to an Award may be granted by the Administrator based on dividends declared on
the Shares underlying such Award (and, in the case of any such Shares which have not been issued, the Dividend
Equivalent may entitle the holder of such Award to receive an amount equal to the dividends which would have been
paid on such Shares, as if such Shares had been issued and outstanding during the relevant period), to be credited as
of dividend payment dates during the period between the date the Dividend Equivalent is granted to a Participant and
the date the Award with respect to which the Dividend Equivalent vests, is exercised, is distributed or expires, as
determined by the Administrator. Such Dividend Equivalents shall be settled in cash, other property or a reduction in
exercise price or base price of the relevant Award by such formula and at such time and subject to such limitations as
may be determined by the Administrator and set forth in the Award Agreement. Dividend Equivalents shall not be
granted on Options or Share Appreciation Rights granted to U.S. Persons.
16
12. Share Payments.
The Administrator is authorized to grant Share Payments to any Service Provider in the manner determined
from time to time by the Administrator; provided, that unless otherwise determined by the Administrator such Share
Payments shall be made in lieu of base salary, bonus, or other cash compensation otherwise payable to such
Participant, including any such compensation that has been deferred at the election of the Participant, and provided,
further, that not less than the par value of any Share shall be received by the Company in connection with its issue
pursuant to any such Share Payment. In accordance with Applicable Law, such par value may be paid through the
provision of services. The number of Shares issuable as a Share Payment shall be determined by the Administrator
and may be based upon satisfaction of such specific criteria as determined appropriate by the Administrator,
including specified dates for electing to receive such Share Payment at a later date and the date on which such Share
Payment is to be made.
13. Non-Transferability.
Awards, and any interest therein, will not be transferable or assignable by a Participant, and may not be made
subject to execution, attachment or similar process; provided, that (i) during a Participant’s lifetime, with the consent
of the Administrator (on such terms and conditions as the Administrator determines appropriate), the Participant may
transfer Nonstatutory Stock Options, Restricted Shares, Restricted Share Units, Share Appreciation Rights, Dividend
Equivalents, and Share Payments to his or her Family Members by gift or pursuant to domestic relations order in the
settlement of marital property rights, and (ii) following a Participant’s death, Awards, to the extent they are vested
upon the Participant’s death, may be transferred by will or by the laws of descent and distribution.
14. Adjustments Upon Changes in Capitalization, Change in Control.
(a) Changes in Capitalization. Subject to any required action by the shareholders of the Company,
the number of Shares covered by each outstanding Award (or each outstanding Restricted Stock Unit, Option or
Share Appreciation Right if it covers more than one Share), the number of Shares which have been authorized for
issuance under the Plan but as to which no Awards have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Award, and the number of Shares subject to grant as Incentive Stock Options,
as well as the price per Share covered by each such outstanding Award, shall be proportionally and equitably
adjusted for any increase or decrease in the number of issued Shares resulting from a subdivision or consolidation,
stock dividend, amalgamation, spin-off, arrangement or consolidation, combination or reclassification of Shares.
Additionally, in the event of any other increase or decrease in the number of issued Shares effected without
consideration by the Company, then the number of Shares covered by each outstanding Award (or each outstanding
Restricted Stock Unit, Option or Share Appreciation Right if it covers more than one Share), the number of Shares
which have been authorized for issuance under the Plan but as to which no Awards have yet been granted or which
have been returned to the Plan upon cancellation or expiration of an Award and the limitations on the number of
Shares subject to grant as Incentive Stock Options, as well as the price per Share covered by each outstanding Award
may be adjusted for any increase or decrease in the number of issued Shares resulting therefrom. The conversion of
any convertible securities of the Company shall not be deemed to have been “effected without receipt of
consideration.” The manner in which such adjustments under this Section 14(a) are to be accomplished shall be
determined by the Board whose determination shall be final,
17
binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of any class, or
securities convertible into shares of any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of Shares subject to an Award. For the avoidance of doubt, in the case of any
extraordinary cash dividend, the Board shall make an equitable or proportionate adjustment to outstanding Awards to
reflect the effect of such extraordinary cash dividend.
