ANNOUNCEMENT OF THE RESULTS FOR THE THREE AND NINE MONTHS ENDED 30 SEPTEMBER 2017

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1 Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement. ANNOUNCEMENT OF THE RESULTS FOR THE THREE AND NINE MONTHS ENDED 30 SEPTEMBER 2017 The Board is pleased to announce the unaudited consolidated results of the Group for the three and nine months ended These interim results have been reviewed by the Auditor in accordance with International Standard on Review Engagements 2410 Review of interim financial information performed by the independent auditor of the entity issued by the International Auditing and Assurance Standards Board, and by the Audit Committee. FINANCIAL PERFORMANCE HIGHLIGHTS Three months ended Yearon-year 30 June change 2017 (RMB in millions, unless specified) Quarteron-quarter change Revenues 65,210 40,388 61% 56,606 15% Gross profit 31,681 21,828 45% 28,306 12% Operating profit 22,746 14,460 57% 22,560 1% Profit for the period 18,047 10,776 67% 18,254-1% Profit attributable to equity holders of the Company 18,006 10,646 69% 18,231-1% Non-GAAP profit attributable to equity holders of the Company 17,070 11,737 45% 16,391 4% EPS (RMB per share) - basic - diluted % 68% % -1% Non-GAAP EPS (RMB per share) - basic - diluted % 45% % 4% 1

2 Nine months ended Yearon-year change (RMB in millions, unless specified) Revenues 171, ,074 59% Gross profit 85,430 60,873 40% Operating profit 64,578 42,187 53% Profit for the period 50,849 30,924 64% Profit attributable to equity holders of the Company 50,713 30,566 66% Non-GAAP profit attributable to equity holders of the Company 47,672 33,088 44% EPS (RMB per share) - basic - diluted % 65% Non-GAAP EPS (RMB per share) - basic - diluted % 43% 2

3 BUSINESS REVIEW AND OUTLOOK 1. Company Financial Performance In the third quarter of 2017 We achieved 61% year-on-year revenue growth, driven primarily by smart phone games and PC games, payment related services, digital content subscriptions and sales, and online advertising. Operating profit grew by 57% year-on-year. Profit attributable to equity holders of the Company increased by 69% year-on-year. Non-GAAP profit attributable to equity holders of the Company increased by 45% year-on-year. Free cash flow grew by 94% year-on-year. 2. Company Business Highlights Operating Information As at 2017 As at 2016 (in millions, unless specified) As at 30 June 2017 Yearon-year change Quarteron-quarter change MAU of QQ % % Smart device MAU of QQ % % PCU of QQ (for the quarter) % % Combined MAU of Weixin and WeChat % % MAU of Qzone % % Smart device MAU of Qzone % % Fee-based VAS registered subscriptions % % 1 Since the first quarter of 2017, we have adjusted historical smart device QQ and Qzone MAU figures so as to include users who only participate in certain activities inside the QQ and Qzone applications, such as interest groups, listening to online music, or reading online literature. These changes had a relatively immaterial impact on the MAU count and growth rates, but we feel better reflect the broadening range of user activities within QQ. 3

4 Social and Communication QQ: Smart device MAU was down by 2.5% year-on-year to million while PCU, including PC and mobile, increased by 8.9% year-on-year to million. Smart device MAU for users aged 21 years or below increased year-on-year and their time spent per user remained high as we enhanced features which appealed to younger users. Daily active users and time spent on the KanDian news feeds service continued to grow. We introduced Topics for KanDian to help users discover trending content. Qzone: Smart device MAU was down 8.1% year-on-year to million. We expanded the Campus Qzone to cover more high schools and colleges, strengthening engagement among student users. Weixin and WeChat: Combined MAU reached million, representing year-on-year growth of 15.8%. Daily messages sent amounted to approximately 38 billion, representing year-on-year growth of 25%. Monthly active Official Accounts amounted to 3.5 million while monthly active followers of Official Accounts amounted to 797 million, representing year-on-year growth of 14% and 19% respectively. We have been enriching features of Weixin and WeChat to bring more convenience to our users daily lives. We rolled out Weixin Smart Transport, a solution which enables users to pay instantly for public transport fares by scanning QR codes, even without Internet access at the point of transaction. We will introduce more smart solutions for different verticals to better serve the social and ecommerce needs of our users and merchants. Online Games PC client games achieved approximately RMB14.6 billion in revenue, representing 27% year-on-year revenue growth, benefiting from key titles including DnF and LoL. We focused on retaining core users and enhancing engagement through initiatives such as the LoL World Championship 2017 event held in China and a DnF-themed cartoon series. We launched anniversary and seasonal content updates which were well-received by gamers. As a result, ARPUs increased both year-on-year and quarter-on-quarter. 4

