缘何圈粉广告主？据悉，欢聚旗下多元产品矩阵覆盖全球超2.6亿的用户群体，拥有优质自有流量。在 此基础上，BIGO Ads更聚合了全球头部开发者的第三方流量池，覆盖了许多垂类广告的核心目标人 群。此外，欢聚广告业务也深度融合行业前沿的生成式AI技术。 欢聚集团董事会主席兼首席执行官李婷表示，2025年是欢聚集团成立以来的第二十个年份，也将是见证 公司多元增长战略初步落地的一年。目前，欢聚的多元增长战略成效显现，一方面，核心直播业务持续 盈利；另一方面，非直播业务上，BIGO Ads广告平台凭借AI驱动的用户洞察、智能创意和精准投放能 力，增长迅猛。期待这些创新进一步巩固欢聚的竞争优势，助力非直播业务成为新的增长引擎。 值得注意的是，一季度欢聚BIGO 毛利率和经营利润率均明显增长，非直播收入增长驱动所有其他业务 毛利率提升至42.1%。展望今年二季度，随着BIGO板块收入环比恢复增长，预计BIGO non-GAAP经营 利润额恢复环比增长。全年来看，预期今年BIGO板块整体non-GAAP经营利润额将保持稳定，并有望实 现增长，公司整体non-GAAP 的经营利润额会呈改善趋势。 直播创收3.713亿美元 第二 ...

"20岁时我还在海外求学，没有报效祖国的机会。如今我已站在故土上，尽自己绵薄之力为国家伟大复 兴作贡献。""90后"青年企业家代表——新沪商联合会青年主席、上润通商集团执行董事王亦季表示， 五四精神启示自己以爱国为底色，以创新为动力，以开放包容的心态，推动商业文明的发展，在创造财 富的同时，为建设祖国尽一份力。 "心怀祖国，才有更强烈的创业斗志。追求进步，才能激励企业在发展过程中不断自我迭代。"新沪商青 峰会副会长、上海羚佳创意设计集团公司CEO仇章奇表示。 上海市工商联党组成员、副主席汪剑明表示，青年应从三方面积极作为：一是要坚定信心。回望历史， 广大青年曾在民族危亡的时刻，发出救亡图存的呐喊。新一代青年应从历史中汲取力量，在危机中育新 机，于变局中开新局，为中华民族开启新的辉煌篇章而努力奋斗。二是要勇于担当。各自领域，青年都 应主动承担责任，青年企业家需推动产业升级和科技创新，助力经济发展。三是要凝聚力量，充分发挥 文化认同的优势，通过组织凝聚力，引导青年企业家明确目标，对接资源，搭建平台，实现共同发展。 青年企业家欢聚"东方蓝宝石"共话青春担当 ◎记者 严曦梦 5月8日，上海证券报社联合新沪商联合会在上 ...

Company Strategy - The company plans to fully upgrade its children's meals by 2025 and introduce two new family-focused experiential products: parent-child cooking classes and baby birthday parties [1] - The company's latest strategic positioning is "family gathering restaurant" as stated by the chairman in the New Year's message [1] Operational Performance - In 2024, the company served over 200 million family customers and sold 40 million professional children's meals [1]

to the JOI Inc's first quarter 2024 earnings call. At this time, all participants are in listen-only mode. After the management's prepared remarks, there will be a question and answer session. I'd now like to hand the conference over to your host today, Jane Zee, the company's Senior Manager of Investor Relations. Please go ahead, Jane. Thank you, Operator. Hello, everyone. Welcome to JOI's first quarter 2024 earnings conference call. Joining us today are Mr. David Schillingly, Chairman and CEO of CHOI, Ms. ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 20-F (Mark One) ☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2023. OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ...

Regulatory and Legal Risks - Fluctuations in foreign currency exchange rates may adversely affect operational and financial results, potentially leading to higher expenses and lower revenues [185]. - The company operates in multiple markets, exposing it to geopolitical tensions that may result in sanctions, bans, or disruptions affecting business operations [187]. - India has banned hundreds of mobile apps, including the company's services, due to national security concerns, impacting user base retention [187]. - The company may require approval from the CSRC for offerings and financing activities outside mainland China, with uncertainties regarding the duration and outcome of such approvals [189]. - New regulations from the CSRC regarding overseas listings may impose filing requirements that could affect the company's future offerings [192]. - The 2021 Negative List for foreign investment may impose additional requirements on the company, potentially affecting its operations in mainland China [193]. - The company is uncertain about its classification as a Singapore tax resident, which could impact its tax obligations and dividend distributions [198]. - Uncertainties in the interpretation and enforcement of laws in mainland China could limit legal protections available to the company [199]. - The legal system in mainland China may involve significant discretion in interpreting laws, making it difficult to evaluate legal outcomes [200]. - The mainland China's government extensively regulates the internet industry, creating significant uncertainty regarding foreign investments and operations [201]. - The evolving regulatory environment may lead to new laws requiring additional licenses for operations in mainland China, which could result in penalties if not complied with [204]. - The complexity of regulations may disrupt business operations if variable interest entities breach contractual arrangements [201]. - The interpretation of existing laws creates uncertainties regarding the legality of foreign investments in internet businesses in mainland China [204]. - The Foreign Investment Security Review Measures require approval for investments in key areas that result in acquiring actual control of assets [220]. - Compliance with SAFE regulations is critical for the ability to conduct foreign exchange activities and remittance of dividends from subsidiaries in mainland China [228]. - The company faces significant legal and regulatory risks, including potential penalties and operational shutdowns if its business structure is deemed non-compliant with mainland China's laws [237]. - The contractual arrangements with variable interest entities may not provide the same level of control as direct ownership, leading to potential operational disruptions [244]. - The equity interest pledge agreements with variable interest entities' shareholders may face enforcement limitations under mainland China's laws [247]. - The company has substantial uncertainties regarding the interpretation and application of current and future laws in mainland China, which could impact its business operations [241]. - If the variable interest entities face bankruptcy or liquidation, the company may lose access to essential assets, adversely affecting its operations [246]. - The company relies on the performance of variable interest entities and their shareholders under contractual arrangements, which may not be effectively enforceable [244]. - Potential conflicts of interest may arise between the shareholders of variable interest entities and the company, impacting business interests [245]. - The inability to provide data or personal information to foreign entities without governmental approval may hinder regulatory compliance and operational transparency [240]. Taxation and Financial Implications - Under the PRC Enterprise Income Tax Law, companies may be classified as PRC "resident enterprises," subjecting them to a 25% enterprise income tax on worldwide income [205]. - Certain subsidiaries in mainland China, such as Guangzhou Huanju Shidai, qualify as High and New Technology Enterprises (HNTEs) and enjoy a reduced tax rate of 15% for 2020, 2021, and 2022 [216]. - If any subsidiaries fail to maintain their HNTE qualification, their enterprise income tax rate may increase to the standard rate of 25%, adversely affecting financial results [217]. - The PRC tax authorities may impose additional tax obligations on share transfers involving non-resident investors, potentially increasing costs [212]. - The statutory enterprise income tax rate in mainland China is 25%, but certain subsidiaries may benefit from reduced rates due to specific qualifications [216]. - Current regulations permit subsidiaries in mainland China to pay dividends only from accumulated after-tax profits, subject to statutory conditions [232]. - The withholding tax rate of 10% applies to dividends payable by companies in mainland China to non-mainland-China-resident enterprises [233]. - The company may be subject to adverse tax consequences due to its corporate structure and contractual arrangements with variable interest entities, potentially impacting consolidated net income [248]. Operational Challenges - The company is vulnerable to fluctuations in the number of registered or active users, which can significantly impact net revenues and earnings [263]. - The company may experience adverse effects on its business operations if it fails to maintain necessary licenses or approvals, leading to potential fines and operational restrictions [250]. - The company faces risks related to geopolitical events, natural disasters, and health epidemics, which could disrupt operations and adversely affect financial results [257]. - The company is adjusting its platforms in mainland China to comply with regulations regarding virtual currency, which may lead to penalties if not adequately addressed [255]. - The company may face penalties for non-compliance by third-party partners, which could disrupt operations and affect user growth [259]. - Future acquisitions in mainland China may be adversely affected by security reviews if the business is deemed to raise national security concerns [220]. - Regulations may delay or limit the ability to effectively use proceeds from public offerings, impacting capital contributions and profit distributions [221]. Shareholder and Corporate Governance Issues - As of March 31, 2023, Mr. David Xueling Li and his affiliates held 79.4% of the total voting power, significantly influencing corporate decisions and limiting other shareholders' ability to affect change [272]. - The company was classified as a Passive Foreign Investment Company (PFIC) for the taxable year ended December 31, 2022, which may lead to adverse U.S. income tax consequences for U.S. holders of its ADSs [267]. - The dual-class share structure may discourage potential change of control transactions that could benefit Class A shareholders [271]. - Mr. Jun Lei, a major shareholder, holds 8.9% of outstanding shares and has delegated voting rights to Mr. Li, potentially leading to conflicts of interest in future business decisions [275]. - The company's articles of association contain anti-takeover provisions that could limit shareholders' opportunities to sell shares at a premium [286]. - The company is incorporated under Cayman Islands law, which may limit shareholders' rights compared to U.S. companies [289]. - Shareholders of the company have no general rights under Cayman Islands law to inspect corporate records, making it difficult to obtain necessary information [291]. - The company is a foreign private issuer and is exempt from certain U.S. securities regulations, resulting in less extensive and timely disclosures [297]. - The company has relied on exemptions allowing non-independent directors to serve on key committees, potentially reducing shareholder protections [298]. - The company may face difficulties in enforcing judgments obtained against it in the U.S. due to its Cayman Islands incorporation [293]. - Holders of ADSs have limited voting rights and must provide instructions to the depositary to vote on their behalf [299]. - The depositary may give a discretionary proxy to vote Class A common shares if ADS holders do not vote, potentially limiting shareholder influence [300]. - Cash dividends or distributions on common shares may not be available to ADS holders if deemed illegal or impractical by the depositary [301]. - The depositary may close its books at any time, affecting the transferability of ADSs [302]. Market and Financial Performance - The trading prices of the company's ADSs ranged from US$21.38 to US$55.14 in 2022, indicating significant volatility [262]. - The trading price of the company's ADSs has been negatively impacted by adverse publicity and allegations regarding user metrics and revenue authenticity, leading to significant fluctuations [276]. - The company has incurred substantial costs related to legal and professional services due to ongoing investigations and allegations, which may continue to divert management's attention from daily operations [277]. - The company may be subject to further investigations and due diligence in response to allegations made in the Short Report, which could lead to additional legal expenses [266]. - If securities analysts downgrade the company's ADSs or cease coverage, it could result in a decline in market price and trading volume [282]. - The company has conducted independent reviews of allegations made against it, concluding that the claims were unsubstantiated, yet it remains vulnerable to market instability due to such allegations [281]. - The company completed the offering of US$500 million in convertible senior notes due 2025 and US$500 million due 2026, which may discourage third-party acquisitions [283]. - The company's ability to raise capital through equity offerings may be impaired by the perception of substantial sales of its ADSs [285].