(b) Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the
Company, the Administrator shall notify each Participant as soon as practicable prior to the effective date of
commencement of such proposed dissolution or liquidation. The Administrator in its discretion may provide for a
Participant to have the right to exercise his or her Option, or Share Appreciation Right until fifteen (15) days prior to
the commencement of such dissolution or liquidation as to all of the Shares covered thereby. In addition, the
Administrator may provide that any Company repurchase option or any vesting condition applicable to any
Restricted Shares shall lapse as to all such Restricted Shares and any Shares issuable under any Restricted Share
Units, or as Share Payments, shall be issued as of such date, provided, that the proposed dissolution or liquidation
commences at the time and in the manner contemplated by the proposed dissolution or liquidation. To the extent it
has not been previously exercised or paid out, each Award will terminate immediately prior to the commencement of
such proposed dissolution or liquidation.
(c) Change in Control. Except as may otherwise be provided in any Award Agreement or any
other written agreement entered into by and between the Company and a Participant, if a Change in Control occurs,
the Company, as determined in the sole discretion of the Administrator and without the consent of the Participant,
may take any of the following actions:
(i) accelerate the vesting, in whole or in part, of any Award;
(ii) purchase any Award for an amount of cash or Shares equal to the value that could
have been attained upon the exercise of such Award or realization of the Participant’s rights had such Award been
currently exercisable or payable or fully vested (and, for the avoidance of doubt, if as of such date the Administrator
determines in good faith that no amount would have been attained upon the exercise of such Award or realization of
the Participant’s rights, then such Award may be terminated by the Company without payment); or
(iii) provide for the assumption, conversion or replacement of any Award by the successor
corporation or a parent or subsidiary of the successor corporation with other rights (including cash) or property
selected by the Administrator in its sole discretion or the assumption or substitution of such Award by the successor
or surviving corporation, or a parent or subsidiary thereof, with such appropriate adjustments as to the number and
kind of Shares and prices as the Administrator deems, in its sole discretion, reasonable, equitable and appropriate. In
the event the successor corporation refuses to assume, convert or replace outstanding Awards, the Awards shall fully
vest and the Participant shall have the right to exercise or receive payment as to all of the Shares subject to the
Award, including Shares as to which it would not otherwise be vested, exercisable or otherwise issuable.
(d) Prior to any payment or adjustment contemplated under this Section 14, the Administrator
may require a Participant to (i) represent and warrant as to the
18
unencumbered title to the Participant’s Awards; (ii) bear such Participant’s pro-rata share of any post-closing
indemnity obligations, and be subject to the same post-closing purchase price adjustments, escrow terms, offset
rights, holdback terms and similar conditions as the other holders of Shares, subject to any limitations or reductions
as may be necessary to comply with Section 409A of the Code; and (iii) deliver customary transfer documentation as
reasonably determined by the Administrator.
15. Miscellaneous General Rules.
(a) Share Issuances. Notwithstanding anything herein to the contrary, the Company shall not be
required to issue or deliver any certificates evidencing Shares issued pursuant to the exercise or settlement of any
Award, unless and until the Board has determined, with advice of counsel, that the issuance and delivery of such
certificates is in compliance with all Applicable Laws, regulations of governmental authorities and, if applicable, the
requirements of any exchange on which the Shares are listed or traded. All share certificates delivered pursuant to the
Plan are subject to any stop-transfer orders and other restrictions as the Administrator deems necessary or advisable
to comply with all Applicable Laws, and the rules of any national securities exchange or automated quotation system
on which the Shares are listed, quoted, or traded. The Administrator may place legends on any share certificate to
reference restrictions applicable to the Share. In addition to the terms and conditions provided herein, the Board may
require that a Participant make such reasonable covenants, agreements, and representations as the Board, in its
discretion, deems advisable in order to comply with any such laws, regulations, or requirements. The Administrator
shall have the right to require any Participant to comply with any timing or other restrictions with respect to the
settlement or exercise of any Award, including a window-period limitation, as may be imposed in the discretion of
the Administrator.