5 Smart phone games grew by 84% year-on-year to approximately RMB18.2 billion in revenue (including smart phone games revenue attributable to our social networks business). Revenue growth in smart phone games was contributed by existing and newly launched game titles such as Honour of Kings in the MOBA genre, the China version of Contra Return in the Action genre, and Legacy TLBB Mobile, Legend of XuanYuan Mobile and Journey to the Fairyland Mobile in the RPG genre. The launch of our self-developed strategy game, Kings of Chaos, also contributed to revenue growth and expanded our leadership into this mobile game genre. In November 2017, we started the pre-registration process for a licensed survival shooter game, Glorious Mission, and CrossFire Mobile s update called Deserted Island. Both received overwhelming registration responses. We will continue to enhance our in-house R&D capability and identify attractive licensing opportunities to further diversify our game portfolio. Digital Content Digital content revenue continued to record rapid growth, driven by video subscriptions, and by live broadcast revenue. Tencent Video has exceeded 43 million fee-based subscriptions, which we believe represents the largest video streaming services subscriber base in China. We will continue to increase our investment in video content, especially self-commissioned video content, and to reinforce our content recommendation algorithms. Online Advertising Our online advertising business achieved 48% year-on-year growth in revenue. For media advertising, our video platform grew strongly, benefiting from the popular drama series such as Nothing Gold Can Stay ( ), and self-commissioned variety shows such as The Temptation of Dinner (Season 2) ( ). These and other self-commissioned and licensed video programmes generated significant growth in our video advertising revenue. News advertising revenue decreased year-on-year versus the high base of the Olympics during the same period last year and decreased quarter-on-quarter due to the reduced advertising inventory of TianTian KuaiBao while we revamped its advertising system. For social and others advertising, Weixin properties, YingYongBao and our advertising network, were the main contributors of revenue growth. Weixin Moments advertisement fill rate increased, driven by strong advertising demand and further expanded key accounts and long-tail advertisers. 5

6 Others We recorded 143% year-on-year revenue growth for other businesses, which was primarily driven by the growth of payment related and cloud services. Our monthly offline payment volume increased 280% year-on-year. We empowered retailers to integrate online and offline resources including marketing, sales, payment and loyalty programmes. Tencent Cloud expanded its global infrastructure coverage and now operates 36 availability zones around the world. We have invested in strengthening our AI cloud technologies, big data analytics and security infrastructure. Leveraging our Weixin enterprise solutions, customer relationship management and targeted marketing capability, Tencent Cloud has made rapid progress in providing end-to-end solutions for financial and ecommerce clients. We will continue to invest in our cloud business to empower the digital and smart transformation of traditional industries, and to build future drivers of revenue growth and profitability. Meanwhile, we will look for collaboration and investment opportunities which can complement our technological capability in order to provide cloud services that fit the needs of our clients. We will also open up cloud computing and AI technological capabilities to third party companies in order to build a vibrant ecosystem. 6

7 MANAGEMENT DISCUSSION AND ANALYSIS Third Quarter of 2017 Compared to Third Quarter of 2016 The following table sets forth the comparative figures for the third quarter of 2017 and the third quarter of 2016: Three months ended (RMB in millions) Revenues 65,210 40,388 Cost of revenues (33,529) (18,560) Gross profit 31,681 21,828 Interest income 1, Other gains, net 3,918 1,155 Selling and marketing expenses (4,812) (3,277) General and administrative expenses (9,058) (5,883) Operating profit 22,746 14,460 Finance costs, net (524) (604) Share of profit/(losses) of associates and joint ventures 818 (619) Profit before income tax 23,040 13,237 Income tax expense (4,993) (2,461) Profit for the period 18,047 10,776 Attributable to: Equity holders of the Company 18,006 10,646 Non-controlling interests ,047 10,776 Non-GAAP profit attributable to equity holders of the Company 17,070 11,737 7

8 Revenues. Revenues increased by 61% to RMB65,210 million for the third quarter of 2017 on a year-on-year basis. The following table sets forth our revenues by line of business for the third quarter of 2017 and the third quarter of 2016: Three months ended % of total % of total Amount revenues Amount revenues (RMB in millions, unless specified) VAS 42,124 65% 27,975 69% Online advertising 11,042 17% 7,449 19% Others 12,044 18% 4,964 12% Total revenues 65, % 40, % Revenues from our VAS business increased by 51% to RMB42,124 million for the third quarter of 2017 on a year-on-year basis. Online games revenues grew by 48% to RMB26,844 million. The increase mainly reflected contributions from our smart phone games, including existing titles such as Honour of Kings, and new titles such as the China version of Contra Return and Legacy TLBB Mobile. Revenues from PC client games also increased, benefiting from our key titles such as DnF and LoL. Social networks revenues increased by 56% to RMB15,280 million. The increase was primarily driven by revenue growth from digital content services such as live broadcast and subscription video on-demand, as well as from in-game virtual item sales. Revenues from our online advertising business increased by 48% to RMB11,042 million for the third quarter of 2017 on a year-on-year basis. Media advertising revenues increased by 29% to RMB4,122 million, primarily due to growth in revenues from our mobile media platforms such as Tencent Video, but adversely affected by the high base effect from the Olympics a year ago. Social and others advertising revenues grew by 63% to RMB6,920 million, mainly reflecting higher advertising revenues derived from Weixin (primarily Weixin Moments and Weixin Official Accounts) and other mobile apps. 2 Revenues from our other businesses increased by 143% to RMB12,044 million for the third quarter of 2017 on a year-on-year basis. The increase primarily reflected higher revenues from our payment related and cloud services. 2 Since the first quarter of 2017, we have reclassified online advertising revenues. Without the reclassification, performance-based advertising revenues increased by 61% to RMB7,017 million and brand display advertising revenues increased by 31% to RMB4,025 million for the third quarter of 2017 on a year-on-year basis. 8