[PART I](index=5&type=section&id=PART%20I) [Key Information](index=6&type=section&id=ITEM%203.%20KEY%20INFORMATION) This section details JOYY Inc.'s corporate structure, VIE reliance, associated risks, and condensed financial data for its China operations - JOYY Inc. is a Cayman Islands holding company that conducts its PRC operations through Variable Interest Entities (VIEs) due to foreign investment restrictions. The revenue contribution from these VIEs has been decreasing, accounting for **31.4%**, **20.7%**, and **17.1%** of total revenues in 2019, 2020, and 2021, respectively[31](index=31&type=chunk) - The company faces significant risks from PRC regulations, including potential requirements for CSRC or CAC approval for offshore offerings and cybersecurity reviews, which could materially impact operations and stock value[34](index=34&type=chunk)[37](index=37&type=chunk)[38](index=38&type=chunk) - Due to the Holding Foreign Companies Accountable Act (HFCAA), JOYY's ADSs could be prohibited from trading in the U.S. starting in **2024** if the PCAOB remains unable to inspect its China-based auditor. This risk could be accelerated to **2023** if proposed legislative changes are enacted[40](index=40&type=chunk)[207](index=207&type=chunk) Condensed Financials for Variable Interest Entities (VIEs) - 2021 | Financial Item | Amount (US$ in thousands) | | :--- | :--- | | **Operations** | | | Total Revenue | 557,089 | | Operating Loss | (139,014) | | Net Loss | (122,292) | | **Financial Position (as of Dec 31, 2021)** | | | Total Assets | 2,260,828 | | Total Liabilities | 327,656 | | **Cash Flows** | | | Net Cash from Operating Activities | 259,520 | | Net Cash from Investing Activities | (49,441) | | Net Cash from Financing Activities | (91,820) | [Risk Factors](index=20&type=section&id=D.%20Risk%20Factors) This section outlines JOYY Inc.'s principal risks across business, jurisdictional, corporate structure, and ADS-related categories - The company generates a substantial majority of its revenue (**94.6%** in 2021) from live streaming services, making its financial performance highly dependent on the continued popularity and monetization of this model[87](index=87&type=chunk)[93](index=93&type=chunk) - The company is subject to complex and evolving international laws regarding cybersecurity and data privacy, such as the EU's GDPR and California's CCPA, which could increase compliance costs and potential liabilities[101](index=101&type=chunk)[111](index=111&type=chunk)[113](index=113&type=chunk) - The PCAOB's inability to inspect the company's China-based auditor could lead to the delisting of its ADSs from U.S. exchanges as early as **2024** under the HFCAA, potentially sooner if legislative changes are enacted[206](index=206&type=chunk)[207](index=207&type=chunk)[209](index=209&type=chunk) - The company believes it was a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes for the **2021** taxable year, which could result in adverse tax consequences for U.S. holders of its ADSs or shares[306](index=306&type=chunk)[307](index=307&type=chunk) - The company's dual-class share structure gives co-founder, chairman, and CEO Mr. David Xueling Li and his affiliates **78.5%** of the total voting power as of March 31, 2022, allowing substantial influence over corporate matters[278](index=278&type=chunk)[309](index=309&type=chunk)[310](index=310&type=chunk) [Information on the Company](index=72&type=section&id=ITEM%204.%20INFORMATION%20ON%20THE%20COMPANY) This section provides an overview of JOYY Inc.'s history, global social media operations, platform details, and intellectual property portfolio - JOYY has transformed into a global social media company, primarily through the acquisition of Bigo in March 2019 and the divestiture of its PRC-based YY Live business, which was substantially completed in February 2021[337](index=337&type=chunk)[343](index=343&type=chunk)[347](index=347&type=chunk) - The company's global mobile monthly active users (MAUs) reached **280 million** in Q4 2021, diversified across its main platforms[352](index=352&type=chunk) Platform Mobile MAUs (Q4 2021) | Platform | Mobile MAUs (millions) | | :--- | :--- | | Bigo Live | 32.2 | | Likee | 67.0 | | Hago | 9.5 | | imo | 171.3 | - Artificial intelligence (AI) is a core technology, used for personalized content recommendation, visual/voice recognition, and enhancing operational efficiency[356](index=356&type=chunk)[382](index=382&type=chunk) - As of December 31, 2021, the company held a significant intellectual property portfolio, including **935** domain names, **796** software copyrights, **988** patents, and **2,015** trademarks, with thousands more applications pending[397](index=397&type=chunk) [Unresolved Staff Comments](index=108&type=section&id=ITEM%204A.%20UNRESOLVED%20STAFF%20COMMENTS) The company reports no unresolved staff comments from the SEC - There are no unresolved staff comments[550](index=550&type=chunk) [Operating and Financial Review and Prospects](index=108&type=section&id=ITEM%205.%20OPERATING%20AND%20FINANCIAL%20REVIEW%20AND%20PROSPECTS) This section provides management's discussion and analysis of JOYY's financial condition and results, highlighting revenue growth, net loss, and key operational drivers - The company's financial reporting has been significantly impacted by the deconsolidation of Huya (since Q2 2020) and the classification of YY Live as a discontinued operation (since Feb 2021), shifting the focus to the BIGO segment[555](index=555&type=chunk)[556](index=556&type=chunk)[597](index=597&type=chunk) - Starting January 1, 2021, the company changed its reporting currency from Renminbi to U.S. dollars to better reflect its global operations, with historical results restated accordingly[558](index=558&type=chunk) Consolidated Results of Operations (Continuing Operations) | Metric (US$ in millions) | 2019 | 2020 | 2021 | | :--- | :--- | :--- | :--- | | **Total Net Revenues** | 900.7 | 1,918.1 | 2,619.1 | | *Live Streaming* | 769.1 | 1,815.8 | 2,476.8 | | *Others* | 131.6 | 102.3 | 142.3 | | **Gross Profit** | 243.8 | 540.0 | 837.9 | | **Operating Loss** | (515.4) | (406.8) | (106.7) | | **Net Loss from Continuing Operations** | (68.7) | (21.8) | (129.6) | - The **36.4%** increase in live streaming revenue in 2021 was driven by growth in the BIGO segment, where the number of paying users increased to **3.8 million** and ARPU rose to **$509**[601](index=601&type=chunk) - Sales and marketing expenses decreased in 2021 primarily due to reduced user acquisition spending for Likee and Hago[605](index=605&type=chunk) [Directors, Senior Management and Employees](index=132&type=section&id=ITEM%206.%20DIRECTORS,%20SENIOR%20MANAGEMENT%20AND%20EMPLOYEES) This section details JOYY's leadership, compensation, board practices, share incentive plans, and employee breakdown by function - For the fiscal year 2021, the aggregate cash compensation paid to directors and executive officers was **US$1.7 million**[753](index=753&type=chunk) - As of March 31, 2022, there were **9,414,400** options, **16,154,922** restricted shares, and **44,755,859** restricted share units outstanding under the company's various share incentive plans[758](index=758&type=chunk) Employee Breakdown by Function (as of Dec 31, 2021) | Function | Number of Employees | Percentage | | :--- | :--- | :--- | | Customer services and operations | 4,016 | 54% | | Research and development | 2,660 | 36% | | Sales and marketing | 294 | 4% | | General and administration | 479 | 6% | | **Total** | **7,449** | **100%** | - The board has four committees: Audit, Compensation, Corporate Governance & Nominating, and Investment. The company relies on foreign private issuer exemptions for certain independence requirements on its compensation and nominating committees[788](index=788&type=chunk)[790](index=790&type=chunk)[792](index=792&type=chunk) [Major Shareholders and Related Party Transactions](index=144&type=section&id=ITEM%207.%20MAJOR%20SHAREHOLDERS%20AND%20RELATED%20PARTY%20TRANSACTIONS) This section details JOYY's ownership structure, related party transactions, and the contractual arrangements underpinning its VIE structure in China Beneficial Ownership (as of March 31, 2022) | Shareholder | Total Common Shares Beneficially Owned | Total Voting Power % | | :--- | :--- | :--- | | David Xueling Li | 364,273,346 | 78.5% | | All directors and executive officers as a group | 387,144,011 | 78.9% | | Top Brand Holdings Limited (Mr. Jun Lei) | 122,741,483 | — (Voting rights delegated to Mr. Li) | | T. ROWE PRICE ASSOCIATES, INC. | 107,383,120 | 2.5% | - The company utilizes a complex Variable Interest Entity (VIE) structure for its PRC operations to comply with foreign ownership restrictions. This structure is maintained through a series of contractual arrangements, including exclusive service, equity pledge, and proxy agreements[813](index=813&type=chunk)[819](index=819&type=chunk) - The company has enhanced its VIE structure by having VIE equity held by PRC limited liability companies, which are in turn owned by PRC limited partnerships, to reduce key-man risk and improve stability[813](index=813&type=chunk)[815](index=815&type=chunk) - Significant related party transactions in 2021 included receiving **US$3.3 million** in bandwidth services from Guangzhou Sunhongs, an investee of major shareholder Mr. Jun Lei[882](index=882&type=chunk) [Financial Information](index=155&type=section&id=ITEM%208.%20FINANCIAL%20INFORMATION) This section covers JOYY's legal proceedings, including a securities class action lawsuit, and its established quarterly dividend policy - The company is defending a putative securities class action lawsuit filed in November 2020. Although the case was dismissed in March 2022, the plaintiffs filed a notice of appeal in April 2022[890](index=890&type=chunk)[305](index=305&type=chunk) - The company has a quarterly dividend policy established in 2020 for a three-year period, with a total expected payout of approximately **US$300 million**, supplemented by an additional policy for another **US$200 million** over three years[892](index=892&type=chunk) - As of March 31, 2022, the company has paid an aggregate of **US$160.1 million** in dividends under its current policies[892](index=892&type=chunk) [The Offer and Listing](index=157&type=section&id=ITEM%209.%20THE%20OFFER%20AND%20LISTING) This section details the trading of JOYY's American Depositary Shares (ADSs) on the Nasdaq Global Select Market - The company's ADSs are listed on the Nasdaq Global Select Market under the symbol "**YY**"[898](index=898&type=chunk) - Each ADS represents **twenty** Class A common shares[898](index=898&type=chunk) [Additional Information](index=157&type=section&id=ITEM%2010.%20ADDITIONAL%20INFORMATION) This section details JOYY's corporate governance, dual-class share structure, anti-takeover provisions, and key tax considerations for investors - The company has a dual-class share structure. Class A common shares have one vote per share, while Class B common shares have ten votes per share. Class B shares are convertible into Class A shares on a one-for-one basis, but not vice-versa[905](index=905&type=chunk)[914](index=914&type=chunk)[918](index=918&type=chunk) - The company's articles of association include anti-takeover provisions, such as the board's authority to issue preferred shares without shareholder approval, which could discourage a change in control[317](index=317&type=chunk)[968](index=968&type=chunk) - For U.S. federal income tax purposes, the company believes it was a Passive Foreign Investment Company (PFIC) for the taxable year ended December 31, 2021, which could have significant adverse tax consequences for U.S. holders[1015](index=1015&type=chunk)[1025](index=1025&type=chunk) - The company's articles designate the United States District Court for the Southern District of New York as the exclusive U.S. forum for resolving complaints related to federal securities laws, which could limit shareholders' ability to choose a judicial forum[319](index=319&type=chunk)[954](index=954&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=176&type=section&id=ITEM%2011.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section details JOYY's exposure to market risks, primarily foreign exchange and interest rate fluctuations, with sensitivity analyses - The company is exposed to foreign exchange risk as some revenues and expenses are in currencies other than its U.S. dollar reporting currency, notably the Renminbi[1040](index=1040&type=chunk) - A **10%** depreciation of the RMB against the USD would result in a decrease of **US$54.3 million** in cash and cash equivalents and **US$34.0 million** in short-term deposits, based on December 31, 2021 balances[1042](index=1042&type=chunk) - The company is exposed to interest rate risk on its interest-earning deposits. A hypothetical **1%** decrease in interest rates would have reduced interest income by **US$17.5 million** for the year ended December 31, 2021[1043](index=1043&type=chunk) [Description of Securities Other Than Equity Securities](index=177&type=section&id=ITEM%2012.%20DESCRIPTION%20OF%20SECURITIES%20OTHER%20THAN%20EQUITY%20SECU RITIES) This section outlines the fees and charges applicable to holders of JOYY's American Depositary Shares (ADSs) ADS Holder Service Fees | Service | Fee | | :--- | :--- | | Issuance of ADSs | Up to US$5.00 per 100 ADSs | | Cancellation of ADSs | Up to US$5.00 per 100 ADSs | | Cash dividend distribution | Up to US$5.00 per 100 ADSs | | Distribution of other securities/rights | Up to US$5.00 per 100 ADSs | - In addition to service fees, ADS holders are responsible for charges such as taxes, registration fees, and foreign currency conversion expenses[1047](index=1047&type=chunk) - The depositary, Citibank N.A., may reimburse JOYY for certain expenses related to the ADS program[1050](index=1050&type=chunk) [PART II](index=179&type=section&id=PART%20II) [Controls and Procedures](index=180&type=section&id=ITEM%2015.