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TABLE OF CONTENTS
~~ALIBABA GROUP HOLDING LIMITED~~ INDEX TO FINANCIAL STATEMENTS

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 20-F


(Mark One)
o		REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR 12(G) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
ý		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 31, ~~2016~~2019
OR
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
o		SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company ~~report……………~~report...............

For the transition period from to

Commission file number 001-36614

Alibaba Group Holding Limited

(Exact name of Registrant as specified in its charter)

Cayman Islands

(Jurisdiction of incorporation or organization)

c/o Alibaba Group Services Limited
26/F Tower One, Times Square
1 Matheson Street, Causeway Bay
Hong Kong

(Address of principal executive offices)

Timothy A. Steinert, Esq., General Counsel and Secretary
Telephone: +852-2215-5100
Facsimile: +852-2215-5200
Alibaba Group Holding Limited
c/o Alibaba Group Services Limited
26/F Tower One, Times Square
1 Matheson Street, Causeway Bay
Hong Kong

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered

Ordinary Shares, par value US$0.000025 per share
American Depositary Shares, each representing one Ordinary Share	BABA	New York Stock Exchange

Securities registered or to be registered pursuant to Section 12(g) of the Act:None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:None

Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report: ~~2,473,927,859~~2,587,059,572 Ordinary Shares

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

ý Yes o No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

o Yes ý No

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

ý Yes o No

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files).

ý Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated ~~filer.~~filer, or an emerging growth company. See ~~definition~~the definitions of "large accelerated filer," "accelerated filer," and ~~large accelerated filer"~~"emerging growth company" in Rule 12b-2 of the Exchange Act. ~~(Check one):~~


Large accelerated filerý		Accelerated filero		Non-accelerated filero		Emerging growth companyo

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act o

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:


U.S. GAAPý		International Financial Reporting Standards as issued by the International Accounting Standards Boardo		Othero

If "Other" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

o Item 17 o Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).

o Yes ý No

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

o Yes o No

Table of Contents

TABLE OF CONTENTS

		Page

	PART I
ITEM 1	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS	1
ITEM 2	OFFER STATISTICS AND EXPECTED TIMETABLE	1
ITEM 3	KEY INFORMATION	1
ITEM 4	INFORMATION ON THE COMPANY	5558
ITEM 4A.	UNRESOLVED STAFF COMMENTS	~~106~~121
ITEM 5	OPERATING AND FINANCIAL REVIEW AND PROSPECTS	~~106~~121
ITEM 6	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	~~151~~165
ITEM 7	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	~~170~~184
ITEM 8	FINANCIAL INFORMATION	~~186~~204
ITEM 9	THE OFFER AND LISTING	~~189~~206
ITEM 10	ADDITIONAL INFORMATION	~~190~~206
ITEM 11	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	~~198~~215
ITEM 12	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	~~200~~216
	PART II
ITEM 13	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	~~202~~219
ITEM 14	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	~~202~~219
ITEM 15	CONTROLS AND PROCEDURES	~~202~~219
ITEM 16A.	AUDIT COMMITTEE FINANCIAL EXPERT	~~203~~220
ITEM 16B.	CODE OF ETHICS	~~203~~220
ITEM 16C.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	~~203~~220
ITEM 16D.	EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEE	~~203~~220
ITEM 16E.	PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS	~~203~~220
ITEM 16F.	CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT	~~204~~221
ITEM 16G.	CORPORATE GOVERNANCE	~~204~~221
ITEM 16H.	MINE SAFETY DISCLOSURE	~~205~~222
	PART III
ITEM 17	FINANCIAL ~~STATEMENTS~~STATEMENTS.	~~206~~223
ITEM 18	FINANCIAL ~~STATEMENTS~~STATEMENTS.	~~206~~223
ITEM 19	~~EXHIBITS~~EXHIBITS.	~~206~~223

Table of Contents

CONVENTIONS THAT APPLY TO THIS ANNUAL REPORT ON FORM 20-F

Unless the context otherwise requires, references in this annual report on Form 20-F to:

•: "active buyers" in a given period are to user accounts that confirmed one or more orders on the relevant marketplace in that period, regardless of whether or not the buyer and seller settle the transaction;
•: "active sellers" in a given period are to seller accounts (representing storefronts) that had one or more orders confirmed by a buyer on the relevant marketplace in that period and that were active at the end of the period, regardless of whether the buyer or seller settle the transaction;
•: "ADSs" are to the American depositary shares, each of which represents one ordinary share;
•: "Alipay" are to Alipay.com Co., Ltd., a company with which we have a long-term contractual relationship and which is a wholly-owned subsidiary of Ant Financial ~~Services~~ or, where the context requires, its predecessor entities. WeAlthough we have agreed to acquire a 33% equity interest in Ant Financial, we do not and, upon completion of our acquisition of the equity interest, will not have any ~~interest or~~ control over either Ant Financial ~~Services~~ or Alipay;
•: "~~Alipay~~ Altaba" are to Altaba Inc. (formerly known as Yahoo! Inc.), Altaba Holdings Hong Kong Limited (formerly known as Yahoo! Hong Kong Holdings Limited) and Altaba HK MC Limited, collectively;
•: "annual active consumers" are to user accounts that had one or more confirmed orders on the relevant platforms during the previous twelve months, regardless of whether or not the buyer and seller settle the transaction;
•: "annual active users" for Ant Financial are to ~~Alipay~~ user accounts ~~with~~that used one or more ~~successful transactions~~services provided by Ant Financial and its investees, such as payment, wealth management, financing, insurance and credit system, during the ~~past~~previous twelve months;
•: "Ant ~~Financial Services"~~Financial" are to ~~Zhejiang~~ Ant Small and Micro Financial Services Group Co., Ltd. ~~(formerly referred to as Small and Micro Financial Services Company)~~, a company organized under the laws of the ~~PRC;~~PRC (in which we have agreed to acquire a 33% equity interest, subject to regulatory approvals and customary closing conditions) and, as the context requires, its consolidated subsidiaries;
•: "Cainiao Network" are to Cainiao Smart Logistics Network Limited, ~~an affiliate in which we own approximately 47% equity interest as~~a company incorporated under the laws of ~~March 31, 2016, together with its subsidiaries, including Cainiao Network Technology Co., Ltd.;~~the Cayman Islands;
•: "China" and the "PRC" are to the People's Republic of China, excluding, for the purposes of this annual report only, Taiwan and the special administrative regions of Hong Kong and Macau;
•: "China retail marketplaces" are to Taobao Marketplace ~~Tmall and Juhuasuan, collectively. Promotional slots on Juhuasuan may only be purchased by Taobao Marketplace~~ and Tmall, merchants, and transactions from traffic originating on Juhuasuan are completed on the merchants' storefronts on Taobao Marketplace or Tmall. For this reason, depending on the context, we may refer only to Taobao Marketplace and Tmall when discussing certain aspects of our China retail marketplaces business;collectively;
•: "GMV" are to the value of confirmed orders of products and services on our marketplaces, regardless of how, or whether, the buyer and seller settle the transaction. Unless otherwise stated, GMV in reference to our marketplaces includes only GMV transacted on our China retail marketplaces. ~~GMV generated from traffic through Juhuasuan is recorded as either Taobao Marketplace GMV or Tmall GMV depending on which of these two marketplaces the transaction is completed.~~ Our calculation of GMV for our China retail marketplaces includes shipping charges paid by buyers to sellers. As a prudential matter aimed at eliminating any influence on our GMV of potentially fraudulent transactions, we exclude from our calculation of GMV transactions in certain product categories over certain amounts and transactions by buyers in certain product categories over a certain amount per day. The translation of annual GMV in RMB for the year ended March 31, 2016 into U.S. dollar amount represents the sum of GMV in U.S. dollars reported for the quarters ended June 30, September 30, and December 31, 2015 and March 31, 2016, each converted from the RMB amounts at the exchange rate as of the end of each relevant quarter;day;
•: "~~ISVs"~~HK$" and "Hong Kong dollars" are to ~~independent software vendors;~~the legal currency of the Hong Kong Special Administrative Region of the People's Republic of China;
•: ~~"mobile GMV" are to that portion of GMV generated by orders that were confirmed using a mobile app or mobile browser;~~
•: "mobile MAUs" in a given month are to the number of unique mobile devices that were used to visit or access certain of our mobile ~~applications~~apps at least once during that month;

~~Table of Contents~~

•: ~~"mobile monetization rate" are to mobile revenue from China commerce retail expressed as a percentage of mobile GMV for a given period;~~
•: "mobile revenue" are to that portion of revenue generated by online marketing services delivered on a mobile app or mobile browser, and commissions on mobile GMV settled through Alipay with merchants, as captured by our online auction system, real-time bidding system and other settlement systems;
•: ~~"monetization rate" are to revenue from China commerce retail expressed as a percentage of GMV for a given period;~~
•: "orders" are to each confirmed order from a transaction between a buyer and a seller for products and services on ~~our China retail marketplaces,~~the relevant platform, even if ~~such order includes~~these orders include multiple items, during the specified period, whether or not the transaction is settled;
•: ~~"retail marketplaces" are to Taobao Marketplace, Tmall, Juhuasuan and AliExpress, collectively;~~
•: "RMB" and "Renminbi" are to the legal currency of China;
•: "SMEs" are to small and medium-sized enterprises;
•: "SoftBank" are to SoftBank Group Corp. (formerly known as SoftBank Corp. before July 2, 2015), SBBM Corporation, West Raptor Holdings, LLC and ~~SB China Holdings Pte Ltd.,~~Skywalk Finance GK, collectively;

•

~~"tier 1 and tier 2 cities" are to 28 cities in China, as categorized by AliResearch, our research division. Based on national divisions~~Table of administrative areas in China as of the end of 2014, AliResearch categorizes over 2,200 cities, city-level regions and counties in China into six tiers, based on online shopping potential composite index, which takes into account GDP, population, retail sales of consumer goods, household disposable income, and number of Internet users;Contents

•: "variable interest entities" or "VIEs" are to our variable interest entities that are 100% owned by PRC citizens or by PRC entities owned by PRC citizens, where applicable, that hold the Internet content provider licenses, or ICP licenses, or other business operation licenses or approvals, and generally operate the various websites and mobile apps for our Internet businesses or other businesses in which foreign investment is restricted or prohibited, and are consolidated into our consolidated financial statements in accordance with U.S. GAAP as if they were our wholly-owned subsidiaries;
•: "we," "us," "our company" and "our" are to Alibaba Group Holding Limited and its consolidated subsidiaries and its affiliated consolidated entities, including our variable interest entities and their subsidiaries;
•: "wholesale marketplaces" are to 1688.com and Alibaba.com, collectively;
•: ~~"Yahoo" are to Yahoo! Inc. and Aabaco Holdings Hong Kong Limited (formerly known as Yahoo! Hong Kong Holdings Limited), collectively;~~ and
•: "US$," "dollars" and "U.S. dollars" are to the legal currency of the United States.

Our reporting currency is the Renminbi. This annual report contains translations of Renminbi and Hong Kong dollar amounts into U.S. dollars at specific rates solely for the convenience of the reader. Unless otherwise stated, all translations of Renminbi and Hong Kong dollars into U.S. dollars and from U.S. dollars into Renminbi in this annual report were made at ~~RMB6.4480~~a rate of RMB6.7112 to US$1.00 and HK$7.8498 to US$1.00, the respective exchange ~~rate~~rates on March 29, 2019 set forth in the H.10 statistical release of the Federal Reserve ~~Board on March 31, 2016.~~Board. We make no representation that ~~the~~any Renminbi, Hong Kong dollar or U.S. dollar amounts referred to in this annual report could have been, or could be, converted into U.S. dollars, Renminbi or ~~Renminbi,~~Hong Kong dollars, as the case may be, at any particular rate or at all. On May ~~20, 2016,~~31, 2019, the noon buying rate for Renminbi and Hong Kong dollars was ~~RMB6.5485~~RMB6.9027 to US$~~1.00.~~1.00 and HK$7.8387 to US$1.00, respectively.

iii

Table of Contents

FORWARD-LOOKING STATEMENTS

This annual report on Form 20-F contains forward-looking statements that involve risks and uncertainties, including statements based on our current expectations, assumptions, estimates and projections about us, our ~~industry~~industries and the regulatory environment in which we and companies integral to our ~~ecosystem~~digital economy operate. ~~All statements other than statements of historical facts are forward-looking statements.~~ These forward-looking statements are made under the "safe harbor" provision under Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements. In some cases, these forward-looking statements can be identified by words or phrases such as "may," "will," "expect," "anticipate," "aim," "estimate," "intend," "plan," "believe," "potential," "continue," "is/are likely to" or other similar expressions. The forward-looking statements included in this annual report relate to, among others:

•: our growth strategies;
•: our future business development, results of operations and financial condition;
•: trends in ~~online~~commerce, the overall technology and ~~mobile commerce,~~the other industries in which we operate, both ~~globally~~in China and ~~in the PRC;~~globally;
•: competition in our ~~industry;~~industries;
•: fluctuations in general economic and business conditions in China and globally;
•: expected changes in our revenues and certain cost and expense items and our operating margins;
•: the completion of our investment transactions, including our subscription for an equity interest in Ant Financial, and regulatory approvals and other conditions that must be met in order to complete investment transactions;
•: the completion of the process of enhancing the structure of our material variable interest entities and certain other variable interest entities, or the VIE Structure Enhancement;
•: international trade policies, protectionist policies and other policies that could place restrictions on economic and commercial activity;
•: the regulatory environment in which we and companies integral to our ~~ecosystem~~digital economy operate; and
•: assumptions underlying or related to any of the foregoing.

The global and ~~PRC~~China Internet, retail, wholesale, online and mobile commerce, cloud computing, and digital media and entertainment ~~cloud computing and data~~ industries ~~market~~or markets may not grow at the rates projected by market data, or at all. The failure of these industries or markets to grow at the projected rates may have a material adverse effect on our business, financial condition and results of operations and the market price of our ADSs. If any one or more of the assumptions underlying the industry or market data turns out to be incorrect, actual results may differ from the projections based on these assumptions. You should not place undue reliance on these forward-looking statements.

The forward-looking statements made in this annual report relate only to events or information as of the date on which the statements are made in this annual report. We undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this annual report and the documents that we have referred to in this annual report completely and with the understanding that our actual future results may be materially different from what we expect.

Table of Contents

PART I

ITEM 1 IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not Applicable.

ITEM 2 OFFER STATISTICS AND EXPECTED TIMETABLE

Not Applicable.

ITEM 3 KEY INFORMATION

A. Selected Financial Data

The selected consolidated statements of operations data for the years ended March 31, ~~2014, 2015~~2017, 2018 and ~~2016,~~2019, and the selected consolidated balance sheet data as of March 31, ~~2015~~2018 and ~~2016~~2019 have been derived from our audited consolidated financial statements included elsewhere in this annual report. Our selected consolidated statements of operations data for the years ended March 31, ~~2012~~2015 and ~~2013~~2016 and the selected consolidated balance sheet data as of March 31, ~~2012, 2013~~2015, 2016 and ~~2014~~2017 have been derived from our audited consolidated financial statements not included in this annual report. Our financial statements have been prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP.

The following selected consolidated financial data for the periods and as of the dates indicated are qualified by reference to and should be read in conjunction with our audited consolidated financial statements and related notes and "Item 5. Operating and Financial Review and Prospects," both of which are included elsewhere in this annual report.

Our historical results for any prior period do not necessarily indicate our results to be expected for any future period.

Table of Contents
Consolidated Statements of Operations Data:

Year ended March 31, Year ended March 31,

2012 2013 2014 2015 2016 2015 2016 2017 2018 2019

RMB RMB RMB RMB RMB US$ RMB RMB RMB RMB RMB US$

(in millions, except per share data)
(in millions, except per share data)

Revenue
76,204 101,143 158,273 250,266 376,844 56,152
China commerce
15,637 29,167 45,132 62,937 84,321 13,077
International commerce
3,765 4,160 4,851 6,486 7,629 1,183
Cloud computing
515 650 773 1,271 3,019 468
Others
108 540 1,748 5,510 6,174 958

Total
20,025 34,517 52,504 76,204 101,143 15,686
Cost of revenue
(6,554 ) (9,719 ) (13,369 ) (23,834 ) (34,355 ) (5,328 ) (23,834 ) (34,355 ) (59,483 ) (107,044 ) (206,929 ) (30,833 )
Product development expenses
(2,897 ) (3,753 ) (5,093 ) (10,658 ) (13,788 ) (2,138 ) (10,658 ) (13,788 ) (17,060 ) (22,754 ) (37,435 ) (5,578 )
Sales and marketing expenses
(3,058 ) (3,613 ) (4,545 ) (8,513 ) (11,307 ) (1,753 ) (8,513 ) (11,307 ) (16,314 ) (27,299 ) (39,780 ) (5,928 )
General and administrative expenses⁽¹⁾
(2,211 ) (2,889 ) (4,218 ) (7,800 ) (9,205 ) (1,428 )
General and administrative expenses
(7,800 ) (9,205 ) (12,239 ) (16,241 ) (24,889 ) (3,708 )
Amortization of intangible assets
(155 ) (130 ) (315 ) (2,089 ) (2,931 ) (455 ) (2,089 ) (2,931 ) (5,122 ) (7,120 ) (10,727 ) (1,599 )
Impairment of goodwill and intangible assets
(135 ) (175 ) (44 ) (175 ) (455 ) (71 )
Yahoo TIPLA amendment payment⁽²⁾
— (3,487 ) — — — —

Impairment of goodwill
(175 ) (455 ) — (494 ) — —

Income from operations
5,015 10,751 24,920 23,135 29,102 4,513 23,135 29,102 48,055 69,314 57,084 8,506
Interest and investment income, net
258 39 1,648 9,455 52,254 8,104 9,455 52,254 8,559 30,495 44,106 6,572
Interest expense
(68 ) (1,572 ) (2,195 ) (2,750 ) (1,946 ) (301 ) (2,750 ) (1,946 ) (2,671 ) (3,566 ) (5,190 ) (773 )
Other income, net
327 894 2,429 2,486 2,058 319 2,486 2,058 6,086 4,160 221 32

Income before income tax and share of results of equity investees
5,532 10,112 26,802 32,326 81,468 12,635 32,326 81,468 60,029 100,403 96,221 14,337
Income tax expenses
(842 ) (1,457 ) (3,196 ) (6,416 ) (8,449 ) (1,310 ) (6,416 ) (8,449 ) (13,776 ) (18,199 ) (16,553 ) (2,466 )
Share of results of equity investees
(25 ) (6 ) (203 ) (1,590 ) (1,730 ) (269 ) (1,590 ) (1,730 ) (5,027 ) (20,792 ) 566 84

Net income
4,665 8,649 23,403 24,320 71,289 11,056 24,320 71,289 41,226 61,412 80,234 11,955
Net (income) loss attributable to noncontrolling interests
(437 ) (117 ) (88 ) (59 ) 171 27 (59 ) 171 2,449 2,681 7,652 1,140

Net income attributable to Alibaba Group Holding Limited
4,228 8,532 23,315 24,261 71,460 11,083 24,261 71,460 43,675 64,093 87,886 13,095
Accretion of convertible preference shares⁽³⁾
— (17 ) (31 ) (15 ) — —
Dividends accrued on convertible preference shares⁽³⁾
— (111 ) (208 ) (97 ) — —

Accretion of convertible preference shares⁽¹⁾ and mezzanine equity
(15 ) — — (108 ) (286 ) (42 )
Dividends accrued on convertible preference shares⁽¹⁾
(97 ) — — — — —

Net income attributable to ordinary shareholders
4,228 8,404 23,076 24,149 71,460 11,083 24,149 71,460 43,675 63,985 87,600 13,053

Earnings per share/ADS attributable to ordinary shareholders:

Basic
1.71 3.66 10.61 10.33 29.07 4.51 10.33 29.07 17.52 25.06 33.95 5.06
Diluted
1.67 3.57 10.00 9.70 27.89 4.33 9.70 27.89 16.97 24.51 33.38 4.97
Weighted average number of shares used in computing earnings per share:

Basic
2,479 2,294 2,175 2,337 2,458 2,337 2,458 2,493 2,553 2,580
Diluted
2,522 2,389 2,332 2,500 2,562 2,500 2,562 2,573 2,610 2,623
Supplemental information:⁽⁴⁾

Non-GAAP EBITDA
7,274 16,607 30,731 40,753 52,340 8,117
Supplemental information:⁽²⁾

Adjusted EBITDA
40,753 52,340 74,456 105,792 121,943 18,170
Adjusted EBITA
38,427 48,570 69,172 97,003 106,981 15,941
Marketplace-based core commerce adjusted EBITA
N/A N/A N/A 122,883 161,589 24,078
Non-GAAP net income
6,452 13,869 28,274 34,981 42,741 6,629 34,876 42,791 57,871 83,214 93,407 13,918
Non-GAAP diluted EPS
2.38 5.76 12.09 13.97 16.75 2.60 13.93 16.77 23.44 32.86 38.40 5.72
Free cash flow
8,752 19,745 32,269 48,121 51,279 7,953 48,921 51,279 71,318 99,996 104,478 15,568
(1)
In fiscal year 2014, these expenses included an equity-settled donation expense of RMB1,269 million relating to the grant of options to purchase 50,000,000 of our ordinary shares to a non-profit organization designated by Jack Ma and Joe Tsai.
~~(2)~~
We entered into the Yahoo TIPLA in October 2005, pursuant to which we paid royalty fees to Yahoo. We and Yahoo amended the existing TIPLA in September 2012, pursuant to which we made a lump sum payment in the amount of US$550 million.

~~Table of Contents~~
~~(3)~~
Upon the completion of our initial public offering in September 2014, all of our then outstanding convertible preference shares were converted into ordinary shares.

~~(4)~~(2)
See "Non-GAAP Measures" below.

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Non-GAAP Measures
We use ~~non-GAAP~~adjusted EBITDA, adjusted EBITA, marketplace-based core commerce adjusted EBITA, non-GAAP net income, non-GAAP diluted EPS and free cash flow, each a non-GAAP financial measure, in evaluating our operating results and for financial and operational decision-making purposes.
We believe that ~~non-GAAP~~adjusted EBITDA, adjusted EBITA, marketplace-based core commerce adjusted EBITA, non-GAAP net income and non-GAAP diluted EPS help identify underlying trends in our business that could otherwise be distorted by the effect of certain income or expenses that we include in income from operations, net income and diluted EPS. We believe that these non-GAAP ~~EBITDA, non-GAAP net income and non-GAAP diluted EPS~~measures provide useful information about our core operating results, enhance the overall understanding of our past performance and future prospects and allow for greater visibility with respect to key metrics used by our management in its financial and operational decision-making.
We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by our business that can be used for strategic corporate transactions, including investing in our new business initiatives, making strategic investments and acquisitions and strengthening our balance sheet.
       ~~Non-GAAP~~Adjusted EBITDA, adjusted EBITA, marketplace-based core commerce EBITA, non-GAAP net income, non-GAAP diluted EPS and free cash flow should not be considered in isolation or construed as an alternative to income from operations, core-commerce EBITA, net income, diluted EPS, cash flows or any other measure of performance or as an indicator of our operating performance. These non-GAAP financial measures presented here do not have standardized meanings prescribed by U.S. GAAP and may not be comparable to ~~similarly titled~~similarly-titled measures presented by other companies. Other companies may calculate ~~similarly titled~~similarly-titled measures differently, limiting their usefulness as comparative measures to our data.
       ~~Non-GAAP~~Adjusted EBITDA represents net income before (i) interest and investment income, net, interest expense, other income, net, income tax expenses and share of results of equity investees, (ii) certain non-cash expenses, consisting of share-based compensation expense, amortization, depreciation, impairment of goodwill and ~~intangible assets as well as~~ (iii) ~~one-time expense items consisting~~settlement of ~~the Yahoo TIPLA amendment payment and an equity-settled donation expense that~~a U.S. federal class action lawsuit, which we do not believe are reflective of our core operating performance during the periods presented.
Adjusted EBITA represents net income before (i) interest and investment income, net, interest expense, other income, net, income tax expenses and share of results of equity investees, (ii) certain non-cash expenses, consisting of share-based compensation expense, amortization and impairment of goodwill and (iii) settlement of a U.S. federal class action lawsuit, which we do not believe are reflective of our core operating performance during the periods presented.
Marketplace-based core commerce adjusted EBITA represents EBITA for core commerce excluding the effects of (i) local consumer services, (ii) Lazada, (iii) New Retail and direct import and (iv) Cainiao Network.
Non-GAAP net income represents net income before share-based compensation expense, amortization, impairment of goodwill ~~intangible assets~~ and investments, gain on deemed disposals/disposals/revaluation of investments, settlement of a U.S. federal class action lawsuit, amortization of excess value receivable arising from the restructuring of commercial arrangements with Ant Financial, ~~Services,~~immediate recognition of unamortized professional fees and ~~one-time expense items relating to the Yahoo TIPLA amendment payment, an equity-settled donation expense,~~upfront fees upon early repayment/termination of bank borrowings, the expenses relating to the sale of shares by existing shareholders in our initial public offering ~~charge~~and others, as adjusted for ~~financing-related fees as a result of early repayment of bank borrowings and others.~~the tax effects on non-GAAP adjustments.
Non-GAAP diluted EPS represents non-GAAP net income attributable to ordinary shareholders divided by the weighted average number of shares outstanding during the periods on a diluted basis, including accounting for the effects of the assumed conversion of convertible preference shares prior to our initial public offering in September 2014.
Free cash flow represents net cash provided by operating activities as presented in our consolidated cash flow statement less purchases of property and equipment ~~and intangible assets~~ (excluding acquisition of land use rights and construction in ~~progress)~~

Table of Contents
progress relating to office campus), licensed copyrights and other intangible assets, and adjusted for changes in loan receivables relating to micro loans of our SME loan business (which we transferred to Ant Financial ~~Services~~ in February 2015)~~, the Yahoo TIPLA amendment payment~~ and others. We present the adjustment for changes in loan receivables because ~~such~~these receivables are reflected under cash ~~flow~~flows from operating activities, whereas the secured borrowings and other bank borrowings used to finance them are reflected under cash flows from financing activities, and accordingly, the adjustment is made to show cash flows from operating activities net of the effect of changes in loan receivables.

~~Table of Contents~~
The following table sets forth a reconciliation of our net income to ~~non-GAAP~~adjusted EBITA and adjusted EBITDA for the periods indicated:

Year ended March 31,

2015 2016 2017 2018 2019

RMB RMB RMB RMB RMB US$

(in millions)

Net income
24,320 71,289 41,226 61,412 80,234 11,955
Less: Interest and investment income, net
(9,455 ) (52,254 ) (8,559 ) (30,495 ) (44,106 ) (6,572 )
Add: Interest expense
2,750 1,946 2,671 3,566 5,190 773
Less: Other income, net
(2,486 ) (2,058 ) (6,086 ) (4,160 ) (221 ) (32 )
Add: Income tax expenses
6,416 8,449 13,776 18,199 16,553 2,466
Add: Share of results of equity investees
1,590 1,730 5,027 20,792 (566 ) (84 )

Income from operations
23,135 29,102 48,055 69,314 57,084 8,506
Add: Share-based compensation expense
13,028 16,082 15,995 20,075 37,491 5,586
Add: Amortization of intangible assets
2,089 2,931 5,122 7,120 10,727 1,599
Add: Impairment of goodwill
175 455 — 494 — —
Add: Settlement of U.S. federal class action lawsuit⁽¹⁾
— — — — 1,679 250

Adjusted EBITA
38,427 48,570 69,172 97,003 106,981 15,941
Add: Depreciation and amortization of property and equipment and land use rights
2,326 3,770 5,284 8,789 14,962 2,229

Adjusted EBITDA
40,753 52,340 74,456 105,792 121,943 18,170

(1)
For a description of the relevant federal class action lawsuit and settlement, see "Item 8. Financial Information — A. Consolidated Statements and Other Financial Information — Legal and Administrative Proceedings."
The following table sets forth a reconciliation of adjusted EBITA for core commerce to marketplace-based core commerce adjusted EBITA for the periods indicated:

Year ended March 31,

2012 2013 2014 2015 2016

RMB RMB RMB RMB RMB US$

(in millions)

Net income
4,665 8,649 23,403 24,320 71,289 11,056
Less: Interest and investment income, net
(258 ) (39 ) (1,648 ) (9,455 ) (52,254 ) (8,104 )
Add: Interest expense
68 1,572 2,195 2,750 1,946 301
Less: Other income, net
(327 ) (894 ) (2,429 ) (2,486 ) (2,058 ) (319 )
Add: Income tax expenses
842 1,457 3,196 6,416 8,449 1,310
Add: Share of results of equity investees
25 6 203 1,590 1,730 269

Income from operations
5,015 10,751 24,920 23,135 29,102 4,513
Add: Share-based compensation expense
1,254 1,259 2,844 13,028 16,082 2,494
Add: Amortization of intangible assets
155 130 315 2,089 2,931 455
Add: Depreciation and amortization of property and equipment and land use rights
715 805 1,339 2,326 3,770 584
Add: Impairment of goodwill and intangible assets
135 175 44 175 455 71
Add: Yahoo TIPLA amendment payment
— 3,487 — — — —
Add: Equity-settled donation expense
— — 1,269 — — —

Non-GAAP EBITDA
7,274 16,607 30,731 40,753 52,340 8,117

Year ended March 31,

2018 2019

RMB RMB US$

(in millions)

Adjusted EBITA for core commerce
114,100 136,167 20,290
Less: Effects of local consumer services, Lazada, New Retail and direct import and Cainiao Network
8,783 25,422 3,788

Marketplace-based core commerce adjusted EBITA
122,883 161,589 24,078

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The following table sets forth a reconciliation of our net income to non-GAAP net income for the periods indicated:

Year ended March 31, Year ended March 31,

2012 2013 2014 2015 2016 2015 2016 2017 2018 2019

RMB RMB RMB RMB RMB US$ RMB RMB RMB RMB RMB US$

(in millions)
(in millions)

Net income
4,665 8,649 23,403 24,320 71,289 11,056 24,320 71,289 41,226 61,412 80,234 11,955
Add: Share-based compensation expense
1,254 1,259 2,844 13,028 16,082 2,494 13,028 16,082 15,995 20,075 37,491 5,586
Add: Amortization of intangible assets
155 130 315 2,089 2,931 455 2,089 2,931 5,122 7,120 10,727 1,599
Add: Impairment of goodwill, intangible assets and investments
399 420 163 1,032 2,319 360
Less: Gain on deemed disposals/disposals/ revaluation of investments and others
(21 ) (76 ) (384 ) (6,715 ) (50,144 ) (7,777 )
Add: Amortization of excess value receivable arising from the restructuring of commercial arrangements with Ant Financial Services
— — — 166 264 41
Add: Yahoo TIPLA amendment payment
— 3,487 — — — —
Add: Equity-settled donation expense
— — 1,269 — — —
Add: Impairment of goodwill and investments
1,032 2,319 2,542 20,463 11,360 1,693
Less: Gain on deemed disposals/disposals/revaluation of investments and others
(6,715 ) (50,435 ) (7,346 ) (25,945 ) (47,525 ) (7,081 )
Add: Settlement of U.S. federal class action lawsuit⁽¹⁾
— — — — 1,679 250
Add: Amortization of excess value receivable arising from the restructuring of commercial arrangements with Ant Financial
166 264 264 264 264 39
Add: Immediate recognition of unamortized professional fees and upfront fees upon early repayment/termination of bank borrowings
830 — — 92 — —
Add: Expenses relating to the sale of shares by existing shareholders at initial public offering
— — — 231 — — 231 — — — — —
Add: One-time charge for financing-related fees as a result of early repayment of bank borrowings
— — 664 830 — —

Adjusted for tax effects on non-GAAP adjustments⁽²⁾
(105 ) 341 68 (267 ) (823 ) (123 )

Non-GAAP net income
6,452 13,869 28,274 34,981 42,741 6,629 34,876 42,791 57,871 83,214 93,407 13,918

~~Table~~
(1)
For a description of ~~Contents~~
the relevant federal class action lawsuit and settlement, see "Item 8. Financial Information — A. Consolidated Statements and Other Financial Information — Legal and Administrative Proceedings."

(2)
Tax effects on non-GAAP adjustments are comprised of tax provisions on the amortization of intangible assets and certain investment gains, as well as tax benefits from share-based awards.
The following table sets forth a reconciliation of our diluted EPS to non-GAAP diluted EPS for the periods indicated:

Year ended March 31, Year ended March 31,

2012 2013 2014 2015 2016 2015 2016 2017 2018 2019

RMB RMB RMB RMB RMB US$ RMB RMB RMB RMB RMB US$

(in millions, except per share data)
(in millions)

Net income attributable to ordinary shareholders
4,228 8,404 23,076 24,149 71,460 11,083 24,149 71,460 43,675 63,985 87,600 13,053
Add: Reversal of accretion upon assumed conversion of convertible preference shares
— 17 31 15 — — 15 — — — — —
Add: Dividend eliminated upon assumed conversion of convertible preference shares
— 111 208 97 — — 97 — — — — —
Less: Dilution effect on earnings arising from option plans operated by a subsidiary
(7 ) — — — — —

Less: Dilution effect on earnings arising from share-based awards operated by a subsidiary and equity investees
— — (11 ) (21 ) (42 ) (6 )

Net income attributable to ordinary shareholders for computing diluted EPS
4,221 8,532 23,315 24,261 71,460 11,083 24,261 71,460 43,664 63,964 87,558 13,047
Add: Non-GAAP adjustments to net income⁽¹⁾
1,787 5,220 4,871 10,661 (28,548 ) (4,427 ) 10,556 (28,498 ) 16,645 21,802 13,173 1,963

Non-GAAP net income attributable to ordinary shareholders for computing non-GAAP diluted EPS
6,008 13,752 28,186 34,922 42,912 6,656 34,817 42,962 60,309 85,766 100,731 15,010

Weighted average number of shares on a diluted basis
2,522 2,389 2,332 2,500 2,562 2,500 2,562 2,573 2,610 2,623
Diluted EPS⁽²⁾
1.67 3.57 10.00 9.70 27.89 4.33 9.70 27.89 16.97 24.51 33.38 4.97
Add: Non-GAAP adjustments to net income per share⁽³⁾
0.71 2.19 2.09 4.27 (11.14 ) (1.73 ) 4.23 (11.12 ) 6.47 8.35 5.02 0.75

Non-GAAP diluted EPS⁽⁴⁾
2.38 5.76 12.09 13.97 16.75 2.60 13.93 16.77 23.44 32.86 38.40 5.72

(1)
See the table above regarding the reconciliation of net income to non-GAAP net income for more information of these non-GAAP adjustments.

Table of Contents
(2)
Diluted EPS is derived from net income attributable to ordinary shareholders for computing diluted EPS divided by weighted average number of shares on a diluted basis.

(3)
Non-GAAP adjustments to net income per share is derived from non-GAAP adjustments to net income divided by weighted average number of shares on a diluted basis.

(4)
Non-GAAP diluted EPS is derived from non-GAAP net income attributable to ordinary shareholders for computing non-GAAP diluted EPS divided by weighted average number of shares on a diluted basis.
The following table sets forth a reconciliation of net cash provided by operating activities to free cash flow for the periods indicated:

Year ended March 31, Year ended March 31,

2012 2013 2014 2015 2016 2015 2016 2017 2018 2019

RMB RMB RMB RMB RMB US$ RMB RMB RMB RMB RMB US$

(in millions)
(in millions)

Net cash provided by operating activities(1)
9,275 14,476 26,379 41,217 56,836 8,815 42,017 56,836 82,854 125,805 150,975 22,496
Less: Purchase of property and equipment and intangible assets (excluding land use rights and construction in progress)
(749 ) (1,046 ) (3,285 ) (4,770 ) (5,438 ) (843 )
Less: Purchase of property and equipment (excluding land use rights and construction in progress relating to office campus)
(4,370 ) (4,722 ) (5,680 ) (15,601 ) (32,336 ) (4,818 )
Less: Acquisition of licensed copyrights and other intangible assets
(400 ) (716 ) (6,540 ) (10,208 ) (14,161 ) (2,110 )
Add: Changes in loan receivables, net and others
226 2,828 9,175 11,674 (119 ) (19 ) 11,674 (119 ) 684 — — —

Add: Yahoo TIPLA amendment payment
— 3,487 — — — —

Free cash flow
8,752 19,745 32,269 48,121 51,279 7,953 48,921 51,279 71,318 99,996 104,478 15,568

~~Table~~
(1)
We adopted ASU 2016-18, "Statement of ~~Contents~~
Cash Flows (Topic 230): Restricted Cash," beginning in the first quarter of fiscal year 2019. As a result of adopting this new accounting update, we retrospectively adjusted the consolidated statements of cash flows to include restricted cash and escrow receivables in cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the consolidated statements of cash flows. The impact of our retrospective reclassification on cash flows from operating activities for the years ended March 31, 2015, 2016, 2017 and 2018 was an increase of RMB800 million, nil, RMB2,528 million and RMB634 million, respectively.
Consolidated Balance Sheet Data:

As of March 31,

2012 2013 2014 2015 2016

RMB RMB RMB RMB RMB US$

(in millions)

Cash and cash equivalents and short-term investments
21,744 32,686 43,632 122,341 111,518 17,295
Investment securities and investment in equity investees⁽¹⁾
2,483 2,426 22,131 52,146 125,031 19,390
Property and equipment, net
2,463 3,808 5,581 9,139 13,629 2,114
Goodwill and intangible assets
11,791 11,628 13,699 48,508 87,015 13,495
Total assets
47,210 63,786 111,549 255,434 364,450 56,521
Current bank borrowings
1,283 3,350 1,100 1,990 4,304 667
Secured borrowings
— 2,098 9,264 — — —
Non-current bank borrowings
— 22,462 30,711 1,609 1,871 290
Unsecured senior notes
— — — 48,994 51,596 8,002
Redeemable preference shares
— 5,191 — — — —
Total liabilities
12,797 52,740 70,731 97,363 114,561 17,767
Convertible preference shares⁽²⁾
— 10,447 10,284 — — —
Total Alibaba Group Holding Limited shareholders' equity (deficits)
31,488 (24 ) 29,338 145,439 216,987 33,652
Total equity⁽³⁾
34,383 513 30,417 157,413 249,539 38,700

As of March 31,

2015 2016 2017 2018 2019

RMB RMB RMB RMB RMB US$

(in millions)

Cash and cash equivalents and short-term investments
122,341 111,518 146,747 205,395 193,238 28,794
Investment securities and investments in equity investees⁽¹⁾
52,146 125,031 155,874 182,707 251,471 37,470
Property and equipment, net
9,139 13,629 20,206 66,489 92,030 13,713
Goodwill and intangible assets, net
48,508 87,015 139,528 189,614 333,211 49,650
Total assets
255,434 364,245 506,812 717,124 965,076 143,801
Accrued expenses, accounts payable and other liabilities⁽²⁾
21,967 29,491 48,269 83,210 123,898 18,462
Deferred tax liabilities
4,510 6,480 10,361 19,312 22,517 3,355
Bank borrowings⁽³⁾
3,599 6,175 36,907 40,181 42,783 6,375
Unsecured senior notes⁽⁴⁾
48,994 51,391 54,825 85,372 91,517 13,636
Total liabilities
97,363 114,356 182,691 277,685 349,674 52,104
Total Alibaba Group Holding Limited shareholders' equity
145,439 216,987 278,799 365,822 492,257 73,348
Total equity
157,413 249,539 321,129 436,438 608,583 90,681
(1)
Includes both current and non-current investment securities and ~~investment~~investments in equity investees.

(2)
~~Upon the completion of our initial public offering in September 2014, all of our then outstanding convertible preference shares were converted into ordinary shares.~~Includes both current and non-current other liabilities.

(3)
~~The decrease from March 31, 2012 to March 31, 2013 was primarily due to the repurchase~~Includes both current and non-current portion of ~~our ordinary shares from Yahoo in September 2012~~bank borrowings.

(4)
Includes both current and ~~the privatization~~non-current portion of ~~Alibaba.com, partially offset by the issuance~~unsecured senior notes.

Table of ordinary shares to finance the repurchase. The increase from March 31, 2014 to March 31, 2015 was primarily due to the issuance of our ordinary shares in connection with our initial public offering in September 2014 and net income for fiscal year 2015.Contents
Selected Operating Data
~~GMV~~Annual active consumers
The ~~following chart sets forth the GMV transacted on our China retail marketplaces and mobile GMV as a percentage of GMV for the periods indicated:~~

Three months ended

Jun. 30,
2014 Sep. 30,
2014 Dec. 31,
2014 Mar. 31,
2015 Jun. 30,
2015 Sep. 30,
2015 Dec. 31,
2015 Mar. 31,
2016

(in billions of RMB, except percentages)

GMV⁽¹⁾

Taobao Marketplace GMV
342 380 494 381 427 438 563 449
Tmall GMV
159 176 293 219 246 275 401 293
Total GMV
501 556 787 600 673 713 964 742
Mobile GMV (as a percentage of total GMV)
33% 36% 42% 51% 55% 62% 68% 73%
~~(1)~~
~~GMV generated from traffic through Juhuasuan is recorded as either Taobao Marketplace GMV or Tmall GMV depending on which of these two marketplaces the transaction is completed.~~

~~Table of Contents~~
~~Annual Active Buyers~~
       ~~The following chart~~table below sets forth the number of annual active ~~buyers~~consumers on our China retail marketplaces for the periods indicated:

Twelve months ended

Jun. 30,
2014 Sep. 30,
2014 Dec. 31,
2014 Mar. 31,
2015 Jun. 30,
2015 Sep. 30,
2015 Dec. 31,
2015 Mar. 31,
2016

(in millions)

Annual active buyers
279 307 334 350 367 386 407 423

Twelve months ended

Jun 30,
2017 Sep 30,
2017 Dec 31,
2017 Mar 31,
2018 Jun 30,
2018 Sep 30,
2018 Dec 31,
2018 Mar 31,
2019

(in millions)

Annual active consumers
466 488 515 552 576 601 636 654
Mobile MAUs
The ~~following charts set~~table below sets forth the mobile MAUs on our China retail marketplaces for the periods indicated:

The month ended

Jun 30,
2017 Sep 30,
2017 Dec 31,
2017 Mar 31,
2018 Jun 30,
2018 Sep 30,
2018 Dec 31,
2018 Mar 31,
2019

(in millions)

Mobile MAUs
529 549 580 617 634 666 699 721
GMV ~~mobile revenue, mobile monetization rates realized and mobile MAUs~~
The table below sets forth the GMV in respect of our China retail marketplaces for the periods indicated:

Three months ended

Jun 30,
2014 Sep 30,
2014 Dec 31,
2014 Mar 31,
2015 Jun 30,
2015 Sep 30,
2015 Dec 31,
2015 Mar 31,
2016

(in millions of RMB, except percentages)

China retail marketplaces:

GMV
500,916 555,666 787,047 600,092 673,198 712,933 964,317 741,937
Mobile GMV
164,428 199,054 326,889 303,772 370,578 440,113 651,139 541,024
as a percentage of GMV
33% 36% 42% 51% 55% 62% 68% 73%
Revenue
12,639 12,769 21,275 13,049 15,712 17,267 28,714 18,340
Mobile revenue
2,454 3,719 6,420 5,247 7,987 10,520 18,746 13,084
as a percentage of revenue
19% 29% 30% 40% 51% 61% 65% 71%
Monetization rate
2.52% 2.30% 2.70% 2.17% 2.33% 2.42% 2.98% 2.47%
Mobile monetization rate
1.49% 1.87% 1.96% 1.73% 2.16% 2.39% 2.88% 2.42%

Year ended March 31,

2017 2018 2019

(in billions of RMB)

Taobao Marketplace GMV
2,202 2,689 3,115
Tmall GMV
1,565 2,131 2,612

Total GMV
3,767 4,820 5,727

Month ended

Jun 30,
2014 Sep 30,
2014 Dec 31,
2014 Mar 31,
2015 Jun 30,
2015 Sep 30,
2015 Dec 31,
2015 Mar 31,
2016

(in millions)

Mobile MAUs
188 217 265 289 307 346 393 410
~~Revenue per Active Buyer / Mobile Revenue per Mobile MAU~~
       ~~The following chart sets forth annual China commerce retail revenue per annual active buyer and annualized mobile revenue per mobile MAU from China commerce retail for the periods indicated:~~

Twelve months ended

Jun 30,
2014 Sep 30,
2014 Dec 31,
2014 Mar 31,
2015 Jun 30,
2015 Sep 30,
2015 Dec 31,
2015 Mar 31,
2016

(in RMB)

Annual China commerce retail revenue per annual active buyer⁽¹⁾
168 166 168 171 171 174 184 189
Mobile revenue per mobile MAU from China commerce retail — annualized⁽²⁾
27 39 52 62 76 87 108 123
~~(1)~~
Annual China commerce retail revenue per annual active buyer for each of the above periods is calculated by dividing the China commerce retail revenue for the previous twelve months by the annual active buyers for the same period.
~~(2)~~
Mobile revenue per mobile MAU from China commerce retail, annualized is calculated by dividing mobile revenue from China commerce retail for the previous twelve months by the mobile MAUs at the end of the same period.

~~Table of Contents~~
Exchange Rate Information
Most of our revenues and expenses are denominated in Renminbi. This annual report contains translations of ~~RMB~~Renminbi amounts and Hong Kong dollar amounts into U.S. dollars at specific rates solely for the convenience of the reader. Unless otherwise ~~noted,~~stated, all translations from ~~RMB to~~Renminbi and Hong Kong dollars into U.S. dollars and from U.S. dollars ~~to RMB~~into Renminbi in this annual report were made at a rate of ~~RMB6.4480~~RMB6.7112 to US$1.00 and HK$7.8498 to US$1.00, the respective exchange ~~rate~~rates on March 29, 2019 set forth in the H.10 statistical release of the Federal Reserve ~~Board on March 31, 2016.~~Board. We make no representation that any ~~RMB~~Renminbi, Hong Kong dollar or U.S. dollar amounts referred to in this annual report could have been, or could be, converted into U.S. dollars or ~~RMB,~~Renminbi, as the case may be, at any particular rate ~~at the rates stated below,~~ or at all. The PRC government imposes control over its foreign currency reserves in part through direct regulation of the conversion of ~~RMB~~Renminbi into foreign exchange and through restrictions on foreign trade. On May ~~20, 2016,~~31, 2019, the noon buying rate for Renminbi and Hong Kong dollars was ~~RMB6.5485~~RMB6.9027 to US$~~1.00.~~
       ~~The following table sets forth, for the periods indicated, information concerning exchange rates between the RMB~~1.00 and ~~the U.S. dollar based on the exchange rates set forth in the H.10 statistical release of the Federal Reserve Board.~~HK$7.8387 to US$1.00, respectively.

Noon buying rate
Period
Period end Average⁽¹⁾ Low High

(RMB per US$1.00)

2011
6.2939 6.4475 6.6364 6.2939
2012
6.2301 6.2990 6.3879 6.2221
2013
6.0537 6.1412 6.2438 6.0537
2014
6.2046 6.1704 6.2591 6.0402
2015
6.4778 6.2869 6.4896 6.1870
November
6.3883 6.3640 6.3945 6.3180
December
6.4778 6.4491 6.4896 6.3883
2016

January
6.5752 6.5726 6.5932 6.5219
February
6.5525 6.5501 6.5795 6.5154
March
6.4480 6.5027 6.5500 6.4480
April
6.4738 6.4754 6.5004 6.4571
May (through May 20)
6.5485 6.5124 6.5485 6.4738
~~(1)~~
Annual averages are calculated using the average of the rates on the last business day of each month during the relevant year. Monthly averages are calculated using the average of the daily rates during the relevant month.
B.  Capitalization and Indebtedness
Not Applicable.
C.  Reasons for the Offer and Use of Proceeds
Not Applicable.

Table of Contents
D.  Risk Factors
Risks Related to Our Business and Industry
Maintaining the trusted status of our ~~ecosystem~~digital economy is critical to our success and growth, and any failure to do so could severely damage our reputation and brand, which would have a material adverse effect on our business, financial condition, ~~and~~ results of ~~operations.~~operations and prospects.
We have established a strong brand name and reputation for our ~~ecosystem in China.~~digital economy. Any loss of trust in our ~~ecosystem~~digital economy or platforms could harm our reputation and the value of our brand, and could result in consumers, merchants, brands, retailers and other participants reducing their levels of activity ~~level~~ in our ~~ecosystem,~~digital economy, which could materially reduce our revenue and

~~Table of Contents~~
profitability. Our ability to maintain trust in our ~~position as a trusted platform for online~~digital economy and ~~mobile commerce~~platforms is based in large part upon:
•
the ~~reliability~~quality and ~~security~~functionality of ~~our platforms (including the reliability~~products and ~~security of the various service providers on our platforms),~~services as well as the ~~commitment to high levels~~quality and appeal of ~~service~~content available through our digital economy;

•
the reliability and ~~data protection by~~integrity of our company and our platforms, as well as of the merchants, software developers, logistics providers, service providers and other participants in our ~~ecosystem;~~digital economy;

•
our commitment to high levels of service;

•
the ~~quality, breadth~~safety, security and ~~functionality~~integrity of ~~products, services~~the data on our systems, and ~~functions and the quality, variety and appeal~~those of ~~content available through~~other participants in our ~~platforms;~~digital economy;

•
the effectiveness and ~~perceived~~ fairness of rules governing our marketplaces, ~~and other~~various platforms and overall ~~ecosystem;~~digital economy;

•
the strength of our ~~consumer protection measures;~~measures to protect consumers and intellectual property rights owners; and

•
our ability to provide reliable and trusted payment and escrow services through our arrangements with Alipay.
~~Increased investments~~Sustained investment in our business, strategic acquisitions and investments, as well as our focus on long-term performance, and on maintaining the health of our ~~ecosystem~~digital economy, may negatively affect our margins and our net income.
We have experienced significant growth in our profit margins and net income. Our operating profit and net income grew 26% and 193%, respectively, from fiscal year 2015 to fiscal year 2016. However, we cannot assure you that we will be able to maintain our growth at these levels, or at all. Our operating profit declined by 7% and net income only grew 4% from fiscal year 2014 to fiscal year 2015. Consistent with our focus on the long-term interests of the participants in our ~~ecosystem participants, we may take actions that fail to generate positive short-term financial results, and we cannot assure you that these actions will produce long-term benefits.~~
digital economy. We continue to increase our spending and ~~investment~~investments in our business, ~~to support~~strategic acquisitions and certain initiatives. Many of our ~~future growth, including~~newly invested businesses have lower or negative margins, and others are in ~~improving our technological infrastructure~~the early stages of exploring, establishing and ~~cloud computing capacities. All~~optimizing appropriate monetization models, many of which are less efficient in attracting and converting paying merchants, subscribers or other participants as compared with certain of the marketplaces and other businesses we operate. We believe these investments and initiatives are crucial to ~~the~~our success ~~of our business~~and future growth, but they will have the effect of increasing our costs and lowering our margins and profit, and ~~such~~this effect may be significant ~~at least~~ in the ~~short-term. Moreover, many of~~short term and potentially over longer periods. We expect our ~~business~~margins will decrease as we continue to make these and similar investments. From fiscal year 2018 to fiscal year 2019, our adjusted EBITDA margin declined from 42% to 32%. These investments and initiatives ~~emphasize~~ include:
•
expanding ~~our user base~~ and enhancing ~~user experience, rather than initially prioritizing monetization.~~our core commerce offerings, including our logistics network and capacities, local consumer services business, our New Retail initiatives, direct sales and cross-border and international businesses;

•
strengthening and expanding various facilities and increasing our employee headcount;

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researching and developing new technologies and improving our technological infrastructure and cloud computing capacity;

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developing and acquiring content for our digital media and entertainment business; and

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incubating new innovation initiatives.
       ~~Furthermore, we~~We have made, and intend to continue to make, strategic investments and acquisitions to ~~expand our user base and geographic coverage and add complementary offerings and technologies to~~ further strengthen our ~~ecosystem. For example, we expect to continue to~~digital economy. We may make strategic investments and acquisitions ~~relating~~in a range of areas either directly related to ~~entertainment, international expansion, cloud computing~~one or more of our businesses, or related to the infrastructure, technology, services or products that support our businesses and ~~big data, logistics services, local commerce, category expansion, e-commerce marketplaces, healthcare and new technologies.~~digital economy. Our strategic investments and acquisitions may adversely affect our ~~future~~ financial results, ~~including by decreasing our margins and net income.~~at least in the short term. For example, acquisitions of, and continued investments in, businesses with lower margins or which are loss-making, such as our acquisitions including those of UCWeb and AutoNavi, have negatively impacted our financial results historically. We also believe that our expansion into the mobile media and entertainment sectors, including our recent acquisition of Youku Tudou and our international expansion through our recent acquisition of a controlling stake in Lazada and Cainiao Network, and our newly integrated local consumer services business, have negatively affected our margins and net income. Acquired businesses that are ~~important~~loss-making may continue to ~~our overall business but will have a negative effect on our financial results, at least~~sustain losses and may not become profitable in the ~~short-term. In addition, the~~near future or at all. Investments made to expand our business, facilities and workforce will also involve costs and risks, such as potential labor disputes and compliance costs and risks. The performance of ~~minority investments we make that are accounted for under the~~our current and future equity ~~method investments~~investees and investment areas may also adversely affect our net income. There can be no assurance that we will be able to ~~sustain~~grow our ~~net income~~acquired or invested businesses, or realize returns, benefits of synergies and growth ~~rates~~opportunities we expect in connection with these investments and acquisitions. Also refer to "— We face risks relating to our acquisitions, investments and alliances."
We may not be able to maintain or grow our revenue or our ~~margins.~~business.

~~Table~~We have experienced significant growth in revenue and in our business in recent years. Our ability to continue to grow our revenue depends on a number of ~~Contents~~factors. See "Item 5. Operating and Financial Review and Prospects — Operating Results — Factors Affecting Our Results of Operations — Our Ability to Create Value for Our Users and Generate Revenue" and "— Our Monetization Model."
Our revenue growth also depends on our ability to continue to grow our core businesses as well as businesses we have acquired or which we consolidate. We are exploring and will continue to explore in the future new business initiatives, including in industries and markets in which we have limited or no experience, as well as new business models, that may be untested. Developing new businesses, initiatives and models requires significant investments of time and resources, and may present new and difficult technological, operational and compliance challenges. Particularly in the commerce space, we expect to face various challenges while facilitating the convergence of online and offline retail and digitalization of offline business operations. Many of these challenges may be specific to business areas we do not have sufficient experience with. We may encounter difficulties or setbacks in the execution of various growth strategies, including our New Retail initiatives, which we expect to be an important driver of our future growth, and this and the other growth strategies may not generate the returns we expect within the timeframe we anticipate, or at all.
In addition, our overall or segment revenue growth may slow or our revenues may decline for other reasons, including decreasing consumer spending, increasing competition and slowing growth of China's retail industry, as well as changes in the geopolitical landscape, government policies or general economic conditions. As our revenue grows to a higher base level, our revenue growth rate may slow in the future. Furthermore, due to the size and scale we have achieved, our user base may not continue to grow as quickly or at all.
If we are unable to compete effectively, our business, financial condition and results of operations would be materially and adversely affected.
We face increasingly intense competition, ~~mainly~~principally from established Chinese ~~and global~~ Internet companies, such as Tencent, and their respective affiliates, as well as ~~certain offline retailers~~global and regional e-commerce players, ~~including those that specialize~~such as Amazon, other providers of local consumer services, and in ~~a limited number~~the cloud computing and digital media and entertainment areas. These areas of ~~product categories.~~our business are subject to rapid market change, the introduction of new business models, and the entry of new and well-funded competitors. Increased investments made and lower prices offered by our competitors may require

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us to divert significant managerial, financial and human resources in order to remain competitive, and ultimately may reduce our market share and negatively impact the profitability of our business. We mainly compete to:
•
attract, engage and retain consumers and increase their spending based on the variety, quality and value of products, services and ~~services listed on~~content offered within our ~~marketplaces, the engagement of media and entertainment content available on our platforms and~~digital economy, the overall user experience and the effectiveness of our consumer protection measures;

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attract and retain merchants, brands and retailers based on the effectiveness of the various technologies, infrastructure, products and services we offer to them;

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attract and retain marketers, publishers and agency-operated demand-side platforms;

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maintain and grow local delivery capabilities to provide convenient and efficient delivery services;

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attract and retain ~~merchants based on our size and on the size and the engagement~~a wide range of ~~consumers on our platforms and the effectiveness~~businesses as users of our ~~products and services to help them build brand awareness and engagement, acquire and retain customers, complete transactions and enhance operating efficiency;~~

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compete to attract and retain marketers, publishers and demand side platforms operated by agencies based on the reach and engagement of our properties, the depth of our consumer data insights and the effectiveness of our branding and marketing solutions;cloud service offerings;

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attract other participants ofto our ~~ecosystems~~digital economy based on access to business opportunities created by the large scale of economic activity, infrastructure and technologies in our digital economy and on our ~~platforms, as well as tools and technologies that help them operate and grow their businesses;~~platforms;

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optimize the usefulness of the data and technologies we provide ~~including data-enabled customer relationship management tools, marketing data~~ and data science, media ecosystem for branding, cloud computing services, omni-channel solutions, the availability of supporting services, including payment settlement and logistics services, and the quality of ourmaintain high-quality customer service;

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identify, bid for, and execute strategic investments and thrive in new industries ~~and sectors~~ as we acquire new businesses and expand, bringing us into competition with major players in these and other ~~industries~~industries;

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innovate and ~~sectors, such as e-commerce service providers in China's healthcare industry~~develop new growth initiatives and ~~media and entertainment providers;~~technologies; and

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attract motivated and ~~effective~~capable employees, including engineers and product ~~developers who serve critical functions in the development of our products and our ecosystem.~~developers.
~~In addition, we face increasing competition in the diversified mobile commerce industry for mobile users in China from established as well as emerging mobile commerce platforms.~~
Our ability to compete depends on a number of other factors as well, some of which may be ~~out of~~beyond our control, ~~including:~~
•
~~the timely introduction and market acceptance of the services we offer, compared to those of our competitors;~~

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~~our ability to innovate and develop new technologies;~~

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~~our ability to maintain and enhance our leading position in retail commerce in China;~~

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~~our ability to benefit from new business initiatives; and~~

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including alliances, acquisitions or consolidations within ~~the Internet industry~~our industries that may result in stronger ~~competitors.~~
competitors, and changes in the regulatory environment in the markets we operate. Existing and new competitors may leverage their established platforms or market positions, or introduce innovative business models, to launch highly-engaging content, products or services that may attract a large user base and achieve rapid growth, which may materially and adversely affect our business expansion and results of operations. We increasingly face ~~uncertainties~~competition from domestic and international players operating in these markets, as well as potential political measures, regulatory challenges and protectionist policies that may ~~fail~~support domestic players in those markets. As we develop our platforms and other businesses, such as our New Retail initiatives and other direct sales businesses, we may also be perceived to ~~anticipate competitive conditions~~compete with other participants in our digital economy, such as ~~we expand~~certain merchants and retailers, which may negatively affect our ~~operations in overseas markets, including, for example, through our recent acquisition of a controlling stake in Lazada.~~ relationships with them.
If we are not able to compete effectively, the ~~GMV transacted on our marketplaces~~level of economic activity and ~~the~~ user engagement ~~level and activity level on~~in our ~~platforms~~digital economy may decrease ~~significantly,~~and our market share and profitability may be negatively affected, which could materially and adversely affect our business, financial condition and results of operations, as well as our reputation and brand.

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We may not be able to maintain and improve the network effects of our ~~ecosystem,~~digital economy, which could negatively affect our business and prospects.
Our ability to maintain a healthy and vibrant ~~ecosystem~~digital economy that creates strong network effects among consumers, merchants, brands, retailers and other participants is critical to our success. The extent to which we are able to maintain and strengthen these network effects depends on our ability to:
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offer secure and open platforms for all participants and balance the interests of these ~~participants, including consumers, merchants, brands, service providers and others;~~

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~~provide tools and services that meet the evolving needs of consumers and merchants;~~participants;

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provide a wide range of high-quality product, service and content offerings to consumers;

•
~~provide~~attract and retain consumers, merchants, ~~with a high level~~brands and retailers of ~~traffic flow with strong commercial intent and effective online marketing services;~~all sizes;

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~~further enhance~~provide effective technologies, infrastructure and services that meet the ~~attractiveness~~evolving needs of ~~our mobile platform;~~consumers, merchants, brands and retailers;

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arrange secure and trusted payment settlement and escrow services;

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address user concerns with respect to data security and privacy measures;

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improve our logistics data platform and coordinate fulfillment and delivery services with ~~third-party~~ logistics ~~and delivery companies;~~service providers;

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attract and retain third-party service providers ~~who~~that are able to provide quality services on commercially reasonable terms to our ~~merchants;~~merchants, brands and retailers;

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maintain the quality of our customer service; and

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continue adapting to the changing demands of the market.
In addition, changes to current operations we may make to enhance and improve our ~~ecosystem and balance the needs and interests of the various participants on our ecosystem~~digital economy or to comply with regulatory requirements may be viewed positively from one participant group's perspective, such as consumers, but may have negative effects from another group's perspective, such as merchants. If we fail to balance the interests of all participants in our ~~ecosystem, fewer~~digital economy, consumers, merchants, brands, retailers and other participants may ~~visit our marketplaces, or they may~~ spend less time, ~~mind share~~mind-share and resources on our ~~websites~~platforms and may conduct fewer transactions or use alternative platforms, any of which could result in a material decrease in our revenue and net income.
We may not be able to maintain our culture, which has been a key to our success.
Since our founding, our culture has been defined by our mission, vision and values, and we believe that our culture has been critical to our success. In particular, our culture has helped us serve the long-term interests of our customers, attract, retain and motivate employees and create value for our shareholders. We face a number of challenges that may affect our ability to sustain our corporate culture, including:
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failure to identify, attract, promote and retain people ~~in leadership positions in our organization~~ who share our culture, mission, vision and values ~~and mission;~~in leadership positions;

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failure to execute aan effective management succession ~~plan~~plan;

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challenges of effectively incentivizing and motivating employees, including members of senior management, and in particular those who have gained a substantial amount of personal wealth related to ~~replace our current generation of management leaders;~~share-based incentives;

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the increasing size, complexity, geographic coverage and cultural diversity of our business and workforce;

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challenges in managing a workforce that is expanding through organic growth and acquisitions, in providing effective training to this workforce, and in promoting a culture of ~~effectively incentivizing~~compliance with laws and ~~motivating~~regulations and preventing misconduct among our employees ~~including those who have gained a substantial amount of personal wealth related to share-based incentives;~~and participants in our digital economy;

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competitive pressures to move in directions that may divert us from our mission, vision and values;

•
the ~~continued challenges of an ever-changing business environment;~~

•
~~the~~ pressure from the public markets to focus on short-term results instead of long-term value creation; and

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the increasing need to develop expertise in new areas of business, such as New Retail, local consumer services and expansion of our logistics network services, that affect ~~us; and~~

•
~~the integration of new personnel and businesses from acquisitions.~~us.
If we are not able to maintain our culture or if our culture fails to deliver the long-term results we expect to achieve, our reputation, business, financial condition, results of operations and prospects could be materially and adversely affected.
~~We may not be able to maintain or grow our revenue or our business.~~
       We primarily derive our revenue from online marketing services, commissions based on transaction value derived from certain of our marketplaces, fees from the sale of memberships on our wholesale marketplaces and cloud service fees, and we have experienced significant growth in revenue in recent years. In particular, our revenue grew 45% from fiscal year 2014 to fiscal year 2015 and 33% from fiscal year 2015 to fiscal year 2016. Our ability to continue to generate and grow our revenue depends on a number of factors. See "Item 5. Operating and Financial Review and Prospects — A. Operating Results — Factors Affecting Our Results of Operations — Our Ability to Create Value for Our Users and Generate Revenue" and "— Our Monetization Model."
       Our future revenue growth also depends on our ability to expand into new geographic regions, including our expansion into international markets, and grow our other businesses, including our cloud computing business and the businesses we have acquired or invested in and new business initiatives we may explore in the future. In particular, we face risks associated with expanding into sectors or geographies in which we have limited or no experience. For example, as we expand our entertainment business, we may be unable to produce or license quality content on commercially reasonable terms or at all, fail to anticipate or keep up with changes in user preferences, user behavior and technological developments or fail to gain access to content distribution channels. In addition, as we expand into the online video industry following the acquisition of Youku Tudou, we may not be able to acquire and retain users, attract marketers to purchase online marketing services on our video websites, obtain professionally produced content at competitive prices or at all, encourage more user-generated content, or grow user acceptance and the popularity of our online video content. Our expansion into new sectors and geographic regions will subject us to additional regulatory risks, such as permit requirements and regulations over content in the PRC. If we are unable to successfully monetize and expand these businesses in our target markets, our future revenue growth may be adversely affected.
       In addition, our revenue growth may slow or our revenues may decline for other reasons, including decreasing consumer spending, increasing competition and slowing growth of the China retail or China online retail industry and changes in government policies or general economic conditions. In addition, as our revenue grows to a higher base level, that rate of growth of our revenue has slowed and may further slow in the future.
We rely on Alipay to conduct substantially all of the payment processing and all of the escrow services on our marketplaces. If Alipay's services are limited, restricted, curtailed or degraded in any way or become unavailable to us or our users for any reason, our business may be materially and adversely affected.
       Through contractual arrangements with us, Alipay provides convenient payment processing and escrow services to us on preferential terms. These services are critical to our platforms and the development of our ecosystem. In the twelve months ended March 31, 2016, approximately 75% of GMV on our China retail marketplaces were settled through Alipay's escrow and payment processing services. We rely on the convenience and ease of use that Alipay provides to our users. If the quality, utility, convenience or attractiveness of Alipay's services declines for any reason, the attractiveness of our marketplaces could be materially and adversely affected.
       ~~Alipay's business is subject to a number of risks that could materially and adversely affect its ability to provide payment processing and escrow services to us, including:~~
•
~~increasing costs to Alipay, including fees charged by banks to process funds through Alipay, which would also increase our cost of revenues;~~

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~~dissatisfaction with Alipay's services or lower use of Alipay by consumers and merchants;~~

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~~changes to rules or practices applicable to payment card systems that link to Alipay;~~

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~~breach of customers' personal information and concerns over the use and security of any collected information;~~

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~~service outages, system failures or failure to effectively scale the system to handle large and growing transaction volumes; and~~

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~~failure to manage funds accurately or loss of funds, whether due to employee fraud, security breaches, technical errors or otherwise.~~
       In addition, certain commercial banks in China impose limits on the amounts that may be transferred by automatic payment from customers' bank accounts to their linked accounts with third-party payment services. Although we believe the impact of these restrictions has not been and will not be significant in terms of the overall volume of payments processed for our China retail marketplaces, and automatic payment services linked to bank accounts represent only one of many payment mechanisms that consumers may use to settle transactions, we cannot predict whether these and any additional restrictions that could be put in place would have a material adverse effect on our marketplaces.
       In addition, Alipay's business is highly regulated. Alipay is required to comply with numerous complex and evolving laws, rules and regulations and faces the risk of failure to manage its regulatory risks. In particular, regulators and third parties in China have been increasing their focus on online and mobile payment services, and recent regulatory and other developments could reduce the convenience or utility of Alipay users' accounts. See "— We and Ant Financial Services are subject to a broad range of laws and regulations, and future laws and regulations may impose additional requirements and other obligations on our business or otherwise that could materially and adversely affect our business, financial condition and results of operations," and "Item 4. Information on the Company — B. Business Overview — Regulation — Regulation Applicable to Alipay."
       If we needed to migrate to another third-party payment service, the transition would require significant time and management resources, and the third-party payment service may not be as effective, efficient or well-received by consumers and merchants on our marketplaces. These third-party payment services also may not provide escrow services, and we may not be able to receive commissions based on GMV transacted through these systems. We would also no longer have the benefit of the commercial agreement with Ant Financial Services and Alipay and would likely be required to pay more for payment processing and escrow services than we currently pay. There can be no assurance that we would be able to reach an agreement with an alternative online payments service on acceptable terms or at all.
We do not control Alipay or its parent entity, Ant Financial Services, over which Jack Ma effectively controls a majority of the voting interests. If conflicts that could arise between us and Alipay or Ant Financial Services are not resolved in our favor, they could have a negative effect on our ecosystem and materially and adversely affect our business, financial condition, results of operations and prospects.
       Although we rely on Alipay to conduct substantially all of the payment processing and all of the escrow services on our marketplaces, we do not have any control over Alipay. Alipay provides payment services to us on preferential terms pursuant to our long-term commercial agreement with Ant Financial Services and Alipay. Following the divestment and subsequent equity holding restructuring related to Ant Financial Services, an entity controlled by Jack Ma, our executive chairman, became the general partner of Hangzhou Junhan Equity Investment Partnership, or Junhan, a PRC limited partnership, and Junao Equity Investment Partnership, or Junao, a PRC limited partnership, which are two major equity holders of Alipay's parent, Ant Financial Services. Accordingly, Jack has an economic interest in Ant Financial Services and is able to exercise the voting power of the major shareholders of Ant Financial Services. We understand that through the exercise of this voting power, Jack continues to control a substantial majority of the voting interests in Ant Financial Services.

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       If Alipay were not able to successfully manage the risks relating to its business, its ability to continue to deliver payment services to us on preferential terms may be undermined. Furthermore, if for any reason, Alipay sought to amend the terms of its agreements and arrangements with us, there is no assurance that Jack Ma, in light of his voting control over Alipay's parent, Ant Financial Services, would act in our interest. If we were to lose the preferential terms with Alipay or if Alipay is unable to successfully manage its business, our ecosystem could be negatively affected, and our business, financial condition, results of operations and prospects could be materially and adversely affected.
       Ant Financial Services also provides other financial services to participants in our ecosystem, including micro-finance services, wealth management, insurance and credit referencing services, and may provide additional services in the future. Other conflicts of interest between us, on the one hand, and Alipay and Ant Financial Services, on the other hand, may arise relating to commercial or strategic opportunities or initiatives. Although we and Ant Financial Services have each agreed to certain non-competition undertakings, we cannot assure you that Ant Financial Services would not pursue opportunities to provide services to our competitors or other opportunities that would conflict with our interests. Jack Ma may not resolve such conflicts in our favor. Furthermore, our ability to explore alternative payment services other than Alipay for our marketplaces may be constrained due to Jack's relationship with Ant Financial Services.
       In addition, we grant share-based awards to employees of Ant Financial Services, and Junhan grants share-based awards tied to the value of Ant Financial Services to our employees. The provision of awards to our employees tied to the value of Ant Financial Services is intended to enhance our strategic and financial relationship with Ant Financial Services. See "Item 7. Major Shareholders and Related Party Transactions — B. Related Party Transactions — Agreements and Transactions Related to Ant Financial Services and its Subsidiaries — Equity-based Award Arrangements." The share-based awards granted by Junhan to our employees result in expenses that are recognized by our company. Subject to the approval of our audit committee, Jack, through his role with us and his control over Junhan, could be in a position to propose and promote further share-based grants that result in additional, and potentially significant, expenses to our company. Accordingly, these and other potential conflicts of interest between us and Ant Financial Services or Alipay, and between us and Jack or Junhan, may not be resolved in our favor, which could have a material adverse effect on our business, financial condition, results of operations and prospects.
       Moreover, because of our close association with Ant Financial Services and overlapping user base, events that negatively affect Ant Financial Services could also negatively affect customers', regulators' and other third parties' perception of us. In addition, any actual or perceived conflict of interest between us and Ant Financial Services or any other company integral to the functioning of our ecosystem could also materially harm our reputation as well as our business and prospects.
If we are not able to continue to innovate or if we fail to adapt to changes in our industry, our business, financial condition and results of operations would be materially and adversely affected.
       ~~The Internet~~Our industry is characterized by rapidly changing technology, evolving industry standards, new mobile apps and protocols, new products and ~~technologies, new service and product introductions,~~services, new media and entertainment content — including user-generated content — and changing ~~customer demands.~~user demands and trends. Furthermore, our domestic and international competitors are ~~constantly~~continuously developing innovations in ~~Internet~~personalized search and recommendation, online shopping and marketing, communications, social networking, entertainment, logistics and other services, ~~on both mobile devices and personal computers,~~ to enhance ~~users' online~~user experience. WeAs a result, we continue to invest significant resources in our infrastructure, research and development and other areas in order to enhance our ~~technology~~businesses and ~~our existing products, services and content~~operations, as well as to explore new growth strategies and introduce new ~~high quality~~high-quality products ~~services~~ and ~~content that will attract more participants~~services. Our investments in innovations and new technologies, which may be significant, may not increase our competitiveness or generate financial returns in the short term, or at all, and we may not be successful in adopting and implementing new technologies, such as artificial intelligence, or AI. Our investments and projects to ~~our platforms.~~develop new growth initiatives and technologies may be hindered by political measures, regulatory scrutiny or other protectionist policies, on national security grounds or for other reasons. The changes and developments taking place in our industry may also require us to re-evaluate our business model and adopt significant changes to our long-term strategies and business ~~plan.~~plans. Our failure to innovate and adapt to these changes and developments would have a material adverse effect on our business, financial condition and results of operations.

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       ~~For example, the use of mobile devices to access content~~ Even if we timely innovate and ~~transact on~~adopt changes in our ~~platforms is developing rapidly,~~strategies and plans, we may nevertheless fail to ~~continue to offer superior user experience in order to increase~~realize the anticipated benefits of these changes or maintain the level of mobile engagement on our platforms, or to successfully develop the mobile community. The variety of technical and other configurations across different mobile devices and platforms increases the challenges associated with this environment. If we are unable to continue to attract significant numbers of new mobile consumers and increase or maintaineven generate lower levels of ~~mobile engagement, our ability to maintain or grow our business would be materially and adversely affected.~~
~~Our business generates and processes~~revenue as a ~~large amount of data, and the improper use or disclosure of such data could harm our reputation as well as have a material adverse effect on our business and prospects.~~
       Our business, including our cloud computing business, generates and processes a large quantity of personal, transaction, demographic and behavioral data. We face risks inherent in handling and protecting large volumes of data. In particular, we face a number of challenges relating to data from transactions and other activities on our platforms, including:
•
~~protecting the data in and hosted on our system, including against attacks on our system by outside parties or fraudulent behavior or improper use by our employees;~~

•
~~addressing concerns related to privacy and sharing, safety, security and other factors; and~~

•
complying with applicable laws, rules and regulations relating to the collection, use, disclosure or security of personal information, including any requests from regulatory and government authorities relating to such data.
       The PRC regulatory and enforcement regime with regard to data security and data protection is evolving. On July 1, 2015, the National People's Congress Standing Committee promulgated the National Security Law, or the New National Security Law, which took effect on the same date and replaced the former National Security Law promulgated in 1993. The New National Security Law covers various types of national security including technology security and information security. According to the New National Security Law, the state shall ensure that the information system and data in important areas are secure and controllable. In addition, according to the New National Security Law, the state shall establish national security review and supervision institutions and mechanisms, and conduct national security reviews of key technologies and IT products and services that affect or may affect national security. In particular, we are obligated under the New National Security Law to safeguard national security by, for example, providing evidence related to activities endangering national security, providing convenience and assistance for national security work, and providing necessary support and assistance for national security institutions, public security institutions as well as military institutions. As such, we may have to provide data to PRC government authorities and military institutions for compliance with the New National Security Law, which may result in additional expenses to us and subject us to negative publicity which could harm our reputation with users and negatively affect the trading price of our ADSs. There are uncertainties on how the New National Security Law will be implemented in practice. PRC regulators, including the MIIT and the Cyberspace Administration, have been increasingly focused on regulation in the areas of data security and data protection. We expect that these areas will receive greater attention and focus from regulators, as well as attract public scrutiny and attention going forward. This greater attention, scrutiny and enforcement, including more frequent inspections, could increase our compliance costs and, subject us to heightened risks and challenges associated with data security and protection. If we are unable to manage these risks, our reputation and results of operations could be materially and adversely affected.
       In addition, pursuant to our data sharing agreement with Ant Financial Services and Alipay, which sets forth data security and confidentiality protocols, and subject to relevant legal requirements and limitations, we have agreed to a broad sharing of data with Ant Financial Services through a data sharing platform that we own and operate. Cainiao Network, Koubei and Alibaba Pictures have also entered into agreements with us to participate in the data sharing platform. We also grant expressly limited access to specified data on our data platform to certain other participants in our ecosystem that provide services to merchants and consumers, such as retail operating

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partners, logistics service providers, mobile app developers, independent software vendors, or ISVs, cloud developers, marketing affiliates and various professional service providers. These ecosystem participants face the same challenges inherent in handling and protecting large volumes of data. Any systems failure or security breach or lapse on our part or on the part of any of our ecosystem participants that results in the release of user data could harm our reputation and brand and, consequently, our business, in addition to exposing us to potential legal liability.
       As we expand our operations, we will be subject to additional laws in other jurisdictions where our merchants, consumers, users, customers and other participants are located. The laws, rules and regulations of other jurisdictions, such as the United States and Europe, may be at a more mature stage of development, be more comprehensive and nuanced in their scope, and impose more stringent or conflicting requirements and penalties than those in China, compliance with which could require significant resources and costs. Our continued expansion into cloud computing services, both within China and overseas, will also increase the amount of data hosted on our system and increase the number of parties who host data on our system, which will present increased challenges and risks in relation to data protection and data privacy. Our privacy policies and practices concerning the collection, use and disclosure of user data are posted on our websites. Any failure, or perceived failure, by us to comply with our posted privacy policies or with any regulatory requirements or privacy protection-related laws, rules and regulations could result in proceedings or actions against us by governmental entities or others. These proceedings or actions could subject us to significant penalties and negative publicity, require us to change our business practices, increase our costs and severely disrupt our business.result.
Our failure to manage the ~~growth of~~significant challenges involved in growing our business and operations could harm us.
Our business has become increasingly complex as ~~its~~the scale, diversity and geographic coverage ~~as well as that~~ of our business and our workforce continue to ~~grow. We have also significantly expanded our headcount, office facilities and infrastructure, and we anticipate that further expansion in certain areas and geographies will be required.~~expand. This expansion increases the complexity of our operations and places a significant strain on our management, operational and financial resources. ~~We must continue~~The challenges involved in expanding our businesses require our employees to ~~effectively hire, train~~handle new and ~~manage new employees.~~expanded responsibilities and duties. If our ~~new hires perform poorly~~employees fail to adapt to the expansion or if we are unsuccessful in hiring, training, managing and integrating new employees or retraining and expanding the roles of our existing employees, our business, financial condition and results of operations may be materially harmed.
Moreover, our current and planned ~~personnel,~~staffing, systems, policies, procedures and controls may not be adequate to support our future operations. To effectively manage ~~the expected~~continuing expansion and growth of our operations and ~~personnel,~~workforce, we will need to continue to improve our personnel management, transaction processing, operational and financial systems, policies, procedures and controls, which could be particularly challenging as we acquire new operations with different and incompatible systems in new industries or geographic areas. These efforts will require significant managerial, financial and human resources. ~~We cannot assure you~~There can be no assurance that we will be able to effectively manage our growth or to implement all these systems, policies, procedures and control measures successfully. If we are not able to manage our growth effectively, our business and prospects may be materially and adversely affected.
We face risks relating to our acquisitions, investments and alliances.
We have acquired and invested in a large number and a diverse range of businesses, including those in different countries and regions, technologies, services and products in recent years, including investments of varying sizes in equity investees and joint ventures, and, from time to time, we may have a number of pending investments and acquisitions that are subject to closing conditions. See "Item 5. Operating and Financial Review and Prospects — A. Operating Results — Recent Investment, Acquisition and Strategic Alliance Activities." We expect to continue to evaluate and consider a wide array of potential strategic transactions as part of our overall business strategy, including business combinations, acquisitions and dispositions of businesses, technologies, services, products and other assets, as well as strategic investments, joint ventures and alliances. At any given time we may be engaged in

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~~we may be engaged in~~ discussing or negotiating a range of these types of transactions. These transactions involve significant challenges and risks, including:
•
difficulties in, and significant and unanticipated additional costs and expenses resulting from, integrating into our ~~operations~~business the ~~diverse and~~ large number of personnel, operations, products, services, technology, internal controls and financial reporting of ~~companies~~the businesses we acquire;

•
disruption of our ongoing business, distraction of and significant time and attention required from our management and employees and ~~increase of~~increases in our expenses;

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~~loss~~departure of skilled professionals and proven management teams of acquired businesses, as well as the loss of established client relationships of ~~the~~those businesses we invest in or acquire;

•
for investments over which we may not obtain management and operational control, we may lack influence over the controlling ~~partner~~partners or ~~shareholder, which~~shareholders, or may ~~prevent us from achieving~~not have aligned interests with these of our ~~strategic goals in such investment;~~partners or other shareholders;

•
additional or conflicting regulatory requirements, heightened restrictions on and ~~compliance risks~~scrutiny of investments, acquisitions and foreign ownership in other jurisdictions, on national security grounds or for other reasons, regulatory hurdles, such as filings and approvals under the anti-monopoly and competition laws, rules and regulations, the risk that acquisitions or investments may fail to close, due to political and regulatory challenges or protectionist policies, as well as related compliance and publicity risks that we become subject to as a result of acquisitions of businesses in new industries or geographic areas or otherwise, especially for acquisitions of public companies which are subject to heightened regulatory requirements and scrutiny;risks;

•
actual or alleged misconduct, unscrupulous business practices or non-compliance by us or any company we acquire or invest in (or by its affiliates), whether before, during or after our acquisition or ~~investment, which may lead to negative publicity, litigation, government inquiry or investigations against such company or against us;~~investments;

•
difficulties in identifying and selecting appropriate targets and strategic partners, including potential loss of opportunities for strategic transactions with competitors of our investee companies and strategic partners;

•
difficulties in conducting sufficient and effective due diligence on potential targets and unforeseen or hidden liabilities or additional incidences of non-compliance, operating losses, costs and expenses that may adversely affect us following our ~~acquisition of~~acquisitions or ~~our investment in such companies;~~investments or other strategic transactions;

•
negative impact on our cash and credit profile from loans to or guarantees for the benefit of equity investees; and

•
actual or potential impairment charges or write-offs due to the changes in the fair value of our investments or acquired companies, ~~as a result of market volatility or other reasons~~including companies and businesses that we ~~may~~have acquired or ~~may not control;~~

•
~~regulatory hurdles including~~invested in ~~relation to~~for a long period of time, in the ~~anti-monopoly and competition laws, rules and regulations~~event that the fair value of ~~China~~our investment has been significantly lower than its carrying value for an extended period of time.
These and other jurisdictions in connection with any proposed investments and acquisitions, including, in the case of our potential future acquisition of an equity interest in Ant Financial Services, PRC regulations pertainingrisks could lead to ~~non-bank payment companies;~~

•
negative publicity, ~~regarding~~litigation, government inquiries, investigations or actions against the companies we invest in or acquire, or even against our ~~acquisition~~other businesses, and ~~investment activities;~~

•
~~the risk~~may force us to incur significant additional expenses and allocate significant management and human resources to rectify or improve these companies' corporate governance standards or internal controls and systems. As we continue to implement our New Retail strategy, among other initiatives, and further expand our digital economy, we expect that ~~any of our pending or other future proposed acquisitions does not close; and~~

•
challenges in achieving the expected benefits of synergies and growth opportunities in connection with these acquisitions and investments, such as the inability to realize the expected benefits of the restructuring in August 2014 of our relationship with Alipay and Ant Financial Services.
       ~~Our significant acquisition activity has occurred recently, and we have limited experience in integrating major acquisitions. As~~ our acquisition and investment activity ~~continues~~will continue at a rapid pace, with a large number and diverse range of target companies, we and ~~our management~~we will continue to face significant challenges, including unanticipated ones, in integrating these businesses into our existing businesses.
~~Failure~~We may face challenges in expanding our international and cross-border businesses and operations.

In addition to ~~maintain~~risks that generally apply to our acquisitions and investments, we face risks associated with expanding into an increasing number of markets where we have limited or ~~improve our technology infrastructure could harm~~no experience, we may be less well-known or have fewer local resources and we may need to localize our business practices, culture and ~~prospects.~~

operations. We ~~are constantly upgrading~~may also face protectionist policies that could, among other things, hinder our ~~platforms~~ability to provide increased scale, improved performance and additional built-in functionality and additional capacity. Adopting new products and upgrading our ecosystem infrastructure require significant investments of time and resources, including adding new hardware, updating software and recruiting and training new engineering personnel. Maintaining and improving our technology infrastructure require significant levels of investment. Any failure to maintain and improve our technology infrastructure could result in unanticipated system disruptions, slower response times, impaired quality of users' experiences and delays in reporting accurate operating and financial information. For example, on Singles Day, there is significantly higher than normal activity on our marketplaces that our systems must handle. In addition, much of the software and interfaces we use are internally developed and proprietary technology. If we experience problems with the functionality and effectiveness of our software or platforms, or are unable to maintain and constantly improve our technology infrastructure to handleexecute our business ~~needs, our business, financial condition, results of operation~~strategies and ~~prospects, as well as our reputation, could be materially and adversely affected.~~put us at a competitive disadvantage relative to domestic companies in other

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jurisdictions. The ~~successful operation~~expansion of our ~~business depends upon~~international and cross-border businesses will also expose us to risks and challenges inherent in operating businesses globally, including:

•

challenges in replicating or adapting our company policies and procedures to operating environments different from that of China, including technology and logistics infrastructure;

•

challenges of maintaining efficient and consolidated internal systems, including information technology infrastructure, and of achieving customization and integration of these systems with the ~~performance~~other parts of our digital economy;

•

lack of acceptance of our product and ~~reliability~~service offerings, and challenges of localizing our offerings to appeal to local tastes;

•

protectionist or national security policies that restrict our ability to:

•
invest in or acquire companies;

•
develop, import or export certain technologies, such as the ~~Internet infrastructure in China~~national AI initiative proposed by the U.S. government; or

•
utilize technologies that are deemed by local governmental regulators to pose a threat to their national security;

•

the need for increased resources to manage regulatory compliance across our international businesses;

•

failure to attract and ~~other countries in which we operate.~~retain capable talent with international perspectives who can effectively manage and operate local businesses;

~~Our business depends~~

•

compliance with privacy laws and data security laws, including the European Union General Data Protection Regulation, or GDPR, and compliance costs across different legal systems;

•

heightened restrictions and barriers on the ~~performance~~transfer of data between different jurisdictions;

•

differing, complex and ~~reliability of the Internet infrastructure in China~~potentially adverse customs, import/export laws, tax rules and other countries in which we operate. Almost all access to the Internet in China is maintained through state-owned telecommunication operators under the administrative control and regulatory supervision of the Ministry of Industry and Information Technology of China. In addition, the national networks in China are connected to the Internet through state-owned international gateways, which are the only channels through which a domestic user can connect to the Internet outside of China. We may not have access to alternative networks in the event of disruptions, failuresregulations or other ~~problems with the Internet infrastructure in China~~trade barriers or ~~elsewhere. In addition, the Internet infrastructure in the countries in~~restrictions which ~~we operate~~ may ~~not support the demands associated with continued growth in Internet usage.~~

~~The failure~~be applicable to transactions conducted through our international and cross-border platforms, related compliance obligations and consequences of telecommunications network operators to provide us with the requisite bandwidth could also interfere with the speed and availability of our websites. We have no control over the costs of the services provided by the telecommunications operators. If the prices that we pay for telecommunications and Internet services rise significantly, our gross margins could be adversely affected. In addition, if Internet access fees or other charges to Internet users increase, our user traffic may decrease, which in turn may significantly decrease our revenues.

~~Our ecosystem could be disrupted by network interruptions.~~

Our ecosystem depends on the efficient and uninterrupted operation of our computer and communications systems. Substantially all of our computer hardware and our cloud computing services are currently located in China. In addition, a large number of merchants maintain their enterprise resource planning, or ERP, and customer relationship management, or CRM, systems on our cloud computing platform, which contains substantial quantities of data relating to their accounts, transaction data, consumer information and other data that enables merchants to operate and manage their businesses. Increasing media and entertainment content on our marketplaces and website also require additional network capacity and infrastructures to process. Consumers expect our media and entertainment content to be readily available online,non-compliance, and any ~~disruptions~~new developments in these areas;

•

availability, reliability and security of international and cross-border payment systems and logistics infrastructure;

•

exchange rate fluctuations; and

•

political instability and general economic or ~~delay~~political conditions in particular countries or regions, including territorial or trade disputes, war and terrorism.

Failure to ~~the delivery of content~~manage these risks and challenges could negatively affect ~~the attractiveness~~our ability to expand our international and ~~reputation of our media~~cross-border businesses and entertainment content platform. Although we have prepared for contingencies through redundancy measures and disaster recovery plans and also carry business interruption insurance, these preparations and insurance coverage may not be sufficient. Despite any precautions we may take, the occurrence of a natural disaster, suchoperations as an earthquake, flood or fire, or other unanticipated problems at our facilities or the facilities of Ant Financial Services, Cainiao Network and other participants in our ecosystem, including power outages, system failures, telecommunications delays or failures, construction accidents, break-ins to information technology systems or computer viruses, could result in delays or interruptions to our platforms, loss of our, consumers' and customers' data and business interruption for us and our customers. Any of these events could damage our reputation, significantly disrupt our operations and the operations of the merchants and other participants in our ecosystem and subject us to liability, which couldwell as materially and adversely affect our business, financial condition and results of operations.

If third-party logistics service providers used by our merchants fail to provide reliable logistics services, or the logistics data platform operated by Cainiao Network were to malfunction, suffer an outage or otherwise fail, ourOur business operations and ~~prospects, as well as our~~ financial ~~condition and results of operations, may be materially and adversely affected.~~

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logistics service providers, such as inclement weather, natural disasters, transportation disruptions or labor unrest. These logistics services could also be affected or interrupted by industry consolidation, insolvency or government shut-downs. The merchants on our marketplaces may not be able to find alternative logistics service providers to provide logistics services in a timely and reliable manner, or at all. We do not have agreements with logistics service providers that require them to offer services to our merchants. If the logistics data platform operated by Cainiao Network were to fail for any reason, the logistics service providers would be severely hindered from or unable to connect with our merchants, and their services and the functionality of our ecosystem could be severely affected. If the products sold on our marketplaces are not delivered in proper condition, on a timely basis or at shipping rates that marketplace participants are willing to bear, our business and prospects, as well as our financial condition and results of operations could be materially and adversely affected.

If other third-party service providers on our ecosystem fail to provide reliable or satisfactory services, our business, financial condition and results of operations may be materially and adversely affected.

In addition to the services provided to our ecosystem by Ant Financial Services, Cainiao Network and logistics service providers, a number of other third-party participants, including retail operating partners, logistics service providers, mobile app developers, ISVs, cloud developers, marketing affiliates and various professional service providers, also provide services to users on our platforms, including merchants, brands, consumers and users of our cloud computing services. To the extent these third-party service providers are unable to provide satisfactory services to our users on commercially acceptable terms or at all or if we fail to retain existing or attract new quality service providers to our platforms, our ability to retain, attract or engage our users may be severely limited, which may have a material and adverse effect on our business, financial condition and results of operations. In addition, certain of these third-party services providers on our ecosystem have access to our user data to a limited extent in order to provide their services. If such third-party participants engage in activities that are negligent, illegal or otherwise harm the trustworthiness and security of our ecosystem, including the leak or negligent use of data, or users are otherwise dissatisfied with their service quality, we could suffer reputational harm, even if these activities are not related to, attributable to or caused by us.

We depend on key management as well as experienced and capable personnel generally, and any failure to attract, motivate and retain our staff could severely hinder our ability to maintain and grow our business.

Our future success is significantly dependent upon the continued service of our key executives and other key employees. If we lose the services of any member of management or key personnel, we may not be able to locate suitable or qualified replacements, and may incur additional expenses to recruit and train new staff, which could severely disrupt our business and growth. In particular, Jack Ma, our lead founder, executive chairman and one of our principal shareholders, has been crucial to the development of our culture and strategic direction.

As our business develops and evolves, it may become difficult for us to continue to retain such employees. A number of our employees, including many members of management, may choose to pursue other opportunities outside of our company. If we are unable to motivate or retain these employees, our business may be severely disrupted and our prospects could suffer.

The size and scope of our ecosystem also require us to hire and retain a wide range of effective and experienced personnel who can adapt to a dynamic, competitive and challenging business environment. We will need to continue to attract and retain experienced and capable personnel at all levels as we expand our business and operations. Competition for talent in the PRC Internet industry is intense, and the availability of suitable and qualified candidates in China is limited. Competition for these individuals could cause us to offer higher compensation and other benefits to attract and retain them. Even if we were to offer higher compensation and other benefits, there is no assurance that these individuals will choose to join or continue to work for us. Any failure to attract or retain key management and personnel could severely disrupt our business and growth.

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~~Our revenue and net income~~position may be materially and adversely affected by any economic slowdown in China as well as globally.

The success of our business ultimately depends on consumer spending. We currently derive substantially all of our revenue from China and are also expanding into the international market. As a result, ourOur revenue and net income are impacted to a significant extent by economic conditions in China and globally, as well as economic conditions specific to ~~online and mobile commerce.~~our business. The global economy, markets and levels of ~~consumer~~ spending by businesses and consumers are influenced by many factors beyond our ~~control, including consumer perception~~control.

The growth of ~~current and future economic conditions, political uncertainty, levels of employment, inflation or deflation, real disposable income, interest rates, taxation and currency exchange rates.~~

~~The~~the PRC ~~government~~economy has slowed in recent years ~~implemented a number of measures~~compared to control the rate of economic growth, including by raising interest rates and adjusting deposit reserve ratios for commercial banks as well as by implementing other measures designed to tighten credit and liquidity. These measures have contributed to a slowdown of the PRC economy. While the PRC government started easing its monetary policy in 2015, there have been signs of continuing economic slowdown in China.prior years. According to the National Bureau of Statistics of China, China's real GDP growth rate was 6.7% in 2016, which increased to 6.9% in ~~2015, down from 7.4%~~2017 and slowed to 6.6% in ~~2014.~~2018. There have also been concerns about the relationships among China and other Asian

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countries, the relationship between China and the United States, as well as the relationship between the United States and certain Asian countries such as North Korea, which may result in or intensify potential conflicts in relation to territorial, regional security and trade disputes. See "— Changes in international trade policies and barriers to trade, or the emergence of a trade war, may have an adverse effect on our business and expansion plans." Any disruptions or continuing or worsening slowdown could significantly reduce domestic commerce activities in China, ~~including through~~which could lead to significant reduction in merchants' demand for and spending on the ~~Internet generally~~various services we offer, such as our marketing services and ~~within our ecosystem. Although our financial performance is mainly affected by consumer spending, which may not be as adversely affected as other sectors of the economy, an~~cloud computing services. An economic downturn, whether actual or perceived, a further decrease in economic growth rates or an otherwise uncertain economic outlook in China or any other market in which we may operate could have a material adverse effect on business and consumer spending and, ~~therefore~~as a result, adversely affect our business, financial condition and results of operations.

~~Security breaches~~In addition, because we hold a significant amount of cash and ~~attacks against our systems~~cash equivalents and ~~network,~~short-term investments, if financial institutions and any potentially resulting breach or failure to otherwise protect confidential and proprietary information, could damage our reputation and negatively impact our business, as well as materially and adversely affect ourissuers of financial ~~condition and results of operations.~~

Although we have employed significant resources to develop our security measures against breaches, our cybersecurity measures may not detect or prevent all attempts to compromise our systems, including distributed denial-of-service attacks, viruses, malicious software, break-ins, phishing attacks, social engineering, security breaches or other attacks and similar disruptions that may jeopardize the security of information stored in and transmitted by our systems orinstruments that we ~~otherwise maintain. Breaches of our cybersecurity measures could result in unauthorized access to our systems, misappropriation of information~~hold become insolvent or data, deletion or modification of user information, or a denial-of-service or other interruption to our business operations. As techniques used to obtain unauthorized access to or sabotage systems change frequently and may not be known until launched against us or our third-party service providers, we may be unable to anticipate, or implement adequate measures to protect against,if the market for these ~~attacks.~~

We have in the past and are likely again in the future to be subject to these types of attacks, although to date no such attack has resulted in any material damages or remediation costs. If we are unable to avert these attacks and security breaches, we could be subject to significant legal and financial liability, our reputation would be harmed and we could sustain substantial revenue loss from lost sales and customer dissatisfaction. We may not have the resources or technical sophistication to anticipate or prevent rapidly evolving types of cyber-attacks. Cyber-attacks may target us, our merchants, consumers, users, customers or other participants, or the communication infrastructure on which we depend. Actual or anticipated attacks and risks may cause us to incur significantly higher costs, including costs to deploy additional personnel and network protection technologies, train employees, and engage third-party experts and consultants. Cybersecurity breaches would not only harm our reputation and business, but also could materially decrease our revenue and net income. We do not carry cybersecurity insurance.

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~~We may not be able to acquire a direct equity ownership interest in Ant Financial Services.~~

In August 2014, we entered into a share and asset purchase agreement, or the 2014 SAPA, to restructure the economic terms of our relationship with Alipay and Ant Financial Services. The 2014 SAPA provides for future potential equity issuances of up to 33% of equity interest in Ant Financial Services to us in the event that Ant Financial Services applies for and receives certain PRC regulatory approvals in the future. In addition, in the event of a qualified IPO of Ant Financial Services or Alipay, if our total ownership of equity interests in Ant Financial Services, if any, has not reached 33%, we would be entitled, at our election, to receive a one-time payment equal to 37.5% of the equity value, immediately prior to such qualified IPO of Ant Financial Services, as a whole and not just of its subsidiary Alipay. If we acquire equity interests in Ant Financial Services in an aggregate amount less than the full 33% equity interest, then the percentage of Ant Financial Services' equity value used to calculate the liquidity event payment will be reduced proportionately. If Ant Financial Services does not receive the required PRC regulatory approvals mentioned above, we will not be able to acquire a direct equity ownership interest in Ant Financial Services, and we would fail to benefit from any appreciation in its equity value beyond the date of a qualified IPO of Ant Financial Services or Alipay. Our inability to reap the benefits of any appreciation in equity value of Ant Financial Services, including in connection with a qualified IPO of Ant Financial Services or Alipay, could represent a significant missed opportunity that is beyond our control. In addition, if we elect to receive a one-time payment equal to 37.5% of the equity value, immediately prior to such qualified IPO of Ant Financial Services, it is possible that Ant Financial Services will not have sufficient funds to make the payment in a timely manner or on a schedule acceptable to us. See "Item 7. Major Shareholders and Related Party Transactions — B. Related Party Transactions — Agreements and Transactions Related to Ant Financial Services and its Subsidiaries — 2014 Restructuring of Our Relationship with Ant Financial Services and Alipay."

Tightening of tax compliance efforts with respect to the revenue or profit generated by our merchants could materially and adversely affect our business, financial condition and results of operations.

E-commerce in China is still developing, and the PRC government may require operators of marketplaces, such as our company, to assist in the collection of taxes with respect to the revenue or profit generated by merchants from transactions conducted on their platforms. A significant number of small businesses and sole proprietors operating businesses through storefronts on Taobao Marketplace may not have completed the required tax registration. PRC tax authorities may enforce registration requirements that target small businesses or sole proprietors on Taobao Marketplace and may request our assistance in these efforts. As a result, these merchants may be subject to more stringent tax compliance requirements and liabilities and their business on our marketplaces could suffer or they could decide to remove their storefronts from our marketplace rather than comply, which could in turn negatively affect us. We may also be requested by tax authorities to supply information on our merchants, such as transaction records and bank account information, and assist in the enforcement of tax regulations, including the payment and withholding obligations against our merchants, in which case, we may lose existing merchants and potential merchants might not be willing to open storefronts on our marketplaces.

Potential heightened enforcement against participants in e-commerce transactions (including imposition of reporting or withholding obligations on operators of marketplaces with respect to value-added tax of merchants) could have a material adverse effect on our business, financial condition and results of operations.

~~We have been and may continue to be subject to allegations and lawsuits claiming that items listed and content available on our marketplaces and websites are pirated, counterfeit or illegal.~~

We have received in the past, and we anticipate we will receive in the future, communications alleging that items offered, sold or made available through our online marketplaces and websites by third parties or that we make available through other services, such as our online music platform, infringe third-party copyrights, trademarks and patents or other intellectual property rights. Although we have adopted measures to verify the authenticity of products sold on our marketplaces and to minimize potential infringement of third-party intellectual property rights through our intellectual property infringement complaint and take-down procedures, these

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measures may not always be successful. We have been and may continue to be subject to allegations of civil or criminal liability based on allegedly unlawful activities carried out by third parties through our online marketplaces. We also have been and may continue to be subject to allegations that we were participants in or facilitators of such allegedly unlawful activities. For example, in May 2015 we were named as a defendant in a lawsuit filed in the Southern District of New York by Kering S.A and other plaintiffs, which asserts various claims based on, among other things, the sales of allegedly counterfeit or otherwise trademark infringing merchandise by merchants on certain of our marketplaces. We have acquired certain companies, such as Youku Tudou and a controlling stake in Lazada, and may continue to acquire other companies that are or may be subject to allegations and lawsuits regarding infringement of third-party intellectual property or other rights.

When we receive complaints or allegations regarding infringement or counterfeit goods, we follow procedures we have developed to verify the nature of the complaint and the relevant facts. We believe these procedures are important for purposes of investigating the allegations in question so that we can ensure confidence in our marketplace among consumers and merchants; however, these procedures could result in delays in delistings of allegedly infringing product listings. In the event that alleged counterfeit or infringing products are listed or sold on our marketplaces or our other services, we could face claims relating to such listings or sales or for our alleged failure to act in a timely or effective manner in response to infringement or to otherwise restrict or limit such sales or infringement.

We may implement further measures in an effort to strengthen our protection against these potential liabilities that could require us to spend substantial additional resources and/or experience reduced revenues. In addition, these changes may reduce the attractiveness of our marketplaces and other services to consumers, merchants and other participants. A customer whose content is removed or whose services are suspended or terminated by us, regardless of our compliance with the applicable laws, rules and regulations, may dispute our actions and commence action against us for damages based on breach of contract or other causes of action, make public complaints or allegations or organize group protests and publicity campaigns against us. Any costs incurredinstruments become illiquid as a result of liability or asserted liability relating to the sale of unlawful goods or other infringement could harm our business. Moreover, we have received in the past, and may continue to receive in the future, negative publicity regarding the sales of counterfeit and pirated items on our marketplaces. Each year, in its annual Special 301 Report or Special 301 Out-of-Cycle Review Report, the Office of the U.S. Trade Representative, or USTR, identifies "notorious markets" that reportedly engage in and facilitate substantial copyright piracy and trademark counterfeiting. In 2008, 2009 and 2010, Alibaba.com, and in 2008, 2009, 2010 and 2011, Taobao Marketplace, were named as notorious markets. The USTR subsequently removed these marketplaces from its list. However, there is no assurance that the USTR will not identify these marketplaces or our other businesses as notorious markets in the future. In its December 2015 Out-of-Cycle Review, the USTR expressed concern about our procedures, citing complaints by rights holders. The USTR did not name any of our marketplaces as notorious markets, but encouraged us to continue to enhance cooperation with rights holders to address concerns.

~~In January 2015, the State Administration for Industry and Commerce in China, or SAIC, released~~ a report stating that Taobao Marketplace had the highest percentage of counterfeit goods among the online marketplaces that it surveyed. Subsequently, in the same month, the SAIC released a self-described "white paper" discussing perceived failures of our platforms, including an alleged failure to crack down on the sale of counterfeit goods and other alleged illegal activities on our China retail marketplaces. Although the SAIC withdrew the so-called "white paper" the same day it was released, and later clarified that the document carried no legal force, continued public perception that counterfeit or pirated items are commonplace on our marketplaces or that we delay the process of removing such items, even if factually incorrect, could damage our reputation with consumers, harm our business, result in litigation and regulatory pressure or action against us and diminish the value of our brand name.

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~~Failure to deal effectively with any fraud perpetrated and fictitious transactions conducted on our marketplaces and other sources of customer dissatisfaction would harm our business.~~

We face risks with respect to fraudulent activities on our marketplaces and periodically receive complaints from consumers who may not have received the goods that they had purchased, as well as complaints from merchants who have not received payment for the goods that a consumer had contracted to purchase. Although we have implemented various measures to detect and reduce the occurrence of fraudulent activities on our marketplaces, there can be no assurance that such measures will be effective in combating fraudulent transactions or improving overall satisfaction among our merchants, consumers and other participants. Additional measures that we take to address fraud could also negatively affect the attractiveness of our marketplaces to consumers or merchants. In addition, merchants on our marketplaces contribute to a fund to provide consumer protection guarantees. If our merchants do not perform their obligations under these programs, then we may use funds that have been deposited by merchants in a consumer protection fund to compensate consumers. If the amounts in the fund are not sufficient, we may choose to compensate consumers for such losses although we are not legally obligated to do so. Although we have recourse against our merchants for any amounts we incur, there is no assurance that we would be able to collect from our merchants.

In addition to fraudulent transactions with legitimate consumers, merchants may also engage in fictitious or "phantom" transactions with themselves or collaborators in order to artificially inflate their own ratings on our marketplaces, reputation and search results rankings, an activity sometimes referred to as "brushing". This activity may harm other merchants by enabling the perpetrating merchant to be favored over legitimate merchants, and may harm consumers by deceiving them into believing that a merchant is more reliable or trusted than the merchant actually is.

Moreover, illegal, fraudulent or collusive activities by our employees could also subject us to liability or negative publicity. In the past, we have discovered cases in which certain of our employees had accepted payments from merchants or other service providers in order to receive preferential treatment on our marketplaces. Although we dismiss the employees responsible for any such incidents and have implemented internal controls and policies with regard to the review and approval of merchant accounts, sales activities and other relevant matters, we cannot assure you that such controls and policies will prevent fraud or illegal activity by our employees or that similar incidents will not occur in the future. Any such illegal, fraudulent or collusive activity could severely damage our brand and reputation as an operator of trusted marketplaces, which could drive users and consumers away from our marketplaces, and materially and adversely affect our business, financial condition and results of operations.

In January 2015, the SAIC discussed alleged fraudulent and fictitious transactions on our China retail marketplaces in its self-described "white paper." Although the SAIC withdrew the so-called "white paper" the same day it was released and later clarified that the document carried no legal force, the negative publicity and user sentiment generated as a result of this document or other allegations of fraudulent or deceptive conduct on our platforms could severely diminish consumer confidence in and use of our services, reduce our ability to attract new or retain current merchants, consumers and other participants, damage our reputation, result in shareholder or other litigation and diminish the value of our brand names, and materially and adversely affect our business, financial condition and results of operations.

We may increasingly become a target for public scrutiny, including complaints to regulatory agencies, negative media coverage, including social media and malicious reports, all of which could severely damage our reputation and materially and adversely affectsevere economic downturn, our business and ~~prospects.~~

We process an extremely large number of transactions on a daily basis on our marketplaces, and the high volume of transactions taking place on our marketplaces and publicity about our business creates the possibility of heightened attention from the public, regulators, the media and our participants. Heightened regulatory and public concern over consumer protection and consumer safety issues may subject us to additional legal and social

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responsibilities, and may also expose us to increased scrutiny and negative publicity over such issues, due to the large number of transactions that take place on our platforms and the increasing scope of our overall business operations. In addition, changes in our services or policies have resulted and could result in objections by members of the public, the media, including social media, participants in our ecosystem or others. From time to time, these objections or allegations, regardless of their veracity, may result in public protests or negative publicity, which could result in government inquiry or harm our reputation. Corporate transactions we or related parties undertake, such as our recent acquisition of the media business of SCMP Group Limited, which includes the South China Morning Post newspaper, may also subject us to increased media exposure and public scrutiny in Hong Kong, China and internationally. Moreover, as our business expands and grows, both organically and through acquisitions of and investments in other businesses, domestically and internationally, we will be exposed to heightened regulatory scrutiny in jurisdictions where we already operate as well as in new jurisdictions in areas including consumer safety, public health and public trust. There is no assurance that we would not become a target for regulatory or public scrutiny in the future or such scrutiny and public exposure would not severely damage our reputation as well as our business and prospects.

In addition, our directors and management have been, and continue to be, subject to scrutiny by the media and the public regarding their activities in and outside Alibaba Group, which may result in unverified, inaccurate or misleading information about them being reported by the press. Negative publicity about our executive chairman or other founders, directors or management, even if untrue or inaccurate, may harm our reputation.

We and Ant Financial Services are subject to a broad range of laws and regulations, and future laws and regulations may impose additional requirements and other obligations on our business or otherwise that could materially and adversely affect our business, financial condition ~~and results of operations.~~

The industries in which we and Ant Financial Services operate in the PRC, including online and mobile commerce and payments, online content offerings, financial services, cloud computing and entertainment, are highly regulated. The PRC government authorities are likely to continue to issue new laws, rules and regulations governing these industries, enhance enforcement of existing laws, rules and regulations and impose requirements relating to, among other things, new and additional licenses, permits and approvals or governance or ownership structures on us, Ant Financial Services and our users. These laws, rules and regulations and their application to us could take a direction that is adverse to our or Ant Financial Services' business at any time. In addition, there is no assurance that any required licenses, permits and approvals could be obtained or such new requirements can be satisfied in a timely or cost-effective manner, and failure to obtain them could have a material adverse effect on our business, financial condition and results of operations. Changes in regulatory enforcement as well as tax policy in the PRC could also result in additional compliance obligations and increased costs or place restrictions upon our current or future operations. Any such legislation or regulation could also severely disrupt and constrain our business and the payment services used on our marketplaces.

We have from time to time been subject to PRC and foreign government inquiries and investigations, including those relating to website content and alleged third-party intellectual property infringement. We also face scrutiny, and have been subject to inquiries and investigations, from foreign governmental bodies that focus on cross-border trade, intellectual property protection, our investment activities, human rights, user privacy matters and fraudulent or other criminal transactions. None of these inquiries and investigations has resulted in significant restrictions on our business operations. However, as we continue to grow in scale and significance, we expect to face increased scrutiny, which will, at a minimum, result in our having to increase our investment in compliance and related capabilities and systems.

The increasing sophistication and development of our user base and our expansion into the mobile and entertainment business will also increase the need for higher standards of user protection, privacy protection and dispute management. Any increased involvement in inquiries or investigations could result in significantly higher legal and other costs, restraints on our ability to enforce the contracts we have entered into, loss of business and revenue, liability for breach of contracts with third parties, diversion of management and other resources, as well

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~~as negative publicity, which could harm our business and reputation and materially reduce our revenue and net income.~~

Ant Financial Services, which through Alipay provides the substantial majority of the payment processing services on our marketplaces as well as other financial services such as wealth management, insurance and credit referencing services, is subject to various laws, rules and regulations in the PRC and other countries where it operates, including those governing banking, privacy, cross-border and domestic money transmission, anti-money laundering, counter-terrorist financing and consumer protection laws, rules and regulations. For example, the laws, rules and regulations governing account verification are evolving rapidly. The Administrative Measures for the Online Payment Business of Non-bank Payment Institutions, or the Online Payment Measures, which will come into effect on July 1, 2016, include provisions relating to account management, security measures and other matters and require third-party payment providers to open real-name payment accounts for clients after verifying clients' valid identification documents. Different identification verification procedures are required for the opening of different types and tiers of payment accounts, which are subject to a range of purchasing and account transfer limits. After the effectiveness of the Online Payment Measures, the ability of consumers to pay for purchases on our marketplaces using deposits in their Alipay payment accounts may be materially limited, although the Online Payment Measures do not affect Alipay's escrow services. In April 2014, the China Banking Regulatory Commission, or the CBRC, and the PBOC issued Joint Circular 10, which requires commercial banks and other financial institutions in China to conduct additional customer verification procedures prior to establishing an automatic payment link between customers' bank accounts and their accounts with third-party payment services, such as Alipay. These laws, rules and regulations are highly complex and could change or be reinterpreted to make it difficult or impossible for Ant Financial Services to comply. In recent years, the PRC government has increasingly focused on regulation of the financial industry, including laws, rules and regulations relating to the provision of payment services. In addition, Alipay is required to maintain a payment business license in the PRC.

Ant Financial Services is also required to maintain other applicable money transmitter or other licenses and approvals from regulatory authorities in other jurisdictions outside China in which it operates, and the expansion by Ant Financial Services of its business may require additional licenses and approvals. In addition, in certain jurisdictions outside China where Alipay currently does not have the required money transmitter or other licenses, Alipay provides payment processing and escrow services through third-party service providers. If these providers were to terminate their relationship with Alipay or otherwise cease providing services to Alipay, cross-border transactions on our marketplaces would be negatively affected. If Alipay or its partners fail to obtain and maintain all required licenses and approvals or otherwise fails to comply with applicable laws, rules and regulations, if new laws, rules or regulations come into effect that impact Alipay or its partners' businesses, its services could be suspended or severely disrupted, and our business, financial condition and results of operations would be materially and adversely affected.

~~We may be accused of infringing intellectual property rights of third parties and content restrictions of relevant laws.~~

Third parties may claim that the technology used in the operation of our platforms or our service offerings or the content on our platforms, including content available through our search business, online reading platform and news feed features, infringe upon their intellectual property rights. Although we have not in the past faced material litigation involving direct claims of infringement by us, the possibility of intellectual property claims against us, whether in China or other jurisdictions, increases as we continue to grow, particularly internationally. We have also acquired businesses, such as Youku Tudou, that have been, and may continue to be, subject to liabilities for infringement of third-party intellectual property rights or other allegations based on the content available on their websites or the services they provide. In addition, we expect our ecosystem to involve more and more user-generated content, including the entertainment content on Youku Tudou, the interactive media content displayed on Tmall and Taobao Marketplace, as well as the data generated, uploaded and saved by users of our cloud computing services, over which we have limited control and we may be subject to claims for infringement of third-party intellectual property rights, or subject us to additional scrutiny by the relevant government authorities. Such claims or scrutiny, whether or not having merit, may result in our expenditure of significant financial and

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management resources, injunctions against us or payment of damages. We may need to obtain licenses from third parties who allege that we have infringed their rights, but such licenses may not be available on terms acceptable to us or at all. These risks have been amplified by the increase in the number of third parties whose sole or primary business is to assert such claims.

China has enacted laws and regulations governing Internet access and the distribution of products, services, news, information, audio-video programs and other content through the Internet. The PRC government has prohibited the distribution of information through the Internet that it deems to be in violation of PRC laws and regulations, impairs the national dignity of China or the public interest, or is obscene, superstitious, fraudulent or defamatory. Users of certain of our websites and platforms, including Youku Tudou, can upload content, to such websites and platforms, which is generally referred to as "user-generated content." Due to the significant amount of content uploaded by our users, we may not be able to identify all the videos or other content that may violate relevant laws and regulations. If any of the information disseminated through our marketplaces and websites, including videos and other content (including user-generated content) displayed on Youku Tudou's or other of our websites or on our Tmall set-top-boxes and smart televisions powered by our YunOS that provide access to entertainment and e-commerce content, were deemed by the PRC government to violate any content restrictions, we would not be able to continue to display such content and could become subject to penalties, including confiscation of income, fines, suspension of business and revocation of required licenses, which could materially and adversely affect our business, financial condition and results of operations. The outcome of any claims, investigations and proceedings is inherently uncertain, and in any event defending against these claims could be both costly and time-consuming, and could significantly divert the efforts and resources of our management and other personnel. An adverse determination in any such litigation or proceedings could cause us to pay damages, as well as legal and other costs, limit our ability to conduct business or require us to change the manner in which we operate and harm our reputation.

~~We may become the target of anti-monopoly and unfair competition claims, which may result in our being subject to fines as well as constraints on our business.~~

Although the PRC Anti-Monopoly Law is relatively recent, having taken effect on August 1, 2008, PRC anti-monopoly enforcement agencies, namely the Ministry of Commerce, or the MOFCOM, the National Development and Reform Commission, or the NDRC, and the SAIC, have in recent years strengthened enforcement actions, including levying significant fines, with respect to concentration of undertakings and cartel activity, mergers and acquisitions, as well as abusive behavior of companies having market dominance. The PRC Anti-Monopoly Law also provides a private right of action for competitors or users to bring anti-monopoly claims against companies. In recent years, an increased number of companies have been exercising their right to seek relief under the PRC Anti-Monopoly Law. As public awareness of the rights under the PRC Anti-Monopoly Law increases, more companies, including our competitors, business partners and customers may resort to seeking the remedies available under the law, such as through complaints to regulators or as plaintiffs in private ligation, to improve their competition position, regardless of the merits of their claims.

From time to time, we may receive close scrutiny from government agencies under the PRC Anti-Monopoly Law in connection with our business practices, investments and acquisitions. Any anti-monopoly lawsuit or administrative proceeding initiated against us may result in our being subject to profit disgorgement, heavy fines and various constraints on our business, or result in negative publicity which could harm our reputation and negatively affect the trading price of our ADSs. These constraints could include forced termination of any agreements or arrangements that are determined to be in violation of anti-monopoly laws, required divestitures and limitations on certain business practices, which may limit our ability to continue to innovate, diminish the appeal of our services and increase our operating costs. These constraints could also enable our competitors to develop websites, products and services that mimic the functionality of our services, which could decrease the popularity of our marketplaces, products and services among merchants, consumers and other participants, and cause our revenue and net income to decrease materially.

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~~We may face challenges in expanding our international and cross-border operations.~~

As we plan to continue expanding our operations into existing and other markets, we will face risks associated with expanding into markets in which we have limited or no experience and in which our company may be less well-known. We may be unable to attract a sufficient number of customers and other participants, fail to anticipate competitive conditions or face difficulties in operating effectively in these new markets. The expansion of our international and cross-border business will also expose us to risks inherent in transacting business globally, including:

•: ~~inability to recruit international talent and challenges in replicating or adapting our company policies and procedures to operating environments different than that of China;~~
•: ~~lack of acceptance of our service offerings;~~
•: ~~challenges and increased expenses associated with staffing and managing international and cross-border operations and managing an organization spread over various jurisdictions;~~
•: ~~trade barriers such as import and export restrictions, high custom duties and other taxes, competition law regimes and other trade restrictions;~~
•: ~~differing and potentially adverse tax consequences;~~
•: ~~increased and conflicting regulatory compliance requirements;~~
•: ~~challenges caused by distance, language and cultural differences;~~
•: ~~increased costs to protect intellectual property and personal data security;~~
•: ~~availability and reliability of international and cross-border payment systems;~~
•: ~~exchange rate fluctuations; and~~
•: ~~political instability and general economic or political conditions in particular countries or regions.~~

As we expand further into new regions and markets, these risks could intensify. One or more of these factors could adversely impact our international and cross-border operations. Accordingly, any efforts we make to expand our international and cross-border operations may not be successful. Failure to expand our international and cross-border operations could materially and adversely affect our business, financial condition and results of operations.

Transactions conducted through our international and cross-border marketplaces may be subject to different customs, taxes and import/export rules and regulations. For example, the Notice on Tax Policies of Cross-Border E-Commerce Retail Importation effective as of April 8, 2016, or the New Cross-Border E-commerce Tax Notice, replaced the previous system for taxing imported consumer goods into the PRC and introduced a 17% VAT on most products sold through e-commerce platforms and a 30% consumption tax on cosmetics and perfumes, but no consumption taxes on skin care products, maternity and baby care products, in the event that the prescribed quotas are exceeded. See "Item 4. Information on the Company — B. Business Overview — Regulation — Tax Regulations." The change of regulation pattern regarding the import tax on consumer goods imported through cross-border e-commerce platforms, as well as limitation on the import categories, may substantially increase import tax imposed on buyers and thus raise the price of goods sold on our cross-border platforms, which may impair our competitive advantage and could adversely affect the growth of our cross-border e-commerce operation, our financial condition and results of operations.

These customs and import/export rules and regulations are complex, and customs and tax authorities in the relevant jurisdictions may challenge our interpretation of applicable customs and import/export rules relating to product shipments under their respective customs and import/export laws and treaties. In addition, we will also face the challenge of complying concurrently with the compliance rules and regulations of multiple jurisdictions,

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and such rules or regulations could conflict or interact with each other in complex ways. Our globalization strategy may be adversely affected by the complexity and development of customs and import/export laws, rules and regulations, including the change of PRC regulation pattern regarding the import tax on consumer goods imported through cross-border e-commerce platforms.

~~Our brand name and our business may be harmed by aggressive marketing and communications strategies of our competitors.~~

Due to intense competition in our industry, we have been and may be the target of incomplete, inaccurate and false statements about our company and our products and services that could damage our and our management's reputation and our brand and materially deter consumers from making purchases on our marketplaces. Our ability to respond to our competitors' misleading marketing efforts may be limited during our self-imposed quiet periods around quarter ends or due to legal prohibitions on permissible public communications by us during certain other periods.

Our results of operations fluctuate significantly from quarter to quarter which may make it difficult to predict our future performance.

Our results of operations ~~fluctuate significantly from quarter to quarter. In addition, our business is~~generally are characterized by seasonal fluctuations ~~which may cause further fluctuations. The~~due to various reasons, including seasonal buying patterns and economic cyclical changes, as well as promotions on our marketplaces. Historically, the fourth quarter of each calendar year generally contributes the largest portion of our annual revenues due to a number of factors, such as merchants allocating a significant portion of their online marketing budgets to the fourth calendar quarter, promotions, such as ~~Singles Day on November 11 of each year~~the 11.11 global shopping festival, and the impact of seasonal buying patterns in respect of certain categories such as apparel. The first quarter of each calendar year generally contributes the smallest portion of our annual revenues, primarily due to a lower level of allocation of ~~online~~ marketing budgets by merchants at the beginning of the calendar year and the Chinese New Year holiday, during which time consumers generally spend less and businesses in China are generally closed. We may also introduce new promotions or change the timing of our promotions in ways that further cause our quarterly results to fluctuate and differ from historical patterns. In addition, seasonal weather patterns may affect the timing of buying decisions. ~~For example, unexpectedly long periods of warm weather could delay the purchase of heavier clothing items that have higher average selling prices.~~ The performance of our equity investees and of major businesses in which we have made investments may also result in fluctuations in our results of operations. Fluctuations in our results of operations related to our investments may also result from the accounting implication of re-measurement of fair values of certain financial instruments, share-based awards and previously held equity interests upon disposal or step acquisitions. Given that the fair value movements ~~of the underlying equities of financial instruments, share-based awards or equity interests~~ are beyond ~~the~~our control, ~~of our management,~~ the magnitude of the related accounting impact is unpredictable and may significantly affect our results of ~~operations significantly.~~ operations.

Our results of operations will likely fluctuate due to these and other factors, some of which are beyond our control. In addition, our growth in the past may have masked the seasonality that might otherwise be apparent in our results of operations. As the rate of growth of our business declines in comparison to prior periods, we expect that the seasonality in our business may become more pronounced. Moreover, as our business grows, we expect that our fixed costs and expenses ~~such as payroll and benefits, bandwidth and co-location fees,~~ will continue to increase, which will result in operating leverage in seasonally strong quarters but can significantly pressure operating margins in seasonally weak quarters.

~~Our quarterly and annual financial results will likely differ from our historical performance.~~ To the extent our results of operations are below the expectations of public market analysts and investors in the future, or if there are significant fluctuations in our financial results, the market price of our ADSs could ~~decline materially.~~fluctuate significantly.

Failure to maintain or improve our technology infrastructure could harm our business and prospects.

We are continuously upgrading our platforms to provide increased scale, improved performance, additional capacity and additional built-in functionality, including functionality related to security. Adopting new products and maintaining and upgrading our technology infrastructure require significant investments of time and resources. Any

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failure to maintain and improve our technology infrastructure could result in unanticipated system disruptions, slower response times, impaired user experience and delays in reporting accurate operating and financial information. The risks of these events occurring are even higher during certain periods of peak usage and activity, such as on or around the 11.11 global shopping festival or other promotional events, when user activity and transactions are significantly higher on our marketplaces compared to other days of the year. In addition, much of the software and interfaces we use are internally developed and proprietary technology. If we experience problems with the functionality and effectiveness of our software, interfaces or platforms, or are unable to maintain and continuously improve our technology infrastructure to handle our business needs, our business, financial condition, results of operations and prospects, as well as our reputation and brand, could be materially and adversely affected.

In addition, our technology infrastructure and services, including our cloud product and service offerings, incorporate third-party-developed software, systems and technologies, as well as hardware purchased or commissioned from outside and overseas suppliers. As our technology infrastructure and services expand and become increasingly complex, we face increasingly serious risks to the performance and security of our technology infrastructure and services that may be caused by these third-party-developed components, including risks relating to incompatibilities among these components, service failures or delays or back-end procedures on hardware and software. We also need to continuously enhance our existing technology. Otherwise, we face the risk of our technology infrastructure becoming unstable and susceptible to security breaches. This instability or susceptibility could create serious challenges to the security and uninterrupted operation of our platforms and services, which would materially and adversely affect our business and reputation.

Security breaches and attacks against our systems and network, and any potentially resulting breach or failure to otherwise protect personal, confidential and proprietary information, could damage our reputation and negatively impact our business, as well as materially and adversely affect our financial condition and results of operations.

Our cybersecurity measures may not detect, prevent or control all attempts to compromise our systems, including distributed denial-of-service attacks, viruses, Trojan horses, malicious software, break-ins, phishing attacks, third-party manipulation, security breaches, employee misconduct or negligence or other attacks, risks, data leakage and similar disruptions that may jeopardize the security of data stored in and transmitted by our systems or that we otherwise maintain. Breaches of our cybersecurity measures could result in unauthorized access to our systems, misappropriation of information or data, deletion or modification of user information, or a denial-of-service or other interruption to our business operations. As techniques used to obtain unauthorized access to or sabotage systems change frequently and may not be known until launched against us or our third-party service providers, there can be no assurance that we will be able to anticipate, or implement adequate measures to protect against, these attacks.

We have in the past and are likely again in the future to be subject to these types of attacks, breaches and data leakage, although to date no attack, breach or data leakage has resulted in any material damage or remediation cost. In addition, we could be subject to an attack, breach or leakage which we do not discover at the time or the consequences of which are not apparent until a later point in time, that could result in material damages or remediation costs. If we are unable to avert these attacks and security breaches, we could be subject to significant legal and financial liability, our reputation would be harmed and we could sustain substantial revenue loss from lost sales and customer dissatisfaction. We may not have the resources or technical sophistication to anticipate or prevent rapidly-evolving cyber-attacks. Cyber-attacks may target us, our merchants, consumers, users, customers, key service providers or other participants in our digital economy, or the communication infrastructure on which we depend. We only carry limited cybersecurity insurance, and actual or anticipated attacks and risks may cause us to incur significantly higher costs, including costs to deploy additional personnel and network protection technologies, train employees, and engage third-party experts and consultants. Cybersecurity breaches would not only harm our reputation and business, but also could materially decrease our revenue and net income.

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The successful operation of our business depends upon the performance, reliability and security of the Internet infrastructure in China and other countries in which we operate.

Our business depends on the performance, reliability and security of the telecommunications and Internet infrastructure in China and other countries in which we operate. Substantially all of our computer hardware and a majority of our cloud computing services are currently located in China. Almost all access to the Internet in China is maintained through state-owned telecommunication operators under the administrative control and regulatory supervision of the Ministry of Industry and Information Technology, or the MIIT. In addition, the national networks in China are connected to the Internet through state- owned international gateways, which are the only channels through which a domestic user can connect to the Internet outside of China. We may face similar or other limitations in other countries in which we operate. We may not have access to alternative networks in the event of disruptions, failures or other problems with the Internet infrastructure in China or elsewhere. In addition, the Internet infrastructure in the countries in which we operate may not support the demands associated with continued growth in Internet usage.

The failure of telecommunications network operators to provide us with the requisite bandwidth could also interfere with the speed and availability of our websites and mobile apps. We have no control over the costs of the services provided by the telecommunications operators. If the prices that we pay for telecommunications and Internet services rise significantly, our margins could be adversely affected. In addition, if Internet access fees or other charges to Internet users increase, our user base may decrease, which in turn may significantly decrease our revenues.

Moreover, if the security of domain names is compromised, we will be unable to use the domain names in our business operations, which could materially and adversely affect our business operations, reputation and brand image. If we fail to implement adequate encryption of data transmitted through the networks of the telecommunications and Internet operators we rely upon, there is a risk that telecommunications and Internet operators or their business partners may misappropriate our data, which could materially and adversely affect our business operations and reputation.

Our digital economy could be disrupted by network interruptions.

Our digital economy depends on the efficient and uninterrupted operation of our computer and communications systems. System interruptions and delays may prevent us from efficiently processing the large volume of transactions on our marketplaces and other businesses we operate. In addition, a large number of merchants and customers maintain their important systems, such as enterprise resource planning, or ERP, and customer relationship management, or CRM, systems on our cloud computing platform, which contain substantial quantities of data that enables them to operate and manage their businesses. Increasing media and entertainment content on our platforms also requires additional network capacity and infrastructure to process. Consumers expect our media and entertainment content to be readily available online, and any disruptions or delay to the delivery of content could affect the attractiveness and reputation of our media and entertainment platforms.

We and other participants in our digital economy, including Ant Financial, have experienced, and may experience in the future, system interruptions and delays that render websites, mobile apps and services (such as cloud services and payment services) temporarily unavailable or slow to respond. Although we have prepared for contingencies through redundancy measures and disaster recovery plans and also carry business interruption insurance, these preparations and insurance coverage may not be sufficient. Despite any precautions we may take, the occurrence of a natural disaster or other unanticipated problems at our facilities or the facilities of Ant Financial and other participants in our digital economy, including power outages, system failures, telecommunications delays or failures, construction accidents, break-ins to information technology systems, computer viruses or human errors, could result in delays in or temporary outages of our platforms or services, loss of our, consumers' and customers' data and business interruption for us and our customers. Any of these events could damage our reputation, significantly disrupt our operations and the operations of the participants in our digital economy and subject us to liability,

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heightened regulatory scrutiny and increased costs, which could materially and adversely affect our business, financial condition and results of operations.

Changes in international trade policies and barriers to trade, or the emergence of a trade war, may have an adverse effect on our business and expansion plans.

In recent years, international market conditions and the international regulatory environment have been increasingly affected by competition among countries and geopolitical frictions. Changes to trade policies, treaties and tariffs in the jurisdictions in which we operate, or the perception that these changes could occur, could adversely affect the financial and economic conditions in the jurisdictions in which we operate, as well as our international and cross-border operations, our financial condition and results of operations. The U.S. administration under President Donald Trump has advocated greater restrictions on international trade generally and significant increases on tariffs on certain goods imported into the United States, particularly from China, and has taken steps toward restricting trade in certain goods. For example, in 2018 the United States announced three finalized tariffs that applied exclusively to products imported from China, totaling approximately US$250 billion, and in May 2019 the United States increased from 10% to 25% the rate of certain tariffs previously levied on Chinese products. Trade tension between China and the United States may intensify, and the United States may adopt even more drastic measures in the future.

Changes to laws or policies in the U.S. and other markets may lead to adverse consequences for our businesses. For example, changes in laws and policy could negatively affect both export-focused businesses on AliExpress and Alibaba.com, as well as import-focused businesses on Tmall and Tmall Global. In addition, if trade discussions lead to greater access to the China market, certain of our businesses, such as our cloud business and digital media and entertainment businesses, could be subject to greater competition and pricing pressure, which could reduce our margins or otherwise negatively affect our results of operations.

In addition, China and other countries have retaliated and may further retaliate in response to new trade policies, treaties and tariffs implemented by the United States. This policy retaliation could result in an escalation leading to a trade war, which would have an adverse effect on manufacturing levels, trade levels and industries, including logistics, retail sales and other businesses and services that rely on trade, commerce and manufacturing, as well as on our marketplaces that rely upon imports.

Any escalation in trade tensions or a trade war, or news and rumors of any escalation, could affect activity levels within our digital economy and have a material and adverse effect on our business, results of operations and trading price of our ADSs.

Export control and economic or trade sanctions could subject us to regulatory investigations or other actions and reputational harm, and could negatively affect our technology supply chain and ability to recruit talent and conduct technological collaboration, which could materially and adversely affect our competitiveness and business operations, as well as lead to significant decrease in the trading price of our ADSs.

The United Nations and a number of countries and jurisdictions, including China, the United States and the European Union, or the EU, have adopted various export control and economic or trade sanction regimes. The U.S. government imposes broad economic and trade restrictions on dealings with certain countries and regions, including the Crimea, Cuba, Iran, North Korea and Syria, or the Sanctioned Countries, and numerous individuals and entities, including those designated as having engaged in activities relating to terrorism, drug trafficking, cybercrime, the rough diamond trade, proliferation of weapons of mass destruction or human rights violations, or the Sanctioned Persons. The U.S. government also imposes more targeted sanctions on certain dealings with countries such as Russia and Venezuela, among others. The U.S. government has recently expanded or suggested that it will expand economic sanctions concerning Iran, North Korea, Russia and Venezuela, and there are risks of further enhanced economic sanctions concerning these countries, among others. It is not, however, possible to predict with a reasonable degree of certainty how the regulatory environment concerning U.S. economic sanctions

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may develop. The United Nations, the EU, the United Kingdom, or the UK, and other countries also impose economic and trade restrictions, including on certain Sanctioned Countries and Sanctioned Persons.