9 Cost of revenues. Cost of revenues increased by 81% to RMB33,529 million for the third quarter of 2017 on a year-on-year basis. The increase primarily reflected greater sharing and content costs, costs of payment related services, as well as channel costs. As a percentage of revenues, cost of revenues increased to 51% for the third quarter of 2017 from 46% for the third quarter of The following table sets forth our cost of revenues by line of business for the third quarter of 2017 and the third quarter of 2016: Three months ended % of segment % of segment Amount revenues Amount revenues (RMB in millions, unless specified) VAS 16,903 40% 9,748 35% Online advertising 7,031 64% 4,748 64% Others 9,595 80% 4,064 82% Total cost of revenues 33,529 18,560 Cost of revenues for our VAS business increased by 73% to RMB16,903 million for the third quarter of 2017 on a year-on-year basis. The increase was primarily driven by greater sharing and content costs, as well as higher channel costs for our smart phone games, in turn due to extended cooperation with third-party app stores. Cost of revenues for our online advertising business increased by 48% to RMB7,031 million for the third quarter of 2017 on a year-on-year basis. The increase was mainly due to greater investments in video content, traffic acquisition costs, as well as bandwidth and server custody fees. Cost of revenues for our other businesses increased by 136% to RMB9,595 million for the third quarter of 2017 on a year-on-year basis, mainly driven by greater costs in payment related and cloud services. 9

10 Other gains, net. We recorded net other gains totalling RMB3,918 million for the third quarter of 2017, which primarily consisted of deemed disposal gains arising from the capital activities of certain investee companies including the IPO of ZhongAn Insurance, fair value gains due to increases in valuations of certain investments in verticals such as healthcare, as well as subsidies and tax rebates. Selling and marketing expenses. Selling and marketing expenses increased by 47% to RMB4,812 million for the third quarter of 2017 on a year-on-year basis. The increase mainly reflected greater marketing spending on products and platforms such as online games and online media, as well as higher staff costs. As a percentage of revenues, selling and marketing expenses decreased to 7% for the third quarter of 2017 from 8% for the third quarter of General and administrative expenses. General and administrative expenses increased by 54% to RMB9,058 million for the third quarter of 2017 on a year-on-year basis. The increase mainly reflected greater R&D expenses, as well as staff costs. As a percentage of revenues, general and administrative expenses decreased to 14% for the third quarter of 2017 from 15% for the third quarter of Finance costs, net. Net finance costs decreased by 13% to RMB524 million for the third quarter of 2017 on a year-on-year basis. The decrease primarily reflected the recognition of foreign exchange gains for the third quarter of 2017, compared to foreign exchange losses for the same period last year, largely offset by an increase in interest expenses. Share of profit/(losses) of associates and joint ventures. We recorded share of profit of associates and joint ventures of RMB818 million for the third quarter of 2017, compared to share of losses of RMB619 million for the third quarter of Some of our investee companies registered profit (including one-off gains) for the third quarter of 2017, compared to losses for the third quarter of Income tax expense. Income tax expense increased by 103% to RMB4,993 million for the third quarter of 2017 on a year-on-year basis. The increase was mainly due to greater profit before income tax and withholding tax. Profit attributable to equity holders of the Company. Profit attributable to equity holders of the Company increased by 69% to RMB18,006 million for the third quarter of 2017 on a year-on-year basis. Non-GAAP profit attributable to equity holders of the Company increased by 45% to RMB17,070 million. 10

11 Third Quarter of 2017 Compared to Second Quarter of 2017 The following table sets forth the comparative figures for the third quarter of 2017 and the second quarter of 2017: Three months ended 30 June (RMB in millions) Revenues 65,210 56,606 Cost of revenues (33,529) (28,300) Gross profit 31,681 28,306 Interest income 1, Other gains, net 3,918 5,125 Selling and marketing expenses (4,812) (3,660) General and administrative expenses (9,058) (8,170) Operating profit 22,746 22,560 Finance costs, net (524) (834) Share of profit of associates and joint ventures Profit before income tax 23,040 22,224 Income tax expense (4,993) (3,970) Profit for the period 18,047 18,254 Attributable to: Equity holders of the Company 18,006 18,231 Non-controlling interests ,047 18,254 Non-GAAP profit attributable to equity holders of the Company 17,070 16,391 11

12 Revenues. Revenues increased by 15% to RMB65,210 million for the third quarter of 2017 on a quarter-on-quarter basis. Revenues from our VAS business increased by 14% to RMB42,124 million for the third quarter of Online games revenues increased by 13% to RMB26,844 million. The increase primarily reflected revenue growth from our existing smart phone games such as Honour of Kings, from recently launched smart phone games such as the China version of Contra Return, Kings of Chaos and Legend of XuanYuan Mobile, as well as positive seasonality and well-received content updates for our PC online games. Social networks revenues grew by 18% to RMB15,280 million. The increase was mainly due to an increase in revenues from in-game virtual item sales, and from our digital content services such as live broadcast, video streaming and music streaming. Revenues from our online advertising business increased by 9% to RMB11,042 million for the third quarter of Media advertising revenues increased slightly by 1% to RMB4,122 million, mainly reflecting revenue growth from Tencent Video, largely offset by the reduced advertising inventory of TianTian KuaiBao due to our revamp of its advertising system. Social and others advertising revenues grew by 14% to RMB6,920 million, primarily driven by growth in advertising revenues derived from Weixin Moments and Weixin Official Accounts. 3 Revenues from our other businesses increased by 25% to RMB12,044 million for the third quarter of The increase was primarily driven by revenue growth from our payment related and cloud services. Cost of revenues. Cost of revenues increased by 18% to RMB33,529 million for the third quarter of 2017 on a quarter-on-quarter basis. The increase mainly reflected greater sharing and content costs, costs of payment related services, and channel costs. As a percentage of revenues, cost of revenues increased to 51% for the third quarter of 2017 from 50% for the second quarter of Cost of revenues for our VAS business increased by 17% to RMB16,903 million for the third quarter of The increase was primarily driven by greater sharing and content costs, and channel costs. 3 Since the first quarter of 2017, we have reclassified online advertising revenues. Without the reclassification, performance-based advertising revenues increased by 11% to RMB7,017 million and brand display advertising revenues increased by 5% to RMB4,025 million for the third quarter of 2017 on a quarter-on-quarter basis. 12