(b) Paperless Administration. Subject to Applicable Laws, the Administrator may make Awards
and provide applicable disclosure and procedures for exercise of Awards by an internet website, electronic mail or
interactive voice response system for the paperless administration of Awards.
(c) Applicable Currency. The Award Agreement shall specify the currency applicable to such
Award. The Administrator may determine, in its sole discretion, that an Award denominated in one currency may be
paid in any other currency based on the prevailing exchange rate as the Administrator deems appropriate. A
Participant may be required to provide evidence that any currency used to pay the exercise price or purchase price of
any Award was acquired and taken out of the jurisdiction in which the Participant resides in accordance with
Applicable Laws, including foreign exchange control laws and regulations.
(d) Relationship to Other Benefits. No payment pursuant to the Plan shall be taken into account in
determining any benefits pursuant to any pension, retirement, savings, profit sharing, group insurance, welfare or
other benefit plan of the Company or any Subsidiary except to the extent otherwise expressly provided in writing in
such other plan or an agreement thereunder.
(e) Government and Other Regulations. The obligation of the Company to make payment of
awards in Shares or otherwise shall be subject to all Applicable Laws, rules, and regulations, and to such approvals
by government agencies as may be required. The Company shall be under no obligation to register any of the Shares
issued under the Plan
19
under any Applicable Laws. If the Shares issued under the Plan may in certain circumstances be exempt from
registration under Applicable Laws the Company may restrict the transfer of such Shares in such manner as it deems
advisable to ensure the availability of any such exemption.
(f) Expenses. The expenses of administering the Plan shall be borne by the Company and its
Subsidiaries.
(g) Titles and Headings. The titles and headings of the Sections in the Plan are for convenience of
reference only and, in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.
(h) Fractional Shares. No fractional Share shall be issued and the Administrator shall determine,
in its discretion, whether cash shall be given in lieu of fractional shares or whether such fractional shares shall be
eliminated by rounding down.
(i) No Rights to Awards. No Participant, employee, or other person shall have any claim to be
granted any Award pursuant to the Plan, and neither the Company nor the Administrator is obligated to treat
Participants, Employees, Consultants or any other persons uniformly.
(j) Taxes. No Shares shall be delivered, and no payment shall be made under the Plan to any
Participant until such Participant has made arrangements acceptable to the Administrator for the satisfaction of Taxes
and any other costs and expenses in connection with the grant, exercise or vesting of Awards and/or the issuance and
delivery of the Shares. The Company or the relevant Group Member shall have the authority and the right to deduct
or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy all Taxes. The
Administrator may in its discretion and in satisfaction of the foregoing requirement allow a Participant to satisfy
Taxes by having the Company withhold Shares otherwise issuable under an Award having a Fair Market Value equal
to the Taxes. Notwithstanding any other provision of the Plan, the number of Shares otherwise issuable under an
Award which may be withheld with respect to the issuance, vesting, exercise or payment of any Award (or which
may be repurchased from the Participant of such Award (or a portion thereof) after such Shares were acquired by the
Participant from the Company) in order to satisfy all Taxes, unless specifically approved by the Administrator, shall
be limited to the number of Shares otherwise issuable under an Award which have a Fair Market Value on the date
such Shares are vested, withheld or repurchased, or such other date as the Administrator deems appropriate or as
required under Applicable Law, equal to the aggregate amount of such Taxes. All elections by the Participants to
have Shares otherwise issuable under an Award withheld for this purpose (as approved by the Administrator) shall be
made in such form and under such conditions as the Administrator may deem necessary or advisable. The
Administrator shall determine the Fair Market Value of the Shares, consistent with Applicable Law, for Taxes due in
connection with a broker-assisted cashless Option exercise involving the sale of Shares, if any, to pay the Option
exercise price or any Taxes.
