Autohome
Annual Report 2014

Plain-text annual report

Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 20-F (Mark One)¨REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR 12(G) OF THE SECURITIES EXCHANGEACT OF 1934OR xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2014OR ¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF1934OR ¨SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACTOF 1934Date of event requiring this shell company report For the transition period from to Commission file number: 001-36222 Autohome Inc.(Exact name of Registrant as specified in its charter) N/A(Translation of Registrant’s name into English)Cayman Islands(Jurisdiction of incorporation or organization)10th Floor Tower B, CEC Plaza3 Dan Ling StreetHaidian District, Beijing 100080The People’s Republic of China(Address of principal executive offices)Nicholas Yik Kay ChongChief Financial OfficerTel: +86 (10) 5985-7001E-mail: ir@autohome.com.cnFax: +86 (10) 5985-738710th Floor Tower B, CEC Plaza3 Dan Ling StreetHaidian District, Beijing 100080The People’s Republic of China(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Persons)Securities registered or to be registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Exchange on Which RegisteredClass A ordinary shares, par value US$0.01 per share The New York Stock Exchange* *Not for trading, but only in connection with the listing on The New York Stock Exchange of the American depositary shares (“ADSs”). Currently, oneADS represents 1 Class A ordinary share. Securities registered or to be registered pursuant to Section 12(g) of the Act:None(Title of Class)Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:None(Title of Class) 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 annualreport. 48,777,835 Class A ordinary shares, par value US$0.01 per share, and 61,824,328 Class B ordinary shares, par value US$0.01 per share, wereoutstanding as of December 31, 2014.Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ¨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 theSecurities Exchange Act of 1934. Yes ¨ No xIndicate 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 of1934 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 filingrequirements for the past 90 days. Yes x No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data Filerequired to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorterperiod that the registrant was required to submit and post such files). Yes x No ¨Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “acceleratedfiler and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):Large accelerated filer ¨ Accelerated filer x Non-accelerated filer ¨Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing: U.S. GAAP x International Financial Reporting Standards as issuedby the International Accounting Standards Board ¨ Other ¨If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected tofollow. Item 17 ¨ Item 18 ¨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 ExchangeAct). Yes ¨ No x(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 SecuritiesExchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ¨ No ¨ Table of ContentsTABLE OF CONTENTS INTRODUCTION 1 FORWARD-LOOKING STATEMENTS 1 PART I 2 ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS 2 ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE 2 ITEM 3. KEY INFORMATION 2 ITEM 4. INFORMATION ON THE COMPANY 35 ITEM 4A. UNRESOLVED STAFF COMMENTS 56 ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS 56 ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES 73 ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS 84 ITEM 8. FINANCIAL INFORMATION 88 ITEM 9. THE OFFER AND LISTING 88 ITEM 10. ADDITIONAL INFORMATION 89 ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 102 ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES 103 PART II 106 ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES 106 ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS 106 ITEM 15. CONTROLS AND PROCEDURES 106 ITEM 16. RESERVED 108 ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT 108 ITEM 16B. CODE OF ETHICS 108 ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES 108 ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES 109 ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS 109 ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT 109 ITEM 16G. CORPORATE GOVERNANCE 109 ITEM 16H. MINE SAFETY DISCLOSURE 109 PART III 110 ITEM 17. FINANCIAL STATEMENTS 110 ITEM 18. FINANCIAL STATEMENTS 110 ITEM 19. EXHIBITS 110 iTable of ContentsINTRODUCTIONUnless otherwise indicated and except where the context otherwise requires, references in this annual report on Form 20-F to: • “ADSs” are to our American depositary shares, each of which represents one Class A ordinary share; • “CAGR” refers to compound annual growth rate; • “China” or the “PRC” are to the People’s Republic of China, excluding, for the purpose of this annual report only, Hong Kong, Macau andTaiwan; • “ordinary shares” are our ordinary shares, par value US$0.01 per share, before our initial public offering, or IPO, and our Class A and Class Bordinary shares, par value US$0.01 per share, after our initial public offering; • “RMB” and “Renminbi” are to the legal currency of China; • “we,” “us,” “our,” “our company” and “the Company” are to Autohome Inc., its predecessors, subsidiaries and variable interest entities, or VIEs; • “U.S. GAAP” refers to generally accepted accounting principles in the United States; and • “$,” “dollars,” “US$” or “U.S. dollars” refers to the legal currency of the United States.FORWARD-LOOKING STATEMENTSThis annual report contains forward-looking statements that reflect our current expectations and views of future events. The forward-looking statementsare contained principally in the sections entitled “Item 3. Key Information—D. Risk Factors,” “Item 4. Information on the Company—B. Business Overview”and “Item 5. Operating and Financial Review and Prospects.” These forward looking statements are made under the “safe-harbor” provisions of the U.S.Private Securities Litigation Reform Act of 1995. Known and unknown risks, uncertainties and other factors, including those listed under “Item 3. KeyInformation—D. Risk Factors,” may cause our actual results, performance or achievements to be materially different from those expressed or implied by theforward-looking statements.You can identify some of these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,”“intend,” “plan,” “believe,” “is/are likely to,” “potential,” “continue” or other similar expressions. We have based these forward-looking statements largelyon our current expectations and projections about future events that we believe may affect our financial condition, results of operations, business strategy andfinancial needs. These forward-looking statements include statements relating to: • our ability to attract and retain users and advertisers; • our business strategies and initiatives as well as our business plans; • our future business development, financial condition and results of operations; • our ability to further enhance our brand recognition; • our ability to attract, retain and motivate key personnel; • competition in our industry in China; and • relevant government policies and regulations relating to our industry. 1Table of ContentsThese forward-looking statements involve various risks and uncertainties. Although we believe that our expectations expressed in these forward-looking statements are reasonable, our expectations may later be found to be incorrect. Our actual results could be materially different from our expectations.Other sections of this annual report include additional factors that could adversely impact our business and financial performance. Moreover, we operate inan evolving environment. New risk factors and uncertainties emerge from time to time and it is not possible for our management to predict all risk factors anduncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual resultsto differ materially from those contained in any forward-looking statements. You should read thoroughly this annual report and the documents that we referto with the understanding that our actual future results may be materially different from, or worse than, what we expect. We qualify all of our forward-lookingstatements by these cautionary statements.This annual report contains certain data and information that we obtained from various government and private publications. Statistical data in thesepublications also include projections based on a number of assumptions. The online automotive advertising industry may not grow at the rate projected bymarket data, or at all. The failure of this market to grow at the projected rate may have a material adverse effect on our business and the market price of ourADSs. In addition, the rapidly changing nature of the online automotive advertising industry and the online automobile transaction industry results insignificant uncertainties for any projections or estimates relating to the growth prospects or future condition of our market. Furthermore, if any one or more ofthe assumptions underlying the market data are later found to be incorrect, actual results may differ from the projections based on these assumptions. Youshould not place undue reliance on these forward-looking statements.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 thisannual report. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of newinformation, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should readthis annual report and the documents that we refer to in this annual report and exhibits to this annual report completely and with the understanding that ouractual future results may be materially different from what we expect.PART IITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORSNot applicable.ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLENot applicable.ITEM 3. KEY INFORMATION A.Selected Financial DataThe following tables present the selected consolidated financial information for our company. Our selected consolidated statement of comprehensiveincome data presented below for the years ended December 31, 2012, 2013 and 2014 and our selected consolidated balance sheet data as of December 31,2013 and 2014 have been derived from our consolidated financial statements, which are included in this annual report beginning on page F-1. Our selectedconsolidated balance sheet data as of December 31, 2010, 2011 and 2012 and the selected consolidated statement of comprehensive income data for 2010and 2011 presented below have been derived from our consolidated financial statements not included in this annual report. Our historical results for anyperiod are not necessarily indicative of results to be expected for any future period. You should read the following selected financial data in conjunction withthe consolidated financial statements and related notes and the information under “Item 5. Operating and Financial Review and Prospects” in this annualreport. Our audited consolidated financial statements are prepared and presented in accordance with U.S. GAAP. 2Table of Contents For the Year Ended December 31, 2010 2011 2012 2013 2014 RMB RMB RMB RMB RMB US$ (in thousands, except for number of shares and per share data) Selected Consolidated Statement of ComprehensiveIncome Data: Net revenues Advertising services 235,415 379,666 592,622 894,937 1,499,516 241,678 Dealer subscription services 17,519 53,523 139,898 321,611 633,433 102,091 Total net revenues 252,934 433,189 732,520 1,216,548 2,132,949 343,769 Cost of revenues(1) (83,897) (130,565) (178,240) (252,236) (381,498) (61,486) Gross profit 169,037 302,624 554,280 964,312 1,751,451 282,283 Operating expensesSales and marketing expenses(1) (48,712) (67,500) (129,796) (245,228) (559,070) (90,106) General and administrative expenses(1) (17,951) (46,547) (83,153) (82,529) (129,751) (20,912) Product development expenses(1) (6,205) (16,459) (42,865) (81,651) (158,395) (25,529) Operating profit 96,169 172,118 298,466 554,904 904,235 145,736 Interest income 159 1,167 5,093 11,082 34,682 5,590 Interest expense — — — (414) — — Other income (expense) (49) 509 310 2,884 2,544 410 Income from continuing operations before income taxes 96,279 173,794 303,869 568,456 941,461 151,736 Income tax expense (15,853) (38,348) (90,988) (112,294) (192,781) (31,071) Income from continuing operations 80,426 135,446 212,881 456,162 748,680 120,665 Income/(loss) from discontinued operations 7,612 (4,182) — — — — Net income 88,038 131,264 212,881 456,162 748,680 120,665 Other comprehensive income, net of tax of nilForeign currency translation adjustments — — 583 1,403 3,946 636 Comprehensive income 88,038 131,264 213,464 457,565 752,626 121,301 Earnings per share for ordinary sharesEarnings per share for ordinary shares - BasicNet income from continuing operations 0.80 1.35 2.13 4.57 7.01 1.13 Income/(loss) from discontinued operations 0.08 (0.04) — — — — Net income 0.88 1.31 2.13 4.57 7.01 1.13 Earnings per share for ordinary shares - DilutedNet income from continuing operations — 1.35 2.12 4.37 6.64 1.07 Loss from discontinued operations — (0.04) — — — — Net income — 1.31 2.12 4.37 6.64 1.07 Shares used in earnings per sharecomputation(2)Ordinary shares:Basic 100,000,000 100,000,000 100,000,000 — — — Diluted — 100,189,928 100,650,652 — — — Class A ordinary shares:Basic — — — 31,109,214 38,633,284 38,633,284 Diluted — — — 104,329,226 112,831,585 112,831,585 Class B ordinary shares:Basic — — — 68,788,940 68,102,019 68,102,019 Diluted — — — 68,788,940 68,102,019 68,102,019 Dividend per share(3) — — — — — — (1)Including share-based compensation expenses as follows: 3Table of Contents For the Year Ended December 31, 2010 2011 2012 2013 2014 RMB RMB RMB RMB RMB US$ (in thousands) Allocation of Share-based Compensation Expenses Cost of revenues — 3,247 6,553 6,534 8,048 1,298 Sales and marketing expenses — 1,138 4,177 4,375 14,644 2,360 General and administrative expenses — 8,049 15,734 11,738 20,557 3,313 Product development expenses — 541 2,678 2,961 13,417 2,162 Total share-based compensation expenses — 12,975 29,142 25,608 56,666 9,133 (2)Earnings per share for Class A and Class B ordinary shares (Diluted) for each year from 2010 to 2014 were computed after taking into account thedilutive effect of the shares underlying our employees’ share-based awards.(3)Dividends distributed to our shareholders in the fiscal years ended 2012 and 2013 were one-time distributions due to special circumstances. See “Item8. Financial Information—A. Consolidated Statements and Other Financial Information—Dividend Policy.” As of December 31, 2010 2011 2012 2013 2014 RMB RMB RMB RMB RMB US$ (in thousands) Selected Consolidated Balance Sheet Data: Cash and cash equivalents, restricted cash and term deposits 174,342 213,705 420,576 1,383,613 2,772,191 446,796 Accounts receivable, net 212,349 203,102 326,071 465,712 736,695 118,734 Total current assets 487,405 451,823 786,192 1,899,265 3,640,766 586,785 Total assets 2,357,368 2,043,005 2,379,673 3,512,950 5,278,515 850,743 Deferred revenue 31,650 41,461 94,392 213,240 438,797 70,723 Total current liabilities 238,710 203,805 336,292 789,818 1,080,657 174,173 Total liabilities 816,563 682,726 821,698 1,300,586 1,613,092 259,985 Total shareholders’ equity 1,540,805 1,360,279 1,557,975 2,212,364 3,665,423 590,758 Exchange Rate InformationSubstantially all of our operations are conducted in China and substantially all of our revenues are denominated in RMB. This annual report containstranslations of RMB amounts into U.S. dollars at specific rates solely for the convenience of the reader. Unless otherwise noted, all translations from RMB toU.S. dollars and from U.S. dollars to RMB in this annual report were made at a rate of RMB6.2046 to US$1.00, the noon buying rate in The City of New Yorkfor cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York on December 31, 2014. We make no representationthat any RMB or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or RMB, as the case may be, at any particular rate, at the ratesstated below, or at all. The PRC government imposes control over its foreign currency reserves in part through direct regulation of the conversion of RMBinto foreign exchange and through restrictions on foreign trade. On March 20, 2015, the noon buying rate was RMB6.2037 to US$1.00. 4Table of ContentsThe following table sets forth information concerning exchange rates between the RMB and the U.S. dollar for the periods indicated. Noon Buying Rate Period Period End Average (1) Low High (RMB per US$1.00) 2010 6.6000 6.7603 6.8330 6.6000 2011 6.2939 6.4475 6.6364 6.2939 2012 6.2301 6.2290 6.3879 6.2221 2013 6.0537 6.1412 6.2438 6.0537 2014 6.2046 6.1704 6.2591 6.0402 September 6.1380 6.1382 6.1495 6.1266 October 6.1124 6.1251 6.1385 6.1107 November 6.1429 6.1249 6.1429 6.1117 December 6.2046 6.1886 6.2256 6.1490 2015 January 6.2495 6.2181 6.2535 6.1870 February 6.2695 6.2518 6.2695 6.2399 March (through March 20) 6.2037 6.2526 6.2741 6.1955 Source: Federal Reserve Statistical Release (1)Annual averages are calculated from month-end rates. Monthly averages are calculated using the average of the daily rates during the relevant period. B.Capitalization and IndebtednessNot applicable. C.Reasons for the Offer and Use of ProceedsNot applicable. D.Risk FactorsAn investment in our capital stock involves a high degree of risk. You should carefully consider the risks described below, together with all of the otherinformation included in this annual report, before making an investment decision. If any of the following risks actually occurs, our business, financialcondition or results of operations could suffer. In that case, the trading price of our capital stock could decline, and you may lose all or part of yourinvestment. 5Table of ContentsRisks Related to Our Business and IndustryWe rely on China’s automotive industry for substantially all of our revenues and future growth, the prospects of which are subject to many uncertainties,including government regulations and policies.We rely on China’s automotive industry for substantially all of our revenues and future growth. We have greatly benefited from the rapid growth ofChina’s automotive industry during the past few years. However, the prospects of China’s automotive industry are subject to many uncertainties, includingthose relating to general economic conditions in China, the urbanization rate of China’s population and the cost of new automobiles. In addition,governmental policies may have a considerable impact on the growth of the automotive industry in China. For example, in an effort to alleviate trafficcongestion and improve air quality, the Beijing municipal government issued a regulation in December 2010 to limit the number of new passenger car platesissued in Beijing each year to 240,000 commencing in 2011, and the limitation was subsequently further reduced to 150,000 starting from 2014. There aresimilar policies that restrict the issuance of new passenger car plates in Shanghai, Guangzhou, Tianjin, Hangzhou and Shenzhen. In September 2013, the PRCgovernment released a plan for the prevention and remediation of air pollution, which requires large cities such as Beijing, Shanghai and Guangzhou tofurther restrict the ownership of motor vehicles. In October 2013, the Beijing municipal government issued an additional regulation to limit the total numberof vehicles in Beijing to no more than six million by the end of 2017, compared to approximately 5.2 million vehicles in operation by the end of 2013.Beginning from late 2011, the National Development and Reform Commission, one of China’s antitrust regulatory authorities, initiated a series ofinvestigations into the pricing practices of foreign automobile companies in China in connection with allegations of the lack of fair competition. Theseinvestigations may lead to price reductions due to enhanced competition. Such regulatory developments, as well as other uncertainties, may adversely affectthe growth prospects of China’s automotive industry, and in turn reduce demand for automobiles. If automakers and dealers were to reduce their marketingexpenditures as a result, our business, financial condition and results of operations could be materially and adversely affected.We face significant competition, and if we fail to compete effectively, we may lose market share and our business, prospects and results of operations maybe materially and adversely affected.The markets for our services are highly competitive. We face competition from China’s automotive websites, such as pcauto.com.cn and bitauto.com,and from the automotive channels of major internet portals, such as Sina and Sohu. In addition, we also face competition from other used-automobilewebsites, such as 51auto.com, taoche.com and youxinpai.com. We may also face competition from other websites engaged in the online automobiletransaction business, such as bitauto.com and tmall.com, as we develop our transaction platform. Competition with these and other websites is primarilycentered on increasing user reach, user engagement and brand recognition, and attracting and retaining advertisers, among other factors.Some of our competitors or potential competitors have longer operating histories and may have greater financial, management, technological,development, sales, marketing and other resources than we do. They may use their experience and resources to compete with us in a variety of ways,including by competing more heavily for users, advertisers and dealers, investing more heavily in research and development and making acquisitions. Someof our competitors have entered or may enter into business cooperation agreements with search engines, which may impact our ability to obtain additionaluser traffic from the same sources. Our competitors may be acquired and consolidated by, or cooperate with, industry conglomerates who are able to furtherinvest with significant resources into our operating space. We cannot assure you that any such large internet business will not in the future focus on theautomotive sector. If we are unable to compete effectively and at a reasonable cost against our existing and future competitors, our business, prospects andresults of operations could be materially and adversely affected.We also face competition from traditional advertising media, such as newspapers, magazines, yellow pages, television, radio and outdoor media.Advertisers in China generally allocate a significant portion of their marketing budgets to traditional advertising media. If we cannot effectively competewith traditional media for the marketing budgets of our existing and potential customers, our results of operations and growth prospects could be adverselyaffected.If we fail to attract and retain users and advertisers, our business and results of operations may be materially and adversely affected.In order to maintain and strengthen our leading market position, we must continue to attract and retain users to our websites, which requires us tocontinue to provide quality content throughout the automobile-ownership cycle. We must also innovate and introduce services and applications thatenhance user experience. In addition, we must maintain and enhance our brand recognition among consumers. If we fail to provide high-quality content, offera superior user experience or maintain and enhance our brand, we may not be able to attract and retain users. If our user base decreases, our websites may berendered less attractive to advertisers and our advertising services and dealer subscription services revenues may decline, which may have a material andadverse impact on our business, financial condition and results of operations. 6Table of ContentsWe may not be able to successfully expand and monetize our mobile internet services.We plan to continue to expand our mobile internet services and explore monetization strategies for our mobile internet services. We have madesignificant efforts in recent years to optimize the mobile version of our websites to display our content and develop new mobile applications to capture agreater number of users that access our services through mobile devices. For example, the number of our average daily unique users who access our websitesvia mobile devices and the number of our average daily unique users of our mobile applications amounted to approximately 4.3 million and 3.4 million,respectively, in December 2014. However, if we are unable to attract and retain a substantial number of mobile device users, or if we do not keep up with ourcompetitors in developing attractive services that are adapted for such mobile devices, we may fail to capture a significant share of an increasingly importantportion of the mobile internet market for our services or lose existing users.Furthermore, we are still in the midst of experimenting with early monetization strategies for our mobile internet services. Advertisers currently spendsignificantly less on advertising on mobile devices as compared to advertising on PCs, and may not increase their advertising spending on mobile devices inthe future. If our users continue to allocate more time on our mobile services instead of our traditional PC services, mobile monetization may becomeincreasingly important to our results of operations. Accordingly, if we are unable to successfully implement monetization strategies for our mobile internetusers, our results of operations may be negatively affected.A limited number of automaker advertisers have accounted for, and are expected to continue to account for, a significant portion of our revenues. Thefailure to maintain or to increase revenues from these advertisers could harm our prospects.A limited number of automaker advertisers have accounted for, and are expected to continue to account for, a significant portion of our revenues. Ourtop five advertisers, all of whom were automakers, contributed 20.0%, 15.0% and 9.8% of our net revenues in 2012, 2013 and 2014, respectively. In each of2012, 2013 and 2014, approximately 80% of over 80 automakers operating in China used our advertising services. These automakers include independentChinese automobile manufacturers, joint ventures between Chinese and international automobile manufacturers and international automobile manufacturersthat sell cars made outside of China. We believe that our major future revenue growth will be focused on deepening our existing commercial relationshipswith automakers to increase our share of each automaker’s advertising budget. If we fail to do so, our growth prospects could be harmed.Due to the limited number of automakers operating in China and our revenue concentration attributable to a small number of these companies, any ofthe following events, among others, may cause a material decline in our revenue and materially and adversely affect our results of operations and prospects: • contract reduction, delay or cancellation by one or more significant advertisers and our failure to identify and acquire additional or replacementadvertisers; • a substantial reduction by one or more of our significant advertisers in the price they are willing to pay for our services; and • financial difficulty of one or more of our significant advertisers who become unable to make timely payment for the advertisements placed onour websites.We may not be able to successfully expand and monetize our dealer network.We had local sales and service representatives covering 150 cities across China as of December 31, 2014. We intend to increase our penetration inexisting dealer advertising and subscription services markets and expand into new geographic markets. China is a large and diverse country and businesspractices and demands may vary significantly by region. Our experience in the markets in which we currently operate may not be applicable in other parts ofChina. We may not be able to leverage our experience to expand into new geographic markets in China. As a result, our expansion and monetizationstrategies, including sales and marketing efforts designed to attract dealer advertisers and maximize the conversion of registered dealers using our free basiclisting service into dealer subscribers, may be unsuccessful. Furthermore, expanding into new geographical markets will require us to hire additionalemployees to cover these markets. We will incur additional compensation and benefit costs, office rental expenses and other costs, as well as additional strainon our managerial resources. In addition, we intend to further monetize our existing dealer network by converting dealers that currently use our free listingservice into dealer subscribers. If we are unable to successfully expand and monetize our dealer network and to generate sufficient revenues to cover ourincreased costs and expenses, our business and results of operations may be materially and adversely affected. 7Table of ContentsOur business depends on strong brand recognition, and failing to maintain or enhance our brands could adversely affect our business and prospects.Maintaining and enhancing our “Autohome” and “Che168” brands is critical to our business and prospects. We believe that brand recognition willbecome increasingly important as the number of internet users in China grows and competition in our industry intensifies. A number of factors could preventus from successfully promoting our brands, including user dissatisfaction with the content offered on our websites, negative publicity involving our businessand the failure of our sales and marketing activities. If we fail to maintain and enhance our brands, or if we incur excessive expenses in this effort, ourbusiness, results of operations and financial condition will be materially and adversely affected.If we are unable to conduct our marketing activities cost-effectively, our results of operations and financial condition may be materially and adverselyaffected.We have incurred expenses on a variety of different marketing and brand promotion efforts designed to enhance our brand recognition and increasesales of our products and services. Our marketing and promotional activities may not be well received by customers and may not result in the levels of salesof products and services that we anticipate. We incurred RMB129.8 million, RMB245.2 million and RMB559.1 million (US$90.1 million) in sales andmarketing expenses in 2012, 2013 and 2014, respectively, representing 17.7%, 20.2% and 26.2%, respectively, of total net revenues in the correspondingyears. Marketing approaches and tools in the consumer products market in China are evolving. This further requires us to enhance our marketing approachesand experiment with new marketing methods to keep pace with industry developments and consumer preferences, which may not be as cost-effective as ourmarketing activities in the past and may lead to significantly higher marketing expenses in the future. We conducted various sales and marketing initiativesto promote our brands through search engines, mobile platforms and navigation sites. For example, we have entered into an arrangement with Baidu for a 12-month period that started from July 1, 2014, for enhanced automotive-related content search results on PCs powered by “Aladdin,” Baidu’s open platforminitiative. We may not be able to continue or conduct these activities efficiently, and our marketing activities may not yield satisfactory results. Failure torefine our existing marketing approaches or to introduce new effective marketing approaches in a cost-effective manner could impact our net revenues andprofitability.Inaccuracy in pricing and listing information provided by our dealer customers may adversely affect our business and financial performance.Our automobile listings and promotional information are provided and continuously updated by our dealer customers. Users interested in particularautomobile models can conveniently search for up-to-date information on such models without having to visit the local showrooms of relevant dealers. Ifsuch listings and promotional information provided by our dealer customers are frequently inaccurate or not reliable, our users may lose faith in our websites,resulting in reduced user traffic to our websites and diminished value to advertisers, which could adversely affect our business and financial performance.We may not be able to manage our expansion and new business initiatives effectively.We have experienced rapid growth in our business in recent years. The number of our employees has grown rapidly from 912 as of December 31, 2012to 1,191 as of December 31, 2013 and 1,771 as of December 31, 2014. Our net revenues increased from RMB732.5 million in 2012 to RMB1,216.5 million in2013 and RMB2,132.9 million (US$343.8 million) in 2014, representing a CAGR of 70.6%. We expect to continue to grow our user base and our businessoperations. 8Table of ContentsOur rapid expansion and new business initiatives may expose us to new challenges and risks. To manage the further expansion of our business, we needto continuously expand and enhance our infrastructure and technology, and improve our operational and financial systems, procedures and internal controls.We also need to train, manage and motivate our growing employee base. In addition, we need to maintain and expand our relationships with automaker anddealer advertisers, advertising agencies and other third parties. We cannot assure you that our current and planned personnel, infrastructure, systems,procedures and controls will be adequate to support our expanding operations. We may be required to spend more on sales and marketing in order to supportany such expansion and our efforts may not be effective. If we fail to manage our expansion and new business initiatives effectively or efficiently, ourbusiness and results of operations may be materially and adversely affected.For example, in June 2014 we launched Autohome Mall, an online transaction platform that we believe will allow us to be a long-term transactionfacilitator as we develop our transaction business. The success of our transaction business depends, in part, on third parties and factors over which we havelimited control. We will need to react quickly to changing consumer preferences and buying trends relating to our transaction business. We will also facecompetition from other websites engaged in the online automobile transaction business. In addition, we must keep up to date with competitive technologytrends, including the use of new or improved technology, creative user interfaces and other transaction marketing tools, such as paid search and mobileapplications among others, which may increase our costs and which may not succeed in increasing sales or attracting customers. Developing the transactionbusiness may require significant investment in product development, sales and marketing and working capital, and we may not be able to get the expectedreturn on our investment. Furthermore, developing the transaction business may take up our management’s time and allow them less time to focus on ourexisting core business. Our failure to successfully mitigate these risks and uncertainties might adversely affect the sales or margins in our transactionbusiness, as well as damage our reputation and brand.We have a limited operating history, which makes it difficult to evaluate our business.We have a limited operating history. Autohome.com.cn and che168.com were launched in 2005 and 2004, respectively. Our company was incorporatedin June 2008 and acquired the entities that operated these two websites soon thereafter. Although we have achieved profitability in recent periods, ourlimited operating history makes the prediction of future results of operations difficult. Historical results of operations achieved by us should not be taken asindicative of the rate of growth, if any, that can be expected in the future. You should consider our future prospects in light of the risks and uncertainties fast-growing companies with limited operating histories may encounter.If we are unable to maintain our relationships with advertising agencies or if we are unable to collect accounts receivable from advertising agencies in atimely manner, our results of operations and prospects may be materially and adversely affected.Although we consider automakers and dealers to be our end-customers, we sell our advertising services and solutions primarily to third-partyadvertising agencies that represent the automakers and dealers, as is customary in China. Our top ten advertising agencies accounted for 51.7%, 44.0% and38.7% of our total net revenues in 2012, 2013 and 2014, respectively. In 2012, 2013 and 2014, our largest agency accounted for 9.0%, 6.7% and 5.9% of ourtotal net revenues, respectively. We do not have long-term cooperation agreements or exclusive arrangements with these agencies and they may elect todirect business to other advertising service providers, including our competitors. If we fail to retain and enhance our business relationships with third-partyadvertising agencies, we may suffer from a loss of advertisers and our business, financial condition, results of operations and prospects may be materially andadversely affected. In our agreements with certain major advertising agencies, we undertake to provide them with most favored pricing terms. Such mostfavored pricing terms may hinder our ability to acquire new customers using special pricing terms.In addition, we rely on third-party advertising agencies for the collection of payment from our advertisers. As a result, the financial soundness of ouradvertising agencies may affect our collection of accounts receivables. We make a credit assessment of the advertising agency to evaluate the collectabilityof the advertising service fees before entering into an advertising contract. However, we cannot assure you that we will be able to accurately assess thecreditworthiness of each advertising agency, and any failure of advertising agencies to pay us in a timely manner may adversely affect our liquidity and cashflows. 9Table of ContentsIf online advertising does not continue to grow in China, our ability to increase revenue and profitability could be materially and adversely affected.The use of the internet as a marketing medium is still developing in China. As of December 2013, the internet penetration rate in China was only45.8% according to the China Internet Network Information Center, or the CNNIC, compared to 84.2% in the United States as of the same date, according tothe World Bank. The expansion of China’s internet population may be limited by a number of factors, including limitations on network infrastructure andsocial and political uncertainties, among others.Many of our current and potential advertisers and dealer subscribers have limited experience with the internet as a marketing medium, and they havenot devoted a significant portion of their marketing budgets to online marketing and promotion until recently. As a result, they may not consider the internetas the most effective medium to promote or sell automobiles as compared to traditional print and broadcast media. Our ability to increase revenue andprofitability from online marketing may be adversely impacted by a number of factors, many of which are beyond our control, including: • difficulties associated with developing a larger user base with demographic characteristics attractive to advertisers; • increased competition and potential downward pressure on online advertising prices; • difficulties in acquiring and retaining advertisers or dealer subscribers; • failure to develop an independent and reliable means of verifying online traffic; and • decreased use of the internet or online marketing in China.If the internet does not become more widely accepted as a media platform for advertising and marketing, our business, financial condition and resultsof operations could be materially and adversely affected.If we are unable to grow our used automobile-related business through our repositioned che168.com website, we may not be able to achieve our expectedbusiness growth and our results of operations may be adversely affected.Historically, we have delivered content related to new and used automobiles through both autohome.com.cn and che168.com websites whose userbases overlap to some extent. We redesigned our che168.com website in October 2011 to focus on used automobile information and content. Through thiswebsite, we offer used automobile listing services to dealers and individual car owners through a user interface that allows potential used car buyers toidentify listings that meet their specific requirements and contact the dealer or individual selling the selected car. Revenue from che168.com currentlycontributes an immaterial portion of our total revenues.We may not be able to successfully grow our used automobile-related business through our repositioned che168.com website. Although the usedautomobile market in China is growing due to the increased number of consumer-owned automobiles, there is still significant uncertainty regarding theextent to which our che168.com business may benefit from such growth. We may not be able to attract a broad user base to our che168.com website. Even ifwe are able to grow our user base, we may not be able to establish a business model that allows us to successfully monetize the user traffic. In such a case, wemay not be able to achieve our expected business growth and our results of operations may be adversely affected.Our business is subject to fluctuations, which makes our results of operations difficult to predict and may cause our quarterly results of operations to fallshort of expectations.Our quarterly revenues and other operating results have fluctuated in the past and may continue to fluctuate depending upon a number of factors, manyof which are beyond our control. For these reasons, comparing our operating results on a period-to-period basis may not be meaningful, and you should notrely on our historical results as an indication of our future performance. For instance, our advertising services revenues typically increase in the secondquarter as automakers increase marketing activities in connection with China’s major auto shows, and in the fourth quarter as advertisers seek to completeyear-end marketing campaigns. Demand for our advertising services is generally lowest in the first quarter of each year, primarily due to a general slowdownin business activities and a reduced number of working days during the Chinese New Year holiday period. 10Table of ContentsIn addition, because a significant portion of our advertising services revenues is attributable to new model promotion campaigns, the timing of new carreleases of our major automaker advertisers can have a significant impact on our results of operations. The timing of such releases, however, is subject touncertainty due to various factors, such as automakers’ design or manufacturing issues, marketing conditions and government incentives or restrictions.These factors may make our results of operations difficult to predict and cause our quarterly results of operations to fall short of expectations.Problems with our network infrastructure or information technology systems could impair our ability to provide services.Our ability to provide our users with a high quality online experience depends on the continuing operation and scalability of our networkinfrastructure and information technology systems. Our systems are potentially vulnerable to damage or interruption as a result of earthquakes, floods, fires,extreme temperatures, power loss, telecommunications failures, technical error, computer viruses, hacking or similar events. We may encounter problemswhen upgrading our systems or services and undetected programming errors could adversely affect the performance of the software we use to provide ourservices. The development and implementation of software upgrades and other improvements to our internet services is a complex process, and issues notidentified during pre-launch testing of new services may only become evident when such services are made available to our entire user base.In addition, we rely on content delivery networks, data centers and other network facilities provided by third parties. Any disruption to these networkfacilities may result in service interruptions, decreases in connection speed, degradation of our services or the permanent loss of user data and uploadedcontent. If we experience frequent or persistent service disruptions, whether caused by failures of our own systems or those of third-party service providers,our reputation or relationships with our users or advertisers may be damaged and our users and advertisers may switch to our competitors, which may have amaterial adverse effect on our business, financial condition and results of operations.Computer viruses and “hacking” may cause delays or interruptions on our systems and may reduce use of our services and damage our reputation andbrand.Computer viruses and “hacking” may cause delays or other service interruptions on our systems. “Hacking” involves efforts to gain unauthorizedaccess to information or systems or to cause intentional malfunctions, loss or corruption of data, including user identity data, software, hardware or othercomputer equipment. In addition, the inadvertent transmission of computer viruses could result in significant damage to our hardware and software systemsand databases, disruptions to our business activities, including our e-mail and other communications systems, breaches of security and inadvertent disclosureof confidential or sensitive information, interruptions in access to our website through the use of “denial of service” or similar attacks and other materialadverse effects on our operations. We have experienced hacking attacks in the past, and although such attacks in the past have not had a material adverseeffect on our operations, there is no assurance that there will be no serious computer viruses or hacking attacks in the future. We may incur significant costs toprotect our systems and equipment against the threat of, and to repair any damage caused by, computer viruses and hacking. Moreover, if a computer virus orhacking affects our systems and is highly publicized, our reputation and brand could be materially damaged and use of our services may decrease.Failure to protect confidential information of our customers and network against security breaches could damage our reputation and brand andsubstantially harm our business and results of operations.Ensuring secured transmission of confidential information through public networks is essential to maintaining the confidence of our customers andusers. Our existing security measures may not be adequate to protect such confidential information. In addition, computer and network systems aresusceptible to breaches by computer hackers. Security breaches could expose us to litigation and potential liability for failing to secure confidential customerinformation and could harm our reputation and reduce our ability to attract customers and users. Future security breaches, if any, may result in a materialadverse effect on our business, financial condition and results of operations. 11Table of ContentsPractices regarding the collection, use, storage, transmission and security of personal information by companies operating over the internet and mobileplatforms have recently come under increased public scrutiny. As e-commerce continues to evolve, we believe that increased regulation by the PRCgovernment of data privacy on the internet is likely. We may become subject to new laws and regulations applying to the solicitation, collection, processingor use of personal or consumer information that could affect how we store, process and share data with our customers. We generally comply with industrystandards and are subject to the terms of our own privacy policies. Compliance with any additional laws could be expensive and may place restrictions on theconduct of our business and the manner in which we interact with our customers. Any failure to comply with applicable regulations could also result inregulatory enforcement actions against us.Significant capital and other resources may be required to protect against information security breaches or to alleviate problems caused by suchbreaches or to comply with our privacy policies or privacy-related legal obligations. The resources required may increase over time as the methods used byhackers and others engaged in online criminal activities are increasingly sophisticated, well-funded and constantly evolving. Any failure or perceived failureby us to prevent information security breaches or to comply with privacy policies or privacy-related legal obligations, or any compromise of security thatresults in the unauthorized release or transfer of personally identifiable information or other customer data, could cause our customers to lose trust in us andcould expose us to legal claims. Any perception by the public that online transactions or the privacy of user information is becoming increasingly unsafe orvulnerable to attacks could inhibit the growth of online retail and other online services generally, which may reduce the number of orders we receive.The continuing and collaborative efforts of our senior management, key employees and highly skilled personnel are crucial to our success, and ourbusiness may be harmed if we were to lose their services.Our success depends on the continuous effort and services of our senior management team and other key personnel. If one or more of our executiveofficers or other key personnel are unable or unwilling to continue to provide us with their services, we might not be able to replace them within a shortperiod of time or at all. Our business could be severely disrupted, our financial condition and results of operations could be materially and adversely affected,and we might incur additional expenses to recruit, train and retain personnel. If any of our executive officers joins a competitor or forms a competingcompany, we may lose advertisers, know-how and key professionals and staff members. Each of our executive officers has entered into an employmentagreement with Beijing Cheerbright Technologies Co., Ltd., or Autohome WFOE, which contains non-competition provisions. However, if any dispute arisesbetween us and our executive officers, we may have to incur substantial costs and expenses in order to enforce these agreements in China.Our performance and future success also depend on our ability to identify, hire, develop, motivate and retain skilled personnel for all areas of ourorganization. Competition in the automotive and internet advertising industries and the online automobile transaction industry for qualified employees isintense, and if competition in these industries further intensifies, it may be more difficult for us to hire, motivate and retain highly skilled personnel. If we donot succeed in attracting additional highly skilled personnel or retaining or motivating our existing personnel, we may be unable to grow effectively or at all.If we fail to protect our intellectual property rights, our brand and business may suffer.We rely on a combination of trademark, patent, copyright and trade secret protection laws in the PRC and other jurisdictions, as well as throughconfidentiality agreements and other measures, to protect our intellectual property rights. Our major brand names and logos are registered trademarks inChina. Most of our professionally produced content available on our websites and proprietary software are protected by copyright laws. Despite ourprecautions, third parties may obtain and use our intellectual property without our authorization. Historically, the legal system and courts of the PRC havenot protected intellectual property rights to the same extent as the legal system and courts of the United States, and companies operating in the PRC continueto face an increased risk of intellectual property infringement. Furthermore, the validity, application, enforceability and scope of protection of intellectualproperty rights for many internet-related activities, such as internet commercial methods patents, are uncertain and still evolving in China and abroad, whichmay make it more difficult for us to protect our intellectual property. From time to time, other websites may use our articles, photos or other content withoutour proper authorization. Although such use has not in the past caused any material damage to our business, it is possible that there may be misappropriationon a much larger scale with a material adverse impact to our business. If we are unable to adequately protect our intellectual property rights in the future, ourbrand and business may suffer. 12Table of ContentsWe may be vulnerable to intellectual property infringement claims brought against us by others.Internet, technology and media companies are frequently involved in litigation based on allegations of infringement of intellectual property rights,unfair competition, invasion of privacy, defamation and other violation of other parties’ rights. We have never experienced any material claims on theseissues against us in the past, but as we face increasing competition and as litigation becomes more common in China in resolving commercial disputes, weface a higher risk of being the subject of intellectual property infringement claims. We may be subject to legal proceedings and claims from time to timerelating to the intellectual property of others in the ordinary course of our business. We could also be subject to claims based upon the content that isdisplayed on our websites or accessible from our websites through links to other websites or information on our websites supplied by third parties.Intellectual property claims and litigation are expensive and time-consuming to investigate and defend and may divert resources and management attentionfrom the operation of our websites. Such claims, even if they do not result in liability, may harm our reputation. Any resulting liability or expenses, orchanges required to our websites to reduce the risk of future liability, may have a material adverse effect on our business, financial condition and results ofoperations.We may be subject to liability for advertisements and other content placed on our websites.The PRC government has adopted regulations governing advertising content as well as internet access and the distribution of information over theinternet. Under PRC advertising laws and regulations, we are obligated to monitor the advertising content shown on our websites to ensure that such contentis true and accurate and in full compliance with applicable laws and regulations. See “Item 4. Information on the Company—B. Business Overview—PRCRegulation—Regulations on Advertisements.” Under the internet information regulations, internet content providers and internet publishers are prohibitedfrom posting or displaying over the internet content that, among other things, compromises national security, harms the dignity or interests of the state,incites ethnic hatred or racial discrimination, undermines the PRC’s religious policy, disturbs social order, disseminates obscenity or pornography,encourages gambling, violence, murder or fear, incites the commission of a crime, infringes upon the lawful rights and interests of a third party, or is otherwiseprohibited by law or administrative regulations. See “Item 4. Information on the Company—B. Business Overview—PRC Regulation—Regulations onInternet Content Services.”We display advertisements on our websites. In addition, through our websites and user forums, we allow users to upload written materials, images,pictures and other content on our websites, and also allow users to share and link to content from other websites through our websites. Failure to identify andprevent illegal or inappropriate content from being displayed on or through our websites may subject us to liability. We cannot assure you that all of theadvertisements and content shown or posted on our websites adhere to the advertising and internet content laws and regulations, especially given theuncertainty in the interpretation of these PRC laws and regulations.If PRC regulatory authorities determine that any advertisements or content displayed on our websites do not adhere to applicable laws and regulations,they may require us to limit or eliminate the dissemination or availability of such advertisements and other content on our websites in the form of take-downorders or otherwise. Such regulatory authorities may also impose penalties on us, including fines, confiscation of advertising income or, in circumstancesinvolving more serious violations by us, the termination of our advertising or internet content license, any of which would materially and adversely affect ourbusiness and results of operations.In addition, we may be subject to claims by consumers asserting that the information on our websites is misleading, and we may not be able to recoverour losses from advertisers. As a result, our business, financial condition and results of operations could be materially and adversely affected.We may undertake acquisitions, investments, joint ventures or other alliances that could prove difficult to integrate, disrupt our business or otherwisenegatively impact our operating results and the value of your investment.As part of our business strategy, we regularly evaluate potential acquisitions, investments and alliances, including joint ventures and minority equityinvestments. These transactions involve numerous risks, including: • the failure to achieve the expected benefits of the acquisition, investment or alliance; • difficulties in, and the cost of, integrating operations, technologies, services and personnel; • write-offs of investments or acquired assets; • non-performance by, or conflicts of interest with, the parties with whom we enter into investments or alliances; • limited ability to monitor or control the actions of other parties with whom we enter into investments or alliances; • misuse of proprietary information shared in connection with an acquisition, investment or alliance; and • depending on the nature of the acquisition, investment or alliance, exposure to new regulatory risks. 13Table of ContentsThe realization of any of these risks could materially adversely affect our business. To the extent any of our directors or officers also invests in acapacity other than as our director or officer, his or her interest may not be aligned with ours.In addition, if we finance acquisitions by issuing equity or convertible debt securities, our existing shareholders may be diluted, which could affect themarket price of our ADSs.Furthermore, we may fail to identify or secure suitable acquisition, investment and other strategic opportunities, or our competitors may capitalize onsuch opportunities before we do, which could impair our ability to compete with our competitors and adversely affect our growth prospects and results ofoperations.Any financial or economic crisis, or perceived threat of such a crisis, including a significant decrease in consumer confidence, may materially andadversely affect our business, financial condition and results of operations.The global financial markets experienced significant disruptions in 2008 and the United States, European and other economies went into recession.The recovery from the lows of 2008 and 2009 was uneven and the global financial markets are facing new challenges, including the escalation of theEuropean sovereign debt crisis since 2011, the hostilities in the Ukraine, the end of quantitative easing by the U.S. Federal Reserve and the economicslowdown in the Eurozone in 2014. It is unclear whether these challenges will be contained and what effects they each may have. There is considerableuncertainty over the long-term effects of the expansionary monetary and fiscal policies that have been adopted by the central banks and financial authoritiesof some of the world’s leading economies, including China’s. Economic conditions in China are sensitive to global economic conditions. There have beenrecently signs that the rate of China’s economic growth is declining. Any prolonged slowdown in China’s economic development might lead to tighter creditmarkets, increased market volatility, sudden drops in business and consumer confidence and dramatic changes in business and consumer behaviors. Inresponse to their perceived uncertainty in economic conditions, consumers might delay, reduce or cancel purchases of automobiles, which are still consideredluxury items in China, and our advertisers may also defer, reduce or cancel purchasing our services. To the extent any fluctuations in the Chinese economysignificantly affect automakers’ and dealers’ demand for our services or change their spending habits, our results of operations may be materially andadversely affected.We are a “controlled company” within the meaning of the NYSE corporate governance requirements, which may result in public investors not having asmuch protection as they would if we were not a controlled company.As of March 20, 2015, Telstra Holdings Pty Limited, a wholly-owned subsidiary of Telstra Corporation Limited, or Telstra, owned 55.6% of the totalvoting rights in our company, and we are a “controlled company” under Section 303A of the NYSE Listed Company Manual. As a controlled company, werely on certain exemptions that are available to controlled companies from the NYSE corporate governance requirements, including the requirements that: • a majority of our board of directors consists of independent directors; • our compensation committee be composed entirely of independent directors; and • our corporate governance and nominating committee be composed entirely of independent directors.We are not required to and will not voluntarily meet these requirements. As a result of our use of the “controlled company” exemption, our investorswill not have the same protection as they would if we were not a controlled company.In addition, because Telstra beneficially owns 55.6% of the voting rights in our company, it has decisive influence in determining the outcome of anycorporate transaction or other matter submitted to the shareholders for approval, including mergers, consolidations and the sale of all or substantially all ofour assets, election of directors and other significant corporate actions. Without the consent of Telstra, we may be prevented from entering into transactionsthat could be beneficial to us. The interests of Telstra may differ from the interests of our other shareholders. Furthermore, Telstra’s business activities,although not related to our operations, may adversely impact reputation. 14Table of ContentsIf we fail to maintain an effective system of internal control over financial reporting, our ability to accurately and timely report our financial results orprevent fraud may be adversely affected, and investor confidence and the market price of our ADSs may be adversely impacted.The Securities and Exchange Commission, or the SEC, as required by Section 404 of the Sarbanes-Oxley Act of 2002, adopted rules requiring everypublic company to include a management report on the company’s internal control over financial reporting in its annual report, which containsmanagement’s assessment of the effectiveness of the company’s internal control over financial reporting. Our management has concluded that our internalcontrol over financial reporting was effective as of December 31, 2014. See “Item 15. Controls and Procedures—Management’s Annual Report on InternalControl over Financial Reporting.” Our independent registered public accounting firm has issued an attestation report, which has concluded that our internalcontrol over financial reporting was effective in all material aspects as of December 31, 2014. However, if we fail to maintain effective internal control overfinancial reporting in the future, our management and our independent registered public accounting firm may not be able to conclude that we have effectiveinternal control over financial reporting at a reasonable assurance level. This could in turn result in loss of investor confidence in the reliability of ourfinancial statements and negatively impact the trading price of our ADSs. Furthermore, we have incurred and anticipate that we will continue to incurconsiderable costs, management time and other resources in an effort to comply with Section 404 and other requirements of the Sarbanes-Oxley Act.We have limited business insurance coverage.Insurance companies in China currently do not offer as extensive an array of insurance products as insurance companies do in more developedeconomies. We do not have any business liability or disruption insurance to cover our operations. We have determined that the costs of insuring for theserisks and the difficulties associated with acquiring such insurance on commercially reasonable terms make it impractical for us to have such insurance. Anyuninsured occurrence of business disruption may result in our incurring substantial costs and the diversion of resources, which could have an adverse effecton our results of operations and financial condition.We face risks related to health epidemics and natural disasters.Our business could be adversely affected by the effects of H1N1 flu, avian flu, Severe Acute Respiratory Syndrome, or SARS, or another epidemic.China reported a number of cases of SARS in 2003, which resulted in the closure of many businesses by the PRC government to prevent the transmission ofSARS. In recent years, there have been reports of occurrences of avian flu in various parts of China, including a few confirmed human cases and deaths. In2009, the global spread of H1N1 flu resulted in several confirmed infections and deaths in China. Restrictions on travel resulting from any prolongedoutbreak of H1N1 flu, avian flu, SARS or another epidemic could adversely affect our ability to market our services to users, automakers and dealersthroughout China. Our business operations could be disrupted if one of our employees is suspected of having H1N1 flu, avian flu, SARS or another epidemic,which could require that a certain number of our employees be quarantined and/or our offices be disinfected. In addition, our results of operations could beadversely affected to the extent that H1N1 flu, avian flu, SARS or another outbreak harms the Chinese economy in general.We are also vulnerable to natural disasters and other calamities. Although our servers are hosted in an offsite location, our backup system does notcapture data on a real-time basis and we may be unable to recover certain data in the event of a server failure. We cannot assure you that any backup systemswill be adequate to protect us from the effects of fire, floods, typhoons, earthquakes, power loss, telecommunications failures, break-ins, war, riots, terroristattacks or similar events. Any of the foregoing events may give rise to server interruptions, breakdowns, system failures, technology platform failures orinternet failures, which could cause the loss or corruption of data or malfunctions of software or hardware as well as adversely affect our ability to provideservices. In addition, a severe disaster could affect the operations or financial condition of our customers and suppliers, which could harm our results ofoperations. For example, certain Japanese automakers or their joint ventures in China delayed or cancelled advertising campaigns following the earthquakeand tsunami in Japan in March 2011. 15Table of ContentsRisks Related to Our Corporate StructureSubstantial uncertainties exist with respect to the enactment timetable, final content, interpretation and implementation of draft PRC Foreign InvestmentLaw published for public comments and how it may impact the viability of our current corporate structure, corporate governance and business operations.The Ministry of Commerce published a discussion draft of the proposed Foreign Investment Law in January 2015 aiming to, upon its enactment,replace the trio of existing laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreignCooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillaryregulations. The draft Foreign Investment Law embodies an expected PRC regulatory trend to rationalize its foreign investment regulatory regime in linewith prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic investments. TheMinistry of Commerce is currently soliciting comments on this draft and substantial uncertainties exist with respect to its enactment timetable, final content,interpretation and implementation. The draft Foreign Investment Law, if enacted as proposed, may materially impact the viability of our current corporatestructure, corporate governance and business operations in many aspects.Among other things, the draft Foreign Investment Law expands the definition of foreign investment and introduces the principle of “actual control” indetermining whether a company is considered a foreign-invested enterprise, or an FIE. The draft Foreign Investment Law specifically provides that entitiesestablished in China but “controlled” by foreign investors will be treated as FIEs, whereas an entity set up in a foreign jurisdiction would nonetheless be,upon market entry clearance by the Ministry of Commerce, treated as a PRC domestic investor provided that the entity is “controlled” by PRC entities and/orcitizens. In this connection, “control” is broadly defined in the draft law to cover the following summarized categories: (i) holding 50% of more of the votingrights of the subject entity; (ii) holding less than 50% of the voting rights of the subject entity but having the power to secure at least 50% of the seats on theboard or other equivalent decision making bodies, or having the voting power to exert material influence on the board, the shareholders’ meeting or otherequivalent decision making bodies; or (iii) having the power to exert decisive influence, via contractual or trust arrangements, over the subject entity’soperations, financial matters or other key aspects of business operations. Once an entity is determined to be an FIE, it will be subject to the foreign investmentrestrictions or prohibitions set forth in a “negative list,” to be separately issued by the State Council later. Unless the underlying business of the FIE fallswithin the negative list, which calls for market entry clearance by the Ministry of Commerce, prior approval from the government authorities as mandated bythe existing foreign investment legal regime would no longer be required for establishment of the FIE.The VIE structure has been adopted by many PRC-based companies, including us, to obtain necessary licenses and permits in the industries that arecurrently subject to foreign investment restrictions in China. See “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions— Contractual Agreements with our Variable Interest Entities” and “—If the PRC government finds that the agreements that establish the structure foroperating our services in China do not comply with PRC governmental restrictions on foreign investment in internet businesses, or if these regulations or theinterpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations”below. Under the draft Foreign Investment Law, VIEs that are controlled via contractual arrangement would also be deemed as FIEs, if they are ultimately“controlled” by foreign investors. Therefore, for any companies with a VIE structure in an industry category that is on the “negative list,” the VIE structuremay be deemed legitimate only if the ultimate controlling person(s) is/are of PRC nationality (either PRC companies or PRC citizens). Conversely, if theactual controlling person(s) is/are of foreign nationalities, the VIEs will be treated as FIEs and any operation in the industry category on the “negative list”without market entry clearance may be considered as illegal.The draft Foreign Investment Law has not taken a position on what actions will be taken with respect to existing companies with a VIE structure,whether or not these companies are controlled by Chinese parties, while it is soliciting comments from the public on this point. The provision of internetcontent services, which we conduct through our VIEs, is subject to foreign investment restrictions set forth in the Catalogue for the Guidance of ForeignInvestment Industries, or the Catalogue, issued by the National Development and Reform Commission and the Ministry of Commerce in March 2015. It isunclear whether the new “negative list” will be different from the Catalogue. If the enacted version of the Foreign Investment Law and the final “negativelist” mandate further actions, such as Ministry of Commerce market entry clearance or certain restructuring of our corporate structure and operations, to becompleted by companies with existing VIE structure like us, we face substantial uncertainties as to whether these actions can be timely completed, or at all,and our business and financial condition may be materially and adversely affected. 16Table of ContentsThe draft Foreign Investment Law, if enacted as proposed, may also materially impact our corporate governance practice and increase our compliancecosts. For instance, the draft Foreign Investment Law imposes stringent ad hoc and periodic information reporting requirements on foreign investors and theapplicable FIEs. Aside from the investment implementation report and investment amendment report that are required at each investment and alteration ofinvestment specifics, an annual report is mandatory, and large foreign investors meeting certain criteria are required to report on a quarterly basis. Anycompany found to be non-compliant with these information reporting obligations may potentially be subject to fines and/or administrative or criminalliabilities, and the persons directly responsible may be subject to criminal liabilities.If the PRC government finds that the agreements that establish the structure for operating our services in China do not comply with PRC governmentalrestrictions on foreign investment in internet businesses, or if these regulations or the interpretation of existing regulations change in the future, we couldbe subject to severe penalties or be forced to relinquish our interests in those operations.Current PRC laws and regulations place certain restrictions on foreign ownership of companies that provide internet content services in China.Specifically, foreign ownership of internet service providers or other value-added telecommunication service providers may not exceed 50%. In addition,according to the Several Opinions on the Introduction of Foreign Investment in the Cultural Industry promulgated by the Ministry of Culture, the StateAdministration of Radio, Film and Television, or the SARFT, the General Administration of Press and Publication, or the GAPP, the National Developmentand Reform Commission and the Ministry of Commerce in June 2005, foreign investors are prohibited from investing in or operating “internet culturalactivities.” Furthermore, PRC laws and regulations do not allow foreign entities with less than two years of direct experience operating an advertisingbusiness outside of China to invest in an advertising business in China. Before we acquired Autohome Media Limited, or Autohome Media, which waspreviously known as Prbrownies Marketing Limited, in October 2013, we had no direct experience operating an advertising business outside of China andwere not allowed to invest directly in a PRC entity that provides advertising services in China. We are a Cayman Islands company and foreign legal personunder PRC laws. Accordingly, neither we nor our wholly foreign-invested PRC subsidiaries are currently eligible to apply for the required licenses forproviding internet content services in China.As such, we conduct our business through contractual arrangements in China. In particular, we operate our internet content business through AutohomeInformation and Hongyuan Information, a wholly-owned subsidiary of Autohome Information. Autohome Information is currently owned by individualshareholders who are PRC citizens and hold the requisite licenses or permits to provide internet content and advertising services in China. We do not have anequity interest in Autohome Information or its subsidiaries but substantially control their operations and receive the economic benefits through a series ofcontractual arrangements. We have been and are expected to continue to be dependent upon Autohome Information and its subsidiaries to operate ourbusinesses in the near future. We have provided advertising services through Chengshi Advertising, Autohome Advertising, Shanghai Advertising andGuangzhou Advertising to automotive industry customers, respectively. In October 2013, Autohome HK acquired Autohome Media, a Hong Kongadvertising and marketing company. Autohome Media has engaged in advertising business outside the PRC for more than three years, and is thereforequalified to directly invest in a PRC company providing advertising services in accordance with PRC laws. We are gradually migrating our advertisingbusiness from our VIEs to Autohome Media and its subsidiaries, a transition we expect to complete in the next two to three years. For more informationregarding these contractual arrangements, see “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions— ContractualAgreements with our Variable Interest Entities.”Based on the advice of our PRC legal counsel, TransAsia Lawyers, the corporate structure of our VIEs and our subsidiaries in China are in compliancewith all existing PRC laws and regulations. However, as there are substantial uncertainties regarding the interpretation and application of PRC laws andregulations, we cannot assure you that the PRC government would agree that our corporate structure or any of the above contractual arrangements complywith PRC licensing, registration or other regulatory requirements, with existing policies or with requirements or policies that may be adopted in the future.PRC laws and regulations governing the validity of these contractual arrangements are uncertain and the relevant government authorities have broaddiscretion in interpreting these laws and regulations. 