13 Cost of revenues for our online advertising business increased by 11% to RMB7,031 million for the third quarter of The increase mainly reflected greater traffic acquisition costs, commissions payable to advertising agencies, as well as bandwidth and server custody fees. Cost of revenues for our other businesses increased by 28% to RMB9,595 million for the third quarter of The increase was primarily due to greater costs in payment related and cloud services. Selling and marketing expenses. Selling and marketing expenses increased by 31% to RMB4,812 million for the third quarter of 2017 on a quarter-on-quarter basis. The increase was primarily driven by greater marketing spending on our mobile apps and seasonal promotional activities launched during the summer holiday. General and administrative expenses. General and administrative expenses increased by 11% to RMB9,058 million for the third quarter of 2017 on a quarter-on-quarter basis. The increase mainly reflected higher R&D expenses, and staff costs. Profit attributable to equity holders of the Company. Profit attributable to equity holders of the Company decreased slightly by 1% to RMB18,006 million for the third quarter of 2017 on a quarter-on-quarter basis. Non-GAAP profit attributable to equity holders of the Company increased by 4% to RMB17,070 million. Other Financial Information Three months ended Nine months ended 30 June (RMB in millions, unless specified) EBITDA (a) 24,024 22,427 15,865 66,446 45,775 Adjusted EBITDA (a) 25,632 23,802 16,963 70,734 48,368 Adjusted EBITDA margin (b) 39% 42% 42% 41% 45% Interest expense ,221 1,556 Net cash (c) 18,862 21,267 8,368 18,862 8,368 Capital expenditures (d) 3,492 3,010 3,651 8,610 9,261 Note: (a) EBITDA consists of operating profit less interest income and other gains/losses, net, and plus depreciation of property, plant and equipment as well as investment properties, and amortisation of intangible assets. Adjusted EBITDA consists of EBITDA plus equity-settled share-based compensation expenses. 13

14 (b) Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by revenues. (c) Net cash represents period end balance and is calculated as cash and cash equivalents, term deposits and others, minus borrowings and notes payable. (d) Capital expenditures consist of additions (excluding business combinations) to property, plant and equipment, construction in progress, investment properties, land use rights and intangible assets (excluding media contents, game licences and other contents). The following table reconciles our operating profit to our EBITDA and Adjusted EBITDA for the periods presented: Three months ended Nine months ended 30 June (RMB in millions, unless specified) Operating profit 22,746 22,560 14,460 64,578 42,187 Adjustments: Interest income (1,017) (959) (637) (2,784) (1,966) Other gains, net (3,918) (5,125) (1,155) (12,234) (2,572) Depreciation of property, plant and equipment and investment properties 1,263 1, ,504 2,709 Amortisation of intangible assets 4,950 4,793 2,264 13,382 5,417 EBITDA 24,024 22,427 15,865 66,446 45,775 Equity-settled share-based compensation 1,608 1,375 1,098 4,288 2,593 Adjusted EBITDA 25,632 23,802 16,963 70,734 48,368 14

15 Non-GAAP Financial Measures To supplement the consolidated results of the Group prepared in accordance with IFRS, certain additional non-gaap financial measures (in terms of, operating profit, operating margin, profit for the period, net margin, profit attributable to equity holders of the Company, basic EPS and diluted EPS), have been presented in this announcement. These unaudited non-gaap financial measures should be considered in addition to, not as a substitute for, measures of the Group s financial performance prepared in accordance with IFRS. In addition, these non-gaap financial measures may be defined differently from similar terms used by other companies. The Company s management believes that the non-gaap financial measures provide investors with useful supplementary information to assess the performance of the Group s core operations by excluding certain non-cash items and certain impact of M&A transactions. In addition, non-gaap adjustments include relevant non-gaap adjustments for the Group s material associates based on available published financials of the relevant material associates, or estimates made by the Company s management based on available information, certain expectations, assumptions and premises. The following tables set forth the reconciliations of the Group s non-gaap financial measures for the third quarter of 2017 and 2016, the second quarter of 2017, and the first nine months of 2017 and 2016 to the nearest measures prepared in accordance with IFRS: three months ended 2017 Adjustments As reported Share-based compensation Net (gains)/losses from investee companies Amortisation of intangible assets Impairment provision (a) (b) (c) (d) (RMB in millions, unless specified) Non-GAAP Operating profit 22,746 1,632 (3,169) ,614 Profit for the period 18,047 1,851 (3,475) ,174 Profit attributable to equity holders 18,006 1,816 (3,475) ,070 EPS (RMB per share) - basic diluted Operating margin 35% 33% Net margin 28% 26% 15