%20CONTROLS%20AND%20PROCEDURES) This section confirms the effectiveness of JOYY's disclosure controls and internal control over financial reporting as of December 31, 2021 - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2021[1055](index=1055&type=chunk) - Based on the COSO framework, management concluded that the company's internal control over financial reporting was effective as of December 31, 2021[1057](index=1057&type=chunk) - The independent registered public accounting firm, PricewaterhouseCoopers Zhong Tian LLP, audited and confirmed the effectiveness of the company's internal control over financial reporting as of December 31, 2021[1058](index=1058&type=chunk) [Principal Accountant Fees and Services](index=181&type=section&id=ITEM%2016C.%20PRINCIPAL%20ACCOUNTANT%20FEES%20AND%20SERVICES) This section discloses fees paid to the principal independent auditor and the audit committee's pre-approval policy Accountant Fees (US$ in thousands) | Fee Type | 2020 | 2021 | | :--- | :--- | :--- | | Audit fees | 2,505 | 2,772 | | Tax fees | 187 | — | | Others | 8 | — | - The audit committee's policy is to pre-approve all audit and non-audit services provided by the independent auditor[1065](index=1065&type=chunk) [Purchases of Equity Securities by the Issuer and Affiliated Purchasers](index=181&type=section&id=ITEM%2016E.%20PURCHASES%20OF%20EQUITY%20SECURITIES%20BY%20THE%20ISSUER%20AND%20AFFILIATED%20PURCHASERS) This section details JOYY's share repurchase activities, including new plans approved in 2021 and total ADSs repurchased - In 2021, the company's board approved two new share repurchase plans: one for up to **US$200 million** in September and another for up to **US$1 billion** in November[1068](index=1068&type=chunk)[1071](index=1071&type=chunk) 2021 Share Repurchases | Period | Total ADSs Purchased | Average Price Paid Per ADS (US$) | | :--- | :--- | :--- | | January 2021 | 170,183 | 79.26 | | March 2021 | 458,507 | 95.60 | | April 2021 | 1,009,579 | 99.05 | | September 2021 | 328,075 | 50.96 | | October 2021 | 185,268 | 50.99 | | November 2021 | 782,605 | 49.72 | | December 2021 | 3,581,271 | 47.63 | | **Total** | **6,515,488** | **60.32** | [Corporate Governance](index=182&type=section&id=ITEM%2016G.%20CORPORATE%20GOVERNANCE) This section explains JOYY's corporate governance practices as a foreign private issuer, relying on home country exemptions - As a foreign private issuer, the company follows certain Cayman Islands corporate governance practices, which differ from Nasdaq requirements[1075](index=1075&type=chunk) - The company relies on exemptions for director independence on its compensation and corporate governance & nominating committees[1076](index=1076&type=chunk) - The company does not require shareholder approval for establishing or amending equity compensation plans, following home country practice[1077](index=1077&type=chunk) [PART III](index=183&type=section&id=PART%20III) [Financial Statements](index=183&type=section&id=ITEM%2018.%20FINANCIAL%20STATEMENTS) This section presents JOYY's audited consolidated financial statements, auditor's opinion, and critical audit matters for 2019-2021 - The independent auditor issued an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting as of December 31, 2021[1108](index=1108&type=chunk)[1109](index=1109&type=chunk) - A critical audit matter was the goodwill impairment assessment for the Bigo reporting unit, which had a goodwill balance of **US$1,854 million**. The fair value of the unit was determined to exceed its carrying value by approximately **10%** as of December 31, 2021[1118](index=1118&type=chunk)[1400](index=1400&type=chunk) - Another critical audit matter was revenue recognition for live streaming, specifically the significant management judgment required to identify distinct performance obligations in complex contracts and estimate their standalone selling prices for transaction price allocation[1122](index=1122&type=chunk)[1123](index=1123&type=chunk) - The company adopted a change in accounting for convertible bonds in 2021, which simplified the accounting by no longer separating embedded conversion features from the host contract[1110](index=1110&type=chunk)[1219](index=1219&type=chunk) [Exhibits](index=184&type=section&id=ITEM%2019.%20EXHIBITS) This section lists all exhibits filed with the annual report, including corporate documents, incentive plans, and VIE agreements - The exhibits include the Third Amended and Restated Memorandum and Articles of Association[1085](index=1085&type=chunk) - Filed exhibits detail the company's share incentive plans, including the Amended and Restated 2011 Share Incentive Plan and the 2019 Share Incentive Awards Arrangement[1085](index=1085&type=chunk)[1096](index=1096&type=chunk) - A comprehensive set of contractual agreements governing the company's relationship with its Variable Interest Entities (VIEs) are included as exhibits[1085](index=1085&type=chunk)[1086](index=1086&type=chunk)[1087](index=1087&type=chunk)

Part I [Key Information](index=5&type=section&id=ITEM%203.%20KEY%20INFORMATION) This section outlines primary investment risks for JOYY Inc., covering business, operational, corporate structure, and ADS-related factors, including the YY Live sale and potential delisting [Risk Factors](index=5&type=section&id=D.%20Risk%20Factors) The company faces significant risks from its new business model, managing growth, the YY Live sale, COVID-19 impacts, and intense competition - The company faces risks from the sale of its YY Live business to Baidu, including potential negative impacts on operations, user relationships, and future growth in China due to non-compete agreements[39](index=39&type=chunk)[42](index=42&type=chunk) - The COVID-19 pandemic had mixed effects, increasing mobile MAUs in H1 2020 but causing decreases in H2 2020 due to app blocks in India, also negatively impacting paying users on the discontinued YY Live platform[68](index=68&type=chunk)[69](index=69&type=chunk)[72](index=72&type=chunk) - The company's ADSs may be delisted from U.S. exchanges under the Holding Foreign Companies Accountable Act (HFCA Act) if the PCAOB is unable to inspect its China-based auditor for three consecutive years[204](index=204&type=chunk)[205](index=205&type=chunk) - The company relies on a Variable Interest Entity (VIE) structure to operate in China due to foreign ownership restrictions, which carries risks as it depends on contractual arrangements rather than direct ownership and could be challenged by PRC authorities[224](index=224&type=chunk)[225](index=225&type=chunk)[230](index=230&type=chunk) - The company believes it was a Passive Foreign Investment Company (PFIC) for the 2020 tax year, which could result in adverse U.S. federal income tax consequences for U.S. holders of its ADSs or shares[269](index=269&type=chunk)[270](index=270&type=chunk) [Information on the Company](index=62&type=section&id=ITEM%204.%20INFORMATION%20ON%20THE%20COMPANY) This section details the company's history, business operations, organizational structure, and properties, including key acquisitions, divestitures, and global platform focus [History and Development of the Company](index=62&type=section&id=A.%20History%20and%20Development%20of%20the%20Company) JOYY Inc., founded in 2005, has undergone significant strategic shifts including its 2012 IPO, the 2019 Bigo acquisition, Huya deconsolidation, and the 2020 sale of YY Live to Baidu - In March 2019, the company completed the acquisition of the remaining **68.3% equity interest in Bigo**, making Bigo a wholly-owned subsidiary[312](index=312&type=chunk) - In April and August 2020, the company transferred a significant portion of its Huya shares to Tencent, resulting in Tencent becoming the controlling shareholder and the deconsolidation of Huya from JOYY's financial statements[319](index=319&type=chunk)[497](index=497&type=chunk) - On November 16, 2020, the company entered into a definitive agreement to sell its PRC video-based entertainment live streaming business (YY Live) to Baidu for approximately **US$3.6 billion in cash**, with the sale substantially completed by February 2021[320](index=320&type=chunk)[498](index=498&type=chunk) [Business Overview](index=66&type=section&id=B.%20Business%20Overview) JOYY operates a global portfolio of video and audio-based social media platforms, leveraging AI technology and facing intense competition and complex regulatory environments - The company operates several global social media platforms, including Bigo Live, Likee, imo, and Hago, focusing on live streaming, short-form video, and social gaming[323](index=323&type=chunk)[324](index=324&type=chunk) Key Platform MAUs (Q4 2020) | Platform | Mobile MAUs (Q4 2020) | | :--- | :--- | | Bigo Live | 28.7 million | | Likee | 120.1 million | | Hago | 16.5 million | | imo | 186.3 million | | YY Live (Discontinued) | 42.0 million | - Artificial intelligence (AI) is central to the business, used for content recommendation, visual recognition, and optimizing user experience[327](index=327&type=chunk)[353](index=353&type=chunk) - The company faces significant competition from global platforms like TikTok and regional players like Twitch, especially after divesting its primary China-based business, YY Live[351](index=351&type=chunk) - Operations are subject to extensive regulations across multiple jurisdictions, including the GDPR in Europe, the CCPA in California, and various PRC laws governing internet content, data privacy, and foreign investment[369](index=369&type=chunk)[471](index=471&type=chunk)[473](index=473&type=chunk) [Organizational Structure](index=92&type=section&id=C.%20Organizational%20Structure) The company utilizes a complex organizational structure with direct subsidiaries and Variable Interest Entities (VIEs) to comply with PRC regulations and manage global operations - The company uses a VIE structure to conduct operations in the PRC, with entities like Guangzhou Huaduo and Guangzhou BaiGuoYuan being controlled through contractual arrangements[483](index=483&type=chunk)[491](index=491&type=chunk) - The acquisition of Bigo was completed in March 2019, making it a wholly-owned subsidiary and a key part of the company's global operations[491](index=491&type=chunk) - The sale of the YY Live business to Baidu, which was substantially completed, represents a major change in the organizational structure, shifting the company's focus to its global assets[491](index=491&type=chunk) [Property, Equipment and Land Use Right](index=93&type=section&id=D.%20Property,%20Equipment%20and%20Land%20Use%20Right) JOYY's corporate headquarters are in Singapore, with significant office space and properties in China and other global locations, and server infrastructure hosted at third-party data centers - The company's corporate headquarters is in Singapore, comprising **1,310 square meters**[486](index=486&type=chunk) - The PRC subsidiaries have a headquarters in Guangzhou (**37,548 sq. meters**) and a building in Zhuhai (**27,206 sq. meters**)[488](index=488&type=chunk) - Subsidiary Bigo leases an aggregate of **58,395 square meters** of office space globally, with **33,827 square meters** located in Guangzhou[487](index=487&type=chunk) [Operating and Financial Review and Prospects](index=94&type=section&id=ITEM%205.%20OPERATING%20AND%20FINANCIAL%20REVIEW%20AND%20PROSPECTS) This section analyzes the company's financial performance, highlighting significant revenue growth from Bigo, a net loss from continuing operations, and substantial net income from discontinued operations [Operating Results](index=94&type=section&id=A.%20Operating%20Results) In 2020, net revenues increased significantly due to Bigo's growth, but continuing operations posted an operating loss, while discontinued operations generated substantial net income from asset disposals Consolidated Results of Operations (Continuing Operations) | For the Year Ended December 31, | 2019 (RMB thousands) | 2020 (RMB thousands) | 2020 (US$ thousands) | | :--- | :--- | :--- | :--- | | **Total net revenues** | 6,239,309 | 13,230,945 | 2,027,731 | | *Live streaming* | 5,330,790 | 12,524,825 | 1,919,513 | | *Others* | 908,519 | 706,120 | 108,218 | | **Gross profit** | 1,686,651 | 3,721,356 | 570,323 | | **Operating loss** | (3,557,955) | (2,820,687) | (432,289) | | **Net loss from continuing operations** | (543,478) | (126,378) | (19,367) | | **Net income from discontinued operations** | 4,243,507 | 9,849,538 | 1,509,507 | - Net revenues increased by **112.1%** in 2020, driven by a **135.0%** increase in live streaming revenues, primarily from the consolidation and growth of the Bigo segment[624](index=624&type=chunk)[626](index=626&type=chunk) - Cost of revenues increased by **108.9%** in 2020, mainly due to a **164.4%** rise in revenue sharing fees and content costs, in line with the growth of Bigo's live streaming business[628](index=628&type=chunk) - The company adopted new accounting standards for revenue recognition (ASC 606) and credit losses (ASU 2016-13), with the latter resulting in a cumulative-effect adjustment to shareholders' equity of **RMB 12.1 million**[535](index=535&type=chunk)[567](index=567&type=chunk) [Liquidity and Capital Resources](index=117&type=section&id=B.