As a Cayman Islands company with the substantial majority of our subsidiaries and operations outside of the U.S., UK and EU, we are generally not required to comply with U.S., UK, and EU sanctions to the same extent as U.S., UK or EU entities. However, for companies like us, their U.S., UK, and EU subsidiaries, employees who are U.S. persons or UK or EU nationals, activities in the U.S., UK, or EU, activities involving U.S.-origin goods, technology or services, and certain conduct or dealings involving Iran and North Korea, among other activities, are subject to applicable sanctions requirements. We do not have employees or operations in any of the Sanctioned Countries, and, although our websites are open and available worldwide, we do not actively solicit business from the Sanctioned Countries or Sanctioned Persons. In the case of Alibaba.com, our aggregate cash revenue from members in these Sanctioned Countries in fiscal year 2019 accounted for a negligible portion of our total revenue. In the case of AliExpress and our China retail marketplaces, an insignificant percentage of orders have been placed by consumers from the Sanctioned Countries, with a negligible amount of aggregate GMV in the twelve months ended March 31, 2019 through transactions conducted voluntarily among merchants and consumers on these marketplaces. As all transaction fees on AliExpress and our China retail marketplaces are paid by merchants, primarily based in China, we do not earn any fees or commission from consumers in Sanctioned Countries in respect of transactions conducted on these platforms.

Recent economic and trade sanctions threatened and/or imposed by the U.S. government on a number of China-based technology companies, including ZTE Corporation, Huawei Technologies Co., Ltd., or Huawei, and certain of their respective affiliates, as well as actions brought against Huawei and related persons by the U.S. and the Canadian governments, have raised further concerns as to whether, in the future, there may be additional regulatory challenges or enhanced restrictions involving other China-based technology companies with global operations in areas such as data security, import/export of technology or other business activities. For instance, the U.S. government recently announced an order effectively barring American firms from selling components and software to Huawei and its affiliates. This restriction, and similar or more expansive restrictions that may be imposed by the U.S. or other jurisdictions in the future, may materially and adversely affect our ability to acquire technologies, systems, devices or components that may be critical to our technology infrastructure, service offerings and business operations. These restrictions or sanctions, even targeting specific entities unrelated to us, could nevertheless also negatively affect our ability to recruit research and development talent or conduct technological collaboration with scientists and research institutes in the U.S., Europe or other countries, which could significantly harm our competitiveness. There can be no assurance that current or future export controls or economic and trade sanctions regulations or developments will not have a negative impact on our business or reputation.

We have established a compliance program that aims to ensure our compliance with these laws and regulations. However, these laws and regulations are complex and subject to frequent change, including with respect to jurisdictional reach and the lists of countries, entities, individuals and technologies subject to sanctions and other regulatory controls. Hence, we may incur significant costs related to current, new or changing sanctions, embargoes or export controls programs, as well as investigations, fines, fees or settlements, which may be difficult to predict. We also could face increased compliance costs and risks as we expand globally and into additional businesses, such as cloud computing. In addition, our expanding network of investee companies, global business partners, joint venture partners or other parties that have collaborative relationships with us or our affiliates may engage in activities in or with Sanctioned Countries, Sanctioned Persons or persons targeted by export control restrictions, which might result in significant negative publicity, governmental investigations and reputational harm. Media reports on alleged violation of export control or economic and trade sanctions laws by our business partners or other companies, even on matters not involving us, could nevertheless damage our reputation and lead to regulatory investigations against us. If we are investigated by any regulator on the basis of suspected or alleged violations of export control or economic and trade sanctions laws and rules, even in situations in which the potential amount or fine involved may be relatively small, our reputation could be significantly harmed. Any of these circumstances may cause the price of our ADSs to decline significantly, and materially reduce the value of your investment in our ADSs.

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Certain institutional investors, including state and municipal governments in the United States and universities, as well as financial institutions, have proposed or adopted divestment or similar initiatives regarding investments in companies that do business with Sanctioned Countries. Accordingly, as a result of activities on our marketplaces or in connection with other business we operate that may involve users based in the Sanctioned Countries, certain investors may not wish to invest or may divest their investment in us, certain financial institutions may not wish to lend, extend credit or offer ordinary banking services to us, or seek early repayment of loans made to us, and certain financial institutions and other businesses with which we partner or may partner may seek to avoid business relationships with us. These divestment initiatives and terminations of business services may negatively impact our reputation, business and results of operations, and may materially and adversely affect the trading price of our ADSs.

Our business generates and processes a large amount of data, including personal data, and the improper use or disclosure of data could harm our reputation and have a material adverse effect on the trading price of our ADSs, our business and prospects.

Our business generates and processes a large quantity of personal, behavioral, transaction and demographic data. Our privacy policies concerning the collection, use and disclosure of personal data are posted on our platforms. We face risks inherent in handling and protecting large volumes of data, especially consumer data. In particular, we face a number of challenges relating to data from transactions and other activities on our platforms, including:

•: protecting the data in and hosted on our system, including against attacks on our system by outside parties or fraudulent behavior or improper use by our employees;
•: addressing concerns, challenges, negative publicity and litigation related to data privacy, collection, use and actual or perceived sharing (including sharing among our own businesses, with business partners or regulators), safety, security and other factors that may arise from our existing businesses or new businesses and technology, such as new forms of data (for example, biometric data, location information and other demographic information); and
•: complying with applicable laws, rules and regulations relating to the collection, use, storage, transfer, disclosure and security of personal information, including requests from data subjects and regulatory and government authorities.

These challenges are heightened as we expand our business into jurisdictions with different legal and regulatory regimes, such as the GDPR and the Russian Data Localization Law. There have been reports of a number of incidents relating to data security and unauthorized use of user data by high-profile Internet and technology companies and their business partners. If our user data is improperly used or disclosed by any party, it could result in a loss of users, businesses and other participants from our digital economy, loss of confidence or trust in out platforms, litigation, regulatory investigations, penalties or actions against us, significant damage to our reputation, and have a material adverse effect on the trading price of our ADSs, our business and prospects.

Pursuant to our data sharing agreement with Ant Financial and Alipay, which sets forth data security and confidentiality protocols, we have agreed to a broad sharing of depersonalized data through a data sharing platform that we own and operate, subject to compliance with relevant law. As permitted by our privacy policies and user agreements, we also grant expressly limited access to specified data on our data platform to certain other participants in our digital economy that provide services to consumers, merchants, brands and retailers. These participants in our digital economy face the same challenges inherent in handling and protecting large volumes of data. Any systems failure or security breach or lapse on our or their part that results in the release of user data could harm our reputation and brand and, consequently, our business, in addition to exposing us to potential legal liability or regulatory actions. This could also attract negative publicity from media outlets, privacy advocates, our competitors or others and could adversely affect the trading price of our ADSs.

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Our business is subject to complex and evolving domestic and international laws and regulation regarding privacy and data protection. These laws and regulations can be complex and stringent, and many are subject to change and uncertain interpretation, which could result in claims, changes to our data and other business practices, penalties, increased cost of operations, or declines in user growth or engagement, or otherwise affect our business.

Regulatory authorities in China and around the world have implemented and are considering further legislative and regulatory proposals concerning data protection, including measures to ensure that encryption of users' data does not hinder law enforcement agencies' access to that data. New laws and regulations that govern new areas of data protection or impose more stringent requirements may be introduced in China and other jurisdictions where we conduct business or may expand into. In addition, the interpretation and application of consumer and data protection laws in China and elsewhere are often uncertain and in flux. It is possible that existing or newly-introduced laws and regulations, or their interpretation or application, could significantly affect the value of our data and force us to change our data and other business practices.

The PRC regulatory and enforcement regime with regard to privacy and data security is evolving. According to the PRC Cybersecurity Law and relevant regulations, network operators, including us, are obligated to provide assistance and support in accordance with the law for public security and national security authorities to protect national security or assist with criminal investigations. In addition, the PRC Cybersecurity Law provides that personal information and important data collected and generated by operators of critical information infrastructure in the course of their operations in the PRC should be stored in the PRC, and the law imposes heightened regulation and additional security and privacy protection obligations on operators of critical information infrastructure. The PRC National Security Law covers various types of national security, including technology security and information security. See "Item 4. Information on the Company — B. Business Overview — Regulation — Regulation of Internet Security." Compliance with the PRC Cybersecurity Law, the PRC National Security Law, as well as additional laws and regulations that PRC regulatory bodies may enact in the future, may result in additional expenses to us and subject us to negative publicity, which could harm our reputation among users and negatively affect the trading price of our ADSs. There are also uncertainties with respect to how the PRC Cybersecurity Law and the PRC National Security Law will be implemented and interpreted in practice. PRC regulators, including the MIIT and the Cyberspace Administration of China, or the Cyberspace Administration, have been increasingly focused on regulation in the areas of data security and data protection. We expect that these areas will receive greater and continued attention and scrutiny from regulators and the public going forward, which could increase our compliance costs and subject us to heightened risks and challenges associated with data security and protection. If we are unable to manage these risks, we could become subject to penalties, including fines, suspension of business and revocation of required licenses, and our reputation and results of operations could be materially and adversely affected.

As we further expand our operations into international markets, we will be subject to additional laws in other jurisdictions where we operate and where our consumers, users, merchants, customers and other participants are located. The laws, rules and regulations of other jurisdictions may be more comprehensive, detailed and nuanced in their scope, and may impose requirements and penalties that conflict with, or are more stringent than, those in China. In addition, these laws, rules and regulations may restrict the transfer of data across jurisdictions, which could impose additional and substantial operational, administrative and compliance burdens on us, and may also restrict our business activities and expansion plans, as well as impede our data-driven business strategies. Complying with laws and regulations for an increasing number of jurisdictions could require significant resources and costs. Our continued expansion into cloud computing services, both in China and elsewhere, will also increase the amount of data hosted on our system, as well as increase the number of jurisdictions in which we have information technology systems. This, as well as the increasing number of new legal requirements in various jurisdictions, such as the Russian Data Localization Law and the GDPR, present increased challenges and risks in relation to policies and procedures relating to data collection, storage, transfer, disclosure, protection and privacy, and will impose significant penalties for non-compliance, including for example, penalties calculated as a percentage of global revenue under the GDPR. The compliance requirements of the GDPR affect a number of our businesses, such as AliExpress and Alibaba Cloud. Compliance with cross-border e-commerce tax laws that

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apply to our businesses will also affect a number of our businesses, increase our compliance costs and subject us to additional risks.

Any failure, or perceived failure, by us to comply with the above and other regulatory requirements or privacy protection-related laws, rules and regulations could result in reputational damages or proceedings or actions against us by governmental entities, consumers or others. On the other hand, compliance with these laws and requirements in manners that are perceived as harming privacy could also lead to significant damages to our reputation and similar proceedings and actions against us by regulators and private parties. These proceedings or actions could subject us to significant penalties and negative publicity, require us to change our data and other business practices, increase our costs and severely disrupt our business, hinder our global expansion or negatively affect the trading price of our ADSs.

We rely on Alipay to conduct substantially all of the payment processing and all of the escrow services on our marketplaces. If Alipay's services are limited, restricted, curtailed or degraded in any way, or become unavailable to us or our users for any reason, our business may be materially and adversely affected.

Given the significant transaction volume on our platforms, Alipay provides convenient payment processing and escrow services to us through contractual arrangements on preferential terms. These services are critical to our marketplaces and the development of our digital economy. In the twelve months ended March 31, 2019, approximately 70% of the GMV on our China retail marketplaces was settled through Alipay's escrow and payment processing services. We rely on the convenience and ease of use that Alipay provides to our users. If the quality, utility, convenience or attractiveness of Alipay's services declines for any reason, the attractiveness of our marketplaces could be materially and adversely affected.

Alipay's business is subject to a number of risks that could materially and adversely affect its ability to provide payment processing and escrow services to us, including:

•: dissatisfaction with Alipay's services or lower use of Alipay by consumers, merchants, brands and retailers;
•: increasing competition, including from other established Chinese Internet companies, payment service providers and companies engaged in other financial technology services;
•: changes to rules or practices applicable to payment systems that link to Alipay;
•: breach of users' privacy and concerns over the use and security of information collected from customers and any related negative publicity relating thereto;
•: service outages, system failures or failure to effectively scale the system to handle large and growing transaction volumes;
•: increasing costs to Alipay, including fees charged by banks to process transactions through Alipay, which would also increase our cost of revenues;
•: negative news about and social media coverage on Alipay, its business, its products and service offerings or matters relating to Alipay's data security and privacy; and
•: failure to manage user funds accurately or loss of user funds, whether due to employee fraud, security breaches, technical errors or otherwise.

In addition, certain commercial banks in China impose limits on the amounts that may be transferred by automated payment from users' bank accounts to their linked accounts with third-party payment services. Although we believe the impact of these restrictions has not been and will not be significant in terms of the overall volume of payments processed for our China retail marketplaces, and automated payment services linked to bank accounts represent only one of many payment mechanisms that consumers may use to settle transactions, we cannot predict whether these and any additional restrictions that could be put in place would have a material adverse effect on our marketplaces.

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Alipay's business is highly regulated and faces challenges in managing its regulatory risks. Alipay is required to comply with numerous complex and evolving laws, rules and regulations. In particular, regulators and third parties in China have been increasing their focus on online and mobile payment services, and recent regulatory and other developments could reduce the convenience or utility of Alipay users' accounts. In addition, as Alipay expands its businesses and operations into more international markets, it will become subject to additional legal and regulatory risks and scrutiny. Furthermore, our commercial arrangements with Alipay may be subject to anti-competition challenges. See "— We and Ant Financial are subject to a broad range of laws and regulations, and future laws and regulations may impose additional requirements and other obligations on our business or otherwise that could materially and adversely affect our business, financial condition and results of operations," and "Item 4. Information on the Company — B. Business Overview — Regulation — Regulation Applicable to Alipay."

If we needed to migrate to another third-party payment service or significantly expand our relationship with other third-party payment services, the transition would require significant time and management resources, and the third-party payment service may not be as effective, efficient or well-received by consumers, merchants, brands and retailers on our marketplaces. These third-party payment services also may not provide escrow services, and we may not be able to receive commissions based on GMV settled through these systems. We would also receive less, or lose entirely, the benefit of the commercial agreement with Ant Financial and Alipay, which provides us with preferential terms, and would possibly be required to pay more for payment processing and escrow services than we currently pay. There can be no assurance that we would be able to reach an agreement with an alternative online payment service provider on acceptable terms or at all.

We do not control Alipay or its parent entity, Ant Financial, over which Jack Ma effectively controls a majority of the voting interests. If conflicts that could arise between us and Alipay or Ant Financial are not resolved in our favor, our digital economy, business, financial condition, results of operations and prospects may be materially and adversely affected.

Although we rely on Alipay to conduct substantially all of the payment processing and all of the escrow services on our marketplaces and we have agreed to acquire a 33% equity interest in Alipay's parent, Ant Financial, we do not, and will not upon completion of the acquisition, have any control over Alipay. Alipay provides payment services to us on preferential terms pursuant to our long-term commercial agreement with Ant Financial and Alipay. Following the 2011 divestment and subsequent equity holding restructuring related to Ant Financial, an entity wholly owned by Jack Ma, our executive chairman, became the general partner of Hangzhou Junhan Equity Investment Partnership, or Junhan, and Hangzhou Junao Equity Investment Partnership, or Junao, each a PRC limited partnership, which are two major equity holders of Ant Financial. Accordingly, Jack has an economic interest in Ant Financial and is able to exercise the voting power of the equity interest in Ant Financial held by Junhan and Junao. We understand that through the exercise of this voting power, Jack continues to control a majority of the voting interests in Ant Financial.

If Alipay were not able to successfully manage the risks relating to its business, its ability to continue to deliver payment services to us on preferential terms may be undermined. Furthermore, if for any reason, Alipay sought to amend the terms of its agreements and arrangements with us, there can be no assurance that Jack Ma, in light of his voting control over Alipay's parent, Ant Financial, would act in our interest. If Alipay were required by regulators to modify the commercial agreement under certain circumstances, Alipay may not have sufficient funds to adequately compensate us for the impact of the adjustment. If we were to lose the preferential terms with Alipay or if Alipay is unable to successfully manage its business, our digital economy could be negatively affected, and our business, financial condition, results of operations and prospects could be materially and adversely affected.

Ant Financial also provides other financial services to participants in our digital economy, including wealth management, financing (including consumer financing) and insurance, and may provide additional services in the future. Other conflicts of interest between us, on the one hand, and Alipay and Ant Financial, on the other hand, may arise relating to commercial or strategic opportunities or initiatives. Although we and Ant Financial have each agreed to certain non-competition undertakings, Ant Financial may provide services to our competitors from time to time and there can be no assurance that Ant Financial would not pursue other opportunities that would conflict

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with our interests. See "Item 7. Major Shareholders and Related Party Transactions — B. Related Party Transactions — Agreements and Transactions Related to Ant Financial and its Subsidiaries — 2014 Share and Asset Purchase Agreement — Non-competition Undertakings." Jack Ma may not resolve these conflicts in our favor. Furthermore, our ability to explore alternative payment services other than Alipay for our marketplaces may be constrained due to Jack's relationship with Ant Financial.

In addition, we grant share-based awards to employees of Ant Financial, and Junhan grants share-based awards tied to the value of Ant Financial to our employees, and a subsidiary of Ant Financial grants restricted share unit awards to our employees. The provision of awards relating to Ant Financial to our employees is intended to enhance our strategic and financial relationship with Ant Financial. See "Item 7. Major Shareholders and Related Party Transactions — B. Related Party Transactions — Agreements and Transactions Related to Ant Financial and its Subsidiaries — Equity-based Award Arrangements." The share-based awards granted by Junhan and the Ant Financial subsidiary to our employees result in expenses that are recognized by our company. Subject to the approval of our audit committee, Jack (through his role with us and his control over Junhan) and Ant Financial could be in a position to propose and promote further share-based grants that result in additional, and potentially significant, expenses to our company. Accordingly, these and other potential conflicts of interest between us and Ant Financial or Alipay, and between us and Jack or Junhan or Junao, may not be resolved in our favor, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

Moreover, because of our close association with Ant Financial and overlapping user bases, events that negatively affect Ant Financial could also negatively affect customers', regulators' and other third parties' perception of us. In addition, any actual or perceived conflict of interest between us and Ant Financial, or any other company integral to the functioning of our digital economy, could also materially harm our reputation as well as our business and prospects.

We may not be able to receive the equity ownership interest in Ant Financial.

Pursuant to the amendment to the 2014 SAPA that we entered into in February 2018 (as amended, the 2018 SAPA Amendment), we have agreed to acquire a 33% equity interest in Ant Financial. The closing of this transaction is subject to the receipt of the necessary PRC regulatory approvals and the satisfaction of other conditions.

If Ant Financial does not receive the required PRC regulatory approvals mentioned above, we will not be able to complete the acquisition of the equity ownership interest in Ant Financial, and we would fail to benefit from any appreciation in its equity value beyond the date of a qualified IPO of Ant Financial or Alipay. Our inability to reap the benefits of any appreciation in equity value of Ant Financial, including in connection with a qualified IPO of Ant Financial or Alipay, could represent a significant missed opportunity that is beyond our control.

In addition, the 2018 SAPA Amendment provides that if Ant Financial's intended equity issuance to us is not completed for any reason, we will unwind the 2018 SAPA Amendment and restore the 2014 SAPA and other related agreements. As a result, we may incur additional costs to unwind the 2018 SAPA Amendment and be subject to significant negative publicity, which could have a material adverse effect on our business, financial condition and results of operations, as well as the trading price of our ADSs. Pursuant to the 2014 SAPA, in the event of a qualified IPO of Ant Financial or Alipay, if the equity issuance has not been completed or is subsequently unwound, we would be entitled, at our election, to receive a one-time payment equal to the 37.5% of the total equity value of Ant Financial immediately prior to the qualified IPO. If we elect to receive this one-time payment, it is possible that Ant Financial will not have sufficient funds to make the payment in a timely manner or on a schedule acceptable to us. See "Item 7. Major Shareholders and Related Party Transactions — B. Related Party Transactions — Agreements and Transactions Related to Ant Financial and its Subsidiaries — 2014 Restructuring of Our Relationship with Ant Financial and Alipay and 2014 Amendments."

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Our future success is significantly dependent upon the continued service of our key executives and other key employees, particularly in new business areas we are expanding into, such as New Retail and local consumer services. If we lose the services of any member of management or key personnel, we may not be able to locate suitable or qualified replacements, and may incur additional expenses to recruit and train new staff. Jack Ma, our lead founder, executive chairman and one of our principal shareholders, has been crucial to the development of our vision, culture and strategic direction. Jack Ma announced that he will retire as our executive chairman in September 2019. Daniel Zhang, our current chief executive officer, has been designated to succeed Jack in that role. This and similar retirements and successions could result in disruptions, or perceived disruptions, in our operations and the execution of our strategy.

As our business develops and evolves, it may become difficult for us to continue to retain our employees. A number of our employees, including many members of management, may choose to pursue other opportunities outside of our company. If we are unable to motivate or retain these employees, our business may be severely disrupted and our prospects could suffer.

The size and scope of our digital economy also require us to hire and retain a wide range of capable and experienced personnel who can adapt to a dynamic, competitive and challenging business environment. We will need to continue to attract and retain experienced and capable personnel at all levels, including members of management, as we expand our business and operations. Our various incentive initiatives may not be sufficient to retain our management and employees. Competition for talent in our industry is intense, and the availability of suitable and qualified candidates in China and elsewhere is limited. Competition for these individuals could cause us to offer higher compensation and other benefits to attract and retain them. Even if we were to offer higher compensation and other benefits, there can be no assurance that these individuals will choose to join or continue to work for us. Any failure to attract or retain key management and personnel could severely disrupt our business and growth.

Failure to deal effectively with fraudulent or illegal activities by our employees would harm our business.

Illegal, fraudulent, corrupt or collusive activities by our employees could subject us to liability or negative publicity. We have discovered cases in which certain of our employees had accepted payments from merchants or other service providers in order to receive preferential treatment on our marketplaces or in connection with other businesses we operate. Although we dismissed the employees responsible for these incidents and other illegal activities, and have implemented internal controls and policies with regard to the review and approval of merchant accounts, sales activities, interactions with business partners and government officials and other relevant matters, there can be no assurance that our controls and policies will prevent fraud or illegal activity by our employees or that similar incidents will not occur in the future. Any illegal, fraudulent, corrupt or collusive activity could severely damage our brand and reputation, which could drive users and consumers away from our digital economy, and materially and adversely affect our business, financial condition and results of operations.

If other third-party service providers in our digital economy fail to provide reliable or satisfactory services, our reputation, business, financial condition and results of operations may be materially and adversely affected.

Ant Financial and a number of other third-party participants, including retail operating partners, logistics service providers, mobile app developers, ISVs, cloud-based developers, marketing affiliates and various professional service providers, provide services to users on our platforms, including consumers, merchants, brands, retailers and users of our cloud computing services. To the extent these service providers are unable to provide satisfactory services to our users on commercially acceptable terms, or at all, or if we fail to retain existing or attract new quality service providers to our platforms, our ability to retain, attract or engage our users may be severely limited, which may have a material and adverse effect on our business, financial condition and results of operations. In addition, we share our user data with certain of these third-party service providers in our digital economy in

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accordance with our privacy policies, agreements and applicable laws. These third-party service providers also engage in a broad range of other business activities outside of our platforms. If these third-party participants engage in activities that are negligent, fraudulent, illegal or otherwise harm the trustworthiness and security of our digital economy, including, for example, the leak or negligent use of data, the handling, transport and delivery of prohibited or restricted content or items, or if these participants fail to perform their contractual obligations, or users are otherwise dissatisfied with their service quality on or off our platforms, we could suffer reputational harm, even if these activities are not related to, attributable to or caused by us, or within our control.

If logistics service providers used by our merchants fail to provide reliable logistics services, or the logistics data platform operated by Cainiao Network were to malfunction, suffer an outage or otherwise fail, our business and prospects, as well as our financial condition and results of operations, may be materially and adversely affected.

Our merchants use third-party logistics service providers to fulfill and deliver their orders. Cainiao Network cooperates with a number of third-party logistics service providers to help merchants on our platforms fulfill orders and deliver their products to consumers. We operate Cainiao Network's logistics data platform that links our information system and those of logistics service providers. Interruptions to or failures in these third parties' logistics services, or in Cainiao Network's logistics data platform, could prevent the timely or proper delivery of products to consumers, which would harm the reputation of our digital economy and the businesses we operate. In addition, certain of our businesses, including Lazada, operate and provide logistics services to merchants within our digital economy and may experience interruptions or failures to timely and properly deliver products to consumers. These interruptions or failures may be due to events that are beyond the control of any of our companies, Cainiao Network or these logistics service providers, such as inclement weather, natural disasters, accidents, transportation disruptions, including special or temporary restrictions or closings of facilities or transportation networks due to regulatory or political reasons, or labor unrest or shortages. These logistics services could also be affected or interrupted by business disputes, industry consolidation, insolvency or government shut-downs. The merchants in our digital economy may not be able to find alternative logistics service providers to provide logistics services in a timely and reliable manner, or at all. We do not have agreements with third-party logistics service providers that require them to offer services to our merchants. If the logistics data platform operated by Cainiao Network were to fail for any reason, the logistics service providers would be severely hindered from or unable to connect with our merchants, and their services and the functionality of our digital economy could be severely affected. If the products sold by merchants in our digital economy are not delivered in proper condition, on a timely basis or at shipping rates that are commercially acceptable to marketplace participants, our business and prospects, as well as our financial condition and results of operations could be materially and adversely affected.

We may be subject to liability for content available in our digital economy that is alleged to be socially destabilizing, obscene, defamatory, libelous or otherwise unlawful.

Under PRC law and the laws of certain other jurisdictions in which we operate, we are required to monitor our websites and the websites hosted on our servers and mobile interfaces, as well as our services and devices that generate or host content, for items or content deemed to be socially destabilizing, obscene, superstitious or defamatory, as well as for items, content or services that are illegal to sell online or otherwise in other jurisdictions in which we operate our marketplaces and other businesses, and promptly take appropriate action with respect to the relevant items, content or services. We may also be subject to potential liability in China or other jurisdictions for any unlawful actions of our merchants, marketing customers or users of our websites or mobile interfaces, or for content we distribute or that is linked from our platforms that is deemed inappropriate. It may be difficult to determine the type of content that may result in liability to us, our websites and platforms, such as our cloud computing services, which allow users to upload and save massive data on our cloud data centers, social communities on our marketplaces and DingTalk, and Youku, which allow users to upload videos and other content to our websites and platforms, may make this even more difficult. If we are found to be liable, we may be subject to negative publicity, fines, have our relevant business operation licenses revoked, or be prevented from operating our websites or mobile interfaces in China or other jurisdictions.

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In addition, claims may be brought against us for defamation, libel, negligence, copyright, patent or trademark infringement, tort (including personal injury), other unlawful activity or other theories and claims based on the nature and content of information posted on our platforms, including user-generated content, product reviews and message boards, by our consumers, merchants and other participants.

Regardless of the outcome of any dispute or lawsuit, we may suffer from negative publicity and reputational damage as a result of these actions.

We have been and may continue to be subject to allegations, lawsuits and negative publicity claiming that items listed and content available in our digital economy are pirated, counterfeit or illegal.

We have been the subject in the past, and may continue to be the subject in the future, of allegations that items offered, sold or made available through our online marketplaces by third parties or that content we make available through other services, such as our online video and music platforms or through our smart devices, infringe third-party copyrights, trademarks and patents or other intellectual property rights. Although we have adopted measures to proactively verify the products sold on our marketplaces for infringement and to minimize potential infringement of third-party intellectual property rights through our intellectual property infringement complaint and take-down procedures, these measures may not always be successful. In the event that alleged counterfeit or infringing products are listed or sold on our marketplaces or allegedly infringing content are made available through our other services, we could face claims and negative publicity relating to these activities or for our alleged failure to act in a timely or effective manner in response to infringement or to otherwise restrict or limit these activities. We may also choose to compensate consumers for any losses, although we are currently not legally obligated to do so. If, as a result of regulatory developments, we are required to compensate consumers, we would incur additional expenses.

Measures we take to protect against these potential liabilities could require us to spend substantial additional resources and/or experience reduced revenues. In addition, these measures may reduce the attractiveness of our digital economy to consumers, merchants, brands, retailers and other participants. A merchant or online marketer whose content is removed or whose services are suspended or terminated by us, regardless of our compliance with the applicable laws, rules and regulations, may dispute our actions and commence action against us for damages based on breach of contract or other causes of action, make public complaints or allegations or organize group protests and publicity campaigns against us or seek compensation. Any costs incurred as a result of liability or asserted liability relating to the sale of unlawful goods or other infringement could harm our business.

We also have been and may continue to be subject to allegations of civil or criminal liability based on allegedly unlawful activities or unauthorized distribution of products or content carried out by third parties through our online marketplaces. We have also acquired certain companies, such as Youku, Lazada and Ele.me, that from time to time are subject to allegations and lawsuits regarding alleged infringement of third-party intellectual property or other rights, and we may continue to acquire other companies that are subject to similar disputes.

In addition, we have been and may continue to be subject to significant negative publicity in China and other countries based on similar claims and allegations. For example, in December 2016, January 2018 and April 2019, the Office of the U.S. Trade Representative, or USTR, identified Taobao Marketplace as a "notorious market." The USTR may continue to identify Taobao Marketplace as a notorious market, and there can be no assurance that the USTR will not identify our other businesses as notorious markets in the future. In addition, government authorities have in the past accused, and may in the future accuse, us of perceived problems and failures of our platforms, including alleged failures to crack down on the sale of counterfeit goods and other alleged illegal activities on our China retail marketplaces. As a result of any claims or accusations by government authorities, by industry watchdog organizations, including the U.S. Commission on the Theft of American Intellectual Property, by brand and intellectual property rights holders or by enterprises, there may be a public perception that counterfeit or pirated items are commonplace on our marketplaces or that we delay the process of removing these items. This perception, even if factually incorrect, and existing or new litigation as well as regulatory pressure or action related

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to intellectual property rights protection, could damage our reputation, harm our business, diminish the value of our brand name and negatively affect trading price of our ADSs.

Failure to deal effectively with any fraud perpetrated and fictitious transactions conducted in our digital economy, and other sources of customer dissatisfaction, would harm our business.

We face risks with respect to fraudulent activities on our marketplaces and in connection with other businesses we operate, and we periodically receive complaints from consumers who may not have received the goods that they had purchased, complaints from merchants who have not received payment for the goods that a consumer had contracted to purchase, as well as other types of actual and alleged fraudulent activities. See "Item 4. Information on the Company — B. Business Overview — Transaction Platform Safety Programs" for more details about the measures we have adopted against fraudulent activities. Although we have implemented various measures to detect and reduce the occurrence of fraudulent activities on our marketplaces and in connection with other businesses we operate, there can be no assurance that these measures will be effective in combating fraudulent transactions or improving overall satisfaction among our consumers, merchants and other participants. Additional measures that we take to address fraud could also negatively affect the attractiveness of our marketplaces and other businesses we operate to consumers or merchants. In addition, merchants on our marketplaces contribute to a fund to provide consumer protection guarantees. If our merchants do not perform their obligations under these programs, we may use funds that have been deposited by merchants in a consumer protection fund to compensate consumers. If the amounts in the fund are not sufficient, we may choose to compensate consumers for losses, although currently we are not legally obligated to do so. If, as a result of regulatory developments, we are required to compensate consumers, we would incur additional expenses. Although we have recourse against our merchants for any amounts we incur, there can be no assurance that we would be able to collect these amounts from our merchants.

In addition to fraudulent transactions with legitimate consumers, merchants may also engage in fictitious or "phantom" transactions with themselves or collaborators in order to artificially inflate their own ratings on our marketplaces, reputation and search results rankings, an activity sometimes referred to as "brushing." This activity may harm other merchants by enabling the perpetrating merchant to be favored over legitimate merchants, and may harm consumers by deceiving them into believing that a merchant is more reliable or trusted than the merchant actually is.

Government authorities, industry watchdog organizations or other third parties may issue reports or engage in other forms of public communications concerning alleged fraudulent or deceptive conduct on our platforms. Negative publicity and user sentiment generated as a result of these reports or allegations could severely diminish consumer confidence in and use of our services, reduce our ability to attract new or retain current merchants, consumers and other participants, damage our reputation, result in shareholder or other litigation, diminish the value of our brand, and materially and adversely affect our business, financial condition and results of operations.

We may be subject to claims under consumer protection laws, including health and safety claims and product liability claims, if property or people are harmed by the products and services sold through our platforms.

Due to several high-profile incidents involving safety, including food safety, and consumer complaints that have occurred in China in recent years, the PRC government, media outlets and public advocacy groups are increasingly focused on consumer protection. Government authorities in other countries where we operate also place high importance on consumer protection. Moreover, as part of our growth strategy, we expect to increase our focus on food, food delivery, food supplements and beverages, mother care, baby care, pharmaceutical and healthcare products and services, as well as electronics products, both as a platform operator and as part of our directly operated business. We have also invested in companies involved in these sectors. These activities pose increasing challenges to our internal control and compliance systems and procedures, including our control over and management of third-party service personnel, and expose us to substantial increasing liability, negative publicity and reputational damage arising from consumer complaints, harms to personal health or safety or accidents involving products or services offered through our platforms or provided by us. Operators of e-commerce platforms

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are subject to certain provisions of consumer protection laws even where the operator is not the merchant of the product or service purchased by the consumer. In addition, if we do not take appropriate remedial action against merchants or service providers for actions they engage in that we know, or should have known, would infringe upon the rights and interests of consumers, we may be held jointly liable for infringement alongside the merchant or service provider. We may also be held jointly liable with the merchants under the PRC E-commerce Law if we fail to take necessary actions when we know or should have known that the products or services provided by the merchants on our platforms do not meet personal and property security requirements, or otherwise infringe upon consumers' legitimate rights. Moreover, applicable consumer protection laws in China hold that trading platforms will be held liable for failing to meet any undertaking that the platforms make to consumers with regard to products listed on their websites. Furthermore, we are required to report to the State Administration for Market Regulation, or the SAMR, formerly known as the State Administration for Industry and Commerce, or the SAIC, or its local branches any violation of applicable laws, regulations or SAMR rules by merchants or service providers, such as sales of goods without proper license or authorization, and we are required to take appropriate remedial measures, including ceasing to provide services to the relevant merchants or service providers. We may also be held liable if we fail to verify the licenses or qualifications of merchants, or fail to safeguard consumers with respect to products or services affecting consumers' health or safety.

In addition, we are facing increasing levels of activist litigation in China by plaintiffs claiming damages based on consumer protection laws. This type of activist litigation could increase in the future, and if it does, we could face increased costs defending these suits and damages should we not prevail, which could materially and adversely affect our reputation and brand and our results of operations.

We may also face increasing scrutiny from consumer protection regulators and activists, as well as increasingly become a target for litigation, in the United States, Europe and other jurisdictions. For example, recently, member groups of the European Consumer Organization's BEUC network expressed concerns about certain consumer rights related to product returns and dispute resolution with respect to transactions conducted on our AliExpress platform, and requested a review of these consumer rights by their national consumer protection agencies. We only maintain product liability insurance for certain businesses we operate, and do not maintain product liability insurance for products and services transacted on our marketplaces, and our rights of indemnity from the merchants in our digital economy may not adequately cover us for any liability we may incur. Consumer complaints and associated negative publicity could materially and adversely harm our reputation and affect our business expansion. Claims brought against us under consumer protection laws, even if unsuccessful, could result in significant expenditure of funds and diversion of management time and resources, which could materially and adversely affect our business operations, net income and profitability.

We may be accused of infringing intellectual property rights of third parties or violating content restrictions under relevant laws.

Third parties may claim that our product and service offerings, the content on our platforms, including content available through our digital media and entertainment business, search business, online reading platform, online music platform, news feed features and Internet of Things, or IoT, devices or our technology infringe upon their intellectual property rights or are provided beyond the authorized scope. Although we have not in the past faced material litigation involving direct claims of infringement by us, the possibility of intellectual property claims against us, whether in China or other jurisdictions, increases as we continue to grow, particularly internationally. The establishment of, and issuance of reports by, the Commission on the Theft of American Intellectual Property also highlights the current focus of the United States on investigating, preventing and taking action against alleged misappropriation of intellectual property, that may result in increased scrutiny, investigations, enforcement actions and litigation relating to intellectual property infringement. In addition, in April 2019, the U.S. administration issued an executive order instructing the U.S. Department of Homeland Security to coordinate with other federal agencies working to combat the counterfeiting of goods. This executive order aims to hold intermediary online marketplaces, such as our company, accountable for the availability and sale of counterfeit goods on their marketplaces. We have also acquired businesses, such as Youku, that have been, and may continue to be, subject to

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liabilities for infringement of third-party intellectual property rights or other allegations based on the content available on their websites and mobile apps or the services they provide. In addition, we expect our digital economy to involve more and more user-generated content, including the entertainment content on Youku and our smart speakers, the interactive media content displayed on Taobao Marketplace and Tmall, including livestreams and short-form videos, as well as the data generated, uploaded and saved by users of our cloud computing services, over which we have limited control and we may be subject to claims for infringement of third-party intellectual property rights, or subject us to additional scrutiny by the relevant government authorities. These claims or scrutiny, whether or not having merit, may result in our expenditure of significant financial and management resources, injunctions against us or payment of damages. We may need to obtain licenses from third parties who allege that we have infringed their rights, but these licenses may not be available on terms acceptable to us or at all. These risks have been amplified by the increase in the number of third parties whose sole or primary business is to assert these claims.

China has enacted laws and regulations governing Internet access and the distribution of products, services, news, information, audio-video programs and other content through the Internet. The PRC government has prohibited the distribution of information through the Internet that it deems to be in violation of PRC laws and regulations, impairs the national dignity of China or the public interest, or is obscene, superstitious, fraudulent or defamatory. Users of certain of our websites and platforms, including Youku, can upload content to these websites, mobile apps and platforms, which is generally referred to as user-generated content. Due to the significant amount of content uploaded by our users, we may not be able to identify all the videos or other content that may violate relevant laws and regulations. If any of the information disseminated through our marketplaces, websites, mobile apps or other businesses we operate, including videos and other content (including user-generated content) displayed on Youku's or our other websites, mobile apps or on our Tmall set-top boxes, smart speakers and smart televisions, or any content that we produce, were deemed by the PRC government to violate any content restrictions, we would not be able to continue to display this content and could suffer losses or become subject to penalties, including confiscation of income, fines, suspension of business and revocation of required licenses, which could materially and adversely affect our business, financial condition and results of operations. The outcome of any claims, investigations and proceedings is inherently uncertain, and in any event defending against these claims could be both costly and time-consuming, and could significantly divert the efforts and resources of our management and other personnel. An adverse determination in any of these litigation matters or proceedings could cause us to pay damages, incur legal and other costs, limit our ability to conduct business or require us to change the manner in which we operate and harm our reputation. As we expand our operations internationally, we expect that we will become subject to similar laws and regulations in other jurisdictions.

We may not be able to protect our intellectual property rights.

We rely on a combination of trademark, fair trade practice, patent, copyright and trade secret protection laws in China and other jurisdictions, as well as confidentiality procedures and contractual provisions, to protect our intellectual property rights. We also enter into confidentiality agreements with our employees and any third parties who may access our proprietary information, and we rigorously control access to our proprietary technology and information. In addition, as our business expands and we increase our acquisition of and management of content, we expect to incur greater costs to acquire, license and enforce our rights to content.

Intellectual property protection may not be sufficient in ~~China or other countries~~the jurisdictions in which we operate. Confidentiality agreements may be breached by counterparties, and there may not be adequate remedies available to us for these breaches. Accordingly, we may not be able to effectively protect our intellectual property rights or to enforce our contractual rights in China or elsewhere. In addition, policing any unauthorized use of our intellectual property is difficult, time-consuming and costly and the steps we have taken may be inadequate to prevent the misappropriation of our intellectual property. In the event that we resort to litigation to enforce our intellectual property rights, ~~the~~this litigation could result in substantial costs and a diversion of our managerial and financial resources. WeThere can ~~provide~~be no assurance that we will prevail in ~~such~~any litigation. In addition, our trade secrets may be leaked or otherwise become available to, or be independently discovered by, our competitors. Any failure in

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protecting or enforcing our intellectual property rights could have a material adverse effect on our business, financial condition and results of operations.

We ~~may be subject to claims under consumer protection laws, including health~~ and ~~safety claims and product liability claims, if property or people are harmed by the products and services sold on our marketplaces.~~

Due to several high-profile incidents involving food safety and consumer complaints that have occurred in China in recent years, the PRC government, media outlets and public advocacy groups are increasingly focused on consumer protection. Moreover, as part of our growth strategy, we expect to increase our focus on food, food supplements and beverages, mother care, baby care and healthcare products and services, and electronics products, and have also invested in companies involved in these sectors, which could expose us to increasing liability associated with consumer protection laws in those areas. Operators of commerce marketplaces and platformsAnt Financial are subject to ~~certain provisions~~a broad range of ~~consumer protection~~ laws ~~even where the operator is not the merchant of the product or service purchased by the consumer. For example, under applicable consumer protection~~and regulations, and future laws ~~in China, e-commerce platform operators~~and regulations may ~~be held liable for consumer claims relating to damage if they are unable to provide consumers with the true name, address~~impose additional requirements and ~~contact details of merchants or service providers. In addition, if we do not take appropriate remedial action against merchants or service providers for actions they engage in~~other obligations that we know, or should have known, would infringe upon the rights and interests of consumers, we may be held jointly liable with the merchant or service provider for such infringement. Moreover, applicable consumer protection laws in China hold that trading platforms will be held liable for failing to meet any undertakings that the platforms make to consumers with regard to products listed on their websites. Furthermore, we are required to report to SAIC or its local branches any violation of applicable laws, regulations or SAIC rules by merchants or service providers, such as sales of goods without proper license or authorization, and to take appropriate remedial measures, including ceasing to provide services to the relevant merchants or service providers. We may also be held jointly liable with merchants who do not possess the proper licenses or authorizations to sell goods or sell goods that do not meet product standards. In addition, we are facing increasing levels of activist litigation in China by plaintiffs claiming damages based on consumer protection laws. This type of activist litigation could increase in the future, and if it does, we could face increased costs defending such suits and damages should we not prevail, which could materially and adversely affect our ~~reputation~~business, financial condition and ~~brand~~results of operations.

The industries in which we and Ant Financial operate in the PRC and other countries, including online and mobile commerce and payments, financial services, cloud computing and digital media and entertainment and other online content offerings, are highly regulated. Government authorities in the PRC and other countries are likely to continue to issue new laws, rules and regulations governing the industries in which we and Ant Financial operate in the PRC and other countries and enhance enforcement of existing laws, rules and regulations. They have imposed, and may continue to impose, requirements relating to, among other things, new and additional licenses, permits and approvals or governance or ownership structures on us or certain of our businesses, Ant Financial and our ~~results~~users.

For example, the recently promulgated E-commerce Law imposes a series of ~~operations. As~~requirements on e-commerce operators including e-commerce platform operators, merchants operating on the platform and the individuals and entities carrying out business online. See "Item 4. Information on the Company — B. Business Overview — Regulation — Regulation of Online and Mobile Commerce." Certain third-party platforms, although offering products and services competing with our ~~business expands outside~~marketplaces, may not be deemed as e-commerce operators and may be subject to less stringent requirements with respect to merchant regulation and consumer protection. The platform governance measures we adopt in response to the enhanced regulatory requirements may fail to meet these requirements and may lead to penalties or our loss of ~~China, we~~merchants to those platforms, or to complaints or claims made against us by merchants on our platforms. New regulations governing various aspects of e-commerce platform operations, including those that may limit an e-commerce platform operator's ability to provide consumers with personalized shopping recommendations, could materially and adversely affect our operating results.

We have from time to time been subject, and are likely again in the future to be subject, to PRC and foreign government inquiries and investigations, including those relating to online content, alleged third-party intellectual property infringement, cybersecurity and privacy laws, and securities laws and regulations. We also face scrutiny, and have been subject and continue to be subject to inquiries and investigations, from PRC and foreign governmental bodies that focus on cross-border trade, tax, intellectual property protection, our investment activities, human rights, user privacy and data protection matters and allegedly fraudulent or other criminal transactions. We may also face ~~increasing~~protectionist policies and regulatory scrutiny, ~~from consumer protection regulators~~on national security grounds or for other reasons, in ~~the United States, Europe and other jurisdictions. If claims are brought against us under any~~foreign countries in which we conduct business or investment activities. None of these ~~laws,~~inquiries and investigations has resulted in significant restrictions on our business operations. However, as we ~~could be subject~~continue to ~~damages~~grow in scale and ~~reputational damage~~significance, we expect to face increased scrutiny, which will, at a minimum, result in our having to continue to increase our investment in compliance and related capabilities and systems.

Ant Financial, which through Alipay provides the substantial majority of the payment processing services on our marketplaces as well as ~~action~~other financial and value-added services, such as wealth management, financing and insurance, is subject to various laws, rules and regulations in the PRC and other countries where it operates, including those governing banking, privacy, cross-border and domestic money transmission, anti-money laundering, counter-terrorist financing and consumer protection laws, rules and regulations. In recent years, the PRC government has increasingly focused on regulation of the financial industry, including laws, rules and regulations relating to the provision of payment services. See "Item 4. Information on the Company — B. Business Overview — Regulation — Regulation Applicable to Alipay." These laws, rules and regulations are highly complex, constantly evolving and could change or be reinterpreted to be burdensome, difficult or impossible for Ant Financial to comply with.

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As we and Ant Financial further expand into international markets, we and Ant Financial will increasingly become subject to additional legal and regulatory compliance requirements as well as political and regulatory challenges, including scrutiny on data privacy and security and anti-money laundering compliance, or on national security grounds or for other reasons, to our business and investment activities in these markets. In addition, Alipay or its affiliates are required to maintain payment business licenses in the PRC and are also required to obtain and maintain other applicable payment, money transmitter or other related licenses and approvals in other countries or regions where they operate. In certain jurisdictions where Alipay currently does not have the required licenses, Alipay provides payment processing and escrow services through third-party service providers. If Alipay or its partners fail to obtain and maintain all required licenses and approvals or otherwise fails to comply with applicable laws, rules and regulations, if new laws, rules or regulations come into effect that impact Alipay or its partners' businesses, or if any of Alipay's partners cease to provide services to Alipay, its services could be suspended or severely disrupted, and our business, financial condition and results of operations would be materially and adversely affected.

Tightening of tax compliance efforts that affect our merchants could materially and adversely affect our business, financial condition and results of operations.

Tax legislation relating to the digital economy is still developing. Governments, both in China and in other jurisdictions, may promulgate or strengthen the implementation of tax regulations that impose obligations on e-commerce companies, which could increase the costs to consumers and merchants and make our platforms less competitive in these jurisdictions. Governments may require operators of marketplaces, such as our company, to assist in the enforcement of tax registration requirements and the collection of taxes with respect to the revenue or profit generated by ~~regulators,~~merchants from transactions conducted on their platforms. We may also be requested by tax authorities to supply information about our merchants, such as transaction records and bank account information, and assist in the enforcement of other tax regulations, including the payment and withholding obligations against our merchants. As a result of more stringent tax compliance requirements and liabilities, we may lose existing merchants and potential merchants might not be willing to open storefronts on our marketplaces, which could in turn negatively affect us. Stricter tax enforcement by tax authorities may also reduce the activities by merchants on our platforms and result in liability to us.

Potential heightened tax law enforcement against participants in our digital economy (including imposition of reporting or withholding obligations on operators of marketplaces with respect to value-added tax of merchants and stricter tax enforcement against merchants generally) could have a material adverse effect on our business, financial condition and results of operations. We do not maintain product liability insurance for products and services transacted on our marketplaces, and our rights of indemnity from the merchants on our marketplaces may not adequately cover us for any liability we may incur. Even unsuccessful

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~~claims could result in the expenditure of funds and management time and resources and could materially reduce our net income and profitability.~~

We may be subject to material litigation and regulatory proceedings.

We have been involved in a high volume of litigation in China and a small volume of potentially high-value litigation outside China relating principally to securities law class actions, third-party and principal intellectual property infringement claims, contract disputes involving merchants and consumers on our ~~platform,~~platforms, consumer protection claims, claims relating to data and privacy protection, employment related cases and other matters in the ordinary course of our business. As our ~~ecosystem~~digital economy expands, including across jurisdictions and through the addition of new businesses, we have encountered and ~~as litigation becomes more common in China, we~~ may face an increasing number and a wider variety of ~~such~~these claims, including those brought against us pursuant to anti-monopoly or unfair competitions laws or involving higher amounts of alleged damages. Laws, rules and regulations may vary in their scope and overseas laws and regulations may impose requirements that are more stringent than, or which conflict with, those in China. We have acquired and may acquire companies ~~such as Youku Tudou,~~ that ~~are~~have been subject to or may become subject to litigation, as well as regulatory proceedings. In addition, in connection with litigation or regulatory proceedings we may be subject to in various jurisdictions, we may be prohibited by laws, regulations or government authorities in one jurisdiction from complying with subpoenas, orders or other requests from courts or regulators of other jurisdictions, including ~~shareholder class action lawsuits~~those relating to data held in or with respect to persons in these jurisdictions. Our failure or inability to comply with the

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subpoenas, orders or requests could subject us to fines, penalties or other legal liability, which could have a material adverse effect on our reputation, business, results of operations and the ~~case~~trading price of our ADSs.

As publicly-listed companies, we ~~acquire that are or were publicly-listed companies.~~

~~As a publicly-listed company, we may~~and certain of our subsidiaries face additional exposure to claims and lawsuits inside and outside China. We will need to defend against ~~such~~these lawsuits, including any appeals should our initial defense be successful. The litigation process may utilize a material portion of our cash resources and divert management's attention away from the day-to-day operations of our company, all of which could harm our business. There can be no assurance that we will prevail in any ~~such~~of these cases, and any adverse outcome of these cases could have a material adverse effect on our reputation, business and results of operations. In particular, we have been named as a defendant in certain purported shareholder class action lawsuits described in "Item 8. Financial Information — A. Consolidated Statements and Other Financial Information — Legal and Administrative Proceedings." We are currently unable to estimate the possible loss or possible range of loss, if any, associated with the resolution of these lawsuits. An unfavorable outcome from the lawsuits, including any plaintiff's appeal of the judgment in these lawsuits, could have a material adverse effect on our consolidated financial position, results of operations, or cash flows in the future. In addition, although we have obtained ~~directors~~directors' and ~~officers~~officers' liability insurance, the insurance coverage may not be adequate to cover our ~~indemnification obligations.~~obligations to indemnify our directors and officers, fund a settlement of litigation in excess of insurance coverage or pay an adverse judgment in litigation.

~~Earlier this year,~~In early 2016, the ~~U.S. Securities and Exchange Commission, or~~ SEC informed us that it ~~was initiating~~had initiated an investigation into whether there have been any violations of the federal securities laws. The SEC has requested that we voluntarily provide it with documents and information relating to, among other ~~things:~~things, our consolidation policies and practices (including our prior practice of accounting for Cainiao Network as an equity method investee), our policies and practices applicable to related party transactions in general, and our reporting of operating data from ~~Singles Day.~~the 11.11 global shopping festival. We are ~~voluntarily disclosing this SEC request for information and~~ cooperating with the SEC and, through our legal counsel, have been providing the SEC with requested documents and information. The SEC advised us that the initiation of a request for information should not be construed as an indication by the SEC or its staff that any violation of the federal securities laws has occurred. This matter is ongoing, and, as with any regulatory proceeding, we cannot predict when it will be concluded.

The existence of litigation, claims, investigations and proceedings may harm our reputation, limit our ability to conduct our business in the affected areas and adversely affect the trading price of our ADSs. The outcome of any claims, investigations and proceedings is inherently uncertain, and in any event defending against these claims could be both costly and time-consuming, and could significantly divert the efforts and resources of our management and other personnel. An adverse determination in any litigation, investigation or proceeding could cause us to pay damages, ~~as well as~~incur legal and other costs, limit our ability to conduct business or require us to change the manner in which we operate.

We may increasingly become a target for public scrutiny, including complaints to regulatory agencies, negative media coverage, including social media and malicious reports, all of which could severely damage our reputation and brand and materially and adversely affect our business and prospects.

We process an extremely large number of transactions on a daily basis on our marketplaces and other businesses we operate, and the high volume of transactions taking place in our digital economy and publicity about our business creates the possibility of heightened attention from the public, regulators, the media and participants in our digital economy. Changes in our services or policies have resulted and could result in objections by members of the public, the media, including social media, participants in our digital economy or others. From time to time, these objections or allegations, regardless of their veracity, may result in public protests or negative publicity, which could result in government inquiry or harm our reputation and brand.

Corporate transactions we or related parties undertake, such as our partnership with the International Olympic Committee, our consolidation of Ele.me and Koubei, our agreement to acquire a 33% equity interest in Ant Financial, and other initiatives to implement our New Retail strategy, grow our local consumer services business and expand into international markets, may also subject us to increased media exposure and public scrutiny in Hong Kong, China and internationally. There can be no assurance that we would not become a target for regulatory or public scrutiny in the future or that scrutiny and public exposure would not severely damage our reputation and brand as well as our business and prospects.

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WeOur reputation, our brand and our business may ~~suffer reputational harm~~be harmed by aggressive marketing and ~~the price~~communications strategies of our ~~ADSs may decrease significantly due to business dealings or connections of merchants or consumers on our marketplaces with sanctioned countries or persons.~~competitors.

~~The U.S. government imposes broad economic~~Due to intense competition in our industry, we have been and trade restrictions on certain countries and regions, or the Sanctioned Countries, including Cuba, Iran, North Korea, Sudan and Syria, and numerous individuals and entities, including those designated as having engaged in activities relating to terrorism, drug trafficking, proliferation of weapons of mass destruction or human rights violations, or the Sanctioned Persons. The United Nations, the European Union, or the EU, the United Kingdom, or the UK, and other countries also impose economic and trade restrictions, including on certain of the Sanctioned Countries and Sanctioned Persons. We do not have employees or operations in the Sanctioned Countries, and, although our websites are open and available worldwide, we do not actively solicit business from the Sanctioned Countries or Sanctioned Persons.

As a Cayman Islands company, we are generally not required to comply with U.S., UK, and EU sanctions to the same extent as U.S., UK or EU entities. However, our U.S., UK, and EU subsidiaries, our employees who are U.S. persons or UK or EU nationals, activities in the U.S., UK, or EU, activities involving U.S.-origin goods or services, and certain Iran-related activities, may be ~~subject to applicable sanctions requirements. In~~ the ~~case~~target of ~~Alibaba.com,~~incomplete, inaccurate and false statements and complaints about our ~~aggregate cash revenue from members in these Sanctioned Countries in fiscal year 2016 accounted for less than 0.04% of~~company and our ~~international wholesale commerce cash revenue. In the case of AliExpress~~products and Taobao Marketplace, an insignificant percentage of orders have been placed by consumers from the Sanctioned Counties, with an aggregate GMV settled of approximately US$10.2 million in the twelve months ended March 31, 2016. As all transaction fees on AliExpress and Taobao Marketplace are paid by merchants, primarily based in China, we do not earn any fees or commission from consumers in Sanctioned Countries in respect of transactions conducted on these platforms.

~~We cannot assure you~~services that current or future economic and trade sanctions regulations or developments will not have a negative impact on our business or reputation. International economic and trade sanctions are complex and subject to frequent change, including jurisdictional reach and the lists of countries, entities, and individuals subject to the sanctions. Hence, we may incur significant costs related to current, new, or changing sanctions programs, as well as investigations, fines, fees or settlements, which may be difficult to predict. We also could face increased sanctions-related compliance costs and risks as we expand globally and into additional businesses, such as cloud computing and data hosting. In addition, our expanding network of global business partners, joint venture partners or other parties that have collaborative relationships with us or our affiliates may engage in activities in or with Sanctioned Countries or Sanctioned Persons, which might result in negative publicity, governmental investigations and reputational harm. Any of the above may cause the price of our ADSs to decline significantly, and thus materially reduce the value of your investment in our ADSs.

Certain institutional investors, including state and municipal governments in the United States and universities, as well as financial institutions, have proposed or adopted divestment or similar initiatives regarding investments in companies that do business with Sanctioned Countries. Accordingly, as a result of activities on our marketplaces involving users based in the Sanctioned Countries, certain investors may not wish to invest, and certain financial institutions may not wish to lend or extend credit and may divest their investment in, or seek early repayment of loans to us. These divestment initiatives may negatively impactdamage our reputation and ~~investor sentiment~~brand and materially deter consumers and customers from spending in our digital economy. In addition, competitors have used, and may continue to use, methods such as lodging complaints with ~~respect~~regulators, initiating frivolous and nuisance lawsuits, and other forms of attack litigation and "lawfare" that attempt to harm our reputation and brand, hinder our operations, force us to expend resources on responding to and defending against these claims, and otherwise gain a competitive advantage over us by means of litigious and accusatory behavior. Our ability to respond on share price-sensitive information to our ~~ADSs~~competitors' misleading marketing efforts, including lawfare, may be ~~materially and adversely affected.~~

~~We may be subject~~limited during our self-imposed quiet periods around quarter ends consistent with our internal policies or due to ~~liability for content available in our ecosystem that is alleged to be socially destabilizing, obscene, defamatory, libelous or otherwise unlawful.~~

~~Under PRC law and the laws of~~legal prohibitions on permissible public communications by us during certain other jurisdictions in which we operate, we are required to monitor our websites and the websites hosted on our servers and mobile interfaces for items or content deemed to be socially destabilizing, obscene, superstitious or defamatory, as well as for items, content or services that are illegal to sell online or otherwise in other jurisdictions in which we operate our marketplaces, and promptly take appropriate action with respect to the relevant items, content or services. We may also be subject to potential liability in China or other jurisdictions for any unlawful actions of our customers or users of our websites or mobile

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interfaces or for content we distribute or that is linked from our platforms that is deemed inappropriate. It may be difficult to determine the type of content that may result in liability to us, our websites and platforms, such as Youku Tudou, which allow users to upload videos and other content to our websites, or our cloud computing services, which allow users to upload and save massive data on our cloud data centers, may make this even more difficult. If we are found to be liable, we may be subject to negative publicity, fines, have our relevant business operation licenses revoked, or be prevented from operating our websites or mobile interfaces in China or other jurisdictions.

~~Regardless of the outcome of such a dispute or lawsuit, we may suffer from negative publicity and reputational damage as a result of these actions.~~periods.

Failure to comply with the terms of our indebtedness ~~could result in acceleration~~or enforcement of our obligations as a guarantor of other parties' indebtedness ~~which~~ could have an adverse effect on our cash flow and liquidity.

~~We have issued an~~As of March 31, 2019, we had US$13.7 billion in aggregate principal amount of ~~US$8.0 billion~~ unsecured senior ~~notes. We have also entered into~~notes and a US$~~3.0~~4 billion term loan outstanding, as well as a US$5.15 billion revolving credit facility ~~and a five-year term loan facility of US$4.0 billion.~~that we have not yet drawn. Under the terms of our ~~unsecured senior notes and credit facilities~~indebtedness and under any debt financing arrangement that we may enter into in the future, we are, and may be in the future, subject to covenants that could, among other things, restrict our business and operations. If we breach any of these covenants, our lenders under our credit facilities and holders of our unsecured senior notes will be entitled to accelerate our debt obligations. Any default under our credit facilities or unsecured senior notes could require that we repay these debts prior to maturity as well as limit our ability to obtain additional financing, which in turn may have a material adverse effect on our cash flow and liquidity. In May 2019, we agreed to provide a guarantee for a loan facility of HK$7.7 billion (US$1.0 billion) in favor of an entity partially owned by Cainiao Network in connection with a logistics center development project at the Hong Kong International Airport. As of the date of this annual report, this entity has not made any drawdown under this facility. In the event of default by this entity under the loan facility, we may be required to repay the full amount or a portion of the outstanding loan and undertake the borrower's other obligations under the loan facility. Enforcement against us under this guarantee and other similar arrangements we may enter into in the future could materially and adversely affect our cash flow and liquidity.

We may need additional capital but may not be able to obtain it on favorable terms or at all.

We may require additional cash resources due to future growth and development of our business, including any investments or acquisitions we may decide to pursue. If our cash resources are insufficient to satisfy our cash requirements, we may seek to issue additional equity or debt securities or obtain new or expanded credit facilities. Our ability to obtain external financing in the future is subject to a variety of ~~uncertainties, including~~uncertainties. Offshore incorporated companies directly or indirectly controlled by individual PRC residents are required to complete filings before the launch of any offshore debt issuance with a term of one year or more in accordance with applicable laws and regulations. The filing procedure takes time which may result in our future financial condition, results of operations, cash flows, trading price of our ADSs, liquidity of international capital and lending markets and PRC governmental regulations over foreign investment andmissing the ~~Internet industry~~best market windows for debt issuances in the ~~PRC.~~future. In addition, incurring indebtedness would subject us to increased debt service obligations and could result in operating and ~~financing~~financial covenants that would restrict our operations. Our ability to access international capital and lending markets may be restricted at a time when we would like, or need, to do so, especially during times of increased volatility and reduced liquidity in global financial markets and stock markets, including due to policy changes and regulatory restrictions, which could limit our ability to raise funds. There can be no assurance that financing will be available in a timely manner or in amounts or on terms acceptable to us, or at all. Any failure to raise needed funds on terms favorable to us, or at all, could severely restrict our liquidity as well as have a material adverse effect on our business, financial condition and results of operations. Moreover, any issuance of equity or equity-linked securities could result in significant dilution to our existing shareholders.

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We are subject to interest rate risk in connection with our indebtedness.

We are exposed to interest rate risk related to our indebtedness. The interest rates under certain of our offshore credit facilities ~~and one tranche of our unsecured senior notes with an aggregate principal amount of US$300 million~~ are based on a spread over LIBOR. As a result, the interest expenses associated with ~~our~~this indebtedness will be subject to the potential impact of any fluctuation in LIBOR. Any increase in LIBOR could impact our financing costs if not effectively hedged. Our ~~RMB denominated~~Renminbi-denominated bank borrowings are also subject to interest rate risk. Although from time to time, we use hedging transactions in an effort to reduce our exposure to interest rate risk, these hedges may not be effective.

~~Table~~In addition, on July 27, 2017, the United Kingdom Financial Conduct Authority, or the FCA, which regulates LIBOR, announced that it intends to stop persuading or compelling banks to submit rates for the calculation of ~~Contents~~LIBOR to the administrator of LIBOR after 2021 (the "FCA Announcement"). The FCA Announcement indicates that the continuation of LIBOR on the current basis is not guaranteed after 2021. Uncertainties surrounding changes to the basis on which LIBOR is calculated or the phase-out of LIBOR, which may cause a sudden and prolonged increase or decrease in LIBOR, could adversely affect our operating results and financial condition, as well as our cash flows. There can be no assurance that any hedging transactions we use will be effective in protecting us against adverse changes in interest rates or that our bank counterparties will be able to perform their obligations. Once LIBOR is not available, the terms of certain of our offshore credit facilities will require alternative determination procedures, which may result in an interest rate differing from our expectations and could materially affect the cost to us of these facilities.

We may not have sufficient insurance coverage to cover our business risks.

We have obtained insurance to cover certain potential risks and liabilities, such as property damage, business interruptions, public liabilities and ~~public liabilities.~~product liability insurance for certain businesses we operate. However, insurance companies in China and other jurisdictions in which we operate may offer limited business insurance products. As a result, we may not be able to acquire any insurance for all types of risks we face in our operations in China and elsewhere, and our coverage may not be adequate to compensate for all losses that may occur, particularly with respect to loss of business or operations. We do not maintain product liability insurance ~~nor~~for products and services transacted on our marketplaces or other businesses we operate, and our rights of indemnity from the merchants in our digital economy may not adequately cover us for any liability we may incur. We also do wenot maintain key-man life insurance. This potentially insufficient coverage could ~~leave~~expose us ~~exposed~~ to potential claims and losses. Any business disruption, litigation, regulatory action, outbreak of epidemic disease or natural disaster could also expose us to substantial costs and diversion of resources. ~~We cannot assure you~~There can be no assurance that our insurance coverage is sufficient to prevent us from any loss or that we will be able to successfully claim our losses under our current insurance policy on a timely basis, or at all. If we incur any loss that is not covered by our insurance policies, or the compensated amount is significantly less than our actual loss, our business, financial condition and results of operations could be materially and adversely affected.

An occurrence of a natural disaster, widespread health epidemic or other outbreaks could have a material adverse effect on our business, financial condition and results of operations.

Our business could be materially and adversely affected by natural disasters, such as snowstorms, earthquakes, fires or floods, the outbreak of a widespread health epidemic, such as swine flu, avian influenza, severe acute respiratory syndrome, or SARS, Ebola, Zika or other events, such as wars, acts of terrorism, environmental accidents, power shortage or communication interruptions. The occurrence of ~~such~~ a disaster or a prolonged outbreak of an epidemic illness or other adverse public health developments in China or elsewhere in the world could materially disrupt our business and operations. These events could also significantly impact our industry and cause a temporary closure of the facilities we use for our operations, which would severely disrupt our operations and have a material adverse effect on our business, financial condition and results of operations. Our operations could be disrupted if any of our employees or employees of our business partners were suspected of ~~having the swine flu, avian influenza, SARS, Ebola, or other epidemical diseases,~~contracting an epidemic disease, since this could require us or our business partners to quarantine some or all of these employees or disinfect the facilities used for our operations. In addition, our revenue and profitability could be materially reduced to the extent that a

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natural disaster, health epidemic or other outbreak harms the global or PRC economy in general. Our operations could also be severely disrupted if our consumers, merchants or other participants were affected by natural disasters, health epidemics or other outbreaks.

Risks Related to our Corporate Structure

The Alibaba Partnership and related voting agreements limit the ability of our shareholders to nominate and elect directors.

Our articles of association allow the Alibaba Partnership to nominate or, in limited situations, appoint a simple majority of our board of directors. If at any time our board of directors consists of less than a simple majority of directors nominated or appointed by the Alibaba Partnership for any reason, including because a director previously nominated by the Alibaba Partnership ceases to be a member of our board of directors or because the Alibaba Partnership had previously not exercised its right to nominate or appoint a simple majority of our board of directors, the Alibaba Partnership will be entitled (in its sole discretion) to nominate or appoint such number of additional directors to the board as necessary to ensure that the directors nominated or appointed by the Alibaba Partnership comprise a simple majority of our board of directors.

In addition, we have entered into a voting agreement pursuant to which SoftBank, ~~Yahoo,~~Altaba, Jack Ma and Joe Tsai have agreed to vote their shares in favor of the Alibaba Partnership director nominees at each annual general shareholders meeting for so long as SoftBank owns at least 15% of our outstanding ordinary shares. Furthermore, the voting agreement provides that SoftBank has the right to nominate one director to our board until SoftBank owns less than 15% of our outstanding ordinary shares, and that right is also reflected in our articles of association. In addition, pursuant to the voting agreement, ~~Yahoo,~~Altaba, Jack Ma and Joe Tsai have agreed to vote their

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shares (including shares for which they have voting power) in favor of the election of the SoftBank director nominee at each annual general shareholders meeting in which the SoftBank nominee stands for election.

Moreover, subject to certain exceptions, pursuant to the voting agreement SoftBank and ~~Yahoo~~Altaba have agreed to give Jack and Joe a proxy over, with respect to SoftBank, any portion of its shareholdings exceeding 30% of our outstanding shares and, with respect to ~~Yahoo,~~Altaba, all of its shareholdings up to a maximum of 121.5 million of our ordinary shares. These proxies will remain in effect until Jack Ma owns less than 1% of our ordinary shares on a fully diluted basis or we materially breach the voting agreement.

This governance structure and contractual arrangement limit the ability of our shareholders to influence corporate matters, including any matters determined at the board level. In addition, the nomination right granted to the Alibaba Partnership will remain in place for the life of the Alibaba Partnership unless our articles of association are amended to provide otherwise by a vote of shareholders representing at least 95% of shares that vote at a shareholders meeting. The nomination rights of the Alibaba Partnership will remain in place notwithstanding a change of control or merger of our company and, for so long as SoftBank and Yahoo remain substantial shareholders, we expect the Alibaba Partnership nominees will receive a majority of votes cast at any meeting for the election of directors and will be elected as directors.company. These provisions and agreements could have the effect of delaying, preventing or deterring a change in control and could limit the opportunity of our shareholders to receive a premium for their ADSs, and could also materially decrease the price that some investors are willing to pay for our ADSs. As of the date of this annual report, the parties to the voting agreement and the partners of the Alibaba Partnership held in the aggregate more than ~~50%~~40% of our outstanding ordinary shares (including ~~unvested shares and~~ shares underlying vested and unvested awards). See "Item 6. Directors, Senior Management and Employees — A. Directors and Senior Management — Alibaba Partnership."

The interests of the Alibaba Partnership may conflict with the interests of our shareholders.

The nomination and appointment rights of the Alibaba Partnership ~~limits~~limit the ability of our shareholders to influence corporate matters, including any matters to be determined by our board of directors. The interests of the Alibaba Partnership may not coincide with the interests of our shareholders, and the Alibaba Partnership or its director nominees may make decisions with which they disagree, including decisions on important topics such as compensation, management succession, acquisition strategy and our business and financial strategy. ~~For example, because~~Since the Alibaba Partnership will continue to be largely comprised of members of our management team, the Alibaba

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Partnership and its director nominees, consistent with our operating philosophy, may focus on the long-term interests of participants in our ~~ecosystem participants~~digital economy at the expense of our short-term financial results, which may differ from the expectations and desires of shareholders unaffiliated with the Alibaba Partnership. To the extent that the interests of the Alibaba Partnership differ from the interests of any of our shareholders, ~~such shareholder~~our shareholders may be disadvantaged by any action that the Alibaba Partnership may seek to pursue.

Our articles of association contain anti-takeover provisions that could adversely affect the rights of holders of our ordinary shares and ADSs.

Our articles of association contain certain provisions that could limit the ability of third parties to acquire control of our company, including:

•: a provision that grants authority to our board of directors to establish from time to time one or more series of preferred shares without action by our shareholders and to determine, with respect to any series of preferred shares, the terms and rights of that series;
•: a provision that ~~grants~~a business combination, if it may adversely affect the right of the Alibaba Partnership ~~the right~~ to nominate or appoint a simple majority of our board of directors, ~~notwithstanding~~including the protective provisions for this right under our articles of association, shall be approved upon vote of shareholders representing at least 95% of the votes in person or by proxy present at a ~~change of control or merger of our company;~~shareholders meeting; and
•: a classified board with staggered terms that will prevent the replacement of a majority of directors at one time.

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These provisions could have the effect of delaying, preventing or deterring a change in control, and could limit the opportunity for our shareholders to receive a premium for their ADSs, and could also materially decrease the price that some investors are willing to pay for our ADSs.

SoftBank owns ~~more than 30%~~approximately 25.9% of our outstanding ordinary shares and its interests may differ from those of our other shareholders.

As of ~~March 31, 2016,~~June 3, 2019, SoftBank beneficially owned approximately ~~32.2%~~25.9% of our outstanding ordinary shares. Subject to certain exceptions, SoftBank has agreed to grant the voting power of any portion of its shareholding exceeding 30% of our outstanding ordinary shares to Jack Ma and Joe Tsai by proxy. Under the terms of the voting agreement we entered into with SoftBank, SoftBank also has the right to nominate one member of our board of directors, and ~~Yahoo,~~Altaba, Jack and Joe have agreed to vote their shares (including shares for which they have voting power) in favor of the SoftBank director nominees at each annual general shareholders meeting in which the SoftBank nominee stands for election until such time as SoftBank holds less than 15% of our outstanding ordinary shares. SoftBank's director nomination right is also reflected in our articles of association. Except with regard to shareholder votes relating to the Alibaba Partnership director nominees, SoftBank will have significant influence over the outcome of matters that require shareholder votes and accordingly over our business and corporate matters. SoftBank may exercise its shareholder rights in a way that it believes is in its own best interest, which may conflict with the interest of our other shareholders. These actions may be taken even if SoftBank is opposed by our other shareholders.

For more information, see "Item 7. Major Shareholders and Related Party Transactions — B. Related Party ~~Transaction~~Transactions — Transactions and Agreements with SoftBank and ~~Yahoo~~Altaba — Voting Agreement."

If the PRC government deems that the contractual arrangements in relation to our variable interest entities do not comply with PRC governmental restrictions on foreign investment, or if these regulations or the interpretation of existing regulations changes in the future, we could be subject to penalties, or be forced to relinquish our interests in those ~~operations.~~operations, which would materially and adversely affect our business, financial results and the trading price of our ADSs.

Foreign ownership of certain types of Internet businesses, such as Internet information services, is subject to restrictions under applicable PRC laws, rules and regulations. ~~For example,~~Under these laws and regulations, foreign investors

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are generally not permitted to own more than 50% of the equity interests in a value-added telecommunication service provider. Any ~~such~~ foreign investor must also have experience and a good track record in providing value-added telecommunications services overseas. Although according to the Notice on Lifting the Restriction to Foreign Shareholding Percentage in Online Data Processing and Transaction Processing Business (Operational E-commerce) promulgated by the MIIT on June 19, 2015, foreign investors are allowed to hold up to 100% of all equity interests in the online data processing and transaction processing business (operational e-commerce) in China, other requirements provided by the ~~Foreign Investment Telecommunications Rules~~relevant rules (such as the track record and experience requirement for a major foreign investor) still apply. ~~It is unclear how this notice will be implemented~~See "Item 4. Information on the Company — B. Business Overview — Regulation — Regulation of Telecommunications and ~~there exist high uncertainties with respect to its interpretation~~Internet Information Services — Regulation of Telecommunication Services" and ~~implementation by authorities.~~"Item 4. Information on the Company — B. Business Overview — Regulation — Regulation of Foreign Investment."

While the significant majority of our revenue was generated by our ~~wholly-foreign owned enterprises~~wholly-owned entities in fiscal year ~~2016,~~2019, we provide Internet information services in China, which are critical to our business, through a number of PRC incorporated variable interest entities. ~~The~~Contractual arrangements between us and the variable interest entities ~~are owned by PRC citizens who are our founders or senior employees or by PRC entities owned by such PRC citizens, or the variable interest entity~~and their equity holders ~~with whom we have contractual arrangements, or the contractual arrangements. The contractual arrangements~~ give us effective control over each of the variable interest entities and enable us to obtain substantially all of the economic benefits arising from the variable interest entities as well as to consolidate the financial results of the variable interest entities in our results of operations. Although the structure we have adopted is consistent with longstanding industry practice, and is commonly adopted by comparable companies in China, the PRC government may not agree that these arrangements comply with PRC licensing, registration or other regulatory requirements, with existing policies or with requirements or policies that may be adopted in the future.

~~Table~~ We are in the process of ~~Contents~~enhancing the structure of our variable interest entities. See "— We are in the process of enhancing the structure of some of our variable interest entities, and its completion is subject to uncertainties."

In the opinion of Fangda Partners, our PRC counsel, the ownership structures of our material ~~wholly-foreign owned enterprises~~wholly-owned entities and our material variable interest entities in China do not and will not violate any applicable PRC law, regulation or rule currently in effect; and the contractual arrangements between our material ~~wholly-foreign owned enterprises,~~wholly-owned entities, our material variable interest entities and their respective equity holders governed by PRC law are valid, binding and enforceable in accordance with their terms and applicable PRC laws and regulations currently in effect and will not violate any applicable PRC law, rule or regulation currently in effect. However, Fangda Partners has also advised us that there are substantial uncertainties regarding the interpretation and application of current PRC laws, rules and regulations. Accordingly, the possibility that the PRC regulatory authorities and PRC courts may in the future take a view that is contrary to the opinion of our PRC legal ~~counsel.~~counsel cannot be ruled out.

It is uncertain whether any new PRC laws, rules or regulations relating to variable interest entity structures will be adopted or if adopted, what they would provide. Please also see "— Substantial uncertainties exist with respect to the ~~enactment timetable,~~ interpretation and implementation of ~~draft~~the recently adopted PRC Foreign Investment ~~Law.~~Law and how it may impact the viability of our current corporate structure, business, financial condition and results of operations."

If we or any of our variable interest entities are found to be in violation of any existing or future PRC laws, rules or regulations, or fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities would have broad discretion to take action in dealing with ~~such~~these violations or failures, including revoking the business and operating licenses of our PRC subsidiaries or the variable interest entities, requiring us to discontinue or restrict our operations, restricting our right to collect revenue, blocking one or more of our websites, requiring us to restructure our operations or taking other regulatory or enforcement actions against us. The imposition of any of these measures could result in a material adverse effect on our ability to conduct all or any portion of our business operations. In addition, it is unclear what impact the PRC government actions would have on us and on our ability to consolidate the financial results of any of our variable interest entities in our consolidated financial statements, if the PRC government authorities were to find our legal structure and contractual arrangements to be in violation of PRC laws, rules and regulations. If the imposition of any of these government actions causes us to lose our right to direct the activities of any of our material variable interest entities or otherwise separate from any of these entities and if we are not able to restructure our ownership structure and operations in a satisfactory manner, we would no longer be able to consolidate the financial results

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of our variable interest entities in our consolidated financial statements. Any of these events would have a material adverse effect on our business, financial condition and results of operations.

We are in the process of enhancing the structure of some of our variable interest entities, and its completion is subject to uncertainties.

In order to further improve our control over our material variable interest entities, reduce key man risks associated with having certain individuals be the equity holders of the material variable interest entities, and address the uncertainty resulting from any potential disputes between us and the individual equity holders of the material variable interest entities that may arise, we are in the process of enhancing the structure of our material variable interest entities and certain other variable interest entities, or the VIE Structure Enhancement.

Prior to the completion of the VIE Structure Enhancement, the variable interest entities were owned, or are owned, by a few PRC citizens who are our founders or employees or by PRC entities owned by these PRC citizens. After completion of the VIE Structure Enhancement, those variable interest entities will be directly owned by PRC limited liability companies that are indirectly held by selected members of the Alibaba Partnership or our management who are PRC citizens through PRC limited partnerships jointly established by these individuals. We enter into contractual arrangements, which are substantially similar to the contractual arrangements we have historically used for our VIEs, with the above-mentioned multiple layers of legal entities and variable interest entity interest holders. The contractual arrangements, both before and after the VIE Structure Enhancement, give us effective control over each of those variable interest entities and enable us to obtain substantially all of the economic benefits arising from those variable interest entities as well as to consolidate the financial results of those variable interest entities in our results of operations. Please also see "Item 4. Information on the Company — Organizational Structure."

While we believe the new structure following completion of the VIE Structure Enhancement is consistent with longstanding industry practice, the PRC government may not agree that these arrangements comply with PRC licensing, registration or other regulatory requirements, with existing policies or with requirements or policies that may be adopted in the future. The VIE Structure Enhancement process is subject to a number of uncertainties, including registration of the transfer of the equity interests, registration of the new equity pledges, and the receipt of required approvals of amendments to certain operating permits, including the Value-added Telecommunication Business Operation Permit, Network Culture Permit and the License for Transmission of Audio-Visual Programs through Information Network. If we are unable to successfully complete these processes involved in the VIE Structure Enhancement, we will be unable to enjoy the benefits we expect, including the anticipated enhanced control over those variable interest entities, or reduced key man risks or the uncertainty resulting from any potential disputes among us and the individual equity holders of those variable interest entities as discussed above.

For further information, See "— If the PRC government deems that the contractual arrangements in relation to our variable interest entities do not comply with PRC governmental restrictions on foreign investment, or if these regulations or the interpretation of existing regulations changes in the future, we could be subject to penalties or be forced to relinquish our interests in those operations, which would materially and adversely affect our business, financial results and the trading price of our ADSs" and "Item 4. Information on the Company — C. Organizational Structure."

Substantial uncertainties exist with respect to the ~~enactment timetable,~~ interpretation and implementation of ~~draft~~the recently adopted PRC Foreign Investment ~~Law.~~Law and how it may impact the viability of our current corporate structure, business, financial condition and results of operations.

The "variable interest entity" structure, or the VIE structure, has been adopted by many China-based companies, including us and certain of our equity investees, to obtain licenses and permits necessary to operate in industries that currently are subject to restrictions on or prohibitions for foreign investment in China. The Ministry of Commerce, or the MOFCOM, published a discussion draft of the proposed Foreign Investment Law in January 2015, ~~aiming~~or the 2015 Draft PRC Foreign Investment Law, according to ~~upon its enactment,~~which, variable interest entities that

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are controlled via contractual arrangements would be deemed as foreign-invested enterprises, if they are ultimately "controlled" by foreign investors. In March 2019, the National People's Congress promulgated the Foreign Investment Law, or the 2019 PRC Foreign Investment Law, which will become effective on January 1, 2020 and will replace ~~the~~ major existing laws and regulations governing foreign investment in ~~China. While~~ the ~~MOFCOM completed~~PRC. See "Item 4. Information on the ~~solicitation~~Company — B. Business Overview — Regulation — Regulation of ~~the comments on this draft in February 2015, there are still substantial uncertainties with respect to its enactment timetable.~~

~~Among other things, the draft~~Foreign Investment." The 2019 PRC Foreign Investment Law ~~purports to introduce~~does not use the ~~principle~~concept of ~~"actual control"~~"control" in determining whether a company isshould be considered as a foreign-invested enterprise, nor does it explicitly classify the VIE structure as a method of foreign ~~invested enterprise, or an FIE. The draft~~investment. Since the 2019 PRC Foreign Investment Law ~~specifically provides that entities established in China but "controlled" by foreign investors will be treated~~has only recently been adopted and relevant government authorities may promulgate rules and regulations as ~~FIEs, whereas an entity organized in a foreign jurisdiction, but cleared by~~to the MOFCOM as "controlled" by PRC entities and/or citizens, would nonetheless be treated as a PRC domestic entity for investment in the "restriction category" on the "negative list." In this connection, "control" is broadly defined in the draft law to cover anyinterpretation and implementation of the ~~following summarized categories:~~

•: ~~holding 50% or more of the voting rights or similar rights and interests of the subject entity;~~
•: holding less than 50% of the voting rights or similar rights and interests of the subject entity but having the power to directly or indirectly appoint or otherwise secure at least 50% of the seats on the board or other equivalent decision making bodies, or having the voting power to materially influence the board, the shareholders' meeting or other equivalent decision making bodies; or

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•: ~~having the power to exert decisive influence, via contractual or trust arrangements, over the subject entity's operations, financial, staffing and technology matters.~~

Once an entity is determined to be an FIE, and its investment amount exceeds certain thresholds or its business operation falls within a "negative list" purported to be separately issued by the State Council in the future, market entry clearance by the MOFCOM or its local counterparts would be required.

The "variable interest entity" structure, or VIE structure, has been adopted by many PRC-based companies, including us and certain of our equity investees such as Weibo, to obtain necessary licenses and permits in the industries that are currently subject to foreign investment restrictions in China. Under the draft2019 PRC Foreign Investment Law, ~~variable interest entities~~there can be no assurance that ~~are controlled via contractual arrangements would also~~the concept of "control" as reflected in the 2015 Draft PRC Foreign Investment Law, will not be reintroduced, or that the VIE structure adopted by us will not be deemed as ~~FIEs, if they~~a method of foreign investment by other laws, regulations and rules. Accordingly, there are ~~ultimately "controlled" by foreign investors. For any companies with a VIE structure in an industry category that is in the "restriction category" on the "negative list," the existing~~substantial uncertainties as to whether our VIE structure may be deemed legitimate only if the ultimate controlling person(s) is/are of PRC nationality (either PRC state owned enterprises or agencies, or PRC citizens). Conversely, if the actual controlling person(s) is/areas a method of foreign ~~nationalities, then the variable interest entities will be treated as FIEs and any operation~~investment in the ~~industry category on~~future. If our VIE structure were to be deemed as a method of foreign investment under any future laws, regulations and rules, and if any of our business operations were to fall under the "negative list" ~~without market entry clearance may be considered as illegal.~~

~~Based on the definition of "control" in the draft Foreign Investment Law as currently proposed, we believe that there are strong basis~~ for ~~a determination that we and our variable interest entities are ultimately controlled by PRC citizens for the following reasons:~~

•: Alibaba Partnership has an exclusive right to nominate and appoint up to a simple majority of the members of our board of directors and therefore effectively controls the board and all management decisions of our company;
•: ~~nearly all of the partners of Alibaba Partnership are PRC citizens; and~~
•: ~~Alibaba Partnership exercises its nomination rights by a majority of votes of all its partners.~~

~~See "Item 6. Directors, Senior Management and Employees — A. Directors and Senior Management — Alibaba Partnership."~~

However, there are significant uncertainties as to how the control status of our company, our variable interest entities and our equity investees with a VIE structure would be determined under the enacted version of the Foreign Investment Law. In addition, it is uncertain whether any of the businesses that we currently operate or plan to operate in the future through our consolidated entities and the businesses operated by our equity investees with a VIE structure would be on the to-be-issued "negative list" and therefore be subject to any foreign investment, ~~restrictions or prohibitions. We also face uncertainties as~~we would need to ~~whether the enacted version of the Foreign Investment Law and the final "negative list" would mandate~~take further actions ~~such as MOFCOM market entry clearance,~~in order to ~~be completed by companies~~comply with ~~existing VIE structure~~these laws, regulations and whether such clearance can be timely obtained, or at all. If we or our equity investees with a VIE structure were not considered as ultimately controlled by PRC domestic investors under the enacted version of the Foreign Investment Law, further actions required to be taken by us or such equity investees under the enacted Foreign Investment Lawrules, which may materially and adversely affect our current corporate structure, business, financial condition and ~~financial condition.~~

In addition, our corporate governance practice may be materially impacted and our compliance costs could increase if we were not considered as ultimately controlled by PRC domestic investors under the enacted versionresults of the Foreign Investment Law. For instance, the draft Foreign Investment Law as proposed purports to impose stringent ad hoc and periodic information reporting requirements on foreign investors and the applicable FIEs. Aside from investment implementation report and investment amendment report that would be required for each investment and alteration of investment specifics, an annual report would be mandatory, and large foreign investors meeting certain criteria would be required to report on a quarterly basis. Any company found to be non-compliant with these information reporting obligations could potentially be subject to fines and/or administrative or criminal liabilities, and the persons directly responsible could be subject to criminal liabilities.

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Our contractual arrangements may not be as effective in providing control over the variable interest entities as direct ownership.

We rely on contractual arrangements with our variable interest entities to operate part of our Internet businesses in China and other businesses in which foreign investment is restricted or prohibited. For a description of these contractual arrangements, see "Item 4. Information on the Company — C. Organizational Structure — Contractual Arrangements among Our ~~Wholly-foreign Owned Enterprises,~~Wholly-Owned Entities, Variable Interest Entities and the Variable Interest Entity Equity Holders." These contractual arrangements may not be as effective as direct ownership in providing us with control over our variable interest entities.

If we had direct ownership of the variable interest entities, we would be able to exercise our rights as an equity holder directly to effect changes in the boards of directors of those entities, which could effect changes at the management and operational level. Under our contractual arrangements, we may not be able to directly change the members of the boards of directors of these entities and would have to rely on the variable interest entities and the variable interest entity equity holders to perform their obligations in order to exercise our control over the variable interest entities. The variable interest entity equity holders may have conflicts of interest with us or our shareholders, and they may not act in the best interests of our company or may not perform their obligations under these contracts. For example, our variable interest entities and their respective equity holders could breach their contractual arrangements with us by, among other things, failing to conduct their operations, including maintaining our websites and using our domain names and trademarks which the relevant variable interest entities have exclusive rights to use, in an acceptable manner or taking other actions that are detrimental to our interests. Pursuant to the call ~~option,~~options, we may replace the equity holders of the variable interest entities at any time pursuant to the contractual arrangements. However, if any equity holder is uncooperative ~~and~~in the replacement of the equity holders or there is any dispute relating to these contracts ~~or the replacement of the equity holders~~that remains unresolved, we will have to enforce our rights under the contractual arrangements through the operations of PRC law and arbitral or judicial agencies, which may be costly and time-consuming and will be subject to uncertainties in the PRC legal system. See "— Any failure by our variable interest entities or their equity holders to perform their obligations under the contractual arrangements would have a material adverse effect on our business, financial condition and results of operations." Consequently, the contractual arrangements may not be as effective in ensuring our control over the relevant portion of our business operations as direct ownership.

Any failure by our variable interest entities or their equity holders to perform their obligations under the contractual arrangements would have a material adverse effect on our business, financial condition and results of operations.

If our variable interest entities or their equity holders fail to perform their respective obligations under the contractual arrangements, we may have to incur substantial costs and expend additional resources to enforce ~~such~~the arrangements. Although we have entered into call option agreements in relation to each variable interest entity, which provide that we may exercise an option to acquire, or nominate a person to acquire, ownership of the equity

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in that entity or, in some cases, its assets, to the extent permitted by applicable PRC laws, rules and regulations, the exercise of these call options is subject to the review and approval of the relevant PRC governmental authorities. We have also entered into equity pledge agreements with the equity shareholders and, in the case of VIEs that have started, or will start, the VIE Structure Enhancement, the limited partnerships with respect to each variable interest entity to secure certain obligations of ~~such~~the variable interest entity or its equity holders to us under the contractual arrangements. ~~However,~~We have not been able to register certain of the pledges in Zhejiang Province where we incorporated those limited partnerships, because the Zhejiang rules for the registration of pledges of partnership interests were relatively new and we are still discussing with the local SAMR about the detailed procedures. In addition, the enforcement of ~~such~~these agreements through arbitral or judicial agencies, if any, may be costly and time-consuming and will be subject to uncertainties in the PRC legal system. Moreover, our remedies under the equity pledge agreements are primarily intended to help us collect debts owed to us by the variable interest entities or the variable interest entity equity holders under the contractual arrangements and may not help us in acquiring the assets or equity of the variable interest entities.

In addition, with respect to the VIEs that have not completed the VIE Structure Enhancement, although the terms of the contractual arrangements provide that they will be binding on the successors of the variable interest entity equity holders, as those successors are not a party to the agreements, it is uncertain whether the successors in case of the death, bankruptcy or divorce of a variable interest entity equity holder will be subject to or will be willing to honor the obligations of ~~such~~the variable interest entity equity holder under the contractual arrangements. If the relevant variable interest entity or its equity holder (or its successor), as

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applicable, fails to transfer the shares of the variable interest entity according to the respective call option agreement or equity pledge agreement, we would need to enforce our rights under the call option agreement or equity pledge agreement, which may be costly and time-consuming and may not be successful.

The contractual arrangements are governed by PRC law and provide for the resolution of disputes through arbitration or court proceedings in China. Accordingly, these contracts would be interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. The legal system in the PRC is not as developed as in some other jurisdictions, such as the United States. Moreover, there are very few precedents and little formal guidance as to how contractual arrangements in the context of a variable interest entity should be interpreted or enforced under PRC law, and as a result it may be difficult to predict how an arbitration panel or court would view such contractual arrangements. As a result, uncertaintiesUncertainties in the PRC legal system could limit our ability to enforce the contractual arrangements. Under PRC law, if the losing parties fail to carry out the arbitration awards or court judgments within a prescribed time limit, the prevailing parties may only enforce the arbitration awards or court judgments in PRC courts, which would require additional expense and delay. In the event we are unable to enforce the contractual arrangements, we may not be able to exert effective control over the variable interest entities, and our ability to conduct our business, as well as our financial condition and results of operations, may be materially and adversely affected.

We may lose the ability to use, or otherwise benefit from, the licenses, approvals and assets held by our variable interest entities, which could severely disrupt our business, render us unable to conduct some or all of our business operations and constrain our growth.

Although the significant majority of our revenues are generated, and the significant majority of our operational assets are held, by our ~~wholly-foreign owned enterprises,~~wholly-owned entities, which are our subsidiaries, our variable interest entities hold licenses and approvals and assets that are necessary for our business operations, as well as equity interests in a series of our portfolio companies, to which foreign investments are typically restricted or prohibited under applicable PRC law. The contractual arrangements contain terms that specifically obligate variable interest entity equity holders to ensure the valid existence of the variable interest entities and restrict the disposal of material assets of the variable interest entities. However, in the event the variable interest entity equity holders breach the terms of these contractual arrangements and voluntarily liquidate our variable interest entities, or any of our variable interest entities declares bankruptcy and all or part of its assets become subject to liens or rights of third-party creditors, or are otherwise disposed of without our consent, we may be unable to conduct some or all of our business operations or otherwise benefit from the assets held by the variable interest entities, which could have a material adverse effect on our business, financial condition and results of operations. Furthermore, if any of our variable interest entities undergoes a voluntary or involuntary liquidation proceeding, its equity ~~holders~~holder or unrelated ~~third-party~~third-

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party creditors may claim rights to some or all of the assets of ~~such~~the variable interest entity, thereby hindering our ability to operate our business as well as constrain our growth.

The equity holders, directors and executive officers of the variable interest entities may have potential conflicts of interest with our company.

PRC laws provide that a director and an executive officer owes a fiduciary duty to the company he or she directs or manages. The directors and executive officers of the variable interest entities, including ~~Jack Ma,~~the relevant members of the Alibaba Partnership or our ~~lead founder and executive chairman,~~management, must act in good faith and in the best interests of the variable interest entities and must not use their respective positions for personal gain. On the other hand, as a director of our company, ~~Jack has~~the relevant individuals have a duty of care and loyalty to our company and to our shareholders as a whole under Cayman Islands law. We control our variable interest entities through contractual arrangements and the business and operations of our variable interest entities are closely integrated with the business and operations of our subsidiaries. Nonetheless, conflicts of interests for these individuals may arise due to dual roles both as equity holders, directors and executive officers of the variable interest entities and as directors or employees of our ~~company, and may also arise due to dual roles both as~~company.

There can be no assurance that these individual shareholders of our variable interest ~~entity equity holders and as directors or employees of our company.~~

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~~We cannot assure you that these individuals~~entities will always act in the best interests of our company should any conflicts of interest arise, or that any conflicts of interest will always be resolved in our favor. WeThere also ~~cannot assure you~~can be no assurance that these individuals will ensure that the variable interest entities will not breach the existing contractual arrangements. If we cannot resolve any ~~such~~of these conflicts of interest or any related disputes, we would have to rely on legal proceedings to resolve these disputes and/or take enforcement action under the contractual arrangements. There is substantial uncertainty as to the outcome of any ~~such~~of these legal proceedings. See "— Any failure by our variable interest entities or their equity holders to perform their obligations under the contractual arrangements would have a material adverse effect on our business, financial condition and results of operations."

Furthermore, a company controlled by Jack serves as one of the general partners of a PRC limited partnership that made a minority investment in Wasu. Yuzhu Shi, the founder, chairman and a principal shareholder of Giant Interactive, a China-based online game company that was previously listed on the New York Stock Exchange, and an entrepreneur with significant experience in and knowledge of the media industry in China, serves as the other general partner and the executive partner. The interest of the general partner controlled by Jack in the limited partnership is limited to a return of its RMB10,000 capital contribution. In addition, Simon Xie, a former employee who is one of our founders and an equity holder in certain of our variable interest entities, is a limited partner in this PRC limited partnership. To fund this investment, in April 2015 Simon was granted a financing with an aggregate principal of up to RMB6.9 billion by a major financial institution in the PRC. The financing is secured by a pledge of the Wasu shares acquired by the PRC limited partnership, and a pledge of certain wealth management products we purchased. In addition, we entered into a loan agreement for a principal amount of up to RMB2.0 billion with Simon in April 2015 to finance the repayment by Simon of the principal and interest under the above financing. We ~~expect that~~entered into these arrangements ~~will~~to strengthen our strategic business arrangements with Wasu to pursue our strategy of expanding entertainment offerings to consumers. See ~~"Item 5. Operating and Financial Review and Prospects — A. Operating Results — Recent Investment, Acquisition and Strategic Alliance Activities — Digital Entertainment — Wasu" and~~ "Item 7. Major Shareholders and Related Party Transactions — B. Related Party Transactions — Pledge for the Benefit of and Loan Arrangement with a Related Party."

~~We cannot assure you~~There can be no assurance that Jack Ma will act in our interest given his ability to control one of the general partners of the PRC limited partnership that invested in Wasu, nor can we assure you that he will not breach his obligations to us as our director, including obligations not to compete with us. In addition, the interests of Mr. Shi, as an independent ~~third-party,~~third party, may not coincide with those of Jack, ~~as the other general partner in the PRC limited partnership,~~ or with our interests in pursuing our entertainment strategy. If any ~~such~~ conflicts of this kind arise between Jack and Mr. Shi in conducting the business of the PRC limited partnership, it could potentially have a material adverse effect on our relationship with the shareholder of Wasu and, consequently, on our ability to ~~achieve the strategic objectives of~~benefit from our alliance with Wasu. Furthermore, there iscan be no assurance that Simon will have sufficient resources to repay the loans in a timely manner or at all. The loan that we provided to Simon is secured by a pledge of Simon's limited partnership interest in the PRC limited

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partnership. However, if Simon fails to repay the loan, our enforcement of ~~such~~our secured interests could be costly and time-consuming and would be subject to the uncertainties in the PRC legal system.

The contractual arrangements with our variable interest entities may be subject to scrutiny by the PRC tax authorities. Any pricing adjustment of a related party transaction ~~pricing~~ could lead to additional taxes, and therefore substantially reduce our consolidated net income and the value of your investment.

The tax regime in China is rapidly evolving and there is significant uncertainty for taxpayers in China as PRC tax laws may be interpreted in significantly different ways. The PRC tax authorities may assert that we or our subsidiaries or the variable interest entities or their equity holders are required to pay additional taxes on previous or future revenue or income. In particular, under applicable PRC laws, rules and regulations, arrangements and transactions among related parties, such as the contractual arrangements with our variable interest entities, may be subject to audit or challenge by the PRC tax authorities. If the PRC tax authorities determine that any contractual arrangements were not entered into on an arm's length basis and therefore constitute a favorable transfer pricing, the PRC tax liabilities of the relevant subsidiaries and/or variable interest entities and/or variable interest entity

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equity holders could be increased, which could increase our overall tax liabilities. In addition, the PRC tax authorities may impose late payment interest. Our net income may be materially reduced if our tax liabilities increase.

Risks Related to Doing Business in the People's Republic of China

Changes in the political and economic policies of the PRC government may materially and adversely affect our business, financial condition and results of operations and may result in our inability to sustain our growth and expansion strategies.

~~Most~~Although we have operating subsidiaries located in various countries and regions, our operations in China currently contribute the large majority of our ~~operations are conducted in the PRC and substantially all of our revenue is sourced from the PRC.~~revenue. Accordingly, our financial condition and results of operations are affected to a significant extent by economic, political and legal developments in the PRC.

The PRC economy differs from the economies of most developed countries in many respects, including the extent of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. Although the PRC government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets, and the establishment of improved corporate governance in business enterprises, aA substantial portion of productive assets in China is still owned by the government. In addition, the PRC government ~~continues to play a significant role in regulating~~regulates industry development by imposing industrial policies. The PRC government also ~~exercises~~plays a significant ~~control over~~role in China's economic growth by allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy, regulating financial services and institutions and providing preferential treatment to particular industries or companies.

While the PRC economy has experienced significant growth in the past ~~three~~four decades, growth has been uneven, both geographically and among various sectors of the economy. The PRC government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit the overall PRC economy, but may also have a negative effect on us. Our financial condition and results of ~~operation~~operations could be materially and adversely affected by government control over capital investments or changes in tax regulations that are applicable to us. In addition, the PRC government has implemented in the past certain measures, including interest rate increases, to control the pace of economic growth. These measures may cause decreased economic activity. ~~While the PRC government started easing its monetary policy in 2015, there have been signs of continuing economic slowdown in China.~~ Any prolonged slowdown in the Chinese economy could lead to a reduction in demand for our services and consequently have a material adverse effect on our businesses, financial condition and results of operations.

There are uncertainties regarding the interpretation and enforcement of PRC laws, rules and regulations.

Most of our operations are conducted in the PRC, and are governed by PRC laws, rules and regulations. Our PRC subsidiaries are subject to laws, rules and regulations applicable to foreign investment in China. The PRC legal system is a civil law system based on written statutes. Unlike the common law system, prior court decisions may be cited for reference but have limited precedential value.

~~In 1979, the PRC government began to promulgate a comprehensive system~~Table of laws, rules and regulations governing economic matters in general. The overall effect of legislation over the past three decades has significantly enhanced the protections afforded to various forms of foreign investment in China. However, Contents

China has not developed a fully integrated legal system, and recently enacted laws, rules and regulations may not sufficiently cover all aspects of economic activities in China or may be subject to a significant degree of interpretation by PRC regulatory agencies and courts. In particular, because these laws, rules and regulations are relatively new, and because of the limited number of published decisions and the non-precedential nature of ~~such~~these decisions, and because the laws, rules and regulations often give the relevant regulator significant discretion in how to enforce them, the interpretation and enforcement of these laws, rules and regulations involve uncertainties and can be inconsistent and unpredictable. Therefore, it is possible that our existing operations may be found not to be

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in full compliance with relevant laws and regulations in the future. In addition, the PRC legal system is based in part on government policies and internal rules, some of which are not published on a timely basis or at all, and which may have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules until after the occurrence of the violation.

Any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management attention. Since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. These uncertainties may impede our ability to enforce the contracts we have entered into and could materially and adversely affect our business, financial condition and results of operations.

PRC regulations regarding acquisitions impose significant regulatory approval and review requirements, which could make it more difficult for us to pursue growth through acquisitions.

Under the PRC ~~Anti-Monopoly~~Anti-monopoly Law, companies undertaking certain investments and acquisitions relating to businesses in China must notify ~~MOFCOM,~~the anti-monopoly enforcement agency, in advance of any transaction where the parties' revenues in the China market exceed certain thresholds and the buyer would obtain control of, or decisive influence over, the other party. In addition, on August 8, 2006, six PRC regulatory agencies, including the MOFCOM, the State-Owned Assets Supervision and Administration Commission, the State Administration of Taxation, the SAIC, the China Securities Regulatory Commission, or the CSRC, and the State Administration of Foreign Exchange, or SAFE, jointly adopted the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, which came into effect on September 8, 2006 and was amended on June 22, 2009. Under the M&A Rules, the approval of MOFCOM must be obtained in circumstances where overseas companies established or controlled by PRC enterprises or residents acquire domestic companies affiliated with ~~such~~ PRC enterprises or residents. Applicable PRC laws, rules and regulations also require certain merger and acquisition transactions to be subject to security review.

Due to the level of our revenues, our proposed acquisition of control of, or decisive influence over, any company with revenues within China of more than RMB400 million in the year prior to any proposed acquisition would be subject to ~~MOFCOM~~the SAMR merger control review. As a result of our size, many of the transactions we may undertake could be subject to ~~MOFCOM~~SAMR merger review. Complying with the requirements of the relevant regulations to complete ~~such~~these transactions could be time-consuming, and any required approval processes, including approval from ~~MOFCOM,~~SAMR, may be uncertain and could delay or inhibit our ability to complete ~~such~~these transactions, which could affect our ability to expand our business, or maintain our market ~~share. In addition, MOFCOM has not accepted antitrust filings~~share or otherwise achieve the goals of our acquisition strategy.

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According to the Regulations on Enterprise Outbound Investment issued by the National Development and Reform Commission, or the NDRC, in December 2017 which came into effect on March 1, 2018, we may also need to report to the NDRC relevant information on overseas investments with an amount of US$300 million or more in non-sensitive areas, and obtain the NDRC's approval for our overseas investments in sensitive areas, if any, ~~transaction involving parties that adopt a variable interest entity structure. If MOFCOM's practice remains unchanged,~~before the closing of the investments. Accordingly, these new regulations may restrict our ability to make investments in some regions and industries overseas, and may subject any proposed investments to additional delays and increased uncertainty, as well as heightened scrutiny, including after the investments have been made.

Our ability to carry out our investment and acquisition strategy may be materially and adversely affected ~~and there may be~~by the regulatory authorities' current practice, which creates significant uncertainty as to whether transactions that we may undertake would subject us to fines or other administrative penalties and negative publicity and whether we will be able to complete ~~large~~investments and acquisitions in the future in a timely manner or at all.

Anti-monopoly and unfair competition claims or regulatory actions against us may result in our being subject to fines as well as constraints on our business.

The PRC anti-monopoly enforcement agencies have in recent years strengthened enforcement under the PRC Anti-monopoly Law, including levying significant fines, with respect to concentration of undertakings and cartel activity, mergers and acquisitions, as well as abusive behavior by companies with market dominance. In March 2018, the SAMR was formed as a new governmental agency to take over, among other things, the anti-monopoly enforcement functions from the relevant departments under the MOFCOM, the NDRC, and the SAIC, respectively. Since its inception, the SAMR has continued to strengthen its anti-monopoly enforcement. The SAMR issued a new set of guidelines with respect to merger control review in September 2018, and issued the Notice on Anti-monopoly Enforcement Authorization on December 28, 2018, which grants authorizations to the SAMR's province-level branches for anti-monopoly enforcement within their respective jurisdictions. The SAMR recently has also imposed several administrative penalties on various companies for failing to duly make filings as to their transactions subject to merger control review by the SAMR. The scope of the companies that were penalized is broad, and covers a variety of different industries.

The PRC Anti-monopoly Law also provides a private right of action for competitors, business partners or customers to bring anti-monopoly claims against companies. In recent years, an increased number of companies have been exercising their right to seek relief under the PRC Anti-monopoly Law. As public awareness of the rights under the PRC Anti-monopoly Law increases, more companies, including our competitors, business partners and customers have resorted to and may continue seeking the remedies available under the PRC Anti-monopoly Law, such as through complaints to regulators or as plaintiffs in private ligation, to hinder our business operations and improve their competitive position, regardless of the merits of their claims. Any of the above actions against us could materially and adversely affect our business, operations, reputation, brand and the trading price of our ADSs.

From time to time, we have received and expect to continue to receive close scrutiny from government agencies under the PRC Anti-monopoly Law in connection with our business practices, investments and acquisitions. Any anti-monopoly lawsuit, regulatory investigations or administrative proceeding initiated against us could result in our being subject to profit disgorgement, heavy fines and various constraints on our business, or result in negative publicity that could harm our reputation and negatively affect the trading prices of our ADSs. These constraints could include forced termination of any agreements or arrangements that are determined by governmental authorities to be in violation of anti-monopoly laws, required divestitures and limitations on certain pricing and business practices, which may limit our ability to continue to innovate, diminish the appeal of our services, increase our operating costs and prevent us from pursuing our investment and acquisition strategy. These constraints could also encourage our competitors to develop platforms, websites, products and services that mimic the functionality of our services, which could decrease the popularity of our marketplaces or other businesses we operate, products and services among merchants, consumers and other participants, and cause our revenue and net income to decrease materially. Given the scale and rapid expansion of our business, we may be subject to greater scrutiny, which could in turn increase the likelihood that we will face regulatory action, which could result in fines or

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restrictions on our business as well as negative publicity and adversely affect our reputation and the trading price of our ADSs.

PRC regulations relating to investments in offshore companies by PRC residents may subject our PRC-resident beneficial owners or our PRC subsidiaries to liability or penalties, limit our ability to inject capital into our PRC subsidiaries or limit our PRC subsidiaries' ability to increase their registered capital or distribute profits.

SAFE promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents' Offshore Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37, on July 4, 2014, which replaced the former circular commonly known as "SAFE Circular 75" promulgated by SAFE on October 21, 2005. See also "Item 4. Information on the Company — B. Business Overview — Regulation — Regulation of Foreign Exchange and Dividend Distribution — Foreign Exchange Regulation — SAFE Circular 37." SAFE Circular 37 ~~requires~~and its implementing rules require PRC residents to register with banks designated by local branches of SAFE in connection with their direct establishment or indirect control of an offshore entity, for the purpose of overseas investment and financing, with ~~such~~the PRC residents' legally owned assets or equity interests in domestic enterprises or offshore assets or interests, referred to in SAFE Circular 37 as a "special purpose vehicle." SAFE Circular 37 further requires amendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such as increase or decrease of capital contributed by PRC individuals, share

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transfer or exchange, merger, division or other material event. In the event that a PRC shareholder holding interests in a special purpose vehicle fails to fulfill the required SAFE registration, the PRC subsidiaries of that special purpose vehicle may be prohibited from making profit distributions to the offshore parent and from carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle may be restricted in its ability to contribute additional capital into its PRC subsidiary. Moreover, failure to comply with the various SAFE registration requirements described above could result in liability under PRC law for evasion of foreign exchange controls.

We have notified substantial beneficial owners of ordinary shares who we know are PRC residents of their filing obligation, and pursuant to SAFE Circular 37, we have periodically filed ~~SAFE Circular 75 reports prior to~~and updated the ~~promulgation of SAFE Circular 37~~above-mentioned foreign exchange registration on behalf of certain employee shareholders who we know are PRC residents. However, we may not be aware of the identities of all of our beneficial owners who are PRC residents. We do not have control over our beneficial owners, and ~~cannot assure you~~there can be no assurance that all of our PRC-resident beneficial owners will comply with SAFE Circular 37 and subsequent implementation rules. The failure of our beneficial owners who are PRC residents to register or amend their SAFE registrations in a timely manner pursuant to SAFE Circular 37 and subsequent implementation rules, or the failure of future beneficial owners of our company who are PRC residents to comply with the registration procedures set forth in SAFE Circular 37 and subsequent implementation rules, may subject ~~such~~the beneficial owners or our PRC subsidiaries to fines and legal sanctions. On February 13, 2015, SAFE promulgated a Notice on Further Simplifying and Improving Foreign Exchange Administration Policy on Direct Investment, or SAFE Notice 13, which became effective on June 1, 2015. Pursuant to SAFE Notice 13, entities and individuals are required to apply for foreign exchange registration of foreign direct investment and overseas direct investment, including those required under the SAFE Circular 37, with qualified banks, instead of SAFE. The qualified banks, under the supervision of SAFE, will directly review the applications and conduct the registration.

Furthermore, since it is unclear how those ~~new~~ SAFE regulations, and any future regulation concerning offshore or cross-border transactions, will be further interpreted, amended and implemented by the relevant PRC government authorities, we cannot predict how these regulations will affect our business operations or future strategy. Failure to register or comply with relevant requirements may also limit our ability to contribute additional capital to our PRC subsidiaries and limit our PRC subsidiaries' ability to distribute dividends to our company. These risks may have a material adverse effect on our business, financial condition and results of operations.

Any failure to comply with PRC regulations regarding our employee equity incentive plans may subject the PRC participants in the plans, us or our overseas and PRC subsidiaries to fines and other legal or administrative sanctions.

Pursuant to SAFE Circular 37, PRC residents who participate in share incentive plans in overseas non-publicly-listed companies may, prior to the exercise of an option, submit applications to SAFE or its local branches for the foreign exchange registration with respect to offshore special purpose companies. In the meantime, our directors, executive officers and other employees who are PRC citizens or who are non-PRC ~~residents~~citizens residing in the PRC for a continuous period of not less than one year, subject to limited exceptions, and who have been granted restricted ~~shares,~~share units, or RSUs, options or ~~options~~restricted shares, by us or our overseas listed subsidiaries may follow the Notice on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas Publicly Listed Company, issued by SAFE in February 2012, to apply for the foreign exchange registration. According to those regulations, employees, directors ~~supervisors~~ and other management members participating in any stock incentive plan of an overseas publicly listed company who are PRC citizens or who are non-PRC citizens residing in China for a continuous period of not less than one year, subject to limited exceptions, are required to register with SAFE through a domestic qualified agent, which ~~could~~may be a PRC subsidiary of ~~such~~the overseas listed company, and complete certain other procedures. Failure to complete the SAFE registrations may subject them to fines and legal sanctions and may also limit ~~the~~their ability to make payment under the relevant

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equity incentive plans or receive dividends or sales proceeds related thereto in foreign currencies, or our ability to contribute additional capital into our ~~wholly-foreign owned enterprises~~domestic subsidiaries in China and limit our ~~wholly-foreign owned enterprises'~~domestic subsidiaries' ability to distribute dividends to us. We also face regulatory uncertainties under PRC law that could restrict our ability or the ability of our overseas listed subsidiaries to adopt additional equity incentive plans for our directors and employees who are PRC citizens or who are non-PRC ~~residents~~citizens residing in the PRC for a continuous period of not less than one year, subject to limited exceptions.

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In addition, the State Administration ~~for~~of Taxation has issued circulars concerning employee RSUs, share options or restricted ~~shares or RSUs.~~shares. Under these circulars, employees working in the PRC whose RSUs or restricted shares vest, or who exercise share options, ~~or whose restricted shares or RSUs vest,~~ will be subject to PRC individual income tax. The PRC subsidiaries of an overseas listed company have obligations to file documents related to employee RSUs, share options or restricted shares with relevant tax authorities and to withhold individual income taxes of those employees related to their RSUs, share options or restricted ~~shares or RSUs.~~shares. Although we and our overseas listed subsidiaries currently withhold income tax from our PRC employees in connection with ~~their exercise of options and~~ the vesting of their RSUs and restricted shares and ~~RSUs,~~their exercise of options, if the employees fail to pay, or the PRC subsidiaries fail to withhold, their income taxes according to relevant laws, rules and regulations, the PRC subsidiaries may face sanctions imposed by the tax authorities.

We rely to a significant extent on dividends, loans and other distributions on equity paid by our principal operating subsidiaries in ~~China and on remittances, including loans, from the variable interest entities in China to fund offshore cash and financing requirements.~~China.

We are a holding company and rely to a significant extent on dividends, loans and other distributions on equity paid by our principal operating subsidiaries ~~and on remittances, including loans, from the variable interest entities,~~ for our offshore cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders, fund inter-company loans, service any debt we may incur outside of China and pay our expenses. When our principal operating subsidiaries ~~or the variable interest entities~~ incur additional debt, the instruments governing the debt may restrict their ability to pay dividends or make other distributions or remittances, including loans, to us. Furthermore, the laws, rules and regulations applicable to our PRC subsidiaries and certain other subsidiaries permit payments of dividends only out of their retained earnings, if any, determined in accordance with applicable accounting standards and regulations.

Under PRC laws, rules and regulations, each of our subsidiaries incorporated in China is required to set aside a portion of its net income each year to fund certain statutory reserves. These reserves, together with the registered equity, are not distributable as cash dividends. As a result of these laws, rules and regulations, our subsidiaries incorporated in China are restricted in their ability to transfer a portion of their respective net assets to their shareholders as dividends. In addition, registered share capital and capital reserve accounts are also restricted from withdrawal in the PRC, up to the amount of net assets held in each operating subsidiary. As of March 31, ~~2016,~~2019, these restricted net assets totaled ~~RMB39,116 million~~RMB112.5 billion (US$~~6,066 million)~~16.8 billion).

Limitations on the ability of the variable interest entities to make remittance to the wholly-foreign owned enterprises to pay dividends to us could limit our ability to access cash generated by the operations of those entities, including to make investments or acquisitions that could be beneficial to our businesses, pay dividends to our shareholders or otherwise fund and conduct our business.

~~The~~Pay-for-performance services ~~conducted by our wholly-foreign owned enterprises might be regarded as a form of online advertising or as~~are considered, in part, ~~of services requiring an~~to involve Internet ~~content provider license or other licenses and subjecting~~advertisement, which subjects us to other laws, rules and regulations as well as ~~increased taxes.~~additional obligations.

~~Our~~On July 4, 2016, the SAIC promulgated the Interim Measures for Administration of Internet Advertising, or the Internet Advertising Measures, which came into effect as of September 1, 2016 and defined Internet advertisements as any commercial advertising that directly or indirectly promotes goods or services through Internet media in any form including paid-for search results. See "Item 4. Information on the Company — B. Business Overview — Regulation — Regulation of Advertising Services."

There exist substantial uncertainties with respect to the interpretation and implementation in practice of the Internet Advertising Measures by various government authorities. We derive a significant amount of our revenue from pay-for-performance, or P4P, services and other related services are currently not classified as a form of online advertising in China or as part of services requiring an ICP license or other licenses. We conduct our P4P and other related business through our wholly-foreign owned enterprises in the PRC, which are not qualified to operate an online advertising business and do not hold an ICP license. However, we cannot assure you that the PRC government will not classify our P4P and other related services as a form of online advertising or as part of services requiring an ICP license or other licenses in the future. On July 1, 2015, the SAIC published a discussion draft of the Interim Administrative Measures on Internet Advertising, or the Draft Internet Advertising Measures, to solicit public comments. The Draft Internet Advertising Measures defines Internet advertisement as commercial display, link, email as well as paid-for search results published in the forms of words, pictures, audio and video, and related media, through Internet media resources. If the Draft Internet Advertising Measures are promulgated as proposed, ourservices. Our P4P services and other related services may be ~~characterized as~~considered to, in part, involve Internet advertisement.

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If We may incur additional taxes in connection with our P4P and other related services are characterized as a form of online advertising which may require an ICP license or other licenses, we may have to conduct our P4P business through variable interest entities, which are qualified to operate online advertising business and hold ICP or other licenses, and we may face increased scrutiny from the tax authorities and may incur additional taxes on any service fees paid by our variable interest entities to our wholly-foreign owned enterprises. In addition, advertising services are subject to a cultural construction fee under PRC law, which is a 3% surcharge in addition to the applicable value-added tax. If our P4P and other related services were to be considered a form of online advertising, our revenue from those services would be subject to the 3% surcharge. If that were to occur, our margins would decline and our net income could be reduced. In addition, the substantial revenue streams attributable to our P4P services would then be collected from variable interest entities and subject to the risks associated with variable interest entities. If the change in classification of our P4P and other related services were to be retroactively applied, we might be subject to sanctions, including payment of delinquent taxes and late payment interest.

services. Moreover, PRC advertising laws, rules and regulations require advertisers, advertising operators and advertising distributors to ensure that the content of the advertisements they prepare or distribute is fair and accurate and is in full compliance with applicable law. Violation of these laws, rules or

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regulations may result in penalties, including fines, confiscation of advertising fees and orders to cease dissemination of the ~~advertisements and orders to publish an advertisement correcting the misleading information.~~advertisements. In circumstances involving serious violations, the PRC government may suspend or revoke a violator's business license or license for operating an advertising business. In addition, the ~~Draft~~ Internet Advertising Measures ~~requires~~require paid-for search results to be ~~obviously~~clearly distinguished from ~~natural~~organic search results so that consumers will not misunderstand the nature of ~~such~~these search results. ~~If the Draft Internet Advertising Measures~~Therefore, we are ~~promulgated as proposed, we will be~~ obligated to distinguish from others the merchants who purchase the above-mentioned P4P and related services or the relevant listings by ~~such~~these merchants. Complying with ~~such~~these requirements, including any penalties or fines for any failure to comply, may significantly reduce the attractiveness of our platforms and increase our costs, and could have a material adverse effect on our business, financial condition and results of operations.

In addition, for advertising content related to specific types of products and services, advertisers, advertising operators and advertising distributors must confirm that the advertisers have obtained requisite government approvals, including the advertiser's operating qualifications, proof of quality inspection of the advertised products, and, with respect to certain industries, government ~~pre-approval~~approval of the ~~contents~~content of the advertisement and filing with the local authorities. IfPursuant to the Internet Advertising Measures, we ~~become subject to PRC advertising laws, we would need~~are required to take steps to monitor ~~and to ensure that our third-party marketing affiliates monitor,~~ the content of ~~any~~ advertisements displayed on our platforms. This ~~could require~~requires considerable resources and time, and could significantly affect the operation of our business, while also subjecting us to increased liability under the relevant laws, rules and regulations. The costs associated with complying with ~~such~~these laws, rules and regulations, including fines or any other penalties ~~or fines~~ for our failure to so comply if required, could have a material adverse effect on our business, financial condition and results of operations. Any further change in the classification of our P4P and other related services by the PRC government may also significantly disrupt our operations and materially and adversely affect our business and prospects.

We may be treated as a resident enterprise for PRC tax purposes under the PRC Enterprise Income Tax Law, and we may therefore be subject to PRC income tax on our global income.

Under the PRC Enterprise Income Tax Law and its implementing rules, both of which came into effect on January 1, 2008, enterprises established under the laws of jurisdictions outside of China with "de facto management bodies" located in China may be considered PRC tax resident enterprises for tax purposes and may be subject to the PRC enterprise income tax at the rate of 25% on their global income. "De facto management body" refers to a managing body that exercises substantive and overall management and control over the production and business, personnel, accounting books and assets of an enterprise. The State Administration of Taxation issued the Notice Regarding the Determination of Chinese-Controlled Offshore-Incorporated Enterprises as PRC Tax Resident Enterprises on the ~~Basis~~basis of ~~De Facto Management Bodies,~~de facto management bodies, or Circular 82, on April 22, 2009. ~~Circular 82 provides certain specific criteria for determining whether~~See "Item 4. Information on the ~~"de facto management body" of a Chinese-controlled offshore-incorporated enterprise is located in China. Although Circular 82 only applies to~~

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~~offshore enterprises controlled by~~Company — B. Business Overview — Regulation — Tax Regulations — PRC enterprises, not those controlled by foreign enterprises or individuals, the determining criteria set forth in Circular 82 may reflect the State Administration of Taxation's general position on how the "de facto management body" test should be applied in determining the tax resident status of offshore enterprises, regardless of whether they are controlled by PRC enterprises. Currently, we generate only a small portion of our revenues offshore. However, if this proportion were to increase and ifEnterprise Income Tax." If we were to be considered a PRC resident enterprise, we would be subject to PRC enterprise income tax at the rate of 25% on our global income. In ~~such~~this case, our profitability and cash flow may be materially reduced as a result of our global income being taxed under the Enterprise Income Tax Law. We believe that none of our entities outside of China is a PRC resident enterprise for PRC tax purposes. However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term "de facto management body."

Dividends payable to ~~our~~ foreign investors and gains on the sale of our ADSs or ordinary shares by our foreign investors may become subject to PRC taxation.

Under the Enterprise Income Tax Law and its implementation regulations issued by the State Council, a 10% PRC withholding tax is applicable to dividends payable by a resident enterprise to investors that are non-resident enterprises, which do not have an establishment or place of business in the PRC or which have ~~such~~an establishment or place of business but the dividends are not effectively connected with ~~such~~the establishment or place of business, to the extent ~~such~~these dividends are derived from sources within the PRC, subject to any reduction set forth in applicable tax treaties. Similarly, any gain realized on the transfer of shares of a resident enterprise by ~~such~~these investors is also subject to PRC tax at a current rate of 10%, subject to any exemption set forth in relevant tax treaties, if ~~such~~the gain is regarded as income derived from sources within the PRC. If we are deemed a PRC resident enterprise, dividends paid on our ordinary shares or ADSs, and any gain realized by the investors from the transfer of our

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ordinary shares or ADSs, ~~would~~may be treated as income derived from sources within the PRC and ~~would~~ as a result be subject to PRC taxation. See "Item 4. Information on the Company — B. Business Overview — Regulation — Tax Regulations." Furthermore, if we are deemed a PRC resident enterprise, dividends payable to individual investors who are non-PRC residents and any gain realized on the transfer of ADSs or ordinary shares by ~~such~~these investors may be subject to PRC tax at a current rate of 20%, subject to any reduction or exemption set forth in applicable tax treaties. It is unclear ~~whether~~ if we or any of our subsidiaries established outside China are considered a PRC resident enterprise, whether holders of our ADSs or ordinary shares would be able to claim the benefit of income tax treaties or agreements entered into between China and other countries or areas and to claim foreign tax credit if applicable. If dividends payable to our non-PRC investors, or gains from the transfer of our ADSs or ordinary shares by ~~such~~these investors are subject to PRC tax, the value of your investment in our ADSs or ordinary shares may decline significantly.

Discontinuation of preferential tax treatments we currently enjoy or other unfavorable changes in tax law could result in additional compliance obligations and costs.

Chinese companies operating in the high-technology and software industry that meet relevant requirements may qualify for three main types of preferential treatment, which are high and new technology enterprises, software enterprises and key software enterprises within the scope of the PRC national plan. For a qualified high and new technology enterprise, the applicable enterprise income tax rate is 15%. The high and new technology enterprise qualification is re-assessed by the relevant authorities every three years. Moreover, a qualified software enterprise is entitled to a tax holiday consisting of a two-year tax exemption beginning from the first profit-making calendar year and a 50% tax reduction for the subsequent three calendar years. The software enterprise qualification is subject to an annual assessment. For a qualified key software enterprise within the scope of the PRC national plan, the applicable enterprise tax rate for a calendar year is 10%. The key software enterprise qualification is subject to an ~~assessment every two years.~~annual assessment.

A number of our China operating entities enjoy ~~such~~these preferential tax ~~treatment. Our effective tax rate in fiscal year 2016 was 10%.~~treatments. The discontinuation of any of the various types of preferential tax treatment we enjoy could

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materially and adversely affect our results of operations. See "Item 5. Operating and Financial Review and Prospects — A. Operating Results — Taxation — PRC Income Tax."

We and our shareholders face uncertainties with respect to indirect transfers of equity interests in PRC resident enterprises or other assets attributed to a PRC establishment of a non-PRC ~~company, or other assets attributable to a PRC establishment of a non-PRC~~ company.

On February 3, 2015, the State Administration of Taxation issued the Bulletin on Issues of Enterprise Income Tax on Indirect Transfers of Assets by Non-PRC Resident Enterprises, or Bulletin 7, which ~~replaced or supplemented certain previous rules under~~has been further amended by the ~~Notice~~Announcement on ~~Strengthening Administration~~Issues Concerning the Withholding of Enterprise Income Tax ~~for Share Transfers by~~at Source on Non-PRC Resident Enterprises, or ~~Circular 698,~~Bulletin 37, issued by the State Administration of Taxation on ~~December 10, 2009.~~October 17, 2017 and amended on June 15, 2018. Pursuant to ~~this Bulletin,~~these bulletins, an "indirect transfer" of assets, including equity interests in a PRC resident enterprise, by non-PRC resident enterprises may be ~~recharacterized~~re-characterized and treated as a direct transfer of PRC taxable assets, if ~~such~~the arrangement does not have a reasonable commercial purpose and was established for the purpose of avoiding payment of PRC enterprise income tax. As a result, gains derived from ~~such~~this indirect transfer may be subject to PRC enterprise income tax. See also "Item 4. Information on the Company — B. Business Overview — Regulation — Tax Regulations — PRC Enterprise Income Tax."

According to Bulletin 7, "PRC taxable assets" include assets attributed to an establishment or a place of business in China, immoveable properties located in China, and equity investments in PRC resident enterprises, in respect of which gains from their transfer by a direct holder, being a non-PRC resident enterprise, would be subject to PRC enterprise income taxes. When determining whether there is a "reasonable commercial purpose" of the transaction arrangement, factors to be taken into consideration include: whether the main value of the equity interest of the relevant offshore enterprise directly or indirectly derives from PRC taxable assets; whether the assets of the relevant offshore enterprise mainly consists of direct or indirect investment in China or if its income mainly derives from China, directly or indirectly; whether the offshore enterprise and its subsidiaries directly or indirectly holding PRC taxable assets have real commercial nature which is evidenced by their actual function and risk exposure; the duration of existence of the business model and organizational structure; the foreign income tax liabilities arising from the indirect transfer of PRC taxable assets; the replicability of the transaction by direct transfer of PRC taxable assets; and the applicable tax treaties or similar arrangements. In respect of an indirect offshore transfer of assets of a PRC establishment or place of business, the resulting gain is to be included with the enterprise income tax filing of the PRC establishment or place of business being transferred, and would consequently be subject to PRC enterprise income tax at a rate of 25%. Where the underlying transfer relates to the immoveable properties located in China or to equity investments in a PRC resident enterprise, which is not related to a PRC establishment or place of business of a non-resident enterprise, a PRC enterprise income tax at 10% would apply, subject to available preferential tax treatment under applicable tax treaties or similar arrangements, and the party who is obligated to make the transfer payments has the withholding obligation. Where the payor fails to withhold any or sufficient tax, the transferor shall declare and pay such tax to the tax authority by itself within the statutory time limit. Late payment of applicable tax will subject the transferor to default interest. Bulletin 7 does not apply to transactions of sale of shares by investors through a public stock exchange where such shares were acquired from a transaction through a public stock exchange.

There are uncertainties as to the application of Bulletin 7.7 and Bulletin 37. Bulletin 7 may be determined by the tax authorities to be applicable to some of our offshore restructuring transactions or sale of the shares of our offshore subsidiaries or investments where PRC taxable assets are involved. The transferors and transferees may be subject to the tax filing and the transferees may be subject to withholding or tax payment obligation, while our PRC subsidiaries may be requested to assist in the filing. Furthermore, we, our non-resident enterprises and PRC subsidiaries may be required to spend valuable resources to comply with Bulletin 7 or to establish that we and our non-resident enterprises should not be taxed under Bulletin 7, for our previous and future restructuring or disposal

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of shares of our offshore subsidiaries, which may have a material adverse effect on our financial condition and results of operations.

The PRC tax authorities have the discretion under ~~Circular 698/~~Bulletin 7 to make adjustments to the taxable capital gains based on the difference between the fair value of the taxable assets transferred and the cost of investment. If the PRC tax authorities make adjustments to the taxable income of the transactions under

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~~Circular 698/~~Bulletin 7, our income tax costs associated with ~~such~~ potential acquisitions or disposals will increase, which may have an adverse effect on our financial condition and results of operations.

Restrictions on currency exchange or outbound capital flows may limit our ability to utilize our PRC revenue effectively.

Substantially all of our revenue is denominated in Renminbi. The Renminbi is currently convertible under the "current account," which includes dividends, trade and service-related foreign exchange transactions, but ~~not~~requires approval from or registration with appropriate government authorities or designated banks under the "capital account," which includes foreign direct investment and loans, including loans we may secure from our onshore subsidiaries or variable interest entities. Currently, our PRC subsidiaries, ~~which~~that are ~~wholly-foreign owned~~foreign invested enterprises, may purchase foreign currency for settlement of "current account transactions," including payment of dividends to us, without the approval of SAFE by complying with certain procedural requirements. However, the relevant PRC governmental authorities may limit or eliminate our ability to purchase foreign currencies in the future for current account transactions.

Since 2016, PRC governmental authorities have imposed more stringent restrictions on outbound capital flows, including heightened scrutiny over "irrational" overseas investments for certain industries, as well as over four kinds of "abnormal" offshore investments, which are:

•: investments through enterprises established for only a few months without substantive operation;
•: investments with amounts far exceeding the registered capital of onshore parent and not supported by its business performance shown on financial statements;
•: investments in targets that are unrelated to onshore parent's main business; and
•: investments with abnormal sources of Renminbi funding suspected to be involved in illegal transfer of assets or illegal operation of underground banking.

On January 26, 2017, SAFE promulgated the Circular on Further Improving Reform of Foreign Exchange Administration and Optimizing Genuineness and Compliance Verification, which tightened the authenticity and compliance verification of cross-border transactions and cross-border capital flow. See "Item 4. Information on the Company — B. Business Overview — Regulation — Regulation of Foreign Exchange and Dividend Distribution — Foreign Exchange Regulation." In addition, the Outbound Investment Sensitive Industry Catalogue (2018) lists certain sensitive industries that are subject to NDRC pre-approval requirements prior to remitting investment funds offshore, which subjects us to increased approval requirements and restrictions with respect to our overseas investment activity. Since a significant amount of our ~~future~~PRC revenue ~~will be~~is denominated in Renminbi, any existing and future restrictions on currency exchange or outbound capital flows may limit our ability to utilize revenue generated in Renminbi to fund our business activities outside of the PRC, make investments, service any debt we may incur outside of China or pay dividends in foreign currencies to our shareholders, including holders of our ADSs. Foreign exchange transactions under the capital account remain subject to limitations and require approvals from, or registration with, SAFE and other relevant PRC governmental authorities. This could affect our ability to obtain foreign currency through debt or equity financing for our subsidiaries and the variable interest entities.

Fluctuations in exchange rates could result in foreign currency exchange losses ~~and could materially reduce the value of your investment.~~to us.

The value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions and the foreign exchange policy adopted by the PRC government. On July 21, 2005, the PRC government changed its policy of pegging the value of the Renminbi to the U.S. dollar. Following the removal of the U.S. dollar peg, the Renminbi appreciated more than 20% against the U.S. dollar over the following three years. Between July 2008 and June 2010, this appreciation halted and the exchange rate between the RMB and the U.S. dollar remained within a narrow band. In June 2010, the People's Bank of China increased the flexibility of the exchange rate and between June 30, 2010 and December 31, 2013, the value of the Renminbi appreciated approximately 12.0% against the U.S. dollar, although the value of the Renminbi depreciated approximately 2.5% against the U.S. dollar in 2014. In August 2015, the People's Bank of China, or PBOC, changed the way it calculates the mid-point price of Renminbi against the U.S. dollar, requiring the market-makers who submit for reference rates to consider the previous day's closing spot rate, foreign-exchange demand and supply as well as changes in major currency

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rates. ~~As a result, in 2015,~~In 2017, the value of the Renminbi ~~depreciated~~appreciated by approximately ~~5.8%~~6.3% against the U.S. ~~dollar,~~dollar; and ~~from December 31, 2015~~in 2018, the Renminbi depreciated by approximately 5.7% against the U.S. dollar. From the end of 2018 through ~~May 20, 2016,~~the end of April 2019, the value of the Renminbi ~~further depreciated~~appreciated by approximately ~~1.1%~~2.0% against the U.S. dollar. It is difficult to predict how market forces or PRC or U.S. government policy, including any interest rate increases by the Federal Reserve, may impact the exchange rate between the Renminbi and the U.S. dollar in the future. There remains significant international pressure on the PRC government to adopt a more flexible currency policy, including from the U.S. government, which has threatened to label China as a "currency manipulator," which could result in greater fluctuation of the Renminbi against the U.S. dollar. ~~Substantially all~~

A substantial percentage of our revenues and costs are denominated in Renminbi, and a significant portion of our financial assets are also denominated in Renminbi while ~~a significant portion~~the majority of our debt is denominated in ~~U.S.~~ dollars. We are a holding company and we rely on dividends, loans and other distributions on equity paid by our operating subsidiaries in ~~China for our cash needs.~~China. Any significant ~~revaluation~~fluctuations in the value of the Renminbi may materially and adversely affect our liquidity and cash flows. ToIf we decide to convert our Renminbi into U.S. dollars for the purpose of repaying principal or interest expense on our outstanding U.S. dollar-denominated debt, making payments for dividends on our ordinary shares or ADSs or other business purposes, appreciation of the U.S. dollar against the Renminbi would have a negative effect on the U.S. dollar amount we would receive. Conversely, to the extent that we need to convert U.S. dollars into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount we would receive. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of making payments for dividends on our ordinary shares or ADSs or for other business purposes, appreciation of the U.S. dollar against the Renminbi would have a negative effect on the U.S. dollar amount we would receive. From time to time we enter into hedging activities with regard to exchange rate risk. ~~We cannot assure you~~There can be no assurance that ~~such~~our hedging activities will successfully mitigate ~~such~~these risks adequately or at all, and in addition hedging activities may result in greater volatility in our ~~results of operations.~~

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The audit report included in this annual report is prepared by auditors who are not inspected fully by the Public Company Accounting Oversight Board and, ~~as such,~~accordingly, our shareholders are deprived of the benefits of ~~such~~this inspection.