16 As reported three months ended 30 June 2017 Share-based compensation Adjustments Net (gains)/losses from investee companies Amortisation of intangible assets Impairment provision (a) (b) (c) (d) (RMB in millions, unless specified) Non-GAAP Operating profit 22,560 1,408 (5,619) 115 1,572 20,036 Profit for the period 18,254 1,553 (5,691) 472 1,899 16,487 Profit attributable to equity holders 18,231 1,492 (5,670) 439 1,899 16,391 EPS (RMB per share) - basic diluted Operating margin 40% 35% Net margin 32% 29% three months ended 2016 Adjustments As reported Share-based compensation Net (gains)/losses from investee companies Amortisation of intangible assets Impairment provision (a) (b) (c) (d) (RMB in millions, unless specified) Non-GAAP Operating profit 14,460 1,132 (2,404) 139 1,710 15,037 Profit for the period 10,776 1,293 (2,309) 426 1,743 11,929 Profit attributable to equity holders 10,646 1,257 (2,297) 389 1,742 11,737 EPS (RMB per share) - basic diluted Operating margin 36% 37% Net margin 27% 30% 16

17 nine months ended 2017 Adjustments As reported Share-based compensation Net (gains)/losses from investee companies Amortisation of intangible assets Impairment provision (a) (b) (c) (d) (RMB in millions, unless specified) Non-GAAP Operating profit 64,578 4,379 (11,535) 378 2,370 60,170 Profit for the period 50,849 4,934 (11,883) 1,367 2,766 48,033 Profit attributable to equity holders 50,713 4,791 (11,862) 1,264 2,766 47,672 EPS (RMB per share) - basic diluted Operating margin 38% 35% Net margin 30% 28% nine months ended 2016 Adjustments As reported Share-based compensation Net (gains)/losses from investee companies Amortisation of intangible assets Impairment provision (a) (b) (c) (d) (RMB in millions, unless specified) Non-GAAP Operating profit 42,187 2,701 (6,122) 235 4,207 43,208 Profit for the period 30,924 3,247 (6,346) 1,110 4,624 33,559 Profit attributable to equity holders 30,566 3,183 (6,330) 1,054 4,615 33,088 EPS (RMB per share) - basic diluted Operating margin 39% 40% Net margin 29% 31% Note: (a) Including put options granted to employees of investee companies on their shares and shares to be issued under investee companies share-based incentive plans which can be acquired by the Group, and other incentives (b) Including net (gains)/losses on deemed disposals, disposals of investee companies and businesses, and fair value changes arising from investments (c) (d) Amortisation of intangible assets resulting from acquisitions, net of related deferred tax Impairment provision for associates, available-for-sale financial assets, and intangible assets arising from acquisitions 17

18 Liquidity and Financial Resources Our net cash positions as at 2017 and 30 June 2017 are as follows: 30 June (RMB in millions) Cash and cash equivalents 87,343 70,301 Term deposits and others 63,454 67, , ,859 Borrowings (97,290) (81,239) Notes payable (34,645) (35,353) Net cash 18,862 21,267 As at 2017, the Group had net cash of RMB18,862 million. The sequential decline was mainly due to payments for M&A initiatives and investments in other companies such as Snap Inc., as well as licensed content, partly offset by free cash flow generation. Fair value of our stakes in listed investee companies (both associates and available-for-sale financial assets) totalled RMB171.1 billion as at 30 September 2017, compared to RMB145.8 billion as at 30 June As at 2017, RMB53,944 million of our financial resources (cash and cash equivalents, as well as term deposits and others, such as treasury investments with high liquidity) were denominated in non-rmb currencies. For the third quarter of 2017, the Group had free cash flow of RMB27,462 million. This was a result of net cash flow generated from operating activities of RMB30,464 million, offset by payments for capital expenditure of RMB3,002 million. 18

19 FINANCIAL INFORMATION CONSOLIDATED INCOME STATEMENT FOR THE THREE AND NINE MONTHS ENDED 30 SEPTEMBER 2017 Three months ended Nine months ended Note RMB Million RMB Million RMB Million RMB Million Revenues Value-added services 42,124 27, ,036 78,619 Online advertising 11,042 7,449 28,078 18,682 Others 12,044 4,964 29,254 10,773 65,210 40, , ,074 Cost of revenues 4 (33,529) (18,560) (85,938) (47,201) Gross profit 31,681 21,828 85,430 60,873 Interest income 1, ,784 1,966 Other gains, net 3 3,918 1,155 12,234 2,572 Selling and marketing expenses 4 (4,812) (3,277) (11,630) (7,674) General and administrative expenses 4 (9,058) (5,883) (24,240) (15,550) Operating profit 22,746 14,460 64,578 42,187 Finance costs, net (524) (604) (2,049) (1,472) Share of profit/(losses) of associates and joint ventures 818 (619) 941 (2,000) Profit before income tax 23,040 13,237 63,470 38,715 Income tax expense 5 (4,993) (2,461) (12,621) (7,791) Profit for the period 18,047 10,776 50,849 30,924 19

20 Three months ended Nine months ended Note RMB Million RMB Million RMB Million RMB Million Attributable to: Equity holders of the Company 18,006 10,646 50,713 30,566 Non-controlling interests ,047 10,776 50,849 30,924 Earnings per share for profit attributable to equity holders of the Company (in RMB per share) - basic diluted