(k) Buy-Out. In the sole discretion of the Administrator, any Award (in whole or in part) under
the Plan may be settled in cash or other property in lieu of Shares; provided, however, payment in cash or other
property in lieu of Shares shall not be made earlier than the time such Shares are deliverable pursuant to the terms of
the Award. If any Award (in whole or in part) is settled in cash or other property in lieu of Shares, the number
20
of Shares subject to such Award (or such portion thereof) shall revert to the Plan and again be available for grant or
award under the Plan.
(l) Valuation. For purposes of Sections 14(c) where an Award is converted into or any underlying
Share is substituted with cash or other property or securities (a “Substitute Property”), the valuation of such Award
and its Substitute Property, or the exchange ratio between the two, shall be determined in good faith by the
Administrator and supported by the valuation achieved in the relevant transaction, or in the absence of any such
transaction, by an independent valuation expert selected by the Administrator.
(m) Effect of Plan upon Other Compensation Plans. The adoption of the Plan shall not affect any
other compensation or incentive plans in effect for the Company or any Subsidiary or Related Entity. Nothing in the
Plan shall be construed to limit the right of the Company, any Subsidiary or any Related Entity (i) to establish any
other forms of incentives or compensation for Service Providers, or (ii) to grant or assume options or other rights or
awards other than under the Plan in connection with any proper corporate purpose including without limitation, the
grant or assumption of options in connection with the acquisition by purchase, lease, merger, consolidation or
otherwise, of the business, securities or assets of any corporation, partnership, limited liability company, firm or
association.
(n) Section 409A. To the extent that the Administrator determines that any Award granted to a
U.S. Person under the Plan is subject to Section 409A of the Code, the Award Agreement evidencing such Award
shall incorporate the terms and conditions required by Section 409A of the Code. To the extent applicable, the Plan
and Award Agreements shall be interpreted in accordance with Section 409A of the Code and Department of
Treasury regulations and other interpretive guidance issued thereunder. Notwithstanding any provision of the Plan to
the contrary, in the event that the Administrator determines that any Award may be subject to Section 409A of the
Code and related Department of Treasury guidance, the Administrator may adopt such amendments to the Plan and
the applicable Award Agreement or adopt other policies and procedures (including amendments, policies and
procedures with retroactive effect), or take any other actions, that the Administrator determines are necessary or
appropriate to (i) exempt the Award from Section 409A of the Code and/or preserve the intended tax treatment of the
benefits provided with respect to the Award or (ii) comply with the requirements of Section 409A of the Code and
related Department of Treasury guidance and thereby avoid the application of any penalty taxes under such Section.
The Administrator shall use commercially reasonable efforts to implement the provisions of this Section 15(n) in
good faith; provided, that neither the Company, the Administrator nor any of the Company’s employees, directors or
representatives shall have any liability to any Participant with respect to this Section 15(n).
(o) Indemnification. To the extent allowable pursuant to Applicable Laws, the Administrator shall
be indemnified and held harmless by the Company from any loss, cost, liability, or expense that may be imposed
upon or reasonably incurred by such member in connection with or resulting from any claim, action, suit, or
proceeding to which he or she may be a party or in which he or she may be involved by reason of any action or
failure to act pursuant to the Plan and against and from any and all amounts paid by him or her in satisfaction of
judgment in such action, suit, or proceeding against him or her; provided, that he or she gives the Company an
opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on
his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of
indemnification to which such persons may be entitled pursuant to the Company’s
21
Memorandum & Articles of Association, as a matter of law, or otherwise, or any power that the Company may have
to indemnify them or hold them harmless.
(p) Plan Language. The official language of the Plan shall be English. To the extent that the Plan
or any Award Agreements are translated from English into another language, the English version of the Plan and
Award Agreements will always govern, in the event that there are inconsistencies or ambiguities which may arise
due to such translation.