As an auditor of companies that are publicly traded in the United States and a firm registered with the Public Company Accounting Oversight Board, or PCAOB, PricewaterhouseCoopers is required under the laws of the United States to undergo regular inspections by the PCAOB. However, because we have substantial operations within the People's Republic of China, a jurisdiction where the PCAOB is currently unable to conduct inspections without the approval of the Chinese government authorities, our auditor and its audit work isare not currently inspected fully by the PCAOB. On December 7, 2018, the SEC and the PCAOB issued a joint statement highlighting continued challenges faced by the U.S. regulators in their oversight of financial statement audits of U.S.-listed companies with significant operations in China. The joint statement reflects a heightened interest in an issue that has concerned U.S. regulators in recent years. However, it remains unclear what further actions the SEC and PCAOB will take to address the problem.

Inspections of other auditors conducted by the PCAOB outside of China have at times identified deficiencies in those auditors' audit procedures and quality control procedures, which may be addressed as part of the inspection process to improve future audit quality.

The ~~lack~~inability of the PCAOB to conduct inspections of ~~audit work undertaken~~auditors in China ~~prevents~~makes it more difficult to evaluate the ~~PCAOB from regularly evaluating~~effectiveness of our auditor's ~~audits and its~~audit procedures or quality control ~~procedures. As a result, shareholders may be deprived~~procedures as compared to auditors outside of ~~the benefits of~~China that are subject to PCAOB ~~inspections, and~~inspections. Investors may lose confidence in our reported financial information and procedures and the quality of our financial statements.

Restrictions on the direct production of audit work papers to foreign regulators could result in our financial statements being determined to not be in compliance with the requirements of the Exchange Act.

In late 2012, the SEC commenced administrative proceedings under Rule 102(e) of its Rules of Practice and also under the Sarbanes-Oxley Act of 2002 against the mainland Chinese affiliates of the "big four" accounting firms, including the affiliate of our auditor, and also against Dahua, the former BDO affiliate in China. The Rule 102(e) proceedings initiated by the SEC related to the failure of these firms to produce documents, including audit work

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papers, in response to the request of the SEC pursuant to Section 106 of the Sarbanes-Oxley Act of 2002, as the auditors located in China are not in a position lawfully to produce documents directly to the SEC because of restrictions under PRC law and specific directives issued by the CSRC. The issues raised by the proceedings are not specific to the Chinese affiliate of our auditor or to us, but potentially affect equally all PCAOB-registered audit firms based in China and all businesses based in China (or with substantial operations in China) with securities listed in the United States. In addition, auditors based outside of China are subject to similar restrictions under PRC law and CSRC directives in respect of audit work that is carried out in China ~~which~~that supports the audit opinions issued on financial statements of entities with substantial China operations.

In February 2015, each of the "big four" accounting firms in China agreed to a censure and to pay a fine to the SEC to settle the dispute with the SEC. The settlement ~~stays~~stayed the current proceeding for four years, during which time the firms ~~are~~were required to follow detailed procedures to seek to provide the SEC with access to Chinese firms' audit documents via the CSRC. If a firm ~~does~~were not to follow the procedures, the SEC would impose penalties such as suspensions, or commence a new, expedited administrative proceeding against the non-compliant firm or it could restart the administrative proceeding against all four firms. In addition, the limitations imposed by the PRC on the production of workpapers reflecting audit work performed in the PRC could likewise result in the imposition of penalties on our independent registered public accounting firm by the PCAOB or the SEC, such as suspensions of our audit firm's ability to practice before the SEC. Under the terms of the settlement, the underlying proceeding against the "big four" accounting firms in China was deemed dismissed with prejudice four years after entry of the settlement. The fourth anniversary of the settlement was on February 6, 2019. We cannot predict if the SEC will further challenge the four firms as to their compliance with U.S. law in connection with U.S. regulatory requests for audit work papers, or if the results of the challenge would result in the SEC imposing penalties, such as suspensions. If any additional remedial measures are imposed on the Chinese affiliates of the "big four" accounting firms, including our independent registered public accounting firm, we could be unable to timely file future financial statements in compliance with the requirements of the U.S. Securities Exchange Act of 1934, as amended, or the Exchange Act.

If our independent registered public accounting firm, or the affiliate of our independent registered public accounting firm, were denied, even temporarily, the ability to practice before the SEC, we would need to consider alternate support arrangements for the audit of our operations in China. If our auditor, or an affiliate of that firm, were unable to address issues related to the production of documents, and we were unable to timely find another independent registered public accounting firm to audit and issue an opinion on our financial statements, our financial statements could be determined to not be in compliance with the requirements of the Exchange Act. ~~Such a~~A determination of this type could ultimately lead to delisting of our ADSs from the New York Stock Exchange or deregistration from the SEC, or both. This would materially and adversely affect the market price of our ADSs and substantially reduce or effectively terminate the trading of our ADSs in the United States.

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Risks Related to ~~our ADS~~Our ADSs

The trading price of our ADSs has been and is likely to continue to be volatile, which could result in substantial losses to holders of our ~~shareholders.~~ADSs.

The trading price of our ADSs has been and is likely to continue to be volatile and could fluctuate widely in response to a variety of factors, many of which are beyond our control. For example, the high and low sale prices of our ADSs in fiscal year ~~2016~~2019 were US$~~95.06~~211.70 and US$~~57.20,~~129.77, respectively. In addition, the performance and fluctuation of the market prices of other companies with business operations located mainly in China that have listed their securities in the United States may affect the volatility in the price of and trading volumes for our ADSs. Some of these companies have experienced significant volatility, including significant price declines after their initial public offerings. The trading performances of these PRC companies' securities at the time of or after their offerings may affect the overall investor sentiment towards other PRC companies listed in the United States

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and consequently may impact the trading performance of our ADSs. In addition to market and industry factors, the price and trading volume for our ADSs may be highly volatile for specific business reasons, including:

•: variations in our results of ~~operations;~~
•: ~~announcements about our~~operations or earnings that are not in line with market or research analyst ~~expectations;~~expectations or changes in financial estimates by securities research analysts;
•: publication of operating or industry metrics by third parties, including government statistical agencies, that differ from expectations of industry or financial ~~analysts;~~
•: ~~changes in financial estimates by securities research~~ analysts;
•: announcements made by us or our competitors of new product and service offerings, acquisitions, strategic relationships, joint ventures or capital commitments;
•: press and other reports, whether or not true, about our ~~business;~~
•: ~~regulatory allegations or actions or~~business, including negative reports ~~or publicity against us,~~published by short sellers, regardless of their veracity or materiality to our company;
•: ~~changes in pricing made by us~~litigation and regulatory allegations or ~~our competitors;~~proceedings that involve us;
•: ~~conditions~~changes in ~~the online retail market;~~pricing we or our competitors adopt;
•: additions to or departures of our management;
•: actual or perceived general industry, regulatory, economic and business conditions and trends in China and globally, due to various reasons, including changes in geopolitical landscape, as some investors or analysts may invest in or value our ADSs based on the economic performance of the Chinese economy, which may not be correlated to our financial performance;
•: fluctuations of exchange rates between the Renminbi and the U.S. dollar;
•: ~~release or expiry of transfer restrictions on our outstanding ordinary shares or ADSs;~~
•: sales or perceived potential sales or other ~~disposition~~dispositions of existing or additional ordinary shares or ADSs or other equity or equity-linked ~~securities, including by our principal shareholders, directors officers~~securities; and ~~other affiliates;~~
•: the creation by our major shareholders of vehicles that hold our ordinary ~~shares, such as Yahoo's proposed spin-off of our ordinary shares that it holds;~~
•: ~~actual or perceived general economic and business conditions and trends in China and globally; and~~
•: ~~changes or developments in the PRC or global regulatory environment.~~shares.

Any of these factors may result in large and sudden changes in the volume and trading price of our ADSs. In addition, the stock market has from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies and industries. These fluctuations may include a so-called "bubble market" in which investors temporarily raise the price of the stocks of companies in certain industries, such as the e-commerce industry, to unsustainable levels. These market fluctuations may significantly affect the trading price of our ADSs. In the past, following periods of volatility in the market price of a company's securities, shareholders have often instituted securities class action litigation against that company. We ~~have been~~

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were named as a defendant in certain purported shareholder class action lawsuits described in "Item 8. Financial Information — A. Consolidated Statements and Other Financial Information — Legal and Administrative Proceedings." The litigation process may utilize a material portion of our cash resources and divert management's attention from the day-to-day operations of our company, all of which could harm our business. If adversely determined, the class action suits may have a material adverse effect on our financial condition and results of operations.

Substantial future sales or perceived potential sales of our ADSs, ordinary shares or other equity or equity-linked securities in the public market could cause the price of our ADSs to decline significantly.

Sales of our ADSs, ordinary shares or other equity or equity-linked securities in the public market, or the perception that these sales could occur, could cause the market price of our ADSs to decline significantly. As of March 31, ~~2016,~~2019, we had ~~2,473,927,859~~2,587,059,572 ordinary shares outstanding, and ~~1,183,920,615~~1,713,232,408 of our ordinary shares were represented by ADSs. All of our ordinary shares represented by ADSs were freely transferable by persons other than our affiliates without restriction or additional registration under the Securities Act of 1933, or the Securities Act. The ordinary shares held by our affiliates and other shareholders are ~~no longer subject to any lock-up arrangements and will be~~also available for sale, subject to volume and other restrictions as applicable under Rules 144 and 701 under the Securities Act, under sales plans adopted pursuant to Rule 10b5-1 or otherwise. ~~Concurrent with the completion~~

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On May 15, 2019, Altaba, one of our ~~investment in Suning Commerce Group Co., Limited, or Suning, Suning will subscribe for approximately 26.3 million~~principal shareholders, announced that it intends to commence sales of our ~~newly issued~~shares on May 20, 2019. Altaba stated that it intends to sell no more than 50% of the Company's shares it holds prior to receiving stockholder approval of its previously announced plan to liquidate and dissolve the Altaba entity pursuant to voluntary liquidation and dissolution. Altaba's stockholder meeting to vote on the plan is scheduled to be held on June 27, 2019. In addition, Altaba expects to file its certificate of dissolution during the third or fourth quarter of 2019, although this filing may be delayed by Altaba's board in its sole discretion. Altaba stated that it intends to sell all of its shares in us if the plan is approved at the stockholder meeting, although Altaba has stated that the timing and method of sales, and other related transaction considerations will be determined at its discretion, and the plan is subject to change based on prevailing market conditions and other factors. If Altaba, or any vehicles that have been created or may be created to hold our shares, among other assets, takes any further steps to divest itself of all or a portion of its holdings in our ordinary shares ~~which will be subject~~in the form of ADSs in the public market, including through its announced plan of liquidation and dissolution and through periodic small-scale sales, this could cause the price of our ADSs to ~~lock-up arrangements.~~decline significantly.

Certain major holders of our ordinary shares will have the right to cause us to register under the Securities Act the sale of their shares. Registration of these shares under the Securities Act would result in ADSs representing these shares becoming freely tradable without restriction under the Securities Act immediately upon the effectiveness of the registration. Sales of these registered shares in the form of ADSs in the public market could cause the price of our ADSs to decline significantly.

~~If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, the market price for our ADSs and trading volume could decline.~~

The trading market for our ADSs will depend in part on the research and reports that securities or industry analysts publish about us or our business. If research analysts do not establish and maintain adequate research coverage or if one or more of the analysts who covers us downgrades our ADSs or publishes inaccurate or unfavorable research about our business, the market price for our ADSs would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which, in turn, could cause the market price or trading volume for our ADSs to decline significantly.

As a foreign private issuer, we are permitted to and we will, rely on exemptions from certain New York Stock Exchange corporate governance standards applicable to domestic U.S. issuers. This may afford less protection to holders of our ordinary shares and the ADSs.

We are exempted from certain corporate governance requirements of the New York Stock Exchange by virtue of being a foreign private issuer. We are required to provide a brief description of the significant differences between our corporate governance practices and the corporate governance practices required to be followed by domestic U.S. companies listed on the New York Stock Exchange. The standards applicable to us are considerably different than the standards applied to domestic U.S. issuers. For instance, we are not required to:

•: have a majority of the board be independent (although all of the members of the audit committee must be independent under the ~~U.S. Securities Exchange Act of 1934, as amended, or the~~ Exchange Act);
•: have a compensation committee or a nominating or corporate governance committee consisting entirely of independent directors;
•: have regularly scheduled executive sessions for non-management directors; or
•: have executive sessions of solely independent directors each year.

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We have relied on and intend to continue to rely on some of these exemptions. As a result, holders of our ~~shareholders~~ADSs may not be provided with the benefits of certain corporate governance requirements of the New York Stock Exchange.

As a foreign private issuer, we are exempt from certain disclosure requirements under the Exchange Act, which may afford less protection to holders of our ~~shareholders~~ADSs than they would enjoy if we were a domestic U.S. company.

As a foreign private issuer, we are exempt from, among other things, the rules prescribing the furnishing and content of proxy statements under the Exchange Act and the rules relating to selective disclosure of material nonpublic information under Regulation FD. In addition, our executive officers, directors and principal shareholders are exempt from the reporting and short-swing profit and recovery provisions contained in Section 16 of the Exchange Act. We are also not required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as domestic U.S. companies with securities registered under the Exchange Act. As a result, holders of our ~~shareholders~~ADSs may be afforded less protection than they would under the Exchange Act rules applicable to domestic U.S. companies.

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~~If and when permitted by law, we~~We may in the future conduct a public offering and listing of our shares in China, which may result in increased regulatory scrutiny and compliance costs as well as increased fluctuations in the prices of our ordinary shares and ADSs listed in overseas markets.

~~Although not currently allowed under PRC law, if and when permitted by law, we~~We may conduct a public offering and/or listing of our shares on a stock exchange in China in the future. We have not set a specific timetable or decided on any specific form for an offering in ~~China.~~China and may not ultimately conduct an offering and listing. The precise timing of the offering and/or listing of our shares in China would depend on a number of factors, including relevant regulatory developments and market conditions. If we complete a public offering or listing in China, we would become subject to the applicable laws, rules and regulations governing public companies listed in China, in addition to the various laws, rules and regulations that we are subject to in the United States as a reporting company. The listing and trading of our ~~securities~~shares in multiple jurisdictions and multiple markets may lead to increased compliance costs for us, and we may face the risk of significant intervention by regulatory authorities in these jurisdictions and markets.

In addition, under current PRC laws, rules and regulations, our ordinary shares will not be interchangeable or fungible with any shares we may decide to list on a PRC stock exchange, and there is no trading or settlement between these markets in the United States and mainland China. Furthermore, these two markets have different trading characteristics and investor bases, including different levels of retail and institutional participation. As a result of these differences, the trading prices of our ADSs, accounting for the share-to-ADS ratio, may not be the same as the trading prices of any shares we may decide to list on a PRC stock exchange. The issuance of a separate class of shares and fluctuations in its trading price may also lead to increased volatility in, and may otherwise materially decrease, the prices of our ordinary shares and ADSs.

Our shareholders may face difficulties in protecting their interests, and their ability to protect their rights through the ~~U.S.~~ federal courts may be limited because we are incorporated under Cayman Islands law, we conduct substantially all of our operations in China and most of our directors and substantially all of our executive officers reside outside the United States.

We are incorporated in the Cayman Islands and conduct substantially all of our operations in China through our ~~wholly-foreign owned enterprises~~wholly-owned entities and ~~the~~ variable interest entities. Most of our directors and substantially all of our executive officers reside outside the United States and a substantial portion of their assets are located outside of the United States. As a result, it may be difficult or impossible for our shareholders (including holders of ADSs) to bring an action against us or against these individuals in the Cayman Islands or in China in the event that they believe that their rights have been infringed under the securities laws of the United States or otherwise. Even if shareholders are successful in bringing an action of this kind, the laws of the Cayman Islands and China may render them unable to enforce a judgment against our assets or the assets of our directors and officers. There is no statutory recognition in the Cayman Islands of judgments obtained in the United States or China, although the courts of the Cayman

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Islands will generally recognize and enforce a non-penal judgment of a foreign court of competent jurisdiction without retrial on the merits.

Our corporate affairs are governed by our memorandum and articles of association, as amended and restated from time to time, and by the Companies Law ~~(2013~~(2018 Revision) and common law of the Cayman Islands. The rights of shareholders to take legal action against us and our directors, actions by minority shareholders and the fiduciary duties of our directors are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law, which provides persuasive, but not binding, authority in a court in the Cayman Islands. The rights of our shareholders and the fiduciary duties of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedents in the United States. In particular, the Cayman Islands has a less developed body of securities laws than the United States and provides significantly less protection to investors. In addition, shareholders in Cayman Islands companies may not have standing to initiate a shareholder derivative action in U.S. federal courts.

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In addition, our articles of association provide that in the event that any shareholder initiates or asserts any claim or counterclaim against us, or joins, offers substantial assistance to or has a direct financial interest in any claim or counterclaim against us, and does not obtain a judgment on the merits in which the initiating or asserting party prevails, then the shareholder will be obligated to reimburse us for all fees, costs and expenses (including, but not limited to, all reasonable attorneys' fees and other litigation expenses) that we may incur in connection with ~~such~~a claim or counterclaim. These fees, costs and expenses that may be shifted to a shareholder under this provision are potentially significant and this fee-shifting provision is not limited to specific types of actions, but is rather potentially applicable to the fullest extent permitted by law.

Our fee-shifting provision may dissuade or discourage our shareholders (and their attorneys) from initiating lawsuits or claims against us or may impact the fees, contingency or otherwise, required by attorneys to represent our shareholders. Fee-shifting provisions such as ours are relatively new and untested. ~~We cannot assure you~~There can be no assurance that we will or will not invoke our fee-shifting provision in any particular dispute, or that we will be successful in obtaining fees if we choose to invoke the provision.

As a result of the foregoing, our public shareholders may have more difficulty in protecting their interests through actions against us, our management, our directors or our major shareholders than would shareholders of a corporation incorporated in a jurisdiction in the United States.

The voting rights of holders of our ADSs are limited by the terms of the deposit agreement.

Holders of our ADSs may exercise their voting rights with respect to the ordinary shares underlying their ADSs only in accordance with the provisions of the deposit agreement. Upon receipt of voting instructions from them in the manner set forth in the deposit agreement, the depositary for our ADSs will endeavor to vote their underlying ordinary shares in accordance with these instructions. Under our articles of association, the minimum notice period required for convening a general meeting is ten days. When a general meeting is convened, holders of our ADSs may not receive sufficient notice of a shareholders' meeting to permit them to withdraw their ordinary shares to allow them to cast their votes with respect to any specific matter at the meeting. In addition, the depositary and its agents may not be able to send voting instructions to holders of our ADSs or carry out their voting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting rights to holders of our ADSs in a timely manner, but they may not receive the voting materials in time to ensure that they can instruct the depositary to vote the ordinary shares underlying their ADSs. Furthermore, the depositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of any ~~such~~ vote. As a result, holders of our ADSs may not be able to exercise their rights to vote and they may lack recourse if the ordinary shares underlying their ADSs are not voted as they requested.

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The depositary for our ADSs will give us a discretionary proxy to vote our ordinary shares underlying the ADSs if holders of ~~such~~these ADSs do not ~~vote at shareholders' meetings,~~give voting instructions to the depositary, except in limited circumstances, which could adversely affect the interests of holders of our ADSs.

Under the deposit agreement for our ADSs, the depositary will give us a discretionary proxy to vote the ordinary shares underlying the ADSs at shareholders' meetings if holders of ~~such~~these ADSs do not give voting instructions to the depositary, unless:

•: we have failed to timely provide the depositary with our notice of meeting and related voting materials;
•: we have instructed the depositary that we do not wish a discretionary proxy to be given;
•: we have informed the depositary that there is substantial opposition as to a matter to be voted on at the meeting;
•: a matter to be voted on at the meeting would have a material adverse impact on shareholders; or
•: voting at the meeting is made on a show of hands.

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The effect of this discretionary proxy is that, if holders of our ADSs fail to give voting instructions to the depositary, they cannot prevent our ordinary shares underlying their ADSs from being voted, absent the situations described above, and it may make it more difficult for shareholders to influence our management. Holders of our ordinary shares are not subject to this discretionary proxy.

Holders of our ADSs may be subject to limitations on transfer of their ADSs.

ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason.

Holders of our ADSs may not receive distributions on our ordinary shares or any value for them if it is illegal or impractical to make them available to them.

The depositary of our ADSs has agreed to pay holders of our ADSs the cash dividends or other distributions it or the custodian for our ADSs receives on our ordinary shares or other deposited securities after deducting its fees and expenses. Holders of our ADSs will receive these distributions in proportion to the number of our ordinary shares that their ADSs represent. However, the depositary is not responsible for making ~~such~~these payments or distributions if it is unlawful or impractical to make a distribution available to any holders of ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act but that are not properly registered or distributed pursuant to an applicable exemption from registration. The depositary is not responsible for making a distribution available to any holders of ADSs if any government approval or registration required for ~~such~~the distribution cannot be obtained after reasonable efforts made by the depositary. We have no obligation to take any other action to permit the distribution of our ADSs, ordinary shares, rights or anything else to holders of our ADSs. This means that holders of our ADSs may not receive the distributions we make on our ordinary shares or any value for them if it is illegal or impractical for us to make them available. These restrictions may materially reduce the value of the ADSs.

There could be adverse United States federal income tax consequences to United States investors if we were or were to become a passive foreign investment company.

While we do not believe we are or will become a passive foreign investment company, or PFIC, there can be no assurance that we were not a PFIC in the past and will not become a PFIC in the future. The determination of whether or not we are a PFIC is made on an annual basis and will depend on the composition of our income and

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assets from time to time. Specifically, we will be classified as a PFIC for United States federal income tax purposes if either: ~~(1)~~(i) 75% or more of our gross income in a taxable year is passive income, or ~~(2)~~(ii) the average percentage of our assets by value in a taxable year ~~which~~that produce or are held for the production of passive income (which includes cash) is at least 50%. The calculation of the value of our assets will be based, in part, on the quarterly market value of our ADSs, which is subject to change. See "Item 10. Additional Information — E. Taxation — Material United States Federal Income Tax Considerations — Passive Foreign Investment Company."

Although we do not believe we were or will become a PFIC, it is not entirely clear how the contractual arrangements between us and our variable interest entities will be treated for purposes of the PFIC rules. If it were determined that we do not own the stock of our variable interest entities for United States federal income tax purposes (for ~~instance,~~example, because the relevant PRC authorities do not respect these arrangements), we may be treated as a PFIC. See "Item 10. Additional Information — E. Taxation — Material United States Federal Income Tax Considerations — Passive Foreign Investment Company."

If we were or were to become a PFIC, ~~such characterization could result in~~ adverse United States federal income tax consequences to our shareholders that are United States ~~investors.~~investors could result. For example, if we are a PFIC, our United States investors will

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become subject to increased tax liabilities under United States federal income tax laws and regulations and will become subject to burdensome reporting requirements. ~~We cannot assure you~~There can be no assurance that we were not or will not become a PFIC for any taxable year. You are urged to consult your own tax advisors concerning United States federal income tax consequence on the application of the PFIC rules. See "Item 10. Additional Information — E. Taxation — Material United States Federal Income Tax Considerations — Passive Foreign Investment Company."

ITEM 4 INFORMATION ON THE COMPANY

A. History and Development of the Company

Alibaba Group Holding Limited is a Cayman Islands holding company established under the Companies Law of the Cayman Islands (as amended) on June 28, 1999, and we conduct our business in China through our subsidiaries and variable interest entities. Our ADSs are listed on the NYSE under the symbol "BABA."

Our significant subsidiaries, as that term is defined under Section 1-02 of Regulation S-X under the Securities Act, include the following entities:

•: Taobao Holding Limited, an exempted company incorporated with limited liability under the laws of the Cayman Islands, which is our wholly-owned subsidiary and the indirect holding company of the PRC subsidiaries relating to ~~our~~ Taobao Marketplace and ~~Tmall platform.~~Tmall.
•: Taobao China Holding Limited, a ~~Hong Kong~~ limited liability company incorporated under the laws of Hong Kong, which is the direct wholly-owned subsidiary of Taobao Holding Limited and the direct holding company of ~~the~~certain PRC subsidiaries relating to ~~our~~ Taobao Marketplace and ~~Tmall platform and operating entity for the overseas business of our Taobao Marketplace and Tmall Global.~~Tmall.
•: Taobao (China) Software Co., Ltd., a limited liability company incorporated under the laws of the PRC, which is an indirect subsidiary of Taobao Holding Limited and ~~a wholly-foreign owned enterprise,~~one of our wholly-owned entities, and provides software and technology services for ~~our~~ Taobao Marketplace.
•: Zhejiang Tmall Technology Co., Ltd., a limited liability company incorporated under the laws of the PRC, which is an indirect subsidiary of Taobao Holding Limited and ~~a wholly-foreign owned enterprise,~~one of our wholly-owned entities, and provides software and technology services for ~~our Tmall platform.~~
•: Alibaba.com Limited, an exempted company incorporated with limited liability under the laws of the Cayman Islands, which is our wholly-owned subsidiary and the indirect holding company of the PRC subsidiaries relating to our Alibaba.com, 1688.com and AliExpress businesses.

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•: Alibaba.com Investment Holding Limited, a company incorporated with limited liability under the laws of the British Virgin Islands, which is the direct wholly-owned subsidiary of Alibaba.com Limited and a lower level holding company of the PRC subsidiaries relating to our Alibaba.com, 1688.com and AliExpress businesses.Tmall.
•: Alibaba Investment Limited, a company incorporated with limited liability under the laws of the British Virgin Islands, which is our wholly-owned subsidiary and the principal holding company for our strategic investments.

The principal executive offices of our main operations are located at 969 West Wen Yi Road, Yu Hang District, Hangzhou 311121, People's Republic of China. Our telephone number at this address is ~~+86-571-8502-2077.~~+86-571-8502-2088. Our registered office in the Cayman Islands is located at the offices of Trident Trust Company (Cayman) Limited, Fourth Floor, One Capital Place, P.O. Box 847, George Town, Grand Cayman, Cayman Islands. Our agent for service of process in the United States is Corporation Service Company located at 1180 Avenue of the Americas, Suite 210, New York, New York 10036. Our corporate website is~~www.alibabagroup.com~~. www.alibabagroup.com.

We have a demonstrated track record of successful organic business creation. In addition to organic growth, we have made, or have entered into agreements to make strategic investments, acquisitions and alliances that are intended to ~~increase~~further our ~~service offerings and expand our capabilities.~~strategic objectives. See "Item 5. Operating and Financial Review and Prospects — A. Operating Results — Recent Investment, Acquisition and Strategic Alliance Activities" for more information.

~~Initial Public Offering~~

In September 2014, we completed our initial public offering, in which we and certain selling shareholders offered and sold an aggregate of 368,122,000 ordinary shares in the form of ADSs. We received approximately US$10 billion in proceeds before expenses. Our ADSs are listed on the NYSE under the symbol "BABA."

Share Repurchase Program

~~On August 12, 2015,~~In May 2017, we announced the ~~implementation~~adoption of a share repurchase program in an aggregate amount of up to US$46.0 billion over a period of two years, or the 2017 Share Repurchase Program. We have repurchased approximately 10.9 million of our ADSs ~~representing our ordinary shares~~for a total of approximately US$1.57 billion on the open market under a purchase ~~plans~~plan adopted to implement the 2017 Share Repurchase Program. ~~In addition, Jack Ma, our executive chairman, and Joe Tsai, our executive vice chairman, have jointly entered into our plans as affiliated purchasers.~~ See "Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers." The 2017 Share Repurchase Program expired as of the date of

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this annual report. In May 2019, our board of directors authorized a new share repurchase program for an amount of up to US$6.0 billion over a period of another two years.

B. Business Overview

Our Mission

Our mission is to make it easy to do business anywhere.

Our founders started our company to champion small businesses, in the belief that the Internet would level the playing field by enabling small enterprises to leverage innovation and technology to grow and compete more effectively in ~~the~~ domestic and global economies. We believe that concentrating on customer needs and solving their problems — whether those customers are consumers, merchants or ~~merchants~~enterprises — ultimately will lead to the best outcome for our business. We have developed a large ~~ecosystem for online and mobile commerce~~digital economy that enables participants to create and share value on our ~~platform.~~platforms. Our decisions are guided by how they serve our mission over the ~~long-term,~~long term, not by the pursuit of short-term gains.

Our Vision

We aim to build the future infrastructure of commerce. We envision that our customers will meet, work and live at Alibaba, and that we will be a company that lasts at least 102 years.

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Meet @ Alibaba. We enable ~~hundreds of millions of~~ commercial and social interactions among ~~our~~hundreds of millions of users, between consumers and merchants, and among businesses every day.

Work @ Alibaba. We empower our customers with the fundamental infrastructure for commerce and ~~data~~new technology, so that they can build businesses and create value that can be shared among our ~~ecosystem~~digital economy participants.

Live @ Alibaba. We strive to expand our products and services to become central to the everyday lives of our customers.

As we continue to expand our businesses from commerce to cloud computing, digital media and entertainment, among other sectors, Alibaba has evolved into a digital economy that is unique, energetic and innovative. By the year 2036, we aim to have served 2 billion global consumers, empowered 10 million profitable businesses and created 100 million jobs.

102 Years. For a company that was founded in 1999, lasting at least 102 years means we will have spanned three centuries, an achievement that few companies can claim. Our culture, business models and systems are built to last, so that we can achieve sustainability in the long run.

Our Values

Our values are fundamental to the way we operate and how we recruit, evaluate and compensate our people.

Our six values are:

•: Customer First — The interests of our community of consumers, merchants and ~~merchants~~enterprises must be our first priority.
•: Teamwork — We believe teamwork enables ordinary people to achieve extraordinary things.
•: Embrace Change — In this fast-changing world, we must be flexible, innovative and ready to adapt to new business conditions in order to ~~survive.~~maintain sustainability and vitality in our business.
•: Integrity — We expect our people to uphold the highest standards of honesty and to deliver on their commitments.

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•: Passion — We expect our people to approach everything with fire in their belly and never give up on doing what they believe is right.
•: Commitment — Employees who demonstrate perseverance and excellence are richly rewarded. Nothing should be taken ~~lightly~~for granted as we encourage our people to "work happily and live seriously."

Company Overview

To fulfill our mission "to make it easy to do business anywhere," we enable businesses to transform the way they market, sell and ~~operate.~~operate and improve their efficiencies. We provide the ~~fundamental~~ technology infrastructure and marketing reach to help merchants, brands and other businesses ~~that provide products, services and digital content~~ to leverage the power of ~~the Internet~~new technology to engage with their users and ~~customers.~~customers and operate in a more efficient way.

Our businesses are comprised of core commerce, cloud computing, ~~mobile~~digital media and entertainment, and ~~other~~ innovation initiatives. ~~Through investee affiliates, Cainiao Network and Koubei (), respectively, we participate in the logistics and local services sectors.~~ In addition, ~~we have a profit sharing interest in~~ Ant Financial, ~~Services, the~~an unconsolidated related party, provides payment and financial services ~~group~~to consumers and merchants on our platforms. A digital economy has developed around our platforms and businesses that ~~operates through Alipay, the leading~~consists of consumers, merchants, brands, retailers, third-party ~~online payment platform in China.~~service providers, strategic alliance partners and other businesses.

Core Commerce

Retail Commerce

Retail commerce in China

We are the largest retail commerce ~~company~~business in the world in terms of GMV in the twelve months ended March 31, ~~2016, compared with others on the basis of publicly available comparable transaction value data for the most recent fiscal year.~~

2019, according to Analysys. We operate Taobao Marketplace, China's largest mobile commerce destination with a large and growing social community, and Tmall, ~~China's~~the world's largest third-party online and mobile commerce platform for brands and retailers, in each case ~~by monthly active users~~ in ~~2015, according to iResearch.~~

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We also operate Juhuasuan, which is our sales and marketing platform for flash sales where merchants can acquire new customers and raise brand awareness through special discounts and promotional events. Taobao, Tmall and Juhuasuan, which comprise our China retail marketplaces, generated a combined GMV ~~of RMB3,092 billion (US$485 billion)~~ in the twelve months ended March 31, 2016. There were 423 million active buyers on these marketplaces in the twelve months ended March 31, 2016. In the three months ended March 31, 2016, mobile GMV accounted for 73% of our GMV. In March 2016, the various mobile apps that consumers use2019, according to ~~access our China retail marketplaces had 410 million mobile MAUs.~~

Analysys. In fiscal year ~~2016,~~2019, we generated ~~79%~~approximately 66% of our revenue from our ~~China~~ retail ~~marketplaces. Our revenue on these marketplaces is generated from merchants~~commerce business in China.

We have introduced New Retail initiatives to reengineer the fundamentals of retail operations and transform the retail landscape. New Retail represents the convergence of online and offline retail by leveraging digitalized operating systems, in-store technology, supply chain systems, consumer insights and mobile ecosystem to provide a seamless shopping experience for consumers. For example, we operate Freshippo, known as "Hema" in Chinese, our proprietary grocery retail chain. Freshippo exemplifies the creation of a new shopping experience through the convergence of online ~~marketing services, commissions on transactions~~ and ~~fees~~offline activities by using retail stores to warehouse and fulfill online orders in addition to offering a rich and fun experience for ~~other online services.~~customers who shop in-store.

~~In 2014, we launched our Rural Taobao program, which is~~Retail commerce — cross-border and global

We operate Lazada's leading e-commerce platform across Southeast Asia with local language mobile apps and websites in Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam. AliExpress, one of our ~~key strategic initiatives to address the consumption needs and promote economic development in China's rural areas.~~

~~Wholesale Commerce in China~~

We operate a China wholesale marketplace, 1688.com, which matches wholesale buyers and sellers in categories such as general merchandise, apparels, electronics, raw materials, industrial components and agricultural and chemical products. A significant number of merchants on ourglobal retail marketplaces, ~~source their inventory on 1688.com.~~

~~International and Cross-border Commerce~~

~~We operate AliExpress, our global marketplace targeting~~enables consumers from around the world to buy directly from manufacturers and distributors in ~~China.~~China and around the world. Tmall Global ~~is our platform within Tmall for~~allows overseas brands and retailers to reach Chinese consumers, ~~without~~and is the ~~need~~largest import e-commerce platform in China based on GMV in the twelve months ended March 31, 2019, according to Analysys. Additionally, Tmall World, a Chinese-language e-commerce platform, allows overseas Chinese consumers to shop directly from Chinese domestic brands and retailers. In fiscal year 2019, we also acquired Trendyol in Turkey, and Daraz, which primarily operates in Pakistan and Bangladesh. Both Trendyol and Daraz operate leading e-commerce platforms in their respective markets.

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Wholesale Commerce

Wholesale commerce in China

1688.com, China's leading integrated domestic wholesale marketplace in 2018 by revenue, according to Analysys, connects wholesale buyers and sellers in a wide range of categories. Lingshoutong (), a digital sourcing platform for ~~physical operations~~retailers, connects fast moving consumer goods, or FMCG, brand manufacturers and their distributors directly to local mom-and-pop stores in China.

Wholesale commerce — cross-border and global

We ~~also~~ operate Alibaba.com, China's largest ~~global~~integrated international online wholesale marketplace in ~~2015~~2018 by revenue, according to ~~iResearch. In April 2016, we acquired~~Analysys. As of March 31, 2019, buyers on Alibaba.com were located in over 190 countries.

Logistics Services

We operate Cainiao Network's logistics data platform and global fulfillment network that primarily leverages the capacity and capabilities of logistics partners. It offers domestic and international one-stop-shop logistics services and supply chain management solutions, fulfilling various logistics needs of merchants and consumers at scale, serving our digital economy and beyond. We use Cainiao Network's data insights and technology to facilitate the digitalization of the entire warehousing, fulfillment and delivery process, thereby improving efficiency across the logistics value chain. For example, it provides real-time access to data for merchants to better manage their inventory and warehousing, for consumers to track their orders, and for express courier companies to optimize delivery routes.

Consumer Services

We use mobile and online technology to enhance the efficiency, effectiveness and convenience of consumer services for both service providers and their customers. We utilize this technology in Ele.me, a ~~controlling stake in Lazada, which operates e-commerce platforms in Indonesia, Malaysia, the Philippines, Singapore, Thailand~~leading on-demand delivery and ~~Vietnam. According~~local services platform, to ~~Internet Live Stats' estimates, these six countries have~~enable consumers to order food and beverages through a ~~combined population of approximately 560 million~~mobile app anytime and ~~an Internet user base of approximately 200 million in 2016.~~anywhere. Koubei, a leading restaurant and local services guide platform for in-store consumption, provides targeted marketing tools for merchants and allow consumers to discover local services content. Fliggy, a leading online travel platform, provides comprehensive services for consumers' travel needs.

Cloud Computing

~~We operate~~ Alibaba Cloud ~~Computing,~~is the world's third largest, and Asia Pacific's largest, Infrastructure-as-a-Service, or IaaS, and Infrastructure Utility Services provider by revenue in 2018, according to Gartner's April 2019 report (Source: Gartner, Market Share: IT Services, 2018, Dean Blackmore et al., April 8, 2019) (Asia Pacific refers to Mature Asia/Pacific, Greater China, Emerging Asia/Pacific and Japan). Alibaba Cloud is also China's largest provider of public cloud services ~~in 2015~~ by revenue in 2018, including Platform-as-a-Service, or PaaS, and IaaS services, according to ~~IDC. The technologies that power Alibaba~~IDC (Source: IDC Semiannual Public Cloud ~~grew out of our own need to operate the massive scale and complexity of our core commerce business. In 2009, we founded Alibaba Cloud to make these technologies available to third-party customers.~~Services Tracker, 2018). Alibaba Cloud offers a complete suite of cloud services, ~~including:~~including elastic computing, database, storage, ~~and content delivery~~ network ~~(CDN),~~virtualization services, large scale computing, security, ~~and~~ management and application ~~services. As of March 31, 2016, Alibaba Cloud had over 2.3 million customers, including over 500,000 paying customers.~~services, big data analytics, a machine learning platform, and IoT services, serving our digital economy and beyond.

~~Mobile~~Digital Media and Entertainment

Based on the strength of our relationship with consumers and our capability in leveraging commerce data that can be applied to serving the broader interests of consumers, we have established an emerging business in mobileDigital media and entertainment ~~mainly through acquisitions. In 2014,~~is a natural extension of our strategy to capture consumption beyond our core commerce businesses. Insights we ~~acquired UCWeb, which operates UC Browser,~~gain from our core commerce business and our proprietary data technology enable us to deliver relevant digital media and entertainment content to consumers. This synergy delivers a superior entertainment experience, increases customer loyalty and return on investment for enterprises, and improves monetization for content providers across the second largest mobile browser in the world after Chrome by page view market share as of April 2016, according to StatCounter (data available at: http://gs.statcounter.com). UCWeb provides mobile value-added services to users including news feeds, mobile web navigation and mobile search. Its mobile search business, Shenma (), was the second largest mobile search engine in China in the three months ended March 31, 2016, according to BigData-Research. In April 2016, we acquired Youku Tudou, a leading multi-screen entertainment and media company in China, enabling users to search, view and share high-quality video content quickly anddigital economy.

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~~easily across multiple devices. These businesses~~Youku, the third largest online video platform in China in terms of monthly active users in March 2019, according to QuestMobile, and UC Browser, one of the top mobile browsers in the world, according to Stat Counter (http://gs/statcounter.com), serve as our two key distribution platforms for digital media and entertainment content. In addition, to further implement our digital media and entertainment strategies, we increased our shareholding in Alibaba Pictures, an Internet-driven integrated platform that covers content production, promotion and distribution, intellectual property licensing and integrated management, cinema ticketing management and data services for the entertainment industry, to approximately 51% in fiscal year 2019. Youku, UC Browser, Alibaba Pictures and our other ~~media~~content platforms, such as news feeds, literature and ~~entertainment-related businesses, including over-the-top TV services,~~ music, ~~sports and games, provide a comprehensive platform on which~~allow users ~~may~~to discover and consume content ~~and engage and~~as well as interact with each other.

~~An ecosystem~~Innovation Initiatives

We continue to innovate and develop new service offerings and products with the goals of meeting the needs and improving efficiency in the daily lives of our customers and creating synergies among our digital economy participants. Amap, the largest provider of mobile digital map, navigation and real-time traffic information in China by monthly active users in March 2019, according to QuestMobile, empowers our businesses and third-party mobile apps through its map data technology. Amap also provides a simple one-stop access point to end-users with services such as navigation, food delivery and taxi-hailing services. To enhance communication and efficiency of our business enterprise customers, DingTalk, the largest business efficiency app in China by monthly active users in March 2019, according to QuestMobile, enables communication in multiple formats, workflow management and network collaboration among team members and enterprises, all in a single interface. Through Tmall Genie, the No. 1 smart speaker in China by shipments in 2018, according to IDC (Source: IDC China Quarterly Smart Home Device Tracker, Fourth Quarter 2018), we have created a new and interactive interface for our customers to easily access services offered by our digital economy participants.

Our Digital Economy

A digital economy has developed around our platforms and businesses that consists of consumers, merchants, brands, ~~other enterprises,~~retailers, third-party service providers, ~~and~~ strategic alliance ~~partners.~~partners and other businesses. At the nexus of this ~~ecosystem~~digital economy are our technology platform, our marketplace rules and the role we play in connecting these participants to make it possible for them to discover, engage and transact with each other and manage their businesses anytime and anywhere. Much of our effort, time and energy is spent on initiatives that are for the greater good of the ~~ecosystem~~digital economy and on balancing the interests of its participants. We feel a strong responsibility for the continued development of the ~~ecosystem~~digital economy and we take ownership in this development. Accordingly, we refer to this as "our ~~ecosystem.~~digital economy." Our ~~ecosystem~~digital economy has strong self-reinforcing network effects benefitting its various participants, who are in turn invested in our ~~ecosystem's~~digital economy's growth and success.

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The following chart sets forth ~~our~~the key businesses ~~selected~~and services provided by us and Ant Financial, our major ~~investee companies and cooperative partners:~~cooperation partner.

*: ~~Entities that are~~We do not ~~consolidated.~~consolidate Ant Financial in our financial statements.

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Our Strategies

We will continue to innovate in the areas of business models, products and services, and technology to create value for both consumers and businesses. We formulate and evolve strategies that aim to ~~strengthen~~best serve consumers' and businesses' interests.

User Growth and Engagement

We look at our businesses and service and product offerings through the lens of our users. To cater to each user's personal needs, we aim to expand and make available a broad range of products and services across our ~~ecosystem~~digital economy, including physical and virtual goods, local consumer services, travel, media and entertainment, healthcare and financial services, among others.

We intend to further address the consumption needs of users in ~~order~~less developed cities and rural areas, and to ~~achieve long-term~~provide individuals at different income levels with access to quality merchandise and services suitable to their consumption capabilities.

We also intend to make our offerings available to more users outside of China as we implement our globalization initiatives. Starting with Southeast Asia, we aim to serve users around the world with localized operations, as well as cross-border commerce with access to Chinese manufacturers and consumers.

Empower Businesses to Facilitate Digital Transformation and Improve Operational Efficiency

Our diverse commerce platforms and extensive consumer insights, combined with our cloud computing technologies, New Retail supply-chain management and sales and marketing systems form a critical foundation that facilitate digital transformation for businesses. We refer to this foundation as the Alibaba Business Operation System ("ABOS").

ABOS allows us to enable the participants in our digital economy with our proprietary capabilities and know-how. To date, we have already enabled the transformation of the business operations, technology infrastructure and organizational systems of many of our enterprise customers. The enterprises that have leveraged our ABOS have already benefited from integrated online and offline operations, effective customer engagement, acquisition and retention, speedy delivery, innovative utilization of retail space, enhanced operating efficiencies and new business models.

ABOS currently serves a wide variety of businesses in our digital economy. We intend to make ABOS available to a broader range of enterprise customers in the future.

Continue to Innovate

We will continue to be an innovator in products and technology as well as an enabler of new business models. Traditionally unstructured, undiscovered and underutilized data can now be captured, activated and leveraged as a new source of intelligence that supports business growth ~~by:~~and decisions, driving improved operating efficiency and targeted offerings to meet consumer needs.

With cloud computing as an easily accessible and scalable service, and data as a value-enhancing resource, we believe that new technology will play a fundamental role in social and commercial interactions. With a strong commitment to data security and privacy, we will continue to apply machine learning technology to all aspects of our business and invest in our cloud computing platform to support our own and our customers' businesses.

Our Businesses

Core Commerce

Our core commerce business is comprised of the following businesses:

•: ~~increasing active buyers and our wallet share through geographic expansion, improved customer experience and new product and service categories;~~Retail commerce in China;

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•: ~~expanding service offerings to consumers beyond physical goods, including digital entertainment, healthcare~~Retail commerce — cross-border and ~~local services;~~global;
•: ~~enhancing the success of merchants, brands and other businesses on our platforms with data-driven marketing services, integrated online and offline distribution channels, and world-class technology;~~Wholesale commerce in China;
•: ~~extending our mobile leadership through development of market-leading mobile apps with hundreds of millions of users;~~Wholesale commerce — cross-border and global;
•: ~~applying data and cloud computing technologies in everything we do for our customers and for ourselves;~~Logistics services; and
•: ~~continuing to be an innovator in products and technology as well as a disrupter of business models and existing industry value chains.~~Consumer services.

Our long-term strategic goal is to serve two billion consumers around the world and support ten million businesses to operate profitably. We have embarked on three key initiatives to achieve this strategic goal: globalization, rural expansion and big data/cloud computing.

~~Globalization~~

~~Cross-border commerce is the focus of our globalization initiative. We aim to address each of the three-pillars of cross-border commerce as follows:~~

•: ~~From the world to China.~~ Our China retail marketplaces provide the gateway for international brands, retailers and small businesses to gain access to Chinese consumers. Through Tmall Global, overseas brands and retailers can reach Chinese consumers without the need for physical operations in China. Taobao Global further facilitates cross-border commerce by helping Taobao merchants to engage Chinese consumers with a rich variety of global products that they have sourced from suppliers outside of China.
•: ~~From China to the world.~~ Through our Alibaba.com wholesale marketplace, we facilitate global trade by connecting Chinese suppliers to importers, wholesalers and distributors across the world. On the retail front, AliExpress enables consumers worldwide to buy directly from manufacturers and distributors in China.
•: ~~From the world to the world.~~ Our long-term vision is to build a global commerce platform that is a virtual, borderless economy, which we refer to as the World e-Trade Platform, or eWTP. Through the power of the Internet, eWTP aims to eliminate barriers to commerce, promote free trade and help businesses and consumers everywhere participate in cross-border trade. To that end, we are investing in international talent and infrastructure, and expanding our presence in key markets around the world to attract and serve international customers.

~~Rural Expansion~~

Over 600 million people in China reside in rural areas, according to the National Bureau of Statistics of China as of December 31, 2015. Their access to goods and services is highly constrained by geographic and infrastructural limitations. We aim to give rural residents greater access to a broader variety of higher quality goods and services through our Rural Taobao program. At the same time, we help farmers earn more by selling agricultural products directly to urban consumers. To achieve our goals for the initiative, we had established service centers in over 14,000 rural villages as of March 31, 2016, where service center operators facilitate purchase orders and delivery logistics.

~~Big Data and Cloud Computing~~

We believe our world is rapidly transitioning from an information technology, or IT, economy to a data technology, or DT, economy. Traditionally unstructured, undiscovered and underutilized data can now be activated and leveraged as a new fundamental energy source. From the development of personal computer, or PC, to mobile, to the Internet of Things, the explosion of data is bringing about a new era of opportunity. In the future, we believe that the Internet will play a fundamental role in social and commercial human interactions, with cloud

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computing as a cost-saving public service, and data as a value-enhancing resource. We will continue to implement our data strategy through the application of data intelligence, machine learning and deep learning technologies to several fields, including marketplace design, user interface, search, targeted marketing, logistics, platform security, location-based services and financial services, among others. We will continue to invest in our cloud computing platform to support our own businesses and those of third parties.

~~Our Businesses~~

~~Core Commerce~~

~~Our core commerce business is comprised of marketplaces operating in three areas: retail commerce in China; wholesale commerce in China; and international and cross-border commerce.~~

Retail Commerce in China

Our retail commerce business in China, empowered by our commerce technologies and services, is primarily comprised of Taobao Marketplace, Tmall, New Retail initiatives and ~~Juhuasuan, collectively our China retail marketplaces, and Rural Taobao and merchant services. Our China retail marketplaces~~Alibaba Health. Together, they have become an important part of the everyday ~~life~~lives of Chinese online consumers. According to CNNIC, 413 million Chinese Internet users have experienced online shopping in 2015, out of a total of 688 million Internet users at the end of 2015. Our high penetration rate of China's online shopping population isconsumers, as evidenced by the ~~407~~654 million annual active ~~buyers~~consumers we had on our China retail marketplaces in the twelve months ended ~~December~~March 31, ~~2015.~~2019.

~~We believe consumers appreciate the shopping experience on our~~Value Proposition to Consumers

Our retail commerce businesses in China ~~retail marketplaces because of~~offer the following value ~~propositions:~~propositions to consumers:

•: Broad selection. We offer a comprehensive selection of products and services. Our China retail marketplaces had over 1two billion product and service listings as of March 31, ~~2016 across over 150 product categories, presenting a comprehensive selection~~2019. Our consumer services and New Retail initiatives through Freshippo and Intime and cooperation with Sun Art further enhance the richness of ~~products and services to consumers.~~our offerings.
•: Convenience. ~~Because of its 24/7 availability~~As our technology and innovation gradually eliminate the boundaries between online and offline commerce, consumers increasingly enjoy a seamless ~~user~~shopping experience especially on mobile, users are rapidly adopting Internet shopping. Through Cainiao Network and the logistics partners that are connected to its logistics data platform, consumers from cities to rural areas enjoy predictable and speedy delivery services.anytime, anywhere.
•: ~~Customized~~Engaging, personalized experience. ~~The content on~~Our Taobao ~~App~~app and Tmall ~~App is driven by~~app provide consumers with a unique social commerce experience through highly relevant content, personalized shopping recommendations, ~~news feeds~~live streaming, short-form videos, social media, buyer community Q&As, and ~~shopping themes~~other opportunities for ~~individual users, making our apps a highly effective platform for user~~social engagement.
•: Value for money. Our marketplace business model ensures that merchants offer competitive prices to consumers.
•: Merchant quality. Consumers can rate a merchant after completion of a transaction on Taobao Marketplace, Tmall and a number of our other platforms based on whether the product or service matches its description, the merchant's service level and delivery timeliness. ~~These customer feedbacks contribute to the detailed service rating, or DSR, which is displayed on the merchant's storefront and~~Consumer feedback is factored into the search algorithm that determines ~~its~~the merchant's ranking on the search results ~~pages.~~pages of our China retail marketplaces and other platforms, including our consumer services platforms.
•: Authentic products. Consumers can expect products purchased from our China retail marketplaces ~~are~~and a number of our other platforms to be protected by merchant quality ratings, clear refund and return policies and the Alipay escrow system. These protections are especially valuable in ~~lower-tier cities and rural villages~~less developed areas where it has been difficult to distribute and purchase authentic branded products.

~~Because~~Our ability to offer and deliver value has driven increased consumer engagement over time. Generally, the longer consumers have been with us, the larger number of orders they tend to place, across a more diverse range of product categories, and the more they tend to spend on our China retail marketplaces. In addition, we believe our platforms appeal to a growing and increasingly-diversified consumer base, including those at different income levels. In fiscal year 2018, more than 100 million annual active consumers spent more than RMB10,000 on our China retail marketplaces and 98% of these consumers continued to be active in fiscal year 2019. Furthermore, consumers from less developed areas are important growth drivers of our user base, contributing to more than 70% of the ~~most popular online shopping platform for Chinese~~increase in our annual active consumers on our China retail marketplaces in fiscal year 2019. While there has been an increasing number of active consumers from less developed areas, the overall average number of

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orders and amount spent (excluding those related to insurance) per annual active consumer on China retail marketplaces remained relatively stable.

Value Proposition to Merchants

With data and technology, we ~~deliver~~are committed to enabling merchants, brands and retailers by delivering the following value ~~proposition to merchants and brands:~~propositions:

•: ~~Efficient distribution.~~Customer acquisition, engagement and retention. ~~Manufacturers and retailers in China and rest of~~In March 2019, the ~~world increasingly recognize~~various mobile apps that ~~e-commerce is essential for survival and growth. As merchants and retailers turn~~consumers use to ~~online channels for distribution in China,~~access our China retail marketplaces ~~have become part of every conversation. The 423~~had 721 million mobile MAUs. In addition, our China retail marketplaces had 654 million annual active ~~buyers~~consumers for the twelve months ended March 31, ~~2016 represent~~2019, representing an unparalleled amount of purchasing power. Our consumer services and New Retail initiatives further allow us to engage a broader consumer base and drive user loyalty. Consumers come to our platforms with strong commercial intent, which drives high conversion rates and return on investment for merchants, brands, retailers and other service providers. The consumer behavior data from our platforms enable merchants, brands, retailers and other service providers to more effectively acquire, engage and retain customers, through campaign testing, targeted marketing and personalized user interface.

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•: Brand identity. Brands use their Tmall storefronts ~~as a platform~~ to ~~distinguish~~showcase their own brands and build brand proposition and awareness. They leverage the multi-media capabilities of our platforms, such as social media, videos and dynamic graphics, to tell their unique brand ~~story. Brand companies, such as Starbucks and P&G,~~stories. Brands are increasingly recognizing ~~the power of our China retail marketplaces~~us as athe top marketing platform, where they can optimize the life-time value of ~~customers can be built to benefit~~ their ~~businesses~~customers, both online and offline. ~~For example, the Starbucks Tmall store is designed to enhance its brand value of building people connections through e-gifting.~~
•: ~~Customer acquisition, retention and engagement.~~ In March 2016, the various mobile apps that consumers use to access our China retail marketplaces had 410 million mobile MAUs. Consumers come to our platform with strong commercial intent, which drives high conversion rates and effective return on investment (ROI) for merchants and brands. The consumer behavior data from our platform enables merchants and brands to acquire, retain and engage their customers effectively, through targeted marketing and a personalized user interface.
•: Efficient operations. ~~In addition to customer facing storefronts~~Merchants, brands and ~~product catalogues, merchants~~retailers use ~~the software offered on~~ our ~~merchant service platform~~commerce technologies and services to improve ~~the operation of~~ their ~~planning,~~sales channels, marketing, supply chain management and ~~sales activities,~~logistics, as well as our cloud computing services to lower their technology costs.
•: ~~Omni-channel opportunities.~~New consumer experience. ~~Brands~~We offer mobile and enterprise technology to enable merchants, brands and retailers ~~that have retail outlets can leverage our omni-channel retailing software~~to offer consumers a seamless online and in-store shopping experience. These solutions integrate online and offline inventory, membership and services ~~including~~that enable merchants, brands and retailers to fulfill online orders with store-based inventories (through store pick-up or delivery from the nearest stores) and allow consumers to purchase a wide variety of products not in stock in stores.
•: Consumer insights. Consumers come to our platforms to browse for ideas, look for new trends, receive merchant and product updates, compare products, share shopping experiences and to be entertained. Consumer actions on our platforms, such as searching, browsing, reading news feeds, bookmarking and adding products to shopping carts, generate valuable data ~~standardization service~~about user intentions. We focus heavily on protecting the privacy and security of consumer-derived data. The consumer insights provided by these actions are unique to our platforms and are not easy for ~~warehouse management and a CRM exchange.~~merchants to obtain anywhere else.

~~A description of the various aspects of our China commerce retail business follows.~~

Taobao Marketplace

Taobao means "search for treasure" in Chinese. Through the Taobao app and the website at www.taobao.com, ~~and the~~we have positioned Taobao ~~App, Taobao~~ Marketplace ~~is positioned~~ as the starting point and destination portal for the shopping journey. ~~In addition, consumers use~~Consumers from both large cities and less developed areas come to Taobao Marketplace ~~as a commerce-oriented social~~to enjoy an engaging, personalized shopping experience, optimized by our big data analytics. Through highly relevant and ~~community platform where they can acquire product knowledge, converse with other consumers, receive~~engaging content and real-time updates from merchants, consumers can learn about products and ~~use interactive media to connect~~new trends. They can also interact with each other and ~~with~~ their favorite ~~brands~~merchants and ~~retailers.~~key opinion leaders. Taobao Marketplace has a broad offering of interactive features such as live broadcast and short-form videos. Taobao Marketplace is China's largest mobile commerce destination, with a large and growing social community, in terms of GMV for the twelve months ended March 31, 2019, according to Analysys.

Taobao Marketplace provides a top-level traffic funnel that directs users to the various marketplaces, channels and features within our ~~China retail marketplaces.~~digital economy. For example, a search result on Taobao Marketplace ~~display~~displays listings not only from Taobao Marketplace merchants but also from Tmall merchants and brands, thereby generating traffic for Tmall.

Taobao Marketplace reaches a vast consumer base, including and beyond consumers from large cities. In the twelve months ended March 31, 2016, approximately 65% of active buyers on our China retail marketplaces were located outside of tier 1 and tier 2 cities.

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~~The substantial majority of users access Taobao Marketplace through a mobile device.~~ Below is a visual presentation of various ~~components~~features of the Taobao ~~App:~~app:

Taobao App — Homepage

~~Starting point~~Taobao app offers a unique social commerce experience through highly relevant content,
personalized shopping recommendations and ~~destination portal~~opportunities for ~~mobile commerce~~social engagements

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Taobao App — ~~Search~~Personalized Shopping Experience

~~Search results are personalized and customized for different users~~Consumers see targeted content based on relevancy

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Taobao App — ~~Good Find~~Rich and Engaging Content for Consumers

~~Shopping recommendations based on consumer actions on our platforms~~Consumers come to Taobao app to discover new trends and ~~user profile~~browse for ideas

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Taobao App — ~~Taobao Headlines~~Enabling Merchants to Engage with Consumers

~~Personalized third-party news feed for~~Taobao app offers features like live streaming, short-form videos and social media which allow
merchants to engage with consumers ~~to look for new trends and browse for ideas~~beyond their storefronts

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Taobao App — ~~Weitao ( )~~Enabling Massive Consumer Base to Interact with One Another

~~Social media~~Interest-based interactive platform for ~~merchants~~consumers to ~~engage and~~ share shopping experiences,
interact with ~~consumers~~one another and answer each other's questions

Taobao Marketplace is also the entry point to various specific product and service categories beyond general merchandise, such as second-hand auctions, and online travel booking, which may also be accessed through their respective independent mobile apps.

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~~Taobao App — Communities~~

~~Interest-based interactive communities for consumers to share shopping experiences and interact with one another~~

~~Taobao Marketplace is also the entry point to verticals such as online travel booking, operated under the Alitrip name, and second-hand auctions, operated under the Xianyu (~~) name, both of which can also be accessed through their own independent mobile app. Alitrip offers a comprehensive selection of domestic and international airline tickets, train and bus tickets, hotel bookings, vacation packages and tourist attractions through online travel agencies and direct travel service providers such as airlines and hotels. Xianyu users trade second-hand items using the Xianyu mobile app which offers location-based information about products and merchant rating reviews.

Merchants on Taobao Marketplace are primarily individuals and small businesses. ~~The creation of~~Merchants can create storefronts and listings ~~by a merchant~~ on Taobao Marketplace is free of charge. The escrow payment services provided by Alipay are free of charge to consumers and merchants unless payment is funded through a credit product such as a credit card, in which case Alipay charges a fee to the merchant based on the related bank fees charged to Alipay. Taobao Marketplace merchants can purchase pay-for-performance, or P4P, and display marketing services to direct traffic to their storefronts. In addition, merchants can acquire additional traffic from third-party marketing affiliates. Taobao Marketplace merchants can also pay for advanced storefront software that ~~help~~helps to upgrade, decorate and manage their online storefronts.

Tmall

Tmall caters to ~~consumers looking~~consumers' ever-growing demand for ~~branded~~high-quality products and a premium shopping experience. A large number of international and Chinese brands and retailers have established storefronts on Tmall. ~~According to iResearch,~~We have positioned Tmall ~~is the largest B2C platform in China in terms of monthly active users in 2015. It is positioned~~ as a trusted platform for consumers in China and overseas to buy both homegrown and ~~international branded~~international-branded products as well as products not available in traditional retail outlets.

~~Table~~ As the brands and offerings on Tmall continue to grow and diversify, we have been able to more accurately target and meet different consumer demands. In the twelve months ended March 31, 2019, Tmall was the largest third-party online and mobile commerce platform for brands and retailers in the world in terms of ~~Contents~~GMV, according to Analysys, and continues to grow quickly.

In 2009, Tmall pioneered ~~November 11, known as "Singles Day" in China, as an annual promotional~~the 11.11 global shopping ~~day. Singles Day~~festival. 11.11 has become the most important shopping event in China and we believe it generated the highest one-day retail sales volume in the ~~world: on~~world in 2018. On November 11, ~~2015,~~2018, our China ~~and international~~ retail marketplaces and AliExpress generated GMV of ~~RMB91~~RMB213.5 billion (US$1430.8 billion) settled ~~through Alipay~~ within a 24-hour ~~period.~~period, reflecting the strength of our infrastructure and the scale of our entire digital economy in China and around the world.

Tmall is the partner of choice for brands. Brands and retailers operate their own stores on the Tmall platform with unique brand identities and look and feel, accompanied by full control over their own branding and merchandising. ~~Merchants on our China retail marketplces can customize their storefronts right down to the software code, without much constraint.~~ As of March 31, ~~2016,~~2019, there were over ~~100,000~~190,000 brands and merchants on ~~Tmall.~~Tmall, including 77% of the consumer brands ranked in the Forbes Top 100 World's Most Valuable Brands for 2019. Because of the presence of a large number of global brands and the stringent ~~requirements~~standards required for merchants, brands and retailers to join and operate on Tmall, a presence on Tmall has become a validation of quality, allowing merchants, brands and retailers to take advantage of our significant traffic to extend and build brand awareness and customer engagement. Major international brands that have physical operations in China ~~such as Apple, Zara, Bose, Estée Lauder, P&G and Unilever,~~ are well represented on Tmall. ~~And Tmall Global, an extension of Tmall, addresses the increasing demand from Chinese consumers for international products and brands that don't have presences in China.~~

Brands and retailers turn to Tmall not only for its broad user base, but also for its ~~merchant services~~data insights and ~~tools for customer acquisition, retention~~technology. Tmall has driven the digitalization and ~~engagement~~transformation of brands and retailers by enabling them to digitalize their operations, engage, acquire and retain consumers, increase brand recognition, innovate product offerings, manage supply chains and enhance ~~the efficiency~~operational efficiency. Tmall also offers a variety of ~~their operations.~~one-stop brand marketing and promotional products to help brands and retailers quickly acquire new users and enhance brand awareness.

We also seek to build our mind-share among consumers to position Tmall as the premier shopping destination for everyday items, highlighting value and convenience. ~~For example, through Tmall Supermarket, we offer consumers frequently purchased products, such as groceries~~Consumer electronics, apparel and ~~fast-moving consumer goods, or~~ FMCG in densely populated top-tier cities, where consumers enjoy same-day delivery or next-day delivery coordinated through the warehouse and delivery network partners of Cainiao Network. In consumer electronics, weare among Tmall's most popular product categories, which are growing quickly. We have ~~leveraged Singles Day to strengthen~~also strengthened consumer recognition of Tmall's value proposition in consumer electronics and home appliances through ~~exclusive promotions~~promotional events and strategic partnerships.

Like merchants on Taobao Marketplace, brands and merchants on Tmall have access to P4P, display marketing services and storefront software, which they can use to fully engineer, customize, and even code the software behind, their storefronts.

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New Retail Initiatives

We have introduced New Retail initiatives to innovate models for retail businesses and reengineer and transform the fundamentals of traditional retail operations. New Retail represents the convergence of online and offline retail by leveraging digitalized operating systems, in-store technology, supply chain systems, consumer insights and the mobile ecosystem to provide a seamless shopping experience for consumers. We believe the lack of real-time consumer insights is one of the key issues facing China's traditional retailers today. Through consumer insights and technology, our New Retail initiatives not only incubate new business models, but also focus on enabling traditional retailer partners to reinvigorate their businesses by digitalizing their operations and increasing their catchment area online and offline, thereby improving sales productivity. We are also empowering retailers with our new technology to significantly improve operating efficiency and allow them to react to consumer demands on a real-time basis.

•: Creating a New Shopping Experience through Innovative Supply Chain Management — Freshippo. Freshippo, known as "Hema" in Chinese, our proprietary grocery retail chain, exemplifies the creation of a new shopping experience through the convergence of online and offline activities by using retail stores to warehouse and fulfill online orders in addition to offering a rich and fun experience for customers who shop in-store. Its proprietary fulfillment system enables 30-minute delivery to customers living within a three-kilometer radius of a Freshippo store. Freshippo offers a mobile app that allows consumers to search for products and place orders while browsing in store. To improve consumer experience, Freshippo uses transaction data to personalize recommendations and geographic data to help plan the most efficient delivery routes. Freshippo is also shortening the sourcing process and increasing supply chain transparency and visibility through data technology. As of March 31, 2019, there were 135 self-operated Freshippo stores, primarily located in tier-one and tier-two cities.
•: Transforming the Traditional Retail Model — Starbucks and Sun Art. Through our New Retail strategy, we are at the forefront of transforming the retail industry by digitalizing all aspects of store-based operations. For example, in fiscal year 2019, Alibaba Group and Starbucks Coffee Company jointly announced a comprehensive strategic New Retail partnership to enhance the way customers enjoy their food and beverages. By the end of April 2019, we had enabled on-demand delivery of Starbucks offerings in more than 2,100 stores across 35 cities throughout China. We have also helped accelerate membership acquisition for its new Starbucks Reward program through the Alipay and Taobao apps. Furthermore, as of March 31, 2019, we have assisted Sun Art, the No. 1 hypermarket chain in China in 2018 by value ~~items~~of retail sales, according to Euromonitor International Ltd, with digitalizing approximately 470 stores. Our technology and know-how enable these stores to better manage their retail systems while allowing consumers to place orders through the Taobao app and secure delivery through our on-demand delivery platform, Ele.me. We invested in and formed a strategic alliance with Sun Art in November 2017.

We are also pursuing New Retail initiatives in product categories beyond daily consumption, such as ~~mobile phones,~~electronics, home furnishings and FMCG, among others. Intime Department Store is a leading department store chain in China that intends to transform traditional retail models for fashion apparel and accessories. We and Suning are jointly testing and developing new ways for consumers to shop for and purchase consumer electronics. In the home furnishing sector, we have invested in Red Star Macalline Group Corporation Limited and Easyhome, each of which is a leading retail chain for home-improvement supplies and furniture in China.

Alibaba Health

Alibaba Health is our flagship vehicle for bringing innovative solutions to the pharmaceutical and healthcare industries. Alibaba Health primarily engages in the operation of pharmaceutical e-commerce and consumer healthcare platforms, self-operated sales of pharmaceutical and healthcare products, the provision of product tracking services, and the development of intelligent medicine and Internet healthcare solutions.

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Branding and Monetization Platforms

Alimama

Alimama is our monetization platform. Using data technology, this platform matches the marketing demands of merchants, brands and retailers with the media resources on our own platforms and third-party properties, and enables us to monetize our core commerce and digital media and entertainment businesses. The platform supports P4P marketing services based on keyword search rankings or display marketing in fixed positions that are bid on through auctions, as well as ~~high~~cost per thousand impression (CPM)-based, time-based marketing formats, or individual campaigns at fixed cost, through the display of photos, graphics and videos.

The ranking of P4P search results on our core commerce platforms is based upon proprietary algorithms that take into account the bid price of keywords, the popularity of an item or merchant, customer feedback ranking of merchants and quality ~~delivery, installation and after-sale services on home appliances, such as television sets, kitchen appliances, refrigerators and washing machines, through our partners Ri Ri Shun (), or RRS, and Suning.~~

~~Merchants on Tmall pay commissions~~of product displays. For display marketing, the Alimama platform delivers marketing messages based on data insights generated across our digital economy. The relevance and comprehensiveness of data based on commercial activity and user activity in our digital economy provide a ~~pre-determined percentage~~unique advantage for Alimama to deliver the most relevant information to users.

Alimama also has an affiliate marketing program that places marketing displays on third-party apps and websites, thereby enabling marketers, if they so choose, to extend their marketing and promotional reach to properties and users beyond our own platforms. Our affiliate marketing program not only provides additional traffic to our core commerce platforms, but also generates revenue to us.

Alimama operates the Taobao Ad Network and Exchange, or TANX, one of ~~transaction value that varies~~the largest real-time online bidding marketing exchanges in China. TANX helps publishers to monetize their media inventories both on mobile apps and web properties. TANX automates the buying and selling of billions of marketing impressions on a daily basis. Participants on TANX include publishers, marketers and demand side platforms operated by product category, typically ranging from 0.4% to 5.0%. Tmall merchants also pay an annual upfront service fee, up to 100% of which may be refunded depending on sales volume achieved by the merchant within each year. Like Taobao Marketplace merchants, Tmall merchants have access to online marketing services, third-party marketing affiliates and storefront software.agencies.

~~Juhuasuan~~Marketing for Brands

~~Juhuasuan is~~Drawing on our big data capabilities, we have developed a ~~sales~~Uni Marketing approach that digitalizes consumer-brand relationships and marketing platform for flash sales where Tmall and Taobao Marketplace merchants can acquire new customers and raise brand awareness through special discounts and promotional events. Juhuasuan offers selected branded and private label products, products madeempowers brands to ~~custom specifications,~~build robust relationships with consumers throughout their lifecycles in our digital economy. We aim to help brands reach consumers by leveraging our marketplaces, Youku, UC Browser, strategic partners in our digital economy, as well as other major third-party Internet properties in China. We intend to become the key partner for brand building by creating an open, inclusive and transparent platform where brands and marketing agencies are able to design, execute, track and optimize their brand building activities using our data and tools.

Commerce Technologies and Services

We provide commerce technologies and services to enable merchants, brands and retailers on Taobao marketplace and Tmall to enhance their online and offline operational capabilities. With our commerce technologies, innovative services and data capabilities, merchants, brands and retailers can acquire, retain and further deepen their engagement with consumers in an efficient and effective manner, thereby enhancing merchants', brands' and retailers' loyalty to our platforms. These commerce technologies and services include the following key components:

Core Operations Control Panel

We provide an integrated online control panel that allows merchants, brands and retailers to conduct core operations through a unified interface. It offers essential business tools, such as an operations dashboard and direct messaging, access to business software marketplace and access to a wide range of offline services such as ~~group travel packages. Juhuasuan is an additional avenue for Taobao Marketplace or Tmall merchants to feature their trendiest products~~fashion modeling and to generate sales. Transactions from traffic originated on Juhuasuan are completed on the merchants' storefronts on Taobao Marketplace or Tmall. Merchants primarily pay a commission based on a pre-determined percentage of transaction value generated from Juhuasuan, which varies by product category, and, under certain circumstances, a placement fee for promotional slots for a specified period.

~~Rural Taobao~~

As of December 31, 2015, over 600 million people in China resided in rural areas, according to the National Bureau of Statistics of China. Consumption in the rural areas is highly constrained by geographic and infrastructural limitations, as the cost of distribution to geographically dispersed and remote locations is prohibitively high. We aim to increase the level of consumption and commerce in rural China through our Rural Taobao program. We have established service centers in villages to give rural residents greater access to goods and services and the ability to sell what they make to the cities. Villagers can shop at these service centers, with thephotography, among others.

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help of service center operators whom we call Rural Taobao Partners. Goods ordered online are delivered to county-level stations and then distributed by local couriers to service centers in the villages for pick up. As of March 31, 2016, we had service centers in over 14,000 rural villages. Coordinated by Cainiao Network, almost all packages can be delivered from the county-level station to a village service center the next day.

Our Rural Taobao program also helps Chinese rural villages to create a production economy by enabling village residents to sell items, such as agricultural products, directly to urban consumers. For example, the program facilitated farmers in the southern part of Jiangxi province, to sell more than 250 tonnes of oranges during the 16-day Ali Chinese New Year Shopping Festival in 2016, helping the region establish its reputation for quality oranges. The program also assisted rice farmers in Zhaoyuan, a small city in Heilongjiang province, with an innovative pre-order campaign where consumers placed their orders six months ahead of harvest and delivery. Despite the lack of e-commerce experience among the Zhaoyuan rice farmers, Zhaoyuan has since become a top-selling region for riceMerchants on our China retail marketplaces ~~in 2016, attracting large orders from corporations,~~use this control panel to conduct day-to-day operations, such as ~~national airlines~~managing storefronts and ~~state-owned enterprises.~~

~~Through our Rural Taobao program, we are pioneering a two-way distribution infrastructure to connect commerce between cities~~product listings, fulfilling orders, managing inventory and ~~rural areas in China. We believe Rural Taobao brings significant benefits to rural residents~~transactions, conducting sales and marketing activities, servicing customers, managing procurement process, interacting and collaborating with other businesses and seeking credit financing provided by ~~improving their quality of life, and to brands and manufacturers who wish to extend their reach by accessing China's vast rural population.~~Ant Financial.

~~Merchant services~~Big Data Support and Engagement Platform

~~While most users experience~~Equipped with our ~~China~~New Retail solutions, which are designed to improve offline retail ~~marketplaces as a consumer, we have also invested substantially in our relationship with merchants and~~operations, brands through development of merchant services, including online software tools. These services enable merchants and brands to manage engagement with their customers and operate more efficiently. We believe offering reliable and useful services to merchants and brands helps to enhance their loyalty to our platform. These merchant services include:

•: ~~Customer relationship management.~~ We provide online store owners the capability to tag and manage their customers who have visited their storefronts by attributes such as demographic characteristics and shopping preferences. This capability enables the store owner to personalize online storefront for each visitor.
•: ~~Inventory and fulfillment management.~~ We provide a data standardization platform to aggregate inventory data and facilitate data exchange between different enterprise systems efficiently, so that retailers can fulfill their online orders from any of their warehouses or offline stores.
•: ~~Storefront management.~~ We provide a suite of tools that assist storefront owners on Taobao Marketplace and Tmall to manage their storefronts, free of charge. Advanced versions of storefront management software for upgrades and decorations are available for a subscription fee. We also offer a free seller management "light app" within our Taobao App that allows merchants to set up and manage their storefronts directly using their mobile phones.
•: ~~Mobile engagement.~~ We offer a multi-media news feed channel on Taobao App and Tmall App for consumers to follow the latest news and videos posted by merchants and brands they have bookmarked. This feature enables merchants and brands to engage and interact with consumers wherever they are.
•: ~~Data insight.~~ ~~We offer a secured cloud data insight platform that offers sophisticated data analytic services such as customer data aggregation, brand marketing and product cycle management services.~~
•: ~~Communication.~~ Merchants can use our proprietary instant messenger to communicate with and provide customer service to consumers. The instant messaging tool supports text, audio and video communication on PC and mobile.
•: ~~Productivity management.~~ We provide an integrated platform for productivity management that allows merchants to access our suite of software tools in storefront management, communications and marketing services through a unified interface.

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~~Taobao Services Platform.~~ We offer Taobao Services Platform where qualified retail operation partners and ISVs offer product planning, supply chain management and fulfillment services to merchants. In addition, merchants can find service providers in marketing, fashion modeling and photography, as well as third-party software tools for storefront and customer relations management on the platform.

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~~Financing.~~ ~~Through Ant Financial Services, merchants doing business~~ on our ~~platforms~~secure cloud-based data insights platform have access to ~~credit financing. Ant Financial Services designs credit products~~sophisticated analytics services that consolidate online and ~~evaluates~~offline data, which in turn help brands gain insights into each stage of the consumer journey and ~~monitors~~provide a personalized online and offline shopping experience for consumers.

Knowledge Graph

We are the ~~credit risks~~largest retail commerce business in the world in terms of merchants through its proprietary model based on real-time data from sales transactions, customer feedbacks, customer service indicators and other factors. The availability of high-value commerce data uniqueGMV in the twelve months ended March 31, 2019, according to Analysys. In March 2019, over 250 million daily active users came to our China retail marketplaces, ~~enables Ant Financial Services~~which featured extensive listings. We develop significant insights from our digital economy, empowered by our technology, which allow us to establish comprehensive understanding of the products' profile and correlation with consumers' needs as well as deepen our product insights throughout our digital economy. As a result, we are able to provide ~~tailored financing services~~more accurate product recommendations to our consumers. We then aggregate and build on these insights to design standardized, themed and interconnected product categorization frameworks that recommend and sort product listings on behalf of merchants. As a result, we ~~believe~~ are ~~unmatched by other Internet peers.~~

~~Wholesale Commerce in China~~

~~1688.com China domestic wholesale marketplace~~

~~1688.com is~~able to help our ~~online wholesale marketplace that connects buyers~~merchants streamline their daily operations, generate more accurate search results across our platforms, and ~~sellers in China who trade in general merchandise, apparel, electronics, raw materials, industrial components,~~offer better recommendations and ~~agricultural and chemical products, among others. A significant number of merchants on~~shopping experiences to our retail marketplaces source their inventory on 1688.com. Listing items on 1688.com is free. Sellers may purchase a China TrustPass membership for an annual subscription fee to host premium storefronts with access to data-analytics applications and upgraded storefront management tools. Paying members may also pay for additional services, such as premium data analytics and online marketing services. As of March 31, 2016, 1688.com had over 930,000 paying members.consumers.

~~International~~Retail Commerce — Cross-border and ~~Cross-border Commerce~~Global

Our retail commerce — cross-border and global businesses include Lazada, AliExpress, Tmall Global, Tmall World, Trendyol and Daraz. In the twelve months ended March 31, 2019, Lazada, AliExpress, Trendyol and Daraz together served more than 120 million annual active consumers overseas.

Lazada

We operate Lazada's leading e-commerce platform across Southeast Asia, with local language mobile apps and websites in Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam. Lazada offers merchants and brands a one-stop marketplace solution to access consumers in these six countries. Lazada also sells products on its platform directly via its own retail operations. In addition, it has an extensive in-house logistics operations, which is supported by our highly scalable warehouse management system, to ensure quick and reliable order fulfillment that improve consumer experience and cost efficiency.

AliExpress

AliExpress is a global marketplace targeting consumers from around the world and enabling them to buy directly from manufacturers and distributors in ~~China.~~China and around the world. In addition to the global English-language site, the AliExpress ~~operates fifteen~~app is also available in 17 local ~~language sites,~~languages, including Russian, Portuguese, Spanish and French. Consumers can access the marketplace through ~~its websites or~~ the AliExpress ~~App.~~app or its websites. Top consumer markets where AliExpress is popular are Russia, the United States, Brazil, Spain ~~Brazil, France~~ and ~~the United Kingdom.~~

Merchants on AliExpress pay a transaction commission, which is typically 5% of transaction value. We also generate revenue on AliExpress from merchants who participate in the third-party marketing affiliate program and those who purchase P4P marketing services. In the twelve months ended March 31, 2016, AliExpress generated US$8.4 billion in GMV, US$5.4 billion of which was settled through Alipay.France.

Tmall Global

~~Through~~We launched Tmall Global ~~an extension of Tmall, we~~to address ~~the~~ increasing Chinese consumer demand for international products and brands. Tmall Global isserves as the premier platform ~~for~~through which overseas brands and retailers to reach Chinese consumers, ~~and~~ build brand awareness ~~in China without the need for physical operations in China. Tmall Global also enables brands to cater to niche demands, reduce time to market to test new products with consumers,~~ and gain valuable consumer insights in forming their overall China ~~strategy. For example, Costco, Macy's, Chemist Warehouse, LG Household & Health Care and Matsumoto Kiyoshi have storefronts on~~strategy,

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without the need for physical operations in China. According to Analysys, Tmall ~~Global.~~Global was the largest import e-commerce platform in China in the twelve months ended March 31, 2019, in terms of GMV.

~~Alibaba.com global trade~~Tmall World

Tmall World allows overseas Chinese consumers to conveniently shop for products from China. Tmall World, a Chinese language e-commerce platform, leverages our commerce infrastructure and aims to fulfill the shopping needs of millions of overseas Chinese consumers.

Wholesale Commerce in China

1688.com China domestic wholesale marketplace

1688.com, China's leading integrated domestic wholesale marketplace in 2018 by revenue, according to Analysys, connects wholesale buyers and sellers in China who trade in apparel, general merchandise, home decoration and furnishing materials, electronics, packaging materials and shoes, among others. Listing items on 1688.com is free. Sellers may purchase a China TrustPass membership for an annual subscription fee to reach customers, provide quotations and transact on the marketplace. Paying members may also pay for additional services, such as premium data analytics and upgraded storefront management tools, as well as customer management services. As of March 31, 2019, 1688.com had over 910,000 paying members.

Lingshoutong () — digital eRTM (electronic route to market) platform

Lingshoutong connects FMCG brand manufacturers and their distributors directly with local mom-and-pop stores in China. It provides digital supply chain services to FMCG brands and their distributors and improves their distribution efficiency by digitalizing offline distribution data through setting up point-of-sale, or POS, systems at the mom-and-pop stores, thereby enabling visibility to data throughout the transaction value chain. Lingshoutong also enables FMCG brands and their distributors to achieve efficient distribution and precise marketing by providing more targeted and accurate marketing recommendations. With these technologies and data, Lingshoutong also makes it easier for mom-and-pop store owners to do business by digitalizing their operations and offering their customers a broader selection of FMCG products.

Wholesale Commerce — Cross-border and Global

Alibaba.com is ~~a leading English language~~China's largest integrated international online wholesale marketplace ~~for global trade.~~in 2018 by revenue, according to Analysys. Sellers on Alibaba.com may ~~pay for~~purchase an annual Gold Supplier membership to ~~host a premium storefront with product listings~~reach customers, provide quotations and transact on the marketplace. Sellers may also purchase an upgraded membership package to receive value-added services such as upgraded storefront management tools and P4P ~~marketing~~ services. Buyers on Alibaba.com ~~are~~were located in over

~~Table~~ 190 countries as of ~~Contents~~

~~200 countries all over the world.~~March 31, 2019. Buyers are typically trade agents, wholesalers, retailers, manufacturers and SMEs engaged in the import and export business.

~~Through OneTouch, an Internet-based integrated services platform, we offer~~Alibaba.com also offers its members ~~of Alibaba.com~~ and other SMEs ~~services relating to~~ import/export ~~transactions,~~supply chain services, including customs clearance, ~~VAT refund,~~ trade financing and logistics. In the twelve months ended March 31, 2016, OneTouch processed over US$15 billion in import/export transaction volume. In 2015, Alibaba.com began offering Trade Assurance, a service through which we will compensate a buyer for damages arising from a seller's breach of contract terms. The amount of coverage is based on the seller's credit profile generated from data on our platforms.logistics services. As of March 31, ~~2016,~~2019, Alibaba.com had over ~~137,000~~165,000 paying members.

~~Lazada~~Logistics Services

Through Cainiao Network, we are committed to further strengthening the capabilities of our global logistics network. Our logistics vision is to be able to fulfill consumer orders within 24 hours in China and within 72 hours anywhere else in the world. To realize this vision, Cainiao Network establishes and operates a global fulfillment network together with logistics partners. It offers domestic and international one-stop-shop logistics services and supply chain management solutions, addressing various logistics needs of merchants and consumers at scale.

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Enhanced point-to-point network and on-demand delivery

~~We acquired~~Cainiao Network uses data insights and technology to digitalize the entire logistics process and empower logistics partners, thereby improving efficiency across the logistics value chain. For example, powered by large-scale computing and machine learning capabilities, Cainiao Network's e-shipping label and value-added services optimize delivery routes and improve efficiencies for express delivery couriers, leading to more accurate and speedy delivery to consumers. As an important complement to the last-mile delivery network of Cainiao's express delivery partners, Cainiao Network has also developed neighborhood delivery solutions with a ~~controlling stake~~combination of community and campus stations and residential self-pickup lockers, which we call Cainiao Post. Consumers can pick up packages from stations around urban communities and college campuses, as well as from smart pick-up lockers. In addition, we also operate Ele.me's local on-demand delivery network, known as Fengniao Logistics, to deliver food, beverages, groceries, among other products, to consumers on a timely basis.

Through technology innovation and open collaboration, Cainiao Network has further strengthened its strategic partnership with major express delivery companies. As of March 31, 2019, Cainiao Network's 15 strategic express courier partners employed over 1.6 million delivery personnel in more than 700 cities and 31 provinces in China, according to data provided by these partners. Collectively these partners operate more than 190,000 hubs and sorting stations. During fiscal year 2019, Cainiao Network and its logistics partners enabled the delivery of 25.1 billion packages that originated from our China retail marketplaces.

Scalable fulfillment network

The vast geographical area of China and wide distribution of Chinese consumers and merchants require a large and distributed logistics infrastructure. Cainiao Network has established a scalable network that consists of fulfillment hubs at key strategic locations, package sorting and distribution centers, which are owned, leased or partnered with logistics partners. The fulfillment network is connected by Cainiao Network's proprietary logistics data platform. To facilitate the execution of our New Retail strategy, Cainiao Network provides a full-fledged fulfillment network at provincial, city, and county levels to offer integrated supply chain management solutions to medium-sized and large brands and merchants. This network allows them to place inventory across multiple locations in advance based on sales forecasts to optimize supply chain efficiency and provide fast delivery to consumers.

International logistics

Cainiao Network and the logistics arm of Lazada have developed a strong and growing network of assets and partners to support our international commerce retail businesses (Lazada, AliExpress and Tmall World). From a China import standpoint, Cainiao Network is focused on developing cross-border fulfillment solutions for Tmall Global, utilizing a combination of bonded warehouses in China and direct shipping from foreign countries.

Consumer Services

Our consumer services businesses consist of:

Ele.me () (which means "Are you hungry?" in Chinese), a leading ~~e-commerce~~on-demand delivery and local services platform ~~across Southeast Asia,~~ in ~~April 2016. Lazada operates e-commerce platforms in Indonesia, Malaysia,~~China, enables consumers to use the ~~Philippines, Singapore, Thailand~~Ele.me, Taobao, Alipay and ~~Vietnam, with local language websites and~~Koubei mobile apps to order meals, snacks and beverages online. In addition, Ele.me's on-demand delivery network is highly synergistic with our other businesses, such as New Retail initiatives and Alibaba Health, which can now leverage the network to deliver fresh food, groceries and pharmaceutical products. As of March 31, 2019, Ele.me's network covered approximately 96% of cities in ~~each~~China, with approximately 30% of total orders generated from Alipay and the ~~six markets. Lazada offers third-party brands~~Taobao app.

Koubei, one of China's leading restaurant and ~~merchants~~local services guide platforms for in-store consumption, provides targeted, data-driven marketing tools and integrated digital operational services for restaurants and local services providers.

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Ele.me and Koubei operate under a ~~marketplace solution~~single management team. Our strategy is for the combined business to leverage the 654 million annual active consumers on our China retail marketplaces and our data technology to expand our offerings from shopping to services, further tapping into new addressable markets for consumption in China.

Fliggy, a leading online travel platform in China, provides comprehensive reservation services for airline tickets, train tickets, accommodation, car rental, package tours and local attractions. Fliggy enhances user experience through data technology that enables partner hotels to identify travelers with ~~simple~~good credit and direct access to consumers in these six countries through one retail channel. Lazada also sells products owned by its retail operations. It has developed its own logistics infrastructure with warehousesprovide travel privileges such as zero-deposit hotel bookings, express check-out and a last-mile delivery fleet to offer quick and reliable delivery to its customers. According to Internet Live Stats' estimates, the six countries in which Lazada operates have a combined population of approximately 560 million and an Internet user base of approximately 200 million in 2016.automatic post-stay billing.

Cloud Computing

Alibaba Cloud is the world's third largest, and Asia Pacific's largest, IaaS and Infrastructure Utility Services provider by revenue in 2018, according to Gartner's April 2019 report (Source: Gartner, Market Share: IT Services, 2018, Dean Blackmore et al., April 8, 2019) (Asia Pacific refers to Mature Asia/Pacific, Greater China, Emerging Asia/Pacific and Japan). Alibaba Cloud is also China's largest provider of public cloud services ~~in 2015~~ by revenue in 2018, including PaaS and IaaS services, according to ~~IDC.~~IDC (Source: IDC Semiannual Public Cloud Services Tracker, 2018). The technologies that power Alibaba Cloud grew out of our own need to operate at the massive scale and to address the complexity of our core commerce ~~business.~~business, including related payments and logistics elements. In 2009, we founded Alibaba Cloud to make these technologies available ~~for~~to third-party customers. In fiscal year 2019, Alibaba Cloud had more than 1.4 million paying customers, covering approximately 50% of the Top 500 Chinese brands, as ranked by Fortune, and more than half of the A-share listed companies in China.

Alibaba Cloud offers a complete suite of cloud services to customers worldwide, including elastic computing, database, storage, ~~and content delivery~~ network ~~(CDN),~~virtualization services, large scale computing, security, ~~and~~ management and application services, big data analytics, a machine learning platform and IoT services. Products that differentiate Alibaba Cloud from our domestic peers include proprietary security and middleware products, large scale computing services and analytic capabilities ~~provided~~supported by our big data analytics platform. These products not only enable customers to quickly build IT infrastructure ~~quickly~~services on-line without ~~having to~~on-premises work, ~~on-premise.~~but also equip them with leading big data analytics capabilities, providing deep data insights by efficiently handling the complex computing tasks of hundreds of millions of data dimensions. We also operate data centers in a number of countries including Indonesia, Malaysia, India, Australia, Singapore, Germany, Japan, the United States and others.

~~We offer~~As a major part of our cloud computing services to merchants doing business on our marketplaces, start-ups, corporations and government organizations. We charges fees that are primarily based on time and usage. As of March 31, 2016,partnership with the International Olympic Committee, we unveiled Alibaba Cloud had over 2.3 million customers, including over 500,000 paying customers. Customers, including China Railway, Weibo and Beijing Genomics Institute, use our elastic computing services, security and artificial intelligencesports-related intelligent capabilities, for data storage, transmission and analysis. Customers, such as Sinopec and BYD, also use our middleware services to upgrade their application infrastructures. Entertainment platforms, including CCTV and Mango TV, use our content delivery networks for live and on-demand video business. China Customs and China Meteorological Administration use our big data solutions to improve efficiency.

Our cloud computing platform supported our annual Singles Day promotion when record traffic and transactions occur. On Singles Day in 2015, Alibaba Cloud successfully processed peak transactions of 140,000 orders per second, demonstrating the platform's reliability and scalability.built on Alibaba Cloud's ~~distributed computation framework, FuxiSort, set new world records in the Sort Benchmark contest in 2015, a further demonstration~~high-performance infrastructure of ~~our leadership in general-purpose computing systems.~~

~~Table of Contents~~world-class data centers, network virtualization services and market-leading security services, which integrate data intelligence and machine learning to re-define engagement between fans, organizers, venues and athletes.

~~Mobile~~Digital Media and Entertainment

~~Based on the strength of~~Our digital media and entertainment business leverages our ~~relationship with consumers and our capability to leverage commerce~~deep data ~~that can be applied~~insights to serve the broader interests of consumers ~~we have developed an emerging business in mobile media and entertainment~~ through ~~three~~two key distribution platforms, ~~UCWeb mobile media, game publishing~~Youku and ~~multi-screen entertainment,~~UC Browser, and through Alibaba Pictures and our other diverse content ~~creation~~platforms that provide online videos, films, live events, news feeds, literature and ~~production companies in film,~~ music, ~~and sports.~~among other areas.

Key Distribution Platforms

~~UCWeb mobile media~~Youku

~~UCWeb operates UC Browser,~~Youku is the ~~second~~third largest mobile browser in the world after Chrome by page view market share as of April 2016, according to StatCounter (data available at: http://gs.statcounter.com). UCWeb also provides mobile value-added services to users including news feeds, mobile web navigation and mobile search. Its mobile search business, Shenma (~~), was the second largest mobile search engine~~online video platform in China in ~~the three months ended~~terms of monthly active users in March ~~31, 2016,~~2019, according to ~~BigData-Research.~~

~~Game publishing~~

We operate a game publishing platform for Android-based mobile games that also serves as an online community and media platform for gamers. We cooperate with upstream and downstream players across the game industry value chain, as a partner, exclusive licensee and developer of mobile games.

~~Multi-screen entertainment~~

~~Youku Tudou, a leading multi-screen entertainment and media company in China,~~QuestMobile. It enables users to search, view and share high-quality video content quickly and easily across multiple devices. The Youku ~~Tudou~~ brand is among the most recognized online video brands in China. ~~In March 2016, monthly active users on Youku Tudou PC platforms reached 344 million~~

Insights we gain from our retail commerce business and monthly active users of Youku App and Tudou App combined reached over 167 million, according to iResearch. The total user time spent on Youku Tudou PC platforms, and the two mobile apps combined reached over 2.9 billion hours in March 2016, according to iResearch. Through licensed operators, we also offer over-the-top TV services, such as the delivery of a variety of video content over the Internet through set-top boxes developed by us and set-top boxes and smart televisions developed by third parties, of which some are powered by YunOS, our proprietary ~~operating system.~~

~~Content Creation~~data technology enable Youku to deliver relevant digital media and ~~Production~~

~~Film~~

~~Alibaba Pictures is our equity method investee company that produces and invests in movies and television programs. It has built a pipeline of upcoming releases including Ferry Man (), Three Lives Three Worlds Ten Miles of Peach Blossom (), The Heroic Age () and Return of~~entertainment content to its users. At the ~~Pearl Princess (). In addition to content production, Alibaba Pictures also promotes and distributes films including blockbusters such as Mission: Impossible — Rogue Nation and Tiny Times 4 (~~ ~~4). It also operates one of the largest suppliers of cinema ticketing systems in China, an online ticketing platform and a C2B financing platform for entertainment projects and merchandising.~~

~~Music~~

~~We operate Xiami (), which offers music streaming services through websites and mobile apps. We also operate online music platform Alibaba Planet () that connects fans, artists and other music industry participants.~~same time, Youku helps drive customer loyalty

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to our core commerce business in the form of complementary content offerings for users. For example, a loyalty program member of our core commerce business can purchase a Youku membership at a preferential rate or be rewarded a membership free of charge. Youku is also the exclusive online video platform to live stream major events of our core commerce business such as the countdown gala celebration for the 11.11 global shopping festival, which is supported by interactive features to drive consumer engagement. In fiscal year 2019, Youku's average daily paying subscribers increased by 88% from the prior fiscal year.

~~Sports~~UC Browser

~~Alibaba Sports Group, established in September 2015,~~UC Browser is ~~engaged~~one of the top mobile browsers in the ~~development~~world, according to StatCounter (http://gs.statcounter.com). It is the second largest third-party browser in terms of monthly active users in China in March 2019, according to QuestMobile. It is also the No. 2 mobile browser in India and ~~operation~~Indonesia by page view during the same period.

Key Content Platforms

We offer a diverse range of ~~sports IP, sporting events, e-sports contests, sporting venues, sports merchandise~~digital media and entertainment content using a sustainable production and acquisition approach. First, we provide self-produced content. We also jointly produce content through arrangements with studios that commission them to produce and distribute some or all of ~~selected~~their content exclusively on our platforms. Third, we acquire rights to display content on our digital media and entertainment platforms pursuant to licensing agreements with rights ~~leveraging~~holders. Last, we offer an open-platform on which user-generated content and professionally-generated content are generated and distributed. Our digital media and entertainment offerings include online videos, films, live events, news feeds, literature and music.

In fiscal year 2019, we increased our ~~expertise~~shareholding in ~~e-commerce~~Alibaba Pictures to approximately 51%. Alibaba Pictures is an Internet-driven integrated platform that covers content production, promotion and distribution, intellectual property licensing and integrated management, cinema ticketing management and data services for the entertainment industry. Alibaba Pictures was involved in the production, promotion and distribution of a number of highly popular films in the twelve months ended March 31, 2019. Green Book, for example, won the Oscar for best picture. The Wandering Earth, widely cited as China's first major science-fiction film, has already generated more than RMB4.6 billion of ticket sales since its opening in February 2019. Through Damai, the largest online ticketing platform for live events in China in 2018, according to Analysys, we provide users with ticketing services for popular concerts, plays and sporting events. Alibaba Literature is our ~~various entertainment distribution platforms.~~platform for distributing literature online, and it offers content for use in derivative works or tie-in entertainment. Our music platform provides music streaming and digital music online publishing services, as well as enabling the discovery and support of independent musicians.

~~Other~~ Innovation Initiatives

~~YunOS Operating System~~Amap

~~YunOS~~Amap is a cloud-based mobile operating system for smartphones, Internet of Things devices, set-top boxes, smart televisions and smart cars, among others. Using YunOS, users can conveniently and securely synchronize data, such as call data, text messages and photos, across their devices through the ~~cloud. YunOS provides the connectivity between cloud-based applications and hardware devices, with a focus on the data needs of users.~~

~~AutoNavi~~

~~AutoNavi is a leading~~largest provider of mobile digital map, navigation and ~~location-based~~real-time traffic information in China by monthly active users in March 2019, according to QuestMobile. Amap provides these services to end users directly and operates a leading open platform in China that powers many major mobile apps in different industries, such as food delivery, ride service, taxi-hailing and social networking with its big data-enabled digital mapping technology. In addition, Amap provides digital map data, navigation software and real-time traffic information to international and domestic automobile manufacturers and aftermarket consumers in China. It also empowers major platforms and infrastructural service providers in our digital economy, including our China retail marketplaces, Cainiao Network and Alipay.

DingTalk

According to QuestMobile, DingTalk is ~~our proprietary enterprise communications~~the largest business efficiency app in China by monthly active users in March 2019. DingTalk is a digital working platform that ~~provides support for text, voice~~serves enterprises and ~~video communication, work flow management and collaboration among team members and enterprises~~organizations of various ~~sizes. With a built-in enterprise directory, users can initiate text chats or voice~~types and ~~video conference calls as well as secured group chats~~sizes with ~~members of their organization. DingTalk unifies the tasks of critical~~unified communication services, intelligent mobile workplaces and network collaboration ~~in the work place.~~

~~Alibaba Health~~

~~Alibaba Health is our flagship vehicle to bring innovative solutions to the healthcare industry.~~

~~Monetization Platforms and Systems~~

~~Alimama~~

Alimama is our marketing technology platform that provides the publisher-side serving and demand-side functionalities for merchants and brands to place various marketing display formats on our marketplaces and other third-party properties. The platform supports P4P marketing based on keyword search rankings or display marketing in fixed positions that are bid through auctions, as well as cost-per-thousand impression-based (CPM) marketing formats via the display of photos and graphics.

The ranking of P4P search results on our core commerce marketplaces is based upon proprietary algorithms that take into account the bid price of keywords, the popularity of an item or merchant, customer feedback ranking of merchants and quality of product displays. For display marketing, the Alimama platform serves marketing messages based on data from our ecosystem, including transactions on our core commerce platforms, payment data from Ant Financial Services, logistics data from Cainiao Network, user navigation and behavioral data from our core commerce and media entertainment properties, as well as demographic and location-based data. The relevance and comprehensiveness of data based on commercial activities and user activities around our ecosystem provide a powerful and unique advantage for Alimama to target the most relevant information to the most relevant users.

We have developed a system that we call Super ID to track users across different properties and devices. For example, we are able to identify a user watching a Youku Tudou video on a PC as the same user shopping on our Taobao App. Our Super ID system takes disparate data and attributes the data to a single user, and in this we can provide marketers with valuable insights into user behavior and preferences.services.

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~~The Alimama technology platform supports marketing delivered through personal computers~~Through both PC and mobile ~~devices. Under Alimama's bidding system, marketers may set~~devices, DingTalk provides a ~~higher~~unified interface for communications in different forms (such as text messages, photo, audio, video and e-mail), workflow management and network collaborations. Its open platform also supports independent software developers and enterprise service providers to develop third-party enterprise apps or lower bid price for mobile marketing than the bid price for marketing on personal computers. Alimama also has an affiliate marketing program to place marketing displays on third-party websites and mobile apps, thereby enabling marketers, if they so choose, to extend their marketing and promotional reach to properties and users beyond our own marketplaces.

~~We believe we have one of the largest online marketing affiliate networks in China in terms of revenue shared~~services that are seamlessly integrated with third-party website properties and mobile apps. Our affiliate marketing program not only provides additional traffic to our core commerce marketplaces, but also generates revenue to us. Under the Taobaoke program, merchants on Taobao Marketplace and Tmall can generate additional traffic and transactions from third-party websites and mobile apps, and the marketer pays commissions based on a percentage of transaction value sourced from such third-party affiliates. We share a significant portion of that commission with our third-party affiliate partners.

Alimama operates the Taobao Ad Network and Exchange, or TANX, one of the largest real-time bidding online marketing exchanges in China. TANX helps publishers to monetize their media inventories both on web properties and mobile apps. TANX automates the buying and selling of billions of marketing impressions on a daily basis. Participants on TANX include publishers, marketers and demand side platforms operated by agencies.

Alimama also offers a data management platform through TANX, or DMP, for marketers that wish to execute their campaigns with proprietary and tailored data. DMP helps the marketer to identify targeted audience groups by mapping their own proprietary data set to the data captured in our ecosystem. By customizing and tagging the attributes of consumers, the marketer is able to reach and expand its targeted audiences.DingTalk.

~~UCWeb Mobile Marketing System~~Tmall Genie

~~Our mobile search engine, Shenma (), monetizes through a keyword bidding system that enables marketers~~Tmall Genie, our AI-powered smart speaker, is the No. 1 smart speaker in China by shipments in 2018, according to ~~reach users who search~~IDC (Source: IDC China Quarterly Smart Home Device Tracker, Fourth Quarter 2018). It connects our customers with services offered by digital economy participants in an interactive way. Tmall Genie has focused on entertainment and educational content for ~~information related~~families in order to broaden its user base and drive their ~~products or services. We engage third-party distributors~~engagement with their devices. Tmall Genie is our gateway to ~~sell some of our mobile marketing services to marketers. UC Browser monetizes primarily through time-based display marketing where marketers place icons that~~ link to their webpage or apps in UC Browser. Its news feed feature UC Headline enables marketers to place marketing messages in news feed on cost-per-click (CPC) basis or impressions on time basis. Our mobile marketing platform enables marketers to launch targeted marketing for apps, games, web pages and services on mobile media including UC Browser, UC Headline and third-party media partners, leveraging our deep consumer insights.

~~Youku Tudou Advertising System~~

Youku Tudou monetizes primarily through brand advertising. Its online advertising services include in-video, display, sponsorship and other forms of advertisements. In-video advertisements appear at certain times during the playback of a video. These video advertisements can be pre-roll, post-roll, mid-roll or pause advertisements. Display advertisements can be delivered alongside a video and may take the form of graphical banners or text hyperlinks. Other forms of advertisements include product placements in the web video series produced in-house, sponsored live events or viral videos produced in-house. Youku Tudou's advertising solutions present brand advertiserscustomers with ~~attractive opportunities to combine the visual impact and engagement of traditional television-like multimedia formats with the interactivity and precise targeting capabilities of the Internet.~~

~~Other Major Elements of our Ecosystem~~

~~Logistics~~

Cainiao Network is a joint venture that we formed in May 2013 with other shareholders who are engaged in logistics, retail, and real estate, including four major express courier companies in China. Cainiao Network does not deliver packages itself. It operates a logistics data platform that leverages the capacity and capabilities of logistics partners to fulfill transactions between merchants and consumers at a large scale. Cainiao Network uses

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data insights and technology to improve efficiency across the logistics value chain. The proprietary data platform provides real-time access to data for merchants to better manage their inventory and warehousing and for consumers to track their orders. In addition, Cainiao Network's data platform helps logistics service providers to improve the efficiency and effectiveness of their services, such as leveraging data to optimize the delivery routes used by express courier companies.

~~Cainiao Network provides two major types of services — assisted-delivery~~new services and ~~end-to-end logistics solutions.~~

•: ~~Assisted-delivery services~~ ~~are data-~~experiences to be generated by IoT and technology-based value-added services that link merchants to logistics service providers, provide real-time order tracking information to consumers and enhance logistics efficiency. Merchants select the services of particular logistics service providers that rely on Cainiao Network's proprietary data platform for accuracy of delivery information and optimization of delivery routes. Under the assisted-delivery model, merchants assume the responsibility for order fulfillment out of their chosen warehouses, and they pay for express courier companies to pick up, transport, sort and make last-mile deliveries to the end consumers. This model does not require Cainiao Network to invest in capital intensive warehouse, transport or last-mile assets. Currently the vast majority of packages from our China retail marketplaces are fulfilled and delivered under the assisted-delivery model.

~~Through the platform approach, Cainiao Network integrates the resources of logistics service providers to build out the logistics ecosystem.~~smart home appliances. As of March 31, ~~2016, Cainiao Network's fifteen strategic express courier partners employed~~2019, over ~~1,700,000 delivery personnel~~10 million Tmall Genie units had been activated since its official launch in ~~more than 600 cities~~August 2017.

Ant Financial — Financial Technology Services

Ant Financial, an unconsolidated related party, is a technology company focused on providing inclusive financial services to consumers and ~~31 provinces~~small and micro businesses, or SMBs, in China ~~according~~and across the world. It primarily operates digital payment services and financial technology platform services through sustained technological innovation and cooperation with financial institutions, and is also pursuing a globalization strategy. During fiscal year 2019, Ant Financial has implemented a series of strategic marketing initiatives to ~~data provided by them. Collectively they operated more than 150,000 hubs~~further grow its user base and ~~sorting stations. The top six of these express courier partners handled the delivery of the majority of packages from our China retail marketplaces in~~enhance user mind-share. During the twelve months ended March 31, ~~2016. We believe that orders from transactions generated on our marketplaces represented a significant portion~~2019, the number of ~~these express courier partners' total delivery volumes in~~global annual active users, or AAUs, served by Ant Financial and its nine local e-wallet partners increased to over one billion. During the twelve months ended March 31, ~~2016. Cainiao Network~~2019, seven out of ten of Ant Financial's domestic AAUs used three or more of the following five service categories: digital payment, wealth management, micro financing, insurance and Zhima Credit.

Digital payment services

Ant Financial operates Alipay, a leading global third-party mobile payment platform. Through Alipay, Ant Financial provides digital payment processing services predominantly to online and offline merchants and consumers globally. In the twelve months ended March 31, 2019, Ant Financial experienced rapid growth in payment transactions, which was primarily driven by the expansion of the offline payment market. With deep customer insights derived from increasing numbers of payments, Ant Financial continuously expands use cases to better serve both consumers and merchants. Ant Financial has also continued to improve the user experience through product innovation. For example, it has been promoting an innovative payment device by leveraging facial recognition technology across its merchant network. Ant Financial is ~~still in an early stage~~dedicated to establishing Alipay as a leading one-stop financial and lifestyle platform.

Financial technology platform services

Ant Financial's financial technology services platform is a comprehensive and open platform through which users can access and purchase a wide variety of ~~development. It has yet to monetize the~~wealth management, micro financing and insurance products and related services. The vast majority of ~~the value-added services it provides under the assisted-delivery model.~~these financial products are provided by third-party financial institutions. Ant Financial's platform primarily serves three sectors in China:

•: ~~End-to-end logistics solutions~~Wealth management. ~~are fulfillment~~Financial institutions, including fund management companies and ~~delivery services offered~~insurance companies, offer money market funds, fixed income products, debt and equity securities funds, as well as other wealth management products, through Ant Financial's wealth management platform, Ant Fortune. The platform also partners with Ant Financial's subsidiary Tianhong Fund and other third-party fund management companies to ~~merchants where Cainiao Network assumes responsibility~~provide money market fund products under the name of getting packages to the end consumers. Cainiao Network uses a combination of owned and partner warehouses to fulfill orders, and it collaborates with providers in warehouse operations, line haul services and express courier services to complete the last-mile delivery. To provide a high quality solution, Cainiao Network oversees the entire logistics process and promotes standardization on efficiency metrics. During the process, Cainiao Network also trains the capabilities of its logistics partners through technology and data insights.Yu'ebao.

In addition to enabling the fulfillment and delivery of orders that fit in standard size packages, we and Cainiao Network also partner with specialized logistics service providers for category-specific solutions where items require special handling and services. The following are examples of category-specific solutions that we and Cainiao Network have organized to enhance the consumer experience:

•: ~~Large appliances.~~ We have entered into a joint venture with Haier Electronics to invest in its logistics subsidiary, RRS, to handle logistics services for large appliances. Partnering with RRS, Cainiao Network provides large appliances merchants with inventory planning tools, data analytics, and logistics services that enhance consumer experience through more efficient inventory placement.
•: ~~Consumer electronics.~~ In connection with our agreement to invest in Suning, one of the largest electronics retail chain in China with 1,600 stores and over 60 national and regional distribution centers as of December 31, 2015, we and Cainiao Network are cooperating with Suning to leverage their retail and logistics assets relating to warehousing and delivery capabilities, and after-sale servicing and returns of electronics products.

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•: ~~Tmall Supermarket.~~Micro financing. ~~Tmall operates a popular supermarket category that generates high frequency purchases~~Through Ant Financial's micro financing platform, banks and ~~builds~~lenders offer credit services to SMBs, and also offer small-amount, short-term consumer ~~mindshare for high quality fresh produce, food~~credit services to consumers. Through the platform model and ~~FMCG products. Cainiao Network~~by leveraging its deep user insights and technology capabilities, Ant Financial provides ~~same-day or next-day delivery under~~ its ~~end-to-end logistics solutions program by partnering~~partners with ~~specialized players in~~credit risk control and relevant technology services, thereby enabling financial institutions to serve more SMBs and customers, reduce their credit risk and enhance the ~~fresh produce supply chain, cold chain transport, warehouse operations and last-mile delivery services.~~user experience.
•: ~~Cross-border.~~Insurance. ~~Cainiao Network provides import~~Ant Financial partners with insurance companies to provide innovative insurance products, including goods return freight insurance for e-commerce transactions and ~~export logistics services~~bank account security insurance, helping to ~~merchants on Tmall Global, our premier~~meet the insurance needs inherent to the new Internet economy. Through its insurance platform, ~~for overseas brands~~Ant Financial also helps insurance company partners to continuously pursue product innovation and ~~retailers, and AliExpress, our global consumer marketplace, respectively.~~customer engagement as well as improving the user experience.

In order to enhance consumer experience and improve efficiency in last-mile delivery in both rural and urban areas, Cainiao Network is also engaged in initiatives including arranging delivery from county-level Rural Taobao stations to villages, and setting up pick-up stations around urban communities.

During the twelve months ended March 31, 2016, Cainiao Network and its logistics partners enabled the delivery of 12.2 billion packages from our China retail marketplaces. Currently, Cainiao Network primarily derives its revenue from end-to-end logistics solutions and generates a significant portion of its revenue from providing these services to Tmall Supermarket.

~~Proprietary Logistics Data Platform~~

Cainiao Network operates a proprietary logistics data platform. This platform links consumers, merchants and logistics service providers and allows them to share information relating to orders, delivery routes and time, and user feedbacks. The logistics data platform can interface with a broad range of systems including our marketplace transaction systems, Alipay's payment system, third-party transportation management systems, and the CRM, ERP and warehouse management systems of merchants. Information generated from the data platform serves many purposes: merchants can review the performance of delivery service providers on different routes; logistics service providers can compare their performance against peers; and consumers can track orders, receive delivery time information, and stay in touch with delivery personnel.

~~Recent Equity Financing of Cainiao Network~~

Cainiao Network completed a round of equity financing of approximately RMB10 billion in March 2016. Existing shareholders and new investors, including major sovereign wealth funds and private equity funds, participated in the financing. We subscribed for Cainiao Network's shares on an approximately pro rata basis. As of March 31, 2016, we own an approximately 47% equity interest in Cainiao Network. See "Item 5. Operating and Financial Review and Prospects — A. Operating Results — Recent Investment, Acquisition and Strategic Alliance Activities — Logistics — Cainiao Smart Logistics Network Limited."

~~Payments~~Globalization

~~Alipay, a wholly-owned subsidiary of~~ Ant Financial ~~Services, provides payment~~also seeks to leverage its leading technology capabilities to provide inclusive financial services globally. Primarily focusing on emerging markets, Ant Financial has cooperated with strategic partners in nine regions or countries, including Bangladesh, Hong Kong, India, Indonesia, Korea, Malaysia, Pakistan, the Philippines and ~~escrow services for transactions on Taobao Marketplace, Tmall, 1688.com, AliExpress~~Thailand, to launch local e-wallets by leveraging its know-how and ~~certain~~technological capabilities developed in China. Ant Financial is also building a global network that connects all of ~~our other platforms.~~its users to its rapidly-expanding global acceptance network. Starting in early 2019, users of Alipay ~~also provides payment~~Hong Kong are able to make online and ~~escrow services to third parties~~offline payments in mainland China and overseas. Alipay is the principal means by which consumers pay for their purchases on our China retail marketplaces. Except for credit card transactions where Alipay charges the merchant to cover processing costs with banks, neither we nor Alipay charge any payment fees to merchants doing business on our platform. Instead, we pay Alipay a fee to cover its cost of operating payment and escrow services it provides on our marketplaces pursuant to a commercial agreement with Ant Financial Services and Alipay. Japan.

For additional details on our commercial relationship with Ant Financial ~~Services~~ and Alipay, see "Item 7. Major Shareholders and Related Party Transactions — B. Related Party Transactions — Agreements and Transactions Related to Ant Financial ~~Services~~ and its Subsidiaries."

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Alipay also offers a mobile app, Alipay Wallet, which further facilitates mobile commerce and other consumer services and digital transactions by making payment accessible and convenient through a mobile device. During the twelve months ended March 31, 2016, there were over 450 million Alipay annual active users.

~~Local Services~~

~~Through investee companies, we are engaged in the online-to-offline, or O2O, local services business involving restaurants, food delivery, movie ticketing and retail stores, among others.~~

~~Koubei Restaurant and Local Services Guide~~

~~In 2015, we and Ant Financial Services set up the joint venture Koubei (~~), one of the leading restaurant and local services guide businesses in China. Koubei operates O2O services in conjunction with Alipay and AutoNavi's map navigation by generating demand to local establishments such as restaurants, supermarkets and convenient stores by offering consumers a "closed loop" experience, from acquiring information on mobile to finding the store to claiming discounts to payment. For the three months ended March 31, 2016, Koubei generated RMB21 billion (US$3 billion) in GMV settled through Alipay with merchants.

~~Ele.Me Food Delivery~~

~~In March 2016, we jointly invested with Ant Financial Services in Ele.me (~~), a leading food delivery company in China. Consumers using the company's food delivery app can order meals, snacks and beverages on a mobile device. Through a delivery network of employed and outsourced personnel, the company's service covered over 300 cities in China as of March 31, 2016. Under a cooperation agreement with the company, food orders generated from the Taobao App and Alipay Wallet are fulfilled by Ele.me.

~~Movie Ticketing~~

Alibaba Pictures, our equity investee and the flagship unit of our movie business, operates an online movie ticketing platform. In May 2016, the platform raised RMB1.7 billion Series A financing from a group of investors led by CDH Investments, Ant Financial Services and Sina.com.

Customer ~~Service~~Services for China Retail Marketplaces

~~Merchants on our platforms serve their customers with tools we provide. In addition, our~~Our customer service representatives serve consumers and merchants on our marketplaces through telephone hotlines, real-time instant messaging and online inquiry systems. ~~Our dispute~~In addition, merchants on our platforms serve their customers with commerce technologies and services we provide. Based on big data analytics, we provide numerous methods to facilitate the resolution ~~system's adjudication panel~~ of ~~experienced consumers and merchants provides an easy way for consumers and merchants to resolve their~~disputes. Aside from disputes ~~while other more complicated disputes are~~ referred to our customer service ~~representatives. In the twelve months ended March 31, 2016, we received dispute cases representing approximately 0.04%~~representatives for resolution and disputes handled automatically by our system, consumers may choose adjudication by a large panel of ~~annual orders placed on our China retail marketplaces.~~experienced and independent consumers and merchants in certain situations, such as those involving contractual disputes.

With certain exceptions, consumers on our China retail marketplaces may return the purchased goods within seven days from ~~their~~ receipt. Alipay's escrow payment ~~escrow~~ services ensure efficient refunds. In addition, for qualified ~~buyers~~consumers with good credit ~~history,~~record, we may accelerate refund procedure by making the refund payment ~~directly to the buyer~~ upon the buyer's submission of a refund application and ~~providing of~~ proof of shipment for the ~~return~~returned goods.

Consumer Protection

We believe every consumer has the right to protection from false and misleading claims and harmful products. We encourage our merchants to make product quality a priority and have established various safeguard mechanisms. All Tmall merchants are required to contribute to and maintain a fund deposit for the benefit of consumers. Fund deposit requirements vary by product category and typically range from RMB10,000 to RMB1,000,000 per storefront. For Tmall Global merchants, the fund deposit requirement typically ranges from RMB150,000 to RMB800,000 for standard storefronts. In most circumstances, Taobao Marketplace merchants maintain individual fund deposit with minimum amounts ranging from RMB1,000 to RMB100,000. All Tmall and Taobao Marketplace merchants are required to sign agreements with us authorizing us to deduct fund deposit from their Alipay accounts in the event of confirmed consumer claims. Merchants who have failed to maintain a minimum amount in their fund deposit are blocked from showing product listings in our P4P, recommendation feeds and search results, among others.

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The consumer protection fund amounts are displayed on each merchant's information page. Many merchants on Tmall and Taobao Marketplace provide a larger deposit than required and make additional service commitments, such as expedited shipment, free maintenance for electronics and installation services for furniture purchases, to demonstrate to their customers their confidence in the quality of their services and products. In addition, Alipay's escrow payment services offer consumers further protection by only releasing the relevant payment upon consumer confirming the receipt of the merchandise, unless specified otherwise.

Transaction Platform Safety Programs

Preserving the integrity of our marketplaces is ~~a top priority for us.~~fundamental to our business. We are committed to protecting intellectual property rights and ~~eradicating~~eliminating counterfeit merchandise and fictitious activities. ~~Counterfeiting and infringement~~Infringement of intellectual property, both online and offline, ~~are~~is an industry-wide ~~issues affecting brands and merchants~~issue globally. ~~We work~~By working with rights holders, trade associations and governments around the ~~world.~~world, we have made significant progress in combating the issue of intellectual property rights infringement. As of March 31, 2019, there were over 190,000 brands on Tmall, including 77% of the consumer brands among the Forbes Top 100 World's Most Valuable Brands for 2019, a demonstration of the trust these brands place in the integrity of our marketplaces.

Product Authenticity

We are committed to offering authentic, high-quality products across our marketplaces, including premium overseas products on Tmall Global, grocery and daily consumption products on Tmall Mart. At the same time, we are proactive in partnering with rights holders and law enforcement authorities both online and offline to monitor product authenticity and protect intellectual property. We have called for collective efforts in the fight against counterfeiting that include stronger law enforcement measures and harsher penalties for those found to be engaged in criminal activity. In addition, we also initiate civil actions against counterfeiters using our platforms. In May 2019, Alibaba Group was awarded World Trademark Review's Asia Pacific Team of the Year for its work in brand protection.

Our product authenticity initiatives have produced effective results. As part of our commitment to allow only authentic product listings on our platforms, we employ big data and technology to proactively identify and shut down storefronts selling infringing products and remove suspicious product listings. Our offline product authenticity initiatives also have borne tangible results as we regularly provide law enforcement authorities with evidence to successfully track down and arrest violators of intellectual property rights.

By leveraging our advanced technologies, as well as engaging in close collaboration with stakeholders, including rights holders, trade associations and government bodies, we have implemented the following best practices around a three-pronged strategy:

•: World-class notice-and-takedown system. We operate a rigorous notice-and-takedown system that allows rights holders to request the removal of potentially infringing listings from our platforms with ease via the Alibaba Intellectual Property Protection (IPP) portal. We also offer qualified rights holders a simplified takedown program pursuant to which we expedite claims and simplify evidentiary requirements.
•: Proactive monitoring powered by big data. We utilize our proprietary algorithms to proactively detect the presence of suspicious goods and remove them from our marketplaces without requiring the notice of a rights holder. To enable proactive monitoring at its best, we have developed the capability to perform real-time scanning of suspicious product specifications during a merchant's listing creation process, which helps us prevent merchants from uploading infringing content in the first place. For example, we employ Optical Character Recognition (OCR) and logo recognition technologies to conduct text and logo detection on images used in product listings in order to detect the brands being sold and flag any potential issues. Our detection technology continuously improves through machine learning, which means we become quicker and more efficient at removing problematic products all the time. Furthermore, to support this effort, an increasing number of rights holders also contribute information about their products and online trends they observe so we can further optimize our algorithms and detection methods.

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~~Anti-Counterfeiting~~

To protect consumers, merchants and brands and to maintain the integrity of our marketplaces, we have taken the following measures through our platforms, with other industry participants and with governmental authorities:

•

~~Through our platforms.~~Offline enforcement. We ~~proactively monitor our platforms and have implemented takedown measures to enforce IP rights, including:~~

•: ~~operating an online takedown platform for brand owners to report infringements;~~
•: offering qualified rights holders a good-faith takedown program on Taobao Marketplace, where we process infringement takedown requests on a "good-faith" basis by expediting claims and simplifying the notification procedure;
•: ~~conducting real-time initial screening of merchandise when merchants add or modify listings;~~
•: ~~conducting test-buy programs to spot check whether the goods mailed by a merchant are genuine or meet quality standards; and~~
•: ~~improving our monitoring system by developing technologies to automate the process and investing in more manpower.~~

•

~~With other industry participants.~~ We have established cooperative relationships with over 1,900 major brand owners and a large number of leading industry associations in connection with intellectual property rights protection to enhance the effectiveness of anti-counterfeiting measures.

•

~~With government authorities.~~ ~~We cooperate with government authorities, agencies and law enforcement authorities to conduct offline anti-counterfeiting investigations, and~~also work ~~with local governments in China to support original brands. With insights drawn from our data analytics, our team works~~ closely with brands and law enforcement authorities to assist in their offline investigations against counterfeiting. With insights drawn from our data analytics, we help law enforcement authorities to identify manufacturers and ~~large-scale distributors~~dealers of ~~counterfeit~~suspicious goods ~~and bring them~~so they can be brought to justice.

~~Combatting~~Alibaba Anti-Counterfeiting Alliance (AACA)

In January 2017, Alibaba, along with 30 domestic and international intellectual property rights holders, founded the Alibaba Anti-Counterfeiting Alliance (AACA), the first alliance of its kind. Owners of famous global consumer brands, such as 3M, Amway, Ford, Johnson & Johnson, Mars, Procter & Gamble, and Spalding, have participated as founding members in the AACA since its establishment. After more than two years, AACA membership has expanded to 133 rights holder members from 16 different countries and regions, and now encompasses 12 industries, such as electronics, automotive, pharmaceuticals and luxury goods, which regularly collaborate through Industry Working Groups, or IWGs.

Alibaba contributes its Internet technology and data to support the AACA through a number of cooperation programs that rights holders can opt into. The cooperation programs encourage rights holders, e-commerce platforms, and law enforcement agencies to work collaboratively to protect intellectual property rights through increased communication and the exchange of information. The AACA facilitates sharing of best practices among its members, as well as with wider society via educational programs for public bodies and consumers about the damage counterfeit products cause, including with respect to health, the environment and safety.

The AACA has also established an Advisory Board consisting of rights owners from all IWGs that acts as a channel for rights holders to provide feedback on significant intellectual property enforcement-related strategies and policies to each other, Alibaba, and other parties. The Advisory Board acts as a leading industry forum to discuss new trends in online intellectual property infringement activities, litigation and platform practices.

Combating Fictitious Transactions

~~With respect to fictitious activities, we~~We have and will continue to invest significant resources in protecting the trust and credit ~~system~~systems we have built on our marketplaces. Measures to prevent, detect and reduce the occurrence of fictitious transactions on Taobao Marketplace and Tmall that we have implemented include:

•: requiring the use of merchants' real identities when opening accounts;
•: analyzing transaction patterns to identify anomalies;
•: ~~offering dynamic password protection and engaging in real-time monitoring of user login behavior;~~
•: enabling consumers and merchants to report suspicious transactions;
•: maintaining a "blacklist" of merchants ~~and sellers~~ who have previously been involved in fictitious transactions; and
•: collaborating with ~~participants in our ecosystem such as Alipay and Cainiao Network as well as industry partners and~~ law enforcement authorities ~~on Internet security.~~to combat fictitious activities by merchants and websites and mobile apps that enable fictitious activities.

Penalties

We aim to protect consumers ~~from being affected~~ by excluding ~~counterfeit~~suspicious merchandise and fictitious transactions from ~~the~~ ranking ~~system,~~systems, credit ~~system~~systems and transaction volume statistics. When ~~such~~these activities are confirmed, we penalize the parties involved, based on the severity of the violation, through a number of means, ~~including:~~ including but not limited to:

•: permanently banning merchants from opening accounts on our marketplaces,
•: closing down storefronts,
•: limiting ~~the relevant merchant's~~merchants' ability to add listings and/or
•: imposing restrictions on participation in promotional activities on our ~~marketplaces, placing~~
marketplaces.

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~~the relevant merchant's product listings at the bottom in search ranking results, closing down storefronts and permanently banning the merchant from opening any accounts on our platforms.~~

~~Consumer Protection~~

We believe every consumer has the right to safety and protection from false and misleading claims. We encourage our merchants to make product quality a priority and have set up various programs to this end. In addition, all Tmall merchants are required to contribute to and maintain a consumer protection fund for the benefit of consumers. Consumer protection fund deposit requirements vary by product category and typically range from RMB50,000 to RMB150,000 per storefront. For Tmall Global merchants, the consumer protection fund deposit requirement is typically RMB150,000 for standard storefronts. The majority of Taobao Marketplace merchants maintain individual consumer protection funds whose minimum amounts range from RMB1,000 to RMB10,000. All Tmall and Taobao Marketplace merchants are required to sign agreements with us authorizing us to make deductions from their Alipay accounts in the event of confirmed consumer claims. Many merchants on both Tmall and Taobao Marketplace fulfill more than our basic requirements to demonstrate their confidence in the quality of their services and products. They provide a larger deposit than required and make additional service commitments, such as expedited shipment, free maintenance for electronics and installation services for furniture purchases. We incentivize merchants to set up customer protection funds by programming our search results to prioritize the rankings of product listings for merchants who have established these funds. In addition, the consumer protection fund amounts are displayed on the merchant's information page. As of March 31, 2016, consumer protection funds deposited in the Alipay accounts of merchants on our China retail marketplaces in aggregate totaled over RMB17 billion. If the amount in a merchant's consumer protection fund is insufficient, we may still choose to compensate consumers ourself for any losses, although we are not legally obligated to do so.

Our Technology

Technology is key to our success in achieving efficiency, ~~for our business,~~ improving ~~the~~ user experience, and enabling innovation. AsOur world-class proprietary technology supports peak order volumes of ~~March 31, 2016,~~up to hundreds of thousands per second, delivers tens of billions of online marketing impressions per day, and enables millions of merchants, brands and other businesses to conduct their operations efficiently and effectively. The uniqueness of our technology lies in the unparalleled large-scale application environment due to the scale of our businesses. By constantly applying our technology across our businesses, we ~~employed a team~~generate knowledge and innovations that drive improvements and further technological development.

Members of ~~over 18,000~~our research and development ~~personnel engaged~~team play key roles in ~~building our~~various international standardization organizations in areas such as e-commerce, security and IoT. In addition, we are also active in open source communities. In October 2017, we established DAMO Academy, a global research program in cutting-edge technology ~~platform~~that aims to integrate science with industry and ~~developing new online and mobile products.~~ speed up information exchange between them. It encourages a collaborative environment where scientific discoveries can be more quickly applied to real-life problems.

Key components of our technology include those described below:

~~Cloud Computing~~Technology Infrastructure

Our data centers utilize leading technologies in distributed structure, innovative cooling techniques, distributed power technology and intelligent monitoring, and we believe our data centers are one of the most efficient in the world as indicated by a low power usage effectiveness, or PUE, ratio. The multi-region availability of our transaction system data centers provides scalability and stable redundancy.

Cloud Operating System

Aspara, our cloud computing ~~platform, called Apsara,~~operating system, is a proprietary general purpose distributed computing ~~platform built with proprietary technology~~operating system that ~~enable server clusters to perform~~provides Alibaba Cloud customers with enhanced computing ~~power. Apsara offers a suite of~~power to support their business growth in the new technology era.

Database

We have developed the next generation cloud ~~services including elastic computing,~~native database, POLARDB, which enables our customers to meet their requirements for on-demand storage and ~~services,~~computation, pay-per-use elasticity and ~~large-scale data~~scalability. POLARDB significantly increases the throughput and performance of transaction and query processing ~~services through web-based API.~~as compared to other open-source relational database management systems. We have also developed a distributed online analytics database, AnalyticDB, which supports real-time interactive and complex analytics over massive data.

~~Content Delivery Network~~Big Data Analytics Platform

~~The technology underlying AliCDN,~~We have developed a distributed data analytics platform that can efficiently handle the complex computing tasks of millions of gigabytes of data per day, providing deep data insights to our ~~content delivery network, accelerates the loading of product photographs on web pages delivered to users~~businesses and ~~offers them~~our cloud computing customers. Our big data analytics platform includes MaxCompute, an offline data storage and computing platform, Blink, a ~~fast~~real-time data storage and ~~smooth experience.~~computing platform, and OneData, a data integration and management system.

~~Data Science~~Artificial Intelligence

~~Our data science technology serves various types~~We believe we are one of ~~data-intensive computational needs, including~~the few companies in the world with a proprietary, distributed deep learning ~~high-volume batch processing~~platform that has access to consumer insights across diverse businesses involving a rich variety of consumer experiences. As a result, we believe we are in a unique position to develop large-scale commercial use of artificial intelligence, or AI. We have applied various AI technologies across our digital economy to enhance the consumer experience. These enhancements include personalized search results and ~~multi-variable~~shopping recommendations empowered by deep learning and ~~multi-dimensional real-time analytics. The~~ data ~~mining~~analytics, speech recognition and ~~transaction, payment~~image analysis technology adopted in search functions, and ~~behavioral data science capabilities are used extensively in numerous applications such as search and online marketing on our marketplaces.~~

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~~Distributed Relational Database~~

~~OceanBase,~~intelligent customer service. In addition, our ~~proprietary distributed relational database management system, plays a critical role in supporting transaction processing on our marketplaces in a cost-efficient manner.~~

~~Search and Online Marketing~~

Our standard product unit database, or SPU database, is built on the vast amount of items listed on Taobao Marketplace and Tmall. The comprehensive transactional and user behavior data generated on our marketplacesAI capabilities enable us to ~~construct a powerful search engine that generates personalized results.~~

Our online marketing technology platform supports millions of online marketers and delivers tens of billions of online marketing impressions every day. Our online marketing technology enables us to continuously improve the effectiveness ofintroduce innovative products, such as Tmall Genie, our ~~online marketing services for our merchants through the use of aggregated behavioral targeting data and analytics.~~AI-powered smart speaker.

~~Deep Learning~~Internet of Things

~~Alimama utilizes cloud-based deep learning extensively to enhance~~We are engaged in the ~~consumer targeting efficiency~~development of a wide range of IoT technologies, such as PaaS, microchip design and ~~return on investments for online marketers of our P4P marketing, display marketing~~development framework, operating systems and ~~DMP service offerings. Supported by our Apsara~~ cloud computing ~~system, Alimama operates a cluster of servers that is capable of analyzing terabytes of~~capabilities for transportation, home, mobile, public and industrial applications. Our IoT PaaS and data ~~points~~allow hardware to work in more application scenarios and solutions as well as for ~~the modeling of tens of billions online marketing impressions.~~applications to have more hardware options.

Security

We ~~are committed to maintaining~~have established a ~~secure e-commerce ecosystem.~~comprehensive situational awareness and risk management security infrastructure that spans across our entire network, covering our systems, apps, data, services and individual end users. Our back-end security system handles hundreds of millions of instances of malicious attacks each day to ~~safeguard the~~provide effective security offor our ~~e-commerce~~commerce and cloud platforms.

~~Multi-Region Availability~~

Compared to social media platforms, the data availability and security requirement for transactions platforms are higher. Our transaction system is kept live and available in data centers in multiple regions in China. This configuration provides more scalability, stability and redundancy than the traditional redundancy configurations.

~~YunOS~~

Our YunOS is a cloud-based mobile operating system for smartphones, Internet of Things devices, set-top boxes, smart televisions and smart cars, among others. With YunOS, users can conveniently and securely synchronize data, such as call data, text messages and photos, across their devices through the cloud. System level based H5/Web, dynamic service linking and unified data technologies, as well as a multi-level security framework enable developers to deliver location-based and contextual Internet services with a focus on the data needs of users.