21 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE THREE AND NINE MONTHS ENDED 30 SEPTEMBER 2017 Three months ended Nine months ended RMB Million RMB Million RMB Million RMB Million Profit for the period 18,047 10,776 50,849 30,924 Other comprehensive income, net of tax: Items that may be subsequently reclassified to profit or loss Share of other comprehensive income of associates Net gains from changes in fair value of available-for-sale financial assets 1,895 1,042 19,311 4,368 Transfer to profit or loss upon disposal of available-for-sale financial assets (176) (2,008) 79 Currency translation differences (2,338) 688 (6,555) 1,782 Other fair value gains/(losses) (172) Items that may not be subsequently reclassified to profit or loss Other fair value gains/(losses) (149) (103) 228 2,318 11,279 6,453 Total comprehensive income for the period 18,275 13,094 62,128 37,377 Attributable to: Equity holders of the Company 18,248 12,953 62,028 36,989 Non-controlling interests ,275 13,094 62,128 37,377 21

22 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 SEPTEMBER 2017 Audited December 2016 Note RMB Million RMB Million ASSETS Non-current assets Property, plant and equipment 17,159 13,900 Construction in progress 6,175 4,674 Investment properties Land use rights 5,138 5,174 Intangible assets 39,194 36,467 Investments in associates 8 81,415 70,042 Investments in redeemable instruments of associates 9 23,489 9,627 Investments in joint ventures Available-for-sale financial assets ,965 83,806 Prepayments, deposits and other assets 12,809 7,363 Other financial assets 5,666 1,760 Deferred income tax assets 9,871 7,033 Term deposits 5,364 5, , ,745 Current assets Inventories Accounts receivable 11 15,567 10,152 Prepayments, deposits and other assets 17,857 14,118 Other financial assets 1,753 1,649 Term deposits 57,371 50,320 Restricted cash 1, Cash and cash equivalents 87,343 71, , ,154 Total assets 513, ,899 22

23 Audited December 2016 Note RMB Million RMB Million EQUITY Equity attributable to equity holders of the Company Share capital Share premium 20,661 17,324 Shares held for share award schemes (3,903) (3,136) Other reserves 33,875 23,693 Retained earnings 182, , , ,624 Non-controlling interests 11,871 11,623 Total equity 244, ,247 LIABILITIES Non-current liabilities Borrowings 14 81,383 57,549 Notes payable 15 29,819 36,204 Long-term payables 4,417 4,935 Other financial liabilities 2,442 2,576 Deferred income tax liabilities 5,647 5,153 Deferred revenue 2,195 2, , ,455 Current liabilities Accounts payable 13 41,850 27,413 Other payables and accruals 26,155 20,873 Borrowings 14 15,907 12,278 Notes payable 15 4,826 3,466 Current income tax liabilities 8,938 5,219 Other tax liabilities 1, Deferred revenue 43,887 31, , ,197 Total liabilities 268, ,652 Total equity and liabilities 513, ,899 23

24 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE NINE MONTHS ENDED 30 SEPTEMBER 2017 Share capital Attributable to equity holders of the Company Share premium Shares held for share award schemes Other reserves Retained earnings Total Noncontrolling interests Total equity RMB Million RMB Million RMB Million RMB Million RMB Million RMB Million RMB Million RMB Million Balance at 1 January ,324 (3,136) 23, , ,624 11, ,247 Comprehensive income Profit for the period 50,713 50, ,849 Other comprehensive income, net of tax: - share of other comprehensive income of associates net gains from changes in fair value of available-for-sale financial assets 19,311 19,311 19,311 - transfer to profit or loss upon disposal of available-for-sale financial assets (2,008) (2,008) (2,008) - currency translation differences (6,519) (6,519) (36) (6,555) - other fair value gains, net Total comprehensive income for the period 11,315 50,713 62, ,128 Transactions with equity holders Capital injection Employee share option schemes: - value of employee services proceeds from shares issued Employee share award schemes: - value of employee services 2, , ,378 - shares withheld for share award schemes (1,886) (1,886) (1,886) - vesting of awarded shares (1,119) 1,119 Tax benefit from share-based payments of a subsidiary Profit appropriations to statutory reserves 3 (3) Dividends (Note 7) (5,052) (5,052) (940) (5,992) Acquisition of additional equity interests in non-wholly owned subsidiaries 576 (800) (224) (262) (486) Disposal of subsidiaries (162) (162) Partial disposal of equity interests in subsidiaries (244) (244) 244 Transfer of equity interests of subsidiaries to non-controlling interests (771) (771) 771 Lapse of put option granted to non-controlling interests Total transactions with equity holders at their capacity as equity holders for the period 3,337 (767) (1,133) (5,055) (3,618) 148 (3,470) Balance at ,661 (3,903) 33, , ,034 11, ,905 24