17Table of ContentsIf we or any of our current or future VIEs or subsidiaries are found to be in violation of any existing or future PRC laws or regulations, or fail to obtainor maintain any of the required permits or approvals, the relevant PRC regulatory authorities, including the Ministry of Industry and InformationTechnology, or the MIIT, which regulates internet information services companies, the State Administration for Industry and Commerce, or the SAIC, whichregulates advertising companies, and the China Securities Regulatory Commission, or the CSRC, would have broad discretion in dealing with suchviolations, including levying fines, confiscating our income or the income of Autohome WFOE and the VIEs, revoking the business licenses or operatinglicenses of Autohome WFOE and the VIEs, shutting down our servers or blocking our websites, discontinuing or placing restrictions or onerous conditions onour operations, requiring us to undergo a costly and disruptive restructuring, or taking other enforcement actions that could be harmful to our business.Any of these actions could cause significant disruption to our business operations and severely damage our reputation, which would in turn materiallyand adversely affect our business and results of operations. In addition, if the imposition of any of these penalties causes us to lose the rights to direct theactivities of the VIEs or our right to receive their economic benefits, we would no longer be able to consolidate the VIEs. The VIEs contributed the majorityof our consolidated net revenues since 2009.Our contractual arrangements with our VIEs may not be as effective in providing operational control as direct ownership.We have relied and expect to continue to rely on contractual arrangements with Autohome Information and its subsidiaries, Shanghai Advertising,Guangzhou Advertising and their shareholders to operate our business. For a description of these contractual arrangements, see “Item 7. Major Shareholdersand Related Party Transactions—B. Related Party Transactions— Contractual Agreements with our Variable Interest Entities.” These contractualarrangements may not be as effective in providing us with control over our VIEs as direct ownership. If we had direct ownership of these entities, we would beable to exercise our rights as a shareholder to effect changes in the board of directors, which in turn could effect changes, subject to any applicable fiduciaryobligations, at the management level. However, under the current contractual arrangements, we rely on the performance by these entities and theirshareholders of their contractual obligations to exercise control over our VIEs. Therefore, our contractual arrangements with our VIEs may not be as effectivein ensuring our control over their operations as direct ownership would be.Shareholders of our VIEs may breach, or cause our VIEs to breach, or refuse to renew, the existing contractual arrangements we have with them and ourVIEs. Any failure by our VIEs or their shareholders to perform their obligations under our contractual arrangements with them would have a materialadverse effect on our business and financial condition.Shareholders of our VIEs may breach, or cause our VIEs to breach, or refuse to renew, the existing contractual arrangements we have with them and ourVIEs. If our VIEs or their shareholders fail to perform their obligations under the contractual arrangements, we may have to incur substantial costs and expendresources to enforce our rights under the contracts. We may have to rely on legal remedies under PRC law, including seeking specific performance orinjunctive relief and claiming damages, which may not be effective. For example, if the shareholders of Autohome Information, Shanghai Advertising andGuangzhou Advertising were to refuse to transfer their equity interests in those companies to us or our designee when we exercise the call option pursuant tothese contractual arrangements, if they transfer the equity interests to other persons against our interests, or if they were otherwise to act in bad faith towardus, then we may have to take legal actions to compel them to perform their contractual obligations.All of these contractual arrangements are governed by PRC law and provide for the resolution of disputes through arbitration in the PRC. Accordingly,these contracts would be interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. The legalsystem in the PRC is not as developed as in other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could limit ourability to enforce these contractual arrangements. Under PRC law, rulings by arbitrators are final, parties cannot appeal the arbitration results in courts, andthe prevailing parties may only enforce the arbitration awards in PRC courts through arbitration award recognition proceedings, which would incuradditional expenses and delay. In the event we are unable to enforce these contractual arrangements, we may not be able to exert effective control over ourVIEs, and our ability to conduct our business may be negatively affected. 18Table of ContentsContractual arrangements our subsidiary has entered into with our VIEs may be subject to scrutiny by the PRC tax authorities and a finding that we or ourVIEs owe additional taxes could substantially reduce our consolidated net income and the value of your investment.Under PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authoritieswithin ten years after the taxable year when the transactions are conducted. We could face material and adverse tax consequences if the PRC tax authoritiesdetermine that the contractual arrangements among Autohome WFOE, our VIEs and the shareholders of our VIEs do not represent arm’s-length prices andconsequently adjust Autohome WFOE’s or our VIEs’ income in the form of a transfer pricing adjustment. A transfer pricing adjustment could, among otherthings, result in a reduction, for PRC tax purposes, of expense deductions recorded by our VIEs, which could in turn increase their tax liabilities. In addition,the PRC tax authorities may impose late payment fees and other penalties on Autohome WFOE or our VIEs for any unpaid taxes. Our consolidated netincome may be materially and adversely affected if Autohome WFOE or our VIEs’ tax liabilities increase or if they are subject to late payment fees or otherpenalties.The shareholders of our VIEs may have potential conflicts of interest with us, which may materially and adversely affect our business.The shareholders of our VIEs are James Zhi Qin, our director and chief executive officer, Xiang Li, our director and president, and Zheng Fan, our vicepresident. Each of these three individuals is also a beneficial owner of our company and a PRC citizen. They hold 8%, 68% and 24%, respectively, of theequity interests in each of our VIEs. Conflicts of interest may arise between their roles as directors, officers and/or beneficial owners of our holding companyand as shareholders of our VIEs. In addition, the controlling shareholders of our company are substantially different from that of the VIEs, which mayheighten any conflicts of interest that could arise between the two groups of shareholders. We cannot assure you that when conflicts of interest arise, any orall of these equity holders will act in the best interests of our company or such conflicts will be resolved in our favor. Currently, we do not have anyarrangements to address potential conflicts of interest between these equity holders and our company. We rely on these three individuals to comply with thelaws of China, which protect contracts, provide that directors and executive officers owe a duty of loyalty and a duty of diligence to our company and requirethem to avoid conflicts of interest and not to take advantage of their positions for personal gain. We also rely on the laws of the Cayman Islands, whichprovide that directors owe a duty of care and a duty of loyalty to our company. However, the legal frameworks of China and the Cayman Islands do notprovide guidance on resolving conflicts in the event of a conflict with another corporate governance regime. If we cannot resolve any conflict of interest ordispute between us and the shareholders of our VIEs, we would have to rely on legal proceedings, which could result in disruption of our business and subjectus to substantial uncertainty as to the outcome of any such legal proceedings.We may rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have. Anylimitation on the ability of our PRC subsidiaries to pay dividends to us could have a material adverse effect on our ability to conduct our business.We are a holding company, and we may rely on dividends and other distributions on equity to be paid by our wholly-owned PRC subsidiaries for ourcash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders and service any debt wemay incur. If our PRC subsidiaries incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividendsor make other distributions to us.Under PRC laws and regulations, our PRC subsidiaries, as wholly foreign-owned enterprises in the PRC, may pay dividends only out of theiraccumulated profits as determined in accordance with PRC accounting standards and regulations. In addition, wholly foreign-owned enterprises are requiredto set aside at least 10% of their accumulated after-tax profits, if any, each year to fund certain statutory reserve funds, until the aggregate amount of suchfunds reach 50% of their registered capital. These statutory reserve funds are not distributable as cash dividends. 19Table of ContentsAny limitation on the ability of our PRC subsidiaries to pay dividends or make other distributions to us could materially and adversely limit ourability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business.PRC regulation of loans to, and direct investment in, PRC entities by offshore holding companies and governmental control of currency conversion mayrestrict or prevent us from using the proceeds of our equity offerings to make loans to our PRC subsidiaries and VIEs or to make additional capitalcontributions to our PRC subsidiaries, which may materially and adversely affect our liquidity and our ability to fund and expand our business.We are an offshore holding company conducting our operations in China through our PRC subsidiaries and VIEs. We may make loans to our PRCsubsidiaries and VIEs, or we may make additional capital contributions to our PRC subsidiaries. Any loans by us to our PRC subsidiaries, which are treated asforeign-invested enterprises under PRC law, are subject to PRC regulations and foreign exchange loan registrations. For example, loans by us to AutohomeWFOE to finance its activities cannot exceed statutory limits and must be registered with the local counterpart of the State Administration of ForeignExchange, or SAFE. We may also decide to finance Autohome WFOE by means of capital contributions. These capital contributions must be approved by thePRC Ministry of Commerce or its local counterpart. Due to the restrictions imposed on loans in foreign currencies extended to any PRC domestic companies,we are not likely to make such loans to our VIEs, which are PRC domestic companies. Further, we are not likely to finance the activities of our VIEs by meansof capital contributions due to regulatory restrictions relating to foreign investment in PRC domestic enterprises engaged in internet content services andonline advertising businesses.On August 29, 2008, SAFE promulgated the Circular on the Relevant Operating Issues Concerning the Improvement of the Administration of thePayment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, or SAFE Circular 142, regulating the conversion by a foreign-investedenterprise of foreign currency registered capital into RMB by restricting how the converted RMB may be used. SAFE Circular 142 provides that the RMBcapital converted from foreign currency registered capital of a foreign-invested enterprise may only be used for purposes within the business scope approvedby the applicable governmental authority and may not be used for equity investments within the PRC. In addition, SAFE strengthened its oversight of theflow and use of the RMB capital converted from foreign currency registered capital of a foreign-invested company. The use of such RMB capital may not bealtered without SAFE approval, and such RMB capital may not in any case be used to repay RMB loans if the proceeds of such loans have not been used.Violations of SAFE Circular 142 could result in severe monetary or other penalties. Furthermore, SAFE promulgated a circular on November 19, 2010, orCircular No. 59, which tightens the examination on the authenticity of settlement of net proceeds from an offering and requires that the settlement of netproceeds shall be in accordance with the description in its prospectus. On July 15, 2014, SAFE issued SAFE Circular 36 that launched the pilot reform ofadministration regarding conversion of foreign currency registered capitals of foreign-invested enterprises in 16 pilot areas. According to SAFE Circular 36,an ordinary foreign-invested enterprise in the pilot areas is permitted to use Renminbi converted from its foreign-currency registered capital to make equityinvestments in the PRC, subject to certain registration and settlement procedures as set forth in SAFE Circular 36. As this circular is relatively new, thereremains uncertainty as to its interpretation and application and any other future foreign exchange related rules.In light of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies,including SAFE Circular 142, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessarygovernment approvals on a timely basis, if at all, with respect to future loans by us to our PRC subsidiaries or VIEs or with respect to future capitalcontributions by us to our PRC subsidiaries. If we fail to complete such registrations or obtain such approvals, our ability to use the proceeds we receivedfrom our equity offerings and to capitalize or otherwise fund our PRC operations may be negatively affected, which could materially and adversely affect ourliquidity and our ability to fund and expand our business. 20Table of ContentsIf our PRC subsidiaries or VIEs become the subject of a bankruptcy or liquidation proceeding, we may lose the ability to use and enjoy substantially all ofour assets, which could reduce the size of our operations and materially and adversely affect our business, our ability to generate revenues and the marketprice of our ADSs.As part of the contractual arrangements with Autohome Information, its shareholders and its subsidiaries, Autohome Information and its subsidiarieshold operating permits and licenses and substantially all of the assets that are important to the operation of our business. We expect to continue to bedependent on Autohome Information and its subsidiaries to operate a significant portion of our business in China. If our VIEs go bankrupt and all or part oftheir assets become subject to liens or rights of third-party creditors, we may be unable to continue some or all of our business activities, which wouldmaterially and adversely affect our business, financial condition and results of operations. If our VIEs undergo a voluntary or involuntary liquidationproceeding, their equity holders or unrelated third-party creditors may claim rights to some or all of these assets, thereby hindering our ability to operate ourbusiness, which would materially and adversely affect our business, our ability to generate revenues and the market price of our ADSs.Risks Related to Doing Business in ChinaChanges in China’s economic, political or social conditions or government policies could have a material adverse effect on our business and operations.The majority of our assets and operations are located in China. Accordingly, our business, financial condition, results of operations and prospects maybe influenced to a significant degree by political, economic and social conditions in China generally and by continued economic growth in China as awhole.The Chinese economy differs from the economies of most developed countries in many respects, including the level of government involvement, levelof development, growth rate, control of foreign exchange and allocation of resources. Although the Chinese government has implemented measures since thelate 1970s emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets, and the establishment ofimproved corporate governance in business enterprises, a substantial portion of productive assets in China are still owned by the Chinese government. Inaddition, the Chinese government continues to play a significant role in regulating industry development by imposing industrial policies. The Chinesegovernment also exercises significant control over China’s economic growth through allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy, and providing preferential treatment to particular industries or companies.While the Chinese economy has experienced significant growth over the past decades, the growth has been uneven, both geographically and amongvarious sectors of the economy. The Chinese government has implemented various measures to encourage economic growth and guide the allocation ofresources. Some of these measures may benefit the overall Chinese economy, but may have a negative effect on us. For example, our financial condition andresults of operations may be adversely affected by government control over capital investments or changes in tax regulations. In addition, in the past theChinese government has implemented certain measures, including interest rate increases, to control the pace of economic growth. These measures may causedecreased economic activity in China, which may adversely affect our business and operating results.Uncertainties with respect to the PRC legal system could adversely affect us.We conduct our business primarily through our PRC subsidiaries and VIEs in China. Our operations in China are governed by PRC laws andregulations. Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us. In1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. The overall effectof legislation over the past several decades has significantly enhanced the protections afforded to various forms of foreign investments in China. However,China has not developed a fully integrated legal system, and recently enacted laws and regulations may not sufficiently cover all aspects of economicactivities in China. In particular, because these laws and regulations are relatively new, and because of the limited volume of published decisions and theirnonbinding nature, the interpretation and enforcement of these laws and regulations involve uncertainties. Since PRC administrative and court authoritieshave significant discretion in interpreting and implementing statutory and contractual terms, it may be difficult to evaluate the outcome of administrativeand court proceedings and the level of legal protection we enjoy. Furthermore, the PRC legal system is based in part on government policies and internalrules, some of which are not published on a timely basis or at all, which may have a retroactive effect. As a result, we may not be aware of our violation ofthese policies and rules until sometime after the violation. In addition, any administrative and court proceedings in China may be protracted, resulting insubstantial costs and diversion of resources and management attention. 21Table of ContentsWe may be adversely affected by the complexity, uncertainties and changes in PRC regulation of internet business and companies.The PRC government extensively regulates the internet industry, including foreign ownership of, and the licensing and permit requirements pertainingto, companies in the internet industry. These internet-related laws and regulations are relatively new and evolving, and their interpretation and enforcementinvolve significant uncertainty. As a result, in certain circumstances it may be difficult to determine what actions or omissions may be deemed to beviolations of applicable laws and regulations. Issues, risks and uncertainties relating to the PRC government regulation of the internet industry include, butare not limited to, the following: • We only have contractual control over our websites. We do not own the websites due to the restriction on foreign investment in businessesproviding value-added telecommunication services in China, which includes internet content provision services. • There are uncertainties relating to the regulation of the internet industry in China, including evolving licensing requirements. This means thatpermits, licenses or operations at some of our companies may be subject to challenge, or we may fail to obtain permits or licenses that applicableregulators may deem necessary for our operations, or we may not be able to obtain or renew permits or licenses. For example, both AutohomeInformation and Hongyuan Information may be required to obtain additional licenses, including internet publishing licenses and internet newsinformation service licenses, if the release of articles and information or the broadcast of videos on the websites autohome.com.cn andche168.com is deemed by the PRC regulatory authorities as being the provision of internet publishing service, internet news information service,or internet culture operating service. See “Item 4. Information on the Company—B. Business Overview—PRC Regulation—Regulations onOnline Cultural Services,” “Item 4. Information on the Company—B. Business Overview—PRC Regulation—Regulations on InternetPublishing” and “Item 4. Information on the Company—B. Business Overview—PRC Regulation—Regulations on Internet News InformationService” for additional details. • The evolving PRC regulatory system for the internet industry may lead to the establishment of new regulatory agencies. For example, in May2011, the State Council announced the establishment of a new department, the State Internet Information Office. The primary role of this newagency is to facilitate policy-making and legislative development in the internet industry, to direct and coordinate with relevant departments inconnection with online content administration and to deal with cross-ministry regulatory matters in relation to the internet industry. • New laws and regulations may be promulgated to regulate internet activities, including online advertising businesses. As such, additionallicenses may be required for our operations. If our operations do not comply with these new regulations at the time they become effective, or ifwe fail to obtain any licenses required under these new laws and regulations, we could be subject to penalties.On July 13, 2006, the MIIT, the predecessor of which was the Ministry of Information Industry, issued the Notice of the Ministry of InformationIndustry on Intensifying the Administration of Foreign Investment in Value-added Telecommunications Services. This notice prohibits domestictelecommunication service providers from leasing, transferring or selling telecommunications business operating licenses to any foreign investor in any form,or providing any resources, sites or facilities to any foreign investor for their illegal operation of a telecommunications business in China. According to thisnotice, either the holder of a value-added telecommunication services operation permit or its shareholders must directly own the domain names andtrademarks used by such license holders in their provision of value-added telecommunication services. The notice also requires each license holder to havethe necessary facilities, including servers, for its approved business operations and to maintain such facilities in the regions covered by its license. Currently,Autohome Information and Hongyuan Information, two of our VIEs, own the related domain names and trademarks and hold the internet content providerlicenses, or ICP licenses, necessary to conduct our operations for websites in China. 22Table of ContentsThe interpretation and application of existing PRC laws, regulations and policies and possible new laws, regulations or policies relating to the internetindustry have created substantial uncertainties regarding the legality of existing and future foreign investments in, and the businesses and activities of,internet businesses in China, including our business. We cannot assure you that we will be able to maintain our existing licenses or obtain any new licenses ifrequired by any new laws or regulations. There are also risks that we may be found to violate existing or future laws and regulations given the uncertainty andcomplexity of China’s regulation of the internet industry. If we or our VIEs fail to obtain or maintain any of the required assets, licenses or approvals, ourcontinued business operations in the internet industry may subject us to various penalties, including the confiscation of illegal net revenues, fines and thediscontinuation or restriction of our operations, any of which would materially and adversely affect our business and results of operations.Fluctuations in exchange rates may have a material adverse effect on your investment.Substantially all of our revenues and costs are denominated in RMB. The conversion of RMB into foreign currencies, including U.S. dollars, is basedon rates set by the People’s Bank of China. Between July 2008 and June 2010, the RMB fluctuated significantly against the U.S. dollar. From June 2010 untilthe start of 2014, the PRC government allowed the RMB to appreciate slowly 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 Chinese government to substantially liberalize its currency policy, which could result in furtherappreciation in the value of the RMB against the U.S. dollar. To the extent that we need to convert U.S. dollars into RMB for capital expenditures andworking capital and other business purposes, appreciation of the RMB against the U.S. dollar would have an adverse effect on the RMB amount we wouldreceive from the conversion. Conversely, if we decide to convert RMB into U.S. dollars for the purpose of making payments for dividends on our ordinaryshares or ADSs, strategic acquisitions or investments or other business purposes, appreciation of the U.S. dollar against the RMB would have a negative effecton the U.S. dollar amount available to us. In addition, a significant depreciation of the RMB against the U.S. dollar may significantly reduce the U.S. dollarequivalent of our earnings, which in turn could adversely affect the price of our ADSs.Very limited hedging options are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into anyhedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in thefuture, the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge our exposure or to hedge our exposureat all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert RMB into foreigncurrency. As a result, fluctuations in exchange rates may have a material adverse effect on your investment.Governmental control of currency conversion may limit our ability to utilize our revenues effectively and affect the value of your investment.The PRC government imposes controls on the convertibility of the RMB into foreign currencies and, in certain cases, the remittance of currency out ofChina. We receive substantially all of our revenues in RMB. Under existing PRC foreign exchange regulations, payments of current account items, includingprofit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior SAFEapproval by complying with certain procedural requirements. Therefore, Autohome WFOE is able to pay dividends in foreign currencies to us without priorapproval from SAFE. However, approval from or registration with appropriate government authorities is required where RMB is to be converted into foreigncurrency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may alsoat its discretion restrict access to foreign currencies for current account transactions in the future. If the foreign exchange control system prevents us fromobtaining sufficient foreign currency to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders,including holders of our ADSs. 23Table of ContentsCertain regulations in the PRC may make it more difficult for us to pursue growth through acquisitions.Among other things, certain regulations and rules concerning mergers and acquisitions established additional procedures and requirements that couldmake merger and acquisition activities by foreign investors more time-consuming and complex. For example, these regulations require that the Ministry ofCommerce be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise or a foreigncompany with substantial PRC operations, if certain thresholds under the Provisions on Thresholds for Prior Notification of Concentrations of Undertakings,issued by the State Council on August 3, 2008, are triggered. According to the Implementing Rules Concerning Security Review on Mergers andAcquisitions by Foreign Investors of Domestic Enterprises issued by the Ministry of Commerce in August 2011, mergers and acquisitions by foreigninvestors involved in an industry related to national security are subject to strict review by the Ministry of Commerce. These rules also prohibit anytransactions attempting to bypass such security review, including by controlling entities through contractual arrangements. We believe that our business isnot in an industry related to national security. However, we cannot preclude the possibility that the Ministry of Commerce or other government agencies maypublish interpretations contrary to our understanding or broaden the scope of such security review in the future. Although we have no current plans to makeany acquisitions, we may elect to grow our business in the future in part by directly acquiring complementary businesses in China. Complying with therequirements of these regulations to complete such transactions could be time-consuming, and any required approval processes, including obtainingapproval from the Ministry of Commerce, may delay or inhibit our ability to complete such transactions.PRC regulations relating to the establishment of offshore holding companies by PRC residents may subject our PRC resident beneficial owners or ourPRC subsidiaries to liability or penalties, limit our ability to inject capital into our PRC subsidiaries, limit our PRC subsidiaries’ ability to increase theirregistered capital or distribute profits to us, or may otherwise adversely affect us.On July 4, 2014, SAFE promulgated the Notice on Relevant Issues Concerning Foreign Exchange Control of Domestic Residents’ Overseas Investmentand Financing and Roundtrip Investment through Offshore Special Purpose Vehicles, or SAFE Circular No. 37, which replaced the former Notice on RelevantIssues Concerning Foreign Exchange Administration for PRC Residents to Engage in Financing and Inbound Investment via Overseas Special PurposeVehicles (generally known as SAFE Circular No. 75) promulgated by SAFE on October 21, 2005.SAFE Circular No. 37 requires PRC residents to register with local branches of SAFE in connection with their direct establishment or indirect control ofan offshore entity, for the purpose of overseas investment and financing, with such PRC residents’ legally owned assets or equity interests in domesticenterprises or offshore assets or interests, which is referred to in SAFE Circular No. 37 as a “special purpose vehicle.” SAFE Circular No. 37 further requiresamendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such as an increase or decrease of capitalcontributed by PRC residents share transfer or exchange, merger, division or other material events. In the event that a PRC resident holding interests in aspecial purpose vehicle fails to complete the required SAFE registration, the PRC subsidiaries of that special purpose vehicle may be prohibited from makingprofit distributions to the offshore parent and from carrying out subsequent cross-border foreign exchange activities and the special purpose vehicle may berestricted in its ability to contribute additional capital into its PRC subsidiaries. Furthermore, failure to comply with the various SAFE registrationrequirements described above could result in liability under PRC law for evasion of foreign exchange controls.Currently, all of our shareholders who are PRC residents have registered with the competent local branch of SAFE with respect to their investments inour company as required by SAFE Circular No. 75 and will update their registration filings with SAFE under SAFE Circular No. 37 when there are anychanges that should be registered under SAFE Circular No. 37. However, we may not at all times be fully aware or informed of the identities of all ourshareholders or beneficial owners that are required to make such registrations, and if or when we have such shareholders or beneficial owners, we may notalways be able to compel them to comply with SAFE Circular No. 37 requirements. As a result, we cannot assure you that all of our shareholders or beneficialowners who are PRC residents will at all times comply with, or in the future make or obtain any applicable registrations or approvals required by, SAFECircular No. 37 or other related regulations. The failure or inability of such individuals to comply with the registration procedures set forth in theseregulations may subject us to fines or legal sanctions, restrictions on our cross-border investment activities or our PRC subsidiaries’ ability to distributedividends to, or obtain foreign-exchange-dominated loans from, our company, or prevent us from making distributions or paying dividends. As a result, ourbusiness operations and our ability to make distributions to you could be materially and adversely affected. 24Table of ContentsFurthermore, as these foreign exchange regulations are still relatively new and their interpretation and implementation has been constantly evolving, itis unclear how these regulations, and any future regulation concerning offshore or cross-border transactions, will be interpreted, amended and implementedby the relevant government authorities. We cannot predict how these regulations will affect our business operations or future strategy. In addition, if wedecide to acquire a PRC domestic company, we cannot assure you that we or the owners of such company, as the case may be, will be able to obtain thenecessary approvals or complete the necessary filings and registrations required by the foreign exchange regulations. This may restrict our ability toimplement our acquisition strategy and could adversely affect our business and prospects.Failure to comply with PRC regulations regarding the registration requirements for employee share ownership plans or share option plans may subject thePRC plan participants or us to fines and other legal or administrative sanctions.In December 2006, the People’s Bank of China, or PBOC, promulgated the Administrative Measures of Foreign Exchange Matters for Individuals,which sets forth the respective requirements for foreign exchange transactions by individuals (both PRC and non-PRC citizens) under either the currentaccount or the capital account. In January 2007, SAFE issued relevant implementing rules that specified approval requirements for certain capital accounttransactions such as a PRC citizen’s participation in the employee stock incentive plans or share option plans of an overseas publicly listed company. InFebruary 2012, SAFE promulgated the Notice on the Administration of Foreign Exchange Matters for Domestic Individuals Participating in the StockIncentive Plans of Overseas Listed Companies, or the Stock Option Notice. The Stock Option Notice supersedes the requirements and procedures for theregistration of PRC resident individuals’ participation in stock incentive plans set forth by certain rules promulgated by SAFE in March 2007. Under thesemeasures, PRC resident individuals who participate in an employee stock incentive plan or a share option plan in an overseas publicly listed company arerequired to register with SAFE and complete certain other procedures. A PRC domestic qualified agent appointed through the PRC subsidiaries of suchoverseas listed company must file applications on behalf of such PRC resident individuals with SAFE or its local counterpart to obtain approval for an annualallowance with respect to the foreign exchange in connection with stock holding or share option exercises. With the approval from SAFE or its localcounterpart, the PRC domestic qualified agent must open a special foreign exchange account at a PRC domestic bank to hold the funds required inconnection with the stock purchase or option exercise, payment received upon sales of shares, dividends issued on the stock and any other income orexpenditures approved by SAFE or its local counterpart. We and our PRC resident employees who participate in our share incentive plans are subject to theseregulations as we are an overseas listed company. We have made registration with the local counterparts of SAFE for our PRC resident employees whoparticipate in our share incentive plans as required under the Stock Option notice and relevant rules. If we or our PRC optionees fail to comply with theseregulations, we or our PRC optionees may be subject to fines and other legal or administrative sanctions. See “Item 4. Information on the Company—B.Business Overview—PRC Regulation—Regulations on Employee Stock Options Plans.”We face uncertainties with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.Pursuant to the Notice on Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises, or SATCircular 698, issued by the State Administration of Taxation, or the SAT, on December 10, 2009 with retroactive effect from January 1, 2008, where a non-resident enterprise transfers the equity interests of a PRC resident enterprise indirectly via disposing of the equity interests of an overseas holding company,or an Indirect Transfer, and such overseas holding company is located in a tax jurisdiction that: (a) has an effective tax rate less than 12.5% or (b) does not taxthe foreign income of its residents, the non-resident enterprise, being the transferor, shall report to the relevant tax authority of the PRC resident enterprisethis Indirect Transfer. Using a “substance over form” principle, the PRC tax authority may disregard the existence of the overseas holding company if it lacksa reasonable commercial purpose and was established for the purpose of reducing, avoiding or deferring PRC tax. As a result, gains derived from such IndirectTransfer may be subject to PRC withholding tax at a rate of up to 10%. SAT Circular 698 also provides that, where a non-PRC resident enterprise transfers itsequity interests in a PRC resident enterprise to its related parties at a price lower than the fair market value, the relevant tax authority has the power to make areasonable adjustment to the taxable income of the transaction. 25Table of ContentsOn February 3, 2015, the SAT issued SAT Notice 7 to supersede the existing tax rules in relation to the Indirect Transfer, while the other provisions ofSAT Circular 698 remain in force. SAT Notice 7 introduces a more sophisticated anti-avoidance guidance. SAT Notice 7 extends its tax jurisdiction tocapture not only Indirect Transfer as set forth under SAT Circular 698 but also transactions involving transfer of movable and immovable property in Chinaof a foreign company through the offshore transfer of a foreign intermediate holding company. According to SAT Notice 7, if a non-resident enterpriseindirectly transfers PRC taxable properties through an arrangement without reasonable commercial purpose but to avoid PRC Corporate Income Tax, theIndirect Transfer shall be re-characterized and treated as a direct transfer of PRC taxable properties. SAT Notice 7 also interprets the term “transfer of theequity interest in a foreign intermediate holding company” broadly. In addition, SAT Notice 7 provides clearer criteria than Circular 698 on how to assessreasonable commercial purposes and introduces safe harbor scenarios applicable to the public trading of shares in a listed company holding taxable PRCassets and indirect transfers resulting from a corporate restructuring.Further, SAT Notice 7 replaces the compulsory reporting requirement in SAT Circular 698 with a voluntary reporting regime and the criteria set forth inCircular 698 for indirect transfer reporting have been abolished. Both the foreign transferor and the transferee, and the PRC tax resident enterprise whoseequity interests being transferred may voluntarily report the transfer by submitting the documents required in SAT Notice 7. In addition to the voluntaryreporting, SAT Notice 7 empowers the Chinese tax authorities to require various documents from the parties involved. Although SAT Notice 7 providesclarities in many important areas such as reasonable commercial purpose and reporting requirements, it brings challenges to both the foreign transferor andtransferee of the Indirect Transfer as they are required to make a self-assessment on whether the transaction should be subject to PRC tax and to file orwithhold the PRC tax accordingly. It also introduces the interest regime by providing that where a transferor fails to file and pay tax on time, and where awithholding agent fails to withhold the tax, interest will be charged on a daily basis. If the transferor has provided the required documents and information orhas filed and paid the tax within 30 days from the date that the share transfer contract or agreement is signed, interest shall be calculated based on thebenchmark interest rate; otherwise, the benchmark interest rate plus 5% will apply.SAT Notice 7 became effective on February 3, 2015, but it also applies to Indirect Transfers which occurred before its issuance but have not receivedassessments from the tax authorities. SAT Circular 698 and SAT Notice 7 may be determined by the tax authorities to be applicable to our corporaterestructuring where non-resident investors were involved, if any of such transactions were determined by the tax authorities to lack reasonable commercialpurpose. As a result, we and our non-resident investors in such transactions may become at risk of being taxed under SAT Circular 698 and SAT Notice 7 andwe may be required to expend valuable resources to comply with SAT Circular 698 and SAT Notice 7 or to establish that we should not be taxed under thegeneral anti-avoidance rule of the PRC Enterprise Income Tax Law, which may have a material adverse effect on our financial condition and results ofoperations or such non-resident investors’ investments in us.There are still uncertainties as to the interpretation and implementation of SAT Notice 7. The PRC tax authorities have the discretion under SATCircular 698 and SAT Notice 7 to make adjustments to the taxable capital gains based on the difference between the fair value of the equity intereststransferred and the cost of investment. We may pursue acquisitions in the future that may involve complex corporate structures. If we are considered a non-resident enterprise under the PRC Enterprise Income Tax Law and if the PRC tax authorities make adjustments to the taxable income of these transactionsunder Circular 698 and SAT Notice 7, our income tax expenses associated with such potential acquisitions will be increased, which may have an adverseeffect on our financial condition and results of operations.Discontinuation of any of the preferential tax treatments or imposition of any additional taxes could adversely affect our financial condition and results ofoperations.China passed a new PRC Enterprise Income Tax Law and its implementation rules, which became effective on January 1, 2008. The Enterprise IncomeTax Law (a) reduces the statutory rate of the enterprise income tax from 33% to 25%, (b) permits companies established before March 16, 2007 to continue toenjoy their existing tax incentives, adjusted by certain transitional phase-out rules promulgated by the State Council on December 26, 2007, and(c) introduces new tax incentives, subject to various qualification criteria. 26Table of ContentsThe Enterprise Income Tax Law and its implementation rules permit certain “high and new technology enterprises strongly supported by the state”which hold independent ownership of core intellectual property to enjoy a preferential enterprise income tax rate of 15% subject to certain qualificationcriteria. Autohome WFOE was recognized jointly by the Beijing Municipal Science and Technology Commission and other authorities as a “high and newtechnology enterprise,” or HNTE, on September 17, 2010 and therefore was eligible for the preferential 15% enterprise income tax rate from 2010 to 2012upon its filing with the relevant tax authority. The qualification as an HNTE is subject to annual evaluation and a three-year review by the relevantauthorities in China. We have obtained renewal of the HNTE qualification through 2015. However, should we lose this qualification for any reason,Autohome WFOE will no longer enjoy the 15% preferential tax rate, and the applicable enterprise income tax rate may increase to up to 25%.Our global income and the dividends that we may receive from our PRC subsidiaries, dividends distributed to our non-PRC shareholders and ADS holders,and gains recognized by such shareholders or ADS holders, may be subject to PRC taxes under the Enterprise Income Tax Law, which would have amaterial adverse effect on our results of operations.Under the Enterprise Income Tax Law and its implementation rules, both of which became effective on January 1, 2008, an enterprise establishedoutside of the PRC with “de facto management bodies” within the PRC is considered a resident enterprise and will be subject to the enterprise income tax atthe rate of 25% on its global income. The implementation rules define the term “de facto management bodies” as “establishments that carry out substantialand overall management and control over the manufacturing and business operations, personnel, accounting, properties, etc. of an enterprise.” The SATissued the Notice Regarding the Determination of Chinese-Controlled Offshore Incorporated Enterprises as PRC Tax Resident Enterprises on the Basis of DeFacto Management Bodies, or SAT Circular 82, on April 22, 2009. SAT Circular 82 provides certain specific criteria for determining whether the “de factomanagement body” of a Chinese-controlled offshore-incorporated enterprise is located in China. Although SAT Circular 82 only applies to offshoreenterprises controlled by PRC enterprises, not those controlled by PRC individuals, the determining criteria set forth in Circular 82 may reflect the SAT’sgeneral position on how the “de facto management body” test should be applied in determining the tax resident status of offshore enterprises, regardless ofwhether they are controlled by PRC enterprises or individuals. Although we do not believe that our legal entities organized outside of the PRC constitutePRC resident enterprises, it is possible that the PRC tax authorities could reach a different conclusion. In such case, we may be considered a PRC residententerprise and may therefore be subject to enterprise income tax at a rate of 25% on our global income. If we are considered a PRC resident enterprise andearn income other than dividends from our PRC subsidiaries, a 25% enterprise income tax on our global income could significantly increase our tax burdenand materially and adversely affect our cash flow and profitability.Pursuant to the Enterprise Income Tax Law and its implementation rules, dividends generated after January 1, 2008 and payable by a foreign-investedenterprise in China to its foreign investors, which are non-PRC tax resident enterprises without an establishment in China, or whose income has noconnection with their institutions and establishments inside China, are subject to withholding tax at a rate of 10%, unless any such foreign investor’sjurisdiction of incorporation has a tax treaty with China that provides for a different withholding arrangement. We are a Cayman Islands holding companyand we conduct our business through Autohome WFOE, which is 100% owned by Cheerbright, our wholly-owned subsidiary located in the British VirginIslands. The British Virgin Islands currently does not have any tax treaty with China with respect to withholding tax. As long as Cheerbright is considered anon-PRC resident enterprise and holds at least 25% of the equity interest of Autohome WFOE, dividends that it receives from Autohome WFOE may besubject to withholding tax at a rate of 10%. We are gradually migrating our advertising business from our VIEs to Autohome Media and its PRC subsidiaries.Autohome Media is 100% owned by Autohome HK, our wholly-owned subsidiary located in Hong Kong. Under the Arrangement between the PRC and theHong Kong Special Administrative Region on the Avoidance of Double Taxation and Prevention of Fiscal Evasion, effective on January 1, 2007, as long asAutohome HK is considered a non-PRC resident enterprise and holds at least 25% of the equity interest of its PRC subsidiaries, dividends that it receivesfrom its PRC subsidiaries may be subject to withholding tax at a preferential rate of 5% , if it is the beneficial owner of the dividends, upon receiving theapproval from the local tax authority. 27Table of ContentsAs uncertainties remain regarding the interpretation and implementation of the Enterprise Income Tax Law and its implementation rules, we cannotassure you that if we are regarded as a PRC resident enterprise, any dividends to be distributed by us to our non-PRC shareholders and ADS holders would notbe subject to any PRC withholding tax at a rate of up to 10%. Similarly, any gain recognized by such non-PRC shareholders or ADS holders on the sale ofshares or ADSs, as applicable, may also be subject to PRC withholding tax. If we are required under the Enterprise Income Tax Law to withhold PRC incometax on our dividends payable to our non-PRC enterprise shareholders and ADS holders, or on gains recognized by such non-PRC shareholders or ADSholders, such investors’ investment in our Class A ordinary shares or ADSs may be materially and adversely affected.Our financial condition and results of operations could be materially and adversely affected if recent value-added tax reforms in the PRC becomeunfavorable to our PRC subsidiaries or VIEs.On November 16, 2011, the Ministry of Finance and the State Administration of Taxation jointly issued the Implementation Rules of the Pilot Programof Value-Added Tax Reform and the Notice on the Pilot Program of Value-Added Tax Reform in Transportation and Certain Modern Service Industries inShanghai. These rules became effective on January 1, 2012, under which certain transportation and modern services companies in Shanghai will be subject tovalue-added tax, or VAT, in lieu of the otherwise applicable business tax of 5%. According to a circular jointly issued by the Ministry of Finance and theState Administration of Taxation on July 31, 2012, certain transportation and modern services companies incorporated in eight other provinces in the PRCwill be subject to the tax reform contemplated under these rules, or VAT Pilot Program. The VAT Pilot Program aims to resolve the double or multipletaxation issues caused by the interplay between the VAT and business tax systems and reduce the overall tax burden of the selected modern service industriesin the PRC. Depending on their taxable revenues, companies may be subject to VAT at a rate of 3% if they are qualified as small-scale VAT payers or 6% ifthey are recognized as general VAT payers for information technology services, advertising services and research, development and technology services theyprovide. As a result, instead of paying business taxes, Shanghai Advertising, one of our VIEs incorporated in Shanghai, was required to pay VAT at a rate of6% starting from January 1, 2012. In addition, our PRC subsidiaries and VIEs incorporated in Beijing were required to pay VAT at a rate of 6% starting fromSeptember 1, 2012. Guangzhou Advertising, one of our VIEs incorporated in Guangdong, was required to pay VAT at a rate of 6% starting from November 1,2012. Since August 2013, this tax pilot program has been expanded to other areas within China. The rules related to the VAT Pilot Program are still evolvingand the timing of the promulgation of the final tax rules or related interpretation is uncertain. Our financial condition and results of operations could bematerially and adversely affected if the interpretation and enforcement of these tax rules become materially unfavorable to our PRC subsidiaries and VIEs.The enforcement of the PRC Labor Contract Law and other labor-related regulations in the PRC may adversely affect our business and our results ofoperations.The PRC Labor Contract Law became effective and was implemented on January 1, 2008. It has reinforced the protection of employees who, under thePRC Labor Contract Law, have the right, among others, to have written labor contracts, to enter into labor contracts with no fixed terms under certaincircumstances, to receive overtime wages and to terminate or alter terms in labor contracts. According to the PRC Social Insurance Law, which becameeffective on July 1, 2011, and the Administrative Regulations on the Housing Funds, employees are required to participate in pension insurance, work-relatedinjury insurance, medical insurance, unemployment insurance, maternity insurance and housing funds, and the employers must pay all or a portion of thesocial insurance premiums and housing funds for such employees.As a result of these new laws and regulations designed to enhance labor protection, we expect our labor costs will increase. In addition, as theinterpretation and implementation of these new laws and regulations are still evolving, our employment practice may not at all times be deemed incompliance with the new laws and regulations. If we are subject to severe penalties or incur significant liabilities in connection with labor disputes orinvestigations, our business and results of operations may be adversely affected. 28Table of ContentsThe Public Company Accounting Oversight Board is not permitted to inspect independent registered public accounting firms operating in China,including our auditor, and as such, investors may be deprived of the benefits of such inspection.Our independent registered public accounting firm, as an auditor of companies that are traded publicly in the United States and a firm registered withthe Public Company Accounting Oversight Board (United States), or PCAOB, is required by the laws of the United States to undergo regular inspections byPCAOB to assess its compliance with the laws of the United States and professional standards. Because our independent registered public accounting firm islocated in China, a jurisdiction where PCAOB is currently unable to conduct inspections without receiving the required approval from the PRC authorities,our independent registered public accounting firm, like other independent registered public accounting firms operating in China, is currently not inspectedby PCAOB. Inspections of other firms that PCAOB has conducted outside of China have identified deficiencies in those firms’ audit procedures and qualitycontrol procedures, which may be addressed as part of the inspection process to improve future audit quality. Since PCAOB cannot conduct inspections ofindependent registered public accounting firms operating in China without receiving the required approval from the PRC authorities, it is more difficult toevaluate the effectiveness of our independent registered public accounting firm’s audit or quality control procedures. As a result, investors may be deprivedof the benefits of PCAOB inspections.Proceedings instituted by the SEC against certain PRC-based accounting firms, including our independent registered public accounting firm, could resultin financial statements being determined to be not in compliance with the requirements of the Exchange Act.In December 2012, the SEC brought administrative proceedings against five accounting firms in China, including our independent registered publicaccounting firm, alleging that they had refused to produce audit work papers and other documents related to certain other China-based companies underinvestigation by the SEC. On January 22, 2014, an initial administrative law decision was issued, censuring these accounting firms and suspending four ofthese firms from practicing before the SEC for a period of six months. The decision is neither final nor legally effective unless and until reviewed andapproved by the SEC. On February 12, 2014, four of these PRC-based accounting firms appealed to the SEC against this decision. In February 2015, each ofthe four PRC-based accounting firms agreed to a censure and to pay a fine to the SEC to settle the dispute and avoid suspension of their ability to practicebefore the SEC. The firms’ ability to continue to serve all their respective clients is not affected by the settlement. The settlement requires the firms to followdetailed procedures to seek to provide the SEC with access to Chinese firms’ audit documents via the CSRC. If the firms do not follow these procedures, theSEC could impose penalties such as suspensions, or it could restart the administrative proceedings. The settlement did not require the firms to admit to anyviolation of law and preserves the firms’ legal defenses in the event the administrative proceeding is restarted.In the event that the SEC restarts the administrative proceedings, depending upon the final outcome, listed companies in the United States with majorPRC operations may find it difficult or impossible to retain auditors in respect of their operations in the PRC, which could result in financial statements beingdetermined to not be in compliance with the requirements of the Exchange Act, including possible delisting. Moreover, any negative news about theproceedings against these audit firms may cause investor uncertainty regarding China-based, United States-listed companies and the market price of ourADSs may be adversely affected.If our independent registered public accounting firm was denied, even temporarily, the ability to practice before the SEC and we were unable to timelyfind another registered public accounting firm to audit and issue an opinion on our financial statements, our financial statements could be determined not tobe in compliance with the requirements of the Exchange Act. Such a determination could ultimately lead to the delay or abandonment of this offering,delisting of our ordinary shares from the NYSE or deregistration from the SEC, or both, which would substantially reduce or effectively terminate the tradingof our ADSs in the United States. 29Table of ContentsRisks Related to our ADSsThe market price for our ADSs has fluctuated and may be volatile.The daily closing trading prices for our ADSs ranged from US$29.00 to US$56.60 in 2014. The trading price for our ADSs may continue to fluctuate inresponse to factors including the following: • regulatory developments in our target markets affecting us, our advertisers or our competitors; • announcements of studies and reports relating to the quality of our services or those of our competitors; • changes in the economic performance or market valuations of other companies that provide online automotive advertising services; • actual or anticipated fluctuations in our quarterly results of operations and changes or revisions to our expected results; • changes in financial estimates by securities research analysts; • conditions in the online automotive advertising industry; • announcements by us or our competitors of new solutions, acquisitions, strategic relationships, joint ventures or capital commitments; • additions to or departures of our senior management; • fluctuations of exchange rates between the RMB and the U.S. dollar; • release or expiry of lock-up or other transfer restrictions on our outstanding Class A ordinary shares or ADSs; • sales or perceived potential sales of additional Class A ordinary shares or ADSs; and • pending or potential litigation or administrative investigation.In addition, the securities market has from time to time experienced significant price and volume fluctuations that are not related to the operatingperformance of any particular company. These market fluctuations may also have a material adverse effect on the market price of our ADSs.We are an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements.We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various requirementsapplicable to other public companies that are not emerging growth companies including, most significantly, not being required to comply with the auditorattestation requirements of Section 404 for so long as we are an emerging growth company. We have voluntarily complied with the requirements ofSection 404 and our independent auditor has provided an attestation report as of December 31, 2014. However, if we elect not to comply with such auditorattestation requirements, our investors may not have access to certain information they may deem important.The JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards untilsuch date that a private company is otherwise required to comply with such new or revised accounting standards. However, we have elected to “opt out” ofthis provision and, as a result, we will comply with new or revised accounting standards as required when they are adopted for public companies. Thisdecision to opt out of the extended transition period under the JOBS Act is irrevocable.If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, the market price for our ADSsand trading volume could decline.The trading market for our ADSs will depend in part on the research and reports that securities or industry analysts publish about us or our business. Ifwe do not establish and maintain adequate research coverage or if one or more of the analysts who covers us downgrades our ADSs or publishes inaccurate orunfavorable research about our business, the market price for our ADSs would likely decline. If one or more of these analysts ceases coverage of our companyor fails to publish reports on us regularly, we could lose visibility in the financial markets, which, in turn, could cause the market price or trading volume forour ADSs to decline. 30Table of ContentsBecause we do not expect to pay dividends in the foreseeable future, you must rely on price appreciation of our ADSs for return on your investment.We currently intend to retain most, if not all, of our available funds and any future earnings to fund the development and growth of our business. As aresult, we do not expect to pay any cash dividends in the foreseeable future. Therefore, you should not rely on an investment in our ADSs as a source of anyfuture dividend income.Subject to certain exceptions, our board of directors has complete discretion as to whether to distribute dividends. Even if our board of directorsdecides to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on, among other things, our future results ofoperations and cash flow, our capital requirements and surplus, the amount of distributions, if any, received by us from our subsidiaries, our financialcondition, contractual restrictions and other factors deemed relevant by our board of directors. Accordingly, the return on your investment in our ADSs willlikely depend entirely upon any future price appreciation of our ADSs. There is no guarantee that our ADSs will appreciate in value or even maintain theprice at which you purchased the ADSs. You may not realize a return on your investment in our ADSs and you may even lose your entire investment in ourADSs.Substantial future sales or perceived potential sales of our ADSs in the public market could cause the price of our ADSs to decline.Sales of our ADSs in the public market, or the perception that these sales could occur, could cause the market price of our ADSs to decline. All ADSssold in our equity offerings will be freely transferable without restriction or additional registration under the Securities Act. In addition, certain holders of ourordinary shares have the right to cause us to register under the Securities Act the sale of their shares. Registration of these shares under the Securities Actwould result in ADSs representing these shares becoming freely tradable without restriction under the Securities Act. Sales of these registered shares, in theform of ADSs, in the public market could cause the price of our ADSs to decline. Such sales also might make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem appropriate. In addition, if we pay for our future acquisitions in whole or in part withadditionally issued ordinary shares, your ownership interests in our company would be diluted and this, in turn, could have a material and adverse effect onthe price of our ADSs.Our dual-class share structure will limit your ability to influence corporate matters and could discourage others from pursuing any change of controltransactions that holders of our Class A ordinary shares and ADSs may view as beneficial.Our ordinary shares are divided into Class A ordinary shares and Class B ordinary shares. Holders of Class A and Class B ordinary shares have the samerights, including dividend rights, except for conversion and voting rights. Each Class B ordinary share may be converted into one Class A ordinary share byits holder at any time, while Class A ordinary shares cannot be converted into Class B ordinary shares under any circumstances. Each Class A ordinary shareis entitled to one vote. When the total number of ordinary shares held by Telstra Holdings Pty Limited and/or its affiliates, or the Telstra Shareholder,constitutes no less than 51% of all of our issued and outstanding ordinary shares, each Class B ordinary share is entitled to one vote; when the total numberof ordinary shares held by the Telstra Shareholder, drops below 51% but is no less than 39.3% of all of our issued and outstanding ordinary shares, each ClassB ordinary share will carry such number of votes that would result in the total number of ordinary shares held by the Telstra Shareholder carrying, in theaggregate, 51% of the voting rights represented by all of our issued and outstanding ordinary shares; when the total number of ordinary shares held by theTelstra Shareholder drops below 39.3% of all of our issued and outstanding ordinary shares, all Class B ordinary shares will be automatically converted intothe same number of Class A ordinary shares. As of March 20, 2015, Telstra beneficially owned 61,824,328 Class B ordinary shares, representing 55.6% of allof our issued and outstanding ordinary shares and 55.6% of our aggregate voting rights. This concentrated control will limit your ability to influencecorporate matters and could discourage others from pursuing any potential merger, takeover or other change of control transactions that holders of Class Aordinary shares and ADSs may view as beneficial. 31Table of ContentsYou may not have the same voting rights as the holders of our Class A ordinary shares and may not receive voting materials in time to be able to exerciseyour right to vote.Except as described in this annual report and in the deposit agreement, holders of our ADSs will not be able to exercise voting rights attaching to theClass A ordinary shares represented by our ADSs on an individual basis. Holders of our ADSs will appoint the depositary or its nominee as theirrepresentative to exercise the voting rights attaching to the Class A ordinary shares represented by the ADSs. Upon receipt of your voting instructions, thedepositary will vote the underlying ordinary shares in accordance with these instructions.Pursuant to our fourth amended and restated memorandum and articles of association, we may convene a shareholders’ meeting upon ten calendardays’ notice. If we give timely notice to the depositary under the terms of the deposit agreement (30 business days’ notice), the depositary will notify you ofthe upcoming vote and arrange to deliver our voting materials to you. We cannot assure you that you will receive the voting materials in time to instruct thedepositary to vote the Class A ordinary shares underlying your ADSs, and it is possible that you, or persons who hold their ADSs through brokers, dealers orother third parties, will not have the opportunity to exercise a right to vote. In addition, the depositary and its agents are not responsible for failing to carryout 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 maybe nothing you can do if the Class A ordinary shares underlying your ADSs are not voted as you requested. In addition, although you may directly exerciseyour right to vote by withdrawing the Class A ordinary shares underlying your ADSs, you may not receive sufficient advance notice of an upcomingshareholders’ meeting to withdraw the Class A ordinary shares underlying your ADSs to allow you to vote with respect to any specific matter.Your right to participate in any future rights offerings may be limited, which may cause dilution to your holdings, and you may not receive cash dividendsif it is illegal or impractical to make them available to you.We may from time to time distribute rights to our shareholders, including rights to acquire our securities. However, we cannot make rights available toyou in the United States unless we register both the rights and the securities to which the rights relate under the Securities Act or an exemption from theregistration requirements is available. Under the deposit agreement, the depositary will not make rights available to you unless both the rights and theunderlying securities to be distributed to ADS holders are either registered under the Securities Act or exempt from registration under the Securities Act. Weare under no obligation to file a registration statement with respect to any such rights or securities or to endeavor to cause such a registration statement to bedeclared effective and we may not be able to establish a necessary exemption from registration under the Securities Act. Accordingly, you may be unable toparticipate in our rights offerings and may experience dilution in your holdings.The depositary of our ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on Class A ordinary shares orother deposited securities after deducting its fees and expenses. You will receive these distributions in proportion to the number of Class A ordinary sharesyour ADSs represent. However, the depositary is not responsible if it decides that it is inequitable or impractical to make a distribution available to anyholders of ADSs. For example, the depositary may determine that it is not feasible to distribute certain property through the mail. Additionally, the value ofcertain distributions may be less than the cost of mailing them. In those cases, the depositary may determine not to distribute such property. We have noobligation to register under U.S. securities laws any ADSs, ordinary shares, rights or other securities received through such distributions. We also have noobligation to take any other action to permit the distribution of ADSs, ordinary shares, rights or anything else to holders of ADSs. This means that you maynot receive the distribution we make on our Class A ordinary shares or any value for them if it is illegal or impractical for us to make them available to you.These restrictions may have a material adverse effect on the value of your ADSs.You may be subject to limitations on the transfer of your ADSs.Your 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 whenit deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSsgenerally 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 anyrequirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason in accordance withthe terms of the deposit agreement. 32Table of ContentsYou may face difficulties in protecting your interests, and your ability to protect your rights through the U.S. federal courts may be limited because we areincorporated under Cayman Islands law, we conduct substantially all of our operations in China and substantially all of our directors and officers resideoutside the United States.We are incorporated in the Cayman Islands and conduct substantially all of our operations in China through our PRC subsidiaries and VIEs. Most ofour directors and officers reside outside the United States and a substantial portion of the assets of such directors and officers are located outside of the UnitedStates. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the Cayman Islands or in China in theevent that you believe that your rights have been infringed under the securities laws or otherwise. Even if you are successful in bringing an action of thiskind, the laws of the Cayman Islands and of China may render you 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, although the courts of the Cayman Islands will generallyrecognize and enforce a non-penal judgment of a foreign court of competent jurisdiction without retrial on the merits.Our corporate affairs are governed by our memorandum and articles of association, as amended and restated from time to time, and by the CompaniesLaw and common law of the Cayman Islands. The rights of shareholders to take legal action against us and our directors, actions by minority shareholdersand the fiduciary responsibilities of our directors are to a large extent governed by the common law of the Cayman Islands. The common law of the CaymanIslands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law, which providespersuasive, but not binding, authority. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not asclearly established as they would be under statutes or judicial precedents in the United States. In particular, the Cayman Islands has a less developed body ofsecurities laws than the United States and provides significantly less protection to investors. In addition, Cayman Islands companies may not have standingto initiate a shareholder derivative action in U.S. federal courts.As a result, our public shareholders may have more difficulty in protecting their interests through actions against us, our management, our directors orour major shareholders than would shareholders of a corporation incorporated in a jurisdiction in the United States.Our memorandum and articles of association contain anti-takeover provisions that could adversely affect the rights of holders of our Class A ordinaryshares and ADSs.Our fourth amended and restated memorandum and articles of association contain certain provisions that could limit the ability of others to acquirecontrol 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 preferredshares without action by our shareholders and to determine, with respect to any series of preferred shares, the terms and rights of that series. Preferred sharescould be issued quickly with terms calculated to delay or prevent a change in control of our company or make removal of management more difficult. If ourboard of directors decides to issue preferred shares, the price of our ADSs may fall and the voting and other rights of the holders of our Class A ordinary sharesand ADSs may be materially adversely affected. These provisions could have the effect of depriving our shareholders of the opportunity to sell their shares ata premium over the prevailing market price by discouraging third parties from seeking to obtain control of our company in a tender offer or similartransaction.We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable toU.S. domestic public companies.Because we qualify as a foreign private issuer under the Securities Exchange Act of 1934, as amended, or the Exchange Act, we are exempt from certainprovisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including: • the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q or current reports on Form 8-K; • the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under theExchange Act; • the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiderswho profit from trades made in a short period of time; and • the selective disclosure rules by issuers of material nonpublic information under Regulation FD. 33Table of ContentsWe are required to file an annual report on Form 20-F within four months of the end of each fiscal year. We intend to publish our results on a quarterlybasis as press releases, distributed pursuant to the rules and regulations of the NYSE. Press releases relating to financial results and material events will also befurnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to the SEC will be less extensive and less frequentcompared to that required to be filed with the SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections or information, whichwould be made available to you, were you investing in a United States domestic issuer.We may be classified as a passive foreign investment company for United States federal income tax purposes, which could subject United States investorsin the ADSs or Class A ordinary shares to significant adverse tax consequences.Under United States federal income tax law, we will be classified as a passive foreign investment company (“PFIC”) for any taxable year if either (i) atleast 75% of our gross income for the taxable year is passive income or (ii) at least 50% of the value of our assets (based on the average quarterly value of ourassets during the taxable year) is attributable to assets that produce or are held for the production of passive income (the “asset test”). Although the law in thisregard is not entirely clear, we treat our VIEs as being owned by us for United States federal income tax purposes because we control their managementdecisions and are entitled to substantially all of the economic benefits associated with such entities, and, as a result, we consolidate their results of operationsin our consolidated U.S. GAAP financial statements. Assuming we are the owner of our VIEs for U.S. federal income tax purposes and based on our currentincome and assets, including goodwill and unbooked intangibles, we presently do not expect to be classified as a PFIC for the current taxable year or futuretaxable years.While we do not anticipate becoming a PFIC for the current taxable year or the foreseeable future, no assurance can be given in this regard because thedetermination of whether we will be or become a PFIC is a fact-intensive inquiry made on an annual basis that depends, in part, on the composition of ourincome and assets. Fluctuations in the market price of our ADSs may cause us to become a PFIC for the current or subsequent taxable years because the valueof assets for the purpose of the asset test may be determined by reference to the market price of our ADSs from time to time (which may be volatile). Thecomposition of our income and assets may also be affected by how, and how quickly, we use our liquid assets. Under circumstances where our revenue fromactivities that produce passive income significantly increase relative to our revenue from activities that produce non-passive income, or where we determinenot to deploy significant amounts of cash for active purposes, our risk of becoming classified as a PFIC may substantially increase. In addition, because thereare uncertainties in the application of the relevant rules, it is possible that the Internal Revenue Service may challenge our classification of certain incomeand assets as non-passive or our valuation of our tangible and intangible assets, each of which may result in our becoming a PFIC for the current orsubsequent taxable years.If we were to be or become a PFIC, a U.S. Holder (as defined in “Item 10. Additional Information—E. Taxation—United States Federal Income TaxConsiderations—General”) may incur significantly increased United States income tax on gains recognized on the sale or other disposition of the ADSs orClass A ordinary shares and on the receipt of distributions on the ADSs or Class A ordinary shares to the extent such gain or distribution is treated as an“excess distribution” under United States federal income tax rules. Further, if we were a PFIC for any year during which a U.S. Holder held our ADSs orClass A ordinary shares, we generally would continue to be treated as a PFIC as to such U.S. Holder for all succeeding years during which such U.S. Holderheld our ADSs or Class A ordinary shares. Alternatively, U.S. Holders of PFIC shares can sometimes avoid the rules described above by making certainelections, including a “mark-to-market” election or electing to treat a PFIC as a “qualified electing fund.” However, U.S. Holders will not be able to make anelection to treat us as a “qualified electing fund” because, even if we were to be or become a PFIC, we do not intend to comply with the requirementsnecessary to permit U.S. Holders to make such election. Each U.S. Holder is urged to consult its tax advisor concerning the United States federal income taxconsequences of owning and disposing of ADSs or Class A ordinary shares if we are or become a PFIC. For more information, see “Item 10. AdditionalInformation—E. Taxation—United States Federal Income Tax Considerations—Passive Foreign Investment Company Rules.” 34Table of ContentsWe incur increased costs as a result of being a public company.We are a public company and expect to incur significant accounting, legal and other expenses that we did not incur as a private company. TheSarbanes-Oxley Act, including Section 404 therein relating to internal control over financial reporting, as well as rules subsequently implemented by theSEC and the NYSE, have detailed requirements concerning corporate governance practices of public companies. We expect these rules and regulationsapplicable to public companies to increase our accounting, legal and financial compliance costs and to make certain corporate activities more time-consuming and costly. Our management is required to devote substantial time and attention to our public company reporting obligations and othercompliance matters. We evaluate and monitor developments with respect to these rules and regulations, and we cannot predict or estimate the amount ofadditional costs we may incur or the timing of such costs. Our reporting and other compliance obligations as a public company may place a significant strainon our management, operational and financial resources and systems for the foreseeable future.In the past, shareholders of a public company often brought securities class action suits against the company following periods of instability in themarket price of that company’s securities. If we were involved in a class action suit, it could divert a significant amount of our management’s attention andother resources from our business and operations, which could harm our results of operations and require us to incur significant expenses to defend the suit.Any such class action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future. In addition, if a claim issuccessfully made against us, we may be required to pay significant damages, which could have a material adverse effect on our financial condition andresults of operations.ITEM 4. INFORMATION ON THE COMPANY A.History and Development of the CompanyAutohome was incorporated under the laws of the Cayman Islands under its former name, Sequel Limited, in June 2008 and adopted its current name inOctober 2011. Shortly after its inception, in June 2008, Autohome acquired all of the equity interests of the following entities: • Cheerbright International Holdings Limited, or Cheerbright, a British Virgin Islands company that operates autohome.com.cn, which waslaunched in 2005; • Norstar Advertising Media Holdings Limited, or Norstar, a Cayman Islands Company that, among other businesses, operated che168.com, whichwas launched in 2004; and • China Topside Limited, or China Topside, a British Virgin Islands company.Our largest shareholder is Telstra Holdings, a wholly-owned subsidiary of Telstra Corporation Limited, the leading diversified telecommunicationscompany in Australia and a Fortune Global 500 company.To sharpen our business focus on the automotive industry, we completed a corporate reorganization in 2011 by spinning off our then subsidiaries thatwere not involved in our core business. In March 2011, we completed the transfer of the che168.com business from Norstar to Cheerbright. In June 2011, inconnection with our strategy to focus on serving the automotive industry in China, we contributed our entire equity interests in Norstar and China Topside,which serve the information technology industry, to Sequel Media, our subsidiary in the Cayman Islands. We then immediately distributed shares of SequelMedia to our shareholders. Since the spin-off, we have focused on serving the automotive industry in China through our autohome.com.cn and che168.comwebsites.On March 16, 2012, we established a new wholly-owned subsidiary, Autohome HK, in Hong Kong. Autohome HK has no material business operationas of the date of this annual report.In October 2013, Autohome HK acquired Prbrownies Marketing Limited, a Hong Kong advertising and marketing company, which we renamedAutohome Media Limited, or Autohome Media, in March 2014. Autohome Media has engaged in the advertising business outside the PRC for more thanthree years, and is therefore qualified to directly invest in a PRC company providing advertising services in accordance with PRC law. Autohome Media hasestablished subsidiaries in Beijing, Shanghai, Guangzhou and Tianjin. We are gradually migrating our advertising business from our VIEs to AutohomeMedia and its subsidiaries, a transition we expect to complete in the next two to three years. 35Table of ContentsIn December 2013, we completed our initial public offering of 8,993,000 ADSs, representing 8,993,000 Class A ordinary shares, and our ADSs werelisted on the NYSE under the symbol “ATHM.”In November 2014, we completed a public offering, or the 2014 Offering, in which we offered and sold 2,424,801 ADSs, and our selling shareholderssold 7,220,858 ADSs, representing 2,424,801 Class A ordinary shares and 7,220,858 Class A ordinary shares, respectively.Our principal executive offices are located at 10th Floor Tower B, CEC Plaza, 3 Dan Ling Street, Haidian District, Beijing 100080, the People’sRepublic of China. Our telephone number at this address is +86 (10) 5985 7001. Our registered office in the Cayman Islands is located at the office of CodanTrust Company (Cayman) Limited, Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands. Our agent for service ofprocess in the United States is Law Debenture Corporate Services Inc., 400 Madison Avenue, 4th Floor, New York, New York 10017.See “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Capital Expenditures” for a discussion of ourcapital expenditures and divestitures. B.Business OverviewOverviewWe are the leading online destination for automobile consumers in China. Through our two websites, autohome.com.cn and che168.com, and ourmobile applications, we deliver comprehensive, independent and interactive content to automobile buyers and owners. The number of our average dailyunique users who access our websites via mobile devices and the number of average daily unique users of our mobile applications amounted toapproximately 4.3 million and 3.4 million, respectively, in December 2014. We have developed a strong and well-recognized brand. Our (“Autohome”) brand has been the most searched automotive-related keyword during substantially the entire period since July 2011 on Baidu.com, theleading Chinese language internet search engine.Our ability to reach a large and engaged user base of automobile consumers has made us a preferred platform for automakers and dealers to conducttheir advertising campaigns. We generate substantially all of our revenues from online advertising services and dealer subscription services. We have a highpenetration rate in the automaker market, with approximately 80% of over 80 automakers operating in China having advertised on our websites in each of2012, 2013 and 2014. In addition, a large and rapidly growing number of dealers are purchasing our advertising services and subscription services, throughwhich they showcase and market their inventories on our websites.We believe our focus on user experience, innovation and high-quality content distinguishes us from our competitors and is the foundation for ourlong-term success. Content we provide to our users includes: • Professionally produced content. We have a dedicated editorial team focused on serving consumers throughout the automobile ownership lifecycle. We conduct independent and professional evaluations of vehicle models from our users’ perspective, rather than relying only oninformation provided by automakers. In 2014, we published a daily average of over 440 articles, 1,500 photos and 20 video clips. • User generated content. We have the largest and most active online community of automotive consumers in China, with over 12.4 millionregistered users and over 1,830 user forums as of December 31, 2014, and an average of over 3.5 million daily unique visitors to our user forumsin 2014. • Automobile library. We have one of the most comprehensive online automobile libraries in China with over 18,900 vehicle modelconfigurations and approximately 2.8 million photos as of December 31, 2014. We believe our automobile library covers all passenger carmodels released in China since 2005. • Automobile listing information. We feature extensive and up-to-date listings of both new and used automobiles on our websites. As ofDecember 31, 2014, we had over 3.6 million new automobile listings and approximately 2.3 million used automobile listings in our database. 36Table of ContentsOur professionally produced and user generated content, comprehensive automobile library and extensive automobile listing information haveattracted a large and engaged user base. This, in turn, represents a highly relevant audience that is receptive to automotive advertising. We believe that thisuser base, together with our nationwide advertising platform, targeted advertising solutions and value-added services, has led to our rapid growth and has laidthe foundation for our continuing success.We develop our business model and technology platforms to provide services for the complete consumer automobile ownership life cycle. We havebuilt an online automotive media and transaction platform that captures critical stages of the sales funnel, starting from product awareness, to purchase desireinitiation and sales leads generation. We are further developing our business model to include the generation of actual sales. For instance, in June 2014 welaunched Autohome Mall, an online transaction platform that we believe will allow us to be a long-term transaction facilitator as we develop our transactionbusiness. We have also been leveraging our comprehensive platform to capture additional revenue opportunities in used car sales and aftermarket services,such as automobile maintenance and replacement.We have experienced significant revenue growth while maintaining profitability. Our net revenues increased from RMB732.5 million in 2012 toRMB1,216.5 million in 2013 and RMB2,132.9 million (US$343.8 million) in 2014, representing a CAGR of 70.6%. Our net income increased fromRMB212.9 million in 2012 to RMB456.2 million in 2013 and RMB748.7 million (US$120.7 million) in 2014, representing a CAGR of 87.5%.Our Business Model and Technology PlatformsWe are the leading online destination for automobile consumers in China. Over the past several years, we have developed the largest and most activeonline community of automobile consumers in China. We serve two distinct groups: our large and engaged user base of automobile consumers and ourcustomers that include automakers, dealers and other auto-related products and service providers. Our business model and technology platforms seek toeffectively link each stage of our users’ automobile ownership life cycle with the corresponding stage of our customers’ sales cycle.We have built an online automotive media and transaction platform that capture critical stages of the sales funnel, starting from product awareness, topurchase desire initiation and to sales leads generation. We are further developing our business model to also include the generation of actual sales. Toinitiate product awareness and purchase desire, we utilize our comprehensive, independent and interactive content through our websites that are accessiblethrough PCs and mobile devices and through our mobile applications to create strong user traffic and user engagement and stickiness. As our user trafficgrows, we focus on generating sales leads through engaging our users with our promotional activities, including our dealer yellow page business whichconsists of dealer advertising services and dealer subscription services. We also launched several promotional initiatives such as “group buy initiative” toleverage our broad user base in our online social community and convert them into higher quality leads for our dealers. Finally we aim to provide atransaction platform to facilitate automobile buyers’ purchases directly on our platform. In June 2014, we launched Autohome Mall, an online transactionplatform. Autohome Mall is a one-stop platform for users to review automotive-related information, purchase coupons offered by automakers or dealers fordiscounts and make purchases to complete the transaction. In 2014, we conducted several marketing events on Autohome Mall, such as the “Group Buy”initiative, “Double 11” and “Double 12” online sales promotional campaigns which generated quality sales leads for our dealer customers.In addition, we have been leveraging our comprehensive platform to capture additional revenue opportunities in connection with the remaining stagesof the automobile ownership life cycle. In February 2015, we introduced a mobile application for users to purchase car care and maintenance services throughthe vendors qualified by us in Beijing. We developed a used automobile listing platform underlying our dedicated used car website che168.com, whichtargets the automobile replacement stage by allowing both used automobile dealers and individuals to list their used automobiles on our websites. We are yetto generate significant revenues from services in connection with Autohome Mall, our automotive aftermarket services platform, or used-automobile listingplatform. 37Table of ContentsOur Services for Automobile ConsumersOur service offerings for users mainly include our high performance websites, our professional and user generated content, our interactive onlinecommunity and our automotive aftermarket services platform.Our WebsitesOur user-centric approach has successfully attracted the largest user base of automobile consumers in China to our websites. Our users are significantlymore affluent, well-educated and active than the general internet users in China. The average monthly personal income of our users was RMB9,998 asopposed to RMB2,392 for general internet users in China, according to a survey conducted by a third-party research firm in September 2013, or the UserSurvey. Approximately 71% of our users held post-secondary degrees and above, according to the User Survey, compared to 20% for the general internetusers in China, according to the 32nd survey report issued by the CNNIC in July 2013. Approximately 97% of our users were between ages of 18 and 49,according to the User Survey. Our autohome.com.cn website targets a wide spectrum of automobile consumers with a focus on new automobiles. To capitalizeon the growing used automobile market in China, we redesigned our che168.com website, which in the past had features and user base similar to ourautohome.com.cn website, to focus on used automobiles. The re-designed che168.com website was launched in October 2011.Most of the content on our websites is tagged by vehicle models to facilitate easy user access. We have developed and are continuing to improve ouruser intelligence engine to analyze user browsing behavior and prioritize content that the user is likely to find relevant and interesting. A user who searchesfor or navigates to a page for a specific vehicle model will be provided with links to relevant content such as vehicle specifications, photos and video clips,reviews, competing vehicle models, and listing and promotional information from local dealers. Users can easily compare competing vehicle models andbrands for price and specifications to make informed purchase decisions. In addition, these user behavior data are summarized and analyzed on a regular basisto improve user experience and provide consumer intelligence to our advertisers.To provide a superior experience to our users, we label sponsored content clearly to maintain objectivity. We do not allow our advertisers to have anyinfluence over our content rankings, such as our “Most-Viewed Models,” which are generated solely from data relating to the number of times users navigateto the relevant pages. We do not use distracting pop-up advertisements which may adversely affect user experience.Our Mobile Website and ApplicationsOur content can be accessed on our websites through PCs and mobile devices and on our mobile applications. We have made significant efforts inrecent years to optimize the mobile version of our website to display our content and develop new mobile applications to capture a greater number of usersthat access our services through mobile devices. For example, the numbers of average daily unique users who access our website via mobile devicesamounted to 4.3 million in December 2014. We were among the earliest in our industry in China to introduce both iOS- and Android-based applications toallow users to easily access our content. As of December 31, 2014, we had nine iOS-based applications and eight Android-based applications. Our mobileapplications have generated significant user interest. In 2014, our iOS- and Android-based applications were downloaded approximately 42.1 million times,and the number of average daily unique users of our mobile applications amounted to approximately 3.4 million in December 2014. Users can convenientlyenjoy features available on our websites from their mobile devices, such as reading articles, checking vehicle prices and model parameters, viewing pictures,and participating in forum discussions. In addition, through our location-based services, our users are able to obtain vehicle pricing information directly fromtheir nearby dealers in approximately 330 cities in China.Our ContentThe foundation of our websites and mobile applications is a large amount of professionally produced content, a comprehensive automobile library andextensive automobile listing and promotional information organized around our automotive information database. In addition, our automotive informationdatabase includes a significant amount of user generated content originating from our user forums. 38Table of ContentsProfessionally produced contentOur professionally produced content is created by our dedicated editorial team and includes automobile-related articles and reviews, pricing trends invarious local markets, and photos and video clips. This content covers topics throughout the automobile ownership life cycle, from automobile research,selection and purchase to ownership and maintenance and to eventual replacement. Our review writers obtain first-hand experiences by test-driving manynewly released vehicle models provided by various automakers. Our editorial team at our Beijing headquarters and sales offices located in 72 citiesthroughout China work closely with automakers, dealers and other industry participants to create automobile related articles. Although automakers mayprovide us with sample vehicles to test drive, we review all new automobiles independently, based upon our teams’ experience and from our users’perspective.In 2014, we published a daily average of over 440 articles, 1,500 photos and 20 video clips. We follow well-developed guidelines in creating andpublishing professional content with attention to details, such as the angles of photos, image sizes and the time between industry events and the relevantarticle publication. These practices enable us to streamline our editorial process and quickly and efficiently make national and local content available to ourusers, while ensuring that we maintain high quality standards and a consistent user experience.Automobile libraryWe have one of the most comprehensive automobile libraries within our industry in China with over 18,900 vehicle model configurations andapproximately 2.8 million photos as of December 31, 2014. We believe our automobile library covers all passenger car models released in China since 2005.It includes a broad range of specifications covering performance levels, dimensions, powertrains, vehicle bodies, interiors, safety, entertainment systems andother unique features, as well as manufacturers’ suggested retail prices. The scale of content in our automobile library, which we believe would requiresignificant time, expertise and expense to replicate, makes it a valuable tool for our users in researching both new and used automobiles.Automobile listingsOur database also includes a large amount of new and used automobile listings and promotional information. As of December 31, 2014, we had over3.6 million new automobile listings and approximately 2.3 million used automobile listings in our database. With the comprehensive and continuouslyupdated listing information, users can conveniently search for up-to-date information of automobile models without having to visit each individual dealer attheir local showrooms.User forums and user generated contentOur platform hosts an open and vibrant community of automobile consumers, from first-time buyers to sophisticated automobile enthusiasts. Our usercommunity centers around our discussion forums, which are organized based on vehicle models, cities and regions, and provides users an easy and intuitiveway to access various topics of interest. Registered users utilize our discussion forums to share a wide range of automotive experiences such as drivingexperiences and usage and maintenance tips. Users also frequently provide reviews of automobiles or automotive products and services, post questions andreceive answers from fellow forum members. We continued to enhance user engagement and participation in the content generation and delivery process. Forexample, we expanded our user review platform by allowing users to add or modify their views and insights on a continuous basis. Approximately 44% of ourusers post on our website at least twice a week, according to the User Survey.We strive to ensure the credibility, appeal and usefulness of our forums by identifying verified automobile owners and empowering selected registeredusers as forum moderators. Our verified automobile owners are registered users whose vehicle ownership has been confirmed through various channels. Ourforum moderators are generally active registered users with significant forum post counts whom we have identified as being reputable automobile enthusiastswithin our online community. 39Table of ContentsOur registered users increased by more than 4.0 million in 2014 with 156.4 million additional pieces of user generated content added to our userforums during 2014. As of December 31, 2014, we had over 12.4 million registered users and 597.1 million cumulative posts in our user forums. As our userbase has grown and our user engagement and forum activity has increased, our database of user generated content has expanded, which in turn has attractedmore users. Furthermore, this feedback effect on our growing user base has also enhanced the effectiveness of our advertisements and therefore the value ofour advertising services, allowing us to attract more advertisers and increase revenues from existing advertisers.Our Advertising Services for Automakers and DealersLeveraging our large and rapidly growing user base and utilizing the user intelligence data we have collected, we provide our advertisers with a broadrange of advertising solutions and tools. Our advertisers are comprised primarily of automakers and new automobile dealers. As millions of consumers visitour websites for automotive information, we have become an increasingly important medium for automakers and dealers to conduct their advertisingcampaigns.Automakers typically utilize our advertising services for brand promotion, new model releases and sales promotions. We believe we are well-positioned to provide solutions to meet all of these needs. Our large and growing automobile purchase- and ownership-oriented user base provides a broadreach for automakers’ marketing messages. Our automotive content delivery and advertisement management platform allows us to segment our user base in anumber of different dimensions, including by users’ geographical location and specific automotive interests, and enables us to place advertisements withtargeted audiences likely to be receptive to particular advertising messages.Leveraging our large user base and extensive forum posting data, we provide automakers with more reliable and timely business insights thantraditional customer surveys or other post-sales feedback channels. For instance, we analyze user posts in our forums to evaluate consumer response. Inaddition, we organize various types of offline national or local events for our automaker and dealer customers through our online marketing campaigns anduser forum activities to complement our advertising services and dealer subscription services. For example, we help automakers increase their brandawareness and execute sales promotions by organizing large-scale test driving activities for specific automobile models in multiple cities across China. Userscan conveniently participate and interact with automaker representatives through our forums.Dealer Subscription ServicesOur dealer subscription services allow dealers to market their inventory and services through our websites, extending the reach of their physicalshowrooms to potentially millions of internet users in China and generating sales leads for them. Our dealer subscription services are delivered through ourdealership information system on a fixed-fee basis, typically for a period of one year. Through the web-based interface of our dealership information system,dealers can create online showrooms hosted on our websites and upload and manage their automobile inventories, pricing and promotional information.Potential automobile purchasers can interact with our dealer subscribers online or through toll free numbers provided by us to inquire for more detailedinformation and schedule test drives. Our dealer subscribers can track all the interactions with their customers originating from our websites, analyze thenumber of sales leads and assess the effectiveness of their marketing activities.We provide automobile consumers trend analysis services for our automaker and dealer customers that helps them analyze data in specific geographicmarkets such as consumer purchasing behavior characteristics and their brand strength in comparison to that of their competitors. We believe the consumerintelligence gathered from our large user base reflects the current automotive market trends in China and provides excellent market insight to our automakerand dealer customers. We continue to develop our dealer subscription services and plan to implement additional services in the future, which we believe willallow us to reach additional dealers by enabling us to offer basic and premium subscriptions at different price levels.We also offer some basic functions of our dealer subscription services to automobile dealers for free. Registered dealers can create their onlineshowrooms and upload inventory and pricing information on our websites. However, their listings have lower priority than those of our dealer subscriberswhen being displayed in response to users’ inquiries and do not have the user interaction features. We believe that these free services allow more dealers tounderstand and appreciate the benefits our subscription services may bring to them, which helps us convert them into dealer subscribers. 40Table of ContentsAutomotive Aftermarket Services PlatformOur large and rapidly growing automotive-oriented user base has attracted an increasing number of providers of auto-related services to our websites.We have sought to capitalize on this trend to better fulfill our goal of serving users throughout the automobile ownership life cycle. In February 2015, weintroduced a mobile application for users to purchase car care and maintenance services through the vendors qualified by us in Beijing. These services do notcurrently contribute to our total net revenues.Used Automobile ListingsWe launched our used automobile listing platform in late 2009. Our used automobile listings services allow used automobile dealers and individualsto market their automobiles for sale on our websites. Our used automobile listing database has been expanding rapidly. We had approximately 2.3 millionused automobile listings in our database as of December 31, 2014.In an effort to capitalize on the used automobile market as it matures, in October 2011, we redesigned our che168.com website as a platform dedicatedto used automobiles. The redesigned website features content, listings and interactive functionality similar to our autohome.com.cn website, but focusesprimarily on used automobiles. We also developed a mobile application for our used automobile services. In 2014, we continued to develop and enhance ourused car sales platform and began to provide advertisement services and dealer subscription services in selected cities.The used automobile market still remains at a nascent stage of development and the revenue generated from our used automobile listing services wasnot significant for the year ended December 31, 2014.Our Advertisers and Dealer SubscribersThe vast majority of our current end-customers are automakers or new automobile dealers. In each of 2012, 2013 and 2014, approximately 80% of over80 automakers in China, which includes independent Chinese automobile manufacturers, joint ventures between Chinese and international automobilemanufacturers and international automobile manufacturers that sell their cars made outside of China, purchased online advertisements from us. Our top fiveadvertisers, all of whom were automakers, contributed 20.0%, 15.0% and 9.8% of our total net revenues in 2012 and 2013 and 2014, respectively. No singleautomaker contributed more than 10% of our net revenues in 2012, 2013 and 2014. In addition, a large number of automobile dealers utilize our onlineadvertising services to improve their brand awareness, promote their inventories and generate sales leads. We also offer automobile dealer subscriptionservices to enable dealers to establish and maintain online showrooms of automobiles with pricing and promotional information on autohome.com.cn.As is customary in China, we sell our advertising services and solutions primarily through third-party advertising agencies that represent theautomakers and dealers. Our top ten advertising agencies accounted for 51.7%, 44.0% and 38.7% of our total net revenues in 2012, 2013 and 2014,respectively. In 2012, 2013 and 2014, our largest agency accounted for 9.0%, 6.7% and 5.9% of our total net revenues, respectively. No other agencyaccounted for more than 10% of our total net revenues in these years. We typically enter into individual advertising agreements with the third-partyadvertising agencies. Depending on the type of advertiser and content, the duration of an advertising agreement ranges from one to twelve months, with themajority being one to three months. We typically require payment be made within 90 days after the delivery of our services, but for contracts that last forthree months or longer, installment payments are typically required. Our agreements with certain major advertising agencies contain a “most-favored priceterm” provision, through which we undertake to provide the advertising agencies with the best price we give to any other agencies or advertisers.Although we sell our advertising services and solutions to third-party advertising agencies, we consider the automakers and dealers, who are the maindecision makers as to whether to place advertisements on our websites, to be our end-customers. As a result, our sales efforts focus primarily on automakersand dealers. However, through direct contact between our sales team, advertisers and advertising agencies, we are able to maintain good relationships withexisting advertisers and their advertising agencies, which in turn may identify and refer new advertisers to us. See “—Our Advertising Services forAutomakers and Dealers.” 41Table of ContentsTechnology and Product DevelopmentOur technologies and infrastructure are critical to our success. We follow a user-centric strategy for our system architecture and have developed robustand scalable technology platforms with sufficient flexibility to support our rapid growth.A key component of our user-centric strategy is our user intelligence engine which we have developed and are continually enhancing. Our userintelligence engine allows us to rapidly gather user intelligence by analyzing large amounts of data from many sources throughout our content productionsystem. We can utilize such user intelligence data to personalize user interfaces, associate and understand the relationship of information from differentsources and facilitate interactions among users and various elements on our websites. It also helps us recommend suitable products, services and userconnections to our users. Through our user intelligence engine, we can engage our users more closely by providing them with relevant content. We are alsoable to provide precision marketing services to our automakers, dealers and other automotive related customers so that they can deliver relevantadvertisements to targeted users who are more receptive to such marketing information.We distribute our web content to numerous network nodes close to our users by utilizing a third-party content delivery network, allowing most of ouruser communications to bypass internet congestion. With our technological expertise, we manage third-party and in-house content delivery networks toenhance our website responsiveness and improve user experience. As such, we believe our websites have a performance advantage over other automotivewebsites.We invested heavily in mobile technologies and were among the earliest in our industry in China to introduce a mobile version of our websites andboth Apple iOS- and Android-based applications to allow our users to easily access our content. We have built up a team of 83 research and developmentpersonnel as of December 31, 2014, to focus exclusively on the development of our mobile websites and applications and to explore new business modelsand opportunities through mobile technology. We plan to continue to leverage our mobile technology to develop more applications for Apple iOS andAndroid platforms focusing on convenience, real-time interaction and location based services.We had an experienced product development team of 475 engineers as of December 31, 2014. Our past innovation has focused on helping usersresearch, select and purchase suitable automobiles through our websites. We plan to develop additional products and services to further explore theadditional business opportunities inherent in the maintenance and replacement stages of the automobile ownership cycle.Sales and MarketingOur nationwide in-house team of sales representatives sells our services to advertisers. As of December 31, 2014, we had 975 sales and marketingrepresentatives operating our physical sales office network spanning 73 cities across China and visiting customers in an additional 77 satellite cities, asignificant increase from December 31, 2009, when we had physical sales offices in 17 cities. We have a prudent expansion plan and we typically only opennew physical sales offices in a city after we have already established a sufficient customer base in the area. In cities where we do not yet have a customer base,we provide sales coverage by telephone. Our Beijing-based telephone sales team provided sales coverage to other cities of our city channels in which we didnot maintain physical offices. Our sales team also provides ongoing customer support to advertisers and dealer subscribers. In the past years, we havesuccessfully expanded our market presence in the first- and second-tier cities in China. We plan to expand our sales and marketing efforts into third- andfourth-tier cities that we believe are under-served markets with significant opportunities for new automobile sales growth.Our sales team is equipped with specialized automotive industry knowledge and expertise, understands our customers’ needs and is trained to helpthem develop their advertising strategies. Sales employees work directly with our advertisers and advertising agencies that represent advertisers. Our salesteams also maintain close relationships with our dealer customers by, among other things, providing continuing training, support and ongoing customerservice for our dealer subscriptions services.Compensation for our salespeople includes a base salary and incentives based on the sales revenues they generate. We provide regular in-house andexternal education and training to our sales team to help them provide current and prospective customers with information on, and the advantages of using,our services. We believe that our performance-linked compensation structure and career-oriented training help to retain and motivate our salespeople. 42Table of ContentsWe believe brand recognition is important to our ability to attract users. We focus our sales and marketing efforts through search engines, navigationwebsites and mobile platforms to retain and strengthen our leading position in terms of user reach. For example, we cooperate with application stores andmobile browsers to promote our mobile applications and our websites. In July 2014, we entered into an arrangement with Baidu for a period of 12 months toprovide automotive-related information, such as model descriptions, pricing information and other useful data for potential car buyers, to enhance the userexperience of automotive-related searches on PCs using “Aladdin,” Baidu’s open platform initiative. We also conduct promotional campaigns on navigationwebsites from time to time.Intellectual PropertyOur intellectual property includes trademarks and trademark applications related to our brands and services, software copyrights, trade secrets and otherintellectual property rights and licenses. We seek to protect our intellectual property assets and brands through a combination of trademark, patent, copyrightand trade secret protection laws in the PRC and other jurisdictions, as well as through confidentiality agreements and other measures.We hold and (both mean “auto home” in English) and “AUTOHOME®” trademarks in China. In addition, as at December 31, 2014,we held 181 pending trademark applications and 47 registered trademarks in China. As at the same date, we had 41 registered domain names, including ourmain website domain names, autohome.com.cn and che168.com, and 63 pending patent applications.CompetitionWe compete with China’s automotive websites, such as pcauto.com.cn and bitauto.com, automotive channels of major internet portals, such as Sinaand Sohu, and traditional forms of media such as television and magazines. We compete primarily on the basis of user traffic, user engagement and brandrecognition, which drive the acquisition and retention of automakers and dealers as advertisers and their spending on our advertising services. We re-designed our che168.com website in October 2011 and converted it into our dedicated used car platform. Our re-designed che168.com website facescompetition from other used car websites, such as 51auto.com, taoche.com and youxinpai.com. As we develop our transaction business, we may facecompetition from other websites engaged in the online automobile transaction business, such as bitauto.com and tmall.com. Competition will be centered onfactors similar to those affecting our current automotive advertising and dealer subscription services. See “Item 3. Key Information—D. Risk Factors—RisksRelated to Our Business and Industry—We face significant competition, and if we fail to compete effectively, we may lose market share and our business,prospects and results of operations may be materially and adversely affected.”SeasonalitySeasonal fluctuations have affected, and are likely to continue to affect, our business. We generally generate less revenue from advertising services anddealer subscription services in the first quarter of each year due to the Chinese New Year holidays and reduced customer activities during this period. Ouradvertising services typically increase in the second quarter as automakers increase marketing activities in connection with China’s major auto shows, and inthe fourth quarter as advertisers seek to complete year-end marketing campaigns. Our cost of revenues, sales and marketing expenses and general andadministrative expenses tend to follow the trend of our business growth. See also “Item 3. Key Information—D. Risk Factors—Risks Related to Our Businessand Industry—Our business is subject to fluctuations, which makes our results of operations difficult to predict and may cause our quarterly results ofoperations to fall short of expectations.”Legal ProceedingsFrom time to time, we may be subject to various claims and legal actions that arise in the ordinary course of our business. There are currently no legalproceedings that, in the opinion of our management, may have a material adverse effect on our business and results of operations.Disclosure of Iran-related Activities under Section 13(r) of the Securities Exchange Act of 1934Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 added Section 13(r) to the Securities Exchange Act of 1934, asamended, or the Exchange Act. Section 13(r) requires an issuer to disclose in its annual or quarterly reports, as applicable, whether it or any of its affiliatesknowingly engaged in certain activities, transactions or dealings relating to Iran or with designated natural persons or entities involved in terrorism or theproliferation of weapons of mass destruction. Disclosure is required even where the activities, transactions or dealings are conducted outside the United Statesby non-U.S. affiliates in compliance with applicable law, whether or not the activities are sanctionable under U.S. law. 43Table of ContentsAs of the date of this report, we are not aware of any activity, transaction or dealing by us or any of our affiliates for the year ended December 31, 2014that requires disclosure in this report under Section 13(r) of the Exchange Act, except as set forth below with respect to our affiliate, Telstra CorporationLimited, or Telstra.Telstra has informed us that it is party to roaming, interconnection and wholesale voice agreements with the following telecommunication providers inIran, some of which may be government-controlled entities: Mobile Company of Iran, Rafsanjan Industrial Complex Islamic Cooperative Company (alsoknown as Taliya) and Telecommunication Infrastructure Company of Iran. These agreements provide Telstra’s customers with service in areas where Telstradoes not own networks and our counterparties’ customers with service on Telstra’s networks. As Telstra’s fiscal year ends on June 30, Telstra does notnormally prepare gross revenue or net profit on the basis of a year ended on December 31. However, for the year ended December 31, 2014, it is estimated thatgross revenues generated by roaming, interconnection and wholesale voice agreements with Iranian entities were A$46,455 (US$37,968) and net profits wereA$25,045 (US$20,469), in this connection. In addition, Telstra provides telecommunications services in the ordinary course of business to the Embassy ofthe Islamic Republic of Iran in Australia. Gross revenues and net profits generated by these services are estimated to be less than A$30,000 (US$24,519) forthe year ended December 31, 2014.We understand that Telstra intends to continue these activities.The financial data in this section has been translated from Australian dollars into U.S. dollars using the noon buying rate for December 31, 2014 ofAUD$1.00=US$0.8173.PRC RegulationThis section summarizes the principal PRC laws and regulations relevant to our business and operations.Regulations on Value-Added Telecommunications ServicesOn September 25, 2000, the State Council promulgated the Telecommunications Regulations, or the Telecom Regulations, which draw a distinctionbetween “basic telecommunication services” and “value-added telecommunication services.” The Telecommunications Regulations were subsequentlyrevised on July 29, 2014. Internet content provision services, or ICP services, is a subcategory of value-added telecommunications businesses. Under theTelecom Regulations, commercial operators of value-added telecommunications services must first obtain an operating license from the MIIT or itsprovincial level counterparts.On September 25, 2000, the State Council issued the Administrative Measures on Internet Information Services, or the Internet Measures. The measureswere subsequently revised on January 8, 2011. According to the Internet Measures, commercial ICP service operators must obtain an ICP license from therelevant government authorities before engaging in any commercial ICP operations within the PRC.On March 1, 2009, the MIIT promulgated the Administrative Measures on Telecommunications Business Operating License, or the Telecom LicenseMeasures, which took effect on April 10, 2009. The Telecom License Measures set forth the types of licenses required to operate value-addedtelecommunications services and the qualifications and procedures for obtaining such licenses. For example, an ICP operator providing value-added servicesin multiple provinces is required to obtain an inter-regional license, whereas an ICP operator providing the same services in one province is required toobtain a local license.To comply with these PRC laws and regulations, both of our ICP operators, Autohome Information and its wholly-owned subsidiary, HongyuanInformation, hold ICP licenses. Autohome Information also holds a value-added telecommunications business operation license for provision of mobilenetwork information services.Restrictions on Foreign Ownership in Value-Added Telecommunications ServicesAccording to the Provisions on Administration of Foreign Invested Telecommunications Enterprises, or the FITE Provisions, promulgated by the StateCouncil on December 11, 2001 and amended on September 10, 2008, the ultimate foreign equity ownership in a value-added telecommunications serviceprovider must not exceed 50%. Moreover, for a foreign investor to acquire any equity interest in a value-added telecommunication business in China, it mustdemonstrate a good track record and experience in operating value-added telecommunications services. Foreign investors that meet these requirements mustobtain approvals from the MIIT and the Ministry of Commerce or its authorized local branches, and the relevant approval application process usually takessix to nine months. 44Table of ContentsOn July 13, 2006, the MIIT issued the Notice of the MIIT on Intensifying the Administration of Foreign Investment in Value-addedTelecommunications Services. This notice prohibits domestic telecommunication service providers from leasing, transferring or selling telecommunicationsbusiness operating licenses to any foreign investor in any form, or providing any resources, sites or facilities to any foreign investor for their illegal operationof a telecommunications business in China. According to this notice, either the holder of a value-added telecommunication business operating license or itsshareholders must legally own the domain names and trademarks used by such license holders in their provision of value-added telecommunication services.The notice further requires each license holder to have the necessary facilities, including servers, for its approved business operations and to maintain suchfacilities in the regions covered by its license. In addition, all value-added telecommunication service providers are required to maintain network and internetsecurity in accordance with the standards set forth in relevant PRC regulations. If a license holder fails to comply with the requirements in the notice and curesuch non-compliance, the MIIT or its local counterparts have the discretion to take measures against such license holders, including revoking their valued-added telecommunication business operating licenses.To comply with these PRC regulations, we operate our websites through our VIEs, Autohome Information and its wholly-owned subsidiary HongyuanInformation. Autohome Information is currently 68% owned by Xiang Li, 24% owned by Zheng Fan and 8% owned by James Zhi Qin, all of whom are PRCcitizens. Both Autohome Information and Hongyuan Information hold ICP licenses.Regulations on Internet Content ServicesThe National People’s Congress has enacted laws with respect to maintaining the security of internet operation and internet content. According tothese laws, as well as the Internet Measures, violators may be subject to penalties, including criminal sanctions, for internet content that: • opposes the fundamental principles stated in the PRC constitution; • compromises national security, divulges state secrets, subverts state power or damages national unity; • harms the dignity or interests of the state; • incites ethnic hatred or racial discrimination or damages inter-ethnic unity; • undermines the PRC’s religious policy or propagates heretical teachings or feudal superstitions; • disseminates rumors, disturbs social order or disrupts social stability; • disseminates obscenity or pornography, encourages gambling, violence, murder or fear or incites the commission of a crime; • insults or slanders a third party or infringes upon the lawful rights and interests of a third party; or • is otherwise prohibited by law or administrative regulations.On February 4, 2015, the China Internet Network Information Center promulgated the Administrative Provisions on Account Names of Internet Users,or the Account Names Provisions, which became effective as of March 1, 2015. The Account Name Provisions require all users of internet information serviceproviders to authenticate their real identity information for registration of accounts and to commit to complying with the “seven basic requirements,”including observing the laws and regulations, upholding the socialist regime, protecting state interests and, among other requirements, ensuring theauthenticity of any information they provide. Relevant internet information service providers are responsible for the protection of users’ privacy, consistencyof user information, such as account names, avatars, the requirements contemplated in the Account Names Provisions, making reports to the competentauthorities regarding any violation of the Account Names Provisions, and taking appropriate measures to stop any such violations, such as notifying the userto make corrections within a specified time and suspending or closing accounts in the event of continuing non-compliance.ICP operators are required to monitor their websites. They may not post or disseminate any content that falls within these prohibited categories andmust remove any such content from their websites. The PRC government may shut down the websites of ICP license holders that violate any of the above-mentioned content restrictions, order them to suspend their operations, or revoke their ICP licenses. These laws and regulations apply to the websites weoperate through our VIEs. 45Table of ContentsRegulations on Internet PrivacyIn recent years, PRC government authorities have enacted legislation on internet use to protect personal information from any unauthorized disclosure.The PRC law does not prohibit ICP operators from collecting and using personal information from their users with the users’ consent. However, the InternetMeasures prohibit an ICP operator from insulting or slandering a third party or infringing the lawful rights and interests of a third party. The regulationsfurther authorize the relevant telecommunications authorities to order ICP operators to rectify unauthorized disclosure. ICP operators are subject to legalliability if the unauthorized disclosure results in damages or losses to users. The PRC government, however, has the power and authority to order ICPoperators to turn over personal information if an internet user posts any prohibited content or engages in illegal activities on the internet. On December 29,2011, the MIIT promulgated the Several Provisions on Regulating the Market Order of Internet Information Services, effective as of March 15, 2012. Itstipulates that ICP operators may not, without a user’s consent, collect the user’s information that can be used alone or in combination with other informationto identify the user and may not provide any such information to third parties without the user’s prior consent. ICP operators may only collect users’ personalinformation that is necessary to provide their services and must expressly inform the users of the method, content and purpose of the collection and use ofsuch personal information. In addition, an ICP operator may only use users’ personal information for the stated purposes under the ICP operator’s scope ofservice. ICP operators are also required to ensure the proper security of users’ personal information, and take immediate remedial measures if users’ personalinformation is suspected to have been inappropriately disclosed. If the consequences of any such disclosure are expected to be serious, ICP operators mustimmediately report the incident to the telecommunications regulatory authority and cooperate with the authorities in their investigations.On December 28, 2012, the Standing Committee of the National People’s Congress of the PRC issued the Decision on Strengthening the Protection ofOnline Information. Most requirements under this decision relevant to ICP operators are consistent with the requirements already established under the MIITprovisions discussed above, but are often stricter and broader. Under this decision, ICP operators are required to take such technical and other measuresnecessary to safeguard information against inappropriate disclosure. To further implement this decision and relevant rules, MIIT issued the Regulation ofProtection of Telecommunication and Internet User Information on July 16, 2013, which became effective on September 1, 2013.To comply with these laws and regulations, we require our users to accept a user terms of service whereby they agree to provide certain personalinformation to us, and have established information security systems to protect users’ privacy.Regulations on AdvertisementsThe PRC government regulates advertising, including online advertising, principally through the SAIC, although there is no PRC law or regulation atthe national level that specifically regulates the online advertising business. Prior to November 30, 2004, in order to conduct any advertising business, anenterprise was required to hold an operating license for advertising in addition to a relevant business license. On November 30, 2004, the SAIC issued theAdministrative Rules for Advertising Operation Licenses, effective as of January 1, 2005, granting a general exemption to this requirement for mostenterprises (other than radio stations, television stations, newspapers and magazines, non-corporate entities and entities specified in other regulations).Because our subsidiaries and VIEs which engage in advertising businesses qualify for the exemption noted above, they are not required to hold anadvertising operation license.Under the Rules for Administration of Foreign Invested Advertising Enterprises, which were jointly promulgated by the SAIC and the Ministry ofCommerce on August 22, 2008, certain foreign investors are permitted to hold direct equity interests in PRC advertising companies if certain conditions, asdiscussed below, are met. A foreign investor in a Chinese advertising company is required to have previously had direct advertising operations as its mainbusiness outside of China for two years if the Chinese advertising company is a joint venture, or three years if the Chinese advertising company is a whollyforeign-owned enterprise. Before we acquired Autohome Media (formerly known as Prbrownies Marketing Limited) in October 2013, our offshore companieshad not been involved in the advertising industry outside of China for the required number of years, and therefore, we were not permitted to hold directequity interests in PRC companies engaging in the advertising business. Therefore, we conducted our advertising business through two subsidiaries ofAutohome Information, namely Autohome Advertising and Chengshi Advertising, and Shanghai Advertising and Guangzhou Advertising. In October 2013,Autohome HK acquired Autohome Media, a Hong Kong advertising and marketing company. Autohome Media has engaged in advertising business outsidethe PRC for more than three years, and is therefore qualified to directly invest in a PRC company providing advertising services in accordance with PRClaws. Autohome Media has established subsidiaries in Beijing, Shanghai, Guangzhou and Tianjin. We are gradually migrating our advertising business fromour VIEs to Autohome Media and its subsidiaries, a transition we expect to complete in the next two to three years. 46Table of ContentsAdvertisers, advertising operators and advertising distributors are required by PRC advertising laws and regulations to ensure that the content of theadvertisements they produce or distribute are true and in full compliance with applicable laws and regulations. In addition, where a special governmentreview is required for certain categories of advertisements before publishing, the advertisers, advertising operators and advertising distributors are obligatedto confirm that such review has been duly performed and that the relevant approval has been obtained. Violation of these regulations may result in penalties,including fines, confiscation of advertising income, orders to cease dissemination of the advertisements and orders to publish an advertisement correcting themisleading information. In circumstances involving serious violations, the SAIC or its local branches may order the violator to terminate its advertisingoperation or even revoke its business license. Furthermore, advertisers, advertising operators or advertising distributors may be subject to civil liabilities ifthey infringe on the legal rights and interests of third parties. To comply with these laws and regulations, we include clauses in our advertising contractsrequiring that all advertising content provided by advertisers must comply with relevant laws and regulations. Prior to website posting, our staff reviewsadvertising materials to ensure there is no violent, pornographic or any other improper content, and will request the advertiser to provide governmentapproval if the advertisement is subject to special government review.Regulations on Broadcasting Audio/Video Programs through the InternetOn July 6, 2004, the SARFT promulgated the Rules for the Administration of Broadcasting of Audio/Video Programs through the Internet and OtherInformation Networks, or the A/V Broadcasting Rules. The A/V Broadcasting Rules apply to the launch, broadcasting, aggregation, transmission or downloadof audio/video programs via televisions, mobile phones and the internet and other information networks. Anyone who wishes to engage in internetbroadcasting activities must first obtain an audio/video program transmission license, with a term of two years, issued by the SARFT and operate pursuant tothe scope as provided in such license. Foreign invested enterprises are not allowed to engage in the above business.On April 13, 2005, the State Council announced Several Decisions on Investment by Non-state-owned Companies in Culture-related Business inChina. These decisions encourage and support non-state-owned companies to enter certain culture-related business in China, subject to restrictions andprohibitions for investment in audio/video broadcasting, website news and certain other businesses by non-state-owned companies. These decisionsauthorize the SARFT, the Ministry of Culture and the General Administration of Press and Publication to adopt detailed implementation rules according tothese decisions.On December 20, 2007, 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 as of January 31, 2008. Circular 56 reiterates the requirement set forth in the A/V Broadcasting Rulesthat online audio/video service providers must obtain an “internet audio/video program transmission license” from the SARFT. Furthermore, Circular 56requires all online audio/video service providers to be either wholly state-owned or state-controlled companies. According to relevant official answers topress questions published on the SARFT’s website dated February 3, 2008, officials from the SARFT and the MIIT clarified that online audio/video serviceproviders that already had been operating lawfully prior to the issuance of Circular 56 may re-register and continue to operate without becoming state-ownedor controlled, provided that such providers have not engaged in any unlawful activities. This exemption will not be granted to online audio/video serviceproviders established after Circular 56 was issued. These policies have been reflected in the Application Procedure for Audio/Video Program TransmissionLicense. Failure to obtain the internet audio/video program transmission license may subject an online audio/video service provider to various penalties,including fines of up to RMB30,000, seizure of related equipment and servers used primarily for such activities and even suspension of its onlineaudio/video services.To comply with these laws and regulations, Autohome Information obtained an internet audio/video program transmission license on February 9,2010, for automotive industry information related audio/video programs posted on our autohome.com.cn website.Regulations on Producing Audio/Video ProgramsOn July 19, 2004, the SARFT promulgated the Administrative Measures on the Production and Operation of Radio and Television Programs, effectiveas of August 20, 2004. These Measures provide that anyone who wishes to produce or operate radio or television programs must first obtain an operatingpermit. Applicants for this permit must meet several criteria, including having a minimum registered capital of RMB3.0 million. Autohome Information andHongyuan Information hold operating licenses for the production and dissemination of radio and television programs for special topic programs, cartoonsand television variety shows. 47Table of ContentsRegulations on Internet Mapping ServicesAccording to the amended Administrative Rules of Surveying Qualification Certificates and the amended Standards for Internet Map Services issuedby the National Administration of Surveying, Mapping and Geoinformation, or NASMG, in July 2014, the provision of internet mapping services by anynon-surveying and mapping enterprise is subject to the approval of the NASMG and requires a surveying and mapping qualification certificate. According tothese rules, certain conditions and requirements, such as the number of technical personnel and map security verification personnel, security facilities andapproval from relevant provincial or national government on the service provider’s security system, qualification management and filings management, arenecessary for an enterprise applying for a Surveying and Mapping Qualification Certificate. Pursuant to the Notice on Further Strengthening theAdministration of Internet Map Services Qualification issued by the NASMG in December 2011, any entity that has not yet applied for a surveyingqualification certificate for internet mapping services is prohibited from providing any internet mapping services. We have provided maps on our website forthe convenience of our users to locate certain services providers. Both Autohome Information and Hongyuan Information hold the Surveying and MappingQualification Certificate for internet mapping.Regulations on Online Cultural ServicesOn February 17, 2011, the Ministry of Culture promulgated the Internet Culture Administration Tentative Measures, or the Internet Culture Measures,which became effective on April 1, 2011 and replaced the original measures promulgated in 2003 and amended in 2004. The Internet Culture Measuresrequire ICP operators engaged in “internet culture activities” to obtain an internet cultural operating license from the provincial administration of culture.The term “internet culture activities” includes, among other things, online dissemination of internet cultural products (such as audio-video products, gamingproducts, performances of plays or programs, works of art and cartoons) and the production, reproduction, importation, publication and broadcasting ofinternet cultural products.Autohome Information has hosted certain audio/video programs on its websites, and if such audio/video programs are deemed by the authorities asinternet cultural products, Autohome Information may be required to obtain the internet culture operating license. However, we have consulted the localculture administration authority and have been informed that as the automotive industry information related audio/video programs we host do not containonline music, games, performances of plays or programs, works of art or cartoons, they do not fall into the scope of “internet cultural products,” therefore weare not required to obtain the internet culture operating license. Nevertheless, Autohome Information has applied and obtained an internet culture operatinglicense in January 2013.Regulations on Internet PublishingThe General Administration of Press and Publication and the Ministry of Industry and Information Technology jointly issued the Interim Provisions forthe Administration of Internet Publishing, or the Internet Publishing Regulations, which became effective on August 1, 2002. The Internet PublishingRegulations authorize the General Administration of Press and Publication, or GAPP, to grant approval to all entities that engage in internet publishing.Pursuant to the Internet Publishing Regulations, the term “internet publishing” shall mean the act of online dissemination of articles, whereby the internetinformation service providers select, edit and process works created by themselves or others and subsequently post such works on the internet or transmitsuch works to the users’ end via the internet for the public to browse, read, use or download. If we release articles or information that may be deemed byauthorities as internet publications, we may be required to obtain the internet publishing license.Based on a consultation we had with the local press and publication administration authority, we believe we are not required to obtain the internetpublishing license as the activities we engage in on our websites do not constitute “internet publishing activities,” as such term is used in the InternetPublishing Regulation. We are also not aware of companies with an operation similar to us have obtained or been required to obtain the internet publishinglicense. As a result, both Autohome Information and Hongyuan Information have not applied for such internet publishing approval. However, in the eventthat our activities are deemed to be “internet publishing,” we may be required to obtain approval from GAPP. If we are deemed to be in breach of relevantinternet publishing regulations, the PRC regulatory authorities may seize the related equipment and servers used primarily for such activities and confiscateany revenues generated from such activities. In addition, relevant PRC authorities may also impose a fine of five to ten times of any revenues exceedingRMB10,000 or a fine of not more than RMB50,000 if such related revenues are below RMB10,000. 