Sales and Marketing

As Taobao Marketplace is China's largest mobile commerce destination, with a large and growing social community and an exceptionally wide range of product offerings, and Tmall is the world's largest third-party online ~~shopping destination,~~and mobile commerce platform for brands and retailers, we have wide consumer recognition of our brands and enjoy significant organic traffic through ~~word-of-mouth and general awareness of our brand and platform.~~word-of-mouth. We believe ~~word-of-mouth, and~~ the reputation and ubiquitous awareness of our ~~brand~~brands and platforms in China and, increasingly, abroad, provide us with the best and most cost-efficient marketing channel. ~~We employ a variety of methods to attract potential merchants and consumers, paying members, online marketers and~~In addition, we also use other ~~ecosystem participants and~~marketing initiatives to promote our ~~brands.~~

~~Table~~platforms. In January 2017, we launched a historic long-term partnership with the International Olympic Committee that will last through 2028. Joining The Olympic Partner worldwide sponsorship program, Alibaba has become the official "E-Commerce Services" Partner and "Cloud Services" Partner and a founding partner of ~~Contents~~

the Olympic Channel through the 2028 Games in Los Angeles. During the most recent fiscal year, we increased our marketing efforts, such as a highly coordinated marketing and promotional campaigns on Tmall for the 11.11 global shopping festival, to expand our user base. We ~~generate~~expect to continue to leverage our resources in future marketing activities. We also expect to enhance our monetization capability through leveraging our data technologies to develop and offer more personalized and innovative services, so as to improve customer experience and wallet share. Furthermore, our major business segments and other elements in our digital economy provide synergetic advantages and create cross-promotional opportunities. For example, the ~~majority~~large number of consumers on our ~~revenues through~~marketplaces attracts a large number of merchants who become customers for our online marketing services, ~~from our merchants. As these merchants~~while an increasing number of key opinion leaders are ~~mostly participants~~actively producing content to engage with consumers and fans on our ~~marketplaces,~~platforms, thereby driving revenue for merchants, brands and retailers.

Socially Responsible Mindset

At Alibaba, we ~~do not need to rely on~~believe acting in a ~~large sales force for our retail marketplaces. The majority~~socially responsible way is an integral part of our ~~sales staff is engaged in selling membership packages to registered members of our wholesale marketplaces through telephone sales and field sales.~~

~~Corporate Social Responsibility~~

business model. Since our founding, we have been highly committed to ~~sustainable corporate responsibility~~supporting and participating in charitable and socially responsible projects ~~both through~~that align with our core values and mission, and to establishing a technology-driven charitable ~~endeavors and by extending~~digital economy to extend the benefits of our ~~ecosystem~~technological capabilities to the community at large. ~~We believe the best approach to~~

Our major corporate social responsibility ~~is through embedding elements of social responsibility in our business model. Our~~ achievements and initiatives ~~in the areas of corporate social responsibility include those described below:~~include:

Creating Job Opportunities and Enabling Small Businesses

The breadth of our ~~ecosystem~~digital economy and the range ~~of different types~~ of service providers needed within it create substantial employment opportunities. In addition to providing direct business opportunities for merchants, our ~~ecosystem~~digital economy has created new opportunities for service providers in logistics, marketing, consulting, operations outsourcing, training and other online and mobile commerce professions. According to ~~AliResearch, our research division, as~~a report published in 2019

Table of ~~December 2015,~~Contents

by China's Renmin University, it is estimated that ~~our China retail marketplaces~~we contributed to the creation of ~~over 15~~about 40 million direct and indirect job opportunities ~~including people working directly for online storefronts and service providers~~in China via our retail platforms. The international expansion of our business also creates job opportunities by enabling merchants from different parts of the world to ~~merchants.~~do business online.

With the power of ~~the Internet,~~new technology, our platforms have leveled the playing fields for businesses in many ~~aspects making it~~respects, helping to foster an inclusive ~~place for~~economy where everyone toand small businesses can thrive and prosper. ~~In fiscal year 2016,~~Female sellers represented approximately half of ~~our active~~the sellers who had one or more orders confirmed by a buyer on our China retail marketplaces ~~are female. We also have programs that create equal opportunities for everyone such~~in fiscal year 2019, as ~~cloud customer service program for people with disabilities, entrepreneur programs for university students~~declared by these sellers.

Supporting Poverty Relief and Rural ~~Taobao partnership program targeting entrepreneurs returning to their villages to start businesses. We have also established entrepreneurial funds~~Development in ~~Hong Kong and Taiwan to support the career and entrepreneurial aspirations of young people locally.~~

~~Alleviating Poverty~~China

AsWe are committed to contributing to China's poverty relief initiatives. Apart from using our own resources, we ~~expand~~also leverage our platforms' reach to maximize our influence and our technological capabilities to increase the efficiency of these initiatives.

In December 2017, we launched a RMB10 billion Alibaba Poverty Relief Program that focuses on education, rural ~~areas~~commerce advancement, women's empowerment, healthcare and environmental sustainability. The program is primarily funded by donations from us and the partners in ~~China~~the Alibaba Partnership. We aim to leverage the power of our digital economy to discover sustainable and ~~help~~replicable ways to work with impoverished communities to break the poverty cycle. To advance rural ~~farmers reach urban consumers,~~commerce, in fiscal year 2019, we ~~have created opportunities for~~connected people ~~living~~from over 200 impoverished counties to our platforms, which led to the development of many new agricultural product brands. In 2018, sellers in ~~poverty to elevate their income levels. For the twelve months ended March 31, 2016, merchants in~~impoverished counties sold over ~~800 state-designated poverty counties in China in aggregate generated~~RMB60 billion (US$8.9 billion) GMV ~~of over RMB20 billion on~~through our China retail marketplaces. Furthermore, as part of our environmental sustainability initiatives, we have provided sustainable business solutions for villagers living in conservation zones to increase their income through developing local products while protecting the environment. To reduce intergenerational poverty through better healthcare, we have provided health insurance to cover major illnesses to over four million people in over 60 impoverished counties as of March 31, 2019. To empower women, we have developed a comprehensive insurance plan that covers women's education, pregnancy and illness in impoverished counties, affording young women opportunities to be educated without worrying about their families' financial situation.

~~Internet Approach~~Contributing to ~~Charity~~Environmental Sustainability

We ~~support~~are committed to raising public awareness of environmental issues and promote a number of charitable and socially responsible initiatives and programs in ways that we believe are in alignment with our core values and our mission. Since 2010, we have earmarked 0.3% of our annual revenue to fund efforts designed to encourage environmental awareness and conservation and other corporate social responsibility efforts.promoting an eco-friendly mindset among the public. In 2011, we established the Alibaba Foundation, a private charity fund that primarily focuses on supporting environmental protection in China. The Alibaba Foundation has funded and spearheaded projects to help protect drinking water sources in China, allow the public to contribute to and ~~helping the disadvantaged~~monitor air quality on Amap app and research international environmental policies for local survey and legislative purposes.

We also work with enterprises to implement environmentally-sustainable business models across various sectors, such as ~~children born~~manufacturing, retail, logistics and cloud computing. Alibaba Cloud not only helps enterprises reduce their need for computing hardware, its technology is also built to promote environmental sustainability. For example, we launched a data center featuring an innovative cooling system that uses fresh water from a nearby lake to reduce energy consumption. Furthermore, Cainiao Network actively spearheads and promotes "green" initiatives with ~~heart defects in underdeveloped areas~~its courier partners and within our digital economy. Key initiatives include "green packages" and "green delivery." "Green packages" refers to promoting the use of ~~China.~~

~~Over RMB400 million.~~biologically degradable courier bags and reusable packages, minimizing repackaging of products and using algorithms to optimize package size and materials used. In fiscal year ~~2016, Alibaba Foundation made~~2019, Cainiao Network's package material optimization algorithm was used in over ~~RMB210~~290 million ~~in donations~~packages. Approximately 50% of Tmall Mart's packages used the manufacturers' original packages during the same period. These measures contribute to ~~support various charitable causes~~reducing the amounts of materials needed for packaging. Cainiao Network further promotes "green delivery" not only through the use of electric delivery vehicles, but also through its neighborhood delivery solutions and ~~initiatives. We have also leveraged our platform to facilitate other charitable organizations to raise over RMB190 million in donations.~~

~~Over 60 projects.~~ ~~In fiscal year 2016, Alibaba Foundation supported more than 60 charitable projects, including those hosted by The Nature Conservancy, National Geographic Air and Water Conservation Fund,~~fully-fledged multi-location fulfillment network. These measures significantly shorten the package delivery distances from warehouses, thereby reducing the carbon footprint of the logistics industry.

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~~Paulson Institute~~Charitable Contributions and ~~Institute of Public~~Community Service
We have consistently been active, and ~~Environmental Affairs. For example,~~also have always encouraged our employees to be active, in participating in community service.

Since 2010, we ~~supported the development of Wei Lan Map () mobile app that exposes pollution hotspots in China~~have established a special fund to encourage environmental awareness and the companies and factories responsible for it on a map. Hundreds of corporations have made press releases about the data exposed by this app while a portion of these corporations have reacted by taking actions to rectify the problems exposed.
       ~~Over 130,000 hours.~~    ~~Starting from~~conservation as well as other corporate social responsibility initiatives. In addition, since September 2015, we ~~encourage~~have encouraged our employees to perform at a minimum of three hours of ~~charitable activities~~community service every ~~year. Since~~year, which led to the ~~program's inception until the end~~creation of projects such as a public online platform for vaccine production information. In fiscal year ~~2016, this program saw~~2019, we contributed over ~~130,000 hours of social service performed by~~RMB250 million (US$37.3 million) to charitable causes and initiatives.
We also leverage our ~~employees.~~
       ~~Over 3.3 billion participations.~~    ~~We recognize our immense influence on our ecosystem and we leverage that~~digital economy to extend the reach of our charitable ~~work. In fiscal year 2016, our platforms facilitated over 3.3 billion charitable participations involving over 280 million consumers~~initiatives and ~~over 1.5 million merchants. We~~ encourage ~~our~~ merchants, consumers and other ~~ecosystem~~digital economy participants to ~~participate~~engage in ~~socially responsible~~community service. For instance, in support of the United Nation's annual International Day of Charity on September 5 each year, we hosted the "95 Philanthropy Week," where we initiated multiple public charity activities. ~~For example, charitable~~
Charitable organizations can also set up storefronts on our marketplaces to raise funds and engage with volunteers. Merchants on China retail marketplaces and Tmall Global can designate ~~certain~~a percentage of their sales proceeds generated on our platforms to go to charitable organizations. Consumers can contribute to charitable causes ~~through~~by purchasing ~~these~~public interest products, or participating in charity auctions hosted on our ~~platforms.~~platforms or directly making donations. Through our China retail marketplaces, we supported over two million merchants and over 440 million users to donate to domestic and overseas charitable projects and enabled charitable organizations to raise approximately RMB470 million (US$70.0 million) in donations in fiscal year 2019, which benefited over 4.8 million disadvantaged people.
Furthermore, "Reunion", a platform that our employees created during their free time, connects our mobile apps and our partners' mobile apps to help locate missing children across China. Since its initial launch in mid-2016 and up to March 15, 2019, our platform has helped law enforcement authorities solve 98.2% of the cases announced through our platform, successfully locating over 3,500 children. In March 2019, we presented our "Reunion" platform to representatives from the United Nations and countries along the Mekong River Delta, including Cambodia, Laos, Myanmar, Thailand and Vietnam. We are committed to providing technological support to countries along the Mekong River Delta to set up similar systems in order to help prevent trafficking of children in the region.
Competition
We face competition principally from established Chinese Internet companies, such as Tencent, ~~Baidu~~ and their respective affiliates, ~~as well as from certain offline retailers~~global and ~~vertical~~regional e-commerce players, ~~including those that specialize in a limited number of categories.~~cloud computing service providers, such as Amazon, and digital media and entertainment providers. These competitors generate significant traffic and have established strong brand recognition, ~~significant~~robust technological capabilities and significant financial resources. Although foreign e-commerce companies currently have a limited presence in China, we face significant competition from them in the areas of cross-border commerce. The areas in which we compete primarily include:
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Consumers — We compete to attract, engage and retain consumers based on the variety and value of products and services listed on our ~~marketplaces,~~platforms, the engagement of digital media and entertainment content available on our platforms, ~~and~~ the overall user experience of our products and ~~services.~~services and the effectiveness of our consumer protection measures.

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Merchants, Brands, Retailers and ~~Brands~~other Businesses — We compete to attract and retain merchants, brands and retailers based on the size and the engagement of consumers on our platforms and the effectiveness of our products and services to help them build brand awareness and engagement, acquire and retain customers, complete transactions, expand service capabilities, protect intellectual property rights and enhance operating efficiency.

In addition, we compete to attract and retain businesses of different sizes across various industries based on the effectiveness of our cloud service offerings to help them enhance operating efficiency and realize their digitalization transformation ambitions.

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Marketers — We compete to attract and retain marketers, publishers and demand side platforms operated by agencies based on the reach and engagement of our properties, the depth of our consumer ~~data~~ insights and the effectiveness of our branding and marketing solutions.

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Talent — We compete for motivated and ~~effective~~capable talent, ~~and personnel,~~ including engineers and product developers to build compelling apps, tools, and functions and to provide services for all participants in our ~~ecosystem.~~digital economy.
       ~~We also~~As we acquire new businesses and expand into new industries and sectors, we face competition from major ~~global Internet companies, including e-commerce companies around the world. Although foreign e-commerce companies currently have a limited presence~~players in ~~China,~~these industries and sectors. In addition, as we expand our businesses and operations into an increasing number of international markets, such as Southeast Asia, India and Russia, we increasingly face ~~significant~~ competition from ~~them~~domestic and international players operating in ~~the areas~~these markets. See "Item 3. Key Information — D. Risk Factors — Risks Related to Our Business and Industry — If we are unable to compete effectively, our business, financial condition and results of ~~cross-border commerce, in particular as we further carry out geographic expansions into international markets.~~operations would be materially and adversely affected."
Seasonality
Our overall operating results fluctuate from quarter to quarter as a result of a variety of factors, including seasonal factors and economic cycles that influence consumer spending as well as ~~promotional shopping activities we conduct.~~promotions.
Historically, we have experienced the highest levels of revenues in the fourth calendar quarter of each year due to a number of factors, including merchants allocating a significant portion of their online marketing budgets

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to the fourth calendar quarter, promotions, such as ~~Singles Day on November 11 of each year~~the 11.11 global shopping festival, and the impact of seasonal buying patterns in respect of certain merchandise categories such as apparel. We also have ~~also~~ experienced lower levels of revenues in the first calendar quarter of each year due to a lower level of ~~allocation of online marketing budgets~~operating activities by merchants ~~at the beginning of~~early in the calendar year and during the Chinese New Year holiday, during which time consumers generally spend less and businesses in China are generally closed. In addition, seasonal weather patterns may affect the timing of buying decisions. For example, unexpectedly long periods of warm weather could delay the purchase of heavier clothing items that have higher average selling prices. Moreover, as ~~our business grows, we expect that~~ our fixed costs and expenses, such as payroll and benefits, bandwidth and ~~co-location~~location fees, ~~will continue~~grow at a relatively stable rate compared to ~~increase, which will result in~~our revenue growth, we expect to enjoy increased operating leverage in seasonally strong quarters, but ~~can significantly~~will face significant margin pressure ~~operating margins~~ in seasonally weak quarters.
Regulation
We operate in an increasingly complex legal and regulatory environment. We and our key service provider, Ant Financial, ~~Services,~~ are subject to a variety of PRC and foreign laws, rules and regulations across a number of aspects of our business. As we have expanded our operations to other countries, we have become increasingly subject to applicable regulations in these jurisdictions. This section primarily summarizes the principal PRC laws, rules and regulations relevant to our business and ~~operations.~~operations, because the PRC remains the country where we conduct the substantial majority of our business and generate the substantial majority of our revenues. Other jurisdictions where we conduct business have their own laws and regulations that cover many of the areas covered by PRC laws and regulations, but their focus, specifics and approaches may differ considerably. Areas in which we are subject to laws, rules and regulations outside of the PRC include data protection and privacy, consumer protection, content regulation, intellectual property, competition, cross-border trade, taxation, anti-money laundering and anti-corruption. We may also face protectionist policies and regulatory scrutiny on national security grounds in foreign countries in which we conduct business or investment activities. See "Item 3. Key Information — D. Risk Factors — Risks Related to Our Business and Industry — We and Ant Financial ~~Services~~ are subject to a broad range of laws and regulations, and future laws and regulations may impose additional requirements and other obligations ~~on our business or otherwise~~ that could materially and adversely affect our business, financial condition and results of operations."
Our online and mobile commerce businesses are classified as value-added telecommunication businesses by the PRC government. Current PRC laws, rules and regulations generally restrict foreign ownership in value-added telecommunication services. As a result, we operate our online and mobile commerce businesses and other businesses in which foreign investment is restricted or prohibited through variable interest entities, each of which is owned by PRC citizens or by PRC entities owned by PRC citizens, and holds all licenses associated with these businesses.

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The applicable PRC laws, rules and regulations governing value-added telecommunication services may change in the future. We may be required to obtain additional approvals, licenses and permits and to comply with any new regulatory requirements adopted from time to time. Moreover, substantial uncertainties exist with respect to the interpretation and implementation of these PRC laws, rules and regulations. See "Item 3. Key Information — D. Risk Factors — Risks Related to Doing Business in the People's Republic of China — There are uncertainties regarding the interpretation and enforcement of PRC laws, rules and regulations."
Regulation of Foreign Investment
       ~~The Guidance Catalogue of Industries for~~On March 15, 2019, the National People's Congress promulgated the 2019 PRC Foreign Investment Law, which will become effective on January 1, 2020 and will replace the major existing laws and regulations governing foreign investment in the PRC. Pursuant to the 2019 PRC Foreign Investment Law, "foreign investments" refer to investment activities conducted by foreign investors directly or "indirectly" in the PRC, which include any of the following circumstances: (i) foreign investors setting up foreign-invested enterprises in the PRC solely or jointly with other investors, (ii) foreign investors obtaining shares, equity interests, property portions or other similar rights and interests of enterprises within the PRC, (iii) foreign investors investing in new projects in the PRC solely or jointly with other investors, and (iv) investment of other methods as specified in laws, administrative regulations, or as stipulated by the State Council.
According to 2019 PRC Foreign Investment Law, China adopts a system of national treatment plus negative list with respect to foreign investment administration, and the negative list will be issued by, amended or release upon approval by the State Council, from time to time. The negative list is contemplated to consist of a list of industries in which foreign investments are prohibited and a list of industries in which foreign investments are restricted. Foreign investors would not be allowed to make investments in prohibited industries, while foreign investments must satisfy certain conditions stipulated in the negative list for investment in restricted industries. Foreign investment and domestic investment in industries outside the scope of the prohibited industries and restricted industries stipulated in the negative list would be treated equally. The current industry entry clearance requirements governing investment activities in the PRC by foreign investors are set out in the Foreign Investment Catalogue, ~~the latest version of~~ which ~~came into effect on April 10, 2015,~~ was promulgated ~~and recently amended~~ by the MOFCOM and the National Development and Reform Commission, with the latest amendment being effective as of July 28, 2018. The recently amended Foreign Investment Catalogue includes two categories, i.e., "Category of Industries Encouraged for Foreign Investment" and ~~governs investment activities in~~"Special Administrative Measures (Negative List) for Foreign Investment Access," or the ~~PRC by foreign investors. The Catalogue divides industries into three categories — "encouraged,~~"Negative List." ~~"restricted," and "prohibited" for foreign investment.~~ Industries not listed in the Foreign Investment Catalogue are generally deemed ~~as falling into a fourth category, "permitted." However,~~"permitted" for foreign investment. The Negative List expands the scope of industries ~~such as value-added telecommunication services, including Internet information services, are restricted from~~in which foreign ~~investment.~~investment is permitted by reducing the number of industries that fall within the Negative List where foreign investment is prohibited or restrictions on the shareholding percentage or requirements on the composition of board or senior management still exist. Among our significant subsidiaries, Taobao (China) Software Co., Ltd. and Zhejiang Tmall Technology Co., Ltd. are registered in China and mainly engaged in software development, technical services and consultations, and Hangzhou Cainiao Supply Chain Management Co., Ltd. is also registered in China and mainly engaged in logistics services and supply chain solutions, all of which fall into the encouraged or permitted category under the latest Foreign Investment Catalogue. These ~~two~~three significant subsidiaries have obtained all material approvals required for their business operations. The Foreign Investment Catalogue does not apply to our significant subsidiaries that are registered and domiciled in Hong Kong, the British Virgin Islands or the Cayman Islands, and operate outside China. The

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businesses of our other PRC subsidiaries — including PRC subsidiaries of our significant subsidiaries — are generally software development, technical services and consulting, which fall into the encouraged or permitted category. Industries such as value-added telecommunication services, including Internet information services, are generally restricted to foreign investment pursuant to the latest Foreign Investment Catalogue. We conduct business operations that are restricted or prohibited to foreign investment through our variable interest entities.
       InOn January ~~2015,~~12, 2017, the ~~MOFCOM published a discussion draft~~State Council issued the Notice on Several Measures for Expansion of Opening-up Policy and Active Use of Foreign Capital, or the ~~proposed Foreign Investment Law,~~Notice No. 5, which ~~embodies an expected PRC regulatory trend~~purports to ~~rationalize its~~relax restrictions on foreign investment ~~regulatory regime~~ in ~~line with prevailing international practice~~sectors including services, manufacturing and mining. Specifically, the ~~legislative efforts~~Notice No. 5 proposes to ~~unify the corporate legal requirements for both~~gradually open

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up telecommunication, Internet, culture, education and transportation industries to foreign ~~and domestic investments. The MOFCOM has solicited comments on this draft and~~investors. However, there are still substantial uncertainties exist with respect to its enactment timetable, the final version, interpretation and implementation. For more details, see "Item 3. Key Information — Risks Related to our Corporate Structure — Substantial uncertainties exist with respect to the ~~enactment timetable, interpretation~~implementing rules and ~~implementation~~regulations of ~~draft PRC Foreign Investment Law."~~Notice No. 5.
Regulation of Telecommunications and Internet Information Services
Regulation of Telecommunication Services
Under the Telecommunications Regulations of the PRC, or the Telecommunications Regulations, promulgated on September 25, 2000 by the State Council of the PRC and most recently amended in February 2016, a telecommunication ~~services~~service provider in China must obtain an operating license from ~~the Ministry of Industry and Information Technology, or~~ the MIIT, or its provincial counterparts. The Telecommunications Regulations categorize all telecommunication services in China as either basic telecommunications services or value-added telecommunications services. Our online and mobile commerce businesses, as well as ~~Youku Tudou's~~Youku's online video businesses, are classified as value-added telecommunications services. The Administrative Measures for Telecommunications Business Operating License, promulgated by the MIIT in December 2001 and most recently amended in September 2017, set forth more specific provisions regarding the types of licenses required to operate value-added telecommunications services, the qualifications and procedures for obtaining the licenses and the administration and supervision of these licenses.
Foreign investment in telecommunications businesses is governed by the State Council's Administrative Rules for Foreign Investments in Telecommunications Enterprises, or the Foreign Investment Telecommunications Rules, issued by the State Council on December 11, 2001 and most recently amended in February 2016, under which a foreign investor's beneficial equity ownership in an entity providing value-added telecommunications services in China is not permitted to exceed 50%. In addition, for a foreign investor to acquire any equity interest in a business providing value-added telecommunications services in China, it must demonstrate a positive track record and experience in providing ~~such~~these services. However, according to the Notice on Lifting the Restriction to Foreign Shareholding Percentage in Online Data Processing and Transaction Processing Business (Operational E-commerce) promulgated by the MIIT on June 19, 2015, foreign investors are allowed to hold up to 100% of all equity interest in the online data processing and transaction processing business (operational e-commerce) in China, while other requirements provided by the Foreign Investment Telecommunications Rules shall still apply. It is unclear how this notice will be implemented and there exist ~~high~~significant uncertainties with respect to its interpretation and implementation by authorities. The MIIT's Notice Regarding Strengthening Administration of Foreign Investment in Operating Value-Added Telecommunication Businesses, or the MIIT Notice, issued on July 13, 2006 prohibits holders of these services licenses from leasing, transferring or selling their licenses in any form, or providing any resource, sites or facilities, to any foreign investors intending to conduct ~~such~~this type of businesses in China.
In addition to restricting dealings with foreign investors, the MIIT Notice contains a number of detailed requirements applicable to holders of value-added telecommunications services licenses, including that license holders or their shareholders must directly own the domain names and trademarks used in their daily operations and each license holder must possess the necessary facilities for its approved business operations and maintain ~~such~~its facilities in the regions covered by its license, including maintaining its network and providing Internet security in accordance with the relevant regulatory standards. The MIIT or its provincial ~~counterpart has~~counterparts have the power to require corrective actions after ~~it discovers~~they discover any non-compliance ~~of the~~by license holders, and where ~~such~~ license holders fail to take ~~such~~those steps, the MIIT or its provincial ~~counterpart has~~counterparts have the power to revoke the value-added telecommunications services licenses.
On December 28, 2016, the MIIT promulgated the Notice on Regulating Telecommunication Services Agreement Matters, or the Telecommunication Services Agreement Notice, which came into effect on February 1, 2017. According to the Telecommunication Services Agreement Notice, telecommunication service providers must require their users to present valid identification certificates and verify the users' identification information before provision of services. Telecommunication service providers are not permitted to provide services to users with unverifiable identity or who decline identity verification.

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Regulation of Internet Information Services
As a subsector of the telecommunications industry, Internet information services are regulated by the Administrative Measures on Internet Information Services, or the ICP Measures, promulgated on September 25, 2000 by the State Council and amended on January 8, 2011. "Internet information services" are defined as services that provide information to online users through the Internet. Internet information ~~services~~service providers, also called Internet content providers, or ICPs, that provide commercial services are required to obtain an operating license from the MIIT or its provincial counterpart.
To the extent the Internet information services provided relate to certain matters, including news, publication, education or medical and healthcare (including pharmaceutical products and medical equipment), approvals must also be obtained from the relevant industry regulators in accordance with the laws, rules and regulations governing those industries.
Regulation of Advertising Services
The principal regulations governing advertising businesses in China are:
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the Advertising Law of the PRC ~~(2015,~~(2018, as amended);

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the Advertising Administrative Regulations (1987);

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the Administrative Regulations on Internet Information Search Services (2016); and

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the Internet Advertising ~~Administrative Regulations (1987)~~Measures (2016).
These laws, rules and regulations require companies such as ours that engage in advertising activities to obtain a business license that explicitly includes advertising in the business scope from the SAMR, formerly the SAIC, or its local branches.
Applicable PRC advertising laws, rules and regulations contain certain prohibitions on the content of advertisements in China (including prohibitions on misleading content, superlative wording, socially destabilizing content or content involving obscenities, superstition, violence, discrimination or infringement of the public interest). Advertisements for anesthetic, psychotropic, toxic or radioactive drugs are prohibited, and the dissemination of advertisements of certain other products, such as tobacco, patented products, pharmaceuticals, medical instruments, agrochemicals, foodstuff, alcohol and cosmetics, are also subject to specific restrictions and requirements.
Advertisers, advertising operators and advertising distributors, including the businesses that certain of the variable interest entities operate, are required by applicable PRC advertising laws, rules and regulations to ensure that the content of the advertisements they prepare or distribute are true and in compliance with applicable laws, rules and regulations. Violation of these laws, rules and regulations may result in penalties, including fines, confiscation of advertising income, orders to cease dissemination of the advertisements and orders to publish an advertisement correcting the misleading information. In circumstances involving serious violations, the ~~SAIC~~SAMR or its local branches may revoke the violator's license or permit for advertising business operations. In addition, advertisers, advertising operators or advertising distributors may be subject to civil liability if they infringe the legal rights and interests of third parties, such as infringement of intellectual proprietary rights, unauthorized use of a name or portrait and defamation.
On June 25, 2016, the Cyberspace Administration of China promulgated the Administrative Regulations on Internet Information Search Services, or the Internet Search Regulations, which came into effect on August 1, 2016. According to the Internet Search Regulations, Internet search service providers must verify paid-search service customers' qualifications, limit the ratio of paid-search results on each webpage, and clearly distinguish paid-search results from natural search results.
The Internet Advertising Measures, which were promulgated by the SAIC on July 4, 2016 and came into effect on September 1, 2016, defined Internet advertising as any commercial advertising that directly or indirectly promotes

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goods or services through websites, webpages, Internet applications and other Internet media in the forms of words, picture, audio, video or others, including promotion through emails, texts, images, video with embedded links and paid-for search results. The Internet Advertising Measures set out, among other things, the following requirements for Internet advertising activities:
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online advertisements for prescription medicine or tobacco are not allowed, while advertisements for special commodities or services such as medical treatment, pharmaceuticals, food for special medical purposes, medical instruments, agrochemicals, veterinary medicine and other health foods must be reviewed by competent authorities before online publication;

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Internet advertisements must be visibly marked as "advertisement," while paid-search results must be obviously distinguished from natural search results; and

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Internet advertisements must not affect users' normal use of the Internet; "pop-up ads" must be clearly marked with a "close" sign and be closable with one click; and no deceptive means may be used to lure users into clicking on advertisements.
According to the Internet Advertising Measures, Internet information service providers must prevent those advertisements they know or should have known to be illegal from being published through their information services. Furthermore, according to the Internet Advertising Measures, Internet advertisers are responsible for the authenticity of the content of Internet advertisements, while Internet advertisement publishers and advertisement agencies are required to verify the identities of Internet advertisers and their qualifications, review the content of Internet advertisement, and employ inspectors who are familiar with PRC laws and regulations governing Internet advertising.
Regulation of Online and Mobile Commerce
China's online and mobile commerce industry is at an early stage of development and there are few PRC laws, regulations or rules specifically regulating this industry. The SAIC adopted the Interim Measures for the Administration of Online Commodities Trading and Relevant Services on May 31, 2010 and replaced those measures with the Administrative Measures for Online Trading on January 26, 2014, which became effective on March 15, 2014. The SAIC also issued the Opinions on Strengthening the Administration of Online Group Buying Operations on March 12, 2012 to subject group buying website operators to the foregoing measures, especially those relating to marketplace platform service providers. On December 24, 2014, the MOFCOM promulgated the Provisions on the Procedures for Formulating Transaction Rules of Third Party Online Retail Platforms (Trial) to regulate the formulation, revision and enforcement of transaction rules for online retail marketplace platforms.

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These ~~newly issued~~ measures impose more stringent requirements and obligations on ~~the~~ online trading or service operators as well as ~~the~~ marketplace platform providers. For example, ~~the~~ marketplace platform providers are obligated to make public and file ~~its~~their transaction rules with MOFCOM or its respective provincial counterparts, examine the legal status of each third-party merchant selling products or services on ~~the platform~~their platforms and display on a prominent location on ~~the~~a merchant's web page ~~of such merchant~~ the information stated in the merchant's business license or a link to ~~such~~its business license, and a group buying website ~~operator~~operators must only allow a third-party merchant with a proper business license to sell products or services on ~~its platform.~~their platforms. Where ~~the~~ marketplace platform providers also act as online distributors, these marketplace platform providers must make a clear distinction between their online direct sales and sales of third-party merchant products on ~~the~~their marketplace ~~platform.~~platforms.
Since the promulgation of the Administrative Measures for Online Trading, the SAIC ~~has~~had issued a number of guidelines and implementing rules aimed at adding greater specificity to these regulations. The ~~SAIC continues~~relevant governmental authorities continue to consider and issue guidelines and implementing rules, and we expect that ~~there will be further development of~~ regulation in this ~~industry.~~industry will further develop. For example, three PRC governmental authorities (the Ministry of Finance, General Administration of Customs and State Administration of Taxation) issued a notice on March 24, 2016 to regulate cross-border e-commerce trading which has experienced rapid growth in recent years. The ~~Notice on Tax Policies of Cross-Border E-Commerce Retail Importation effective as of April 8, 2016, or the~~ New Cross-Border E-commerce Tax Notice, which became effective on April 8, 2016, introduced the concept of the Cross-Border E-Commerce Retail Importation Goods Inventory, or the Cross-Border E-Commerce Goods Inventory, which ~~are~~is to be issued and updated by the three authorities together with other relevant authorities from time to time. Goods ~~beyond~~outside the scope of the Cross-Border E-commerce Goods Inventory will have no tax codes

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and be effectively removed from cross-border e-commerce platforms. Two ~~batches~~versions of the Cross-Border E-Commerce Goods Inventory have been issued on April 6, 2016 and April 15, 2016, respectively.
Cosmetics imported for the first time, nutrition supplements and other special food products required to be registered with the National Medical Products Administration, formerly known as State Drug Administration or State Food and Drug Administration, are excluded from the Cross-Border E-Commerce Goods Inventory and will not be able to be sold on the relevant cross-border e-commerce platforms. However, pursuant to a transition policy issued by the General Administration of Customs, goods ~~which~~that have been imported to or in transit to the bonded areas and special regulated areas of customs before April 8, 2016 can still be sold on the cross-border e-commerce platforms no matter whether these goods are included in the Cross-Border E-Commerce Goods Inventory or not. Furthermore, pursuant to the Notice of Relevant Matters on Implementation of New Cross-Border E-Commerce Retail Importation Supervision and Administration Requirements, or the New Cross-Border E-Commerce Tax Implementation Notice, issued by the General Administration of Customs on May 24, 2016, the implementation of certain provisions of the New Cross-Border E-commerce Tax Notice will be suspended until the expiration of a transition period, which was supposed to conclude by the end of 2017. According to the New Cross-Border E-Commerce Tax Implementation Notice, the requirement of presenting customs clearance for bonded goods purchased online is suspended in ten cities, and the requirement of presenting first-time import license, registration or filing for online purchased cosmetics imported for the first time, nutrition supplements and other special food products, are suspended until the end of the transition period. Furthermore, according to an official MOFCOM news release issued on March 17, 2017, from January 1, 2018 retail goods imported on cross-border e-commerce platforms will be temporarily treated as personal items that are not subject to stricter regulation and higher tax rates applicable to normal imported goods in 15 cross-border e-commerce trial areas. On September 20, 2017, the State Council decided to extend the transition period for cross-border e-commerce retail import regulations to the end of 2018, during which period cross-border e-commerce retail import goods were to be temporarily regulated as personal items in ten pilot cities. Furthermore, according to a December 7, 2017 statement by the Ministry of Commerce, starting on January 1, 2018, the transitional period policy will be extended to 15 pilot cities. On November 28, 2018, the MOFCOM, the National Development and Reform Commission, and the Ministry of Finance jointly issued the Notice on Improving the Supervision over Cross-border E-commerce Retail Imports, which came into effect on January 1, 2019. According to this notice, the transitional period policy continued to be adopted in 37 cross-border e-commerce pilot areas, which means the retail goods imported on cross-border e-commerce platforms will still be regulated as personal items, and the registration or filing requirements for goods imported for the first time will not apply, except for goods that are temporarily prohibited from being imported from epidemic areas and goods for which risk emergency response is initiated to address major risks in product quality and safety. Cross-Border E-Commerce Goods Inventory was also revised on November 20, 2018 to reflect this change.
On August 31, 2018, the Standing Committee of the National People's Congress promulgated the E-commerce Law, which came into effect on January 1, 2019. The E-commerce Law imposes a series of requirements on e-commerce operators including e-commerce platform operators, merchants operating on the platform and the individuals and entities carrying out business online. According to the E-commerce Law, e-commerce operators who provide search results based on consumers' characteristics such as hobbies and consumption habits shall also provide consumers with options that are not targeted at their personal characteristics at the same time, respect and fairly protect the legitimate interests of the consumers. The E-commerce Law requires the e-commerce platform operators to:
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verify and register the identities, addresses, contacts and licenses of merchants who apply to provide goods or services on its platform, establish registration archives and update this information on a regular basis;

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record and retain information of the products and services published on its platform, as well as transaction information, for a no less than three years unless otherwise provided by laws and regulations, and ensure the completeness, confidentiality and availability of this information;

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use noticeable labels to clearly distinguish the products or services provided by the platform operators from those provided by merchants;

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submit the identification information of the merchants on its platform to market regulatory administrative authorities as required and remind the merchants to complete the registration with market regulatory administrative authorities;

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submit identification information and tax-related information to tax authorities as required in accordance with the laws and regulations regarding the administration of tax collection and remind the individual merchants to complete the tax registration;

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display the platform service agreement and the transaction rules or links to this information on the homepage of the platform;

•
establish a credit evaluation system and publish the credit evaluation rules, and provide consumers with methods to evaluate products sold or services provided on the platform; and

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establish intellectual property rights protection rules, and take necessary measures against infringement of intellectual property rights by merchants on its platform.
In addition, e-commerce platform operators are not allowed to impose unreasonable restrictions over or add unjustified conditions to transactions concluded on their platforms by merchants, or charge merchants operating on its platform any unreasonable fees.
According to the E-commerce Law, e-commerce platform operators are required to assume joint liability with the merchants and may be subject to warnings and fines up to RMB2,000,000 where (i) they fail to take necessary actions when they know or should have known that the products or services provided by the merchants on the platform do not meet personal and property security requirements, or otherwise infringe upon consumers' legitimate rights; or (ii) they fail to take necessary actions, such as deleting and blocking information, disconnecting, terminating transactions and services, when they know or should have known that the merchants on the platform infringe upon the intellectual property rights of others. With respect to products or services affecting consumers' health and safety, e-commerce platform operators will be held liable if they fail to review the qualifications of merchants or fail to safeguard the interests of consumers, and may be subject to warnings and fines up to RMB2,000,000.
Regulation of Mobile Apps
On June 28, 2016, the Cyberspace Administration of China promulgated the Regulations for the Administration of Mobile Internet Application Information Services, which came into effect on August 1, 2016, requiring ICPs who provide information services through mobile Internet applications, or "Apps," to:
•
verify the real identities of registered users through mobile phone numbers or other similar channels;

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establish and improve procedures for protection of user information;

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establish and improve procedures for information content censorship;

•
ensure that users are given adequate information concerning an App, and are able to choose whether an App is installed and whether or not to use an installed App and its functions;

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respect and protect intellectual property rights; and

•
keep records of users' logs for 60 days.
If an ICP who provides information services through Apps violates these regulations, mobile app stores through which the ICP distributes its Apps may issue warnings, suspend the release of its Apps, or terminate the sale of its Apps, and/or report the violations to governmental authorities.

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Regulation of Internet Content
The PRC government has promulgated measures relating to Internet content through various ministries and agencies, including the MIIT, the News Office of the State Council, the Ministry of Culture and Tourism and the General Administration of Press and Publication. In addition to various approval and license requirements, these measures specifically prohibit Internet activities that result in the dissemination of any content ~~which~~that is found to contain pornography, promote gambling or violence, instigate crimes, undermine public morality or the cultural traditions of the PRC or compromise State security or secrets. ICPs must monitor and control the information posted on their websites. If any prohibited content is found, they must remove ~~such~~the content immediately, keep a record of it and report to the relevant authorities. If an ICP violates these measures, the PRC government may impose fines and revoke any relevant business operation licenses.

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Regulations on Broadcasting Audio/Video Programs through the Internet
       On July 6, 2004, the State Administration of Radio, Film and Television, or the SARFT, promulgated the Rules for the Administration of Broadcasting of Audio/Video Programs through the Internet and Other Information Networks, or the Audio/Video Broadcasting Rules. The Audio/Video Broadcasting Rules apply to the launch, broadcasting, aggregation, transmission or download of audio/video programs via the Internet and other information networks. Anyone who wishes to engage in Internet broadcasting activities must first obtain an audio/video program transmission license, with a term of two years, issued by the SARFT and operate pursuant to the scope as provided in such license. Foreign invested enterprises are not allowed to engage in these businesses.
On April 13, 2005, the State Council announced Several Decisions on Investment by Non-state-owned Companies in Culture-related Business in China. These decisions encourage and support non-state-owned companies to enter certain culture-related business in China, subject to restrictions and prohibitions for investment in audio/video broadcasting, website news and certain other businesses by non-state-owned companies. These decisions authorize the State Administration of Radio, Film, and Television, or the SARFT, the Ministry of Culture and the General Administration of Press and Publication, ~~or the GAPP,~~ to adopt detailed implementing rules according to these decisions.
On December 20, 2007, the SARFT and the MIIT jointly issued the Rules for the Administration of Internet Audio and Video Program Services, commonly known as Circular 56, which came into effect ~~as of~~on January 31, 2008 and was amended on August 28, 2015. ~~Circular 56 reiterates the requirement set forth in the Audio/Video Broadcasting Rules that online audio/video service providers must obtain a license from the SARFT. Furthermore,~~Among other things, Circular 56 requires all online audio/video service providers to be either wholly state-owned or state-controlled. According to relevant official answers to press questions published on the SARFT's website dated February 3, 2008, officials from the SARFT and the MIIT clarified that online audio/video service providers that already had been operating lawfully prior to the issuance of Circular 56 may re-register and continue to operate without becoming state-owned or controlled, provided that ~~such~~the providers have not engaged in any unlawful activities. This exemption will not be granted to online audio/video service providers established after Circular 56 was issued. These policies have been reflected in the Application Procedure for Audio/Video Program Transmission License.
On March 17, 2010, the SARFT issued the Internet Audio/Video Program Services Categories (Provisional), or the Provisional Categories, which were amended on March 10, 2017. The amended Provisional Categories classified Internet audio/video programs into four ~~categories. Category I is only open to state-owned broadcast media companies operating in the television section, and the other three~~ categories, which are ~~open to privately held entities.~~further divided into seventeen sub-categories.
In 2009, the SARFT released a Notice on Strengthening the Administration of Online Audio/Video Content. This notice reiterated, among other things, that all movies and television shows released or published online must comply with relevant regulations on the administration of radio, film and television. In other words, these movies and television shows, whether produced in the PRC or overseas, must be pre-approved by the SARFT, and the distributors of these movies and television shows must obtain an applicable permit before releasing any ~~such movie~~of these movies or television ~~show.~~shows. In 2012, the SARFT and the State Internet Information Office of the PRC issued a Notice on Improving the Administration of Online Audio/Video Content Including Internet Drama and Micro Films. In 2014, the General Administration of Press and Publication, Radio, Film and Television, or GAPPRFT ~~formerly~~(which was split into the ~~SARFT~~National Radio and Television Administration, or NRTA, and the ~~GAPP,~~State Administration of News and Publication in March 2018) released a Supplemental Notice on Improving the Administration of Online Audio/Video Content Including Internet Drama and Micro Films. This notice stresses that entities producing online audio/video content, such as Internet dramas and micro films, must obtain a permit for radio and television program production and operation, and that online audio/video content service providers should not release any Internet dramas or micro films that were produced by any entity lacking ~~such~~the permit. For Internet dramas or micro films produced and uploaded by individual users, the online audio/video service providers transmitting ~~such~~this content will be deemed responsible as the producer. ~~Further,~~Furthermore, under this notice, online audio/video service providers can only transmit content uploaded by individuals whose identity has been verified and ~~such~~the content must comply

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with the relevant content management rules. This notice also requires that online audio/video content, ~~include~~including Internet drama and micro films, be filed with the relevant authorities before release.

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       On October 28, 2011, the SARFT issued the Administrative and Operational Requirements for Licensed Internet TV Organizations, commonly known as Circular 181, which came into effect as of the same date. Circular 181 requires that Smart TVs must be exclusively connected to a specific licensed Internet TV organization and must not have access to the public Internet or network operators' databases. Up to now, there are only seven licensed Internet TV organizations and all are state-owned companies.
On September 2, 2014, the GAPPRFT promulgated a Notice on Further Implementing the Relevant Provisions for the Administration of Broadcasting Foreign Films and TV dramas. The notice stresses that any foreign film or TV drama must have a License for Film Publication or a TV drama Issuance License before being broadcast online, and that the annual total number of foreign films and TV dramas broadcast by a website must not exceed 30% of the total amount of domestic films and TV dramas broadcast by ~~such~~the relevant website in the preceding year. Furthermore, online video operators are required to report their annual plans for the import of foreign films and TV dramas to the GAPPRFT before the end of the preceding year. If the online video operators' import plans are approved, the samples, contracts, copyright certificates, plot summaries and other materials relevant to the foreign films and TV dramas are subject to further content examination before the issuance of Licenses for Film Publication or the TV drama Issuance Licenses. The notice also requires these online video operators to upload information about the foreign films and TV dramas to be broadcast to a unified platform for registration before March 31, 2015. Since April 1, 2015, unregistered foreign films and TV dramas are no longer allowed to be broadcast online.
On April 25, 2016, the GAPPRFT promulgated the Administration Measures on Audio/Video Program Services via Special Network and Directional Transmission, or Circular 6, which came into effect on June 1, 2016 and replaced the Rules for the Administration of Broadcasting of Audio/Video Programs through the Internet and Other Information Networks, which were promulgated in July 2004. Pursuant to Circular 6, providers of audio/video program services via special network and directional transmission, including content providing, integrated broadcasting controlling and transmission and delivery, must obtain an audio/video program transmission license, with a term of three years, issued by the GAPPRFT and operate pursuant to the scope as provided in these licenses. Foreign invested enterprises are not allowed to engage in these businesses.
On March 16, 2018, the GAPPRFT promulgated the Notice on Further Regulating the Transmission of Internet Audio/Video Programs, which requires that, among other things, audio/video platforms must: (i) not re-edit, re-dub, re-caption or otherwise ridicule classic works, radio and television programs, or original Internet audio/video programs without authorization, (ii) not broadcast clips and trailers of audio/video programs without due approval or those already sanctioned by the GAPPRFT, (iii) not transmit re-edited programs that unfairly distort the original content, (iv) strictly monitor the adapted content uploaded by platform users and not provide transmission channels for illicit content, and (v) immediately take down unauthorized content upon receipt of complaints from copyright owners, radio and television stations, or film and television production institutions.
Pursuant to this notice, online audio/video programs may not cooperate with entities that illegally conduct Internet audio/video program services without approval, including accepting sponsorship or endorsement from these entities.
On December 27, 2018, the NRTA issued the Notice on the Upgrading of the Network Audio/Visual Program Information Filing System. According to this notice, since February 15, 2019, a producer shall submit relevant information, such as name, type, content outline and budget, of any major network movie or teleplay (including network plays, network movies and network animations) to the NRTA's "Major Network Movies and Teleplays Information Filing System" before producing the movie or teleplay. Major network movies and teleplays include any network series, and network animations, with total investment of over RMB5 million, and any network movie with an investment of over RMB1 million. After shooting and production of any major network movie or teleplay, the producers shall file the relevant information, such as the expected broadcasting platform, amount of actual investment and actor's remuneration, with the above-mentioned filing system, and submit the finished program to the relevant radio and television administrative departments. An online filing number will be assigned to a major network series after the content passes the review of the relevant radio and television administrative department. Major network series, network movies and network animations with online filing numbers are permitted to be broadcasted and promoted on the home pages of various audio-visual program websites, and may be used for promoting investment, membership recommendation, online recommendation and program optimization of audio-visual program websites.

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Regulations on Internet Publication
The ~~GAPP~~SARFT is responsible for nationwide supervision and administration of publishing activities in China. On June 27, 2002, the GAPP and the MIIT jointly promulgated the Internet Publication Tentative Administrative Measures, or the Internet Publication Measures, which took effect on August 1, 2002. Pursuant to the Internet Publication Measures, any entity engaged in Internet publishing activities must obtain the Internet Publication License from the GAPP before conducting any Internet publication activities. The term "Internet publication" is defined as Internet transmission activity by which Internet information service providers publish on the Internet or transmit to end-users via the Internet works that they or others have created, after selection and editing, for browsing, reading, use or downloading by the general public. The works in question primarily include (i) content that has already been published formally, such as books, newspapers, periodicals, audio/video products and electronic publications, or that has been made public via other media; and (ii) edited works of literature and art or works concerning natural science, social science, engineering or other topics.
       On February 4, 2016, the GAPPRFT, the SARFT's predecessor, and the MIIT jointly promulgated the Online Publication Service Administration Rules, or the Online Publication Rules, which took effect on March 10, 2016 and replaced the Internet Publication ~~Measures.~~ Tentative Administrative Measures, which were promulgated in June 2002.
Pursuant to the Online Publication Rules, an online publication service provider must obtain the Online Publication Service License from the GAPPRFT. The term "online publication service" is defined as the provision of online publications to the public through information networks. The term "online publications" is defined as digital works characteristic of publishing such as editing, production or processing provided to the public through information networks, and primarily ~~include:~~includes:
•
original digital works such as texts, pictures, maps, games, cartoons and audio-visual reading materials in the fields of literature, art, science, etc., ~~which~~that are of knowledge or ideology;

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digital works, the content of which is the same as that ofwhich has already been published, such as books, newspapers, periodicals and electronic ~~publication, etc., which have already been published;~~publications;

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digital works such as online document databases formed by way of selecting, compiling or collecting the abovementioned works; and

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other types of digital works determined by the GAPPRFT.
The Online Publication Rules expressly prohibit ~~the~~ foreign invested enterprises from providing online publication services. In addition, if an online publication service provider intends to cooperate for an online

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publication services project with foreign invested enterprises, overseas organizations or overseas individuals, it must report to the GAPPRFT and obtain an approval in advance. Also, ~~the~~an online publication service provider is prohibited from lending, leasing, selling or otherwise transferring the Online Publication Service License, or to allow any other online information service provider to provide online publication services in its name.
Pursuant to the Online Publication Rules, book, audio-visual, electronic, newspaper or periodical publishers who intend to engage in online publication services must have:
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a specific publishing platform, such as domain name and smart terminal application, for conducting online publication business;

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a specific online publication service scope; and

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necessary technical equipment for the provision of online publication services, with the related server and storage equipment located within the territory of the PRC.
Other entities that intend to engage in online publication services must have:
•
a specific name and articles of association that is not identical to those of any other publication service provider;

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a legal representative and key responsible persons who shall be PRC citizens living permanently in the PRC who have full civil capacity to act, and at least one of these legal representatives or key responsible persons must have a mid-level or higher professional qualification in the field of publication;

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at least eight full-time editing and publishing staff, other than the legal representative and key responsible persons, who have professional qualifications in publishing or other relevant fields recognized by the GAPPRFT and meet the needs of the entity's scope of online publication services, among whom at least three must have mid-level or higher professional qualification;

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a content review system meeting the needs of the provision of online publication services;

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fixed working premises; and

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•
other items as required by relevant laws, administrative regulations or the GAPPRFT.
Regulations on Internet Drug Information Service
The State Food and Drug Administration, or the SFDA, the predecessor of the National Medical Products Administration, promulgated the Administrative Measures on Internet Drug Information Service in July 2004 and further amended the same in November 2017. Since the promulgation of the Administrative Measures on Internet Drug Information Service, the SFDA had issued certain implementing rules and notices ~~thereafter.~~aimed at adding specificity to these regulations. These measures set out regulations governing the classification, application, approval, content, qualifications and requirements for Internet drug information services. An ICP service operator that provides information regarding drugs or medical equipment must obtain an Internet Drug Information Service Qualification Certificate from the applicable provincial level counterpart of the ~~SFDA.~~National Medical Products Administration.
Regulations on Internet News ~~Publication~~Information Services
Publishing and disseminating news through the Internet are highly regulated in the PRC. On November 7,6, 2000, the State Council Information Office, or SCIO, and the MIIT jointly promulgated the Provisional Measures for Administrating Internet Websites Carrying on the News Publication Business, or Internet News Measures.
These measures require an ICP operator (other than a government authorized news unit) to obtain the approval from SCIO to publish news on its website or disseminate news through the Internet. Furthermore, any disseminated news is required to be obtained from government-approved sources based on contracts between the ICP operator and these sources. The copies of ~~such~~these contracts must be filed with relevant government authorities.
On September 25, 2005, the SCIO and the MIIT jointly issued the Provisions on the Administration of Internet News Information Services, requiring Internet news information service organizations to provide services as approved by the SCIO, subject to annual inspection under the new provisions. These Provisions also provide that no ~~Internet news information service organizations may take the form of a~~ foreign invested enterprise, whether jointly or wholly owned by the foreign ~~investment,~~investor, may be an Internet news information service organization, and no cooperation between Internet news information service organizations and foreign invested ~~enterprise~~enterprises is allowed before the SCIO completes the security evaluation.
On May 2, 2017, the Cyberspace Administration issued the Administrative Provisions on Internet News Information Services, or the 2017 Internet News Information Provisions, which came into effect on June 1, 2017 and redefine news information as reports and commentary on political, economic, military, diplomatic and other social and public affairs, as well as reports and commentary on emergency social events. Pursuant to the 2017 Internet News Information Provisions, the Cyberspace Administration and its local counterparts replaced the SCIO as the government department in charge of supervision and administration of Internet news information. Furthermore, an ICP operator must obtain approval from the Cyberspace Administration in order to provide Internet news information services, including through websites, applications, forums, blogs, microblogs, public accounts, instant messaging tools, and webcasts.
Regulations on Internet Culture Activities
On February 17, 2011, the Ministry of Culture, the predecessor of the Ministry of Culture and Tourism, promulgated the Internet Culture Administration Tentative Measures, or the Internet Culture ~~Measures.~~Measures, which was most recently amended in December 2017. The Internet Culture Measures require ICP operators engaging in "Internet culture activities" to obtain a permit from the Ministry of ~~Culture.~~Culture and Tourism. The term "Internet culture activities" includes, among other things, online dissemination of Internet cultural products (such as audio-video products, gaming products, performances of plays or programs, works of art and cartoons) and the production, reproduction, importation, publication and broadcasting of Internet cultural products.
On November 20, 2006, the Ministry of Culture issued Several Suggestions of the Ministry of Culture on the Development and Administration of ~~the~~ Internet Music, or the Suggestions, which became effective on November 20, 2006. The Suggestions, among other things, reiterate the requirement for ~~the~~an Internet service provider to obtain an

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Internet culture business permit to carry on any business relating to Internet music products. In addition, foreign investors are prohibited from operating Internet culture businesses. However, the laws and regulations on Internet music products are still evolving, and there have not been any provisions stipulating whether or how music ~~video~~videos will be regulated by the Suggestions.
On August ~~18, 2009,~~12, 2013, the Ministry of Culture promulgated the Notice on ~~Strengthening and Improving~~Implementing the Administrative Measures for the Content ~~Review~~Self-examination of ~~Online Music.~~Internet Culture Business Entities. According to this notice, only "Internet culture operating entities" approved by the Ministry of Culture may engage in the production, release, dissemination (including providing direct links to music products) and importation of online music products. The content of online music mustany cultural product or service shall be reviewed by ~~or filed with~~ the ~~Ministry of Culture. Internet culture operating entities should establish a strict self-monitoring system of online music~~provider before being released to the public and the review process shall be done by persons who have obtained the relevant content ~~and set up a special department in charge of such monitoring.~~

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On October 23, 2015, the Ministry of Culture promulgated the Notice on Further Strengthening and Improving the Content Review of Online Music, which took effect on January 1, ~~2016.~~2016 and stipulated that ICPs shall carry out self-examination in respect of the content management of online music, which shall be regulated by the cultural administration departments in process or afterwards. According to this notice, ICP operators are required to submit their content administrative system, review procedures, and work standards to the provincial culture administrative department where they are located for filing within a prescribed period.
Regulations on Producing Audio/Video Programs
On July 19, 2004, the SARFT promulgated the Administrative Measures on the Production and Operation of Radio and Television Programs, effective as of August 20, 2004 and amended on August 28, 2015. These Measures provide that anyone who wishes to produce or operate radio or television programs must first obtain an operating ~~permit.~~permit for their business.
On ~~February 1, 2002,~~December 25, 2001, the State Council promulgated the Regulations for the Administration of Films, or the Film Regulations, which became effective ~~as of~~on February 1, 2002. The Film Regulations set forth the general regulatory guidelines for China's film industry and address practical issues with respect to production, censorship, distribution and screening. They also establish the SARFT as the sector's regulatory authority, and serve as the foundation for all other legislation promulgated in this area. The Film Regulations provide the framework for an industry-wide licensing system operated by the SARFT, under which separate permits (and permit application procedures) apply.
Regulation of Express Delivery Services
The PRC Postal Law, which took effect in October 2009 and was most recently amended in 2015, sets forth the fundamental rules on the establishment and operation of an express delivery company. According to the Postal Law, an enterprise that operates and provides express delivery services is required to obtain a Courier Service Operation Permit. Pursuant to the Postal Law, "delivery" refers to delivery of correspondence, parcels, printed materials and other items to specific individuals or entities according to the names and addresses on the envelopes or packages, including mail acceptance, sorting, transportation, delivery, and "express delivery" refers to rapid mail "delivery" within a specified time limit. The above-mentioned requirements are also provided for in the Administrative Measures for Express Delivery Market, which were promulgated by the Ministry of Transport in January 2013 and became effective in March 2013.
The PRC Postal Law also requires that a company operating express delivery services must apply for and obtain the Courier Service Operation Permit prior to applying for its business license. Pursuant to the Administrative Measures on Courier Service Operation Permits, which were promulgated by the Ministry of Transport in June 2015 and amended in October 2018, any entity engaging in express delivery services is required to obtain a Courier Service Operation Permit from the State Post Bureau or its local counterpart and is subject to their supervision and regulation. The express delivery business must be operated within the permitted scope and the valid term of the Courier Service Operation Permit.
On March 2, 2018, the State Council promulgated the Provisional Regulations for Express Delivery, or the Provisional Regulations, which came into effect on May 1, 2018 and was amended on March 2, 2019. The

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Provisional Regulations reiterate that a company operating express delivery services must obtain the Courier Service Operation Permit and sets forth specific rules and security requirements for express delivery operations.
Regulation of Internet Security
The Decision in Relation to Protection of ~~the~~ Internet Security enacted by the Standing Committee of the National People's Congress of China on December 28, 2000 provides that the following activities conducted through the Internet are subject to criminal punishment:
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gaining improper entry into a computer or system of strategic importance;

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disseminating politically disruptive information or obscenities;

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leaking State secrets;

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spreading false commercial information; or

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infringing intellectual property rights.
The Administrative Measures on the Security Protection of Computer Information Network with International Connections, issued by the Ministry of Public Security on December 16, 1997 and amended on January 8, 2011, prohibit the use of the Internet in a manner that would result in the leakage of State secrets or the spread of socially destabilizing content. The Provisions on Technological Measures for Internet Security Protection, or the Internet Security Protection Measures, promulgated on December 13, 2005 by the Ministry of Public Security require all ICPs to keep records of certain information about ~~its~~their users (including user registration information, log-in and log-out time, IP address, content and time of posts by users) for at least 60 days and submit the above information as required by laws and regulations. Under these measures, ~~the~~ value-added telecommunications services license holders must regularly update information security and content control systems for their websites and must also report any public dissemination of prohibited content to local public security authorities. If a value-added telecommunications services license holder violates these measures, the Ministry of Public Security and the local security bureaus may revoke its operating license and shut down its websites.
The Communication Network Security Protection Administrative Measures, which ~~was~~were promulgated by the MIIT on January 21, 2010, require that all communication network operators, including telecommunications ~~services~~service providers and Internet domain name service providers, divide their own communication networks into units. ~~Such~~These communication network units shall be rated in accordance with degree of damage to national security, economic operation, social order and public interest ~~assuming such units~~in the event a unit is damaged. ~~The communication~~Communication network operators must file the division and ratings of their communication ~~network~~networks with MIIT or its local counterparts. If a communication network operator violates these measures, the MIIT or its local counterparts may order rectification or impose a fine up to RMB30,000 in case ~~such~~a violation is not duly rectified.

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Internet security in China is also regulated and restricted from a national security standpoint. On July 1, 2015, the National People's Congress Standing Committee promulgated the New National Security Law, which took effect on the same date and replaced the former National Security Law promulgated in 1993. According to the New National Security Law, the state shall ensure that the information system and data in important areas are secure and controllable. In addition, according to the New National Security Law, the state shall establish national security review and supervision institutions and mechanisms, and conduct national security reviews of key technologies and IT products and services that affect or may affect national security. There are uncertainties on how the New National Security Law will be implemented in practice.
On November 7, 2016, the National People's Congress Standing Committee promulgated the Cybersecurity Law, which came into effect on June 1, 2017, and applies to the construction, operation, maintenance and use of networks as well as the supervision and administration of cybersecurity in China. The Cybersecurity Law defines "networks" as systems that are composed of computers or other information terminals and relevant facilities used for the purpose of collecting, storing, transmitting, exchanging and processing information in accordance with

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certain rules and procedures. "Network operators," who are broadly defined as owners and administrators of networks and network service providers, are subject to various security protection-related obligations including:
•
complying with security protection obligations in accordance with tiered cybersecurity system's protection requirements, which include formulating internal security management rules and manual, appointing cybersecurity responsible personnel, adopting technical measures to prevent computer viruses and cybersecurity endangering activities, adopting technical measures to monitor and record network operation status, cybersecurity events, retaining user logs for at least six months and adopting measures such as data classification, key data backup and encryption, for the purpose of securing networks from interference, vandalization, or unauthorized visit and preventing network data from leakage, theft or tampering;

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verifying user's identities before signing agreements or providing services such as network access, domain name registration, landline telephone or mobile phone access, information publishing or real-time communication services;

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formulating cybersecurity emergency response plans, timely handling security risks, initiating emergency response plans, taking appropriate remedial measures and reporting to regulatory authorities; and

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providing technical assistance and support for public security and national security authorities for protection of national security and criminal investigations.
According to the Cybersecurity Law, network service providers must inform users about and report to the relevant authorities any known security defects and bugs, and must provide continuous security maintenance services for their products and services. Network products and service providers shall not contain or provide malware.
Network service providers who do not comply with the Cybersecurity Law may be subject to fines, suspension of their businesses, shutdown of their websites, and revocation of their business licenses.
On April 11, 2017, the Cyberspace Administration of China released the draft Measures on Security Assessment of the Cross-Border Transfer of Personal Information and Important Data, or the draft Cross-Border Transfer Measures, which require personal information and important data collected by and produced by all network operators during the course of their operations within China to be stored within China. According to the draft Cross-Border Transfer Measures, self-assessment by network operators or assessment by industrial regulatory authority or the national cyberspace authority under certain circumstances must be completed before transferring personal information or important data overseas.
According to the draft Cross-Border Transfer Measures, personal information or important data may not be transferred overseas without consent from the concerned individual(s), or if the transfer endangers the interests of individuals, the public or national security. The export of the following data shall be pre-assessed by industrial regulatory authority or the national cyberspace authority:
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personal information of 500,000 individuals or more;

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data with volume of 1,000 gigabytes or more;

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data in relation to nuclear facilities, chemistry and biology, national defense and military, health of the population, mega project activities, ocean environment, and sensitive geographical information;

•
network security information involving system bugs and security protection of key information infrastructure;

•
personal information and important data provided by key information infrastructure operators; and

•
other data that may affect national security and societal public interests, and considered by the industrial administration authority or regulatory authority necessary to be subject to their assessment.
The Cyberspace Administration of China completed the solicitation of comments on the draft Cross-Border Transfer Measures in May 2017 but has not promulgated the final measures. There are still substantial uncertainties with respect to its final content and enactment timetable.

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On May 2, 2017, the Cyberspace Administration issued the Measures for Security Review of Cyber Products and Services, or the Cybersecurity Review Measures, which came into effect on June 1, 2017. According to the Cybersecurity Review Measures, the following cyber products and services will be subject to cybersecurity review:
•
important cyber products and services purchased by networks and information systems related to national security; and

•
the purchase of cyber products and services by operators of critical information infrastructure in important industries and fields such as public communications and information services, energy, transportation, water resources, finance, public service and electronic administration, and other critical information infrastructure, which may affect national security.
The Cyberspace Administration is responsible for organizing and implementing cybersecurity reviews, while the competent departments in key industries such as finance, telecommunications, energy and transport shall be responsible for organizing and implementing security review of cyber products and services in their respective industries or fields. There are still substantial uncertainties with respect to the interpretation and implementation of the Cybersecurity Review Measures.
On November 15, 2018, the Cyberspace Administration issued the Provisions on Security Assessment of the Internet Information Services with Public Opinion Attributes or Social Mobilization Capacity, which came into effect on November 30, 2018. The provisions require ICPs to conduct security assessments on their Internet information services if their services include forums, blogs, microblogs, chat rooms, communication groups, public accounts, short-form videos, online live-streaming, information sharing, mini programs or other functions that provide channels for the public to express opinions or have the capability of mobilizing the public to engage in specific activities. ICPs must conduct self-assessment on, among other things, the legality of new technology involved in the services and the effectiveness of security risk prevention measures, and file the assessment report with the local competent cyberspace administration authority and public security authority.
Regulation of Privacy Protection
Under the ICP Measures, ICPs are prohibited from producing, copying, publishing or distributing information that is humiliating or defamatory to others or that infringes upon the lawful rights and interests of others.
Depending on the nature of the violation, ICPs may face criminal charges or sanctions by PRC security authorities for ~~such~~these acts, and may be ordered to suspend temporarily their services or have their licenses revoked.
Under the Several Provisions on Regulating the Market Order of Internet Information Services, issued by the MIIT on December 29, 2011, ICPs are also prohibited from collecting any personal user ~~personal~~ information or providing any ~~such~~ information to third parties without the consent of athe user. The Cybersecurity Law provides an exception to the consent requirement where the information is anonymous, not personally identifiable and unrecoverable. ICPs must expressly inform the users of the method, content and purpose of the collection and processing of ~~such~~ user personal information and may only collect ~~such~~ information necessary for its services. ICPs are also required to properly maintain the user personal information, and in case of any leak or likely leak of the user personal information, ICPs must take remedial measures immediately and report any material leak to the telecommunications regulatory authority.
In addition, the Decision on Strengthening Network Information Protection promulgated by the Standing Committee of the National People's Congress on December 28, 2012 emphasizes the need to protect electronic information that contains individual identification information and other private data. The decision requires ICPs to establish and publish policies regarding the collection and use of personal electronic information and to take necessary measures to ensure the security of the information and to prevent leakage, damage or loss. Furthermore, MIIT's Rules on Protection of Personal Information of Telecommunications and Internet Users promulgated on July 16, 2013 contain detailed requirements on the use and collection of personal information as well as the security measures to be taken by ICPs.

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The PRC government retains the power and authority to order ICPs to provide an Internet user's personal information if ~~such~~a user posts any prohibited content or engages in any illegal activities through the Internet.
According to the Cybersecurity Law, individuals may request that network operators make corrections to or delete their personal information in case the information is wrong or was collected or used beyond an individuals' agreement with network operators.
Regulation of Consumer Protection
Our online and mobile commerce business is subject to a variety of consumer protection laws, including the PRC Consumer Rights and Interests Protection Law, as amended and effective as of March 15, 2014, and the Administrative Measures for Online Trading, both of which have ~~provided~~imposed stringent requirements and obligations on business operators, including Internet business operators and platform service providers like us. For example, consumers are entitled to return goods purchased online, subject to certain exceptions, within seven days upon receipt of ~~such~~ goods for no reason. On January 6, 2017, the SAIC issued the Interim Measures for No Reason Return of Online Purchased Commodities within Seven Days, which came into effect on March 15, 2017, further clarifying the scope of consumers' rights to make returns without a reason, including exceptions, return procedures and online marketplace platform providers' responsibility to formulate seven-day no-reason return rules and related consumer protection systems, and supervise the merchants for compliance with these rules. To ensure that merchants and service providers comply with these laws and regulations, we, as platform operators, are required to implement rules governing transactions on our platform, monitor the information posted by merchants and service providers, and report any violations by ~~such~~ merchants or service providers to the relevant authorities. In addition, online marketplace platform providers may, pursuant to PRC consumer protection laws, be ~~exposed~~subject to liabilities if the lawful rights and interests of consumers are infringed in connection with consumers' purchase of goods or acceptance of services on online marketplace platforms and the platform service providers fail to provide consumers with the contact information of the merchant or manufacturer. In addition, platform service providers may be jointly and severally liable with merchants and manufacturers if they are aware or should be aware that the merchant or manufacturer is using the

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online platform to infringe upon the lawful rights and interests of consumers and fail to take measures necessary to prevent or stop ~~such~~this activity.
Failure to comply with these consumer protection laws could subject us to administrative sanctions, such as the issuance of a warning, confiscation of illegal income, imposition of a fine, an order to cease business operations, revocation of business licenses, as well as potential civil or criminal liabilities.
Regulation of Pricing
In China, the prices of a very small number of products and services are guided or fixed by the government. According to the Pricing Law, business operators must, as required by the government departments in charge of pricing, mark the prices explicitly and indicate the name, production origin, ~~of production,~~ specifications, and other related particulars clearly. Business operators may not sell products at a premium or charge any fees that are not explicitly indicated. Business operators must not commit the specified unlawful pricing activities, such as colluding with others to manipulate the market price, providing fraudulent discounted price information, using false or misleading prices to deceive consumers to transact, or conducting price discrimination against other business operators. Failure to comply with the Pricing Law or other rules or regulations on pricing may subject business operators to administrative sanctions such as warning, orders to cease unlawful activities, payment of compensation to consumers, confiscation of illegal gains, and/or fines. The business operators may be ordered to suspend business for rectification, or have their business licenses revoked if the circumstances are severe. Merchants on Tmall and Taobao Marketplace undertake the primary obligation under the Pricing Law. However, in some cases, we have been and may in the future be held liable and be subject to fines or other penalties if the authorities determine that, as the platform operator, our guidance for platform-wide promotional activities resulted in unlawful pricing activities by the merchants on our platforms or if the pricing information we provided for platform-wide promotional activities was determined to be untrue or misleading.

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Regulation of Intellectual Property Rights
       ~~Patent.~~Patent
Patents in the PRC are principally protected under the Patent Law of the PRC. The duration of a patent right is either 10 years or 20 years from the date of application, depending on the type of patent right.
Copyright
       ~~Copyright.~~Copyright in the PRC, including copyrighted software, is principally protected under the Copyright Law of the PRC and related rules and regulations. Under the Copyright Law, the term of protection for copyrighted software is 50 years. The Regulation on the Protection of the Right to Communicate Works to the Public over Information Networks, which was most recently amended on January 30, 2013, provides specific rules on fair use, statutory license, and a safe harbor for use of copyrights and copyright management technology and specifies the liabilities of various entities for violations, including copyright holders, libraries and Internet service providers.
Trademark
       ~~Trademark.~~Registered trademarks are protected under the Trademark Law of the PRC and related rules and regulations. Trademarks are registered with the State Intellectual Property Office, formerly the Trademark Office of the SAIC. Where registration is sought for a trademark that is identical or similar to another trademark which has already been registered or given preliminary examination and approval for use in the same or similar category of commodities or services, the application for registration of ~~such~~this trademark may be rejected. Trademark registrations are effective for a renewable ten-year period, unless otherwise revoked.
Domain Name
Domain ~~Name.~~names are protected under the Administrative Measures on Internet Domain Names promulgated by the MIIT on August 24, 2017 and effective as of November 1, 2017. Domain name registrations are handled through domain name service agencies established under the relevant regulations, and applicants become domain name holders upon successful registration.
Regulation of Anti-counterfeiting
According to the Trademark Law of the PRC, counterfeit or unauthorized production of the label of another person's registered trademark, or sale of any label that is counterfeited or produced without authorization will be deemed as an infringement of the exclusive right to use a registered trademark. The infringing party will be ordered to cease infringement immediately, a fine may be imposed and the counterfeit goods will be confiscated. The infringing party may also be held liable for damages suffered by the owner of the intellectual property rights, which will be equal to the gains obtained by the infringing party or the losses suffered by ~~such~~the owner as a result of the infringement, including reasonable expenses incurred by ~~such~~the owner in connection with enforcing its rights.

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Under the Tort Liability Law of the PRC, an Internet service provider may be subject to joint liability if it is aware that an Internet user is infringing upon the intellectual property rights of others through its Internet services, such as selling counterfeit products, and fails to take necessary measures to stop that activity. If an Internet service provider receives a notice from an infringed party regarding an infringement, the Internet service provider is required to take certain measures, including deleting, blocking and unlinking the infringing content, in a timely manner.
In addition, under the Administrative Measures for Online Trading issued by the SAIC on January 26, 2014, as an operator of an online trading platform, we must adopt measures to ensure safe online transactions, protect consumers' rights and prevent trademark infringement.

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Tax Regulations
PRC Enterprise Income Tax
The PRC enterprise income tax, or EIT, is calculated based on the taxable income determined under the applicable EIT Law and its implementation rules, both of which became effective on January 1, ~~2008.~~2008 and were most recently amended on December 29, 2018 and April 23, 2019, respectively. The EIT Law generally imposes a uniform enterprise income tax rate of 25% on all resident enterprises in China, including foreign-invested enterprises.
The EIT Law and its implementation rules permit certain High and New Technologies Enterprises, or HNTEs, to enjoy a reduced 15% enterprise income tax rate subject to these HNTEs meeting certain qualification criteria. In addition, the relevant EIT laws and regulations also provide that entities recognized as Software Enterprises are able to enjoy a tax holiday consisting of a ~~2-year-exemption~~two-year-exemption commencing from their first profitable calendar year and a 50% reduction in ordinary tax rate for the following three calendar years, while entities qualified as ~~Key Software Enterprises~~key software enterprises can enjoy a preferential EIT rate of 10%. A number of our PRC subsidiaries and operating entities enjoy these types of preferential tax treatment. ~~See "Item 10. Additional Information — E. Taxation — People's Republic of China Taxation."~~
Uncertainties exist with respect to how the EIT Law applies to the tax residence status of Alibaba Group and our offshore subsidiaries. Under the EIT Law, an enterprise established outside of China with a "de facto management body" within China is considered a "resident enterprise," which means that it is treated in the same manner as a Chinese enterprise for enterprise income tax purposes. Although the implementation rules of the EIT Law define "de facto management body" as a managing body that exercises substantive and overall management and control over the production and business, personnel, accounting books and assets of an enterprise, the only official guidance for this definition currently available is set forth in Circular 82 issued by the State Administration of Taxation ~~which~~in April 2009 and most recently amended in December 2017. Circular 82 provides guidance on the determination of the tax residence status of a Chinese-controlled offshore incorporated enterprise, defined as an enterprise that is incorporated under the laws of a foreign country or territory and that has a PRC enterprise or enterprise group as its primary controlling shareholder. Although Alibaba Group Holding Limited does not have a PRC enterprise or enterprise group as our primary controlling shareholder and is therefore not a Chinese-controlled offshore incorporated enterprise within the meaning of Circular 82, in the absence of guidance specifically applicable to us, we have applied the guidance set forth in Circular 82 to evaluate the tax residence status of Alibaba Group and our subsidiaries organized outside the PRC.
According to Circular 82, a Chinese-controlled offshore incorporated enterprise will be regarded as a PRC tax resident by virtue of having a "de facto management body" in China and will be subject to PRC enterprise income tax on its worldwide income only if all of the following criteria are met:
•
the primary location of the day-to-day operational management is in the PRC;

•
decisions relating to the enterprise's financial and human resource matters are made or are subject to approval by organizations or personnel in the PRC;

•
the enterprise's primary assets, accounting books and records, company seals, and board and shareholders meeting minutes are located or maintained in the PRC; and

•
50% or more of voting board members or senior executives habitually reside in the PRC.

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We do not believe that we meet any of the conditions outlined in the immediately preceding paragraph. Alibaba Group Holding Limited and our offshore subsidiaries are incorporated outside the PRC. As a holding company, our key assets and records, including the resolutions and meeting minutes of our board of directors and the resolutions and meeting minutes of our shareholders, are located and maintained outside the PRC. In addition, we are not aware of any offshore holding companies with a corporate structure similar to ours that have been deemed a PRC "resident enterprise" by the PRC tax authorities. Accordingly, we believe that Alibaba Group Holding Limited and our offshore subsidiaries should not be treated as a "resident enterprise" for PRC tax purposes if the criteria for "de facto management body" as set forth in Circular 82 were deemed applicable to us. However, as the tax residency status of an enterprise is subject to determination by the PRC tax authorities and uncertainties

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remain with respect to the interpretation of the term "de facto management body" as applicable to our offshore entities, we will continue to monitor our tax status. See "Item 3. Key Information — D. Risk Factors — Risks Related to Doing Business in the People's Republic of China — We may be treated as a resident enterprise for PRC tax purposes under the PRC Enterprise Income Tax Law, and we may therefore be subject to PRC income tax on our global income."
In the event that Alibaba Group Holding Limited or any of our offshore subsidiaries is considered to be a PRC resident enterprise:
•
Alibaba Group Holding Limited or our offshore subsidiaries, as the case may be, may be subject to the PRC enterprise income tax at the rate of 25% on our worldwide taxable income;

•
dividend income that Alibaba Group Holding Limited or our offshore subsidiaries, as the case may be, received from our PRC subsidiaries may be exempt from the PRC withholding tax; and

•
dividends paid to our overseas shareholders or ADS holders who are non-PRC resident enterprises as well as gains realized by ~~such~~these shareholders or ADS holders from the transfer of our shares or ADSs may be regarded as PRC-sourced income and as a result be subject to PRC withholding tax at a rate of up to 10%, subject to any reduction or exemption set forth in relevant tax treaties, and similarly, dividends paid to our overseas shareholders or ADS holders who are non-PRC resident individuals, as well as gains realized by ~~such~~these shareholders or ADS holders from the transfer of our shares or ADSs, may be regarded as PRC-sourced income and as a result be subject to PRC withholding tax at a rate of 20%, subject to any reduction or exemption set forth in relevant tax treaties.
       ~~Under~~ Bulletin 7 was issued by the State Administration of Taxation on February 3, 2015 and most recently amended pursuant to Bulletin 37, which ~~replaced or supplemented certain previous rules under Circular 698,~~was issued by the State Administration of Taxation on October 17, 2017 and became effective as of December 1, 2017. Pursuant to Bulletin 7, an "indirect transfer" of assets, including equity interests in a PRC resident enterprise, by non-PRC resident enterprises may be re-characterized and treated as a direct transfer of PRC taxable assets, if ~~such~~the arrangement does not have a reasonable commercial purpose and was established for the purpose of avoiding payment of PRC enterprise income tax. As a result, gains derived from ~~such~~an indirect transfer may be subject to PRC enterprise income tax. According to Bulletin 7, "PRC taxable assets" include assets attributed to an establishment or a place of business in China, immoveable properties in China, and equity investments in PRC resident enterprises. In respect of an indirect offshore transfer of assets of a PRC establishment or place of business, the relevant gain is to be regarded as effectively connected with the PRC establishment or a place of business and therefore included in its enterprise income tax filing, and would consequently be subject to PRC enterprise income tax at a rate of 25%. Where the underlying transfer relates to the immoveable properties in China or to equity investments in a PRC resident enterprise, which is not effectively connected to a PRC establishment or a place of business of a non-resident enterprise, a PRC enterprise income tax at 10% would apply, subject to available preferential tax treatment under applicable tax treaties or similar arrangements, and the party who is obligated to make the transfer payments has the withholding obligation. There is uncertainty as to the implementation details of Bulletin 7. If Bulletin 7 was determined by the tax authorities to be applicable to some of our transactions involving PRC taxable assets, our offshore subsidiaries conducting the relevant transactions might be required to spend valuable resources to comply with Bulletin 7 or to establish that the relevant transactions should not be taxed under Bulletin 7, which may materially and adversely affect us. See "Item 3. Key Information — D. Risk Factors — Risks Related to Doing Business in the People's Republic of China — We and

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our shareholders face uncertainties with respect to indirect transfers of equity interests in PRC resident enterprises or other assets attributed to a PRC establishment ~~or a place of business of a non-PRC company, or other assets attributable to a PRC establishment~~ of a non-PRC company."
       ~~Where the payers fail~~According to ~~withhold any or sufficient tax, the~~Bulletin 37, if a non-PRC ~~residents, as the transferors, are required to declare and pay such taxes to the tax authorities on their own within the statutory time limit. Failure~~resident fails to comply with the tax payment obligations, bythe tax authority may seek the payment of tax arrears and late fees payable from other income of the non-PRC ~~residents will result in penalties, including full payment~~resident within the territory of ~~taxes owed, and interest on those taxes.~~China.

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PRC Business Tax and Value-Added Tax
Before August 2013 and pursuant to applicable PRC tax regulations, any entity or individual conducting business in the service industry is generally required to pay a business tax at the rate of 5% on the revenues generated from providing ~~such~~ services. However, if the services provided are related to technology development and transfer, ~~such~~the business tax may be exempted subject to approval by the relevant tax authorities.
In November 2011, the Ministry of Finance and the State Administration of Taxation promulgated the Pilot Plan for Imposition of Value-Added Tax to Replace Business Tax. In May and December 2013, April 2014, ~~and~~ March 2016 and July 2017, the Ministry of Finance and the State Administration of Taxation promulgated Circular 37, Circular 106, Circular 43, Circular 36 and Circular 3658 to further expand the scope of services ~~which~~that are to be subject to Value-Added Tax, or VAT, instead of business tax. Pursuant to these tax rules, from August 1, 2013, a VAT was imposed to replace the business tax in certain service industries, including technology services and advertising services, and from May 1, 2016, VAT replaced business tax in all industries, on a nationwide basis. On November 19, 2017, the State Council further amended the Interim Regulation of the People's Republic of China on Value Added Tax to reflect the normalization of the pilot program. A VAT rate of 6% applies to revenue derived from the provision of certain services. Unlike business tax, a taxpayer is allowed to offset the qualified input VAT paid on taxable purchases against the output VAT chargeable on the revenue from services provided.
Accordingly, although the 6% VAT rate is higher than the previously applicable 5% business tax rate, no materially different tax cost to us has resulted nor do we expect one to result from the replacement of the business tax with a VAT on our services.
On April 4, 2018, the Ministry of Finance and the State Administration of Taxation issued the Notice on Adjustment of VAT Rates, which came into effect on May 1, 2018. According to the abovementioned notice, the taxable goods previously subject to VAT rates of 17% and 11% respectively become subject to lower VAT rates of 16% and 10% respectively starting from May 1, 2018.
On March 20, 2019, the Ministry of Finance, the State Administration of Taxation and the General Administration of Customs issued the Announcement on Policies for Deepening the VAT Reform, or Announcement 39, which came into effect on April 2019, to further slash VAT rates. According to Announcement 39, (i) for general VAT payers' sales activities or imports previously subject to VAT at an existing applicable rate of 16% or 10%, the applicable VAT rate is adjusted to 13% or 9% respectively; (ii) for the agricultural products purchased by taxpayers to which an existing 10% deduction rate is applicable, the deduction rate is adjusted to 9%; (iii) for the agricultural products purchased by taxpayers for production or commissioned processing, which are subject to VAT at 13%, the input VAT will be calculated at a 10% deduction rate; (iv) for the exportation of goods or labor services that are subject to VAT at 16%, with the applicable export refund at the same rate, the export refund rate is adjusted to 13%; and (v) for the exportation of goods or cross-border taxable activities that are subject to VAT at 10%, with the export refund at the same rate, the export refund rate is adjusted to 9%.
PRC Import Tax
Consumer goods imported through cross-border e-commerce platforms were originally classified as "personal baggage or postal articles" under the Notice on Pilot Bonded Area Import Pattern of Cross-Border Trade E-Commerce Services issued by PRC General Administration of Customs on March 4, 2014. A personal baggage or postal articles tax was levied on ~~such~~these goods before the online retailors could deliver the same to buyers. The personal baggage or postal articles tax ~~were~~was exempted if the payable amount was lower than RMB50. The rate of personal baggage or postal articles tax was respectively 10%, 20%, 30% and 50% for different categories of products imported. Under this tax pattern, a quota of RMB1,000 for each purchase order was imposed on online buyers, otherwise the imported goods were classified as normal goods, which are subject to value-added tax, consumption tax and tariff.
The above-mentioned ~~pilot bonded area import pattern of cross-border e-commerce~~notice was abolished pursuant to ~~the Notice on Tax Policies of Cross-Border E-commerce Retail Importation, effective on April 8, 2016, or~~ the New Cross-Border E-commerce Tax Notice. The goods imported through cross-border e-commerce platforms are now treated as normal goods rather than "personal

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baggage or postal articles" and subject to the usual value-added tax, consumption tax and tariff. ~~Normally,~~In general, a ~~17%~~ value-added tax ~~will be~~at the rate of 17% (before May 1, 2018) and 16% (from May 1, 2018 onwards) is levied on most products sold on the cross-border e-commerce platform and a ~~30%~~15% consumption tax ~~will be levied~~ on high-end cosmetics, ~~and perfumes,~~ while no consumption tax ~~will be~~is levied on skin care products, maternity and baby care products. ~~However,~~As a preferential tax treatment, the ~~New~~Notice on Improving the Tax Policies on Cross-Border ~~E-commerce Tax Notice~~E-Commerce Retail Imports, which was issued on November 29, 2018 provides that, if the goods imported through cross-border e-commerce platforms are within the quota of ~~RMB2,000 for each~~RMB5,000 per purchase order ~~or RMB20,000~~and RMB26,000 per year ~~for each~~per buyer, there is a 30% discount off the ~~payable amount for the~~applicable value-added tax and the consumption tax, ~~will be reduced to 70% of the payable tax,~~ and the tariff ~~will be~~is waived.

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PRC Export Tax
According to the Notice on the Taxation Policies for Cross-border E-Commerce Retail Export, or the E-Commerce Export Taxation Notice, which was jointly issued by the Ministry of Finance and the State Administration of Taxation and took effect as of January 1, 2014, an e-commerce export enterprise may be exempt from or refunded ~~from~~with consumption tax and VAT upon satisfaction of the following conditions:
•
it is a general VAT taxpayer, and has bebeen granted the export tax refund/exemption eligibility;

•
the customs export declarations (specifically for export tax refund) for exported goods have been obtained and information thereon is consistent with the electronic information of the customs export declarations;

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the foreign exchange for the exported goods is received prior to the deadline of tax refund or tax exemption; and

•
where the e-commerce export enterprise is a foreign trade enterprise, it ~~shall~~must have obtained corresponding special VAT invoices, special payment statements for consumption tax (split pages) or special customs statements for payment of import VAT or consumption tax for purchase of the goods for export, and relevant information on the foregoing documents shall be consistent with that contained in the customs export declarations (specifically for export tax refunds).
Even if an e-commerce export enterprise does not satisfy the foregoing conditions, it may also be exempt from consumption tax and VAT if it meets the following requirements:
•
it has completed tax registration;

•
it has obtained customs export declarations for the exported goods; and

•
it has obtained legal and valid proof for purchase of the exported goods.
Third-party e-commerce platforms providing transaction services for e-commerce export enterprises are not eligible for a tax refund or exemption under the E-Commerce Export Taxation Notice.
Regulation of Foreign Exchange and Dividend Distribution
Foreign Exchange Regulation
The principal regulations governing foreign currency exchange in China are the Regulations on Foreign Exchange Administration of the PRC. Under the PRC foreign exchange regulations, payments of current account items, such as profit distributions and trade and service-related foreign exchange transactions, may be made in foreign currencies without prior approval from SAFE by complying with certain procedural requirements. By contrast, approval from or registration with appropriate government authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of foreign currency-denominated loans or foreign currency is to be remitted into China under the capital account, such as a capital increase or foreign currency loans to our PRC subsidiaries.
In August 2008, SAFE issued the Circular on the Relevant Operating Issues Concerning the Improvement of the Administration of the Payment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, or

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SAFE Circular 142, regulating the conversion by a foreign-invested enterprise of foreign currency-registered capital into RMB by restricting how the converted RMB may be used. In addition, SAFE promulgated Circular 45 on November 9, 2011 in order to clarify the application of SAFE Circular 142. Under SAFE Circular 142 and Circular 45, the RMB capital converted from foreign currency registered capital of a foreign-invested enterprise may only be used for purposes within the business scope approved by the applicable government authority and may not be used for equity investments within the PRC. In addition, SAFE strengthened its oversight of the flow and use of ~~the~~ RMB capital converted from foreign currency registered capital of foreign-invested enterprises. The use of ~~such~~ RMB capital may not be changed without SAFE's approval, and ~~such~~ RMB capital may not in any case be used to repay RMB loans if the proceeds of ~~such~~the loans have not been used.

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       ~~Since SAFE Circular 142 has been in place for more than five years, SAFE decided to~~To further reform the foreign exchange administration system in order to satisfy and facilitate the business and capital operations of foreign invested enterprises, ~~and~~SAFE issued the Circular on the Relevant Issues Concerning the Launch of Reforming Trial of the Administration Model of the Settlement of Foreign Currency Capital of Foreign-Invested Enterprises in Certain Areas in July 2014, which became effective on August 4, 2014. This circular suspends the application of SAFE Circular 142 in certain areas and allows a foreign-invested enterprise registered in ~~such~~these areas with a business scope including "investment" to use the RMB capital converted from foreign currency registered capital for equity investments within the PRC. ~~On April 9, 2015,~~ SAFE released the Notice on the Reform of the Administration Method for the Settlement of Foreign Exchange Capital of Foreign-invested Enterprises, or SAFE Circular 19, in March 2015, which came into force and superseded SAFE Circular 142 on June 1, 2015. Circular 19 allows foreign invested enterprises to settle their foreign exchange capital on a discretionary basis according to the actual needs of their business operation and provides the procedures for foreign invested companies to use Renminbi converted from foreign currency-denominated capital for equity investment. Nevertheless, Circular 19 also reiterates the principle that Renminbi converted from foreign currency-denominated capital of a foreign-invested company may not be directly or indirectly used for purposes beyond its business scope. ~~Since Circular 19 was only recently promulgated, there are uncertainties on how it will be interpreted and implemented in practice.~~
In November 2012, SAFE promulgated the Circular of Further Improving and Adjusting Foreign Exchange Administration Policies on ~~Foreign~~ Direct Investment, which substantially amends and simplifies the current foreign exchange procedure. Pursuant to this circular, the opening of various special purpose foreign exchange accounts, such as pre-establishment expenses accounts, foreign exchange capital accounts and guarantee accounts, the reinvestment of RMB proceeds by foreign investors in the PRC, and remittance of foreign exchange profits and dividends by a foreign-invested enterprise to its foreign shareholders no longer require the approval or verification of SAFE, and multiple capital accounts for the same entity may be opened in different provinces, which was not possible previously. In addition, SAFE promulgated the Circular on Printing and Distributing the Provisions on Foreign Exchange Administration over Domestic Direct Investment by Foreign Investors and the Supporting Documents in May 2013, which specifies that the administration by SAFE or its local branches over direct investment by foreign investors in the PRC shall be conducted by way of registration and banks shall process foreign exchange business relating to the direct investment in the PRC based on the registration information provided by SAFE and its branches. In February 2015, SAFE promulgated the Circular of Further Simplifying and Improving the Policies of Foreign Exchange Administration Applicable to Direct Investment, or SAFE Circular 13, which became effective on June 1, 2015. Under SAFE Circular 13, the current foreign exchange procedures will be further simplified, and foreign exchange registrations of direct investment will be handled by the banks designated by the foreign exchange authority instead of SAFE and its branches. However, the foreign invested enterprises ~~are~~were still prohibited by SAFE Circular 13 to use the RMB converted from foreign currency-registered capital to extend entrustment loans, repay bank loans or inter-company loans.
In June 2016, SAFE issued the Circular on Reforming and Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts, or Circular 16, which took effect on the same day. Compared to Circular 19, Circular 16 provides that discretionary foreign exchange settlement applies to foreign exchange capital, foreign debt offering proceeds and remitted foreign listing proceeds, and the corresponding Renminbi obtained from foreign exchange settlement are not restricted from extending loans to related parties or repaying the inter-company loans (including advances by third parties). However, there still exist substantial uncertainties with respect to the interpretation and implementation of Circular 16 in practice.

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On January 26, 2017, SAFE promulgated the Circular on Further Improving Reform of Foreign Exchange Administration and Optimizing Genuineness and Compliance Verification, or Circular 3, which took effect on the same day. Circular 3 sets out various measures, including the following:
•
relaxing the policy restriction on foreign exchange inflow to further enhance trade and investment facilitation, including:

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expanding the scope of foreign exchange settlement for domestic foreign exchange loans,

•
allowing the capital repatriation for offshore financing against domestic guarantee,

•
facilitating the centralized management of foreign exchange funds of multinational companies, and

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allowing offshore institutions within pilot free trade zones to settle foreign exchange in domestic foreign exchange accounts; and

•
tightening genuineness and compliance verification of cross-border transactions and cross-border capital flow, including:

•
improving the statistics of current account foreign currency earnings deposited offshore,

•
requiring banks to verify board resolutions, tax filing form, and audited financial statements before wiring foreign invested enterprises' foreign exchange distribution above US$50,000,

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strengthening genuineness and compliance verification of foreign direct investments, and

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implementing full scale management of offshore loans in Renminbi and foreign currencies by requiring the total amount of offshore loans be no higher than 30% of the onshore lender's equity shown on its audited financial statements of the last year.
We typically do not need to use our offshore foreign currency to fund our PRC operations. In the event we need to do so, we will apply to obtain the relevant approvals of SAFE and other PRC government authorities as necessary. Our PRC subsidiaries' distributions to their offshore parents and our cross-border foreign exchange activities are required to comply with the various requirements as described above.
SAFE Circular 37
SAFE promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents' Offshore Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37, on July 4, 2014, which replaced the former circular commonly known as "SAFE Circular 75" promulgated by SAFE on October 21, 2005. SAFE Circular 37 requires PRC residents to register with local branches of SAFE in connection with their direct establishment or indirect control of an offshore entity, for the purpose of overseas investment and financing, with ~~such PRC residents'~~their legally owned assets or equity interests in domestic enterprises or offshore assets or interests, referred to in SAFE Circular 37 as a "special purpose vehicle." SAFE Circular 37 further requires amendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such as increase or decrease of capital contributed by PRC individuals, share

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transfer or exchange, merger, division or other material event. In the event that a PRC shareholder holding interests in a special purpose vehicle fails to fulfill the required SAFE registration, the PRC subsidiaries of that special purpose vehicle may be prohibited from making profit distributions to the offshore parent and from carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle may be restricted in its ability to contribute additional capital into its PRC subsidiary. Furthermore, failure to comply with the various SAFE registration requirements described above could result in liability under PRC law for evasion of foreign exchange controls. On February 13, 2015, SAFE released SAFE Circular 13, under which local banks will examine and handle foreign exchange registration for overseas direct investment, including the initial foreign exchange registration and amendment registration, from June 1, 2015. ~~However, since the notice came into force recently, there~~There exist substantial uncertainties with respect to its interpretation and implementation by governmental authorities and banks.

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We have notified substantial beneficial owners of ordinary shares who we know are PRC residents of their filing obligation, and pursuant to Circular 37, we have periodically filed ~~SAFE Circular 75 reports prior to the promulgation of SAFE Circular 37,~~and updated foreign exchange registration, on behalf of certain employee shareholders whom we know are PRC residents. However, we may not be aware of the identities of all our beneficial owners who are PRC residents. In addition, we do not have control over our beneficial owners and cannot assure you that all of our PRC resident beneficial owners will comply with SAFE Circular 37. The failure of our beneficial owners who are PRC residents to register or amend their SAFE registrations in a timely manner pursuant to SAFE Circular 37 or the failure of future beneficial owners of our company who are PRC residents to comply with the registration procedures set forth in SAFE Circular 37 may subject ~~such~~these beneficial owners or our PRC subsidiaries to fines and legal sanctions. Failure to register or amend the registration may also limit our ability to contribute additional capital to our PRC subsidiaries or receive dividends or other distributions from our PRC subsidiaries or other proceeds from disposal of our PRC subsidiaries, or we may be penalized by SAFE.
Share option rules
Under the Administration Measures on Individual Foreign Exchange Control issued by the People's Bank of China, or the PBOC, on December 25, 2006, all foreign exchange matters involved in employee share ownership plans and share option plans in which PRC citizens participate require approval from SAFE or its authorized branch. Pursuant to SAFE Circular 37, PRC residents who participate in share incentive plans in overseas non-publicly-listed companies may submit applications to SAFE or its local branches for the foreign exchange registration with respect to offshore special purpose companies. In addition, under the Notices on Issues concerning the Foreign Exchange Administration for Domestic Individuals Participating in Share Incentive Plans of Overseas Publicly-Listed Companies, or the Share Option Rules, issued by SAFE on February 15, 2012, PRC residents who are granted shares or share options by companies listed on overseas stock exchanges under share incentive plans are required to (i) register with SAFE or its local branches, (ii) retain a qualified PRC agent, which may be a PRC subsidiary of the overseas listed company or another qualified institution selected by the PRC subsidiary, to conduct the SAFE registration and other procedures with respect to the share incentive plans on behalf of the participants, and (iii) retain an overseas institution to handle matters in connection with their exercise of share options, purchase and sale of shares or interests and funds transfers.
Regulation of dividend distribution
The principal laws, rules and regulations governing dividend distribution by foreign-invested enterprises in the PRC are the Company Law of the PRC, as amended, the Wholly Foreign-owned Enterprise Law and its implementation regulations and the Chinese-foreign Equity Joint Venture Law and its implementation regulations. Under these laws, rules and regulations, foreign-invested enterprises may pay dividends only out of their accumulated profit, if any, as determined in accordance with PRC accounting standards and regulations. Both PRC domestic companies and wholly-foreign owned PRC enterprises are required to set aside as general reserves at least 10% of their after-tax profit, until the cumulative amount of ~~such~~their reserves reaches 50% of their registered capital. A PRC company is not permitted to distribute any profits until any losses from prior fiscal years have been offset. Profits retained from prior fiscal years may be distributed together with distributable profits from the current fiscal year.

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Labor Laws and Social Insurance
Pursuant to the PRC Labor Law and the PRC Labor Contract Law, employers must execute written labor contracts with full-time employees. All employers must comply with local minimum wage standards. Violations of the PRC Labor Contract Law and the PRC Labor Law may result in the imposition of fines and other administrative and criminal liability in the case of serious violations.
In addition, according to the PRC Social Insurance Law and the Regulations on the Administration of Housing Funds, employers in China must provide employees with welfare schemes covering pension insurance, unemployment insurance, maternity insurance, work-related injury insurance, medical insurance and housing funds.

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Anti-monopoly Law
The PRC Anti-monopoly Law, which took effect on August 1, 2008, prohibits monopolistic conduct, such as entering into monopoly agreements, abuse of dominant market position and concentration of undertakings that have the effect of eliminating or restricting competition.
Monopoly Agreement
Competing business operators may not enter into monopoly agreements that eliminate or restrict competition, such as by boycotting transactions, fixing or changing the price of commodities, limiting the output of commodities, fixing the price of commodities for resale to third parties, among others, unless ~~such~~the agreement will satisfy the exemptions under the Anti-monopoly Law, such as improving technologies, increasing the efficiency and competitiveness of small and medium-sized undertakings, or safeguarding legitimate interests in cross-border trade and economic cooperation with foreign counterparts. Sanctions for violations include an order to cease the relevant activities, and confiscation of illegal gains and fines (from 1% to 10% of sales revenue from the previous year, or RMB500,000 if the intended monopoly agreement has not been performed).
Abuse of Dominant Market Position
A business operator with a dominant market position may not abuse its dominant market position to conduct acts, such as selling commodities at unfairly high prices or buying commodities at unfairly low prices, selling products at prices below cost without any justifiable cause, and refusing to trade with a trading party without any justifiable cause. Sanctions for violation of the prohibition on the abuse of dominant market position include an order to cease the relevant activities, confiscation of the illegal gains and fines (from 1% to 10% of sales revenue from the previous year).
Concentration of Undertakings
Where a concentration of undertakings reaches the declaration threshold stipulated by the State Council, a declaration must be approved by the anti-monopoly authority before the parties implement the concentration.
Concentration refers to (1) a merger of undertakings; (2) acquiring control over other undertakings by acquiring equities or assets; or (3) acquisition of control over, or the possibility of exercising decisive influence on, an undertaking by contract or by any other means. If business operators fail to comply with the mandatory declaration requirement, the anti-monopoly authority is empowered to terminate and/or unwind the transaction, dispose of relevant assets, shares or businesses within certain periods and impose fines of up to RMB500,000.
See "Item 3. Key Information — D. Risk Factors — Risks Related to Our Business and Industry — ~~We may become the target of anti-monopoly~~Anti-monopoly and unfair competition claims ~~which~~against us may result in our being subject to fines as well as constraints on our business."
Anti-Terrorism Law
The PRC Anti-Terrorism Law, which was promulgated on December 27, 2015, ~~and~~ came into effect on January 1, 2016 ~~imposes~~and was amended on April 27, 2018, imposing obligations on telecommunication business operators and Internet service providers to

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provide technical interfaces and technical assistance in decryption and other efforts to public and national security authorities in terrorism prevention and investigation. Also, the Anti-Terrorism Law requires Internet service providers to implement network security and information and content monitoring systems and adopt technical security measures to prevent the dissemination of information containing terrorist or extremist content. Once ~~such~~ content of this type is detected, Internet service providers shall cease the transmission of the information, keep the relevant records, delete the information and report to public and national security bodies. In addition, the Anti-Terrorism Law requires telecommunication business operators and Internet service providers to verify the identity of their clients, and not to ~~not~~ provide services to anyone whose identity is unclear or who declines to verify his/her identity. However, the Anti-Terrorism Law does not further specify the required verification

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measures. Since the Anti-Terrorism Law was promulgated recently, there exist substantial uncertainties with respect to its interpretation and implementation by governmental authorities.
Regulation Applicable to Alipay
Regulation of Non-financial Institution Payment Services
According to the Administrative Measures for the Payment Services Provided by Non-financial Institutions, or the Payment Services Measures, promulgated by the PBOC on June 14, 2010 and effective as of September 1, 2010, a payment institution, a non-financial institution providing monetary transfer services as an intermediary between payees and payers, including online payment, issuance and acceptance of prepaid cards or bank cards, and other payment services specified by the PBOC, is required to obtain a payment business license. Any ~~non — financial~~non-financial institution or individual engaged in the payment business without ~~such~~this license may be ordered to cease its payment services and be subject to administrative sanctions and even criminal liabilities. Applications for payment business licenses are examined by the local branches of the PBOC and then submitted to the PBOC for approval. The registered capital of an applicant that engages in a nationwide payment business must be at least RMB100 million, while that of an applicant engaging in a payment business within a province must be at least RMB30 million.
A payment institution is required to conduct its business within the scope of business indicated in its payment business license, and may not undertake any business beyond that scope or outsource its payment business. No payment institution may transfer, lease or lend its payment business license.
On January 20, 2015, the SAFE promulgated the Guiding Opinions on the Pilot Services of Cross-Border Foreign Exchange Payment by Payment Institutions, or the Guiding Opinions, which replaced the previous guiding opinion issued by SAFE on February 1, 2013. Pursuant to the Guiding Opinions, a payment institution is required to obtain approval from the SAFE in order to engage in pilot cross-border foreign exchange payment services and may only provide cross-border foreign exchange payment services for trade in goods or trade in services with real and legitimate transaction background. The payment institution must also verify the real names and identity information of the customers involved in the cross-border transactions, maintain records of the relevant transactions and make monthly reports to the local branch of the SAFE.
In addition, on December 28, 2015, the PBOC promulgated the Administrative Measures for the Online Payment Business of Non-bank Payment Institutions, or the Online Payment Measures, which ~~will come~~came into effect on July 1, 2016. The Online Payment Measures classify online payment accounts into three categories and require online payment institutions to impose classified management based on the real name system with respect to different categories of online payment accounts. The Online Payment Measures require online payment institutions to conduct "know your client" checks and implement the real name system for payment accounts. The Online Payment Measures classify online payment accounts into three categories and require online payment institutions to impose real-name based, classified management, including imposing limits on annual payment volume with respect to different categories of online payment accounts. In addition, a payment account can only be opened by a payment institution with Internet payment business license at the request of customers.
On January 13, 2017, the PBOC issued the Notice on Matters Related to Implementation of Centralized Custody of Clients' Reserve Funds of Payment Institutions, which requires that from April 17, 2017, payment institutions transfer a portion of customer reserve funds to a specifically designated bank account upon the request of the PBOC and that no interest shall accrue upon the transferred customer reserve funds. On June 29, 2018, the PBOC issued the Notice on Matters Related to Fully-centralized Custody of Clients' Reserve Funds of Payment Institutions, which requires payment institutions to deposit 100% of their customer reserve funds by January 14, 2019.
We rely on Alipay to provide payment services on our marketplaces and Alipay has obtained a payment business license from the PBOC as well as approval for cross-border foreign exchange payment services from the SAFE.

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Anti-money Laundering Regulations
The PRC Anti-money Laundering Law, which became effective on January 1, 2007, sets forth the principal anti-money laundering requirements applicable to both financial and non-financial institutions with anti-money

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laundering obligations, such as Alipay, including the adoption of precautionary and supervisory measures, establishment of various systems for client identification, preservation of clients' identification information and transactions records, and reports on block transactions and suspicious transactions. The Payment Services Measures also require that the payment institution follow the rules associated with anti-money laundering and comply with their anti-money laundering obligations.
In addition, the PBOC promulgated the Administrative Measures for Payment Institutions Regarding Anti-money Laundering and Counter Terrorism Financing on March 5, 2012, or the Anti-money Laundering Measures, according to which the payment institution must establish and improve unified anti-money laundering internal control systems and file ~~such~~their systems with the local branch of the PBOC. The Anti-money Laundering Measures also require the payment institution to set up an anti-money laundering department or designate an internal department to be responsible for anti-money laundering and counter terrorism financing work.
Alipay is in the process of expanding its business internationally, and it may become subject to additional laws, rules and regulations of the jurisdictions in which it chooses to operate. These regulatory regimes may be complex and require extensive time and resources to ensure compliance.
Data Protection Regulation in Europe
On May 25, 2018, EU Directive 95/46/EEC was replaced by the GDPR on the protection of natural persons with regard to the processing and free movement of personal data. The GDPR applies directly in all EU member states from May 25, 2018 and applies to companies with an establishment in the European Economic Area, or the EEA, and to certain other companies not in the EEA that offer or provide goods or services to individuals located in the EEA or monitor individuals located in the EEA. The GDPR implements more stringent operational requirements for controllers of personal data, including, for example, expanded disclosures about how personal information is to be used, limitations on retention of information and pseudonymized data, increased cyber security requirements, mandatory data breach notification requirements and higher standards for controllers to demonstrate that they have obtained a valid legal basis for certain data processing activities.
The activities of data processors will be regulated for the first time, and companies undertaking processing activities are required to offer certain guarantees in relation to the security of processing and the handling of personal data. Contracts with data processors will also need to be updated to include certain terms prescribed by the GDPR, and negotiating these updates may not be fully successful in all cases. Failure to comply with EU laws, including failure under the GDPR and other laws relating to the security of personal data may result in fines up to €20,000,000 or up to 4% of the total worldwide annual turnover of the preceding financial year, if greater, and other administrative penalties including criminal liability.
Disclosure of Iranian Activities under Section 13(r) of the Exchange Act
Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 added Section 13(r) to the Securities Exchange Act of 1934. Section 13(r) requires an issuer to disclose in its annual or quarterly reports, as applicable, whether it or any of its affiliates knowingly engaged in certain activities, including, among other matters, transactions or dealings relating to the government of Iran. Disclosure is required even where the activities, transactions or dealings are conducted outside the U.S. by non-U.S. affiliates in compliance with applicable law, and whether or not the activities are sanctionable under U.S. law.
SoftBank is one of our substantial shareholders. During fiscal year 2019, SoftBank, through one of its non-U.S. subsidiaries, provided roaming services in Iran through Telecommunications Services Company (MTN Irancell), which is or may be a government-controlled entity. During fiscal year 2019, SoftBank had no gross revenues from these services and no net profit was generated. This subsidiary also provided telecommunications services in the ordinary course of business to accounts affiliated with the Embassy of Iran in Japan. During fiscal year 2019, SoftBank estimates that gross revenues and net profit generated by these services were both under US$17,000. We were not involved in, and did not receive any revenue from, any of these activities. These activities have been conducted in accordance with applicable laws and regulations, and they are not sanctionable under U.S.

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or Japanese law. Accordingly, with respect to Telecommunications Services Company (MTN Irancell), the relevant SoftBank subsidiary intends to continue these activities. With respect to services provided to accounts affiliated with the Embassy of Iran in Japan, the relevant SoftBank subsidiary is obligated under contract to continue these services.
In addition, during fiscal year 2019, SoftBank, through one of its non-U.S. indirect subsidiaries, provided office supplies to the Embassy of Iran in Japan. SoftBank estimates that gross revenue and net profit generated by these services were under US$10,000 and US$2,000, respectively. We were not involved in, and did not receive any revenue from any of these activities. The relevant SoftBank subsidiary intends to continue these activities.
C.    Organizational Structure
       ~~We conduct~~As of March 31, 2019, we conducted our business operations across approximately ~~330~~700 subsidiaries and consolidated entities incorporated in China and approximately 520 subsidiaries and consolidated entities incorporated in other ~~consolidated entities.~~jurisdictions. Like many large scale, multinational companies with businesses around the world and across industries, we conduct our business through a large number of Chinese and foreign operating entities as we continue to expand through organic growth and acquisitions and consolidations of new businesses. The chart below summarizes our corporate legal structure and identifies ~~the~~our significant subsidiaries, ~~described in "— A. History~~as that term is defined under Section 1-02 of Regulation S-X under the Securities Act, and ~~Development of the Company," as well as our~~ other subsidiaries and variable interest entities that are material to our ~~business and the number of their respective subsidiaries, as of March 31, 2016:~~

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(1)
Includes approximately 40 subsidiaries and consolidated entities incorporated in China and approximately 80 subsidiaries incorporated in other jurisdictions that are not illustrated in this chart. In addition, the entities pictured in this chart hold, directly and indirectly, an aggregate of approximately 100 additional subsidiaries and consolidated entities incorporated in China and approximately 90 additional subsidiaries incorporated outside of China not pictured in the chart.The principal holding company for our strategic investments.

(2)
Primarily involved in the operation of Taobao Marketplace.

(3)
Primarily involved in the operation of ~~Tmall and Juhuasuan.~~Tmall.

(4)
Primarily involved in the operation of ~~Alimama.~~our cloud computing business.

(5)
Primarily involved in the operation of Alibaba.com, 1688.com and AliExpress.

(6)
Primarily involved in the operation of ~~cloud computing services.~~Cainiao Network's business.

(7)
Primarily involved in the operation of Youku's business.

(8)
Each of these variable interest entities is ~~80%-owned~~owned by ~~Jack Ma and 20%-owned~~PRC citizens or PRC entities owned and/or controlled by ~~Simon Xie, other than Zhejiang Taobao Network Co., Ltd., which is 90%-owned by Jack Ma and 10%-owned by Simon Xie.~~PRC citizens.

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Contractual Arrangements among Our ~~Wholly-foreign Owned Enterprises,~~Wholly-Owned Entities, Variable Interest Entities and the Variable Interest Entity Equity Holders
Due to ~~PRC~~ legal restrictions on foreign ownership and investment in, among other areas, value-added telecommunications services, which include the operations of Internet content providers, or ICPs, we, similar to all other entities with foreign-incorporated holding company structures operating in our industry in China, operate our Internet businesses and other businesses in which foreign investment is restricted or prohibited in the PRC through ~~wholly-foreign owned enterprises, majority-owned entities and variable interest entities. The relevant variable interest entities, which~~various contractual arrangements with VIEs that are incorporated ~~in the PRC~~ and 100% owned by PRC citizens or by PRC entities owned and/or controlled by PRC ~~citizens, where applicable,~~citizens. The relevant variable interest entities hold the ICP licenses and other regulated licenses and operate our Internet businesses and other businesses in which foreign investment is restricted or prohibited. Specifically, our variable interest entities that are material to our business are Zhejiang Taobao Network Co., Ltd., Zhejiang Tmall Network Co., Ltd., Alibaba Cloud Computing Ltd., Hangzhou Alibaba Advertising Co., Ltd.~~, Hangzhou Ali~~ and Youku Information Technology (Beijing) Co., Ltd. and Alibaba Cloud Computing Ltd. Each of these variable interest entities other than Zhejiang Taobao Network Co., Ltd. is 80%-owned by Jack Ma, our lead founder, executive chairman and one of our principal shareholders, and 20%-owned by Simon Xie, one of our founders. Zhejiang Taobao Network Co., Ltd. is 90%-owned by Jack Ma and 10%-owned by Simon Xie. We have entered into certain contractual arrangements, as described in more detail

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below, which collectively enable us to exercise effective control over the variable interest entities and realize substantially all of the economic risks and benefits arising from the variable interest entities. As a result, we include the financial results of each of the variable interest entities in our consolidated financial statements in accordance with U.S. GAAP as if they were our wholly-owned subsidiaries.
Other than the ICP licenses and other licenses and approvals for businesses in which foreign ownership is restricted or prohibited that are held by our variable interest entities, we hold our material assets in, ~~and~~ conduct our material operations and generate the significant majority of revenues through, our ~~wholly-foreign owned and majority-owned enterprises,~~wholly-owned entities, which primarily provide technology and other services to our customers. We primarily generate ~~the significant majority of~~ our revenue directly through our ~~wholly-foreign owned enterprises,~~wholly-owned entities, which directly capture the profits and associated cash flow from operations without having to rely on contractual arrangements to transfer ~~such~~ cash flow from the variable interest entities to ~~the wholly-foreign owned enterprises.~~our wholly-owned entities.
VIE Structure Enhancement
Overview
The following diagram is a simplified illustration of the typical ownership structure and contractual arrangements for variable interest entities:

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We are in the process of enhancing the structure we use to hold our variable interest entities so that we ~~typically~~can better ensure the stability and proper governance of our variable interest entities as an integral part of our company, or the VIE Structure Enhancement. The VIE Structure Enhancement maintains the primary legal framework that we and many peer companies in our industry have adopted to operate businesses in ~~place~~which foreign investment is restricted or prohibited in the PRC. We have completed the VIE Structure Enhancement for four of our five material variable interest entities.
Upon the completion of the VIE Structure Enhancement for each VIE, the equity interest of each variable interest entity will, instead of being held by a few individuals, be directly held by a PRC limited liability company, which in turn will be indirectly held (through a layer of PRC limited partnerships) by selected members of the Alibaba Partnership or our management who are PRC citizens. This new structure institutionalizes the governance framework of our VIEs.
Compared with the existing VIE shareholder structure we and many peer companies in our industry have adopted, which uses natural persons to serve as direct or indirect equity holders of the variable interest entity, we have designed the VIE Structure Enhancement to:
•
reduce the key man and succession risks associated with natural person VIE equity holders, through a new structure that has widely dispersed interests among natural person interest holders;

•
create a VIE ownership structure that is more stable and self-sustaining, by distancing the natural person interest holders with the VIE with multiple layers of legal entities, including a partnership structure; and

•
further enhance our control over the VIEs through multiple layers of contractual arrangements.
VIE equity holders after the VIE Structure Enhancement
Prior to the VIE Structure Enhancement, our material variable interest entities were owned by natural persons.
Following the VIE Structure Enhancement, a material variable interest entity will be held by a PRC limited liability company. This PRC limited liability company will in turn be directly or indirectly owned by two PRC limited partnerships, each of which will hold 50% of the equity interest. Each of these partnerships is comprised of (i) a PRC limited liability company, as general partner (which is formed by a number of selected members of the Alibaba Partnership and our management who are PRC citizens), and (ii) the same group of natural persons, as limited partners. Under the terms of the relevant partnership agreements, the natural person limited partners must be members of the Alibaba Partnership or our management who are PRC citizens and as designated by the general partner of the partnership. We may also create additional holding structures in the future in connection with the VIE Structure Enhancement.

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The following diagram is a simplified illustration of the typical ownership structure and contractual arrangements of the VIEs following the VIE Structure Enhancement.
(1)
Selected members of the Alibaba Partnership or our management who are PRC citizens.
Following the VIE Structure Enhancement, the designated wholly-owned entity, on the one hand, and the corresponding VIE and the multiple layers of legal entities above the VIE, as well as the natural persons described above, on the other hand, will enter into contractual arrangements, which are substantially similar to the contractual arrangements we have historically used for our variable interest ~~entities:~~entities. See "— Contracts that Give us Effective Control of the Variable Interest Entities" and "— Contracts that Enable us to Receive Substantially All of the Economic Benefits from the Variable Interest Entities" below.
Although we believe the VIE Structure Enhancement will further improve our control over our variable interest entities, there continue to be risks associated with the VIE structure in general, as well as with the completion of the VIE Structure Enhancement. See "Item 3. Key Information — D. Risk Factors — Risks Related to Our Corporate Structure."
The following is a summary of ~~the common~~our typical contractual ~~arrangements that provide us with effective control~~arrangements.

Table of ~~our material variable interest entities and that enable us to receive substantially all of the economic benefits from their operations.~~Contents
Contracts that Give Us Effective Control of the Variable Interest Entities
Loan agreements
       ~~Loan agreements.~~Pursuant to the relevant loan agreement, ~~the~~our respective ~~wholly-foreign owned enterprise~~wholly-owned entity has granted ~~an interest-free~~a loan to the relevant variable interest entity equity holders, which may only be used for the purpose of ~~a capital contribution to the relevant variable interest entity or as may be otherwise~~its business operation activities agreed by ~~the wholly-foreign owned enterprise. The wholly-foreign owned enterprise~~our wholly-owned entity. Our wholly-owned entity may require acceleration of repayment at its absolute discretion. When the variable interest entity equity holders make early repayment of the outstanding amount, ~~the wholly-foreign owned enterprise~~our wholly-owned entity or a third-party designated by it may purchase the equity interests in the variable interest entity at a price equal to the outstanding amount of the loan, subject to any applicable PRC laws, rules and regulations. The variable interest entity equity holders undertake not to enter into any prohibited transactions in relation to the variable interest entity, including the transfer of any business, material assets, intellectual property rights or equity interests in the variable interest entity to any third-party. The parties to the loan agreement for each of our material variable interest entities are ~~Jack Ma and Simon Xie~~the PRC citizens or entities that are shareholders of those entities (in respect of the existing VIE structure) or, following the VIE Structure Enhancement, the relevant PRC limited liability company, on the one hand,

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and Taobao (China) Software Co., Ltd., Zhejiang Tmall Technology Co., Ltd., Alibaba (China) Technology Co., Ltd., ~~Hangzhou Alimama Technology Co., Ltd. and~~ Zhejiang Alibaba Cloud Computing Ltd. and Youku Internet Technology (Beijing) Co., ~~the~~Ltd., our respective ~~wholly-foreign owned enterprise~~wholly-owned entity, on the other hand.
Exclusive call option ~~agreements.~~agreements
The variable interest entity equity ~~holders have~~holder has granted ~~the wholly-foreign owned enterprise~~our wholly-owned entity an exclusive call option to purchase ~~their~~its equity interest in the variable interest entity at an exercise price equal to the higher of (i) the paid-in registered capital in the variable interest entity; and (ii) the minimum price as permitted by applicable PRC laws. Each relevant variable interest entity has further granted ~~the~~our relevant ~~wholly-foreign owned enterprise~~wholly-owned entity an exclusive call option to purchase its assets at an exercise price equal to the book value of the assets or the minimum price as permitted by applicable PRC law, whichever is higher. ~~The wholly-foreign owned enterprise~~Following the VIE Structure Enhancement, each relevant variable interest entity and its equity holders will also jointly grant our relevant wholly-owned entity (A) an exclusive call option to request the relevant variable interest entity to decrease its registered capital at an exercise price equal to the higher of (i) the paid-in registered capital in the relevant variable interest entity and (ii) the minimum price as permitted by applicable PRC law, or the capital decrease price, and (B) an exclusive call option to subscribe for the increased capital of relevant variable interest entity at a price equal to the sum of the capital decrease price and the unpaid registered capital, if applicable, as of the capital decrease. Our wholly-owned entity may nominate another entity or individual to purchase the equity interest or assets, or to subscribe for the relevant increased capital, if applicable, under the call options. ~~Each~~Execution of each call option ~~is exercisable subject to~~shall not violate the ~~condition that~~ applicable PRC laws, rules and ~~regulations do not prohibit completion of the transfer of the equity interest or assets pursuant to the call option.~~regulations. Each ~~wholly-foreign owned enterprise is entitled to all dividends and other distributions declared by the variable interest entity, and the~~ variable interest entity equity holders ~~have~~has agreed that the following amounts, to ~~give up their rights to receive any distributions or proceeds from~~ the ~~disposal of their equity interests in the variable interest entity which are~~extent in excess of the original registered capital that they contributed to the variable interest entity (after deduction of relevant tax expenses), belong to and shall be paid to ~~pay any such~~our relevant wholly-owned entities: (i) proceeds from the transfer of its equity interests in the variable interest entity, (ii) proceeds received in connection with a capital decrease in the variable interest entity, and (iii) distributions or ~~premium~~liquidation residuals from the disposal of its equity interests in the variable interest entity upon termination or liquidation. Moreover, any profits, distributions or dividends (after deduction of relevant tax expenses) received by the variable interest entity equity holder also belong to ~~the wholly-foreign owned enterprise.~~and shall be paid to our wholly-owned entity. The exclusive call option agreements remain in effect until the equity interest or assets that are the subject of ~~such~~these agreements are transferred to ~~the wholly foreign owned enterprise.~~our wholly-owned entity. The parties to the exclusive call option agreement for each of our material variable interest entities are ~~Jack Ma and Simon Xie as~~ the relevant variable interest entity equity holders, the relevant variable interest entity and its corresponding ~~wholly-foreign owned enterprise.~~wholly-owned entity.
Proxy agreements
       ~~Proxy agreements.~~Pursuant to the relevant proxy agreement, each of the variable interest entity equity holders irrevocably authorizes any person designated by ~~the wholly-foreign owned enterprise~~our wholly-owned entity to exercise his rights as anthe equity holder of the variable interest entity, including without limitation the right to ~~attend and~~ vote ~~at equity holders' meetings~~ and appoint directors. The parties to the proxy agreement for

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each of our material variable interest entities are ~~Jack Ma and Simon Xie as~~ the relevant variable interest entity equity ~~holders,~~holder, the relevant variable interest entity and its corresponding ~~wholly-foreign owned enterprise.~~wholly-owned entity.
Equity pledge ~~agreements.~~agreements
Pursuant to the relevant equity pledge agreement, the relevant variable interest entity equity holders have pledged all of their interests in the equity of the variable interest entity as a continuing first priority security interest in favor of the corresponding ~~wholly-foreign owned enterprise~~wholly-owned entity to secure the outstanding amounts advanced under the relevant loan agreements described above and to secure the performance of obligations by the variable interest entity and/or its equity holders under the other structure contracts. Each ~~wholly-foreign owned enterprise~~wholly-owned entity is entitled to exercise its right to dispose of the variable interest entity equity holders' pledged interests in the equity of the variable interest entity and has priority in receiving payment by the application of proceeds from the auction or sale of ~~such~~the pledged interests, in the event of any breach or default under the loan agreement or other structure contracts, if applicable. These equity pledge agreements remain in force ~~for~~until the ~~duration~~later of (i) the full performance of the contractual arrangements by the relevant ~~loan agreement~~parties, and ~~other structure contracts.~~(ii) the full repayment of the loans made to the relevant variable interest entity equity holders. The parties to the equity pledge agreement for each of our material variable interest entities are ~~Jack Ma and Simon Xie as~~ the relevant variable interest entity equity holders, the relevant variable interest entity and its corresponding wholly-foreign owned enterprise. All of the equity pledges relating to our material variable interest entities have been registered with the relevant office of the Administration for Industry and Commerce in China.wholly-owned entity.
Contracts that Enable Us to Receive Substantially All of the Economic Benefits from the Variable Interest Entities
Exclusive technology services agreements or exclusive services agreements
       ~~Exclusive technical services agreements.~~Each relevant variable interest entity has entered into an exclusive ~~technical~~technology services agreement or, following the VIE Structure Enhancement, an exclusive service agreement with the respective ~~wholly-foreign owned enterprise,~~wholly-owned entity, pursuant to which ~~the~~our relevant ~~wholly-foreign owned enterprise~~wholly-owned entity provides exclusive ~~technical~~ services to the variable interest entity. In exchange, the variable interest entity pays a service fee to our wholly-owned entity, the ~~wholly-foreign owned enterprise~~amount of which ~~typically amount~~shall be determined, to ~~what~~

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~~would be substantially all of~~ the ~~variable interest entity's pre-tax profit (absent the service fee),~~extent permitted by applicable PRC laws as proposed by our wholly-owned entity, resulting in a transfer of substantially all of the profits from the variable interest entity to ~~the wholly-foreign owned enterprise.~~our wholly-owned entity.
The exclusive call option agreements described above also entitle ~~the wholly-foreign owned enterprise~~our wholly-owned entity to all ~~dividends and other distributions declared by the variable interest entity and to any~~profits, distributions or ~~proceeds from the disposal~~dividends (after deduction of relevant tax expenses) to be received by the variable interest entity equity ~~holders of their equity interests in~~holder, and the ~~variable interest entity that are~~following amounts, to the extent in excess of the original registered capital that they contributed to the variable interest ~~entity.~~entity (after deduction of relevant tax expenses) to be received by each variable interest entity equity holder: (i) proceeds from the transfer of its equity interests in the variable interest entity, (ii) proceeds received in connection with a capital decease in the variable interest entity, and (iii) distributions or liquidation residuals from the disposal of its equity interests in the variable interest entity upon termination or liquidation.
In the opinion of Fangda Partners, our PRC legal counsel:
•
the ownership structures of our material ~~wholly-foreign owned enterprises~~wholly-owned entities and our material variable interest entities in China do not and will not violate any applicable PRC law, regulation, or rule currently in effect; and

•
the contractual arrangements between our material ~~wholly-foreign owned enterprises,~~wholly-owned entities, our material variable interest entities and the variable interest entity equity holders governed by PRC laws are valid, binding and enforceable in accordance with their terms and applicable PRC laws, rules, and regulations currently in effect, and will not violate any applicable PRC law, regulation, or rule currently in effect.
However, we have been further advised by our PRC legal counsel, Fangda Partners, that there are substantial uncertainties regarding the interpretation and application of current and future PRC laws, rules and regulations. Accordingly, the possibility that the PRC regulatory authorities and PRC courts may in the future take a view that is contrary to the opinion of our PRC legal ~~counsel.~~counsel cannot be ruled out. We have been further advised by our PRC legal counsel that if the PRC government finds that the agreements that establish the structure for operating our Internet-based business do not comply with PRC government restrictions on foreign investment in the aforesaid business we engage in, we could be subject to severe penalties including being prohibited from continuing operations. See "Item 3. Key Information — D. Risk Factors — Risks Related to Our Corporate Structure."

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D.  Property, Plant and Equipment
As of March 31, ~~2016,~~2019, we occupied facilities around the world with an aggregate gross floor area of office buildings, logistics warehouses, retail space and other facilities owned by us totaling ~~421,445~~approximately 6.3 million square ~~meters.~~meters, reflecting the continuous expansion of our business through organic growth and acquisitions and consolidation of new businesses. We maintain offices in many countries and regions, including China, ~~Dubai, France, Germany,~~ Hong Kong, ~~India, Italy, Korea, Taiwan, Turkey, Russia,~~ Singapore ~~the United Kingdom~~ and the United States. In addition, we maintain data centers in a number of countries including China, ~~Hong Kong,~~Indonesia, Malaysia, India, Australia, Singapore, ~~and~~Dubai, Germany, the United ~~States.~~Kingdom, Japan, the United States and others.
ITEM 4A.    UNRESOLVED STAFF COMMENTS
Not Applicable.
ITEM 5    OPERATING AND FINANCIAL REVIEW AND PROSPECTS
A.  Operating Results
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and the related notes included elsewhere in this annual report and in particular, "Item 4. Information on the Company — B. Business Overview." This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under "Item 3. Key Information — D. Risk Factors" and elsewhere in this annual report. We have prepared our financial statements in accordance with U.S. GAAP. Our fiscal year ends on March 31 and references to fiscal years ~~2014, 2015~~2017, 2018 and ~~2016~~2019 are to the fiscal years ended March 31, ~~2014, 2015~~2017, 2018 and ~~2016,~~2019, respectively.

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Overview
We achieved significant growth and strong operating results in fiscal year ~~2016.~~2019. Our total revenue increased by ~~45%~~58% from ~~RMB52,504~~RMB158,273 million in fiscal year ~~2014~~2017 to ~~RMB76,204~~RMB250,266 million in fiscal year ~~2015,~~2018, and further increased by ~~33%~~51% to ~~RMB101,143~~RMB376,844 million (US$~~15,686~~56,152 million) in fiscal year ~~2016.~~2019. Our net income increased by 4%49% from ~~RMB23,403~~RMB41,226 million in fiscal year ~~2014~~2017 to ~~RMB24,320~~RMB61,412 million in fiscal year ~~2015~~2018, and further increased by ~~193%~~31% to ~~RMB71,289~~RMB80,234 million (US$~~11,056~~11,955 million) in fiscal year ~~2016.~~ 2019.
Our ~~GMV surpassed RMB3 trillion~~non-GAAP net income, which excludes the effect of disposal and revaluation gains, share-based compensation and certain other items, increased by 44% from RMB57,871 million in fiscal year ~~2016.~~ 2017 to RMB83,214 million in fiscal year 2018, and further increased by 12% to RMB93,407 million (US$13,918 million) in fiscal year 2019. For further information on non-GAAP financial measures we use in evaluating our operating results and for financial and operational decision-making purposes, see "Item 3. Key Information — A. Selected Financial Data — Non-GAAP Measures."
Our Operating Segments
We ~~believe~~organize and report our ~~focus on long-term strategic priorities — globalization, rural expansion, building a world-class cloud computing~~ business ~~and creating a comprehensive~~in four operating segments:
•
Core commerce;

•
Cloud computing;

•
Digital media and ~~entertainment platform — has laid a strong foundation for future growth.~~
entertainment; and

•
Innovation initiatives and others.
       ~~We have experienced significant~~This presentation reflects how we manage our business to maximize efficiency in allocating resources. This presentation also provides further transparency to our various businesses that are executing different phases of growth ~~across various key metrics for our China retail marketplaces:~~and operating leverage trajectories.

       ~~We have also experienced significant growth in our mobile monetization on our China retail marketplaces:~~

~~(1)~~
Annual mobile revenue per mobile MAU from China commerce retail is calculated by dividing mobile revenue from China commerce retail for the previous twelve months, by the mobile MAUs at the end of the same period.

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We ~~primarily generate~~present segment information after elimination of inter-company transactions. In general, revenue, cost of revenue and operating expenses are directly attributable, and are allocated, to each segment. We allocate costs and expenses that are not directly attributable to individual segments, such as those that support infrastructure across different operating segments, to different operating segments mainly on the basis of usage, revenue or headcount, depending on the nature of the relevant costs and expenses.
In discussing the operating results of these four segments, we present each segment's revenue, income from ~~the businesses~~operations and adjusted earnings before interest, taxes and amortization ("adjusted EBITA").
Our reported segments are described below:
•
Core commerce.    The core commerce segment is comprised of platforms operating in retail and wholesale commerce in China, retail and wholesale commerce — cross-border and global, logistics services, local consumer services and others.

•
Cloud computing.    The cloud computing segment is comprised of Alibaba Cloud, which offers a complete suite of cloud services to customers worldwide, including elastic computing, database, storage, network virtualization services, large scale computing, security, management and application services, big data analytics, a machine learning platform and IoT services.

•
Digital media and entertainment.    The digital media and entertainment businesses leverage our deep data insights to serve the broader interests of consumer through two key distribution platforms, Youku and UC Browser, and through Alibaba Pictures and our other diverse content platforms that provide online videos, films, live events, news feeds, literature and music, among other areas.

•
Innovation initiatives and others.    The innovation initiatives and others segment includes businesses such as Amap, DingTalk, Tmall Genie and others.
The table below sets forth supplemental financial information of our reported segments for fiscal year 2019:
~~Revenue~~ ~~Businesses~~
~~China Commerce Retail~~
•
~~Taobao Marketplace — Online shopping destination~~
•
~~Tmall~~⁽¹⁾ ~~— Brands and retail platform~~
•
~~Juhuasuan — Flash sale platform~~
~~China Commerce Wholesale~~
•
~~1688.com — China wholesale marketplace~~
~~International Commerce Retail~~
•
~~AliExpress — Global consumer marketplace~~
~~International Commerce Wholesale~~
•
~~Alibaba.com — Global wholesale marketplace~~
~~Cloud Computing~~
•
~~Alibaba Cloud — Cloud computing services provider~~

Year ended March 31, 2019

Core
commerce Cloud
computing Digital media
and
entertainment Innovation
initiatives
and others Unallocated⁽¹⁾ Consolidated

RMB RMB RMB RMB RMB RMB US$

(in millions, except percentages)

Revenue
323,400 24,702 24,077 4,665 — 376,844 56,152
Income (loss) from operations

109,312
(5,508
)
(20,046
)
(11,795
)
(14,879
)
57,084
8,506
Add: Share-based compensation expense
17,694 4,332 2,988 5,774 6,703 37,491 5,586
Add: Amortization of intangible assets
9,161 18 1,262 50 236 10,727 1,599
Add: Settlement of U.S. federal class action lawsuit⁽²⁾
— — — — 1,679 1,679 250

Adjusted EBITA
136,167 (1,158 ) (15,796 ) (5,971 ) (6,261 ) 106,981 15,941

Adjusted EBITA margin
42 % (5 )% (66 )% (128 )% 28 %
(1)
~~GMV~~Unallocated expenses are primarily related to corporate administrative costs and ~~revenue~~other miscellaneous items that are not allocated to individual segments.

(2)
For a description of ~~Tmall Global, part of our international retail business, are captured in Tmall.~~the relevant federal class action lawsuit and settlement, see "Item 8. Financial Information — A. Consolidated Statements and Other Financial Information — Legal and Administrative Proceedings."
       ~~See "Item 4. Information on the Company — B. Business Overview" for a detailed discussion of our business and our ecosystem.~~
Our Monetization Model
       ~~The revenue we generate on~~Our marketplaces and businesses are highly synergetic which create a digital economy that enables consumers, merchants, brands, retailers, other businesses, third party service providers and strategic partners to interconnect and interact with each other. We leverage our ~~retail marketplaces is highly correlated with the number and engagement of the consumers on our platforms, the myriad~~leading technologies to provide various value propositions to participants in our digital economy and realize monetization by offering different services and creating value under each of ~~branding, marketing, promotions, distribution and productivity enhancements we offer merchants and brands, and~~ our ~~data and technology capabilities. The revenue we generate on~~business segments.