(q) Other Provisions. The Award Agreement shall contain such other terms, provisions and
conditions not inconsistent with the Plan as may be determined by the Administrator in its sole discretion.
16. Amendment and Termination of the Plan.
(a) Effective Date; Term of Plan. This Plan became effective on the Effective Date and was
approved by shareholders of the Company on September 2, 2014. The Plan shall continue in effect for a term of ten
(10) years from the Effective Date unless sooner terminated under this Section 16.
(b) Amendment and Termination. The Board in its sole discretion may terminate this Plan at any
time. The Board may amend this Plan at any time in such respects as the Board may deem advisable; provided, that
to the extent necessary and desirable to comply with Applicable Laws, or stock exchange rules, the Company shall
obtain shareholder approval of any Plan amendment in such a manner and to such a degree as required.
(c) Effect of Termination. Except as otherwise provided in Section 14, any amendment or
termination of this Plan shall not affect Awards previously granted or issued, as the case may be, and such Awards
shall remain in full force and effect as if this Plan had not been amended or terminated, unless mutually agreed
otherwise between the affected Participant and the Company, which agreement must be in writing and signed by
such Participant and the Company.
17. Certain Securities Law Matters and Other Regulations.
(a) The obligation of the Company to settle Awards in Shares or other consideration shall be
subject to all Applicable Laws, rules, and regulations, and to such approvals by governmental agencies as may be
required. Notwithstanding any terms or conditions of any Award to the contrary, the Company shall be under no
obligation to offer to sell or to sell, and shall be prohibited from offering to sell or selling, any Shares pursuant to an
Award unless such shares have been properly registered for sale pursuant to Applicable Laws or unless the Company
has received an opinion of counsel, satisfactory to the Company, that such Shares may be offered or sold without
such registration pursuant to an available exemption therefrom and the terms and conditions of such exemption have
been fully complied with. The Company shall be under no obligation to register for sale under any Applicable Laws
any of the Shares to be offered or sold under the Plan.
(b) The Administrator may cancel an Award or any portion thereof if it determines, in its sole
discretion, that legal or contractual restrictions and/or blockage and/or other market considerations would make the
Company’s acquisition of Shares from the public markets, the Company’s issuance of the Shares to the Participant,
the Participant’s
22
acquisition of the Shares from the Company and/or the Participant’s sale of Shares to the public markets, illegal,
impracticable or inadvisable. If the Administrator determines to cancel all or any portion of an Award in accordance
with the foregoing, the Company shall pay to the Participant an amount equal to the excess of (i) the aggregate Fair
Market Value of the Shares subject to such Award or portion thereof canceled (determined as of the applicable
exercise date, or the date that the Shares would have been vested or delivered, as applicable), over (ii) the aggregate
exercise price or base amount or any amount payable as a condition of delivery of Shares (in the case of any other
Award). Such amount shall be delivered to the Participant as soon as practicable following the cancellation of such
Award or portion thereof.
(c) Notwithstanding any provision of the Plan to the contrary, in no event shall a Participant be
permitted to exercise an Option in a manner that the Administrator determines would violate the United States
Sarbanes-Oxley Act of 2002, or any other Applicable Law or the applicable rules and regulations of the U.S.
Securities Exchange Commission or the applicable rules and regulations of any securities exchange or inter-dealer
quotation system on which the securities of the Company are listed or traded.