%20Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity, primarily from operations and financing activities, holding **RMB 11.67 billion** in cash and equivalents as of December 31, 2020 Cash and Liquidity Position (Continuing Operations) | As of December 31, | 2019 (RMB thousands) | 2020 (RMB thousands) | 2020 (US$ thousands) | | :--- | :--- | :--- | :--- | | Cash, cash equivalents, restricted cash, and restricted short-term deposits | 3,367,157 | 11,666,329 | 1,787,942 | - Net cash used in continuing operating activities was **RMB 18.8 million (US$2.9 million)** in 2020, a significant improvement from a use of **RMB 1.23 billion** in 2019[689](index=689&type=chunk)[691](index=691&type=chunk) - Net cash provided by continuing investing activities was **RMB 4.77 billion (US$731.2 million)** in 2020, mainly from maturities of short-term investments and proceeds from the disposal of investments[696](index=696&type=chunk)[697](index=697&type=chunk) - Capital expenditures were **RMB 1.06 billion (US$162.0 million)** in 2020, primarily for purchasing office space, computers, and servers[703](index=703&type=chunk) [Contractual Obligations](index=121&type=section&id=F.%20Tabular%20Disclosure%20of%20Contractual%20Obligations) As of December 31, 2020, the company had significant contractual obligations including operating lease commitments, capital commitments, short-term loans, and convertible senior notes Contractual Obligations as of December 31, 2020 | Obligation | Total | Less than 1 year | 1-2 years | 3-5 years | More than 5 years | | :--- | :--- | :--- | :--- | :--- | :--- | | Operating lease commitments (RMB thousands) | 177,383 | 111,639 | 50,686 | 15,058 | — | | Capital commitment (RMB thousands) | 932,898 | 643,945 | 103,015 | 185,938 | — | | Short-term loans (RMB thousands) | 738,808 | 738,808 | — | — | — | | Convertible senior notes (US$ thousands) | 1,054,688 | 10,625 | 10,625 | 530,000 | 503,438 | [Directors, Senior Management and Employees](index=122&type=section&id=ITEM%206.%20DIRECTORS,%20SENIOR%20MANAGEMENT%20AND%20EMPLOYEES) This section details the company's leadership, compensation, board structure, employee base, and share ownership, highlighting the dual-class share structure and concentrated voting power [Directors and Senior Management](index=122&type=section&id=A.%20Directors%20and%20Senior%20Management) The company is led by co-founder, Chairman, and CEO David Xueling Li, with a board comprising five directors, including three independent members - David Xueling Li is the co-founder, Chairman of the Board, and Chief Executive Officer[715](index=715&type=chunk) - The board includes four independent directors: Qin Liu, Peter Andrew Schloss, Richard Weidong Ji, and David Tang[716](index=716&type=chunk)[717](index=717&type=chunk)[719](index=719&type=chunk)[720](index=720&type=chunk) [Compensation of Directors and Executive Officers](index=123&type=section&id=B.%20Compensation%20of%20Directors%20and%20Executive%20Officers) For fiscal year 2020, aggregate cash compensation for directors and executive officers was **RMB 15.5 million**, supplemented by three share incentive plans with significant outstanding awards - Aggregate cash compensation for directors and executive officers in FY2020 was **RMB 15.5 million (US$2.4 million)**[723](index=723&type=chunk) - The company has three share incentive plans: the 2009 Scheme (expired), the 2011 Plan, and the 2019 Arrangement (for Bigo employees)[727](index=727&type=chunk) - As of March 31, 2021, outstanding awards included options for **9.7 million shares**, **24.7 million restricted shares**, and **74.2 million restricted share units**[728](index=728&type=chunk) [Board Practices](index=128&type=section&id=C.%20Board%20Practices) The board of directors, consisting of five members, operates through four committees, with directors serving without fixed terms under Cayman Islands law - The board has four committees: Audit, Compensation, Corporate Governance & Nominating, and Investment[758](index=758&type=chunk) - The Audit Committee consists of three independent directors: Peter Andrew Schloss (Chairman), David Tang, and Richard Weidong Ji[759](index=759&type=chunk) - Directors are not subject to a term of office and serve until removed by a special resolution of shareholders[764](index=764&type=chunk) [Employees](index=130&type=section&id=D.%20Employees) As of December 31, 2020, JOYY had **7,931 employees**, primarily in customer services/operations and research and development, a decrease from 2019 due to the Huya deconsolidation Employees by Function as of Dec 31, 2020 | Function | Number of Employees | Percentage | | :--- | :--- | :--- | | Customer services and operations | 3,657 | 46% | | Research and development | 3,451 | 44% | | Sales and marketing | 329 | 4% | | General and administration | 494 | 6% | | **Total** | **7,931** | **100%** | [Share Ownership](index=130&type=section&id=E.%20Share%20Ownership) The company's dual-class share structure grants Chairman and CEO David Xueling Li **76.0%** of the total voting power, giving him substantial influence over corporate matters - As of March 31, 2021, Chairman and CEO David Xueling Li beneficially owned shares representing **76.0%** of the total voting power[774](index=774&type=chunk)[231](index=231&type=chunk) - The company has a dual-class share structure: Class A shares have one vote per share, while Class B shares have ten votes per share and are convertible to Class A shares[778](index=778&type=chunk)[273](index=273&type=chunk) - Principal shareholder Jun Lei (via Top Brand Holdings Limited) has delegated the voting rights of his **122.7 million Class B shares** to David Xueling Li[776](index=776&type=chunk) [Major Shareholders and Related Party Transactions](index=132&type=section&id=ITEM%207.%20MAJOR%20SHAREHOLDERS%20AND%20RELATED%20PARTY%20TRANSACTIONS) This section details the company's major shareholders and extensive related party transactions, emphasizing the enhancement of its Variable Interest Entity (VIE) structure for stability and control [Related Party Transactions](index=133&type=section&id=B.%20Related%20Party%20Transactions) The company's China operations rely on complex contractual arrangements with VIEs, which are being enhanced for stability, alongside significant transactions with related parties for services - The company is enhancing its VIE structure to reduce key-man risk and improve stability by having VIEs held by PRC limited liability companies, which are in turn owned by partnerships of management individuals[780](index=780&type=chunk)[781](index=781&type=chunk)[782](index=782&type=chunk) - A series of contractual arrangements (Exclusive Business Cooperation, Exclusive Option, Equity Pledge, and Powers of Attorney) are in place to provide JOYY with effective control over its VIEs and to transfer economic benefits[787](index=787&type=chunk)[789](index=789&type=chunk)[791](index=791&type=chunk)[793](index=793&type=chunk)[794](index=794&type=chunk) - In 2020, the company received service fees of **RMB 222.2 million** from Guangzhou Huaduo and **RMB 784.5 million** from Guangzhou BaiGuoYuan under these arrangements[795](index=795&type=chunk)[812](index=812&type=chunk) - The company purchased bandwidth services from Guangzhou Sunhongs and Kingsoft Cloud, both related to major shareholder Jun Lei, for **RMB 98.4 million** and **RMB 14.7 million**, respectively, in 2020[830](index=830&type=chunk)[832](index=832&type=chunk) [Financial Information](index=142&type=section&id=ITEM%208.%20FINANCIAL%20INFORMATION) This section covers consolidated financial statements, ongoing legal proceedings, and the company's dividend policy, including potential restrictions on dividend payments from PRC subsidiaries - The company is defending a putative securities class action lawsuit filed in November 2020, alleging material misrepresentations regarding revenue and the Bigo acquisition, with potential loss not yet estimable[839](index=839&type=chunk) - The board approved quarterly dividend policies in August and November 2020 for the next three years, with total expected payouts of approximately **US$500 million**, and **US$67 million** had been paid as of March 31, 2021[841](index=841&type=chunk) - Dividends from PRC subsidiaries are subject to PRC regulations and withholding taxes, which may restrict the ability to pay dividends to ADS holders[842](index=842&type=chunk) [Additional Information](index=144&type=section&id=ITEM%2010.%20ADDITIONAL%20INFORMATION) This section details the company's corporate governance under Cayman Islands law, its dual-class share structure, material contracts, exchange controls, and significant U.S. and PRC tax implications, including its PFIC status [Memorandum and Articles of Association](index=144&type=section&id=B.%20Memorandum%20and%20Articles%20of%20Association) JOYY Inc., a Cayman Islands exempted company, operates with a dual-class share structure and anti-takeover provisions, with Cayman Islands law offering fewer shareholder rights compared to U.S. law - The company's common stock is divided into Class A (one vote per share) and Class B (ten votes per share)[853](index=853&type=chunk)[862](index=862&type=chunk) - Class B shares automatically convert to Class A shares upon transfer to a non-affiliate, and the entire class converts if the founding group's ownership of Class B shares falls below **5%**[866](index=866&type=chunk) - The articles contain anti-takeover provisions, allowing the board to issue preferred shares without shareholder approval, which could delay or prevent a change in control[276](index=276&type=chunk)[917](index=917&type=chunk) - Cayman Islands law provides fewer shareholder rights compared to U.S. law, particularly regarding inspection of corporate records and initiating derivative lawsuits[277](index=277&type=chunk)[903](index=903&type=chunk)[911](index=911&type=chunk) [Taxation](index=156&type=section&id=E.%20Taxation) This subsection details tax considerations across key jurisdictions, including Cayman Islands tax exemption, PRC enterprise income tax and withholding tax, and the company's Passive Foreign Investment Company (PFIC) status for U.S. tax purposes - The company is a Cayman Islands entity and is not subject to profits, income, or capital gains tax there[939](index=939&type=chunk) - PRC subsidiaries are subject to a **25% EIT**, with some qualifying for preferential rates, and dividends paid from PRC subsidiaries to the offshore holding company are subject to a **10% withholding tax**[941](index=941&type=chunk) - The company believes it was a Passive Foreign Investment Company (PFIC) for the U.S. federal income tax purposes for the taxable year ended December 31, 2020[949](index=949&type=chunk) - If classified as a PFIC, U.S. holders face special, often punitive, tax rules on 'excess distributions' and gains from selling ADSs/shares; a mark-to-market election may be available for ADSs, but a QEF election is not[957](index=957&type=chunk)[960](index=960&type=chunk)[962](index=962&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=161&type=section&id=ITEM%2011.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company is exposed to market risks, primarily foreign exchange risk (USD vs. RMB) and interest rate risk on cash holdings, with sensitivity analyses provided for both - The company's primary market risks are foreign exchange risk (especially USD vs. RMB) and interest rate risk on its cash holdings[970](index=970&type=chunk)[975](index=975&type=chunk) - As of Dec 31, 2020, the company held significant U.S. dollar-denominated assets; a hypothetical **10% depreciation** of the USD against the RMB would result in a decrease of **RMB 1.34 billion** in the value of its cash, deposits, and short-term investments[973](index=973&type=chunk) - A hypothetical **one percentage point decrease** in interest rates would have reduced the company's interest income by **US$19.4 million** for the year ended December 31, 2020[975](index=975&type=chunk) [Description of Securities Other Than Equity Securities](index=162&type=section&id=ITEM%2012.%20DESCRIPTION%20OF%20SECURITIES%20OTHER%20THAN%20EQUITY%20SECURITIES) This section details the fees and charges applicable to holders of the company's American Depositary Shares (ADSs), including service fees charged by the depositary bank and reimbursements to the company ADS Holder Service Fees | Service | Fee | | :--- | :--- | | Issuance of ADSs | Up to US$5.00 per 100 ADSs | | Cancellation of ADSs | Up to US$5.00 per 100 ADSs | | Cash distribution | Up to US$5.00 per 100 ADSs | | Stock distribution | Up to US$5.00 per 100 ADSs | | Other securities distribution | Up to US$5.00 per 100 ADSs | | ADS Services (annual fee) | Up to US$5.00 per 100 ADSs | - For the year ended December 31, 2020, the depositary, Citibank, N.A., reimbursed the company **US$0.07 million** for expenses related to the ADS program[983](index=983&type=chunk) Part II [Controls and Procedures](index=164&type=section&id=ITEM%2015.%20CONTROLS%20AND%20PROCEDURES) This section confirms the effectiveness of the company's disclosure controls and internal control over financial reporting as of December 31, 2020, as concluded by management and attested by the independent auditor - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2020[988](index=988&type=chunk) - Based on the COSO 2013 framework, management concluded that the company's internal control over financial reporting was effective as of December 31, 2020[990](index=990&type=chunk) - The independent auditor, PricewaterhouseCoopers Zhong Tian LLP, audited and confirmed the effectiveness of the company's internal control over financial reporting as of December 31, 2020[991](index=991&type=chunk) [Purchases of Equity Securities by the Issuer and Affiliated Purchasers](index=165&type=section&id=ITEM%2016.E.%20PURCHASES%20OF%20EQUITY%20SECURITIES%20BY%20THE%20ISSUER%20AND%20AFFILIATED%20PURCHASERS) This section details the company's share repurchase activities under its **US$300 million** plan, with approximately **2.1 million ADSs** repurchased as of December 31, 2020 2020 Share Repurchases | Period | Total ADSs Purchased | Average Price Paid Per ADS (US$) | | :--- | :--- | :--- | | March 2020 | 499,165 | 43.44 | | November 2020 | 56,218 | 84.67 | | December 2020 | 1,102,908 | 81.03 | - As of December 31, 2020, the company had repurchased a total of **2,092,436 ADSs** under its **US$300 million** plan, with approximately **US$160.5 million** remaining authorized for repurchase[1003](index=1003&type=chunk)[1004](index=1004&type=chunk) [Corporate Governance](index=166&type=section&id=ITEM%2016.G.