48Table of ContentsRegulations on Internet News Information ServiceIn September 2005, the State Council Information Office and the Ministry of Industry and Information Technology jointly issued the Provisions for theAdministration of Internet News Information Services, or Internet News Provision. Internet news information services shall include the publishing of news viathe internet, provision of electronic bulletin services on current and political events and transmission of information on current and political events to thepublic. Under the Internet News Provision, internet news service providers shall also include entities that are not established by news press but reproduceinternet news from other sources, provide electronic bulletin services on current and political events, and transmit such information to the public. TheInformation Office of the State Council shall be in charge of the supervision and administration of the internet news information services throughout China.The counterparts of the Information Office of the State Council at the provincial level shall take charge of the supervision and administration of the internetnews information services within their own jurisdiction.If we release information that may be deemed by authorities as internet news, we may be required to obtain the internet news information servicelicense. However, we have consulted the relevant government authorities and have been informed that we would not be required to obtain the internet newsreleasing license because the internet news posted on our website is only automotive industry related news which is not political in nature or related tomacroeconomics. However, if any of the internet news posted on our website is deemed by the government to be political in nature, related tomacroeconomics, or otherwise requires such license based on the sole discretion of the government authority, we would need to apply for such license. If weare deemed to be in breach of the Internet News Provision or other relevant internet news releasing regulations, the PRC regulatory authorities may suspendour information release activities and impose a fine exceeding RMB10,000 but not more than RMB30,000. In serious cases, the PRC regulatory authoritiesmay even suspend the internet service or internet access.Regulations on E-commerceChina’s e-commerce industry is at an early stage of development and there are few PRC laws or regulations specifically regulating the e-commerceindustry. In January 2014, the SAIC promulgated the Administrative Measures for Online Trading, which strengthens the protection of consumers and imposestringent requirements and obligations on online business operators and third-party online marketplace operators. Online business operators and third-partyonline marketplace operators are prohibited from collecting any information on consumers and business operators or disclosing, selling or providing anysuch information to any third party, or sending commercial electronic messages to consumers without their consent. Fictitious transactions, deletion ofadverse comments and technical attacks on competitors’ websites are prohibited as well. In addition, third-party online marketplace operators are required toexamine and verify the identifications of the online business operators and set up and retain relevant records for at least two years. Moreover, any third-partyonline marketplace operator that simultaneously engages in online trading for products and services should clearly distinguish itself from other onlinebusiness operators on the marketplace platform. We are subject to these measures as a result of our online platform services.Foreign ownership of e-commerce and related businesses, including online retail businesses, is subject to restrictions under current PRC laws andregulations, except for foreign investors in the China (Shanghai) Pilot Free Trade Zone. Foreign investors are not allowed to own more than 50% of the equityinterests in a value-added telecommunications service provider, and any such foreign investor must have experience in providing value-addedtelecommunications services overseas and maintain a good track record, except for foreign investors in China (Shanghai) Pilot Free Trade Zone, subject tocertain conditions. The National Development and Reform Commission and the Ministry of Commerce jointly issued the Catalogue for the Guidance ofForeign Investment Industries in March 2015, or the Catalogue, which further relaxes market access through regulatory reforms such as allowing foreigninvestors to have complete ownership of equity interests in e-commerce businesses. The Catalogue will take effect on April 10, 2015.Regulations on Intellectual Property RightsChina has adopted legislation governing intellectual property rights, including trademarks, patents and copyrights. China is a signatory to the majorinternational conventions on intellectual property rights and became a member of the Agreement on Trade Related Aspects of Intellectual Property Rightsupon its accession to the World Trade Organization in December 2001. 49Table of ContentsPatent. The National People’s Congress adopted the Patent Law in 1984, and amended it in 1992, 2000 and 2008. The purpose of the Patent Law is toprotect lawful interests of patent holders, encourage invention, foster applications of inventions, enhance innovative capabilities and promote thedevelopment of science and technology. To be patentable, invention or utility models must meet three conditions: novelty, inventiveness and practicalapplicability. Patents cannot be granted for scientific discoveries, rules and methods for intellectual activities, methods used to diagnose or treat diseases,animal and plant breeds, substances obtained by means of nuclear transformation or a design which has major marking effect on the patterns or colors ofgraphic print products or a combination of both patterns and colors. The Patent Office under the State Intellectual Property Office is responsible for receiving,examining and approving patent applications. A patent is valid for a term of twenty years in the case of an invention and a term of ten years in the case ofutility models and designs. A third-party user must obtain consent or a proper license from the patent owner to use the patent. Otherwise, the use constitutesan infringement of patent rights. We had 63 pending patent applications as of December 31, 2014.Copyright. The National People’s Congress adopted the Copyright Law in 1990 and amended it in 2001 and 2010, respectively. The amendedCopyright Law extends copyright protection to internet activities, products disseminated over the internet and software products. In addition, there is avoluntary registration system administered by the China Copyright Protection Center. The amended Copyright Law also requires registration of a copyrightpledge.To address the problem of copyright infringement related to the content posted or transmitted over the internet, the National Copyright Administrationand the MIIT jointly promulgated the Measures for Administrative Protection of Internet Copyright on April 29, 2005. This measure became effective onMay 30, 2005.On October 27, 2000, the MIIT issued the Administrative Measures on Software Products, or the Software Measures, to strengthen the regulation ofsoftware products and to encourage the development of the PRC software industry. On March 5, 2009, the MIIT issued amended Software Measures, whichbecame effective on April 10, 2009. The Software Measures provide a registration and filing system with respect to software products made in or importedinto China. These software products may be registered with the competent local authorities in charge of software industry administration. Registered softwareproducts may enjoy preferential treatment status granted by relevant software industry regulations. Software products can be registered for five years, and theregistration is renewable upon expiration.In order to further implement the Computer Software Protection Regulations promulgated by the State Council on December 20, 2001, as amended in2013, the National Copyright Administration of the PRC issued Computer Software Copyright Registration Procedures on February 20, 2002, which apply tosoftware copyright registration, license contract registration and transfer contract registration.In compliance with, and in order to take advantage of, the above rules, we have registered 77 computer software copyrights as of December 31, 2014.On May 18, 2006, the State Council promulgated the Protection of the Right of Communication through Information Networks, which becameeffective on July 1, 2006, as amended in 2013. Under this regulation, with respect to any information storage space, search or link services provided by aninternet service provider, if the legitimate rights owner believes that the works, performance or audio or video recordings pertaining to that service infringehis or her rights of communication, the rights owner may give the internet service provider a written notice containing the relevant information along withpreliminary documents supporting that an infringement has occurred, and requesting that the internet service provider delete, or disconnect the links to, suchworks or recordings. The rights owner will be responsible for the truthfulness of the content of the notice. Upon receipt of the notice, the internet serviceprovider must delete or disconnect the links to the infringing content immediately and forward the notice to the user that provided the infringing works orrecordings. If the user believes that the subject works or recordings have not infringed others’ rights, the user may submit to the internet service provider awritten explanation with preliminary documents supporting non-infringement, and a request for the restoration of the deleted works or recordings. Theinternet service provider should then immediately restore the deleted or disconnected content and forward the user’s written statement to the rights owner. 50Table of ContentsOn December 26, 2009, the Standing Committee of the National People’s Congress adopted the Torts Liability Law, which became effective on July 1,2010. Under this Torts Liability Law, both internet users and internet service providers may be liable for the wrongful acts of users who infringe the lawfulrights of other parties. If an internet user utilizes internet services to commit a tortious act, the party whose rights are infringed may request the internetservice provider to take measures, such as removing or blocking the content, or disabling the links thereto. Failure to take necessary measures after receivingsuch notice will subject the internet service providers to joint liability for any further damages suffered by the rights holder. Furthermore, if an internetservice provider fails to take necessary measures when it knows that an internet user utilizes its internet services to infringe the lawful rights and interests ofother parties, it will be held jointly liable with the internet user for damages resulting from the infringement.According to an interpretation by PRC Supreme People’s Court, which took effect on January 1, 2013, internet service providers will be held jointlyliable if they continue their infringing activities or do not remove infringing content from their websites once they know of the infringement or receive noticefrom the rights holder. If an internet service provider economically benefits from the works, performances, and sound or visual recordings provided bynetwork users, it must pay close attention to infringement of network information transmission rights by network users.Trademark. The PRC Trademark Law, adopted in 1982 and amended in 1993, 2001 and 2013, protects registered trademarks. The Trademark Officeunder the SAIC handles trademark registrations and grants a term of ten years for registered trademarks. Trademark license agreements must be filed with theTrademark Office for record. We hold and (“auto home” in English) and “AUTOHOME®” trademarks in China with each registered underdifferent categories.Domain Names. In September 2002, the CNNIC issued the Implementing Rules for Domain Name Registration, as amended in June 2009 and May2012, that set forth detailed rules for registration of domain names. On November 5, 2004, the MIIT promulgated the Measures for Administration of DomainNames for the Chinese Internet, or the Domain Name Measures. The Domain Name Measures regulate the registration of domain names, such as the first tierdomain name “.cn.” In 2002, the CNNIC issued the Measures on Domain Name Dispute Resolution, as amended in February 2006 and 2012, pursuant towhich the CNNIC can authorize a domain name dispute resolution institution to decide disputes. We have registered a number of domain names, includingautohome.com.cn, autohome.com and che168.com.Regulations on TaxSee “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Taxation—PRC” and “Item 10. Additional Information—E.Taxation—People’s Republic of China Taxation.”Regulations on Foreign ExchangeForeign exchange activities in China are primarily governed by the following regulations: • Foreign Currency Administration Rules (2008), or the Exchange Rules; and • Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996), or the Administration Rules.Under the Exchange Rules, if documents certifying the purposes of the conversion of RMB into foreign currency are submitted to the relevant foreignexchange conversion bank, the RMB will be convertible for current account items, including the distribution of dividends, interest and royalties payments,and trade and service-related foreign exchange transactions. Conversion of RMB for capital account items, such as direct investment, loans, securitiesinvestment and repatriation of investment, however, is subject to the approval of, or registration with, SAFE or its local counterpart. Capital investments byPRC entities outside of China, after obtaining the required approvals of, or making filings with, the relevant approval authorities, such as the Ministry ofCommerce and the National Development and Reform Commission or their local counterparts, are also required to register with SAFE or its local counterpart.Under the Administration Rules, foreign-invested enterprises may only buy, sell and/or remit foreign currencies at banks authorized to conduct foreignexchange business after providing valid commercial documents and, in the case of capital account item transactions, obtaining approval from or beingregistered with SAFE or its local counterpart. 51Table of ContentsIn utilizing the proceeds we received from our equity offerings, as an offshore holding company with PRC subsidiaries, we may (a) make additionalcapital contributions to our PRC subsidiaries, (b) establish new PRC subsidiaries and make capital contributions to these new PRC subsidiaries, (c) makeloans to our PRC subsidiaries or VIEs or (d) acquire offshore entities with business operations in China in offshore transactions. However, most of these usesare subject to PRC regulations and approvals. For example: • capital contributions to our PRC subsidiaries, whether existing or newly established, must be approved by the Ministry of Commerce or its localcounterparts; • loans by us to our PRC subsidiaries, each of which is a foreign-invested enterprise, to finance their activities cannot exceed statutory limits andmust be registered with SAFE or its local branches; and • loans by us to our VIEs, which are domestic PRC entities, must be approved by the National Development and Reform Commission (in the caseof middle or long term loans) or be within the limits approved by SAFE (in the case of short term loans), and must also be registered with SAFE orits local branches.On August 29, 2008, SAFE issued the Circular on the Relevant Operating Issues Concerning the Improvement of the Administration of the Paymentand Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, or SAFE Circular 142. Pursuant to SAFE Circular 142, RMB resulting from thesettlement of foreign currency capital of a foreign-invested enterprise must be used within the business scope as approved by the applicable governmentauthority and cannot be used for domestic equity investment, unless it is otherwise approved. In addition, the SAFE strengthened its oversight of the flow anduse of RMB capital converted from foreign currency registered capital of a foreign-invested company. The use of such RMB capital may not be alteredwithout the SAFE’s approval, and such RMB capital may not be used to repay RMB loans if such loans have not been used. Violations of SAFE Circular 142could result in severe monetary fines or penalties. On July 15, 2014, SAFE issued SAFE Circular 36 which launches the pilot reform of administrationregarding conversion of foreign currency registered capitals of foreign-invested enterprises in 16 pilot areas. According to SAFE Circular 36, an ordinaryforeign-invested enterprise in the pilot area is permitted to use RMB converted from its foreign currency registered capital to make equity investments in thePRC, subject to certain registration and settlement procedures as set forth in SAFE Circular 36. As this circular is relatively new, there remains uncertainty asto the interpretation and application of this circular and any other future foreign exchange related rules. We expect that if we convert the net proceeds fromour equity offerings into RMB pursuant to SAFE Circular 142, our use of RMB funds will be within the approved business scope of our PRC subsidiaries.However, we may not be able to use such RMB funds to make equity investments in the PRC through our PRC subsidiaries. There are no costs associatedwith applying for registration or approval of loans or capital contributions with or from relevant PRC governmental authorities, other than nominalprocessing charges. Under PRC laws and regulations, the PRC governmental authorities are required to process such approvals or registrations or deny ourapplication within a prescribed time period, which is usually less than 90 days. The actual time taken, however, may be longer due to administrative delays.We cannot assure you that we will be able to obtain these government registrations or approvals on a timely basis, if at all, with respect to our future plans touse the U.S. dollar proceeds we received from our equity offerings for our expansion and operations in China. If we fail to receive such registrations orapprovals, our ability to use the proceeds from our equity offerings and to capitalize our PRC operations may be negatively affected, which could materiallyand adversely affect our liquidity and ability to fund and expand our business. See “Item 3. Key Information—D. Risk Factors—Risks Related to OurCorporate Structure—PRC regulation of loans to, and direct investment in, PRC entities by offshore holding companies and governmental control ofcurrency conversion may restrict or prevent us from using the proceeds of our equity offerings to make loans to our PRC subsidiaries and VIEs or to makeadditional capital contributions to our PRC subsidiaries, which may materially and adversely affect our liquidity and our ability to fund and expand ourbusiness.”Regulations on Dividend DistributionThe principal regulations governing dividend distributions of wholly foreign-owned enterprises include: • the Companies Law (2005, as amended in 2013); • the Wholly Foreign-Owned Enterprise Law (2000); and • the Wholly Foreign-Owned Enterprise Law Implementing Rules (2001). 52Table of ContentsUnder these regulations, wholly foreign-owned enterprises in the PRC may pay dividends only out of their accumulated profits as determined inaccordance with PRC accounting standards and regulations. In addition, these wholly foreign-owned enterprises are required to set aside at least 10% of theirrespective accumulated profits each year, if any, to fund certain reserve funds, until the aggregate amount of such fund reaches 50% of its registered capital.Regulations on Offshore Investment by PRC ResidentsOn July 4, 2014, the SAFE promulgated the Notice on Relevant Issues Concerning Foreign Exchange Control of Domestic Residents’ OverseasInvestment and Financing and Roundtrip Investment through Offshore Special Purpose Vehicles, or SAFE Circular No. 37, which replaced the former Noticeon Relevant Issues Concerning Foreign Exchange Administration for PRC Residents to Engage in Financing and Inbound Investment via Overseas SpecialPurpose Vehicles (generally known as SAFE Circular No. 75) promulgated by the SAFE on October 21, 2005.SAFE Circular No. 37 requires PRC residents to register with local branches of SAFE in connection with their direct establishment or indirect control ofan offshore entity, for the purpose of overseas investment and financing, with such PRC residents’ legally owned assets or equity interests in domesticenterprises or offshore assets or interests, which is referred to in SAFE Circular No. 37 as a “special purpose vehicle.” SAFE Circular No. 37 further requiresamendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such as an increase or decrease of capitalcontributed by PRC residents, share transfer or exchange, merger, division or other material events. In the event that a PRC resident holding interests in aspecial purpose vehicle fails to complete the required SAFE registration, the PRC subsidiaries of that special purpose vehicle may be prohibited from makingprofit distributions to the offshore parent and from carrying out subsequent cross-border foreign exchange activities and the special purpose vehicle may berestricted in its ability to contribute additional capital into its PRC subsidiaries. Furthermore, failure to comply with the various SAFE registrationrequirements described above could result in liability under PRC law for evasion of foreign exchange controls.Currently, all of our shareholders who are PRC residents have registered with the competent local branch of the SAFE with respect to their investmentsin our company as required by SAFE Circular No. 75 and will update their registration filings with the SAFE under SAFE Circular No. 37 when there are anychanges that should be registered under SAFE Circular No. 37.Regulations on Employee Stock Options PlansIn December 2006, the PBOC promulgated the Administrative Measures of Foreign Exchange Matters for Individuals, setting forth the respectiverequirements for foreign exchange transactions by individuals (both PRC or non-PRC citizens) under either the current account or the capital account. InJanuary 2007, SAFE issued relevant implementing rules that specified approval requirements for certain capital account transactions, such as a PRC citizen’sparticipation in employee stock ownership plans or share option plans of an overseas publicly listed company. In February 2012, SAFE promulgated theStock Option Notice that supersedes the requirements and procedures for the registration of PRC resident individuals’ participation in stock incentive plansset forth by certain rules promulgated by SAFE in March 2007. The purpose of the Stock Option Notice is to regulate the foreign exchange administration ofPRC resident individuals who participate in employee stock holding plans and share option plans of overseas listed companies.According to the Stock Option Notice, if a PRC resident individual participates in any employee stock incentive plan of an overseas listed company, aPRC domestic qualified agent appointed through the PRC subsidiary of such overseas listed company must, among other things, file, on behalf of suchindividual, an application with SAFE or its local counterpart to obtain approval for an annual allowance with respect to the purchase of foreign exchange inconnection with stock holding or share option exercises. With the approval from SAFE or its local counterpart, the PRC domestic qualified agent shall open aspecial foreign exchange account at a PRC domestic bank to hold the funds required in connection with the stock purchase or option exercise, any returnedprincipal or profits upon sales of shares, any dividends issued on the stock and any other income or expenditures approved by SAFE or its local counterpart. 53Table of ContentsUnder the Foreign Currency Administration Rules, as amended, the foreign exchange proceeds of domestic entities and individuals can be remittedinto China or deposited abroad, subject to the terms and conditions to be issued by SAFE. However, the implementing rules in respect of depositing theforeign exchange proceeds abroad have not been issued by SAFE. The foreign exchange proceeds from the sales of shares can be converted into RMB ortransferred to such individuals’ foreign exchange savings account after the proceeds have been remitted back to the special foreign exchange account openedat the PRC domestic bank. If share options are exercised in a cashless exercise, the PRC domestic individuals are required to remit the proceeds to specialforeign exchange accounts.Many issues with respect to the Stock Option Notice require further interpretation. We and our PRC employees who participate in an employee stockincentive plan are subject to the Stock Option Notice as we are an overseas listed company. We have registered with the local counterparts of SAFE for ourPRC resident employees who participate in our share incentive plans, as required under the Stock Option Notice and relevant rules. If we or our PRCemployees fail to comply with the Stock Option Notice, we and our PRC employees may face sanctions imposed by the PRC foreign exchange authority orany other PRC government authorities, including restriction on foreign currency conversions and additional capital contribution to our PRC subsidiaries.In addition, the SAT has issued circulars concerning employee share options. Under these circulars, our employees working in China who exerciseshare options will be subject to PRC individual income tax. Our PRC subsidiary has obligations to file documents related to employee share options withrelevant tax authorities and withhold the individual income taxes of employees who exercise their share options. If our employees fail to pay and we fail towithhold their income taxes, we may face sanctions imposed by tax authorities or any other PRC government authorities. See “Item 3. Key Information—D.Risk Factors—Risks Related to Doing Business in China—Failure to comply with PRC regulations regarding the registration requirements for employeeshare ownership plans or share option plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions.”Regulation on EmploymentPursuant to the PRC Labor Law and the PRC Labor Contract Law, employers must execute written labor contracts with full-time employees. Allemployers must compensate their employees with wages equal to at least the local minimum wage standards. All employers are required to establish a systemfor labor safety and sanitation, strictly abide by state rules and standards and provide employees with workplace safety training. Violations of the PRC LaborContract Law and the PRC Labor Law may result in the imposition of fines and other administrative liabilities.In addition, employers in China are obliged to provide employees with welfare schemes covering pension insurance, unemployment insurance,maternity insurance, work-related injury insurance, medical insurance and housing funds.Regulations on Concentration in Merger and Acquisition TransactionsThe M&A Rules established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time-consuming and complex. These rules require, among other things, that the Ministry of Commerce be notified in advance of any change-of-control transactionin which a foreign investor will take control of a PRC domestic enterprise or a foreign company with substantial PRC operations, if certain thresholds underthe Provisions on Thresholds for Prior Notification of Concentrations of Undertakings issued by the State Council on August 3, 2008 are triggered.Complying with these requirements could affect our ability to expand our business or maintain our market share. See “Item 3. Key Information—D.Risk Factors—Risks Related to Doing Business in China—Certain regulations in the PRC may make it more difficult for us to pursue growth throughacquisitions.” C.Organizational StructureThe following diagram illustrates our corporate structure, including our principal subsidiaries and VIEs, as of the date of this annual report: 54Table of Contents (1)The three individuals are James Zhi Qin, our director and chief executive officer, Xiang Li, our director and president, and Zheng Fan, our vicepresident. Each of these three individuals is also a beneficial owner of our company and a PRC citizen. James Zhi Qin, Xiang Li and Zheng Fan hold8%, 68% and 24%, respectively, of the equity in each of Autohome Information, Shanghai Advertising and Guangzhou Advertising. 55Table of ContentsD.Property, Plants and EquipmentOur corporate headquarters is located in Beijing, China, where we lease office space with an area of approximately 12,354 square meters. We generallymake rental payments on a monthly basis. In addition, as of December 31, 2014, we also lease office space in 72 cities for our representative offices, includingregional operation centers in Shanghai, Guangzhou and Tianjin in China. We believe that our existing facilities are generally adequate to meet our currentneeds, but we expect to seek additional space as needed to accommodate future growth.Our servers are primarily hosted at internet data centers owned by major domestic internet data center providers. The hosting services agreementstypically have a term of one year. We believe that our current facilities are adequate and that we will be able to obtain additional facilities, principallythrough leasing, to accommodate any future expansion plans.ITEM 4A. UNRESOLVED STAFF COMMENTSNone.ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTSYou should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidatedfinancial statements and the related notes included elsewhere in this annual report. This discussion contains forward-looking statements that involve risksand uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements asa result of various factors, including those set forth under “Risk Factors” and elsewhere in this annual report. A.Operating ResultsOverviewWe are the leading online destination for automobile consumers in China. Through our two websites, autohome.com.cn and che168.com, and ourmobile applications, we deliver comprehensive, independent and interactive content to automobile buyers and owners. We generate revenues from onlineadvertising services and dealer subscription services. Our advertisers consist primarily of automakers and automobile dealers, with automakers contributing asubstantial majority of our total revenues. In each of 2012, 2013 and 2014, we provided advertising services to approximately 80% of over 80 automakersoperating in China. We also provided dealer subscription services to 5,052, 10,617 and 17,779 dealer subscribers in 2012, 2013 and 2014, respectively.Our net revenues increased from RMB732.5 million in 2012 to RMB1,216.5 million in 2013 and RMB2,132.9 million (US$343.8 million) in 2014,representing a CAGR of 70.6%. Our net income increased from RMB212.9 million in 2012 to RMB456.2 million in 2013 and RMB748.7 million (US$120.7million) in 2014, representing a CAGR of 87.5%.General Factors Affecting Our Results of OperationsOur business and results of operations are significantly affected by China’s overall economic conditions and the general trends in the automotiveindustry, especially new automobile sales in China. Economic growth in China has contributed to an increase in household disposable income and improvedthe availability of financing for automobile purchases. These factors, coupled with increased production capacity and lower import tariffs, past governmentalincentives designed to encourage automobile purchases and the decreasing cost of new automobiles, have contributed to the growth of the number of newautomobiles sold in China. Although the automotive industry has benefited from China’s overall favorable policies, some local governments have imposedrestrictions on automobile registrations to curb traffic congestion in urban centers. If such regulations slow the growth rate of new automobile sales in Chinaand lead to decreased advertising expenditures by automakers and dealers, our business and results of operations may be adversely affected. 56Table of ContentsIn addition, our business and results of operations may be affected by our user reach and engagement. Automaker and dealer advertisers, whichcontribute substantially to all of our revenues, choose to advertise on our websites in significant part due to our leading market position in the onlineautomotive advertising industry. We anticipate that our ability to continue to attract a large and growing user base and maintain a high level of userengagement will affect our ability to attract advertisers and dealer subscribers to our websites.Specific Factors Affecting Our Results of OperationsWhile our business and results of operations are generally affected by China’s overall economic conditions, the general trends in China’s automotiveindustry and our user reach and engagement, our results of operations are more directly affected by the specific financial factors set forth below.Net RevenuesWe generate our net revenues from selling online advertising services and dealer subscription services. We sell our advertising services primarily toautomakers and automobile dealers, with automakers contributing a substantial majority of our advertising services revenues. As is customary in China, wesell our advertising services primarily through third-party advertising agencies while we consider automakers and dealer advertisers to be our end-customers.Consistent with common practice in the advertising industry in China, we offer incentives to advertising agencies. We also provide cash incentives toautomakers and dealers who participate in various incentive programs on our online transaction platform. Our net revenues are presented net of rebates toadvertising agencies and cash incentives to automakers and dealers. We sell our dealer subscription services to automobile dealers on a fixed-fee subscriptionbasis.The following table sets forth the principal components of our net revenues in absolute amounts and as percentages of our total net revenues for theyears presented: For the Year Ended December 31, 2012 2013 2014 RMB % RMB % RMB US$ % (in thousands, except percentages) Net revenues: Advertising services 592,622 80.9% 894,937 73.6% 1,499,516 241,678 70.3% Dealer subscription services 139,898 19.1 321,611 26.4 633,433 102,091 29.7 Total net revenues 732,520 100.0% 1,216,548 100.0% 2,132,949 343,769 100.0% Advertising Services RevenuesWe generate advertising services revenues primarily from automakers. In each of 2012, 2013 and 2014, approximately 80% of over 80 automakersoperating in China purchased advertising services from us. As a result of our high penetration in the automaker market, we believe that our future automakeradvertising services revenue growth will be driven primarily by automakers’ increased advertising spending on our websites as they continue to shiftadvertising budgets from traditional media to online media.Increased spending will be driven primarily by a combination of (i) our ability to increase advertising volume, either due to the availability ofadditional advertising locations as we expand our service offerings or due to higher sell-through rates, which is calculated as the percentage of advertisinglocations actually sold over total advertising locations available for sale in a given period, and (ii) our ability to increase our pricing, as measured by priceper location per day, as our user reach continues to expand, thereby enhancing the effectiveness of the services we offer. As is customary in China’s onlineadvertising market, we use a “cost per time” pricing model to price our online advertising services by charging our advertisers on a daily basis for anadvertisement placed in a given location on our websites. We expect that this cost-per-time model will continue to be our primary pricing model in the nearfuture. However, as we continue to grow our user base and enhance user engagement, we intend to explore “cost per thousand-impressions,” “cost per lead”and other performance-based pricing models. 57Table of ContentsWe also sell advertising services to automobile dealers. Our automobile dealer customers receive reimbursements for a majority of their marketing andadvertising expenses from their automakers. Therefore, while automobile dealers are our end-customers for dealer advertising services, their advertisingdecisions are increasingly influenced by automakers. Revenues from dealer advertisers accounted for 18.1%, 21.3% and 29.4% of our advertising servicesrevenues in 2012, 2013 and 2014, respectively. We believe that our dealer advertising services revenues will continue to grow in absolute amounts and as apercentage of our advertising services revenues in the near future, driven mainly by (i) the increase in the advertising budgets that automakers allocate totheir dealers, and (ii) our ability to increase our “share of wallet” relative to other online media as we continue to expand into new geographical markets andpenetrate deeper into existing markets to increase our customer base of auto dealers.Dealer Subscription ServicesWe generate dealer subscription services revenues through the sale of various subscription services packages at different prices, which enable dealers tomarket their vehicle inventories on our websites. All of our dealer subscription services are sold on a quarterly or annual fixed-fee basis.We offer basic automobile listing services free of charge to all of our registered dealers. We had 24,562 registered dealers as of December 31, 2014,compared with 23,897 and 18,609 registered dealers as of December 31, 2013 and 2012, respectively. Our dealer subscribers are registered dealers that havepurchased subscription packages. We provide our dealer subscribers with additional tools and features to enable them to more effectively market theirinventories on our websites. Our dealer subscribers grew from 5,052 in 2012 to 10,617 in 2013 and 17,779 in 2014. Our dealer subscription services revenuesaccounted for 19.1%, 26.4% and 29.7% of our net revenues in 2012, 2013 and 2014, respectively. We believe that our dealer subscription services revenueswill continue to grow in absolute amounts and as a percentage of our net revenues in the near future, driven by our ability to increase the number of registereddealers, as well as our ability to subsequently convert registered dealers into dealer subscribers and command higher fees for different subscription packages.Cost of RevenuesCost of revenues refers primarily to (i) content-related costs, (ii) depreciation and amortization expenses, (iii) bandwidth and internet data center(“IDC”) costs, and (iv) value-added tax, business tax and surcharges. The following table sets forth the principal components of our cost of revenues inabsolute amounts and as a percentage of our total net revenues for the years indicated: For the Year Ended December 31, 2012 2013 2014 RMB % RMB % RMB US$ % (in thousands, except percentages) Cost of revenues: Content-related costs(1) 62,871 8.6% 95,987 7.9% 127,929 20,618 6.0% Depreciation and amortization expenses 21,978 3.0 26,439 2.2 31,703 5,110 1.5 Bandwidth and IDC costs 15,045 2.0 21,047 1.7 30,713 4,950 1.4 Value-added tax, business tax and surcharges 78,346 10.7 108,763 8.9 191,153 30,808 9.0 Total cost of revenues 178,240 24.3% 252,236 20.7% 381,498 61,486 17.9% (1)Including share-based compensation expenses of RMB6.6 million for 2012, RMB6.5 million for 2013 and RMB8.0 million (US$1.3 million) for 2014,respectively.Content-related Costs. Content-related costs are costs directly related to creating and editing the professionally produced content and organizing andmaintaining user generated content on our websites. This mainly includes salaries and benefits, toll free telephone charges, travel and office expenses of oureditorial personnel, expenses we incur in the execution of the offline portion of our advertisers’ online promotions and expenses we pay to third parties forcreating and publishing certain rich media content displayed on our websites. We expect our content-related costs will continue to increase primarily due toour business growth. In addition, as a result of our adoption of the 2011 Plan and the 2013 Plan, our content-related expenses in subsequent periods includeshare-based compensation expenses related to our editorial personnel. 58Table of ContentsDepreciation and Amortization Expenses. A substantial majority of our depreciation and amortization expenses relate to amortization expenses for theamortization of intangibles including trademarks, customer relationships and websites that we acquired in connection with the acquisitions of Cheerbright,China Topside and Norstar in June 2008, shortly after the inception of our company. Depreciation expenses are related to servers and other equipment thatare directly related to our revenue generating business activities. We expect our amortization expenses will decrease after the end of the estimated useful livesof certain intangible assets, while depreciation expenses will increase as we continue to invest in our business.Bandwidth and IDC Costs. Bandwidth and IDC costs consist of fees that we pay to telecommunication carriers and other service providers fortelecommunication services and for hosting our servers at their internet data centers, as well as fees we pay to our content delivery network service providerfor the distribution of our content. Our bandwidth and IDC costs continued to increase in subsequent periods as our user traffic continued to increase and werequired more high quality bandwidth to support user traffic growth and improve our users’ experience.Value-Added Tax, or VAT, Business Tax and Surcharges. We have been subjected to business tax, surcharges or cultural construction fees levied on ourgross revenue. The business tax rate was 5% in 2012. As a result of the VAT Pilot Program introduced by the Ministry of Finance and the SAT, ShanghaiAdvertising and Guangzhou Advertising were required to pay VAT instead of business tax starting January 1, 2012 and November 1, 2012, respectively. PRCsubsidiaries and our VIEs in Beijing were required to pay VAT instead of business tax starting September 1, 2012. Since August 2013, this pilot program hasbeen expanded to other areas in China. Following these changes, the service fees received by Autohome WFOE from our VIEs are no longer subject tobusiness tax and the VAT incurred by Autohome WFOE based on the services it provided to our VIEs can be deducted from the VAT payables of our VIEs.The VAT rate for all these entities was 6% in 2013 and 2014. In addition, revenues from our dealer subscription services are not subject to the culturalconstruction fee and they, as a percentage of our total net revenues, increased in 2013 and 2014. Also, since November 2014, Beijing Prbrownies SoftwareCo., Ltd. was entitled to a 14% VAT refund on the total VAT payable at the rate of 17% after the registration of its software resolutions with the relevantauthority. As a result of the above, our overall VAT, business tax and surcharges as a percentage of our total net revenues decreased from 10.7% in 2012 to8.9% in 2013 and remained stable at 9.0% in 2014.Operating ExpensesOur operating expenses consist of sales and marketing expenses, general and administrative expenses and product development expenses. Thefollowing table sets forth our operating expenses for our continuing operations in absolute amounts and as percentages of our total net revenues for the yearsindicated: For the Year Ended December 31, 2012 2013 2014 RMB % RMB % RMB US$ % (in thousands, except percentages) Operating expenses: Sales and marketing expenses(1) 129,796 17.7% 245,228 20.2% 559,070 90,106 26.2% General and administrative expenses(2) 83,153 11.4 82,529 6.8 129,751 20,912 6.1 Product development expenses(3) 42,865 5.9 81,651 6.7 158,395 25,529 7.4 Total operating expenses 255,814 35.0% 409,408 33.7% 847,216 136,547 39.7% (1)Including share-based compensation expenses of RMB4.2 million for 2012, RMB4.4 million for 2013 and RMB14.6 million (US$2.4 million) for2014, respectively.(2)Including share-based compensation expenses of RMB15.7 million for 2012, RMB11.7 million for 2013 and RMB20.6 million (US$3.3 million) for2014, respectively.(3)Including share-based compensation expenses of RMB2.7 million for 2012, RMB3.0 million for 2013 and RMB13.4 million (US$2.2 million) for2014, respectively.Sales and Marketing Expenses. Our sales and marketing expenses primarily consist of the marketing expenses incurred in connection with promotingour brands through search engines, mobile platforms and navigation sites, sales promotion activities and salaries and benefits and sales commissions for oursales and marketing personnel. Our sales and marketing expenses also include office and travel-related expenses and business development expensesassociated with our sales and marketing activities. We expect that our sales and marketing expenses will continue to increase as we increase traffic on ourwebsites and mobile applications, enlarge our sales force to expand our coverage and develop our transaction business initiatives to realize our value as atransaction platform. 59Table of ContentsGeneral and Administrative Expenses. Our general and administrative expenses primarily consist of personnel-related expenses for management andadministrative personnel. In addition, we incurred a significant amount of third-party professional services fees as we engaged auditors and legal counsel inconnection with our equity offerings. Our general and administrative expenses decreased from 2012 to 2013 because of a one-off cost associated with theCompany’s postponement of its initial public offering in the fourth quarter of 2012, and was partially offset by an increase in salaries and benefits in 2013.We expect that our general and administrative expenses will increase in the future as we expand our business.Product Development Expenses. Our product development expenses primarily consist of personnel-related expenses associated with the developmentof new technologies and products as well as enhancement of our websites. We expect that our product development expenses will increase as we expand ourbusiness, develop new features and functionalities and increase the accessibility of our websites, mobile applications and the transaction platform.TaxationCayman IslandsWe are incorporated in the Cayman Islands. Under the current laws of the Cayman Islands, we are not subject to income or capital gains tax. Inaddition, dividend payments are not subject to withholding tax in the Cayman Islands.British Virgin IslandsCheerbright is a business company incorporated in the British Virgin Islands. Under the current laws of the British Virgin Islands, Cheerbright is notsubject to income or capital gains tax. In addition, dividend payments are not subject to withholding tax in the British Virgin Islands.Hong KongAutohome HK and Autohome Media are incorporated in Hong Kong. Companies registered in Hong Kong are subject to Hong Kong profits tax on thetaxable income as reported in their respective statutory financial statements adjusted in accordance with relevant Hong Kong tax laws. The applicable taxrate is 16.5% in Hong Kong. For 2012, 2013 and 2014, we did not make any provisions for Hong Kong profit tax as Autohome HK and Autohome Media hadno assessable profits derived from or earned in Hong Kong during those years. Under the Hong Kong tax law, Autohome HK and Autohome Media areexempted from income tax on their foreign-derived income and there are no withholding taxes in Hong Kong on remittance of dividends.PRCOur PRC subsidiaries and VIEs are subject to PRC enterprise income tax, or EIT, on the taxable income in accordance with the relevant PRC incometax laws.Under the PRC Enterprise Income Tax Law and its implementation rules, both of which became effective on January 1, 2008, a uniform 25% enterpriseincome tax rate is generally applicable to both foreign-invested enterprises and domestic enterprises, unless they qualify for certain exceptions.In 2010, Autohome WFOE was recognized as an HNTE, effective 2010 and was eligible for a 15% preferential enterprise income tax rate effective from2010 through 2012. The HNTE qualification is subject to an annual evaluation and a three-year review by the relevant authorities in China. We haveobtained renewal of the HNTE qualification through 2015. However, should we lose this qualification for any reason, Autohome WFOE will no longer enjoythe 15% preferential tax rate, and the applicable enterprise income tax rate may increase to up to 25%.Our remaining PRC subsidiaries and all the VIEs were subject to EIT at a rate of 25% for 2012, 2013 and 2014. 60Table of ContentsUnder the PRC Enterprise Income Tax Law, an enterprise established outside of the PRC with “de facto management bodies” located within the PRC isconsidered a PRC resident enterprise and therefore will be subject to a 25% EIT on its global income. The implementation rules define “de facto managementbodies” as “establishments that carry out substantial and overall management and control over the manufacturing and business operations, personnel,accounting, properties, etc. of an enterprise.” In addition, according to the Notice Regarding the Determination of Chinese-Controlled Offshore IncorporatedEnterprises as PRC Tax Resident Enterprises on the Basis of De Facto Management Bodies issued by State Administration of Taxation, or SAT Circular 82,on April 22, 2009, a Chinese-controlled enterprise established outside of China is treated as a PRC resident enterprise with “de facto management bodies”located in the PRC for tax purposes where all of the following requirements are satisfied: (a) the senior management and core management departments incharge of its daily production or business operations are located in the PRC; (b) its financial and human resource decisions are subject to determination orapproval by persons or bodies in the PRC; (c) its major assets, accounting books, company seals, and minutes and files of its board and shareholders’meetings are located or kept in the PRC; and (d) more than half of the enterprise’s board members with voting rights or senior management habitually residein the PRC. Despite the uncertainties resulting from limited PRC tax guidance on the issue, we do not believe that our legal entities organized outside of thePRC constitute PRC resident enterprises under the PRC Enterprise Income Tax Law. However, if we are considered a PRC resident enterprise and earn incomeother than dividends from our PRC subsidiaries, a 25% enterprise income tax on our global income could significantly increase our tax burden and materiallyand adversely affect our cash flow and profitability.Further, the PRC Enterprise Income Tax Law and the implementation rules provide that an income tax rate of 10% may be applicable to China-sourcedincome of foreign enterprises, such as dividends paid by PRC subsidiaries to their overseas parent that is not a PRC resident enterprise, which (a) do not havean establishment or place of business in the PRC or (b) have an establishment or place of business in the PRC but the relevant income is not effectivelyconnected with the establishment or place of business, unless there are applicable treaties that reduce such rate. The implementation rules of the new PRCEnterprise Income Tax Law provide that (a) if the enterprise that distributes dividends is domiciled in the PRC, or (b) if gains are realized from transferringequity interests of enterprises domiciled in the PRC, then such dividends or capital gains are treated as China-sourced income. It is not clear how “domicile”may be interpreted under the PRC Enterprise Income Tax Law, and it may be interpreted as the jurisdiction where the enterprise is a tax resident. Therefore, ifwe are considered as a PRC tax resident enterprise for tax purposes, any dividends we pay to our overseas shareholders or ADS holders as well as gainsrealized by such shareholders or ADS holders from the transfer of our shares or ADSs may be regarded as China-sourced income and as a result become subjectto PRC withholding tax at the rate of 10%, subject to reduction by an applicable treaty. See “Item 3. Key Information—D. Risk Factors—Risks Related toDoing Business in China—Our global income and the dividends that we may receive from our PRC subsidiaries, dividends distributed to our non-PRCshareholders and ADS holders, and gains recognized by such shareholders or ADS holders, may be subject to PRC taxes under the Enterprise Income TaxLaw, which would have a material adverse effect on our results of operations.”Critical Accounting PoliciesWe prepare our financial statements in conformity with U.S. GAAP, which requires us to make judgments, estimates and assumptions that affect thereported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the end of each reporting period and the reported amount ofrevenue and expenses during each reporting period. We evaluate these estimates and assumptions based on historical experience, knowledge and assessmentof current business and other conditions and expectations that we believe to be reasonable under the circumstances. Since the use of estimates is an integralcomponent of the financial reporting process, actual results could differ from these estimates and assumptions.Some of our accounting policies require higher degrees of judgment than others in their application. When reviewing our consolidated financialstatements, you should consider (a) our selection of critical accounting policies, (b) the judgment and other uncertainties affecting the application of suchpolicies and (c) the sensitivity of reported results to changes in conditions and assumptions. For further information on our significant accounting policies,see Note 2 to our consolidated financial statements for 2012, 2013 and 2014. We consider the policies discussed below to be critical to an understanding ofour consolidated financial statements as their application places significant demands on the judgment of our management. We believe the following criticalaccounting policies are the most significant to the presentation of our financial statements and some of which may require the most difficult, subjective andcomplex judgments. They should be read in conjunction with our consolidated financial statements, the risks and uncertainties described under “Item 3. KeyInformation—D. Risk Factors” and other disclosures included in this annual report. 61Table of ContentsRevenue RecognitionWe derive revenues primarily from online advertising services and dealer subscription services. Revenues are recognized only when the price is fixedor determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the related fee is reasonably assured based on theguidance in the Accounting Standards Codification or ASC 605, Revenue Recognition.Contracts are signed to establish significant terms such as the price and online advertising services to be provided. We consider the price for ourservices to be fixed and determinable when we and our customers have signed the contracts. We assess the creditworthiness of our customers prior to signingthe contracts to ensure collectability is reasonably assured. Nonrefundable payments received before satisfaction of all relevant criteria for revenuerecognition are recorded as deferred revenue.Advertising servicesWe provide online advertising services to automakers, dealers and agency companies that represent automakers and dealers. The majority of our onlineadvertising service arrangements involve multiple deliverables such as banner advertisements, links and logos, other media insertions and promotionalactivities that are delivered over different periods of time. Multiple contracts with the same customers are accounted for as separate arrangements if thecontracts are not linked together in a single transaction. Historically, we have not entered into multiple contracts with the same counterparty that should becombined and accounted for as a single arrangement.In determining our best estimated selling price for each deliverable, we consider our overall pricing model and objectives, as well as market orcompetitive conditions that may impact the price at which we would transact if the deliverable were sold regularly on a standalone basis. We monitor theconditions that affect our determination of the selling price for each deliverable and reassess such estimates periodically. Revenues are recognized ratablywhen the advertisements are published over the stated display period in the case of websites or when the services have been rendered in the case ofpromotional activities. The amount recognized is limited to the amount that is not contingent upon the delivery of additional deliverables or meeting otherspecified performance conditions.Dealer subscription servicesWe provide subscription services to automakers, dealers and agency companies. Throughout the subscription period, the dealers can publishinformation such as the pricing of their products, locations and addresses and other related information on our website. Revenues are recognized ratably asservices are provided over the subscription period.Rebates and cash incentives provided to customersWe provide rebates to agency companies based on cumulative annual advertising and service volume or surrounding occasional activities. Weestimate our obligations under such agreements based on an evaluation of the likelihood of the agency companies’ achievement of the advertising andservice volume targets, giving consideration to the actual activity during the incentive period and, as appropriate, evaluation of the agency companies’purchase trends and history. We also provide cash incentives to automakers and dealers who participated in various incentive programs on our onlinetransaction platform. The cash incentives are accounted for as a reduction of revenue in accordance with ASC 605-50, Revenue Recognition: CustomerPayments and Incentives. Estimated rebates and cash incentives are recorded as a reduction of revenues in the period revenues are recognized in ourconsolidated financial statements. We have estimated and recorded rebates and cash incentives to agency companies, dealers and automakers cumulativelyamounting to RMB153.4 million, RMB231.1 million and RMB395.2 million (US$63.7 million) for 2012, 2013 and 2014, respectively. 62Table of ContentsIncome taxesWe account for income taxes using the liability method. Under this method, deferred tax assets and liabilities are determined based on the differencebetween the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the period in which the differences areexpected to reverse. We record a valuation allowance against deferred tax assets if, based on the weight of available evidence, it is more-likely-than-not thatsome portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized in income in the periodthat includes the enactment date.We apply ASC 740, Accounting for Income Taxes, to account for uncertainty in income taxes. ASC 740 prescribes a recognition threshold a taxposition is required to meet before being recognized in the financial statements. We have recorded unrecognized tax benefits in the other liabilities line itemin the accompanying consolidated balance sheets. We have elected to classify interest and penalties related to unrecognized tax benefits, if and whenrequired, as part of “income tax expense,” in the consolidated statements of comprehensive income.Our estimated liability for unrecognized tax benefits and the related interest and penalties are periodically assessed for adequacy and may be affectedby changing interpretations of laws, rulings by tax authorities, changes and/or developments with respect to tax audits, and expiration of the statute oflimitations. The actual benefits ultimately realized may differ from our estimates. As each audit is concluded, adjustments, if any, are recorded in ourconsolidated financial statements. Additionally, in future periods, changes in facts and circumstances, and new information may require us to adjust therecognition and measurement estimates with regard to individual tax positions. Changes in recognition and measurement estimates are recognized in theperiod in which they occur.Fair Value of Financial InstrumentsOur financial instruments are primarily comprised of cash and cash equivalents, restricted cash, term deposits, accounts receivable, other current assets,short-term debt, accrued expenses and other payables, payable for repurchase of common stock and due to related parties. The carrying values of thesefinancial instruments approximated their fair values due to the short-term maturity of these instruments.Accounts Receivable and Allowance for Doubtful AccountsAccounts receivable are carried at net realizable value. An allowance for doubtful accounts is recorded in the period when a loss is probable based onan assessment of specific evidence indicating troubled collection, historical experience, accounts aging and other factors. An accounts receivable balance iswritten off after all collection effort has ceased.GoodwillOur goodwill as of December 31, 2013 and 2014 were related to the acquisition of Cheerbright, China Topside, and Norstar, representing the excess ofthe purchase price over the amounts assigned to the fair value of the assets acquired and the liabilities assumed. In accordance with ASC 350, Goodwill andOther Intangible Assets, recorded goodwill amounts are not amortized, but rather are tested for impairment annually, or more frequently if there are indicatorsof impairment present.Goodwill is tested for impairment at the reporting unit level on an annual basis (December 31 for the Company) and between annual tests if an eventoccurs or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying value. These events orcircumstances include a significant change in our stock prices, business environment, legal factors, financial performances, competition, or events affectingour reporting unit. Application of the goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets andliabilities to reporting units, assignment of goodwill to reporting units, and determination of the fair value of each reporting unit. The estimation of fair valueof a reporting unit using a discounted cash flow methodology also requires significant judgments, including estimation of future cash flows, which isdependent on internal forecasts, estimation of the long-term rate of growth for our business, estimation of the useful life over which cash flows will occur, anddetermination of our weighted average cost of capital. The estimates used to calculate the fair value of a reporting unit change from year to year based onoperating results and market conditions. Changes in these estimates and assumptions could materially affect the determination of fair value and goodwillimpairment for the reporting unit. 63Table of ContentsManagement has determined that we represent the lowest level within the entity at which goodwill is monitored for internal management purposes.Management evaluated the recoverability of goodwill by performing a qualitative assessment before using a two-step impairment test approach at thereporting unit level. Based on an assessment of the qualitative factors, management determined that it is more-likely-than-not that the fair value of thereporting unit is in excess of its carrying amount. Therefore, management concluded that it was not necessary to proceed to the two-step goodwill impairmenttest. No impairment loss was recorded for any of the years presented.If we reorganize our reporting structure in a manner that changes the composition of one or more of our reporting units, goodwill will be reassignedbased on the relative fair value of each of the affected reporting units.Share-based CompensationWe account for share-based awards granted to employees under ASC 718, Compensation—Stock Compensation, which requires that share-basedawards granted to employees be measured based on the grant date fair value and recognized as compensation expense over the requisite service period (whichis generally the vesting period) in the consolidated statements of comprehensive income. We have elected to recognize compensation expense using thestraight-line method for all share-based awards granted with service conditions that have a graded vesting schedule. ASC 718 requires forfeitures to beestimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from initial estimates.Forfeiture rates are estimated based on historical and future expectations of employee turnover rates and are adjusted to reflect future changes incircumstances and facts, if any. Share-based compensation expense is recorded net of estimated forfeitures such that expense is recorded only for those share-based awards that are expected to vest. To the extent we revise these estimates in the future, the share-based payments could be materially impacted in theperiod of revision, as well as in following periods. We, with the assistance of an independent third-party valuation firm, determined the fair value of the stockoptions granted to employees. The binomial option pricing model was applied in determining the estimated fair value of the options granted to employees.Subsequent to our initial public offering, fair value of the ordinary shares will be the price of our publicly traded shares.Implications of Being an Emerging Growth CompanyAs a company with less than US$1.0 billion in revenue for our last fiscal year, we qualify as an “emerging growth company” pursuant to the JOBS Act.An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to publiccompanies. These provisions include exemption from the auditor attestation requirement under Section 404 in the assessment of the emerging growthcompany’s internal control over financial reporting. The JOBS Act also provides that an emerging growth company does not need to comply with any new orrevised financial accounting standards until such date that a private company is otherwise required to comply with such new or revised accounting standards.However, we have elected to opt out of this provision and, as a result, we will comply with new or revised accounting standards as required when they areadopted for public companies. This decision to opt out of the extended transition period under the JOBS Act is irrevocable.We will remain an emerging growth company until the earliest of (a) the last day of our fiscal year during which we have total annual gross revenues ofat least US$1.0 billion; (b) December 31, 2018; (c) the date on which we have, during the previous three-year period, issued more than US$1.0 billion innonconvertible debt; or (d) the date on which we are deemed to be a “large accelerated filer” under the Exchange Act, which would occur if the market valueof our ADSs that are held by non-affiliates exceeds US$700 million as of the last business day of our most recently completed second fiscal quarter. Once wecease to be an emerging growth company, we will not be entitled to the exemptions provided in the JOBS Act discussed above that we have not previouslyopted out of irrevocably. 64Table of ContentsResults of OperationsThe following table presents our historical results of operations in absolute amounts and as a percentage of our total net revenues for the yearsindicated. For the Year Ended December 31, 2012 2013 2014 RMB % RMB % RMB US$ % (in thousands, except percentages) Net revenues Advertising services 592,622 80.9% 894,937 73.6% 1,499,516 241,678 70.3% Dealer subscription services 139,898 19.1 321,611 26.4 633,433 102,091 29.7 Total net revenues 732,520 100.0 1,216,548 100.0 2,132,949 343,769 100.0 Cost of revenues(1) (178,240) (24.3) (252,236) (20.7) (381,498) (61,486) (17.9) Gross Profit 554,280 75.7 964,312 79.3 1,751,451 282,283 82.1 Operating expensesSales and marketing expenses(1) (129,796) (17.7) (245,228) (20.2) (559,070) (90,106) (26.2) General and administrative expenses(1) (83,153) (11.4) (82,529) (6.8) (129,751) (20,912) (6.1) Product development expenses(1) (42,865) (5.9) (81,651) (6.7) (158,395) (25,529) (7.4) Operating profit 298,466 40.7 554,904 45.6 904,235 145,736 42.4 Interest income 5,093 0.8 11,082 0.9 34,682 5,590 1.6 Interest expense — — (414) (0.0) — — — Other income, net 310 0.0 2,884 0.2 2,544 410 0.1 Income before income taxes 303,869 41.5 568,456 46.7 941,461 151,736 44.1 Income tax expense (90,988) (12.4) (112,294) (9.2) (192,781) (31,071) (9.0) Net income 212,881 29.1% 456,162 37.5% 748,680 120,665 35.1% (1)Including share-based compensation expenses as follows: For the Year Ended December 31, 2012 2013 2014 RMB % RMB % RMB US$ % (in thousands, except percentages) Allocation of Share-Based Compensation Expenses Cost of revenues 6,553 0.9% 6,534 0.5% 8,048 1,298 0.4% Sales and marketing expenses 4,177 0.6 4,375 0.4 14,644 2,360 0.7 General and administrative expenses 15,734 2.1 11,738 1.0 20,557 3,313 1.0 Product development expenses 2,678 0.4 2,961 0.2 13,417 2,162 0.6 Total share-based compensation expenses 29,142 4.0% 25,608 2.1% 56,666 9,133 2.7% Year Ended December 31, 2014 Compared to Year Ended December 31, 2013Net Revenues. Our net revenues increased by 75.3% from RMB1,216.5 million in 2013 to RMB2,132.9 million (US$343.8 million) in 2014. Thisincrease was due to increases in both our advertising services revenues and our dealer subscription services revenues.Advertising services. Our advertising services revenues increased by 67.6% from RMB894.9 million in 2013 to RMB1,499.5 million (US$241.7million) in 2014. This increase was due to our increased revenues from both automaker advertisers and dealer advertisers. Revenues from our automakeradvertisers and dealer advertisers accounted for 70.6% and 29.4%, respectively, of our total advertising services revenues in 2014. Revenues from ourautomaker advertisers and dealer advertisers accounted for 78.7% and 21.3%, respectively, of our total advertising services revenues in 2013.The increase in revenues from our automaker advertisers was attributable to an increase in average revenues per automaker advertiser, as automakerscontinued to allocate more of their advertising budget to Autohome’s online advertising channels. The increase in dealer advertising services revenues wasmainly due to an increase in the volume of advertising purchased by dealer advertisers as a result of our expansion into new geographic markets and deeperpenetration into existing markets, as well as an increase in the rates for our dealer advertising services. 65Table of ContentsDealer subscription services. Dealer subscription services revenues increased by 97.0% from RMB321.6 million in 2013 to RMB633.4 million(US$102.1 million) in 2014. The increase in dealer subscription services revenues was mainly due to (i) an increase in the number of paying subscribers,which in turn was a result of our expansion into new geographic markets and deeper penetration into existing markets and (ii) an increase in average revenueper paying subscriber as dealers continue to allocate a greater portion of their budget to subscribe to our services and an increase in the rates for our dealersubscription services. We sold dealer subscription services to 17,779 dealers in 2014, compared with 10,617 dealers in 2013.Cost of Revenues. Our cost of revenues increased by 51.2% from RMB252.2 million in 2013 to RMB381.5 million (US$61.5 million) in 2014,primarily due to increases in VAT, business tax and surcharges, content-related costs, bandwidth and IDC costs and depreciation.Content-related Costs. Our content-related costs increased by 33.3% from RMB96.0 million in 2013 to RMB127.9 million (US$20.6 million) in 2014,primarily due to an increase in salaries and benefits of our editorial personnel and an increase in toll free telephone charges due to the increase of sales leadsgenerated for dealer subscribers. Our content-related costs included share-based compensation expenses, which increased from RMB6.5 million in 2013 toRMB8.0 million (US$1.3 million) in 2014.Depreciation and Amortization Expenses. Our depreciation and amortization expenses increased by 19.9% from RMB26.4 million in 2013 toRMB31.7 million (US$5.1 million) in 2014, primarily due to an increase in depreciation expenses related to servers that were mainly purchased in 2014,partially offset by a decrease in amortization of acquired intangible assets, including customer relationships, domain names and licensing agreement.Bandwidth and IDC Costs. Our bandwidth and IDC costs increased by 45.9% from RMB21.0 million in 2013 to RMB30.7 million (US$5.0 million) in2014, primarily due to increased bandwidth and IDC requirements to fulfill the growth of our user traffic and improve our users’ experience.VAT, Business Tax and Surcharges. We are subject to VAT, business tax and surcharges on external services as well as services provided by our PRCsubsidiaries to our VIEs. VAT, business taxes and related surcharges increased by 75.8% from RMB108.8 million for 2013 to RMB191.2 million (US$30.8million) for 2014, as a result of increased revenues.Operating Expenses. Our operating expenses increased by 106.9% from RMB409.4 million in 2013 to RMB847.2 million (US$136.5 million) in2014, primarily due to increases in sales and marketing expenses, general and administrative expenses and product development expenses. As a percentage ofnet revenues, operating expenses increased from 33.7% in 2013 to 39.7% in 2014.Sales and Marketing Expenses. Our sales and marketing expenses increased by 128.0% from RMB245.2 million in 2013 to RMB559.1 million(US$90.1 million) in 2014. This increase was primarily due to (i) an increase in marketing expenses in connection with the promotion of our brands throughsearch engines, mobile platforms and navigation sites, including the cooperation with Baidu for enhanced auto-related content search results on PCs poweredby “Aladdin,” and the cooperation with application stores and mobile browsers to promote our mobile applications and websites, and (ii) an increase insalaries and benefits, resulting from our increased sales and marketing headcount and the hiring of senior personnel to oversee our sales and marketingactivities as well as more experienced sales persons to provide better service and support to our important customers. As a percentage of net revenues, salesand marketing expenses increased from 20.2% in 2013 to 26.2% in 2014. Our sales and marketing expenses in 2014 included share-based compensationexpenses of RMB14.6 million (US$2.4 million), compared to RMB4.4 million in 2013.General and Administrative Expenses. Our general and administrative expenses increased by 57.2% from RMB82.5 million in 2013 to RMB129.8million (US$20.9 million) in 2014. This increase was primarily attributable to an increase in salaries and benefits, professional service fees and officeexpenses. As a percentage of net revenues, general and administrative expenses decreased from 6.8% in 2013 to 6.1% in 2014. Our general and administrativeexpenses for 2014 included share-based compensation expenses of RMB20.6 million (US$3.3 million), compared to RMB11.7 million in 2013. 