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We derive most of our ~~wholesale marketplaces is largely driven by the number of paying members and the value of the wholesale marketplaces as a marketing and distribution platform. We primarily derive~~ revenue from ~~online marketing services, commissions, memberships and cloud computing services. In fiscal year 2016, revenue from P4P marketing services and display marketing services~~our core commerce segment, which accounted for ~~53%~~85%, ~~commissions accounted for 27%, memberships~~86% and ~~value-added services accounted for 8%, and cloud computing services accounted for 3%,~~86% of our total revenue in fiscal year 2017, 2018 and 2019, respectively, while cloud computing, digital media and entertainment, and innovation initiatives and others contributed in aggregate 15%, 14% and 14% in fiscal year 2017, 2018 and 2019, respectively.
The ~~pricing~~following table sets forth the principal components of our ~~marketing~~revenue for the periods indicated:

Year ended March 31,

2017 2018 2019

RMB % of
revenue RMB % of
revenue RMB US$ % of
revenue

(in millions, except percentages)

Core commerce:

China commerce retail
114,109 72 % 176,559 71 % 247,615 36,896 66 %
China commerce wholesale
5,679 4 % 7,164 3 % 9,988 1,488 3 %
International commerce retail
7,336 5 % 14,216 6 % 19,558 2,914 5 %
International commerce wholesale
6,001 4 % 6,625 2 % 8,167 1,217 2 %
Cainiao logistics services
— — 6,759 3 % 14,885 2,218 4 %
Local consumer services
— — — — 18,058 2,691 5 %
Others
755 0 % 2,697 1 % 5,129 764 1 %

Total core commerce
133,880 85 % 214,020 86 % 323,400 48,188 86 %
Cloud computing
6,663 4 % 13,390 5 % 24,702 3,681 7 %
Digital media and entertainment
14,733 9 % 19,564 8 % 24,077 3,588 6 %
Innovation initiatives and others
2,997 2 % 3,292 1 % 4,665 695 1 %

Total
158,273 100 % 250,266 100 % 376,844 56,152 100 %

Our monetization and profit model primarily consists of the following elements:
Core Commerce
Our core commerce segment is primarily comprised of our China commerce retail, China commerce wholesale, retail commerce — cross-border and global, wholesale commerce — cross-border and global, logistics services, local consumer services and others. The marketplaces of our core commerce business attract and retain a large number of consumers and merchants. We primarily generate revenue from merchants.
China Commerce Retail
We generate revenue from merchants by leveraging our data technology and consumer insights which enable brands and merchants to attract, retain and engage consumers, complete transactions, improve their branding, enhance operating efficiency, and offer various services.
The revenue model of our China commerce retail business is primarily performance-based or impression-based. Performance-based marketing uses clicks or transactions as the measurement unit for performance. Impression-based marketing uses the number of impressions delivered to the user. The pricing of our marketing services isthat are typically set by market-based bidding ~~systems so that each marketer determines~~systems. Revenue from this model primarily consists of customer management revenue, commission and other revenue. The following table sets forth the ~~price it is willing to pay for the services.~~
       Marketers' willingness to pay and the amount they are willing to pay for our online marketing services is a function of the marketers' expected return on investment, which generally depends on the following factors:
•
~~if our platform serves as a sales and distribution channel for products: the sales volume, profits and inventory turnover expected to be generated on our platform;~~

•
~~if our platform serves as a customer acquisition and retention channel: the expected online and offline lifetime value of customers acquired from our platform; and~~

•
~~if our platform serves as a brand building and brand engagement platform: the awareness reach, and brand association, measured both online and offline, achieved as a result of the marketing.~~
       ~~China Commerce Retail.~~    ~~We generate~~ revenue from our China commerce retail marketplaces primarily through the monetization models described below. In fiscal year 2016, 75% of GMV on our China retail marketplaces was settled through Alipay. In fiscal year 2016, we generated 65%business, in absolute amounts and ~~32%~~as percentages of our ~~China commerce retail~~total revenue, ~~from online marketing services and commissions, respectively.~~for the fiscal years presented:

Year ended March 31,

2017 2018 2019

RMB % of
revenue RMB % of
revenue RMB US$ % of
revenue

(in millions, except percentages)

China commerce retail

Customer management
77,530 49 % 114,285 46 % 145,684 21,708 39 %
Commission
34,066 21 % 46,525 19 % 61,847 9,215 16 %
Others
2,513 2 % 15,749 6 % 40,084 5,973 11 %

Total
114,109 72 % 176,559 71 % 247,615 36,896 66 %

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~~Online marketing services.~~Customer management
       ~~Online marketing services~~We derive a substantial majority of our China commerce retail revenue from customer management, which primarily ~~consist~~consists of:
•
P4P marketing services, where merchants primarily bid for keywords through our online auction system that ~~match~~matches product or service listings appearing in search or browser results on a cost-per-click, or CPC, ~~basis at~~basis. Whether and where the listing will be displayed, and the corresponding prices ~~established~~for the display are determined by the algorithm of our online auction system ~~which facilitates price discovery~~based on a number of factors with various weights and through a market-based bidding mechanism. ~~P4P marketing services are provided both on our marketplaces as well as through third-party marketing affiliates; and~~

•
Display marketing services, where merchants bid for display positions ~~on the relevant marketplaces or through our third-party marketing affiliates~~ at fixed prices or prices established by a market-based bidding system on a cost-per-thousand impression, or CPM, basis.
~~For both~~In addition to the above-mentioned P4P marketing services and display marketing services directly provided on our marketplaces, we ~~generate a portion of our revenue~~also provide these services through collaboration with other third-party marketing affiliates. These third parties are primarily third-party online media, such as search engines, news feeds and video entertainment websites and mobile apps. These third-party online media enter into agreements with us to connect their designated online resources to our online auction system so that the merchants' listings or other marketing information can be displayed on those third-party online resources. Revenue from P4P and display marketing services provided through ~~third- party~~third-party marketing affiliates represented 6%3%, 3%2% and 3%1% of our total revenue in fiscal years ~~2014, 2015~~2017, 2018 and ~~2016, respectively, and this revenue is recognized on a gross basis.~~2019, respectively.
•
Taobaoke program, where we collaborate with shopping guide platforms, medium- and small-sized websites and mobile apps, individuals and other third parties, collectively "Taobaokes," to offer marketing services. Taobaokes display the marketing information of our merchants on ~~Taobao Marketplace~~their media which facilitate our merchants to market and ~~Tmall~~transact. Merchants pay us commissions to the Taobaokes based on a percentage of transaction value generated from users ~~sourced from third-party marketing affiliates.~~under the Taobaoke program. Commissions ~~on Taobaoke~~to the Taobaokes are set by the ~~merchants~~merchants. Revenue from the Taobaoke program represented 3%, 3% and ~~depend on the amount the merchant is willing to pay to generate incremental sales through this channel. A significant portion~~2% of ~~that commission is shared with~~ our ~~third-party marketing affiliates~~total revenue in fiscal years 2017, 2018 and we recognize the remaining portion as our revenue on a net basis. In certain situations where we are obligated to pay for website inventory costs in fixed amounts to third-party marketing affiliates, we recognize the commission revenue on a gross basis.

•
~~Placement services~~~~, where merchants pay placement fees to purchase promotional slots on Juhuasuan for a specified period.~~2019, respectively.
Commissions on ~~transactions.~~transactions
In addition to purchasing ~~online marketing~~customer management services, merchants also pay a commission based on a percentage of transaction value generated on Tmall ~~or from Juhuasuan.~~and certain other marketplaces. The commission percentages typically range from ~~0.4%~~0.3% to 5.0% depending on the product category. ~~The commission rate we establish varies according~~
Other
Other revenue from our China commerce retail is primarily generated by our New Retail and direct sale businesses, mainly Freshippo, Intime, Tmall Global and Tmall Mart, and primarily consists of revenue from product sales, commissions on transactions and software service fees.
China Commerce Wholesale
We generate revenue from our China commerce wholesale business primarily through membership fees, value-added services and customer management services. Revenue from membership fees are primarily fixed annual fees from the sale of China TrustPass memberships for paying members to ~~our estimate~~reach customers, provide quotations and transact. Paying members may also purchase additional value-added services, such as premium data analytics and upgraded storefront management tools, the prices of which are determined based on the types and duration of the industry profit margins in specific product categories. For example, for categories that typically have lower gross margins, such as consumer electronics, we charge a lower commission rate, whereas for categories such as apparel, where gross margins are generally higher for the merchants, we charge a higher commission rate.value-added services. Revenue from customer management services is primarily derived from P4P marketing services.

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~~Storefront fees.~~ ~~Our revenue from storefront fees is primarily comprised of monthly subscription fees for Wangpu (), our storefront software that includes a suite of tools that assist merchants in upgrading, decorating and managing their storefronts.~~
~~Purchaser of services:~~
~~Taobao Marketplace~~ ~~Tmall~~ ~~Juhuasuan~~
~~Taobao Marketplace merchants~~
~~•  P4P marketing fees~~
~~•  Display marketing fees~~
~~•  Taobaoke commissions~~
~~•  Storefront fees~~
~~•  Other fees~~^* ~~•  Not applicable~~ ~~•  Commissions~~
~~•  Placement fees~~
~~Tmall merchants~~
~~•  P4P marketing fees~~
~~•  Display marketing fees~~
~~•  Commissions~~
~~•  P4P marketing fees~~
~~•  Display marketing fees~~
~~•  Taobaoke commissions~~
~~•  Commissions~~
~~•  Placement fees~~
*
Other fees primarily consist of online travel commissions and lottery commissions. We suspended our online lottery business in late February 2015 around the same time as the other major online lottery platforms in China in response to regulatory requirements. As of the date of this annual report, there is no clear indication on how long this suspension will last.
       ~~China~~International Commerce ~~Wholesale.~~Retail
We generate revenue from our ~~China~~international commerce retail businesses primarily through direct sales, commissions, logistics and customer management services from Lazada and AliExpress. Merchants pay a commission based on a percentage of the transaction value they generate, mainly on AliExpress. The commissions on AliExpress are typically 5% to 8% of the transaction value. In addition, we generate revenue from logistics services provided by Lazada and customer management services, primarily from AliExpress's collaboration with third-party websites and mobile apps.
International Commerce Wholesale
We generate revenue from our wholesale ~~marketplace, 1688.com,~~commerce — cross-border and global primarily ~~through:~~
•
~~Memberships~~through membership fees, value-added services and ~~value-added~~customer management services. Revenue from ~~our China wholesale marketplace is~~membership fees are primarily fixed annual fees from the sale of ~~China TrustPass~~Gold Supplier memberships ~~which allow wholesalers~~for paying members to ~~host premium storefronts, with access to basic data analytic applications,~~reach customers, provide quotations and ~~upgraded storefront management tools, as well as~~transact. Revenue from value-added services primarily consists of fees for services such as ~~premium data analytics. In fiscal year 2016, we generated 73%~~customs clearance services, the prices of ~~our China commerce wholesale revenue from memberships~~which are determined based on the types, usage and duration of the value-added services.

•
~~Online marketing services.~~ Revenue from ~~online marketing~~customer management services ~~on our China wholesale marketplace~~ is primarily derived from P4P marketing services. ~~In fiscal year 2016, 27% of our China commerce wholesale revenue was generated from online marketing services.~~
       ~~International Commerce Retail.~~Logistics Services
We charge merchants and third-party logistics service providers fees based on the number of contracted orders completed and other value-added services we provide.
Local Consumer Services
We generate revenue from ~~our international retail marketplaces,~~local consumer services primarily ~~AliExpress,~~ through platform commissions which are typically 5% of transaction value. In the twelve months ended March 31, 2016, GMV on AliExpress settled through Alipay was US$5.4 billion. We also generate revenue on AliExpress from merchants who participate in the third-party affiliate marketing program and ~~those who purchase P4P marketing services.~~on-demand delivery service fees by Ele.me.
       ~~International Commerce Wholesale.~~Cloud Computing
We primarily generate cloud computing revenue from enterprise customers based on the duration and usage of the services.
    WeDigital Media and Entertainment
Revenue from digital media and entertainment business is primarily comprised of customer management services and membership subscription fees. Customer management services fees are generally generated from businesses and advertising agencies and the monetization model is substantially similar to the customer management services fees for our China commerce retail business. Membership subscription fees are mainly generated from paying consumers.
Innovation Initiatives and Others
In this segment we primarily generate revenue from ~~our global wholesale marketplace, Alibaba.com, primarily through:~~
•
~~Memberships~~enterprise customers and ~~online marketing services.~~  ~~Revenue from our global wholesale marketplace is primarily generated from the sale of our Gold Supplier memberships on Alibaba.com, which allow wholesalers~~consumers. For example, Amap charges a software service fee to host premium storefronts with product listings on the marketplace, as well as additional online marketing services, primarily P4P marketing services. In fiscal year 2016, 67% of our international commerce wholesale revenue was generated from membershipsenterprise customers, and ~~online marketing services.~~

•
~~Value-added services.~~  We generate revenues from providing import/export business solutions through OneTouch, such as custom clearance and VAT refunds, and other value-added services, such as product showcases. In fiscal year 2016, we generated 33% of our international commerce wholesaleTmall Genie generates revenue from ~~these value-added services.~~
product sale. Other revenue includes annual fees payable by Ant Financial or its affiliates in relation to the SME loans business that we transferred to Ant Financial in February 2015. See "Item 7.B. Related Party Transactions — Agreements and Transactions Related to Ant Financial and Its Subsidiaries."

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       ~~Cloud Computing.~~    We generate revenue from cloud computing services primarily from the time- and usage-based provision of cloud computing services, such as elastic computing, database, storage and CDN, large scale computing, security and management, and application services, as well as from web-hosting and domain name registration.
       ~~Others.~~    We generate revenue from mobile Internet services provided by UCWeb, as well as other businesses such as AutoNavi, over-the-top TV services and YunOS. Other revenue also includes annual fees payable by Ant Financial Services to us, calculated at 2.5% of the daily average book balance of the SME loans generated by the SME loan business we transferred to Ant Financial Services upon the completion of the restructuring of our relationship with Ant Financial Services in early February 2015. Prior to this sale, other revenue also included interest income generated by the SME loan business.
Factors Affecting Our Results of Operations
Our Ability to Create Value for Our Users and Generate Revenue.    Our ability to create value for our users and generate revenue is driven by the factors described below:
•
Number and engagement of consumers.  Consumers are attracted to our ~~marketplaces due to~~platforms by the breadth of curated products and ~~depth~~services, personalized content and the interactive user experience these platforms offer. Our platforms include a comprehensive selection of product and service ~~listings, relevant entertaining~~offerings as well as engaging content, such as news feeds on our Taobao app and ~~good customer experience. In addition, our other businesses, for example, mobile media~~UC Browser and entertainment ~~businesses,~~content on Youku. Consumers enjoy an engaging social experience by interacting with each other and ~~other components~~with merchants, brands and key opinion leaders on our platforms. We leverage our data insights to further optimize the relevance of this rich content we provide to our ~~ecosystem also drive the growth of number of consumers.~~users. The engagement of consumers in our ~~ecosystem~~digital economy is affected by our ability to continue to enhance and expand our product and service offerings and ~~content offerings as well as~~improve user experience.

•
Broader value offered to merchants, brands, retailers and other businesses.  ~~The willingness of merchants,~~Merchants, brands, retailers and other businesses ~~to pay us is affected by the efficiency and effectiveness of~~use our products and services to help them reach, acquire and retain customers, build brand awareness and engagement, complete transactions, and enhance their operating efficiency. We offer merchants and retailers a complete suite of ~~merchant~~ services ~~including~~and tools, powered by our consumer insights, to help them effectively engage consumers, efficiently manage their operations and provide a seamless online ~~software tools, for customer relationship management, inventory~~ and ~~fulfillment management, storefront management, mobile engagement,~~offline consumer experience. With our proprietary data ~~insight, communication~~ and ~~productivity management. We~~technologies, we also ~~offer third-party merchant services~~facilitate the digital transformation of traditional merchants and retailers. In addition, we empower businesses of different sizes across various industries through our ~~Taobao Services Platform.~~comprehensive enterprise cloud service offerings.

•
Empowering data and technology.  Our ability to engage consumers and empower merchants, brands, retailers and other businesses is affected by the breadth and depth of our ~~data~~consumer insights, such as the accuracy of our shopping recommendations and of our targeted marketing, and our technology capabilities and infrastructure, such as cloud computing, and our continued ability to develop scalable products and services that adapt to the quickly evolving industry trends and consumer preferences.
Operating Leverage of Our ~~Marketplace~~ Business Model.    Our primary business model has significant operating leverage and our ~~ecosystem~~digital economy enables us to realize structural cost savings. For example, Taobao Marketplace drives significant traffic to Tmall as Tmall product listings also appear on Taobao Marketplace search result pages. In addition, promotional slots purchased on Juhuasuan by Taobao Marketplace and Tmall merchants also drive consumers to Taobao Marketplace and Tmall storefronts, thereby enabling merchants to introduce consumers to additional product and service offerings beyond those featured on the particular Juhuasuan promotion and drive additional user traffic. This network effect allows for lower traffic acquisition costs across our marketplaces. In addition, due toFurthermore, the large number of consumers on our marketplaces ~~we are able to attract~~attracts a large number of merchants, ~~which in turn provides a strong source of~~who become customers for our ~~online marketing~~customer management and storefront services. ~~Merchants purchase marketing~~In addition, the vast consumer base of our digital economy presents cross-selling opportunities across our various platforms. For example, we can offer consumer services, ~~through a self-service platform~~such as Ele.me, and promote our digital media and entertainment services, including Youku, to consumers on our ~~China retail~~ marketplaces. ~~As a result, we do not rely on a field sales force to generate revenue~~These network effects allow for lower traffic acquisition costs and provide synergies across our ~~China retail marketplaces.~~businesses.
Our Investment in User Base, Technology, People, Infrastructure, and ~~Infrastructure.~~Innovative Business Model.    We have made, and will continue to make, significant investments in our platforms and ~~ecosystem~~digital economy to attract consumers and merchants, enhance user experience and expand the capabilities and scope of our platforms. We expect our investments will include

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~~developing and marketing new products and services,~~ expanding our core commerce offerings, implementing our New Retail initiatives, enhancing our cloud computing business, acquiring content and ~~YunOS, a cloud-based mobile operating system for Internet of Things devices, developing new ways~~users to ~~interact with consumers through~~further develop our ~~mobile~~digital media and entertainment ~~assets, developing~~business, cultivating innovation initiatives and new ~~software tools to attract additional consumers and merchants to our marketplaces~~technologies as well as executing our globalization strategy. Our operating leverage and margin levels enable us to continue to invest in our people, particularly engineers, scientists and product management personnel, as well as in our ~~underlying~~ technology capabilities and infrastructure. ~~In addition, as a result of our financial strength, we expect to invest~~Our investment in the above mentioned new and existing businesses ~~which~~has and will continue to lower our margins but we believe the investment will deliver overall long-term growth.
Strategic Investments and Acquisitions.    We have made, and intend to make, strategic investments and acquisitions. We do not make investments and acquisitions ~~to increase user~~for purely financial reasons. Our investment and acquisition strategy is focused on strengthening our digital economy, creating strategic synergies across our businesses, and ~~engagement, improve customer experience and expand~~enhancing

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the overall value of our ~~product, service, and content offerings.~~company. Our strategic investments and acquisitions may affect our future financial results, including our margins and our net income. For example, we expect that our ~~recent~~ acquisitions of Youku ~~Tudou~~ and a controlling ~~stake~~stakes in Lazada, Cainiao Network and Ele.me and our privatization of Intime will have a negative effect on our financial results, at least in the ~~short-term.~~short term. In addition, some of our acquisitions and investments may not be successful. We have incurred impairment charges in the past and may incur impairment charges in the future.
Recent Investment, Acquisition and Strategic Alliance Activities
In addition to organic growth, we have made, or have entered into agreements to make, strategic investments, acquisitions and alliances that are intended to further our strategic objectives. The financial results for these strategic transactions that were completed are reflected in our operating results beginning with the period of their respective completion. Investments in which we did not obtain control are accounted for under the equity method if we have significant influence over the investee through investment in common stock or in-substance common stock. Otherwise, investments are accounted for as investment securities based on our accounting policies over different categories of investments and merger and acquisition activities. For the details of our accounting policies for each category of our investments, see notes 2(d), 2(t) and 2(u) to our audited consolidated financial statements included elsewhere in this annual report.
We take a deliberate and staged approach to our investment and acquisition strategy. In some cases, we may begin with an initial minority investment followed by business cooperation. We have chosen to make minority investments in some circumstances instead of full acquisitions for one or more of the following reasons: (i) the investee has strong management, where we allow them to have operating independence and potential upside tied to their business in order to retain them; (ii) the investee does not fit within our core business operations but can generate strategic synergies through an equity relationship; and/or (iii) the investee demonstrates clear strategic value to us but capital or integration risk in the near term suggests a deliberate and phased-in approach. When the business results, cooperation and the overall relationship established with the management of the investee company show increasing value to our ongoing business strategy, we may increase our investment or acquire the investee company completely. Examples of this type of approach include our investments in UCWeb, Amap, Youku, Intime, Cainiao Network and Ele.me, where the period from initial investment to eventual acquisition and/or consolidation spanned more than one fiscal year.
We have funded our strategic acquisitions and investments primarily from cash generated from our operations and through debt and equity financing. Our debt financing primarily consists of unsecured senior notes and bank borrowings, including an aggregate of US$8.0 billion unsecured senior notes issued in November 2014, of which US$1.3 billion was repaid in November 2017, an additional aggregate US$7.0 billion unsecured senior notes issued in December 2017, a five-year term loan facility of US$4.0 billion drawn down in fiscal year 2017, the maturity of which has been extended to May 2024 in May 2019, as well as a US$5.15 billion revolving credit facility which we have not yet drawn. Going forward, we expect to fund additional investments through cash generated from our operations and through debt and equity financing when opportunities arise in the future. Although we expect our margins to be negatively affected by acquisitions of target companies with lower or negative margins, such as our acquisitions and consolidations of Youku, Lazada, Intime, Cainiao Network and Ele.me, we do not expect our investment activities to have any significant negative impact on our liquidity or operations. We believe acquired businesses operating at a loss do not detract from the total value of our company because they bring clear strategic value to us in the long run. However, there can be no assurance that our future financial results would not be materially and adversely affected if our strategic investments and acquisitions are not successful. See "Item 3. Key Information — D. Risk Factors — Risks Related to Our Business and Industry — Sustained investment in our business, strategic acquisitions and investments as well as our focus on long-term performance and on maintaining the health of our digital economy may negatively affect our margins and our net income" and "Item 3. Key Information — D. Risk Factors — Risks Related to Our Business and Industry — We face risks relating to our acquisitions, investments and alliances."
Our significant strategic investments and acquisitions (including those that are under definitive agreement but have not closed) in fiscal year 2019 and the period through the date of this annual report are set forth below. For those investments and acquisitions described below that have not yet closed, there can be no assurance that the closing conditions will be satisfied in a timely manner or at all.

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Core Commerce and New Retail
Red Star Macalline Group Corporation Limited, or Red Star, a leading home improvement and furnishings shopping mall operator in China that is listed on both the Hong Kong Stock Exchange and the Shanghai Stock Exchange. In May 2019, we completed the subscription of exchangeable bonds issued by the controlling shareholder of Red Star for a cash consideration of RMB4,359 million (US$650 million). The exchangeable bonds have a term of five years and are exchangeable into ordinary shares of Red Star at an initial price of RMB12.28 per share. In addition, we acquired an approximately 2% equity interest in Red Star for a total consideration of HK$447 million (US$57 million).
Focus Media Information Technology Co., Ltd., or Focus Media, operates a media network for advertisements, including within cinemas, and advertising posters and displays in elevators of office and residential buildings, and is listed on the Shenzhen Stock Exchange. During fiscal year 2019, we acquired a total equity interest of approximately 7% in Focus Media for a cash consideration of approximately RMB10.7 billion (US$1.6 billion). We have also entered into an arrangement with Hangzhou Hanyun Xinling Equity Investment Fund (the "Onshore Retail Fund"), our affiliated investment fund, under which the Onshore Retail Fund will participate in the gain and loss related to a certain portion of the equity interest in Focus Media held by us. In addition, we agreed to acquire a 10% equity interest of an entity controlled by the founder and chairman of Focus Media, which holds an approximately 23% equity interest in Focus Media, for a cash consideration of US$511 million. This transaction has not been completed as of the date of this annual report.
Kaiyuan Commerce Co., Ltd., or Kaiyuan, a leading department store operator in the northwestern part of China. In April 2018, we acquired a 100% equity interest in Kaiyuan for a cash consideration of RMB3.4 billion (US$501 million). We expect that the acquisition will complement our New Retail initiatives to reengineer the fundamentals of retail operations and transform the retail landscape.
Shiji Retail Information Technology Co., Ltd., or Shiji Retail, a company that is engaged in the provision of retail information system solutions. In April 2018, we acquired a 38% equity interest of Shiji Retail for a cash consideration of US$486 million.
Local Consumer Services
Rajax Holding, or Ele.me (), a leading on-demand delivery and local services platform in China, andKoubei Holding Limited, or Koubei, one of China's leading restaurant and local services guide platforms for in-store consumption. In April and August 2017, we and Ant Financial, through a joint investment vehicle, invested a total of US$1.2 billion in the preferred shares of Ele.me, of which our investment totaled US$864 million. In May 2018, we invested, through the joint investment vehicle, a total of US$5.5 billion to acquire all outstanding shares of Ele.me that it did not already own. Upon the completion of the transaction, Ele.me became our consolidated subsidiary. In December 2018, we completed the integration of Ele.me and Koubei under a newly-established holding company and paid a cash consideration of US$465 million. Immediately prior to the integration, we held an approximately 90% equity interest in Ele.me and an approximately 38% equity interest in Koubei on a fully diluted basis. Upon the completion of the integration, we held an approximately 72% equity interest in this new holding company, which owns substantially all of the equity interest in Ele.me and Koubei. Subsequent to the integration and through the date of this annual report, we acquired additional equity interest in this holding company for a cash consideration of US$2,355 million. Our local consumer services business is an important part of our consumer-facing platform, which leverages our massive consumer base to further penetrate the local consumer services market, increasing our ability to tap into China's ongoing consumption upgrade.
Cloud Computing
China TransInfo Technology Co Ltd, or China TransInfo, a China-based smart city infrastructure and service provider, including intelligent transportation operation services. In May 2019, we agreed to acquire a 15% equity interest in China TransInfo for a cash consideration of RMB3,595 million (US$536 million). The completion of the transaction is subject to customary closing conditions.

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Digital Media and Entertainment
Alibaba Pictures Group Limited, or Alibaba Pictures, an Internet-driven integrated platform that covers content production, promotion and distribution, IP licensing and integrated management, cinema ticketing management and data services for the entertainment industry that is listed on the Hong Kong Stock Exchange. In March 2019, we subscribed for newly issued ordinary shares of Alibaba Pictures for a cash consideration of HK$1,250 million (US$159 million). Upon the completion of the transaction, our equity interest in Alibaba Pictures increased from approximately 49% to approximately 51%, and Alibaba Pictures became our consolidated subsidiary. We expect greater integration and synergies between Alibaba Pictures and related business in Alibaba Group on both content production and distribution to deliver high-quality entertainment experiences for consumers in China.
Logistics
STO Express Co., Ltd., or STO Express, one of the leading express delivery services companies in China that is listed on the Shenzhen Stock Exchange. In March 2019, we made a loan to the controlling shareholder of STO Express with a principal amount of RMB5.0 billion (US$745 million) for a term of three years. The controlling shareholder of STO Express has pledged a portion of its equity interest in STO Express in relation to the loan. In addition, we entered into a share purchase agreement to acquire a 49% equity interest in an investment vehicle to be established by the controlling shareholder, which will hold a 29.9% equity interest in STO Express for a cash consideration of RMB4.7 billion (US$700 million). The completion of this transaction is subject to customary closing conditions.
ZTO Express (Cayman) Inc., or ZTO Express, one of the leading express delivery services companies in China that is listed on the New York Stock Exchange. In June 2018, we completed an investment in newly issued ordinary shares of ZTO Express for a cash consideration of US$1,100 million, representing an approximately 8% equity interest in ZTO Express. We expect that ZTO Express will complement other logistics businesses in our digital economy.
International Expansion
PT Tokopedia,or Tokopedia, a company that operates one of the leading e-commerce platforms in Indonesia. During fiscal year 2018, we completed a minority investment in existing and newly issued preferred shares of Tokopedia for a total cash consideration of US$445 million. In connection with the initial investment, we also agreed to subscribe for additional preferred shares of Tokopedia if so elected by Tokopedia. Pursuant to the agreement, we acquired additional newly issued preferred shares of Tokopedia for a total cash consideration of US$500 million in December 2018. Upon the completion of this investment, we held an approximately 29% equity interest in Tokopedia on a fully diluted basis. The investment in Tokopedia further expands our presence in the Southeast Asia consumer market.
DSM Grup Danışmanlık İletişim ve Satış Ticaret A.Ş., or Trendyol, a leading online fashion retailer in Turkey. In July 2018, we acquired an approximately 85% equity interest in Trendyol for a cash consideration of US$728 million. In connection with the transaction, we also entered into an agreement with the founders of Trendyol, allowing them to acquire additional equity interests in Trendyol from us or sell a portion of their equity interests in Trendyol to us in the future. In December 2018, we purchased additional equity interests in Trendyol for a cash consideration of US$2 million. The investment underscores our commitment to international expansion.
Daraz Singapore Private Limited, or Daraz, a leading e-commerce platform in South Asia. In May 2018, we acquired a 100% equity interest in Daraz for a cash consideration of US$194 million. The investment reflects our continued focus on implementing our globalization initiatives.

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Others
Huatai Securities Co, Ltd., or Huatai Securities, a leading integrated securities group in China that is listed on both the Shanghai Stock Exchange and the Hong Kong Stock Exchange. In July 2018, we acquired an approximately 3% interest in Huatai Securities for a cash consideration of RMB3.5 billion (US$522 million).
Huitongda Network Co., Ltd.,or Huitongda, a company that operates a rural online services platform in China. In April 2018, we acquired existing and newly issued shares of Huitongda for a cash consideration of RMB4.5 billion (US$671 million), representing a 20% equity interest in Huitongda. The investment in Huitongda complements our strategic initiative in rural expansion.
Intangible Assets and Goodwill
When we make an acquisition, consideration that exceeds the fair value of the acquired assets and liabilities is allocated to intangible assets and goodwill. We have and will continue to incur amortization expenses as we amortize intangible assets over their estimated useful life on a straight-line basis. We do not amortize goodwill. We test intangible assets and goodwill periodically for impairment, and any impairment may materially and adversely affect our financial condition and results of operations. Some of our acquisitions and investments may not be successful, and we may incur impairment charges in the future. For additional information, see "— Critical Accounting Policies and Estimates — Impairment Assessment on Goodwill and Intangible Assets" and "Item 3. Key Information — D. Risk Factors — Risks Related to Our Business and Industry — We face risks relating to our acquisitions, investments and alliances."
Components of Results of Operations
Revenue
The following table sets forth the principal components of our revenue for the periods indicated:

Year ended March 31, Year ended March 31,

2014 2015 2016 2017 2018 2019

RMB % of
revenue RMB % of
revenue RMB US$ % of
revenue RMB % of
revenue RMB % of
revenue RMB US$ % of
revenue

(in millions, except percentages)
(in millions, except percentages)

China commerce

Retail
42,832 82 % 59,732 78 % 80,033 12,412 79 %
Wholesale
2,300 4 % 3,205 4 % 4,288 665 4 %

Total China commerce
45,132 86 % 62,937 82 % 84,321 13,077 83 %

International commerce

Retail
938 2 % 1,768 3 % 2,204 342 2 %
Wholesale
3,913 7 % 4,718 6 % 5,425 841 6 %

Total international commerce
4,851 9 % 6,486 9 % 7,629 1,183 8 %

Cloud computing
773 2 % 1,271 2 % 3,019 468 3 %
Core commerce:

China commerce retail
114,109 72 % 176,559 71 % 247,615 36,896 66 %
China commerce wholesale
5,679 4 % 7,164 3 % 9,988 1,488 3 %
International commerce retail
7,336 5 % 14,216 6 % 19,558 2,914 5 %
International commerce wholesale
6,001 4 % 6,625 2 % 8,167 1,217 2 %
Cainiao logistics services
— — 6,759 3 % 14,885 2,218 4 %
Local consumer services
— — — — 18,058 2,691 5 %
Others
1,748 3 % 5,510 7 % 6,174 958 6 % 755 0 % 2,697 1 % 5,129 764 1 %

Total revenue
52,504 100 % 76,204 100 % 101,143 15,686 100 %
Total core commerce
133,880 85 % 214,020 86 % 323,400 48,188 86 %
Cloud computing
6,663 4 % 13,390 5 % 24,702 3,681 7 %
Digital media and entertainment
14,733 9 % 19,564 8 % 24,077 3,588 6 %
Innovation initiatives and others
2,997 2 % 3,292 1 % 4,665 695 1 %

Total
158,273 100 % 250,266 100 % 376,844 56,152 100 %

GMV
1,677,587 2,443,721 3,092,385
We generate ~~substantially all~~most of our revenue from our ~~retail and wholesale marketplaces.~~core commerce segment. We also earn revenue from services associated with our cloud computing ~~services~~segment, digital media and ~~other revenue primarily from mobile Internet services provided by UCWeb. Substantially all~~entertainment segment as well as innovation initiatives and others segment. A substantial majority of our revenue is attributable to our businesses in China. See "— Our Monetization Model" for additional information regarding our revenue.

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Cost of Revenue
The principal components of our cost of revenue include: logistics costs; cost of inventories; expenses associated with the operation of our mobile platforms and websites, such as bandwidth and co-location fees, and depreciation and maintenance expenses for our servers and computers, call centers and other equipment; content acquisition costs paid to third parties and production costs of original content for our online media properties; salaries, bonuses, benefits and share-based compensation expense relating to customer service, mobile platform and platform operation personnel as well as payment processing ~~fees paid to Alipay or other financial institutions;~~consultants; traffic acquisition costs paid to third-party marketing affiliates either at a fixed price or on a

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~~revenue sharing~~ revenue-sharing basis; ~~expenses associated with the operation of our websites, such as bandwidth and co-location~~payment processing fees ~~and depreciation and maintenance expenses for our computers, servers, call centers~~paid to Alipay or other financial institutions; and other equipment; salary, bonuses, benefits and share-based compensation expense relating to customer service and web operation personnel and payment processing consultants; logistics costs relating to fulfillment services provided to us by our affiliate Cainiao Network, primarily related to Tmall Supermarket; rebates and subsidies mainly relating to our new business initiatives; business taxes and related surcharges; and allowance for doubtful accounts in relation to the micro loans and VAT receivables.miscellaneous costs.
Product Development Expenses
Product development expenses primarily include salaries, bonuses, benefits and share-based compensation expense for ~~our employees engaged in~~research and development personnel and other expenses that are directly attributable to the development ~~maintenance~~of new technologies and ~~enhancement~~products for our businesses, such as the development of the Internet infrastructure, applications, operating systems, software, databases and networks for our marketplaces, mobile products and service platforms. In addition, product development expenses include royalty fees paid to Yahoo pursuant to the Yahoo TIPLA. This royalty fee arrangement was terminated upon completion of our initial public offering in September 2014.networks. We expense all of our product development costs as they are incurred.
Sales and Marketing Expenses
Sales and marketing expenses primarily consist of online and offline advertising expenses, promotion expenses, ~~sales commissions paid for membership acquisition for our wholesale marketplaces, and~~ salaries, bonuses, benefits and share-based compensation expense for our employees engaged in sales and marketing ~~functions.~~functions, and sales commissions paid for membership acquisition for our wholesale marketplaces.
General and Administrative Expenses
General and administrative expenses consist mainly of salaries, bonuses, benefits and share-based compensation expense for our management and administrative employees, professional services fees, office facilities, other support overhead costs, ~~and~~ charitable ~~contributions. In fiscal year 2014, these expenses included an equity-settled donation expense~~contributions, as well as non-recurring items, such as settlement of ~~RMB1,269 million relating to the grant of options to purchase 50,000,000 of our ordinary shares to~~ a non-profit organization designated by Jack Ma and Joe Tsai. As there are no vesting conditions attached to the above share options, equity-settled donation expense of RMB1,269 million was recognized in full. See note 9 to our consolidated financial statements for the years ended March 31, 2014, 2015 and 2016 included elsewhere in this annual report for further information on this expense.U.S. federal class action lawsuit.
Interest and Investment Income, Net
Interest and investment income, net consists of interest income, ~~investment gain or loss related to our treasury management activities and~~ gain or loss on deemed disposals, disposals and revaluation of our long term equity investments and impairment of equity investments. ~~Our interest and investment income, net became more significant~~We obtained control over Cainiao Network in fiscal year ~~2015 as a result of a net gain of RMB6,535 million recognized with respect to the revaluation of previously held equity interests, relating primarily to the step acquisitions of UCWeb, OneTouch~~2018 and ~~AutoNavi. In~~Koubei and Alibaba Pictures in fiscal year ~~2016, we also~~2019. We recognized ~~a deemed disposal gain~~gains of ~~RMB24,734~~RMB22,442 million in fiscal year 2018 and RMB27,815 million (US$~~3,836~~4,145 million) ~~arising from the deconsolidation of Alibaba Pictures and a gain of RMB18,603 million (US$2,885 million)~~in fiscal year 2019 from the revaluation of our previously held equity interest in Cainiao Network, Koubei and Alibaba ~~Health.~~Pictures.
We adopted ASU 2016-01, "Financial Instruments — Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities" beginning in fiscal year 2019. After the adoption of this new accounting update, equity investments other than those accounted for under the equity method or those that result in the consolidation of the investee are required to be measured at fair value, with subsequent changes in fair value recognized in the income statement. We have adopted this new accounting update using the modified retrospective method. The adoption of this new accounting update resulted in an increase of RMB10,610 million (US$1,581 million) in interest and investment income, net for the fiscal year 2019.
Interest Expense
Our interest expense is comprised of interest payments and amortization of upfront fees and incidental charges primarily associated with our ~~bank borrowings and~~ unsecured senior notes issued in November 2014, ~~to refinance our previous syndicated loan arrangements. In addition, we obtained a~~the US$~~3.0~~4.0 billion ~~revolving credit facility in August 2014 and a~~ five-year term loan facility drawn down in fiscal year 2017 and an additional aggregate of US$~~3.0~~7.0 billion unsecured senior notes issued in ~~March 2016, which has been subsequently upsized to~~December 2017. In addition, in April 2017, we obtained a new US$~~4.0~~5.15 billion ~~both of which we have not yet drawn as of March 31, 2016.~~revolving credit facility,

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which we have not yet drawn as of the date of this annual report. Interest expense in fiscal year 2019 was RMB5,190 million (US$773 million), an increase of 46% compared to RMB3,566 million in fiscal year 2018. The increase was primarily due to an increase in average debt outstanding in fiscal year 2019 as compared to fiscal year 2018, reflecting primarily an additional US$7.0 billion of unsecured senior notes issued in December 2017.
Other Income, Net
Other income, net, primarily consists of royalty fees and software technology service fees paid by ~~Alipay, government grants~~Ant Financial, exchange gain or loss, as well as ~~exchange gain or loss. Alipay~~government grants. Ant Financial pays us royalty fees and software technology service fees pursuant to an intellectual property and software technology services agreement, as amended in August 2014, or the ~~amended Alipay~~2014 IPLA. See "Item 7. Major Shareholders and Related Party Transactions — B. Related Party Transactions — Agreements and Transactions Related to Ant Financial ~~Services~~ and its Subsidiaries — Share and Asset Purchase Agreement — Alipay Intellectual Property License and Software Technology Services Agreement" for further information on the arrangements between us and ~~Alipay.~~Ant Financial. Exchange gain or loss, arising from our operations and treasury management activities, recognized in our income statement is largely a result of appreciation or depreciation of RMB, respectively. The amount is also partially affected by the currency movements on our hedging activities related to the portion that is deemed ineffective from an accounting perspective. Government grants primarily relate to grants by central and local governments in connection with our contributions to technology development and investments in local business districts. These grants may not be recurring in nature, and we recognize ~~such~~the income when the grants are received and no further conditions need to be met. Exchange gain or loss, arising from our operations and treasury management activities, recognized in our income statement is largely a result of depreciation or appreciation of RMB, respectively. The amount is also partly impacted by such currency movements on our hedging activities related to the portion that is deemed ineffective from an accounting perspective.
~~Income Tax Expense~~Rajax Holding, or Ele.me (
       ~~Our income tax expense is comprised primarily of current tax expense, mainly attributable to certain profitable subsidiaries~~), a leading on-demand delivery and local services platform in China, and ~~deferred tax expense, mainly including withholding tax on dividends to be distributed by our major subsidiaries operating in China.~~
~~Taxation~~Koubei Holding Limited,
~~Cayman Islands Profits Tax~~
       ~~Under Cayman Islands law, our company is not subject to income, corporation~~ or ~~capital gains tax,~~Koubei, one of China's leading restaurant and ~~no withholding tax is imposed upon the payment~~local services guide platforms for in-store consumption. In April and August 2017, we and Ant Financial, through a joint investment vehicle, invested a total of ~~dividends.~~
~~Hong Kong Profits Tax~~
       ~~Our company's subsidiaries incorporated in Hong Kong were subject to Hong Kong profits tax rate of 16.5% in fiscal years 2014, 2015 and 2016.~~
~~PRC Income Tax~~
       Under the PRC Enterprise Income Tax Law, or EIT Law, the standard enterprise income tax rate is 25%. Entities qualifying as High and New Technology Enterprises enjoy a preferential tax rate of 15%. Entities recognized as Software Enterprises are exempt from the EIT for two years beginning from their first profitable calendar year and are entitled to a 50% reduction in EIT for the following three calendar years. Furthermore, entities recognized as key software enterprises within the PRC national plan enjoy a preferential EIT rate of 10%.
       Certain subsidiaries received the above preferential tax treatments during the calendar years 2013, 2014, 2015 and 2016. One of our major subsidiaries in China, Zhejiang Tmall Technology Co. Ltd., which is a wholly foreign-owned enterprise primarily involvedUS$1.2 billion in the ~~operation~~preferred shares of ~~Tmall, is currently in its fifth profitable year and was subject~~Ele.me, of which our investment totaled US$864 million. In May 2018, we invested, through the joint investment vehicle, a total of US$5.5 billion to ~~an EIT rate~~acquire all outstanding shares of ~~12.5% (or 50%~~Ele.me that it did not already own. Upon the completion of the ~~standard statutory rate)~~transaction, Ele.me became our consolidated subsidiary. In December 2018, we completed the integration of Ele.me and Koubei under a newly-established holding company and paid a cash consideration of US$465 million. Immediately prior to the integration, we held an approximately 90% equity interest in ~~calendar years 2014, 2015~~Ele.me and ~~2016, and to~~ an ~~EIT rate of 15% thereafter for so long as~~approximately 38% equity interest in Koubei on a fully diluted basis. Upon the subsidiary continues to qualify as a High and New Technology Enterprise. Two of our subsidiaries in China, Taobao (China) Software Co. Ltd. and Alibaba (China) Technology Co. Ltd., which are also wholly foreign owned enterprises primarily involved in the operations of Taobao Marketplace and wholesale marketplaces respectively, were recognized as key software enterprises in the calendar years of 2012, 2013 and 2014 and they were subject to an EIT rate of 10%. In respectcompletion of the ~~calendar years~~integration, we held an approximately 72% equity interest in this new holding company, which owns substantially all of ~~2015~~the equity interest in Ele.me and ~~2016, Key Software Enterprise status has not yet been awarded up~~Koubei. Subsequent to the integration and through the date of this annual report, we acquired additional equity interest in this holding company for a cash consideration of US$2,355 million. Our local consumer services business is an important part of our consumer-facing platform, which leverages our massive consumer base to further penetrate the local consumer services market, increasing our ability to tap into China's ongoing consumption upgrade.
Cloud Computing
China TransInfo Technology Co Ltd, or China TransInfo, a China-based smart city infrastructure and service provider, including intelligent transportation operation services. In May 2019, we agreed to acquire a 15% equity interest in China TransInfo for a cash consideration of RMB3,595 million (US$536 million). The completion of the transaction is subject to customary closing conditions.

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~~report~~Digital Media and ~~accordingly~~Entertainment
Alibaba Pictures Group Limited, or Alibaba Pictures, an ~~EIT rate of 15% is used~~Internet-driven integrated platform that covers content production, promotion and distribution, IP licensing and integrated management, cinema ticketing management and data services for the ~~accounting~~entertainment industry that is listed on the Hong Kong Stock Exchange. In March 2019, we subscribed for newly issued ordinary shares of ~~taxation during such periods. Key Software Enterprise status~~Alibaba Pictures for a cash consideration of HK$1,250 million (US$159 million). Upon the completion of the transaction, our equity interest in Alibaba Pictures increased from approximately 49% to approximately 51%, and Alibaba Pictures became our consolidated subsidiary. We expect greater integration and synergies between Alibaba Pictures and related business in Alibaba Group on both content production and distribution to deliver high-quality entertainment experiences for consumers in China.
Logistics
STO Express Co., Ltd., or STO Express, one of the leading express delivery services companies in China that is ~~subject~~listed on the Shenzhen Stock Exchange. In March 2019, we made a loan to ~~review by~~ the ~~relevant authorities every two years and the timing~~controlling shareholder of ~~annual review and notification by the relevant authorities may vary from year to year.~~STO Express with a principal amount of RMB5.0 billion (US$745 million) for a term of three years. The ~~related tax adjustments~~controlling shareholder of STO Express has pledged a portion of its equity interest in STO Express in relation to the ~~change~~loan. In addition, we entered into a share purchase agreement to acquire a 49% equity interest in ~~applicable EIT rate~~an investment vehicle to be established by the controlling shareholder, which will ~~be accounted~~hold a 29.9% equity interest in STO Express for a cash consideration of RMB4.7 billion (US$700 million). The completion of this transaction is subject to customary closing conditions.
ZTO Express (Cayman) Inc., or ZTO Express, one of the leading express delivery services companies in China that is listed on the ~~period prospectively~~New York Stock Exchange. In June 2018, we completed an investment in ~~which Key Software Enterprise status is recognized.~~newly issued ordinary shares of ZTO Express for a cash consideration of US$1,100 million, representing an approximately 8% equity interest in ZTO Express. We expect that ZTO Express will complement other logistics businesses in our digital economy.
~~VAT and Other Levies~~International Expansion
       ~~Our major PRC subsidiaries are subject~~PT Tokopedia,or Tokopedia, a company that operates one of the leading e-commerce platforms in Indonesia. During fiscal year 2018, we completed a minority investment in existing and newly issued preferred shares of Tokopedia for a total cash consideration of US$445 million. In connection with the initial investment, we also agreed to ~~VAT on revenue earned~~subscribe for most services under a national VAT reform program. In general, the applicable VAT rate on the revenue earned for services is 6% with companies entitled to credit VAT paid on certain purchases against VAT on sales. Revenue is recognized netadditional preferred shares of ~~VAT in our consolidated income statement.~~
~~PRC Withholding Tax~~
Tokopedia if so elected by Tokopedia. Pursuant to the ~~EIT Law,~~agreement, we acquired additional newly issued preferred shares of Tokopedia for a ~~10% withholding tax is generally levied on dividends declared by companies~~total cash consideration of US$500 million in ~~China to their non-resident enterprise investors. A lower withholding tax rate~~December 2018. Upon the completion of ~~5% is applicable for direct foreign investors incorporated in Hong Kong with at least a 25%~~this investment, we held an approximately 29% equity interest in the PRC company and who meet the relevant conditions or requirements pursuant to the tax arrangement between the PRC and Hong Kong. As the equity holders of our major subsidiaries in China are qualified Hong Kong incorporated companies, our deferred tax liabilities for distributable earnings are calculated basedTokopedia on a ~~5% withholding tax. As~~fully diluted basis. The investment in Tokopedia further expands our presence in the Southeast Asia consumer market.
DSM Grup Danışmanlık İletişim ve Satış Ticaret A.Ş., or Trendyol, a leading online fashion retailer in Turkey. In July 2018, we acquired an approximately 85% equity interest in Trendyol for a cash consideration of ~~March 31, 2016,~~US$728 million. In connection with the transaction, we ~~have fully accrued~~also entered into an agreement with the ~~withholding tax on the earnings distributable by all~~founders of ~~our subsidiaries in China, except for those being reserved for permanent reinvestment in China of RMB13.6 billion (US$2.1 billion).~~
~~Share-based Compensation~~
       ~~We have various equity incentive plans pursuant to which the employees, consultants and directors of our company, our affiliates and certain other companies are granted options or awarded RSUs~~Trendyol, allowing them to acquire ~~our ordinary shares. We believe share-based awards are vital~~additional equity interests in Trendyol from us or sell a portion of their equity interests in Trendyol to attract, incentivize and retain our employees and consultants. In addition to on-hire grants for new recruits above a specific job level, we also make performance and promotion grants on an annual basis to our top performing employees. RSUs and share options grantedus in the ~~above categories are generally subject~~future. In December 2018, we purchased additional equity interests in Trendyol for a cash consideration of US$2 million. The investment underscores our commitment to international expansion.
Daraz Singapore Private Limited, or Daraz, a ~~four-year vesting schedule. Depending~~leading e-commerce platform in South Asia. In May 2018, we acquired a 100% equity interest in Daraz for a cash consideration of US$194 million. The investment reflects our continued focus on the nature and the purpose of the grant, share options and RSUs generally vest 25% upon the first anniversary of the vesting commencement date or 50% upon the second anniversary of the vesting commencement date, and thereafter 25% every year. Starting in fiscal year 2015, RSUs and share options granted toimplementing our senior management members as performance grants were subject to a six-year pro rata vesting schedule. We believe share-based awards are the appropriate tool to align the interests of the grantees with those of our shareholders.
       In addition, Junhan, a major equity holder of Ant Financial Services, granted certain share-based awards similar to share appreciation awards linked to the valuation of Ant Financial Services to a significant number of our employees. These share-based awards have vesting schedules that are conditioned upon the fulfillment of requisite services to us, and such awards will be settled in cash by Junhan upon disposal by our employees. We have no obligation to reimburse Junhan, Ant Financial Services or its subsidiaries for the cost associated with these awards. See "Item 7. Major Shareholders and Related Party Transactions — B. Related Party Transaction — Agreements and Transactions Related to Ant Financial Services and its Subsidiaries — Equity-based Award Arrangements."globalization initiatives.

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       ~~We recognized share-based compensation expense~~Others
Huatai Securities Co, Ltd., or Huatai Securities, a leading integrated securities group in China that is listed on both the Shanghai Stock Exchange and the Hong Kong Stock Exchange. In July 2018, we acquired an approximately 3% interest in Huatai Securities for a cash consideration of ~~RMB2,844 million, RMB13,028 million~~RMB3.5 billion (US$522 million).
Huitongda Network Co., Ltd.,or Huitongda, a company that operates a rural online services platform in China. In April 2018, we acquired existing and ~~RMB16,082 million~~newly issued shares of Huitongda for a cash consideration of RMB4.5 billion (US$~~2,494~~671 million), representing a 20% equity interest in ~~fiscal years 2014, 2015~~Huitongda. The investment in Huitongda complements our strategic initiative in rural expansion.
Intangible Assets and ~~2016, respectively, representing 5%, 17% and 16% of our revenue in those respective periods. The following table sets forth~~Goodwill
When we make an ~~analysis of share-based compensation expense by function for~~acquisition, consideration that exceeds the ~~periods indicated.~~

Year ended March 31,

2014 2015 2016

RMB RMB RMB US$

(in millions)

Cost of revenue
1,154 4,176 4,003 621
Product development expenses
795 3,876 5,703 885
Sales and marketing expenses
189 1,235 1,963 304
General and administrative expenses
706 3,741 4,413 684

Total
2,844 13,028 16,082 2,494

       Share-based compensation expense increased significantly in fiscal years 2015 and 2016 as compared to fiscal year 2014 due to performance-based and retention grants of share-based awards to our employees and senior management members prior to our initial public offering as well as the increase in average fair ~~market~~ value of the ~~awards granted. In addition, as a result of "mark-to-market" accounting required under U.S. GAAP, the increase in share-based compensation expense also reflected the re-measurement charge relating~~acquired assets and liabilities is allocated to ~~our share-based awards granted to the employees of Ant Financial Services~~intangible assets and ~~share-based awards of Ant Financial Services granted to our employees by Junhan. The following table sets forth an analysis of share-based compensation expense by type of awards:~~

Year ended March 31,

2014 2015 2016

RMB RMB RMB US$

(in millions)

Alibaba Group share-based awards granted to:

— Our employees
2,017 6,977 9,687 1,502
— Ant Financial Services employees and other consultants⁽¹⁾
827 2,263 889 138
Ant Financial Services share-based awards granted to our employees⁽¹⁾
— 3,788 5,506 854

Total share-based compensation expense
2,844 13,028 16,082 2,494

~~(1)~~
~~Awards subject to mark-to-market accounting treatment.~~
       The expense arising from Ant Financial Services' share-based awards granted to our employees represents a non-cash charge that will not result in any economic costs or equity dilution to our shareholders. It is the view of Jack Ma, our executive chairman, who controls Ant Financial Services, that the grant of these equity awards to our employees will benefit us because of the strategic importance of Ant Financial Services as a payment service provider to usgoodwill. We have and ~~our significant participation in the profit and value accretion of Ant Financial Services through our agreements with Ant Financial Services.~~
       ~~We expect that our share-based compensation expense~~ will continue to ~~be affected by the change in fair value~~incur amortization expenses as we amortize intangible assets over their estimated useful life on a straight-line basis. We do not amortize goodwill. We test intangible assets and goodwill periodically for impairment, and any impairment may materially and adversely affect our financial condition and results of operations. Some of our ~~shares, our subsidiaries' share-based awards (including Youku Tudou~~acquisitions and ~~Lazada)~~investments may not be successful, and ~~the quantity of awards~~ we ~~grant to our employees and consultants~~may incur impairment charges in the future. Furthermore, our share-based compensation expense will also be affected by the anticipated increase in fair value of share-based awards of Ant Financial Services. As a result of these factors, we expect that our share-based compensation expense will likely increase. SeeFor additional information, see "— Critical Accounting Policies and Estimates — ~~Share-based Compensation Expense~~Impairment Assessment on Goodwill and ~~Valuation of the Underlying Awards" for additional information regarding our share-based compensation expense.~~

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~~Recent Investment, Acquisition and Strategic Alliance Activities~~
       In addition to organic growth, we have made, or have entered into agreements to make, strategic investments, acquisitions and alliances that are intended to further our strategic objectives. The financial results for these strategic transactions that were completed are reflected in our operating results beginning with the period of their respective completion. The investments in which we did not obtain control are accounted for under the equity method if we have significant influence over the investees through investment in common stock or in-substance common stock, or otherwise under the cost method or accounted for as investment securities based on our accounting policies over different categories of investments and merger and acquisition activities. For the details of our accounting policies for each category of our investments, see notes 2(d), 2(s) and 2(t) to our consolidated financial statements for the years ended March 31, 2014, 2015 and 2016 included elsewhere in this annual report.
       ~~Our investment and acquisition strategy focuses on three objectives:~~
•
~~increasing user acquisition and engagement;~~

•
~~improving customer experience; and~~

•
~~expanding our products and services.~~
       We take a deliberate and staged approach to our investment and acquisition strategy. In some cases, we may begin with an initial minority investment followed by business cooperation. We have chosen to make minority investments in some circumstances instead of full acquisitions for one or more of the following reasons: (i) the investee has strong management, where we allow them to have operating independence and potential upside tied to their business in order to retain them; (ii) the investee does not fit within our core business operations but can generate strategic synergies through an equity relationship; and/or (iii) the investee demonstrates clear strategic value to us but capital or integration risk in the near term suggests a deliberate and phased-in approach. Where the business results, cooperation and the overall relationship established with the management of the investee company show increasing value to our ongoing business strategy, we may increase our investment or acquire the investee company completely. Examples of this type of approach include our investments in UCWeb, AutoNavi and Youku Tudou, where the period from initial investment to eventual acquisition spanned more than one fiscal year.
       We have funded our strategic acquisitions and investments primarily from cash generated from our operations and through debt and equity financing. Our debt financing primarily consists of unsecured senior notes and bank borrowings. We have issued an aggregate of US$8.0 billion unsecured senior notes. We have entered into a five-year term loan facility of US$4.0 billion, of which $3.0 billion was drawn down subsequent to March 31, 2016. We have also entered into a US$3.0 billion revolving credit facility, which we have not yet drawn. Going forward, we expect to fund additional investments through cash generated from our operations and through debt and equity financing when opportunities arise in the future. Although we expect our margins to be negatively affected by acquisitions of target companies with lower or negative margins, such as our recent acquisitions of Youku Tudou and a controlling stake in Lazada, we do not expect our investment activities to have any significant negative impact on our liquidity or operations. We believe acquired businesses operating at a loss do not detract from the total value of our company because they bring clear strategic value to us in the long run. However, there can be no assurance that our future financial results would not be materially and adversely affected if our strategic investments and acquisitions are not successful. See "Item 3. Key Information — D. Risk Factors — Risks Related to Our Business and Industry — Increased investments in our business, strategic acquisitions and investments as well as our focus on long-term performance and maintaining the health of our ecosystem may negatively affect our margins and our net income"Intangible Assets" and "Item 3. Key Information — D. Risk Factors — Risks Related to Our Business and Industry — We face risks relating to our acquisitions, investments and alliances."
Components of Results of Operations
Revenue
The following table sets forth the principal components of our revenue for the periods indicated:

Year ended March 31,

2017 2018 2019

RMB % of
revenue RMB % of
revenue RMB US$ % of
revenue

(in millions, except percentages)

Core commerce:

China commerce retail
114,109 72 % 176,559 71 % 247,615 36,896 66 %
China commerce wholesale
5,679 4 % 7,164 3 % 9,988 1,488 3 %
International commerce retail
7,336 5 % 14,216 6 % 19,558 2,914 5 %
International commerce wholesale
6,001 4 % 6,625 2 % 8,167 1,217 2 %
Cainiao logistics services
— — 6,759 3 % 14,885 2,218 4 %
Local consumer services
— — — — 18,058 2,691 5 %
Others
755 0 % 2,697 1 % 5,129 764 1 %

Total core commerce
133,880 85 % 214,020 86 % 323,400 48,188 86 %
Cloud computing
6,663 4 % 13,390 5 % 24,702 3,681 7 %
Digital media and entertainment
14,733 9 % 19,564 8 % 24,077 3,588 6 %
Innovation initiatives and others
2,997 2 % 3,292 1 % 4,665 695 1 %

Total
158,273 100 % 250,266 100 % 376,844 56,152 100 %

We generate most of our revenue from our core commerce segment. We also earn revenue from services associated with our cloud computing segment, digital media and entertainment segment as well as innovation initiatives and others segment. A substantial majority of our revenue is attributable to our businesses in China. See "— Our significant recent strategic investments and acquisitions (including those that are under definitive agreement but have not closed) in fiscal year 2016 and the period through the date of this annual report are set forth below.Monetization Model" for additional information regarding our revenue.

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~~Local Services~~Cost of Revenue
~~Koubei Holding Limited~~,The principal components of our cost of revenue include: logistics costs; cost of inventories; expenses associated with the operation of our mobile platforms and websites, such as bandwidth and co-location fees, and depreciation and maintenance expenses for our servers and computers, call centers and other equipment; content acquisition costs paid to third parties and production costs of original content for our online media properties; salaries, bonuses, benefits and share-based compensation expense relating to customer service, mobile platform and platform operation personnel as well as payment processing consultants; traffic acquisition costs paid to third-party marketing affiliates either at a fixed price or ~~Koubei (~~on a revenue-sharing basis; payment processing fees paid to Alipay or other financial institutions; and other miscellaneous costs.
Product Development Expenses
Product development expenses primarily include salaries, bonuses, benefits and share-based compensation expense for research and development personnel and other expenses that are directly attributable to the development of new technologies and products for our businesses, such as the development of the Internet infrastructure, applications, operating systems, software, databases and networks. We expense all of our product development costs as they are incurred.
),Sales and Marketing Expenses
Sales and marketing expenses primarily consist of online and offline advertising expenses, promotion expenses, salaries, bonuses, benefits and share-based compensation expense for our employees engaged in sales and marketing functions, and sales commissions paid for membership acquisition for our wholesale marketplaces.
General and Administrative Expenses
General and administrative expenses consist mainly of salaries, bonuses, benefits and share-based compensation expense for our management and administrative employees, professional services fees, office facilities, other support overhead costs, charitable contributions, as well as non-recurring items, such as settlement of a ~~joint venture that we set up together with Ant Financial Services during~~U.S. federal class action lawsuit.
Interest and Investment Income, Net
Interest and investment income, net consists of interest income, gain or loss on deemed disposals, disposals and revaluation of our long term equity investments and impairment of equity investments. We obtained control over Cainiao Network in fiscal year ~~2016.~~2018 and Koubei ~~integrates~~and Alibaba Pictures in fiscal year 2019. We recognized gains of RMB22,442 million in fiscal year 2018 and RMB27,815 million (US$4,145 million) in fiscal year 2019 from the ~~convenience aspects~~revaluation of mobile commerce and big data to provide consumers with information and promotional benefits from local restaurants in China. As of March 31, 2016, we invested a total cash amount of RMB3,000 million and also injected certain related businesses into Koubei. We and Ant Financial Services each hold a 49.6%our previously held equity interest in Cainiao Network, Koubei ~~while an unrelated third-party affiliated with a major Chinese restaurant chain holds a small minority~~and Alibaba Pictures.
We adopted ASU 2016-01, "Financial Instruments — Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities" beginning in fiscal year 2019. After the adoption of this new accounting update, equity ~~interest. Through Koubei, we participate~~investments other than those accounted for under the equity method or those that result in the ~~restaurant~~consolidation of the investee are required to be measured at fair value, with subsequent changes in fair value recognized in the income statement. We have adopted this new accounting update using the modified retrospective method. The adoption of this new accounting update resulted in an increase of RMB10,610 million (US$1,581 million) in interest and investment income, net for the fiscal year 2019.
Interest Expense
Our interest expense is comprised of interest payments and amortization of upfront fees and incidental charges primarily associated with our unsecured senior notes issued in November 2014, the US$4.0 billion five-year term loan facility drawn down in fiscal year 2017 and an additional aggregate of US$7.0 billion unsecured senior notes issued in December 2017. In addition, in April 2017, we obtained a new US$5.15 billion revolving credit facility,

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which we have not yet drawn as of the date of this annual report. Interest expense in fiscal year 2019 was RMB5,190 million (US$773 million), an increase of 46% compared to RMB3,566 million in fiscal year 2018. The increase was primarily due to an increase in average debt outstanding in fiscal year 2019 as compared to fiscal year 2018, reflecting primarily an additional US$7.0 billion of unsecured senior notes issued in December 2017.
Other Income, Net
Other income, net, primarily consists of royalty fees and software technology service fees paid by Ant Financial, exchange gain or loss, as well as government grants. Ant Financial pays us royalty fees and software technology service fees pursuant to an intellectual property and software technology services agreement, as amended in August 2014, or the 2014 IPLA. See "Item 7. Major Shareholders and Related Party Transactions — B. Related Party Transactions — Agreements and Transactions Related to Ant Financial and its Subsidiaries — Share and Asset Purchase Agreement — Alipay Intellectual Property License and Software Technology Services Agreement" for further information on the arrangements between us and Ant Financial. Exchange gain or loss, arising from our operations and treasury management activities, recognized in our income statement is largely a result of appreciation or depreciation of RMB, respectively. The amount is also partially affected by the currency movements on our hedging activities related to the portion that is deemed ineffective from an accounting perspective. Government grants primarily relate to grants by central and local ~~establishment sector~~governments in ~~a "closed loop" manner, which is characterized by~~connection with our contributions to technology development and investments in local business districts. These grants may not be recurring in nature, and we recognize the ~~"online-to-offline" interaction of users obtaining information~~income when the grants are received and ~~receiving promotional offers, mostly through a mobile device, and then visiting the physical establishment~~no further conditions need to ~~enjoy the services while making on-location payment with Alipay.~~be met.
Rajax Holding, or Ele.me (), a leading on-demand delivery and local services platform in China, andKoubei Holding Limited, or Koubei, one of ~~the largest mobile food ordering~~China's leading restaurant and ~~delivery~~local services ~~in China, covering over 300 cities as of March 31, 2016.~~guide platforms for in-store consumption. In ~~March 2016,~~April and August 2017, we and Ant Financial, ~~Services completed~~through a ~~portion~~joint investment vehicle, invested a total of US$1.2 billion in the ~~subscription for newly issued convertible~~ preferred shares inof Ele.me, ~~for a total combined investment amount of US$1,250 million,~~ of which our investment totaled US$864 million. In May 2018, we invested, through the joint investment vehicle, a total ~~commitment is~~of US$~~900~~5.5 billion to acquire all outstanding shares of Ele.me that it did not already own. Upon the completion of the transaction, Ele.me became our consolidated subsidiary. In December 2018, we completed the integration of Ele.me and Koubei under a newly-established holding company and paid a cash consideration of US$465 million. ~~Our effective~~Immediately prior to the integration, we held an approximately 90% equity interest in Ele.me ~~will be~~and an approximately ~~22%~~38% equity interest in Koubei on a ~~fully-diluted basis once~~fully diluted basis. Upon the ~~full investment amount is completed.~~completion of the integration, we held an approximately 72% equity interest in this new holding company, which owns substantially all of the equity interest in Ele.me ~~complements our investment in Koubei in local services, focusing on food ordering~~ and ~~delivery characterized by high-frequency usage~~Koubei. Subsequent to the integration and ~~last-mile logistics within a city.~~
~~Xiaoju Kuaizhi Inc~~~~., or Didi Chuxing (~~), the leading transportation network company that provides vehicles and taxis for hire in China via smartphone applications. We have an existing equity stake of 10% in the fully-diluted equity of Didi Chuxing, which is the resulting company of a merger between Didi Chuxing and Kuaidi Dache, a taxi hailing company in which we had an investment. We account for our stake in Didi Chuxing as a cost method equity investment, in which we have an aggregate investment cost of US$445 million. As ofthrough the date of this annual report, we ~~have committed to invest a further US$200 million and Ant Financial Services is expected to invest US$200 million in the preferred shares of Didi Chuxing. In connection with this~~acquired additional equity ~~investment,~~interest in this holding company for a cash consideration of US$2,355 million. Our local consumer services business is an important part of our consumer-facing platform, which leverages our massive consumer base to further penetrate the local consumer services market, increasing our ability to tap into China's ongoing consumption upgrade.
Cloud Computing
China TransInfo Technology Co Ltd, or China TransInfo, a China-based smart city infrastructure and service provider, including intelligent transportation operation services. In May 2019, we ~~have signed~~agreed to acquire a ~~cooperation agreement with Didi Chuxing relating~~15% equity interest in China TransInfo for a cash consideration of RMB3,595 million (US$536 million). The completion of the transaction is subject to ~~the adoption~~customary closing conditions.

Table of ~~navigation and map services provided by AutoNavi to the riders and drivers of Didi Chuxing's services, thereby further increasing the user base and usage of AutoNavi's services.~~Contents
Digital Media and Entertainment
~~Youku Tudou, Inc.~~, or Youku Tudou, a leading multi-screen entertainment and media company in China that was previously listed on the New York Stock Exchange. In May 2014, we, through a holding company, invested US$1,090 million to purchase Class A ordinary shares of Youku Tudou, representing an effective equity interest of 16.5% on a fully-diluted basis. We made this investment on the same terms together with a Yunfeng Fund, which invested US$132 million for an approximately 2% equity interest. In April 2016, we completed an acquisition of all of the issued and outstanding shares of Youku Tudou that we or the Yunfeng Fund did not already own for a total cash consideration of US$4.4 billion. Following the completion of the transaction, Youku Tudou became our consolidated subsidiary, with the Yunfeng Fund holding an approximately 2% minority interest. The management of Youku Tudou has a right for an option to purchase up to 15% of its equity. Youku Tudou is a core part of our strategy to offer digital entertainment to consumers in our ecosystem, thereby strengthening user engagement as well as enabling a new marketing channel for the merchants in our ecosystem. Further, Youku Tudou creates additional revenue sources for us from advertising and membership subscriptions.
Alibaba Pictures Group Limited,, or Alibaba Pictures, ~~a producer of movies~~an Internet-driven integrated platform that covers content production, promotion and ~~television programs in China~~distribution, IP licensing and integrated management, cinema ticketing management and data services for the entertainment industry that is listed on the Hong Kong Stock Exchange. In ~~June 2014,~~March 2019, we ~~acquired control of Alibaba Pictures by completing an investment in~~subscribed for newly issued ordinary shares ~~representing an approximately 60%~~of Alibaba Pictures for a cash consideration of HK$1,250 million (US$159 million). Upon the completion of the transaction, our equity interest in Alibaba Pictures ~~for a total cash consideration of HK$6,244 million. In June 2015,~~increased from approximately 49% to approximately 51%, and Alibaba Pictures ~~placed newly issued ordinary shares to unrelated third-party investors with aggregate gross proceeds of HK$12,179 million. Our equity interest~~became our consolidated subsidiary. We expect greater integration and synergies between Alibaba Pictures and related business in Alibaba Pictures was therefore diluted to 49.5% upon completion of the placing. Accordingly, we deconsolidated the financial results of Alibaba Pictures starting from June 2015, and recognized a gain of RMB24,734 million basedGroup on ~~revaluation of our remaining equity interest in Alibaba Pictures. In addition, Alibaba~~

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~~Pictures completed its purchase of our online movie ticketing business and financing and investment platform for the production of movie and other media~~both content for a cash consideration of US$350 million plus certain reimbursement amounts in December 2015. With these transactions, Alibaba Pictures has created a comprehensive platform that integrates valuable assets in the production and distribution ~~value chain~~to deliver high-quality entertainment experiences for ~~movies and TV dramas.~~
~~Wasu Media Holding Co., Ltd.~~~~, or Wasu, a company listed on the Shenzhen Stock Exchange and engaged~~consumers in ~~the business of digital media broadcasting and distribution in~~ China. In April 2015, Simon Xie, who is one of our founders and an equity holder in certain of our variable interest entities, was granted a financing with an aggregate principal of up to RMB6.9 billion by a major financial institution in the PRC, which was used to fund a minority investment in Wasu via a PRC limited partnership. A company controlled by Jack Ma serves as one of the general partners of the limited partnership. Yuzhu Shi, the founder, chairman and a principal shareholder of Giant Interactive, a China-based online game company that was previously listed on the New York Stock Exchange, and an entrepreneur with significant experience in and knowledge of the media industry in China, serves as the other general partner. Jack, through his control of one of the general partners, and Mr. Shi, as the other general partner and the executive partner, jointly control this PRC limited partnership. The interest of the general partner controlled by Jack in the limited partnership is limited to the return of its RMB10,000 contributed capital. The financing is secured by a pledge of Wasu shares acquired by the PRC limited partnership and a pledge of certain wealth management products we purchased. In addition, we entered into a loan agreement with a principal amount of up to RMB2.0 billion with Simon Xie in April 2015 to finance the repayment by Simon of the interest under the above-mentioned financing. Our loan to Mr. Xie will be made at an interest rate equal to SHIBOR as specified by us and is repayable in five years. The loan is secured by a pledge of Mr. Xie's limited partnership interest in the limited partnership, and is available for draw-down starting from January 1, 2016 but it has not yet been drawn. These arrangements have facilitated our entering into strategic business arrangements with Wasu to enhance our entertainment strategy.
~~Healthcare~~
~~Alibaba Health Information Technology Limited~~, or Alibaba Health, a company primarily engaged in the business of developing the technology for product identification, authentication and tracking system for pharmaceutical and medical products in China that is listed on the Hong Kong Stock Exchange. In April 2014, we completed an acquisition of newly issued ordinary shares representing an effective equity interest of approximately 38% in Alibaba Health for a total purchase price of HK$932 million. Subsequent to March 31, 2016, we and Alibaba Health entered into a services agreement under which Alibaba Health will provide outsourced services in relation to product categories related to Tmall's online pharmacy business. Alibaba Health is the flagship vehicle for us to execute our data-driven healthcare strategy.
Logistics
       We have made investments in a number of logistics-related companies as part of our strategy to enhance the customer experience in our core commerce business through predictable, speedy and high quality logistics services. Below is a description of the major investments in this area.
~~Cainiao Smart Logistics Network Limited~~, or Cainiao Network, a logistics data platform that leverages a network of logistics partners' capacity and capabilities to fulfill the logistics needs of our core commerce business. In May 2013, we took part in establishing Cainiao Network together with other parties with significant operational experience in logistics, retail and real estate in China. In March 2016, Cainiao Network completed a new equity financing round, after which our aggregate investment in Cainiao Network increased to RMB7.0 billion. Currently our equity interest in Cainiao Network is approximately 47%. See "Item 4. Information on the Company — B. Business Overview — Other Major Elements of Our Ecosystem — Logistics."
~~Haier Electronics Group Co., Ltd.~~, or Haier, a company that is listed on the Hong Kong Stock Exchange and principally engaged in the research, development, manufacture and sale of electrical appliances, especially large home appliances such as refrigerators and air conditioners. In March 2014, as part of our strategy for providing better delivery and installation services to consumers, we completed an acquisition of ordinary shares representing an approximately 2% equity interest in Haier, an acquisition of a 9.9% equity interest in a wholly-owned subsidiary

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of Haier that is engaged in the logistics business in China, or RRS, and a subscription for a convertible and exchangeable bond which is either convertible into an approximately 2.6% equity interest in Haier or exchangeable into an approximately 24% equity interest in RRS. We paid a total purchase price of HK$2,821 million upon the closing of the transactions. Our investment in Haier and RRS has enabled our China retail marketplaces to gain a competitive advantage in the large home appliance category through high quality delivery, installation and after-sale services.
~~YTO~~STO Express ~~(Logistics)~~ Co., Ltd., or ~~YTO~~STO Express, one of the leading express ~~courier~~delivery services companies in China. In May 2015, we invested RMB1,500 million in YTO Express representing an equity interest of 12% in the company. YTO Express is one of the fifteen strategic express courier partners participating in the data platform of Cainiao Network to fulfill orders from our core commerce business. We invested in YTO Express so that we can leverage our shareholding relationship to establish delivery service standards and new service offerings for online shopping. Once implemented and tested, such standards and offerings may be rolled out to other delivery partners of Cainiao Network, enhancing the overall consumer experience. In January 2016, a company listed on the Shanghai Stock Exchange filed an application to purchase all of the equity interest in YTO Express through an asset swap and share issue, resulting in a reverse takeover of that company by YTO Express. The completion of the reverse takeover is subject to the approval by the shareholders of that company and certain regulatory authorities.
~~Best Logistics Technologies Ltd.,~~ or Best Logistics, a provider of comprehensive supply-chain solutions and services including express delivery, freight delivery, inventory management, warehouse fulfillment, software development, financing, business consulting to cross-border logistics services. Since fiscal year 2009, we have participated in several rounds of equity financing of Best Logistics, including one in January 2015, and have acquired an aggregate of approximately 22% equity interest in Best Logistics for an aggregate investment cost of US$256 million. In 2016, Cainiao Network also participated in a round of equity financing of Best Logistics in which it invested US$165 million for an approximately 5% equity interest in Best Logistics.
~~E-commerce and Related Services~~
~~Suning Commerce Group Co., Ltd.~~~~, or Suning, one of the largest consumer electronics retail chains in~~ China ~~with over 1,600 retail stores and over 60 national and regional distribution centers as of December 2015~~ that is listed on the Shenzhen Stock Exchange. In ~~August 2015,~~March 2019, we made a loan to the controlling shareholder of STO Express with a principal amount of RMB5.0 billion (US$745 million) for a term of three years. The controlling shareholder of STO Express has pledged a portion of its equity interest in STO Express in relation to the loan. In addition, we entered into ~~definitive agreements~~a share purchase agreement to ~~establish~~acquire a ~~comprehensive collaboration with Suning. Under our agreements, we~~49% equity interest in an investment vehicle to be established by the controlling shareholder, which will ~~invest RMB28.2~~hold a 29.9% equity interest in STO Express for a cash consideration of RMB4.7 billion ~~for 19.99%~~(US$700 million). The completion of this transaction is subject to customary closing conditions.
ZTO Express (Cayman) Inc., or ZTO Express, one of the ~~enlarged~~leading express delivery services companies in China that is listed on the New York Stock Exchange. In June 2018, we completed an investment in newly issued ordinary shares of ZTO Express for a cash consideration of US$1,100 million, representing an approximately 8% equity ~~capital of Suning. These transactions are expected to be completed during the quarter ending June 30, 2016.~~interest in ZTO Express. We ~~have formed a strategic alliance with Suning to build on synergies~~expect that ZTO Express will complement other logistics businesses in e-commerce, logistics and incremental business through joint omni-channel initiatives. We believe these transactions will bring significant strategic benefits, including improved product selection, competitive pricing, and better customer experience through reliable delivery and after-sale services.our digital economy.
International Expansion
~~Lazada Group S.A~~PT Tokopedia,., or ~~Lazada,~~Tokopedia, a company that operates one of the leading e-commerce platforms in ~~Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam, with local language websites and mobile apps in each of the six markets. In April 2016,~~Indonesia. During fiscal year 2018, we completed ~~an acquisition~~a minority investment in existing and newly issued preferred shares of ~~a controlling stake in Lazada~~Tokopedia for a total cash consideration of US$~~1.0 billion. Lazada offers third-party brands and merchants~~445 million. In connection with the initial investment, we also agreed to subscribe for additional preferred shares of Tokopedia if so elected by Tokopedia. Pursuant to the agreement, we acquired additional newly issued preferred shares of Tokopedia for a ~~marketplace solution with simple and direct access to consumers~~total cash consideration of US$500 million in ~~these six countries through one retail channel. Lazada also sells products owned by its retail operations. It has developed its own logistics infrastructure with warehouses and~~December 2018. Upon the completion of this investment, we held an approximately 29% equity interest in Tokopedia on a ~~last-mile delivery fleet to offer quick and reliable delivery to its customers. We intend that Lazada will be~~fully diluted basis. The investment in Tokopedia further expands our ~~vehicle for expansion into~~presence in the Southeast Asia consumer ~~market, including potential cross-border opportunities introducing Chinese merchants and international brands to Southeast Asian consumers.~~market.
~~Others~~
~~Beijing Shiji Information Technology Co., Ltd.~~DSM Grup Danışmanlık İletişim ve Satış Ticaret A.Ş., or ~~Shiji,~~Trendyol, a ~~developer and provider~~leading online fashion retailer in Turkey. In July 2018, we acquired an approximately 85% equity interest in Trendyol for a cash consideration of ~~hotel information management system software, system integration and technical service that is listed~~US$728 million. In connection with the transaction, we also entered into an agreement with the founders of Trendyol, allowing them to acquire additional equity interests in Trendyol from us or sell a portion of their equity interests in Trendyol to us in the future. In December 2018, we purchased additional equity interests in Trendyol for a cash consideration of US$2 million. The investment underscores our commitment to international expansion.
Daraz Singapore Private Limited, or Daraz, a leading e-commerce platform in South Asia. In May 2018, we acquired a 100% equity interest in Daraz for a cash consideration of US$194 million. The investment reflects our continued focus on ~~Shenzhen Stock Exchange. In November 2015, we completed an investment in newly issued ordinary shares, representing approximately 13%~~implementing our globalization initiatives.

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~~equity interest in Shiji for~~Others
Huatai Securities Co, Ltd., or Huatai Securities, a total cash consideration of RMB2,389 million. Our investment in and strategic alliance with Shiji enhances the customer experience in our online travel business, Alitrip, as the alliance improves our capability to integrate real time information, such as rooms availability and special promotional offers, from participating hotels on the Alitrip platform.
~~AGTech Holdings Limited~~~~, or AGTech, an~~leading integrated ~~lottery technology and services company~~securities group in China that is listed on both the Shanghai Stock Exchange and the Hong Kong ~~Growth Enterprise Market.~~Stock Exchange. In ~~March 2016,~~July 2018, we acquired an approximately 3% interest in Huatai Securities for a cash consideration of RMB3.5 billion (US$522 million).
Huitongda Network Co., Ltd.,or Huitongda, a company that operates a rural online services platform in China. In April 2018, we acquired existing and ~~Ant Financial Services agreed to subscribe for~~ newly issued ~~ordinary~~ shares ~~and convertible bonds~~ of ~~AGTech~~Huitongda for a ~~total~~cash consideration of RMB4.5 billion (US$671 million), representing a 20% equity interest in Huitongda. The investment ~~amount of HK$2,388 million, of which~~in Huitongda complements our total commitment is HK$1,433 million. Upon the completion of the transaction, AGTech will become our consolidated subsidiary. The completion of this transaction is subject to a number of customary closing conditions including the approval by shareholders of AGTech and certain regulatory authorities. We intend that AGTech will be our vehicle for participatingstrategic initiative in ~~the lottery business in China.~~rural expansion.
~~2014 Restructuring of Our Relationship with Ant Financial Services and Alipay~~
       On August 12, 2014, we entered into a share and asset purchase agreement, or the 2014 SAPA, and entered into or amended certain ancillary agreements including an amendment and restatement of the Alipay IPLA. Pursuant to these agreements, we restructured our relationships with Ant Financial Services and Alipay, its wholly-owned subsidiary, and terminated the 2011 framework agreement.
       Pursuant to the 2014 SAPA, we sold the SME loan business and related services to Ant Financial Services for an aggregate cash consideration of RMB3,219 million. In calendar years 2015 to 2017, we will receive an annual fee equal to 2.5% of the average daily book balance of the SME loans. In calendar years 2018 to 2021, we will receive an annual fee equal to the amount paid for the calendar year 2017, or collectively the SME annual fee.
       In connection with the 2014 SAPA, we also entered into an amended intellectual property license agreement with Alipay, or amended Alipay IPLA, pursuant to which we license certain intellectual property and provide certain software technology services to Alipay and the SME loan business. Under the amended Alipay IPLA, we receive royalty streams and a service fee, or collectively the profit share payments, paid at least annually, amounting to the sum of an expense reimbursement plus 37.5% of the consolidated pre-tax income of Ant Financial Services, subject to certain adjustments.
       Pursuant to the terms of the 2014 SAPA, in the event of an initial public offering of Ant Financial Services or Alipay at an implied equity value exceeding US$25 billion which results in gross proceeds of at least US$2.0 billion (a "Qualified IPO"), if our total ownership of equity interests in Ant Financial Services has not reached 33%, we would be entitled at our election to either receive a one-time payment equal to 37.5% of the equity value of Ant Financial Services as determined immediately prior to such Qualified IPO. There is no cap on the maximum value of such liquidity event payment. If we acquire equity interests in Ant Financial Services in an aggregate amount less than 33%, the percentage of Ant Financial Services' equity value used to calculate such liquidity event payment will be reduced proportionately.
       In lieu of receiving such liquidity event payment, we may elect to continue to receive the profit share payment in perpetuity, subject to the receipt of regulatory approvals. In connection with a Qualified IPO and if we so elect, Ant Financial Services must use its commercially reasonable efforts to obtain the required approvals for continued payments under the amended Alipay IPLA. If such approvals are not obtained, Ant Financial Services will pay the liquidity event payment as described above to us.
       The 2014 SAPA provides for future potential equity issuances to us by Ant Financial Services. In the event that Ant Financial Services applies for and receives certain PRC regulatory approvals in the future, Ant Financial Services will issue and we will purchase newly issued equity interests in Ant Financial Services up to a 33% equity interest, or such lesser equity interest as may be permitted by the regulatory approvals. If the liquidity event payment described above has not become payable upon a Qualified IPO of Ant Financial Services, our right to acquire equity interests up to the full 33% equity interest will continue after such Qualified IPO. However, the maximum equity interest that we are entitled to acquire will be reduced in proportion to any dilutive equity issuances by Ant Financial Services in and following such Qualified IPO. If we acquire an equity interest in Ant Financial Services pursuant to this arrangement which is below 33%, the liquidity event payment amount and the

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~~profit sharing arrangement under the Alipay IPLA will be proportionately reduced based on the amount of equity interests acquired by us.~~
       For additional details of the new and amended agreements, see "Item 7. Major Shareholders and Related Party Transactions — B. Related Party Transactions — Agreements and Transactions Related to Ant Financial Services and its Subsidiaries."
~~Acquired~~ Intangible Assets and Goodwill
When we make an acquisition, consideration that exceeds the ~~book~~fair value of the acquired assets ~~are~~and liabilities is allocated to ~~acquired~~ intangible assets and ~~goodwill, respectively.~~goodwill. We have and will continue to incur amortization expenses as we amortize ~~acquired~~ intangible assets over their estimated useful life on a straight-line basis. We do not amortize ~~our~~ goodwill. We test intangible assets and goodwill periodically for impairment, and any ~~such~~ impairment may materially and adversely affect our financial condition and results of operations. Some of our acquisitions and investments may not be successful, and we may incur impairment charges in the future. For additional information, see "— Critical Accounting Policies and Estimates — Impairment Assessment on Goodwill and Intangible Assets" and "Item 3. Key Information — D. Risk Factors — Risks Related to Our Business and Industry — We face risks relating to our acquisitions, investments and alliances."
~~Key Financial Information~~Components of ~~Selected Equity Method Investees~~
       ~~Our investments in the following companies are accounted for under the equity method. Consistent with our accounting policies for investments in equity method investees, we record our share~~Results of ~~results of the following companies on a one quarter in arrears basis within share of results of equity investees in the consolidated income statements.~~Operations
~~Cainiao Network~~Revenue
The following table ~~is a summary~~sets forth the principal components of ~~key unaudited financial information of Cainiao Network Technology Co., Ltd.*:~~
~~Income statement data:~~our revenue for the periods indicated:

Twelve months ended
December 31,

2014 2015

RMB RMB

(in millions)

Revenue
941 3,099
Net loss
(183 ) (617 )

Year ended March 31,

2017 2018 2019

RMB % of
revenue RMB % of
revenue RMB US$ % of
revenue

(in millions, except percentages)

Core commerce:

China commerce retail
114,109 72 % 176,559 71 % 247,615 36,896 66 %
China commerce wholesale
5,679 4 % 7,164 3 % 9,988 1,488 3 %
International commerce retail
7,336 5 % 14,216 6 % 19,558 2,914 5 %
International commerce wholesale
6,001 4 % 6,625 2 % 8,167 1,217 2 %
Cainiao logistics services
— — 6,759 3 % 14,885 2,218 4 %
Local consumer services
— — — — 18,058 2,691 5 %
Others
755 0 % 2,697 1 % 5,129 764 1 %

Total core commerce
133,880 85 % 214,020 86 % 323,400 48,188 86 %
Cloud computing
6,663 4 % 13,390 5 % 24,702 3,681 7 %
Digital media and entertainment
14,733 9 % 19,564 8 % 24,077 3,588 6 %
Innovation initiatives and others
2,997 2 % 3,292 1 % 4,665 695 1 %

Total
158,273 100 % 250,266 100 % 376,844 56,152 100 %

~~Balance sheet data:~~

As of
December 31,

2014 2015

RMB RMB

(in millions)

Total assets
5,951 5,929
Total liabilities
2,642 1,761
Total equity
3,309 4,168
*
~~Cainiao Network Technology Co., Ltd.~~We generate most of our revenue from our core commerce segment. We also earn revenue from services associated with our cloud computing segment, digital media and entertainment segment as well as innovation initiatives and others segment. A substantial majority of our revenue is ~~a company incorporated~~attributable to our businesses in China. After the completion of a restructuring process in March 2016, it became a wholly owned subsidiary of Cainiao Network. Prior to the restructuring, we held a direct 48% equity interest in Cainiao Network Technology Co. Ltd. See ~~note 4(w) to the consolidated financial statements included elsewhere in this annual report~~"— Our Monetization Model" for ~~further details.~~
additional information regarding our revenue.

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       ~~We recorded~~Cost of Revenue
The principal components of our ~~share~~cost of revenue include: logistics costs; cost of inventories; expenses associated with the operation of our mobile platforms and websites, such as bandwidth and co-location fees, and depreciation and maintenance expenses for our servers and computers, call centers and other equipment; content acquisition costs paid to third parties and production costs of original content for our online media properties; salaries, bonuses, benefits and share-based compensation expense relating to customer service, mobile platform and platform operation personnel as well as payment processing consultants; traffic acquisition costs paid to third-party marketing affiliates either at a fixed price or on a revenue-sharing basis; payment processing fees paid to Alipay or other financial institutions; and other miscellaneous costs.
Product Development Expenses
Product development expenses primarily include salaries, bonuses, benefits and share-based compensation expense for research and development personnel and other expenses that are directly attributable to the development of new technologies and products for our businesses, such as the development of the Internet infrastructure, applications, operating systems, software, databases and networks. We expense all of our product development costs as they are incurred.
Sales and Marketing Expenses
Sales and marketing expenses primarily consist of online and offline advertising expenses, promotion expenses, salaries, bonuses, benefits and share-based compensation expense for our employees engaged in sales and marketing functions, and sales commissions paid for membership acquisition for our wholesale marketplaces.
General and Administrative Expenses
General and administrative expenses consist mainly of salaries, bonuses, benefits and share-based compensation expense for our management and administrative employees, professional services fees, office facilities, other support overhead costs, charitable contributions, as well as non-recurring items, such as settlement of a U.S. federal class action lawsuit.
Interest and Investment Income, Net
Interest and investment income, net consists of interest income, gain or loss on deemed disposals, disposals and revaluation of our long term equity investments and impairment of equity investments. We obtained control over Cainiao Network ~~Technology Co., Ltd.~~in fiscal year 2018 and Koubei and Alibaba Pictures in fiscal year 2019. We recognized gains of ~~RMB90~~RMB22,442 million in fiscal year 2018 and ~~RMB295~~RMB27,815 million (US$464,145 million) in fiscal ~~years 2015 and 2016, respectively. We also have commercial arrangements conducted on an arm's length basis with~~year 2019 from the revaluation of our previously held equity interest in Cainiao Network, ~~to receive certain logistics services, primarily related to Tmall Supermarket, which are recorded~~Koubei and Alibaba Pictures.
We adopted ASU 2016-01, "Financial Instruments — Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities" beginning in ~~our cost~~fiscal year 2019. After the adoption of ~~revenue. For additional details~~this new accounting update, equity investments other than those accounted for under the equity method or those that result in the consolidation of the ~~related party transactions~~investee are required to be measured at fair value, with ~~Cainiao Network, see~~subsequent changes in fair value recognized in the income statement. We have adopted this new accounting update using the modified retrospective method. The adoption of this new accounting update resulted in an increase of RMB10,610 million (US$1,581 million) in interest and investment income, net for the fiscal year 2019.
Interest Expense
Our interest expense is comprised of interest payments and amortization of upfront fees and incidental charges primarily associated with our unsecured senior notes issued in November 2014, the US$4.0 billion five-year term loan facility drawn down in fiscal year 2017 and an additional aggregate of US$7.0 billion unsecured senior notes issued in December 2017. In addition, in April 2017, we obtained a new US$5.15 billion revolving credit facility,

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which we have not yet drawn as of the date of this annual report. Interest expense in fiscal year 2019 was RMB5,190 million (US$773 million), an increase of 46% compared to RMB3,566 million in fiscal year 2018. The increase was primarily due to an increase in average debt outstanding in fiscal year 2019 as compared to fiscal year 2018, reflecting primarily an additional US$7.0 billion of unsecured senior notes issued in December 2017.
Other Income, Net
Other income, net, primarily consists of royalty fees and software technology service fees paid by Ant Financial, exchange gain or loss, as well as government grants. Ant Financial pays us royalty fees and software technology service fees pursuant to an intellectual property and software technology services agreement, as amended in August 2014, or the 2014 IPLA. See "Item 7. Major Shareholders and Related Party Transactions — B. Related Party ~~transactions~~Transactions — Agreements and Transactions Related to Ant Financial and its Subsidiaries — Share and Asset Purchase Agreement — Alipay Intellectual Property License and Software Technology Services Agreement" for further information on the arrangements between us and Ant Financial. Exchange gain or loss, arising from our operations and treasury management activities, recognized in our income statement is largely a result of appreciation or depreciation of RMB, respectively. The amount is also partially affected by the currency movements on our hedging activities related to the portion that is deemed ineffective from an accounting perspective. Government grants primarily relate to grants by central and local governments in connection with ~~Cainiao Network"~~our contributions to technology development and investments in local business districts. These grants may not be recurring in nature, and we recognize the income when the grants are received and no further conditions need to be met.
Income Tax Expense
Our income tax expense is comprised primarily of current tax expense, mainly attributable to certain profitable subsidiaries in China, and deferred tax expense, mainly including withholding tax on dividends to be distributed by our major subsidiaries operating in China.
Taxation
Cayman Islands Tax
Under Cayman Islands law, our company is not subject to income, corporation or capital gains tax, and no withholding tax is imposed upon the payment of dividends.
Hong Kong Profits Tax
Our company's subsidiaries incorporated in Hong Kong were subject to Hong Kong profits tax at a rate of 16.5% in fiscal years 2017, 2018 and 2019.
PRC Income Tax
Under the PRC Enterprise Income Tax Law, or EIT Law, the standard enterprise income tax rate is 25%.
Entities qualifying as High and New Technology Enterprises enjoy a preferential tax rate of 15%. ~~Our logistics service costs paid or payable~~Entities recognized as Software Enterprises are exempt from the EIT for two years beginning from their first profitable calendar year and are entitled to ~~Cainiao Network accounted for approximately 60% of its revenue~~a 50% reduction in EIT for the ~~twelve months ended December 31, 2015.~~following three calendar years. Furthermore, entities recognized as Key Software Enterprises within the PRC national plan enjoy a preferential EIT rate of 10%.
~~Koubei~~
       ~~The following table is a summary~~Certain subsidiaries received the above preferential tax treatments during calendar years 2016, 2017, 2018 and 2019. Three of ~~key unaudited financial information~~our subsidiaries in China, Zhejiang Tmall Technology Co. Ltd., or Tmall China, Taobao (China) Software Co. Ltd., or Taobao China, and Alibaba (China) Technology Co. Ltd., or Alibaba China, which are our wholly-owned entities primarily involved in the operations of ~~Koubei:~~Tmall, Taobao Marketplace and wholesale
~~Income statement data:~~

~~From the date of~~
~~incorporation to~~
~~December 31, 2015~~

~~RMB~~

~~(in millions)~~
~~Revenue~~
31
~~Net loss~~
~~(1,735~~ )
~~Balance sheet data:~~

~~As of~~
~~December 31, 2015~~

~~RMB~~

~~(in millions)~~
~~Total assets~~
~~1,731~~
~~Total liabilities~~
~~445~~
~~Total equity~~
~~1,286~~
       ~~We recorded our share of the net loss of Koubei of RMB867 million (US$135 million) in fiscal year 2016.~~
~~Alibaba Pictures~~
       ~~The following table is a summary of key unaudited financial information of Alibaba Pictures:~~
~~Income statement data:~~

~~From the date of~~
~~deconsolidation to~~
~~December 31, 2015~~

~~RMB~~

~~(in millions)~~
~~Revenue~~
~~254~~
~~Net income~~
~~544~~
~~Balance sheet data:~~

~~As of~~
~~December 31, 2015~~

~~RMB~~

~~(in millions)~~
~~Total assets~~
~~18,976~~
~~Total liabilities~~
~~2,782~~
~~Total equity~~
~~16,194~~

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       ~~We recorded our share~~marketplaces, respectively, were recognized as Key Software Enterprises in calendar years of 2016 and 2017 and they were subject to an EIT rate of 10%.
Key Software Enterprise status is subject to review by the relevant authorities every year and the timing of annual review and notification by the relevant authorities may vary from year to year. The annual review and notification relating to the renewal of the Key Software Enterprise status for the calendar year of 2018 had not yet been obtained as of March 31, 2019. Accordingly Alibaba China, Taobao China and Tmall China continued to apply an EIT rate of 15% as High and New Technology Enterprises for the accounting of taxation during calendar year 2018. The related tax adjustments in relation to the change in applicable EIT rate will be accounted for in the period prospectively in which Key Software Enterprise status is recognized.
VAT and Other Levies
Our major PRC subsidiaries are subject to VAT on revenue earned for our services under a national VAT reform program. In general, the applicable VAT rate on the revenue earned for services is 6% with companies entitled to credit VAT paid on certain purchases against VAT on sales. Revenue is recognized net ~~income~~ of Alibaba Pictures of RMB268 million (US$42 million) in fiscal year 2016. We also disposed of our online movie ticketing business and financing and investment platform for production of movie and other media content to Alibaba Pictures during fiscal year 2016 at a cash consideration of US$350 million (RMB2,259 million) plus certain reimbursement amounts. We recognized a disposal gain of RMB2,214 million (US$343 million) in interest and investment income, netVAT in our consolidated income ~~statement~~statement.
PRC Withholding Tax
Pursuant to the EIT Law, a 10% withholding tax is generally levied on dividends declared by companies in China to their non-resident enterprise investors. A lower withholding tax rate of 5% is applicable for direct foreign investors incorporated in Hong Kong with at least 25% equity interest in the PRC company and meeting the relevant conditions or requirements pursuant to the tax arrangement between the PRC and Hong Kong. As the equity holders of our major subsidiaries in China are qualified Hong Kong incorporated companies, our deferred tax liabilities for distributable earnings are calculated at a 5% withholding tax rate. As of March 31, 2019, we have fully accrued the withholding tax on the earnings distributable by all of our subsidiaries in China, except for those being reserved for permanent reinvestment in China of RMB49.7 billion (US$7.4 billion).
Share-based Compensation
We have various equity incentive plans pursuant to which the employees, consultants and directors of our company, our affiliates and certain other companies, such as Ant Financial, are awarded RSUs or granted options to acquire our ordinary shares. We believe share-based awards are vital to attract, incentivize and retain our employees and consultants. In addition to on-hire grants for new recruits above a specific job level, we also make performance grants on an annual basis and promotion grants on a semi-annual basis to our top performing employees. RSUs and options granted in the above categories are generally subject to a four-year vesting schedule. Depending on the nature and the purpose of the grant, RSUs and options generally vest 25% upon the first anniversary of the vesting commencement date or 50% upon the second anniversary of the vesting commencement date, and thereafter 25% every year. Certain RSUs and options granted to our senior management members are subject to a six-year vesting schedule. We believe share-based awards are the appropriate tool to align the interests of the grantees with those of our shareholders.
In addition, since March 2014, Junhan has granted certain share-based awards similar to share appreciation awards linked to the valuation of Ant Financial to our employees, and since April 2018, Ant Financial, through its subsidiary, has granted certain RSU awards to our employees. The awards granted by Junhan will be settled in cash by Junhan upon disposal of these awards by the holders. The awards granted by the Ant Financial subsidiary may be settled in equity or cash by the Ant Financial subsidiary upon vesting of the awards. These awards are generally subject to a four year vesting schedule as determined by the administrator of the plan. Depending on the nature and the purpose of the grant, these awards generally vest 25% or 50% upon the first or second anniversary of the vesting commencement date, respectively, as provided in the grant agreement, and 25% every year thereafter. Certain awards granted to our senior management members are subject to a six-year vesting schedule. We have no obligation to reimburse Junhan, Ant Financial or its subsidiaries for the cost associated with these

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awards. See "Item 7. Major Shareholders and Related Party Transactions — B. Related Party Transaction — Agreements and Transactions Related to Ant Financial and its Subsidiaries — Equity-based Award Arrangements."
We recognized share-based compensation expense of RMB15,995 million, RMB20,075 million and RMB37,491 million (US$5,586 million) in fiscal years 2017, 2018 and 2019, respectively, representing 10%, 8% and 10% of our revenue in those respective periods. The following table sets forth an analysis of share-based compensation expense by function for the periods indicated.

Year ended March 31,

2017 2018 2019

RMB RMB RMB US$

(in millions)

Cost of revenue
3,893 5,505 8,915 1,328
Product development expenses
5,712 7,374 15,378 2,291
Sales and marketing expenses
1,772 2,037 4,411 657
General and administrative expenses
4,618 5,159 8,787 1,310

Total
15,995 20,075 37,491 5,586

Share-based compensation expense increased in fiscal year ~~2016.~~2019 as compared to fiscal year 2018. The increase is primarily due to a general increase in the average fair market value of the awards granted. In addition, as a result of "mark-to-market" accounting required under U.S. GAAP, the increase in share-based compensation expense also reflected the increase in the fair value relating to share-based awards relating to Ant Financial granted to our employees by Junhan or Ant Financial's subsidiary. The following table sets forth an analysis of share-based compensation expense by type of awards:

Year ended March 31,

2017 2018 2019

RMB RMB RMB US$

(in millions)

Alibaba Group share-based awards granted to:

— Our employees
11,810 15,267 21,942 3,269
— Ant Financial employees and other consultants⁽¹⁾
1,277 1,603 785 117
Ant Financial share-based awards granted to our employees⁽¹⁾
2,188 2,278 12,855 1,915
Others
720 927 1,909 285

Total share-based compensation expense
15,995 20,075 37,491 5,586

(1)
Awards subject to mark-to-market accounting treatment.
The expense arising from share-based awards relating to Ant Financial granted to our employees represents a non-cash charge that will not result in any economic costs or equity dilution to our shareholders. We believe that the grant of these equity awards to our employees will encourage mutually beneficial cooperation between us and Ant Financial.
We expect that our share-based compensation expense will continue to be affected by changes in the fair value of our shares, our subsidiaries' share-based awards and the quantity of awards we grant to our employees and consultants in the future. Furthermore, we expect that our share-based compensation expense will continue to be affected by future changes in the valuation of Ant Financial. See "— Critical Accounting Policies and Estimates — Share-based Compensation Expense and Valuation of the Underlying Awards" for additional information regarding our share-based compensation expense.

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Results of Operations
The following table sets out our consolidated results of operations for the periods indicated:

Year ended March 31, Year ended March 31,

2014 2015 2016 2017 2018 2019

RMB RMB RMB US$ RMB RMB RMB US$

(in millions, except per share data)
(in millions, except per share data)

Revenue

China commerce
45,132 62,937 84,321 13,077
International commerce
4,851 6,486 7,629 1,183
Core commerce
133,880 214,020 323,400 48,188
Cloud computing
773 1,271 3,019 468 6,663 13,390 24,702 3,681
Others
1,748 5,510 6,174 958
Digital media and entertainment
14,733 19,564 24,077 3,588
Innovation initiatives and others
2,997 3,292 4,665 695

Total
52,504 76,204 101,143 15,686 158,273 250,266 376,844 56,152
Cost of revenue
(13,369 ) (23,834 ) (34,355 ) (5,328 ) (59,483 ) (107,044 ) (206,929 ) (30,833 )
Product development expenses
(5,093 ) (10,658 ) (13,788 ) (2,138 ) (17,060 ) (22,754 ) (37,435 ) (5,578 )
Sales and marketing expenses
(4,545 ) (8,513 ) (11,307 ) (1,753 ) (16,314 ) (27,299 ) (39,780 ) (5,928 )
General and administrative expenses
(4,218 ) (7,800 ) (9,205 ) (1,428 ) (12,239 ) (16,241 ) (24,889 ) (3,708 )
Amortization of intangible assets
(315 ) (2,089 ) (2,931 ) (455 ) (5,122 ) (7,120 ) (10,727 ) (1,599 )
Impairment of goodwill
(44 ) (175 ) (455 ) (71 ) — (494 ) — —

Income from operations
24,920 23,135 29,102 4,513 48,055 69,314 57,084 8,506
Interest and investment income, net
1,648 9,455 52,254 8,104 8,559 30,495 44,106 6,572
Interest expense
(2,195 ) (2,750 ) (1,946 ) (301 ) (2,671 ) (3,566 ) (5,190 ) (773 )
Other income, net
2,429 2,486 2,058 319 6,086 4,160 221 32

Income before income tax and share of results of equity investees
26,802 32,326 81,468 12,635 60,029 100,403 96,221 14,337
Income tax expenses
(3,196 ) (6,416 ) (8,449 ) (1,310 ) (13,776 ) (18,199 ) (16,553 ) (2,466 )
Share of results of equity investees
(203 ) (1,590 ) (1,730 ) (269 )
Share of results of equity method investees
(5,027 ) (20,792 ) 566 84

Net income
23,403 24,320 71,289 11,056 41,226 61,412 80,234 11,955
Net (income) loss attributable to noncontrolling interests
(88 ) (59 ) 171 27
Net loss attributable to noncontrolling interests
2,449 2,681 7,652 1,140

Net income attributable to Alibaba Group Holding Limited
23,315 24,261 71,460 11,083 43,675 64,093 87,886 13,095
Accretion of convertible preference shares
(31 ) (15 ) — —
Dividends accrued on convertible preference shares
(208 ) (97 ) — —
Accretion of mezzanine equity
— (108 ) (286 ) (42 )

Net income attributable to ordinary shareholders
23,076 24,149 71,460 11,083 43,675 63,985 87,600 13,053

Earnings per share/ADS attributable to ordinary shareholders:

Basic
10.61 10.33 29.07 4.51 17.52 25.06 33.95 5.06
Diluted
10.00 9.70 27.89 4.33 16.97 24.51 33.38 4.97

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Year ended
March 31, Year ended
March 31,

2014 2015 2016 2017 2018 2019

%
%
%
%
%
%

(as percentage of
revenue)
(as percentage of
revenue)

Revenue

China commerce
86 82 83
International commerce
9 9 8
Core commerce
85 86 86
Cloud computing
2 2 3 4 5 7
Others
3 7 6
Digital media and entertainment
9 8 6
Innovation initiatives and others
2 1 1

Total
100 100 100 100 100 100
Cost of revenue
(25 ) (31 ) (34 ) (38 ) (43 ) (55 )
Product development expenses
(10 ) (14 ) (14 ) (11 ) (9 ) (10 )
Sales and marketing expenses
(9 ) (11 ) (11 ) (10 ) (11 ) (11 )
General and administrative expenses
(8 ) (10 ) (9 ) (8 ) (6 ) (6 )
Amortization of intangible assets
(1 ) (3 ) (3 ) (3 ) (3 ) (3 )
Impairment of goodwill
— (1 ) —
— — —

Income from operations
47 30 29 30 28 15
Interest and investment income, net
3 13 52 6 12 12
Interest expense
(4 ) (4 ) (2 ) (2 ) (1 ) (1 )
Other income, net
5 3 2 4 1 —

Income before income tax and share of results of equity investees
51 42 81 38 40 26
Income tax expenses
(6 ) (8 ) (8 ) (9 ) (7 ) (5 )
Share of results of equity investees
— (2 ) (2 ) (3 ) (8 ) —

Net income
45 32 71 26 25 21
Net income attributable to noncontrolling interests
(1 ) — —

Net loss attributable to noncontrolling interests
2 1 2

Net income attributable to Alibaba Group Holding Limited
44 32 71 28 26 23
Accretion of convertible preference shares
— — —
Dividends accrued on convertible preference shares
— — —

Accretion of mezzanine equity
— — —

Net income attributable to ordinary shareholders
44 32 71 28 26 23

~~Comparison of~~Segment Information for Fiscal Years ~~2015~~2017, 2018 and ~~2016~~2019
~~Revenue~~The table below sets forth certain financial information of our operating segments for the periods indicated:

Year ended March 31,

2015 2016

RMB RMB US$ % Change

(in millions, except percentages)

China commerce
62,937 84,321 13,077 34%
International commerce
6,486 7,629 1,183 18%
Cloud computing
1,271 3,019 468 138%
Others
5,510 6,174 958 12%

Total revenue
76,204 101,143 15,686 33%

Year ended March 31, 2019

Core
commerce Cloud
computing Digital media
and
entertainment Innovation
initiatives
and others Unallocated⁽¹⁾ Consolidated

RMB RMB RMB RMB RMB RMB US$

(in millions, except percentages)

Revenue
323,400 24,702 24,077 4,665 — 376,844 56,152
Income (loss) from operations
109,312 (5,508 ) (20,046 ) (11,795 ) (14,879 ) 57,084 8,506
Add: Share-based compensation expense
17,694 4,332 2,988 5,774 6,703 37,491 5,586
Add: Amortization of intangible assets
9,161 18 1,262 50 236 10,727 1,599
Add: Settlement of U.S. federal class action lawsuit⁽²⁾
— — — — 1,679 1,679 250

Adjusted EBITA
136,167 (1,158 ) (15,796 ) (5,971 ) (6,261 ) 106,981 15,941

Adjusted EBITA margin
42 % (5) % (66) % (128) % 28 %
       Total revenue increased by 33%, from RMB76,204 million in fiscal year 2015 to RMB101,143 million (US$15,686 million) in fiscal year 2016. The increase was mainly driven by the continued rapid growth of our China commerce retail business.

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~~China Commerce~~

Year ended March 31,

2015 2016

RMB RMB US$ % Change

(in millions, except percentages)

Revenue

China commerce retail business

Online marketing services
37,509 52,396 8,126 40%
Commission
21,201 25,829 4,006 22%
Others⁽¹⁾
1,022 1,808 280 77%

59,732 80,033 12,412 34%
China commerce wholesale business
3,205 4,288 665 34%

Total
62,937 84,321 13,077 34%

Year ended March 31, 2018

Core
commerce Cloud
computing Digital media
and
entertainment Innovation
initiatives
and others Unallocated⁽¹⁾ Consolidated

RMB RMB RMB RMB RMB RMB

(in millions, except percentages)

Revenue
214,020 13,390 19,564 3,292 — 250,266
Income (loss) from operations
102,743 (3,085 ) (14,140 ) (6,901 ) (9,303 ) 69,314
Add: Share-based compensation expense
8,466 2,274 2,142 3,707 3,486 20,075
Add: Amortization of intangible assets
2,891 12 3,693 198 326 7,120
Add: Impairment of goodwill
— — — — 494 494

Adjusted EBITA
114,100 (799 ) (8,305 ) (2,996 ) (4,997 ) 97,003

Adjusted EBITA margin
53 % (6 )% (42 )% (91 )% 39 %

Year ended March 31, 2017

Core
commerce Cloud
computing Digital media
and
entertainment Innovation
initiatives and
others Unallocated⁽¹⁾ Consolidated

RMB RMB RMB RMB RMB RMB

(in millions, except percentages)

Revenue
133,880 6,663 14,733 2,997 — 158,273
Income (loss) from operations
74,180 (1,681 ) (9,882 ) (6,798 ) (7,764 ) 48,055
Add: Share-based compensation expense
5,994 1,201 1,454 3,017 4,329 15,995
Add: Amortization of intangible assets
2,258 4 1,886 656 318 5,122

Adjusted EBITA
82,432 (476 ) (6,542 ) (3,125 ) (3,117 ) 69,172

Adjusted EBITA margin
62 % (7 )% (44 )% (104 )% 44 %
(1)
~~Primarily consists~~Unallocated expenses are primarily related to corporate administrative costs and other miscellaneous items that are not allocated to individual segments.

(2)
For a description of ~~storefront fees.~~the relevant federal class action lawsuit and settlement, see "Item 8. Financial Information — A. Consolidated Statements and Other Financial Information — Legal and Administrative Proceedings."

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Comparison of Fiscal Years 2018 and 2019
Revenue

Year ended March 31,

2018 2019

RMB RMB US$ �� % Change

(in millions, except percentages)

Core commerce:

China commerce retail
176,559 247,615 36,896 40 %
China commerce wholesale
7,164 9,988 1,488 39 %
International commerce retail
14,216 19,558 2,914 38 %
International commerce wholesale
6,625 8,167 1,217 23 %
Cainiao logistics services
6,759 14,885 2,218 120 %
Local consumer services
— 18,058 2,691 N/A
Others
2,697 5,129 764 90 %

Total core commerce
214,020 323,400 48,188 51 %
Cloud computing
13,390 24,702 3,681 84 %
Digital media and entertainment
19,564 24,077 3,588 23 %
Innovation initiatives and others
3,292 4,665 695 42 %

Total revenue
250,266 376,844 56,152 51 %

Total revenue increased by 51% from RMB250,266 million in fiscal year 2018 to RMB376,844 million (US$56,152 million) in fiscal year 2019. The increase was mainly driven by the robust revenue growth of our China commerce retail business, the consolidation of newly acquired businesses, mainly Ele.me, as well as the strong revenue growth of Alibaba Cloud.
Core commerce segment
China commerce retail

Year ended March 31,

2018 2019

RMB RMB US$ % Change

(in millions, except percentages)

Revenue

China commerce retail business

Customer management
114,285 145,684 21,708 27 %
Commission
46,525 61,847 9,215 33 %
Others
15,749 40,084 5,973 155 %

Total
176,559 247,615 36,896 40 %

Revenue from our China commerce retail business ~~increased by 34% from RMB59,732~~in fiscal year 2019 was RMB247,615 million (US$36,896 million), an increase of 40% compared to RMB176,559 million in fiscal year ~~2015~~2018. Revenue from our China retail marketplaces continued to ~~RMB80,033 million (US$12,412 million) in fiscal year 2016.~~
       ~~Revenue growth during this period reflected~~see strong growth. Combined customer management and commission revenues grew 29% year-over-year, which represents an increase of 27% in ~~GMV transacted on these marketplaces~~customer management revenue and an increase of 33% in commission revenue. The growth of customer management revenue was primarily the result of increases in the monetization rate. GMV transacted on Taobao Marketplace increased by 18% from RMB1,597 billion in fiscal year 2015 to RMB1,877 billion (US$295 billion) in fiscal year 2016 and GMV transacted on Tmall increased by 43% from RMB847 billion in fiscal year 2015 to RMB1,215 billion (US$190 billion) in fiscal year 2016. The overall increase in total GMV transacted on these marketplaces was primarily driven by a 21% increase in the numbervolume of ~~buyers~~paid clicks and to a lesser extent ~~by a moderate~~an increase in ~~the average level of their spending.~~price per click. The growth inof commission revenue was primarily due to strong 31% year-over-year growth of Tmall physical goods GMV transacted on Tmall in particular was attributable to the increase in the number of buyers making purchases on Tmall, reflecting consumer preferences for branded products and a premium shopping experience and the beneficial impact of promotional events, and increases in the average level of spending of buyers. Our monetization rate during this period increased from 2.44%(excluding unpaid orders). "Others" revenue in fiscal year ~~2015~~2019 was RMB40,084 million (US$5,973 million), a significant increase compared to ~~2.59% in fiscal year 2016, mainly as a result of the accelerated growth of our online marketing services revenue.~~
       ~~Online marketing services revenue increased by 40% from RMB37,509~~RMB15,749 million in fiscal year ~~2015 to RMB52,396 million (US$8,126 million) in fiscal year 2016. The growth was~~2018, primarily driven by our focus on high-quality merchants and on delivering a broader value proposition to our merchants. This resulted in higher marketing spend by our merchants as we optimized online marketing efficiency and added new online marketing inventory on both mobile and PC interfaces, leading to a 44% increase in the number of clicks attributable to our P4P marketing services, and a 1% increase in the cost-per-click paid by our merchants. To a lesser extent, our online marketing services revenue during this period was also positively impacted by an increase in the CPM of our display marketing services, partially offset by a decrease in the number of impressions displayed.
       ~~Commission revenue increased by 22%~~contributions from RMB21,201 million in fiscal year 2015 to RMB25,829 million (US$4,006 million) in fiscal year 2016. The lower year-over-year commission revenue growth relative to the 43% increase in GMV transacted on Tmall during the same period was mainly a result of (i) suspension of our online lottery business on Taobao Marketplace (which had a higher monetization rate than our overall monetization rate) in late February 2015 in response to regulatory requirements, (ii) a decrease in the pricing charged on Juhuasuan as an investment to acquire more high-quality merchants and (iii) impact from changes in category mix. Excluding the effect of the online lottery business, our revenue would have increased by 31% in fiscal year 2016 from fiscal year 2015. Due to the ongoing shift of user engagement toward mobile devices, categories such as virtual goods on which we charge a lower commission rate, are seeing higher growth than other categories. As a result of the above, commission revenue increased at a lower rate than the Tmall GMV.
       Mobile revenue from our China commerce retail business increased by 182% from RMB17,840 million in fiscal year 2015 to RMB50,337 million in fiscal year 2016, representing 63% of our China commerce retail business

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direct sale businesses, including Tmall Direct Import and Freshippo. We expect that the proportion of revenue ~~in fiscal year 2016, compared~~of our direct sales businesses will continue to ~~30% in fiscal year 2015. The~~ increase ~~in mobile revenue from~~as we further implement our New Retail strategy.
China commerce retail business was primarily due to an increase in GMV generated and better monetization of traffic on mobile devices. Mobile monetization rate improved to 2.51% in fiscal year 2016 from 1.79% in fiscal year 2015.wholesale
Revenue from our China commerce wholesale business ~~increased by 34% from RMB3,205~~in fiscal year 2019 was RMB9,988 million (US$1,488 million), an increase of 39% compared to RMB7,164 million in fiscal year ~~2015 to RMB4,288 million (US$665 million) in fiscal year 2016.~~2018. The increase ~~in revenue~~ was primarily due to an increase in average revenue from paying members ~~and an increase in paying members.~~on 1688.com, our domestic wholesale marketplace.
International ~~Commerce~~commerce retail

Year ended March 31,

2015 2016

RMB RMB US$ % Change

(in millions, except percentages)

Revenue

International commerce retail business
1,768 2,204 342 25%
International commerce wholesale business
4,718 5,425 841 15%

Total
6,486 7,629 1,183 18%

Revenue from our international commerce retail business ~~increased by 25% from RMB1,768~~in fiscal year 2019 was RMB19,558 million (US$2,914 million), an increase of 38% compared to RMB14,216 million in fiscal year ~~2015 to RMB2,204 million (US$342 million) in fiscal year 2016.~~2018. The ~~main reason for this~~ increase was primarily due to an increase in ~~GMV transacted on AliExpress, primarily due to the increasing number~~revenue from Lazada, our consolidation of ~~consumers, particularly~~Trendyol, Turkey's leading e-commerce platform, as well as an increase in ~~Russia, Spain, the United States and France.~~revenue from AliExpress.
International commerce wholesale
Revenue from our international commerce wholesale business ~~increased by 15% from RMB4,718~~in fiscal year 2019 was RMB8,167 million (US$1,217 million), an increase of 23% compared to RMB6,625 million in fiscal year ~~2015,~~2018. The increase was primarily due to increases in average revenue from paying members and the number of paying members on Alibaba.com, our global wholesale marketplace.
Cainiao logistics services
Revenue from Cainiao logistics services, which ~~69% was~~represents revenue from ~~membership fees~~domestic and ~~online marketing~~international one-stop-shop logistics services and ~~31%~~supply chain management solutions provided by Cainiao Network, after elimination of inter-company transactions, was ~~from value-added services, to RMB5,425~~RMB14,885 million (US$~~841~~2,218 million) in fiscal year ~~2016,~~2019, an increase of 120% compared to RMB6,759 million in fiscal year 2018. The increase mainly reflected the full year effect of consolidation of Cainiao in fiscal year 2019. We started to consolidate Cainiao Network in mid-October 2017.
Local consumer services
Revenue from local consumer services, which ~~67% was~~primarily represents platform commissions, fees from ~~membership fees and online marketing~~provision of delivery services and ~~33% was from value-added services. The increase in revenue was due to growth in revenue generated by the import/export related~~other services provided by ~~One Touch~~our on-demand delivery and local services platform Ele.me, was RMB18,058 million (US$2,691 million). We started to ~~a lesser extent, an increase~~consolidate Ele.me in ~~online marketing service revenue from China wholesale suppliers.~~May 2018 and Koubei in December 2018.
Cloud ~~Computing Business~~computing segment
Revenue from our cloud computing business in fiscal year ~~2016~~2019 was ~~RMB3,019~~RMB24,702 million (US$~~468~~3,681 million), an increase of ~~138%~~84% compared to ~~RMB1,271~~RMB13,390 million in fiscal year ~~2015,~~2018, primarily driven by ~~the continued growth~~an increase in average spending per customer.
Digital media and entertainment segment
Revenue from our digital media and entertainment business in fiscal year 2019 was RMB24,077 million (US$3,588 million), an increase of ~~our cloud computing business.~~23% compared to RMB19,564 million in fiscal year 2018. The ~~growth~~increase was primarily due to an increase in ~~the number of paying customers~~revenue from mobile value-added services provided by UCWeb, such as mobile search and ~~also to~~game publishing, and an increase in ~~their usage of and spending on our cloud computing services including more complex offerings, such as our content delivery network and database services.~~subscription revenue from Youku.
~~Other Revenue~~Innovation initiatives and others segment
       ~~Other revenue~~Revenue from innovation initiatives and others in fiscal year ~~2016~~2019 was ~~RMB6,174~~RMB4,665 million (US$~~958~~695 million), an increase of ~~12%~~42% compared to ~~RMB5,510~~RMB3,292 million in fiscal year ~~2015. This result included the effect of~~2018. The increase was mainly due to an increase in revenue from ~~mobile Internet services provided by UCWeb,~~Tmall Genie and revenue from AutoNavi, over-the-top TV services and YunOS and a decrease in revenue related to the SME loan business that we transferred to Ant Financial Services in February 2015. Revenue from mobile Internet services, AutoNavi, over-the-top TV services and YunOS increased by 86% year-over-year.Amap.

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Cost of Revenue

Year ended March 31,
Year ended March 31,

2015 2016
2018 2019

RMB RMB US$ % Change RMB RMB US$ % Change

(in millions, except percentages)
(in millions, except percentages)

Cost of revenue
23,834 34,355 5,328 44 % 107,044 206,929 30,833 93 %
Percentage of revenue
31 % 34 % 43 % 55 %
Shared-based compensation expense included in cost of revenue

4,176
4,003
621
(4
)%
Share-based compensation expense included in cost of revenue
5,505 8,915 1,328 62 %
Percentage of revenue
5 % 4 % 2 % 2 %
Cost of revenue excluding share-based compensation expense

19,658
30,352
4,707
54
% 101,539 198,014 29,505 95 %
Percentage of revenue
26 % 30 % 41 % 53 %
Our cost of revenue increased by ~~44%~~93% from ~~RMB23,834~~RMB107,044 million in fiscal year ~~2015~~2018 to ~~RMB34,355~~RMB206,929 million (US$~~5,328~~30,833 million) in fiscal year ~~2016. This~~2019. The increase was primarily due to an increase of ~~RMB2,278~~RMB34,347 million ~~(US$353 million)~~in logistic costs related to the on-demand delivery service provided by Ele.me and the fulfillment services provided by Cainiao Network, an increase of RMB24,411 million in cost of inventory in relation to our New Retail businesses and Lazada, an increase of RMB10,416 million in bandwidth and co-location fees and depreciation expenses as a result of our investments in our cloud computing ~~business~~ and ~~our data platform, increases of RMB2,146 million (US$333 million) in costs associated with our new~~core commerce business initiatives (mainly our mobile operating system, over-the-top TV services and entertainment), an increase of RMB1,865 million (US$289 million) in traffic acquisition costs as a result of the expansion of our third-party affiliate marketing ecosystem and an increase of ~~RMB1,564~~RMB8,534 million ~~(US$243 million)~~ in ~~logistics~~content acquisition costs mainly relating to fulfillment services provided to us by our affiliate Cainiao Network, which amounted to RMB2,370 million (US$368 million), or 2% of our revenue, in fiscal year 2016, primarily related to Tmall Supermarket.for online media properties. Without the effect of share-based compensation expense, cost of revenue as a percentage of revenue would have increased from ~~26%~~41% in fiscal year ~~2015~~2018 to ~~30%~~53% in fiscal year ~~2016,~~2019. This increase was primarily due to ~~increase in costs associated with~~ our ~~new business initiatives~~consolidation of newly acquired businesses, mainly Ele.me and Cainiao, as well as an increase inof the cost of inventory and logistics ~~costs, as discussed above.~~from our New Retail and direct sale businesses. As we continue to invest in ~~new and acquired businesses, customer service initiatives~~New Retail, globalization, user acquisition, user experience and infrastructure, we expect our cost of revenue will increase in absolute dollar amounts and will likely increase as a percentage of ~~revenues.~~revenue.
Product Development Expenses

Year ended March 31,
Year ended March 31,

2015 2016
2018 2019

RMB RMB US$ % Change RMB RMB US$ % Change

(in millions, except percentages)
(in millions, except percentages)

Product of development expenses
10,658 13,788 2,138 29 %
Product development expenses
22,754 37,435 5,578 65 %
Percentage of revenue
14 % 14 % 9 % 10 %
Shared-based compensation expense included in product development expenses

3,876
5,703
885
47
%
Share-based compensation expense included in product development expenses
7,374 15,378 2,291 109 %
Percentage of revenue
5 % 6 % 3 % 4 %
Product development expenses excluding share-based compensation expense

6,782
8,085
1,253
19
% 15,380 22,057 3,287 43 %
Percentage of revenue
9 % 8 % 6 % 6 %
Our product development expenses increased by ~~29%~~65% from ~~RMB10,658~~RMB22,754 million in fiscal year ~~2015~~2018 to ~~RMB13,788~~RMB37,435 million (US$~~2,138~~5,578 million) in fiscal year ~~2016.~~2019. The increase was ~~largely~~primarily due to an increase ~~of RMB3,114 million (US$483 million)~~ in payroll and benefits expenses, including share-based compensation expense (an effect that we expect will continue, as discussed in "Share-based Compensation" above), partially offset by a decrease in the royalty fee paid to Yahoo, which terminated by contract upon the completion of our initial public

~~Table of Contents~~
~~offering in September 2014.~~expense. Without the effect of share-based compensation expense, product development expenses as a percentage of revenue would have ~~decreased from 9%~~remained stable at 6% in fiscal year ~~2015 to 8% in fiscal year 2016 due to a decrease in royalty fees paid to Yahoo.~~2019 and 2018. We expect our product development expenses will increase in absolute amounts and may ~~over time~~ increase as a percentage of ~~revenues.~~revenue, as we increase our investments in technology, research and development.

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Sales and Marketing Expenses

Year ended March 31,
Year ended March 31,

2015 2016
2018 2019

RMB RMB US$ % Change RMB RMB US$ % Change

(in millions, except percentages)
(in millions, except
percentages)

Sales and marketing expenses
8,513 11,307 1,753 33 % 27,299 39,780 5,928 46 %
Percentage of revenue
11 % 11 % 11 % 11 %
Shared-based compensation expense included in sales and marketing expenses

1,235
1,963
304
59
%
Share-based compensation expense included in sales and marketing expenses
2,037 4,411 657 117 %
Percentage of revenue
2 % 2 % 1 % 2 %
Sales and marketing expenses excluding share-based compensation expense

7,278
9,344
1,449
28
% 25,262 35,369 5,271 40 %
Percentage of revenue
9 % 9 % 10 % 9 %
Our sales and marketing expenses increased by ~~33%~~46% from ~~RMB8,513~~RMB27,299 million in fiscal year ~~2015~~2018 to ~~RMB11,307~~RMB39,780 million (US$~~1,753~~5,928 million) in fiscal year ~~2016.~~2019. The increase was ~~due~~ primarily to an increase in advertising and promotional spending mainly focused on strengthening consumer connection to our Taobao and Tmall brands, especially in top tier cities, as well as to promote our new businesses initiatives, such as Alitrip and DingTalk, during fiscal year 2016. The increase was also due to an increase in ~~share-based compensation expense (an effect~~marketing and promotional spending for user acquisition that ~~we expect will continue, as discussed~~led to the significant increase in ~~"Share-based Compensation" above).~~annual active consumers and MAUs in fiscal year 2019. Without the effect of share-based compensation expense, sales and marketing expenses as a percentage of revenue would have ~~remained stable at~~decreased from 10% in fiscal year 2018 to 9% in ~~both~~ fiscal year ~~2015 and fiscal year 2016.~~2019. We expect our sales and marketing expenses will increase in absolute amounts and may increase as a percentage of ~~revenues~~revenue as we continue to invest in marketing and promotion.
General and Administrative Expenses

Year ended March 31,
Year ended March 31,

2015 2016
2018 2019

RMB RMB US$ % Change RMB RMB US$ % Change

(in millions, except percentages)
(in millions, except
percentages)

General and administrative expenses
7,800 9,205 1,428 18 % 16,241 24,889 3,708 53 %
Percentage of revenue
10 % 9 % 6 % 6 %
Shared-based compensation expense included in general and administrative expenses

3,741
4,413
684
18
%
Share-based compensation expense included in general and administrative expenses
5,159 8,787 1,310 70 %
Percentage of revenue
5 % 4 % 2 % 2 %
General and administrative excluding share-based compensation expense

4,059
4,792
744
18
% 11,082 16,102 2,398 45 %
Percentage of revenue
5 % 5 % 4 % 4 %
Our general and administrative expenses increased by ~~18%~~53% from ~~RMB7,800~~RMB16,241 million in fiscal year ~~2015~~2018 to ~~RMB9,205~~RMB24,889 million (US$~~1,428~~3,708 million) in fiscal year ~~2016.~~2019. The increase was primarily due to ~~a significant~~an increase in payroll and benefits expenses, including share-based compensation, ~~expense (an effect that we expect will continue, as discussed in "Share-based Compensation" above),~~ as well as ~~an increase~~settlement of ~~RMB353 million (US$55 million) in professional services fees.~~

~~Table~~a U.S. federal class action lawsuit of ~~Contents~~
US$250 million. Without the effect of share-based compensation expense, general and administrative expenses as a percentage of revenue ~~in fiscal year 2016~~ would have remained stable at 5%4% in ~~both~~ fiscal year ~~2015~~2019 and ~~fiscal year 2016.~~2018.

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Amortization of Intangible Assets

Year ended March 31,
Year ended March 31,

2015 2016
2018 2019

RMB RMB US$ % Change RMB RMB US$ % Change

(in millions, except percentages)
(in millions, except
percentages)

Amortization of intangible assets
2,089 2,931 455 40 % 7,120 10,727 1,599 51 %
Percentage of revenue
3 % 3 % 3 % 3 %
Amortization of intangible assets increased by ~~40%~~51% from ~~RMB2,089~~RMB7,120 million in fiscal year ~~2015~~2018 to ~~RMB2,931~~RMB10,727 million (US$~~455~~1,599 million) in fiscal year ~~2016.~~2019. This increase was due to an increase in amortization of intangible assets ~~recognized arising~~acquired from ~~our strategic acquisitions~~business combinations of Ele.me and ~~investments. Because of the recent major acquisitions~~Koubei. As we ~~will~~ consolidate ~~such as Youku Tudou and our controlling stake in Lazada,~~newly acquired businesses, we expect that our amortization of intangible assets will increase in the future.
Income from Operations and Operating Margin

Year ended March 31,
Year ended March 31,

2015 2016
2018 2019

RMB RMB US$ % Change RMB RMB US$ % Change

(in millions, except percentages)
(in millions, except
percentages)

Income from operations
23,135 29,102 4,513 26 % 69,314 57,084 8,506 (18 )%
Percentage of revenue
30 % 29 % 28 % 15 %
Share-based compensation expense included in income from operations
20,075 37,491 5,586 87 %
Percentage of revenue
8 % 10 %
Settlement of U.S. federal class action lawsuit⁽¹⁾
— 1,679 250 N/A
Percentage of revenue
— 0 %
Income from operations excluding share-based compensation expense and settlement of U.S. federal class action lawsuit⁽¹⁾
89,389 96,254 14,342 8 %
Percentage of revenue
36 % 25 %
(1)
For a description of the relevant federal class action lawsuit and settlement, see "Item 8. Financial Information — A. Consolidated Statements and Other Financial Information — Legal and Administrative Proceedings."
Our income from operations ~~increased~~decreased by ~~26%~~18% from ~~RMB23,135~~RMB69,314 million, or ~~30%~~28% of revenue, in fiscal year ~~2015~~2018 to ~~RMB29,102~~RMB57,084 million (US$~~4,513~~8,506 million), or ~~29%~~15% of revenue, in fiscal year ~~2016.~~2019. The decrease was primarily due to an increase in share-based compensation expense and settlement of a U.S. federal class action lawsuit of US$250 million. Without the effect of share-based compensation expense and settlement of the U.S. federal class action lawsuit, our ~~operating~~income from operations would have increased by 8% from RMB89,389 million in fiscal year 2018 to RMB96,254 million (US$14,342 million) in fiscal year 2019.

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Adjusted EBITA and adjusted EBITA margin
Adjusted EBITA and adjusted EBITA margin by segments are set forth in the table below. See the section entitled "— Segment Information for Fiscal Years 2017, 2018 and 2019" above for a reconciliation of income from operations to adjusted EBITA.