%20CORPORATE%20GOVERNANCE) As a foreign private issuer, JOYY utilizes exemptions from certain Nasdaq listing rules, particularly regarding compensation committee independence and shareholder approval for equity issuances - The company, as a foreign private issuer, follows certain Cayman Islands governance practices, exempting it from some Nasdaq rules[1006](index=1006&type=chunk) - An exemption is used for the compensation committee, which is chaired by non-independent director David Xueling Li[1007](index=1007&type=chunk) - The company relies on an exemption from requiring shareholder approval for certain equity issuances, including for its 2019 Share Incentive Awards Arrangement[1008](index=1008&type=chunk) Part III [Financial Statements](index=166&type=section&id=ITEM%2018.%20FINANCIAL%20STATEMENTS) This section presents JOYY Inc.'s complete audited consolidated financial statements for 2018-2020, prepared under U.S. GAAP, with the auditor highlighting goodwill impairment and revenue recognition as critical audit matters [Report of Independent Registered Public Accounting Firm](index=178&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) PricewaterhouseCoopers Zhong Tian LLP issued an unqualified opinion on JOYY Inc.'s financial statements and internal controls, identifying goodwill impairment and revenue recognition as critical audit matters - The auditor, PricewaterhouseCoopers Zhong Tian LLP, issued an unqualified opinion on the financial statements and the effectiveness of internal controls over financial reporting[1034](index=1034&type=chunk) - A critical audit matter was the goodwill impairment assessment for the Bigo reporting unit, which had a goodwill balance of **RMB 12.1 billion**, requiring significant management judgment regarding cash flow projections, growth rates, and discount rates[1042](index=1042&type=chunk)[1043](index=1043&type=chunk) - Another critical audit matter was revenue recognition for live streaming, specifically the judgment involved in identifying distinct performance obligations in complex contracts and estimating their standalone selling prices[1046](index=1046&type=chunk)[1047](index=1047&type=chunk) [Consolidated Financial Statements](index=181&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements show total assets of **RMB 52.8 billion** as of December 31, 2020, a net loss from continuing operations of **RMB 126.4 million**, but an overall net income of **RMB 9.7 billion** driven by discontinued operations Consolidated Balance Sheet Highlights (As of Dec 31, 2020) | Item | Amount (RMB thousands) | | :--- | :--- | | **Total Assets** | **52,818,794** | | Cash and cash equivalents | 11,371,264 | | Goodwill | 12,215,156 | | **Total Liabilities** | **11,623,668** | | Convertible bonds | 5,084,362 | | **Total Shareholders' Equity** | **40,721,310** | Consolidated Income Statement Highlights (Year Ended Dec 31, 2020) | Item | Amount (RMB thousands) | | :--- | :--- | | Total net revenues | 13,230,945 | | Gross profit | 3,721,356 | | Operating loss | (2,820,687) | | Net loss from continuing operations | (126,378) | | Net income from discontinued operations | 9,849,538 | | **Net income** | **9,723,160** | - The acquisition of Bigo in March 2019 added **RMB 12.4 billion** to goodwill[1275](index=1275&type=chunk)[1316](index=1316&type=chunk) - The disposal of Huya in 2020 resulted in a gain of **RMB 6.4 billion**, which is included in income from discontinued operations[1245](index=1245&type=chunk)

PART I [Key Information](index=6&type=section&id=ITEM%203.%20KEY%20INFORMATION) This section outlines JOYY Inc.'s financial performance, capital structure, and risk profile, emphasizing live streaming revenue growth and key business, regulatory, and structural challenges [Selected Financial Data](index=6&type=section&id=A.%20Selected%20Financial%20Data) The company's net revenues significantly grew to RMB 25.6 billion in 2019, driven by live streaming, with net income reaching RMB 3.4 billion and total assets expanding to RMB 52.2 billion due to the Bigo acquisition Selected Consolidated Statements of Operations Data (2017-2019) | | 2017 | 2018 | 2019 | | :--- | :--- | :--- | :--- | | | (RMB thousands) | (RMB thousands) | (RMB thousands) | | **Total net revenues** | **11,594,792** | **15,763,557** | **25,576,204** | | Live streaming | 10,670,954 | 14,877,667 | 24,028,299 | | Others | 923,838 | 885,890 | 1,547,905 | | **Gross profit** | **4,568,390** | **5,746,423** | **8,427,854** | | **Operating income** | **2,699,231** | **2,639,690** | **1,067,955** | | **Net income attributable to common shareholders** | **2,493,235** | **1,641,958** | **3,379,330** | Selected Consolidated Balance Sheet Data (As of Dec 31, 2018 & 2019) | | 2018 | 2019 | | :--- | :--- | :--- | | | (RMB thousands) | (RMB thousands) | | **Total assets** | **25,768,045** | **52,209,483** | | Cash and cash equivalents | 6,004,231 | 3,893,538 | | Short-term deposits | 7,326,996 | 16,770,885 | | Goodwill | 11,763 | 12,947,192 | | **Total liabilities** | **3,972,241** | **13,325,646** | | **Total shareholders' equity** | **21,377,131** | **38,417,766** | - Share-based compensation expenses totaled **RMB 948.1 million** in 2019, a significant increase from previous years, with the largest allocations to Research and Development (**RMB 505.7 million**) and General and Administrative (**RMB 348.5 million**) expenses[22](index=22&type=chunk) [Risk Factors](index=8&type=section&id=D.%20Risk%20Factors) The company faces numerous risks, including heavy reliance on live streaming revenue, intense competition, PRC regulatory scrutiny of its VIE structure, data privacy laws, and PFIC classification for U.S. tax purposes - The business is heavily dependent on live streaming, which constituted **93.9% of total net revenue** in 2019. Any decline in this segment could materially affect results[39](index=39&type=chunk)[44](index=44&type=chunk) - The company faces significant competition from other social media and live streaming platforms in China (Kuaishou, Douyin, Tencent Music, Momo, Douyu) and overseas (TikTok)[71](index=71&type=chunk) - The company's VIE structure, essential for its PRC operations, faces risks from PRC regulations. If the government finds this structure non-compliant, it could face severe penalties, including the shutdown of its platforms[149](index=149&type=chunk)[151](index=151&type=chunk)[152](index=152&type=chunk) - The company believes it was a Passive Foreign Investment Company (PFIC) for the 2019 tax year, which could result in significant adverse U.S. federal income tax consequences for U.S. holders of its ADSs[255](index=255&type=chunk)[257](index=257&type=chunk) - The company's dual-class share structure gives holders of Class B shares **ten votes per share**, compared to one for Class A shares. As of March 31, 2020, **Mr. David Xueling Li and his affiliates held 75.8% of the total voting power**, giving them substantial control over corporate matters[261](index=261&type=chunk)[262](index=262&type=chunk) [Information on the Company](index=60&type=section&id=ITEM%204.%20INFORMATION%20ON%20THE%20COMPANY) This section details JOYY's corporate history, business operations, organizational structure, and properties, highlighting the Bigo acquisition, name change, global platform portfolio, AI strategy, and VIE structure [History and Development of the Company](index=60&type=section&id=A.%20History%20and%20Development%20of%20the%20Company) JOYY Inc., founded in 2005 and public since 2012, underwent strategic changes including the 2019 Bigo acquisition and corporate name change, with Huya's controlling stake transferred to Tencent in April 2020 - In March 2019, the company completed the acquisition of the remaining **68.3% of Bigo** for **US$343.1 million** in cash and the issuance of common shares, making Bigo a wholly-owned subsidiary[300](index=300&type=chunk) - Effective December 20, 2019, the company changed its corporate name from "YY Inc." to "JOYY Inc."[302](index=302&type=chunk) - On April 3, 2020, the company transferred a controlling stake in Huya to a Tencent subsidiary for approximately **US$262.6 million**. Consequently, JOYY will no longer consolidate Huya's operating results[297](index=297&type=chunk) [Business Overview](index=64&type=section&id=B.%20Business%20Overview) JOYY operates a global social media matrix focused on video content, monetizing primarily through virtual item sales on platforms like YY Live and Bigo Live, leveraging AI, and navigating extensive content and data privacy regulations Key Product Mobile Monthly Active Users (MAU) - Q4 2019 | Platform | Mobile MAU (Q4 2019) | YoY Growth | | :--- | :--- | :--- | | imo | 211.0 million | N/A | | Likee | 115.3 million | 208.3% | | Huya | 61.6 million | 21.5% | | YY Live | 41.2 million | 3.8% | | Hago | 33.0 million | 57.9% | | Bigo Live | 23.1 million | 18.6% | - The company's business model focuses on integrating traffic generation, user engagement, and monetization, primarily through the sale of virtual items in live streaming[313](index=313&type=chunk) - Artificial intelligence (AI) is integral to all critical aspects of the business, from content recommendation and distribution to automated product testing and corporate decision-making[312](index=312&type=chunk)[334](index=334&type=chunk) - The company is subject to extensive PRC regulations covering telecommunications, internet content, online games, virtual currency, and data security, as well as international regulations like GDPR in the EU and the CCPA in California[352](index=352&type=chunk)[469](index=469&type=chunk)[470](index=470&type=chunk)[472](index=472&type=chunk) [Organizational Structure](index=94&type=section&id=C.%20Organizational%20Structure) JOYY Inc. operates in China via Variable Interest Entities (VIEs) like Guangzhou Huaduo, essential for complying with PRC foreign ownership restrictions, providing effective control and financial consolidation - The company uses a Variable Interest Entity (VIE) structure to conduct its operations in China due to PRC restrictions on foreign ownership in the internet sector[790](index=790&type=chunk) - Key VIEs include Guangzhou Huaduo, Beijing Tuda, Bilin Online, Guangzhou Huya, and Guangzhou BaiGuoYuan. These entities are controlled through a series of contractual agreements rather than direct equity ownership[482](index=482&type=chunk)[790](index=790&type=chunk) - As of April 3, 2020, JOYY owned **43.0% of the voting power** in HUYA Inc. and no longer consolidates its financial results[483](index=483&type=chunk) [Property, Equipment and Land Use Right](index=95&type=section&id=D.%20Property%2C%20Equipment%20and%20Land%20Use%20Right) The company's headquarters are in Guangzhou, China, with additional owned and leased office spaces globally, including Zhuhai and Singapore, while physical servers are hosted in third-party data centers - The company's corporate headquarters is in Guangzhou, China, comprising **37,548 square meters**. It also owns a **27,206 square meter** building in Zhuhai[484](index=484&type=chunk) - Bigo's headquarters is in Singapore, and it leases **39,793 square meters** of office space globally. Huya leases **30,402 square meters**, primarily in Guangzhou[485](index=485&type=chunk)[486](index=486&type=chunk) [Operating and Financial Review and Prospects](index=96&type=section&id=ITEM%205.%20OPERATING%20AND%20FINANCIAL%20REVIEW%20AND%20PROSPECTS) This section analyzes JOYY's financial condition and results, noting a 62.2% revenue surge in 2019 driven by Bigo consolidation, alongside sharp increases in costs and operating expenses due to global expansion [Operating Results](index=96&type=section&id=A.%20Operating%20Results) In 2019, net revenues increased 62.2% to RMB 25.6 billion, primarily from live streaming and Bigo consolidation, while costs and operating expenses rose significantly due to revenue sharing, bandwidth, and sales and marketing Year-over-Year Financial Performance (2018 vs. 2019) | Metric | 2018 (RMB millions) | 2019 (RMB millions) | Change (%) | | :--- | :--- | :--- | :--- | | **Net Revenues** | **15,763.6** | **25,576.2** | **+62.2%** | | Live Streaming Revenues | 14,877.7 | 24,028.3 | +61.5% | | **Cost of Revenues** | **10,017.1** | **17,148.4** | **+71.2%** | | Revenue Sharing & Content | 8,272.7 | 12,861.4 | +55.5% | | Bandwidth Costs | 967.4 | 1,723.0 | +78.1% | | **Operating Expenses** | **3,224.6** | **7,764.7** | **+140.8%** | | R&D Expenses | 1,192.1 | 2,535.5 | +112.7% | | Sales & Marketing Expenses | 1,149.3 | 3,739.7 | +225.4% | | **Net Income Attributable to Shareholders** | **1,642.0** | **3,379.3** | **+105.8%** | - The significant increase in net income for 2019 was heavily influenced by a non-cash gain of **RMB 2.7 billion** on the fair value change of the company's pre-existing investment in Bigo upon its acquisition[634](index=634&type=chunk)[1267](index=1267&type=chunk) - The company's three main segments in 2019 were YY, Huya, and Bigo. Bigo, consolidated from March 2019, contributed **RMB 5.0 billion** in revenue for the period[648](index=648&type=chunk)[652](index=652&type=chunk) [Liquidity and Capital Resources](index=118&type=section&id=B.