25 Share capital Attributable to equity holders of the Company Share premium Shares held for share award schemes Other reserves Retained earnings Total Noncontrolling interests Total equity RMB Million RMB Million RMB Million RMB Million RMB Million RMB Million RMB Million RMB Million Balance at 1 January ,167 (1,817) 9, , ,035 2, ,100 Comprehensive income Profit for the period 30,566 30, ,924 Other comprehensive income, net of tax: - share of other comprehensive income of associates net gains from changes in fair value of available-for-sale financial assets 4,368 4,368 4,368 - transfer to profit or loss upon disposal of available-for-sale financial assets currency translation differences 1,752 1, ,782 - other fair value losses, net (275) (275) (275) Total comprehensive income for the period 6,423 30,566 36, ,377 Transactions with equity holders Capital injection Employee share option schemes: - value of employee services proceeds from shares issued Employee share award schemes: - value of employee services 2, , ,336 - shares withheld for share award schemes (1,608) (1,608) (1,608) - vesting of awarded shares (507) 507 Tax benefit from share-based payments of a subsidiary Profit appropriations to statutory reserves 24 (24) Dividends (3,699) (3,699) (907) (4,606) Non-controlling interests arising from business combinations 7,392 7,392 Acquisition of additional equity interests in non-wholly owned subsidiaries 1,519 (1,741) (222) 180 (42) Disposal of a subsidiary (2) (2) Partial disposal of equity interests in subsidiaries and businesses 9,244 9, ,544 Transfer of equity interests of subsidiaries to non-controlling interests (439) (439) 439 Total transactions with equity holders at their capacity as equity holders for the period 3,387 (1,101) 8,211 (3,723) 6,774 7,698 14,472 Balance at ,554 (2,918) 24, , ,798 10, ,949 25

26 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED 30 SEPTEMBER 2017 Nine months ended RMB Million RMB Million Net cash flows generated from operating activities 77,546 45,518 Net cash flows used in investing activities (79,089) (56,169) Net cash flows generated from financing activities 19,023 18,552 Net increase in cash and cash equivalents 17,480 7,901 Cash and cash equivalents at beginning of the period 71,902 43,438 Exchange (losses)/gains on cash and cash equivalents (2,039) 1,078 Cash and cash equivalents at end of the period 87,343 52,417 Analysis of balances of cash and cash equivalents: Bank balances and cash 35,678 26,847 Term deposits and highly liquid investments with initial terms within three months 51,665 25,570 87,343 52,417 26

27 Note: 1 General information, basis of preparation and presentation The Company was incorporated in the Cayman Islands with limited liability. The shares of the Company have been listed on the main board of the Stock Exchange since 16 June The Company is an investment holding company. The Group is principally engaged in the provision of VAS and online advertising services to users in the PRC. The condensed consolidated interim financial information comprises the consolidated statement of financial position as at 2017, the related consolidated income statement and the consolidated statement of comprehensive income for the three-month and nine-month periods then ended, the consolidated statement of changes in equity and the consolidated statement of cash flows for the nine-month period then ended, and a summary of significant accounting policies and other explanatory notes (the Interim Financial Information ). The Interim Financial Information is presented in RMB, unless otherwise stated. The Interim Financial Information has been prepared in accordance with IAS 34 Interim Financial Reporting issued by the International Accounting Standards Board and should be read in conjunction with the annual consolidated financial statements of the Group for the year ended 31 December 2016, which have been prepared in accordance with IFRS, as set out in the 2016 annual report of the Company dated 22 March 2017 (the 2016 Financial Statements ). The accounting policies and method of computation used in the preparation of the Interim Financial Information are consistent with those used in the 2016 Financial Statements, which have been prepared in accordance with IFRS under the historical cost convention, as modified by the revaluation of available-for-sale financial assets, financial assets at fair value through profit or loss and derivative financial instruments, which are carried at fair values. Taxes on income for the interim period are accrued using the tax rates that would be applicable to expected total annual assessable profits. Amendments to IFRS effective for the financial year ending 31 December 2017 do not have a material impact on the Group s Interim Financial Information. 2 Segment information The Group has following reportable segments for the three and nine months ended 2017 and 2016: VAS; Online advertising; and Others. Others primarily comprises payment related services, cloud services and other services. 27

28 There were no material inter-segment sales during the three and nine months ended 2017 and The revenues from external customers reported to the chief operating decision-makers are measured in a manner consistent with that applied in the consolidated income statement. The segment information provided to the chief operating decision-makers for the reportable segments for the three and nine months ended 2017 and 2016 is as follows: Three months ended 2017 Online VAS advertising Others Total RMB Million RMB Million RMB Million RMB Million Segment revenues 42,124 11,042 12,044 65,210 Gross profit 25,221 4,011 2,449 31,681 Depreciation ,031 Amortisation 2,196 2,570 4,766 Three months ended 2016 Online VAS advertising Others Total RMB Million RMB Million RMB Million RMB Million Segment revenues 27,975 7,449 4,964 40,388 Gross profit 18,227 2, ,828 Depreciation Amortisation 928 1,181 2,109 Nine months ended 2017 Online VAS advertising Others Total RMB Million RMB Million RMB Million RMB Million Segment revenues 114,036 28,078 29, ,368 Gross profit 68,915 10,251 6,264 85,430 Depreciation 1, ,755 Amortisation 6,039 6,728 12,767 28

29 Nine months ended 2016 VAS Online advertising Others Total RMB Million RMB Million RMB Million RMB Million Segment revenues 78,619 18,682 10, ,074 Gross profit 51,731 7,710 1,432 60,873 Depreciation 1, ,873 Amortisation 1,804 3,237 5,041 3 Other gains, net Three months ended Nine months ended RMB Million RMB Million RMB Million RMB Million Gains on disposals and deemed disposals of investee companies (Note) 1,731 2,404 7,591 5,464 Fair value gains on other financial instruments 1,438 3, Impairment provision for investee companies and intangible assets from acquisitions (295) (1,710) (2,370) (4,207) Subsidies and tax rebates 1, , Dividend income Donations to Tencent Charity Fund (550) (350) Others (188) 93 (204) 302 Note: 3,918 1,155 12,234 2,572 The disposal and deemed disposal gains during the nine months ended 2017 mainly comprised the following: gains of approximately RMB3,055 million on dilution of the Group s equity interests in certain associates which are principally engaged in mobile game business and online insurance business, as a result of new shares issued by these associates upon their IPOs; aggregate net gains of approximately RMB4,075 million on disposals, acquisitions achieved in stages or partial disposals of various investments of the Group. 29