Year ended March 31,

2018 2019

RMB % of Segment
Revenue RMB % of Segment
Revenue

(in millions, except percentages)

Core commerce
114,100 53 % 136,167 42 %
Cloud computing
(799 ) (6 )% (1,158 ) (5 )%
Digital media and entertainment
(8,305 ) (42 )% (15,796 ) (66 )%
Innovation initiatives and others
(2,996 ) (91 )% (5,971 ) (128 )%
Core commerce segment
Adjusted EBITA increased by 19% to RMB136,167 million (US$20,290 million) in fiscal year 2019, compared to RMB114,100 million in fiscal year 2018. Marketplace-based core commerce adjusted EBITA increased by 31% year-over-year to RMB161,589 million (US$24,078 million). Adjusted EBITA margin decreased to 42% in fiscal year 2019 from 53% in fiscal year 2018 due to strategic investments, primarily including aggressive investment in local consumer services and gradual revenue mix shift towards self-operated New Retail and direct sale businesses, where revenue is recorded on a gross basis including the cost of inventory. We expect that our core commerce adjusted EBITA margin will continue to be affected by the pace of our investments in new businesses and revenue mix shift to self-operated New Retail and direct sale businesses.
Cloud computing segment
Adjusted EBITA in fiscal year 2019 was a loss of RMB1,158 million (US$172 million), compared to a loss of RMB799 million in fiscal year 2018. Adjusted EBITA margin improved to negative 5% in fiscal year 2019 from negative 6% in fiscal year 2018.
Digital media and entertainment segment
Adjusted EBITA in fiscal year 2019 was a loss of RMB15,796 million (US$2,354 million), compared to a loss of RMB8,305 million in fiscal year 2018. Adjusted EBITA margin decreased to negative 66% in fiscal year 2019 from negative 42% in fiscal year 2018, primarily due to our continued investments in licensing rights and the production of original content and an increase in impairment charges on licensed copyrights.
Innovation initiatives and others segment
Adjusted EBITA in fiscal year 2019 was a loss of RMB5,971 million (US$890 million), compared to a loss of RMB2,996 million in fiscal year 2018. Adjusted EBITA margin was negative 128% in fiscal year 2019, as compared to negative 91% in fiscal year 2018. The increase in adjusted EBITA loss was primarily ~~attributable~~due to investments in new business initiatives, ~~such as~~including Tmall Genie and our ~~mobile operating systems, over-the-top TV services~~investments in technological research and ~~entertainment, and also to an increase in logistics costs, as discussed above.~~innovation.
Interest and Investment Income, Net
Our ~~net~~ interest and investment income, net, increased ~~significantly~~ from ~~RMB9,455~~RMB30,495 million in fiscal year ~~2015~~2018 to ~~RMB52,254~~RMB44,106 million (US$~~8,104~~6,572 million) in fiscal year ~~2016. The increase was primarily due to a~~2019, which mainly included non-cash ~~deemed disposal gain~~gains of ~~RMB24,734~~RMB21,990 million (US$~~3,836~~3,277 million) ~~arising from the deconsolidation of Alibaba Pictures, a non-cash gain of RMB18,603~~and RMB5,825 million (US$~~2,885~~868 million) arising from the revaluation of our previously held equity interest in Koubei and Alibaba ~~Health~~Pictures when we obtained control ~~over Alibaba Health~~ in ~~fiscal year 2016,~~December 2018 and March 2019, respectively, as well as net gains arising from ~~disposals~~change in fair value of certain ~~investments~~equity investments. These gains were

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partly offset by impairment charges of RMB10,867 million (US$1,619 million) on certain investments. The above-mentioned gains and ~~businesses. See note 4 to~~impairment charges were excluded from our ~~consolidated financial statements for the years ended March 31, 2014, 2015 and 2016 included elsewhere in this annual report for further information.~~non-GAAP net income.
Interest Expense
Our interest expense ~~decreased~~increased by ~~29%~~46% from ~~RMB2,750~~RMB3,566 million in fiscal year ~~2015~~2018 to ~~RMB1,946~~RMB5,190 million (US$~~301~~773 million) in fiscal year ~~2016. Interest~~2019. The increase in interest expense was primarily due to an increase in average debt outstanding in fiscal year ~~2015 included~~2019 as compared to fiscal year 2018, reflecting primarily an ~~one-time charge for financing-related fees~~additional US$7.0 billion of ~~RMB830 million as a result of the early repayment of our US$8.0 billion bank borrowings with proceeds from our issuance of US$8.0 billion~~unsecured senior ~~unsecured notes.~~notes issued in December 2017.
Other Income, Net
Our other income, net decreased by ~~17%~~95% from ~~RMB2,486~~RMB4,160 million in fiscal year ~~2015~~2018 to ~~RMB2,058~~RMB221 million (US$~~319~~32 million) in fiscal year ~~2016.~~2019. The decrease was primarily due to a decrease in income recognized in respect of royalty fees and software technology services fees from Ant Financial, ~~Services,~~ which ~~were RMB1,122~~was RMB517 million

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~~(US$174~~ (US$77 million) in fiscal year ~~2016,~~2019, compared to ~~RMB1,667~~RMB3,444 million in fiscal year ~~2015. Such decrease in income recognized primarily resulted from increased marketing and promotion activities of~~2018 as Ant Financial ~~Services~~continued its strategic investments to ~~drive~~expand its user ~~growth and engagement, causing a decrease in its consolidated pre-tax income.~~base significantly.
Income Tax Expenses
Our income tax expenses ~~increased~~decreased by ~~32%~~9% from ~~RMB6,416~~RMB18,199 million in fiscal year ~~2015~~2018 to ~~RMB8,449~~RMB16,553 million (US$~~1,310~~2,466 million) in fiscal year ~~2016. The increase in income tax expenses was primarily due to the increase in taxable income from our operations in China.~~2019. Our effective tax rate decreased to ~~10%~~17% in fiscal year ~~2016~~2019 from ~~20%~~18% in fiscal year ~~2015, primarily due to the non-cash gains relating to the deconsolidation~~2018. Excluding share-based compensation expense, investment gain/loss and impairment of Alibaba Pictures and consolidation of Alibaba Health, as discussed in "Interest and Investment Income, Net" above, which are not taxable for income tax purposes. Excluding the above gains and other non-taxable or non-deductible items,investments, our effective tax rate ~~remains stable.~~would have remained at 17% in fiscal year 2019, as compared to 18% in fiscal year 2018.
Share of Results of Equity Investees
Share of ~~losses~~results of equity investees in fiscal year ~~2016~~2019 was ~~RMB1,730~~a profit of RMB566 million (US$~~269~~84 million), ~~an increase of 9%~~ compared to ~~RMB1,590~~a loss of RMB20,792 million in fiscal year ~~2015.~~ 2018. As previously disclosed, the loss in fiscal year 2018 was primarily due to an impairment loss of RMB18,116 million with respect to Alibaba Pictures. The increase in share of profit of other equity investees in fiscal year 2019, compared to fiscal year 2018, was primarily due to an increase in our share of profit in Suning. We record our share of results of equity investees one quarter in arrears.
Share of results of equity ~~investee~~investees in fiscal ~~year 2016~~years 2018 and 2019 consisted of the following:

Year ended March 31, Year ended March 31,

2015 2016 2018 2019

RMB RMB US$ RMB RMB US$

(in millions)
(in millions)

Share of results of equity investees:

Share of (loss) profit of equity investees:

Koubei(1)
— (867 ) (135 ) (1,340 ) — —
Youku Tudou
(99 ) (391 ) (61 )
Cainiao Network
(90 ) (295 ) (46 )
Cainiao Network⁽²⁾
(518 ) — —
Others
(275 ) 62 10 1,040 2,997 446
Dilution gains
— 827 128
Impairment
(438 ) — —
Others
(688 ) (1,066 ) (165 )
Impairment loss
(18,153 ) (493 ) (73 )
Dilution loss
(128 ) (185 ) (28 )
Others⁽³⁾
(1,693 ) (1,753 ) (261 )

(1,590 ) (1,730 ) (269 ) (20,792 ) 566 84

       ~~The increase~~
(1)
We started to consolidate Koubei in ~~share~~December 2018 after obtaining control over Koubei.

(2)
We started to consolidate Cainiao Network in mid-October 2017 after obtaining control over Cainiao Network.

(3)
Others mainly include amortization of ~~losses~~intangible assets of equity investees ~~in fiscal year 2016 compared to fiscal year 2015 was primarily due to our share~~and share-based compensation expense.

Table of losses of Koubei, Youku Tudou and Cainiao Network, partially offset by accounting gains related to dilution of our ownership interest in Cainiao Network and Evergrande FC, as these investees each raised capital at a higher valuation in fiscal year 2016. We established Koubei as a joint venture with Ant Financial Services in September 2015. Our share of Koubei's loss in fiscal year 2016 represents Koubei's high investments and promotional spending during its start-up stage. We expect such share of loss to decrease in the future.Contents
Net Income
As a result of the foregoing, our net income increased by ~~193%~~31% from ~~RMB24,320~~RMB61,412 million in fiscal year ~~2015~~2018 to ~~RMB71,289~~RMB80,234 million (US$~~11,056~~11,955 million) in fiscal year ~~2016.~~

~~Table of Contents~~2019.
Comparison of Fiscal Years ~~2014~~2017 and ~~2015~~2018
Revenue

Year ended
March 31,
Year ended
March 31,

2014 2015
2017 2018

RMB RMB % Change RMB RMB % Change

(in millions, except percentages)
(in millions, except percentages)

China commerce
45,132 62,937 39 %
International commerce
4,851 6,486 34 %
Core commerce:

China commerce retail
114,109 176,559 55 %
China commerce wholesale
5,679 7,164 26 %
International commerce retail
7,336 14,216 94 %
International commerce wholesale
6,001 6,625 10 %
Cainiao logistics services
— 6,759 N/A
Others
755 2,697 257 %

Total core commerce
133,880 214,020 60 %
Cloud computing
773 1,271 64 % 6,663 13,390 101 %
Others
1,748 5,510 215 %
Digital media and entertainment
14,733 19,564 33 %
Innovation initiatives and others
2,997 3,292 10 %

Total revenue
52,504 76,204 45 % 158,273 250,266 58 %

Total revenue increased by ~~45%,~~58% from ~~RMB52,504~~RMB158,273 million in fiscal year ~~2014~~2017 to ~~RMB76,204~~RMB250,266 million in fiscal year ~~2015.~~2018. The increase was mainly driven by the continued rapid growth of our China and international commerce retail ~~business. Our revenue growth rate will likely decline~~businesses, Alibaba Cloud as ~~our revenue grows to higher levels.~~well as the consolidation of newly acquired businesses, mainly Cainiao Network and Intime.
Core commerce segment
China ~~Commerce~~commerce retail

Year ended
March 31,

2014 2015

RMB RMB % Change

(in millions, except percentages)

Revenue

China commerce retail business

Online marketing services
29,729 37,509 26 %
Commission
12,023 21,201 76 %
Others⁽¹⁾
1,080 1,022 (5 )%

42,832 59,732 39 %
China commerce wholesale business
2,300 3,205 39 %

Total
45,132 62,937 39 %

~~(1)~~
~~Primarily consists of storefront fees.~~

Year ended
March 31,

2017 2018

RMB RMB % Change

(in millions, except percentages)

Revenue

China commerce retail business

Customer management
77,530 114,285 47 %
Commission
34,066 46,525 37 %
Others
2,513 15,749 527 %

Total
114,109 176,559 55 %

Revenue from our China commerce retail business increased by ~~39%~~55% from ~~RMB42,832~~RMB114,109 million in fiscal year ~~2014~~2017 to ~~RMB59,732~~RMB176,559 million in fiscal year ~~2015.~~
       ~~Revenue~~2018. The robust revenue growth ~~during this period~~ reflected ~~an increase~~the growth of ~~46% in GMV transacted on these~~our New Retail initiatives, including the Freshippo fresh food grocery business, the import business and Intime. In addition, revenue from our China retail marketplaces ~~including a 36% increase in GMV transacted on Taobao Marketplace from RMB1,173 billion in fiscal year 2014~~continued to ~~RMB1,597 billion in fiscal year 2015 and a 68% increase in GMV transacted on Tmall from RMB505 billion in fiscal year 2014 to RMB847 billion in fiscal year 2015.~~see strong growth. The ~~overall increase in total GMV transacted on these marketplaces~~growth was primarily driven by the robust growth of customer management revenue, which increased by 47% from RMB77,530 million in fiscal year 2017 to RMB114,285 million in fiscal year 2018. The growth reflected our ability to deliver more relevant content to consumers through our improved data technology, which enabled merchants, brands and retailers to more effectively attract, engage, acquire and retain their customers.

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These value propositions resulted in higher spending on our customer management services by an increasing number of brands and merchants. Commission revenue increased by 37% from RMB34,066 million in fiscal year 2017 to RMB46,525 million in fiscal year 2018, primarily due to the strong growth in physical goods GMV on Tmall. Other revenue was RMB15,749 million in fiscal year 2018, a ~~37%~~significant increase compared to RMB2,513 million in fiscal year 2017, primarily driven by our New Retail businesses, including the consolidation of Intime and contribution from Tmall Global and Freshippo.
China commerce wholesale
Revenue from our China commerce wholesale business increased by 26% from RMB5,679 million in fiscal year 2017 to RMB7,164 million in fiscal year 2018. The increase was due to an increase in average revenue from paying members on our 1688.com platform.
International commerce retail
Revenue from our international commerce retail business increased by 94% from RMB7,336 million in fiscal year 2017 to RMB14,216 million in fiscal year 2018. The increase was primarily due to an increase in revenue generated from Lazada and AliExpress, primarily driven by robust GMV growth on these two marketplaces.
International commerce wholesale
Revenue from our international commerce wholesale business increased by 10% from RMB6,001 million in fiscal year 2017 to RMB6,625 million in fiscal year 2018. The increase was due to an increase in customer management revenue and membership fees.
Cainiao logistics services
Revenue from Cainiao logistics services represents revenue from the domestic and international one-stop-shop logistics services and supply chain management solutions provided by Cainiao Network, after elimination of inter-company transactions. We started to consolidate Cainiao Network in mid-October 2017.
Cloud computing segment
Revenue from our cloud computing business in fiscal year 2018 was RMB13,390 million, an increase of 101% compared to RMB6,663 million in fiscal year 2017, primarily driven by an increase in the number of ~~consumers~~paying customers and ~~to a lesser extent, by a moderate~~also an increase in ~~the average level~~their usage of ~~their spending. The rapid increase in GMV transacted~~and spending on ~~Tmall in particular was attributable to the increase in the number of consumers making purchases on Tmall, reflecting consumer preferences for branded products~~our cloud computing services, including more complex offerings, such as our network virtualization and ~~a premium shopping experience, increases in the average level of spending of consumers~~database services.
Digital media and ~~the beneficial impact of promotional events. Our monetization rate during this period decreased~~entertainment segment
Revenue from ~~2.55%~~our digital media and entertainment business in fiscal year ~~2014~~2018 was RMB19,564 million, an increase of 33% compared to ~~2.44%~~RMB14,733 million in fiscal year ~~2015, mainly~~2017. The increase was primarily due to an increase in revenue from mobile value-added services provided by UCWeb, such as ~~a result~~news feeds and mobile search, and an increase in subscription revenue from Youku.
Innovation initiatives and others segment
Revenue from innovation initiatives and others in fiscal year 2018 was RMB3,292 million, an increase of ~~the higher percentage of total GMV contributed by mobile GMV, which has a lower monetization rate~~10% compared to RMB2,997 million in fiscal year 2017. Starting from fiscal year 2018, we have reclassified Freshippo, previously reported under this segment, as revenue from China commerce retail because Freshippo has moved beyond the ~~non-mobile monetization rate.~~incubation stage.

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       ~~Mobile~~Cost of Revenue

Year ended March 31,

2017 2018

RMB RMB % Change

(in millions, except percentages)

Cost of revenue
59,483 107,044 80 %
Percentage of revenue
38 % 43 %
Share-based compensation expense included in cost of revenue
3,893 5,505 41 %
Percentage of revenue
2 % 2 %
Cost of revenue excluding share-based compensation expense
55,590 101,539 83 %
Percentage of revenue
36 % 41 %
Our cost of revenue increased by 80% from ~~our China commerce retail business in fiscal year 2015 was RMB17,840 million, an increase of 514% compared to RMB2,905~~RMB59,483 million in fiscal year ~~2014, representing 30% of our China commerce retail business revenue~~2017 to RMB107,044 million in fiscal year ~~2015, compared to 7% in fiscal year 2014.~~2018. The increase ~~in mobile revenue from our China commerce retail business~~ was primarily due to an increase ~~in GMV generated on mobile devices and also to an increase in the mobile monetization rate.~~
       ~~Online marketing services revenue increased by 26% from RMB29,729~~of RMB13,439 million in ~~fiscal year 2014 to RMB37,509 million~~cost of inventory in fiscal year 2015, reflecting GMV growth of 46% from RMB1,678 billion in fiscal year 2014 to RMB2,444 billion in fiscal year 2015. The lower growth rate of online marketing services revenue relative to the GMV growth rate reflected the ongoing shift of consumer engagement from personal computers to mobile devices, as we monetize mobile GMV at a lower rate than GMV transacted on personal computer interfaces because merchants allocated a smaller proportion of their budget to purchase online marketing services on mobile relative to the GMV generated on mobile. As a result, mobile GMV accounted for 19% and 41% of total GMV in fiscal years 2014 and 2015, respectively, while mobile revenue accounted for 7% and 30% of China commerce retail business revenue, respectively, during those periods. This lower but increasing level of mobile monetization reflected our focus on prioritizing mobile user activity and engagement over monetization and the fact that we increased our efforts to promote online marketing services for mobile interfaces beginning in the three months ended December 31, 2013. The increase in online marketing services revenue during this period was primarily driven by a 55% increase in the number of clicks attributablerelation to our P4P marketing services. This increase was partially offset by a 21% decrease in the cost-per-click paid by our merchants, as a result of the higher percentage of total clicks generated on mobile devices, which have a lower cost-per-click compared to cost-per-click on personal computers. Our strong momentum in mobileNew Retail businesses and commitment to improving user experience may slow the growth rate of our online marketing services revenue in the near term, but we believe our approach will create significant value for both our users and our business in the longer term. To a lesser extent, our online marketing services revenue during this period was also positively impacted by an increase in the CPM of our display marketing services, which was partially offset by a decrease in the number of impressions displayed.
       Commission revenue increased by 76% from RMB12,023 million in fiscal year 2014 to RMB21,201 million in fiscal year 2015, primarily due to a 68% increase in GMV transacted on Tmall during the same period as well asLazada, an increase of ~~RMB989~~RMB11,796 million in ~~lottery commission income from Taobao marketplace, which was mainly due~~logistics costs relating to significantly higher activity since the World Cup soccer competition in the summer of 2014 before we suspended our lottery business in late February 2015, around the same time as the other major online lottery platforms in China in response to regulatory requirements. The published commission rates we chargefulfillment services provided by category as well as our blended commission rate remained relatively stable over this period, and accordingly, the increase in revenue from commissions during this period was principally a result of increased GMV transacted rather than any change in the pricing of commission rates. As Tmall GMV increased at a higher rate than Taobao Marketplace GMV, commission revenue grew at a faster rate than online marketing services revenue because we charge commissions on Tmall. Commission revenue from transactions on Tmall is generated from both personal computer and mobile transactions, and accordingly the ongoing shift of consumer engagement towards mobile devices did not negatively affect commission revenue from GMV transacted on Tmall.
       Revenue from our China commerce wholesale business increased by 39% from RMB2,300 million in fiscal year 2014 to RMB3,205 million in fiscal year 2015. The increase in revenue was due to an increase in paying members and an increase in average revenue from paying members.

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~~International Commerce~~

Year ended
March 31,

2014 2015

RMB RMB % Change

(in millions, except percentages)

Revenue

International commerce retail business
938 1,768 88 %
International commerce wholesale business
3,913 4,718 21 %

Total
4,851 6,486 34 %

       Revenue from our international commerce retail business increased by 88% from RMB938 million in fiscal year 2014 to RMB1,768 million in fiscal year 2015. The main reason for this increase was an increase in GMV transacted on AliExpress, primarily from the increasing number of buyers, particularly in Russia, Brazil and the United States.
       Revenue from our international commerce wholesale business increased by 21% from RMB3,913 million in fiscal year 2014, of which 88% was from membership fees and value-added services and 12% was from online marketing services, to RMB4,718 million in fiscal year 2015, of which 85% was from membership fees and value-added services and 15% was from online marketing services. The increase in revenue was due to an increase in the number of paying members and an increase in average revenue from paying members.
~~Other revenue~~
       ~~Other revenue in fiscal year 2015 was RMB5,510 million,~~Cainiao Network, an increase of 215% compared to RMB1,748 million in fiscal year 2014. This increase was primarily due to the consolidation of revenue from acquired businesses (mainly UCWeb and AutoNavi) in a total amount of RMB2,489 million, and an increase in interest income generated by the SME loan business before this business was transferred to Ant Financial Services upon the completion of the restructuring of our relationship with Ant Financial Services in early February 2015.
~~Cost of Revenue~~

Year ended
March 31,

2014 2015

RMB RMB % Change

(in millions, except percentages)

Cost of revenue
13,369 23,834 78 %
Percentage of revenue
25 % 31 %
       Our cost of revenue increased by 78% from RMB13,369 million in fiscal year 2014 to RMB23,834 million in fiscal year 2015. This increase was primarily due to increases of RMB4,183 million in payroll and benefits expense mainly resulting from an increase in share-based compensation expense (an effect that we expect will continue, as discussed in "Share-based Compensation" above), an increase of RMB1,653RMB6,111 million in bandwidth and co-location fees and depreciation expenses as a result of ~~our~~ investments in our cloud computing ~~business~~ and ~~our data platform,~~core commerce businesses, an increase of ~~RMB1,487~~RMB4,751 million in ~~payment processing fees resulting from an increase in GMV transacted on our retail marketplaces and an increase of RMB951 million in traffic~~content acquisition costs ~~as a result~~for online media properties. Without the effect of ~~the expansion of our third-party affiliate marketing ecosystem. As we continue to invest in our business, customer service initiatives and infrastructure, we expect our~~share-based compensation expense, cost of revenue ~~will increase in absolute dollar amounts and will likely increase~~ as a percentage of ~~revenues.~~revenue would have increased from 36% in fiscal year 2017 to 41% in fiscal year 2018. This increase was primarily due to an increase in cost of inventory incurred by our New Retail businesses and Lazada, as well as investments in Cainiao Network and our spending in growing user base and improving user experience.
Product Development Expenses

Year ended
March 31,

2017 2018

RMB RMB % Change

(in millions, except percentages)

Product development expenses
17,060 22,754 33 %
Percentage of revenue
11 % 9 %
Share-based compensation expense included in product development expenses
5,712 7,374 29 %
Percentage of revenue
4 % 3 %
Product development expenses excluding share-based compensation expense
11,348 15,380 36 %
Percentage of revenue
7 % 6 %
Our product development expenses increased by 33% from RMB17,060 million in fiscal year 2017 to RMB22,754 million in fiscal year 2018. The increase was largely due to an increase in payroll and benefits expenses, including share-based compensation expense. Without the effect of share-based compensation expense, product development expenses as a percentage of revenue would have decreased from 7% in fiscal year 2017 to 6% in fiscal year 2018, due to operating leverage.

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Sales and Marketing Expenses

Year ended
March 31,

2017 2018

RMB RMB % Change

(in millions, except percentages)

Sales and marketing expenses
16,314 27,299 67 %
Percentage of revenue
10 % 11 %
Share-based compensation expense included in sales and marketing expenses
1,772 2,037 15 %
Percentage of revenue
1 % 1 %
Sales and marketing expenses excluding share-based compensation expense
14,542 25,262 74 %
Percentage of revenue
9 % 10 %
Our sales and marketing expenses increased by 67% from RMB16,314 million in fiscal year 2017 to RMB27,299 million in fiscal year 2018. The increase was due primarily to an increase in marketing and promotional spending for user acquisition that led to the significant increase in annual active consumers and MAUs in fiscal year 2018. Without the effect of share-based compensation expense, sales and marketing expenses as a percentage of revenue would have increased from 9% in fiscal year 2017 to 10% in fiscal year 2018.
General and Administrative Expenses

Year ended
March 31,

2017 2018

RMB RMB % Change

(in millions, except percentages)

General and administrative expenses
12,239 16,241 33 %
Percentage of revenue
8 % 6 %
Share-based compensation expense included in general and administrative expenses
4,618 5,159 12 %
Percentage of revenue
3 % 2 %
General and administrative excluding share-based compensation expense
7,621 11,082 45 %
Percentage of revenue
5 % 4 %
Our general and administrative expenses increased by 33% from RMB12,239 million in fiscal year 2017 to RMB16,241 million in fiscal year 2018. The increase was primarily due to an increase in payroll and benefits expenses, including share-based compensation, as well as an increase in other administrative expenses. Without the effect of share-based compensation expense, general and administrative expenses as a percentage of revenue would have decreased from 5% in fiscal year 2017 to 4% in fiscal year 2018.
Amortization of Intangible Assets

Year ended
March 31,

2017 2018

RMB RMB % Change

(in millions, except
percentages)

Amortization of intangible assets
5,122 7,120 39 %
Percentage of revenue
3 % 3 %

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Amortization of intangible assets increased by 39% from RMB5,122 million in fiscal year 2017 to RMB7,120 million in fiscal year 2018. This increase was due to an increase in intangible assets recognized relating to our strategic acquisitions and investments.
Income from Operations and Operating Margin

Year ended
March 31,

2017 2018

RMB RMB % Change

(in millions, except percentages)

Income from operations
48,055 69,314 44 %
Percentage of revenue
30 % 28 %
Share-based compensation expense included in income from operations
15,995 20,075 26 %
Percentage of revenue
10 % 8 %
Income from operations excluding share-based compensation expense
64,050 89,389 40 %
Percentage of revenue
40 % 36 %
Our income from operations increased by 44% from RMB48,055 million, or 30% of revenue, in fiscal year 2017 to RMB69,314 million, or 28% of revenue, in fiscal year 2018. Without the effect of share-based compensation expense, our operating margin would have decreased from 40% in fiscal year 2017 to 36% in fiscal year 2018, primarily due to our investments in New Retail, the consolidation of Cainiao Network, investments in Lazada and spending in growing our user base and improving user experience.
Adjusted EBITA and adjusted EBITA margin
Adjusted EBITA and adjusted EBITA margin by segments are set forth in the table below. See the section entitled "— Segment Information for Fiscal Years 2017, 2018 and 2019" above for a reconciliation of income from operations to adjusted EBITA.

Year ended March 31,

2017 2018

RMB % of Segment
Revenue RMB % of Segment
Revenue

(in millions, except percentages)

Core commerce
82,432 62 % 114,100 53 %
Cloud computing
(476 ) (7 )% (799 ) (6 )%
Digital media and entertainment
(6,542 ) (44 )% (8,305 ) (42 )%
Innovation initiatives and others
(3,125 ) (104 )% (2,996 ) (91 )%
Core commerce segment
Adjusted EBITA increased by 38% to RMB114,100 million in fiscal year 2018, compared to RMB82,432 million in fiscal year 2017. Adjusted EBITA margin decreased to 53% in fiscal year 2018 from 62% in fiscal year 2017. Core commerce adjusted EBITA margin was lower mainly due to our investments in New Retail, the consolidation of Cainiao Network, investments in Lazada and spending in growing our user base and improving user experience. Excluding New Retail, the consolidation of Cainiao Network and investments in Lazada, adjusted core commerce EBITA margin would have been 63% for fiscal year 2018. Our New Retail businesses primarily include Intime, Freshippo and Tmall Global.

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Cloud computing segment
Adjusted EBITA in fiscal year 2018 was a loss of RMB799 million, compared to a loss of RMB476 million in fiscal year 2017. Adjusted EBITA margin improved to negative 6% in fiscal year 2018 from negative 7% in fiscal year 2017.
Digital media and entertainment segment
Adjusted EBITA in fiscal year 2018 was a loss of RMB8,305 million, compared to a loss of RMB6,542 million in fiscal year 2017. Adjusted EBITA margin improved to negative 42% in fiscal year 2018 from negative 44% in fiscal year 2017, primarily due to improved results from UCWeb and other media and entertainment businesses, partially offset by an increase in content acquisition costs of Youku.
Innovation initiatives and others segment
Adjusted EBITA in fiscal year 2018 was a loss of RMB2,996 million, compared to a loss of RMB3,125 million in fiscal year 2017. Adjusted EBITA margin was negative 91% in fiscal year 2018, as compared to negative 104% in fiscal year 2017.
Interest and Investment Income, Net
Our net interest and investment income increased from RMB8,559 million in fiscal year 2017 to RMB30,495 million in fiscal year 2018. The increase was primarily due to a non-cash gain of RMB22,442 million arising from the revaluation of our previously held equity interest in Cainiao Network when we acquired control over Cainiao Network in mid-October 2017.
Interest Expense
Our interest expense increased by 34% from RMB2,671 million in fiscal year 2017 to RMB3,566 million in fiscal year 2018. The increase in interest expense was primarily due to an increase in average debt outstanding, including an additional US$7.0 billion unsecured senior notes issued in December 2017.
Other Income, Net
Our other income, net decreased by 32% from RMB6,086 million in fiscal year 2017 to RMB4,160 million in fiscal year 2018. The decrease was primarily due to an increase in foreign exchange loss, partly offset by an increase in income recognized in respect of royalty fees and software technology services fees from Ant Financial, which increased from RMB2,086 million in fiscal year 2017 to RMB3,444 million in fiscal year 2018.
Income Tax Expenses
Our income tax expenses increased by 32% from RMB13,776 million in fiscal year 2017 to RMB18,199 million in fiscal year 2018. Our effective tax rate decreased to 18% in fiscal year 2018 from 23% in fiscal year 2017. Income before income tax and share of results of equity investees in fiscal year 2018 included a gain of RMB22,442 million from revaluation of our previously held equity interest in Cainiao Network when we acquired control over Cainiao Network in mid-October 2017, which was non-taxable, leading to a lower effective tax rate in fiscal year 2018. Excluding share-based compensation expense, impairment of goodwill and investments, as well as other unrealized investment gain/loss, our effective tax rate would have remained stable at 18% in fiscal year 2018, compared to fiscal year 2017.

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~~Product Development Expenses~~Share of Results of Equity Investees
Share of results of equity investees in fiscal years 2017 and 2018 consisted of the following:

Year ended March 31,

2017 2018

RMB RMB

(in millions)

Share of (loss) profit of equity investees:

Koubei
(990 ) (1,340 )
Cainiao Network⁽¹⁾
(1,056 ) (518 )
Others
(838 ) 1,040
Impairment loss
(245 ) (18,153 )
Dilution loss
(336 ) (128 )
Others⁽²⁾
(1,562 ) (1,693 )

(5,027 ) (20,792 )

Year ended
March 31,

2014 2015

RMB RMB % Change

(in millions, except percentages)

Product development expenses
5,093 10,658 109 %
Percentage of revenue
10 % 14 %
(1)
We started to consolidate Cainiao Network in mid-October 2017 after obtaining control over Cainiao Network.

(2)
Others mainly include amortization of intangible assets of equity investees and share-based compensation expense.
       ~~Our product development~~During fiscal year 2018, we took an impairment loss of RMB18,116 million with respect to Alibaba Pictures, our affiliated movie production business. The impairment represented the difference between the market value and our carrying value of this investment as of December 31, 2017. In June 2015, following a financing transaction that diluted our shareholding from a controlling position to minority investment, we were required to write up the carrying value to the substantially increased market value of Alibaba Pictures at the time. As a result, we booked a non-cash accounting gain of RMB24,734 million, which increased the carrying value of our investment in Alibaba Pictures from RMB4,818 million to RMB29,552 million. Since July 2015, the market value of Alibaba Pictures has declined and remained below our increased carrying value. The continued low market price combined with Alibaba Pictures' strategic decision made in early 2018 to increase investments and expenses ~~increased by 109% from RMB5,093 million~~for market share growth of its online movie ticketing business caused us to conclude that the decline in market value against our carrying value may be "other-than-temporary," which led us to take the impairment in fiscal year 2014 to RMB10,658 million in fiscal year 2015. The increase was largely due to an increase of RMB5,465 million in payroll and benefits expenses including share-based compensation expense (an effect that we expect will continue, as discussed in "Share-based Compensation" above), partially offset by a decrease in the royalty fee paid to Yahoo, which terminated by contract upon the completion of our initial public offering in September 2014. We expect our product development expenses will increase in absolute amounts and may over time increase as a percentage of revenues.
~~Sales and Marketing Expenses~~

Year ended
March 31,

2014 2015

RMB RMB % Change

(in millions, except percentages)

Sales and marketing expenses
4,545 8,513 87%
Percentage of revenue
9 % 11 %
       Our sales and marketing expenses increased by 87% from RMB4,545 million in fiscal year 2014 to RMB8,513 million in fiscal year 2015. The increase was due primarily to the consolidation of marketing expenses of acquired businesses (mainly UCWeb and AutoNavi), and also to an increase in advertising and promotional spending mainly focused on strengthening consumer connection to our Taobao and Tmall brands, especially in lower tier cities, as well as to promote our new businesses initiatives (e.g., offline commerce) during fiscal year 2015. The increase was also due to an increase in share-based compensation expense (an effect that we expect will continue, as discussed in "Share-based Compensation" above). We expect our sales and marketing expenses will increase in absolute amounts and may increase as a percentage of revenues as we continue to invest in marketing and promotion.
~~General and Administrative Expenses~~

Year ended
March 31,

2014 2015

RMB RMB % Change

(in millions, except percentages)

General and administrative expenses
4,218 7,800 85%
Percentage of revenue
8 % 10 %
       Our general and administrative expenses increased by 85% from RMB4,218 million in fiscal year 2014 to RMB7,800 million in fiscal year 2015. The increase was primarily due to a significant increase in share-based compensation expense (an effect that we expect will continue, as discussed in "Share-based Compensation" above). Our general and administrative expenses in fiscal year 2014 included a one-time equity-settled donation expense of RMB1,269 million relating to the grant of options to purchase 50,000,000 of our ordinary shares to a non-profit

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~~organization. See "Item 7. Major Shareholders and Related Party Transactions — B. Related Party Transactions — Equity-settled Donation Relating to Our Ordinary Shares."~~
~~Income from Operations and Operating Margin~~

Year ended
March 31,

2014 2015

RMB RMB % Change

(in millions, except percentages)

Income from operations
24,920 23,135 (7% )
Percentage of revenue
47% 30%
       Our income from operations decreased by 7% from RMB24,920 million in fiscal year 2014 to RMB23,135 million in fiscal year 2015. Although our revenue increased by 45% year-over-year, income from operations decreased, due primarily to a significant increase in share-based compensation expense from RMB2,844 million in fiscal year 2014 to RMB13,028 million in fiscal year 2015, and also to other factors affecting cost and expenses as discussed above.
       Our operating margin decreased from 47% in fiscal year 2014 to 30% in fiscal year 2015. The decrease was primarily attributable to increase in share-based compensation expense, which amounted to 17% and 5% as a percentage of revenue in fiscal year 2015 and fiscal year 2014, respectively, the consolidation of acquired businesses with lower overall margins than our margins, mainly UCWeb and AutoNavi, as well as investments in new business initiatives, such as cloud computing, entertainment, mobile operating system and offline commerce.
~~Interest and Investment Income, Net~~
       Our net interest and investment income increased significantly from RMB1,648 million in fiscal year 2014 to RMB9,455 million in fiscal year 2015. The increase was primarily due to a net gain of RMB6,535 million recognized with respect to the revaluation of previously held equity interests, relating primarily to the step acquisitions of UCWeb, OneTouch and AutoNavi. The increase was also due to an increase in interest income as a result of higher cash balance during the period, which in turn was due primarily to the proceeds from our initial public offering in September 2014 and also to an increase in operating cash flow.
~~Interest Expense~~
       Our interest expense increased by 25% from RMB2,195 million in fiscal year 2014 to RMB2,750 million in fiscal year 2015. The increase was primarily due to an increase in average debt outstanding, with debt outstanding during fiscal year 2014 primarily reflecting a loan of US$5.0 billion drawn down under a US$8.0 billion credit facility, and debt outstanding during fiscal year 2015 primarily reflecting an additional US$3.0 billion drawn down under the same credit facility in April 2014, which was refinanced by the US$8.0 billion unsecured senior notes issued in November 2014.
~~Other Income, Net~~
       ~~Our other income, net increased by 2% from RMB2,429 million in fiscal year 2014 to RMB2,486 million in fiscal year 2015.~~
~~Income Tax Expenses~~
       Our income tax expenses increased by 101% from RMB3,196 million in fiscal year 2014 to RMB6,416 million in fiscal year 2015. The increase was due primarily to the expiration of an EIT exemption period for one of our major subsidiaries, upon which the subsidiary is no longer exempt from paying EIT but is subject to an EIT rate of 12.5% (or 50% of the statutory EIT rate) in calendar year 2014. The increase in income tax expenses was also due to the increase in taxable income from our operations in China. Our effective tax rate increased to 20% in fiscal

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year 2015 from 12% in fiscal year 2014, due primarily to the expiration of the EIT exemption as discussed above, and to the increase in share-based compensation expense, which is not deductible for income tax purposes.2018.
Net Income
As a result of the foregoing, our net income increased by 4%49% from ~~RMB23,403~~RMB41,226 million in fiscal year ~~2014~~2017 to ~~RMB24,320~~RMB61,412 million in fiscal year ~~2015.~~2018.
B.  Liquidity and Capital Resources
We fund our operations and strategic investments from cash generated from our operations and through debt and equity financing. We generated ~~RMB26,379~~RMB82,854 million, ~~RMB41,217~~RMB125,805 million and ~~RMB56,836~~RMB150,975 million (US$~~8,815~~22,496 million) of cash from operating activities for fiscal years ~~2014, 2015~~2017, 2018 and ~~2016,~~2019, respectively. As of March 31, ~~2016,~~2019, we had cash and cash equivalents and short-term investments of ~~RMB106,818~~RMB189,976 million (US$~~16,566~~28,308 million) and ~~RMB4,700~~RMB3,262 million (US$~~729~~486 million), respectively. Short-term investments consist primarily of investments in fixed deposits with maturities between three months and one year and investments in money market funds or other investments whereby we have the intention to redeem within one year.
In November 2014, we issued unsecured senior notes, including floating rate and fixed rate notes, with varying maturities for an aggregate principal amount of US$8.0 billion. Interest on the unsecured senior notes ~~are~~is payable in arrears, quarterly for the floating rate notes and semiannually for the fixed-rate notes. We used the proceeds from the issuance of the unsecured senior notes to refinance our previous syndicated loan arrangements in the same amount. We are not subject to any financial covenant or other significant operating covenants ~~or restrictions~~ under the unsecured senior notes. ~~In December 2015, we completed an exchange offer to exchange our outstanding unsecured senior notes for unsecured senior notes that have been registered under the Securities Act.~~ See note 2120 to our audited consolidated financial statements ~~for the years ended March 31, 2014, 2015 and 2016~~ included elsewhere in this annual report for further information.

       ~~In August 2014, we entered into a revolving loan facility agreement with certain financial institutions for an amount~~Table of US$3.0 billion which has not yet been drawn down. The interest rate for this credit facility is calculated based on LIBOR plus 120 basis points. This loan facility is reserved for future general corporate purposes.Contents
In March 2016, we signed a five-year US$3.0 billion syndicated loan agreement with a group of eight lead arrangers, which ~~has been~~we subsequently ~~drawn~~drew down in April 2016. The loan was upsized from US$3.0 billion to US$4.0 billion in May 2016 through a general syndication ~~of which~~and the upsized portion ~~has not yet been~~was subsequently drawn ~~down.~~down in August 2016. The loan ~~has~~had a five-year bullet maturity and iswas priced at 110 basis points over LIBOR. In May 2019, we amended the pricing of the loans to 85 basis points over LIBOR and extended the maturity to May 2024. The use of proceeds of the loan is for general corporate and working capital purposes (including funding our acquisitions).
In April 2017, we entered into a revolving credit facility agreement with certain financial institutions for an amount of US$5.15 billion, which we have not yet drawn down. The interest rate for this credit facility is calculated based on LIBOR plus 95 basis points. This loan facility is reserved for future general corporate and working capital purposes (including funding our acquisitions).
In November 2017, we repaid US$1.3 billion of our US$8.0 billion unsecured senior notes that became due. In December 2017, we issued an additional aggregate of US$7.0 billion unsecured senior notes.
As of March 31, ~~2016,~~2019, we also had other bank borrowings of ~~RMB6,175~~RMB16,003 million (US$~~957~~2,385 million), primarily used for the construction of corporate campuses and office facilities and other working capital purposes. See note 2019 to our audited consolidated financial statements ~~for the years ended March 31, 2014, 2015 and 2016~~ included elsewhere in this annual report for further information.
       ~~The following table sets out a summary of our cash flows for the periods indicated.~~

Year ended March 31,

2014 2015 2016

RMB RMB RMB US$

(in millions)

Net cash provided by operating activities
26,379 41,217 56,836 8,815
Net cash used in investing activities
(32,997 ) (53,454 ) (42,831 ) (6,643 )
Net cash provided by (used in) financing activities
9,364 87,497 (15,846 ) (2,457 )
We believe that our current levels of cash and cash flows from operations will be sufficient to meet our anticipated cash needs for at least the next twelve months. However, we may need additional cash resources in the

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future if we find and wish to pursue opportunities for investment, acquisition, strategic cooperation or other similar actions, which may include investing in technology, ~~our underlying technical~~ infrastructure, including data management and analytics solutions, or related talent. If we determine that our cash requirements exceed our amounts of cash on hand or if we decide to further optimize our capital structure, we may seek to issue additional debt or equity securities or obtain credit facilities or other sources of funding.
The following table sets out a summary of our cash flows for the periods indicated:

Year ended March 31,

2017 2018 2019

RMB RMB RMB US$

(in millions)

Net cash provided by operating activities⁽¹⁾
82,854 125,805 150,975 22,496
Net cash used in investing activities⁽¹⁾
(79,579 ) (83,764 ) (151,060 ) (22,509 )
Net cash provided by (used in) financing activities
32,914 20,359 (7,392 ) (1,101 )
(1)
We adopted ASU 2016-18, "Statement of Cash ~~Provided by~~Flows (Topic 230): Restricted Cash," beginning in the first quarter of fiscal year 2019. As a result of adopting this new accounting update, we retrospectively adjusted the consolidated statements of cash flows to include restricted cash and escrow receivables in cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the consolidated statements of cash flows. The impact of our retrospective reclassification on cash flows from operating activities for the years ended March 31, 2017 and 2018 was an increase of RMB2,528 million and RMB634 million, respectively, and the impact of our retrospective reclassification on cash flows from investing activities for the years ended March 31, 2017 and 2018 was a decrease of RMB1,215 million and an increase of RMB126 million, respectively.
Cash Flows from Operating Activities
Cash provided by operating activities in fiscal year ~~2016~~2019 was ~~RMB56,836~~RMB150,975 million (US$~~8,815~~22,496 million) and primarily consisted of net income of ~~RMB71,289~~RMB80,234 million (US$~~11,056~~11,955 million), as adjusted for non-cash items and the effects of changes in working capital and other activities. Adjustments for non-cash items primarily included ~~a deemed disposal gain~~share-based compensation expense of ~~RMB24,734~~RMB37,491 million (US$~~3,836~~5,586 million) ~~arising from the deconsolidation of Alibaba Pictures, a gain of RMB18,603 million (US$2,885 million) from the~~, revaluation ~~of our~~gains on previously held equity ~~interest~~interests of RMB30,187 million (US$4,498 million), amortization of intangible assets and licensed copyrights of RMB22,118 million (US$3,295 million), realized and unrealized gain of RMB16,082 million (US$2,396 million) related to ~~Alibaba Health, RMB16,082 million (US$2,494 million) of share-based compensation expense, RMB3,770 million (US$584 million) of~~investment securities and depreciation and amortization of property and equipment and land use rights ~~a gain~~

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of RMB14,962 million (US$~~479~~2,229 million) ~~from disposals of equity investees and RMB2,931 million (US$455 million) of amortization of intangible assets.~~. Changes in working capital and other activities primarily consisted of an increase of ~~RMB8,104~~RMB24,355 million (US$~~1,257~~3,629 million) in accrued expenses, accounts payable and other ~~current~~ liabilities as a result of the growth of our business and an increase of ~~RMB2,350~~RMB8,639 million (US$~~364~~1,288 million) in deferred revenue and customer advances, partially offset by an increase of ~~RMB4,012~~RMB10,185 million (US$~~622~~1,517 million) in ~~prepayment,~~prepayments, receivables and other assets.
Cash provided by operating activities in fiscal year ~~2015~~2018 was ~~RMB41,217~~RMB125,805 million and primarily consisted of net income of ~~RMB24,320~~RMB61,412 million, as adjusted for non-cash items and the effects of changes in working capital and other activities. Adjustments for non-cash items primarily included ~~RMB13,028 million of share-based compensation expense, a net gain from our step acquisitions arising from~~ revaluation ofgains on previously held equity interests ~~totaling RMB6,535~~of RMB24,436 million, ~~RMB2,326~~share of results of equity investees of RMB20,792 million, share-based compensation expense of RMB20,075 million, amortization of intangible assets and licensed copyrights of RMB13,231 million and depreciation and amortization of property and equipment and land use rights ~~RMB2,089 million~~ of ~~amortization of intangible assets and RMB1,659 million of deferred income taxes.~~RMB8,789 million. Changes in working capital and other activities primarily consisted of an increase of ~~RMB11,415~~RMB23,158 million in accrued expenses, accounts payable and other ~~current~~ liabilities as a result of the growth of our business, an increase of RMB6,610 million in income tax payable and an increase of ~~RMB2,490~~RMB5,690 million in ~~merchant deposits, which relate to merchants operating on Tmall,~~deferred revenue and customer advances, partially offset by an increase of ~~RMB13,927~~RMB14,765 million in prepayments, receivables and other assets, as a result of the increase in loan receivables relating to the SME loan business before we transferred this business to Ant Financial Services. See "Item 7. Major Shareholders and Related Party Transactions — B. Related Party Transactions — Agreements and Transactions Related to Ant Financial Services and its Subsidiaries — 2014 Restructuring of Our Relationship with Ant Financial Services and Alipay."assets.
Cash provided by operating activities in fiscal year ~~2014~~2017 was ~~RMB26,379~~RMB82,854 million and primarily consisted of net income of ~~RMB23,403~~RMB41,226 million, as adjusted for non-cash items and the effects of changes in working capital and other activities. ~~Adjustment~~Adjustments for non-cash items primarily included ~~RMB2,844 million of~~ share-based compensation expense ~~RMB1,269~~of RMB15,995 million, amortization of ~~equity-settled donation expense, RMB1,466~~intangible assets and licensed copyrights of RMB9,008 million, realized and unrealized gain of ~~deferred income taxes and RMB1,339~~RMB5,488 million ofrelated to investment securities, depreciation and amortization ~~expenses.~~of property and equipment and land use rights of RMB5,284 million and share of results of equity investees of RMB5,027 million. Changes in working capital and other activities primarily consisted of an increase of RMB12,742 million in prepayments, receivables and other assets due to the increase in loan receivables as a result of the continued growth of our SME loan business, partially offset by an increase of RMB5,336RMB5,312 million in accrued expenses, accounts payable and other ~~current~~ liabilities as a result of the growth of our business, an increase of RMB4,698 million in income tax payable and an increase of ~~RMB1,628~~RMB4,611 million in ~~merchant deposits, which relate to merchants operating on Tmall.~~deferred revenue and customer advances, partially offset by an increase of RMB8,237 million in prepayments, receivables and other assets.
Cash ~~Used in~~Flows from Investing Activities
Cash used in investing activities was ~~RMB42,831~~RMB151,060 million (US$~~6,643~~22,509 million) in fiscal year ~~2016~~2019 and was primarily attributable to ~~RMB54,483~~RMB119,766 million (US$~~8,449~~17,846 million) in acquisition of ~~available-for-sale, held-to-maturity~~investment securities and equity investments mainly held for strategic purposes, including ~~Ele.me, Koubei, Magic Leap, CMC~~

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Focus Media and ~~Cainiao Network,~~ZTO Express, and cash paid for business combinations, net of cash acquired, ~~acquisition~~including Ele.me, capital expenditures of ~~equipment, intangible assets and construction in progress of RMB10,845~~RMB49,643 million (US$~~1,682~~7,396 million) primarily in connection with the purchase of computer equipment and licensed copyrights, as well as our investments in data centers and infrastructure for logistic and New Retail businesses, partially offset by proceeds from disposal of subsidiaries, equity investees and investment securities of RMB10,329 million (US$1,539 million).
Cash used in investing activities was RMB83,764 million in fiscal year 2018 and was primarily attributable to RMB66,129 million in acquisition of investment securities and equity investments mainly held for strategic purposes, including Sun Art Group Limited, Ele.me, Wanda Film, Easyhome and Tokopedia, and cash paid for business combinations, net of cash acquired, including Intime and Cainiao Network, capital expenditures of RMB29,836 million primarily in connection with the purchase of computer equipment and licensed copyrights, as well as the continued expansion of our corporate campuses, partially offset by proceeds from disposal of subsidiaries, equity investees ~~available-for-sale securities~~ and ~~held-to-maturity~~investment securities of ~~RMB17,088 million (US$2,650 million) and net decrease in short-term investments of RMB4,619 million (US$716 million).~~RMB13,381 million.
Cash used in investing activities was ~~RMB53,454~~RMB79,579 million in fiscal year ~~2015~~2017 and was primarily attributable to ~~RMB35,231~~RMB77,554 million in acquisition of ~~available-for-sale, held-to-maturity~~investment securities and equity investments mainly held for strategic purposes, including ~~Youku Tudou, Intime, Meizu,~~Suning, Ele.me, Didi Chuxing, Paytm and Weibo, and ~~SingPost, RMB10,255 million in~~ cash paid for business combinations, net of cash acquired, including ~~AutoNavi, UCWeb~~Youku and ~~OneTouch and acquisitions~~Lazada, capital expenditures of ~~equipment, intangible assets and construction in progress of RMB7,705~~RMB17,546 million primarily in connection

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with the purchase of computer equipment and ~~the continued expansion of our corporate campus.~~
       Cash used in investing activities was RMB32,997 million in fiscal year 2014 and was primarily attributable to RMB16,468 million in equity investments mainly held for strategic purposes, including UCWeb, Weibo and AutoNavi, a net increase in short-term investments of RMB8,304 million and acquisitions of land use rights, construction in progress and other property, equipment and intangible assets of RMB4,776 million primarily in connection withlicensed copyrights, as well as the continued expansion of our corporate campuses, partially offset by proceeds from disposal of subsidiaries, equity investees and ~~the purchase~~investment securities of ~~computer equipment.~~RMB9,545 million and net decrease in short-term investments of RMB5,761 million.
Cash ~~Provided by (Used in)~~Flows from Financing Activities
Cash used in financing activities was ~~RMB15,846~~RMB7,392 million (US$~~2,457~~1,101 million) in fiscal year ~~2016,~~2019, and was primarily attributable to cash used in share repurchase of ~~RMB19,795~~RMB10,872 million (US$~~3,070~~1,620 million) and net repayment of borrowings of RMB4,231 million (US$630 million), ~~partially~~partly offset by ~~net proceeds~~cash injection from ~~borrowings~~noncontrolling interests of ~~RMB2,478~~RMB8,706 million (US$~~384~~1,297 million). ~~See "Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers" for further information.~~
Cash provided by financing activities was ~~RMB87,497~~RMB20,359 million in fiscal year ~~2015,~~2018, and was primarily attributable to ~~the~~proceeds from issuance of ~~ordinary shares~~senior notes of ~~RMB61,831 million in connection with our initial public offering in September 2014 and the additional drawdown~~US$7.0 billion, partly offset by net repayment of ~~US$3.0 billion under our previous syndicated loan arrangement in April 2014, which was refinanced with the proceeds from the US$8.0 billion~~ unsecured senior notes ~~issued in November 2014.~~and bank borrowings of RMB12,192 million and cash used to acquire additional shares of non-wholly owned subsidiaries, primarily including Lazada and Intime, of RMB13,627 million.
Cash provided by financing activities was ~~RMB9,364~~RMB32,914 million in fiscal year ~~2014,~~2017, and was primarily attributable to ~~a drawdown~~net proceeds from borrowings of ~~RMB29,947~~RMB29,333 million ~~or US$5.0 billion,~~and proceeds from ~~our previous syndicated loan arrangement, as well as a net increase~~issuance of ~~RMB7,166~~ordinary shares of RMB14,607 million, primarily representing shares issued to Suning, partially offset by cash used in ~~secured borrowings underlying our transfers~~share repurchase of ~~micro loans to third-party financial institutions.~~RMB13,182 million.
Capital Expenditures
Our capital expenditures have been incurred primarily in relation to (1) the acquisition of computer equipment and construction of data centers relating to our cloud computing business and the operation of our mobile platforms and websites; (2) infrastructure for logistic and New Retail businesses and (3) the acquisition of land use rights and construction of corporate campuses and office facilities in Hangzhou, Beijing, Guangzhou and ~~Shenzhen; and (2) the acquisition of computer equipment relating to the operation of our websites, furniture and office equipment and leasehold improvements for our office facilities.~~Shenzhen. In fiscal years ~~2014, 2015~~2017, 2018 and ~~2016,~~2019, our capital expenditures totaled ~~RMB4,776~~RMB11,006 million, ~~RMB7,705~~RMB19,628 million and ~~RMB10,845~~RMB35,482 million (US$~~1,682~~5,286 million), respectively. In addition, our acquisitions of licensed copyrights and other intangible assets in fiscal years 2017, 2018 and 2019 were RMB6,540 million, RMB10,208 million and RMB14,161 million (US$2,110 million), respectively.
Holding Company Structure
We are a holding company with no operation other than ownership of operating subsidiaries in Hong Kong, China and elsewhere that own and operate our marketplaces and other businesses as well as a portfolio of intellectual property rights. As a result, we rely on dividends and other distributions paid by our operating subsidiaries, including funds to pay dividends to our shareholders or to service our outstanding debts. If our operating subsidiaries incur additional debt on their own behalf in the future, the instruments governing the debt may restrict the ability of our operating subsidiaries to pay dividends or make other distributions to us. In addition,

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applicable PRC law permits payment of dividends to us by our operating subsidiaries in China only out of their ~~net income,~~retained earnings, if any, determined in accordance with PRC accounting standards and regulations. Moreover, our operating subsidiaries in China are also required to set aside a portion of their net income, if any, each year to fund general reserves for appropriations until ~~such~~this reserve has reached 50% of the related subsidiary's registered capital. These reserves are not distributable as cash dividends. In addition, registered share capital and capital reserve accounts are also restricted from ~~withdrawal in the PRC, up to the amount of net assets held in each operating subsidiary.~~distribution. As of March 31, ~~2016,~~2019, these restricted net assets totaled ~~RMB39,116 million~~RMB112.5 billion (US$~~6,066 million)~~16.8 billion). See note 2422 to our audited consolidated financial statements ~~for the years ended March 31, 2014, 2015 and 2016~~ included elsewhere in this annual report.
Our holding company structure differs from some of our peers in that we hold our material assets and operations, except for ICP and other licenses for regulated activities as well as certain equity investments in restricted businesses, in our ~~wholly-foreign owned enterprises~~wholly-owned entities and most of our revenue is generated directly by ~~the wholly-foreign owned enterprises.~~our wholly-owned entities. As revenue is generated directly by our ~~wholly-foreign owned enterprises, the wholly-foreign owned enterprises~~wholly-owned entities, our wholly-owned entities directly capture the profits and associated cash flow from operations, without having to rely on contractual arrangements to

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transfer ~~such~~ cash flow from the variable interest entities to ~~the wholly-foreign owned enterprises.~~our wholly-owned entities. In fiscal years ~~2014, 2015~~2017, 2018 and ~~2016,~~2019, the significant majority of our revenues were generated by our ~~wholly-foreign owned enterprises~~wholly owned-entities in China. See "Item 4. Information on the Company — C. Organizational Structure" for a description of these contractual arrangements and the structure of our company.
Inflation
Inflation in China has not materially impacted our results of operations in recent years. According to the National Bureau of Statistics of China, the year-over-year increase in the consumer price index in calendar years ~~2013, 2014~~2016, 2017 and ~~2015~~2018 was ~~2.6%~~2.0%, ~~2.0%~~1.6% and ~~1.4%~~2.1%, respectively. Although we have not been materially affected by inflation in the past, we can provide no assurance that we will not be affected in the future by higher inflation rates in China.
Critical Accounting Policies and Estimates
Our significant accounting policies are set forth in note 2 to our audited consolidated financial statements included elsewhere in this annual report. The preparation of our consolidated financial statements requires our management to make estimates and assumptions that affect the ~~amount~~amounts reported in the consolidated financial statements. ~~These~~Our management periodically re-evaluates these estimates and assumptions ~~are periodically re-evaluated by management and are~~ based on historical experience and other factors, including expectations of future events that ~~are believed~~they believe to be reasonable under the circumstances. Actual results may differ significantly from those estimates and assumptions. We have identified the following accounting policies as the most critical to an understanding of our financial position and results of operations, because the application of these policies requires significant and complex management estimates, assumptions and judgment, and the reporting of materially different amounts could result if different estimates or assumptions were used or different judgments were made.
Principles of Consolidation
A subsidiary is an entity in which (i) we directly or indirectly control more than 50% of the voting power; or (ii) we have the power to appoint or remove the majority of the members of the board of directors or to cast a majority of votes at the ~~meeting~~meetings of the board of directors or to govern the financial and operating policies of the investee pursuant to a statute or under an agreement among the shareholders or equity holders. However, there are situations in which consolidation is required even though these usual conditions of consolidation do not apply. Generally, this occurs when an entity holds an interest in another business enterprise that was achieved through arrangements that do not involve voting interests, which results in a disproportionate relationship between ~~such~~the entity's voting interests in, and its exposure to the economic risks and potential rewards of, the other business enterprise. This disproportionate relationship results in what is known as a variable interest, and the entity in which we have the variable interest is referred to as a "VIE." We consolidate a VIE if we are determined to be

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the primary beneficiary of the VIE. The primary beneficiary has both (i) the power to direct the activities of the VIE that most significantly impact the entity's economic performance, and (ii) the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.
For the entities that we invested in or are associated with but in which the usual conditions of consolidation mentioned above do not apply, we continuously reassess whether these entities possess any of the ~~characteristic~~characteristics of a VIE and whether we are the primary beneficiary.
We consolidate our subsidiaries and the VIEs of which we are the primary beneficiary. On a periodic basis, we reconsider the initial determination of whether a legal entity is a consolidated entity upon the occurrence of certain events ~~listed~~provided in ~~ASC 810-10-35-4 occurred and~~Accounting Standards Codification ("ASC") 810. We also continuously reconsider whether we are the primary ~~beneficiaries~~beneficiary of our affiliated entities as facts and circumstances change.
Recognition of Revenue
Revenue is principally ~~represents online marketing services~~comprised of customer management revenue, commissions on transactions, membership ~~and~~fees, logistics services revenue, cloud computing services revenue, sales of goods and other revenue. Revenue ~~comprises~~

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represents the ~~fair value~~amount of consideration we are entitled to upon the ~~consideration received~~transfer of promised goods or ~~receivable for the provision of~~ services in ~~our~~the ordinary course of our activities and is recorded net of VAT. Consistent with the criteria of ASC ~~605~~606 "Revenue ~~Recognition,~~from Contracts with Customers," we recognize revenue when performance obligations are satisfied by transferring control of a promised good or service to a customer. For performance obligations that are satisfied at a point in time, we also consider the following ~~four~~indicators to assess whether control of a promised good or service is transferred to the customer: (i) right to payment, (ii) legal title, (iii) physical possession, (iv) significant risks and rewards of ownership and (v) acceptance of the good or service. For performance obligations satisfied over time, we recognize revenue ~~recognition criteria are met: (i) persuasive evidence~~over time by measuring the progress toward complete satisfaction of ~~an arrangement exists, (ii) delivery has occurred or services have been provided, (iii) the selling price is fixed or determinable, and (iv) collectability is reasonably assured.~~a performance obligation.
The application of various accounting principles related to the measurement and recognition of revenue requires us to make judgments and estimates. Specifically, complex arrangements with non-standard terms and conditions may require ~~significant~~relevant contract interpretation to determine the appropriate accounting treatment, including whether the ~~deliverables~~promised goods and services specified in a multiple element arrangement should be treated as separate ~~units of accounting.~~performance obligations. Other significant judgments include determining whether we are acting as the principal or the agent from an accounting perspective in a transaction.
For multiple element arrangements with customers, which primarily relate to the sale of membership packages and ~~online marketing~~customer management services on our ~~international~~ wholesale marketplace and Youku's platforms, significant judgment is required to determine whether each good and service element is a distinct performance obligation and is separately accounted for. To determine whether a performance obligation is distinct, we consider its level of integration, customization, interdependence and interrelation with other elements within the arrangement. If an arrangement ~~consideration~~involves multiple distinct performance obligations, each obligation is ~~allocated at~~separately accounted for and the ~~inception of the arrangement to each element based on their relative fair values for revenue recognition purposes. The~~total consideration is allocated to each ~~element using vendor-specific objective evidence or third-party evidence of~~obligation based on the relative standalone selling prices at contract inception. If directly observable standalone selling prices are not available, we need to apply significant judgment and perform assessments on market conditions and entity-specific factors to estimate the standalone selling ~~price~~prices for each deliverable, or if neither type of evidence is available, using management's best estimate of selling price. Significant judgment is required in assessing the fair values of these elements by considering standalone selling price and other observable data.element. Changes in the estimated ~~fair values~~standalone selling price may cause the amount of revenue to be recognized for each ~~element~~performance obligation to ~~change~~differ, but ~~not~~ the total amount of revenue ~~allocated~~ to be recognized within a ~~contract.~~contract should not be affected. We periodically re-assess the ~~fair value~~standalone selling price of the elements as a result of changes in market conditions. ~~These multiple element arrangements are currently not significant to our operations.~~ Revenue recognition for P4P marketing service and display marketing on our China retail marketplaces does not require ~~our management~~us to exercise significant judgment or estimate.
For ~~other~~certain arrangements, we apply significant judgment in determining whether we are acting as the principal or agent in a ~~transaction;~~transaction. We are acting as the principal if we obtain control over the goods and services before they are transferred to customers. Generally, when we are primarily obligated in a transaction and are subject to inventory risk or have latitude in establishing prices, or have several but not all of these indicators, we act as the principal and record revenue on a gross basis. We act as the agent and record the net amount as revenue earned if we do not obtain control over the goods and services before they are transferred to the customers. We record P4P marketing services revenue and display marketing revenue generated through third-party marketing affiliate programs on a gross basis; and revenue relating to the Taobaoke program generated through third-party marketing affiliate partners' websites where we do not take inventory risks on a net basis. In addition, revenue generated from certain platforms in which we operate as a ~~primary obligor~~principal is reported on a gross basis while ~~such~~this revenue was insignificant for each of the periods presented. Generally, when we are primarily obligated in a transaction and are subject to inventory risk or have latitude in establishing prices, or have several but not all of these indicators, we record revenue on a gross basis. We record the net amount as revenue share earned if we are not primarily obligated and do not have inventory risk or latitude in establishing prices. These judgments could have significant implications on the amount of revenue we recognize.

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Share-based Compensation Expense and Valuation of the Underlying Awards
Granting of ~~share options, restricted shares and RSUs~~share-based awards relating to our ordinary shares
We account for various types of share-based awards granted to the employees, consultants and directors of our company, our affiliates and certain other companies, such as Ant Financial, ~~Services,~~ in accordance with the authoritative guidance on share-based compensation expense. Under the fair value recognition provision of ~~such~~this guidance, compensation for share-based awards granted, including RSUs, share options and restricted shares, ~~and RSUs,~~ is measured at the grant date, or at the future vesting ~~date~~dates in the case of consultants or other non-employee grantees, based on

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the fair value of the awards and is recognized as expense over the requisite service period, which is generally the vesting period of the respective award, on an accelerated attribution method. In the case of share-based awards granted to non-employees, the fair value of the unvested portion is re-measured each period, with the resulting difference, if any, recognized as an expense during the period when the related services are rendered. Under the accelerated attribution method, each vesting installment of a graded vesting award is treated as a separate share-based award, and accordingly each vesting installment is separately measured and attributed to expense, resulting in accelerated recognition of share-based compensation expense.
Share-based compensation expense is recorded net of estimated forfeitures in our consolidated income ~~statement~~statements and ~~as such~~accordingly is recorded only for ~~only~~ those share-based awards that ~~we expect~~are expected to vest. We estimate the forfeiture rate based on historical forfeitures of equity awards and adjust the rate to reflect changes ~~in facts and circumstances, if any.~~when necessary. We revise our estimated forfeiture rate if actual forfeitures significantly differ from ~~our~~the initial estimates.
Determining the fair value of share-based awards requires significant judgment. ~~We estimated~~The fair values of RSUs and restricted shares are determined based on the fair value of our ordinary shares. The market price of our publicly traded ADSs is used as an indicator of fair value for our ordinary shares.
We estimate the fair value of share options using the Black-Scholes ~~option-valuation~~valuation model, which requires inputs such as the fair value of our ordinary shares, risk-free interest rate, expected dividend yield, expected life and expected ~~volatility on the following assumptions:~~
•
Fair value of our ordinary shares — prior to our initial public offering in September 2014, the fair value was determined based on management estimates, as discussed in the paragraphs below. Subsequent to our initial public offering, the market price of our publicly traded ADSs is used as an indicator of fair value for our ordinary shares.

•
~~Risk free interest rate — the risk free interest rate is based on the yields of U.S. Treasury securities with maturities similar to the expected life of the share options.~~

•
Expected dividend yield — we have never declared or paid any cash dividends on our ordinary shares and do not presently plan to pay cash dividends in the foreseeable future. Consequently, we used an expected dividend yield of zero.

•
~~Expected life — the expected term was estimated based on the average between the vesting period and the contractual term.~~

•
Expected volatility — as we have a short period of trading history for our ordinary shares, the expected volatility for our ordinary shares was estimated by taking the average historical price volatility for industry peers based on the price fluctuations of their shares over a period equivalent to the expected term of the share options granted. Industry peers consist of several public companies in the technology industry similar in size, which are engaged in similar business sectors in China and worldwide. We intend to continue to consistently apply this process using the same or similar public companies until a sufficient amount of historical information regarding the volatility of our own ordinary share price becomes available, or unless circumstances change such that the identified companies are no longer similar to us, in which case, more suitable companies whose share prices are publicly available would be utilized in the calculation.
       ~~The fair value of restricted shares and RSUs is determined based on the fair value of our ordinary shares.~~volatility.
       Prior to our initial public offering in September 2014, in the absence of a public trading market, the determination of the fair value of our ordinary shares by the administrators was made with reference to the price at which we had recently sold our ordinary shares to third-party investors, or other representative private share

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sale transactions entered into on an arms-length basis known to us. If such references were not available, the valuations of our ordinary shares were determined in accordance with the guidelines outlined in the American Institute of Certified Public Accountants' Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation, and with the assistance of an independent appraisal firm from time to time. The assumptions we use in the valuation model are based on future expectations combined with management judgment, with inputs of numerous objective and subjective factors such as our operating and financial performance, expected growth rates, expected profit margins and the market performance of industry peers, to determine the fair value of our ordinary shares.
       In order to determine the fair value of our ordinary shares underlying each share-based award grant, we first determined our business enterprise value, or BEV, and then allocated the BEV to each element of our capital structure (convertible preference shares and ordinary shares) using a hybrid method comprising the probability-weighted expected return method and the option pricing method. In our case, two scenarios were assumed, namely: (i) the redemption scenario, in which the option pricing method was adopted to allocate the value between convertible preference shares and ordinary shares, and (ii) the mandatory conversion scenario, in which equity value was allocated to convertible preference shares and ordinary shares on an as-if converted basis. Increasing probability was assigned to the mandatory conversion scenario during fiscal year 2014 and the subsequent periods in light of preparations for our initial public offering.
       Before April 2014, our BEV was estimated using a combination of two generally accepted approaches: the market approach using the guideline company method, or GCM, and the income approach using the discounted cash flow method, or DCF. The market approach considers valuation metrics based on trading multiples of a selected industry peer group of companies. The DCF method estimates enterprise value based on the estimated present value of future net cash flows that the business is expected to generate over a forecasted period and an estimate of the present value of cash flows beyond that period, which is referred to as terminal value. The estimated present value is calculated using a discount rate based on the guideline companies' weighted average cost of capital, which accounts for the time value of money and the appropriate degree of risks inherent in the business. The GCM and DCF methods are then weighted equally in determining our BEV.
       In addition to the GCM and DCF methods, starting from April 2014, the market transaction method, or MTM, was also adopted. MTM considers recent transactions of secondary shares by our existing shareholders, which indicate the equity value of the underlying business being evaluated. We assigned a 50% weight to MTM and the remaining 50% weight equally to GCM and DCF.
       ~~Subsequent to our initial public offering in September 2014, the market price of our publicly traded ADSs is used as an indicator of fair value of our ordinary shares.~~
If the fair value of the underlying equity and any of the assumptions used in the Black-Scholes model changes significantly, share-based compensation expense for future awards may differ materially compared with the awards granted previously.
Subscription offor rights to acquire our restricted shares
       WeBeginning in 2013, we offered selected ~~partners~~members of the Alibaba Partnership ~~and they have subscribed for~~ rights to acquire our restricted shares. These rights are not subject to any vesting conditions and entitle the holders to purchase restricted shares at a price of US$14.50 per share during a four year period. Upon the exercise of such rights, the underlying ordinary shares may not be transferred for a period of eight years from the date of subscription of the relevant rights. The fair value of the rights ~~was~~is determined byusing the Black-Scholes ~~option-valuation~~valuation model. AFor the rights offered before 2016, a discount for post-vesting sales restriction was applied to arrive at the estimated value of the restricted ~~shares for the determination of the fair value of the rights. Share-based~~shares. We record share-based compensation expense equivalent to the entire fair value of these rights less the initial subscription price ~~was recorded~~ in the period of subscription.

~~Table~~ For the rights offered since 2016, we recognize share-based compensation expense equivalent to the entire fair value of ~~Contents~~these rights over the requisite service period.
Share-based awards relating to Ant Financial ~~Services~~
Since March 2014, Junhan ~~made grants of~~has granted certain share-based awards similar to share appreciation awards linked to the valuation of Ant Financial ~~Services~~ to ~~a substantial number of~~our employees, and since April 2018, Ant Financial, through its subsidiary, has granted certain RSU awards to our employees. The ~~vesting of such~~ awards ~~is conditional upon the fulfillment of requisite services to us, and such awards~~granted by Junhan will be settled in cash by Junhan upon ~~their~~ disposal of these awards by the holders. The awards granted by the Ant Financial subsidiary may be settled in equity or cash by the Ant Financial subsidiary upon vesting of the awards. Junhan ~~has~~and the Ant Financial subsidiary have the right to repurchase the vested awards (or any underlying shares of vested RSU awards) granted by them, as applicable, from the holders upon an initial public offering of Ant Financial ~~Services~~ or the termination of the holders' employment ~~of the employees~~ with us at a price to be determined based on the then fair market value of Ant ~~Financial Services.~~Financial. We have no obligation to reimburse Junhan, Ant Financial ~~Services~~ or its subsidiaries for the cost associated with these awards.
These awards meet the definition of a financial derivative. The cost relating to ~~such share-based~~these awards is recognized by us ~~as a shareholder contribution as the awards will ultimately be settled in cash by Junhan. The awards are accounted for as financial derivatives and initially measured at their fair value,~~ and the related ~~share-based compensation~~ expense ~~will be~~is recognized over the requisite service ~~period.~~period in the consolidated income statements with a corresponding credit to additional paid-in capital. Subsequent changes in the fair value of ~~the~~these awards are recorded in the consolidated income ~~statements through~~statements. The expenses relating to the awards granted by Junhan are re-measured at the fair value on each reporting date until their settlement dates. The expenses relating to the RSU awards granted by the Ant Financial subsidiary are re-measured at the fair value on ~~which the underlying awards are settled by Junhan.~~each reporting date until their vesting dates. See note 8(d) to our audited consolidated financial statements ~~for the years ended March 31, 2014, 2015 and 2016~~ included elsewhere in this annual report. The fair values of the underlying equity are primarily determined bywith reference to the business enterprise

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value, or BEV, of Ant Financial ~~Services~~ which is based on the contemporaneous valuation reports or recent financing transactions. Given that the determination of the BEV of Ant Financial ~~Services~~ requires ~~the~~ judgments and is beyond our control, the magnitude of the related accounting impact is unpredictable and may affect our consolidated income ~~statement~~statements significantly.
As of March 31, ~~2016, the~~2019, total unamortized share-based compensation expense related to ~~(i)~~our ordinary shares ~~of us and our subsidiaries and (ii) awards linked to the valuation of Ant Financial Services~~ that we expect to recognize was ~~RMB13,709~~RMB23,484 million (US$~~2,120~~3,499 million) ~~and RMB2,542 million~~, with a weighted-average remaining requisite service period of ~~2.1 years and 1.7 years, respectively.~~2.0 years. To the extent the actual forfeiture rate is different from what we have anticipated, share-based compensation expense related to these awards will be ~~different from our expectations.~~different. Furthermore, share-based compensation expense ~~will be~~was affected by changes in the fair value of our shares, as certain share-based awards were granted to non-employees ~~where~~for which the unvested portions of the awards ~~are~~were re-measured at each reporting date through the vesting ~~dates in the future.~~dates. As of March 31, ~~2016, share-based awards granted to non-employees included 384,116~~2019, 1,878,835 outstanding RSUs and 76,550 outstanding share options ~~and 5,880,443 RSUs.~~were held by non-employees, who consist primarily of employees of Ant Financial. In addition, share-based compensation expense will also be affected by changes in the fair value of awards granted to our employees by Junhan ~~which is controlled by Jack Ma.~~and Ant Financial ~~Services~~through its subsidiary. Ant Financial has informed us that they expect its wholly-owned subsidiary and Junhan will ~~also~~ issue additional share-based awards to our employees from time to time in the future.
See "Item 7. Major Shareholders and Related Party Transactions — B. Related Party ~~Transaction~~Transactions — Agreements and Transactions Related to Ant Financial ~~Services~~ and ~~its~~Its Subsidiaries — ~~Ownership of Ant Financial Services and Alipay.~~Equity-based Award Arrangements." The expenses associated with these awards will be recognized across the functions in which the award recipients are employed and may continue to be significant in future periods.
~~Equity-settled Donation Expense~~
       In October 2013, we granted options to acquire 50,000,000 of our ordinary shares to a non-profit organization designated by Jack Ma and Joe Tsai, subject to irrevocable instructions to designate and transfer these share options to the separate charitable trusts to be established by them. 35,000,000 and 15,000,000 of these share options have been transferred to the separate charitable trusts established by Jack Ma and Joe Tsai, respectively. These share options were approved by our board of directors and the options are not subject to any vesting condition and are exercisable for a period of four years starting from the grant date. The exercise price of these options is US$25.00 per share based on a fair market value appraisal process. For each of the eight years beginning one year after the date of listing of our ordinary shares on a recognized stock exchange, the charitable trusts are permitted to sell only up to 6,250,000 ordinary shares (or one-eighth of the total number of ordinary shares subject to the options) per year excluding such number of unsold ordinary shares carried forward from previous years. The fair value of the share options was determined using the Black-Scholes option valuation model, which requires inputs such as the fair value of the underlying restricted shares, risk-free interest rate, expected dividend yield, expected life and expected volatility. As we do not have a history of granting such options for

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charity purposes, the expected life was estimated to be the exercisable period of the options. To determine the fair value of the restricted shares, discounts for post-vesting sales restrictions were applied to the fair value of our ordinary shares depending on the duration of the restriction period of each particular tranche. We have determined the fair value of these options based on the methodology described above, with the assistance of an independent appraisal firm. As there are no vesting conditions attached to the above share options, equity-settled donation expense of RMB1,269 million was recognized in full and recorded in general and administrative expenses during fiscal year 2014.
       The considerations, assumptions and valuations of ordinary shares as well as assumptions for risk-free interest rate, expected dividend yield and expected volatility used to calculate the equity-based donation expense are the same as those used in connection with our share-based awards during the corresponding period. See "— Share-based Compensation Expense and Valuation of the Underlying Awards."
Recognition of Income Taxes and Deferred Tax Assets/Liabilities
We are mainly subject to income tax in China, but are also subject to taxation on profit arising in or derived from the tax jurisdiction where our subsidiaries are domiciled and operate outside China. Income taxes are assessed and determined on an entity basis. There are transactions (including entitlement to preferential tax treatment and deductibility of expenses) where the ultimate tax determination is uncertain until the final tax position is confirmed by relevant tax authorities. In addition, we recognize liabilities for anticipated tax audit issues based on estimates of whether additional taxes could be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, ~~such~~the differences will impact the income tax and deferred tax provisions in the period in which ~~such~~the determination is made.
Deferred income tax is recognized for all temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available in the future against which the temporary differences, the carry forward of unused tax credits and unused tax losses could be utilized. Deferred income tax is provided in full, using the liability method. The deferred tax assets recognized are mainly related to the temporary differences arising from amortization of licensed copyrights and accrued expenses, which are not deductible until paid under the applicable PRC tax laws. We have also recognized deferred tax liabilities on the undistributed earnings generated by our subsidiaries in China, which are subject to withholding taxes when they resolve to distribute dividends to us. As of March 31, ~~2016,~~2019, we have fully accrued the withholding tax on the earnings distributable by all of our subsidiaries in China, except for those undistributed earnings that we intend to ~~invest~~reinvest indefinitely in ~~China of RMB13.6 billion.~~China. If our intent changes or if these funds are in fact distributed outside of China, we would be required to accrue or pay the withholding tax on some or all of these undistributed earnings and our effective tax rate would be adversely affected.
Fair Value Determination Related to the Accounting for Business Combinations
A component of our growth strategy has been to acquire and integrate complementary businesses into our ~~ecosystem.~~digital economy. We complete business combinations from time to time ~~which~~that require us to perform purchase price allocations. In order to recognize the fair value of assets acquired and liabilities assumed, mainly consisting of intangible assets and goodwill, as well as the fair value of any contingent consideration to be recognized, we use valuation techniques such as discounted cash flow analysis and ratio analysis in comparison to comparable

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companies in similar industries under the income approach, market approach and cost approach. Major factors considered include historical financial results and assumptions including future growth rates, an estimate of weighted average cost of capital and the effect of expected changes in regulation. Most of the valuations of our acquired businesses have been performed by independent valuation specialists under our management's supervision. We believe that the estimated fair value assigned to the assets acquired and liabilities assumed are based on reasonable assumptions and estimates that market participants would use. However, ~~such~~these assumptions are inherently uncertain and actual results could differ from those estimates.

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Fair Value Determination Related to Financial Instruments Accounted for at Fair Value
We have a significant amount of ~~investments and liabilities~~financial instruments that are ~~classified as~~categorized within Level 2 and Level 3 according to ASC 820 "Fair Value Measurement." The valuations for ~~the investments and liabilities classified as~~financial instruments categorized within Level 2 relating to ~~financial derivatives,~~ interest rate ~~swaps and forward exchange~~swap contracts are ~~provided~~performed based on inputs derived from or corroborated by ~~independent third parties~~observable market data. Convertible bonds that do not have a quoted price are categorized within Level 3, of which the valuations are performed using valuation models such as the ~~custodian banks.~~binomial model with unobservable inputs including risk-free interest rate and expected volatility. The valuation ~~for the investments and liabilities classified as~~of contingent consideration categorized within Level 3 ~~relating~~is performed using an expected cash flow method with unobservable inputs including the probability to ~~convertible bonds accounted for under~~achieve the ~~fair value option,~~contingencies in connection with the contingent consideration and put liability in relation to investments and acquisitions are determined based on unobservable inputs, such as historical financial results and assumptions about future growth rates, which require significantarrangements. Significant judgment is required to determine the ~~future outcome~~appropriateness of ~~such contingencies.~~those unobservable inputs.
Investments in privately held companies for which the company elected to record using the measurement alternative are recorded at cost, less impairment, with subsequent adjustments for observable price changes resulting from orderly transactions for identical or similar investments of the same issuer that were completed on or after April 1, 2018, the date on which we have begun to apply the guidance under Accounting Standards Update ("ASU") 2016-01. The valuations of these investments are categorized within Level 3, and are estimated based on valuation methods using the observable transaction price at the transaction date and other unobservable inputs including volatility, as well as rights and obligations of the securities that we hold. The determination of whether an observed transaction is orderly and similar to our investment, and the amount of adjustment considering the rights and obligations of the investment, requires significant judgment.
Impairment Assessment on Goodwill and Intangible Assets
We test annually, or whenever events or circumstances indicate that the carrying value of assets exceeds the recoverable amounts, whether goodwill and intangible assets have suffered any impairment in accordance with the accounting policy stated in note 2 to our audited consolidated financial statements included elsewhere in this annual report. For the impairment assessment on goodwill, we have elected to perform a qualitative assessment to determine whether the two-step impairment testing of goodwill is necessary. In this assessment, we identify the reporting units, consider primary factors such as industry and market considerations, overall financial performance of the reporting unit, and other specific information related to the operations. Based on the qualitative assessment, if it is more likely than not that the fair value of ~~each~~a reporting unit is less than the carrying amount, the quantitative impairment test is performed.
For the quantitative assessment of goodwill impairment, we ~~identify the reporting units and~~ compare the fair value of each reporting unit to its carrying amount, including goodwill. If the fair value of ~~each~~the reporting unit exceeds its carrying amount, goodwill is not considered to be impaired and the second step will not be required.
If the carrying amount of a reporting unit exceeds its fair value, the second step compares the implied fair value of goodwill to the carrying value of a reporting unit's goodwill.
For intangible assets other than licensed copyrights, we perform an impairment assessment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. These assessments primarily use cash flow projections based on financial forecasts prepared by management and an estimated terminal value. The expected growth in revenues and operating margin, timing of future capital expenditures, an estimate of weighted average cost of capital and terminal growth rate are based on actual and prior year

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performance and market development expectations. The periods of the financial forecasts generally range from three to five years or a longer period if necessary. Judgment is required to determine key assumptions adopted in the cash flow projections and changes to key assumptions can significantly affect these cash flow projections and the results of the impairment tests.
Impairment Assessment on Licensed Copyrights
We evaluate the program usefulness of licensed copyrights pursuant to the guidance in ASC 920 "Entertainment — Broadcasters," which provides that the rights be reported at the lower of unamortized cost or estimated net realizable value. When there is a change in the expected usage of licensed copyrights, we estimate net realizable value of licensed copyrights to determine if any impairment exists. The net realizable value of licensed copyrights is determined by estimating the expected cash flows from advertising and membership fees, less any direct costs, over the remaining useful lives of the licensed copyrights. We monetize our licensed copyrights with branding customers based on the different content channels available on our entertainment distribution platforms. Therefore, we estimate these cash flows for each category of content separately, such as movies, television series, variety shows, animations and other video content. Estimates that impact these cash flows include anticipated levels of demand for our advertising services and the expected selling prices of advertisements. Judgment is required to determine the key assumptions adopted in the cash flow projections and changes to key assumptions can significantly affect these cash flow projections and the results of the impairment tests.
Impairment Assessment on Investments in Equity Investees
We continually review our investments in equity investees to determine whether a decline in fair value below the carrying value is ~~other than temporary.~~"other-than-temporary." The primary factors that we consider ~~include~~ include:
•
the severity and length of time that the fair value of the investment is below its carrying value; ~~post-balance sheet date fair value~~

•
the stage of development, the ~~investment;~~business plan, the financial condition, the sufficiency of funding and the operating performance of the investee companies; strategic collaboration with and the prospects of the ~~investee;~~ investee companies;

•
the ~~economic or technological environment~~geographic region, market and industry in which the investee ~~operates;~~companies operate; and

•
other entity specific information such as recent financing rounds completed by the investee ~~companies.~~ companies and post balance sheet date fair value of the investment.
Fair value of the listed securities is subject to volatility and may be materially affected by market fluctuations. Judgment is required to determine the weighting and impact of the ~~aforementioned~~abovementioned factors and changes to ~~such~~this determination can significantly affect the results of the impairment tests.
Impairment Assessment on Equity Securities
Equity securities without readily determinable fair values that are accounted for using the measurement alternative are subject to periodic impairment reviews. Our impairment analysis considers both qualitative and quantitative factors that may have a significant effect on the fair value of these equity securities. Qualitative factors considered may include market environment and conditions, financial performance, business prospects, and other relevant events and factors. When indicators of impairment exist, we perform quantitative assessments of the fair value, which may include the use of market and income valuation approaches and the use of estimates, which may include discount rates, investees' liquidity and financial performance, and market data of comparable companies in similar industries. Judgment is required to determine the appropriateness of the valuation approaches and the weighting and impact of the abovementioned factors. Changes to this determination can significantly affect the results of the quantitative assessments.

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Depreciation and Amortization
The costs of property and equipment and intangible assets are charged ratably as depreciation and amortization expenses, respectively, over the estimated useful lives of the respective assets using the straight-line

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method. We periodically review changes in technology and industry conditions, asset retirement activity and residual values to determine adjustments to estimated remaining useful lives and depreciation and amortization rates. Actual economic lives may differ from estimated useful lives. Periodic reviews could result in a change in estimated useful lives and therefore depreciation and amortization expenses in future periods.
~~Allowance for Doubtful Accounts Relating to Loan and VAT Receivables~~
       We record allowances for doubtful accounts primarily on the micro loans and VAT receivables according to our best estimate of the losses inherent in the outstanding loan portfolio and VAT receivables. The credit periods extended by us to the merchants relating to micro loans generally range from 7 days to 360 days and the collection periods for the VAT receivables generally range from three to six months. We estimate the allowances by multiplying pre-determined percentages to the outstanding loan amounts based on the aging of the loans. Given that substantially all borrowers of the micro loans are merchants on our marketplaces, we are able to monitor the transaction history of these merchants and other operating data accumulated on our platforms, and assess the general financial health of these borrowers. VAT receivables mainly represent VAT receivables from relevant PRC tax authorities arising from OneTouch's VAT refund service. We monitor the aging of the VAT receivables and assess the collectability of these VAT receivables. Judgment is required to determine the percentages used to determine the allowance amounts and whether such amounts are adequate to cover potential bad debts, and periodic reviews are performed to ensure such percentages continue to reflect our best estimate of the inherent losses based on our assessment of the merchants' ability to repay the loans or the collectability of the VAT receivables. The micro loans and the allowance for doubtful accounts relating to micro loans balances were insignificant as of March 31, 2016 because we disposed substantially all of such business and assets upon the completion of the restructuring of our relationship with Ant Financial Services during the year ended March 31, 2015. See "Item 7. Major Shareholders and Related Party Transactions — B. Related Party Transactions — Agreements and Transactions Related to Ant Financial Services and its Subsidiaries — 2014 Restructuring of Our Relationship with Ant Financial Services and Alipay."
Recent Accounting Pronouncements
       In May 2014, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2014-09, "Revenue from Contracts with Customers," which supersedes the revenue recognition requirements in "Revenue Recognition (Topic 605)" and requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14 to defer the effective date of ASU 2014-09 by one year. In April 2016, the FASB issued ASU 2016-10 to clarify ASU 2014-09 on identifying performance obligations and licensing implementation guidance contained in the new revenue recognition standard. The new guidance is effective retrospectively for us for the year ending March 31, 2019 and the interim reporting periods during the year ending March 31, 2019, with early application permitted only for the annual reporting period ending March 31, 2018 and the interim reporting periods during the year ending March 31, 2018. We are evaluating the existing revenue recognition policies to determine whether any contracts in the scope of the guidance will be affected by the new requirements.
       In January 2015, the FASB issued ASU 2015-01, "Income Statement — Extraordinary and Unusual Items," which eliminates the concept of extraordinary and unusual items from U.S. GAAP. The new guidance is effective prospectively for us for the year end ending March 31, 2017 and interim reporting periods during the year ending March 31, 2017. Early adoption is permitted. The revised guidance will not have a material effect on our financial position, results of operations or cash flows. We are evaluating the effects, if any, of the adoption of this revised guidance on our financial position, results of operations or cash flows.
       In February 2015, the FASB issued ASU 2015-02, "Consolidation (Topic 810) — Amendments to the Consolidation Analysis," which amends the criteria for determining which entities are considered VIEs, amends the criteria for determining if a service provider possesses a variable interest in a VIE and ends the deferral granted to investment companies for application of the VIE consolidation model. The guidance is effective for us for the year

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ending March 31, 2017 and interim reporting periods during the year ending March 31, 2017. The guidance may be applied retrospectively or through a cumulative effect adjustment to equity as of the beginning of the year of adoption. Early application is permitted, including adoption in an interim period. We are evaluating the effects, if any, of the adoption of this revised guidance on our financial position, results of operations or cash flows.
       In April 2015, the FASB issued ASU 2015-03, "Simplifying the Presentation of Debt Issuance Costs," which requires debt issuance costs relating to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The new guidance is effective retrospectively for us for the year end ending March 31, 2017 and interim reporting periods during the year ending March 31, 2017. Early adoption is permitted. We are evaluating the effects, if any, of the adoption of this revised guidance on our financial position, results of operations or cash flows. At this time, we do not expect this accounting standard update to have a material impact on the financial statements.
       In September 2015, the FASB issued ASU 2015-16, "Business Combinations (Topic 805) — Simplifying the Accounting for Measurement-Period Adjustments," which eliminates the requirement to restate prior period financial statements for measurement period adjustments. The new guidance requires that the cumulative impact of a measurement period adjustment (including the impact on prior periods) be recognized in the reporting period in which the adjustment is identified. The new guidance is effective prospectively for us for the year end ending March 31, 2017 and interim reporting periods during the year ending March 31, 2017. Early adoption is permitted. We are evaluating the effects, if any, of the adoption of this revised guidance on our financial position, results of operations or cash flows.
       In November 2015, the FASB issued ASU 2015-17, "Income Taxes (Topic 740) — Balance Sheet Classification of Deferred Taxes," which simplifies the presentation of deferred income taxes by requiring deferred tax assets and liabilities be classified as noncurrent on the balance sheet. The new guidance is effective for us for the year ending March 31, 2018 and interim reporting periods during the year ending March 31, 2018. Early adoption is permitted. The new guidance may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. We are evaluating the effects, if any, of the adoption of this revised guidance on our financial position, results of operations or cash flows. At this time, we do not expect this accounting standard update to have a material impact on the financial statements.
       In January 2016, the FASB issued ASU 2016-01 "Financial Instruments-Overall (Subtopic 825-10) — Recognition and Measurement of Financial Assets and Financial Liabilities," which amends various aspects of the recognition, measurement, presentation, and disclosure for financial instruments. With respect to our consolidated financial statements, the most significant impact relates to the accounting for equity investments. It will impact the disclosure and presentation of financial assets and liabilities. The new guidance is effective for us for the year ending March 31, 2019 and interim reporting periods during the year ending March 31, 2019. Early adoption is permitted only for certain provisions. We are evaluating the effects, if any, of the adoption of this revised guidance on our financial position, results of operations or cash flows.
In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)" and issued certain transitional guidance and subsequent amendments between January 2018 and March 2019 within ASU 2018-01, ASU 2018-10, ASU 2018-11, ASU 2018-20 and ASU 2019-01 (collectively, including ASU 2016-02, "ASC 842"). ASU 2016-02 creates a new topic in ASC 842 "Leases" to ~~increase~~replace the current topic in ASC 840 "Leases," which increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the consolidated balance ~~sheet~~sheets and disclosing key information about leasing arrangements. ASU ~~2016-02 creates a new ASC~~ 842 ~~"Leases" to replace the previous ASC 840 "Leases." ASU 2016-02~~ affects both lessees and lessors, although for the latter the provisions are similar to the ~~previous~~current model, but are updated to align with certain changes to the lessee model and also the new revenue recognition provisions contained in ~~ASU 2014-09.~~ASC 606. The new guidance is effective for us for the year ending March 31, 2020 and interim reporting periods during the year ending March 31, 2020. We adopted the new guidance beginning on April 1, 2019 using the modified retrospective method, and no adjustment will be made to the comparative periods. As permitted under the transition guidance, we will carry forward the assessment of whether the contracts contain or are leases, classification of the leases and remaining lease terms. Based on our portfolio of leases as of March 31, 2019, approximately RMB24.9 billion of right-of-use assets and RMB19.4 billion of liabilities, primarily relating to property leases, will be recognized on our consolidated balance sheet upon adoption.
In June 2016, the FASB issued ASU 2016-13, "Financial Instruments — Credit Losses (Topic 326): Measurement on Credit Losses on Financial Instruments," and issued subsequent amendments to the initial guidance and transitional guidance between November 2018 and May 2019 within ASU 2018-19, ASU 2019-04 and ASU 2019-05. ASU 2016-13 introduces new guidance for credit losses on instruments within its scope. The new guidance introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade and other receivables, held-to-maturity debt securities, loans and net investments in leases. The new guidance also modifies the impairment model for available-for-sale debt securities and requires entities to determine whether all or a portion of the unrealized loss on an available-for-sale debt security is a credit loss. Further, the new guidance indicates that entities may not use the length of time a security has been in an unrealized loss position as a factor in concluding whether a credit loss exists. The new guidance is effective for us for the year ending March 31, 2021 and interim reporting periods during the year ending March 31, 2021. Early adoption is permitted for us for the year ending March 31, 2020 and interim reporting periods during the year ending March 31, 2020. We are evaluating the effects, if any, of the adoption of this guidance on our financial position, results of operations and cash flows.
In January 2017, the FASB issued ASU 2017-04, "Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment," which simplifies how an entity is required to test goodwill for impairment by eliminating step two from the goodwill impairment test. Step two of the goodwill impairment test measures a goodwill impairment loss by comparing the implied fair value of a reporting unit's goodwill with its carrying amount. The new guidance is effective prospectively for us for the year ending March 31, 2021 and interim reporting periods during the year ending March 31, 2021. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We are evaluating the effects, if any, of the adoption of this guidance on our financial position, results of operations and cash flows.
In August 2017, the FASB issued ASU 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities," and issued subsequent amendments to the initial guidance or transitional

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guidance within ASU 2019-04 in April 2019. ASU 2017-12 simplifies the application of hedge accounting and makes more financial and nonfinancial hedging strategies eligible for hedge accounting. It also amends the presentation and disclosure requirements and changes how companies assess effectiveness. The new guidance permits a qualitative effectiveness assessment for certain hedges instead of a quantitative test after the initial qualification, if the company can reasonably support an expectation of high effectiveness throughout the term of the hedge. Also, for cash flow hedges and net investment hedges, if the hedge is highly effective, all changes in the fair value of the derivative hedging instrument will be recorded in other comprehensive income. We adopted the new guidance prospectively beginning on April 1, 2019. At this time, we do not expect that the adoption of this guidance will have a material impact on our financial position, results of operations and cash flows.
In June 2018, the FASB issued ASU 2018-07, "Compensation — Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting," which expands the scope of ASC 718 to include share-based payment transactions for acquiring goods and services from non-employees. An entity should apply the requirements of ASC 718 to non-employee awards except for specific guidance on inputs to an option pricing model and the attribution of cost. The amendments specify that ASC 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor's own operations by issuing share-based payment awards. We adopted the new guidance beginning on April 1, 2019. The adoption of this guidance will impact the accounting of the share-based awards granted to non-employees but we do not expect that the adoption of this guidance will have a material impact on our financial position, results of operations and cash flows.
In August 2018, the FASB issued ASU 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement," which eliminates, adds and modifies certain disclosure requirements for fair value measurements as part of the FASB's disclosure framework project. The new guidance is effective for us for the year ending March 31, 2021 and interim reporting periods during the year ending March 31, 2021. Early adoption is permitted for the adoption of either the entire standard or only the provisions that eliminate or modify the requirements. We are evaluating the effects, if any, of the adoption of this guidance on the fair value disclosure in the consolidated financial statements.
In October 2018, the FASB issued ASU 2018-17, "Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities," which provides guidance that indirect interests held through related parties under common control will be considered on a proportional basis when determining whether fees paid to decision makers and service providers are variable interests. These indirect interests were previously treated the same as direct interests. The consideration of indirect interests on a proportional basis is consistent with how indirect interests held through related parties under common control are treated when determining if a reporting entity within a related party group is the primary beneficiary of a VIE. The new guidance is effective retrospectively for us for the year ending March 31, 2021 and interim reporting periods during the year ending March 31, 2021 with a cumulative-effect adjustment to retained earnings at the beginning of the earliest period presented. Early adoption is permitted. We are evaluating the effects, if any, of the adoption of this ~~revised~~ guidance on our financial position, results of operations orand cash flows.
In ~~March 2016,~~November 2018, the FASB issued ASU ~~2016-05 "Derivatives~~2018-18, "Collaborative Arrangements (Topic 808): Clarifying the Interaction Between Topic 808 and ~~Hedging: Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships,~~Topic 606." ~~which~~ASU 2018-18 clarifies that ~~a change~~elements of collaborative arrangements could qualify as transactions with customers in the ~~counterparty~~scope of ASC 606. The amendments require the application of existing guidance to determine the units of account in collaborative arrangement for purposes of identifying transactions with customers. For transactions outside the scope of ASC 606, companies can apply elements of ASC 606 or other relevant guidance by analogy, or apply a derivative instrument that has been designated as the hedging instrument under ASC 815 "Derivatives and hedging," does not, in and of itself, require dedesignation of that hedging relationship provided that all other

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~~hedge~~reasonable accounting ~~criteria continue to be met. The new guidance~~policy if there is no appropriate analogy. ASU 2018-18 is effective retrospectively for us for the year ending March 31, ~~2018~~2021 and interim reporting periods during the year ending March 31, ~~2018.~~2021. Early adoption is permitted. We are evaluating the effects, if any, of the adoption of this ~~revised~~ guidance on our financial position, results of operations orand cash flows.
In March ~~2016,~~2019, the FASB issued ASU ~~2016-06 "Derivatives~~2019-02, "Entertainment — Films — Other Assets — Film Costs (Subtopic 926-20) and ~~Hedging: Contingent Put~~Entertainment — Broadcasters — Intangibles — Goodwill and ~~Call Options in Debt Instruments" to clarify~~Other (Subtopic 920-350)".

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This guidance aligns the accounting guidance for production costs for (1) films and (2) episodic content produced for television series and streaming services. This new guidance also clarifies when a company should test films and license agreements for program material for impairment at the film-group level, amends the presentation and disclosure requirements for ~~assessing whether contingent call (put) options that can accelerate the payment~~produced or licensed content and addresses statement of principal on debt instruments are clearly and closely related to their debt hosts. An entity performing the assessment under the amendments is required to assess the embedded call (put) options solely in accordance with the four-step decision sequence. The amendments apply to all entities that are issuers of or investors in debt instruments (or hybrid financial instruments that are determined to have a debt host) with embedded call (put) options.cash flows classification for license arrangements. The new guidance is effective prospectively for us for the year ending March 31, ~~2018~~2021 and interim reporting periods during the year ending March 31, ~~2018.~~2021. Early adoption is permitted. We are evaluating the effects, if any, of the adoption of this ~~revised~~ guidance on ~~the Company's~~our financial position, results of operations orand cash flows.
In ~~March 2016,~~April 2019, the FASB issued ASU ~~2016-07 "Simplifying~~2019-04 "Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments." Apart from the ~~Transition~~amendments to ASU 2016-13 and ASU 2017-12 mentioned above, the ASU also included subsequent amendments to ASU 2016-01, which we adopted in April 2018. The guidance in relation to the ~~Equity Method of Accounting,"~~amendments to simplify the accounting for equity method investments, which eliminates the requirement in ASC 323 "Investments — equity method and joint ventures" that an entity retroactively adopt the equity method of accounting if an investment qualifies for use of the equity method as a result of an increase in the level of ownership or degree of influence. The amendments require that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor's previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. The new guidanceASU 2016-01 is effective for us for the year ending March 31, ~~2018~~2021 and interim reporting periods during the year ending March 31, ~~2018.~~2021. Early adoption is permitted. We are evaluating the effects, if any, of the adoption of ~~this revised~~these guidance on our financial position, results of operations ~~or cash flows.~~
       In March 2016, the FASB issued ASU 2016-09 "Improvements to Employee Share-Based Payment Accounting," to simplify the accounting for employee share-based payment transactions, including the income tax consequences, classification of excess tax benefits on the statement of cash flows, introduction of accounting policy election on forfeitures, and the change of the threshold of share withholding by employer for settlement of employees' tax without causing the award to be liability classified. The new guidance is effective for us for the year ending March 31, 2018 and interim reporting periods during the year ending March 31, 2018. Early adoption is permitted. We are evaluating the effects, if any, of the adoption of this revised guidance on our financial position, results of operations or cash flows.
C.  Research and Development, Patents and Licenses, etc.
Research and Development
We have built our core technology for our ~~e-commerce~~online and mobile commerce and cloud computing businesses in-house. ~~As of March 31, 2016, we employed over 18,000~~We employ research and development personnel ~~engaged in building~~to build our technology platform and ~~developing~~develop new online and mobile products. We recruit top and experienced talent locally and ~~oversea,~~overseas, and we have advanced training programs designed specifically for new campus hires.
Intellectual Property
We believe the protection of our trademarks, copyrights, domain names, trade names, trade secrets, patents and other proprietary rights is critical to our business. We rely on a combination of trademark, fair trade practice, copyright and trade secret protection laws and patent protection in China and other jurisdictions, as well as confidentiality procedures and contractual provisions to protect our intellectual property and our trademarks. We also enter into confidentiality and invention assignment agreements with all of our employees, and we rigorously control access to our proprietary technology and information. As of March 31, ~~2016,~~2019, we had ~~1,529~~5,536 issued patents and ~~2,141~~12,321 publicly filed patent applications in China and ~~1,387~~2,874 issued patents and ~~3,096~~9,163 publicly filed patent

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applications in various other countries and jurisdictions ~~internationally.~~globally. We do not know whether any of our pending patent applications will result in the issuance of patents or whether the examination process will require us to narrow our claims.
D.  Trend Information
Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the current fiscal year that are reasonably likely to have a material effect on our net revenues, income, profitability, liquidity or capital reserves, or that caused the disclosed financial information to be not necessarily indicative of future operating results or financial conditions.
E.  Off-Balance Sheet Arrangements
We did not have any material off-balance sheet arrangements in fiscal years ~~2014, 2015~~2017, 2018 or ~~2016.~~2019.

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F.     ~~Tabular Disclosure of~~  Contractual Obligations
The following table sets forth our contractual obligations and commercial commitments as of March 31, ~~2016:~~2019.

Payment due by period Payment due by period

Total Less than
1 Year 1-3
Years 3-5
Years More than
5 Years Total Less than
1 Year 1 – 3
Years 3 – 5
Years More than
5 Years

(in millions of RMB)
(in millions of RMB)

Contractual Obligations

Short term borrowings⁽¹⁾
4,304 4,304 — — —
Long term borrowings⁽²⁾
1,871 — 1,202 669 —
Unsecured senior notes⁽³⁾
51,726 — 8,405 14,548 28,773
Short-term borrowings⁽¹⁾
7,358 7,358 — — —
Long-term borrowings⁽²⁾
8,647 — 1,935 1,136 5,576
US$4.0 billion syndicated loan denominated in US$⁽³⁾
26,892 — 26,892 — —
Unsecured senior notes⁽⁴⁾
92,106 15,127 10,084 4,706 62,189
Contractual Commitments

Purchase of property and equipment
803 796 7 — — 5,656 4,417 1,228 11 —
Construction in progress
1,688 1,500 185 3 —
Construction of corporate campus
3,576 2,265 1,225 40 46
Leases for office facility and transportation equipment
900 394 330 111 65 31,005 4,984 6,326 4,349 15,346
Co-location, bandwidth fees and marketing expenses
8,422 2,680 2,733 2,186 823
Investment commitments⁽⁴⁾
65,597 65,597 — — —
Acquisition of license and copyrights
3,770 885 1,627 1,258 —

Licensed copyrights, co-location, bandwidth fees and marketing expenses
49,023 21,768 15,023 7,268 4,964
Investment commitments⁽⁵⁾
23,954 23,954 — — —

Total
139,081 76,156 14,489 18,775 29,661 248,217 79,873 62,713 17,510 88,121

(1)
Excluding estimated interest payments of ~~RMB61~~RMB87 million assuming the applicable interest rates in effect as of March 31, ~~2016.~~2019. The majority of the borrowings are subject to floating interest rates.

(2)
Excluding estimated interest payments of ~~RMB254~~RMB2,446 million in total ~~(RMB99~~(RMB405 million, ~~RMB132~~RMB727 million, RMB599 million and RMB23 million over the periods of less than one year, one to three years and three to five years from April 1, 2016, respectively), assuming the applicable interest rates in effect as of March 31, 2016. Substantially all of the borrowings are subject to floating interest rates.
~~(3)~~
~~Excluding estimated interest payments of RMB11,588 million in total (RMB1,522 million, RMB2,873 million, RMB2,300 million and RMB4,893~~RMB715 million over the periods of less than one year, one to three years, three to five years and more than five years from April 1, ~~2016,~~2019, respectively), assuming the applicable interest rates in effect as of March 31, ~~2016. Aggregate principal amount~~2019. Substantially all of ~~fixed~~the borrowings are subject to floating interest rates.

(3)
Excluding estimated interest payments of RMB2,054 million in total (RMB982 million and RMB1,072 million over the periods of less than one year and one to three years from April 1, 2019, respectively), assuming the applicable interest rate ~~notes~~in effect as of March 31, 2019. The syndicated loan is subject to a floating interest rate. In May 2019, we amended the pricing of the loans to 85 basis points over LIBOR and ~~floating rate notes were US$7.7 billion and US$300 million respectively.~~extended the maturity to May 2024.

(4)
Excluding estimated interest payments of RMB43,697 million in total (RMB3,094 million, RMB5,551 million, RMB4,951 million and RMB30,101 million over the periods of less than one year, one to three years, three to five years and more than five years from April 1, 2019, respectively). The unsecured senior notes are subject to fixed interest rates.

(5)
Including the consideration for the ~~acquisitions~~investments related to STO Express, Focus Media and the remaining committed capital of ~~Youku Tudou~~certain investment funds.
In addition, according to our partnership arrangement with the International Olympic Committee, we will provide at least US$815 million worth of ~~RMB28.4 billion, which was completed~~cash, cloud infrastructure services and cloud computing services, as well as marketing and media support through 2028, in ~~April 2016,~~connection with various Olympic initiatives, events and activities, including the Olympic Games and the Winter Olympic Games. As of ~~Suning~~March 31, 2019, the aggregate amount of ~~RMB28.2 billion, which is expected~~cash to be ~~completed~~paid and value of services to be provided in the future is approximately US$738 million.
In May 2019, Hong Kong Cingleot Investment Management Limited ("Cingleot"), a company that is partially owned by Cainiao Network, entered into a facility agreement for a term loan of HK$7.7 billion (US$1.0 billion) to fund a logistics center project at Hong Kong International Airport. Alibaba acts as a guarantor for the ~~end~~term loan. As of the ~~quarter ending June 30, 2016.~~date of this annual report, Cingleot has not drawn down the term loan.
G.  Safe Harbor
See "Forward-Looking Statements."

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ITEM 6    DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A.  Directors and Senior Management
~~Directors and Executive Officers~~
The following table sets forth certain information relating to our directors and executive officers.
Name
Age Position/Title
Jack Yun MA ^†(1)(c)
5154 Executive Chairman
Joseph C. TSAI ^†(2)(a)
5255 Executive ~~Vice Chairman~~
~~Jonathan Zhaoxi LU~~ ^†(1)
46 Vice Chairman
Daniel Yong ZHANG ^†(1)(b)
4447 Director and Chief Executive Officer
J. Michael EVANS ^†(2)(a)
5861 Director and President
~~Masayoshi SON~~Eric Xiandong JING ^{‡(3)†(2)(a)}
5846 Director
Masayoshi SON ^‡(3)(c)
61 Director
Chee Hwa TUNG^(2)(b)
7982 Independent director
Walter Teh Ming KWAUK^(2)(c)
6366 Independent director
Jerry YANG^(2)(b)
4750 Independent director
E. Börje E. EKHOLM^(2)(a)
5356 Independent director
Wan Ling MARTELLO^(2)(b)
5861 Independent director
Maggie Wei WU⁽²⁾
4851 Chief Financial Officer
~~Jane Fang JIANG~~Judy Wenhong TONG⁽¹⁾
4248 Chief People Officer
Jeff Jianfeng ZHANG⁽¹⁾
4245 Chief Technology Officer and President, Alibaba Cloud Intelligence
~~Zhenfei LIU~~Sophie Minzhi WU⁽¹⁾
44 ~~Chief Risk Officer~~
~~Trudy Shan DAI~~⁽¹⁾
3943 Chief Customer Officer
Timothy A. STEINERT⁽²⁾
5659 General Counsel and Secretary
~~Jianhang JIN~~Jessie Junfang ZHENG⁽¹⁾
4645 ~~President~~Chief Risk Officer and Chief Platform Governance Officer
Chris Pen-hung TUNG⁽¹⁾
4649 Chief Marketing Officer
~~Yongfu YU~~⁽¹⁾
39 ~~President, Mobile Internet and Alimama~~
~~Simon Xiaoming HU~~⁽¹⁾
46 ~~President, Alibaba Cloud Computing~~
~~Sophie Minzhi WU~~⁽¹⁾
40 ~~President, Wholesale Marketplaces~~
~~Jessie Junfang ZHENG~~Trudy Shan DAI⁽¹⁾
42 ~~Chief Platform Governance Officer~~President, Wholesale Marketplaces
Fan JIANG⁽¹⁾
33 President, Taobao and ~~Deputy Chief Financial Officer~~Tmall
Yvonne Yifen CHANG⁽¹⁾
53 President, Alimama
Luyuan FAN⁽¹⁾
45 President, Alibaba Digital Media and Entertainment
†
Director nominated by the Alibaba Partnership.

‡
Director nominated by SoftBank.

(a)
Group I directors. Current term of office will expire at our 2021 annual general meeting.

(b)
Group II directors. Current term of office will expire at our 2019 annual general meeting.

(c)
Group III directors. Current term of office will expire at our 2020 annual general meeting.

(1)
c/o 969 West Wen Yi Road, Yu Hang District, Hangzhou 311121, the People's Republic of China.

(2)
c/o Alibaba Group Services Limited, 26/F Tower One, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong S.A.R.

(3)
SoftBank Group Corp., 1-9-1 Higashi-shimbashi, Minato-ku, Tokyo, 105-7303, Japan.
Biographical Information
Jack Yun MA ( ) is our lead founder and, since May 2013, has served as our executive chairman. From our founding in 1999 ~~and until~~through May 2013, Jack served as our chairman and chief executive officer. He is also the founder of the Zhejiang-based Jack Ma Foundation. Jack currently serves on the board of SoftBank Group Corp., one of our major shareholders and a Japanese corporation listed on the Tokyo Stock Exchange. He is also a member of the ~~Foundation~~ Board of Trustees of the World Economic Forum, ~~a member of the U.K. government's Business Advisory Group,~~ chairman of the Zhejiang Chamber of Commerce, as well as chairman of the China Entrepreneur Club. In ~~January 2016,~~May 2019, he was ~~named~~renamed as a Sustainable

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Development Goals (SDGs) advocate by the United Nations. Jack graduated from Hangzhou Teacher's Institute with a major in English language education.
Joseph C. TSAI ( )) joined our company in 1999 as a member of the Alibaba founding team and has served ason our board of directors since our inception. He was chief financial officer until 2013 and is currently our executive vice ~~chairman since May 2013.~~chairman. He ~~has been~~serves on our investment committee and Ant Financial's investment committee, and is a ~~non-executive director~~founding member of Alibaba ~~Health since September 2015. Joe previously served as our chief financial officer and has been a member of our board of~~

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~~directors since our formation.~~Partnership. From 1995 to 1999, ~~Joe worked~~he was a private equity investor based in Hong Kong with Investor AB, the main investment vehicle of Sweden's Wallenberg ~~family, where he was responsible for Asian private equity investments.~~family. Prior to that, he was ~~vice president and~~ general counsel of Rosecliff, Inc., a management buyout firm based in New York. From 1990 to 1993, Joe was an associate attorney in the tax group of Sullivan & Cromwell LLP, a New York-based international law firm. Joe ~~serves on the boards of directors of several of our investee companies. Joe~~ is qualified to practice law in the State of New York. He received his bachelor's degree in Economics and East Asian Studies from Yale College and a juris doctor degree from Yale Law School.
~~Jonathan Zhaoxi LU ( )~~ has been our director since September 2014 and vice chairman since May 2015. Jonathan joined our company in 2000 and served as chief executive officer from May 2013 to May 2015. Mr. Lu has at different points served as the top executive officer of almost all of our key business units. He has previously served as our chief data officer and also oversaw our YunOS division. Before that, he served as chief executive officer of Alibaba.com from February 2011 until its privatization in 2012. He joined Taobao in January 2008 and served as its chief executive officer from January 2010 to June 2011. In September 2004, he led a dedicated team to establish Alipay and became Alipay's first president. From 2000 to 2004, Jonathan held several leadership roles at Alibaba.com and managed its South China sales region. Before joining Alibaba Group, Jonathan was co-founder of a network communications company. Since May 2014, Jonathan has served on the board of directors of Youku Tudou. Jonathan received a graduate certificate in hotel management from Guangzhou University and a master's degree in business administration from China Europe International Business School.
Daniel Yong ZHANG ( )) has been our Chief Executive Officer since May 2015 and our director since September 2014. Mr. Zhang is also currently a member of Ant Financial's investment committee. Prior to his current role, he served as our Chief Operating Officer from September 2013 to May 2015. He joined our company in August 2007 as Chief Financial Officer of Taobao Marketplace and served in this position until June 2011. He took on the additional role of general manager for Tmall.com in August 2008, which he ~~served in concurrence~~performed concurrently until his appointment as president of Tmall.com in June 2011 when Tmall.com became an independent platform. Prior to joining Alibaba, ~~Daniel~~Mr. Zhang served as Chief Financial Officer of Shanda Interactive Entertainment Limited, an online game developer and operator then listed on ~~NASDAQ,~~Nasdaq, from ~~August~~September 2005 to August 2007. From 2002 to 2005, he was a senior ~~executive~~manager of PricewaterhouseCoopers' Audit and Business Advisory Division in Shanghai. ~~Daniel~~Mr. Zhang is ~~Chairman~~the chairman of ~~Intime Retail,~~Sun Art, a company listed on ~~SEHK, and~~the Hong Kong Stock Exchange. He also serves on the ~~boards~~board of ~~Haier, a company listed on SEHK, and~~ Weibo, a company listed on ~~NYSE. Daniel~~the Nasdaq. Mr. Zhang received a bachelor's degree in finance from Shanghai University of Finance and Economics.
J. Michael EVANS has been our president since August 2015 and our director since September 2014. Mr. Evans served as Vice Chairman of The Goldman Sachs Group, Inc. from February 2008 until his retirement in December 2013. Mr. Evans served as chairman of Asia operations at Goldman Sachs from 2004 to 2013 and was the global head of Growth Markets at Goldman Sachs from January 2011 to December 2013. He also co-chaired the Business Standards Committee of Goldman Sachs from 2010 to 2013. Mr. Evans joined Goldman Sachs in 1993, became a partner of the firm in 1994 and held various leadership positions within the firm's securities business while based in New York and London, including global head of equity capital markets and global co-head of the equities division, and global co-head of the securities business. Mr. Evans is a board member of City Harvest. He is also a trustee of the Asia Society and a member of the Advisory Council for the Bendheim Center for Finance at Princeton University. In August 2014, Mr. Evans joined the board of Barrick Gold Corporation. ~~In October 2014, Mr. Evans was appointed as an independent board member of Castleton Commodities International LLC.~~ Mr. Evans received his bachelor's degree in politics from Princeton University in 1981.
Eric Xiandong JING () has been our director since September 2016. He is currently the chief executive officer of Ant Financial, and has also served as chairman of Ant Financial starting in April 2018. Prior to his current position, Mr. Jing served as president of Ant Financial from June 2015 to October 2016, and chief operating officer of Ant Financial from October 2014 to June 2015. Prior to that, he served as Alipay's chief financial officer. Before joining Alipay in September 2009, he was senior corporate finance director and corporate finance vice president of Alibaba.com from 2007 to 2009. Previously, Mr. Jing was the chief financial officer of Guangzhou Pepsi Cola Beverage Co. from 2004 to 2006. He also held management positions in several Coca-Cola bottling companies across China. Currently, Mr. Jing also serves as a director of Hundsun Technologies, a company listed on the Shanghai Stock Exchange. Mr. Jing received an MBA degree from the Carlson School of Management at the University of Minnesota and a bachelor's degree in economics from Shanghai Jiao Tong University.
Masayoshi SON has been our director since ~~2000 and~~2005. Mr. Son is the founder, ~~chairman~~Chairman and ~~chief executive officer~~CEO of SoftBank Group Corp. (SBG), a ~~Japanese corporation listed on~~global technology company that aspires to drive the ~~Tokyo Stock Exchange, with operations~~Information Revolution. Founded in ~~broadband, mobile~~1981, SBG and ~~fixed-line~~its portfolio companies cover a range of technologies, including advanced telecommunications, ~~e-commerce,~~ Internet technology services, media and marketing, and other businesses. Mr. Son founded SoftBank Group Corp. in 1981. Mr. Son also serves as chairman and chief executive officer of several other SoftBank subsidiaries and affiliates, including SoftBank Corp. as well as serving

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asservices, AI, smart robotics, IoT and clean energy. Mr Son is also the chairman of SoftBank Corp., the domestic telecommunications subsidiary of SBG, director of Yahoo Japan Corporation ~~since 1996,~~ and Director of Sprint ~~Corporation since 2013.~~Corporation. He also serves as Chairman and Director of Arm Limited. Mr. Son received a bachelor's degree in Economics from the University of California, Berkeley.
Chee Hwa TUNG ( )) has been our director since September 2014 and is the Vice Chairman of the ~~Twelfth~~Thirteenth National Committee of the Chinese People's Political Consultative Conference of the PRC, which is an important institution of multiparty cooperation and political consultation in the PRC. Mr. Tung is the Founding Chairman of the China-United States Exchange Foundation, which is a non-profit organization registered in Hong Kong to promote understanding and strengthening relationships between China and the United States. Mr. Tung is also the chairman of Our Hong Kong Foundation Limited, a non-government, non-profit organization dedicated to promoting the long-term and overall interests of Hong Kong. Mr. Tung also serves in various public sector and advisory positions, including as a member of the J.P. Morgan International Council, the China Development Bank International Advisory Committee and the Advisory Board of the Schwarzman Scholars Program at Tsinghua University. Prior to these appointments, Mr. Tung served as the First Chief Executive of the Hong Kong Special Administrative Region from July 1997 to March 2005. Mr. Tung had a successful and distinguished career in business, including serving as the Chairman and Chief Executive Officer of Orient Overseas (International) Limited, aan SEHK-listed company with its principal business activities in container transport and logistics services on a global scale. Mr. Tung is also the chairman and chief executive officer of Our Hong Kong Foundation Limited, a non-government, non-profit organization dedicated to promoting the long-term and overall interests of Hong Kong. Mr. Tung received a bachelor's degree in science from the University of Liverpool.
Walter Teh Ming KWAUK ( )) has been our director since September 2014. He previously served as an independent non-executive director and chairman of the audit committee of Alibaba.com Limited, one of our subsidiaries, which was listed on the SEHK, from October 2007 to July 2012. Mr. Kwauk is currently a senior ~~consultant~~adviser of Motorola Solutions (China) Co., Ltd. and serves as an independent non-executive director and chairman of ~~Thunder Power Co. Ltd., a Taiwan company with its shares traded on Taiwan's Gre Tai Securities Market;~~the audit committee of each of Sinosoft Technology Group Limited, a company listed on the SEHK, ~~of which Mr. Kwauk is also~~and WuXi Biologics (Cayman) Inc., a company listed on the ~~chairman~~SEHK and Hua Medicine (Shanghai) Ltd., a company listed on the SEHK, and as a director of ~~its audit committee; and~~ several private companies. Mr. Kwauk was a vice president of Motorola Solutions, Inc. and its director of corporate strategic finance and tax, Asia Pacific from 2003 to 2012. Mr. Kwauk served with KPMG from 1977 to 2002 and held a number of senior positions, including the general manager of KPMG's joint venture accounting firm in Beijing, the managing partner in KPMG's Shanghai office and a partner in KPMG's Hong Kong Office. He is a member of the Hong Kong Institute of Certified Public Accountants. Mr. Kwauk received a bachelor's degree in science and a licentiate's degree in accounting from the University of British Columbia.
Jerry YANG ( )) has been our director since September 2014. Mr. Yang previously served as our director from October 2005 to January 2012. Since March 2012, Mr. Yang has served as the founding partner of AME Cloud Ventures, a venture capital firm. Mr. Yang is a co-founder of Yahoo! Inc., and served as Chief Yahoo! and as a member of its board of directors from March 1995 to January 2012. In addition, he served as Yahoo!'s Chief Executive Officer from June 2007 to January 2009. From January 1996 to January 2012, Mr. Yang served as a director of Yahoo! Japan. Mr. Yang also served as an independent director of Cisco Systems, Inc. from July 2000 to November 2012. He is currently an independent director of Workday Inc., a company listed on the New York Stock Exchange, and Lenovo Group Ltd., a company listed on the SEHK. He also serves as a director of various private companies and foundations. Mr. Yang received a bachelor's degree and a master's degree in electrical engineering from Stanford University, ~~and served~~where he is serving on ~~Stanford~~the University's ~~board~~Board of ~~trustees~~Trustees beginning in October 2017. He was previously on Stanford's Board of Trustees from ~~October~~ 2005 to ~~September 2015.~~2015, including being a vice chair.
E. Börje E. EKHOLM has been our director since June 2015. Mr. Ekholm is ~~currently~~since January 2017 the president and Chief Executive Officer of Ericsson. Prior to his current position, Mr. Ekholm was head of Patricia Industries, a newly created division of Investor AB, a Swedish investment company, where he has held a variety of management positions since joining the firm in 1992. ~~Prior to his current position,~~ Mr. Ekholm served as president and ~~chief executive officer~~Chief Executive Officer and a member of the board of directors of Investor ~~AB.~~AB from September 2005 to May 2015. Prior to becoming president and ~~chief executive officer in 2005,~~Chief Executive Officer, Mr. Ekholm was a member of the management group of Investor AB. Previously, Mr. Ekholm worked at McKinsey & Co. Inc. Mr. Ekholm is currently ~~the non-executive chairman of NASDAQ OMX Inc. and also~~ serves as a ~~director~~member of ~~Chalmers Innovation AB, Telefonaktiebolaget LM~~the board of Ericsson, ~~KTH Royal Institute of Technology, Choate Rosemary Hall and NASDAQ-listed Trimble Navigation Ltd.~~

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as a member of the board of the Swedish American Chamber of Commerce in New York and as a member of the board of trustees of the independent school Choate Rosemary Hall. Mr. Ekholm received a master's degree in electrical engineering from KTH Royal Institute of Technology and a master's degree in business administration from INSEAD.
Wan Ling MARTELLO has been our director since September 2015. She ~~is currently~~served as the executive vice president ~~head~~and chief executive officer of ~~zone~~the Asia, Oceania, ~~Sub-Saharan~~and Subsaharan Africa ofregion for Nestlé ~~S.A.~~SA from May 2015 to December 2018. She was Nestlé's global chief financial officer from April 2012 to May 2015, and executive vice president from November 2011 to March 2012. Prior to ~~this appointment,~~Nestlé, Ms. Martello was a senior executive ~~vice president, chief financial officer of Nestlé S.A., and joined the company in November 2011. Before joining Nestlé S.A., Ms. Martello worked~~ at Walmart Stores Inc. from 2005 to ~~2011 where she served as~~2011. Her roles included executive vice president ~~global ecommerce,~~and chief operating officer for Global eCommerce, and senior vice president, ~~and~~ chief financial officer and strategy for Walmart ~~International, at different times. Prior to that, Ms. Martello worked~~International. Before Walmart, she was president, U.S.A. at NCH Marketing Services Inc. She was with the firm from 1998 to ~~2005 and~~2005. She also worked at Borden Foods Corporation ~~from 1995 to 1998,~~and Kraft Inc. where she held various senior management positions. ~~Previously, Ms. Martello worked at Kraft Foods, Inc. from 1985 to 1995.~~ Ms. Martello received a master's degree in business administration (management information systems) from the University of Minnesota and a bachelor's degree in business administration and accountancy from the University of the Philippines. ~~She is a certified public accountant in the Philippines.~~
Maggie Wei WU ( )) has been our chief financial officer since ~~May 2013. Maggie served as our deputy chief financial officer from October 2011 to~~ May 2013. Maggie joined our company in July 2007 as chief financial officer of Alibaba.com and was responsible for instituting Alibaba.com's financial systems and organization leading up to its initial public offering in Hong Kong in November of that year, as well as co- leading the privatization of Alibaba.com in 2012.Alibaba.com. She was voted best CFO in FinanceAsia's annual poll for Asia's Best Managed Companies in 2010. In 2018, she was named one of the world's 100 most powerful women by Forbes. Before joining ~~our company,~~Alibaba, Maggie was an audit partner at KPMG in Beijing. In her 15 years with KPMG, she was lead audit partner for the initial public offerings and audits of several major large-cap Chinese companies listed in international capital markets and provided audit and advisory services to major multinational corporations operating in China. Maggie is a member of the Association of Chartered Certified Accountants (ACCA) ~~and a member of the Chinese Institute of Certified Public Accountants.~~. She received a bachelor's degree in accounting from Capital University of Economics and Business.
Judy Wenhong TONG (~~Jane Fang JIANG ( )~~ ~~joined our company in 1999 as a member of our founding team and was appointed~~) has been our chief people officer since January 2017. Since joining our company in ~~April 2016. She is currently responsible for strategy~~2000, she has served as director and ~~execution~~senior director in various departments in our company, including administration, customer service and human resources. Between 2007 and 2013, she served as vice president and senior vice president in various departments, including construction, real estate and procurement. Starting in 2013, Ms. Tong led the formation of ~~our talent~~Cainiao Network and ~~organizational culture development~~served at various times as chief operating officer, president, chief executive officer and non-executive chairwoman, overseeing ~~our integrity department. Jane has held a number~~the operations of ~~senior management roles in different departments within~~ the company, at different times leading China TrustPass product planning, business analysis, global operations, website operations and marketing for Alibaba.com, as well as credit system development. Prior to her current position, she was our deputy chief people officer. Janecompany. Ms. Tong received a bachelor's degree ~~in industry and foreign trade~~ from ~~the Hangzhou Institute of Electrical Engineering.~~Zhejiang University.
Jeff Jianfeng ZHANG ( )) has served as our chief technology officer since April ~~2016. Prior to his current position, Jeff~~2016 and president of Alibaba Cloud Intelligence since November 2018. Previously, Mr. Zhang was president of China retail marketplaces from May 2015 to April 2016, and president of Taobao Marketplace and the wireless business division prior to that. He joined our company in July 2004 and has held various management positions, at different times leading Taobao Marketplace's technology ~~infrastructure team,~~teams, the B2C development team, and Taobao Marketplace's product technology development team from 2004 to 2011. He served as vice president of product technology and operations of Taobao Marketplace from June 2011 to March 2012, and vice president of website and technology of Alibaba.com's China operations, ~~from March 2012 to January 2013. From January 2013 to February 2014, he oversaw Juhuasuan,~~ local services, 1688.com, and Tmall.com. ~~Jeff~~Mr. Zhang studied computer science at Zhejiang University.
Sophie Minzhi WU (~~Zhenfei LIU ( )~~) has been our chief customer officer since January 2017. Prior to her current position, Ms. Wu served as president of Alibaba.com and 1688.com, our international and China wholesale marketplaces. From October 2014 to February 2015, she also led the Rural Taobao team. Previously, she was vice president of Alibaba.com's supplier service division, responsible for leading her team to optimize service to China Gold Supplier members and enhancing supplier quality. In July 2012, she was appointed the head of Alibaba.com's international operations and later also took charge of 1688.com. Ms. Wu joined our company in November 2000 and has served in several sales management roles, including general manager of regional sales, director and vice president of China Gold Supplier sales, and vice president of China TrustPass sales. Before joining Alibaba Group, Ms. Wu was sales and customer manager at a technology development company wholly owned by Zhejiang University. She holds a bachelor's degree in international trade from Zhejiang University and an EMBA degree from China Europe International Business School.
Timothy A. STEINERT has been our general counsel since July 2007 and also serves as our secretary. Mr. Steinert represents Alibaba on the NYSE Listed Company Advisory Board. From 1999 until he joined our company, Mr. Steinert was a partner in the Hong Kong office of Freshfields Bruckhaus Deringer. From 1994 to 1999, he was

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an associate attorney at Davis Polk & Wardwell in Hong Kong and New York, and from 1989 to 1994, he was an associate attorney at Coudert Brothers in Beijing and New York. Mr. Steinert is qualified to practice law in the State of New York and in Hong Kong. He received a bachelor's degree in history from Yale College and a juris doctor degree from Columbia University School of Law.
Jessie Junfang ZHENG () has been our chief risk officer since ~~May 2015.~~December 2017, responsible for data and information security across our platforms, and our chief platform governance officer since December 2015, responsible for the governance of our retail and wholesale marketplaces. Prior to her current position, she served as our deputy chief financial officer from November 2013 to June 2016, and financial vice president of Alibaba.com from December 2010 to October 2013. Before joining our company, Ms. Zheng was an audit partner at KPMG. Jessie received a bachelor's degree in accounting from Northeastern University in China.
Chris Pen-hung TUNG () joined our company as chief marketing officer in January 2016. He was also president of Alimama from November 2017 to November 2018. Prior to his current position, ~~Zhenfei~~he was the chief executive officer of VML China, a marketing agency, from October 2010 to January 2016. Prior to joining VML, he was at PepsiCo China from October 2004 to October 2010 where he served as vice president of marketing. Prior to that, Mr. Tung worked at Proctor & Gamble from 1995 to 1998, Gigamedia from 1998 to 2001 and L'Oréal from 2001 to 2003 in various senior management ~~positions since he joined us in 2006.~~positions. He ~~was head~~is currently a director of our infrastructure services division from September 2009 to March 2016, and concurrently served as head of our security technology division from May 2014 to May 2015. Prior to those roles, he was head of Alimama's advertising technology team. ZhenfeiRuhnn Holding Limited, a company listed on Nasdaq. He received ~~his~~a bachelor's degree in ~~computer science~~electrical engineering from National Taiwan University ~~of Science~~ and ~~Technology Beijing and holds~~ a master's degree in ~~computer science~~industrial engineering from ~~Peking University.~~University of Michigan, Ann Arbor.
Trudy Shan DAI ( )) joined our company in 1999 as a member of our founding team and has been president of Alibaba.com and 1688.com, our ~~chief customer officer~~international and China wholesale marketplaces since ~~June 2014.~~January 2017, as well as of AliExpress, our international retail marketplace. Prior to her current position, ~~Trudy~~Ms. Dai was our chief customer officer from June 2014 to January 2017 and served as senior vice president of human resources and administration of Taobao and Alibaba.com as well as our deputy chief people officer and

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chief people officer from 2009 to 2014. She was general manager of Alibaba.com's international operations from 2007 to 2008. Prior to that, she was vice president of human resources of China Yahoo! and the first general manager of Alibaba.com's Guangzhou branch, in charge of field and telephone sales, marketing and human resources in Guangdong Province. From 2002 to 2005, ~~Trudy~~Ms. Dai served as senior sales director of China TrustPass in Alibaba.com's China marketplace division. She received a bachelor's degree in engineering from Hangzhou Institute of Electrical Engineering.
~~Timothy A. STEINERT~~Fan JIANG has been our general counsel since July 2007 and also serves as our secretary. From 1999 until he joined our company, Tim was a partner in the Hong Kong office of Freshfields Bruckhaus Deringer. From 1994 to 1999, he was an associate attorney at Davis Polk & Wardwell in Hong Kong and New York, and from 1989 to 1994, he was an associate attorney at Coudert Brothers in Beijing and New York. Tim is qualified to practice law in the State of New York and in Hong Kong. He received a bachelor's degree in history from Yale College and a juris doctor degree from Columbia University School of Law.(
~~Jianhang JIN ( )~~ ~~joined our company in 1999~~) has served as ~~a member of our founding team and was appointed the~~ president of ~~our company in August 2014.~~Taobao since December 2017 and president of Tmall since March 2019. Prior to his current position, he had been responsible for the Taobao app since joining our company in August 2013. Previously, he founded and served as ~~senior~~the chief executive officer of Umeng, a provider of mobile app analytics solutions for developers which we acquired. Before founding Umeng in 2010, he worked in product development at Google China. Mr. Jiang received a bachelor's degree in computer science from Fudan University.
Yvonne Yifen CHANG () rejoined our company as president of Alimama in November 2018. From May 2007 to April 2009, she was our vice president of ~~corporate affairs~~pay-for-performance, search engine and monetization. From August 2016 to November 2018, Ms. Chang was the executive vice president, Asia Pacific, of global advertising technology firm Criteo, where she oversaw operations in Australia, China, India, Japan, Singapore and South Korea. Prior to that, from ~~September~~December 2014 to May 2016, Ms. Chang was president of Eastern Broadcasting, one of Taiwan's largest media companies, after working at Yahoo! from 2009 to ~~July~~ 2014, ~~and from March 2007 to December 2007. He also served as general manager of China Yahoo! (later Yahoo! Koubei) from January 2008 to August 2009 and~~where she was vice president of ~~human resources~~advertising solutions for Asia Pacific and managing director for India and Southeast Asia. She brings more than 15 years of experience in leadership roles within the CEO office from January 2006 to February 2007. As a founding member, he has served in a variety of other management roles at different times since our company's inception, including heading the marketing and website operations functions for one of our marketplaces. Headvertising technology industry. Ms. Chang received a bachelor's degree in journalism from ~~Fudan University.~~
~~Chris Pen-hung TUNG ( )~~ joined our company as chief marketing officer in January 2016. Prior to his current position, he was the chief executive officer of VML China, a marketing agency, from October 2010 to January 2016. Prior to joining VML, he was at PepsiCo China from October 2004 to October 2010 where he served as vice president of marketing. Prior to that, Chris worked at Proctor & Gamble from 1995 to 1998, Gigamedia from 1998 to 2001 and L'Oréal from 2001 to 2003 in various senior management positions. Chris currently serves as a director of VML China. He received a bachelor's degree in electrical engineering fromTaiwan National ~~Taiwan~~Chengchi University and a master's degree in ~~industrial engineering~~business administration from the University of ~~Michigan, Ann Arbor.~~Texas at Austin.
Luyuan FAN (~~Yongfu YU ( )~~) has served as president of ~~Mobile Internet~~our Digital Media & Entertainment Group since November 2018. He has been an executive director of Alibaba Pictures since January 2016, and ~~Alimama since May 2015. Prior to his current position, Yongfu served~~currently serves as ~~president of UCWeb after he joined our company in June 2014 and president of AutoNavi from March 2015. From 2006 to June 2014, Yongfu was chairman and~~the chief executive officer and chairman of ~~UCWeb before it became our wholly-owned subsidiary. Prior to that, Yongfu was~~Alibaba Pictures. He joined Alipay in 2007, where he served in a ~~vice~~number of senior management positions, including the president of Alipay and ~~associate with Legend Capital from 2001 to 2006. He also serves as~~the president of Ant Financial's wealth management business. Mr. Fan holds an ~~independent director and a member of the audit committee of Xunlei Limited, a NASDAQ-listed company. Yongfu received a bachelor's~~executive master's degree in business administration from ~~Nankai University.~~
~~Simon Xiaoming HU ( )~~ ~~has been the president~~Cheung Kong Graduate School of Alibaba Cloud Computing since November 2014. Prior to his current position, Simon served in various management positions at our company and at Ant Financial Services since he joined us in June 2005. He served as chief risk officer of Ant Financial Services from November 2013 to October 2014. From July 2009 to November 2013, he was general manager of our SME loan business. Before joining our company, Simon worked in financial institutions including China Construction Bank and China Everbright Bank for over ten years. He serves as an independent director of Zhejiang Daily Media Group Co., Ltd., a company listed on the Shanghai Stock Exchange, and a director of Hundsun Technologies Inc., a Company listed on the Shanghai Stock Exchange. Simon received a bachelor's degree in finance from Zhejiang University and an executive MBA degree from China Europe International Business School.
~~Sophie Minzhi WU ( )~~ has served as president of Alibaba.com and 1688.com, our international and China wholesale marketplaces. Sophie joined our company in November 2000 and has served in several sales management roles, including general manager of regional sales, director and vice president of China Gold Supplier sales, and vice president of China TrustPass sales. Later, Sophie became vice president of Alibaba.com's supplierBusiness.