%20Liquidity%20and%20Capital%20Resources) The company financed operations through cash flow and a US$1 billion convertible notes offering in 2019, with cash, cash equivalents, and restricted cash totaling RMB 4.55 billion by year-end Summary of Cash Flows (2019) | Cash Flow Item | Amount (in millions RMB) | | :--- | :--- | | Net cash provided by operating activities | 4,581.7 | | Net cash used in investing activities | (15,609.9) | | Net cash provided by financing activities | 9,469.9 | | **Net decrease in cash and equivalents** | **(1,558.3)** | - In June 2019, the company issued **US$1 billion** in convertible senior notes (**US$500 million** due 2025 and **US$500 million** due 2026), receiving net proceeds of **US$982.4 million**[690](index=690&type=chunk) - As of December 31, 2019, the company held **RMB 4.55 billion** in cash, cash equivalents, and restricted cash, down from **RMB 6.00 billion** at the end of 2018[691](index=691&type=chunk) - Capital expenditures were **RMB 1.22 billion (US$175.9 million)** in 2019, a significant increase from **RMB 392.8 million** in 2018, primarily for purchasing office space, servers, and other assets[707](index=707&type=chunk) [Tabular Disclosure of Contractual Obligations](index=122&type=section&id=F.%20Tabular%20Disclosure%20of%20Contractual%20Obligations) As of December 31, 2019, JOYY's primary contractual obligations included operating lease commitments, capital commitments, and convertible senior notes, representing significant future payments Contractual Obligations as of December 31, 2019 | Obligation Type | Total | Less than 1 year | 1-2 years | 3-5 years | More than 5 years | | :--- | :--- | :--- | :--- | :--- | :--- | | | (RMB thousands) | (RMB thousands) | (RMB thousands) | (RMB thousands) | (RMB thousands) | | Operating lease commitments (RMB) | 359,971 | 159,920 | 106,987 | 93,064 | — | | Capital commitment (RMB) | 915,780 | 506,924 | 197,749 | 211,107 | — | | Convertible senior notes (US$) | 1,065,313 | 10,625 | 10,625 | 31,875 | 1,012,188 | [Directors, Senior Management and Employees](index=123&type=section&id=ITEM%206.%20DIRECTORS%2C%20SENIOR%20MANAGEMENT%20AND%20EMPLOYEES) This section covers JOYY's leadership, compensation, board structure, and workforce, highlighting key executives, share incentive plans, board committees, and a dual-class share structure concentrating voting power [Directors and Senior Management](index=123&type=section&id=A.%20Directors%20and%20Senior%20Management) JOYY is led by co-founder David Xueling Li as Chairman and CEO, supported by a senior management team including the CFO, COO, and CTO, with a board comprising five directors, including four independent members - Mr. David Xueling Li is the co-founder, Chairman of the Board, and Chief Executive Officer[719](index=719&type=chunk) - The senior executive team includes Bing Jin (CFO), Ting Li (COO), and Pengjun Lu (CTO)[719](index=719&type=chunk) [Compensation of Directors and Executive Officers](index=124&type=section&id=B.%20Compensation%20of%20Directors%20and%20Executive%20Officers) In 2019, directors and executive officers received RMB 28.8 million in cash compensation, with equity-based incentives from three share incentive plans aligning management interests with shareholder value - For the fiscal year ended December 31, 2019, the aggregate cash compensation (salaries and bonuses) paid to directors and executive officers was **RMB 28.8 million (US$4.1 million)**[728](index=728&type=chunk) - The company has three share incentive plans: the 2009 Scheme (expired Dec 2019), the 2011 Plan, and the 2019 Arrangement (for Bigo employees)[732](index=732&type=chunk)[734](index=734&type=chunk)[744](index=744&type=chunk)[753](index=753&type=chunk) - As of March 31, 2020, there were outstanding options to purchase **10.3 million common shares**, **37.1 million restricted shares**, and **42.7 million restricted share units** under the various plans[733](index=733&type=chunk) [Board Practices](index=130&type=section&id=C.%20Board%20Practices) The board of directors, consisting of five members, has four key committees, with the Audit Committee comprising independent directors and the Compensation Committee chaired by the CEO under foreign private issuer exemptions - The board has four committees: Audit, Compensation, Corporate Governance and Nominating, and Investment[765](index=765&type=chunk) - The Audit Committee consists of three independent directors: Peter Andrew Schloss (Chairman), David Tang, and Richard Weidong Ji. Mr. Schloss qualifies as an "audit committee financial expert"[766](index=766&type=chunk) - The Compensation Committee is chaired by CEO David Xueling Li, who is not an independent director, a practice permitted under foreign private issuer exemptions[767](index=767&type=chunk) [Employees](index=132&type=section&id=D.%20Employees) As of December 31, 2019, JOYY's workforce more than doubled to 9,273 employees, with a strong focus on research and development and customer services, and participation in all required PRC social security plans Employee Breakdown by Function (as of Dec 31, 2019) | Function | Number of Employees | Percentage | | :--- | :--- | :--- | | Customer services and operations | 4,210 | 45% | | Research and development | 3,946 | 43% | | Sales and marketing | 446 | 5% | | General and administration | 671 | 7% | | **Total** | **9,273** | **100%** | - The total number of employees more than doubled from **4,325** at the end of 2018 to **9,273** at the end of 2019[775](index=775&type=chunk) [Share Ownership](index=132&type=section&id=E.%20Share%20Ownership) The company's dual-class share structure, with Class B shares holding ten votes per share, grants co-founder David Xueling Li substantial control, owning 75.8% of the total voting power as of March 31, 2020 - As of March 31, 2020, **David Xueling Li**, Chairman and CEO, beneficially owned shares representing **75.8% of the total voting power**[784](index=784&type=chunk) - The company has a dual-class share structure where Class A common shares have **one vote per share** and Class B common shares have **ten votes per share**[788](index=788&type=chunk) [Major Shareholders and Related Party Transactions](index=134&type=section&id=ITEM%207.%20MAJOR%20SHAREHOLDERS%20AND%20RELATED%20PARTY%20TRANSACTIONS) This section details JOYY's concentrated ownership structure and related party transactions, particularly the critical contractual arrangements with its Variable Interest Entities (VIEs) for PRC operations [Related Party Transactions](index=135&type=section&id=B.%20Related%20Party%20Transactions) JOYY conducts China operations via VIE contractual arrangements to comply with foreign ownership restrictions, receiving significant service fees from entities like Guangzhou Huaduo and Guangzhou Huya, and engaging in affiliate transactions - The company relies on a VIE structure to operate in China. This involves a series of contractual arrangements with entities like Guangzhou Huaduo and Guangzhou Huya to transfer economic benefits and maintain control[790](index=790&type=chunk) - In 2019, the company received service fees of **RMB 476.5 million** from Guangzhou Huaduo and **RMB 941.0 million** from Guangzhou Huya under these VIE arrangements[798](index=798&type=chunk)[806](index=806&type=chunk) - The company paid **RMB 116.0 million (US$16.7 million)** for bandwidth services in 2019 to Guangzhou Sunhongs, a company in which principal shareholder Mr. Jun Lei holds a **19.5% interest**[832](index=832&type=chunk) [Financial Information](index=143&type=section&id=ITEM%208.%20FINANCIAL%20INFORMATION) This section includes consolidated financial statements, discusses a notable lawsuit with NetEase resulting in a RMB 20.0 million compensation order, and confirms the company's policy of not paying dividends - The company was ordered by the Guangzhou Intellectual Property Court to compensate NetEase **RMB 20.0 million** for copyright infringement related to the game Fantasy Westward Journey. The judgment was upheld on appeal in December 2019[840](index=840&type=chunk) - The company has never paid dividends and does not have a current plan to do so, preferring to retain earnings for operational and expansion purposes[844](index=844&type=chunk) [Additional Information](index=145&type=section&id=ITEM%2010.%20ADDITIONAL%20INFORMATION) This section details JOYY's corporate governance and legal framework as a Cayman Islands company, highlighting its dual-class share structure, differences in shareholder rights, and its classification as a PFIC for U.S. tax purposes - The company's common stock is divided into Class A (**1 vote per share**) and Class B (**10 votes per share**). Class B shares are convertible to Class A, but not vice-versa, concentrating voting power with Class B holders[856](index=856&type=chunk)[864](index=864&type=chunk) - The company believes it was a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes for the taxable year ended December 31, 2019[949](index=949&type=chunk) - As a Cayman Islands company, shareholder rights differ from those in the U.S. For example, shareholders have no general right to inspect corporate records or lists of shareholders, and derivative lawsuits are more difficult to bring[903](index=903&type=chunk)[912](index=912&type=chunk)[936](index=936&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=160&type=section&id=ITEM%2011.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company's primary market risks are foreign exchange risk, impacting USD-denominated assets, and interest rate risk on deposits, with a hypothetical 10% USD depreciation decreasing asset value by RMB 1.39 billion - The company is exposed to foreign exchange risk as most revenues are in RMB while some assets are in USD. As of Dec 31, 2019, a **10% depreciation of the USD** against the RMB would result in a decrease of **RMB 1.39 billion** in the value of its USD-denominated cash, deposits, and investments[968](index=968&type=chunk)[971](index=971&type=chunk) - The company is exposed to interest rate risk on its interest-earning bank deposits. A hypothetical **1% decrease in interest rates** would have reduced interest income by **US$23.6 million** for the year ended December 31, 2019[972](index=972&type=chunk) [Controls and Procedures](index=164&type=section&id=ITEM%2015.%20CONTROLS%20AND%20PROCEDURES) Management concluded that JOYY's disclosure controls and internal control over financial reporting were effective as of December 31, 2019, with the independent auditor also issuing an unqualified opinion - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2019[986](index=986&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2019, based on the COSO framework (2013)[988](index=988&type=chunk) - In 2019, the company completed the integration of the internal control over financial reporting of its acquisition, Bigo[990](index=990&type=chunk) [Principal Accountant Fees and Services](index=165&type=section&id=ITEM%2016C.%20PRINCIPAL%20ACCOUNTANT%20FEES%20AND%20SERVICES) This section details fees paid to PricewaterhouseCoopers Zhong Tian LLP, totaling RMB 26.9 million in 2019, with audit fees comprising the largest portion, all pre-approved by the audit committee Accountant Fees (2018-2019) | Fee Type | 2018 (RMB thousands) | 2019 (RMB thousands) | | :--- | :--- | :--- | | Audit fees | 20,101 | 23,186 | | Audit-related fees | — | 688 | | Tax fees | 763 | 2,521 | | Others | 680 | 534 | [Purchases of Equity Securities by the Issuer and Affiliated Purchasers](index=166&type=section&id=ITEM%2016E.%20PURCHASES%20OF%20EQUITY%20SECURITIES%20BY%20THE%20ISSUER%20AND%20AFFILIATED%20PURCHASERS) In August 2019, the board approved a US$300 million share repurchase plan, under which the company repurchased approximately 0.4 million ADSs for US$23.7 million by year-end - On August 13, 2019, the board approved a 12-month share repurchase plan for up to **US$300 million**[1001](index=1001&type=chunk) Share Repurchases in 2019 | Period | Total ADSs Purchased | Average Price Paid Per ADS (US$) | Approx. Dollar Value of ADSs Purchased (US$ thousands) | Value Remaining Under Plan (US$ thousands) | | :--- | :--- | :--- | :--- | :--- | | Aug 14 - Aug 31, 2019 | 434,145 | 54.62 | 23,713 | 276,287 | PART III [Financial Statements](index=166&type=section&id=ITEM%2018.%20FINANCIAL%20STATEMENTS) This section presents JOYY's audited consolidated financial statements, with the auditor identifying critical audit matters related to Bigo acquisition intangible asset valuation, goodwill impairment, and revenue recognition - The independent auditor, PricewaterhouseCoopers Zhong Tian LLP, identified three Critical Audit Matters for the 2019 audit: 1) Valuation of trademark and user base intangible assets from the Bigo acquisition, 2) Goodwill impairment assessment for the Bigo reporting unit, and 3) Revenue recognition for contracts with multiple performance obligations[1040](index=1040&type=chunk)[1041](index=1041&type=chunk)[1045](index=1045&type=chunk)[1048](index=1048&type=chunk) - The acquisition of Bigo in March 2019 was a transformative event, with net consideration of **RMB 16.0 billion**, resulting in the recognition of **RMB 12.4 billion** in goodwill and **RMB 3.5 billion** in identifiable intangible assets (trademark, user base, etc.)[1041](index=1041&type=chunk)[1265](index=1265&type=chunk)[1269](index=1269&type=chunk) - On April 3, 2020, the company sold a controlling stake in Huya to Tencent for **US$262.6 million**. As a result, Huya ceased to be a subsidiary and its results will be accounted for using the equity method going forward[1445](index=1445&type=chunk) [Exhibits](index=167&type=section&id=ITEM%2019.%20EXHIBITS) This section lists all exhibits filed with the annual report, including articles of association, share incentive plans, material contracts like VIE agreements, convertible notes indentures, and required CEO/CFO certifications - The exhibits include the detailed contractual arrangements that form the basis of the company's VIE structure for its key PRC operating entities, such as Guangzhou Huaduo, Beijing Tuda, and the entities related to Huya and Bigo[1013](index=1013&type=chunk)[1014](index=1014&type=chunk)[1015](index=1015&type=chunk) - Filed exhibits include the indentures for the **US$500 million** 0.75% Convertible Senior Notes due 2025 and the **US$500 million** 1.375% Convertible Senior Notes due 2026[1021](index=1021&type=chunk) - The list includes the 2009, 2011, and 2019 Share Incentive Plans, which govern the company's equity compensation for employees[1013](index=1013&type=chunk)[1021](index=1021&type=chunk)