66Table of ContentsProduct Development Expenses. Our product development expenses increased by 94.0% from RMB81.7 million in 2013 to RMB158.4 million(US$25.5 million) in 2014, primarily due to an increase in salaries and benefits in line with an increase in the number of product development personnelincluding additional senior engineers to enhance our product development capabilities, especially in our growth initiatives, such as mobile platforms. As apercentage of net revenues, product development expenses increased from 6.7% in 2013 to 7.4% in 2014. Our product development expenses for 2014included share-based compensation expenses of RMB13.4 million (US$2.2 million), compared to RMB3.0 million in 2013.Income before Income Taxes. Our income before income taxes increased by 65.6% from RMB568.5 million in 2013 to RMB941.5 million (US$151.7million) in 2014.Income Tax Expense. We incurred income tax expense of RMB192.8 million (US$31.1 million) in 2014, compared with RMB112.3 million in 2013,primarily due to the growth of our income before income taxes. As a percentage of our income before income taxes, our income tax expenses were 19.8% in2013 and 20.5% in 2014.Net Income. As a result of the foregoing, we had net income of RMB748.7 million (US$120.7 million) in 2014, compared with net income ofRMB456.2 million in 2013.Year Ended December 31, 2013 Compared to Year Ended December 31, 2012Net Revenues. Our net revenues increased by 66.1% from RMB732.5 million in 2012 to RMB1,216.5 million in 2013. This increase was due toincreases in both our advertising service revenues and our dealer subscription services revenues.Advertising services. Our advertising services revenues increased by 51.0% from RMB592.6 million in 2012 to RMB894.9 million in 2013, due to ourincreased revenues from both automaker advertisers and dealer advertisers. Revenues from our automaker advertisers and dealer advertisers accounted for78.7% and 21.3%, respectively, of our total advertising services revenues in 2013. Revenues from our automaker advertisers and dealer advertisers accountedfor 81.9% and 18.1%, respectively, of our total advertising services revenues in 2012.The increase in revenues from our automaker advertisers was primarily attributable to the increased average revenues per automaker advertiser. Ouraverage revenues per automaker advertiser increased by 48.8% in 2013, compared with that in 2012, mainly because we increased the rates for ouradvertising services as measured by the price per advertisement per day at a given location on our websites. We sold advertising services to 77 and 75automakers in 2012 and 2013, respectively. The increase in our automaker advertising services revenues was also driven by an increase in the totaladvertising volume purchased by automakers.The increase in dealer advertising services revenues was mainly attributable to an increase in the advertising volume purchased by dealer advertisers asa result of our expansion into new geographical markets and our deeper penetration into existing markets, together with an increase in the rates for ouradvertising services. The increase in our dealer advertising services revenues was also due to increased marketing campaigns conducted by automakers’regional sales offices to help dealers meet their sales targets.Dealer subscription services. Dealer subscription services revenues increased by 129.9% from RMB139.9 million in 2012 to RMB321.6 million in2013. The increase in dealer subscription services revenues was mainly due to an increase in the number of our dealer subscribers, which in turn was a resultof our expansion into new geographic markets and our deeper penetration into existing markets. We sold dealer subscription services to 10,617 dealers in2013, compared with 5,052 dealers in 2012.Cost of Revenues. Our cost of revenues increased by 41.5% from RMB178.2 million in 2012 to RMB252.2 million in 2013, primarily due to anincrease in VAT, business tax and surcharges, content-related costs, bandwidth and IDC costs and depreciation. 67Table of ContentsContent-related Costs. Our content-related costs increased by 52.7% from RMB62.9 million in 2012 to RMB96.0 million in 2013, primarily due to anincrease in salaries and benefits payments to our editorial and testing personnel, which in turn was primarily due to a moderate increase in averagecompensation levels as well as increased editorial headcount. Our content-related costs included share-based compensation expenses, which decreasedslightly from RMB6.6 million in 2012 to RMB6.5 million in 2013.Depreciation and Amortization Expenses. Our depreciation and amortization expenses increased by 20.3% from RMB22.0 million in 2012 toRMB26.4 million in 2013, primarily due to an increase in depreciation expenses related to servers that were purchased in 2013, partially offset by a decreasein the amortization of acquired intangible assets, which mainly are our customer relationships and websites.Bandwidth and IDC Costs. Our bandwidth and IDC costs increased by 39.9% from RMB15.0 million in 2012 to RMB21.0 million in 2013, primarilydue to increased bandwidth and IDC requirements to fulfill the growth of our user traffic and improve our users’ experience.VAT, Business Tax and Surcharges. We are subject to VAT, business tax and surcharges on external services as well as services provided by our PRCsubsidiaries to our VIEs. Since the implementation of the VAT Pilot Program, the service fees received by Autohome WFOE from our VIEs are no longersubject to business tax and the VAT incurred by Autohome WFOE, based on the services it provided to our VIEs, are deductible from the VAT payables ofour VIEs. VAT, business taxes and related surcharges increased by 38.8% from RMB78.3 million for 2012 to RMB108.8 million for 2013, as a result ofincreased revenues, partially offset by the decrease in the VAT, business tax and surcharges as a percentage of our net revenues due to the VAT Pilot Program.Operating Expenses. Our operating expenses increased by 60.0% from RMB255.8 million in 2012 to RMB409.4 million in 2013, primarily due toincreases in sales and marketing expenses and product development expenses. As a percentage of net revenues, operating expenses in 2013 decreased to33.7% from 35.0% in 2012.Sales and Marketing Expenses. Our sales and marketing expenses increased by 88.9% from RMB129.8 million in 2012 to RMB245.2 million in 2013.This increase was primarily due to (i) an increase in salaries and benefits, which in turn was primarily due to our increased sales and marketing headcount andthe hiring of more experienced sales persons to provide better service and support to our important customers, and (ii) an increase in our marketing expensesin connection with the promotion of our brands through online media and the sales promotion activity held on November 11, 2013 (being a popular onlineshopping festival in China). As a percentage of net revenues, sales and marketing expenses in 2013 increased to 20.2% from 17.7% in 2012. Our sales andmarketing expenses in 2013 included share-based compensation expenses of RMB4.4 million, compared to RMB4.2 million in 2012.General and Administrative Expenses. Our general and administrative expenses were RMB82.5 million in 2013, which is roughly the same level ofgeneral and administrative expenses of RMB83.2 million we incurred in 2012. As a percentage of net revenues, general and administrative expenses in 2013decreased to 6.8% from 11.4% in 2012. The marginal decrease was attributable to a one-off cost associated with our postponement of our initial publicoffering process in the fourth quarter of 2012, which was partially offset by an increase in salaries and benefits in 2013. Our general and administrativeexpenses for 2013 included share-based compensation expenses of RMB11.7 million, compared to RMB15.7 million in 2012.Product Development Expenses. Our product development expenses increased by 90.5% from RMB42.9 million in 2012 to RMB81.7 million in 2013,primarily due to an increase in salaries and benefits payments as we recruited more product development personnel. As a percentage of net revenues, productdevelopment expenses in 2013 increased to 6.7% from 5.9% in 2012. Our product development expenses for 2013 included share-based compensationexpenses of RMB3.0 million, compared to RMB2.7 million in 2012.Income before Income Taxes. Our income before income taxes increased by 87.1% to RMB568.5 million in 2013 from RMB303.9 million in 2012.Income Tax Expense. We incurred income tax expense of RMB112.3 million in 2013, compared with RMB91.0 million in 2012, primarily due to thegrowth of our income before income taxes. As a percentage of our income before income taxes, our income tax expenses were 19.8% in 2013, decreased from29.9% in 2012, primarily due to the accrued withholding tax of RMB26.6 million on our dividend distribution in May 2012. 68Table of ContentsNet Income. As a result of the foregoing, we had net income of RMB456.2 million in 2013, compared with net income of RMB212.9 million in 2012.InflationSince our inception, inflation in China has not materially impacted our results of operations. According to the National Bureau of Statistics of China,the consumer price index in China increased by 2.6%, 2.6% and 2.0% in 2012, 2013 and 2014, and the year-over-year percent changes in the consumer priceindex for December 2012, 2013 and 2014 were increases of 2.5%, 2.5% and 1.5%, respectively. Although we have not in the past been materially affected byinflation since our inception, we can provide no assurance that we will not be affected in the future by higher rates of inflation in China.Recent Accounting PronouncementsIn May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which supersedes the revenuerecognition requirements in ASC 605, Revenue Recognition. The core principle of the guidance is that an entity should recognize revenue to depict thetransfer of the promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchangefor goods or services. The amendments in ASU 2014-09 are effective for annual reporting periods beginning after December 15, 2016, including interimperiods within that reporting period. Early adoption is not permitted. We are in the process of evaluating the effect of the update on our consolidatedfinancial statements.In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure ofUncertainties about an Entity’s Ability to Continue as a Going Concern. The guidance requires an entity to evaluate whether there are conditions or events,in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financialstatements are issued and to provide related footnote disclosures in certain circumstances. The guidance is effective for the annual period ending afterDecember 15, 2016, and for annual and interim periods thereafter. Early application is permitted. The adoption of this guidance is not expected to have asignificant impact on our consolidated financial statements. B.Liquidity and Capital ResourcesCash Flows and Working CapitalOur principal sources of liquidity are cash generated from our operating activities and our issuance of ADSs. In December 2013, we completed ourinitial public offering and raised net proceeds of US$142.6 million, after deducting underwriting commissions and discounts and expenses. In November2014, we completed our 2014 Offering and raised net proceeds of US$97.3 million, after deducting underwriting commissions and discounts and expenses.Our principal uses of cash for 2012, 2013 and 2014 were operating activities, primarily employee compensation, tax expenses, marketing expenses,bandwidth and IDC costs and capital expenditures. As of December 31, 2014, we had RMB1,054.4 million (US$169.9 million) in cash and cash equivalents.We believe that our current cash and anticipated cash flow from operations, together with the net proceeds that we received from our equity offerings,will be sufficient to meet our anticipated cash needs, including our cash needs for at least the next 12 months. We may require additional cash due tounanticipated business conditions or other future developments. If our existing cash is insufficient to meet our requirements, we may seek to sell additionalequity securities, debt securities or secure debt funding from financial institutions.We expect to continue to accrue for staff welfare benefits including medical insurance, housing funds, pension benefits, unemployment insurance,maternity insurance and work-related injury insurance based on certain percentages of the employees’ respective salaries and to make cash contributions tostate-sponsored plans out of the amounts accrued. The amount of such cash contributions may increase due to our expanding workforce as we grow ourbusiness or increase wage levels. However, we do not expect that any such increases will have a material effect on our liquidity. 69Table of ContentsThe following table sets forth a summary of our cash flows for the years indicated. For the Year Ended December 31, 2012 2013 2014 RMB RMB RMB US$ (in thousands) Net cash generated from operating activities 279,515 593,893 1,023,743 164,998 Net cash used in investing activities (27,734) (45,943) (1,759,517) (283,582) Net cash (used in)/generated from financing activities (44,910) 169,298 647,396 104,342 Effect of exchange rate on cash and cash equivalents — 789 4,181 672 Net increase/(decrease) in cash and cash equivalents 206,871 718,037 (84,197) (13,570) Cash and cash equivalents at beginning of year 213,705 420,576 1,138,613 183,511 Cash and cash equivalents at end of year 420,576 1,138,613 1,054,416 169,941 Operating ActivitiesNet cash generated from operating activities was RMB1,023.7 million (US$165.0 million) for 2014. This amount was primarily attributable to netincome of RMB748.7 million (US$120.7 million), (a) adjusted for (i) certain non-cash expenses, primarily share-based compensation expenses of RMB56.7million (US$9.1 million), depreciation of property and equipment of RMB35.1 million (US$5.7 million) and deferred income taxes of RMB5.3 million(US$0.9 million), and (ii) changes in operating assets and liabilities that positively affected operating cash flow, primarily an increase in deferred revenue ofRMB225.6 million (US$36.4 million) and an increase in accrued expenses and other payables of RMB201.4 million (US$32.5 million), and (b) partiallyoffset by changes in operating assets and liabilities that negatively affected operating cash flow, primarily an increase in accounts receivable of RMB271.0million (US$43.7 million). The increase in deferred revenues was mainly attributable to the growth of our dealer subscription services. The increase inaccounts receivable was primarily due to the increase of our advertising service sales. The increase in accrued expenses and other payables was mainly due tothe increase in accrued rebates to advertising agencies in accordance with growth of revenue and accrual for the year-end bonuses to employees during theperiod.Net cash generated from operating activities was RMB593.9 million for 2013. This amount was primarily attributable to net income of RMB456.2million, (a) adjusted for (i) certain non-cash expenses, primarily share-based compensation expenses of RMB25.6 million, depreciation of property andequipment of RMB25.5 million and deferred income taxes of RMB3.3 million, and (ii) changes in operating assets and liabilities that positively affectedoperating cash flow, primarily an increase in deferred revenue of RMB118.8 million and an increase in accrued expenses and other payables of RMB97.8million, and (b) partially offset by changes in operating assets and liabilities that negatively affected operating cash flow, primarily an increase in accountsreceivable of RMB139.9 million. The increase in deferred revenues was mainly attributable to the subscription fees we received from our growing number ofdealer subscribers. The increase in accounts receivable was primarily due to the increase in our advertising services sales. The increase in accrued expensesand other payables was mainly due to accrued rebates to advertising agencies in accordance with growth of revenue and accrual for the year-end bonuses toemployees during the period.Net cash generated from operating activities was RMB279.5 million for 2012. This amount was primarily attributable to income from continuingoperations of RMB212.9 million, (a) adjusted for certain non-cash expenses, primarily share-based compensation expenses of RMB29.1 million, and forchanges in working capital accounts that positively affected operating cash flow, primarily an increase in accrued expenses and other payables of RMB63.8million and an increase in deferred revenue of RMB52.9 million, and (b) partially offset by changes in working capital accounts that negatively affectedoperating cash flow, primarily an increase in accounts receivable of RMB123.8 million. The increase in accrued expenses and other payables was mainlyattributable to the increase in accrued rebate in connection with our revenue growth and increase in accrued salaries and benefits. The increase in deferredrevenue was mainly attributable to the subscription fees we received from our growing number of dealer subscribers. The increase in accounts receivable wasprimarily due to the increase of our advertising services.Investing ActivitiesNet cash used in investing activities was RMB1,759.5 million (US$283.6 million) in 2014, which was primarily attributable to the purchase of termdeposits. 70Table of ContentsNet cash used in investing activities amounted to RMB45.9 million in 2013, primarily attributable to the purchase of property and equipment.Net cash used in investing activities amounted to RMB27.7 million in 2012, primarily attributable to the purchase of property and equipment.Financing ActivitiesNet cash generated from financing activities in 2014 was RMB647.4 million (US$104.3 million), which was primarily attributable to the net proceedsfrom our 2014 Offering of RMB604.0 million (US$97.3 million) and the decrease in restricted cash of RMB245.0 million (US$39.5 million), partially offsetby the payment of the final installment for the repurchase of common stock from Mr. Jiang Lan, a former director of our company, of RMB227.0 million(US$36.6 million), pursuant to the West Crest Share Purchase. See “Item 7. Major Shareholders and Related Party Transactions—B. Related PartyTransactions—Transactions with Entities Affiliated with Our Shareholders” for more information.Net cash generated from financing activities in 2013 was RMB169.3 million, mainly attributable to the net proceeds from our initial public offering ofRMB863.2 million, partially offset by the payments of dividends amounting to RMB220.9 million, net of withholding taxes paid in June and July 2013 toall of our shareholders and the payment of the first installment for the repurchase of common stock from Mr. Jiang Lan of RMB230.3 million, pursuant to forthe West Crest Share Purchase. See “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transaction—Transactions with EntitiesAffiliated with Our Shareholders” for more information.In connection with financing the first installment payable to Mr. Jiang Lan under the West Crest Share Purchase, we entered into a short-term loanfacility agreement with The Hongkong and Shanghai Banking Corporation Limited, Hong Kong, on November 18, 2013 in the amount of RMB230.3million. The term of this loan was three months, with an interest rate of LIBOR plus 0.9% and a maturity of three months from the date of first drawdown. Thisshort-term facility was secured by RMB denominated bank deposits of RMB245.0 million placed with HSBC Bank (China) Company Limited, whichincreased restricted cash for 2013. We repaid this loan in full in 2013 and subsequently the pledged RMB denominated bank deposits were released in early2014.We paid a special dividend of RMB44.9 million, net of withholding tax, in April 2012 to all of our shareholders.Capital ExpendituresCash outflow in connection with capital expenditures amounted to RMB27.7 million, RMB46.5 million and RMB42.8 million (US$6.9 million) in2012, 2013 and 2014, respectively. These capital expenditures were primarily used to purchase equipment and intangible assets for our business.Holding Company StructureOur ability to pay dividends is primarily dependent on our receiving distributions of funds from our subsidiaries. Relevant PRC statutory laws andregulations permit payments of dividends by our PRC subsidiaries only out of their retained earnings, if any, as determined in accordance with PRCaccounting standards and regulations. The results of operations reflected in the consolidated financial statements prepared in accordance with U.S. GAAPdiffer from those reflected in the statutory financial statements of our PRC subsidiaries.Under PRC law, our PRC subsidiaries are required to allocate at least 10% of their after-tax profits on an individual company basis as determined underPRC accounting standards to the general reserve before paying dividends to us, and have the right to discontinue allocations to the general reserve if suchreserve has reached 50% of registered capital on an individual company basis. In addition, they are also required to make appropriations to the enterpriseexpansion fund and staff welfare and bonus fund at the discretion of their respective boards of directors. Our VIEs in the PRC are also subject to similarstatutory reserve requirements. These reserves can only be used for specific purposes and are not transferable to us in the form of loans, advances or cashdividends. As of December 31, 2012, 2013 and 2014, our PRC subsidiaries and VIEs had appropriated RMB4.9 million, RMB7.1 million and RMB8.8million (US$1.4 million), respectively, of retained earnings for their statutory reserves. 71Table of ContentsAs a result of these PRC laws and regulations, prior to allocations of after-tax profits to the statutory reserves, our PRC subsidiaries and VIEs arerestricted in their ability to transfer a portion of their net assets to us.Foreign exchange and other regulation in the PRC may further restrict our PRC subsidiaries and VIEs from transferring funds to us in the form ofdividends, loans and advances. As of December 31, 2012, 2013 and 2014, the amounts of the net restricted assets of our PRC subsidiaries and VIEs wereRMB1,600.2 million, RMB1,818.1 million and RMB2,626.1 million (US$423.3 million), respectively. C.Research and Development, Patents and Licenses, Etc.Technology and Product DevelopmentOur technologies and infrastructure are critical to our success. We follow a user-centric strategy for our system architecture and have developed robustand scalable technology platforms with sufficient flexibility to support our rapid growth.A key component of our user-centric strategy is our user intelligence engine which we have developed and are continually enhancing. Our userintelligence engine allows us to rapidly gather user intelligence by analyzing large amounts of data from many sources throughout our content productionsystem. We can utilize such user intelligence data to personalize user interfaces, associate and understand the relationship of information from differentsources and facilitate interactions among users and various elements on our websites. It also helps us recommend suitable products, services and userconnections to our users. Through our user intelligence engine, we can engage our users more closely by providing them with relevant content. We are alsoable to provide precision marketing services to our automakers, dealers and other automotive-related customers so that they can deliver relevantadvertisements to targeted users who are more receptive to such marketing information.We distribute our web content to numerous network nodes close to our users by utilizing a third-party content delivery network, allowing most of ouruser communications to bypass internet congestion. With our technological expertise, we manage third-party and in-house content delivery networks toenhance our website responsiveness and to improve user experience. As such, we believe our websites have a performance advantage over other automotivewebsites.We invested heavily in mobile technologies and were among the earliest in our industry in China to introduce a mobile version of our websites andboth Apple iOS- and Android-based applications to allow our users to easily access our content. We have built up a team of 83 research and developmentpersonnel as of December 31, 2014, to focus exclusively on the development of our mobile websites and applications and to explore new business modelsand opportunities through mobile technology. We plan to continue to leverage our mobile technology to develop more applications for Apple iOS andAndroid platforms focusing on convenience, real-time interaction and location based services.We had an experienced product development team of 475 engineers as of December 31, 2014. Our past innovation has focused on helping usersresearch, select and purchase suitable automobiles through our websites. We plan to develop additional products and services to further explore theadditional business opportunities inherent in the maintenance and replacement stages of the automobile ownership cycle. Our product development expenseswere RMB42.9 million, RMB81.7 million and RMB158.4 million (US$25.5 million) for the years ended December 31, 2012, 2013 and 2014, respectively.Intellectual PropertyOur intellectual property includes trademarks and trademark applications related to our brands and services, software copyrights, trade secrets and otherintellectual property rights and licenses. We seek to protect our intellectual property assets and brands through a combination of trademark, patent, copyrightand trade secret protection laws in the PRC and other jurisdictions, as well as through confidentiality agreements and other measures.We hold and (both mean “auto home” in English) and “AUTOHOME®” trademarks in China. In addition, as at December 31, 2014,we held 181 pending trademark applications and 47 registered trademarks in China. As at the same date, we had 41 registered domain names, including ourmain website domain names, autohome.com.cn and che168.com, and 63 pending patent applications. 72Table of ContentsD.Trend InformationOther than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events since thebeginning of our fiscal year 2014 that are reasonably likely to have a material effect on our net revenues, income from operations, profitability, liquidity orcapital resources, or that would cause the disclosed financial information to be not necessarily indicative of future operating results or financial condition. E.Off-Balance Sheet ArrangementsWe have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have notentered into any derivative contracts that are indexed to our shares and classified as shareholder’s equity, or that are not reflected in our consolidatedfinancial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit,liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, marketrisk or credit support to us or engages in leasing, hedging or research and development services with us. F.Tabular Disclosure of Contractual ObligationsThe following summarizes our contractual obligations as of December 31, 2014: Payments Due by Period Less Than 1Year 1 to 3 Years 3 to 5 Years More than 5Years Total (in thousands of RMB) Operating lease obligations(1) 39,493 36,222 1,317 — 77,032 (1)Operating lease obligations primarily related to the lease of office space.Rental expenses for the years ended December 31, 2012, 2013 and 2014 were RMB12.0 million, RMB17.9 million and RMB30.5 million (US$4.9million), respectively. G.Safe HarborSee “Forward-Looking Statements” on page 2 of this annual report.ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES A.Directors and Senior ManagementThe following table sets forth information regarding our directors and executive officers as of the date of this annual report. Directors and Executive Officers Age Position/TitleTimothy Y. (Tim) Chen 58 Chairman of the BoardJames Zhi Qin 42 Director and Chief Executive OfficerAndrew Penn 51 DirectorXiang Li 33 Director and PresidentNicholas Yik Kay Chong 47 Chief Financial OfficerCynthia Whelan 45 DirectorHan Willem Kotterman 49 DirectorRuey-Bin Kao 54 DirectorTed Tak-Tai Lee 64 Independent DirectorGuangfu Cui 46 Independent DirectorJunling Liu 50 Independent Director 73Table of ContentsTimothy Y. (Tim) Chen has served as our chairman of the board since 2012. He has served as the president and group managing director of TelstraInternational Group and is currently International President of Telstra, which he joined in November 2012. He is also a director of China CommunicationsMedia Group Co. Ltd., Qingdao Haier, Telstra International HK Limited, Telstra Holdings Pty Limited and several other Telstra subsidiaries. He was a non-executive director on the board of directors of Telstra Corporation Limited between April 2012 and November 2012 and a director of Sequel Media Inc.between November 2012 and November 2014. Previously, Mr. Chen was a partner of a China Opportunities Fund within GL Capital Group. He was the CEOof National Basketball Association China from 2007 to 2010, the corporate vice president of Microsoft and the CEO of its Greater China region from 2003 to2007, the corporate vice president of Motorola and the chairman and president of Motorola (China) Electronics from 2001 to 2003. Before Microsoft, he wasthe CEO of 21CN Cybernet, a company listed on the Hong Kong Stock Exchange, from 2000 to 2001. Prior to 2000, Mr. Chen spent eight years in Chinawith Motorola, including serving as the general manager responsible for the sales and marketing for the Greater China Cellular Infrastructure Division. Healso spent nine years with AT&T Bell Laboratories in the United States. Mr. Chen holds an MBA degree from the University of Chicago and a master’s degreein both computer science and mathematics from Ohio State University.James Zhi Qin has served as our director since 2008 and chief executive officer since 2009. Mr. Qin is also a director of Sequel Media. Mr. Qin joinedour company in 2007 and prior to joining us, from 2006 to 2007, Mr. Qin was the chief operating officer of 265.com, an internet company providing websitedirectory service, which was acquired by Google in 2007. Mr. Qin worked for McKinsey & Company as an associate from 2005 to 2006 and NorthernTelecom Limited as a software engineer from 1999 to 2003. Prior to that, Mr. Qin was employed at IBM Corporation from 1996 to 1998 and Hughes NetworkSystems from 1995 to 1996. Mr. Qin earned a bachelor’s degree in electrical engineering from Tsinghua University in 1995, a master’s degree in computerscience from the University of Iowa in 1999, and an MBA degree from Harvard Business School in 2005.Andrew Penn has served as our director since March 2012. He joined Telstra Corporation Limited in March 2012 and currently serves as ChiefFinancial Officer and Group Executive International, Finance and Strategy. Mr. Penn has been appointed as Chief Executive Officer of Telstra effective as ofMay 1, 2015. Prior to that, Mr. Penn had a career at AXA Asia Pacific Holdings Limited spanning twenty years, where he served in a variety of senior finance,strategy and executive roles, including group Chief Executive Officer from 2006 to 2011. Mr. Penn holds an MBA degree from Kingston University, Londonand is a graduate of Harvard Business School’s advanced management program. He is a fellow of the Chartered Association of Certified Accountants.Xiang Li has served as our director since 2008 and president since May 2013. He served as our executive vice president between 2008 and May 2013.Mr. Li is also a director of Sequel Media. In 2005, Mr. Li founded our autohome.com.cn website providing online advertising services to the automotiveindustry. In 2000, Mr. Li founded pcpop.com website, which began commercial operations in 2003. Pcpop.com focuses on providing marketing services forthe information technology industry and was operated through China Topside. Pcpop.com was spun off from our company in June 2011. Mr. Li currentlymainly focuses on content creation and product development in our company.Nicholas Yik Kay Chong has served as our chief financial officer since February 2014. He served as our co-chief financial officer between September2013 and February 2014. Mr. Chong has over 22 years of experience in the fast-moving consumer goods, IT and sporting goods industries. From 2009 to2012, Mr. Chong was a director and the group chief financial officer of Li Ning Sports Limited, a company listed on the Hong Kong Stock Exchange.Mr. Chong served in a variety of senior finance and management roles at Dell China from 2001 to 2009 and Procter & Gamble Singapore and China from1991 to 2001. Mr. Chong holds a bachelor’s degree in economics, statistics and business studies from National University of Singapore.Cynthia Whelan has served as our director since December 10, 2013. Ms. Whelan has been group managing director of strategic finance of TelstraCorporation since August 2013. Prior to that, she was with Barclays Bank PLC, Australia Branch where she held the role of chief executive officer,Australia/New Zealand for three years. Over her ten years at Barclays, Ms. Whelan held a variety of roles including managing director and head of AsiaPacific capital markets, based in Hong Kong. During her investment banking career spanning more than 20 years, Ms. Whelan worked in Australia forBarclays, UBS, Merrill Lynch and Westpac. Ms. Whelan was previously a director of Asia Securities Industry and Financial Markets Association andAustralian Financial Markets Association. She holds a Bachelor of Commerce (Finance and Japanese studies) from the University of New South Wales and aMasters of Applied Finance from Macquarie University. 74Table of ContentsHan Willem Kotterman has served as our director since December 10, 2013. Mr. Kotterman is the Chief Operating Officer for Telstra InternationalGroup, based in Hong Kong. Mr. Kotterman joined Telstra from CSL Limited where he held the position of acting chief executive officer and executive vicepresident, customer service and operations. Mr. Kotterman has over 20 years of experience in telecommunications, management consulting, and internationalcorporate tax law across Europe, Asia and North America. Before joining CSL Limited, Mr. Kotterman was a senior strategy consultant in Accenture’sWireless Communications Practice based in New York. In this role, Mr. Kotterman advised the leading U.S. wireless operators in the areas of corporatestrategy and merger integration, and was involved in executing several large industry mergers in the North American wireless industry. Mr. Kotterman holdsan MBA degree from Wharton School of Business in Philadelphia in finance and strategic management and a master of laws degree in international corporatetaxation from Leiden University in the Netherlands.Ruey-Bin Kao has served as our director since February 20, 2014. Dr. Kao was named CEO of Telstra Greater China in January 2014. Based in Beijing,he is responsible for developing Telstra’s integrated service capabilities and identifying strategic areas to grow the business in the rapidly evolving GreaterChina market. He has more than 25 years of technology and management experience in the U.S. and Asia, and has served in many senior positions, includingas country president of Applied Materials China. Prior to that, he was the managing director and vice president of Enterprise Business in Hewlett PackardChina and the chairman of Motorola (China) Electronics Limited and Motorola Asia Pacific Business Council. He holds directorships at China NationalTravel Service (HK) Group Corporation, one of the largest diversified comprehensive travel groups in China, and Want-Want China Holdings Limited, acompany listed on the Hong Kong Stock Exchange. He is also a former director at Shenhua Group Corporation Limited, a diversified energy enterprise.Dr. Kao holds a bachelor of science degree in computer science from Tam-Kang University, a master of science degree in computer and information sciencefrom the University of Delaware and a doctorate of business administration from The Hong Kong Polytechnic University.Ted Tak-Tai Lee has served as our independent director since December 10, 2013. Mr. Lee is the managing director of T Plus Capital Ltd., a firm hefounded in 2007 that provides strategic, financial and business development advisory services to accounting, financial valuation services and humanresources firms in China. Mr. Lee is also an independent director and chairman of the audit committee of Daphne International Holding Limited, a companylisted on the Hong Kong Stock Exchange, and a director of Shriro Trading (Shanghai) Company Limited, a privately held company established in China.From September 2007 to April 2009, he was an executive director at Prax Capital, a private equity firm specializing in China-focused investments. Mr. Leewas a senior partner at Deloitte where he worked for 31 years in the United States and Asia. Mr. Lee is an AICPA certified public accountant (inactive) andreceived his MBA degree from the University of Southern California in 1979 and his bachelor’s degree in accounting from California State University, Fresnoin 1973.Guangfu Cui has served as our independent director since December 9, 2014. Mr. Cui has been serving as the chief executive officer of eLong, Inc., acompany listed on the Nasdaq Stock Market, since October 2007 and as a director of eLong, Inc. since February 2011. Prior to joining eLong Inc., Mr. Cuiwas the managing director of FedEx Kinko’s China for more than three years. Prior to FedEx Kinko’s, Mr. Cui worked for Procter & Gamble for over 12 years,including two and half years working in the United States. Mr. Cui holds a bachelor’s degree in law from Peking University and an MBA degree from KelloggSchool of Management at Northwestern University.Junling Liu has served as our independent director since January 12, 2015. Mr. Liu is the co-founder and chief executive officer of Yihaodian, aleading online grocery retailer in China. Before establishing Yihaodian in 2008, Mr. Liu was the co-president of Dell China and Hong Kong. Prior to that, hewas a managing director of Avaya China. Mr. Liu received his master’s degree in international business administration from Flinders University in Australia. B.Compensation of Directors and Executive OfficersFor the fiscal year ended December 31, 2014, we incurred an aggregate compensation expense of approximately RMB14.7 million (US$2.4 million) forour executive officers and directors. Our PRC subsidiaries and VIEs are required by law to make contributions equal to certain percentages of eachemployee’s salary for his or her pension insurance, medical insurance, unemployment insurance, housing fund and other statutory benefits. Other than theabove-mentioned statutory contributions mandated by applicable PRC law, we have not set aside or accrued any amount to provide pension, retirement orother similar benefits to our executive officers and directors. For additional information on share incentive grants to our directors and executive officers, see“— Share Incentive Plans.” 75Table of ContentsEmployment AgreementsWe have entered into employment agreements with each of our executive officers through Autohome WFOE. Under these agreements, each of ourexecutive officers is employed for a specified time period. We may terminate employment for cause at any time without advance notice or remuneration forcertain acts of the executive officer, such as a conviction or plea of guilty to a felony or any crime involving moral turpitude, negligent or dishonest acts toour detriment, or misconduct or a failure to perform agreed duties. In such case, the executive officer will not be entitled to receive payment of any severancebenefits or other amounts by reason of the termination, and the executive officer’s right to all other benefits will terminate, except as required by anyapplicable law. We may also terminate an executive officer’s employment without cause upon one-month advance written notice. In such case of terminationby us, we are required to provide compensation to the executive officer, including cash compensation equivalent to three months of the executive officer’ssalary. The executive officer may terminate the employment at any time with a one-month advance written notice, if there is any significant change in theexecutive officer’s duties and responsibilities inconsistent in any material and adverse respect with his or her title and position, or a material reduction in theexecutive officer’s annual salary before the next annual salary review, or if otherwise approved by the board of directors.Each executive officer has agreed to hold, both during and after the termination or expiry of his or her employment agreement, in strict confidence andnot to use, except as required in the performance of his duties in connection with the employment, any of our confidential information or trade secrets, anyconfidential information or trade secrets of our clients or prospective clients, or the confidential or proprietary information of any third party received by usand for which we have confidential obligations. The executive officers have also agreed to disclose in confidence to us all inventions, designs and tradesecrets which they conceive, develop or reduce to practice and to assign all right, title and interest in them to us, and assist us in obtaining patents, copyrightsand other legal rights for these inventions, designs and trade secrets.In addition, each executive officer has agreed to be bound by non-competition and non-solicitation restrictions during the term of his or heremployment. Specifically, each executive officer has agreed not to (a) approach our clients, advertisers or contacts or other persons or entities introduced tothe executive officer for the purpose of doing business with such persons or entities that will harm our business relationships with these persons or entities;(b) assume employment with or provide services to any of our competitors, or engage, whether as principal, partner, licensor or otherwise, any of ourcompetitors; or (c) seek directly or indirectly, to solicit the services of any of our employees who is employed by us on or after the date of the executiveofficer’s termination, or in the year preceding such termination.Share Incentive Plans2011 Share Incentive PlanOn May 4, 2011, we adopted our 2011 Share Incentive Plan to attract and retain the best available personnel, provide additional incentives toemployees, directors and consultants and promote the success of our business. The maximum aggregate number of our Class A ordinary shares which may beissued pursuant to all awards under the 2011 Share Incentive Plan, as currently in effect, is 7,843,100. As of March 20, 2015, options to purchase 4,250,543Class A ordinary shares under the 2011 Share Incentive Plan at an exercise price of US$2.20 were outstanding. The following table summarizes, as ofMarch 20, 2015, the outstanding options we had granted to our directors, officers and other individuals under our 2011 Share Incentive Plan: Name Options Exercise Price(US$/Share) Date ofGrant Date ofExpiration Vesting ScheduleJames Zhi Qin * US$2.20 May 6, 2011 May 5, 2021 **Xiang Li * US$2.20 May 6, 2011 May 5, 2021 **Directors and officers as a group 700,000 US$2.20 May 6, 2011 May 5, 2021 **Other individuals as a group 3,550,543 US$2.20 May 6, 2011August 1, 2011October 8, 2011December 19, 2011July 1, 2012May 27, 2013October 22, 2013January 16, 2014 Ten years aftergrant date Approximately4 years fromeach date ofgrant *Less than one percent of our total outstanding share capital.**25% of the awards vested on each of January 1, 2012, 2013, 2014 and 2015. 76Table of ContentsThe following paragraphs describe the principal terms of the 2011 Share Incentive Plan:Types of awards. The Plan permits the awards of incentive and non-statutory share-based awards, share appreciation rights, restricted shares andrestricted share units. The following briefly describes the principal features of the various awards that may be granted under the 2011 Share Incentive Plan. • Options. The administrator may grant incentive stock options, or ISOs, or non-statutory stock options, NSOs, under our 2011 Share IncentivePlan. Unless the administrator determines otherwise, the exercise price of options granted under our 2011 Share Incentive Plan must at least beequal to the fair market value of our ordinary shares on the date of grant and its term may not exceed ten years. In addition, for any participantwho owns more than 10% of the total combined voting rights of all classes of our outstanding shares, or of certain of our parent or subsidiary, theterm of an ISO must not exceed five years and the exercise price of such ISO must equal at least 110% of the fair market value on the grant date.The administrator determines the term of all other options.After termination of an employee, director or consultant, he or she may exercise his or her option, to the extent vested as of such date oftermination, within 60 days of termination, or such longer period of time stated in the option agreement. In the absence of a specified period oftime in the option agreement, the option will remain exercisable for a period of 12 months in the event of a termination due to death ordisability. However, in no event may an option be exercised later than the expiration of its term. • Share appreciation rights. Share appreciation rights may be granted under our 2011 Share Incentive Plan. Share appreciation rights allow therecipient to receive the appreciation in the fair market value of our ordinary shares between the exercise date and the date of grant. The exerciseprice of share appreciation rights granted under our 2011 Share Incentive Plan must at least be equal to the fair market value of our ordinaryshares on the date of grant. The administrator determines the terms of share appreciation rights, including when such rights vest and becomeexercisable and whether to settle such awards in cash or with our ordinary shares, or a combination thereof. Share appreciation rights expire underthe same rules that apply to options. • Restricted shares. Restricted shares may be granted under our 2011 Share Incentive Plan. Restricted share awards are Class A ordinary shares thatare subject to various restrictions, including restrictions on transferability and forfeiture provisions. Restricted shares will vest and therestrictions on such shares will lapse, in accordance with terms and conditions established by the administrator. The administrator will determinethe number of restricted shares granted to any employee. The administrator may impose whatever conditions to vesting it determines to beappropriate. For example, the administrator may set restrictions based on the achievement of specific performance goals and/or continued serviceto us. Holders of restricted share awards generally will have voting rights but not dividend rights, unless the administrator provides otherwise.Restricted shares that do not vest for any reason will be forfeited by the recipient and will revert to us. 77Table of Contents • Restricted Share Units. A restricted share unit award is the grant of the right to receive an ordinary share at a future date and may be subject toforfeiture. Our plan administrator has the discretion to set performance objectives or other vesting criteria that will determine the number or valueof restricted share units to be granted. Unless otherwise determined by our plan administrator, a restricted share unit is nontransferable and maybe forfeited or repurchased by us upon termination of employment or service during a restricted period. Our plan administrator, at the time ofgrant, specifies the dates on which the restricted share units become fully vested.Administration. Our board of directors or the compensation committee of our board of directors administers our 2011 Share Incentive Plan. Subject tothe provisions of our 2011 Share Incentive Plan, the administrator has the power to determine the terms of the awards, including the recipients, the exerciseprice, the number of shares subject to each such award, the vesting schedule applicable to the awards, together with any vesting acceleration, and the form ofconsideration payable upon exercise. The administrator also has the authority to modify or amend awards, to prescribe rules and to construe and interpret the2011 Share Incentive Plan. Our board of directors may delegate limited authority to additional committees with respect to certain employees and consultantsto reduce the burden on the board in administering the 2011 Share Incentive Plan.Award Agreement. Options, share appreciation rights, restricted shares, or restricted share units granted under the plan are evidenced by an awardagreement that sets forth the terms, conditions, and limitations for each grant.Eligibility. We may grant awards to our employees, directors and consultants of our company. However, we may grant options that are intended toqualify as incentive share-based awards only to our employees and employees of our parent companies and subsidiaries.Transferability. Unless the administrator provides otherwise, our 2011 Share Incentive Plan does not allow for the transfer of awards other than by willor the laws of descent and distribution and only the recipient of an award may exercise an award during his or her lifetime.Certain adjustments. In the event of certain changes in our capitalization, to prevent diminution or enlargement of the benefits or potential benefitsavailable under the 2011 Share Incentive Plan, the administrator will make adjustments to one or more of the number and class of shares that may bedelivered under the plan and/or the number, class and price of shares covered by each outstanding award and the numerical share limits contained in the plan.In the event of our proposed liquidation or dissolution, the administrator will notify participants as soon as practicable and all awards will terminateimmediately prior to the consummation of such proposed transaction.Change in control transactions. Our 2011 Share Incentive Plan provides that in the event of our merger or change in control, as defined in the 2011Share Incentive Plan, each outstanding award will be treated as the administrator determines, except that if the successor corporation or its parent orsubsidiary does not assume or substitute an equivalent award for each outstanding option or share appreciation right, then such option or share appreciationright will be exercisable for a period of time determined by the administrator in its sole discretion. The option or share appreciation right will then terminateupon the expiration of the specified period of time.Amendment and Termination. Our board of directors has the authority to amend, suspend or terminate the 2011 Share Incentive Plan.2013 Share Incentive PlanWe adopted the 2013 Share Incentive Plan in November 2013. The maximum aggregate number of Class A ordinary shares which may be issuedpursuant to all awards under the 2013 Share Incentive Plan is 3,350,000. As of March 20, 2015, 1,508,750 restricted shares under the 2013 Share Incentiveplan were outstanding. The following table summarizes, as of March 20, 2015, the outstanding awards we granted under the 2013 Share Incentive Plan: 78Table of ContentsName Restricted Shares Date of Grant Vesting ScheduleNicholas Yik Kay Chong * November 4, 2013 **James Zhi Qin * January 23, 2015 ***Xiang Li * January 23, 2015 ***Directors and officers as a group * November 4, 2013January 23, 2015 *****Other individuals as a group * May 8, 2014October 9, 2014January 23, 2015 Approximately 4 yearsfrom each date of grant *Less than one percent of our total outstanding share capital.**25% of the restricted shares vested on September 29, 2014, and the remaining restricted shares will vest on each of September 29, 2015, September 29,2016 and September 29, 2017.***25% of the restricted shares will vest on each of January 1, 2016, January 1, 2017, January 1, 2018 and January 1, 2019.The following paragraphs summarize the terms of the 2013 Share Incentive Plan:Types of awards. The 2013 Share Incentive Plan permits the awards of options, restricted shares and restricted share units. The following brieflydescribe the principal features of the various awards that may be granted under the 2013 Share Incentive Plan. • Options. Options provide for the right to purchase a specified number of our ordinary shares at a specified price and usually will becomeexercisable at the discretion of our plan administrator in one or more installments after the grant date. The option exercise price may be paid,subject to the discretion of the plan administrator, in cash or check, in our ordinary shares which have been held by the option holder for suchperiod of time as may be required by our plan administrator, in other property with value equal to the exercise price, through a broker-assistedcashless exercise, or by any combination of the foregoing. • Restricted Shares. A restricted share award is the grant of our ordinary shares which are subject to certain restrictions and may be subject to riskof forfeiture. Unless otherwise determined by our plan administrator, a restricted share is nontransferable and may be forfeited or repurchased byus upon termination of employment or service during a restricted period. Our plan administrator may also impose other restrictions on therestricted shares, such as limitations on the right to vote or the right to receive dividends. • Restricted share units. A restricted share unit award is the grant of the right to receive an ordinary share at a future date and may be subject toforfeiture. Our plan administrator has the discretion to set performance objectives or other vesting criteria that will determine the number or valueof restricted share units to be granted. Unless otherwise determined by our plan administrator, a restricted share unit is nontransferable and maybe forfeited or repurchased by us upon termination of employment or service during a restricted period. Our plan administrator, at the time ofgrant, specifies the dates on which the restricted share units become fully vested.Plan Administration. Our board or a committee of one or more members of our board duly authorized for the purpose of the 2013 Share Incentive Plancan act as the plan administrator.Award Agreement. Options, restricted shares or restricted share units granted under the 2013 Share Incentive Plan are evidenced by an award agreementthat sets forth the terms, conditions and limitations for each grant.Exercise Price. The exercise price in respect of any option shall be determined by the plan administrator and set forth in the award agreement whichmay be a fixed or variable price related to the fair market value of the shares. The exercise price per share subject to an option may be amended or adjusted inthe absolute discretion of the plan administrator, the determination of which shall be final, binding and conclusive.Eligibility. We may grant awards to our directors, employees or consultants.Term of the Options. The term of each option grant shall be no more than ten years from the date of the grant. 79Table of ContentsVesting Schedule. In general, the plan administrator determines the vesting schedule, which is set forth in the award agreement.Transfer Restrictions. Unless otherwise determined by the plan administrator, no awards may be transferred other than by will or the laws of descentand distribution. Nevertheless, awards (other than incentive share-based awards) can be transferred to certain persons or entities related to the planparticipants.Termination. The 2013 Share Incentive Plan will expire ten years after it became effective and may be terminated earlier with the approval of our board. C.Board PracticesOur board of directors consists of ten directors. A director is not required to hold any shares in the company by way of qualification. A director mayvote with respect to any contract, proposed contract or arrangement in which he or she is materially interested provided (a) such director, if his or her interestin such contract or arrangement is material, has declared the nature of his or her interest at the earliest meeting of the board at which it is practicable for him orher to do so, either specifically or by way of a general notice and (b) if such contract or arrangement is a transaction with a related party, such transaction hasbeen approved by the audit committee. The directors may exercise all the powers of the company to borrow money, mortgage its undertaking, property anduncalled capital, and issue debentures or other securities whenever money is borrowed or as security for any obligation of the company or of any third party.None of our non-executive directors has a service contract with us that provides for benefits upon termination of service.Committees of the Board of DirectorsWe have established three committees under the board of directors: the audit committee, the compensation committee and the nominating andcorporate governance committee. We have adopted a charter for each of the three committees. Each committee’s members and functions are described below.Audit Committee. Our audit committee consists of Messrs. Ted Tak-Tai Lee, Guangfu Cui and Junling Liu. Mr. Ted Tak-Tai Lee is the chairman of ouraudit committee. We have determined that Messrs. Ted Tak-Tai Lee, Guangfu Cui and Junling Liu satisfy the “independence” requirements of Section 303Aof the NYSE Listed Company Manual and Rule 10A-3 under the Securities Exchange Act of 1934. The audit committee oversees our accounting andfinancial reporting processes and the audits of the financial statements of our company. The audit committee is responsible for, among other things: • appointing the independent auditors and preapproving all auditing and nonauditing services permitted to be performed by the independentauditors; • reviewing with the independent auditors any audit problems or difficulties and management’s response; • discussing the annual audited financial statements with management and the independent auditors; • reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any steps taken to monitor andcontrol major financial risk exposures; • reviewing and approving all proposed related party transactions; • meeting separately and periodically with management and the independent auditors; and • monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures toensure proper compliance.Compensation Committee. Our compensation committee consists of Dr. Ruey-Bin Kao, Mr. Han Willem Kotterman, Ms. Cynthia Whelan, Mr. JamesZhi Qin and Mr. Guangfu Cui. Dr. Ruey-Bin Kao is the chairman of our compensation committee. We have determined that Mr. Guangfu Cui satisfies the“independence” requirements of Section 303A of the NYSE Listed Company Manual. The compensation committee assists the board in reviewing andapproving the compensation structure, including all forms of compensation, relating to our directors and executive officers. Our chief executive officer maynot be present at any committee meeting during which his compensation is deliberated. The compensation committee is responsible for, among other things: 80Table of Contents • reviewing and approving, or recommending to the board for its approval, the compensation for our chief executive officer and other executiveofficers; • reviewing and recommending to the board for determination with respect to the compensation of our nonemployee directors; and • reviewing periodically and approving any incentive compensation or equity plans, programs or similar arrangements.Nominating and Corporate Governance Committee. Our nominating and corporate governance committee consists of Messrs. Tim Chen, Andrew Penn,James Zhi Qin and Ted Tak-Tai Lee. Mr. Tim Chen is the chairperson of our nominating and corporate governance committee. We have determined thatMr. Ted Tak-Tai Lee satisfies the “independence” requirements of Section 303A of the NYSE Listed Company Manual. The nominating and corporategovernance committee assists the board of directors in selecting individuals qualified to become our directors and in determining the composition of theboard and its committees. The nominating and corporate governance committee is responsible for, among other things: • selecting and recommending to the board nominees for election by the shareholders or appointment by the board; • reviewing annually 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 the law and practice of corporate governance as well as ourcompliance with applicable laws and regulations, and making recommendations to the board on all matters of corporate governance and on anyremedial action to be taken.Duties of DirectorsUnder Cayman Islands law, our directors have a duty of loyalty to act honestly in good faith with a view to our best interests. Our directors also owe toour 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 greaterdegree of skill than may reasonably be expected from a person of his or her knowledge and experience. However, English and Commonwealth courts havemoved towards an objective standard with regard to the required skill and care and these authorities are likely to be followed in the Cayman Islands. Infulfilling their duty of care to us, our directors must ensure compliance with our memorandum and articles of association. Our company has the right to seekdamages if a duty owed by our directors is breached.Terms of Directors and OfficersOur officers are elected by and serve at the discretion of the board of directors. At each annual general meeting, one-third of our directors then existing,or if their number is not a multiple of three, then the number nearest to and not exceeding one-third, shall retire from office by rotation, provided that (i) thechairman of the board and/or our chief executive officer shall not, whilst holding such office, be subject to retirement by rotation or be taken into account indetermining the number of directors to retire in each year, and (ii) a director appointed by the Telstra Shareholder shall not be subject to retirement byrotation and should not be taken into account in determining the number of directors who are to retire by rotation, so long as the Telstra Shareholder holds atleast 51% of the voting rights represented by our issued and outstanding voting shares. 81Table of ContentsD.EmployeesWe had 912, 1,191 and 1,771 employees as of December 31, 2012, 2013 and 2014, respectively. The following table sets forth the number of ouremployees by function as of December 31, 2014: Functional Area Number of Employees Sales and marketing 975 Content and editorial 226 Product development 475 Management and administrative 95 Total 1,771 Through a combination of short-term performance evaluations and long-term incentive arrangements, we intend to build a competent, loyal and highlymotivated workforce. We have not experienced any work stoppages due to labor disputes. E.Share OwnershipClass A Ordinary SharesAs of March 20, 2015, we had 49,454,779 Class A ordinary shares outstanding (excluding 983,193 Class A ordinary shares that are reserved for futuregrants under our share incentive plans). In addition, as of March 20, 2015, we have granted, and have outstanding, options to purchase a total of 4,250,543Class A ordinary shares and 1,508,750 restricted shares to our employees, directors and consultants. For information regarding the Share Incentive Plans, see“Item 6. Directors, Senior Management and Employees—B. Compensation of Directors and Executive Officers.”Class B Ordinary SharesAs of March 20, 2015, we had 61,824,328 Class B ordinary shares outstanding.Beneficial Ownership of Ordinary SharesExcept as specifically noted in the table, the following table sets forth information with respect to the beneficial ownership of our ordinary shares as ofMarch 20, 2015: • each of our directors and executive officers; and • each person known to us to own beneficially more than 5% of our ordinary shares.Beneficial ownership is determined in accordance with the rules and regulations of the SEC. In computing the number of shares beneficially owned bya person and the percentage ownership of that person, we have included shares that the person has the right to acquire within 60 days, including through theexercise of any option, warrant or other right or the conversion of any other security. These shares, however, are not included in the computation of thepercentage ownership of any other person. 82Table of Contents Ordinary Shares Beneficially Owned as of March 20, 2015 Class A Class B % of VotingRights(2) Number %(1) Number %(1) Directors and Executive Officers: Timothy Y. (Tim) Chen(3) — — — — — James Zhi Qin(4) 3,688,929 3.3 — — 3.3 Andrew Penn(5) — — — — — Xiang Li(6) 3,750,606 3.4 — — 3.4 Nicholas Yik Kay Chong(7) * * — — * Cynthia Whelan(8) — — — — — Han Willem Kotterman(9) — — — — — Ruey-Bin Kao(10) — — — — — Ted Tak-Tai Lee(11) * * — — * Guangfu Cui(12) — — — — — Junling Liu(13) — — — — — All Directors and Executive Officers as a Group 7,559,248 6.8 — — 6.8 Principal Shareholders: Telstra Holdings Pty Limited(14) — — 61,824,328 55.6 55.6 Tiger Group(15) 8,735,000 7.8 — — 7.8 *Less than one percent of our total outstanding share capital.(1)For each person and group included in this column, percentage ownership is calculated by dividing the number of shares beneficially owned by suchperson or group by the sum of the total number of our Class A ordinary shares and Class B ordinary shares outstanding, which is 111,279,107 as ofMarch 20, 2015, and the number of shares such person or group has the right to acquire upon exercise of option, warrant or other right within 60 daysafter March 20, 2015.(2)For each person and group included in this column, the percentage of voting rights is calculated by dividing the voting rights beneficially owned bysuch person or group by the voting rights with respect to all of our Class A ordinary shares and Class B ordinary shares as a single class. Each Class Aordinary share is entitled to one vote. When the total number of ordinary shares held by Telstra Holdings Pty Limited and/or its affiliates, or the TelstraShareholder, constitutes no less than 51% of all of our issued and outstanding ordinary shares, each Class B ordinary share is entitled to one vote; whenthe total number of ordinary shares held by the Telstra Shareholder, drops below 51% but is no less than 39.3% of all of our issued and outstandingordinary shares, each Class B ordinary share will carry such number of votes that would result in the total number of ordinary shares held by the TelstraShareholder carrying, in the aggregate, 51% of the voting rights represented by all of our issued and outstanding ordinary shares; when the totalnumber of ordinary shares held by the Telstra Shareholder drops below 39.3% of all of our issued and outstanding ordinary shares, all Class B ordinaryshares will be automatically converted into the same number of Class A ordinary shares.(3)The business address of Mr. Chen is 43/F, One Island East, 18 Westlands Road, Quarry Bay, Hong Kong.(4)Represents (i) 3,088,929 Class A ordinary shares held by Right Brain Limited, which is wholly owned by Mr. Qin, and (ii) 600,000 Class A ordinaryshares underlying the options that are exercisable within 60 days after March 20, 2015 held by Mr. Qin. The business address of Mr. Qin is 10th Floor,Tower B, CEC Plaza, No. 3 Dan Ling Street, Haidian District, Beijing 100080, People’s Republic of China.(5)The business address of Mr. Penn is Level 41, 242 Exhibition Street, Melbourne, VIC 3000, Australia.(6)Represents (i) 3,000,000 Class A ordinary shares held by AutoLee Ltd., which is wholly owned by Mr. Li, (ii) 650,606 Class A ordinary shares in theform of ADSs held by AutoLee Ltd., which is wholly owned by Mr. Li, and (iii) 100,000 Class A ordinary shares underlying the options that areexercisable within 60 days after March 20, 2015 held by Mr. Li. The business address of Mr. Li is 10th Floor Tower B, CEC Plaza, No. 3 Dan LingStreet, Haidian District, Beijing 100080, People’s Republic of China.(7)Represents Class A ordinary shares in the form of ADSs held by Mr. Chong. The business address of Mr. Chong is 10th Floor Tower B, CEC Plaza, No. 3Dan Ling Street, Haidian District, Beijing 100080, People’s Republic of China.(8)The business address of Ms. Whelan is Level 41, 242 Exhibition Street, Melbourne, VIC 3000, Australia.(9)The business address of Mr. Kotterman is 43/F, One Island East, 18 Westlands Road, Quarry Bay, Hong Kong.(10)The business address of Dr. Kao is 2428, Tower 1, China World Trade Center, No. 1 Jianguo Men Wai Avenue, Chaoyang District, Beijing 100004,People’s Republic of China.(11)Represents Class A ordinary shares in the form of ADSs held by Mr. Lee. The business address of Mr. Lee is 7/F, Hong Kong Trade Centre, 161-7 DesVoeux Road Central, Hong Kong.(12)The business address of Mr. Cui is 3/F, Tower B, Xingke Plaza, 10 Middle JiuXianQiao Road, Beijing, 100015, People’s Republic of China.(13)The business address of Mr. Liu is S105, 1 Long Dong Avenue, Shanghai, 201203, People’s Republic of China. 83Table of Contents(14)Represents 61,824,328 Class B ordinary shares. Telstra Holdings Pty Limited is an Australian company and a wholly-owned subsidiary of TelstraCorporation Limited, which is a public company traded on the Australian Securities Exchange. Telstra Holdings Pty Limited’s business address isLevel 41, 242 Exhibition Street, Melbourne, VIC 3000, Australia.(15)Represents 8,735,000 Class A ordinary shares in the form of ADSs held by private funds advised by Tiger Global Management, LLC, or Tiger Group.Such shareholding information is based on the information contained in the Schedule 13G/A filed by Tiger Global Investments, L.P., Tiger GlobalPerformance, LLC, Tiger Global Management, LLC, Charles P. Coleman III, Feroz Dewan and Scott Shleifer with the SEC on February 17, 2015. Pleasesee such Schedule 13G/A for information relating to Tiger Global Investments, L.P., Tiger Global Performance, LLC, Tiger Global Management, LLC,Charles P. Coleman III, Feroz Dewan and Scott Shleifer. The business address of Tiger Global Management, LLC, Tiger Global Performance, LLC,Charles P. Coleman III, Feroz Dewan and Scott Shleifer is 9 West 57th Street, 35th Floor, New York, New York 10019. The business address of TigerGlobal Investments, L.P. is c/o Citco Fund Services (Cayman Islands) Limited, P.O. Box 31106, 89 Nexus Way, Camana Bay, Grand Cayman KY1-1205, Cayman Islands.To our knowledge, as of March 20, 2015, 40,313,178 Class A ordinary shares were held by one record holder in the United States, which was DeutscheBank Trust Company Americas, the depositary of our ADS program (excluding 983,193 Class A ordinary shares that are reserved for future grants under ourshare incentive plans). No Class B ordinary shares were held by record holders in the United States. The number of beneficial owners of our ADSs in theUnited States is likely to be much larger than the number of record holders of our ordinary shares in the United States.As of March 20, 2015, Telstra beneficially owned 55.6% of the total voting rights in our company. We are not aware of any arrangement that may, at asubsequent date, result in a change of control of our company.ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS A.Major ShareholdersPlease refer to “Item 6. Directors, Senior Management and Employees—E. Share Ownership.” B.Related Party TransactionsContractual Agreements with our Variable Interest EntitiesPRC laws and regulations currently limit foreign ownership of companies that engage in internet and advertising services. We therefore conduct ouroperations in China primarily through contractual agreements between our wholly-owned PRC subsidiary, Beijing Cheerbright Technologies Co., Ltd., orAutohome WFOE, and each of the three groups of entities and individuals—(i) Beijing Autohome Information Technology Co., Ltd., or AutohomeInformation, shareholders of Autohome Information and three subsidiaries of Autohome Information: Beijing Shengtuo Hongyuan Information TechnologyCo., Ltd., or Hongyuan Information, Beijing Shengtuo Chengshi Advertising Co., Ltd., or Chengshi Advertising, and Beijing Shengtuo AutohomeAdvertising Co., Ltd., or Autohome Advertising, (ii) Shanghai You Che You Jia Advertising Co., Ltd., or Shanghai Advertising, and shareholders of ShanghaiAdvertising, and (iii) Guangzhou You Che You Jia Advertising Co., Ltd, or Guangzhou Advertising, and shareholders of Guangzhou Advertising. We treatthese three groups of entities as our VIEs under U.S. GAAP.The following is a summary of our contractual arrangements among Autohome WFOE, Autohome Information and its shareholders. The contractualagreements among Autohome WFOE and Shanghai Advertising and its shareholders and the contractual agreements among Autohome WFOE andGuangzhou Advertising and its shareholders are substantially the same as the contractual agreements among Autohome WFOE, Autohome Information andits shareholders and subsidiaries. 84Table of ContentsAgreements that Provide Effective Control over Autohome InformationEquity Interest Pledge Agreements. Pursuant to the equity interest pledge agreements between Autohome WFOE and each of the three shareholders ofAutohome Information, each shareholder of Autohome Information pledges to Autohome WFOE all of his equity interests in Autohome Information to securethe performance of such shareholder’s respective obligations and Autohome Information’s obligations under the loan agreements, equity option agreements,and the exclusive technology consulting and service agreements. See “—Contractual Agreements with our Variable Interest Entities—Agreements thatTransfer Economic Benefits of Autohome Information to Us” and “—Contractual Agreements with our Variable Interest Entities—Agreements that ProvideUs the Options to Purchase the Equity Interests in Autohome Information” for a brief description of these obligations. Without Autohome WFOE’s consent,shareholders of Autohome Information shall not create or permit to create any encumbrances on the pledged equities in Autohome Information. In the eventof default, Autohome WFOE is entitled to request immediate repayment of the outstanding amounts payable under the loan agreements, the equity optionagreements and the exclusive technology consulting and service agreements or to dispose of the pledged equity interests at Autohome WFOE’s solediscretion. The equity pledge agreements have an indefinite term and will terminate after all the secured obligations under these agreements have beensatisfied in full or the pledged equity interests have been transferred to Autohome WFOE or its designee.Pursuant to the equity interest pledge agreements between Autohome WFOE and Autohome Information, Autohome Information pledges to AutohomeWFOE all of its equity interests in its three subsidiaries to secure the performance of its obligations under the exclusive technology consulting and serviceagreements and the equity option agreements. These equity interest pledge agreements contain substantially the same terms as the equity interest pledgeagreements between Autohome WFOE and the shareholders of Autohome Information.Power of Attorney. Autohome Information and each of the shareholders of Autohome Information have executed an irrevocable power of attorneyappointing Autohome WFOE, or any person designated by Autohome WFOE, as their attorney-in-fact to vote on their behalf at the shareholders’ meetings ofAutohome Information’s subsidiaries and Autohome Information and to exercise full voting rights as the shareholders of these companies with powersgranted under PRC laws and regulations and the articles of association of each of the above companies, including the rights to appoint directors andmanagement personnel.Agreements that Transfer Economic Benefits of Autohome Information to UsExclusive Technology Consulting and Service Agreements. Pursuant to the exclusive technology consulting and service agreements betweenAutohome WFOE and each of Autohome Information and its subsidiaries, Autohome WFOE has the exclusive right to provide each of these VIEscomprehensive technology and management consulting services. In addition, Autohome WFOE is obligated to provide financing support to each of theseVIEs to ensure the cash flow requirements of the day-to-day operations of these VIEs. Each of these VIEs is obligated to pay to Autohome WFOE service fees,which are calculated based on such VIE’s revenues reduced by its business taxes and surcharges, operating expenses and an appropriate amount of retainedprofit that is determined pursuant to our tax planning strategies and relevant tax laws. Such service fees may be adjusted by Autohome WFOE at AutohomeWFOE’s sole discretion. Autohome WFOE owns the intellectual properties arising from the performance of these agreements. These agreements have a 30-year term that can be automatically extended for another 10 years at the option of Autohome WFOE and can only be terminated by the parties’ mutual writtenconsent or by Autohome WFOE’s prior 30-day notice at its sole discretion. During the term of these agreements, these VIEs may not enter into anyagreements with third parties for the provision of any technology or management consulting services without prior consent of Autohome WFOE.Autohome WFOE recognized service fees from all the VIEs in the amount of RMB411.6 million in 2012, RMB657.2 million in 2013 and RMB980.5million (US$158.0 million) in 2014 in consideration for services provided to the VIEs.Loan Agreements. Pursuant to the loan agreements between Autohome WFOE and each of the three shareholders of Autohome Information, AutohomeWFOE granted interest-free loans to these three shareholders of Autohome Information. The loans are to be used solely for the purpose of making capitalcontribution to the registered capital of Autohome Information. The term of the loans is indefinite and must be repaid in the manner specified in theagreements upon written notice from Autohome WFOE at any time in Autohome WFOE’s sole discretion or upon an event of default by the shareholders ofAutohome Information. 