18. Joining a Competitor; Termination for Cause.
(a) (i) Subject to Applicable Laws, all unexercised Options or Share Appreciation Rights, whether
vested or unvested, and all other unvested Awards shall be cancelled as of the date as determined by the
Administrator in its sole discretion; (ii) all Shares acquired pursuant to an Award (or a portion thereof) by such
Participant shall be subject to a right of repurchase by the Company at any time and from time to time at the lesser of
(A) the original purchase price or exercise price paid for the Shares, or in the event no payment was made or the
price was paid in services, then the Shares will be forfeited and cancelled without payment, and (B) the then Fair
Market Value or such other value of Shares as determined by the Administrator or as set forth in the applicable
Award Agreement; and (iii) all proceeds, gains or other economic benefit actually or constructively received by the
Participant upon any receipt or exercise of any Awards (or a portion thereof) or upon the receipt or resale of any
Shares underlying any Award or a portion thereof), must be paid to the Company if:
(I) such Participant is Terminated for Cause;
(II) during such Participant’s term of service or within twelve (12) months of termination
as a Service Provider or such other period determined by the Administrator and set forth in the applicable Award
Agreement, such Participant (1) directly or indirectly, establishes, incorporates, forms, enters into, or participates in
the Business as an owner, partner, principal or shareholder or other proprietor (other than through a purchase on the
open market, solely as a passive investment, of not more than five percent (5%) of the interest) of any Competitor;
(2) has become, is or becomes an officer, director, employee, consultant, adviser of, or otherwise, directly or
indirectly, enters the employ of, continues any employment with or renders any services to or for, any Competitor; or
(3) knowingly performs or has performed any act that may confer a competitive benefit or advantage upon any
Competitor (in each case as determined by the Administrator).
(b) Any unissued Shares covered by such cancelled Awards and any issued Shares repurchased at
the original purchase price or other values as required by Applicable Laws pursuant to this Section 18 shall revert to
the Plan and again be available for
23
grant or award under the Plan.
19. Governing Law.
This Plan shall be governed by the laws of the Cayman Islands.
* * * * *
24
I hereby certify that the foregoing Plan was duly adopted by the Board of Directors of Alibaba Group
Holding Limited on August 22, 2014.
* * * * *
I hereby certify that the foregoing Plan was approved by the shareholders of Alibaba Group Holding Limited
on September 2, 2014.
Executed on this 13th day of November, 2014.
/s/ Timothy A. Steinert
Company Secretary
List of Subsidiaries and Consolidated Entities of
Alibaba Group Holding Limited as of March 31, 2020*
Exhibit 8.1
Taobao Holding Limited (Cayman Islands)
Taobao China Holding Limited (Hong Kong)
Local Services Holding Limited (Cayman Islands )
Taobao (China) Software Co., Ltd. (PRC)
Zhejiang Tmall Technology Co., Ltd. (PRC)
Alibaba (Beijing) Software Services Co., Ltd. (PRC)
Ali Panini Investment Holding Limited (Hong Kong)
Zhejiang Taobao Network Co., Ltd. (PRC)
Zhejiang Tmall Network Co., Ltd. (PRC)
Zhejiang Tmall Supply Chain Management Co., Ltd. (PRC)
Tianjin Tmall E-Commerce Co., Ltd. (PRC)
Hangzhou Zhenqiang Investment Management Limited (PRC)
Hangzhou Tongxin Network Technology Co., Ltd. (PRC)
Zhejiang Tmall Network Technology Co., Ltd. (PRC)
Alibaba Cloud Computing (Zhangbei) Co., Ltd. (PRC)
HQG, Inc. (Cayman Islands)
Alibaba Group Services Limited (Hong Kong)
Alibaba (China) Co., Ltd. (PRC)
Lazada Group S.A. (Luxembourg)
Alibaba Group Treasury Limited (BVI)
Des Voeux Investment Company Limited (BVI)
Alibaba Group Properties Limited (Cayman Islands)
Ali CN Investment Holding Limited (BVI)
Alibaba Investment Limited (BVI)
Ali UC Investment Holding Limited (Cayman Islands)
Ali WB Investment Holding Limited (Cayman Islands)
AutoNavi Holdings Limited (Cayman Islands)
Ali YK Investment Holding Limited (Cayman Islands)
Ali CV Investment Holding Limited (Cayman Islands)
Perfect Advance Holding Limited (BVI)