30 4 Expenses by nature Three months ended Nine months ended RMB Million RMB Million RMB Million RMB Million Employee benefits expenses (a) 9,617 6,012 25,634 16,217 Content costs and agency fees (excluding amortisation of intangible assets) 9,733 6,580 25,346 16,800 Channel costs 4,757 2,071 11,459 5,619 Bandwidth and server custody fees 2,966 2,044 8,057 5,616 Promotion and advertising expenses 3,768 2,486 8,816 5,603 Operating lease rentals in respect of office buildings Travelling and entertainment expenses Amortisation of intangible assets (b) 4,950 2,264 13,382 5,417 Depreciation of property, plant and equipment 1, ,481 2,697 Note: (a) During the three and nine months ended 2017, the Group incurred expenses for the purpose of R&D of approximately RMB4,828 million and RMB12,666 million, respectively (three and nine months ended 2016: RMB3,165 million and RMB8,244 million, respectively), which comprised employee benefits expenses of RMB4,107 million and RMB10,774 million, respectively (three and nine months ended 30 September 2016: RMB2,434 million and RMB6,410 million, respectively). No significant development expenses had been capitalised for the three and nine months ended 2017 and (b) Mainly included amortisation charge of intangible assets in respect of media contents and game licences. 5 Income Tax expense Income tax expense is recognised based on management s best knowledge of the income tax rates expected for the financial year. (a) Cayman Islands and British Virgin Islands corporate income tax The Group was not subject to any taxation in the Cayman Islands and the British Virgin Islands for the three and nine months ended 2017 and

31 (b) Hong Kong profits tax Hong Kong profits tax has been provided for at the rate of 16.5% on the estimated assessable profits for the three and nine months ended 2017 and (c) PRC corporate income tax PRC CIT has been provided for at applicable tax rates under the relevant regulations of the PRC after considering the available preferential tax benefits and the estimated assessable profits of entities within the Group established in the PRC for the three and nine months ended 2017 and The general PRC CIT rate is 25% for the three and nine months ended 2017 and Certain subsidiaries of the Group in the PRC were approved as High and New Technology Enterprise, and accordingly, they were subject to a reduced preferential CIT rate of 15% for the three and nine months ended 2017 and Meanwhile certain subsidiaries of the Company were in the process of renewing such entitlements by applying to the relevant government authorities as at The directors of the Company expect that they will continue to be approved as High and New Technology Enterprises. As such, CIT rate of 15% was adopted by these subsidiaries in accruing their CIT liabilities for the three and nine months ended In addition, according to announcement and circular issued by relevant government authorities, for the year of 2015 and beyond, software enterprise that is entitled to the preferential tax rate of 10% as a national key software enterprise shall file its status with tax authorities for record in accordance with the relevant requirements at the time of final tax settlement each year. The filing records will be subject to verification by relevant government authorities. Accordingly, PRC CIT for the relevant subsidiaries of the Company applying for this preferential tax treatment has been provided for at their respective prevailing tax rates during the period. Upon completion of the verification process, the relevant subsidiaries of the Company will be entitled to CIT rate of 10% and corresponding tax adjustments will be accounted for. Moreover, according to relevant tax circulars issued by the PRC tax authorities, certain subsidiaries of the Company are entitled to other tax concessions and they are exempt from CIT for two years, followed by a 50% reduction in the applicable tax rates for the next three years, commencing either from the first year of commercial operation or from the first year of profitable operation, after offsetting tax losses generated in prior years. (d) Corporate income tax in other countries Income tax on profits arising from other jurisdictions, including the United States, Europe, East Asia and South America, has been calculated on the estimated assessable profits for the three and nine months ended 2017 and 2016 at the respective rates prevailing in the relevant jurisdictions, mainly ranging from 12.5% to 36%. 31

32 (e) Withholding tax According to applicable tax regulations prevailing in the PRC, dividends distributed by a company established in the PRC to a foreign investor with respect to profits derived after 1 January 2008 are generally subject to a 10% withholding tax. If a foreign investor is incorporated in Hong Kong, under the double taxation arrangement between the Mainland China and Hong Kong, the relevant withholding tax rate applicable to the Group will be reduced from 10% to 5% subject to the fulfilment of certain conditions. Dividends distributed from certain jurisdictions that the Group s entities operate in are also subject to withholding tax at respective applicable tax rates. The income tax expense of the Group for the three and nine months ended 2017 and 2016 are analysed as follows: Three months ended Nine months ended RMB Million RMB Million RMB Million RMB Million Current income tax 5,324 3,241 12,840 8,503 Deferred income tax (331) (780) (219) (712) 4,993 2,461 12,621 7,791 6 Earnings per share (a) Basic Basic EPS is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period. Three months ended Nine months ended Profit attributable to equity holders of the Company (RMB Million) 18,006 10,646 50,713 30,566 Weighted average number of ordinary shares in issue (million shares) 9,418 9,384 9,406 9,368 Basic EPS (RMB per share)