85Table of ContentsAgreements that Provide Us the Options to Purchase the Equity Interests in Autohome InformationEquity Option Agreements. Pursuant to the equity option agreements between Autohome WFOE and each of the three shareholders of AutohomeInformation, each shareholder of Autohome Information jointly and severally grants to Autohome WFOE an option to purchase all or part of his equityinterests in Autohome Information at a price equivalent to the lowest price permitted by PRC law. The purchase price is to be offset against the loanrepayments under the loan agreements. If there will be additional payments to be made by Autohome Information to these shareholders required by the PRClaw, these shareholders must immediately return the received payments to Autohome WFOE. Autohome WFOE may exercise its option at any time or transferthe rights and obligations under the equity option agreement to any of its designated parties. The equity option agreements have an indefinite term and willterminate at the earlier of (i) the date on which the equity interests in Autohome Information have been transferred to Autohome WFOE or its designatedparties, or (ii) the unilateral termination by Autohome WFOE.Pursuant to the equity option agreements among Autohome WFOE, Autohome Information and each of the three subsidiaries of AutohomeInformation, Autohome Information granted Autohome WFOE or its designated parties an option to purchase all or part of Autohome Information’s equityinterests in its subsidiaries at a price equivalent to the lowest price permitted by PRC law. Autohome WFOE may exercise its option at any time. The equityoption agreements have an indefinite term and will terminate at the earlier of (i) the date on which all of Autohome Information’s equity interests in itssubsidiaries have been transferred to Autohome WFOE or its designated parties, or (ii) the unilateral termination by Autohome WFOE.Transactions with Entities Affiliated with Our ShareholdersDuring 2013, Telstra International HK Limited provided network maintenance services amounting to RMB0.1 million to Autohome Information. Inaddition, Telstra International Limited provided network maintenance services amounting to RMB0.3 million and RMB0.4 million (US$0.06 million),respectively, to Autohome Information in 2013 and 2014. There was an outstanding balance of nil and RMB0.03 million (US$0.005 million) as ofDecember 31, 2013 and 2014, respectively. In October 2013, Autohome HK acquired Autohome Media with a consideration of RMB1.9 million. AutohomeMedia was 50% owned by the spouse of Mr. Henry Hon, one of our former directors whose resignation was effective as of March 28, 2014.On October 30, 2013, West Crest Limited and its sole shareholder Mr. Jiang Lan, a then-director of our company, requested that we repurchase itsoutstanding shares in our company, namely 6,684,711 ordinary shares, for a total purchase price of US$130 million. On November 4, 2013, we and TelstraHoldings entered into a share purchase agreement with West Crest Limited, Mr. Jiang Lan and other shareholders of our company. Pursuant to the agreement,we and Telstra Holdings purchased 3,856,564 and 2,828,147 ordinary shares of our company held by West Crest Limited, or the West Crest Share Purchase,for US$75 million and US$55 million, respectively, in cash. We paid fifty percent of the purchase price on November 21 2013 (initially financed through ashort-term secured loan facility), and paid the remainder on January 29, 2014 using proceeds from our initial public offering.During 2013, we and Telstra International Limited entered into an agreement whereby a Telstra executive would provide consulting services to us.Under this agreement, the amount due to Telstra for services provided during 2013 and 2014 amounted to RMB0.4 million and RMB0.3 million (US$0.04million), respectively. All outstanding balances have been paid in full as of December 31, 2014.During 2013, we and Beijing Australian Telecommunications Technical Consulting Limited entered into an agreement whereby a Telstra executivewould provide consulting services to us. Under this agreement, the amount due to Beijing Australian Telecommunications Technical Consulting Limited forservices provided during 2013 and 2014 amounted to RMB0.2 million and RMB0.2 million (US$0.04 million), respectively. All outstanding balances havebeen paid in full as of December 31, 2014.Investors Rights AgreementWe and certain of our current shareholders, including Telstra, entered into an investors rights agreement on November 4, 2013. Under the investorsrights agreement, certain shareholders are entitled to registration rights, rights of access to information and pre-emptive rights.Registration RightsPursuant to our investors rights agreement, we have granted registration rights to certain of our current shareholders. Set forth below is a description ofthe registration rights granted under the agreement. 86Table of ContentsDemand Registration Rights. The Telstra Shareholder has the right to demand that we file a registration statement covering the offer and sale ofsecurities it holds. Upon receipt of a request by the Telstra Shareholder, we should offer other holders of registrable securities the opportunity to register thenumber of registrable shares as such holders may request. We, however, are not obligated to effect a demand registration if the dollar amount of securities tobe sold to the public is of an aggregate price less than US$5.0 million; and we are not obligated to effect a demand registration if, among other things, wehave already filed three demand registrations and each of such registrations has been declared effective. We have the right to defer filing of a registrationstatement for up to 90 days if our board of directors determines in good faith that the filing of a registration statement would be materially detrimental to us,but we cannot exercise the deferral right more than three times in any 12-month period.Piggyback Registration Rights. If we propose to file a registration statement for a public offering of our ordinary shares on a form that would besuitable for registrable securities, we must offer holders of registrable securities an opportunity to include in that registration all or any part of their registrablesecurities. The underwriters of any underwritten offering have the right to limit the number of shares with registration rights to be included in the registrationstatement if a piggyback registration is initiated as a primary underwritten offering on our behalf.Form F-3 Registration Rights. When we are eligible for registration on Form F-3, upon a written request from the Telstra Shareholder, we shall file aregistration statement on Form F-3 covering the offer and sale of the registrable securities owned and designated by them. Upon receipt of a request by theTelstra Shareholder, we should offer other holders of registrable shares the opportunity to register the number of registrable shares as such holders mayrequest. We, however, are not obligated to effect an F-3 resignation if the dollar amount of securities to be sold to the public is of an aggregate price less thanUS$5.0 million. We have the right to defer filing of a registration statement for up to 90 days if our board of directors determines in good faith that the filingof a registration statement would be materially detrimental to us, but we cannot exercise the deferral right more than three times in any 12-month period.Expenses of Registration. We will pay all expenses incurred by us in complying with any demand, Form F-3 or piggyback registration. We are notobligated to pay any underwriting discounts and selling commissions applicable to the sale of a holder’s registrable securities or any fees and expenses ofany counsel representing holders of registrable securities.Termination of Obligations. We shall have no obligation to effect any demand, Form F-3, or piggyback registration if, in the opinion of counsel to us,all such registrable securities proposed to be sold by a holder may then be sold without registration and without regard to any volume limitation requirementunder Rule 144 under the Securities Act. In addition, our obligations relating to registration rights under the investors rights agreement with respect to theTelstra Shareholder shall automatically terminate if the Telstra Shareholder beneficially owns less than 5% of our issued and outstanding shares.Pre-emptive RightsWhen we propose to issue any ordinary shares or securities convertible into ordinary shares, the Telstra Shareholder (for so long as the TelstraShareholder beneficially owns any Class B ordinary shares) is entitled to purchase such number of new securities at its election so as to enable the TelstraShareholder to beneficially hold a pro rata portion of the new securities equal to the respective percentage of our issued and outstanding share capital ownedby the Telstra Shareholder prior to the issuance. If the Telstra Shareholder does not exercise its pre-emptive rights, we are entitled to issue such number of newsecurities at a price no less than that offered to the Telstra Shareholder (as applicable) within 90 business days, which period of time may be extended in orderto comply with applicable laws and regulations (including receipt of any applicable regulatory or shareholder approvals).Employment AgreementsSee “Item 6. Directors, Senior Management and Employees—B. Compensation of Directors and Executive Officers—Employee Agreements” for adescription of the employment agreements we have entered into with our senior executive officers. 87Table of ContentsShare Incentive PlansSee “Item 6. Directors, Senior Management and Employees—B. Compensation of Directors and Executive Officers” for a description of share-basedcompensation awards we have granted to our directors, officers and other individuals as a group.See footnote 10 to our financial statements for further information about our related party transactions. C.Interests of Experts and CounselNot applicable.ITEM 8. FINANCIAL INFORMATION A.Consolidated Statements and Other Financial InformationSee “Item 18. Financial Statements.”Legal ProceedingsFrom time to time, we may be subject to various claims and legal actions that arise in the ordinary course of our business. There are currently no legalproceedings that, in the opinion of our management, may have a material adverse effect on our business and results of operations.Dividend PolicyOur board of directors has complete discretion, subject to approval by a duly authorized representative of the Telstra Shareholder for so long as theTelstra Shareholder holds at least 51% of our issued and outstanding shares, to declare dividends. Even if our board of directors decides to pay dividends, theform, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractualrestrictions and other factors that the board of directors may deem relevant.Our board of directors declared dividends of RMB49.9 million and RMB249.2 million in February 2012 and May 2013, respectively, to all of ourshareholders. The dividends, net of applicable withholding taxes, were paid in April 2012 and June and July 2013, respectively. We do not have any plan topay additional cash dividends on our ordinary shares in the foreseeable future. We currently intend to retain most, if not all, of our remaining available fundsand any future earnings to operate and expand our business.We are a holding company incorporated in the Cayman Islands. We may rely on dividends from our subsidiaries in China for our cash requirements,including any payment of dividends to our shareholders. PRC regulations may restrict the ability of our PRC subsidiaries to pay dividends to us. See “Item 4.Information on the Company—B. Business Overview—PRC Regulation—Regulations on Dividend Distribution.”If we pay any dividends, we will pay our ADS holders to the same extent as holders of our ordinary shares, subject to the terms of the depositagreement, including the fees and expenses payable thereunder. See “Item 12. Description of Securities other than Equity Securities—D. AmericanDepositary Shares.” Cash dividends on our ordinary shares, if any, will be paid in U.S. dollars. B.Significant ChangesExcept as disclosed elsewhere in this annual report, we have not experienced any significant changes since the date of our audited consolidatedfinancial statements included in this annual report.ITEM 9. THE OFFER AND LISTING A.Offering and Listing DetailsSee “—C. Markets.” 88Table of ContentsB.Plan of DistributionNot applicable. C.MarketsOur ADSs, each representing one Class A ordinary share, have been listed on the NYSE since December 2013 and trade under the symbol “ATHM.”The following table provides the high and low trading prices for our ADSs on the NYSE for the periods indicated. Trading Price High Low US$ US$Annual High and Low Fiscal Year 2013 (from December 11, 2013) US$37.88 US$26.51Fiscal Year 2014 US$57.93 US$28.50Quarterly Highs and Lows Fourth Fiscal Quarter of 2013 (from December 11, 2013) US$37.88 US$26.51First Fiscal Quarter of 2014 US$51.98 US$28.52Second Fiscal Quarter of 2014 US$42.68 US$28.50Third Fiscal Quarter of 2014 US$57.93 US$31.80Fourth Fiscal Quarter of 2014 US$53.56 US$34.14Monthly Highs and Lows September 2014 US$51.88 US$39.36October 2014 US$53.41 US$38.54November 2014 US$53.56 US$40.90December 2014 US$43.35 US$34.14January 2015 US$41.99 US$34.50February 2015 US$39.88 US$34.69March 2015 (through March 20) US$47.47 US$37.82 D.Selling ShareholdersNot applicable. E.DilutionNot applicable. F.Expenses of the IssueNot applicable.ITEM 10. ADDITIONAL INFORMATION A.Share CapitalNot applicable. B.Memorandum and Articles of AssociationWe are a Cayman Islands company and our affairs are governed by our memorandum and articles of association and the Companies Law of the CaymanIslands, referred to as the Companies Law below. The following are summaries of certain provisions of our memorandum and articles of association in effectas of the date of this annual report insofar as they relate to the material terms of our ordinary shares. 89Table of ContentsRegistered Office and ObjectsOur registered office in the Cayman Islands is located at Codan Trust Company (Cayman) Limited, Cricket Square, Hutchins Drive, P.O. Box 2681,Grand Cayman KY1-1111, Cayman Islands. The memorandum of association provides, inter alia, that the liability of the members of our company is limitedto the amount, if any, for the time being unpaid on the ordinary shares. The objects for which our company is established are unrestricted (including acting asan investment company), and we shall have and be capable of exercising all the functions of a natural person of full capacity irrespective of corporate benefit,as provided in section 27(2) of the Companies Law and in view of the fact that we are an exempted Company, we will not trade in the Cayman Islands withany person, firm or corporation except in furtherance of our business carried on outside the Cayman Islands.Board of DirectorsSee “Item 6. Directors, Senior Management and Employees—C. Board Practices—Duties of Directors” and “— Terms of Directors and Officers.”Ordinary SharesGeneralOur authorized share capital consists of (i) 99,931,211,060 Class A ordinary shares with a par value of US$0.01 each (ii) 68,788,940 Class B ordinaryshares with a par value of US$0.01 each. As of March 20, 2015, we had 49,454,779 Class A ordinary shares (excluding 983,193 Class A ordinary shares thatare reserved for future grants under our share incentive plans) and 61,824,328 Class B ordinary shares issued and outstanding.All of our outstanding ordinary shares, which consist of Class A ordinary shares and Class B ordinary shares, are fully paid and non-assessable.Certificates representing the ordinary shares are issued in registered form. Our shareholders who are non-residents of the Cayman Islands may freely hold andtransfer their ordinary shares.Class Rights of our Class A and Class B Ordinary SharesSubject to our fourth memorandum and articles of association and any resolution of the shareholders to the contrary and without prejudice to anyspecial rights conferred thereby on the holders of any other shares or class of shares, the Class A ordinary shares and Class B ordinary shares carry equal rightsand rank pari passu with one another other than as set out below.ConversionSubject to the provisions of our fourth amended and restated memorandum and articles of association and in compliance with all fiscal and other lawsand regulations applicable thereto, a holder of Class B ordinary shares shall have the right to convert all or any of its Class B ordinary shares into Class Aordinary shares on a one-for-one basis. Upon the transfer of any Class B ordinary shares by the Telstra Shareholder to any person that is not an affiliate of theTelstra Shareholder, such Class B ordinary shares will be converted into an equal number of Class A ordinary shares. When the total number of Class A andClass B ordinary shares held by the Telstra Shareholder represents less than 39.3% of all of our total issued and outstanding shares, all Class B ordinary shareswill be automatically converted into the same number of Class A ordinary shares. In addition, if immediately following the transfer of any ordinary sharesheld by the Telstra Shareholder to any party that is not an affiliate of the Telstra Shareholder, the Telstra Shareholder holds less than 51% of our total numberof outstanding shares, all Class B ordinary shares will be automatically converted into the same number of Class A ordinary shares. Furthermore, upon achange of control event involving the Telstra Shareholder, all Class B ordinary shares shall be automatically converted into the same number of Class Aordinary shares.A holder of Class A ordinary shares has no rights of conversion in respect of each such Class A ordinary share into Class B ordinary shares.DividendsThe holders of our ordinary shares are entitled to such dividends as may be declared by us in general meeting or by our board of directors subject to theCompanies Law and to the fourth amended and restated memorandum and articles of association. So long as the Telstra Shareholder holds at least 51% of ourissued and outstanding shares, the board may not declare any dividend unless the dividend is approved by a duly authorized representative of the TelstraShareholder. 90Table of ContentsVoting RightsSubject to any special rights or restrictions as to voting for the time being attached to any shares, at any general meeting every holder of Class Aordinary shares who is present in person or by proxy (or, in the case of a shareholder being a corporation, by its duly authorized representative) shall have onevote on a show of hands, and on a poll every shareholder holding Class A ordinary shares present in person or by proxy (or, in the case of a shareholder beinga corporation, by its duly appointed representative) shall have one vote for each fully paid Class A ordinary share of which such shareholder is the holder.Subject to any special rights or restrictions as to voting for the time being attached to any shares, at any general meeting every holder of Class Bordinary shares who is present in person or by proxy (or, in the case of a shareholder being a corporation, by its duly authorized representative) shall have thenumber of votes for each fully paid Class B ordinary share calculated as described in the following paragraph.When the total number of ordinary shares held by the Telstra Shareholder constitutes no less than 51% of all of our issued and outstanding ordinaryshares, each Class B ordinary share is entitled to one vote; when the total number of ordinary shares held by the Telstra Shareholder drops below 51% but isno less than 39.3% of all of our issued and outstanding ordinary shares, each Class B ordinary share will carry such number of votes that would result in thetotal number of ordinary shares held by the Telstra Shareholder carrying, in the aggregate, 51% of the voting rights represented by all of our issued andoutstanding ordinary shares; when the total number of ordinary shares held by the Telstra Shareholder drops below 39.3% of all of our issued and outstandingordinary shares, all Class B ordinary shares will be automatically converted into the same number of Class A ordinary shares.A quorum required for a meeting of shareholders consists of two shareholders entitled to vote and present in person or by proxy or, if a corporation orother non-natural person, by its duly authorized representative holding at least one third of the voting rights represented by the issued and outstandingordinary shares throughout the meeting. However, if at any time the Telstra Shareholder holds at least 51% of voting rights represented by all of our issuedand outstanding ordinary shares, two or more members entitled to vote and present in person or by proxy or (in the case of a member being a corporation) byits duly authorized representative representing not less than fifty percent (50%) of the voting rights represented by our issued and outstanding voting sharesthroughout the meeting will form a quorum for all purposes. We may, but are not obligated to, hold a general meeting in each year as our annual generalmeeting. The annual general meeting shall be held at such time and place as may be determined by the directors. Each general meeting, other than an annualgeneral meeting, shall be an extraordinary general meeting. A majority of our board of directors or our chairman may call extraordinary general meetings.Advance notice of at least ten clear days is required for the convening of our annual general meeting and other shareholders meetings. The agenda of anyextraordinary general meeting will be set by a majority of the directors then in office.An ordinary resolution to be passed by the shareholders requires the affirmative vote of a simple majority of the votes attaching to the ordinary sharescast in a general meeting, while a special resolution requires the affirmative vote of at least two-thirds of the votes cast attaching to the outstanding ordinaryshares. A special resolution will be required for important matters such as a change of name or making changes to our fourth amended and restatedmemorandum and articles of association.Transfer of Ordinary SharesSubject to the restrictions of our fourth amended and restated memorandum and articles of association, as applicable, any of our shareholders maytransfer all or any of his or her ordinary shares by an instrument of transfer in the usual or common form or any other form approved by our board of directors.Our board of directors may, in its absolute discretion, decline to register any transfer of any ordinary share which is not fully paid up or on which wehave a lien. Our board of directors may also decline to register any transfer of any ordinary share unless: 91Table of Contents • the instrument of transfer is lodged with us, accompanied by the certificate for the ordinary shares to which it relates and such other evidence asour 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 ordinary shares; • the instrument of transfer is properly stamped, if required; and • in the case of a transfer to joint holders, the number of joint holders to whom the ordinary share is to be transferred does not exceed four.If our directors refuse to register a transfer they shall, within three months after the date on which the instrument of transfer was lodged, send to each ofthe transferor and the transferee notice of such refusal.The registration of transfers may, after compliance with any notice required of the Designated Stock Exchange (as defined in the fourth amended andrestated memorandum and articles of association), be suspended and the register closed at such times and for such periods as our board of directors may fromtime to time determine, provided, however, that the registration of transfers shall not be suspended nor the register closed for more than 30 days in any year.LiquidationOn a return of capital on winding up or otherwise (other than on conversion, redemption or purchase of ordinary shares), assets available fordistribution among the holders of ordinary shares shall be distributed among the holders of the ordinary shares on a pro rata basis. The amount received byholders of Class B ordinary shares and Class A ordinary shares should be the same in any liquidation event. If our assets available for distribution areinsufficient to repay all of the paid-up capital, the assets will be distributed so that the losses are borne by our shareholders proportionately.Calls on Ordinary Shares and Forfeiture of Ordinary SharesOur board of directors may from time to time make calls upon shareholders for any amounts unpaid on their ordinary shares in a notice served to suchshareholders at least 14 days prior to the specified time of payment. The ordinary shares that have been called upon and remain unpaid are subject toforfeiture.Redemption of Ordinary SharesSubject to the provisions of the Companies Law, we may repurchase or redeem shares at our option or at the option of the holders of these shares, onsuch terms and in such manner, including out of capital, as may be determined by our board of directors.Variations of Rights of SharesAll or any of the special rights attached to any class of shares may, subject to the provisions of the Companies Law, be varied with the sanction of aspecial 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 issuedwith preferred or other rights shall not, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be varied by thecreation or issue of further shares ranking pari passu with such existing class of shares.General Meetings of ShareholdersShareholders’ meetings may be convened by a majority of our board of directors or our chairman. Advance notice of at least ten clear days is requiredfor the convening of our annual general shareholders’ meeting and any other general meeting of our shareholders. In addition, general meetings will also beconvened on the requisition in writing of any shareholder or shareholders entitled to attend and vote at our general meetings holding at least one third of thevoting rights represented by our issued voting shares. 92Table of ContentsAppointment of DirectorsSo long as the Telstra Shareholder holds at least 51% of our voting rights, it will be entitled to appoint a majority of our directors and to remove anydirector so appointed. Subject to the foregoing, our shareholders may by ordinary resolution elect any person to fill a casual vacancy or as an addition to theexisting board.The directors will also have the power from time to time and at any time to appoint any person as a director to fill a casual vacancy on the board or asan addition to the existing board.Inspection of Books and RecordsHolders of our ordinary shares have no general right under Cayman Islands law to inspect or obtain copies of our list of shareholders or our corporaterecords. However, we will allow our shareholders to inspect our register of members and provide our shareholders with annual audited financial statements.Pursuant to the investors rights agreement we have with the Telstra Shareholder and other shareholders, the Telstra Shareholder has the right to accessour books and records so long as it holds in aggregate at least 20% of our issued and outstanding share capital.Issuance of Additional Preferred SharesOur fourth amended and restated memorandum of association authorizes our board of directors to issue additional ordinary shares from time to time asour board of directors shall determine, to the extent of available authorized but unissued shares.Our fourth amended and restated memorandum of association authorizes our board of directors to establish from time to time one or more series ofpreferred shares and to determine, with respect to any series of preferred shares, the terms and rights of that series, including: • the designation of the series; • the number of shares of the series; • the dividend rights, dividend rates, conversion rights, voting rights; and • the rights and terms of redemption and liquidation preferences.Our board of directors may issue preferred shares without action by our shareholders to the extent authorized but unissued. The issuance of preferredshares may be used as an anti takeover device without further action on the part of the shareholders. Issuance of these shares may dilute the voting rights ofholders of ordinary shares. C.Material ContractsWe have not entered into any material contracts other than in the ordinary course of business and other than those described elsewhere in “Item 4.Information on the Company—B. Business Overview,” “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions,” orelsewhere in this annual report. D.Exchange ControlsSee “Item 4. Information on the Company—B. Business Overview—PRC Regulation—Regulations on Foreign Exchange.” E.TaxationCayman Islands TaxationThe Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxationin the nature of inheritance tax or estate duty. There are no other taxes levied by the Government of the Cayman Islands that are likely to be material toholders of ADSs or Class A ordinary shares. The Cayman Islands is not party to any double tax treaties, except for a double tax treaty entered into with theUnited Kingdom in 2010. There are no exchange control regulations or currency restrictions in the Cayman Islands. 93Table of ContentsPursuant to Section 6 of the Tax Concessions Law (1999 Revision) of the Cayman Islands, we have obtained an undertaking from the Governor-in-Cabinet:(a) that no law which is enacted in the Cayman Islands imposing any tax to be levied on profits or income or gains or appreciation shall apply to us orour operations; and(b) that the aforesaid tax or any tax in the nature of estate duty or inheritance tax shall not be payable on our shares, debentures or other obligations.The undertaking for us is for a period of 20 years from July 22, 2008.People’s Republic of China TaxationWe are a holding company incorporated in the Cayman Islands, which indirectly holds Autohome WFOE and other subsidiaries in the PRC. Ourbusiness operations are principally conducted through our VIEs.The PRC enterprise income tax is calculated based on the taxable income determined under the applicable Enterprise Income Tax Law and itsimplementation rules, which became effective on January 1, 2008. The Enterprise Income Tax Law imposes a uniform enterprise income tax rate of 25% onall resident enterprises in China, including foreign-invested enterprises and domestic enterprises, unless they qualify for certain exceptions.The Enterprise Income Tax Law and its implementation rules permit certain “high and new technology enterprises strongly supported by the state” thathold independent ownership of core intellectual property and simultaneously meet a list of other criteria, financial or non-financial as stipulated in theimplementation rules and other regulations, to enjoy a reduced 15% enterprise income tax rate subject to certain qualification criteria. On April 14, 2008, theState Administration of Taxation, the Ministry of Science and Technology and the Ministry of Finance jointly issued the Administrative Rules for theCertification of High and New Technology Enterprises delineating the specific criteria and procedures for the certification of “high and new technologyenterprises,” or HNTEs.Autohome WFOE, our PRC subsidiary, was recognized by the provincial level science and technology commission, finance bureau, and state and localtax bureaus as a HNTE on September 17, 2010, which is valid for three years. Therefore, Autohome WFOE is entitled to the preferential enterprise income taxrate of 15% from 2010 through 2012. We have obtained renewal of the HNTE qualification through 2015. However, if we lose this qualification, AutohomeWFOE will no longer enjoy the 15% preferential tax rate, and the applicable enterprise income tax rate may increase to up to 25%.Uncertainties exist with respect to how the Enterprise Income Tax Law applies to our tax residency status. Under the Enterprise Income Tax Law, anenterprise established outside of China with a “de facto management body” within China is considered a “resident enterprise,” which means that it can betreated in a manner similar to a Chinese enterprise for enterprise income tax purposes, although the dividends paid to one resident enterprise from anothermay qualify as “tax-exempt income.” Though the implementation rules of the Enterprise Income Tax Law define “de facto management body” as“establishments that carry out substantial and overall management and control over the manufacturing and business operations, personnel, accounting,properties, etc. of an enterprise,” the only constructive guidance for this definition currently available is set forth in the SAT Circular 82 issued by the PRCState Administration of Taxation, which provides guidance on the determination of the tax residency status of Chinese-controlled offshore incorporatedenterprises, 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 itsprimary controlling shareholder. Although SAT Circular 82 only applies to offshore enterprises controlled by PRC enterprises, not those controlled by PRCindividuals, the determining criteria set forth in SAT Circular 82 may reflect the SAT’s general position on how the “de facto management body” test shouldbe applied in determining the tax resident status of offshore enterprises. 94Table of ContentsAccording to the SAT 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 conditions setforth in SAT Circular 82 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 inthe PRC; • the enterprise’s primary assets, accounting books and records, company seals, and board and shareholder resolutions are located or maintained inthe PRC; and • 50% or more of voting board members or senior executives habitually reside in the PRC.We do not believe that Autohome Inc. or its British Virgin Islands subsidiary, Cheerbright, or the Hong Kong subsidiaries, Autohome HK or AutohomeMedia, meets all of the conditions above. Each of Autohome Inc., Cheerbright, Autohome HK and Autohome Media is a company incorporated outside thePRC. As holding companies, these four entities’ key assets and records, including the resolutions of their respective board of directors and the resolutions oftheir respective shareholders, are located and maintained outside the PRC. In addition, we are not aware of any offshore holding companies with a similarcorporate structure as ours which has ever has been deemed a PRC “resident enterprise” by the PRC tax authorities. Therefore, we believe that neitherAutohome Inc., nor Cheerbright, Autohome HK and Autohome Media, should be treated as a “resident enterprise” for PRC tax purposes if the criteria for a“de facto management body” as set forth in SAT Circular 82 were deemed applicable to us. However, as the tax residency status of an enterprise is subject todetermination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body” as applicable toour offshore entities, we will continue to monitor our tax status.Although we believe we are not a PRC resident enterprise for enterprise income tax purposes, substantial uncertainty exists. In the event that ourcompany or our British Virgin Islands subsidiary , or Cayman Island subsidiary, or Hong Kong subsidiaries of our British Virgin Islands subsidiary, isconsidered to be a PRC resident enterprise: (a) our company or our British Virgin Islands subsidiary or our Cayman Island subsidiary or our Hong Kongsubsidiaries, as the case may be, would be subject to the PRC enterprise income tax at the rate of 25% on worldwide income; and (b) dividend income thatour company or British Virgin Islands subsidiary or Hong Kong subsidiaries, as the case may be, receives from our PRC subsidiaries would be exempt fromthe PRC withholding tax since such income is exempted under the Enterprise Income Tax Law for PRC resident enterprise; and (c) any dividends we pay toour non-PRC shareholders or ADS holders as well as gains realized by such shareholders or ADS holders from the transfer of our shares or ADSs may beregarded as China-sourced income and as a result become subject to PRC withholding tax at a rate of up to 10%, subject to reduction or exemption by anapplicable treaty. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—Our global income and the dividends that wemay receive from our PRC subsidiaries, dividends distributed to our non-PRC shareholders and ADS holders, and gains recognized by such shareholders orADS holders, may be subject to PRC taxes under the Enterprise Income Tax Law, which would have a material adverse effect on our results of operations.”Under SAT Circular 698, if a non-resident enterprise transfers the equity interests of a PRC resident enterprise indirectly by disposition of the equityinterests of an overseas holding company, or Indirect Transfer, and such overseas holding company is located in a tax jurisdiction that: (a) has an effective taxrate less than 12.5%, or (b) does not tax foreign income of its residents, the non-resident enterprise, being the transferor, shall report to the PRC competent taxauthority of the PRC resident enterprise this Indirect Transfer. Using a “substance over form” principle, the PRC tax authority may disregard the existence ofthe overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding, or deferring PRC tax.As a result, gains derived from such Indirect Transfer may be subject to PRC withholding tax at a rate of up to 10%. SAT Circular 698 also provides that,where a non-PRC resident enterprise transfers its equity interests in a PRC resident enterprise to its related parties at a price lower than the fair market value,the relevant tax authority has the power to make a reasonable adjustment to the taxable income of the transaction. SAT Circular 698 is retroactively effectiveon January 1, 2008. Although it appears that SAT Circular 698 was not intended to apply to share transfers of publicly traded companies, there is uncertaintyas to the application of SAT Circular 698. If SAT Circular 698 was determined by the tax authorities to be applicable to us and our non-resident investorswith respect to our corporate restructuring where non-resident investors were involved or transfer of our shares or ADSs by our non-PRC resident investors, weand our non-resident investors in such transactions may be required to expend valuable resources to comply with this circular or to establish that we or ournon-resident investors should not be taxed under SAT Circular 698, which may adversely affect us or our non-resident investors. See “Item 3. KeyInformation—D. Risk Factors—Risks Related to Doing Business in China—We face uncertainties with respect to indirect transfers of equity interests in PRCresident enterprises by their non-PRC holding companies.” 95Table of ContentsOn February 3, 2015, the SAT issued SAT Notice 7 to supersede the existing tax rules in relation to the Indirect Transfer, while the other provisions ofSAT Circular 698 remain in force. SAT Notice 7 introduces a more sophisticated anti-avoidance guidance. SAT Notice 7 extends its tax jurisdiction tocapture not only Indirect Transfer as set forth under SAT Circular 698 but also transactions involving transfer of real properties and assets in China of aforeign company through the offshore transfer of a foreign intermediate holding company. According to SAT Notice 7, if a nonresident enterprise indirectlytransfers China taxable properties through an arrangement without reasonable commercial purpose but to avoid China Corporate Income Tax, the indirecttransfer shall be re-characterized and treated as a direct transfer of China taxable properties. SAT Notice 7 also interprets the term “transfer of the equityinterest in a foreign intermediate holding company” broadly. In addition, SAT Notice 7 provides clearer criteria than SAT Circular 698 on how to assessreasonable commercial purposes and introduces safe harbor scenarios applicable to internal group restructurings.Further, SAT Notice 7 replaces the compulsory reporting requirements in SAT Circular 698 to voluntary reporting and the criteria set forth in SATCircular 698 for SAT Circular 698 reporting has been abolished. Both the foreign transferor and the transferee, and the PRC tax resident enterprise whoseequity interests being transferred may voluntarily report the transfer by submitting the documents required in SAT Notice 7. In addition to the voluntaryreporting, SAT Notice 7 empowers the Chinese tax authorities to require various documents from the parties involved. Although SAT Notice 7 providesclarities in many important areas such as business purpose and reporting requirements, it brings challenges to both the foreign transferor and transferee of theIndirect Transfer as they are required to make a self-assessment on whether the transaction should be subject to PRC tax and to file or withhold the PRC taxaccordingly. It also introduces the interest regime by providing that where a transferor fails to file and pay tax on time, and where a withholding agent fails towithhold the tax, interest will be charged on a daily basis. If the transferor has provided the required documents and information or has filed and paid the taxwithin 30 days from the date that the share transfer contract or agreement is signed, interest shall be calculated based on the benchmark interest rate;otherwise, the benchmark interest rate plus 5% will apply.There is uncertainty as to the application of SAT Circular 698. For example, while the term “Indirect Transfer” is not clearly defined, it is understoodthat the relevant PRC tax authorities have jurisdiction regarding requests for information over a wide range of foreign entities having no direct contact withChina. Also, although it appears that SAT Circular 698 was not intended to apply to share transfers of publicly traded companies, there is uncertainty as tothe application of SAT Circular 698 to other indirect transfers of PRC resident enterprises. Moreover, the relevant authority has not yet promulgated anyformal provisions or formally declared or stated how to calculate the effective tax rates in foreign tax jurisdictions, and the process and format of the reportingof an Indirect Transfer to the relevant tax authority of the PRC resident enterprise. In addition, there are no formal declarations with regard to how todetermine whether a foreign investor has adopted an abusive arrangement in order to reduce, avoid or defer PRC tax. SAT Notice 7 became effective fromFebruary 3, 2015, but it also applies to indirect transfers which occurred before its issuance but have not received assessments from the tax authorities. SATCircular 698 and SAT Notice 7 may be determined by the tax authorities to be applicable to our corporate restructuring where non-resident investors wereinvolved if any transactions are determined by the tax authorities to have lacked reasonable commercial purpose. As a result, we and our non-residentinvestors in such transactions, may become at risk of being taxed under SAT Circular 698 and we may be required to expend valuable resources to complywith SAT Circular 698 and SAT Notice 7 or to establish that we should not be taxed under the general anti-avoidance rule of the PRC Enterprise Income TaxLaw, which may have a material adverse effect on our financial condition and results of operations or such non-resident investors’ investments in us. See“Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—We face uncertainties with respect to indirect transfers of equityinterests in PRC resident enterprises by their non-PRC holding companies.” 96Table of ContentsThere are still uncertainties as to the interpretation and implementation of SAT Notice 7. The PRC tax authorities have discretion under SAT Circular59, SAT Circular 698 and SAT Notice 7 to make adjustments to the taxable capital gains based on the difference between the fair value of the equity intereststransferred and the cost of investment. We may pursue acquisitions in the future that may involve complex corporate structures. If we are considered a non-resident enterprise under the PRC Enterprise Income Tax Law and if the PRC tax authorities make adjustments to the taxable income of these transactionsunder SAT Circular 59, SAT Circular 698 or SAT Notice 7, our income tax expenses associated with such potential acquisitions will be increased, which mayhave an adverse effect on our financial condition and results of operations. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Businessin China—We face uncertainties with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.”Dividend Withholding TaxWe are a Cayman Islands holding company and substantially all of our income will come from dividends distributed by our subsidiaries located in thePRC through Cheerbright, our British Virgin Island subsidiary, and by our other subsidiaries in the PRC through Autohome Media, our Hong Kongsubsidiary. Pursuant to the Enterprise Income Tax Law and its implementation rules, dividends from our PRC subsidiaries paid out of profits generated afterJanuary 1, 2008, are subject to a withholding tax of 10%, unless there is a tax treaty with China that provides for a different withholding arrangement. BritishVirgin Islands currently does not have any tax treaty with China with respect to withholding tax.Pursuant to the Arrangement between the Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxationand Tax Evasion on Income, the withholding tax rate in respect to the payment of dividends by a PRC enterprise to a Hong Kong enterprise is reduced to 5%from a standard rate of 10% if the Hong Kong enterprise directly holds at least 25% of the PRC enterprise. Pursuant to the Notice of the State Administrationof Taxation on the Issues concerning the Application of the Dividend Clauses of Tax Agreements, or Circular 81, a Hong Kong resident enterprise must meetthe following conditions, among others, in order to enjoy the reduced tax: (a) it must directly own the required percentage of equity interests and votingrights in the PRC resident enterprise; and (b) it must have directly owned such percentage in the PRC resident enterprise throughout the 12 months prior toreceiving the dividends. Furthermore, the Administrative Measures for Non-Resident Enterprises to Enjoy Treatments under Tax Treaties (For TrialImplementation), which became effective in October 2009, requires that non-resident enterprises must obtain approval from the relevant tax authority in orderto enjoy the reduced withholding tax rate. There are also other conditions for enjoying the reduced withholding tax rate according to other relevant tax rulesand regulations. Accordingly, Autohome Media may be able to enjoy the 5% withholding tax rate for the dividends it receives from our PRC subsidiaries, ifit satisfies the conditions prescribed under Circular 81 and other relevant tax rules and regulations, and obtains the approvals as required. However, accordingto Circular 81, if the relevant tax authorities determine that the transactions or arrangements we have are for the primary purpose of enjoying favorable taxtreatment, the relevant tax authorities may adjust the favorable withholding tax in the future. Distributions of profits generated before January 1, 2008 areexempt from PRC withholding tax. Our board of directors declared dividends of RMB49.9 million and RMB249.2 million in February 2012 and May 2013,respectively, to all of our shareholders. The dividends, net of applicable withholding tax, were paid in April 2012 and June and July 2013, respectively. Wedo not have any plan to pay additional cash dividends on our ordinary shares in the foreseeable future. The board of Autohome WFOE has resolved toreinvest all its undistributed earnings indefinitely in Autohome WFOE. We currently intend to retain most, if not all, of our remaining available funds andany future earnings to operate and expand our business.As uncertainties remain regarding the interpretation and implementation of the Enterprise Income Tax Law and its implementation rules, we cannotassure you that, if we are deemed a PRC resident enterprise, any dividends to be distributed by us to our non-PRC shareholders and ADS holders would not besubject to any PRC withholding tax. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—Our global income and thedividends that we may receive from our PRC subsidiaries, dividends distributed to our non-PRC shareholders and ADS holders, and gains recognized by suchshareholders or ADS holders, may be subject to PRC taxes under the Enterprise Income Tax Law, which would have a material adverse effect on our results ofoperations.” 97Table of ContentsUnited States Federal Income Tax ConsiderationsThe following discussion is a summary of United States federal income tax considerations relating to the ownership and disposition of our ADSs orClass A ordinary shares by U.S. Holders (as defined below) that will hold ADSs or Class A ordinary shares as “capital assets” (generally, property held forinvestment) under the United States Internal Revenue Code of 1986, as amended (the “Code”). This discussion is based upon applicable provisions of theInternal Revenue Code, Treasury regulations (proposed, temporary and final) promulgated thereunder, pertinent judicial decisions, interpretive rulings of theInternal Revenue Service and such other authorities as we have considered relevant, which are subject to change, possibly with retroactive effect. Thisdiscussion does not address all aspects of United States federal income taxation that may be important to particular investors in light of their individualinvestment circumstances, including investors subject to special tax rules (for example, certain financial institutions, insurance companies, broker-dealers,pension plans, regulated investment companies, real estate investment trusts, cooperatives, and tax-exempt organizations (including private foundations),holders who are not U.S. Holders, holders who own (directly, indirectly, or constructively) 10% or more of our voting stock, investors that will hold theirADSs or Class A ordinary shares as part of a straddle, hedge, conversion, constructive sale, or other integrated transaction for United States federal income taxpurposes, investors that are traders in securities that have elected the mark-to-market method of accounting, or investors that have a functional currency otherthan the United States dollar), all of whom may be subject to tax rules that differ significantly from those discussed below. In addition, this discussion doesnot address United States federal estate, gift, Medicare, and alternative minimum tax considerations, or any non-United States, state, or local taxconsiderations. Each U.S. Holder is urged to consult its tax advisors regarding the United States federal, state, local, and non-United States income and othertax considerations of an investment in ADSs or Class A ordinary shares.GeneralFor purposes of this summary, a “U.S. Holder” is a beneficial owner of our ADSs or Class A ordinary shares that is, for United States federal income taxpurposes, (i) an individual who is a citizen or resident of the United States, (ii) a corporation, or other entity treated as a corporation for United States federalincome tax purposes, created in, or organized under the laws of the United States or any state thereof or the District of Columbia, or treated as such for UnitedStates federal income tax purposes, (iii) an estate the income of which is includible in gross income for United States federal income tax purposes regardlessof its source, or (iv) a trust (A) the administration of which is subject to the primary supervision of a United States court and which has one or more UnitedStates persons who have the authority to control all substantial decisions of the trust or (B) that has otherwise validly elected to be treated as a United Statesperson under the Code.If a partnership (or other entity treated as a partnership for United States federal income tax purposes) is a beneficial owner of our ADSs or Class Aordinary shares, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. If aU.S. Holder is a partner of a partnership holding our ADSs or Class A ordinary shares, the U.S. Holder is urged to consult its tax advisors regarding aninvestment in our ADSs or Class A ordinary shares.It is generally expected that a U.S. Holder of ADSs will be treated as the beneficial owner, for United States federal income tax purposes, of theunderlying shares represented by the ADSs. The remainder of this discussion assumes that a U.S. Holder of our ADSs will be treated in this manner.Accordingly, deposits or withdrawals of our Class A ordinary shares for our ADSs will not be subject to United States federal income tax.Passive Foreign Investment Company ConsiderationsA non-United States corporation, such as our company, will be classified as a “passive foreign investment company” (or a “PFIC”), for United Statesfederal income tax purposes for any taxable year, if either (i) 75% or more of its gross income for such year consists of certain types of “passive” income or(ii) 50% or more of the value of its assets (determined on the basis of a quarterly average) during such year produce or are held for the production of passiveincome (the “asset test”). Passive income generally includes dividends, interest, royalties, rents, annuities, net gains from the sale or exchange of propertyproducing such income and net foreign currency gains. For this purpose, cash is categorized as a passive asset and the company’s goodwill and otherunbooked intangibles associated with active business activity are taken into account as non-passive assets. We will be treated as owning our proportionateshare of the assets and earning our proportionate share of the income of any other corporation in which we own, directly or indirectly, more than 25% (byvalue) of the stock. 98Table of ContentsAlthough the law in this regard is unclear, we treat our VIEs as being owned by us for United States federal income tax purposes, not only because weexercise effective control over the operation of such entities but also because we are entitled to substantially all of their economic benefits, and, as a result,we consolidate their results of operation in our consolidated financial statements. If it were determined, however, that we are not the owner of our VIEs forUnited States federal income tax purposes, we would likely be treated as a PFIC for our current and any subsequent taxable year.Furthermore, the determination of whether we will be or become a PFIC will depend, in part, on the composition of our income and assets. Fluctuationsin the market price of our ADSs may cause us to become a PFIC for the current or subsequent taxable years because the value of assets for the purpose of theasset test may be determined by reference to the market price of our ADSs. The composition of our income and assets may also be affected by how, and howquickly, we use our liquid assets. Under circumstances where our revenue from activities that produce passive income significantly increase relative to ourrevenue from activities that produce non-passive income, or where we determine not to deploy significant amounts of cash for active purposes, our risk ofbecoming classified as a PFIC may substantially increase. In addition, because there are uncertainties in the application of the relevant rules, it is possiblethat the Internal Revenue Service may challenge our classification of certain income and assets as non-passive or our valuation of our tangible and intangibleassets, each of which may result in our becoming a PFIC for the current or subsequent taxable years.Assuming we are the owner of our VIEs for U.S. federal income tax purposes, we believe that we primarily operate as an active provider of onlineautomotive advertising solutions in China. Based on our current income and assets, we presently do not expect to be classified as a PFIC for the currenttaxable year or future taxable years. While we do not anticipate becoming a PFIC for the current taxable year or the foreseeable future, no assurance can begiven in this regard. Because the determination of whether we will be or become a PFIC is a fact-intensive inquiry made on an annual basis, the determinationof whether we will be or become a PFIC will depend, in part, upon the value of our goodwill and other unbooked intangibles (which will depend upon themarket value of our ADSs from time to time, which may be volatile). In estimating the value of our goodwill and other unbooked intangibles, we have takeninto account our current market capitalization. If our market capitalization subsequently declines, we may be or become classified as a PFIC for the currenttaxable year or future taxable years. It is also possible that the Internal Revenue Service may challenge our classification or valuation of our goodwill andother unbooked intangibles, which may result in our company being or becoming a PFIC for the current taxable year or foreseeable future.If we are classified as a PFIC for any taxable year during which a U.S. Holder holds our ADSs or Class A ordinary shares, the PFIC tax rules discussedbelow under “Passive Foreign Investment Company Rules” generally will apply to such U.S. Holder for such taxable year and, unless the U.S. Holder makescertain elections, will apply in future years even if we cease to be a PFIC in subsequent years. The discussion below under “Dividends” and “Sale or OtherDisposition of ADSs or Class A Ordinary Shares” is written on the basis that we will not be classified as a PFIC for United States federal income tax purposes.DividendsAny cash distributions (including the amount of any PRC tax withheld) paid on ADSs or Class A ordinary shares out of our earnings and profits, asdetermined under United States federal income tax principles, will generally be includible in the gross income of a U.S. Holder as dividend income on theday actually or constructively received by the U.S. Holder, in the case of Class A ordinary shares, or by the depositary bank, in the case of ADSs. Because wedo not intend to determine our earnings and profits on the basis of United States federal income tax principles, any distribution paid will generally be treatedas a “dividend” for United States federal income tax purposes. Non-corporate U.S. Holders receiving dividend income generally will be subject to tax on suchdividend income from a “qualified foreign corporation” at a lower applicable capital gains rate rather than the marginal tax rates generally applicable toordinary income provided that certain holding period and other requirements are met. A non-United States corporation (other than a corporation that isclassified as a PFIC for the taxable year in which the dividend is paid or the preceding taxable year) generally will be considered to be a qualified foreigncorporation (i) with respect to any dividend it pays on stock (or ADSs in respect of such stock) which is readily tradable on an established securities market inthe United States, or (ii) if it is eligible for the benefits of a comprehensive tax treaty with the United States that the Secretary of Treasury of the United Statesdetermines is satisfactory for purposes of this provision and that includes an exchange of information program. Our ADSs are listed on the NYSE, which is anestablished securities market in the United States, and will be considered readily tradable on an established securities market for as long as the ADSs continueto be listed on such exchange. Thus, we believe that we will be a qualified foreign corporation with respect to dividends we pay on our ADSs, but there canbe no assurance that our ADSs will continue to be considered readily tradable on an established securities market in later years. 99Table of ContentsSince we do not expect that our Class A ordinary shares be listed on established securities markets, it is unclear whether dividends that we pay on ourordinary shares that are not backed by ADSs currently meet the requirements for the reduced tax rate. However, in the event that we are deemed to be a PRCresident enterprise under the Enterprise Income Tax Law (see “People’s Republic of China Taxation”), we may be eligible for the benefits of the UnitedStates-PRC income tax treaty, which the United States Treasury Department has determined is satisfactory for this purpose, and be treated as a qualifiedforeign corporation with respect to dividends paid on our ADSs or Class A ordinary shares. Dividends received on our ADSs or Class A ordinary shares willnot be eligible for the dividends-received deduction allowed to corporations. Each U.S. Holder is advised to consult its tax advisors regarding the availabilityof the reduced tax rate applicable to qualified dividend income for any dividends we pay with respect to our ADSs or Class A ordinary shares.Dividends generally will be treated as income from foreign sources for United States foreign tax credit purposes. In the event that we are deemed to be aPRC resident enterprise under the Enterprise Income Tax Law, a U.S. Holder may be subject to PRC withholding taxes on dividends paid on our ADSs orClass A ordinary shares. A U.S. Holder may be eligible, subject to a number of complex limitations, to claim a foreign tax credit in respect of any foreignwithholding taxes imposed on dividends received on ADSs or Class A ordinary shares. A U.S. Holder who does not elect to claim a foreign tax credit forforeign tax withheld may instead claim a deduction, for United States federal income tax purposes, in respect of such withholding taxes, but only for a year inwhich such U.S. Holder elects to do so for all creditable foreign income taxes. The rules governing the foreign tax credit are complex and U.S. Holders areurged to consult their tax advisors regarding the availability of the foreign tax credit under their particular circumstances.Sale or Other Disposition of ADSs or Class A Ordinary SharesA U.S. Holder will generally recognize capital gain or loss upon the sale or other disposition of ADSs or Class A ordinary shares in an amount equal tothe difference between the amount realized upon the disposition and the holder’s adjusted tax basis in such ADSs or Class A ordinary shares. Any capital gainor loss will be long-term gain or loss if the ADSs or Class A ordinary shares have been held for more than one year and will generally be United States-sourcegain or loss for United States foreign tax credit purposes. Long-term capital gain of non-corporate U.S. Holders is generally eligible for reduced rates oftaxation. In the event that gain from the disposition of the ADSs or Class A ordinary shares is subject to tax in the PRC, a U.S. Holder that is eligible for thebenefits of the United States-PRC income tax treaty may elect to treat the gain as PRC-source income. The deductibility of a capital loss may be subject tolimitations. U.S. Holders are urged to consult their tax advisors regarding the tax consequences if a foreign tax is imposed on a disposition of our ADSs orClass A ordinary shares, including the availability of the foreign tax credit under their particular circumstances.Passive Foreign Investment Company RulesIf we are classified as a PFIC for any taxable year during which a U.S. Holder holds our ADSs or Class A ordinary shares, and unless the U.S. Holdermakes a mark-to-market election with respect to ADSs (as described below), the U.S. Holder will generally be subject to special tax rules that have apenalizing effect, regardless of whether we remain a PFIC, on (i) any excess distribution that we make to the U.S. Holder (which generally means anydistribution paid during a taxable year that is greater than 125% of the average annual distributions paid in the three preceding taxable years or, if shorter, theU.S. Holder’s holding period for the ADSs or Class A ordinary shares), and (ii) any gain realized on the sale or other disposition, including a pledge, undercertain circumstances, of ADSs or Class A ordinary shares. Under these PFIC rules: 100Table of Contents • the U.S. Holder’s excess distribution or gain will be allocated ratably over the U.S. Holder’s holding period for the ADSs or Class A ordinaryshares; • the amount allocated to the current taxable year and any taxable years in the U.S. Holder’s holding period prior to the first taxable year in whichwe are classified as a PFIC (each, a “pre-PFIC year”) will be taxable as ordinary income; • the amount allocated to each prior taxable year, other than a pre-PFIC year, will be subject to tax at the highest tax rate in effect applicable toindividuals or corporations, as appropriate, for that year; • an additional tax equal to the interest charge generally applicable to underpayments of tax will be imposed on the tax attributable to each priortaxable year, other than a pre-PFIC year.If we are a PFIC for any taxable year during which a U.S. Holder holds our ADSs or Class A ordinary shares and any of our non-United Statessubsidiaries is also a PFIC (i.e., a lower-tier PFIC), such U.S. Holder would be treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC and would be subject to the rules described above on certain distributions by a lower-tier PFIC and a disposition of shares of a lower-tier PFIC eventhough such U.S. Holder would not receive the proceeds of those distributions or dispositions. U.S. Holders are urged to consult their tax advisors regardingthe application of the PFIC rules to any of our subsidiaries.As an alternative to the foregoing rules, a U.S. Holder of “marketable stock” in a PFIC may make a mark-to-market election with respect to our ADSs,provided that the ADSs are regularly traded on the NYSE. We anticipate that the ADSs should qualify as being regularly traded, but no assurances may begiven in this regard. If a U.S. Holder makes this election, the U.S. Holder will generally (i) include as ordinary income for each taxable year the excess, if any,of the fair market value of ADSs held at the end of the taxable year over the adjusted tax basis of such ADSs and (ii) deduct as an ordinary loss the excess, ifany, of the adjusted tax basis of such ADSs over the fair market value of such ADSs held at the end of the taxable year, but such deduction will be allowedonly to the extent of the amount previously included in income as a result of the mark-to-market election. The U.S. Holder’s adjusted tax basis in the ADSswould be adjusted to reflect any income or loss resulting from the mark-to-market election. If a U.S. Holder makes a mark-to-market election in respect of acorporation classified as a PFIC and such corporation ceases to be classified as a PFIC, the U.S. Holder will not be required to take into account the gain orloss described above during any year that such corporation is not classified as a PFIC. If a U.S. Holder makes a mark-to-market election, any gain such U.S.Holder recognizes upon the sale or other disposition of our ADSs in a year when we are a PFIC will be treated as ordinary income and any loss will be treatedas ordinary loss, but such loss will only be treated as ordinary loss to the extent of the net amount previously included in income as a result of the mark-to-market election. In the case of a U.S. Holder who has held ADSs or Class A ordinary shares during any taxable year in respect of which we were classified as aPFIC and continues to hold such ADSs or Class A ordinary shares (or any portion thereof) and has not previously made a mark-to-market election, and if suchU.S. Holder makes a mark-to-market election, special tax rules may apply relating to purging the PFIC taint of such ADSs or Class A ordinary shares.Because, as a technical matter, a mark-to-market election cannot be made for any lower-tier PFICs that we may own, a U.S. Holder may continue to besubject to the PFIC rules with respect to its indirect interest in any investments held by us that are treated as an equity interest in a PFIC for United Statesfederal income tax purposes.We do not intend to provide information necessary for U.S. Holders to make “qualified electing fund” elections which, if available, would result in taxtreatment different from the general tax treatment for PFICs described above.Dividends that we pay on our ADSs or Class A ordinary shares will not be eligible for the reduced tax rate that applies to qualified dividend incomediscussed above under “Dividends” if we are classified as a PFIC for the taxable year in which the dividend is paid or the preceding taxable year. If a U.S.Holder owns our ADSs or Class A ordinary shares during any taxable year that we are a PFIC, the U.S. Holder must generally file an annual report with theInternal Revenue Service, subject to certain limited exceptions. Each U.S. Holder is urged to consult its tax advisor concerning the United States federalincome tax consequences of owning and disposing of our ADSs or Class A ordinary shares if we are or become a PFIC, including filing requirements, thepossibility of making a mark-to-market election and the unavailability of the qualifying electing fund election. 101Table of ContentsInformation ReportingCertain U.S. Holders are required to report information to the Internal Revenue Service relating to an interest in “specified foreign financial assets,”including shares issued by a non-United States corporation, for any year in which the aggregate value of all specified foreign financial assets exceeds$50,000 (or a higher dollar amount prescribed by the Internal Revenue Service), subject to certain exceptions (including an exception for shares held incustodial accounts maintained with a U.S. financial institution). These rules also impose penalties if a U.S. Holder is required to submit such information tothe Internal Revenue Service and fails to do so.In addition, dividend payments with respect to our ADSs or Class A ordinary shares and proceeds from the sale or other disposition of our ADSs orClass A ordinary shares may be subject to information reporting to the Internal Revenue Service. U.S. Holders are urged to consult their tax advisorsregarding the application of the United States information reporting rules to their particular circumstances. F.Dividends and Paying AgentsNot applicable. G.Statement by ExpertsNot applicable. H.Documents on DisplayWe previously filed with the SEC a registration statement on Form F-1 under the Securities Act with respect to our initial public offering of our Class Aordinary shares represented by ADSs.We are subject to the periodic reporting and other informational requirements of the Securities Exchange Act of 1934, or the Exchange Act. Under theExchange Act, we are required to file reports and other information with the SEC. Specifically, we are required to file annually a Form 20-F within fourmonths after the end of each fiscal year which is December 31. The SEC maintains a website at www.sec.gov that contains reports, proxy and informationstatements, and other information regarding registrants that make electronic filings with the SEC using its EDGAR system. Copies of reports and otherinformation, when filed, may also be inspected without charge and may be obtained at prescribed rates at the public reference facilities maintained by theSEC at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. The public may obtain information regarding the Washington, D.C. Public Reference Roomby calling the SEC at 1-800-SEC-0330. As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing andcontent of quarterly reports and proxy statements, and officers, directors and principal shareholders are exempt from the reporting and short-swing profitrecovery provisions contained in Section 16 of the Exchange Act.We will furnish Deutsche Bank Trust Company Americas, the depositary of our ADSs, with our annual reports, which will include a review ofoperations and annual audited consolidated financial statements prepared in conformity with U.S. GAAP, and all notices of shareholders’ meetings and otherreports and communications that are made generally available to our shareholders. The depositary will make such notices, reports and communicationsavailable to holders of ADSs and, upon our request, will mail to all record holders of ADSs the information contained in any notice of a shareholders’ meetingreceived by the depositary from us. I.Subsidiary InformationFor a listing of our subsidiaries, see “Item 4. Information on the Company—C. Organizational Structure.”ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKInterest Rate RiskOur exposure to interest rate risk primarily relates to the interest income generated by excess cash, which is mostly held in interest-bearing bankdeposits. We have not used derivative financial instruments in our investment portfolio. Interest earning instruments carry a degree of interest rate risk. Wehave not been exposed to, nor do we anticipate being exposed to, material risks due to changes in market interest rates. However, our future interest incomeand interest expense may fluctuate due to changes in market interest rates. 102Table of ContentsForeign Exchange RiskWe earn substantially all of our revenues and incur most of our expenses in RMB, and substantially all of our sales contracts are denominated in RMB.We do not believe that we currently have any significant direct foreign exchange risk and have not used any derivative financial instruments to hedge ourexposure to such risk. Although in general, our exposure to foreign exchange risks should be limited, the value of your investment in our ADSs will beaffected by the exchange rate between the U.S. dollar and the RMB because the value of our business is effectively denominated in RMB, while the ADSswill be traded in U.S. dollars. Based on the amount of our cash and cash equivalents and term deposits as of December 31, 2014, a 1.0% change in theexchange rate between the Renminbi and the U.S. dollar would result in an increase or decrease of approximately US$4.4 million to our cash and cashequivalents and term deposits.The conversion of Renminbi into foreign currencies, including U.S. dollars, is based on rates set by the People’s Bank of China. The PRC governmentallowed the Renminbi to appreciate by more than 20% against the U.S. dollar between July 2005 and July 2008. Between July 2008 and June 2010, thisappreciation was halted and the exchange rate between the Renminbi and the U.S. dollar remained within a narrow band. As a consequence, the RMBfluctuated significantly during that period against other freely traded currencies, in tandem with the U.S. dollar. The PRC government again allowed theRenminbi to appreciate slowly against the U.S. dollar from June 2010 until the start of 2014. 