Ali Fortune Investment Holding Limited (BVI)
Intime Retail (Group) Company Limited (Cayman Islands)
Hangzhou Ali Venture Capital Co., Ltd. (PRC)
Hema Investment Holding Limited (BVI)
Alibaba.com Limited (Cayman Islands)
Alibaba.com Hong Kong Limited (Hong Kong)
Alibaba.com Investment Holding Limited (BVI)
Alibaba.com China Limited (Hong Kong)
Alibaba (China) Technology Co., Ltd. (PRC)
Shenzhen OneTouch Business Service Ltd. (PRC)
Hangzhou Meitou Information Technology Co., Ltd. (PRC)
Alibaba (Chengdu) Software & Technology Co., Ltd. (PRC)
Hangzhou Alibaba Advertising Co., Ltd. (PRC)
Alibaba.com International (Cayman) Holding Limited (Cayman Islands)
Alibaba.com International (BVI) Holding Limited (BVI)
Alibaba Singapore Holding Private Limited (Singapore)
Alibaba Cloud (Singapore) Private Limited (Singapore)
Alibaba.com Singapore E-Commerce Private Limited (Singapore)
Alimama Limited (Cayman Islands)
Alimama Investment Holding Limited (BVI)
Alimama China Holding Limited (Hong Kong)
Hangzhou Alimama Technology Co., Ltd. (PRC)
Hangzhou Ali Technology Co., Ltd. (PRC)
Hangzhou Alimama Software Services Co., Ltd. (PRC)
Alibaba ZT Investment Limited (Hong Kong)
Alisoft Holding Limited (Cayman Islands)
Alisoft Investment Holding Limited (BVI)
Alisoft China Holding Limited (Hong Kong)
Zhejiang Alibaba Cloud Computing Ltd. (PRC)
Alibaba Cloud Computing Ltd. (PRC)
Hanbao (Shanghai) Information Technology Co., Ltd. (PRC)
*Other subsidiaries and consolidated entities of Alibaba Group Holding Limited have been omitted because, in the aggregate, they would not be
a “significant subsidiary” as defined in rule 1-02(w) of Regulation S-X as of the end of the fiscal year covered by this report.
Exhibit 12.1
Certification by the Principal Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Daniel Yong Zhang, Chief Executive Officer of Alibaba Group Holding Limited (the “Company”), certify that:
1. I have reviewed this annual report on Form 20-F of the Company;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;
4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rule 13a-15(f) and 15d-15(f)) for the Company and have:
a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is being prepared;
b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
c. evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered
by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over
financial reporting; and
5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent
functions):
a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and
b. any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s
internal control over financial reporting.
Dated:
July 9, 2020
By:
/s/ Daniel Yong Zhang
Name: Daniel Yong Zhang
Title: Chairman and Chief Executive Officer
Exhibit 12.2
Certification by the Principal Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Maggie Wei Wu, Chief Financial Officer of Alibaba Group Holding Limited (the “Company”), certify that:
1. I have reviewed this annual report on Form 20-F of the Company;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;
4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rule 13a-15(f) and 15d-15(f)) for the Company and have:
a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is being prepared;
b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
c. evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered
by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over
financial reporting; and
5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent
functions):
a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and
b. any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s
internal control over financial reporting.
Dated:
July 9, 2020
By:
/s/ Maggie Wei Wu
Name: Maggie Wei Wu
Title: Chief Financial Officer
Certification by the Principal Executive Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 13.1
I, Daniel Yong Zhang, Chairman and Chief Executive Officer of Alibaba Group Holding Limited (the “Company”), hereby certify, pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
a. the Company’s annual report on Form 20-F for the fiscal year ended March 31, 2020 (the “Report”) fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
b. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company for the periods presented therein.