Part I [Key Information](index=5&type=section&id=ITEM%203.%20KEY%20INFORMATION) This section presents selected consolidated financial data for the past five years and details significant investment risks, categorized by business, corporate structure, China operations, and ADS-related factors [Selected Financial Data](index=5&type=section&id=A.%20Selected%20Financial%20Data) The company presents selected consolidated financial data for fiscal years 2014-2018, showing consistent net revenue growth to **RMB 15.76 billion** in 2018, though net income decreased to **RMB 1.64 billion** due to fair value losses, while total assets significantly increased to **RMB 25.77 billion** Selected Consolidated Statements of Operations Data (2016-2018) | Indicator | 2016 (RMB, thousands) | 2017 (RMB, thousands) | 2018 (RMB, thousands) | | :--- | :--- | :--- | :--- | | **Total net revenues** | 8,204,050 | 11,594,792 | 15,763,557 | | - Live streaming | 7,027,227 | 10,670,954 | 14,877,667 | | - Others | 1,176,823 | 923,838 | 885,890 | | **Gross profit** | 3,100,620 | 4,568,390 | 5,746,423 | | **Operating income** | 1,771,484 | 2,699,231 | 2,639,690 | | **Net income attributable to common shareholders** | 1,523,918 | 2,493,235 | 1,641,958 | | **Diluted Net income per ADS (RMB)** | 26.40 | 41.33 | 25.38 | Selected Consolidated Balance Sheet Data (As of Year-End 2017-2018) | Indicator | 2017 (RMB, thousands) | 2018 (RMB, thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | 2,617,432 | 6,004,231 | | Short-term deposits | 6,000,104 | 7,326,996 | | **Total assets** | 14,458,719 | 25,768,045 | | Total current liabilities | 3,145,799 | 3,853,026 | | **Total shareholders' equity** | 10,712,859 | 21,377,131 | - Share-based compensation expenses totaled **RMB 648.0 million** in 2018, a significant increase from **RMB 257.7 million** in 2017, impacting overall profitability[23](index=23&type=chunk) [Risk Factors](index=7&type=section&id=D.%20Risk%20Factors) This section details numerous risks, including heavy dependence on live streaming revenue, intense competition, challenges in managing growth, risks associated with the VIE structure, evolving PRC and international regulations, and ADS-related price volatility and share structure dilution - The company's business is heavily dependent on live streaming services, which constituted **94.4%** of total net revenue in 2018, and any decline in this segment could materially harm results[41](index=41&type=chunk)[44](index=44&type=chunk) - The company faces significant competition from other live streaming platforms like Momo, Tencent Music, Kuaishou, and Douyin in China, and TikTok and Live.me overseas[70](index=70&type=chunk)[71](index=71&type=chunk) - The use of a Variable Interest Entity (VIE) structure to comply with PRC foreign ownership restrictions is a key risk, as non-compliance could lead to severe penalties, including platform shutdown[141](index=141&type=chunk)[143](index=143&type=chunk)[144](index=144&type=chunk) - The dual-class share structure gives holders of Class B shares ten votes per share, while Class A shares get one vote, resulting in Mr. David Xueling Li and his affiliates holding **75.4%** of the total voting power as of April 15, 2019, granting them substantial control over corporate matters[245](index=245&type=chunk)[247](index=247&type=chunk) - The company may be classified as a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes, which could result in adverse tax consequences for U.S. holders of its ADSs or common shares[242](index=242&type=chunk)[243](index=243&type=chunk)[244](index=244&type=chunk) [Information on the Company](index=55&type=section&id=ITEM%204.%20INFORMATION%20ON%20THE%20COMPANY) This section provides a comprehensive overview of the company's history, business operations, organizational structure, and properties, detailing its evolution, key platforms, revenue model, technology, and the competitive and regulatory landscape, including its use of VIEs [History and Development of the Company](index=55&type=section&id=A.%20History%20and%20Development%20of%20the%20Company) Founded in 2005 and listed on Nasdaq in 2012, the company expanded through organic growth and strategic acquisitions, including the spin-off and IPO of HUYA Inc. and the significant global expansion achieved through the acquisition of Bigo Inc. in March 2019 - The company commenced operations in April 2005 with the establishment of Guangzhou Huaduo[264](index=264&type=chunk) - The company's ADSs were listed on The Nasdaq Stock Market under the symbol "YY" on November 21, 2012[287](index=287&type=chunk) - In March 2019, the company completed the acquisition of the remaining **68.3%** equity interest in Bigo Inc., making it a wholly-owned subsidiary and significantly expanding its international presence[285](index=285&type=chunk) - Its majority-controlled subsidiary, HUYA Inc., completed its initial public offering in May 2018, and Tencent holds a right to purchase shares to reach **50.1%** of HUYA's voting power between March 2020 and March 2021[282](index=282&type=chunk) [Business Overview](index=58&type=section&id=B.%20Business%20Overview) The company operates as a global social media platform focused on live streaming through YY Live, Huya, and Bigo, generating revenue primarily from virtual item sales, while expanding its user base to **90.4 million** mobile MAUs for YY Live and Huya, and **59.4 million** for Bigo in Q4 2018, with a focus on AI-driven innovation and global expansion - The company's main platforms are YY Live (comprehensive live streaming), Huya (game-focused live streaming), and Bigo (global live streaming and short-form video)[300](index=300&type=chunk)[302](index=302&type=chunk)[303](index=303&type=chunk)[304](index=304&type=chunk) - In Q4 2018, YY Live and Huya combined had **90.4 million** mobile average monthly active users (MAUs), an **18.1%** increase YoY, while Bigo had **59.4 million** mobile MAUs for its services in the same period[291](index=291&type=chunk)[300](index=300&type=chunk) - The primary revenue model is the sale of virtual gifts and items on its live streaming platforms, with additional revenue from online games, memberships, and advertising[297](index=297&type=chunk)[298](index=298&type=chunk) - The company is expanding globally with Hago, a casual-game social platform with **20.9 million** MAUs in Q4 2018, and Bigo, which has a strong presence in Southeast Asia, South Asia, the Middle East, and America[292](index=292&type=chunk)[294](index=294&type=chunk) - The business is subject to extensive PRC regulations covering telecommunications, internet content, online games, data privacy, and foreign ownership, as well as international regulations like GDPR in the EU[341](index=341&type=chunk)[343](index=343&type=chunk)[461](index=461&type=chunk) [Organizational Structure](index=90&type=section&id=C.%20Organizational%20Structure) The company, a Cayman Islands holding entity, operates through a complex structure of subsidiaries and Variable Interest Entities (VIEs) to comply with PRC foreign ownership restrictions, with key VIEs like Guangzhou Huaduo and Guangzhou Huya holding necessary operating licenses - The company is a Cayman Islands holding company[469](index=469&type=chunk) - It controls its PRC operating entities, such as Guangzhou Huaduo and Guangzhou Huya, through a series of contractual arrangements (VIE structure) rather than direct ownership to comply with Chinese law[469](index=469&type=chunk) - HUYA Inc. is a majority-controlled, publicly-listed subsidiary whose financial results are consolidated with the company[469](index=469&type=chunk) [Property, Plant, and Equipment](index=92&type=section&id=D.%20Property,%20Equipment%20and%20Land%20Use%20Right) The company's principal executive offices are in an owned property in Guangzhou, with additional owned and leased facilities in China, and it acquired land use rights in Guangzhou for future development, while servers are hosted in leased third-party data centers - Principal executive offices are located in a **37,548 square meter** owned property in Panyu District, Guangzhou[471](index=471&type=chunk) - The company acquired land use rights for a parcel in Pazhou, Guangzhou, designated as a new e-commerce center, to support future development[472](index=472&type=chunk) - Servers are hosted in leased internet data centers owned by major domestic providers throughout China[473](index=473&type=chunk) [Operating and Financial Review and Prospects](index=92&type=section&id=ITEM%205.%20OPERATING%20AND%20FINANCIAL%20REVIEW%20AND%20PROSPECTS) This section provides management's discussion and analysis of the company's financial condition and operating results, detailing revenue streams, cost structures, and expenses, highlighting live streaming growth, and covering liquidity, capital resources, expenditures, and contractual obligations [Operating Results](index=93&type=section&id=A.%20Operating%20Results) In 2018, total net revenues grew **36.0%** to **RMB 15.76 billion**, driven by a **39.4%** increase in live streaming revenue, though net income attributable to common shareholders decreased to **RMB 1.64 billion** from **RMB 2.49 billion** in 2017, primarily due to a **RMB 2.29 billion** fair value loss on derivative liabilities Revenue Breakdown (2016-2018) | Revenue Stream | 2016 (RMB, thousands) | 2017 (RMB, thousands) | 2018 (RMB, thousands) | | :--- | :--- | :--- | :--- | | Live streaming | 7,027,227 | 10,670,954 | 14,877,667 | | Others | 1,176,823 | 923,838 | 885,890 | | **Total net revenues** | **8,204,050** | **11,594,792** | **15,763,557** | - **2018 vs. 2017 Performance:** - **Net Revenues:** Increased **36.0%** to **RMB 15,763.6 million**[615](index=615&type=chunk) - **Live Streaming Revenues:** Increased **39.4%** to **RMB 14,877.7 million**, driven by growth in paying users (16.6M to 19.8M) and ARPU (**RMB 643.2** to **RMB 751.2**)[616](index=616&type=chunk) - **Cost of Revenues:** Increased **42.6%** to **RMB 10,017.1 million**, mainly due to a **44.4%** rise in revenue sharing fees and content costs[618](index=618&type=chunk) - **Operating Expenses:** Increased **59.6%** to **RMB 3,224.6 million**, driven by higher R&D and Sales & Marketing expenses[619](index=619&type=chunk) - **Net Income:** Decreased to **RMB 1,642.0 million** from **RMB 2,493.2 million**, primarily due to a **RMB 2.29 billion** fair value loss on derivative liabilities[619](index=619&type=chunk) - **2017 vs. 2016 Performance:** - **Net Revenues:** Increased **41.3%** to **RMB 11,594.8 million**[628](index=628&type=chunk) - **Live Streaming Revenues:** Increased **51.9%** to **RMB 10,671.0 million**, driven by a significant increase in paying users from **11.0 million** to **16.6 million**[629](index=629&type=chunk) - **Cost of Revenues:** Increased **37.7%**, primarily due to a **51.1%** rise in revenue sharing fees and content costs[632](index=632&type=chunk) - **Net Income:** Increased to **RMB 2,493.2 million** from **RMB 1,523.9 million**[639](index=639&type=chunk) [Liquidity and Capital Resources](index=114&type=section&id=B.%20Liquidity%20and%20Capital%20Resources) The company's operations are financed by cash from operations, IPOs, and offerings, holding **RMB 6.0 billion** in cash and equivalents as of December 31, 2018, with strong net cash from operating activities at **RMB 4.46 billion** in 2018, and believes its current liquidity is sufficient for the next 12 months Summary of Cash Flows (2016-2018) | Cash Flow Activity | 2016 (RMB, thousands) | 2017 (RMB, thousands) | 2018 (RMB, thousands) | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | 2,421,135 | 3,718,452 | 4,464,814 | | Net cash used in investing activities | (2,172,359) | (3,037,516) | (6,295,386) | | Net cash provided by financing activities | 10,651 | 1,392,525 | 4,167,270 | - As of December 31, 2018, the company had **RMB 6.00 billion** in cash and cash equivalents, up from **RMB 3.62 billion** at year-end 2017[652](index=652&type=chunk) - Significant financing events in 2018 included receiving **US$461.6 million** from Tencent for Huya's Series B-2 shares and net proceeds of **US$190.1 million** from Huya's IPO[649](index=649&type=chunk)[650](index=650&type=chunk) - Capital expenditures were **RMB 392.8 million** (**US$57.1 million**) in 2018, primarily for purchasing servers, office space, and other assets[668](index=668&type=chunk) [Contractual Obligations](index=117&type=section&id=F.%20Tabular%20Disclosure%20of%20Contractual%20Obligations) As of December 31, 2018, total contractual obligations amounted to **RMB 415.3 million**, comprising **RMB 221.9 million** in operating lease commitments and **RMB 193.4 million** in capital commitments, with most obligations due within one to five years Contractual Obligations as of December 31, 2018 (in RMB thousands) | Obligation Type | Total | Less than 1 year | 1-2 years | 3-5 years | More than 5 years | | :--- | :--- | :--- | :--- | :--- | :--- | | Operating lease commitments | 221,895 | 84,689 | 53,609 | 83,597 | - | | Capital commitment | 193,412 | 154,427 | 27,383 | 11,599 | 3 | | Convertible senior notes (in US$) | 1,006 | 1,006 | - | - | - | [Directors, Senior Management and Employees](index=118&type=section&id=ITEM%206.