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 Chinese government to substantially liberalize its currency policy, which could result in furtherappreciation in the value of the RMB against the U.S. dollar. To the extent that we need to convert U.S. dollars into RMB for capital expenditures andworking capital and other business purposes, appreciation of the RMB against the U.S. dollar would have an adverse effect on the RMB amount we wouldreceive from the conversion. Conversely, if we decide to convert RMB into U.S. dollars for the purpose of making payments for dividends on our ordinaryshares or ADSs, strategic acquisitions or investments or other business purposes, appreciation of the U.S. dollar against the RMB would have a negative effecton the U.S. dollar amount available to us.ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES A.Debt SecuritiesNot applicable. B.Warrants and RightsNot applicable. C.Other SecuritiesNot applicable. 103Table of ContentsD.American Depositary SharesFees and Charges Our ADS Holders May Have to PayAs an ADS holder, you will be required to pay the following service fees to the depositary bank: Service Fees• Issuance of ADSs, including issuances resulting from a distribution of sharesor rights or other property Up to US$0.05 per ADS issued• Cancellation of ADSs, including the case of termination of the depositagreement Up to US$0.05 per ADS cancelled• Distribution of cash dividends or other cash distributions Up to US$0.05 per ADS held• Distribution of ADSs pursuant to share dividends, free share distributions orexercise of rights Up to US$0.05 per ADS held• Distribution of securities other than ADSs or rights to purchase additionalADSs A fee equivalent to the fee that would be payable if securities distributedto you had been Class A ordinary shares and the Class A ordinary shareshad been deposited for issuance of ADSs• Depositary services Up to US$0.05 per ADS held on the applicable record date(s) establishedby the depositary bank• Transfer of ADRs US$1.50 per certificate presented for transferAs an ADS holder, you will also be responsible for paying certain fees and expenses incurred by the depositary bank and certain taxes andgovernmental charges (in addition to any applicable fees, expenses, taxes and other governmental charges payable on the deposited securities represented byany of your ADSs) such as: • Fees for the transfer and registration of Class A ordinary shares charged by the registrar and transfer agent for the Class A ordinary shares in theCayman Islands (i.e., upon deposit and withdrawal of Class A ordinary shares). • Expenses incurred for converting foreign currency into U.S. dollars. • Expenses for cable, telex and fax transmissions and for delivery of securities. • Taxes and duties upon the transfer of securities, including any applicable stamp duties, any stock transfer charges or withholding taxes (i.e.,when Class A ordinary shares are deposited or withdrawn from deposit). • Fees and expenses incurred in connection with the delivery or servicing of Class A ordinary shares on deposit. • Fees and expenses incurred in connection with complying with exchange control regulations and other regulatory requirements applicable toClass A ordinary shares, deposited securities, ADSs and ADRs. • Any applicable fees and penalties thereon.The depositary fees payable upon the issuance and cancellation of ADSs are typically paid to the depositary bank by the brokers (on behalf of theirclients) receiving the newly issued ADSs from the depositary bank and by the brokers (on behalf of their clients) delivering the ADSs to the depositary bankfor cancellation. The brokers in turn charge these fees to their clients. Depositary fees payable in connection with distributions of cash or securities to ADSholders 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.The depositary fees payable for cash distributions are generally deducted from the cash being distributed or by selling a portion of distributableproperty to pay the fees. In the case of distributions other than cash (i.e., share dividends, rights), the depositary bank charges the applicable fee to the ADSrecord date holders concurrent with the distribution. In the case of ADSs registered in the name of the investor (whether certificated or uncertificated in directregistration), 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 inDTC) from the brokers and custodians holding ADSs in their DTC accounts. The brokers and custodians who hold their clients’ ADSs in DTC accounts inturn charge their clients’ accounts the amount of the fees paid to the depositary banks. 104Table of ContentsIn the event of refusal to pay the depositary fees, the depositary bank may, under the terms of the deposit agreement, refuse the requested service untilpayment is received or may set off the amount of the depositary fees from any distribution to be made to the ADS holder.Fees and Other Payments Made by the Depositary to UsDeutsche Bank Trust Company Americas, as depositary, has agreed to reimburse us for a portion of certain expenses we incur that are related toestablishment and maintenance of the ADR program, including investor relations expenses. There are limits on the amount of expenses for which thedepositary will reimburse us, but the amount of reimbursement available to us is not related to the amounts of fees the depositary collects from investors.Further, the depositary has agreed to reimburse us certain fees payable to the depositary by holders of ADSs. Neither the depositary nor we can determine theexact amount to be made available to us because (i) the number of ADSs that will be issued and outstanding, (ii) the level of service fees to be charged toholders of ADSs and (iii) our reimbursable expenses related to the program are not known at this time. In our most recent fiscal year, we have received fromthe depositary a reimbursement of approximately US$25,000. 105Table of ContentsPART IIITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIESNone.ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDSSee “Item 10. Additional Information” for a description of the rights of securities holders, which remain unchanged.The following “Use of Proceeds” information relates to: • the registration statement on Form F-1, as amended (File Number 333-192085) for our initial public offering of 8,993,000 ADSs (reflecting thefull exercise of the over-allotment option by the underwriters to purchase an additional 1,173,000 ADSs), representing 8,993,000 Class Aordinary shares, which registration statement was declared effective by the SEC on December 10, 2013. Deutsche Bank Securities Inc. andGoldman Sachs (Asia) L.L.C. acted as the representatives of the underwriters in our initial public offering; and • the registration statement on Form F-1, as amended (File Number 333-199862) for our 2014 Offering of 9,645,659 ADSs (reflecting the partialexercise of the over-allotment option by the underwriters to purchase an additional 1,145,659 ADSs), representing 9,645,659 Class A ordinaryshares, which registration statement was declared effective by the SEC on November 19, 2014. Deutsche Bank Securities Inc. and Goldman Sachs(Asia) L.L.C. acted as the representatives of the underwriters in our 2014 Offering.We incurred expenses and paid to others US$12.8 million for underwriting discounts and commissions in connection with our initial public offeringfrom the effective date of the registration statement for the initial public offering to December 31, 2014. We incurred expenses and paid to othersUS$5.0 million for underwriting discounts and commissions in connection with our 2014 Offering from the effective date of the registration statement for the2014 Offering to December 31, 2014. We received net proceeds of approximately US$142.6 million and US$97.3 million from our initial public offering and2014 Offering, respectively.As of December 31, 2014, we used approximately US$94.0 million of the net proceeds from our initial public offering and 2014 Offering for paymentfor the remaining portion of the share repurchase consideration in the West Crest Share Purchase, repayment of loans for the West Crest Share Repurchase,professional fees, insurance fees, compensation to directors, establishment of new PRC subsidiaries and general corporate purposes.ITEM 15. CONTROLS AND PROCEDURESEvaluation of Disclosure Controls and ProceduresOur management, with the participation of our chief executive officer and chief financial officer, has performed an evaluation of the effectiveness ofour disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report, as requiredby Rule 13a-15(b) under the Exchange Act. Based on that evaluation, our management has concluded that, as of December 31, 2014, our disclosure controlsand procedures were effective.Management’s Annual Report on Internal Control over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and15d-15(f) under the Exchange Act. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of consolidated financial statements in accordance with U.S. GAAP and 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 a company’s assets,(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance withgenerally accepted accounting principles, and that a company’s receipts and expenditures are being made only in accordance with authorizations of acompany’s management and directors, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, ordisposition of a company’s assets that could have a material effect on the consolidated financial statements. Our management, with the participation of ourchief executive officer and chief financial officer, conducted an evaluation of the effectiveness of our company’s internal control over financial reporting asof December 31, 2014 based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of theTreadway Commission (2013 Framework). Based on this evaluation, our management concluded that our internal control over financial reporting waseffective as of December 31, 2014. 106Table of ContentsBecause of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, any evaluation ofeffectiveness as to future periods is subject to the risks that controls may become inadequate because of changes in conditions, or that the degree ofcompliance with the policies or procedures may deteriorate.Ernst & Young Hua Ming LLP, our independent registered public accounting firm, audited the effectiveness of our company’s internal control overfinancial reporting as of December 31, 2014 and has issued an attestation report set forth below.Report of Independent Registered Public Accounting FirmThe Board of Directors and Shareholders of Autohome Inc.We have audited Autohome Inc.’s internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the “COSO criteria”).Autohome Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness ofinternal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Ourresponsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in allmaterial respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weaknessexists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures aswe considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’sinternal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of thecompany are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assuranceregarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on thefinancial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degreeof compliance with the policies or procedures may deteriorate.In our opinion, Autohome Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based onthe COSO criteria. 107Table of ContentsWe also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balancesheets of Autohome Inc. as of December 31, 2014 and 2013, and the related consolidated statements of comprehensive income, cash flows and changes inshareholders’ equity for each of the three years in the period ended December 31, 2014 of Autohome Inc. and our report dated March 27, 2015 expressed anunqualified opinion thereon./s/ Ernst & Young Hua Ming LLPBeijing, People’s Republic of ChinaMarch 27, 2015Changes in Internal Control Over Financial ReportingThere were no changes in our internal controls over financial reporting that occurred during the year ended December 31, 2014 that have materiallyaffected, or are reasonably likely to materially affect, our internal control over financial reporting.ITEM 16. RESERVEDITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERTOur board of directors has determined that Mr. Ted Tak-Tai Lee is our audit committee financial expert, who is an independent director under thestandards set forth in Section 303A of the NYSE Listed Company Manual and Rule 10A-3 of the Exchange Act. Mr. Lee is the chairman of our auditcommittee.ITEM 16B. CODE OF ETHICSOur board of directors has adopted a code of business conduct and ethics that applies to our directors, officers, employees and agents, including certainprovisions that specifically apply to our chairman, chief executive officer, chief financial officer, controller, vice presidents and any other persons whoperform similar functions for us. We filed our code of business conduct and ethics as Exhibit 99.1 to our registration statement on Form F-1, as amended,which was originally filed with the SEC on November 4, 2013 and subsequently amended and filed with this annual report. We have posted a copy of ourcode of business conduct and ethics on our website at http://ir.autohome.com.cn.ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICESThe following table sets forth the aggregate fees by categories specified below in connection with certain professional services rendered by Ernst &Young Hua Ming LLP, our independent registered public accounting firm, for the periods indicated. We did not pay any other fees to our independentregistered public accounting firm during the periods other than those indicated below. For the Year Ended December 31, 2013 2014 (in RMB thousands) Audit fees(1) 8,716 8,138 Audit-related fees(2) — 2,168 Tax fees(3) 101 — (1)“Audit fees” means the aggregate fees billed for professional services rendered by our independent registered public accounting firm for the audit ofour annual financial statements and the audit of internal control over financial reporting, and the review of our comparative interim financialinformation.(2)“Audit-related fees” represents aggregate fees billed for professional services rendered by our principal auditor for the assurance and related services,which were not included under “Audit Fees” above.(3)“Tax fees” represents the aggregated fees billed for professional services rendered by our independent registered public accounting firm for taxcompliance, tax advice and tax planning. 108Table of ContentsThe policy of our audit committee is to preapprove all audit and nonaudit services provided by Ernst & Young Hua Ming LLP, including auditservices, audit-related services and tax services as described above, other than those for de minimis services which are approved by the audit committee priorto the completion of the audit. Our audit committee has approved all of our audit fees and audit-related fees for the year ended December 31, 2014.ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEESNot applicable.ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERSNone.ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANTNot applicable.ITEM 16G. CORPORATE GOVERNANCEWe have followed and intend to continue to follow the applicable NYSE corporate governance listing standards.ITEM 16H. MINE SAFETY DISCLOSURENot applicable. 109Table of ContentsPART IIIITEM 17. FINANCIAL STATEMENTSWe have elected to provide financial statements pursuant to Item 18.ITEM 18. FINANCIAL STATEMENTSThe consolidated financial statements of Autohome Inc. are included at the end of this annual report.ITEM 19. EXHIBITS ExhibitNumber Description of Document1.1 Fourth Amended and Restated Memorandum and Articles of Association of the Registrant, adopted on November 27, 2013 (incorporatedherein by reference to Exhibit 3.2 to the registration statement on Form F-1, as amended (File No. 333-192085), initially filed with theSecurities and Exchange Commission on November 4, 2013)2.1 Registrant’s Specimen American Depositary Receipt (incorporated herein by reference to Exhibit 4.1 to the registration statement on FormF-1, as amended (File No. 333-192085), initially filed with the Securities and Exchange Commission on November 4, 2013)2.2 Registrant’s Specimen Certificate for Ordinary Shares (incorporated herein by reference to Exhibit 4.2 to the registration statement on FormF-1, as amended (File No. 333-192085), initially filed with the Securities and Exchange Commission on November 4, 2013)2.3 Deposit Agreement, among the Registrant, the depositary and holders of the American Depositary Receipts dated as of December 10, 2013(incorporated herein by reference to Exhibit 4.3 to the registration statement on Form S-8 (File No. 333-196006), filed with the Securitiesand Exchange Commission on May 16, 2014)2.4 Investors Rights Agreement among the Registrant, Telstra Holdings Pty Limited and certain minority shareholders of the Registrant datedNovember 4, 2013 (incorporated herein by reference to Exhibit 4.63 to the registration statement on Form F-1, as amended (File No. 333-192085), initially filed with the Securities and Exchange Commission on November 4, 2013)4.1 2011 Share Incentive Plan of the Registrant (incorporated herein by reference to Exhibit 10.1 to the registration statement on Form F-1, asamended (File No. 333-192085), initially filed with the Securities and Exchange Commission on November 4, 2013)4.2 2013 Share Incentive Plan of the Registrant (incorporated herein by reference to Exhibit 10.2 to the registration statement on Form F-1, asamended (File No. 333-192085), initially filed with the Securities and Exchange Commission on November 4, 2013)4.3 Form of Indemnification Agreement between the Registrant and its directors and officers (incorporated herein by reference to Exhibit 10.3to the registration statement on Form F-1, as amended (File No. 333-192085), initially filed with the Securities and Exchange Commissionon November 4, 2013)4.4 English Translation of Form of Employment Agreement between Autohome WFOE and an executive officer of the Registrant (incorporatedherein by reference to Exhibit 10.4 to the registration statement on Form F-1, as amended (File No. 333-192085), initially filed with theSecurities and Exchange Commission on November 4, 2013)4.5 Restated Exclusive Technology Consulting and Service Agreement between Autohome WFOE and Autohome Information dated June 7,2011 (incorporated herein by reference to Exhibit 4.5 to the registration statement on Form F-1, as amended (File No. 333-192085), initiallyfiled with the Securities and Exchange Commission on November 4, 2013) 110Table of ContentsExhibitNumber Description of Document4.6 Exclusive Technology Consulting and Service Agreement between Autohome WFOE and Hongyuan Information dated November 8, 2010(incorporated herein by reference to Exhibit 4.6 to the registration statement on Form F-1, as amended (File No. 333-192085), initially filedwith the Securities and Exchange Commission on November 4, 2013)4.7 Exclusive Technology Consulting and Service Agreement between Autohome WFOE and Chengshi Advertising dated November 12, 2010(incorporated herein by reference to Exhibit 4.7 to the registration statement on Form F-1, as amended (File No. 333-192085), initially filedwith the Securities and Exchange Commission on November 4, 2013)4.8 Exclusive Technology Consulting and Service Agreement between Autohome WFOE and Autohome Advertising dated September 21, 2010(incorporated herein by reference to Exhibit 4.8 to the registration statement on Form F-1, as amended (File No. 333-192085), initially filedwith the Securities and Exchange Commission on November 4, 2013)4.9 Restated Loan Agreement between Autohome WFOE and Zhi Qin dated June 7, 2011 (incorporated herein by reference to Exhibit 4.9 to theregistration statement on Form F-1, as amended (File No. 333-192085), initially filed with the Securities and Exchange Commission onNovember 4, 2013)4.10 Restated Loan Agreement between Autohome WFOE and Zheng Fan dated June 7, 2011 (incorporated herein by reference to Exhibit 4.10 tothe registration statement on Form F-1, as amended (File No. 333-192085), initially filed with the Securities and Exchange Commission onNovember 4, 2013)4.11 Restated Loan Agreement between Autohome WFOE and Xiang Li dated June 7, 2011 (incorporated herein by reference to Exhibit 4.11 tothe registration statement on Form F-1, as amended (File No. 333-192085), initially filed with the Securities and Exchange Commission onNovember 4, 2013)4.12 Restated Equity Option Agreement among Autohome WFOE, Autohome Information and Zhi Qin dated June 7, 2011 (incorporated herein byreference to Exhibit 4.12 to the registration statement on Form F-1, as amended (File No. 333-192085), initially filed with the Securities andExchange Commission on November 4, 2013)4.13 Restated Equity Option Agreement among Autohome WFOE, Autohome Information and Zheng Fan dated June 7, 2011 (incorporated hereinby reference to Exhibit 4.13 to the registration statement on Form F-1, as amended (File No. 333-192085), initially filed with the Securitiesand Exchange Commission on November 4, 2013)4.14 Restated Equity Option Agreement among Autohome WFOE, Autohome Information and Xiang Li dated June 7, 2011 (incorporated hereinby reference to Exhibit 4.14 to the registration statement on Form F-1, as amended (File No. 333-192085), initially filed with the Securitiesand Exchange Commission on November 4, 2013)4.15 Equity Option Agreement among Autohome WFOE, Autohome Information and Hongyuan Information dated November 8, 2010(incorporated herein by reference to Exhibit 4.15 to the registration statement on Form F-1, as amended (File No. 333-192085), initially filedwith the Securities and Exchange Commission on November 4, 2013)4.16 Equity Option Agreement among Autohome WFOE, Autohome Information and Chengshi Advertising dated November 12, 2010(incorporated herein by reference to Exhibit 4.16 to the registration statement on Form F-1, as amended (File No. 333-192085), initially filedwith the Securities and Exchange Commission on November 4, 2013) 111Table of ContentsExhibitNumber Description of Document4.17 Equity Option Agreement among Autohome WFOE, Autohome Information and Autohome Advertising dated September 21, 2010(incorporated herein by reference to Exhibit 4.17 to the registration statement on Form F-1, as amended (File No. 333-192085), initially filedwith the Securities and Exchange Commission on November 4, 2013)4.18 Restated Equity Interest Pledge Agreement between Autohome WFOE and Zhi Qin dated August 23, 2011 (incorporated herein by referenceto Exhibit 4.18 to the registration statement on Form F-1, as amended (File No. 333-192085), initially filed with the Securities and ExchangeCommission on November 4, 2013)4.19 Restated Equity Interest Pledge Agreement between Autohome WFOE and Zheng Fan dated August 23, 2011 (incorporated herein byreference to Exhibit 4.19 to the registration statement on Form F-1, as amended (File No. 333-192085), initially filed with the Securities andExchange Commission on November 4, 2013)4.20 Restated Equity Interest Pledge Agreement between Autohome WFOE and Xiang Li dated August 23, 2011 (incorporated herein by referenceto Exhibit 4.20 to the registration statement on Form F-1, as amended (File No. 333-192085), initially filed with the Securities and ExchangeCommission on November 4, 2013)4.21 Equity Interest Pledge Agreement between Autohome WFOE and Autohome Information dated November 8, 2010 regarding HongyuanInformation (incorporated herein by reference to Exhibit 4.21 to the registration statement on Form F-1, as amended (File No. 333-192085),initially filed with the Securities and Exchange Commission on November 4, 2013)4.22 Equity Interest Pledge Agreement between Autohome WFOE and Autohome Information dated November 12, 2010 regarding ChengshiAdvertising (incorporated herein by reference to Exhibit 4.22 to the registration statement on Form F-1, as amended (File No. 333-192085),initially filed with the Securities and Exchange Commission on November 4, 2013)4.23 Equity Interest Pledge Agreement between Autohome WFOE and Autohome Information dated September 21, 2010 regarding AutohomeAdvertising (incorporated herein by reference to Exhibit 4.23 to the registration statement on Form F-1, as amended (File No. 333-192085),initially filed with the Securities and Exchange Commission on November 4, 2013)4.24 Power of Attorney issued by Zhi Qin dated April 3, 2013 regarding Autohome Information (incorporated herein by reference to Exhibit 4.24to the registration statement on Form F-1, as amended (File No. 333-192085), initially filed with the Securities and Exchange Commission onNovember 4, 2013)4.25 Power of Attorney issued by Zheng Fan dated April 3, 2013 regarding Autohome Information (incorporated herein by reference to Exhibit4.25 to the registration statement on Form F-1, as amended (File No. 333-192085), initially filed with the Securities and ExchangeCommission on November 4, 2013)4.26 Power of Attorney issued by Xiang Li dated April 3, 2013 regarding Autohome Information (incorporated herein by reference to Exhibit 4.26to the registration statement on Form F-1, as amended (File No. 333-192085), initially filed with the Securities and Exchange Commission onNovember 4, 2013)4.27 Power of Attorney issued by Autohome Information dated April 3, 2013 regarding Hongyuan Information (incorporated herein by referenceto Exhibit 4.27 to the registration statement on Form F-1, as amended (File No. 333-192085), initially filed with the Securities and ExchangeCommission on November 4, 2013) 112Table of ContentsExhibitNumber Description of Document4.28 Power of Attorney issued by Autohome Information dated April 3, 2013 regarding Chengshi Advertising (incorporated herein by reference toExhibit 4.28 to the registration statement on Form F-1, as amended (File No. 333-192085), initially filed with the Securities and ExchangeCommission on November 4, 2013)4.29 Power of Attorney issued by Autohome Information dated April 3, 2013 regarding Autohome Advertising (incorporated herein by referenceto Exhibit 4.29 to the registration statement on Form F-1, as amended (File No. 333-192085), initially filed with the Securities and ExchangeCommission on November 4, 2013)4.30 Supplementary Agreement to Exclusive Technology Consulting and Service Agreement between Hongyuan Information and AutohomeWFOE dated July 22, 2011 (incorporated herein by reference to Exhibit 4.30 to the registration statement on Form F-1, as amended (File No.333-192085), initially filed with the Securities and Exchange Commission on November 4, 2013)4.31 Supplementary Agreement to Exclusive Technology Consulting and Service Agreement between Autohome WFOE and ChengshiAdvertising dated July 22, 2011 (incorporated herein by reference to Exhibit 4.31 to the registration statement on Form F-1, as amended (FileNo. 333-192085), initially filed with the Securities and Exchange Commission on November 4, 2013)4.32 Supplementary Agreement to Exclusive Technology Consulting and Service Agreement between Autohome Advertising and AutohomeWFOE dated July 22, 2011 (incorporated herein by reference to Exhibit 4.32 to the registration statement on Form F-1, as amended (File No.333-192085), initially filed with the Securities and Exchange Commission on November 4, 2013)4.33 Supplementary Agreement to Restated Exclusive Technology Consulting and Service Agreement between Autohome Information andAutohome WFOE dated July 22, 2011 (incorporated herein by reference to Exhibit 4.33 to the registration statement on Form F-1, asamended (File No. 333-192085), initially filed with the Securities and Exchange Commission on November 4, 2013)4.34 Exclusive Technology Consulting and Service Agreement between Autohome WFOE and Shanghai Advertising dated December 31, 2011(incorporated herein by reference to Exhibit 4.34 to the registration statement on Form F-1, as amended (File No. 333-192085), initially filedwith the Securities and Exchange Commission on November 4, 2013)4.35 Loan Agreement between Autohome WFOE and Zhi Qin dated December 31, 2011 (incorporated herein by reference to Exhibit 4.35 to theregistration statement on Form F-1, as amended (File No. 333-192085), initially filed with the Securities and Exchange Commission onNovember 4, 2013)4.36 Loan Agreement between Autohome WFOE and Zheng Fan dated December 31, 2011 (incorporated herein by reference to Exhibit 4.36 to theregistration statement on Form F-1, as amended (File No. 333-192085), initially filed with the Securities and Exchange Commission onNovember 4, 2013)4.37 Loan Agreement between Autohome WFOE and Xiang Li dated December 31, 2011 (incorporated herein by reference to Exhibit 4.37 to theregistration statement on Form F-1, as amended (File No. 333-192085), initially filed with the Securities and Exchange Commission onNovember 4, 2013)4.38 Equity Option Agreement among Autohome WFOE, Shanghai Advertising and Zhi Qin dated July 2, 2012 (incorporated herein by referenceto Exhibit 4.38 to the registration statement on Form F-1, as amended (File No. 333-192085), initially filed with the Securities and ExchangeCommission on November 4, 2013) 113Table of ContentsExhibitNumber Description of Document4.39 Equity Option Agreement among Autohome WFOE, Shanghai Advertising and Zheng Fan dated July 2, 2012 (incorporated herein byreference to Exhibit 4.39 to the registration statement on Form F-1, as amended (File No. 333-192085), initially filed with the Securities andExchange Commission on November 4, 2013)4.40 Equity Option Agreement among Autohome WFOE, Shanghai Advertising and Xiang Li dated July 2, 2012 (incorporated herein by referenceto Exhibit 4.40 to the registration statement on Form F-1, as amended (File No. 333-192085), initially filed with the Securities and ExchangeCommission on November 4, 2013)4.41 Equity Interest Pledge Agreement between Autohome WFOE and Zhi Qin dated July 2, 2012 (incorporated herein by reference to Exhibit4.41 to the registration statement on Form F-1, as amended (File No. 333-192085), initially filed with the Securities and ExchangeCommission on November 4, 2013)4.42 Equity Interest Pledge Agreement between Autohome WFOE and Zheng Fan dated July 2, 2012 (incorporated herein by reference to Exhibit4.42 to the registration statement on Form F-1, as amended (File No. 333-192085), initially filed with the Securities and ExchangeCommission on November 4, 2013)4.43 Equity Interest Pledge Agreement between Autohome WFOE and Xiang Li dated July 2, 2012 (incorporated herein by reference to Exhibit4.43 to the registration statement on Form F-1, as amended (File No. 333-192085), initially filed with the Securities and ExchangeCommission on November 4, 2013)4.44 Power of Attorney issued by Zhi Qin dated April 3, 2013 regarding Shanghai Advertising (incorporated herein by reference to Exhibit 4.44 tothe registration statement on Form F-1, as amended (File No. 333-192085), initially filed with the Securities and Exchange Commission onNovember 4, 2013)4.45 Power of Attorney issued by Zheng Fan dated April 3, 2013 regarding Shanghai Advertising (incorporated herein by reference to Exhibit4.45 to the registration statement on Form F-1, as amended (File No. 333-192085), initially filed with the Securities and ExchangeCommission on November 4, 2013)4.46 Power of Attorney issued by Xiang Li dated April 3, 2013 regarding Shanghai Advertising (incorporated herein by reference to Exhibit 4.46to the registration statement on Form F-1, as amended (File No. 333-192085), initially filed with the Securities and Exchange Commission onNovember 4, 2013)4.47 Loan Agreement between Autohome WFOE and Zhi Qin dated July 2, 2012 (incorporated herein by reference to Exhibit 4.47 to theregistration statement on Form F-1, as amended (File No. 333-192085), initially filed with the Securities and Exchange Commission onNovember 4, 2013)4.48 Loan Agreement between Autohome WFOE and Zheng Fan dated July 2, 2012 (incorporated herein by reference to Exhibit 4.48 to theregistration statement on Form F-1, as amended (File No. 333-192085), initially filed with the Securities and Exchange Commission onNovember 4, 2013)4.49 Loan Agreement between Autohome WFOE and Xiang Li dated July 2, 2012 (incorporated herein by reference to Exhibit 4.49 to theregistration statement on Form F-1, as amended (File No. 333-192085), initially filed with the Securities and Exchange Commission onNovember 4, 2013) 114Table of ContentsExhibitNumber Description of Document4.50 Exclusive Technology Consulting and Service Agreement between Autohome WFOE and Guangzhou Advertising dated May 8, 2012(incorporated herein by reference to Exhibit 4.50 to the registration statement on Form F-1, as amended (File No. 333-192085), initially filedwith the Securities and Exchange Commission on November 4, 2013)4.51 Loan Agreement between Autohome WFOE and Zhi Qin dated May 8, 2012 (incorporated herein by reference to Exhibit 4.51 to theregistration statement on Form F-1, as amended (File No. 333-192085), initially filed with the Securities and Exchange Commission onNovember 4, 2013)4.52 Loan Agreement between Autohome WFOE and Zheng Fan dated May 8, 2012 (incorporated herein by reference to Exhibit 4.52 to theregistration statement on Form F-1, as amended (File No. 333-192085), initially filed with the Securities and Exchange Commission onNovember 4, 2013)4.53 Loan Agreement between Autohome WFOE and Xiang Li dated May 8, 2012 (incorporated herein by reference to Exhibit 4.53 to theregistration statement on Form F-1, as amended (File No. 333-192085), initially filed with the Securities and Exchange Commission onNovember 4, 2013)4.54 Equity Option Agreement among Autohome WFOE, Guangzhou Advertising and Zhi Qin dated May 8, 2012 (incorporated herein byreference to Exhibit 4.54 to the registration statement on Form F-1, as amended (File No. 333-192085), initially filed with the Securities andExchange Commission on November 4, 2013)4.55 Equity Option Agreement among Autohome WFOE, Guangzhou Advertising and Zheng Fan dated May 8, 2012 (incorporated herein byreference to Exhibit 4.55 to the registration statement on Form F-1, as amended (File No. 333-192085), initially filed with the Securities andExchange Commission on November 4, 2013)4.56 Equity Option Agreement among Autohome WFOE, Guangzhou Advertising and Xiang Li dated May 8, 2012 (incorporated herein byreference to Exhibit 4.56 to the registration statement on Form F-1, as amended (File No. 333-192085), initially filed with the Securities andExchange Commission on November 4, 2013)4.57 Equity Interest Pledge Agreement between Autohome WFOE and Zhi Qin dated May 8, 2012 (incorporated herein by reference to Exhibit4.57 to the registration statement on Form F-1, as amended (File No. 333-192085), initially filed with the Securities and ExchangeCommission on November 4, 2013)4.58 Equity Interest Pledge Agreement between Autohome WFOE and Zheng Fan dated May 8, 2012 (incorporated herein by reference to Exhibit4.58 to the registration statement on Form F-1, as amended (File No. 333-192085), initially filed with the Securities and ExchangeCommission on November 4, 2013)4.59 Equity Interest Pledge Agreement between Autohome WFOE and Xiang Li dated May 8, 2012 (incorporated herein by reference to Exhibit4.59 to the registration statement on Form F-1, as amended (File No. 333-192085), initially filed with the Securities and ExchangeCommission on November 4, 2013)4.60 Power of Attorney issued by Zhi Qin dated April 3, 2013 regarding Guangzhou Advertising (incorporated herein by reference to Exhibit 4.60to the registration statement on Form F-1, as amended (File No. 333-192085), initially filed with the Securities and Exchange Commission onNovember 4, 2013) 115Table of ContentsExhibitNumber Description of Document4.61 Power of Attorney issued by Zheng Fan dated April 3, 2013 regarding Guangzhou Advertising (incorporated herein by reference to Exhibit4.61 to the registration statement on Form F-1, as amended (File No. 333-192085), initially filed with the Securities and ExchangeCommission on November 4, 2013)4.62 Power of Attorney issued by Xiang Li dated April 3, 2013 regarding Guangzhou Advertising (incorporated herein by reference to Exhibit4.62 to the registration statement on Form F-1, as amended (File No. 333-192085), initially filed with the Securities and ExchangeCommission on November 4, 2013)8.1* List of Principal Subsidiaries11.1 Amended and Restated Code of Business Conduct and Ethics of the Registrant (incorporated herein by reference to Exhibit 11.1 to the Form20-F (File No. 001-36222), filed with the Securities and Exchange Commission on March 31, 2014)12.1* Certification by Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200212.2* Certification by Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200213.1** Certification by Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 200213.2** Certification by Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 200215.1* Consent of Ernst & Young Hua Ming LLP, independent registered public accounting firm15.2* Consent of TransAsia Lawyers101.INS* XBRL Instance Document101.SCH* XBRL Taxonomy Extension Schema Document101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document101.DEF* XBRL Taxonomy Extension Definition Linkbase Document101.LAB* XBRL Taxonomy Extension Labels Linkbase Document101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document *Filed with this annual report on Form 20-F.**Furnished with this annual report on Form 20-F. 116Table of ContentsSIGNATURESThe 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 tosign this annual report on its behalf. AUTOHOME INC.By:/s/ James Zhi QinName: James Zhi QinTitle: Director and Chief Executive OfficerDate: March 27, 2015 117Table of ContentsAUTOHOME INC.INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of independent registered public accounting firm F-2 Consolidated balance sheets as of December 31, 2013 and 2014 F-3 – 4 Consolidated statements of comprehensive income for the years ended December 31, 2012, 2013 and 2014 F-5 Consolidated statements of cash flows for the years ended December 31, 2012, 2013 and 2014 F-6 Consolidated statements of changes in shareholders’ equity for the years ended December 31, 2012, 2013 and 2014 F-7 Notes to the consolidated financial statements F-8 – 38 F-1Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMThe Board of Directors and Shareholders of Autohome Inc.We have audited the accompanying consolidated balance sheets of Autohome Inc. (the “Company”) as of December 31, 2014 and 2013, and the relatedconsolidated statements of comprehensive income, cash flows and changes in shareholders’ equity for each of the three years in the period endedDecember 31, 2014. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinionon these consolidated financial statements based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our auditsprovide a reasonable basis for our opinion.In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of AutohomeInc. at December 31, 2014 and 2013, and the consolidated results of its operations and its cash flows for each of the three years in the period endedDecember 31, 2014, in conformity with U.S. generally accepted accounting principles.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Autohome Inc.’s internal controlover financial reporting as of December 31, 2014, based on criteria established in Internal Control-Integrated Framework issued by the Committee ofSponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 27, 2015 expressed an unqualified opinion thereon./s/ Ernst & Young Hua Ming LLPBeijing, People’s Republic of ChinaMarch 27, 2015 F-2Table of ContentsAUTOHOME INC.CONSOLIDATED BALANCE SHEETSAS OF DECEMBER 31, 2013 AND 2014(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data) Note 2013 2014 RMB RMB US$ ASSETS Current assets: Cash and cash equivalents 1,138,613 1,054,416 169,941 Restricted cash 245,000 — — Term deposits — 1,717,775 276,855 Accounts receivable (net of allowance for doubtful accounts of RMB1,253 and RMB335 (US$54) as ofDecember 31, 2013 and 2014, respectively) 3 465,712 736,695 118,734 Prepaid expenses and other current assets 4 13,287 73,911 11,912 Deferred tax assets, current 5 36,653 57,969 9,343 Total current assets 1,899,265 3,640,766 586,785 Non-current assets:Property and equipment, net6 57,897 74,882 12,069 Intangible assets, net7 45,361 39,400 6,350 Goodwill8 1,504,278 1,504,278 242,446 Other non-current assets 6,149 19,189 3,093 Total non-current assets 1,613,685 1,637,749 263,958 Total assets 3,512,950 5,278,515 850,743 LIABILITIES AND SHAREHOLDERS’ EQUITYCurrent liabilities:Short-term debt (including short-term debt of consolidated variable interest entities(“VIEs”) without recourse toBeijing Cheerbright Technologies Co., Ltd. (“Autohome WFOE” or “WFOE”) of both nil as of December 31,2013 and 2014) 2,358 — — Accrued expenses and other payables (including accrued expenses and other payables of consolidated VIEswithout recourse to Autohome WFOE of RMB247,516 and RMB53,106 (US$8,559) as of December 31, 2013and 2014, respectively)9 324,094 524,534 84,540 Advance from customers (including advance from customers of consolidated VIEs without recourse to AutohomeWFOE of RMB2,340 and RMB17,650 (US$2,845) as of December 31, 2013 and 2014, respectively) 2,340 42,530 6,855 Deferred revenue (including deferred revenue of consolidated VIEs without recourse to Autohome WFOE ofRMB213,240 and RMB138,921 (US$22,390) as of December 31, 2013 and 2014, respectively) 213,240 438,797 70,723 Income tax payable (including income tax payable of consolidated VIEs without recourse to Autohome WFOE ofRMB10,291 and RMB13,930 (US$2,245) as of December 31, 2013 and 2014, respectively) 20,204 74,763 12,050 Due to related parties (including due to related parties of consolidated VIEs without recourse to Autohome WFOEof nil and RMB33 (US$5) as of December 31, 2013 and 2014, respectively)10 567 33 5 Payable for repurchase of common stock (including payable for repurchase of common stock of consolidatedVIEs without recourse to Autohome WFOE of both nil as of December 31, 2013 and 2014)13 227,015 — — Total current liabilities (including current liabilities of consolidated VIEs without recourse to Autohome WFOEof RMB473,387 and RMB223,640 (US$36,044) as of December 31, 2013 and 2014, respectively) 789,818 1,080,657 174,173 The accompanying notes are an integral part of these consolidated financial statements F-3Table of ContentsAUTOHOME INC.CONSOLIDATED BALANCE SHEETSAS OF DECEMBER 31, 2013 AND 2014(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data) Note 2013 2014 RMB RMB US$ Non-current liabilities: Other liabilities (including other liabilities of consolidated VIEs without recourse to Autohome WFOE ofRMB22,253 and RMB17,212 (US$2,774) as of December 31, 2013 and 2014, respectively) 29,041 24,058 3,877 Deferred tax liabilities (including deferred tax liabilities of consolidated VIEs without recourse to AutohomeWFOE of RMB10,816 and RMB9,677 (US$1,560) as of December 31, 2013 and 2014, respectively) 5 481,727 508,377 81,935 Total non-current liabilities (including non-current liabilities of consolidated VIEs without recourse toAutohome WFOE of RMB33,069 and RMB26,889 (US$4,334) as of December 31, 2013 and 2014,respectively) 510,768 532,435 85,812 Total liabilities (including total liabilities of consolidated VIEs without recourse to Autohome WFOE ofRMB506,456 and RMB250,529 (US$40,378) as of December 31, 2013 and 2014, respectively) 1,300,586 1,613,092 259,985 Commitments and contingencies11Shareholders’ equity:Class A ordinary shares (par value of US$0.01 per share; 99,931,211,060 shares authorized; 36,347,496 and48,777,835 shares issued and outstanding as of December 31, 2013 and 2014, respectively)13 2,472 3,301 532 Class B ordinary shares (par value US$0.01 per share; 68,788,940 shares authorized; 68,788,940 and 61,824,328shares issued and outstanding as of December 31, 2013 and 2014, respectively)13 4,677 4,183 674 Additional paid-in capital13 1,949,013 2,649,111 426,959 Accumulated other comprehensive income 1,986 5,932 956 Retained earnings13 254,216 1,002,896 161,637 Total shareholders’ equity 2,212,364 3,665,423 590,758 Total liabilities and shareholders’ equity 3,512,950 5,278,515 850,743 The accompanying notes are an integral part of these consolidated financial statements F-4Table of ContentsAUTOHOME INC.CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMEFOR THE YEARS ENDED DECEMBER 31, 2012, 2013 AND 2014(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data) Note 2012 2013 2014 RMB RMB RMB US$ Net revenues: Advertising services 592,622 894,937 1,499,516 241,678 Dealer subscription services 139,898 321,611 633,433 102,091 Total net revenues 732,520 1,216,548 2,132,949 343,769 Cost of revenues 12 (178,240) (252,236) (381,498) (61,486) Gross profit 554,280 964,312 1,751,451 282,283 Operating expenses:Sales and marketing expenses (129,796) (245,228) (559,070) (90,106) General and administrative expenses (83,153) (82,529) (129,751) (20,912) Product development expenses (42,865) (81,651) (158,395) (25,529) Operating profit 298,466 554,904 904,235 145,736 Interest income 5,093 11,082 34,682 5,590 Interest expense — (414) — — Other income, net 310 2,884 2,544 410 Income before income taxes 303,869 568,456 941,461 151,736 Income tax expense 5 (90,988) (112,294) (192,781) (31,071) Net income 212,881 456,162 748,680 120,665 Earnings per share for ordinary share:Basic 15 2.13 4.57 7.01 1.13 Diluted 15 2.12 4.37 6.64 1.07 Shares used in earnings per share computation:Ordinary shares:Basic 15 100,000,000 — — — Diluted 15 100,650,652 — — — Class A ordinary sharesBasic 15 — 31,109,214 38,633,284 38,633,284 Diluted 15 — 104,329,226 112,831,585 112,831,585 Class B ordinary sharesBasic 15 — 68,788,940 68,102,019 68,102,019 Diluted 15 — 68,788,940 68,102,019 68,102,019 Other comprehensive income, net of tax of nilForeign currency translation adjustments 583 1,403 3,946 636 Comprehensive income 213,464 457,565 752,626 121,301 The accompanying notes are an integral part of these consolidated financial statements F-5Table of ContentsAUTOHOME INC.CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED DECEMBER 31, 2012, 2013 AND 2014(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data) 2012 2013 2014 RMB RMB RMB US$ CASH FLOWS FROM OPERATING ACTIVITIES Net income 212,881 456,162 748,680 120,665 Adjustments to reconcile net income to net cash from operating activities: Depreciation of property and equipment 14,301 25,548 35,084 5,655 Amortization of intangible assets 10,203 6,250 6,053 976 Loss on disposal of property and equipment 73 90 163 26 Provision for doubtful accounts 790 251 42 7 Share-based compensation 29,142 25,608 56,666 9,133 Deferred income taxes 5,801 3,327 5,334 860 Changes in operating assets and liabilities: Accounts receivable (123,759) (139,901) (271,025) (43,681) Prepaid expenses and other current assets 13,045 (855) (60,528) (9,755) Other non-current assets — (6,149) (12,936) (2,085) Accrued expenses and other payables 63,816 97,803 201,421 32,463 Advance from customers — 2,340 40,190 6,477 Deferred revenue 52,931 118,848 225,557 36,353 Income tax payable (5,651) (8,469) 54,559 8,793 Due to related parties (4,655) 567 (534) (86) Other liabilities 10,597 12,473 (4,983) (803) Net cash generated from operating activities 279,515 593,893 1,023,743 164,998 CASH FLOWS FROM INVESTING ACTIVITIESPurchase of property and equipment (27,734) (44,212) (42,718) (6,885) Proceeds from disposal of property and equipment — 535 1,084 175 Acquisition of intangible assets — (2,266) (108) (17) Purchase of term deposits — — (2,155,360) (347,381) Maturity of term deposits — — 437,585 70,526 Net cash used in investing activities (27,734) (45,943) (1,759,517) (283,582) CASH FLOWS FROM FINANCING ACTIVITIES(Decrease)/increase in restricted cash — (245,000) 245,000 39,487 Proceeds from short-term debt — 232,398 — — Repayment of short-term debt — (230,040) (2,358) (380) Net proceeds from the initial public offering (“IPO”) and follow-on offering of ADSs — 863,200 603,980 97,344 Payments of offering cost for IPO — — (11,998) (1,934) Payments for repurchase of common stock (Note 13) — (230,335) (227,015) (36,588) Proceeds from exercise of share options — — 39,787 6,413 Payments of dividends (44,910) (220,925) — — Net cash (used in)/generated from financing activities (44,910) 169,298 647,396 104,342 Effect of exchange rate changes on cash and cash equivalents — 789 4,181 672 Net increase/(decrease) in cash and cash equivalents 206,871 718,037 (84,197) (13,570) Cash and cash equivalents at beginning of year 213,705 420,576 1,138,613 183,511 Cash and cash equivalents at end of year 420,576 1,138,613 1,054,416 169,941 Supplemental disclosures of cash flow information:Income taxes paid 79,904 107,134 137,826 22,214 Payable for repurchase of common stock (Note 13) — 227,015 — — Capitalized IPO costs included in accrued expenses and other payables — 13,079 — — Purchase of fixed assets included in accrued expenses and other payables — — 10,598 1,708 The accompanying notes are an integral part of these consolidated financial statements F-6Table of ContentsAUTOHOME INC.CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITYFOR THE YEARS ENDED DECEMBER 31, 2012, 2013 AND 2014(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data) Ordinary shares, Class Aordinary shares andClass B ordinary shares Additionalpaid-in capital Accumulated othercomprehensive income RetainedEarnings TotalShareholders’Equity Shares Amount Number RMB RMB RMB RMB RMB Balance as of January 1, 2012 100,000,000 6,867 1,099,172 — 254,240 1,360,279 Net income — — — — 212,881 212,881 Other comprehensive income: Foreign currency translation adjustments — — — 583 — 583 Payments of dividends — — — — (44,910) (44,910) Share-based compensation — — 29,142 — — 29,142 Balance as of December 31, 2012 100,000,000 6,867 1,128,314 583 422,211 1,557,975 Net income — — — — 456,162 456,162 Other comprehensive income:Foreign currency translation adjustments — — — 1,403 — 1,403 Payments of dividends — — — — (220,925) (220,925) Repurchase and retirement of treasury stock (Note 1, Note 13) (3,856,564) (265) (53,853) — (403,232) (457,350) Issuance of Class A ordinary shares upon completion of the IPO,net of offering costs (Note 13) 8,993,000 547 848,944 — — 849,491 Share-based compensation — — 25,608 — — 25,608 Balance as of December 31, 2013 105,136,436 7,149 1,949,013 1,986 254,216 2,212,364 Net income — — — — 748,680 748,680 Other comprehensive income:Foreign currency translation adjustments — — — 3,946 — 3,946 Issuance of Class A ordinary shares upon completion of follow-onoffering of ADSs in November, 2014, net of offering costs (Note13) 2,424,801 149 603,831 — — 603,980 Exercise and vesting of share-based awards 3,040,926 186 39,601 — — 39,787 Share-based compensation — — 56,666 — — 56,666 Balance as of December 31, 2014 110,602,163 7,484 2,649,111 5,932 1,002,896 3,665,423 Balance as of December 31, 2014, in US$ 1,206 426,959 956 161,637 590,758 The accompanying notes are an integral part of these consolidated financial statements F-7Table of ContentsAUTOHOME INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data) 1.ORGANIZATIONAutohome Inc., formerly known as Sequel Limited (the “Company”), was incorporated under the laws of the Cayman Islands on June 23, 2008. Uponincorporation, the Company was 100% owned by Telstra Holdings Pty Ltd. (“Telstra”). On June 27, 2008 (the “Acquisition date”), the Company acquiredCheerbright International Holdings Ltd. (“Cheerbright”), China Topside Co., Ltd. (“China Topside”), and Norstar Advertising Media Holdings Co., Ltd.(“Norstar”), and their respective wholly foreign-owned enterprises (“WFOEs”) and variable interest entities (“VIEs”). Subsequent to the acquisition, theCompany was owned 55% by Telstra, and 45% by the selling shareholders of Cheerbright, China Topside and Norstar. The Company, through its subsidiariesand VIEs (as disclosed in the table below), is principally engaged in the provision of online advertising and dealer subscription services in the People’sRepublic of China (the “PRC”). In May 2012, Telstra acquired additional ordinary shares of the Company from other shareholders.On June 14, 2011, the Company incorporated, under the laws of the Cayman Islands, a wholly-owned subsidiary, Sequel Media Inc. (“Sequel Media”). OnJune 30, 2011, the Company contributed all the shares of the entities that provided online advertising services to manufacturers and retailers in theinformation technology industry (collectively the “Distributed Entities”) to Sequel Media. On June 30, 2011, the Company distributed all the shares ofSequel Media to its shareholders. Accordingly, pursuant to ASC 205-20, Discontinued Operations, the Distributed Entities have been accounted for as adiscontinued operation whereby the results of operations of these businesses have been eliminated from the results of continuing operations.On October 8, 2011, the Shijiazhuang Industry and Commercial Bureau approved the termination of the business license of Shijiazhuang XinFengAdvertising Co., Ltd., formally dissolving the legal entity.On November 4, 2013, the Company and Telstra entered into a Share Purchase Agreement with West Crest Limited, its sole shareholder and the othershareholders of the Company. Pursuant to the agreement, the Company and Telstra purchased 3,856,564 and 2,828,147 ordinary shares of the Company heldby West Crest Limited for US$75 million and US$55 million, respectively, in cash to be paid in two instalments (“West Crest Limited Share Purchase”). Theselling shareholder has resigned from the board of directors upon signing of the agreement. On November 15, 2013, the Company decided to retire thetreasury stock purchased from West Crest.The Company successfully completed its IPO and listing of 8,993,000 American Depositary Shares (“ADSs”) on the New York Stock Exchange in December,2013, and raised net proceeds of US$142,590 from the offering. Each ADS represents one ordinary share. Upon the completion of IPO in December, 2013, theCompany’s dual-class ordinary share structure came into effect (Note 13). Upon the completion of follow-on offering in November 2014, 2,424,801 ADSswere issued by the Company and 6,964,612 Class B ordinary shares were converted into Class A ordinary shares. The net proceeds from the follow-onoffering amounted to US$97,344 net of issuance cost. As of December 31, 2014, the Company had ordinary shares outstanding, comprised of 48,777,835Class A ordinary shares and 61,824,328 Class B ordinary shares. Telstra remains the Company’s controlling shareholder holding 55.9% of the total equityinterest and voting rights, respectively in the Company as of December 31, 2014. F-8Table of ContentsAUTOHOME INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data) 1.ORGANIZATION (CONTINUED) As of December 31, 2014, the Company’s principal subsidiaries and VIEs where Autohome WFOE is the primary beneficiary include the followingentities: Entity Date ofincorporation oracquisition Place ofincorporation Percentage ofdirect ownershipby the Company PrincipalactivitiesSubsidiaries Cheerbright International Holdings, Ltd(“Cheerbright”) June 13, 2006 British VirginIslands 100% Investment holdingAutohome (Hong Kong) Ltd. (“Autohome HK”) March 16, 2012 Hong Kong 100% Provision of online advertising servicesAutohome Media Limited (“Autohome Media”,formerly known as Prbrownies MarketingLimited) October 18, 2013 Hong Kong 100% Provision of online advertising servicesBeijing Cheerbright Technologies Co., Ltd.(“Autohome WFOE”) September 1, 2006 PRC 100% Provision of technical and consulting servicesAutohome Shanghai Advertising Co., Ltd. September 29, 2013 PRC 100% Provision of online advertising servicesBeijing Prbrownies Software Co., Ltd. (formerlyknown as “Beijing Autohome Software Co.,Ltd.”) November 12, 2013 PRC 100% Provision of information technology servicesBeijing Autohome Technologies Co., Ltd. November 12, 2013 PRC 100% Provision of information technology servicesBeijing Autohome Advertising Co., Ltd. November 13, 2013 PRC 100% Provision of online advertising servicesGuangzhou Autohome Advertising Co., Ltd. November 25, 2013 PRC 100% Provision of online advertising servicesTianjin Autohome Technologies Co., Ltd. October 20, 2014 PRC 100% Provision of information technology servicesAutohome (Tianjin) Automobile Sales Co., Ltd. October 20, 2014 PRC 100% Provision of automobile and component parts salesserviceVIEs Beijing Autohome Information Technology Co.,Ltd. (“Autohome Information”) August 28, 2006 PRC — Provision of online advertising and dealersubscription servicesBeijing Shengtuo Autohome Advertising Co., Ltd. September 21, 2010 PRC — Provision of online advertising servicesBeijing Shengtuo Hongyuan InformationTechnology Co., Ltd. (“Shengtuo Hongyuan”) November 8, 2010 PRC — Provision of online advertising and dealersubscription servicesBeijing Shengtuo Chengshi Advertising Co., Ltd. November 12, 2010 PRC — Provision of online advertising servicesShanghai Youche Youjia Advertising Co., Ltd.(“Shanghai Advertising”) December 31, 2011 PRC — Provision of online advertising servicesGuangzhou Youche Youjia Advertising Co., Ltd.(“Guangzhou Advertising”) May 8, 2012 PRC — Provision of online advertising services F-9Table of ContentsAUTOHOME INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data) 1.ORGANIZATION (CONTINUED) The Company, its subsidiaries and VIEs are hereinafter collectively referred to as the “Group”. The Group provides online advertising and dealer subscriptionservices through its websites and mobile applications. These services are offered to automakers and dealers, and advertising agencies that representautomakers and dealers in the automobile industry. The Group’s principal geographic market is in the PRC. The Company does not conduct any substantiveoperations of its own but conducts its primary business operations through its wholly-owned subsidiaries and VIEs in the PRC.PRC laws and regulations prohibit or restrict foreign ownership of internet content and online advertising businesses. To comply with these foreignownership restrictions, the Company and its subsidiaries operate websites and provide online advertising services and dealer subscription services in the PRCthrough VIEs. The paid-in capital of the VIEs was funded by the Company’s PRC subsidiary, Autohome WFOE, through loans extended to the VIEs’shareholders (“Nominee Shareholders”). The effective control of the VIEs is held by Autohome WFOE, through a series of contractual arrangements (the“Contractual Arrangements”). As a result of the Contractual Arrangements, Autohome WFOE maintains the ability to control the VIEs, is entitled tosubstantially all of the economic benefits from the VIEs and is obligated to absorb all of the VIE’s expected losses.Despite the lack of technical majority ownership, there exists a parent-subsidiary relationship between the Company and the VIEs through the irrevocablepower of attorney agreement, whereby the Nominee Shareholders effectively assigned all of their voting rights underlying their equity interest in the VIEs tothe Autohome WFOE. In addition, through the Contractual Arrangements the Company demonstrates its ability and intention to continue to exercise theability to absorb substantially all of the expected losses and majority of the profits of the VIEs through Autohome WFOE.Thus, the Company is also considered the primary beneficiary of the VIEs through Autohome WFOE. As a result of the above, the Company consolidates theVIEs in accordance with SEC Regulation SX-3A-02 and Accounting Standards Codification (“ASC”) 810-10 (“ASC 810-10”) Consolidation: Overall.The following is a summary of the Contractual Arrangements:Exclusive technical consulting and service agreementsPursuant to the exclusive technical consulting and service agreements that have been entered into by the WFOE and the VIEs, the VIEs have engaged theWFOE as their exclusive provider of technical support and management consulting services. The VIEs shall pay to the WFOE service fees determined basedon the revenues of the VIEs. The service fees can be adjusted by the WFOE unilaterally. The WFOE shall exclusively own any intellectual property arisingfrom the performance of this agreement. This agreement has a 30 year term that can be automatically extended for another 10 years at the option of theWFOE. The agreement can only be terminated mutually by the parties in writing. During the term of the agreement, the VIEs may not enter into anyagreement with third parties for the provision of any technical or management consulting services without prior consent of the WFOE.Loan agreementsPursuant to the loan agreements between the Nominee Shareholders of the VIEs and the WFOE, the WFOE granted interest-free loans for the NomineeShareholders’ contributions to the VIEs. The term of the loan is indefinite until the WFOE requests repayment. The manner and timing of the repayment shallbe at the sole discretion of the WFOE and at the WFOE’s option may be in the form of transferring the VIEs’ equity interest to the WFOE or its designatedpersons.Exclusive equity option agreementsPursuant to the exclusive option agreements, entered into between the Nominee Shareholders of the VIEs and the WFOE, the Nominee Shareholders jointlyand severally granted to the WFOE an option to purchase their equity interests in the VIEs. The purchase price will be offset against the loan repaymentsunder the loan agreements. If the transfer price of the equity interest is greater than the loan amount, the Nominee Shareholders are required to immediatelyreturn the received transfer price in excess of the loan amount to the WFOE or any person designated by the WFOE. The WFOE may exercise such option atany time until it has acquired all equity interests of the VIEs or freely transfer the option to any third party and such third party may assume the right andobligations of the option agreement. The exclusive equity option agreements have an indefinite term and will terminate at the earlier of i) the date on whichall of the equity interests have been transferred to the WFOE or any person designated by the WFOE; or ii) the unilateral termination by the WFOE. F-10Table of ContentsAUTOHOME INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data) 1.ORGANIZATION (CONTINUED) Equity interest pledge agreementsPursuant to the equity interest pledge agreements entered into between the Nominee Shareholders of the VIEs and the WFOE, the Nominee Shareholderspledged all of their equity interests in the VIEs to the WFOE as collateral for all of their payments due to the WFOE and to secure their obligations under theabove agreements. The Nominee Shareholders may not transfer or assign the shares, the rights and obligations in the share pledge agreement or create orpermit to create any pledges which may have an adverse effect on the rights or benefits of the VIEs without the WFOE’s preapproval. The WFOE is entitled totransfer or assign in full or in part the shares pledged. In the event of default, the WFOE as the pledgee will be entitled to request immediate repayment of theloan or to dispose of the pledged equity interests through transfer or assignment. There have been no dividends or distributions from inception to date. Theequity interest pledge agreements have an indefinite term and will terminate after all the obligations under these agreements have been satisfied in full or thepledged equity interests have been transferred to the WFOE or its designees.Power of attorney agreementsPursuant to the power of attorney agreements signed between the Nominee Shareholders of the VIEs and the WFOE, the Nominee Shareholders have giventhe WFOE an irrevocable proxy to act on their behalf on all matters pertaining to the VIEs and to exercise all of their rights as shareholders of the VIEs,including the right to attend shareholders meetings, to exercise voting rights and to transfer all or a part of his equity interests in the VIEs.In June 2011, the Contractual Arrangements were supplemented with the following terms: • With respect to the exclusive equity option agreements, in the event of liquidation or dissolution of the VIEs, all assets shall be sold to the WFOE atthe lowest selling price permitted by applicable PRC law, and any proceeds from the transfer and any residual interests in the VIEs shall be remitted tothe WFOE immediately; • With respect to the exclusive equity option agreements, dividends and distributions are not permitted without the prior consent of the WFOE, to theextent there is a dividend or distribution, the Nominee Shareholders will remit the amounts in full to the WFOE immediately; • With respect to the exclusive technical consulting and service agreements and loan agreements, the WFOE shall provide the necessary financialsupport to the VIEs whether or not the VIEs incur any losses, and not request for repayment if the VIEs are unable to do so. F-11Table of ContentsAUTOHOME INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data) 1.ORGANIZATION (CONTINUED) Risk in relation to the VIE StructureInternet and advertising related businesses are subject to significant restrictions under current PRC laws and regulations. Specifically, foreign investors arenot allowed to own more than a 50% equity interest in any Internet Content Provider (“ICP”) business. In addition, PRC regulations require any foreignentities that invest in the advertising services industry to have at least a two-year track record with a principal business in the advertising industry outside ofChina.The Group conducts its operations in China through Contractual Arrangements entered into between the Autohome WFOE and VIEs. In 2014, the Groupbegan gradually migrating the advertising service business from the VIEs to Autohome Media and its subsidiaries, a transition that is expected to becompleted in the next two to three years. The relevant regulatory authorities may find the current contractual arrangements and businesses to be in violationof any existing or future PRC laws or regulations. If the Company or any of its current or future VIEs or subsidiaries are found in violation of any existing orfuture laws or regulations, or fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities would have broaddiscretion in dealing with such violations, including levying fines, confiscating the income of Autohome WFOE, Shanghai Advertising, GuangzhouAdvertising, Autohome Information and its subsidiaries, revoking the business licenses or operating licenses of Autohome WFOE, Shanghai Advertising,Guangzhou Advertising, Autohome Information and its subsidiaries, shutting down the Group’s servers or blocking the Group’s websites, discontinuing orplacing restrictions or onerous conditions on the Group’s operations, requiring the Group to undergo a costly and disruptive restructuring, restricting theGroup’s rights to use the proceeds from this offering to finance the Group’s business and operations in China, or enforcement actions that could be harmful tothe Group’s business. Any of these actions could cause significant disruption to the Group’s business operations and severely damage the Group’s reputation,which would in turn materially and adversely affect the Group’s business and results of operations. In addition, if the imposition of any of these penaltiescauses the Company to lose the rights to direct the actives of VIEs or the Company’s right to receive their economic benefits, the Company would no longerbe able to consolidate the VIEs.In addition, if Shanghai Advertising, Guangzhou Advertising, Autohome Information and its subsidiaries or their shareholders fail to perform theirobligations under the Contractual Arrangements, the Company may have to incur substantial costs and expend resources to enforce the Company’s rightsunder the contracts. The Company may have to rely on legal remedies under PRC law, including seeking specific performance or injunctive relief andclaiming damages, which may not be effective. All of these Contractual Arrangements are governed by PRC law and provide for the resolution of disputesthrough arbitration in the PRC. Accordingly, these contracts would be interpreted in accordance with PRC law and any disputes would be resolved inaccordance with PRC legal procedures. The legal system in PRC is not as developed as in other jurisdictions, such as United States. As a result, uncertaintiesin the PRC legal system could limit the Company’s ability to enforce these Contractual Arrangements. Under PRC law, rulings by arbitrators are final, partiescannot appeal the arbitration results in courts, and prevailing parties may only enforce the arbitration awards in PRC courts through arbitration awardrecognition proceedings, which would incur additional expenses and delay. In the event the Company is unable to enforce these Contractual Arrangements,the Company may not be able to exert effective control over its VIEs, and the Company’s ability to conduct its business may be negatively affected.Based on the advice of the Company’s PRC legal counsel, the corporate structure and Contractual Arrangements of the Company’s VIEs and WFOE in Chinaare in compliance with all existing PRC laws and regulations. Therefore, in the opinion of management, (i) the ownership structure of the Company and theVIEs are in compliance with existing PRC laws and regulations; (ii) the Contractual Arrangements with VIEs and their nominee shareholder are valid andbinding, and will not result in any violation of PRC laws or regulations currently in effect; and (iii) the Group’s business operations are in compliance withexisting PRC law and regulations in all material respects.VIEs contributed an aggregate of 99.7%, 100.0% and 69.1% of the consolidated net revenues for the years ended December 31, 2012, 2013 and 2014,respectively after elimination of inter-company transactions. As of December 31, 2013 and 2014, the VIEs accounted for an aggregate of 62.2% and 37.4%,respectively, of the consolidated total assets, and 40.5% and 15.6%, respectively, of the consolidated total liabilities after elimination of inter-companybalances.Relevant PRC laws and regulations restrict the VIE from transferring a portion of its net assets, equivalent to the balance of its statutory reserve and its sharecapital, to the company in the form of loans and advances or cash dividends. Please refer to Note 14 for disclosure of restricted net assets. F-12Table of ContentsAUTOHOME INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data) 1.ORGANIZATION (CONTINUED) The following table sets forth the assets, liabilities, results of operations and cash flows of the VIEs included in the Company’s consolidated balance sheets,consolidated statements of comprehensive income and consolidated statements of cash flows: December 31, 2013 2014 RMB RMB US$ Current assets 577,529 639,347 103,044 Non-current assets 1,606,709 1,612,276 259,852 Total assets 2,184,238 2,251,623 362,896 Current liabilities 493,710 498,209 80,297 Non-current liabilities 33,069 26,889 4,334 Total liabilities 526,779 525,098 84,631 Net assets 1,657,459 1,726,525 278,265 Year ended December 31, 2012 2013 2014 RMB RMB RMB US$ Net revenues 729,961 1,216,410 1,473,401 237,469 Net (loss)/income (7,790) 28,170 57,358 9,244 Year ended December 31, 2012 2013 2014 RMB RMB RMB RMB Net cash generated from operating activities 27,633 29,925 102,403 16,504 Net cash used in investing activities (24,865) (38,100) (33,773) (5,443) Net cash generated from financing activities — — — — The revenue-producing assets that are held by the VIEs comprise of customer relationships, trademarks, websites, domain names and servers.The current assets of the VIEs included amounts due from PRC subsidiaries of RMB883 and RMB280,857 (US$45,266), for the years ended December 31,2013 and 2014, respectively, which were eliminated upon consolidation by the Company. The current liabilities of the VIEs included amounts due to PRCsubsidiaries of RMB20,323 and RMB274,569 (US$44,253), for the years ended December 31, 2013 and 2014, respectively, which were eliminated uponconsolidation by the Company. There was no pledge or collateralization of the VIEs’ assets and the WFOE has not provided any financial support that it wasnot previously contractually required to provide to the VIEs. There were no assets of the VIEs that can only be used to settle their own obligations. Creditorsof the VIEs have no recourse to the general credit of the WFOE, which is the primary beneficiary of the VIEs. F-13Table of ContentsAUTOHOME INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data) 2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a)Basis of accountingThe accompanying consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”). (b)Principles of ConsolidationThe consolidated financial statements include the financial statements of the Company, its subsidiaries, and the VIEs for which the Company or a subsidiaryof the Company is the primary beneficiary. All significant inter-company transactions and balances between the Company, its subsidiaries, and the VIEs areeliminated upon consolidation. Results of acquired subsidiaries and VIEs are consolidated from the date on which control is transferred to the Company. (c)Use of EstimatesThe preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affectthe reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and thereported amounts of revenues and expenses during the year. Areas where management uses subjective judgment include, but are not limited to, estimating theuseful lives of long-lived assets and intangible assets, identifying separate accounting units and estimating rebates related to revenue transactions, assessingthe initial valuation of the assets acquired and liabilities assumed in a business combination and the subsequent impairment assessment of long-lived assets,intangible assets and goodwill, determining the provision for accounts receivable, determining the value-added tax (“VAT”) receivables, accounting fordeferred income taxes and accounting for the share-based compensation. Changes in facts and circumstances may result in revised estimates. Actual resultscould differ from those estimates, and as such, differences may be material to the consolidated financial statements. (d)Foreign CurrencyThe functional currency of the Company and Cheerbright, is the United States dollar (“US$”), whereas the functional currency of Autohome HK andAutohome Media is the Hong Kong dollar (“HK$”), and the functional currency of the PRC subsidiaries and VIEs is the Chinese Renminbi (“RMB”) asdetermined based on the criteria of ASC 830, Foreign Currency Matters. The