Dated:
July 9, 2020
By:
/s/ Daniel Yong Zhang
Name: Daniel Yong Zhang
Title: Chairman and Chief Executive Officer
Certification by the Principal Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 13.2
I, Maggie Wei Wu, Chief Financial Officer of Alibaba Group Holding Limited (the “Company”), hereby certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
a. the Company’s annual report on Form 20-F for the fiscal year ended March 31, 2020 (the “Report”) fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
b. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company for the periods presented therein.
Dated:
July 9, 2020
By:
/s/ Maggie Wei Wu
Name: Maggie Wei Wu
Title: Chief Financial Officer
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Exhibit 15.1
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-199133, No. 333-
214595, No. 333-219292, No. 333-226521 and No. 333-233794) and Form F-3 (No. 333-221742 and 333-234662) of Alibaba Group
Holding Limited of our report dated July 9, 2020 relating to the financial statements and the effectiveness of internal control over
financial reporting, which appears in this Form 20-F.
/s/ PricewaterhouseCoopers
PricewaterhouseCoopers
Hong Kong, July 9, 2020
Exhibit 15.2
FANGDA PARTNERS
上海 Shanghai·北京 Beijing·深圳 Shenzhen·香港 Hong Kong 广州 Guangzhou
http://www.fangdalaw.com
中国北京市朝阳区光华路1号
北京嘉里中心北楼27层
邮政编码：100020
电子邮件E-mail:
电 话Tel.:
传 真Fax:
email@fangdalaw.com
86-10-5769-5600
86-10-5769-5788
27/F, North Tower, Beijing Kerry Centre
1 Guanghua Road, Chaoyang District
Beijing 100020, PRC
July 9, 2020
Alibaba Group Holding Limited
c/o Alibaba Group Services Limited
26/F Tower One, Times Square
1 Matheson Street, Causeway Bay
Hong Kong
Dear Sirs,
We consent to the references to our firm under “Item 3. Key Information—D. Risk Factors—Risks Related to our
Corporate Structure—If the PRC government deems that the contractual arrangements in relation to our variable interest
entities do not comply with PRC governmental restrictions on foreign investment, or if these regulations or the interpretation
of existing regulations changes in the future, we could be subject to penalties or be forced to relinquish our interests in those
operations”, “Item 4. Information on the Company—C. Organizational Structure—Contracts that Enable Us to Receive
Substantially All of the Economic Benefits from the Variable Interest Entities, which would materially and adversely affect
our business, financial results and the trading price of our ADSs and/or Shares”, “Item 6. Directors, Senior Management and
Employees—B. Compensation—Employment Agreements” and “Item 10. Additional Information—E. Taxation” in Alibaba
Group Holding Limited’s Annual Report on Form 20-F for the year ended March 31, 2020 (the “Annual Report”), which is
filed with the Securities and Exchange Commission (the “SEC”) on July 9, 2020. We also consent to the filing with the SEC
of this consent letter as an exhibit to the Annual Report.
In giving such consent, we do not thereby admit that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, or under the Securities Exchange Act of 1934, in each case, as
amended, or the regulations promulgated thereunder.
Yours faithfully,
/s/ Fangda Partners
Fangda Partners
Exhibit 15.3
Our ref
MHY/604743-000001/17848564v1
Alibaba Group Holding Limited
c/o Alibaba Group Services Limited
26/F Tower One, Times Square
1 Matheson Street, Causeway Bay
Hong Kong
9 July, 2020
Alibaba Group Holding Limited
We have acted as legal advisors as to the laws of the Cayman Islands to Alibaba Group Holding Limited, an exempted
limited liability company incorporated in the Cayman Islands (the "Company"), in connection with the filing by the
Company with the United States Securities and Exchange Commission of an annual report on Form 20-F for the fiscal
year ended March 31, 2020.
We hereby consent to the reference of our name under the heading "Item 10. Additional Information E. Taxation –
Cayman Islands Taxation" in the Form 20-F.
Yours faithfully
/s/ Maples and Calder (Hong Kong) LLP
Maples and Calder (Hong Kong) LLP