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service division, responsible for leading her team to optimize service to China Gold Supplier members and enhance supplier quality. In March 2012, she was appointed the head of Alibaba.com's international operations and later also took charge of 1688.com. From October 2014 to February 2015, she also led the Rural Taobao team. Before joining Alibaba Group, Sophie was sales and customer manager at a technology development company wholly owned by Zhejiang University. She holds a bachelor's degree in international trade from Zhejiang University and an EMBA degree from China Europe International Business School.
~~Jessie Junfang ZHENG ( )~~ has been our chief platform governance officer since December 2015, responsible for the governance of our retail and wholesale marketplaces. She has also been our deputy chief financial officer since November 2013. Prior to her current position, she served as financial vice president of Alibaba.com from December 2010 to October 2013. Before joining our company, Jessie was an audit partner at KPMG. Jessie received a bachelor's degree in accounting from Northeastern University in China.
Alibaba Partnership
Since our founders first gathered in Jack Ma's apartment in 1999, they and our management have acted in the spirit of partnership. We view our culture as fundamental to our success and our ability to serve our customers, develop our employees and deliver long-term value to our shareholders. In July 2010, in order to preserve this spirit of partnership and to ensure the sustainability of our mission, vision and values, we decided to formalize our partnership as Lakeside Partners, named after the Lakeside Gardens residential community where Jack and our other founders started our company. We refer to the partnership as the Alibaba Partnership.
We believe that our partnership approach has helped us to better manage our business, with the peer nature of the partnership enabling senior managers to collaborate and override bureaucracy and hierarchy. The Alibaba Partnership currently has ~~34 members comprised of 26 members of our management, seven members of management of Ant Financial Services and one member of management of Cainiao Network.~~38 members. The number of partners in the Alibaba Partnership is not fixed and may change from time to time due to the election of new partners, the retirement of partners and the departure of partners for other reasons.
Our partnership is a dynamic body that rejuvenates itself through admission of new partners each year, which we believe enhances our excellence, innovation and sustainability. Unlike dual-class ownership structures that employ a high-vote class of shares to concentrate control in a few founders, our approach is designed to embody the vision of a large group of management partners. This structure is our solution for preserving the culture shaped by our founders while at the same time accounting for the fact that founders will inevitably retire from the company.
Consistent with our partnership approach, all partnership votes are made on a one-partner-one-vote basis.
The partnership is governed by a partnership agreement and operates under principles, policies and procedures that have evolved with our business and are further described below.
Nomination and Election of Partners
The Alibaba Partnership elects new partners annually after a nomination process whereby existing partners propose candidates to the partnership committee, or the partnership committee, as described below. The partnership committee reviews the nominations and determines whether the nomination of a candidate will be proposed to the entire partnership for election. Election of new partners requires the approval of at least 75% of all of the partners.
To be eligible for election, a partner candidate must have demonstrated the following attributes:
•
a high standard of personal character and integrity;

•
continued service with Alibaba Group, our affiliates and/or certain companies with which we have a significant relationship, such as Ant Financial ~~Services~~ for not less than five years;

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•
a track record of contribution to the business of Alibaba Group; and

•
being a "culture carrier" who shows a consistent commitment to, and traits and actions consonant with, our mission, vision and values.
We believe the criteria and process of the Alibaba Partnership applicable to the election of new partners, as described above, promote accountability among the partners as well as to our customers, employees and shareholders. In order to align the interests of partners with the interests of our shareholders, we require that each partner maintain a meaningful level of equity interests in our company during ~~such individual's~~his or her tenure as a partner. Since a partner nominee must have been our employee or an employee of one of our related companies or affiliates for at least five years, as of the time he or she becomes a partner, he or she will typically already own or have been awarded a personally meaningful level of equity interest in our company through our equity incentive and share purchase plans.

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Duties of Partners
The main duty of partners in their capacity as partners is to embody and promote our mission, vision and values. We expect partners to be evangelists for our mission, vision and values, both within our organization and externally to customers, business partners and other participants in our ~~ecosystem.~~digital economy.
Partnership Committee
The partnership committee must consist of at least five partners, including partnership committee continuity members, and is currently comprised of Jack Ma, Joe Tsai, ~~Jonathan Lu,~~Daniel Zhang, Lucy Peng and ~~Ming Zeng.~~Eric Jing. The partnership committee is responsible for administering partner elections and allocating the relevant portion of the annual cash bonus pool for all partner members of management, with any amounts payable to partners who are our executive officers or directors or members of the partnership committee subject to approval of the compensation committee of our board of directors. ~~Partnership~~Either one or two partners may be designated as partnership committee continuity partners, and Jack Ma and Joe Tsai are the initial partnership committee continuity members. Other than partnership committee continuity members, the partnership committee members serve for a term of three years and may serve multiple terms. Elections of partnership committee members are held once every three years. Partnership committee continuity members are not subject to election, and may serve until they cease to be partners, retire from the partnership committee or are unable to discharge duties as partnership committee members as a result of illness or permanent incapacity. A replacement partnership committee continuity partner is either designated by a retiring or, as the case may be, the remaining, partnership committee continuity member. Prior to each election, the partnership committee will nominate a number of partners equal to the number of partnership committee members that will serve in the next partnership committee term plus three additional ~~nominees.~~nominees less the number of the serving partnership committee continuity members. Each partner votes for a number of nominees equal to the number of partnership committee members that will serve in the next partnership committee term less the number of the serving partnership committee continuity members, and all except the three nominees who receive the least votes from the partners are elected to the partnership committee.
Director Nomination and Appointment Rights
Pursuant to our articles of association, the Alibaba Partnership has the exclusive right to nominate or, in limited situations, appoint up to a simple majority of the members of our board of directors.
The election of each director nominee of the Alibaba Partnership will be subject to the director nominee receiving a majority vote from our shareholders voting at an annual general meeting of shareholders. If an Alibaba Partnership director nominee is not elected by our shareholders or after election departs our board of directors for any reason, the Alibaba Partnership has the right to appoint a different person to serve as an interim director of the class in which the vacancy exists until our next scheduled annual general meeting of shareholders. At the next scheduled annual general meeting of shareholders, the appointed interim director or a replacement Alibaba Partnership director nominee (other than the original nominee) will stand for election for the remainder of the term of the class of directors to which the original nominee would have belonged.
If at any time our board of directors consists of less than a simple majority of directors nominated or appointed by the Alibaba Partnership for any reason, including because a director previously nominated by the Alibaba Partnership ceases to be a member of our board of directors or because the Alibaba Partnership had previously not exercised its right to nominate or appoint a simple majority of our board of directors, the Alibaba Partnership will be entitled (in its sole discretion and without the need for any additional shareholder action) to

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appoint such number of additional directors to the board as necessary to ensure that the directors nominated or appointed by the Alibaba Partnership comprise a simple majority of our board of directors.
In determining the Alibaba Partnership director nominees who will stand for election to our board, the partnership committee will propose director nominees who will be voted on by all of the partners, and those nominees who receive a simple majority of the votes of the partners will be selected for ~~such~~these purposes. The director nominees of

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the Alibaba Partnership may be partners of the Alibaba Partnership or other qualified individuals who are not affiliated with the Alibaba Partnership.
The Alibaba Partnership's right to nominate or appoint up to a simple majority of our directors is conditioned on the Alibaba Partnership being governed by the partnership agreement in effect as of the completion of our initial public offering in September 2014, or as may be amended in accordance with its terms from time to time. Any amendment to the provisions of the partnership agreement relating to the purpose of the partnership, or to the manner in which the Alibaba Partnership exercises its right to nominate a simple majority of our directors, will be subject to the approval of the majority of our directors who are not nominees or appointees of the Alibaba Partnership and are "independent directors" within the meaning of Section 303A of the New York Stock Exchange Listed Company Manual. The provisions relating to nomination rights and procedures described above are incorporated in our articles of association. Pursuant to our articles of association, the Alibaba Partnership's nomination rights and related provisions of our articles of association may only be changed upon the vote of shareholders representing 95% of the votes present in person or by proxy at a general meeting of shareholders.
Our board of directors currently consists of eleven members, and five of these directors are Alibaba Partnership nominees. If at any time our board of directors consists of less than a simple majority of directors nominated or appointed by the Alibaba Partnership for any reason — including because the Alibaba Partnership had previously not exercisedPursuant to its right to nominate or appoint a simple majority of our board of directors — the Alibaba Partnership will be entitled (in its sole discretion and without the need for any additional shareholder approval) to nominate or appoint such number of additional directors as ~~necessary to ensure that the directors nominated or appointed by the Alibaba Partnership comprise a simple majority of our board of directors. Accordingly,~~discussed above, the Alibaba Partnership is entitled to nominate or appoint two additional directors to our board, which would increase the total number of directors to thirteen. We have entered into a voting agreement pursuant to which both SoftBank and ~~Yahoo will agree~~Altaba have agreed to vote their shares in favor of the Alibaba Partnership director nominees at each annual general shareholders meeting so long as SoftBank owns at least 15% of our outstanding ordinary shares. Accordingly, for so long as SoftBank and Yahoo remain substantial shareholders, we expect the Alibaba Partnership nominees will receive a majority of votes cast at any meeting for the election of directors and will be elected as directors. See "Item 7. Major Shareholders and Related Party Transactions — B. Related Party Transactions — Transactions and Agreements with SoftBank and ~~Yahoo~~Altaba — Voting Agreement."

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Current Partners
The following table sets forth the names, in alphabetical order by surname, and other information regarding the current partners of the Alibaba Partnership as of the date of this annual report.
Name
Age Gender Year
Joined
Alibaba
Group Current position with Alibaba Group or
related/affiliated companies Age Gender Year
Joined
Alibaba
Group Current position with Alibaba Group or
related/affiliated companies
Jingxian CAI ()
39 M 2000 Principal Engineer 42 M 2000 Senior Researcher
Li CHENG ()
41 M 2005 Chief Technology Officer, Ant Financial Services 44 M 2005 Chief Technology Officer, Ant Financial
Trudy Shan DAI ()
39 F 1999 Chief Customer Officer 42 F 1999 President, Wholesale Marketplaces
Luyuan FAN ()
43 M 2007 President, Payment Business, Ant Financial Services 45 M 2007 President, Alibaba Digital Media and Entertainment
Yongxin FANG ()
42 M 2000 Director, Human Resources 45 M 2000 Senior Director, DingTalk
Felix Xi HU ()
38 M 2007 Deputy Chief Technology Officer, Ant Financial
Simon Xiaoming HU ()
46 M 2005 President, Alibaba Cloud Computing 49 M 2005 President, Ant Financial
Fan JIANG ()
33 M 2013 President, Taobao and Tmall
Jane Fang JIANG ()
42 F 1999 Chief People Officer 45 F 1999 Deputy Chief People Officer
Peng JIANG ()
42 M 2000 Senior Vice President
Jianhang JIN ()
46 M 1999 President
Eric Xiandong JING ()
43 M 2007 President, Ant Financial Services
Jiangwei JIANG ()
37 M 2008 Researcher
Eric Xiandong JING ()†
46 M 2007 Chairman and Chief Executive Officer, Ant Financial
Zhenfei LIU ()
44 M 2006 Chief Risk Officer 47 M 2006 President, Amap
Jonathan Zhaoxi LU ()†
46 M 2000 Vice Chairman
Jack Yun MA ()†
51 M 1999 Executive Chairman 54 M 1999 Executive Chairman
Xingjun NI ()
38 M 2003 Principal Engineer, Ant Financial Services 41 M 2003 President, Alipay, Ant Financial
Lucy Lei PENG ()†
42 F 1999 Chief Executive Officer, Ant Financial Services 45 F 1999 Director, Ant Financial; Chairwoman and President, Alipay China; Chairwoman, Lazada
Sabrina Yijie PENG ()
37 F 2000 General Manager, International, Ant Financial Services 40 F 2000 Chief Marketing Officer, Ant Financial
Xiaofeng SHAO ()
50 M 2005 Senior Vice President, Director, Office of the Chairman 53 M 2005 Secretary-General
Jie SONG ()
40 F 2000 Vice President
Timothy A. STEINERT
56 M 2007 General Counsel and Secretary 59 M 2007 General Counsel and Secretary
Lijun SUN ()
39 M 2002 General Manager, Rural Taobao 42 M 2002 General Manager of Social Responsibility
Judy Wenhong TONG ()
45 F 2000 Chief Executive Officer, Cainiao Network 48 F 2000 Chief People Officer
Joseph C. TSAI ()†
52 M 1999 Executive Vice Chairman 55 M 1999 Executive Vice Chairman
Jian WANG ()
53 M 2008 Chairman, Technology Committee 56 M 2008 Chairman, Technology Steering Committee
Lei WANG ()
39 M 2003 President, Local Services
Shuai WANG ()
41 M 2003 Senior Vice President 44 M 2003 Chairman, Marketing and Public Relations Committee
Winnie Jia WEN ()
42 F 2007 Vice President, Office of the Chairman
Sophie Minzhi WU ()
40 F 2000 President, Wholesale Marketplaces 43 F 2000 Chief Customer Officer
Maggie Wei WU ()
48 F 2007 Chief Financial Officer 51 F 2007 Chief Financial Officer
Eddie Yongming WU ()
41 M 1999 Chairman, Alibaba Health 44 M 1999 Chairman, Alibaba Health
Zeming WU ()
38 M 2004 President, New Retail Technology
Sara Siying YU ()
41 F 2005 Associate General Counsel, China 44 F 2005 Deputy General Counsel
Yongfu YU ()
39 M 2014 President, Mobile Internet and Alimama 42 M 2014 Head of eWTP Investment Working Group
Ming ZENG ()†
46 M 2006 Executive Vice President
Sam Songbai ZENG ()
52 M 2012 Senior Vice President, Human Resources, Ant Financial
Jeff Jianfeng ZHANG ()
42 M 2004 Chief Technology Officer 45 M 2004 Chief Technology Officer and President, Alibaba Cloud Intelligence
Daniel Yong ZHANG ()
44 M 2007 Chief Executive Officer
Daniel Yong ZHANG () †
47 M 2007 Chief Executive Officer
Yu ZHANG ()
46 F 2004 Vice President, Corporate Development 49 F 2004 Vice President
Ying ZHAO ()
42 F 2005 Vice President, Ant Financial Services
Angel Ying ZHAO ()
45 F 2005 Head of Alibaba Globalization Leadership Group
Jessie Junfang ZHENG ()
42 F 2010 Chief Platform Governance Officer and Deputy Chief Financial Officer 45 F 2010 Chief Risk Officer and Chief Platform Governance Officer
†
Member of the partnership committee.

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Bonus Pool
Our board of directors, acting on the recommendation of our compensation committee, approves an annual cash bonus pool for management of our company (which in fiscal year ~~2016~~2019 comprised over ~~250~~360 individuals) equal to a percentage of our adjusted pre-tax operating profits. Once the annual cash bonus pool is calculated, our compensation committee will then first determine the proportion to be allocated to the non-partner members of our management. Any remaining portion will then be available for the partner members of our management. The partnership committee will determine the allocation of the relevant portion of the annual cash bonus pool for all partner members of management, with any amounts payable to partners who are our executive officers or directors or members of the partnership committee subject to approval of the compensation committee of our board of directors. We understand that a partner's level of contribution to our business and to the promoting of our mission, vision and values will be a key factor in determining his or her allocation from the bonus pool. A portion of the annual cash bonus pool that is available to the partner members of management may, upon the recommendation of the partnership committee and approval of our compensation committee, be deferred, with the allocations of deferred payment determined by the partnership committee with any amounts payable to our executive officers or directors who are partners or members of the partnership committee subject to approval of the compensation committee of our board of directors. We understand that participation in deferred distributions, other than retirement pension payments funded out of the deferred pool, is conditioned on a partner's continued employment with us, our affiliates and/or certain companies with which we have a significant relationship, such as Ant ~~Financial Services.~~Financial.
Retirement and Removal
Partners may elect to retire from the partnership at any time. All partners except continuity partners are required to retire upon reaching the age of sixty or upon termination of their qualifying employment. ~~Continuity~~Jack Ma and Joe Tsai are designated as continuity partners, who may remain partners until they reach the age of seventy (and this age limit may be extended by a majority votes of all partners), elect to retire from the partnership, die or are incapacitated or are removed as partners. Either two or three partners may be designated as continuity partners at a time, with Jack and Joe serving as the initial continuity partners. Continuity partners are either designated by a retiring continuity partner or by the serving continuity partners. Any partner, including continuity partners, may be removed upon the vote of a simple majority of all partners present at a duly-called meeting of partners for violations of certain standards set forth in the partnership agreement, including failure to actively promote our mission, vision and values, fraud, gross misconduct or gross negligence. As with other partners, continuity partners must maintain the shareholding levels required by us of all partners as described below. Partners who retire from the partnership upon meeting certain age and service requirements may be designated as ~~honorary~~honorably retired partners by the partnership committee. ~~Honorary~~Honorably retired partners may not act as partners, but may be entitled to allocations from the deferred portion of the annual cash bonus pool described below as retirement pension payments. Continuity partners will not be eligible to receive allocations from the annual cash bonus pool if they cease to be our employees even if they remain partners, but may be entitled to receive allocations from the deferred bonus pool if they are ~~honorary~~honorably retired partners.
Restrictive Provisions
Under our articles of association, in connection with any change of control, merger or sale of our company, the partners and other holders of our ordinary shares shall receive the same consideration with respect to their ordinary shares in connection with any ~~such transaction.~~of these types of transactions. In addition, our articles of association provide that the Alibaba Partnership may not transfer or otherwise delegate or give a proxy to any third-party with respect to its right to nominate directors, although it may elect not to exercise its rights in full. In addition, as noted above, our articles of association also provide that the amendment of certain provisions of the Alibaba Partnership agreement relating to the purpose of the partnership or the manner in which the partnership exercises its rights to nominate or appoint a majority of our board of directors will require the approval of a majority of directors who are not appointees of the Alibaba Partnership and are "independent directors" within the meaning of Section 303A of the New York Stock Exchange Listed Company Manual.

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Amendment of Alibaba Partnership Agreement
Pursuant to the partnership agreement, amendment of the partnership agreement requires the approval of 75% of the partners in attendance at a meeting of the partners at which not less than 75% of all the partners are in attendance, except that the general partner may effect certain administrative amendments. In addition, certain amendments relating to the purposes of the Alibaba Partnership or the manner in which it exercises its nomination rights with respect to our directors require the approval of a majority of our independent directors not nominated or appointed by the Alibaba Partnership.
Alibaba Group Equity Interest Holding Requirements for Partners
Each of the partners holds his or her equity interests in our company directly as an individual or through his or her affiliates. We have entered into share retention agreements with each partner. These agreements provide that a period of three years from the date on which ~~such~~a person becomes a partner, ~~or for 27 of the existing partners,~~which ranges from January 1, 2014 ~~three of the~~to January 2019 for our existing partners, ~~from August 26, 2014, and four of the existing partners, from December 8, 2015,~~ we require that each partner retain at least 60% of the equity interests (including ~~unvested shares and~~ shares underlying vested and unvested awards) that he or she held on the starting date of ~~such~~the three-year period. Following the initial three-year holding period and for so long as he or she remains a partner, we require that the partner retain at least 40% of the equity interests (including ~~unvested shares and~~ shares underlying vested and unvested awards) that he or she held on the starting date of the initial three-year holding period. Exceptions to the holding period rules described in the share retention agreements must be approved by a majority of the independent directors.
B.  Compensation
Compensation of Directors and Executive Officers
For fiscal year ~~2016,~~2019, we paid and accrued aggregate fees, salaries and benefits (excluding equity-based grants) of up to approximately ~~RMB435~~RMB503 million (US$75 million) to our directors and executive officers as a group and granted ~~options to purchase an aggregate of 4,100,000 ordinary shares and 6,231,000~~344,500 RSUs to our directors and executive officers.
The board, acting on the recommendation of our compensation committee, may determine the remuneration to be paid to non-employee directors. ~~Employee~~We do not provide employee directors ~~will not receive~~with any additional remuneration for serving as directors other than their remuneration as ~~employees of us or~~ our ~~related entities.~~employees. Pursuant to our service agreements with our directors, neither we nor our subsidiaries provide benefits to directors upon termination of employment. We do not separately set aside any amounts for pensions, retirement or other benefits for our executive officers, other than pursuant to relevant statutory requirements. Management members who are partners of the Alibaba Partnership may receive retirement payments from the deferred portion of the annual cash bonus pool available to the Alibaba Partnership.
Mr. Chee Hwa Tung has indicated to us his intention to donate all cash compensation and equity-based awards he receives from us as an independent director to one or more non-profit or charitable organizations to be designated by him.
For information regarding equity-based grants to directors and executive officers, see "— Equity Incentive Plans."
Employment Agreements
We have entered into employment agreements with each of our executive officers. We may terminate their employment at any time, with cause, and we are not required to provide any prior notice of ~~such~~the termination. We may also terminate their employment in circumstances prescribed under and in accordance with the requirements of applicable labor law, including notice and payment in lieu. Executive officers may terminate their employment with us at any time upon written notice. Although our employment agreements with our executive officers do not provide for severance pay, where severance pay is mandated by law, our executive officers will be entitled to ~~such~~

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severance pay in the amount mandated by law when his or her employment is terminated. We have been advised by our PRC counsel, Fangda Partners, that we may be required to make ~~such~~ severance payments upon termination

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without cause to comply with the PRC Labor Law, the labor contract law and other relevant PRC regulations, which entitle employees to severance payments in case of early termination of "de facto employment relationships" by PRC entities without statutory cause regardless of whether there exists a written employment agreement with ~~such~~these entities.
Our grant letter agreements under our equity incentive plans also contain, among other rights, restrictive covenants that enable us to terminate grants and repurchase shares at par or the exercise price paid for ~~such~~the shares in the event of a grantee's termination for cause for breaching ~~such~~these covenants. See "— Equity Incentive Plans" below.
Equity Incentive Plans
We have adopted ~~the following~~a number of equity incentive plans since our ~~inception:~~inception. The following equity incentive plans are those currently in effect:
•
~~1999 Share Option Plan, or the 1999 Plan;~~

•
~~2004 Share Option Plan, or the 2004 Plan;~~

•
~~2005 Share Option Plan, or the 2005 Plan;~~

•
~~2007 Share Incentive Plan, or the 2007 Plan;~~

•
2011 Equity Incentive Plan, or the 2011 Plan; and

•
2014 Post-IPO Equity Incentive Plan, or the 2014 Plan.
Currently, awards are only available for issuance under our 2014 Plan. If an award under the 2011 Plan terminates, expires or lapses, or is cancelled for any reason, ordinary shares subject to the award become available for the grant of a new award under the 2014 Plan. As of March 31, ~~2016,~~2019, there were:
•
~~15,108,078~~64,346,493 ordinary shares issuable upon vesting of outstanding RSUs;

•
7,104,706 ordinary shares issuable upon exercise of outstanding ~~options and 2,699,250 issued but unvested restricted shares;~~

•
~~78,005,100 ordinary shares subject to unvested RSUs;~~options; and

•
~~23,050,439~~34,151,552 ordinary shares authorized for issuance under the 2014 ~~Plan; plus, on~~Plan.
In addition, starting from April 1, 2015 and on each anniversary thereof, an additional amount equal to the lesser of ~~(A)~~ 25,000,000 ordinary shares and ~~(B)~~ such lesser number of ordinary shares as is determined by our board of ~~directors.~~

directors will be included in the shares available for issuance of awards under our 2014 Plan.
Our equity incentive plans provide for the granting of RSUs, incentive and non-statutory options, restricted shares, ~~RSUs,~~ dividend equivalents, share appreciation rights and share payments to any directors, employees, and consultants of ours, our affiliates and certain other companies, such as ~~Alipay. Share~~Ant Financial. RSUs and share options ~~and RSUs~~ granted are generally subject to a four-year vesting schedule as determined by the administrator of the respective plans. Depending on the nature and the purpose of the grant, RSUs and share options ~~and RSUs~~ in general vest 25% upon the first anniversary of the vesting commencement date for annual incentive awards or 50% upon the second anniversary of the vesting commencement date for on-hire awards, and ~~thereafter~~ 25% every ~~year. Starting in fiscal~~ year ~~2015, certain~~thereafter. Certain RSUs and ~~share~~ options granted to our senior management members ~~were~~are subject to a six-year ~~pro rata~~ vesting schedule. We believe equity-based awards are vital to attract, motivate and retain our directors, employees and consultants, and those of certain of our affiliates and other companies, such as ~~Alipay,~~Ant Financial, and are the appropriate tool to align their interests with our shareholders. Accordingly, we will continue to grant equity-based awards to the employees, consultants and directors of our company, our affiliates and certain other companies as an important part of their compensation packages.
In addition, our equity incentive award agreements generally provide that, in the event of a grantee's termination for cause or violation of a non-competition undertaking, we will have the right to repurchase the shares acquired by ~~such~~the grantee, generally at par or the exercise price paid for ~~such~~the shares.

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The following paragraphs summarize other key terms of our equity incentive plans.
Plan ~~administration.~~Administration
Subject to certain limitations, our equity incentive plans are generally administered by the compensation committee of the board (or a subcommittee thereof), or ~~such other~~another committee of the board to which the board has delegated power to act; provided, that in the absence of any ~~such~~ committee, our equity incentive plans will be administered by the board. Grants to any executive directors of the board must be approved by the disinterested directors of our board.

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Types of ~~awards.~~Awards
The equity incentive plans provide for the granting of RSUs, incentive and non-statutory options, restricted shares, ~~restricted share units,~~ dividend equivalents, share appreciation rights, share payments and other rights.
Award Agreements
       ~~Award agreements.~~Generally, awards granted under the equity incentive plans are evidenced by an award agreement providing for the number of ordinary shares subject to the award, and the terms and conditions of the award, which must be consistent with the relevant plan.
Eligibility
       ~~Eligibility.~~Any employee, consultant or director of our company, our affiliates or certain other companies, such as ~~Alipay,~~Ant Financial, is eligible to receive grants under the equity incentive plans, but only employees of our company, our affiliates and certain other companies, such as ~~Alipay,~~Ant Financial, are eligible to receive incentive stock options.
Term of ~~awards.~~Awards
The term of awards granted under our equity incentive plans are generally not to exceed ten years from the date of grant.
Acceleration, Waiver and Restrictions
       ~~Acceleration, waiver and restrictions.~~The administrator of our equity incentive plans has sole discretion in determining the terms and conditions of any award, any vesting acceleration or waiver of forfeiture restrictions, and any restrictions regarding any award or the ordinary shares relating thereto.
Change in ~~control.~~Control
If a change in control of our company occurs, the plan administrator may, in its sole ~~discretion,~~discretion:
•
accelerate the vesting, in whole or in part, of any award;

•
purchase any award for an amount of cash or ordinary shares of our company equal to the value that could have been attained upon the exercise of the award or the realization of the plan participant's rights had ~~such~~the award been currently exercisable or payable or fully vested; or

•
provide for the assumption, conversion or replacement of any award by the successor corporation, or a parent or subsidiary of the successor corporation, with other rights or property selected by the plan administrator in its sole discretion, or the assumption or substitution of the award by the successor or surviving corporation, or a parent or subsidiary of the surviving or successor corporation, with ~~such~~ appropriate adjustments as to the number and kind of shares and prices as the plan administrator deems, in its sole discretion, reasonable, equitable and appropriate.
Amendment and ~~termination.~~Termination
Unless earlier terminated, our equity incentive plans continue in effect for a term of ten years. The board may at any time terminate or amend ~~the 2014 Plan~~a plan in any respect, including amendment of any form of any award agreement or instrument to be executed, provided, however, that to the extent necessary and desirable to comply with applicable laws or stock exchange rules, shareholder approval of any amendment to ~~the 2014 Plan~~a plan shall be obtained in ~~such~~the manner and to ~~such~~the degree as required.

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Senior Management Equity Incentive Plan
We adopted the Senior Management Equity Incentive Plan in 2010, pursuant to which selected management of our company subscribed for preferred shares in a special purpose vehicle, Alternate Solutions Management Limited, which holds our ordinary shares. These preferred shares, subject to a non-compete provision, are redeemable by the holders thereof for our ordinary shares upon the earlier to occur of an initial public offering of our shares (subject to statutory and contractual lock-up periods), and five years from the respective dates of

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issuance of the preferred shares to the participants. The maximum number of our ordinary shares redeemable upon the redemption of the preferred shares issued under this plan by the participants is 15,000,000. The underlying ordinary shares have already been issued to the special purpose vehicle and are included in our total outstanding share number. The preferred shares are subject to forfeiture if a holder engages in certain activities that compete with us.
Partner Capital Investment Plan
We adopted the Partner Capital Investment Plan in 2013 to provide partners of the Alibaba Partnership an opportunity to invest in interests in our ordinary shares in order to align further their interests with the interests of our shareholders. Pursuant to the Partner Capital Investment Plan, ~~the~~eligible partners subscribed for ~~convertible preferred shares in~~rights, issued by two special purpose vehicles, ~~PCIP I Limited and PCIP II Limited. These convertible preferred shares are, for a period of up~~ to ~~four years from the respective dates of issuance thereof, convertible into exchangeable ordinary shares in these special purpose vehicles, which are exchangeable for~~acquire our ordinary ~~shares after eight years following the respective dates of issuance of the convertible preferred~~ shares. ~~The convertible preference shares and the exchangeable ordinary shares of these special purpose vehicles~~These rights are subject to ~~forfeiture if a partner engages in certain activities that compete with us.~~non-compete provisions, transfer restrictions, exercise restrictions and/or vesting schedules, which are longer than the vesting schedules under our equity incentive plans. The maximum number of our ordinary shares ~~that may be acquired upon the exchange of exchangeable ordinary shares in the special purpose vehicles by the partners~~underlying these rights is 18,000,000. The underlying ordinary shares have already been issued by us to the special purpose vehicles and are included in our total outstanding share number. The Partner Capital Investment Plan permits the issuance of additional shares to the partners as the board may approve from time to time.

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Share-based Awards Held by Our Directors and Officers
The following table summarizes, the outstanding RSUs, options ~~(including unvested restricted shares related to options early exercised), RSUs~~ and other rights held as of March 31, ~~2016~~2019 by our directors and executive officers, as well as by their affiliates, under ~~the~~ our equity incentive plans, as well as equity held through their investments in our Senior Management Equity Incentive Plan and Partner Capital Investment Plan.
Name
Ordinary shares
underlying
outstanding
~~options~~RSUs / ~~restricted~~
~~shares or RSUs~~options /
other rights
granted or
subscribed Exercise
price
(US$/Share) Date of grant⁽⁶⁾⁽⁵⁾ Date of expiration
Jack Yun MA
~~260,000~~⁽²⁾ — ~~June 26, 2013~~ ~~June 26, 2019~~
~~75,000~~37,500⁽²⁾ — January 27, 2016 January 27, 2024
~~Joseph C. TSAI~~
~~1,200,000~~⁽¹⁾ ~~5.00~~ ~~November 12, 2010~~ —
~~130,000~~66,667⁽²⁾ — ~~June 26, 2013~~August 10, 2016 ~~June 26, 2019~~August 10, 2024
~~45,000~~62,500⁽²⁾ — May 17, 2017 May 17, 2025
60,000⁽²⁾ — July 24, 2018 July 24, 2026
Joseph C. TSAI
22,500⁽²⁾ — January 27, 2016 January 27, 2024
~~Jonathan Zhaoxi LU~~
*23,334⁽³⁾⁽²⁾ ~~18.50~~— ~~May 18, 2013~~August 10, 2016 ~~May 18, 2019~~August 10, 2024
16,667⁽²⁾ — May 17, 2017 May 17, 2025
12,000⁽²⁾ — July 24, 2018 July 24, 2026

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Name
Ordinary shares
underlying
outstanding
RSUs / options /
other rights
granted or
subscribed Exercise
price
(US$/Share) Date of grant⁽⁵⁾ Date of expiration
Daniel Yong ZHANG
*⁽⁴⁾⁽³⁾ 14.50 July 26, 2013 —
*⁽⁵⁾ ~~56.00~~ ~~July 2, 2014~~ ~~July 2, 2022~~
*⁽²⁾ — ~~January 27, 2016~~ ~~January 27, 2024~~
~~Daniel Yong ZHANG~~
*⁽³⁾ ~~18.50~~ ~~May 18, 2013~~ ~~May 18, 2019~~
*⁽⁴⁾ ~~14.50~~ ~~July 26, 2013~~ —
*⁽⁵⁾ 56.00 July 2, 2014 July 2, 2022
*⁽²⁾ — July 2, 2014 July 2, 2022
*⁽⁵⁾⁽⁴⁾ 87.06 May 10, 2015 May 10, 2023
*⁽²⁾ — May 10, 2015 May 10, 2023
*⁽²⁾ — January 27, 2016 January 27, 2024
*⁽²⁾ — March 17, 2016 March 17, 2024
~~J. Michael EVANS~~
*⁽²⁾ — ~~September 24, 2014~~August 10, 2016 ~~September 24, 2020~~August 10, 2024
*⁽⁵⁾⁽²⁾ — May 17, 2017 May 17, 2025
*⁽²⁾ — July 24, 2018 July 24, 2026
J. Michael EVANS
*⁽⁴⁾ 79.96 July 31, 2015 July 31, 2023
*⁽²⁾ — July 31, 2015 July 31, 2023
*⁽²⁾ — August 10, 2016 August 10, 2022
*⁽²⁾ — May 17, 2017 May 17, 2023
*⁽²⁾ — July 24, 2018 July 24, 2024
Eric Xiandong JING
*⁽³⁾ 14.50 July 26, 2013 —
*⁽²⁾ — July 2, 2014 July 2, 2022
Masayoshi SON
— — — —
Chee Hwa TUNG
*⁽²⁾ — ~~September 24, 2014~~November 4, 2018 ~~September 24, 2020~~November 4, 2024
Walter Teh Ming KWAUK
*⁽²⁾ — ~~September 24, 2014~~November 4, 2018 ~~September 24, 2020~~November 4, 2024
Jerry YANG
*⁽²⁾ — ~~September 24, 2014~~November 4, 2018 ~~September 24, 2020~~November 4, 2024
E. Börje E. EKHOLM
*⁽²⁾ — ~~June 1, 2015~~November 4, 2018 ~~June 1, 2021~~November 4, 2024
Wan Ling MARTELLO
*⁽²⁾ — ~~September 1, 2015~~November 4, 2018 ~~September 1, 2021~~November 4, 2024
Maggie Wei WU
*⁽³⁾ ~~18.50~~ ~~May 18, 2013~~ ~~May 18, 2019~~
*⁽⁴⁾ 14.50 July 26, 2013 —
*⁽²⁾ — July 2, 2014 July 2, 2022
*⁽²⁾ — January 27, 2016 January 27, 2024
~~Jane Fang JIANG~~
*⁽³⁾⁽²⁾ ~~18.50~~— ~~May 18, 2013~~August 10, 2016 ~~May 18, 2019~~August 10, 2024
*⁽²⁾ — ~~September 10, 2013~~May 17, 2017 ~~September 10, 2019~~May 17, 2025
*⁽⁴⁾⁽²⁾ — July 24, 2018 July 24, 2026
Judy Wenhong TONG
*⁽³⁾ 14.50 July 26, 2013 —
*⁽²⁾ — July 2, 2014 July 2, 2022
*⁽²⁾ — ~~February 21, 2016~~May 17, 2017 ~~February 21, 2024~~May 17, 2025

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*⁽²⁾ — July 24, 2018 July 24, 2026
~~Name~~
~~Ordinary shares~~
~~underlying~~
~~outstanding~~
~~options / restricted~~
~~shares or RSUs /~~
~~other rights~~
~~granted or~~
~~subscribed~~ ~~Exercise~~
~~price~~
~~(US$/Share)~~ ~~Date of grant~~⁽⁶⁾ ~~Date of expiration~~
Jeff Jianfeng ZHANG
*⁽³⁾ ~~18.50~~ ~~May 18, 2013~~ ~~May 18, 2019~~
*⁽⁴⁾ 14.50 July 26, 2013 —
*⁽²⁾ — July 2, 2014 July 2, 2022
*⁽⁵⁾⁽⁴⁾ 69.54 January 27, 2016 January 27, 2024
*⁽²⁾ — January 27, 2016 January 27, 2024
~~Zhenfei LIU~~
*⁽³⁾⁽²⁾ ~~18.50~~— ~~May 18, 2013~~August 10, 2016 ~~May 18, 2019~~August 10, 2024
*⁽⁴⁾⁽²⁾ — May 17, 2017 May 17, 2025
*⁽²⁾ — July 24, 2018 July 24, 2026
Sophie Minzhi WU
*⁽³⁾ 14.50 July 26, 2013 —
*⁽²⁾ — July 2, 2014 July 2, 2022
*⁽²⁾ — January 27, 2016 January 27, 2024
~~Trudy Shan DAI~~
*⁽³⁾⁽²⁾ ~~18.50~~— ~~May 18, 2013~~August 10, 2016 ~~May 18, 2019~~August 10, 2024
*⁽⁴⁾⁽²⁾ — July 24, 2018 July 24, 2026

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Name
Ordinary shares
underlying
outstanding
RSUs / options /
other rights
granted or
subscribed Exercise
price
(US$/Share) Date of grant⁽⁵⁾ Date of expiration
Timothy A. STEINERT
*⁽¹⁾ 5.00 November 12, 2010 —
*⁽³⁾ 14.50 July 26, 2013 —
*⁽²⁾ — July 2, 2014 July 2, 2022
*⁽²⁾ — January 27, 2016 January 27, 2024
~~Timothy A. STEINERT~~*⁽²⁾ — August 10, 2016 August 10, 2024
*⁽²⁾ — May 17, 2017 May 17, 2025
*⁽²⁾ — July 24, 2018 July 24, 2026
Jessie Junfang ZHENG
*⁽¹⁾⁽²⁾ ~~5.00~~— ~~November 12, 2010~~August 21, 2015 —August 21, 2021
*⁽³⁾ ~~18.50~~23.00 May ~~18, 2013~~23, 2016 May ~~18, 2019~~23, 2027
*⁽²⁾ — August 10, 2016 August 10, 2024
*⁽²⁾ — May 17, 2017 May 17, 2025
*⁽²⁾ — July 24, 2018 July 24, 2026
Chris Pen-hung TUNG
*⁽⁴⁾ 67.28 February 21, 2016 February 21, 2022
*⁽²⁾ — February 21, 2016 February 21, 2022
*⁽²⁾ — May 17, 2017 May 17, 2023
*⁽²⁾ — July 14, 2018 July 24, 2024
Trudy Shan DAI
*⁽³⁾ 14.50 July 26, 2013 —
*⁽²⁾ — July 2, 2014 July 2, 2022
*⁽²⁾ — January 27, 2016 January 27, 2024
~~Jianhang JIN~~
*⁽¹⁾⁽²⁾ ~~5.00~~— ~~November 12, 2010~~August 10, 2016 —August 10, 2024
*⁽²⁾ — May ~~3, 2011~~17, 2017 May ~~3, 2017~~17, 2025
*⁽²⁾ — ~~May 11, 2012~~ ~~May 11,~~July 24, 2018
*⁽⁴⁾ ~~14.50~~ July ~~26, 2013~~ —
*⁽²⁾ — ~~January 27, 2016~~ ~~January 27, 2024~~24, 2026
~~Chris Pen-hung TUNG~~Fan JIANG
*⁽⁵⁾ ~~67.28~~ ~~February 21, 2016~~ ~~February 21, 2022~~
*⁽²⁾ — ~~February 21, 2016~~ ~~February 21, 2022~~
~~Yongfu YU~~
*⁽²⁾ — ~~August 20, 2013~~ ~~August 20, 2019~~
*⁽²⁾ — ~~November 15, 2014~~ ~~November 15, 2020~~
*⁽²⁾ — August 21, 2015 August 21, 2021
~~Simon Xiaoming HU~~
*⁽³⁾⁽²⁾ ~~18.50~~— May ~~18, 2013~~16, 2016 May ~~18, 2019~~16, 2022
*⁽⁴⁾⁽²⁾ — May 22, 2017 May 22, 2023
*⁽²⁾ — October 1, 2017 October 1, 2023
*⁽²⁾ — July 24, 2018 July 24, 2024
Luyuan FAN
*⁽³⁾ 14.50 July 26, 2013 —
*⁽²⁾ — July 2, 2014 July 2, 2022
*⁽²⁾ — ~~January 27, 2016~~ ~~January 27, 2024~~
~~Sophie Minzhi WU~~
*⁽³⁾ ~~18.50~~ ~~May 18, 2013~~ ~~May 18, 2019~~
*⁽⁴⁾ ~~14.50~~July 30, 2018 July ~~26, 2013~~ —30, 2026
Yvonne Yifen CHANG
*⁽²⁾ — ~~July 2, 2014~~December 8, 2018 ~~July 2, 2022~~
*⁽²⁾ — ~~January 27, 2016~~ ~~January 27,~~December 8, 2024
~~Jessie Junfang ZHENG~~
*⁽³⁾ ~~18.50~~ ~~May 18, 2013~~ ~~May 18, 2019~~
*⁽²⁾ — ~~May 22, 2014~~ ~~May 22, 2020~~
*⁽²⁾ — ~~August 21, 2014~~ ~~August 21, 2020~~
*⁽²⁾ — ~~August 21, 2015~~ ~~August 21, 2021~~
*
The RSUs, options ~~RSUs~~ and other rights to acquire ordinary shares in aggregate held by each of these directors and executive officers and their affiliates represent less than 1% of our total outstanding shares.

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(1)
Represents rights under the Senior Management Equity Incentive Plan subscribed for at a subscription price of US$0.50 per preference share in 2010.

(2)
Represents RSUs.

(3)
~~Represents unvested restricted shares related to options early exercised.~~
~~(4)~~
Represents rights under the Partner Capital Investment ~~Plan subscribed for at US$4.00 per preference share.~~Plan. See note 8(c) to our audited consolidated financial statements ~~for the years ended March 31, 2014, 2015 and 2016~~ included elsewhere in this annual report for further information.

~~(5)~~(4)
Represents options.

~~(6)~~(5)
Date of grant represents the original grant date of the RSUs, options ~~RSUs~~ and other rights held by the respective director or executive officer. ~~Each outstanding option~~RSUs and ~~RSU described in this table~~options granted prior to the adoption of our 2014 Plan that isare not held by a U.S. resident ~~was~~were cancelled and replaced with a new grant under the terms of the 2014 Plan (as described herein) with ~~such~~ terms and conditions that are substantially similar to those that applied to the cancelled awards.

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C.  Board Practices,
Nomination and Terms of Directors
Pursuant to our articles of association, our board of directors is classified into three classes of directors designated as Group I, Group II and Group III, each generally serving a three-year term unless earlier removed. The Group I directors currently consist of Joe Tsai, Michael Evans, ~~Jonathan Lu~~Eric Jing and Börje Ekholm; the Group II directors currently consist of Daniel Zhang, Chee Hwa Tung, Jerry Yang and Wan Ling Martello; and the Group III directors currently consist of Jack Ma, Masayoshi Son and Walter Kwauk. The terms of office of the current Group I, Group II and Group III directors will expire, respectively, at our 2021 annual general meeting, 2019 annual general meeting and 2020 annual general meeting. Unless otherwise determined by the shareholders in a general meeting, our board will consist of not less than nine directors for so long as SoftBank has a director nomination right. The Alibaba Partnership has the exclusive right to nominate up to a simple majority of our board of directors, and SoftBank has the right to nominate one director for so long as SoftBank owns at least 15% of our outstanding shares. If at any time our board of directors consists of less than a simple majority of directors nominated or appointed by the Alibaba Partnership for any reason, including because a director previously nominated by the Alibaba Partnership ceases to be a member of our board of directors or because the Alibaba Partnership had previously not exercised its right to nominate or appoint a simple majority of our board of directors, the Alibaba Partnership shall be entitled (in its sole discretion) to appoint such number of additional directors to the board as necessary to ensure that the directors nominated or appointed by the Alibaba Partnership comprise a simple majority of our board of directors. The remaining members of the board of directors will be nominated by the nominating and corporate governance committee of the board. Director nominees will be elected by the simple majority vote of shareholders at our annual general meeting.
If a director nominee is not elected by our shareholders or departs our board of directors for any reason, the party or group entitled to nominate that director has the right to appoint a different person to serve as an interim director of the class in which the vacancy exists until our next scheduled annual general meeting of shareholders. At the next scheduled annual general meeting of shareholders, the appointed interim director or a replacement director nominee (who, in the case of Alibaba Partnership nominees, cannot be the original nominee) will stand for election for the remainder of the term of the class of directors to which the original nominee would have belonged.
For additional information, see "Item 6. Directors, Senior Management and Employees — A. Directors and Senior Management — Alibaba Partnership" and "Item 7. Major Shareholders and Related Party Transactions — B. Related Party Transactions — Transactions and Agreements with SoftBank and ~~Yahoo~~Altaba — Voting Agreement."
Code of Ethics and Corporate Governance Guidelines
We have adopted a code of ethics, which is applicable to all of our directors, executive officers and employees. Our code of ethics is publicly available on our website.
In addition, our board of directors has adopted a set of corporate governance guidelines covering a variety of matters, including approval of related party transactions. Our corporate governance guidelines also provide that any adoption of a new equity incentive plan and any material amendments to ~~such~~those plans will be subject to the approval of our non-executive directors and also provide that the director nominated by SoftBank is entitled to

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notices and materials for all meetings of committees of our board of directors and, by giving prior notice, may attend, observe and participate in any discussions at any committee meetings. The guidelines reflect certain guiding principles with respect to our board's structure, procedures and committees. The guidelines are not intended to change or interpret any applicable law, rule or regulation or our articles of association.
Duties of Directors
Under Cayman Islands law, all of our directors owe us fiduciary duties, including a duty of loyalty, a duty to act honestly and a duty to act in good faith and in a manner they believe to be in our best interests. Our directors also have a duty to exercise the skill they actually possess and ~~such~~the care and diligence that a reasonably prudent person would exercise in comparable circumstances. In fulfilling their duty of care to us, our directors must ensure

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compliance with our articles of association, as amended and restated from time to time. We have the right to seek damages if a duty owed by any of our directors is breached.
Board Committees
Our board of directors has established an audit committee, a compensation committee and a nominating and corporate governance committee. Our corporate governance guidelines provide that a majority of the members of our compensation committee and nominating and corporate governance committee will be independent directors within the meaning of Section 303A of the New York Stock Exchange Listed Company Manual. All members of our audit committee ~~shall be~~are independent within the meaning of Section 303A of the New York Stock Exchange Listed Company Manual and ~~will~~ meet the criteria for independence set forth in Rule 10A-3 of the Exchange ~~Act by the end of the one year transition period for companies following an initial public offering.~~Act.
Audit Committee
Our audit committee currently consists of Walter Kwauk, Börje Ekholm and Wan Ling Martello. Mr. Kwauk is the chairman of our audit committee. Mr. Kwauk satisfies the criteria of an audit committee financial expert as set forth under the applicable rules of the SEC. Mr. Kwauk, Mr. Ekholm and Ms. Martello satisfy the requirements for an "independent director" within the meaning of Section 303A of the New York Stock Exchange Listed Company Manual and meet the criteria for independence set forth in Rule 10A-3 of the Exchange Act.
The audit committee oversees our accounting and financial reporting processes and the audits of our financial statements. Our audit committee is responsible for, among other things:
•
selecting, and evaluating the qualifications, performance and independence of, the independent auditor;

•
pre-approving or, as permitted, approving auditing and non-auditing services permitted to be performed by the independent auditor;

•
considering the adequacy of our internal accounting controls and audit procedures;

•
reviewing with the independent auditor any audit problems or difficulties and management's response;

•
reviewing and approving related party transactions between us and our directors, senior management and other persons specified in Item 6B of Form 20-F;

•
reviewing and discussing the quarterly financial statements and annual audited financial statements with management and the independent auditor;

•
establishing procedures for the receipt, retention and treatment of complaints received from our employees regarding accounting, internal accounting controls or auditing matters and the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters;

•
meeting separately, periodically, with management, internal auditors and the independent auditor; and

•
reporting regularly to the full board of directors.

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Compensation Committee
Our compensation committee currently consists of Jerry Yang, Walter Kwauk and Joe Tsai. Mr. Yang is the chairman of our compensation committee. Mr. Yang and Mr. Kwauk satisfy the requirements for an "independent director" within the meaning of Section 303A of the New York Stock Exchange Listed Company Manual.
Our compensation committee is responsible for, among other things:
•
determining the amount of the annual cash bonus pool to be allocated to each executive officer and determining the total proportions of the annual cash bonus pool to be allocated in aggregate to the non-partner members of our management and in aggregate to the partners we employ;

•
reviewing, evaluating and, if necessary, revising our overall compensation policies;

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•
reviewing and evaluating the performance of our directors and executive officers and determining the compensation of our directors and executive officers;

•
reviewing and approving our executive officers' employment agreements with us;

•
determining performance targets for our executive officers with respect to our incentive compensation plan and equity-based compensation plans;

•
administering our equity-based compensation plans in accordance with the terms thereof; and

•
carrying out ~~such~~ other matters that are specifically delegated to the compensation committee by our board of directors from time to time.
Nominating and Corporate Governance Committee
Our nominating and corporate governance committee currently consists of Jack Ma, Chee Hwa Tung and Jerry Yang. Jack is the chairman of our nominating and corporate governance committee. Mr. Tung and Mr. Yang satisfy the "independence" requirements of Section 303A of the New York Stock Exchange Listed Company Manual.
Our nominating and corporate governance committee is responsible for, among other things:
•
selecting the board nominees (other than the director nominees to be nominated by the Alibaba Partnership and SoftBank) for election by the shareholders or appointment by the board;

•
periodically reviewing with the board the current composition of the board with regards to characteristics such as independence, knowledge, skills, experience and diversity;

•
making recommendations on the frequency and structure of board meetings and monitoring the functioning of the committees of the board; and

•
advising the board periodically with regards to significant developments in corporate governance law and practices as well as our compliance with applicable laws and regulations, and making recommendations to the board on corporate governance matters.
Committee Observer
In accordance with our articles and the voting agreement entered into among us, Jack Ma, Joe Tsai, SoftBank and ~~Yahoo,~~Altaba, we have agreed that the director nominated by SoftBank is entitled to receive notices and materials for all meetings of our committees and to join as an observer in meetings of the audit committee, the compensation committee, the nominating and corporate governance committee and/or our other board committees we may establish upon notice to the relevant committee.

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D.  Employees
~~Employees~~
As of March 31, ~~2014, 2015~~2017, 2018 and ~~2016,~~2019, we had a total of ~~22,072, 34,985~~50,097, 66,421 and ~~36,446~~101,958 full-time employees, respectively. ~~Substantially all~~The increase in our employees was primarily due to our recent acquisitions and consolidation of certain businesses, as well as our organic business growth. A substantial majority of our employees are based in China.
       ~~The following table sets out the breakdown of our full-time employees by functions as of March 31, 2016:~~

Function
Number of
employees⁽¹⁾ % of total
employees⁽¹⁾
Research and development
18,737 51%
Operations and customer services
7,877 22%
Sales and marketing
6,606 18%
General and administrative
3,226 9%

Total
36,446 100%

~~(1)~~
~~The number of employees presented in this table does not include third-party consultants and contractors that we employ from time to time.~~
We believe that we have a good working relationship with our employees and we have not experienced any significant labor disputes.
E.  Share Ownership
For information regarding the share ownership of our directors and officers, see "Item 7. Major Shareholders and Related Party Transactions — A. Major Shareholders." For information as to stock options granted to our directors, executive officers and other employees, see "Item 6. Directors, Senior Management and Employees — B. Compensation — Equity Incentive Plans."

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ITEM 7    MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A.  Major Shareholders
The following table sets forth information with respect to beneficial ownership of our ordinary shares as of ~~the date of this annual report~~June 3, 2019, except otherwise noted, by:
•
each of our directors and executive officers;

•
our directors and executive officers as a group; and

•
each person known to us to beneficially own 5% ~~and~~or more of our ordinary shares.
Beneficial ownership is determined in accordance with the rules and regulations of the SEC and includes the power to direct the voting or the disposition of the securities or to receive the economic benefit of the ownership of the securities. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, we have included shares underlying the ADSs held by the person, as well as shares that the person has the right to acquire within 60 days of this annual report, including through the vesting of RSUs and the exercise of any option or other ~~right and the vesting of restricted shares.~~right. These shares, however, are not included in the computation of the percentage ownership of any other person. The calculations of percentage ownership in the table below are based on ~~2,495,276,682~~2,603,531,693 ordinary shares outstanding as of ~~May 20, 2016.~~June 3, 2019.

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Name
Ordinary shares
beneficially owned Percent Ordinary shares
beneficially owned Percent
Directors and Executive Officers:

Jack Yun MA⁽¹⁾
193,744,241 7.8% 161,861,406 6.2 %
Joseph C. TSAI⁽²⁾
80,026,036 3.2% 56,202,810 2.2 %
Jonathan Zhaoxi LU
* *
Daniel Yong ZHANG
* *    * *
J. Michael EVANS
* *    * *
Eric Xiandong JING
* *
Masayoshi SON
— —    — —
Chee Hwa TUNG
* *    * *
Walter Teh Ming KWAUK
* *    * *
Jerry YANG
* *    * *
Börje E. EKHOLM
* *
E. Börje EKHOLM
* *
Wan Ling MARTELLO
— —    * *
Maggie Wei WU
* *    * *
Jane Fang JIANG
* *
Judy Wenhong TONG
* *
Jeff Jianfeng ZHANG
* *    * *
Zhenfei LIU
* *
Sophie Minzhi WU
* *
Timothy A. STEINERT
* *
Jessie Junfang ZHENG
* *
Chris Pen-hung TUNG
* *
Trudy Shan DAI
* *    * *
Timothy A. STEINERT
* *
Jianhang JIN
* *
Chris Pen-hung TUNG
* *
Yongfu YU
* *
Simon Xiaoming HU
* *
Sophie Minzhi WU
* *
Jessie Junfang ZHENG
* *
All directors and executive officers as a group
311,196,212 12.5%
Greater than 5% Beneficial Owners:

Fan JIANG
* *
Yvonne Yifen CHANG
* *
Luyuan FAN
* *
All directors and executive officers as a group Greater than 5% Beneficial Owners:
241,259,070 9.3 %
SoftBank⁽³⁾
797,742,980 32.0% 673,758,371 25.9 %
Yahoo⁽⁴⁾
383,565,416 15.4%
Altaba⁽⁴⁾
244,790,000 9.4 %
Notes:
*
This person beneficially owns less than 1% of our outstanding ordinary shares.

(1)
Represents (i) ~~2,175,677~~395,000 ordinary shares held directly by Jack Ma, (ii) 35,000,000 ordinary shares held by APN Ltd., a Cayman Islands company with its registered address at Fourth Floor, One Capital Place, P.O. Box 847, Grand Cayman, KY1-1103,

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Cayman Islands, in which Jack holds a 70% equity interest, which ordinary shares, together with Jack's equity interest in APN Ltd., have been pledged to us to support certain obligations under the 2014 SAPA, (iii) ~~17,500,000~~11,648,921 ordinary shares ~~underlying options~~ held by Yun Capital Limited, a British Virgin Islands company with its registered address at Woodbourne Hall, Road Town, Tortola, British Virgin Islands, which has granted Jack a revocable proxy over ~~such~~these shares and which is wholly-owned by The Jack Ma Philanthropic Foundation, (iv) ~~17,500,000~~11,648,921 ordinary shares ~~underlying options~~ held by Ying Capital Limited, a British Virgin Islands company with its registered address at Woodbourne Hall, Road Town, Tortola, British Virgin Islands, which has granted Jack a revocable proxy over ~~such~~these shares and which is wholly owned by The Jack Ma Philanthropic Foundation, (v) ~~57,367,988~~52,367,988 ordinary shares held by JC Properties Limited, a British Virgin Islands company with its registered address at Woodburne Hall, Road Town Tortola, British Virgin Islands, which is wholly-owned by a trust ~~established for~~ the ~~benefit~~beneficiaries of ~~Jack's~~which are Jack and his family and (vi) ~~64,200,576~~50,800,576 ordinary shares held by JSP Investment Limited, a British Virgin Islands company with the address of P.O. Box 916, Woodbourne Hall, Road Town, Tortola, British Virgin Islands, which is wholly-owned by a trust ~~established for~~ the ~~benefit~~beneficiaries of ~~Jack and his~~which are Jack's family. Excludes shares held by SoftBank representing SoftBank's share ownership in excess of 30% of our outstanding ordinary shares as of the most recent record date with respect to any shareholders action and up to ~~21,500,000~~121,500,000 ordinary shares held by ~~Yahoo,~~Altaba, over which Jack and Joe will share voting power pursuant to the voting agreement that we, Jack, Joe, SoftBank and ~~Yahoo~~Altaba entered into as described in "Item 7. Major Shareholders and Related Party Transactions — B. Related Party Transactions — Transactions and Agreements with ~~Yahoo~~Altaba and SoftBank — Voting Agreement." Jack has historically voted the ordinary shares held by the family trusts and he is deemed a beneficial owner of the ordinary shares held by the family trusts. Jack does not have any pecuniary interests in the ~~35,000,000~~23,297,842 ordinary shares ~~underlying options~~ held by Yun Capital Limited and Ying Capital Limited. Jack's business address is 969 West Yi Road, Yu Hang District, Hangzhou 311121, the People's Republic of China.
(2)
Represents (i) ~~1,510,464~~1,624,130 ordinary shares held directly by Joe Tsai, (ii) 15,000,000 ordinary shares held by APN Ltd., in which Joe holds a 30% equity interest and serves as a director, which ordinary shares, together with Joe's equity interest in APN Ltd., have been pledged to us to

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support certain obligations under the 2014 SAPA, (iii) ~~15,000,000~~5,982,293 ordinary shares ~~underlying options~~ held by Joe and Clara Tsai Foundation Limited, a company incorporated under the law of the Island of Guernsey with its registered address at Helvetia Court, South Esplanade, St. Peter Port, Guernsey GY1 4EE, that has granted Joe a revocable proxy over ~~such~~these shares and which is wholly-owned by Joe and Clara Tsai Foundation, (iv) ~~21,905,952~~19,473,209 ordinary shares ~~and 1,200,000 ordinary shares underlying preferred shares of Alternate Solutions Management Limited, in each case~~ held by Parufam Limited, a Bahamas corporation with its registered address at Suite 200B, 2nd Floor, Centre of Commerce, One Bay Street, P.O. Box N-3944, Nassau, Bahamas, and over which, Joe, as a director of Parufam Limited, has been delegated sole voting and disposition power and (v) ~~21,000,000~~14,123,178 ordinary shares held by PMH Holding Limited, a British Virgin Islands corporation with its registered address at Trident Chambers, P.O. Box 146, Road Town, Tortola, British Virgin Islands, and over which, Joe, as sole director of PMH Holding Limited, has voting and dispositive power, (vi) 2,868,198 ordinary shares held by MFG Limited, a British Virgin Islands corporation with its registered address at Trident Chambers, P.O. Box 146, Road Town, Tortola, British Virgin Islands, and over which, Joe, as sole director of MFG Limited, has voting and dispositive power and (vii) 1,541,422 ordinary shares held by MFG II Ltd., a British Virgin Islands corporation with its registered address at Trident Chamber, P.O. Box 146, Road Town, Tortola, British Virgin Islands, and over which Joe, as sole director of MFG II Ltd., has voting and dispositive power. Excludes shares held by SoftBank representing SoftBank's share ownership in excess of 30% of our outstanding ordinary shares as of the most recent record date with respect to any shareholders action and up to 121,500,000 ordinary shares held by ~~Yahoo,~~Altaba, over which Joe and Jack will share voting power pursuant to the voting agreement that we, Jack, Joe, SoftBank and ~~Yahoo~~Altaba have entered into as described in "Item 7. Major Shareholders and Related Party Transactions — B. Related Party Transactions — Transactions and Agreements with ~~Yahoo~~Altaba and SoftBank — Voting Agreement." Joe does not have any pecuniary interests in the ~~15,000,000~~5,982,293 ordinary shares ~~underlying options~~ held by Joe and Clara Tsai Foundation Limited. Joe's business address is c/o Alibaba Group Services Limited, 26/F Tower One, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong S.A.R.

(3)
Represents ~~(a) 466,826,180~~(i) 490,934,571 ordinary shares owned by SoftBank Group Corp. with its registered office at 1-9-1 Higashi-Shimbashi Minato-ku, Tokyo 105-7303, Japan, ~~(b) 15,000,000~~(ii) 12,823,800 ordinary shares owned by ~~SBBM Corporation~~West Raptor Holdings, LLC with its registered office at 251 Little Falls Drive, Wilmington, New Castle County, DE 19808, and (iii) 170,000,000 ordinary shares owned by Skywalk Finance GK with its registered office at 1-9-1, Higashi-Shimbashi, Minato-ku, Tokyo, ~~105-7303, Japan and (c) 315,916,800~~Japan.

(4)
Based on information published by Altaba on its website as of May 31, 2019. Represents ordinary shares ~~owned~~and ADSs held directly and indirectly by ~~SB China Holdings Pte Ltd. with its registered office at 20 Raffles Place, #09-01 Ocean Towers, Singapore 048620. SoftBank Group Corp. is a public company listed on the Tokyo Stock Exchange.~~
~~(4)~~
~~Represents (a) 92,626,716 ordinary shares owned by Yahoo!~~Altaba Inc. with its registered office at ~~701 First Avenue, Sunnyvale, CA 94089,~~140 East 45^th Street, 15^th Floor, New York, NY 10017, the United ~~States and (b) 290,938,700~~States. On May 15, 2019, Altaba announced that it intends to commence sales of our ADSs on May 20, 2019. Altaba stated that it intends to sell no more than 50% of the Company's ordinary shares ~~owned by Aabaco Holdings Hong Kong Limited with~~it holds prior to receiving stockholder approval of its ~~registered office at 15/F Caroline Centre, 28 Yun Ping Road, Causeway Bay, Hong Kong S.A.R. Yahoo! Inc. is a public company listed~~previously announced plan to liquidate and dissolve the Altaba entity pursuant to voluntary liquidation and dissolution. Altaba's stockholder meeting to vote on the ~~NASDAQ Global Select Market.~~plan is scheduled to be held on June 27, 2019. In addition, Altaba expects to file its certificate of dissolution during the third or fourth quarter of 2019, although this filing may be delayed by Altaba's board in its sole discretion. Altaba stated that it intends to sell all of its shares in us if the plan is approved at the stockholder meeting, although Altaba has stated that the timing and method of sales, and other related transaction considerations will be determined at its discretion, and the plan is subject to change based on prevailing market conditions and other factors. See "Item 3. Key Information — D. Risk Factors — Risks Related to Our ADSs — Substantial future sales or perceived potential sales of our ADSs, ordinary shares or other equity or equity-linked securities in the public market could cause the price of our ADSs to decline significantly."

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We have one class of ordinary shares, and each holder of our ordinary shares is entitled to one vote per share.
As of ~~May 20, 2016, 2,495,276,682~~June 3, 2019, 2,603,531,693 of our ordinary shares were outstanding. To our knowledge, ~~1,300,005,347~~1,718,093,609 ordinary shares, representing approximately ~~52%~~66% of our total outstanding shares, were held by ~~126~~204 record shareholders ~~in the United States. The number of beneficial owners of our ADSs~~with registered addresses in the United States, ~~is likely to be much larger than the number~~including brokers and banks that hold securities in street name on behalf of ~~record holders of our ordinary shares in the United States.~~their customers. We are not aware of any arrangement that may at a subsequent date, result in a change of control of our company.
B.  Related Party Transactions
Our Related Party Transaction Policy
In order to prevent risks of conflicts of interest or the appearance of conflicts of interest, all of our directors and employees are subject to our code of business conduct and other policies which require, among other things, that any potential transaction between us and an employee or director, their relatives and closely connected persons and certain entities in which they, their relatives or closely connected persons have an interest be approved in writing by an appropriate supervisor or compliance officer.
We have also adopted a related party transaction policy to which all of our directors, senior management and other key management personnel, all ~~such person's~~close family members (as defined in the policy) of the foregoing individuals, Ant Financial ~~Services~~ and its subsidiaries as well as the Alibaba Partnership and certain other related entities are subject. Related party transactions defined under this policy, as required by Form 20-F, include transactions with our directors, senior management and major shareholders and their affiliates, as well as transactions with parties that do not pose risks of conflicts of interest, such as transactions with our investee companies that are not otherwise affiliated with any of the foregoing individuals. This policy is intended to supplement the procedures set forth in our code of business conduct and our other corporate governance policies and does not exempt any person from more restrictive provisions that may exist in our existing procedures and policies.
This related party transaction policy provides, among other things, that, unless otherwise pre-approved by our board of directors:
•
each related party transaction, orand any material amendment or modification ofto a related party transaction, shall be adequately disclosed to, and reviewed and approved or ratified by, our audit committee or any committee composed solely of disinterested independent directors or by the disinterested members of such committee; and

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•
any employment relationship or similar transaction involving our directors or senior management of our company and any related compensation shall be approved by the disinterested members of our compensation committee or recommended by the disinterested members of the compensation committee to our board for its approval.
Our related party transaction policy, code of business conduct and our other corporate governance policies are subject to periodic review and revision by our board.

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Summary of Major Related Party Transactions
As disclosed in greater details in the following paragraphs, the table below summarizes the major related party transactions in fiscal years 2017, 2018 and 2019.
Related Party
Transaction Description
SoftBank
•
Voting agreement among us, Jack Ma, Joe Tsai, SoftBank and Altaba which, among others, provides that SoftBank, Altaba, Jack Ma and Joe Tsai will vote their shares in favor of the Alibaba Partnership director nominees, and provides SoftBank with the right to nominate a director
•
Various investments involving SoftBank
Altaba
•
Voting agreement among us, Jack Ma, Joe Tsai, SoftBank and Altaba which, among others, provides that SoftBank, Altaba, Jack Ma and Joe Tsai will vote their shares in favor of the Alibaba Partnership director nominees, and provides SoftBank with the right to nominate a director
Ant Financial and its affiliates
•
Alipay provides payment and escrow services to us
•
2014 SAPA, which was amended in 2018 and provides a series of transactions, including our acquisition of an equity interest in Ant Financial
•
2014 IPLA, which was subsequently amended in 2018 and provides that we and our subsidiaries license to Ant Financial and/or its subsidiaries certain intellectual property rights and provide various software technology services, and Ant Financial pays us profit share payments
•
We, Ant Financial, our controlled affiliates and certain other affiliates, contribute all data collected or generated (subject to applicable law, industry rules and contractual requirements) to a data platform that we operate and maintain, and to which all of the full data sharing participants will have access
•
We and Ant Financial cooperate with each other with respect to the enforcement of each other's rights and the provision of certain financial services to our customers and merchants in connection with the SME loan business
•
We granted Ant Financial a license for it to continue to use certain trademarks and domain names
•
We and Ant Financial provide certain administrative and support services to each other and our respective affiliates
•
We and Ant Financial provide various other services to each other
•
Various investments involving Ant Financial
•
We have awarded RSUs and granted options to acquire our ordinary shares to employees of Ant Financial and its subsidiaries; Junhan, a major equity holder of Ant Financial, has granted to our employees certain share-based awards that are similar to share appreciation awards linked to the valuation of Ant Financial; Ant Financial, through a wholly-owned subsidiary, has granted certain RSU awards to our employees

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Related Party
Transaction Description
Alibaba Pictures
•
We subscribed for newly issued ordinary shares of Alibaba Pictures and it became our consolidated subsidiary
Jack Ma, Joe Tsai, and J. Michael Evans
•
We agreed to assume the cost of maintenance, crew and operation of the personal aircrafts of these directors and officers where the cost is allocated for business purposes
Investment funds affiliated with Jack Ma
•
Various investments involving the Yunfeng Funds, investment funds affiliated with Jack Ma
Jack Ma
•
Made certain commitments to us relating to his interest in Ant Financial, the Yunfeng Funds and other entities
•
In connection with strengthening our strategic cooperation with Wasu, we entered into financing arrangements with a limited partner of a PRC limited partnership that invested in Wasu. A company controlled by Jack Ma serves as one of the general partners of the PRC limited partnership.
Cainiao Network
Before Cainiao Network became our consolidated subsidiary in October 2017,
•
Cainiao Network provided logistics services to us
•
We provided Cainiao Network with various administrative and support services
Weibo
•
Weibo provides us with certain marketing services
•
We provide Weibo with certain cloud computing services
Investees
•
We have commercial arrangements with certain of our investees and other related parties to provide and receive certain marketing, logistics, traffic acquisition, cloud computing and other services
•
We extended loans to certain of our investees
•
We have made co-investments with certain of our investees
Variable interest entities and variable interest entity equity holders
•
We operate certain of our businesses in China through contractual arrangements between our wholly-owned entities, our variable interest entities and variable interest entity equity holders
Directors and executive officers
•
We entered into indemnification agreements with our directors and executive officers
•
We entered into employment agreements with our directors and executive officers
•
We grant equity incentive awards to our directors and executive officers

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The following table summarizes the services fees paid to certain related parties in fiscal years 2017, 2018 and 2019.

Year Ended March 31,
Related Party
Transaction 2017 2018 2019

RMB RMB RMB US$

(in millions)

Ant Financial and its affiliates
Payment processing and escrow services fee 5,487 6,295 8,252 1,230

Administrative and support services

15
84
80
12

Marketing support services in connection with membership management and other services

937
1,810
1,248
186
Cainiao Network

Logistics service fee

4,444
3,437
N/A
⁽¹⁾
N/A
⁽¹⁾
Weibo

Marketing service fee

340
615
624
93
Note:
(1)
In October 2017, our equity interest in Cainiao Network increased to approximately 51% and it became one of our consolidated subsidiaries.
Certain of our investees have entered into commercial arrangements with us in connection with certain logistics services they provide to Cainiao Network and our other businesses. In fiscal year 2019, we incurred costs and expenses of RMB12,933 million (US$1,927 million) for these logistics services, accounting for 4.2% of our costs and expenses in fiscal year 2019.
Other than the foregoing, the aggregate service fees we paid to other related parties accounted for less than 1% of total cost and expenses in each of fiscal years 2017, 2018 and 2019.
The following table summarizes the services fees received from related parties in fiscal year 2017, 2018 and 2019.

Year Ended March 31,
Related Party
Transaction 2017 2018 2019

RMB RMB RMB US$

(in millions)

Ant Financial
Software technology services fee and license fee 2,086 3,444 517 77

Reimbursement payment for software technology services fee

245
37
106
16
Ant Financial and its affiliates

Annual fee for SME loan business

847
956
954
142

Administrative and support services

531
676
1,017
152

Cloud computing services fee

264
482
761
113

Marketplace software technology services fee

409
497
591
88

Others

90
524
898
134

Reimbursement payment for RSUs and options⁽¹⁾

54
5
—
—
Cainiao Network

Administrative and support service fee

152
123
N/A
⁽²⁾
N/A
⁽²⁾
Weibo

Cloud computing service fee

105
223
304
45
Note:
(1)
We entered into agreements with Ant Financial under which we will receive reimbursements for RSUs and options relating to our ordinary shares granted to the employees of Ant Financial and its subsidiaries during the period from December 14, 2011 to March 31, 2014. Grants of RSUs and options made subsequent to March 31, 2014 are not subject to these reimbursement arrangements. See "— Agreements and Transactions Related to Ant Financial and Its Subsidiaries — Equity-based Award Arrangements."

(2)
In October 2017, our equity interest in Cainiao Network increased to approximately 51% and it became one of our consolidated subsidiaries.

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Other than the related party transactions summarized above, the aggregate payments we received from other related parties accounted for less than 1% of total revenue in each of the fiscal years 2017, 2018 and 2019.
Transactions and Agreements with SoftBank and ~~Yahoo~~Altaba
Voting Agreement
We have entered into a voting agreement with Jack Ma, Joe Tsai, SoftBank and ~~Yahoo,~~Altaba, which provides SoftBank with the right to nominate one director to our board of directors who will, subject to certain conditions, have the right to receive notices and materials for all meetings of our committees and to join ~~such~~these meetings as an observer, which rights are also reflected in our memorandum and articles of association. These nomination rights will terminate when SoftBank's shareholding declines below 15% of our outstanding shares. The voting agreement also contains provisions to the effect that:
•
SoftBank agrees ~~(i) to~~ to:

•
vote its shares in favor of the election of the Alibaba Partnership's director nominees at each annual general shareholders meeting until SoftBank's shareholding declines below 15% of our outstanding shares, and ~~(ii) to~~

•
grant the voting power of any portion of its shareholdings exceeding 30% of our outstanding ordinary shares to Jack and Joe by proxy;

•
Jack and Joe will vote their shares and any other shares over which they hold voting rights in favor of the election of the SoftBank director nominee at each annual general shareholders meeting in which the SoftBank nominee stands for election until SoftBank's shareholding declines below 15% of our outstanding ordinary shares;

•
~~Yahoo~~Altaba agrees ~~(i) to~~ to:

•
vote its shares in favor of the election of all of the Alibaba Partnership's director nominees and the SoftBank director nominee, if so standing for election, at each annual general shareholders meeting until SoftBank's shareholding declines below 15% of our outstanding shares, and ~~(ii) to~~

•
grant the voting power over any shares it owns, up to 121.5 million of our ordinary shares, to Jack and Joe by proxy;

•
each party to the voting agreement will use its commercially reasonable efforts to cause any other person with whom it jointly files a statement (or an amendment to a statement) on Schedule 13D or Schedule 13G pursuant to the Exchange Act to become a party to the voting agreement and vote its shares in favor of SoftBank's and the Alibaba Partnership's director nominees pursuant to the foregoing; and

•
SoftBank and ~~Yahoo~~Altaba will receive certain information rights in connection with the preparation of their financial statements.
SoftBank's and ~~Yahoo's~~Altaba's proxy obligations described in ~~clause (ii) in~~the second sub-bullet under each of the first ~~bullet~~ and ~~the~~ third ~~bullet~~bullets above, respectively, shall (a) not apply in respect of any proposal submitted to our shareholders that may result in an issuance of shares or other equity interests of us, including securities exchangeable or convertible into shares, that would increase the amount of our then-outstanding shares by 3% or more and (b) terminate when Jack owns less than 1% of our outstanding shares on a fully diluted basis or if we materially breach the voting agreement.
~~Yahoo Technology and Intellectual Property License Agreement~~
       We and Yahoo entered into a technology and intellectual property license agreement dated October 24, 2005, as amended and restated on September 18, 2012, or the Yahoo TIPLA. Under the Yahoo TIPLA, Yahoo granted to us the use of certain intellectual property. In consideration of the rights granted under the Yahoo TIPLA, we paid Yahoo a lump sum payment in the amount of US$550 million and agreed to pay Yahoo an annual royalty equal to 2% of our consolidated revenues (less certain costs) for the period from January 1, 2006 to December 31,

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2012 and 1.5% of our consolidated revenues (less certain costs) for the period from January 1, 2013 until the completion of our initial public offering in September 2014. No royalties have been payable since then. For fiscal years 2014 and 2015, the royalty fees amounted to RMB748 million and RMB448 million, respectively.
~~Patent Sale and Assignment Agreement with Yahoo~~
       We and Yahoo entered into patent sale and assignment agreements in fiscal years 2014 and 2015, pursuant to which we acquired ownership of certain patents and patent applications for aggregate consideration of US$70 million and US$24 million, respectively.
~~Our Repurchase of Ordinary Shares from Yahoo~~
       On May 20, 2012, we entered into a share repurchase and preference share sale agreement with Yahoo, or the Yahoo repurchase agreement. As amended through July 14, 2014, the agreement governed the terms on which we have repurchased 523,565,416 ordinary shares from Yahoo in September 2012 and caused Yahoo to sell 140,000,000 ADSs representing 140,000,000 of our ordinary shares in connection with our initial public offering in September 2014. As of March 31, 2016, Yahoo owned 383,565,416 ordinary shares, representing approximately 15.5% of our then issued share capital.
Investments Involving SoftBank
We have invested in businesses in which SoftBank or one or more of its affiliates is ~~an existing~~a shareholder or co-invested with SoftBank or one or more of its affiliates in other businesses. SoftBank has also invested in businesses in which we or our controlled entities are ~~existing~~ shareholders. For instance, in ~~January 2015, we~~April 2017, SoftBank participated in a new round of

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equity financing ~~round~~completed by Didi Chuxing, in which we hold an equity interest. In September 2017, we sold a portion of our investment in Didi Chuxing to SoftBank for cash consideration of US$639 million. In December 2018, an investment fund affiliated with SoftBank in Travice Inc., the operator and developer of Kuaidi Dache, which in February 2015 merged into Didi Chuxing, the leading transportation network company that provides vehicles and taxis for hire in China via smartphone applications. In June 2015, we announced that we agreed to ~~invest~~acquire a minority equity interest in ~~SoftBank's robotics business. We expect that we will continue to engage in investment activities that involve SoftBank in the future.~~our local services holding company. We may continue to co-invest with SoftBank, invest in businesses in which SoftBank is already an existing investor, and may also bring SoftBank as an investor into our new businesses or businesses in which we are an existing investor.
Agreements and Transactions Related to Ant Financial ~~Services~~ and Its Subsidiaries
Ownership of Ant Financial ~~Services~~ and Alipay
We originally established Alipay in December 2004 to operate our payment services business. In June 2010, the PBOC issued new regulations that required non-bank payment companies to obtain a license in order to operate in China. These regulations provided specific guidelines for license applications only for domestic PRC-owned entities. These regulations stipulated that, in order for any foreign-invested payment company to obtain a license, the scope of business, the qualifications of any foreign investor and any level of foreign ownership would be subject to future regulations to be issued, which in addition would require approval by the PRC State Council. ~~Further,~~Furthermore, the regulations required that any payment company that failed to obtain a license must cease operations by September 1, 2011. Although Alipay was prepared to submit its license application in early 2011, at that time the PBOC had not issued any guidelines applicable to license applications for foreign-invested payment ~~companies (and no such guidelines have been issued as of the date of this annual report).~~companies. In light of the uncertainties relating to the license qualification and application process for a foreign-invested payment company, our management determined that it was necessary to restructure Alipay as a company wholly-owned by PRC ~~nationals~~citizens in order to avail Alipay of the specific licensing guidelines applicable only to domestic PRC-owned entities. Accordingly, we divested all of our interest in and control over Alipay in 2011, which resulted in deconsolidation of Alipay from our financial statements. This action enabled Alipay to obtain a payment business license in May 2011 without delay and without any detrimental impact to our China retail marketplaces or to Alipay.

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Following the divestment of our interest in and control over Alipay, effective in the first calendar quarter of 2011, the ownership structure of Alipay's parent entity, Ant Financial, ~~Services,~~ was changed ~~such~~so that Jack Ma held a substantial majority of the equity ownership interest in Ant ~~Financial Services.~~Financial. The ownership structure of Ant Financial ~~Services~~ has subsequently been further restructured. ~~In May 2016,~~ Ant Financial ~~Services~~has also completed ~~a round~~several rounds of equity ~~financing~~financing. On February 1, 2018, pursuant to the 2014 SAPA, we agreed to acquire a 33% equity interest in Ant Financial through an onshore PRC subsidiary and terminate the profit share payments that we currently receive from Ant Financial, subject to the receipt of ~~approximately US$4.5 billion.~~the necessary PRC regulatory approvals and the satisfaction of other conditions set forth in the 2018 SAPA. As of the date of this annual report, approximately ~~42.28%~~40% of ~~its~~Ant Financial's equity ~~interests are~~interest is held by Junhan, approximately ~~34.15%~~30% of its equity ~~interests are~~interest is held by Junao and approximately ~~23.57%~~25% of its equity ~~interests are~~interest is held by other shareholders.
Economic interests of Ant Financial ~~Services~~ through Junhan are owned by Jack Ma, Simon Xie and other employees of our company and Ant Financial ~~Services.~~and its affiliates and investee companies. These economic interests are in the form of limited partnership interests and interests similar to share appreciation rights tied to potential appreciation in the value of Ant ~~Financial Services.~~Financial. The economic interests in Junao are held in the form of limited partnership interests by certain members of the Alibaba Partnership.
We understand that it is the intention of the shareholders of Ant Financial ~~Services~~ that:
•
Jack Ma's direct and indirect economic interest in Ant Financial ~~Services~~ will be reduced over time to a percentage that does not exceed his and his affiliates' interest in our company as of the time immediately prior to the completion of our initial public offering (the percentage of our ordinary shares Jack and his affiliates beneficially owned immediately prior to the completion of our initial public offering was 8.8%) and that this reduction will be caused in a manner by which neither Jack nor any of his affiliates would receive any economic benefit. See "— Commitments of Jack Ma to Alibaba Group." We have been informed by Ant Financial ~~Services~~ that ~~such~~the proposed reduction of Jack's economic interest is expected to be accomplished ~~within three to five years from our initial public offering in September 2014~~ through a

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combination of future equity-based incentive awards to employees and dilutive issuances of equity in Ant Financial, ~~Services,~~ among others;

•
from time to time, additional economic interests in Ant Financial ~~Services~~ in the form of interests similar to share appreciation rights issued by Junhan will be transferred to employees of Ant Financial ~~Services~~ and our employees; and

•
Ant Financial ~~Services~~ will raise equity capital from investors in the future in order to finance its business expansion, with the effect that the shareholding of Junao and Junhan in Ant Financial ~~Services~~ will be reduced through dilution (the amount of ~~such~~ dilution would depend on future valuations and the amount of equity capital to be raised), but it is the intention that the combined ownership of Junao and Junhan ~~(and through them, Jack Ma)~~ will continue to constitute a majority of the outstanding equity interests of Ant Financial ~~Services.~~(prior to the closing of our acquisition of a 33% equity interest in Ant Financial).
       ~~The general partner of both Junao and Junhan is an entity 100% owned by~~ Jack Ma. As the general partner, this entity, and therefore indirectly Jack, holds the voting rights in the two limited partnerships, while the limited partners hold a majority of the economic interests in each of Junao and Junhan. Accordingly, JackMa is able to exercise the voting power of Junao and Junhan as the major shareholders of Ant Financial ~~Services.~~because the general partner of both Junao and Junhan is an entity 100% owned by him.
Our ~~Relationship~~Commercial Arrangements with Ant Financial ~~Services~~ and Alipay ~~through August 2014~~
After the divestment of our interest in and control over Alipay, we entered into a framework agreement in July 2011, or the 2011 framework agreement, with SoftBank, ~~Yahoo,~~Altaba, Alipay, Ant Financial, ~~Services,~~ Jack Ma and Joe Tsai and certain of their affiliates. At the same time, we also entered into various implementation agreements that included a commercial agreement, or the Alipay commercial agreement, an intellectual property license and software technology service agreement, or the ~~Alipay~~2011 IPLA, and a shared services agreement, which together governed our financial and commercial relationships with Ant Financial ~~Services~~ and Alipay.
       As described in more detail below, we restructured our relationship with Ant Financial Services in August 2014 with the approval of our board of directors and with the agreement of SoftBank, Yahoo, Alipay, Ant Financial Services, Jack Ma and Joe Tsai and certain of their and our affiliates.

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Alipay Commercial Agreement
Under the Alipay commercial agreement among us, Alipay and Ant Financial, ~~Services,~~ which agreement still remains in place following the 2014 restructuring and the 2018 amendments to our agreements with Ant Financial, each as described below, Alipay provides payment processing and escrow services to us. These services enable settlement of transactions on our marketplaces through a secure payment platform and escrow process. We pay Alipay a fee for these services on terms that are preferential to ~~us for such services.~~us. These preferential terms enable us, with certain exceptions, to make available basic payment processing and escrow services to consumers and merchants on our marketplaces free of charge. We believe that these services provide us with a competitive advantage that otherwise would be diminished without the preferential terms of the Alipay commercial agreement.
The fees that we pay Alipay are based on fee rates and actual payment volumes processed on our marketplaces. The fee rates reflect, among other things, Alipay's bank-processing costs and operating costs allocable to the services provided to us, and accordingly are subject to adjustment on an annual basis to the extent ~~such~~these costs increase or decline. ~~The Alipay commercial agreement provided that the directors of our company designated by SoftBank and Yahoo approve the fee rates payable by us in advance on an annual basis.~~ In connection with the 2014 restructuring, ~~of our relationship with Ant Financial Services,~~ the Alipay commercial agreement was amended to provide that ~~after the completion of our initial public offering,~~ a special independent committee formed by our independent directors and the director designated by SoftBank, or the Independent Committee, must approve the fee rates in advance on an annual basis. The fee rates for the immediately preceding year remain in effect until such time as ~~such~~the annual approval by the ~~special committee~~Independent Committee has been obtained. In fiscal years ~~2014, 2015~~2017, 2018 and ~~2016, we paid~~2019, service fees in connection with the payment services provided by Alipay amounted to ~~Alipay totaling RMB2,349~~RMB5,487 million, ~~RMB3,853~~RMB6,295 million and ~~RMB4,898~~RMB8,252 million (US$~~760~~1,230 million), respectively, under this agreement. The Alipay commercial agreement has an initial term of 50 years, and is automatically renewable for further periods of 50 years, subject to our right to terminate at any time upon one year's prior written notice. If the Alipay commercial agreement is required by applicable regulatory authorities, including under stock exchange listing rules, to be modified in certain circumstances, a one-time payment may be payable to us by Ant Financial ~~Services~~ to compensate us for the impact of ~~such~~the adjustment. Certain conforming amendments were made to the Alipay commercial agreement as part of the 2018 amendments to our agreements with Ant Financial and Alipay described below.

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2014 Restructuring of Our Relationship with Ant Financial ~~Services~~ and Alipay and 2018 Amendments
On August 12, 2014, we entered into a share and asset purchase agreement, or the 2014 SAPA, and entered into or amended certain ancillary agreements including an amendment and restatement of the ~~Alipay~~2011 IPLA, or the ~~amended Alipay~~2014 IPLA. Pursuant to these agreements, we restructured our relationships with Ant Financial ~~Services~~ and Alipay ~~its wholly-owned subsidiary,~~ and terminated the 2011 framework agreement. The restructuring contemplated by the 2014 SAPA and the ancillary agreements described below has taken effect and these agreements now govern our economic and commercial relationships with Ant Financial Services and Alipay. UnderOn February 1, 2018, we amended both the 2014 SAPA, the ~~arrangements are structured~~amended version of which we refer to as the 2018 SAPA, and the Alipay commercial agreement, and agreed with Ant Financial and certain other parties on forms of certain ancillary agreements, including an amendment and restatement of the ~~aim~~2014 IPLA, or the 2018 IPLA. The 2018 amendments were entered into to facilitate our planned acquisition of ~~securing long-term economic participation~~a 33% equity interest in Ant Financial, ~~Services which we believe is in~~and the ~~best interests~~forms of certain ancillary agreements will be entered into and/or become effective upon the closing of our ~~company and all~~acquisition of this equity interest.
Apart from the amended provisions described below, the key terms of our ~~shareholders. The potential for long-term economic participation can come in~~agreements with Ant Financial and Alipay from the form of either a perpetual 37.5% profit share stream or a possible future direct equity interest as described below. We believe this restructuring will strengthen and benefit our company as well as better position us for future growth.2014 Restructuring remain substantially unchanged.
2014 Share and Asset Purchase Agreement
Sale of SME Loan Business and Certain Other Assets
Pursuant to the 2014 SAPA, we agreed to sell certain securities and assets primarily relating to our SME loan business and other related services to Ant ~~Financial Services, for aggregate cash consideration of RMB3,219 million, which was based on a premium to the aggregate book value of the entities operating the SME loan business.~~Financial. The sale was completed in February 2015. In addition, pursuant to software system use and service agreements relating to the know-how and related intellectual property that we agreed to sell together with the SME loan business and related services, we will receive annual fees for a term of seven years. These fees, which ~~will be~~are recognized as other revenue, ~~will be~~are determined as follows: for calendar years 2015 to 2017, the entities

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operating the SME loan business ~~will pay us~~paid an annual fee equal to 2.5% of the average daily balance of the SME loans provided by ~~such~~these entities, and in calendar years 2018 to 2021, these entities will pay an annual fee equal to the amount of the fees paid in ~~the~~ calendar year 2017. In fiscal years ~~2015~~2017, 2018 and ~~2016, we received~~2019, the annual fees ~~of RMB90 million and RMB708 million (US$110 million), respectively,~~we received from Ant Financial ~~Services~~ and its ~~affiliates.~~affiliates in connection with the SME loan business amounted to RMB847 million, RMB956 million and RMB954 million (US$142 million), respectively.
For regulatory reasons, we retained approximately RMB1,225 million of the existing SME loan portfolio upon the completion of the transfer of the SME loan ~~business, which will be wound down over time as such~~business. These loans ~~are~~have been repaid. We will not conduct any new SME loan business going forward. ~~The remaining balance of this retained portfolio of loans was insignificant as of March 31, 2016.~~
Planned Issuance of Equity Interest
Pursuant to the 2014 SAPA, we are entitled to receive up to a 33% equity interest in Ant Financial under certain circumstances. To facilitate our acquisition of equity interest in Ant Financial contemplated under the 2014 SAPA, the 2018 SAPA provides that Ant Financial will issue new securities to us representing a 33% equity interest in Ant Financial, subject to the receipt of the necessary PRC regulatory approvals and the satisfaction of other conditions set forth in the 2018 SAPA. Upon closing, we will hold our equity interest in Ant Financial through an onshore PRC subsidiary. We expect the planned acquisition of the 33% equity interest in Ant Financial will strengthen our strategic relationship pursuant to the series of agreements reached with Ant Financial in 2014.
Under the 2014 SAPA and the 2018 SAPA, the consideration we are required to pay to acquire the 33% equity interest in Ant Financial will be fully funded by payments from Ant Financial and its subsidiaries to us in consideration for certain intellectual property and assets that we will transfer upon the issuance of the equity interest. Ant Financial may elect to defer certain offshore transfer payments, in which case our obligations to pay corresponding consideration for the equity issuance will also be deferred. If we have made all our outstanding equity issuance consideration payments at a time when Ant Financial has not made all corresponding transfer payments to us, for example to facilitate an Ant Financial or Alipay qualified IPO process, Ant Financial or its relevant subsidiaries will issue interest-bearing promissory notes to our transferor entities in respect of the transfer payments unpaid at that time. In any event, Ant Financial must complete all outstanding transfer payments to us, or settle all related promissory notes, by the earlier of (i) the first anniversary of an Ant Financial IPO meeting certain minimum criteria for a qualified IPO set forth in the 2018 SAPA, and (ii) the fifth anniversary of the issuance of the equity interest.

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As a condition to these transfers, upon the issuance of the equity interest we will enter into a cross license agreement with Ant Financial providing for a license of certain patents and software by Ant Financial to us (ensuring our continued right to use those transferred patents and software), and by us to Ant Financial. The large majority of the intellectual property and assets to be transferred as part of these arrangements was previously planned to be transferred to Ant Financial pursuant to the 2014 SAPA.
Upon the issuance of the equity interest, we will enter into the 2018 IPLA and the profit share payments under the 2014 IPLA will automatically terminate. For more information, see "Alipay Intellectual Property License and Software Technology Services Agreement" below.
Removal of Liquidity Event Payment Obligation
Under the 2014 SAPA, in the event of a qualified IPO of Ant Financial ~~Services~~ or Alipay, if ~~our total ownership of~~we had not acquired equity ~~interests~~interest in Ant Financial ~~Services, if any, acquired as described under "— Potential Equity Interest" below, has not reached 33%, which~~prior to the closing of such IPO, we ~~refer to as the full 33% equity interest, we would be~~were entitled, at our election, to receive a one-time liquidity event payment equal to 37.5% of the equity value, immediately prior to ~~such~~the qualified IPO, of Ant Financial ~~Services,~~ as a ~~whole and not just of Alipay, its subsidiary.~~whole. If we ~~acquire~~had acquired the equity ~~interests~~interest in Ant Financial, ~~Services~~but in an aggregate amount less than ~~the full~~ 33% ~~equity interest, then~~, the percentage of Ant ~~Financial Services'~~Financial's equity value used to calculate ~~the~~this liquidity event payment ~~will~~would be ~~reduced~~adjusted proportionately.
In lieu of receiving the liquidity event payment, we ~~may~~could instead elect to receive profit share payments under the ~~profit sharing provision of the amended Alipay~~2014 IPLA described below in perpetuity, subject to the receipt of regulatory approvals, including under applicable stock exchange listing rules, required to permit continuation of the profit share payments following a qualified IPO of Ant Financial ~~Services~~ or Alipay. If we so ~~elect,~~elected, in connection with ~~such~~ a qualified IPO, Ant Financial ~~Services must~~would have been required to use its commercially reasonable efforts to obtain ~~such~~these regulatory approvals. If ~~such~~these approvals ~~are~~were not obtained, then Ant Financial ~~Services will~~would have been obligated to pay us the liquidity event payment described above.
The 2018 SAPA no longer provides for this liquidity event payment, as we have agreed to acquire the entire 33% equity interest in Ant Financial upon the equity issuance. If the equity issuance does not take place, the 2014 SAPA and the liquidity event payment obligation will be restored, as discussed below under "— Regulatory Unwind and Long-Stop Date" below.
Jack Ma and Joe Tsai contributed 35,000,000 and 15,000,000 ~~respectively,~~ of our ordinary shares held by them to APN Ltd., a vehicle they established to hold ~~such~~these shares. The shares of APN Ltd., as well as the 50,000,000 ordinary shares in us held by APN Ltd., ~~have been~~were pledged to us to secure the liquidity event payment and certain other obligations of Ant Financial ~~Services~~ under the 2014 SAPA and the Alipay commercial agreement, as well as the direct liability of APN Ltd. for up to US$500 million of the liquidity event payment whenever any ~~such~~ liquidity event payment becomes due. These shares remain pledged to us to secure certain obligations of Ant Financial under the 2018 SAPA and the Alipay commercial agreement.
~~Potential Equity Interest~~Regulatory Unwind and Long-Stop Date
The 2018 SAPA provides that, if a relevant governmental authority prohibits us from owning all or a portion of our equity interest in Ant Financial after the equity issuance has occurred through enactment of a law, rule or regulation, or explicitly requires Ant Financial to redeem this equity interest, and the prohibition or request is not subject to appeal and cannot otherwise be resolved, then to the extent necessary, Ant Financial will redeem the equity interest; the related intellectual property and asset transfers, and ancillary transactions under the 2018 SAPA will be unwound; and the terms of the 2014 SAPA, ~~provides for future potential~~the 2014 IPLA, and other related agreements will be restored, including the prior profit share payments and liquidity event payment terms discussed above. If there is a partial unwind where we retain a portion of our equity interest in Ant Financial, but less than the full 33%, then pursuant to the terms of the 2014 SAPA and the 2014 IPLA, the prior profit share payment arrangement and liquidity event payment amount will be proportionately reduced based on the amount of equity interest retained by us.
Similarly, if a governmental authority prohibits the equity issuance through enactment of a law, rule or regulation, and the prohibition is not subject to appeal and cannot otherwise be resolved, or if the equity issuance has not

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occurred by the first anniversary of our establishment of a PRC subsidiary to acquire the relevant equity interest, which time period may be extended in certain circumstances, then the 2018 SAPA and related agreements will terminate, and the 2014 SAPA and other related agreements will come back into effect.
Pre-emptive Rights
As was the case under the 2014 SAPA, under the 2018 SAPA, following our receipt of equity interest in Ant Financial, we will have pre-emptive rights to participate in other issuances ~~to us~~of equity securities by Ant Financial ~~Services. In the event that Ant Financial Services applies for~~ and ~~receives~~ certain PRC regulatory approvals in the future, Ant Financial Services will issue and we will purchase newly-issued equity interests in Ant Financial Services, up to the full 33% equity interest, or such lesser equity interest as may be permitted by the applicable regulatory approvals.
       ~~If we were to acquire such equity interests, we will have a pre-emptive right~~of its affiliates prior to the time of a qualified IPO of Ant ~~Financial Services, in the event Ant Financial Services issues additional equity interests to third parties, that will~~Financial. These pre-emptive rights entitle us ~~to acquire additional equity interests in order~~ to maintain the equity ownership percentage we ~~hold~~held in Ant Financial ~~Services~~ immediately prior to any such ~~third-party~~ issuances.
       If the liquidity event payment described above under "— Liquidity Event Payment" has not become payable upon a qualified IPO of Ant Financial Services, then our right to acquire up to the full 33% equity interest will continue after such qualified IPO. However, the equity interests that we are entitled to acquire will be reduced in proportion to any dilutive issuances of equity securities by Ant Financial Services in and following such qualified IPO.
       The consideration to be paid by us to acquire any equity interest in Ant Financial Services up to the full 33% equity interest will be fully funded by payments from Ant Financial Services under the 2014 SAPA in respect of

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~~certain intellectual property and asset transfers. Similarly, in~~ In connection with our exercise of ~~the~~our pre-emptive ~~right, under the amended Alipay IPLA,~~rights we ~~will~~are also entitled to receive certain payments from Ant Financial, ~~Services that will~~ effectively ~~fund~~funding our subscription for ~~such~~these additional equity interests, up to a value of US$1.5 ~~billion.~~
       Tobillion, subject to certain adjustments, or the ~~extent we acquire the full 33% equity interest pursuant~~pre-emptive rights funded payments. In addition to ~~the provisions of the 2014 SAPA, the liquidity event payment~~these pre-emptive rights and the ~~profit share~~pre-emptive rights funded payments, under the ~~amended Alipay IPLA described~~2018 SAPA, in ~~"— Alipay Intellectual Property License and Software Technology Services Agreement" below, other than the payments~~certain circumstances we are permitted to exercise pre-emptive rights through an alternative arrangement that ~~effectively offset the purchase price with respect to the exercise of the pre-emptive right,~~ will automatically terminate. If we acquire less than the full 33% equity interest in Ant Financial Services pursuant to the provisions of the 2014 SAPA, the liquidity event payment amount and the profit sharing arrangement under the amended Alipay IPLA will be proportionately reduced based on the amount of equity interests acquired by us.
       ~~We believe that under applicable regulatory rules and practices currently in effect, the relevant PRC approvals necessary for~~further protect us ~~to own an equity interest in Ant Financial Services would not be granted. There can be no assurance that such applicable regulatory rules and practices will change in the near future.~~from dilution.
Certain Restrictions on the Transfer of Ant Financial ~~Services~~ Equity Interests
       ~~Pursuant to~~As was the case under the 2014 SAPA, under the 2018 SAPA and ~~amended Alipay~~the 2014 IPLA, certain parties thereto, including us in some cases, ~~our company,~~ are subject to restrictions on the transfer of equity interests in Ant Financial, ~~Services,~~ including:
•
prior to our acquisition of the full 33% equity interest in Ant Financial, none of Jack Ma, Junao, Junhan, our company or Ant Financial ~~Services~~ may transfer any shares of Ant Financial ~~Services~~ that would result in Jack Ma, Junao, Junhan and our company, collectively, no longer having beneficial ownership of a majority voting interest in Ant ~~Financial Services;~~Financial;

•
prior to our acquisition of the full 33% equity interest in Ant Financial, none of Jack Ma, Joe Tsai (if he holds any equity interest at that time), Junao, Junhan, Ant Financial ~~Services~~ or Alipay may transfer any equity interest in Ant Financial ~~Services~~ or Alipay if, to his or its knowledge, ~~such~~the transfer would result in a non-PRC person or entity acquiring beneficial ownership of any equity interest in Ant Financial ~~Services~~ or Alipay;

•
following our acquisition of the ~~earliest occurrence of any~~full 33% equity ~~issuance by~~interest in Ant Financial ~~Services to us as described above in the first paragraph under "Share and Asset Purchase Agreement — Potential Equity Interest"~~ and until the earlier of a qualified IPO of Ant Financial ~~Services~~ or the termination of the independent director rights provided in the ~~2014~~2018 SAPA, none of Jack Ma, Joe Tsai (if he holds any equity interest at that time), Junao, Junhan or Ant Financial ~~Services~~ may knowingly transfer any equity in Ant Financial ~~Services~~ to a third-party who would thereby acquire more than 50% of the voting or economic rights in, or assets of, Ant ~~Financial Services;~~Financial; and

•
in the event we acquire an equity interest in Ant Financial, ~~Services,~~ any transfer of equity interests in Ant Financial ~~Services~~ by Junao or Junhan, on the one hand, or our company, on the other hand, will be subject to a right of first refusal by the other party.
Non-competition Undertakings
       ~~Under~~As was the case under the 2014 SAPA, ~~we and Ant Financial Services have each agreed~~under the 2018 SAPA, subject to certain limitations ~~on our respective ability to enter into or participate in the same line of business as the other party. The 2014 SAPA provides that~~and unless both parties agree, Ant Financial ~~Services~~ may not engage in any business conducted by us from time to time ~~including businesses that we enter into after the date of the 2014 SAPA,~~ or logical extensions thereof, and we are restricted from engaging in specified business activities within the scope of business of Ant Financial, ~~Services,~~ including the provision and distribution of credit facilities and insurance, the provision of investment management and banking services, payment transaction processing and payment clearing services, leasing, lease financing and related services, trading, dealing and brokerage with respect to foreign exchange and financial instruments, distribution of securities, commodities, funds, derivatives and other financial products and the provision of credit ratings, credit profiles and credit reports. Each party may, however, make passive investments in competing businesses below specified

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thresholds, in some cases after offering the investment opportunity to the other ~~party, and we will be permitted to wind down the portion~~party.

Table of ~~our SME loan business that is not transferred to Ant Financial Services.~~Contents
Corporate Governance Provisions
       ~~The~~As was the case under the 2014 SAPA, the 2018 SAPA provides that ~~unless not permitted in connection with a qualified IPO of Ant Financial Services and subject to other conditions,~~ we and Ant Financial ~~Services~~ will recommend one independent ~~person~~nominee who Ant Financial ~~Services~~ will nominate as a member of its board, and Jack Ma, Joe Tsai (as long as he holds any equity interest in Ant Financial), Junhan and Junao will agree to vote the equity interests in Ant Financial ~~Services~~ controlled by them in favor of ~~such~~the nomination. ~~Pursuant to the 2014 SAPA, we and the other parties agreed on the initial independent director who Ant Financial Services subsequently nominated and appointed as a member of its board.~~ If ~~such~~this independent director resigns or ~~such~~the director's seat otherwise becomes vacant, so long as SoftBank owns at least 20% of our outstanding ordinary shares, and certain other conditions are satisfied, SoftBank and Jack, acting jointly, will select on our behalf the individual to be designated as a replacement director, subject to the approval of ~~an independent committee of our board. We have agreed~~the Independent Committee. This Independent Committee, which was formed pursuant to ~~form an independent committee of our board comprised of our directors who meet~~ the ~~independent director standards under New York Stock Exchange listing rules and who are not our officers or employees, as well as any director of our board nominated by SoftBank,~~2014 SAPA, is required to approve certain actions that we may take in connection with the ~~2014~~2018 SAPA and related agreements.
Under the 2018 SAPA, upon the issuance of the equity interest, in addition to the Ant Financial independent director discussed above, we will have the right to nominate two of our officers or employees for election to the board of Ant Financial. In each case, these director nomination rights will continue unless required to be terminated by applicable laws and regulations or listing rules in connection with an Ant Financial qualified IPO process or we cease to own a certain amount of our post-issuance equity interests in Ant Financial.
Additional Alibaba Rights
In addition to the rights discussed above, the 2014 SAPA provided us with certain other rights with respect to Ant Financial. These included, among others:
•
customary information rights;

•
approval rights over certain Ant Financial or Alipay actions; and

•
rights to ensure our ability to participate in any qualified IPO of Ant Financial.
Except as otherwise discussed "— Termination of Alibaba Rights" below, these rights have been substantially retained in the 2018 SAPA. Following the equity issuance, the 2018 SAPA will also provide the Independent Committee with new approval rights over:
•
increases to the size of the Ant Financial board resulting in the number of board seats exceeding a certain specific number; and

•
any Alipay IPO or equity issuance (other than in the context of an IPO).
Termination of Alibaba Rights
As was the case under the 2014 SAPA, under the 2018 SAPA certain of our rights with respect to Ant Financial will terminate upon our receiving the full 33% equity interest in Ant Financial, upon a qualified IPO of Ant Financial, or upon other specified events.
In addition, the 2018 SAPA provides that, in connection with Ant Financial or Alipay commencing an IPO process, we and Ant Financial will discuss in good faith the amendment or termination of our rights to the extent necessary or advisable to achieve an efficient and successful IPO. Certain of our rights that would be incremental to the rights of other shareholders of Ant Financial as of the consummation of the IPO (excluding, among other things, our information rights) will terminate if required by a relevant stock exchange or governmental authority, or if necessary to obtain a legal opinion in connection with the IPO application. If the IPO application is withdrawn or rejected by the relevant authorities, or if the IPO is not consummated within a certain period of time, then any of our rights that were terminated or amended in anticipation of the IPO will be restored.
Ancillary Agreements
In connection with the 2014 SAPA, we also entered into the ~~amended Alipay~~2014 IPLA, a data sharing agreement, an amended and restated shared services agreement, a SME loan cooperation framework agreement and a trademark

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agreement, each of which is described below. We also entered into a binding term sheet in respect of a technology services agreement pursuant to which we agreed to provide certain cloud computing, database service and storage, computing services and certain other services to Ant Financial ~~Services~~ on a cost-plus basis. We further agreed towith Ant Financial on a new form of ~~crosslicense~~cross license agreement to be entered into under the 2014 SAPA, providing for a license of certain ~~intellectual property~~patents and software by Ant Financial ~~Services~~ to us (ensuring our continued right to use those transferred patents and software), and by us to Ant ~~Financial Services.~~Financial.
In connection with the 2018 SAPA, we also agreed on the form of the 2018 IPLA, which we will enter into upon the issuance of the equity interest, agreed to certain revisions to the previously-agreed form of cross license agreement, and agreed on new forms of various intellectual property transfer agreements to be entered into in connection with, and to implement, the contemplated intellectual property and asset transfers described in "— Planned Issuance of Equity Interest" above.
Alipay Intellectual Property License and Software Technology Services Agreement
       ~~Under~~2014 IPLA
Pursuant to the ~~terms of~~original 2011 framework agreement, we entered into the ~~Alipay~~2011 IPLA, pursuant to which we and our subsidiaries licensed to Alipay certain intellectual property rights and provided various software technology services to Alipay and its subsidiaries. ~~We originally entered into the Alipay IPLA in connection with the 2011 framework agreement, and, in~~In August 2014, we entered into the ~~amended Alipay~~2014 IPLA.
Under the ~~Alipay~~2011 IPLA, Alipay paid us a royalty and software technology services fee equal to the sum of an expense reimbursement plus 49.9% of the consolidated pre-tax income of Alipay and its subsidiaries until a liquidity event of Alipay or Ant ~~Financial Services. Such~~Financial. The calculation of the profit share percentage was subject to downward adjustments upon certain dilutive equity issuances by Alipay or Ant ~~Financial Services.~~Financial. Under the ~~Amended~~2014 IPLA, ~~which became effective on the date~~ we ~~entered into the 2014 SAPA, we will~~ receive, in addition to a software technology service fee, royalty streams related to Alipay and other current and future businesses of Ant Financial, ~~Services,~~ which we refer to collectively as the profit share payments. The profit share payments ~~will be~~are paid at least annually and ~~will~~ equal the sum of an expense reimbursement plus 37.5% of the consolidated pre-tax income of Ant Financial ~~Services on a consolidated basis~~ (subject to certain adjustments), including not only Alipay but all of Ant ~~Financial Services'~~Financial's subsidiaries.
The ~~profit share payments will be reduced in proportion to any equity issuances made to us under the~~ 2014 ~~SAPA.~~
       In addition, if we acquire any equity interest in Ant Financial Services as described above under "Share and Asset Purchase Agreement — Potential Equity Interest," the profit share payments will be reduced in proportion to such equity issuance and, at or prior to the time of such equity issuance, Ant Financial Services will make a payment to us in consideration for the reduction in profit share payments, in exchange for the transfer by us to Ant Financial Services of certain intellectual property. This payment by Ant Financial Services will effectively fund

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our subscription for up to the full 33% equity interest. This payment will result in our acquiring equity interests in Ant Financial Services with effectively no cash impact to us, subject to applicable taxes.
       ~~The amended Alipay~~ IPLA will terminate, and the remainder (if any) of the intellectual property exclusively related to the business of Ant Financial ~~Services~~ will be transferred to Ant Financial ~~Services~~ after the termination of the ~~amended Alipay~~2014 IPLA, (i) after our total equity interest ownership in Ant Financial ~~Services~~ has reached the full 33%, when either the full ~~funding~~payment of all pre-emptive rights funded payments under the 2014 SAPA is completed or a qualified IPO of Ant Financial ~~Services~~ or Alipay occurs; (ii) after a qualified IPO of Ant Financial ~~Services~~ or Alipay has occurred, when our total equity interest ownership in Ant Financial ~~Services~~ reaches the full 33%; (iii) if and when the liquidity event payment as described above under ~~"Share~~"— Share and Asset Purchase Agreement — Removal of Liquidity Event ~~Payment"~~Payment Obligation" becomes payable or (iv) ~~upon transfer of certain intellectual property to Ant Financial Services~~ as required by the relevant stock exchange or securities authority in order to obtain approval for a qualified IPO of either Ant Financial ~~Services~~ or Alipay. However, as discussed above, we expect the 2014 IPLA to be amended and restated upon the closing of our planned acquisition of a 33% equity interest in Ant Financial, in which case the termination provisions described in "2018 IPLA" below will apply instead.
In fiscal years ~~2014, 2015~~2017, 2018 and ~~2016,~~2019, under the ~~Alipay~~2014 IPLA, we recognized royalty and software technology services ~~fee income,~~fees, net of costs incurred by our company, amounting ~~RMB1,764~~to RMB2,086 million, ~~RMB1,667~~RMB3,444 million and ~~RMB1,122~~RMB517 million (US$~~174~~77 million), respectively, as other ~~income.~~income, and the relevant expense reimbursement amounted to RMB245 million, RMB37 million and RMB106 million (US$16 million), respectively, over the same periods.
       ~~The effect~~2018 IPLA
Pursuant to the 2018 SAPA, we, Ant Financial and Alipay agreed to enter into the 2018 IPLA upon the closing of ~~the amended Alipay IPLA is that the base~~our planned acquisition of ~~profits of the financial services businesses that~~a 33% equity interest in Ant Financial, at which time we will also transfer certain intellectual property and assets to Ant Financial and its subsidiaries and the current arrangement of profit share

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payments will immediately terminate, as described in "— 2014 Share and Asset Purchase Agreement — Planned Issuance of Equity Interest" above.
While the current profit share ~~has been expanded, from~~payments will be terminated under the ~~pre-tax income of only Alipay~~2018 IPLA, Ant Financial may in certain circumstances continue to make certain royalty payments to us (as agreed to by Ant Financial and the Independent Committee), which may be used as pre-emptive rights funded payments under the 2018 SAPA, as described in "— 2014 Share and Asset Purchase Agreement — Pre-emptive Rights" above.
Additionally, pursuant to the ~~pre-tax income of the entire~~2018 IPLA, Ant Financial ~~Services, while the profit sharing percentage is reduced~~and its subsidiaries will receive expanded rights to ~~align with the percentage that~~apply for, register and manage certain intellectual property related to their businesses, subject to certain continuing restrictions and our rights, and we will ~~be used~~cease to ~~calculate the liquidity event payment. In addition, our participation in the profits of~~provide certain software technology services to Ant Financial ~~Services, subject to receipt~~and its subsidiaries.
The 2018 IPLA will terminate upon the earliest of:
•
the full payment of ~~required regulatory approvals, including under applicable stock exchange listing rules, is perpetual~~all pre-emptive rights funded payments under the ~~amended Alipay IPLA (unless we elect to receive~~ 2018 SAPA;

•
the ~~liquidity event payment under the 2014 SAPA upon~~closing of a qualified IPO of Ant Financial ~~Services~~ or ~~Alipay or unless we acquire the full 33% equity interest in~~Alipay; and

•
our transfer to Ant Financial ~~Services), as opposed~~of any remaining intellectual property we own that is exclusively related to ~~automatic termination~~the business of ~~the profit share upon a liquidity event under the 2011 framework agreement and Alipay IPLA.~~
Ant Financial.
Data Sharing Agreement
We and Ant Financial ~~Services~~ have entered into a data sharing agreement dated August 12, 2014.
Pursuant to the data sharing agreement, we, Ant Financial, ~~Services,~~our controlled affiliates and ~~our controlled~~certain other affiliates, which we refer to hereinafter as full data sharing participants, will contribute all data collected or generated as a result of the use by users of our or their respective products or services (subject to applicable law, industry rules and contractual requirements) to a data platform that we operate and maintain, and to which all of the full data sharing participants will have access. A data platform management committee established by us and Ant Financial ~~Services~~ may also approve ~~non-controlled~~noncontrolled affiliates of us and Ant Financial ~~Services~~ and unaffiliated third parties to have certain access to and contribute data to the platform, subject to execution of a data platform participation agreement containing the terms and restrictions on access to and use of the data sharing platform and shared data as the data management committee shall determine. No fees or other compensation are required to be paid by any of the full data sharing participants for access to the data platform, other than the obligation for ~~such~~ participants to share in the costs of the operation of the data platform on a fair and reasonable basis. The data sharing agreement provides that none of the participants may reproduce any of the data on the data platform for transfer to their own servers, except that a participant may retain its own data that it has contributed to the data platform. ~~As of the date of this annual report, Cainiao Network, Koubei and Alibaba Pictures have entered into data platform participation agreements with us.~~
The data sharing agreement initially had a minimum term of ~~10 years. Pursuant to the data sharing agreement, if we completed our initial public offering within five years from the date of the agreement, our board could extend the term for up to a total of 50~~ten years. In May 2015, our board approved the extension of the term of the agreement to a total of 50 years.

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SME Loan Cooperation Framework Agreement
We and Ant Financial ~~Services~~ entered into a SME loan cooperation framework agreement dated August 12, 2014, pursuant to which each party agreed to cooperate with, and provide certain services with respect to, the other party's enforcement of certain rights of ~~such~~the other party against users of its platforms and services and with respect to the provision of certain financial services to our customers and merchants. In particular, we agreed, upon Ant Financial's request, to close down or suspend online storefronts and restrict marketing activities on our platforms of persons defaulting on loans made by Ant Financial ~~Services~~ and persons in violation of Alipay rules and regulations, and to publish notices on our platforms and provide information regarding ~~such~~these persons, in each case in a manner to be further agreed upon from time to time. Ant Financial ~~Services~~ agreed, upon our request, to make loans and/or extensions of credit and related financial services available to our users, freeze and pay over to us funds in accounts of users violating our rules and regulations or agreements with us, accelerate loans and terminate credit facilities of ~~such~~these users, restrict marketing activities on its platforms by ~~such~~these users, and provide information

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regarding ~~such~~these users, in each case in a manner to be further agreed upon from time to time. Neither party is required to pay any fees in consideration for the services provided by the other party, and apart from the provision of these services, there will be no other exchange of value in connection with this agreement. The cooperation agreement has an initial term of five years, with automatic renewals upon expiry for additional ~~five year~~five-year periods.
From time to time, we expect to enter into similar commercial arrangements with respect to cooperation matters and the provision of services between us and Ant Financial ~~Services~~ and to our respective customers.
Trademark Agreement
We and Ant Financial ~~Services~~ entered into a trademark agreement dated August 12, 2014, pursuant to which we granted Ant Financial ~~Services~~ a non-transferable, non-assignable and non-sublicensable (except to its subsidiaries) license for it and its sublicensed subsidiaries to continue to use certain trademarks and domain names based on trademarks owned by us, in connection with their payment services business and the SME loan business transferred by us to them, and in the same manner of ~~such uses~~use as of August 12, 2014, and a non-transferable, non-assignable and non-sublicensable (except to its subsidiaries) license to use ~~such~~ other trademarks and domain names based on trademarks owned by us, and in ~~such~~that manner, as we may agree to allow in the future. Pursuant to the trademark agreement, each of the parties further agreed to the rights and limitations that each would have to use the "Ali" name or prefix and the ~~"ecommerce"~~"e-commerce" (and its Chinese equivalent) name, prefix or logo as part of a trademark or domain name in each party's and its subsidiaries' respective businesses. Neither party is required to pay any fees under this agreement, and, apart from the licenses and rights set forth in the agreement, there will be no other exchange of value in connection with this agreement. Pursuant to the 2018 SAPA, upon the closing of our planned acquisition of a 33% equity interest in Ant Financial, we will transfer to Ant Financial ownership of several of the trademarks and domain names licensed by us to Ant Financial. However, the trademark agreement will remain in effect in accordance with its terms following the transaction to provide for a continued license of other trademarks that we will continue to own.
Shared Services Agreement with Ant Financial ~~Services~~
We and Ant Financial ~~Services~~ have entered into a shared services agreement, which was amended and restated as of August 12, 2014 in connection with the 2014 ~~SAPA, pursuant~~SAPA. Pursuant to ~~which~~the shared services agreements, we and Ant Financial ~~Services~~ provide certain administrative and support services to each other and our respective affiliates.
Service fees in connection with the administrative and support services provided by us to Ant Financial ~~Services paid us RMB46~~and its affiliates under the agreement amounted to RMB531 million, ~~RMB158~~RMB676 million and ~~RMB670~~RMB1,017 million (US$~~104~~152 million) in fiscal years ~~2014, 2015~~2017, 2018 and ~~2016, respectively, for~~2019, respectively. Service fees in connection with the administrative and support services we provided ~~to it under the agreement. We paid~~by Ant Financial ~~Services nil, RMB58~~and its affiliates to us amounted to RMB15 million, RMB84 million and ~~RMB56~~RMB80 million (US$912 million) in fiscal years ~~2014, 2015~~2017, 2018 and ~~2016, respectively, for services Ant Financial Services provided to us under the agreement.~~2019, respectively.
Other Commercial Arrangements with Ant Financial ~~Services~~
We ~~have~~ also ~~entered into other commercial arrangements with~~provide Ant Financial, ~~Services,~~ its subsidiaries and affiliates ~~such as online~~with cloud computing services, marketplace software technology services and other services. Meanwhile, Ant Financial and its affiliates provide us with marketing support services ~~treasury~~in connection with membership management and other services. In fiscal years ~~2014, 2015~~2017, 2018 and ~~2016, the amounts generated and receivable from Ant Financial Services~~2019, under these arrangements, ~~were nil, nil~~service fees in connection with various services provided by us to Ant Financial and ~~RMB416~~its affiliates amounted to RMB763 million, RMB1,503 million and RMB2,250 million (US$65335 million), respectively. During the same periods, service fees in connection with the ~~amounts incurred~~marketing support services and ~~payable~~other services provided by ~~us to~~ Ant Financial ~~Services under these arrangements were RMB21~~amounted to RMB937 million, ~~RMB248~~RMB1,810 million and ~~RMB243~~RMB1,248 million (US$38186 million), respectively.

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Investments Involving Ant Financial ~~Services~~
We have invested in businesses in which Ant Financial ~~Services~~ is ~~an existing~~a shareholder or co-invested with Ant Financial ~~Services~~ in other businesses. For instance, in September 2015, we established a joint venture under the brand name Koubei with Ant ~~Financial Services.~~

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Financial. We and Ant Financial ~~Services~~ injected certain related businesses into Koubei and each invested RMB3.0 billion in this joint venture. In April and August 2017, we and Ant Financial invested in the preferred shares of Ele.me, with our investment totaling US$864 million. In December 2018, Ant Financial participated in the integration of Ele.me and Koubei, ~~is one~~and became a minority shareholder of ~~the leading restaurant and~~our local consumer services ~~guide businesses in China.~~holding company. In addition, in ~~February 2016, we~~May 2019, Ant Financial agreed to invest ~~US$900~~HK$454 million (US$58 million) for a 0.5% equity interest in ~~a co-investment with~~Alibaba Health, our subsidiary listed on the Hong Kong Stock Exchange. Ant Financial ~~Services~~is also a shareholder of both Paytm, a mobile payment platform in ~~Ele.me,~~India, and Paytm Mall, an ~~operator~~e-commerce platform in India, both of ~~one of the largest mobile food ordering and delivery services in China.~~which are our minority investees.
Equity-based Award Arrangements
       ~~We grant~~In order to encourage mutually beneficial cooperation, we have awarded RSUs and granted options ~~and RSUs relating~~ to acquire our ordinary shares to ~~the~~ employees of Ant Financial ~~Services.~~ and its subsidiaries.
As of March 31, ~~2014, 2015~~2017, 2018 and ~~2016,~~2019, there were ~~6,397,150, 6,097,651~~2,967,982, 1,628,309 and ~~4,362,339~~1,881,471 of our ordinary shares, respectively, underlying unvested RSUs and outstanding options ~~and RSUs~~ held by employees of Ant ~~Financial Services.~~Financial.
We entered into agreements with Ant Financial ~~Services~~ in calendar years 2012 and 2013 under which we will receive reimbursements for ~~options~~RSUs and ~~RSUs~~options relating to our ordinary shares granted to the employees of Ant Financial ~~Services~~ and its subsidiaries during the period from December 14, 2011 to March 31, 2014. Grants of RSUs and options made subsequent to March 31, 2014 are not subject to these reimbursement arrangements. Pursuant to these agreements, we will, upon vesting of ~~such~~these RSUs and options, ~~and RSUs,~~ receive a cash reimbursement equal to their respective grant date fair value. The amounts of these reimbursements in fiscal years ~~2014, 2015~~2017, 2018 and ~~2016~~2019 were ~~RMB266~~RMB30 million, ~~RMB206~~RMB5 million and ~~RMB113 million (US$18 million),~~nil, respectively.
We understand that Jack Ma, aswho effectively controls the ~~controlling shareholder of~~majority voting interest in Ant Financial, ~~Services,~~ believes that providing equity-related awards to our employees tied to the success of Ant Financial ~~Services~~ will enhance the value of our business because of the strategic importance of Alipay to our marketplaces and because, through our strategic and financial relationship with Ant Financial, ~~Services,~~ we have a significant participation in the profits and value accretion of Ant ~~Financial Services. In~~Financial.
Since March 2014, Junhan, the general partner of which is an entity controlled by Jack Ma, ~~made a grant of~~has granted certain ~~equity-based~~share-based awards similar to ~~share-appreciation rights~~share appreciation awards linked to the valuation of Ant Financial ~~Services~~ to ~~most of~~ our ~~employees. Since then, Junhan~~employees, and since April 2018, Ant Financial, through its subsidiary, has granted ~~similar equity-based performance~~certain RSU awards to our ~~employees on an annual basis.~~
employees. The ~~grant~~awards granted by Junhan ~~to our employees is subject to approval by our audit committee. The vesting of such awards is conditional upon the fulfillment of requisite service conditions to us, and such awards~~ will be settled in cash by Junhan upon disposal of ~~such~~these awards by the holders. The awards granted by the Ant Financial subsidiary may be settled in equity or cash by the Ant Financial subsidiary upon vesting of the awards. Junhan ~~has~~and the Ant Financial subsidiary have the right to repurchase the vested awards (or any underlying shares of vested RSU awards) granted by them, as applicable, from the holders upon an initial public offering of Ant Financial ~~Services~~ or the termination of ~~their~~the holders' employment with us at a price to be determined based on the then fair market value of Ant Financial Services. Junhan's obligation to cash settle these awards will be funded by the proceeds of sales of or loans against the equity interests in Ant Financial Services that Jack contributed to Junhan. We have no obligation to reimburse Junhan, Ant Financial Services or its subsidiaries for the cost associated with these awards. For accounting purposes, we recognize the cost relating to such equity-based awards granted by the shareholder through Junhan as a shareholder contribution as the awards will ultimately be settled in cash by Junhan. The awards are accounted for as financial derivatives and initially measured at their fair value, and the related expense will be recognized over the requisite service period in our consolidated income statements with a corresponding credit to additional paid-in capital. Subsequent changes in the fair value of the awards are recorded in our consolidated income statements through the date on which the underlying awards are settled by Junhan. The expenses arising from Ant Financial Services' share-based awards granted to our employees represent a non-cash charge that will not result in any economic costs or equity dilution to our shareholders.Financial.
Subsequent to our initial public offering, based on the arrangements agreed to in the 2014 SAPA, we, Junhan and Ant Financial ~~Services~~ entered into an agreement, under which we agreed to continue granting our share-based awards to employees of Ant Financial, ~~Services,~~ and Junhan and Ant Financial ~~Services~~ agreed that Junhan and/or Ant Financial ~~Services~~ through one of its subsidiaries will continue granting equity-based performance awards to our employees on an annual basis. Due to the mutually beneficial nature of this arrangement, the parties agreed that none of them has any obligation to reimburse any other party any expenses relating to ~~such equity-~~

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~~based~~the equity-based awards. This agreement has a term of three years and will be automatically renewed for another three years, unless otherwise terminated by written agreement among the parties or unilaterally by Ant Financial ~~Services~~ if it is required under applicable laws (including any regulatory requirements applicable to a public offer of Ant ~~Financial Services'~~Financial's shares) to terminate the agreement.

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Transactions with Alibaba Pictures
In ~~June 2014, as part of our entertainment media strategy,~~March 2019, we ~~completed an investment of HK$6,244 million (RMB4,955 million) in~~subscribed for newly issued ordinary shares ~~representing approximately 60%~~of Alibaba Pictures for a cash consideration of HK$1,250 million (US$159 million). Upon the completion of the issued share capital of Alibaba Pictures. In addition, in June 2015, Alibaba Pictures placed newly issued ordinary shares to unrelated third-party investors for aggregate proceeds of approximately HK$12,179 million (RMB9,647 million). Ourtransaction, our equity interest in Alibaba Pictures ~~was therefore diluted~~increased from approximately 49% to ~~49.5% upon completion of this transaction. In December 2015,~~approximately 51%, and Alibaba Pictures ~~completed its purchase of~~became our ~~online movie ticketing business and movie and TV series financing platform for a cash consideration of US$350 million (RMB2,259 million) plus certain reimbursement amounts.~~consolidated subsidiary.
Transactions with ~~Alibaba Health~~
       In April 2014, through a holding company jointly held with a Yunfeng Fund, we acquired newly issued ordinary shares representing an effective equity interest of approximately 38% in Alibaba Health. The Yunfeng Fund acquired an effective equity interest of approximately 16% in this investment. See "— Relationship with Investment Funds Affiliated with Our Executive Chairman" below. We paid a purchase price of HK$932 million upon the closing of the transaction. In April 2015, we entered into an agreement pursuant to which we agreed to transfer the operations of Tmall's online pharmacy business to Alibaba Health in consideration for newly issued shares and convertible bonds of Alibaba Health. In July 2015, pursuant to an agreement with the Yunfeng Fund, we obtained control over the holding company that holds approximately 54% of the equity interests in Alibaba Health (including the 38% effective equity interest we own), and as a result, Alibaba Health became our consolidated subsidiary. Our proposed transaction with Alibaba Health was not completed before its expiration date in March 2016 and therefore lapsed. In April 2016, we and Alibaba Health entered into a services agreement pursuant to which Alibaba Health will provide outsourced services in relation to product categories related to Tmall's online pharmacy business.
~~Transaction with Entity~~Entities Affiliated with Our Directors and Officers
Jack Ma, our executive chairman, Joe Tsai, our executive vice chairman, and J. Michael Evans, our president, have purchased their own aircraft for both business and personal use. The use of the above-mentioned executive officers' own ~~aircraft~~aircrafts in connection with the performance of their duties as our employees is free of charge to us, and we have agreed to assume the cost of maintenance, crew and operation of the aircraft where ~~such~~the cost is allocated for business purposes.
Relationship with Investment Funds Affiliated with ~~Our Executive Chairman~~Jack Ma
Jack Ma currently ~~has an approximately 40% interest, held directly and/or indirectly,~~holds minority interests in the general partners of ~~each~~a number of ~~four~~ Yunfeng ~~Capital-sponsored~~ investment funds, in which he is entitled to receive a portion of carried interest proceeds, namely, Yunfeng Fund, L.P., Shanghai Yunfeng Equity Investment (Limited Partnership), Shanghai Yunfeng New Innovation Enterprise Equity Investment (Limited Partnership) and Smart System Investment Fund, L.P. Jack Ma also currently has an approximately 26.7% indirect interest in the general partner of Yunfeng Fund II, L.P. and KHL, L.P., each of which is also a Yunfeng Capital-sponsored investment fund in which he is also entitled to receive a portion of carried interest proceeds. Of the six Yunfeng Capital-sponsored funds in respect of which Jack Ma holds an interest in the general partner entities thereof and is entitled to receive carried interest proceeds, two are U.S. dollar denominated funds, or the U.S. Dollar Funds, two are RMB denominated funds, or the RMB Funds, one is a co-investment fund of one of the U.S. Dollar Funds and one is a parallel fund of one of the U.S. Dollar Funds. We refer to these funds collectively as the Yunfeng Funds. ~~Jack Ma~~He also ~~currently has a 40% interest~~holds minority interests in ~~each of Yunfeng Capital Limited, Shanghai Yunfeng Investment Management Co., Ltd. and Shanghai Yunfeng New Innovation Investment Management Co., Ltd., which are the~~certain investment

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advisor entities of ~~the U.S. Dollar Funds and the RMB Funds, respectively, and which we collectively refer to as~~certain Yunfeng ~~Capital.~~Funds. In addition, Jack, ~~Ma,~~ his wife, ~~a trust~~certain trusts established for the benefit of his family and ~~an entity~~certain entities controlled by Jack and his wife have committed, ~~directly~~ or ~~indirectly, approximately US$5.2 million and US$46.0 million as~~are expected to commit, funds to the general partners ~~and~~or as limited partners ~~respectively,~~of certain Yunfeng Funds.
Jack has either non-voting interests or has waived the exercise of his voting power with respect to his interests in each of the U.S. Dollar Funds, and approximately RMB16.0 million and approximately RMB201.1 million as general partners and limited partners, respectively, to the RMB Funds. The U.S. Dollar Funds have accepted over US$1.4 billion in capital commitmentsinvestment advisor entities and the ~~RMB Funds have accepted over RMB5.0 billion in capital commitments.~~
managing entities of certain Yunfeng Funds. Jack ~~will~~has also agreed to donate all distributions of (x) carried interest proceeds he may receive in respect of the Yunfeng Funds and (y) dividends he may receive with respect to his holdings of shares in any ~~member~~investment advisor entity of the Yunfeng ~~Capital,~~Funds, which we collectively refer to as the Yunfeng Distributions, to, or for the benefit of, the Alibaba Group Charitable Fund or other entities identified by Jack that serve charitable purposes. In addition, Jack has agreed that he will not claim any deductions from his applicable income tax obligations resulting from payment of the Yunfeng Distributions to the Alibaba Group Charitable Fund or any other entity identified by Jack that serves charitable purposes. See "— Commitments of Jack Ma to Alibaba Group." We ~~expect~~believe that, through its expertise, knowledge base and extensive network of contacts in private equity in China, Yunfeng Capital will assist us in developing a range of relevant strategic investment opportunities.
The Yunfeng Funds have historically ~~and may in the future, enter~~entered into co-investment transactions with us and third parties, such as our ~~recent investments~~co-investment in ~~Youku Tudou~~Easyhome, one of the largest home improvement supplies and ~~Alibaba Health. In April 2014,~~furniture chains in ~~conjunction with our investment in Alibaba Health and on~~ the same terms as us, a Yunfeng Fund acquired, through a holding company it jointly established with us, an effective equity interest of approximately 16% in Alibaba Health for a total purchase price of HK$395 million. Also in April 2014, in conjunction with our investment in Youku Tudou and on the same terms as us, a Yunfeng Fund agreed to invest approximately US$132 million to purchase Class A ordinary shares of Youku Tudou, representing an effective equity interest of 2.0% on a fully-diluted basis. See "Item 5. Operating and Financial Review Prospects — A. Operating Results — Recent Investment, Acquisition and Strategic Alliance Activities — Entertainment."PRC. We have also invested in other businesses in which the Yunfeng Funds are ~~existing shareholders. In addition, we committed US$80 million~~shareholders, such as our acquisition in March 2017 of all of the issued and outstanding shares of Damai, a ~~limited partner of~~leading online ticketing platform for live events in China, in which an Yunfeng Fund ~~II, L.P. Through such investment, we have formalized an institutional relationship with Yunfeng Capital. In addition, Yunfeng Fund, L.P.~~ was an indirect holder of approximately 84,600 convertible preference shares purchased by an entity wholly-owned by it in September 2012, and such convertible preference shares were automatically converted into our ordinary shares upon the completion of our initial public offering in September 2014.a shareholder.
Commitments of Jack Ma to Alibaba Group
Jack Ma, our executive chairman, has confirmed the following commitments to our board of ~~directors in writing:~~directors:
•
He intends to reduce and thereafter limit his direct and indirect economic interest in Ant Financial ~~Services~~ over time, to a percentage that does not exceed his and his affiliates' interest in our company immediately prior to our initial public offering and that ~~such~~the reduction will ~~be caused~~occur in a manner by which neither Jack nor any of his affiliates would receive any economic benefit;

•
He ~~has entered into a deed to, and~~ will donate all of his Yunfeng Distributions to, or for the benefit of, the Alibaba Group Charitable Fund or other entities identified by him that serve charitable purposes;

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•
He will not claim any deductions from his applicable income tax obligations resulting from donating his Yunfeng Distributions to the Alibaba Group Charitable Fund or any other entity identified by him that ~~serve~~serves charitable purposes; and

•
If required by us, while he remains an Alibaba executive, he will assume for our benefit legal ownership of investment vehicles, holding companies and variable interest entities that further our business interests in Internet, media and telecom related businesses and, in ~~such circumstances,~~this case, he will disclaim all economic benefits from ~~such~~his ownership and enter into agreements to transfer any ~~such~~ benefits to us (or as we may direct) when permitted by applicable law.