Company uses the RMB as its reporting currency. Transactions denominated inforeign currencies are re-measured into the functional currency at the exchange rates prevailing on the transaction dates. Foreign currency denominatedfinancial assets and liabilities are re-measured at the balance sheet date exchange rate. Exchange gains and losses are included in other income, net in theconsolidated statements of comprehensive income.Assets and liabilities of the Company, Cheerbright, Autohome HK and Autohome Media are translated into RMB at fiscal year-end exchange rates. Incomeand expense items are translated at average exchange rates prevailing during the fiscal year. (e)Convenience TranslationAmounts in United States dollars (“US$”) are presented for the convenience of the reader and are translated at the noon buying rate of US$1.00 toRMB6.2046 on December 31, 2014 in the City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of NewYork. No representation is made that the RMB amounts could have been, or could be, converted into US$ at such rate. F-14Table of ContentsAUTOHOME INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data) 2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (f)Cash and Cash EquivalentsCash and cash equivalents consist of cash on hand, demand deposits and time deposits placed with banks or other financial institutions which areunrestricted as to withdrawal and use and have original maturities less than three months. (g)Term depositsAll bank deposits with original maturities of greater than 90 days but less than 365 days are classified as term deposits which are stated at their approximatefair value. (h)Restricted CashRestricted cash represents cash pledged to the bank as collateral for the Company’s loan facility. (i)Deferred Offering CostsDirect costs incurred by the Company attributable to its IPO of ordinary shares in December, 2013 and follow-on offering of ADSs in November, 2014 in theUnited States have been deferred and charged against the gross proceeds received from such offerings. (j)Fair Value of Financial InstrumentsFinancial instruments of the Group primarily comprise of cash and cash equivalents, term deposits, restricted cash, accounts receivable, other current assets,short-term debt, accrued expenses and other payables, payable for repurchase of common stock and due to related parties. The carrying values of thesefinancial instruments approximated their fair values due to the short-term maturity of these instruments. (k)Accounts Receivable and Allowance for Doubtful AccountsAccounts receivable are carried at net realizable value. An allowance for doubtful accounts is recorded in the period when a loss is probable based on anassessment of specific evidence indicating troubled collection, historical experience, accounts aging and other factors. An accounts receivable balance iswritten off after all collection effort has ceased. (l)Property and EquipmentProperty and equipment are stated at cost and are depreciated using the straight-line method over the estimated useful lives of the assets, as follows: Category Estimated useful lifeElectronic equipment 3 – 5 yearsOffice equipment 3 – 5 yearsMotor vehicles 4 – 5 yearsPurchased software 3 – 5 yearsLeasehold improvements Shorter of lease term or the estimated useful lives of the assetsRepair and maintenance costs are charged to expense as incurred, whereas the costs of betterments that extend the useful life of property and equipment arecapitalized as additions to the related assets. Retirements, sale and disposals of assets are recorded by removing the cost and accumulated depreciation withany resulting gain or loss reflected in the consolidated statements of comprehensive income. F-15Table of ContentsAUTOHOME INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data) 2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (m)Intangible AssetsIntangible assets are carried at cost less accumulated amortization and any recorded impairment. Intangible assets acquired in a business combination wererecognized initially at fair value at the date of acquisition. Intangible assets with finite useful lives are amortized using a straight-line method of amortizationthat reflects the estimated pattern in which the economic benefits of the intangible asset are to be consumed. The estimated useful life for the intangible assetsis as follows: Category Estimated useful lifeTrademark 15 yearsCustomer relationship 5 yearsWebsites 4 yearsDomain names 4 yearsLicensing agreements 1.75 years (n)GoodwillGoodwill represents the excess of the purchase price over the amounts assigned to the fair value of the assets acquired and the liabilities assumed of anacquired business. The Group’s goodwill at December 31, 2013 and 2014 were related to its acquisition of Cheerbright, China Topside and Norstar. Inaccordance with ASC 350, Goodwill and Other Intangible Assets, recorded goodwill amounts are not amortized, but rather are tested for impairment annuallyor more frequently if there are indicators of impairment present.Goodwill is tested for impairment at the reporting unit level on an annual basis (December 31 for the Company) and between annual tests if an event occursor circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying value. These events or circumstancesinclude a significant change in stock prices, business environment, legal factors, financial performances, competition, or events affecting the reporting unit.Application of the goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities toreporting units, assignment of goodwill to reporting units, and determination of the fair value of each reporting unit. The estimation of fair value of reportingunit using a discounted cash flow methodology also requires significant judgments, including estimation of future cash flows, which is dependent on internalforecasts, estimation of the long-term rate of growth for the Company’s business, estimation of the useful life over which cash flows will occur, anddetermination of the Company’s weighted average cost of capital. The estimates used to calculate the fair value of a reporting unit change from year to yearbased on operating results and market conditions. Changes in these estimates and assumptions could materially affect the determination of fair value andgoodwill impairment for the reporting unit.Management has determined that the Group represents the lowest level within the entity at which goodwill is monitored for internal management purposes.Management evaluated the recoverability of goodwill by performing a qualitative assessment before using a two-step impairment test approach at thereporting unit level. Based on an assessment of the qualitative factors, management determined that it is more-likely-than-not that the fair value of thereporting unit is in excess of its carrying amount. Therefore, management concluded that it was not necessary to proceed to the two-step goodwill impairmenttest. No impairment loss was recorded for any of the years presented.If the Group reorganizes its reporting structure in a manner that changes the composition of one or more of its reporting units, goodwill is reassigned based onthe relative fair value of each of the affected reporting units. (o)Impairment of Long-Lived Assets and IntangiblesThe Group evaluates its long-lived assets or asset group, including intangible assets with finite lives, for impairment whenever events or changes incircumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying amount of anasset or a group of long-lived assets may not be recoverable. When these events occur, the Group evaluates impairment by comparing the carrying amount ofthe assets to future undiscounted net cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expectedundiscounted cash flow is less than the carrying amount of the assets, the Group would recognize an impairment loss based on the excess of the carryingamount of the asset group over its fair value. No impairment charge was recorded for any of the years presented. F-16Table of ContentsAUTOHOME INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data) 2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (p)Revenue RecognitionThe Group’s revenue is primarily derived from online advertising and dealer subscription services. Revenue is recognized only when the price is fixed ordeterminable, persuasive evidence of an arrangement exists, the service is performed and collectability of the related fee is reasonably assured based on theguidance in ASC 605, Revenue Recognition.Contracts are signed to establish significant terms such as the price and online advertising services to be provided. The Group considers the price for itsservices to be fixed and determinable when the Group and its customers have signed the contracts. The Group assesses the creditworthiness of its customersprior to signing the contracts to ensure collectability is reasonably assured. Non-refundable payments received before all of the relevant criteria for revenuerecognition are satisfied are recorded as deferred revenue.Advertising servicesThe Group provides online advertising services to automakers, dealers and agency companies that represent automakers and dealers. The majority of theGroup’s online advertising service arrangements involve multiple deliverables such as banner advertisements, links and logos, other media insertions andpromotional activities that are delivered over different periods of time. Multiple contracts with the same customers are accounted for as separate arrangementsif the contracts are not linked together in a single transaction. Historically, the Company has not entered into multiple contracts with the same counterpartythat should be combined and accounted for as a single arrangement.In determining its best estimated selling price for each deliverable, the Group considered its overall pricing model and objectives, as well as market orcompetitive conditions that may impact the price at which the Group would transact if the deliverable were sold regularly on a standalone basis. The Groupmonitors the conditions that affect its determination of selling price for each deliverable and reassesses such estimates periodically. Revenue is recognizedratably when the advertisements are published over the stated display period in the case of websites or when the services have been rendered in the case ofpromotional activities. The amount recognized is limited to the amount that is not contingent upon the delivery of additional deliverables or meeting otherspecified performance conditionsDealer subscription servicesThe Group provides subscription services to automakers, dealers and agency companies that represent automakers and dealers. The Group makes availablethroughout the subscription period a webpage linked to its websites where the dealers can publish information such as the pricing of their products, locationsand addresses and other related information. Revenue is recognized ratably as services are provided over the subscription period.Rebates and cash incentives provided to customersThe Group provides rebates to agency companies based on cumulative annual advertising and service volume or surrounding occasional activities. TheGroup estimates its obligations under such agreements based on an evaluation of the likelihood of the agency companies’ achievement of the advertising andservice volume targets, giving consideration to the actual activity during the incentive period and, as appropriate, evaluation of the agency companiespurchase trends and history.The Group also provides cash incentives to automakers and dealers who participated in various incentive programs on the Group’s online transactionplatform. The cash incentives are accounted for as a reduction of revenue in accordance with ASC 605-50, “Revenue Recognition: Customer Payments andIncentives”.Therefore, rebates and cash incentives are recorded as a reduction of revenue in the period revenue is recognized in the Group’s consolidated financialstatements. The Group has estimated and recorded rebates and cash incentives to agency companies, dealers and automakers cumulatively amounting toRMB153,388, RMB231,136 and RMB395,175 (US$63,691) for the years ended December 31, 2012, 2013 and 2014, respectively. F-17Table of ContentsAUTOHOME INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data) 2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (q)Cost of RevenuesCost of revenues consist primarily of bandwidth and internet data centre fees, depreciation of the Group’s long-lived assets, amortization of acquiredintangible assets, VAT, business tax and surcharges and content-related costs. Content-related costs primarily comprise salaries and benefits for employeesdirectly involved in revenue generation activities and other overhead expenses directly attributable to the provision of the online advertising and dealersubscription services.The Group’s business is subject to VAT, business tax, surcharges and cultural construction fees levied on advertising related sales in China. Pursuant to ASC605-45, Revenue Recognition—Principal Agent Considerations, the group elected to present VAT, business tax, surcharges and cultural construction fees ascost of revenues on the consolidated statements of comprehensive income. For the years ended December 31, 2013 and 2014, the Company’s PRCsubsidiaries and its VIEs are subject to a 6% VAT for the service provided. Since November 2014, Beijing Prbrownies Software Co., Ltd. was entitled to a14% VAT refund on the total VAT payable at the rate of 17% after registration of its software resolutions with the relevant authority. (r)Advertising ExpendituresAdvertising expenditures which amounted to RMB37,858, RMB86,198 and RMB266,942 (US$43,023) for the years ended December 31, 2012, 2013 and2014, respectively, are expensed as incurred and are included in sales and marketing expenses. (s)Product Development ExpensesProduct development expenses consist primarily of employee costs related to personnel involved in the development and enhancement of the Group’sservice offerings on its websites, mobile application and related software. The Group recognizes these costs as expenses when incurred, unless they result insignificant additional functionality, in which case they are capitalized. No costs were capitalized during any of the years presented. (t)LeasesLeases are classified at the inception date as either a capital lease or an operating lease. The Group assesses a lease to be a capital lease if any of the followingconditions exist: a) ownership is transferred to the lessee by the end of the lease term, b) there is a bargain purchase option, c) the lease term is at least 75% ofthe property’s estimated remaining economic life or d) the present value of the minimum lease payments at the beginning of the lease term is 90% or more ofthe fair value of the leased property to the lessor at the inception date. A capital lease is accounted for as if there was an acquisition of an asset and anincurrence of an obligation at the inception of the lease. The Group has no capital leases for the years presented.All other leases are accounted for as operating leases wherein rental payments are expensed on a straight-line basis over the periods of their respective leaseterms. The Group leases office space and employee accommodation under operating lease agreements. Certain of the lease agreements contain rent holidays.Rent holidays are considered in determining the straight-line rental expense to be recorded over the lease term. The lease term begins on the date of initialpossession of the lease property for purposes of recognizing lease expense on straight-line basis over the term of the lease. F-18Table of ContentsAUTOHOME INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data) 2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (u)Income TaxesThe Group accounts for income taxes using the liability method. Under this method, deferred tax assets and liabilities are determined based on the differencebetween the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the period in which the differences areexpected to reverse. The Group records a valuation allowance against deferred tax assets if, based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized in income in theperiod that includes the enactment date.The Group applies ASC 740, Accounting for Income Taxes, to account for uncertainty in income taxes. ASC 740 prescribes a recognition threshold a taxposition is required to meet before being recognized in the financial statements. The Group has recorded unrecognized tax benefits in the other liabilities lineitem in the accompanying consolidated balance sheets. The Group has elected to classify interest and penalties related to unrecognized tax benefits, if andwhen required, as part of “income tax expense”, in the consolidated statements of comprehensive income.The Group’s estimated liability for unrecognized tax benefits and the related interest and penalties are periodically assessed for adequacy and may beaffected by changing interpretations of laws, rulings by tax authorities, changes and/or developments with respect to tax audits, and expiration of the statuteof limitations. The actual benefits ultimately realized may differ from the Group’s estimates. As each audit is concluded, adjustments, if any, are recorded inthe Company’s consolidated financial statements. Additionally, in future periods, changes in facts and circumstances, and new information may require theGroup to adjust the recognition and measurement estimates with regard to individual tax positions. Changes in recognition and measurement estimates arerecognized in the period in which they occur. (v)Treasury StockThe Company accounts for treasury stock repurchases at cost in accordance with ASC 505-30, Treasury Stock. When a corporation’s stock is retired, anexcess of repurchase price over par value may be allocated between additional paid-in capital and retained earnings. (w)Earnings Per ShareEarnings per share are calculated in accordance with ASC 260-10, Earnings per Share: Overall. Basic earnings per share are computed by dividing netincome attributable to holders of ordinary shares by the weighted average number of ordinary shares outstanding during the year using the two-class method.Under the two-class method, net income is allocated between the Class A and Class B ordinary shares based on their participating rights in undistributedearnings as if all the earnings for the reporting period had been distributed.Diluted earnings per ordinary share reflects the potential dilution that could occur if securities to issue ordinary shares were exercised. The dilutive effect ofoutstanding share-based awards is reflected in the diluted earnings per share by application of the treasury stock method. The computation of the dilutive netincome per share of Class A ordinary share assumes the conversion of Class B ordinary shares, while the diluted income per share of Class B ordinary sharedoes not assume the conversion of those shares.The participating rights (liquidation and dividend rights) of the holders of the Company’s Class A and Class B ordinary shares are identical, except withrespect to voting and conversion. As a result, and in accordance with ASC 260, the undistributed income for each year is allocated based on the contractualparticipating rights of the Class A and Class B ordinary shares as if the income for the year had been distributed. As the participating rights are identical, theundistributed income is allocated on a proportionate basis. F-19Table of ContentsAUTOHOME INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data) 2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (x)Comprehensive IncomeComprehensive income is defined to include all changes in shareholders’ equity except those resulting from investments by owners and distributions toowners. Among other disclosures, ASC 220-10, Comprehensive Income: Overall requires that all items that are required to be recognized under currentaccounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as otherfinancial statements. For each of the periods presented, the Company’s comprehensive income includes foreign currency translation adjustments and ispresented in the consolidated statement of comprehensive income. There have been no reclassifications out of accumulated other comprehensive income tonet income for the periods presented. (y)Segment ReportingIn accordance with ASC 280-10, Segment Reporting: Overall, the Group’s chief operating decision maker has been identified as the Chief Executive Officerwho reviews the consolidated results of operations when making decisions about allocating resources and assessing performance of the Group as a whole;hence, the Group has only one operating segment. The Group does not distinguish between markets or segments for the purpose of internal reporting. As theGroup’s long-lived assets and revenue are substantially located in and derived from the PRC, no geographical segments are presented. (z)Employee BenefitsThe full-time employees of the Company’s PRC subsidiaries and VIEs are entitled to staff welfare benefits including medical care, housing fund, pensionbenefits and unemployment insurance, which are governmental mandated defined contribution plans. These entities are required to accrue for these benefitsbased on certain percentages of the employees’ respective salaries, subject to certain ceilings, in accordance with the relevant PRC regulations, and makecash contributions to the state-sponsored plans out of the amounts accrued. The total expenses for the employee benefits plans were RMB13,666,RMB23,410 and RMB61,532 (US$9,917) for the years ended December 31, 2012, 2013 and 2014, respectively. (aa)Share-based CompensationShare-based awards granted to employees are accounted for under ASC 718, Compensation—Stock Compensation, which requires that share-based awardsgranted to employees be measured based on the grant date fair value and recognized as compensation expense over the requisite service period (which isgenerally the vesting period) in the consolidated statements of comprehensive income. The Company has elected to recognize compensation expense usingthe straight-line method for all share-based awards granted with service conditions that have a graded vesting schedule. ASC 718 requires forfeitures to beestimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from initial estimates.Forfeiture rates are estimated based on historical and future expectations of employee turnover rates and are adjusted to reflect future changes incircumstances and facts, if any. Share-based compensation expense is recorded net of estimated forfeitures such that expense is recorded only for those share-based awards that are expected to vest. To the extent the Company revises these estimates in the future, the share-based payments could be materiallyimpacted in the period of revision, as well as in following periods. The Company, with the assistance of an independent third-party valuation firm,determined the fair value of the stock options granted to employees. The binomial option pricing model was applied in determining the estimated fair valueof the options granted to employees. Subsequent to the IPO, fair value of the ordinary shares will be the price of the Company’s publicly traded shares. F-20Table of ContentsAUTOHOME INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data) 2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (bb)Recent Accounting PronouncementsIn May 2014, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2014-09 (“ASU 2014-09”), Revenue fromContracts with Customers, which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition. The core principle of the guidance isthat an entity should recognize revenue to depict the transfer of the promised goods or services to customers in an amount that reflects the consideration towhich entity expects to be entitled to in exchange for goods or services. The amendments in ASU 2014-09 are effective for annual reporting periodsbeginning after December 15, 2016, including interim period within that reporting period. Early adoption is not permitted. The Company is in the process ofevaluating the effect of the update on the Company’s consolidated financial statements.In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertaintiesabout an Entity’s Ability to Continue as a Going Concern. The guidance requires an entity to evaluate whether there are conditions or events, in theaggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements areissued and to provide related footnote disclosures in certain circumstances. The guidance is effective for the annual period ending after December 15, 2016,and for annual and interim periods thereafter. Early application is permitted. The adoption of this guidance is not expected to have a significant impact onthe Company’s consolidated financial statements. (cc)Concentration of RiskCredit riskFinancial instruments that potentially subject the Group to significant concentrations of credit risk consist primarily of cash and cash equivalents, termdeposits and accounts receivable. As of December 31, 2013 and 2014, cash and cash equivalents, restricted cash and term deposits amounting toRMB1,383,613 and RMB2,772,191 (US$446,796), respectively, were deposited with various major reputable financial institutions located in the PRC andinternational financial institutions outside of the PRC. Management believes that these financial institutions are of high credit quality and continuallymonitors the creditworthiness of these financial institutions. Historically, deposits in Chinese banks are secure due to the state policy on protectingdepositors’ interests. However, China promulgated a new Bankruptcy Law in August 2006 that came into effect on June 1, 2007, which contains a separatearticle expressly stating that the State Council may promulgate implementation measures for the bankruptcy of Chinese banks based on the Bankruptcy Law.Under the new Bankruptcy Law, a Chinese bank may go into bankruptcy. In the event of bankruptcy of one of the banks which holds the Group’s deposits, itis unlikely to claim its deposits back in full since it is unlikely to be classified as a secured creditor based on PRC laws. The Group continues to monitor thefinancial strength of these financial institutions.Accounts receivable are typically unsecured and derived from revenue earned from customers in the PRC, which are exposed to credit risk. The risk ismitigated by the Group’s assessment of its customers’ creditworthiness and its ongoing monitoring process of outstanding balances. The Group maintainsreserves for estimated credit losses and these losses have generally been within expectations. There was one and one customer that individually representedgreater than 10% of the total accounts receivable as of December 31, 2013 and 2014, respectively.Business, customer, political, social and economic risksThe Group participates in a dynamic high technology industry and believes that changes in any of the following areas could have a material adverse effect onthe Group’s future financial position, results of operations or cash flows; changes in the overall demand for services and products; changes in businessofferings; competitive pressures due to new entrants; acceptance of the Internet as an effective marketing platform by China’s automotive industry; changesin certain strategic relationships or customer relationships; growth in China’s automotive industry, regulatory considerations; and risks associated with theGroup’s ability to attract and retain employees necessary to support its growth.There were no customers that individually represented greater than 10% of the total net revenue for the years ended December 31, 2012, 2013 and 2014,respectively. F-21Table of ContentsAUTOHOME INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data) 2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (cc)Concentration of Risk (Continued) Currency convertibility riskThe Group transacts substantially all its business in RMB, which is not freely convertible into foreign currencies. On January 1, 1994, the PRC governmentabolished the dual-rate system and introduced a single rate of exchange as quoted daily by the People’s Bank of China (the “PBOC”). However, theunification of the exchange rates does not imply that the RMB may be readily convertible into US$ or other foreign currencies. All foreign exchangetransactions continue to take place either through the PBOC or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by thePBOC. Approval of foreign currency payments by the PBOC or other institutions requires submitting a payment application form together with suppliers’invoices, shipping documents and signed contracts.As of December 31, 2014, cash and cash equivalents and term deposits in PRC were held by PRC subsidiaries and the VIEs. Cash and cash equivalents andterm deposits of PRC subsidiaries and VIEs are all denominated in RMB and amounted to RMB1,600,167 (US$257,900) and RMB167,938 (US$27,067),respectively. Cash distributed outside of the PRC by PRC subsidiaries and the VIEs may be subject to PRC dividend withholding tax.Foreign Currency exchange rate riskSince July 21, 2005, the RMB was permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. There wasappreciation of RMB against US$ of approximately 1.0% and 2.9% in the years ended December 31, 2012 and 2013 and depreciation of 2.4% in the yearended December 31, 2014, respectively. While the international reaction to the appreciation of the RMB has generally been positive, there remainssignificant international pressure on the PRC Government to adopt an even more flexible currency policy, which could result in appreciation or depreciationof the RMB against the US$. (dd)Comparative FiguresCertain comparative amounts have been reclassified to conform with the current year’s presentation. F-22Table of ContentsAUTOHOME INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data) 3.ACCOUNTS RECEIVABLE, NETAccounts receivable and allowance for doubtful accounts consist of the following: December 31, 2013 2014 RMB RMB US$ Accounts receivable 466,965 737,030 118,788 Allowance for doubtful accounts (1,253) (335) (54) Total 465,712 736,695 118,734 As of December 31, 2013 and 2014, all accounts receivable were due from third party customers.An analysis of the allowance for doubtful accounts is as follows: December 31, 2013 2014 RMB RMB US$ Beginning balance 1,161 1,253 202 Additions charged to bad debt expense 251 348 56 Reversal — (306) (49) Write off (159) (960) (155) Ending balance 1,253 335 54 The Group recognized additions to allowance for doubtful accounts amounting to RMB790, RMB251 and RMB42 (US$7) within general and administrativeexpenses, for the years ended December 31, 2012, 2013 and 2014, respectively. 4.PREPAID EXPENSES AND OTHER CURRENT ASSETSPrepaid expenses and other current assets consist of the following: December 31, 2013 2014 RMB RMB US$ Rental deposits 2,105 843 136 Prepayments 7,769 42,120 6,789 Staff advances 867 2,435 392 Interest receivable 1,602 12,040 1,940 Receivables from third-party payment platform — 12,283 1,980 Other receivables 944 4,190 675 13,287 73,911 11,912 F-23Table of ContentsAUTOHOME INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data) 5.TAXATIONEnterprise income taxCayman IslandsThe Company is incorporated in the Cayman Islands and conducts substantially all of its business through its PRC subsidiaries and VIEs. Under the currentlaws of the Cayman Islands, the Company is not subject to tax on income or capital gains. In addition, upon payments of dividends by these entities to theirshareholders, no Cayman Islands withholding tax will be imposed.British Virgin IslandsCheerbright is incorporated in the British Virgin Islands and conducts substantially all of its businesses through its PRC subsidiary and VIEs. Under thecurrent laws of the British Virgin Islands, Cheerbright is not subject to tax on income or capital gains. In addition, upon payments of dividends by theseentities to their shareholders, no British Virgin Islands withholding tax will be imposed.Hong KongAutohome HK is incorporated in Hong Kong on March 16, 2012. In October 2013, Autohome HK acquired Autohome Media, a Hong Kong advertising andmarketing company. Companies registered in Hong Kong are subject to Hong Kong Profits Tax on the taxable income as reported in their respective statutoryfinancial statements adjusted in accordance with relevant Hong Kong tax laws. The applicable tax rate is 16.5% in Hong Kong. For the years endedDecember 31, 2012, 2013 and 2014, the Company did not make any provisions for Hong Kong profit tax as there were no assessable profits derived from orearned in Hong Kong during this period. Under the Hong Kong tax law, Autohome HK and Autohome Media are exempted from income tax on its foreign-derived income and there are no withholding taxes in Hong Kong on remittance of dividends.The PRCIn September 2010, Autohome WFOE was recognized as a “High-New Technology Enterprise” (“HNTE”), and is eligible for a 15% preferential tax rateeffective from 2010 to 2012 and thereafter for an additional three years through an administrative renewal process if it qualifies. Autohome WFOE met theHNTE requirements and completed the administrative renewal process in November 2013, qualifying them for a 15% preferential tax rate for three years from2013 to 2015. The aggregate effects of the preferential tax rate were RMB34,007, RMB49,551 and RMB89,394 (US$14,408) for the years endedDecember 31, 2012, 2013 and 2014, respectively. The basic earnings per share effects related to the preferential tax rate were RMB0.34, RMB0.50 andRMB0.84 (US$0.14) for the years ended December 31, 2012, 2013 and 2014, respectively.The Company’s remaining PRC subsidiaries and all the VIEs were subject to EIT at a rate of 25% for the years ended December 31, 2012, 2013 and 2014.Under the New EIT Law, dividends paid by PRC enterprises out of profits earned post-2007 to non-PRC tax resident investors are subject to PRC withholdingtax of 10%. A lower withholding tax rate may be applied based on applicable tax treaty with certain countries. F-24Table of ContentsAUTOHOME INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data) 5.TAXATION (CONTINUED) The New EIT Law also provides that enterprises established under the laws of foreign countries or regions and whose “place of effective management” islocated within the PRC are considered PRC tax resident enterprises and subject to PRC income tax at the rate of 25% on worldwide income. The definition of“place of effective management” refers to an establishment that exercises, in substance, overall management and control over the production and business,personnel, accounting, properties, and other aspects of an enterprise. As of December 31, 2014, no detailed interpretation or guidance has been issued todefine “place of effective management”. Furthermore, as of December 31, 2014, the administrative practice associated with interpreting and applying theconcept of “place of effective management” is unclear. If the Company is deemed as a PRC tax resident, it would be subject to PRC tax under the New EITLaw. The Company has analyzed the applicability of this law and will continue to monitor the related development and application.The Company had minimal operations in jurisdictions other than the PRC. Income before income tax expenses consists of: Year ended December 31, 2012 2013 2014 RMB RMB RMB US$ PRC 317,844 570,659 946,261 152,510 Non PRC (13,975) (2,203) (4,800) (774) 303,869 568,456 941,461 151,736 The income tax expense is comprised of: Year ended December 31, 2012 2013 2014 RMB RMB RMB US$ Current 84,851 136,047 187,447 30,211 Deferred 6,137 (23,753) 5,334 860 90,988 112,294 192,781 31,071 The reconciliation of income tax expense for the years ended December 31, 2012, 2013 and 2014 is as follows: Year ended December 31, 2012 2013 2014 RMB RMB RMB US$ Income before income tax expense 303,869 568,456 941,461 151,736 Income tax expense computed at applicable tax rates (25%) 75,967 142,114 235,365 37,935 Non-deductible expenses 14,571 697 8,344 1,345 Valuation allowances — 2,114 5,493 885 Outside basis difference 30,278 14,254 27,789 4,479 Effect of international tax rate difference 3,494 551 1,200 193 Interest expense relating to unrecognized tax benefits 685 2,115 3,984 642 Effect of preferential tax rate (34,007) (49,551) (89,394) (14,408) Income tax expense 90,988 112,294 192,781 31,071 F-25Table of ContentsAUTOHOME INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data) 5.TAXATION (CONTINUED) Deferred taxThe significant components of deferred taxes are as follows: December 31, 2013 2014 RMB RMB US$ Deferred tax assets Current Allowance for doubtful accounts 367 84 13 Accrued staff cost 19,538 31,463 5,071 Accrued expenses 5,251 7,802 1,258 Revenue recognition 11,174 17,941 2,892 Tax losses 2,437 2,962 477 Less: Valuation allowances (2,114) (2,283) (368) Net current deferred tax assets 36,653 57,969 9,343 Non-currentTax losses — 5,324 858 Less: Valuation allowances — (5,324) (858) Net non-current deferred tax assets — — — Total deferred tax assets 36,653 57,969 9,343 Deferred tax liabilitiesNon-currentIntangible assets 10,816 9,677 1,559 Outside basis difference 470,911 498,700 80,376 Total non-current deferred tax liabilities 481,727 508,377 81,935 Total deferred tax liabilities 481,727 508,377 81,935 In assessing the realizability of deferred tax assets, the Group has considered whether it is more-likely-than-not that some portion or all of the deferred taxassets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods inwhich those temporary differences become deductible. The Group records a valuation allowance to reduce deferred tax assets to a net amount thatmanagement believes is more-likely-than-not of being realizable based on the weight of all available evidence. The Company recorded valuation allowancesagainst the deferred tax assets of one VIE as of December 31, 2013 and five VIEs as of December 31, 2014, respectively, due to the cumulative tax losspositions and insufficient forecasted future taxable income.As of December 31, 2014, the Group had net operating losses of approximately RMB33,927 (US$5,468), which can be carried forward to offset taxableincome. The net operating loss will start to expire in 2017 if not utilized. F-26Table of ContentsAUTOHOME INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data) 5.TAXATION (CONTINUED) As of December 31, 2013 and 2014, the Company intended to indefinitely reinvest the undistributed earnings of its PRC subsidiaries. As of December 31,2013 and 2014, the total amount of undistributed earnings from the Company’s PRC subsidiaries that are considered to be permanently reinvested wasRMB570,864 and RMB1,265,273 (US$203,925), respectively. As of December 31, 2013 and 2014, determination of the amount of unrecognized deferredtax liability related to the earnings that are indefinitely reinvested is not practical.Unrecognized tax benefitsAs of December 31, 2013 and 2014, the Company recorded an unrecognized tax benefit of RMB29,459 and RMB24,058 (US$3,877), respectively, of whichRMB418 and nil, respectively, are presented on a net basis against the deferred tax assets related to tax loss carry forwards on the consolidated balancesheets. This primarily represents the estimated income tax expense the Group would pay should its income tax returns have been prepared in accordance withthe current PRC tax laws and regulations. It is possible that the amount of uncertain tax position will change in the next twelve months, however, an estimateof the range of the possible outcomes cannot be made at this time. As of December 31, 2013 and 2014, unrecognized tax benefits of RMB10,560 andRMB15,222 (US$2,453), respectively, if ultimately recognized, will impact the effective tax rate.A roll-forward of unrecognized tax benefits is as follows: December 31, 2013 2014 RMB RMB US$ Beginning balance 17,379 26,659 4,297 Additions based on tax positions related to current year 16,514 4,662 751 Decreases based on tax positions related to prior years (7,234) (14,047) (2,264) Ending balance 26,659 17,274 2,784 During the years ended December 31, 2012, 2013 and 2014, the Company recorded late payment interest expense of RMB685, RMB2,115 and RMB3,984(US$642), and penalties of nil, nil and nil, respectively, as part of income tax expense. As of December 31, 2013 and 2014, the Company recorded RMB2,800and RMB6,784 (US$1,093) for late payment interest expense, and nil and nil for penalties.The tax years ended December 31, 2009 through 2014 for the Company’s PRC subsidiaries and VIEs remain subject to examination by the PRC taxauthorities. F-27Table of ContentsAUTOHOME INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data) 6.PROPERTY AND EQUIPMENT, NETProperty and equipment consist of the following: December 31, 2013 2014 RMB RMB US$ At cost: Electronic equipment 90,248 120,872 19,481 Office equipment 563 792 128 Motor vehicles 3,176 2,729 440 Purchased software 7,858 9,440 1,521 Leasehold improvements 4,672 14,749 2,377 106,517 148,582 23,947 Less: Accumulated depreciation (48,620) (73,700) (11,878) 57,897 74,882 12,069 Depreciation expense was RMB14,301, RMB25,548 and RMB35,084 (US$5,655) for the years ended December 31, 2012, 2013 and 2014, respectively. 7.INTANGIBLE ASSETS, NETThe following tables present the Group’s intangible assets with definite lives as of the respective balance sheet dates: December 31, 2014 Gross CarryingValue AccumulatedAmortization Net CarryingValue RMB RMB RMB US$ Trademarks 68,310 (29,601) 38,709 6,239 Customer relationship 9,050 (9,050) — — Websites 27,000 (27,000) — — Domain names 1,870 (1,870) — — Licensing agreements 2,352 (1,661) 691 111 108,582 (69,182) 39,400 6,350 December 31, 2013 Gross CarryingValue AccumulatedAmortization Net CarryingValue RMB RMB RMB Trademarks 68,310 (25,047) 43,263 Customer relationship 9,050 (9,050) — Websites 27,000 (27,000) — Domain names 1,870 (1,714) 156 Licensing agreements 2,266 (324) 1,942 108,496 (63,135) 45,361 F-28Table of ContentsAUTOHOME INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data) 7.INTANGIBLE ASSETS, NET (CONTINUED) The intangible assets are amortized using the straight-line method, which is the Group’s best estimate of how these assets will be economically consumedover their respective estimated useful lives ranging from approximately 1.75 to 15 years. Amortization expense was RMB10,203, RMB6,250 and RMB6,053(US$976) for the years ended December 31, 2012, 2013 and 2014, respectively.The annual estimated amortization expenses for the acquired intangible assets for each of the next five years are as follows: 2015 2016 2017 2018 2019 RMB RMB RMB RMB RMB Trademarks 4,554 4,554 4,554 4,554 4,554 Licensing agreements 691 — — — — 5,245 4,554 4,554 4,554 4,554 8.GOODWILLAt December 31, 2013 and 2014, goodwill was RMB1,504,278 and RMB1,504,278 (US$242,446), respectively.Goodwill was assessed for impairment as of December 31, 2013 and 2014, and no impairment loss was recognized in any of the years presented. 9.ACCRUED EXPENSES AND OTHER PAYABLESThe components of accrued expenses and other payables are as follows: December 31, 2013 2014 RMB RMB US$ VAT and surcharges payable 4,496 22,535 3,632 Payroll and welfare payable 100,454 160,404 25,852 Accrued rebates and cash incentives 182,057 283,025 45,615 Deposit from customers 3,400 13,289 2,142 Accrued expenses 1,262 15,565 2,509 Payable for purchase of fixed assets — 10,598 1,708 Professional service fees 22,912 3,798 612 Others 9,513 15,320 2,470 324,094 524,534 84,540 F-29Table of ContentsAUTOHOME INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data) 10.RELATED PARTY TRANSACTIONS Name of related parties Relationship with the GroupTelstra International HK Limited A wholly-owned subsidiary of the Company’s major shareholderTelstra International Limited A wholly-owned subsidiary of the Company’s major shareholderBeijing Australian Telecommunications Technical Consulting Limited A wholly-owned subsidiary of the Company’s major shareholderDuring the year ended December 31, 2013, Telstra International HK Limited provided network services amounting to RMB128 to Autohome Information.The outstanding balance has been paid in full as of December 31, 2013.During the year ended December 31, 2013, Telstra International Limited provided network services amounting to RMB255 to Autohome Information. Theoutstanding balance has been paid in full as of December 31, 2013.During the year ended December 31, 2013, the Group acquired Autohome Media in October 2013, which is 50% owned by the spouse of one of the Group’sformer directors. There are no outstanding balances associated with this acquisition as of December 31, 2013.During the year ended December 31, 2013, the Group and Telstra International Limited entered into an agreement where a Telstra executive would provideconsulting services to the Group. Under this agreement, the amount due to Telstra for services provided during the year ended December 31, 2013 amountedto RMB418.During the year ended December 31, 2013, the Group and Beijing Australian Telecommunications Technical Consulting Limited entered into an agreementwhere a Telstra executive would provide consulting services to the Group. Under this agreement, the amount due to Beijing Australian TelecommunicationsTechnical Consulting Limited for services provided during the year ended December 31, 2013 amounted to RMB149.During the year ended December 31, 2014, Telstra International Limited provided network maintenance services amounting to RMB384 (US$62) toAutohome Information.During the year ended December 31, 2014, an executive of Telstra International Limited provided consulting services amounting to RMB266 (US$43) to theGroup. The outstanding balance has been paid in full as of December 31, 2014.During the year ended December 31, 2014, an executive of Beijing Australian Telecommunications Technical Consulting Limited provided consultingservices amounting to RMB218 (US$35) to the Group. The outstanding balance has been paid in full as of December 31, 2014.The Group had the following related party payables outstanding as of December 31, 2013 and 2014: December 31, 2013 2014 RMB RMB US$ Telstra International Limited 418 33 5 Beijing Australian Telecommunications Technical Consulting Limited 149 — — 567 33 5 F-30Table of ContentsAUTOHOME INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data) 11.COMMITMENTS AND CONTINGENCIESOperating lease commitmentsThe Group leases office space and employee accommodation in the PRC under non-cancellable operating leases expiring on various dates. Payments underoperating leases are expensed on a straight-line basis, after considering rent holidays, over the periods of the respective lease terms. The terms of the leases donot contain rent escalation or contingent rents for the years ended December 31, 2012, 2013 and 2014, total rental expenses for all operating leases amountedto RMB12,038, RMB17,898 and RMB30,461 (US$4,909) respectively.As of December 31, 2014, the Group has future minimum lease payments under non-cancellable operating leases, with initial terms in excess of one year, foroffice premises consisting of the following: RMB US$ 2015 39,493 6,365 2016 34,785 5,606 2017 1,437 232 2018 1,317 212 2019 — — 77,032 12,415 TaxationAs of December 31, 2013 and 2014, the Group has recognized liabilities of RMB29, 041 and RMB24, 058 (US$3,877), respectively, related to unrecognizedtax benefits (Note 5). The final outcome of the tax uncertainty is dependent upon various matters including tax examinations, interpretation of tax laws orexpiration of statutes of limitation. However, due to the uncertainties associated with the status of examinations, including the protocols of finalizing auditsby the relevant tax authorities, there is a high degree of uncertainty regarding the future cash outflows associated with these tax uncertainties. The Groupclassified the accrual for unrecognized tax benefits as a non-current liability.With respect to display advertising services, consistent with industry practice in the PRC, the Company regularly provides such services at a discount to itsstandard rates. These discounts are in the form of free advertising elements, of which the duration and other terms of services are specified as part of therevenue contract. The VAT pilot program replaced the business tax rules for advertising services in Beijing effective from September 1, 2012. There areuncertainties under the current VAT rules as to whether these free elements should constitute deemed services in addition to the chargeable elements ratherthan discounts to the overall revenue arrangements for tax purposes and thus be subject to VAT at the standard rates of services. The Company currentlyconsiders that such free elements do not give rise to deemed services for VAT purposes and the value-added tax for a revenue contract is calculated based onthe contract price for the overall arrangements. The rules related to the VAT pilot program are still evolving and the timing of the promulgation of the finaltax rules or related interpretation is uncertain. The estimated amount of this contingency as of December 31, 2014 is not determinable. 12.COST OF REVENUES Year ended December 31, 2012 2013 2014 RMB RMB RMB US$ Content-related costs 62,871 95,987 127,929 20,618 Depreciation and amortization 21,978 26,439 31,703 5,110 Bandwidth and internet data centre 15,045 21,047 30,713 4,950 VAT, business taxes and surcharges 78,346 108,763 191,153 30,808 178,240 252,236 381,498 61,486 F-31Table of ContentsAUTOHOME INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data) 13.ORDINARY SHARESOn November 4, 2013, the Company entered into the West Crest Limited Share Purchase agreement and repurchased 3,856,564 treasury stock. OnNovember 15, 2013, the Company decided to retire the treasury stocks repurchased. As of December 31, 2013, there was an outstanding payable of RMB227,015 due to West Crest Limited, which was fully repaid in 2014.Upon the effectiveness of the IPO registration statement, the Company’s ordinary shares were redeemed and cancelled in consideration for the issuance of anequivalent number of Class A ordinary shares and Class B ordinary shares to the holders of former ordinary shares, respectively. Holders of Class A ordinaryshares and Class B ordinary shares have the same rights except for conversion and voting rights. Each Class B ordinary share is convertible into one Class Aordinary share at any time, while Class A ordinary shares cannot be converted into Class B ordinary shares under any circumstances. Each Class A ordinaryshare is entitled to one vote. When the total number of ordinary shares held by Telstra constitutes no less than 51% of all of the Company’s issued andoutstanding ordinary shares, each Class B ordinary share is entitled to one vote; when the total number of ordinary shares held by Telstra drops below 51%but is no less than 39.3% of all of the Company’s issued and outstanding ordinary shares, each Class B ordinary share will carry such number of votes thatwould result in the total number of ordinary shares held by Telstra carrying, in the aggregate, 51% of the voting rights represented by all of the Company’sissued and outstanding ordinary shares; when the total number of ordinary shares held by Telstra drops below 39.3% of all of the Company’s issued andoutstanding ordinary shares, all Class B ordinary shares will be automatically converted into the same number of Class A ordinary shares.Immediately prior to the completion of the IPO in December 2013, the Company had 27,354,496 Class A ordinary shares and 68,788,940 Class B ordinaryshares outstanding. During the IPO, the Company issued 8,993,000 Class A ordinary shares. As of December 31, 2013, the Company had ordinary sharesoutstanding comprised of 36,347,496 Class A ordinary shares and 68,788,940 Class B ordinary shares.Upon the completion of follow-on offering in November, 2014, 2,424,801 ADSs were issued by the Company and the net proceeds from the follow-onoffering amounts to US$97,344 net of issuance costs. There were nil, nil and 6,964,612 class B ordinary shares converted into Class A ordinary shares for theyears ended December 31, 2012, 2013 and 2014. As of December 31, 2014, the Company had ordinary shares outstanding, comprised of 48,777,835 Class Aordinary shares and 61,824,328 Class B ordinary shares. 14.RESTRICTED NET ASSETSThe Company’s ability to pay dividends is primarily dependent on the Company receiving distributions of funds from its subsidiaries. Relevant PRCstatutory laws and regulations permit payments of dividends by the Company’s PRC subsidiaries only out of its retained earnings, if any, as determined inaccordance with PRC accounting standards and regulations. The results of operations reflected in the consolidated financial statements prepared inaccordance with U.S.GAAP differ from those reflected in the statutory financial statements of the Company’s PRC subsidiaries.Under PRC law, the Company’s PRC subsidiaries are required to provide for certain statutory reserves, namely a general reserve, an enterprise expansion fundand a staff welfare and bonus fund. The subsidiary is required to allocate at least 10% of their after tax profits on an individual company basis as determinedunder PRC accounting standards to the general reserve and has the right to discontinue allocations to the general reserve if such reserve has reached 50% ofregistered capital on an individual company basis. In addition, the registered capital of the Company’s PRC subsidiaries and VIEs is also restricted.Appropriations to the enterprise expansion fund and staff welfare and bonus fund are at the discretion of the Board of Directors of the subsidiary. TheCompany’s VIEs in the PRC are also subject to similar statutory reserve requirements. These reserves can only be used for specific purposes and are nottransferable to the Group in the form of loans, advances or cash dividends. As of December 31, 2012, 2013 and 2014, the Company’s PRC subsidiaries andVIEs had appropriated RMB4,850, RMB7,113 and RMB8,836 (US$1,424), respectively, of retained earnings for its statutory reserves.As a result of these PRC laws and regulations subject to the limit discussed above that require annual appropriations of 10% of after-tax income to be setaside, prior to payment of dividends as general reserve fund, the Company’s PRC subsidiaries and VIEs are restricted in their ability to transfer a portion oftheir net assets to the Company. Foreign exchange and other regulations in the PRC may further restrict the Company’s PRC subsidiaries and VIEs fromtransferring funds to the Company in the form of dividends, loans and advances. As of December 31, 2013 and 2014, amounts restricted are the net assets ofthe Company’s PRC subsidiaries and VIEs, which amounted to RMB1,818,103 and RMB2,626,141 (US$423,257), respectively. F-32Table of ContentsAUTOHOME INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data) 15.EARNINGS PER SHAREBasic and diluted earnings per share for each of the years presented are calculated as follows: Year ended December 31, 2012 2013 2014 Ordinary shares Class A Class B Class A Class A Class B Class B RMB RMB RMB RMB US$ RMB US$ Basic earnings per share: Numerator: Net income 212,881 142,053 314,109 270,988 43,675 477,692 76,990 Denominator: Weighted average ordinary shares outstanding 100,000,000 31,109,214 68,788,940 38,633,284 38,633,284 68,102,019 68,102,019 Basic earnings per share 2.13 4.57 4.57 7.01 1.13 7.01 1.13 Diluted earnings per share:Numerator:Net income 212,881 155,394 300,768 296,797 47,835 451,883 72,830 Reallocation of net income as a result ofconversion of Class B into Class A ordinaryshares (Note 13) — 300,768 — 451,883 72,830 — — Net income 212,881 456,162 300,768 748,680 120,665 451,883 72,830 Denominator:Weighted average ordinary shares outstanding 100,000,000 31,109,214 68,788,940 38,633,284 38,633,284 68,102,019 68,102,019 Conversion of Class B into Class A ordinaryshares (Note 13) — 68,788,940 — 68,102,019 68,102,019 — — Dilutive effect of share-based awards 650,652 4,431,072 — 6,096,282 6,096,282 — — Weighted-average number of sharesoutstanding- diluted 100,650,652 104,329,226 68,788,940 112,831,585 112,831,585 68,102,019 68,102,019 Diluted earnings per share 2.12 4.37 4.37 6.64 1.07 6.64 1.07 The effects of 2,048,849, 43,846 and nil stock options were excluded from the calculation of diluted earnings per share as their effect would have been anti-dilutive during the years ended December 31, 2012, 2013 and 2014, respectively. The effects of 62,637 and 300,185 restricted shares were excluded from thecalculation of diluted earnings per share as their effect would have been anti-dilutive during the year ended December 31, 2013 and 2014. 16.SHARE-BASED COMPENSATIONIn order to provide additional incentives to employees and to promote the success of the Company’s business, the Company adopted a share incentive planin 2011 (the “2011 Plan”) and a share incentive plan in 2013 (the “2013 Plan”), (collectively “the Plans). The Company may grant share-based awards to itsemployees, directors and consultants to purchase an aggregate of no more than 7,843,100 and 3,350,000 ordinary shares of the Company under the 2011 Planand 2013 Plan, respectively. The Plans were approved by the Board of Directors and shareholders of the Company on May 4, 2011 and November 4, 2013,respectively. The Plans are administered by the Board of Directors or any of its committees as set forth in the Plans. F-33Table of ContentsAUTOHOME INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data) 16.SHARE-BASED COMPENSATION (CONTINUED) The following table summarizes the options granted to employees and directors during the years ended December 31, 2012, 2013 and 2014. Grant Date Contractual Terms Number of Awards Exercise Price (US$) Vesting ScheduleJuly 1, 2012 10 years 120,000 2.20 (a)May 27, 2013 10 years 560,000 2.20 (b)October 22, 2013 10 years 78,000 2.20 (b)October 22, 2013 10 years 150,000 2.20 (c)January 16, 2014 10 years 57,600 2.20 (d)January 16, 2014 10 years 120,000 2.20 (e)As of December 31, 2014, share-based awards to purchase 5,663,237 Class A ordinary shares were outstanding and share-based awards to purchase 2,488,937Class A ordinary shares were available for future grant under the 2011 Plan and 2013 Plan, respectively. (a)25% of the awards have vested on each of July 1, 2013 and 2014 and the remainder of the awards will vest on an annual basis each July 1, thereafter,until July 1, 2016.(b)25% of the awards have vested on January 1, 2014 and the remainder of the awards will vest on an annual basis each January 1, thereafter, untilJanuary 1, 2017.(c)25% of the awards have vested on July 1, 2014 and the remainder of the awards will vest on an annual basis each July 1, thereafter, until July 1, 2017.(d)25% of the awards have vested on January 16, 2014 and the remainder of the awards will vest on an annual basis each January 16, thereafter, untilJanuary 16, 2017.(e)25% of the awards will vest on January 1, 2015 and the remainder of the awards will vest on an annual basis each January 1, thereafter, until January 1,2018.Share optionsThe following table summarizes the Company’s employee share option activity under the share option plans: Number ofoptions Weightedaverageexerciseprice Weightedaverage grantdate fair value Weightedaverageremainingcontractualterm Aggregateintrinsic value US$ US$ Years US$ Outstanding, January 1, 2014 7,665,500 2.20 2.65 7.74 263,617 Granted 177,600 2.20 34.57 Exercised (2,939,863) 2.20 Forfeited (35,000) 2.20 Outstanding, December 31, 2014 4,868,237 2.20 3.77 6.89 166,299 Vested and expected to vest at December 31, 2014 4,818,877 2.20 3.73 6.87 164,613 Exercisable as of December 31, 2014 2,149,037 2.20 2.52 6.53 73,411 F-34Table of ContentsAUTOHOME INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data) 16.SHARE-BASED COMPENSATION (CONTINUED) The aggregate intrinsic value in the table above is calculated as the difference between the exercise price of the underlying awards and $36.36, the closingstock price of the Company’s ordinary shares on December 31, 2014. The total intrinsic value of options exercised during the year ended December 31, 2014was RMB693,878 (US$111,833).The aggregate fair value of the outstanding options at the grant dates were determined to be RMB114,013 (US$18,376) and such amount shall be recognizedas compensation expenses using the straight-line method for all employee share options granted with graded vesting. As of December 31, 2014, there wasRMB48,033 (US$7,742) of total unrecognized share-based compensation expenses, net of estimated forfeitures, related to unvested share-based awards whichare expected to be recognized over a weighted-average period of 2.32 years. Total unrecognized compensation expenses may be adjusted for future changesin estimated forfeitures.Restricted sharesThe following table summarizes the restricted shares granted till December 31, 2014. Grant Date Vesting Schedule Number of Awards Fair Value per Share at the Grant date(US$) November 4, 2013 (a) 400,000 12.38 May 8, 2014 (b) 100,000 29.00 October 9, 2014 (c) 406,000 39.35 December 9, 2014 (d) 1,063 36.71 (a)25% of the awards have vested on September 29, 2014 and the remainder of the awards will vest on an annual basis each September 29, thereafter, untilSeptember 29, 2017.(b)The restricted shares granted on May 8, 2014 will vest over a period of approximately four years, with 25% of the awards vesting on various datesranging from March 14, 2015 to May 13, 2015, and the remainder of the awards vesting on an annual basis thereafter, until 2018.(c)The restricted shares granted on October 9, 2014 will vest over a period of approximately four years, with 25% of the awards vesting on various datesranging from January 1, 2015 to October 1, 2015, and the remainder of the awards vesting on an annual basis thereafter, until 2018.(d)The restricted shares granted on December 9, 2014 fully vested on the grant date.Restricted shares activity for the year ended December 31, 2014 was as follows: Numbersof shares Weightedaverage grantdate fair value US$ Outstanding, January 1, 2014 400,000 12.38 Granted 507,063 37.30 Vested (101,063) 12.64 Forfeited (11,000) Outstanding, December 31, 2014 795,000 27.87 Expected to vest, December 31, 2014 795,000 27.87 The weighted average fair value of restricted shares on the grant date was US$37.30, which was derived from the fair value of the underlying ordinary shares.The aggregate fair value of the restricted shares at the grant dates were determined to be RMB137,477 (US$22,157) and such amount shall be recognized ascompensation expense using the straight-line method for all restricted shares granted with graded vesting. As of December 31, 2014, there was RMB122,026(US$19,667) of total unrecognized share-based compensation expenses, net of estimated forfeitures, related to unvested restricted shares which are expectedto be recognized over a weighted-average period of 3.15 years. Total unrecognized compensation expenses may be adjusted for future changes in estimatedforfeitures. F-35Table of ContentsAUTOHOME INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data) 16.SHARE-BASED COMPENSATION (CONTINUED) The binomial option pricing model was applied in determining the estimated fair value of the options granted to employees. The model requires the input ofhighly subjective assumptions including the estimated expected stock price volatility and the exercise multiple for which employees are likely to exerciseshare options. For expected volatilities, the Company has made reference to the historical price volatilities of ordinary shares of several comparablecompanies in the same industry as the Company. For the exercise multiple, the Company has no historical exercise patterns as reference, thus the exercisemultiple is based on management’s estimation, which the Company believes is representative of the future exercise pattern of the options. The risk-free ratefor periods within the contractual life of the option is based on the U.S. Treasury Bills yield curve in effect at the time of grant. The estimated fair value of theordinary shares, at the option grant dates prior to the IPO, was determined with assistance from an independent third party valuation firm. The Company’smanagement is ultimately responsible for the determination of the estimated fair value of its ordinary shares. Subsequent to the IPO, fair value of the ordinaryshares was the price of the Company’s publicly traded shares.The Company calculated the estimated fair value of the share-based awards on the respective grant dates using the binomial option pricing model with thefollowing assumptions: 2012 2013 2014Fair value of ordinary share US$3.70 US$4.58-US$11.64 US$36.62Risk-free interest rates 1.73% 2.07%-2.60% 2.909%Expected exercise multiple 2.2 2.2 2.2Expected volatility 60.40% 53.70%-55.49% 53.5%Expected dividend yield 0.00% 0.00% 0.00%Weighted average fair value per option granted US$2.36 US$3.03-US$9.69 US$34.52-US$34.59Share-based compensation expenses relating to options granted to employees recognized for the year ended December 31, 2014 is as follows: Year ended December 31, 2012 2013 2014 RMB RMB RMB US$ Cost of revenues 6,553 6,534 8,048 1,298 Sales and marketing expenses 4,177 4,375 14,644 2,360 General and administrative expenses 15,734 11,738 20,557 3,313 Product development expenses 2,678 2,961 13,417 2,162 29,142 25,608 56,666 9,133 F-36Table of ContentsAUTOHOME INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data) 17.CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANYCONDENSED BALANCE SHEETS December 31, 2013 2014 RMB RMB US$ ASSETS Current assets: Cash and cash equivalents 630,670 234,034 37,719 Term deposits — 685,633 110,504 Prepaid expenses and other current assets 187 7,591 1,223 Due from subsidiaries 11,771 — — Total current assets 642,628 927,258 149,446 Non-current assets:Other non-current assets — 8,421 1,357 Investment in subsidiaries 1,818,025 2,737,009 441,126 Total non-current assets 1,818,025 2,745,430 442,483 Total assets 2,460,653 3,672,688 591,929 LIABILITIES AND SHAREHOLDERS’ EQUITYCurrent liabilities:Accrued expenses and other payables 20,707 4,772 769 Payable for repurchase of common stock 227,015 — — Due to subsidiaries 2,493 402 Due to related parties 567 — — Total current liabilities 248,289 7,265 1,171 Total liabilities 248,289 7,265 1,171 Commitments and ContingenciesShareholders’ equity:Class A ordinary shares(par value of US$0.01 per share; 99,931,211,060 shares authorized; 36,347,496 and 48,777,835shares issued and outstanding as of December 31, 2013 and 2014, respectively) 2,472 3,301 532 Class B ordinary shares(par value US$0.01 per share; 68,788,940 shares authorized; 68,788,940 and 61,824,328 sharesissued and outstanding as of December 31, 2013 and 2014, respectively) 4,677 4,183 674 Additional paid-in capital 1,949,013 2,649,111 426,959 Accumulated other comprehensive income 1,986 5,932 956 Retained earnings 254,216 1,002,896 161,637 Total shareholders’ equity 2,212,364 3,665,423 590,758 Total liabilities and shareholders’ equity 2,460,653 3,672,688 591,929 F-37Table of ContentsAUTOHOME INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Amounts in thousands of Renminbi (“RMB”) and US dollars (“US$”) except for number of shares and per share data) 17.CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY (CONTINUED) CONDENSED STATEMENTS OF COMPREHENSIVE INCOME Year ended December 31, 2012 2013 2014 RMB RMB RMB US$ Operating expenses: General and administrative expenses (14,638) (1,125) (9,178) (1,479) Operating losses (14,638) (1,125) (9,178) (1,479) Interest income — — 4,973 802 Equity in income of subsidiaries 227,519 457,287 752,885 121,342 Income before income taxes 212,881 456,162 748,680 120,665 Income tax expense — — — — Net income 212,881 456,162 748,680 120,665 Other comprehensive income, net of tax of nilForeign currency translation adjustments 252 1,734 3,946 636 Comprehensive income 213,133 457,896 752,626 121,301 CONDENSED STATEMENTS OF CASH FLOWS Year ended December 31, 2012 2013 2014 RMB RMB RMB US$ Net cash used in operating activities — (3,294) (8,908) (1,436) Net cash used in investing activities — — (796,209) (128,326) Net cash generated from financing activities — 632,865 404,754 65,235 Effect of exchange rate changes on cash and cash equivalents — 1,099 3,727 600 Net increase(decrease) in cash and cash equivalents — 630,670 (396,636) (63,927) Cash and cash equivalents at beginning of year — — 630,670 101,646 Cash and cash equivalents at end of year — 630,670 234,034 37,719 (a)Basis of accountingFor the Company only condensed financial information, the Company records its investment in its subsidiaries and VIEs under the equity method ofaccounting as prescribed in ASC 323-10, Investments-Equity Method and Joint Ventures: Overall. Such investment is presented on the condensed balancesheets as “Investment in subsidiaries” and share of their income as “Equity in income of subsidiaries” on the condensed statements of comprehensive income.The parent company’s condensed financial statements should be read in conjunction with the Company’s consolidated financial statements. (b)CommitmentsThe Company does not have any significant commitments or long-term obligations as of any of the years presented. F-38Exhibit 8.1Principal Subsidiaries of Autohome Inc.Subsidiaries:Cheerbright International Holdings Limited, a British Virgin Islands companyAutohome (Hong Kong) Limited, a Hong Kong companyBeijing Cheerbright Technologies Co., Ltd., a PRC companyAutohome Media Limited, a Hong Kong companyAutohome Shanghai Advertising Co. Ltd., a PRC companyBeijing Prbrownies Software Co., Ltd., a PRC companyBeijing Autohome Advertising Co., Ltd., a PRC companyBeijing Autohome Technologies Co., Ltd., a PRC companyTianjin Autohome Technologies Co., Ltd., a PRC companyGuangzhou Autohome Advertising Co., Ltd., a PRC companyAutohome (Tianjin) Automobile Sales Co., Ltd., a PRC companyVariable Interest Entities:Beijing Autohome Information Technology Co., Ltd., a PRC companyBeijing Shengtuo Hongyuan Information Technology Co., Ltd., a PRC companyBeijing Shengtuo Chengshi Advertising Co., Ltd., a PRC companyBeijing Shengtuo Autohome Advertising Co., Ltd., a PRC companyShanghai You Che You Jia Advertising Co., Ltd., a PRC companyGuangzhou You Che You Jia Advertising Co., Ltd., a PRC companyExhibit 12.1Certification by the Principal Executive OfficerPursuant to Section 302 of the Sarbanes-Oxley Act of 2002I, James Zhi Qin, certify that: 1.I have reviewed this annual report on Form 20-F of Autohome Inc. (“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 thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial 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(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have: (a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within thoseentities, 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 oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal 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 theeffectiveness 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 thisannual 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(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theCompany’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent function): (a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely 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 controlover financial reporting.Date: March 27, 2015 By:/s/ James Zhi QinName:James Zhi QinTitle:Director and Chief Executive OfficerExhibit 12.2Certification by the Principal Financial OfficerPursuant to Section 302 of the Sarbanes-Oxley Act of 2002I, Nicholas Yik Kay Chong, certify that: 1.I have reviewed this annual report on Form 20-F of Autohome Inc. (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 thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial 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(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have: (a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within thoseentities, 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 oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal 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 theeffectiveness 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 thisannual 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(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theCompany’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent function): (a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely 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 controlover financial reporting.Date: March 27, 2015 By:/s/ Nicholas Yik Kay ChongName:Nicholas Yik Kay ChongTitle:Chief Financial OfficerExhibit 13.1Certification by the Principal Executive OfficerPursuant to Section 906 of the Sarbanes-Oxley Act of 2002In connection with the annual report of Autohome Inc. (the “Company”) on Form 20-F for the year ended December 31, 2014 as filed with theSecurities and Exchange Commission on the date hereof (the “Report”), I, James Zhi Qin, Chief Executive Officer of the Company, hereby certify, pursuant to18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: (1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany.Date: March 27, 2015 By:/s/ James Zhi QinName:James Zhi QinTitle:Director and Chief Executive OfficerExhibit 13.2Certification by the Principal Financial OfficerPursuant to Section 906 of the Sarbanes-Oxley Act of 2002In connection with the annual report of Autohome Inc. (the “Company”) on Form 20-F for the year ended December 31, 2014 as filed with theSecurities and Exchange Commission on the date hereof (the “Report”), I, Nicholas Yik Kay Chong, chief financial officer of the Company, certify, pursuantto 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: (1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany.Date: March 27, 2015 By:/s/ Nicholas Yik Kay ChongName:Nicholas Yik Kay ChongTitle:Chief Financial OfficerExhibit 15.1Consent of Independent Registered Public Accounting FirmWe consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-196006) pertaining to the 2011 Option Plan and 2013 OptionPlan of Autohome Inc. of our reports dated March 27, 2015, with respect to the consolidated financial statements of Autohome Inc. and the effectiveness ofinternal control over financial reporting of Autohome Inc. included in its Annual Report (Form 20-F) for the year ended December 31, 2014,/s/ Ernst & Young Hua Ming LLPBeijing, People’s Republic of ChinaMarch 27, 2015Exhibit 15.2 TransAsia LawyersAdvisors on PRC & International LawSuite 2218, China World Office 1, 1 Jianguomenwai Avenue, Beijing 100004, ChinaTel: (86 10) 6505 8188 Fax: (86 10) 6505 8189/98Website: www.TransAsiaLawyers.comMarch 27, 2015Autohome Inc.10th Floor Tower B, CEC Plaza3 Dan Ling StreetHaidian District, BeijingThe People’s Republic of ChinaLadies and Gentlemen,We consent to the reference to our firm under the captions of “Item 3. Key Information—D. Risk Factors” in Autohome Inc.’s annual report on Form 20-F forthe year ended December 31, 2014, which will be filed with the Securities and Exchange Commission in the month of March 2015, and further consent to theincorporation by reference of the summaries of our opinions under these captions into Autohome Inc.’s registration statement on Form S-8 (File No. 333-196006) that was filed on May 16, 2014 Yours faithfully,/s/ TransAsia LawyersTransAsia Lawyers

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