%20DIRECTORS,%20SENIOR%20MANAGEMENT%20AND%20EMPLOYEES) This section details the company's leadership, board practices, and employee base, including directors and executive officers, 2018 compensation of **RMB 19.6 million**, board committee structures, **4,325** employees as of December 31, 2018, and the significant voting control held by the chairman due to the dual-class share system [Directors and Senior Management](index=118&type=section&id=A.%20Directors%20and%20Senior%20Management) The company is led by co-founder, Chairman, and CEO David Xueling Li, with a senior management team including CFO Bing Jin, COO Ting Li, and CTO Pengjun Lu, and a five-member board of directors including three independent directors - Mr. David Xueling Li is the co-founder, Chairman of the Board, and Chief Executive Officer[679](index=679&type=chunk) - Other key executives include Bing Jin (CFO), Ting Li (COO), and Pengjun Lu (CTO)[685](index=685&type=chunk)[686](index=686&type=chunk)[688](index=688&type=chunk) [Compensation](index=120&type=section&id=B.%20Compensation%20of%20Directors%20and%20Executive%20Officers) In fiscal year 2018, the company paid **RMB 19.6 million** in cash compensation to directors and executive officers, in addition to awarding **367,870** HUYA Inc. ordinary shares, utilizing multiple share incentive plans to attract and retain talent - Aggregate cash compensation (salaries and bonuses) for directors and executive officers in FY2018 was **RMB 19.6 million** (**US$2.8 million**)[689](index=689&type=chunk) - The company utilizes multiple share incentive plans (2009 Scheme, 2011 Plan, HUYA 2017 Plan) to grant equity awards, with a significant number of options, restricted shares, and restricted share units outstanding as of April 15, 2019[692](index=692&type=chunk) [Board Practices](index=126&type=section&id=C.%20Board%20Practices) The five-member board of directors has established Audit, Compensation, and Corporate Governance & Nominating Committees, with the Audit Committee comprising independent directors, and the company utilizing foreign private issuer exemptions allowing a non-independent director to chair the Compensation Committee - The board has three committees: Audit, Compensation, and Corporate Governance and Nominating[734](index=734&type=chunk) - The Audit Committee consists of three independent directors: Peter Andrew Schloss (Chairman), David Tang, and Richard Weidong Ji, with Mr. Schloss qualifying as the 'audit committee financial expert'[735](index=735&type=chunk) - The company relies on foreign private issuer exemptions, allowing Chairman David Xueling Li, a non-independent director, to chair the Compensation Committee[736](index=736&type=chunk)[931](index=931&type=chunk) [Employees](index=128&type=section&id=D.%20Employees) As of December 31, 2018, the company had **4,325** employees, with the largest segment being Research and Development at **2,197** employees, underscoring its focus on technology and innovation Employee Breakdown by Function (as of Dec 31, 2018) | Function | Number of Employees | | :--- | :--- | | Research and development | 2,197 | | Customer services and operations | 1,303 | | General and administration | 404 | | Sales and marketing | 231 | | Engineering and maintenance | 175 | | Management | 15 | | **Total** | **4,325** | [Share Ownership](index=128&type=section&id=E.%20Share%20Ownership) The company operates with a dual-class share structure, where Chairman David Xueling Li beneficially owned **21.9%** of common shares but controlled **75.4%** of total voting power as of April 15, 2019, granting him substantial influence over corporate matters - The company has a dual-class share structure: Class A common shares (1 vote per share) and Class B common shares (10 votes per share)[753](index=753&type=chunk) Beneficial Ownership of Key Shareholders (as of April 15, 2019) | Shareholder | Total Common Shares Beneficially Owned (%) | Total Voting Power (%) | | :--- | :--- | :--- | | David Xueling Li | 21.9% | 75.4% | | All directors and executive officers as a group | 22.1% | 75.4% | - Mr. David Xueling Li's voting power includes shares held by entities he controls and voting rights over shares held by Mr. Jun Lei, which were delegated to him in August 2016[751](index=751&type=chunk) [Major Shareholders and Related Party Transactions](index=130&type=section&id=ITEM%207.%20MAJOR%20SHAREHOLDERS%20AND%20RELATED%20PARTY%20TRANSACTIONS) This section details major shareholders and related party transactions, emphasizing critical contractual arrangements with Variable Interest Entities (VIEs) like Guangzhou Huaduo and Guangzhou Huya, which ensure compliance with PRC regulations and transfer economic benefits and control to the company - The company conducts its operations in China through a series of contractual arrangements with its VIEs (e.g., Guangzhou Huaduo, Guangzhou Huya) and their shareholders to comply with PRC restrictions on foreign ownership[755](index=755&type=chunk) - These VIE agreements include Exclusive Business Cooperation, Exclusive Option, Equity Pledge, and Powers of Attorney, which collectively transfer economic benefits and provide effective control to YY Inc[757](index=757&type=chunk)[759](index=759&type=chunk)[761](index=761&type=chunk)[762](index=762&type=chunk) - In 2018, the company received service fees of **RMB 313.1 million** from Guangzhou Huaduo and **RMB 420.2 million** from Guangzhou Huya under these arrangements[763](index=763&type=chunk)[771](index=771&type=chunk) - Prior to its full acquisition in March 2019, Bigo Inc. was a significant related party, and as of Dec 31, 2018, the amount due from Bigo was **RMB 191.8 million** for operating expenses paid and loans provided by the company[793](index=793&type=chunk) [Financial Information](index=138&type=section&id=ITEM%208.%20FINANCIAL%20INFORMATION) This section includes the company's consolidated financial statements, discloses ongoing legal proceedings including a copyright infringement lawsuit with Guangzhou NetEase involving **RMB 20.0 million** in damages under appeal, and states the company's policy of retaining earnings for business expansion without current dividend plans - The company is involved in a lawsuit with Guangzhou NetEase Computer System Co., Ltd. over alleged copyright infringement, where a court ordered the company to pay **RMB 20.0 million**, but this judgment is not final and is under appeal[799](index=799&type=chunk) - The company has no current dividend policy and does not plan to pay dividends in the foreseeable future, retaining earnings for business operations and expansion[802](index=802&type=chunk) - The ability to pay dividends is also restricted by PRC regulations on the distribution of profits from PRC subsidiaries to the offshore holding company[803](index=803&type=chunk) [The Offer and Listing](index=139&type=section&id=ITEM%209.%20THE%20OFFER%20AND%20LISTING) This section details the trading of the company's securities, noting that its American Depositary Shares (ADSs) are listed on the Nasdaq Global Select Market under the symbol "YY", with each ADS representing **twenty** Class A common shares - The company's ADSs are listed on the Nasdaq Global Select Market under the symbol "YY"[808](index=808&type=chunk) - Each ADS represents **twenty** Class A common shares[808](index=808&type=chunk) [Additional Information](index=139&type=section&id=ITEM%2010.%20ADDITIONAL%20INFORMATION) This section provides additional details on the company's corporate governance and legal framework, summarizing key provisions of its Memorandum and Articles of Association, covering material contracts, exchange controls, and comprehensive taxation considerations for the Cayman Islands, PRC, and U.S., including the risk of PFIC classification - The company is incorporated in the Cayman Islands and its affairs are governed by its Memorandum and Articles of Association and Cayman Islands law[812](index=812&type=chunk) - Voting Rights: Class A common shares have one vote per share, while Class B common shares have ten votes per share, and Class B shares are convertible into Class A shares on a one-for-one basis, but not vice-versa[814](index=814&type=chunk)[823](index=823&type=chunk)[827](index=827&type=chunk) - PRC Taxation: Dividends from PRC subsidiaries to the overseas parent are generally subject to a **10%** withholding tax, and the company could be classified as a PRC "resident enterprise," which would subject its worldwide income to a **25%** PRC tax rate[863](index=863&type=chunk)[864](index=864&type=chunk) - U.S. Taxation: There is a risk that the company could be classified as a Passive Foreign Investment Company (PFIC), which would lead to adverse U.S. federal income tax consequences for U.S. holders of its ADSs or shares[870](index=870&type=chunk)[880](index=880&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=152&type=section&id=ITEM%2011.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company's primary market risks are foreign exchange risk from RMB-USD fluctuations and interest rate risk on cash deposits, where a hypothetical **1%** decrease would have reduced 2018 interest income by **US$12.8 million**, with no current hedging instruments in place - The company is exposed to foreign exchange risk as its revenues are primarily in RMB, while its ADSs are traded in USD, and the RMB is not freely convertible and its value fluctuates[894](index=894&type=chunk)[897](index=897&type=chunk) - Interest rate risk primarily affects interest income from cash and deposits, where a hypothetical **1 percentage point** decrease in interest rates would have lowered 2018 interest income by **US$12.8 million**[899](index=899&type=chunk) - The company has not entered into any hedging transactions to mitigate these risks[895](index=895&type=chunk) [Description of Securities Other than Equity Securities](index=153&type=section&id=ITEM%2012.%20DESCRIPTION%20OF%20SECURITIES%20OTHER%20THAN%20EQUITY%20SECU RITIES) This section details fees and charges for American Depositary Shares (ADSs) holders, including issuance, cancellation, and distribution fees, noting that the depositary reimbursed the company **US$0.36 million** in 2018 for ADS program expenses ADS Holder Service Fees | Service | Fee | | :--- | :--- | | Issuance of ADSs | Up to US$5.00 per 100 ADSs | | Cancellation of ADSs | Up to US$5.00 per 100 ADSs | | Distribution of cash dividends | Up to US$5.00 per 100 ADSs | | Distribution of ADSs (stock dividends, etc.) | Up to US$5.00 per 100 ADSs | | ADS Services Fee | Up to US$5.00 per 100 ADSs held on record date | - In 2018, the company received **US$0.36 million** from the depositary as reimbursement for expenses related to the ADS program[909](index=909&type=chunk) Part II [Controls and Procedures](index=155&type=section&id=ITEM%2015.%20CONTROLS%20AND%20PROCEDURES) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2018, a conclusion affirmed by PricewaterhouseCoopers Zhong Tian LLP's unqualified opinion - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2018[914](index=914&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2018, based on the COSO framework[917](index=917&type=chunk) - The independent auditor, PricewaterhouseCoopers Zhong Tian LLP, issued an unqualified audit report on the effectiveness of the company's internal control over financial reporting as of December 31, 2018[918](index=918&type=chunk) [Principal Accountant Fees and Services](index=156&type=section&id=ITEM%2016C.%20PRINCIPAL%20ACCOUNTANT%20FEES%20AND%20SERVICES) This section discloses fees paid to PricewaterhouseCoopers Zhong Tian LLP, totaling **RMB 21.5 million** in fiscal year 2018, primarily for audit services, all of which were pre-approved by the audit committee Accountant Fees (in RMB thousands) | Fee Type | 2017 | 2018 | | :--- | :--- | :--- | | Audit fees | 10,317 | 20,101 | | Audit-related fees | 4,029 | - | | Tax fees | - | 763 | | Others | - | 680 | - Audit fees for 2018 include services for the annual audit, internal controls audit, and services related to Huya's initial public offering[923](index=923&type=chunk) [Corporate Governance](index=157&type=section&id=ITEM%2016G.%20CORPORATE%20GOVERNANCE) As a foreign private issuer, the company adheres to Cayman Islands corporate governance practices, relying on exemptions from certain Nasdaq requirements, notably allowing a non-independent director to chair its compensation committee and for certain securities issuances without shareholder approval - The company follows home country (Cayman Islands) practices for certain governance matters, as permitted for foreign private issuers[930](index=930&type=chunk) - The company relies on an exemption allowing its compensation committee to be chaired by a non-independent director, Mr. David Xueling Li[931](index=931&type=chunk) Part III [Financial Statements](index=158&type=section&id=ITEM%2018.%20FINANCIAL%20STATEMENTS) This section presents the company's audited consolidated financial statements for fiscal years 2016-2018, prepared under U.S. GAAP, including the Independent Auditor's Report, Balance Sheets, Statements of Comprehensive Income, Statements of Changes in Shareholders' Equity, Statements of Cash Flows, and detailed notes [Report of Independent Registered Public Accounting Firm](index=166&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) PricewaterhouseCoopers Zhong Tian LLP issued an unqualified opinion on the company's consolidated financial statements for the three years ended December 31, 2018, and also on the effectiveness of its internal control over financial reporting as of December 31, 2018 - The auditor's opinion states that the consolidated financial statements present fairly, in all material respects, the financial position of YY Inc. in conformity with U.S. GAAP[949](index=949&type=chunk) - The auditor also opined that the company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018[949](index=949&type=chunk)