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Pledge for the Benefit of and Loan Arrangement with a Related Party
In May 2015, we entered into a pledge with a financial institution in the PRC in connection with certain wealth management products with an aggregate principal amount of RMB7.3 billion we invested in to secure ana RMB6.9 billion financing provided by ~~such~~this financial institution to Simon Xie, one of our founders and an equity holder in certain of our variable interest entities, to finance the minority investment by a PRC limited partnership in Wasu, a company listed on the Shenzhen Stock Exchange and engaged in the business of digital media broadcasting and distribution in China. As of March 31, 2019, RMB420 million of the pledge had been released. In addition, we entered into a loan agreement for a principal amount of up to RMB2.0 billion with Simon Xie in April 2015 to finance the repayment by Simon of the principal and interest under ~~the~~this financing. These arrangements strengthen our strategic business ~~arrangements~~cooperation with Wasu to enhance our entertainment strategy. Our loan to Simon will be made at an interest rate equal to SHIBOR as specified by us from time to time and is repayable in five years. The loan is secured by a pledge of Simon's limited partnership interest in the PRC limited ~~partnership and is available for draw-down starting from January 1, 2016, but it has not yet been drawn.~~ partnership. As of March 31, 2019, the balance of this loan was RMB1,525 million (US$227 million).
We have entered into strategic cooperation agreements with a major shareholder of Wasu in order to enhance our capabilities and influence in the entertainment sector in China. A company controlled by Jack Ma serves as one of the general partners of the PRC limited partnership. Yuzhu Shi, the founder, chairman and a principal shareholder of Giant Interactive, a China-based online game company that was previously listed on the New York Stock Exchange, and who is also an entrepreneur with significant experience in and knowledge of the media industry in China, serves as the other general partner. Jack, through his control of one of the general partners, and Mr. Shi, as the other general partner and the executive partner, jointly control this PRC limited partnership. The interest of the general partner controlled by Jack in the limited partnership is limited to the return of its RMB10,000 contributed capital.
~~Equity-settled Donation Relating to Our Ordinary Shares~~
       During fiscal year 2014, we granted options to acquire 50,000,000 ordinary shares of ours to a non-profit organization designated by Jack Ma and Joe Tsai. 35,000,000 and 15,000,000 of these share options have been transferred to the separate charitable trusts established by Jack Ma and Joe Tsai, respectively. These share options were approved by our board of directors and the options are not subject to any vesting conditions and are exercisable for a period of four years from the grant date. The exercise price of these options is US$25.00 per share based on a fair market value appraisal process. For each of the eight years beginning one year after the date of listing of our ordinary shares on a recognized stock exchange, the charitable trusts are permitted to sell only up to 6,250,000 ordinary shares (or one-eighth of the total number of ordinary shares subject to the options) per year excluding such number of unsold ordinary shares carried forward from previous years. As there are no vesting conditions attached to the above share options, equity-settled donation expense of RMB1,269 million was recognized in full and recorded in general and administrative expenses during fiscal year 2014.
Transactions with Cainiao Network
       ~~We entered into agreements with~~In October 2017, our equity interest in Cainiao Network increased to approximately 51% and it became one of our equity-accounted affiliate, during fiscal year 2014, whereby we disposed of two wholly-owned subsidiaries to the parent Cainiao of Network for cash consideration of RMB524 million. The gain on disposals in fiscal year 2014 was RMB74 million. In addition, during fiscal year 2016, we disposed a wholly-owned subsidiary toconsolidated subsidiaries.
Before Cainiao Network ~~for cash consideration of US$33 million (RMB204 million). The gain on disposal~~became our consolidated subsidiary in ~~fiscal year 2016 was RMB3 million (US$0.5 million). The major assets of the disposed subsidiaries consisted of land use rights in the PRC.~~October 2017,
       ~~We have~~
•
we had commercial arrangements with Cainiao Network to receive certain logistics services that are conducted on an arm's length ~~basis to receive certain logistics services. Expenses incurred~~basis. Service fees in connection with the logistics services provided by Cainiao Network in fiscal years ~~2015~~2017 and ~~2016 were RMB785~~2018 (prior to its becoming our consolidated subsidiary) amounted to RMB4,444 million and ~~RMB2,370~~RMB3,437 million, ~~(US$368 million), respectively.~~
       Werespectively; and

•
we also ~~have cost sharing arrangements with~~provided Cainiao Network onwith various administrative and ~~cloud computing~~support services. InService fees in connection with the administrative and support services we provided to Cainiao Network ~~paid us RMB20~~amounted to RMB152 million and ~~RMB86~~RMB123 million ~~(US$13 million)~~ in fiscal years ~~2015~~2017 and ~~2016,~~2018 (prior to its becoming our consolidated subsidiary), respectively.
       ~~From time to time, we also co-invest with Cainiao Network in other businesses.~~

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Transactions with Weibo
We entered into a strategic collaboration agreement and a marketing cooperation agreement with Weibo, one of our equity investees, during fiscal year ~~2014, pursuant to which Weibo provided marketing services.~~2014. These agreements expired in January 2016. In fiscal years ~~2014, 2015~~2017, 2018 and ~~2016,~~2019, service fees in connection with the ~~amounts paid to~~marketing services provided by Weibo pursuant to these agreements ~~were RMB154~~and other commercial arrangements amounted to RMB340 million, ~~RMB654~~RMB615 million and ~~RMB715~~RMB624 million (US$~~111~~93 million), respectively.
We also have other commercial arrangements with Weibo primarily relating to the provision of cloud computing services. InService fees in connection with the cloud computing services we provided ~~Weibo paid~~by us ~~nil, RMB2~~amounted to RMB105 million, RMB223 million and ~~RMB38~~RMB304 million (US$645 million) in fiscal years ~~2014, 2015~~2017, 2018 and ~~2016,~~2019, respectively.
Transactions with other investees
We have commercial arrangements with certain of our investees related to logistics services. Revenue recognized in connection with the logistics services we provided to our investees amounted to RMB72 million and RMB261 million (US$39 million) in the period from the date of consolidation of Cainiao Network in October 2017 to March 31, 2018 and the year ended March 31, 2019, respectively. Fees incurred in connection with the logistics service provided by our investees to Cainiao Network, after it became one of our consolidated subsidiaries, and certain of our other businesses in fiscal years 2018 and 2019 amounted to RMB5,608 million and RMB12,933 million (US$1,927 million), respectively.
We have also extended loans to certain of our investees for working capital and other uses in conjunction with our investments. As of March 31, 2019, the aggregate outstanding balance of these loans was RMB2,543 million (US$379 million), with durations generally ranging from one month to ten years and interest rates of up to 10% per annum.
We have also co-invested with certain of our investees in other businesses. For example, we have made co-investments with Hangzhou Hanyun Xinling Equity Investment Fund Partnership and New Retail Strategic Opportunities Fund, L.P. – both of which are our investees that focus on retail-related businesses – in a number of companies, including Red Star, Sun Art, Easyhome, ZTO and Focus Media.
Other commercial transactions with investees
Other than the transactions disclosed above, we also have commercial arrangements with certain of our investees and other related parties in which:
•
we recorded cost and expenses paid to investees for logistics services, content acquisition, merchant commission rebate, purchase of inventory, market services, traffic acquisition and various other services; and

•
we recorded income generated from investees for providing marketing, cloud computing and other services.
The amounts relating to these services provided and received represent less than 1% of our revenue and total costs and expenses, respectively, for the years ended March 31, 2017, 2018 and 2019.
Contractual Arrangements among Our ~~Wholly-foreign Owned Enterprises,~~Wholly-Owned Entities, Variable Interest Entities and the Variable Interest Entity Equity Holders
Chinese law restricts foreign ownership in enterprises that provide value-added telecommunications services, which includes the ICPs. As a result, we operate our Internet businesses and other businesses in which foreign investment is restricted or prohibited in China through contractual arrangements between our ~~wholly-foreign owned enterprises,~~wholly-owned entities, our variable interest entities, which, where applicable, hold the ICP licenses and other regulated licenses and generally operate our Internet businesses and other businesses in which foreign investment is restricted or prohibited, and the variable interest entity equity holders. For a description of these contractual arrangements, see "Item 4.

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Information on the Company — C. Organizational Structure — Contractual Arrangements among Our ~~Wholly-foreign Owned Enterprises,~~Wholly-Owned entities, Variable Interest Entities and the Variable Interest Entity Equity Holders."
Indemnification Agreements
We have entered into indemnification agreements with our directors and executive officers. These agreements require us to indemnify ~~such~~these individuals, to the fullest extent permitted by law, for certain liabilities to which they may become subject as a result of their affiliation with us.
Employment Agreements
See "Item. 6 Directors, Senior Management and Employees — B. Compensation — Employment Agreements."
Share Options
See "Item. 6 Directors, Senior Management and Employees — B. Compensation — Equity Incentive Plans."
C.  Interests of Experts and Counsel
Not applicable.
ITEM 8    FINANCIAL INFORMATION
A.  Consolidated Statements and Other Financial Information
See "Item 18. Financial Statements."
Legal and Administrative Proceedings
We are involved from time to time, and may in the future be involved in, litigation, claims or other disputes in the ordinary course of business regarding, among other things, contract disputes with our customers, copyright, trademark and other intellectual property infringement claims, consumer protection claims, employment related cases and other matters in the ordinary course of our and disputes between our merchants and consumers. We have also been, and may in the future be, involved in litigation, regulatory investigations or inquiries and administrative proceedings that may not necessarily arise from our ordinary course of business, such as securities class action lawsuits and investigations or inquiries by securities regulators.
We establish balance sheet provisions relating to potential losses from litigation based on estimates of ~~such~~the losses. For this purpose, we classify potential losses as remote, reasonably possible or probable. We analyze

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potential outcomes from current and potential litigation and proceedings as loss contingencies in accordance with U.S. GAAP. Our management believes that the risk of loss in connection with the proceedings discussed below is currently remote and that these proceedings will not have a material adverse effect on our financial condition, either individually or in the aggregate. However, in light of the inherent uncertainties involved in these matters, some of which are beyond our control, the risk of loss may become more likely and an adverse outcome of one or more of these matters could be material to our results of operations or cash flows for any particular reporting period. See note 2(ad) to our audited consolidated financial statements included elsewhere in this annual report for more information on our provisioning policy with regard to legal and administrative proceedings.
Shareholder Class Action Lawsuits
~~Federal Consolidated Exchange Act Actions~~
In ~~January~~ 2015, we and certain of our current and former officers and directors were named as a defendant in ~~the first of~~ seven putative shareholder class action lawsuits filed in the United States District Courts ~~for the Southern District of New York, Central District of California and Northern District of California. The operative complaint is brought on behalf of a putative class of~~by shareholders ~~who acquired our American Depositary Shares from October 21, 2014 through January 29, 2015, inclusive. The complaints assert~~asserting claims ~~under~~pursuant to the United States Securities Exchange Act of ~~1934.~~
       ~~In June 2015,~~1934 and three putative shareholder class action lawsuits filed in the ~~U.S. Judicial Panel on Multidistrict Litigation ordered transfer~~Superior Court of the ~~actions in the Central District~~State of California to the Southern District of New York for coordinated or consolidated pretrial proceedings with the four actions before that court. In June 2015, the Panel ordered transfer of the action pending in the Northern District of California to the Southern District of New York. All of the actions are now pending in the Southern District of New York under the master caption,~~Christine Asia Co., Ltd. et al. v. Alibaba Group Holding Limited et al.~~~~, No. 1:15-md-02631-CM (S.D.N.Y.) and related cases.~~
       ~~The Southern District of New York has appointed a Lead Plaintiff and Lead Counsel on behalf of the putative class~~by shareholders asserting claims pursuant to the ~~Private~~United States Securities ~~Litigation Reform Act.~~
       ~~In June 2015, the Lead Plaintiff filed a consolidated amended complaint, which generally alleges~~Act of 1933. The lawsuits allege that the registration statement and prospectus filed in connection with our initial public offering and various other public statements contained misrepresentations regarding our business operations and financial prospects, and failed to disclose, among other things, regulatory scrutiny by the SAIC prior to our initial public offering. ~~Specifically, plaintiffs allege that we should have disclosed a 2014 SAIC anti-counterfeiting initiative~~
The District Court lawsuits were centralized in the ~~e-commerce market, a July 16, 2014 administrative guidance meeting we had~~Southern District of New York under the master captionChristine Asia Co., Ltd. et al. v. Alibaba Group Holding Limited et al., No. 1:15-md-02631-CM (S.D.N.Y.). In June 2016, the Southern District of New York issued an order granting Defendants' motion to dismiss without leave to amend. The order held that Plaintiffs failed to plead that Defendants made actionable misstatements or

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omissions or that Defendants acted with ~~the SAIC that was later the subject of a self-described "white paper" issued and then withdrawn~~scienter. In December 2017, following an appeal by the ~~SAIC,~~plaintiffs, the Second Circuit Court of Appeals issued a summary order vacating the Southern District of New York's dismissal order and remanding the ~~alleged impact~~case to the Southern District of New York for further proceedings. In May 2018, the Southern District of New York certified a class of all persons and/or entities that purchased or otherwise acquired our American Depositary Shares or purchased call options or sold put options on our American Depositary Shares between September 19, 2014 and January 28, 2015, inclusive, with certain exclusions. On April 29, 2019, we announced that defendants had entered into a settlement agreement to resolve the lawsuits. Under the terms of the ~~sale~~settlement agreement, we agreed to pay US$250 million in exchange for a full release of ~~counterfeit goods~~all claims brought in the lawsuit. The settlement agreement expressly provides that the settlement does not constitute an admission or finding that the claims asserted had any merit. We expect, subject to court approval, that a hearing on our financial results. Plaintiffs assert claims against our company and Executive Chairman Jack Yun Ma, Executive Vice Chairman Joseph C. Tsai, then Chief Executive Officer Jonathan Zhaoxi Lu and Chief Financial Officer Maggie Wei Wu for violation of sections 10(b) and 20(a)the final approval of the ~~United States Exchange Act and Rule 10b-5. Plaintiffs seek unspecified damages, attorneys' fees and costs.~~settlement will take place in or around October 2019.
       ~~In July 2015, the Defendants filed motions to dismiss the complaint for failure to state a claim. Briefing on the motion was complete on September 2015.~~ The ~~parties are awaiting the court's decision.~~
California ~~State Consolidated Securities Act Actions~~
       ~~In October 2015, we were named as a defendant in the first of three securities class action~~ lawsuits ~~filed in the Superior Court of the State of California, San Mateo County. The three actions~~ were consolidated ~~in October 2015, and plaintiffs filed a consolidated complaint on March 25, 2016. The consolidated action is captioned~~under the captionGary Buelow, et al. v. Alibaba Group Holding Limited, et al., No. CIV-535692 (San Mateo Sup. Ct.). ~~The~~In December 2016, the Superior Court sustained our demurrer to the complaint in part and denied it in part. In January 2017, we answered the consolidated ~~action is brought on behalf of~~complaint, asserting a ~~putative~~general denial as to all allegations and setting forth affirmative defenses. In March 2018, plaintiffs filed a motion for class certification, requesting, among other things, that the Superior Court certify a class of ~~investors~~all persons who purchased ~~Alibaba~~or otherwise acquired our American Depositary Shares pursuant or traceable to the Registration Statement issued in connection with our IPO. ~~The complaint alleges violations of Sections 11, 12(a)(2) and 15~~This motion was not ruled on by the Superior Court. On December 31, 2018, we announced that defendants had entered into a settlement agreement to resolve the consolidated class action lawsuit. Under the terms of the ~~United States Securities Act~~settlement agreement, we agreed to pay US$75 million to settle the lawsuit in exchange for a full release of ~~1933.~~
       The consolidated complaint names our company, Executive Chairman Jack Yun Ma, Executive Vice Chairman Joseph C. Tsai, then Chief Executive Officer Jonathan Zhaoxi Lu, Chief Financial Officer Maggie Wei Wu,

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Director Masayoshi Son, General Counsel and Secretary Timothy A. Steinert, and 34 separate underwriters of our initial public offering. It alleges that our company, our senior officers who signed the registration statement, and the underwriters made material misrepresentations in our initial offering materials similar to those allegedall claims brought in the ~~above federal consolidated complaint.~~
       ~~We filed a demurrer for failure to state a claim and lack of subject matter jurisdiction~~lawsuit. The settlement agreement expressly provides that the settlement does not constitute an admission or finding that the claims asserted in ~~response to~~ the ~~consolidated complaint~~lawsuit had any merit. The settlement was approved by the Superior Court on May ~~6, 2016. Briefing on~~17, 2019 and a final judgment concluding the ~~demurrer is expected to be complete in July 2016. Regulatory Inquiry~~lawsuit was entered that same date.
Pending SEC Inquiry
       ~~Earlier this year,~~In early 2016, the SEC informed us that it ~~was initiating~~had initiated an investigation into whether there have been any violations of the federal securities laws. The SEC has requested that we voluntarily provide it with documents and information relating to, among other ~~things:~~things, our consolidation policies and practices (including our prior practice of accounting for Cainiao Network as an equity method investee), our policies and practices applicable to related party transactions in general, and our reporting of operating data from ~~Singles Day.~~the 11.11 global shopping festival. We are voluntarily disclosing this SEC request for information and cooperating with the SEC and, through our legal counsel, have been providing the SEC with requested documents and information. The SEC advised us that the initiation of a request for information should not be construed as an indication by the SEC or its staff that any violation of the federal securities laws has occurred.
~~Concluded SEC Inquiry~~
       ~~On January 30, 2015, following~~Our management believes that the ~~release~~risk of loss in connection with this proceeding is currently remote and that this proceeding will not have a material adverse effect on our financial condition. However, in light of the ~~so-called SAIC "white paper,"~~inherent uncertainties involved in this and similar proceedings, some of which are beyond our control, the ~~SEC initiated a non-public inquiry into whether any violations~~risk of ~~the federal securities laws had occurred. The SEC advised us that the existence of the inquiry should not~~loss may become more likely and an adverse outcome could be construed as an indication by the SEC or its Staff that we or any of our officers or directors had violated any of the federal securities laws. As part of its inquiry, the SEC requested that we voluntarily provide certain information. The SEC's initial information request covered background facts and other information relatedmaterial to our ~~interaction with the SAIC, and related matters. In September 2015, the SEC notified us that it had concluded its inquiry and, based on the~~results of operations or cash flows for any particular reporting period. See note 2 to our audited consolidated financial statements included elsewhere in this annual report for more information ~~it had received, it did not intend to recommend an enforcement action against us.~~
~~Kering Lawsuit~~
       In May 2015, we were named as a defendant in a lawsuit filed in the Southern District of New York by Gucci America Inc., Balenciaga S.A., Balenciaga America, Inc., Bottega Veneta S.A., Bottega Veneta Inc., Yves Saint Laurent America, Inc., Luxury Goods International (L.G.I.) S.A. and Kering S.A. The case is captioned~~Gucci America, Inc. et al. v. Alibaba Group Holding Ltd. et al., No. 15-cv-03784-PKC (S.D.N.Y.). A second amended complaint was filed in September 2015. The complaint generally alleges that merchants~~ on our ~~marketplaces sold allegedly counterfeit or otherwise trademark infringing merchandise, purportedly~~provisioning policy with ~~our actual or constructive knowledge,~~regard to legal and that we purportedly supported such merchants and merchandise. In their complaint, the plaintiffs assert multiple claims against our company and seek unspecified damages. We filed a motion to dismiss Plaintiffs' Racketeer Influenced and Corrupt Organizations Act, or RICO, claims in October 2015 and this motion is pending before the Court. Discovery on other claims is proceeding.administrative proceedings.

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Dividend Policy
Since our inception, we have not declared or paid any dividends on our ordinary shares. We have no present plan to pay any dividends on our ordinary shares in the foreseeable future. We intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business.
Any future determination to pay dividends will be made at the discretion of our board of directors and may be based on a number of factors, including our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem

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relevant. If we pay any dividends, the depositary will pay our ADS holders to the same extent as holders of our ordinary shares, subject to the terms of the deposit agreement, including the fees and expenses payable thereunder. Cash dividends on our ordinary shares, if any, will be paid in U.S. dollars.
We are a holding company incorporated in the Cayman Islands. In order for us to distribute any dividends to our shareholders and ADS holders, we rely on dividends, ~~distributed~~loans, and other distributions on equity paid by our ~~PRC subsidiaries.~~operating subsidiaries in China and on remittances, including loans, from our variable interest entities in China. Dividend distributions from our PRC subsidiaries to us are subject to PRC taxes, such as withholding tax. In addition, regulations in the PRC currently permit payment of dividends of a PRC company only out of accumulated distributable after-tax profits as determined in accordance with its articles of association and the accounting standards and regulations in China. See "Item 3. Key Information — D. Risk Factors — Risks Related to Doing Business in the People's Republic of China — We rely to a significant extent on dividends, loans and other distributions on equity paid by our principal operating subsidiaries in ~~China and on remittances, including loans, from the variable interest entities in China to fund offshore cash and financing requirements.~~China."
B.  Significant Changes
We have not experienced any significant changes since the date of our audited consolidated financial statements included in this annual report.
ITEM 9    THE OFFER AND LISTING
A.  Offer and Listing ~~Details.~~Details
Our ADSs, each representing one of our ordinary shares, have been listed on the New York Stock Exchange since September 19, 2014 under the symbol "BABA." The table below shows, for the periods indicated, the high and low market prices, based on the highest and lowest intraday sales prices, on the New York Stock Exchange for our ADSs through May 20, 2016.

Market Price⁽¹⁾
(US$)

High Low
Annual highs and lows

Fiscal year 2015 (from September 19, 2014)
120.00 80.03
Fiscal year 2016
95.06 57.20
Quarterly highs and lows

Third calendar quarter 2015
85.38 57.20
Fourth calendar quarter 2015
86.42 58.20
First calendar quarter 2016
79.84 59.25
Second calendar quarter 2016 (through May 20, 2016)
85.89 75.01
Monthly highs and lows

December 2015
85.82 78.99
January 2016
78.68 65.34
February 2016
70.58 59.25
March 2016
79.84 69.86
April 2016
85.89 75.66
May 2016 (through May 20, 2016)
80.49 75.01
~~(1)~~
~~Source: Bloomberg~~

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B.  Plan of Distribution
Not applicable.
C.  Markets
Our ADSs, each representing one of our ordinary shares, have been listed on the New York Stock Exchange since September 19, 2014 under the symbol "BABA."
D.  Selling Shareholders
Not applicable.
E.  Dilution
Not applicable.
F.  Expenses of the Issue
Not applicable.
ITEM 10    ADDITIONAL INFORMATION
A.  Share Capital
Not applicable.
B.  Memorandum and Articles of Association
We incorporate by reference into this annual report the description of our amended and restated memorandum and articles of association contained in ourRegistration Statement on Form F-1 ~~registration statement~~ (File No. 333-195736), as amended, initially filed with the SEC on May 6, 2014. Our shareholders adopted our amended and restated

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memorandum and articles of association by a special resolution on September 2, 2014, and effective upon completion of our initial public offering of ordinary shares represented by our ADSs.
C.  Material Contracts
We have not entered into any material contracts other than in the ordinary course of business and other than those described in "Item 4. Information on the Company," "Item 5. Operating and Financial Review and Prospects" or elsewhere in this annual report.
D.  Exchange Controls
See "Item 4. Information on the Company — B. Business Overview — Regulation — Regulation of Foreign Exchange and Dividend Distribution — Foreign Exchange Regulation."
E.  Taxation
The following is a general summary of certain Cayman Islands, PRC and United States federal income tax consequences relevant to an investment in our ADSs and ordinary shares. The discussion is not intended to be, nor should it be construed as, legal or tax advice to any particular prospective purchaser. The discussion is based on laws and relevant interpretations thereof in effect as of the date of this annual report, all of which are subject to change or different interpretations, possibly with retroactive effect. The discussion does not address U.S. state or local tax laws, or tax laws of jurisdictions other than the Cayman Islands, the People's Republic of China and the United States. You should consult your own tax advisors with respect to the consequences of acquisition, ownership and disposition of our ADSs and ordinary shares. To the extent that this discussion relates to matters of Cayman

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Islands tax law, it is the opinion of Maples and Calder (Hong Kong) LLP, our special Cayman Islands counsel. To the extent that the discussion states definitive legal conclusions under PRC tax laws and regulations, it is the opinion of Fangda Partners, our special PRC counsel.
Cayman Islands Taxation
The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of inheritance tax or estate duty or withholding tax applicable to us or to any holder of our ADSs and ordinary shares. There are no other taxes likely to be material to us levied by the Government of the Cayman Islands except for stamp duties ~~which~~that may be applicable on instruments executed in, or after execution brought within, the jurisdiction of the Cayman Islands. No stamp duty is payable in the Cayman Islands on the issue of shares by, or any transfers of shares of, Cayman Islands companies (except those which hold interests in land in the Cayman Islands). The Cayman Islands is not party to any double tax treaties that are applicable to any payments made to or by our company. There are no exchange control regulations or currency restrictions in the Cayman Islands.
Payments of dividends and capital in respect of our ADSs and ordinary shares will not be subject to taxation in the Cayman Islands and no withholding will be required on the payment of a dividend or capital to any holder of our ADSs or ordinary shares, as the case may be, nor will gains derived from the disposal of our ADSs or ordinary shares be subject to Cayman Islands income or corporation tax.
People's Republic of China Taxation
We are a holding company incorporated in the Cayman Islands and we gain substantial income by way of dividends from our PRC subsidiaries. The EIT Law and its implementation rules, both of which became effective on January 1, 2008 and were most recently amended on December 29, 2018 and April 23, 2019, respectively, provide that China-sourced income of foreign enterprises, such as dividends paid by a PRC subsidiary to its equity holders that are non-resident enterprises, will normally be subject to PRC withholding tax at a rate of 10%, unless any ~~such~~ foreign investor's jurisdiction of incorporation has a tax treaty with China that provides for a lower withholding tax rate for which the foreign investor is eligible.

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Under the EIT Law, an enterprise established outside of China with a "de facto management body" within China is considered a "resident enterprise," which means that it is treated in the same manner as a Chinese enterprise for enterprise income tax purposes. Although the implementation rules of the EIT Law define "de facto management body" as a managing body that exercises substantive and overall management and control over the production and business, personnel, accounting books and assets of an enterprise, the only official guidance for this definition currently available is set forth in Circular 82 issued by the State Administration of Taxation, which provides guidance on the determination of the tax residence status of a Chinese-controlled offshore incorporated enterprise, defined as an enterprise that is incorporated under the laws of a foreign country or territory and that has a PRC enterprise or enterprise group as its primary controlling shareholder. Although Alibaba Group Holding Limited does not have a PRC enterprise or enterprise group as our primary controlling shareholder and is therefore not a Chinese-controlled offshore incorporated enterprise within the meaning of Circular 82, in the absence of guidance specifically applicable to us, we have applied the guidance set forth in Circular 82 to evaluate the tax residence status of Alibaba Group Holding Limited and its subsidiaries ~~organized~~ outside the PRC.
According to Circular 82, a Chinese-controlled offshore incorporated enterprise will be regarded as a PRC tax resident by virtue of having a "de facto management body" in China and will be subject to PRC enterprise income tax on its worldwide income only if all of the following criteria are met:
•
the primary location of the day-to-day operational management is in the PRC;

•
decisions relating to the enterprise's financial and human resource matters are made or are subject to approval by organizations or personnel in the PRC;

•
the enterprise's primary assets, accounting books and records, company seals, and board and shareholders meeting minutes are located or maintained in the PRC; and

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•
50% or more of voting board members or senior executives habitually reside in the PRC.
We do not believe that we meet any of the conditions outlined in the immediately preceding paragraph. Alibaba Group Holding Limited and its offshore subsidiaries are incorporated outside the PRC. As a holding company, our key assets and records, including the resolutions and meeting minutes of our board of directors and the resolutions and meeting minutes of our shareholders, are located and maintained outside the PRC. In addition, we are not aware of any offshore holding companies with a corporate structure similar to ours that has been deemed a PRC "resident enterprise" by the PRC tax authorities. Accordingly, we believe that Alibaba Group Holding Limited and ~~its~~our offshore subsidiaries should not be treated as a "resident enterprise" for PRC tax purposes if the criteria for "de facto management body" as set forth in Circular 82 were deemed applicable to us. However, as the tax residency status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term "de facto management body" as applicable to our offshore entities, we will continue to monitor our tax status.
The implementation rules of the EIT Law provide that, (i) if the enterprise that distributes dividends is domiciled in the PRC or (ii) if gains are realized from transferring equity interests of enterprises domiciled in the PRC, then ~~such~~the dividends or capital gains are treated as China-sourced income. It is not clear how "domicile" may be interpreted under the EIT Law, and it may be interpreted as the jurisdiction where the enterprise is a tax resident. Therefore, if we are considered as a PRC tax resident enterprise for PRC tax purposes, any dividends we pay to our overseas shareholders or ADS holders ~~which~~that are non-resident enterprises as well as gains realized by ~~such~~those shareholders or ADS holders from the transfer of our shares or ADSs may be regarded as China-sourced income and as a result become subject to PRC withholding tax at a rate of 10%, unless any ~~such~~of the non-resident ~~enterprise's jurisdiction~~enterprises' jurisdictions has a tax treaty with China that provides for a preferential treatment.
Furthermore, if we are considered a PRC resident enterprise and the competent PRC tax authorities consider dividends we pay with respect to our shares or ADSs and the gains realized from the transfer of our shares or ADSs to be income derived from sources within the PRC, ~~such~~the dividends ~~and gains~~ we pay to our overseas shareholders or ADS holders who are non-resident individuals, and gains realized by those shareholders or ADS holders from the transfer of our shares or ADSs, may be subject to PRC individual income tax at a rate of 20%, unless any ~~such~~ of the

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non-resident individuals' ~~jurisdiction~~jurisdictions has a tax treaty with China that provides for a preferential tax rate or a tax exemption. It is also unclear whether, if we are considered a PRC resident enterprise, holders of our shares or ADSs would be able to claim the benefit of income tax treaties or agreements entered into between China and other countries or areas.
See "Item 3. Key Information — D. Risk Factors — Risks Related to Doing Business in the People's Republic of China — We may be treated as a resident enterprise for PRC tax purposes under the PRC Enterprise Income Tax Law, and we may therefore be subject to PRC income tax on our global income." and "Item 3. Key Information — D. Risk Factors — Risks Related to Doing Business in the People's Republic of China — Dividends payable to ~~our~~ foreign investors and gains on the sale of our ADSs or ordinary shares by our foreign investors may become subject to PRC taxation."
Material United States Federal Income Tax Considerations
The following summary describes the material United States federal income tax consequences of the ownership of our ordinary shares and ADSs as of the date of this annual report. The discussion set forth below is applicable only to United States Holders. Except where noted, this summary deals only with ordinary shares and ADSs held as capital assets. As used herein, the term "United States Holder" means a beneficial owner of an ordinary share or ADS that is for United States federal income tax purposes:
•
an individual citizen or resident of the United States;

•
a corporation (or other entity treated as a corporation for United States federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia;

•
an estate the income of which is subject to United States federal income taxation regardless of its source; or

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•
a trust if it ~~(1)~~ is subject to the primary supervision of a court within the United States and one or more United States persons has or have the authority to control all substantial decisions of the trust, or ~~(2)~~if it has a valid election in effect under applicable United States Treasury regulations to be treated as a United States person.
This summary does not represent a detailed description of the United States federal income tax consequences applicable to you if you are subject to special treatment under the United States federal income tax laws, including if you are:
•
a dealer in securities or currencies;

•
a financial institution;

•
a regulated investment company;

•
a real estate investment trust;

•
an insurance company;

•
a tax-exempt organization;

•
a person holding our ordinary shares or ADSs as part of a hedging, integrated or conversion transaction, a constructive sale or a straddle;

•
a trader in securities that has elected the mark-to-market method of accounting for your securities;

•
a person liable for alternative minimum tax;

•
a person who owns or is deemed to own 10% or more of our ~~voting stock;~~stock (by vote or value);

•
a person required to accelerate the recognition of any item of gross income with respect to our ordinary shares or ADSs as a result of such income being recognized on an applicable financial statement;

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•
a partnership or other pass-through entity for United States federal income tax purposes; or

•
a person whose "functional currency" is not the ~~United States~~U.S. dollar.
The discussion below is based upon the provisions of the Internal Revenue Code of 1986, as amended, or the Code, and regulations, rulings and judicial decisions thereunder as of the date of this annual report, and ~~such~~the relevant authorities may be replaced, revoked or modified so as to result in United States federal income tax consequences different from those discussed below. In addition, this summary is based, in part, upon representations made by the depositary to us and assumes that the deposit agreement, and all other related agreements, will be performed in accordance with their terms.
If a partnership holds our ordinary shares or ADSs, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. If you are a partner of a partnership holding our ordinary shares or ADSs, you should consult your tax advisors.
This summary does not contain a detailed description of all the United States federal income tax consequences to you in light of your particular circumstances and does not address the Medicare tax on net investment income, or the effects of any state, local or non-United States tax laws. If you are considering the purchase, ownership or disposition of our ordinary shares or ADSs, you should consult your own tax advisors concerning the United States federal income tax consequences to you in light of your particular situation as well as any consequences arising under the laws of any other taxing jurisdiction.
ADSs
If you hold ADSs, for United States federal income tax purposes, you generally will be treated as the owner of the underlying ordinary shares that are represented by ~~such~~the ADSs. Accordingly, deposits or withdrawals of ordinary shares for ADSs will not be subject to United States federal income tax.

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Taxation of Dividends
Subject to the discussion under "— Passive Foreign Investment Company" below, the gross amount of distributions on the ADSs or ordinary shares (including any amounts withheld to reflect PRC withholding taxes) will be taxable as dividends, to the extent paid out of our current or accumulated earnings and profits, as determined under United States federal income tax principles. ~~Such~~The income (including withheld taxes) will be includable in your gross income as ordinary income on the day actually or constructively received by you, in the case of the ordinary shares, or by the depositary, in the case of ADSs. ~~Such~~The dividends will not be eligible for the dividends received deduction allowed to corporations under the Code. The following discussion assumes that all dividends will be paid in U.S. dollars.
With respect to non-corporate United States investors, certain dividends received from a qualified foreign corporation may be subject to reduced rates of taxation. A foreign corporation is treated as a qualified foreign corporation with respect to dividends received from that corporation on ordinary shares (or ADSs backed by such shares) that are readily tradable on an established securities market in the United States. United States Treasury Department guidance indicates that our ADSs (which are listed on the New York Stock Exchange) are readily tradable on an established securities market in the United States. Thus, we believe that dividends we pay on our ordinary shares that are represented by ADSs will meet the conditions required for the reduced tax ~~rate.~~rates. Since we do not expect that our ordinary shares will be listed on an established securities market in the United States, we do not believe that dividends that we pay on our ordinary shares that are not represented by ADSs currently meet the conditions required for these reduced tax rates. There can be no assurance that our ADSs will be considered readily tradable on an established securities market in subsequent years. A qualified foreign corporation also includes a foreign corporation that is eligible for the benefits of certain income tax treaties with the United States. In the event that we were deemed to be a PRC resident enterprise under the EIT Law, although no assurance can be given, we might be eligible for the benefits of the income tax treaty between the United States and the PRC, which is hereinafter referred to as the Treaty, and if we were eligible for such benefits, dividends we pay on our ordinary shares, regardless of whether ~~such~~the shares are represented by ADSs, would be eligible for the reduced rates

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of taxation. See "— People's Republic of China Taxation." Non-corporate United States Holders that do not meet a minimum holding period requirement during which they are not protected from the risk of loss or that elect to treat the dividend income as "investment income" pursuant to Section 163(d)(4) of the Code will not be eligible for the reduced rates of taxation regardless of our status as a qualified foreign corporation. In addition, the rate reduction will not apply to dividends if the recipient of a dividend is obligated to make related payments with respect to positions in substantially similar or related property. This disallowance applies even if the minimum holding period has been met. You should consult your own tax advisors regarding the application of these rules given your particular circumstances.
Non-corporate United States Holders will not be eligible for reduced rates of taxation on any dividends received from us if we are a ~~passive foreign investment company, or~~ PFIC in the taxable year in which ~~such~~the dividends are paid or in the preceding taxable year. See "— Passive Foreign Investment Company" below.
In the event that we were deemed to be a PRC resident enterprise under the EIT Law, you might be subject to PRC withholding taxes on dividends paid to you with respect to the ADSs or ordinary shares. See "— People's Republic of China Taxation." In that case, subject to certain conditions and limitations, PRC withholding taxes on dividends would be treated as foreign taxes eligible for credit against your United States federal income tax liability. For purposes of calculating the foreign tax credit, dividends paid on the ADSs or ordinary shares will be treated as foreign-source income and will generally constitute passive category income. However, in certain circumstances, if you have held the ADSs or ordinary shares for less than a specified minimum period during which you are not protected from risk of loss, or are obligated to make payments related to the dividends, you will not be allowed a foreign tax credit for any PRC withholding taxes imposed on dividends paid on the ADSs or ordinary shares. If you are eligible for Treaty benefits, any PRC taxes on dividends will not be creditable against your United States federal income tax liability to the extent withheld at a rate exceeding the applicable Treaty rate. The rules governing the foreign tax credit are complex. You are urged to consult your tax advisor regarding the availability of the foreign tax credit under your particular circumstances.

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To the extent that the amount of any distribution exceeds our current and accumulated earnings and profits for a taxable year, as determined under United States federal income tax principles, the distribution will first be treated as a tax-free return of capital, causing a reduction in the adjusted basis of the ADSs or ordinary shares (thereby increasing the amount of gain, or decreasing the amount of loss, to be recognized by you on a subsequent disposition of the ADSs or ordinary shares), and the balance in excess of adjusted basis will be taxed as capital gain recognized on a sale or exchange, as described below under "— Taxation of Capital Gains." Consequently, ~~such~~any distributions in excess of our current and accumulated earnings and profits would generally not give rise to foreign source income and you would generally not be able to use the foreign tax credit arising from any PRC withholding tax imposed on ~~such~~those distributions unless ~~such~~the credit can be applied (subject to applicable limitations) against United States federal income tax due on other foreign source income in the appropriate category for foreign tax credit purposes. However, we do not expect to keep earnings and profits in accordance with United States federal income tax principles. Therefore, you should expect that a distribution will generally be treated as a dividend (as discussed above).
Distributions of ADSs, ordinary shares or rights to subscribe for ordinary shares that are received as part of a pro rata distribution to all of our shareholders generally will not be subject to United States federal income tax. Consequently, ~~such~~these distributions generally will not give rise to foreign source income and you generally will not be able to use the foreign tax credit arising from any PRC withholding tax imposed on ~~such~~the distributions unless ~~such~~the credit can be applied (subject to applicable limitations) against United States federal income tax due on other foreign source income in the appropriate category for foreign tax credit purposes.
Passive Foreign Investment Company
Based on the projected composition of our income and assets and the valuation of our assets, including goodwill, we do not expect to be a PFIC for our current taxable year, and we do not expect to become one in the future, although there can be no assurance in this regard.

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In general, we will be a PFIC for any taxable year in which:
•
at least 75% of our gross income is passive income; or

•
at least 50% of the value (determined on a quarterly basis) of our assets is attributable to assets that produce or are held for the production of passive income.
For this purpose, passive income generally includes dividends, interest, royalties and rents (other than royalties and rents derived in the active conduct of a trade or business and not derived from a related person). If we own at least 25% (by value) of the stock of another corporation, we will be treated, for purposes of the PFIC tests, as owning our proportionate share of the other corporation's assets and receiving our proportionate share of the other corporation's income. Although we do not expect to be a PFIC, it is not entirely clear how the contractual arrangements between us and our variable interest entities will be treated for purposes of the PFIC rules. If it were determined that we do not own the stock of our variable interest entities for United States federal income tax purposes (for instance, because the relevant PRC authorities do not respect these arrangements), we may be treated as a PFIC.
The determination of whether we are a PFIC is made annually. Accordingly, it is possible that we may become a PFIC in the current or any future taxable year due to changes in our asset or income composition. Because we have valued our goodwill based on the ~~projected~~ market value of our ~~equity,~~ADSs, a decrease in the price of our ADSs may also result in our becoming a PFIC. If we are a PFIC for any taxable year during which you hold our ADSs or ordinary shares, you will be subject to special tax rules discussed below.
If we are a PFIC for any taxable year during which you hold our ADSs or ordinary shares and you do not make a timely mark-to-market election (as discussed below), you will be subject to special tax rules with respect to any "excess distribution" received and any gain realized from a sale or other disposition, including a pledge, of ADSs or ordinary shares. Distributions received in a taxable year that are greater than 125% of the average annual distributions received during the shorter of the three preceding taxable

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years or your holding period for the ADSs or ordinary shares will be treated as excess distributions. Under these special tax rules:
•
the excess distribution or gain will be allocated ratably over your holding period for the ADSs or ordinary shares;

•
the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which we were a PFIC, will be treated as ordinary income; and

•
the amount allocated to each other year will be subject to tax at the highest tax rate in effect for that year and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each ~~such~~relevant year.
In addition, non-corporate United States Holders will not be eligible for reduced rates of taxation on any dividends received from us if we are a PFIC in the taxable year in which ~~such~~the dividends are paid or in the preceding taxable year. You will generally be required to file Internal Revenue Service Form 8621 if you hold our ADSs or ordinary shares in any year in which we are classified as a PFIC.
If we were a PFIC for any taxable year during which you hold our ADSs or ordinary shares and any of our non-United States subsidiaries was also a PFIC, a United States Holder would be treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC for purposes of the application of these rules. You are urged to consult your tax advisors about the application of the PFIC rules to any of our subsidiaries.
In certain circumstances, in lieu of being subject to the excess distribution rules discussed above, you may make an election to include gain on the stock of a PFIC as ordinary income under a mark-to-market method, provided that ~~such~~the stock is regularly traded on a qualified exchange. Under current law, the mark-to-market election may be available to United States Holders of ADSs ifsince the ADSs are listed on the New York Stock Exchange, which constitutes a qualified exchange, ~~and~~provided the ADSs are "regularly traded" for purposes of the mark-to-market election (for which no assurance can be given). It should also be noted that ~~it is intended that~~ only the ADSs and not the ordinary

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shares ~~will be~~are listed on the New York Stock Exchange. Consequently, if you are a United States Holder of ordinary shares that are not represented by ADSs, you generally will not be eligible to make a mark-to-market election if we are or were to become a PFIC.
If you make an effective mark-to-market election, you will include in each year that we are a PFIC as ordinary income the excess of the fair market value of your ADSs at the end of the year over your adjusted tax basis in the ADSs. You will be entitled to deduct as an ordinary loss in each ~~such~~relevant year the excess of your adjusted tax basis in the ADSs over their fair market value at the end of the year, but only to the extent of the net amount previously included in income as a result of the mark-to-market election. If you make an effective mark-to-market election, in each year that we are a PFIC any gain you recognize upon the sale or other disposition of your ADSs will be treated as ordinary income and any loss will be treated as ordinary loss, but only to the extent of the net amount previously included in income as a result of the mark-to-market election.
Your adjusted tax basis in the ADSs will be increased by the amount of any income inclusion and decreased by the amount of any deductions under the mark-to-market rules. If you make a mark-to-market election it will be effective for the taxable year for which the election is made and all subsequent taxable years unless the ADSs are no longer regularly traded on a qualified exchange or the Internal Revenue Service consents to the revocation of the election. You are urged to consult your tax advisor about the availability of the mark-to-market election, and whether making the election would be advisable in your particular circumstances.
Alternatively, you can sometimes avoid the rules described above by electing to treat a PFIC as a "qualified electing fund" under Section 1295 of the Code. However, this option is not available to you because we do not intend to comply with the requirements necessary to permit you to make this election.
You are urged to consult your tax advisors concerning the United States federal income tax consequences of holding ADSs or ordinary shares if we are considered a PFIC in any taxable year.

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Taxation of Capital Gains
For United States federal income tax purposes, you will recognize taxable gain or loss on any sale or exchange of ADSs or ordinary shares in an amount equal to the difference between the amount realized for the ADSs or ordinary shares and your tax basis in the ADSs or ordinary shares. Subject to the discussion under "— Passive Foreign Investment Company" above, ~~such~~this gain or loss will generally be capital gain or loss. Capital gains of individuals derived with respect to capital assets held for more than one year are eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations. Any gain or loss recognized by you will generally be treated as United States source gain or loss. However, if we were treated as a PRC resident enterprise for EIT Law purposes and PRC tax were imposed on any gain, and if you are eligible for the benefits of the Treaty, you may elect to treat ~~such~~this gain as PRC source gain under the Treaty. If you are not eligible for the benefits of the Treaty or you fail to make the election to treat any gain as PRC source, then you may not be able to use the foreign tax credit arising from any PRC tax imposed on the disposition of our ADSs or ordinary shares unless ~~such~~the credit can be applied (subject to applicable limitations) against tax due on other income derived from foreign sources. You will be eligible for the benefits of the Treaty if, for purposes of the Treaty, you are a resident of the United States, and you meet other requirements specified in the Treaty. Because the determination of whether you qualify for the benefits of the Treaty is fact-intensive and depends upon your particular circumstances, you are specifically urged to consult your tax advisors regarding your eligibility for the benefits of the Treaty. You are also urged to consult your tax advisor regarding the tax consequences in case any PRC tax is imposed on gain on a disposition of our ADSs or ordinary shares, including the availability of the foreign tax credit and the election to treat any gain as PRC source, under your particular circumstances.
Information Reporting and Backup Withholding
In general, information reporting will apply to dividends in respect of our ADSs or ordinary shares and the proceeds from the sale, exchange or redemption of our ADSs or ordinary shares that are paid to you within the United States (and in certain cases, outside the United States), unless you are an exempt recipient. A backup

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withholding tax may apply to ~~such~~these payments if you fail to provide a taxpayer identification number or certification of other exempt status or, in the case of dividend payments, if you fail to report in full dividend and interest income.
Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against your United States federal income tax liability provided the required information is furnished to the Internal Revenue Service in a timely manner.
Under the Hiring Incentives to Restore Employment Act of 2010, certain United States Holders are required to report information relating to ADSs or ordinary shares, subject to certain exceptions (including an exception for ADSs or ordinary shares held in accounts maintained by certain financial institutions), by attaching a complete Internal Revenue Service Form 8938, Statement of Specified Foreign Financial Assets, with their tax return for each year in which they hold ADSs or ordinary shares. You are urged to consult your own tax advisors regarding information reporting requirements relating to your ownership of the ADSs or ordinary shares.
F.     Dividends and Paying Agents
Not applicable.
G.    Statement by Experts
Not applicable.

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H.   Documents on Display
We have previously filed with the SEC our ~~registration statement~~Registration Statement on Form F-1 (File No. 333-195736), as amended, with respect to our ordinary shares and ADSs. As allowed by the SEC, in Item 19 of this annual report, we incorporate by reference certain information we previously filed with the SEC. This means that we can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is considered to be part of this annual report.
You may read and copy this annual report, including the exhibits incorporated by reference in this annual report, at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549 and at the SEC's regional offices in New York, New York and Chicago, Illinois. You can also request copies of this annual report, including the exhibits incorporated by reference in this annual report, upon payment of a duplicating fee, by writing information on the operation of the SEC's Public Reference Room.
The SEC also maintains a website atwww.sec.gov that contains reports and other information regarding registrants that file electronically with the SEC. Our annual report and some of the other information submitted by us to the SEC may be accessed through this website.
As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of quarterly reports and proxy statements, and officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act.
In accordance with NYSE Rule 203.01, we will post this annual report on our websitewww.alibabagroup.com. In addition, we will provide hardcopies of our annual report to shareholders, including ADS holders, free of charge upon request.
I.     Subsidiary Information
Not applicable.

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ITEM 11    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risks
Interest Rate Risk
Our main interest rate exposure relates to bank borrowings. ~~In addition, one tranche of our unsecured senior notes bear interest at three-month LIBOR plus 0.520% per annum.~~ We also have interest-bearing assets, including cash and cash equivalents, short-term investments and restricted cash. We manage our interest rate exposure with a focus on reducing our overall cost of debt and exposure to changes in interest rates. ~~From time to time,~~When considered appropriate, we use derivatives, such as interest rate swaps, to manage our interest rate exposure. ~~Approximately 92%~~
As of ~~the aggregate principal amount~~March 31, 2019, approximately 30% of our total debt (including bank borrowings and unsecured senior ~~notes was at fixed~~notes) carries floating interest rates and the remaining ~~8% was at~~70% carries fixed interest rates. We have entered into various agreements with various financial institutions as counterparties to swap a certain portion of our floating interest rate debt to effectively become fixed interest rate debt. After taking these interest rate swaps into consideration, approximately 20% of our total debt carries floating interest rates and the remaining 80% carries fixed interest rates as of March 31, ~~2016.~~2019. All of the abovementioned interest rate derivatives are designated as cash flow hedges and we expect these hedges to be highly effective. Certain of our indebtedness carries floating interest rates based on a spread over LIBOR. As a result, the interest expenses associated with these indebtedness will be subject to the potential impact of any fluctuation in LIBOR. The continuation of LIBOR on the current basis is not guaranteed after 2021. See "Item 3. Key Information — D. Risk Factors — Risks Related to Our Business and Industry — We are subject to interest rate risk in connection with our indebtedness."
As of March 31, ~~2015~~2018 and ~~2016,~~2019, if interest rates increased/decreased by 1%, with all other variables having remained constant, and assuming the amount ~~outstanding at March 31, 2015~~of interest-bearing assets and ~~2016 under our bank borrowings and the tranche of our unsecured senior notes~~debts that bear floating interest ~~was~~were outstanding for the entire respective ~~fiscal~~ years, our profit attributable to equity owners ~~of our company~~ would have been ~~RMB1,202~~RMB1,829 million and ~~RMB1,089~~RMB1,760 million (US$~~169~~262 million) higher/lower, respectively, mainly as a result of higher/lower interest income from our cash and cash equivalents and short-term investments. The analysis does not include floating interest rate debts whose interests are hedged by interest rate swaps.
Foreign Exchange Risk
Foreign currency risk arises from future commercial transactions, recognized assets and liabilities and net investments in foreign operations. Although we operate businesses in different countries, ~~substantially all~~most of our revenue-generating transactions, and a majority of our expense-related transactions, are denominated in Renminbi,

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which is the functional currency of our major operating subsidiaries and the reporting currency of our financial statements. ~~From time to time,~~When considered appropriate, we enter into hedging activities with regard to exchange rate risk.
The value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions and the foreign exchange policy adopted by the PRC government. On July 21, 2005, the PRC government changed its policy of pegging the value of the Renminbi to the U.S. dollar. Following the removal of the U.S. dollar peg, the Renminbi appreciated more than 20% against the U.S. dollar over the following three years. Between July 2008 and June 2010, this appreciation halted and the exchange rate between the Renminbi and the U.S. dollar remained within a narrow band. In June 2010, the People's Bank of China increased the flexibility of the exchange rate and between June 30, 2010 and December 31, 2013, the value of the Renminbi appreciated approximately 12.0% against the U.S. dollar, although the value of the Renminbi depreciated approximately 2.5% against the U.S. dollarFor instance, in ~~2014. In~~ August 2015, the ~~People's Bank of China~~PBOC changed the way it calculates the mid-point price of Renminbi against the U.S. dollar, requiring the market-makers who submit for reference rates to consider the previous day's closing spot rate, foreign-exchange demand and supply as well as changes in major currency rates. ~~As a result, in 2015,~~In 2017, the value of the Renminbi ~~depreciated~~appreciated by approximately ~~5.8%~~6.3% against the U.S. ~~dollar,~~dollar; and ~~from December 31, 2015~~in 2018, the Renminbi depreciated by approximately 5.7% against the U.S. dollar. From the end of 2018 through ~~May 20, 2016,~~the end of April 2019, the value of the Renminbi ~~further depreciated~~appreciated by approximately ~~1.1%~~2.0% against the U.S. dollar. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the Renminbi and the U.S. dollar in the future. There remains significant international pressure on the PRC government to adopt a more flexible currency policy, which could result in greater fluctuations of the Renminbi against the U.S. dollar. ~~Accordingly, it is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the Renminbi and the U.S. dollar in the future.~~
To the extent that we need to convert U.S. dollars into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would reduce the Renminbi amount we receive from the conversion. Conversely, if we decide to convert Renminbi into U.S. dollars for the purpose of making payments for dividends on our ordinary

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shares or ADSs, servicing our outstanding debts, or for other business purposes, appreciation of the U.S. dollar against the Renminbi would reduce the U.S. dollar amounts available to us.
As of March 31, ~~2015,~~2018, we had Renminbi-denominated cash and cash equivalents and ~~short term~~short-term investments of ~~RMB107,089~~RMB131,433 million and U.S. dollar-denominated cash and cash equivalents and short-term investments of US$~~2,461~~11,352 million. Assuming we had converted ~~RMB107,089~~RMB131,433 million into U.S. dollars at the exchange rate of ~~RMB6.199~~RMB6.2726 for US$1.00 as of March 31, ~~2015,~~2018, our total U.S. dollar cash balance would have been US$~~19,736~~32,305 million. If the Renminbi had depreciated by 10% against the U.S. dollar, our U.S. dollar cash balance would have been US$~~18,166~~30,400 million.
As of March 31, ~~2016,~~2019, we had Renminbi-denominated cash and cash equivalents and ~~short term~~short-term investments of ~~RMB82,302~~RMB139,017 million and U.S. dollar-denominated cash and cash equivalents and short-term investments of US$~~4,359~~7,607 million. Assuming we had converted ~~RMB82,302~~RMB139,017 million into U.S. dollars at the exchange rate of ~~RMB6.448~~RMB6.7112 for US$1.00 as of March ~~31, 2016,~~29, 2019, our total U.S. dollar cash balance would have been US$~~17,123~~28,321 million. If the Renminbi had depreciated by 10% against the U.S. dollar, our U.S. dollar cash balance would have been US$~~15,963~~26,438 million.
Market Price Risk
We are exposed to market price risk primarily with respect to investment securities ~~to a lesser extent interest rate swaps and forward exchange contracts, held by us which are reported~~carried at fair ~~value.~~value that are publicly traded. A substantial portion of our ~~investment~~investments in equity investees are ~~all~~ held for long-term appreciation or for strategic ~~purposes. All of these~~purposes, which are accounted for under ~~cost or~~ equity method and are not subject to market price risk. We are not exposed to commodity price risk.
The sensitivity analysis is determined based on the exposure of ~~financial assets~~these investment securities at fair value to market price risks ~~related to equity and debt securities~~ at the end of each reporting period. ~~The~~
In fiscal year 2018, the securities we ~~hold are~~held were investment securities accounted for ~~as convertible bonds, trading securities~~under the fair value option or available-for-sale securities. Their changes in fair values are recorded as income for ~~convertible bonds and trading~~investment securities accounted for under the fair value option or through equity for available-for-sale securities, respectively. If market prices of the respective instruments held by us had been 1% higher/lower as of March 31, ~~2015 and March 31, 2016, our~~2018, these investment securities would have been approximately ~~RMB169~~RMB305 million

~~Table~~ higher/lower, of ~~Contents~~which RMB18 million relating to investment securities accounted for under the fair value option would be recognized as income or loss during the respective period.
~~and RMB228~~In fiscal year 2019, after our adoption of ASU 2016-01, changes in fair values of these securities are recorded as income or loss. If the market price of the respective instruments held by us had been 1% higher/lower as of March 31, 2019, these investment securities would have been approximately RMB665 million (US$3599 million) higher/lower, ~~respectively,~~all of which ~~RMB50 million and RMB56 million (US$8 million) relating to trading securities~~ would be recognized as income or loss during the respective period.
ITEM 12    DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
A.  Debt Securities
Not applicable.
B.  Warrants and Rights
Not applicable.
C.  Other Securities
Not applicable.

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D.  American Depositary Shares
Fees Paid by Our ADS Holders
As an ADS holder, you will be required to pay the following service fees to the depositary, Citibank, N.A.:
Persons depositing or withdrawing
shares or ADS holders must pay:
For:
Up to US$5.00 per 100 ADSs (or fraction thereof)
•
Issuance of ADSs upon deposit of Shares (excluding issuances as a result of distributions of ADSs pursuant to (i) stock dividends or other free stock distributions, or (ii) exercise of rights to purchase additional ~~ADSs.~~ADSs).

•
Delivery of ordinary shares against surrender of ADSs.

•
Distribution of cash dividends or other cash distributions.

•
Distribution of ADSs pursuant to (i) stock dividends or other free stock distributions, or (ii) exercise of rights to purchase additional ADSs.

•
Distribution of securities other than ADSs or rights to purchase additional ADSs.
Up to US$5.00 per 100 ADS per calendar year
•
ADS services
As an ADS holder you will also be responsible to pay certain fees and expenses incurred by the depositary and certain taxes and governmental charges such as:
•
taxes (including applicable interest and penalties) and other governmental charges;

•
fees for the transfer and registration of ordinary shares charged by the registrar and transfer agent for the ordinary shares in the Cayman Islands (i.e., upon deposit and withdrawal of ordinary shares);

•
expenses incurred for converting foreign currency into U.S. dollars;

•
expenses for cable, telex and fax transmissions and for delivery of securities;

•
fees and expenses as are incurred by the depositary in connection with compliance with applicable exchange control regulations; and

•
fees and expenses incurred in connection with the delivery or servicing of ordinary shares on deposit.

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Depositary fees payable upon the issuance and cancellation of ADSs are typically paid to the depositary bank by the brokers (on behalf of their clients) receiving the newly issued ADSs from the depositary bank and by the brokers (on behalf of their clients) delivering the ADSs to the depositary bank for cancellation. The brokers in turn charge these fees to their clients. Depositary fees payable in connection with distributions of cash or securities to ADS holders and the depositary services fee are charged by the depositary bank to the holders of record of ADSs as of the applicable ADS record date.
The Depositary fees payable for cash distributions are generally deducted from the cash being distributed. In the case of distributions other than cash (i.e., stock dividend, rights), the depositary bank charges the applicable fee to the ADS record date holders concurrent with the distribution. In the case of ADSs registered in the name of the investor (whether certificated or uncertificated in direct registration), the depositary bank sends invoices to the applicable record date ADS holders. In the case of ADSs held in brokerage and custodian accounts (via DTC), the depositary bank generally collects its fees through the systems provided by DTC (whose nominee is the registered holder of the ADSs held in DTC) from the brokers and custodians holding ADSs in their DTC accounts. The brokers and custodians who hold their clients' ADSs in DTC accounts in turn charge their clients' accounts the amount of the fees paid to the depositary banks.

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In the event of refusal to pay the depositary fees, the depositary bank may, under the terms of the deposit agreement, refuse the requested service until payment is received or may set off the amount of the depositary fees from any distribution to be made to the ADS holder.
Note that the fees and charges you may be required to pay may vary over time and may be changed by us and by the depositary. You will receive prior notice of ~~such~~these changes.
Fees and Payments from the Depositary to Us
Our depositary has agreed to reimburse us for certain expenses we incur that are related to the administration and maintenance of the ADS program. There are limits on the amount of expenses for which the depositary will reimburse us, but the amount of reimbursement available to us is not related to the amounts of fees the depositary collects from investors. ~~The depositary has reimbursed us for any expenses related to~~For fiscal year 2019, the ~~administration and maintenance~~amount of the ~~facility in an amount of~~reimbursement due from the depositary amounted to US$~~13.7~~26.9 million, after deduction of applicable U.S. ~~taxes, for the year ended March 31, 2016.~~taxes.

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PART II
ITEM 13    DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
None.
ITEM 14    MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
See "Item 10. Additional Information" for a description of the rights of securities holders, which remain unchanged.
ITEM 15    CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed under the Exchange Act is recorded, processed, summarized and reported within the specified time periods and accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Our management, under the supervision and with the participation of our principal executive officer and our principal financial officer, evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) or 15d-15(e) promulgated under the Exchange Act, at March 31, ~~2016.~~2019. Based on that evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures are effective in ensuring that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms, and that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure.
Management's Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. As required by Rule 13a-15(c) of the Exchange Act, our management conducted an evaluation of our company's internal control over financial reporting as of March 31, ~~2016~~2019 based on the framework in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of March 31, ~~2016.~~2019.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness of our internal control over financial reporting to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our independent registered public accounting firm, PricewaterhouseCoopers, has audited the effectiveness of our internal control over financial reporting as of March 31, ~~2016,~~2019, as stated in its report, which appears on page F-2 of this annual report.
Changes in Internal Control over Financial Reporting
There were no changes in our internal controls over financial reporting that occurred during the period covered by this annual report on Form 20-F that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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ITEM 16A.    AUDIT COMMITTEE FINANCIAL EXPERT
Our Board of Directors has determined that Mr. Walter Kwauk, an independent director within the meaning of Section 303A of the New York Stock Exchange Listed Company Manual and a member of our audit committee, qualifies as "audit committee financial expert" as defined in Item 16A of Form 20-F.
ITEM 16B.    CODE OF ETHICS
Our board of directors has adopted a code of ethics that applies to all of our directors, executive officers and employees. We have filed our code of ethics as an exhibit to our registration statement on Form F-1 (File Number 333-195736), as amended, initially filed with the Commission on May 6, 2014. The code is also available on our official website under the investor relations section at~~www.alibabagroup.com~~. www.alibabagroup.com.
ITEM 16C.    PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets forth the aggregate fees by categories specified below in connection with certain professional services rendered by PricewaterhouseCoopers, our principal external auditors, for the periods indicated. We did not pay any other fees to our auditors during the periods indicated below.

Year ended
March 31, Year ended
March 31,

2015 2016 2018 2019

(in thousands of RMB)
(in thousands of
RMB)

Audit Fees⁽¹⁾
66,956 * 38,000 66,606 87,545
Audit-related Fees⁽²⁾
5,422 5,958 7,753 14,212
Tax Fees⁽³⁾
5,060 480 753 —
All Other Fees⁽⁴⁾
111 967 5,442 5,982

Total
77,549 45,405 80,554 107,739

*
~~Includes audit fees relating to our initial public offering completed in September 2014.~~
(1)
"Audit Fees" represents the aggregate fees billed or to be billed for each of the fiscal years listed for professional services rendered by our principal auditors for the audit of our annual financial statements and assistance with and review of documents filed with the SEC and other statutory and regulatory filings.

(2)
"Audit-related Fees" represents the aggregate fees billed ~~for~~in each of the fiscal years listed for the assurance and related services rendered by our principal auditors that are reasonably related to the performance of the audit or review of our financial statements and not reported under "Audit Fees."

(3)
"Tax Fees" represents the aggregate fees billed ~~for~~in each of the fiscal years listed for the professional tax services rendered by our principal auditors.

(4)
"All Other Fees" represents the aggregate fees billed in each of the fiscal years listed for services rendered by our principal auditors other than services reported under "Audit Fees," "Audit-related Fees" and "Tax Fees."
The policy of our audit committee is to pre-approve all audit and non-audit services provided by PricewaterhouseCoopers, including audit services, audit-related services, tax services and other services as described above, other than those for de ~~minimus~~minimis services ~~which~~that are approved by the audit committee prior to the completion of the audit.
ITEM 16D.    EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEE
Not applicable.
ITEM 16E.    PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED ~~PURCHASERS.~~PURCHASERS
       ~~On August 12, 2015,~~In May 2017, we announced the ~~implementation~~adoption of ~~a share repurchase program~~the 2017 Share Repurchase Program in an aggregate amount of up to US$46.0 billion over a period of two years. ~~We have repurchased ADSs representing our ordinary shares on the open market under purchase plans adopted to implement the~~The 2017 Share Repurchase ~~Program. In~~Program expired as of the date of this annual report.

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~~addition, Jack Ma, our executive chairman, and Joe Tsai, our executive vice chairman, have jointly entered into our plans as affiliated purchasers.~~
In addition, our equity incentive award agreements generally provide that, in the event of a grantee's termination for cause or violation of a non-competition undertaking, we will have the right to repurchase the shares acquired by ~~such~~the grantee, generally at par or the exercise price paid for ~~such~~these shares. See "Item 6. Directors, Senior Management and Employees — B. Compensation — Equity Incentive Plans." In addition, when an employee leaves our company, we repurchase any shares acquired by ~~such~~the employee pursuant to early-exercised but unvested options.
The table below summarizes the repurchases we made in the periods indicated.

Month
Total Number of
Ordinary
Shares
Purchased⁽¹⁾ Total Price
Paid⁽¹⁾
(US$) Average Price
Paid Per
Ordinary
Share⁽²⁾
(US$) Total Number of
Ordinary
Shares
Purchased as
Part of Share
Repurchase
Program⁽³⁾ Approximate
Dollar Value of
Ordinary Shares
that May Yet Be
Purchased
Under Share
Repurchase
Program⁽⁴⁾
(US$, in millions)
April, 2015
29,018 531,875 18.33 — —
May 2015
— — — — —
June 2015
70,833 1,310,411 18.50 — —
July 2015
— — — — —
August 2015
20,523,626 1,440,310,625 70.18 18,653,009 2,690
September 2015
23,301,329 1,499,765,925 64.36 22,126,613 1,265
October 2015
906 — Par value — 1,265
November 2015
14,324 — Par value — 1,265
December 2015
— — — — 1,265
January 2016
43,750 462,500 10.57 — 1,265
February 2016
7,219,297 455,836,405 63.14 5,775,441 900
March 2016
— — — — 900
Month
Total Number of
Ordinary
Shares
Purchased⁽¹⁾ Total Price
Paid⁽¹⁾
(US$) Average Price
Paid Per
Ordinary
Share⁽²⁾
(US$) Total Number of
Ordinary
Shares
Purchased as
Part of Share
Repurchase
Program Approximate
Dollar Value of
Ordinary Shares
that May Yet Be
Purchased
Under Share
Repurchase
Program⁽³⁾
(US$, in millions)
April 2018
— — — — 6,000
May 2018
— — — — 6,000
June 2018
— — — — 6,000
July 2018
— — — — 6,000
August 2018
— — — — 6,000
September 2018
1,415,849 222,444,761 157.11 1,412,156 5,778
October 2018
6,512,170 945,861,849 145.25 6,512,170 4,832
November 2018
1,443,029 203,318,974 140.90 1,443,029 4,628
December 2018
1,476,437 199,621,195 135.20 1,472,456 4,429
January 2019
22,507 2,925,579 129.99 22,507 4,426
February 2019
— — — — 4,426
March 2019
1,718 — Par value — 4,426
(1)
Includes (i) an aggregate of ~~46,555,063~~10,862,318 ADSs representing our ordinary shares we repurchased pursuant to our Share Repurchase Program and (ii) an aggregate of ~~4,472,187~~9,392 ADSs representing our ordinary shares ~~repurchased by Jack Ma and Joe Tsai, our affiliate purchasers, and (iii) an aggregate of 175,833 ordinary shares, including 143,333 ordinary shares underlying unvested awards,~~ we repurchased pursuant to our equity incentive award agreements.

(2)
Ordinary shares we repurchased pursuant to our equity incentive award agreements were generally repurchased at par or the exercise price paid by the grantee for ~~such~~these shares.

(3)
~~Includes only those ADSs representing our ordinary shares we repurchased pursuant to the Share Repurchase Program.~~
~~(4)~~
Our 2017 Share Repurchase Program, ~~implemented~~which was adopted in ~~August 2015, authorizes~~May 2017, authorized the repurchase in an aggregate amount of up to US$46.0 billion over a period of two years.
In May 2019, our board of directors authorized a new share repurchase program for an amount of up to US$6.0 billion over a period of another two years.
ITEM 16F.    CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT.
Not applicable.
ITEM 16G.    CORPORATE GOVERNANCE.
We are a "foreign private issuer" (as such term is defined in Rule 3b-4 under the Exchange Act), and our ADSs, each representing one ordinary share, are listed on the New York Stock Exchange. Under Section 303A of the New York Stock Exchange Listed Company Manual, New York Stock Exchange listed companies that are foreign private issuers are permitted to follow home country practice in lieu of the corporate governance provisions specified by the New York Stock Exchange with limited exceptions. The following summarizes some significant ways in which our corporate governance practices differ from those followed by domestic companies under the listing standards of the New York Stock Exchange.

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Under the New York Stock Exchange Listed Company Manual, or the NYSE Manual, U.S. domestic listed companies are required to have a majority independent board, which is not required under the Companies Law of

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the Cayman Islands, our home country. Currently, our board of directors is composed of eleven members, five of whom are independent directors. In addition, the NYSE Manual requires U.S. domestic listed companies to have a compensation committee and a nominating/corporate governance committee, each composed entirely of independent directors, which are not required under the Companies Law of the Cayman Islands. Currently, our compensation committee is composed of three members, only two of whom are independent directors. Our nominating and corporate governance committee is composed of three members, only two of whom are independent directors. In addition, the NYSE Manual requires shareholder approval for certain matters, such as requiring that shareholders must be given the opportunity to vote on all equity compensation plans and material revisions to those plans, which is not required under the Cayman Islands law. We intend to comply with the requirements of Cayman Islands law only in determining whether shareholder approval is required.
ITEM 16H.    MINE SAFETY DISCLOSURE.
Not applicable.

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PART III
ITEM 17    FINANCIAL STATEMENTS.
We have provided financial statements pursuant to Item 18.
ITEM 18    FINANCIAL STATEMENTS.
The following financial statements are filed as part of this annual report, together with the report of the independent auditors:
•
Report of Independent Registered Public Accounting Firm

•
Consolidated Income Statements for the years ended March 31, ~~2014, 2015~~2017, 2018 and ~~2016~~2019

•
Consolidated Statements of Comprehensive Income for the years ended March 31, ~~2014, 2015~~2017, 2018 and ~~2016~~2019

•
Consolidated Balance Sheets as of March 31, ~~2015~~2018 and ~~2016~~2019

•
Consolidated Statements of Changes in Shareholders' Equity for the years ended March 31, ~~2014, 2015~~2017, 2018 and ~~2016~~2019

•
Consolidated Statements of Cash Flows for the years ended March 31, ~~2014, 2015~~2017, 2018 and ~~2016~~2019

•
Notes to the Consolidated Financial Statements
ITEM 19    EXHIBITS.
Exhibit
Number Description of Document
1.1*1.1⁽¹⁾ Form of Amended and Restated Memorandum and Articles of Association of the Registrant as currently in effect

2.1*2.1⁽²⁾ Registrant's Form of Ordinary Share Certificate

~~2.2†~~2.2⁽³⁾ ~~Form~~Deposit Agreement, dated as of ~~Deposit Agreement~~September 24, 2014, between the Registrant, the depositary and holders and beneficial holders of American Depositary Shares evidenced by American Depositary Receipts issued thereunder, including the form of American Depositary Receipt

~~2.3†~~2.3⁽³⁾ Form of American depositary receipt evidencing American depositary shares (included in Exhibit 2.2)

2.4*2.4⁽¹⁾ Amended and Restated Registration Rights Agreement among the Registrant and the persons whose names are set out in Schedule I thereto, dated September 18, 2012

2.5*2.5⁽¹⁾ Voting Agreement by and among the Registrant, Yahoo! Inc., SoftBank Corp., the Management Members as defined therein and certain other shareholders of the Registrant

~~2.6††~~2.6⁽⁴⁾ Indenture, dated as of November 28, 2014 between the Registrant and Bank of New York Mellon as Trustee

~~2.7††~~2.7⁽⁴⁾ ~~First Supplemental Indenture, dated as of November 28, 2014 between the Registrant and Bank of New York Mellon as Trustee~~
~~2.8††~~ ~~Second Supplemental Indenture, dated as of November 28, 2014 between the Registrant and Bank of New York Mellon as Trustee~~
~~2.9††~~ Third Supplemental Indenture, dated as of November 28, 2014 between the Registrant and Bank of New York Mellon as Trustee

~~2.10††~~2.8⁽⁴⁾ Fourth Supplemental Indenture, dated as of November 28, 2014 between the Registrant and Bank of New York Mellon as Trustee
2.9⁽⁴⁾ Fifth Supplemental Indenture, dated as of November 28, 2014 between the Registrant and Bank of New York Mellon as Trustee
2.10⁽⁴⁾ Sixth Supplemental Indenture, dated as of November 28, 2014 between the Registrant and Bank of New York Mellon as Trustee
2.11⁽⁴⁾ Form of 2.500% Senior Notes Due 2019 (included in Exhibit 2.7)

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Exhibit
Number Description of Document
~~2.11††~~2.12⁽⁴⁾ ~~Fifth Supplemental~~ Form of 3.125% Senior Notes Due 2021 (included in Exhibit 2.8)
2.13⁽⁴⁾ Form of 3.600% Senior Notes Due 2024 (included in Exhibit 2.9)
2.14⁽⁴⁾ Form of 4.500% Senior Notes Due 2034 (included in Exhibit 2.10)
2.15⁽⁶⁾ Indenture, dated as of ~~November 28, 2014~~December 6, 2017, between the Registrant and Bank of New York Mellon as Trustee

~~2.12††~~2.16⁽⁶⁾ ~~Sixth~~First Supplemental Indenture, dated as of ~~November 28, 2014~~December 6, 2017 between the Registrant and Bank of New York Mellon as Trustee

~~2.13††~~2.17⁽⁶⁾ ~~Form~~Second Supplemental Indenture, dated as of ~~Floating Rate Senior Notes Due~~December 6, 2017 ~~(included in Exhibit 2.7)~~between the Registrant and Bank of New York Mellon as Trustee

~~2.14††~~2.18⁽⁶⁾ ~~Form~~Third Supplemental Indenture, dated as of ~~1.625% Senior Notes Due~~December 6, 2017 ~~(included in Exhibit 2.8)~~between the Registrant and Bank of New York Mellon as Trustee

~~2.15††~~2.19⁽⁶⁾ ~~Form~~Fourth Supplemental Indenture, dated as of ~~2.500% Senior Notes Due 2019 (included in Exhibit 2.9)~~December 6, 2017 between the Registrant and Bank of New York Mellon as Trustee

~~2.16††~~2.20⁽⁶⁾ ~~Form~~Fifth Supplemental Indenture, dated as of ~~3.125% Senior Notes Due 2021 (included in Exhibit 2.10)~~December 6, 2017 between the Registrant and Bank of New York Mellon as Trustee

~~2.17††~~2.21⁽⁶⁾ Form of ~~3.600%~~2.800% Senior Notes Due ~~2024~~2023 (included in Exhibit ~~2.11)~~2.16)

~~2.18††~~2.22⁽⁶⁾ Form of ~~4.500%~~3.400% Senior Notes Due ~~2034~~2027 (included in Exhibit ~~2.12)~~2.17)

~~2.19†††~~2.23⁽⁶⁾ ~~Registration Rights Agreement dated as~~Form of ~~November 28, 2014 between the Registrant and Morgan Stanley & Co. International plc, Citigroup Global Markets Inc., Deutsche Bank AG, Singapore Branch and J.P. Morgan Securities LLC~~4.000% Senior Notes Due 2037 (included in Exhibit 2.18)

4.1*2.24⁽⁶⁾ ~~2011 Equity Incentive Plan~~Form of ~~the Registrant~~4.200% Senior Notes Due 2047 (included in Exhibit 2.19)

4.2*2.25⁽⁶⁾ Form of 4.400% Senior ~~Management Equity Incentive Plan~~Notes Due 2057 (included in Exhibit 2.20)

4.3*2.26⁽⁹⁾ ~~Partner Capital Investment Plan~~Amendment to the Amended and Restated Registration Rights Agreement among the Registrant and the persons whose names are set out in Schedule I thereto, dated January 24, 2018

4.4*4.1⁽¹⁾ 2011 Equity Incentive Plan of the Registrant
4.2⁽¹⁾ Senior Management Equity Incentive Plan
4.3⁽¹⁾ Partner Capital Investment Plan
4.4⁽¹⁾ Form of Indemnification Agreement between the Registrant and its directors and executive officers

4.5*4.5⁽¹⁾ Form of Employment Agreement between the Registrant and its executive officers

4.6*4.6⁽¹⁾ ~~English translation of Loan Agreements entered into by and among Jack Ma, Simon Xie and Taobao (China) Software Co., Ltd., dated January 1, 2009, as amended on October 11, 2010 and March 13, 2013~~
4.7* English translation of Exclusive Call Option Agreement entered into by and among Jack Ma, Simon Xie, Taobao (China) Software Co., Ltd. and Zhejiang Taobao Network Co., Ltd., dated January 21, 2009
4.8* ~~English translation of Proxy Agreement entered into by and among Jack Ma, Simon Xie, Taobao (China) Software Co., Ltd. and Zhejiang Taobao Network Co., Ltd., dated January 21, 2009~~
4.9* English translation of Equity Pledge Agreements entered into by and among Jack Ma, Simon Xie, Taobao (China) Software Co., Ltd. and Zhejiang Taobao Network Co., Ltd., dated January 21, 2009, as amended on March 13, 2013
4.10* ~~English translation of Exclusive Technical Services Agreement entered into by and between Taobao (China) Software Co., Ltd. and Zhejiang Taobao Network Co., Ltd., dated January 21, 2009~~
4.11* ~~Share Repurchase and Preference Share Sale Agreement by and between the Registrant, Yahoo! Inc. and Yahoo! Hong Kong Holdings Limited, dated May 20, 2012~~
4.12* ~~First Amendment to Share Repurchase and Preference Share Sale Agreement by and between the Registrant, Yahoo! Inc. and Yahoo! Hong Kong Holdings Limited, dated September 11, 2012~~
4.13* ~~Second Amendment to Share Repurchase and Preference Share Sale Agreement by and between the Registrant, Yahoo! Inc. and Yahoo! Hong Kong Holdings Limited, dated October 14, 2013~~
4.14* ~~Amended and Restated Technology and Intellectual Property License Agreement by and between the Registrant and Yahoo! Inc., dated September 18, 2012~~

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~~Exhibit~~
~~Number~~ ~~Description of Document~~
4.15* Framework Agreement by and among the Registrant, Yahoo! Inc., SoftBank Corp., Alipay.com Co., Ltd., APN Ltd., Zhejiang Alibaba E-Commerce Co., Ltd., Jack Ma and Joseph C. Tsai and the Joinder Parties, dated July 29, 2011
4.16* Amendment to Framework Agreement by and among the Registrant, Yahoo! Inc., SoftBank Corp., Alipay.com Co., Ltd., APN Ltd., Zhejiang Alibaba E-Commerce Co., Ltd., Jack Ma and Joseph C. Tsai and the Joinder Parties, dated November 15, 2012
4.17* Second Amendment to Framework Agreement by and among the Registrant, Yahoo! Inc., SoftBank Corp., Alipay.com Co., Ltd., APN Ltd., Zhejiang Alibaba E-Commerce Co., Ltd., Jack Ma and Joseph C. Tsai and the Joinder Parties, dated May 3, 2014
4.18* Waiver and Consent Agreement by and among the Registrant, Yahoo! Inc., SoftBank Corp., Alipay.com Co., Ltd., APN Ltd., Zhejiang Alibaba E-Commerce Co., Ltd., Jack Ma and Joseph C. Tsai and the Joinder Parties, dated January 23, 2014
4.19* Commercial Agreement by and among the Registrant, Zhejiang Alibaba E-Commerce Co., Ltd. and Alipay.com Co., Ltd., dated July 29, 2011

4.20*4.7⁽¹⁾ Amendment to Commercial Agreement by and among the Registrant, Zhejiang Alibaba E-Commerce Co., Ltd. and Alipay.com Co., Ltd., dated December 14, 2011

4.21*4.8⁽⁴⁾ ~~Intellectual Property License and Software Technology Services Agreement by and between the Registrant and Alipay.com Co., Ltd., dated July 29, 2011~~
4.22* ~~Share Subscription and Purchase Agreement among Ali WB Investment Holding Limited, SINA Corporation and Weibo Corporation, dated April 29, 2013~~
4.23* ~~Agreement and Plan of Merger by and among Alibaba Investment Limited, Ali ET Investment Holding Limited and AutoNavi Holdings Limited, dated April 11, 2014~~
4.24* ~~Voting Agreement by and among Alibaba Investment Limited, Ali ET Investment Holding Limited and Shareholders Listed thereto, dated April 11, 2014~~
~~4.25††~~ English Translation of Loan Agreement between Simon Xie and Taobao (China) Software Co., Ltd., dated April 22, 2015

4.26*4.9 Investment Agreement by and among Youku Tudou Inc., 1Look Holdings Ltd., Ali YK Investment Holding Limited and, solely for the purposes of Section 11.4, 11.5 and 11.16 therein, the Registrant, dated April 28, 2014
4.27* Investor Rights Agreement by and among Youku Tudou Inc., Ali YK Investment Holding Limited and solely for the purposes of Section 7.1 and 7.2 and Article VIII therein, the Registrant and YF Venus Ltd, dated April 28, 2014
4.28* ~~Shareholders Agreement by and among Ali YK Investment Holding Limited and each of the persons listed on Exhibit A thereto, dated April 28, 2014~~
4.29* ~~Amended and Restated Share Purchase and Shareholders Agreement by and among Ali YK Investment Holding Limited, YF Venus Ltd and Alibaba Investment Limited, dated May 21, 2014~~
4.30* ~~Share Purchase Agreement by and among Ali UC Investment Holding Limited, the Management and the Selling Shareholders as defined therein, dated May 28, 2014~~
4.31* Schedules of Material Differences of Contractual Arrangements of Material Variable Interest Entities of the Registrant

4.32*4.10⁽¹⁾ Share and Asset Purchase Agreement by and among the Registrant, Zhejiang Ant Small and Micro Financial Services Group Co., Ltd., Yahoo! Inc., SoftBank Corp. and the other Parties named therein, dated August 12, 2014

Table of Contents
Exhibit
Number Description of Document
4.33*4.11⁽¹⁾ Second Amendment to Commercial Agreement by and among the Registrant, Zhejiang Ant Small and Micro Financial Services Group Co., Ltd. (formerly known as Zhejiang Alibaba E-Commerce Co., Ltd.) and Alipay.com Co., Ltd., dated August 12, 2014

4.34*4.12⁽¹⁾ Amended and Restated Intellectual Property License and Software Technology Services Agreement by and among the Registrant, Zhejiang Ant Small and Micro Financial Services Group Co., Ltd. and Alipay.com Co., Ltd., dated August 12, 2014

4.35*4.13⁽¹⁾ Data Sharing Agreement by and between the Registrant and Zhejiang Ant Small and Micro Financial Services Group Co., Ltd., dated August 12, 2014

4.36*4.14⁽¹⁾ English Translation of Software System Use and Service Agreement between Alibaba (China) Co., Ltd. and Chongqing Alibaba Small Loan Co. Ltd., dated August 12, 2014

4.37*4.15⁽¹⁾ ~~US$3,000,000,000 Facility Agreement between the Registrant and other parties named therein, dated August 20,~~Form of 2014 Post-IPO Equity Incentive Plan

4.38*4.16⁽¹⁾ ~~Form of 2014 Post-IPO Equity Incentive Plan~~
4.39* ~~Third Amendment to Share Repurchase and Preference Share Sale Agreement by and between the Registrant, Yahoo! Inc. and Yahoo! Hong Kong Holdings Limited, dated July 14, 2014~~
4.40* Form of Share Retention Agreement between the Registrant and certain members of management

~~4.41††~~4.17⁽⁴⁾ English Translation of Pledge Agreement between ICBC Credit Suisse Investment Management Co., Ltd. and Taobao (China) Software Co., Ltd., dated May 28, 2015

~~4.42††~~4.18⁽⁵⁾ ~~Share Purchase Agreement among Alibaba Health Information Technology Limited, Ali JK Investment Holding Limit and other parties named therein, dated April 8, 2015~~
~~4.43†††~~ ~~English translation of Share Subscription Agreement between Suning Commerce Group Co., Ltd. And Taobao (China) Software Co., Ltd., dated August 9, 2015~~
~~4.44†††~~ ~~Investment Agreement by and between Alibaba Group Holding Limited and Suning Commerce Group Co., Ltd., dated August 9, 2015~~
~~4.45†††~~ ~~Share Subscription Agreement between Alibaba Group Holding Limited and Zhejiang Ant Small and Micro Financial Services Group Co., Ltd., dated September 7, 2015~~
~~4.46~~ ~~Agreement and Plan of Merger among Ali YK Investment Holding Limited, Ali YK Subsidiary Holding Limited, Youku Tudou Inc. and Alibaba Investment Limited, dated November 6, 2015~~
~~4.47~~ US$3,000,000,000 Facility Agreement between the Registrant and other parties named therein, dated March 9, 2016

~~4.48~~4.19⁽⁵⁾ Syndication and Amendment Agreement, dated May 3, 2016, in respect of a US$3,000,000,000 Facility Agreement dated March 9, 2016

~~4.49~~4.20⁽⁶⁾ ~~Amended~~US$5,150,000,000 Facility Agreement between the Registrant and ~~Restated Investment Agreement by and between Alibaba Group Holding Limited and Suning Commerce Group Co., Ltd.,~~other parties named therein, dated ~~August 9, 2015 and amended and restated as of May 19, 2016~~April 7, 2017

~~8.1~~4.21⁽⁶⁾ ~~Significant Subsidiaries~~English translation of Loan Agreement, between Hangzhou Zhenxi Investment Management Co., Ltd. and ~~Consolidated Entities of the Registrant~~Zhejiang Tmall Technology Co., Ltd., dated January 10, 2018

11.1*4.22⁽⁶⁾ ~~Code~~English translation of ~~Ethics of the Registrant~~Exclusive Call Option Agreement entered into by and among Hangzhou Zhenxi Investment Management Co., Ltd., Zhejiang Tmall Technology Co., Ltd. and Zhejiang Tmall Network Co., Ltd., dated January 10, 2018

~~12.1~~4.23⁽⁶⁾ ~~Principal Executive Officer Certification Pursuant to Section 302~~English translation of ~~the Sarbanes-Oxley Act of 2002~~Shareholder's Voting Rights Proxy Agreement entered into by and among Hangzhou Zhenxi Investment Management Co., Ltd., Zhejiang Tmall Technology Co., Ltd. and Zhejiang Tmall Network Co., Ltd., dated January 10, 2018

~~12.2~~4.24⁽⁶⁾ ~~Principal Financial Officer Certification Pursuant to Section 302~~English translation of ~~the Sarbanes-Oxley Act of 2002~~Equity Pledge Agreement entered into by and among Hangzhou Zhenxi Investment Management Co., Ltd., Zhejiang Tmall Technology Co., Ltd. and Zhejiang Tmall Network Co., Ltd., dated January 10, 2018

13.1**4.25⁽⁶⁾ ~~Principal Executive Officer Certification Pursuant to Section 906~~English translation of ~~the Sarbanes-Oxley Act of 2002~~Exclusive Services Agreement entered into between Zhejiang Tmall Network Co., Ltd. and Zhejiang Tmall Technology Co., Ltd., dated January 10, 2018

13.2**4.26⁽⁸⁾ ~~Principal~~Amendment to Share and Asset Purchase Agreement by and among the Registrant, Ant Small and Micro Financial ~~Officer Certification Pursuant to Section 906 of~~Services Group Co., Ltd. (formerly known as Zhejiang Alibaba E-Commerce Co., Ltd.), SoftBank Group Corp., Jack Ma, Joseph C. Tsai, and the ~~Sarbanes-Oxley Act of 2002~~other Parties named therein, dated February 1, 2018
4.27⁽⁸⁾ Amended and Restated Commercial Agreement by and among the Registrant, Zhejiang Ant Small and Micro Financial Services Group Co., Ltd. (formerly known as Zhejiang Alibaba E-Commerce Co., Ltd.) and Alipay.com Co., Ltd., dated February 1, 2018
4.28⁽⁶⁾ Subscription Agreement by and between Cainiao Smart Logistics Network Limited and Ali CN Investment Holding Limited, dated September 25, 2017

Table of Contents
Exhibit
Number Description of Document
4.29⁽⁶⁾ Share Purchase Agreement relating to the sale and purchase of shares in A-RT Retail Holdings Limited between Concord Greater China Limited and Taobao China Holding Limited, dated November 20, 2017
4.30⁽⁶⁾ Share Purchase Agreement relating to the sale and purchase of shares in Sun Art Retail Group Limited between Concord Greater China Limited and Taobao China Holding Limited, dated November 20, 2017
4.31⁽⁶⁾ Share Purchase Agreement relating to the sale and purchase of shares in A-RT Retail Holdings Limited between Kofu International Limited and Taobao China Holding Limited, dated November 20, 2017
4.32⁽⁶⁾ Share Purchase Agreement relating to the sale and purchase of shares in Sun Art Retail Group Limited between Kofu International Limited and Taobao China Holding Limited, dated November 20, 2017
4.33⁽⁶⁾ Share Purchase Agreement by and among Ali Panini Investment Limited, Ali Panini Investment Holding Limited, Rajax Holding and the other parties named therein, dated April 2, 2018
4.34⁽⁶⁾ Share Purchase Agreement between Alibaba Health Information Technology Limited and Ali JK Nutritional Products Holding Limited, dated May 28, 2018
4.35⁽¹⁰⁾ Share Purchase Agreement among ZTO Express (Cayman) Inc., Taobao China Holding Limited, Cainiao Smart Logistics Investment Limited and the other parties named therein, dated May 29, 2018
4.36⁽⁶⁾ Share Purchase Agreement by and among Alibaba Investment Limited, New Retail Strategic Opportunities Fund, L.P. and Giovanna Investment Cayman Limited, dated July 16, 2018
4.37⁽⁶⁾ Share Purchase Agreement by and among Alibaba Investment Limited, New Retail Strategic Opportunities Fund, L.P., Gio2 Cayman Holdings Ltd and Gio2 Hong Kong Holdings Limited, dated July 16, 2018
4.38⁽⁶⁾ English translation of Share Transfer Agreement between Power Star Holdings (Hong Kong) Limited and Glossy City (HK) Limited and Alibaba (China) Technology Co., Ltd., dated July 17, 2018
4.39 Amendment and Restatement Agreement, dated May 29, 2019, in respect of US$4,000,000,000 Facility Agreement dated March 9, 2016
4.40 Facility Agreement relating to a HK$7,653,750,000 term loan facility between the Registrant, as Guarantor, and the other parties named therein, dated May 17, 2019
4.41* Share Subscription Agreement by and among Local Services Holding Limited, Koubei Holding Limited, Rajax Holding and the investors named therein, dated December 3, 2018
4.42 English translation of Asset Management Contract of Huatai Securities Asset Management Single Asset Management Plan No. 6 as Part of the Securities Industry's Support for the Development of Private-owned Enterprises, by and among Alibaba (China) Technology Co., Ltd., Huatai Securities (Shanghai) Asset Management Co., Ltd. and China Merchants Bank Co., Ltd. Suzhou Branch, dated March 26, 2019
4.43 English translation of Asset Management Contract of Huatai Securities Asset Management Single Asset Management Plan No. 7 as Part of the Securities Industry's Support for the Development of Private-owned Enterprises, by and among Alibaba (China) Technology Co., Ltd., Huatai Securities (Shanghai) Asset Management Co., Ltd. and China Merchants Bank Co., Ltd. Suzhou Branch, dated March 26, 2019
4.44 English translation of Equity Transfer Agreement regarding Shanghai De Yin De Run Industry Development Co., Ltd. (the Proposed Name) among Shanghai DeYin Investment Holding Co., Ltd. Chen Dejun, Chen Xiaoying and Alibaba (China) Technology Co., Ltd., dated March 26, 2019

Table of Contents
Exhibit
Number Description of Document
8.1 Significant Subsidiaries and Consolidated Entities of the Registrant
11.1⁽¹⁾ Code of Ethics of the Registrant
12.1 Principal Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
12.2 Principal Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
13.1⁽⁷⁾ Principal Executive Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
13.2⁽⁷⁾ Principal Financial Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
15.1 Consent of PricewaterhouseCoopers — Independent Registered Public Accounting Firm

15.2 Consent of Fangda Partners

15.3 Consent of Maples and Calder (Hong Kong) LLP

101.INS XBRL Instance Document

101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF XBRL Taxonomy Extension Definition Linkbase Document

101.LAB XBRL Taxonomy Extension Label Linkbase Document

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
*(1)
Previously filed with the Registration Statement on Form F-1 (File No. 333-195736), initially filed on May 6, 2014 and incorporated herein by reference.

†(2)
No exhibit to be filed as the Company does not issue physical ordinary share certificates.

(3)
Previously filed with the Registration Statement on Form F-6 (File No. ~~333-198401)~~333-231579), dated ~~August 27, 2014~~May 17, 2019 and incorporated herein by reference.

††(4)
Previously filed with our Annual Report on Form 20-F for the Fiscal Year Ended on March 31, 2015 (File No. 001-36614), filed on June 25, 2015 and incorporated herein by reference.

~~†††~~(5)
Previously filed with ~~the Registration Statement~~our Annual Report on Form ~~F-4~~20-F for the Fiscal Year Ended on March 31, 2016 (File No. ~~333-266575)~~001-36614), ~~initially~~ filed on ~~August 26, 2015~~May 24, 2016 and incorporated herein by reference.

**(6)
Previously filed with our Annual Report on Form 20-F for the Fiscal Year Ended on March 31, 2018 (File No. 001-36614), filed on July 27, 2018 and incorporated herein by reference.

(7)
Furnished with this annual report on Form ~~20-F~~20-F.

(8)
Previously filed on Form 6-K, dated February 2, 2018 and incorporated herein by reference.

(9)
Previously filed on Form 6-K, dated February 26, 2018 and incorporated herein by reference.

(10)
Previously filed on Schedule 13D, dated June 21, 2018 and incorporated herein by reference.

*
Confidential treatment is being requested for portions of this document.

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SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing ~~its annual report~~ on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

Alibaba Group Holding Limited

By:

/s/ DANIEL YONG ZHANG
Name:    Daniel Yong Zhang
Title:      Chief Executive Officer
Date: ~~May 24, 2016~~June 5, 2019

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ALIBABA GROUP HOLDING LIMITED

INDEX TO FINANCIAL STATEMENTS

Page
Report of Independent Registered Public Accounting Firm
F-2
Consolidated Income Statements for the Years Ended March 31, ~~2014, 2015~~2017, 2018 and ~~2016~~2019
~~F-3~~F-4
Consolidated Statements of Comprehensive Income for the Years Ended March 31, ~~2014, 2015~~2017, 2018 and ~~2016~~2019
~~F-4~~F-5
Consolidated Balance Sheets as of March 31, ~~2015~~2018 and ~~2016~~2019
~~F-5~~F-6
Consolidated Statements of Changes in Shareholders' Equity for the Years Ended March 31, ~~2014, 2015~~2017, 2018 and ~~2016~~2019
~~F-7~~F-8
Consolidated Statements of Cash Flows for the Years Ended March 31, ~~2014, 2015~~2017, 2018 and ~~2016~~2019
~~F-10~~F-11
Notes to ~~the~~ Consolidated Financial Statements
~~F-13~~F-14

Table of Contents
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Alibaba Group Holding ~~Limited:~~Limited
~~In our opinion,~~Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Alibaba Group Holding Limited and its subsidiaries (the "Company") as of March 31, 2018 and 2019, and the related consolidated income statements, consolidated statements of comprehensive income, changes in shareholders' equity and cash flows for each of the three years in the period ended March 31, 2019, including the related notes (collectively referred to as the "consolidated financial statements"). We also have audited the Company's internal control over financial reporting as of March 31, 2019, based on criteria established inInternal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of ~~Alibaba Group Holding Limited and its subsidiaries (collectively,~~ the ~~"Company") at~~Company as of March 31, ~~2015~~2018 and ~~2016,~~2019, and the results of ~~their~~its operations and ~~their~~its cash flows for each of the three years in the period ended March 31, ~~2016~~2019 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, ~~2016,~~2019, based on criteria established inInternal Control — Integrated Framework (2013) issued by the ~~Committee of Sponsoring Organizations of~~COSO.
Change in Accounting Principle
As discussed in Note 2(t), Note 11 and Note 13 to the ~~Treadway Commission (COSO).~~ consolidated financial statements, the Company changed the manner in which it accounts for its investments in equity securities for the year ended March 31, 2019.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Annual Report on Internal Control over Financial Reporting appearing under Item 15. Our responsibility is to express opinions on ~~these~~the Company's consolidated financial statements and on the Company's internal control over financial reporting based on our ~~audits (which was an integrated audit~~audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in ~~2016).~~ accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the ~~Public Company Accounting Oversight Board (United States).~~PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence ~~supporting~~regarding the amounts and disclosures in the consolidated financial ~~statements, assessing~~statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, ~~and~~as well as evaluating the overall presentation of the consolidated financial ~~statement presentation.~~statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Table of Contents
Definition and Limitations of Internal Control over Financial Reporting
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers
PricewaterhouseCoopers
Hong Kong, ~~May 24, 2016~~June 5, 2019
We have served as the Company's auditor since 1999.

Table of Contents
ALIBABA GROUP HOLDING LIMITED
CONSOLIDATED INCOME STATEMENTS

Year ended March 31,
Year ended March 31,

2014 2015 2016
2017 2018 2019

RMB RMB RMB US$
RMB RMB RMB US$

(Note 2(a))

(Note 2(a))

(in millions, except per share data)

(in millions, except per share data)

Notes

Notes
Revenue
5 52,504 76,204 101,143 15,686 5, 21 158,273 250,266 376,844 56,152
Cost of revenue
23 (13,369 ) (23,834 ) (34,355 ) (5,328 ) 21 (59,483 ) (107,044 ) (206,929 ) (30,833 )
Product development expenses
23 (5,093 ) (10,658 ) (13,788 ) (2,138 ) 21 (17,060 ) (22,754 ) (37,435 ) (5,578 )
Sales and marketing expenses
23 (4,545 ) (8,513 ) (11,307 ) (1,753 ) 21 (16,314 ) (27,299 ) (39,780 ) (5,928 )
General and administrative expenses
9, 23 (4,218 ) (7,800 ) (9,205 ) (1,428 ) 21 (12,239 ) (16,241 ) (24,889 ) (3,708 )
Amortization of intangible assets
16 (315 ) (2,089 ) (2,931 ) (455 ) 15 (5,122 ) (7,120 ) (10,727 ) (1,599 )
Impairment of goodwill
17 (44 ) (175 ) (455 ) (71 ) 16 — (494 ) — —

Income from operations
24,920 23,135 29,102 4,513 48,055 69,314 57,084 8,506
Interest and investment income, net
1,648 9,455 52,254 8,104 8,559 30,495 44,106 6,572
Interest expense
(2,195 ) (2,750 ) (1,946 ) (301 ) (2,671 ) (3,566 ) (5,190 ) (773 )
Other income, net
6, 23 2,429 2,486 2,058 319 6, 21 6,086 4,160 221 32

Income before income tax and share of results of equity investees
26,802 32,326 81,468 12,635 60,029 100,403 96,221 14,337
Income tax expenses
7 (3,196 ) (6,416 ) (8,449 ) (1,310 ) 7 (13,776 ) (18,199 ) (16,553 ) (2,466 )
Share of results of equity investees
14 (203 ) (1,590 ) (1,730 ) (269 ) 13 (5,027 ) (20,792 ) 566 84

Net income
23,403 24,320 71,289 11,056 41,226 61,412 80,234 11,955
Net (income) loss attributable to noncontrolling interests
(88 ) (59 ) 171 27
Net loss attributable to noncontrolling interests
2,449 2,681 7,652 1,140

Net income attributable to Alibaba Group Holding Limited
23,315 24,261 71,460 11,083 43,675 64,093 87,886 13,095
Accretion of Convertible Preference Shares
22 (31 ) (15 ) — —
Dividends accrued on Convertible Preference Shares
22 (208 ) (97 ) — —

Accretion of mezzanine equity
— (108 ) (286 ) (42 )

Net income attributable to ordinary shareholders
23,076 24,149 71,460 11,083 43,675 63,985 87,600 13,053

Earnings per share/ADS attributable to ordinary shareholders
10 9
Basic
10.61 10.33 29.07 4.51 17.52 25.06 33.95 5.06
Diluted
10.00 9.70 27.89 4.33 16.97 24.51 33.38 4.97
Weighted average number of share/ADS used in computing earnings per share/ADS (million share)

10

Weighted average number of shares/ADSs used in computing earnings per share/ADS (million shares)
9
Basic
2,175 2,337 2,458 2,493 2,553 2,580
Diluted
2,332 2,500 2,562 2,573 2,610 2,623

The accompanying notes form an integral part of these consolidated financial statements.

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ALIBABA GROUP HOLDING LIMITED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Year ended March 31,

2014 2015 2016

RMB RMB RMB US$

(Note 2(a))

(in millions)

Net income
23,403 24,320 71,289 11,056

Other comprehensive income:

- Foreign currency translation:

Change in unrealized gains
538 52 312 48
Less: reclassification adjustment for (gains) losses recorded in net income
(14 ) — 21 3

Net change
524 52 333 51

- Available-for-sale securities:

Change in unrealized gains
306 3,102 2,343 363
Less: reclassification adjustment for gains recorded in net income
(13 ) — (422 ) (65 )
Less: tax effect
— — (488 ) (76 )

Net change
293 3,102 1,433 222

- Interest rate swaps under hedge accounting:

Change in unrealized gains (losses)
36 (36 ) — —

- Forward exchange contracts under hedge accounting:

Change in unrealized losses
— — (168 ) (26 )

Other comprehensive income
853 3,118 1,598 247

Total comprehensive income
24,256 27,438 72,887 11,303
Less: total comprehensive (income) loss attributable to noncontrolling interests
(90 ) (56 ) 102 16

Total comprehensive income attributable to Alibaba Group Holding Limited
24,166 27,382 72,989 11,319

~~The accompanying notes form an integral part of these consolidated financial statements.~~

~~Table of Contents~~

~~ALIBABA GROUP HOLDING LIMITED~~
~~CONSOLIDATED BALANCE SHEETS~~

As of March 31,

2015 2016

RMB RMB US$

(Note 2(a))

(in millions)

Notes

Assets

Current assets:

Cash and cash equivalents
108,193 106,818 16,566
Short-term investments
2(q) 14,148 4,700 729
Restricted cash
11 2,297 1,346 209
Investment securities
12 3,658 4,178 648
Prepayments, receivables and other assets
13 13,813 17,028 2,640

Total current assets
142,109 134,070 20,792
Investment securities
12 14,611 29,392 4,558
Prepayments, receivables and other assets
13 4,085 6,007 932
Investment in equity investees
14 33,877 91,461 14,184
Property and equipment, net
15 9,139 13,629 2,114
Land use rights
2(v) 3,105 2,876 446
Intangible assets
16 6,575 5,370 833
Goodwill
17 41,933 81,645 12,662

Total assets
255,434 364,450 56,521

Liabilities, Mezzanine Equity and Shareholders' Equity

Current liabilities:

Current bank borrowings
20 1,990 4,304 667
Income tax payable
2,733 2,790 433
Accrued expenses, accounts payable and other liabilities
19 19,834 27,334 4,240
Merchant deposits
2(ab) 7,201 7,314 1,134
Deferred revenue and customer advances
18 7,914 10,297 1,597

Total current liabilities
39,672 52,039 8,071
Deferred revenue
18 445 418 65
Deferred tax liabilities
7 4,493 6,471 1,004
Non-current bank borrowings
20 1,609 1,871 290
Unsecured senior notes
21 48,994 51,596 8,002
Other liabilities
19 2,150 2,166 335

Total liabilities
97,363 114,561 17,767

~~The accompanying notes form an integral part of these consolidated financial statements.~~

~~Table of Contents~~

~~ALIBABA GROUP HOLDING LIMITED~~
~~CONSOLIDATED BALANCE SHEETS (CONTINUED)~~

As of March 31,

2015 2016

RMB RMB US$

(Note 2(a))

(in millions)

Notes

Commitments and contingencies
25, 26 — — —
Mezzanine equity

658
350
54
Alibaba Group Holding Limited shareholders' equity:

Ordinary shares, US$0.000025 par value; 4,000,000,000 shares authorized as of March 31, 2015 and 2016; 2,495,499,036 and 2,473,927,859 shares issued and outstanding as of March 31, 2015 and 2016, respectively
1 1 —
Additional paid-in capital
117,142 132,206 20,504
Treasury shares at cost
2(ae) — — —
Restructuring reserve
4(b) (1,152 ) (888 ) (138 )
Subscription receivables
2(af) (411 ) (172 ) (27 )
Statutory reserves
2(ag) 2,715 3,244 503
Accumulated other comprehensive income

Cumulative translation adjustments
(1,095 ) (1,050 ) (163 )
Unrealized gain on available-for-sale securities, interest rate swaps and others
3,397 4,894 760
Retained earnings
24,842 78,752 12,213

Total Alibaba Group Holding Limited shareholders' equity
145,439 216,987 33,652
Noncontrolling interests
11,974 32,552 5,048

Total equity
157,413 249,539 38,700

Total liabilities, mezzanine equity and equity
255,434 364,450 56,521

Year ended March 31,

2017 2018 2019

RMB RMB RMB US$

(Note 2(a))

(in millions)

Net income
41,226 61,412 80,234 11,955

Other comprehensive income (loss):

- Foreign currency translation:

Change in unrealized (losses) gains
(2,191 ) (805 ) 1,068 159
Reclassification adjustment for losses recorded in net income
44 — — —

Net change
(2,147 ) (805 ) 1,068 159

- Available-for-sale securities:

Change in unrealized gains
8,911 769 — —
Reclassification adjustment for (gains) losses recorded in net income
(5,764 ) 57 — —
Tax effect
(1,042 ) 385 — —

Net change
2,105 1,211 — —

- Share of other comprehensive income of equity method investees:

Change in unrealized gains (losses)
780 (930 ) 582 87

- Interest rate swaps under hedge accounting and others:

Change in unrealized gains (losses)
433 143 (295 ) (44 )

- Forward exchange contracts under hedge accounting:

Change in unrealized gains (losses)
169 (85 ) — —

Other comprehensive income (loss)
1,340 (466 ) 1,355 202

Total comprehensive income
42,566 60,946 81,589 12,157
Total comprehensive loss attributable to noncontrolling interests
389 2,215 6,637 989

Total comprehensive income attributable to ordinary shareholders
42,955 63,161 88,226 13,146


The accompanying notes form an integral part of these consolidated financial statements.

Table of Contents

ALIBABA GROUP HOLDING LIMITED
CONSOLIDATED BALANCE SHEETS

As of March 31,

2018 2019

RMB RMB US$

(Note 2(a))

(in millions)

Notes
Assets

Current assets:

Cash and cash equivalents
2(p) 199,309 189,976 28,308
Short-term investments
2(q) 6,086 3,262 486
Restricted cash and escrow receivables
10 3,417 8,518 1,269
Investment securities
11 4,815 9,927 1,479
Prepayments, receivables and other assets
12 43,228 58,590 8,730

Total current assets
256,855 270,273 40,272
Investment securities
11 38,192 157,090 23,407
Prepayments, receivables and other assets
12 26,274 28,018 4,175
Investments in equity investees
13 139,700 84,454 12,584
Property and equipment, net
14 66,489 92,030 13,713
Intangible assets, net
15 27,465 68,276 10,173
Goodwill
16 162,149 264,935 39,477

Total assets
717,124 965,076 143,801

Liabilities, mezzanine equity and shareholders' equity

Current liabilities:

Current bank borrowings
19 6,028 7,356 1,096
Current unsecured senior notes
20 — 15,110 2,251
Income tax payable
13,689 17,685 2,635
Escrow money payable
10 3,053 8,250 1,229
Accrued expenses, accounts payable and other liabilities
18 81,165 117,711 17,540
Merchant deposits
2(ad) 9,578 10,762 1,604
Deferred revenue and customer advances
17 22,297 30,795 4,589

Total current liabilities
135,810 207,669 30,944
Deferred revenue
17 993 1,467 219
Deferred tax liabilities
7 19,312 22,517 3,355
Non-current bank borrowings
19 34,153 35,427 5,279
Non-current unsecured senior notes
20 85,372 76,407 11,385
Other liabilities
18 2,045 6,187 922

Total liabilities
277,685 349,674 52,104

The accompanying notes form an integral part of these consolidated financial statements.

Table of Contents

ALIBABA GROUP HOLDING LIMITED
CONSOLIDATED BALANCE SHEETS (CONTINUED)

As of March 31,

2018 2019

RMB RMB US$

(Note 2(a))

(in millions)

Notes
Commitments and contingencies
23, 24 — — —
Mezzanine equity

3,001
6,819
1,016
Shareholders' equity:

Ordinary shares, US$0.000025 par value; 4,000,000,000 shares authorized as of March 31, 2018 and 2019; 2,571,929,843 and 2,587,059,572 shares issued and outstanding as of March 31, 2018 and 2019, respectively
1 1 —
Additional paid-in capital
186,764 231,783 34,537
Treasury shares, at cost
2(ag) (2,233 ) — —
Restructuring reserve
4(a) (361 ) (97 ) (15 )
Subscription receivables
(163 ) (49 ) (7 )
Statutory reserves
2(ah) 4,378 5,068 755
Accumulated other comprehensive income (loss)

Cumulative translation adjustments
(3,594 ) (2,592 ) (386 )
Unrealized gains on available-for-sale securities, interest rate swaps and others
8,677 257 38
Retained earnings
172,353 257,886 38,426

Total shareholders' equity
365,822 492,257 73,348
Noncontrolling interests
70,616 116,326 17,333

Total equity
436,438 608,583 90,681

Total liabilities, mezzanine equity and equity
717,124 965,076 143,801

The accompanying notes form an integral part of these consolidated financial statements.

Table of Contents
ALIBABA GROUP HOLDING LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

Accumulated other
comprehensive income (loss)

Accumulated other
comprehensive income (loss)

Unrealized
gain (loss) on
available-for-sale
securities, interest
rate swaps and
others
Total Alibaba
Group Holding
Limited
shareholders'
equity
(deficits)

Unrealized
gains (losses) on
available-for-sale
securities, interest
rate swaps and
others

Ordinary shares

Retained
earnings
(Accumulated
deficits)

Ordinary shares

Additional
paid-in
capital Treasury
shares Subscription
receivables Statutory
reserves Cumulative
translation
adjustments Unrealized
gain (loss) on
available-for-sale
securities, interest
rate swaps and
others Total Alibaba
Group Holding
Limited
shareholders'
equity
(deficits) Additional
paid-in
capital Treasury
shares Restructuring
reserve
(Note 4(a)) Subscription
receivables Statutory
reserves Cumulative
translation
adjustments Total
shareholders'
equity Unrealized
gains (losses) on
available-for-sale
securities, interest
rate swaps and
others Noncontrolling
interests Total
equity

Share Amount Total Alibaba
Group Holding
Limited
shareholders'
equity
(deficits) Share Amount Unrealized
gains (losses) on
available-for-sale
securities, interest
rate swaps and
others

RMB
RMB
RMB
RMB
RMB
RMB
RMB
RMB
RMB

RMB
RMB
RMB
RMB
RMB
RMB
RMB
RMB
RMB
RMB
RMB

(in millions, except share data)

(in millions, except share data)
Balance as of April 1, 2013
2,175,220,739 1 21,655 — (852 ) 1,337 (1,666 ) (8 ) (20,491 ) (24 ) 537 513
Balance as of April 1, 2016
2,473,927,859 1 132,206 — (888 ) (172 ) 3,244 (1,050 ) 4,894 78,752 216,987 32,552 249,539
Foreign currency translation adjustment
— — — — 16 — 536 — — 552 2 554 — — — — — (17 ) — (2,612 ) 322 — (2,307 ) 99 (2,208 )
Net change in unrealized gains on available-for-sale securities
— — — — — — — 293 — 293 — 293 — — — — — — — — 2,105 — 2,105 — 2,105
Share of additional paid-in capital and other comprehensive income of equity method investees
— — 1,419 — — — — — 780 — 2,199 — 2,199
Change in fair value of forward exchange contracts under hedge accounting
— — — — — — — — 169 — 169 — 169
Change in fair value of interest rate swaps under hedge accounting
— — — — — — — 36 — 36 — 36 — — — — — — — — 433 — 433 — 433
Net income for the year
— — — — — — — — 23,315 23,315 88 23,403 — — — — — — — — — 43,675 43,675 (488 ) 43,187
Deconsolidation of subsidiaries
— — — — — — (14 ) — — (14 ) — (14 ) — — — — — — — 44 — — 44 — 44
Acquisition of shares of a consolidated subsidiary
— — (7 ) — — — — — — (7 ) (2 ) (9 )
Acquisition of subsidiaries
828,299 — 276 — — — — — — 276 — 276 — — — — — — — — — — — 9,209 9,209
Issuance of ordinary shares for Partner Capital Investment Plan (Note 8(c))
18,000,000 — — — — — — — — — 442 442
Exercise of share options and vesting of early exercised options and RSUs, including repayment of related employee loans
30,880,761 — 700 — (12 ) — — — — 688 — 688
Issuance of shares, including exercise of share options and vesting of early exercised options and RSUs, including repayment of related employee loans
56,165,655 — 575 — — 126 — — — — 701 — 701
Repurchase and retirement of ordinary shares
(3,943,139 ) — (32 ) — 308 — — — (504 ) (228 ) — (228 ) (27,054,014 ) — (149 ) — — — — — — (13,033 ) (13,182 ) — (13,182 )
Transactions with noncontrolling interests
— — 210 — — — — — — — 210 571 781
Amortization of compensation cost
— — 2,784 — — — — — — 2,784 12 2,796 — — 15,610 — — — — — — — 15,610 487 16,097
Equity-settled donation
— — 1,269 — — — — — — 1,269 — 1,269
Issuance of ordinary shares in relation to investment in equity investees and others
5,824,000 — 637 — — — — — — 637 — 637
Accretion to convertible preferred shareholders
— — (31 ) — — — — — — (31 ) — (31 )
Dividend to convertible preferred shareholders
— — (208 ) — — — — — — (208 ) — (208 )
Tax benefits from share-based awards
— — 689 — — — — — — — 689 — 689
Issuance of ordinary shares (Note 4(y))
26,324,689 — 14,012 (2,823 ) — — — — — — 11,189 — 11,189
Exercise of right of subscription by noncontrolling interest for Partner Capital Investment Plan (Note 8(c))
— — — — — — — — — — — 100 100
Appropriation to statutory reserves
— — — — — 1,137 — — (1,137 ) — — —
— — — — — — 836 — — (836 ) — — —
Others
— — 13 — 264 — — — — — 277 (200 ) 77

Balance as of March 31, 2014
2,226,810,660 1 27,043 — (540 ) 2,474 (1,144 ) 321 1,183 29,338 1,079 30,417
Balance as of March 31, 2017
2,529,364,189 1 164,585 (2,823 ) (624 ) (63 ) 4,080 (3,618 ) 8,703 108,558 278,799 42,330 321,129

The accompanying notes form an integral part of these consolidated financial statements.

Table of Contents
ALIBABA GROUP HOLDING LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (CONTINUED)

Accumulated other
comprehensive income (loss)

Unrealized
gain (loss) on
available-for-sale
securities, interest
rate swaps and
others

Total Alibaba
Group Holding
Limited
shareholders'
equity

Ordinary shares

Additional
paid-in
capital Treasury
shares Restructuring
reserve
(Note 4(b)) Subscription
receivables Statutory
reserves Cumulative
translation
adjustments Retained
earnings Noncontrolling
interests Total
equity

Share Amount

RMB
RMB
RMB
RMB
RMB
RMB
RMB
RMB
RMB
RMB
RMB
RMB

(in millions, except share data)

Balance as of April 1, 2014
2,226,810,660 1 27,043 — — (540 ) 2,474 (1,144 ) 321 1,183 29,338 1,079 30,417
Foreign currency translation adjustment
— — — — — — — 49 10 — 59 (7 ) 52
Net change in unrealized gains on available-for-sale securities
— — — — — — — — 3,102 — 3,102 — 3,102
Change in fair value of interest rate swaps under hedge accounting
— — — — — — — — (36 ) — (36 ) — (36 )
Net income for the year
— — — — — — — — — 24,261 24,261 63 24,324
Liquidation and deconsolidation of subsidiaries
— — — — — — (26 ) — — 26 — (378 ) (378 )
Acquisition of subsidiaries
8,876,755 — 3,782 — — — — — — — 3,782 10,897 14,679
Exercise of share options and vesting of early exercised options and RSUs, including repayment of related employee loans
20,240,334 — 516 — — 160 — — — — 676 — 676
Repurchase and retirement of ordinary shares
(892,859 ) — (13 ) — — 6 — — — (249 ) (256 ) — (256 )
Deemed disposals of partial interest in subsidiaries arising from exercise or vesting of share-based awards
— — (7 ) — — — — — — — (7 ) 17 10
Repurchase from, net of subscription, by noncontrolling interest for Partner Capital Investment Plan (Note 8(c))
— — — — — (37 ) — — — — (37 ) (86 ) (123 )
Redemption of treasury shares granted for Senior Management Share Incentive Scheme
— — 15 — — — — — — — 15 (15 ) —
Capital injection from noncontrolling interests
— — — — — — — — — — — 174 174
Amortization of compensation cost
— — 12,659 — — — — — — — 12,659 291 12,950
Issuance of Ordinary Shares — initial public offer
149,220,834 — 61,536 — — — — — — — 61,536 — 61,536
Excess value receivable arising from the restructuring of the commercial arrangements with Ant Financial Services and related amortization (Note 4(b))
— — 1,318 — (1,152 ) — — �� — — — 166 — 166
Conversion of convertible preferred shares
91,243,312 — 10,293 — — — — — — — 10,293 — 10,293
Accretion to convertible preferred shareholders
— — — — — — — — — (15 ) (15 ) — (15 )
Dividend to convertible preferred shareholders
— — — — — — — — — (97 ) (97 ) — (97 )
Dividend declared by a consolidated subsidiary to noncontrolling interests
— — — — — — — — — — — (61 ) (61 )
Appropriation to statutory reserves
— — — — — — 267 — — (267 ) — — —

Balance as of March 31, 2015
2,495,499,036 1 117,142 — (1,152 ) (411 ) 2,715 (1,095 ) 3,397 24,842 145,439 11,974 157,413

Accumulated other
comprehensive income (loss)

Unrealized
gains (losses) on
available-for-sale
securities, interest
rate swaps and
others

Ordinary shares

Additional
paid-in
capital Treasury
shares Restructuring
reserve
(Note 4(a)) Subscription
receivables Statutory
reserves Cumulative
translation
adjustments Retained
earnings Total
shareholders'
equity Noncontrolling
interests Total
equity

Share Amount

RMB
RMB
RMB
RMB
RMB
RMB
RMB
RMB
RMB
RMB
RMB
RMB

(in millions, except share data)

Balance as of April 1, 2017
2,529,364,189 1 164,585 (2,823 ) (624 ) (63 ) 4,080 (3,618 ) 8,703 108,558 278,799 42,330 321,129
Foreign currency translation adjustment
— — — — — 14 — 24 (366 ) — (328 ) (463 ) (791 )
Net change in unrealized gains on available-for-sale securities
— — — — — — — — 1,212 — 1,212 (1 ) 1,211
Share of additional paid-in capital and other comprehensive income of equity method investees
— — (525 ) — — — — — (930 ) — (1,455 ) — (1,455 )
Change in fair value of forward exchange contracts under hedge accounting
— — — — — — — — (85 ) — (85 ) — (85 )
Change in fair value of interest rate swaps under hedge accounting
— — — — — — — — 143 — 143 — 143
Net income for the year
— — — — — — — — — 64,093 64,093 (1,751 ) 62,342
Acquisition of subsidiaries
— — — — — — — — — — — 40,087 40,087
Issuance of shares, including exercise of share options and vesting of early exercised options and RSUs, including repayment of related employee loans
42,565,654 — 3,945 — — (114 ) — — — — 3,831 — 3,831
Transactions with noncontrolling interests
— — (186 ) — — — — — — — (186 ) (10,513 ) (10,699 )
Amortization of compensation cost
— — 19,053 — — — — — — — 19,053 1,039 20,092
Partial disposal of the Company's shares by Suning (Note 4(y))
— — — 590 — — — — — — 590 — 590
Appropriation to statutory reserves
— — — — — — 298 — — (298 ) — — —
Others
— — (108 ) — 263 — — — — — 155 (112 ) 43

Balance as of March 31, 2018
2,571,929,843 1 186,764 (2,233 ) (361 ) (163 ) 4,378 (3,594 ) 8,677 172,353 365,822 70,616 436,438

The accompanying notes form an integral part of these consolidated financial statements.

Table of Contents
ALIBABA GROUP HOLDING LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (CONTINUED)

Accumulated other
comprehensive income (loss)

Unrealized
gain (loss) on
available-for-sale
securities, interest
rate swaps and
others

Total Alibaba
Group Holding
Limited
shareholders'
equity

Ordinary shares

Additional
paid-in
capital Treasury
shares Restructuring
reserve
(Note 4(b)) Subscription
receivables Statutory
reserves Cumulative
translation
adjustments Retained
earnings Noncontrolling
interests Total
equity

Share Amount

RMB
RMB
RMB
RMB
RMB
RMB
RMB
RMB
RMB
RMB
RMB
RMB

(in millions, except share data)

Balance as of April 1, 2015
2,495,499,036 1 117,142 — (1,152 ) (411 ) 2,715 (1,095 ) 3,397 24,842 145,439 11,974 157,413
Foreign currency translation adjustment
— — — — — (16 ) — 24 232 — 240 56 296
Net change in unrealized gains on available-for-sale securities
— — — — — — — — 1,433 — 1,433 — 1,433
Change in fair value of forward exchange contracts under hedge accounting
— — — — — — — — (168 ) — (168 ) — (168 )
Net income for the year
— — — — — — — — — 71,460 71,460 (158 ) 71,302
Deconsolidation of subsidiaries
— — — — — — — 21 — — 21 (10,849 ) (10,828 )
Acquisition of subsidiaries
— — — — — — — — — — — 31,409 31,409
Exercise of share options and vesting of early exercised options and RSUs, including repayment of related employee loans
25,016,386 — 519 — — 255 — — — — 774 — 774
Repurchase and retirement of ordinary shares
(46,587,563 ) — (2,774 ) — — — — — — (17,021 ) (19,795 ) — (19,795 )
Acquisition of shares of a consolidated subsidiary
— — (30 ) — — — — — — — (30 ) — (30 )
Redemption of treasury shares granted for Senior Management Share Incentive Scheme
— — 13 — — — — — — — 13 (13 ) —
Capital injection from noncontrolling interests
— — — — — — — — — — — 56 56
Amortization of compensation cost
— — 16,434 — — — — — — — 16,434 80 16,514
Tax benefits from share-based awards
— — 725 — — — — — — — 725 — 725
Amortization of excess value receivable arising from the restructuring of the commercial arrangements with Ant Financial Services (Note 4(b)) and others
— — 177 — 264 — — — — — 441 — 441
Dividend declared by a consolidated subsidiary to noncontrolling interests
— — — — — — — — — — — (3 ) (3 )
Appropriation to statutory reserves
— — — — — — 529 — — (529 ) — — —

Balance as of March 31, 2016
2,473,927,859 1 132,206 — (888 ) (172 ) 3,244 (1,050 ) 4,894 78,752 216,987 32,552 249,539

Accumulated other
comprehensive income (loss)

Unrealized
gains (losses) on
available-for-sale
securities, interest
rate swaps and
others

Ordinary shares

Additional
paid-in
capital Treasury
shares Restructuring
reserve
(Note 4(a)) Subscription
receivables Statutory
reserves Cumulative
translation
adjustments Retained
earnings Total
shareholders'
equity Noncontrolling
interests Total
equity

Share Amount

RMB
RMB
RMB
RMB
RMB
RMB
RMB
RMB
RMB
RMB
RMB
RMB

(in millions, except share data)

Balance as of March 31, 2018
2,571,929,843 1 186,764 (2,233 ) (361 ) (163 ) 4,378 (3,594 ) 8,677 172,353 365,822 70,616 436,438
Cumulative effect of change in accounting principle (Note 2(t))
— — — — — — — (32 ) (8,164 ) 8,196 — — —

Balance as of April 1, 2018
2,571,929,843 1 186,764 (2,233 ) (361 ) (163 ) 4,378 (3,626 ) 513 180,549 365,822 70,616 436,438

Foreign currency translation adjustment
— — — — — (12 ) — 452 39 — 479 577 1,056
Share of additional paid-in capital and other comprehensive income of equity method investees
— — 142 — — — — 582 — — 724 — 724
Change in fair value of interest rate swaps under hedge accounting and others
— — — — — — — — (295 ) — (295 ) — (295 )
Net income for the year
— — — — — — — — — 87,886 87,886 (7,214 ) 80,672
Acquisition of subsidiaries
— — 7,515 — — — — — — — 7,515 49,805 57,320
Issuance of shares, including vesting of RSUs and early exercised options and exercise of share options
26,001,439 — 228 — — 126 — — — — 354 — 354
Repurchase and retirement of ordinary shares
(10,871,710 ) — (1,013 ) — — — — — — (9,859 ) (10,872 ) — (10,872 )
Transactions with noncontrolling interests
— — 3,412 — — — — — — — 3,412 406 3,818
Amortization of compensation cost
— — 35,015 — — — — — — — 35,015 2,586 37,601
Disposal of the Company's shares by Suning (Note 4(y))
— — — 2,233 — — — — — — 2,233 — 2,233
Appropriation to statutory reserves
— — — — — — 690 — — (690 ) — — —
Others
— — (280 ) — 264 — — — — — (16 ) (450 ) (466 )

Balance as of March 31, 2019
2,587,059,572 1 231,783 — (97 ) (49 ) 5,068 (2,592 ) 257 257,886 492,257 116,326 608,583

The accompanying notes form an integral part of these consolidated financial statements.

Table of Contents

ALIBABA GROUP HOLDING LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS

Year ended March 31, Year ended March 31,

2014 2015 2016 2017 2018 2019

RMB RMB RMB US$ RMB RMB RMB US$

(Note 2(a))

(Note 2(a))

(in millions)
(in millions)

Cash flows from operating activities:

Net income
23,403 24,320 71,289 11,056 41,226 61,412 80,234 11,955
Adjustments to reconcile net income to net cash provided by operating activities:

Revaluation of previously held equity interest
— (6,535 ) (18,603 ) (2,885 )
Loss (Gain) on disposals of equity investees
3 (128 ) (3,089 ) (479 )
Revaluation gain on previously held equity interest
(770 ) (24,436 ) (30,187 ) (4,498 )
Gain on disposals of equity investees
(536 ) (2,971 ) (42 ) (6 )
Realized and unrealized gain related to investment securities
(90 ) (178 ) (906 ) (141 ) (5,488 ) (70 ) (16,082 ) (2,396 )
Change in fair value of other assets and liabilities
(98 ) 102 84 13 (759 ) 1,415 (1,422 ) (212 )
Gain on disposals of other subsidiaries
(387 ) (307 ) (26,913 ) (4,174 )
Loss (Gain) on disposals of subsidiaries
35 (14 ) 4 —
Depreciation and amortization of property and equipment and land use rights
1,339 2,326 3,770 584 5,284 8,789 14,962 2,229
Amortization of intangible assets
315 2,089 2,931 455
Amortization of intangible assets and licensed copyrights
9,008 13,231 22,118 3,295
Tax benefits from share-based awards
— — (1,120 ) (174 ) (1,369 ) — — —
Share-based compensation expense
2,844 13,028 16,082 2,494 15,995 20,075 37,491 5,586
Equity-settled donation expense
1,269 — — —
Impairment of cost method equity investees and investment securities
119 419 1,864 289
Impairment of goodwill
44 175 455 71
Gain on disposals of property and equipment
— (13 ) (11 ) (2 )
Amortization of restructuring reserve (Note 4(b))
— 166 264 41
Impairment of cost method investees and investment securities
2,298 1,816 10,867 1,619
Impairment of goodwill and licensed copyrights
857 1,295 2,843 424
Loss (Gain) on disposals of property and equipment
34 (95 ) 55 8
Amortization of restructuring reserve
264 264 264 39
Share of results of equity investees
203 1,590 1,730 269 5,027 20,792 (566 ) (84 )
Deferred income taxes
1,466 1,659 1,226 190 281 976 (2,197 ) (327 )
Allowance for doubtful accounts relating to micro loans
442 650 (9 ) (1 )
Allowance for doubtful accounts
1,680 601 383 57
Changes in assets and liabilities, net of effects of acquisitions and disposals:

Restricted cash and escrow receivables
(1,329 ) (851 ) — —
Prepayments, receivables and other assets
(12,742 ) (13,927 ) (4,012 ) (622 ) (8,237 ) (14,765 ) (10,185 ) (1,517 )
Income tax payable
1,008 1,410 1,237 192 4,698 6,610 3,060 456
Escrow money payable
2,528 643 5,197 774
Accrued expenses, accounts payable and other liabilities
5,336 11,415 8,104 1,257 5,312 23,158 24,355 3,629
Merchant deposits
1,628 2,490 113 18 875 1,389 1,184 177
Deferred revenue and customer advances
1,606 1,317 2,350 364 4,611 5,690 8,639 1,288

Net cash provided by operating activities
26,379 41,217 56,836 8,815 82,854 125,805 150,975 22,496

Cash flows from investing activities:

(Increase) Decrease in short-term investments, net
(8,304 ) (1,113 ) 4,619 716
Decrease in restricted cash
199 1,139 746 116
(Increase) Decrease in trading investment securities, net
(147 ) (16 ) 9 1
Acquisitions of available-for-sale and held-to-maturity securities
(2,972 ) (11,801 ) (15,363 ) (2,382 )
Disposals of available-for-sale and held-to-maturity securities
372 939 2,177 338
Decrease (Increase) in short-term investments, net
5,761 (730 ) 8,028 1,196
Decrease in trading securities, net
468 — — —
Payments for settlement of forward exchange contracts
(256 ) (582 ) (15 ) (3 )
Acquisitions of investment securities
(4,677 ) (11,872 ) (72,472 ) (10,799 )
Disposals of investment securities
4,354 7,223 10,057 1,499
Acquisitions of equity investees
(16,468 ) (23,430 ) (37,625 ) (5,835 ) (39,429 ) (53,742 ) (11,860 ) (1,767 )
Disposals of equity investees
89 99 10,021 1,554 4,941 6,185 282 42
Acquisitions of:

Land use rights and construction in progress
(1,491 ) (2,935 ) (5,407 ) (839 )
Other property, equipment and intangible assets
(3,285 ) (4,770 ) (5,438 ) (843 )
Land use rights and construction in progress relating to office campus
(5,326 ) (4,027 ) (3,146 ) (468 )
Other property and equipment
(5,680 ) (15,601 ) (32,336 ) (4,818 )
Licensed copyrights and other intangible assets
(6,540 ) (10,208 ) (14,161 ) (2,110 )
Cash paid for business combinations, net of cash acquired
(732 ) (10,255 ) (1,495 ) (232 ) (33,448 ) (515 ) (35,434 ) (5,280 )
Deconsolidation and disposal of subsidiaries, net of cash proceeds (Note 4(b) and (e))
(46 ) (1,271 ) 4,890 758
Deconsolidation and disposal of subsidiaries, net of cash proceeds
250 (27 ) (10 ) (2 )
Loans to employees, net of repayments
(212 ) (40 ) 35 5 3 132 7 1

Net cash used in investing activities
(32,997 ) (53,454 ) (42,831 ) (6,643 ) (79,579 ) (83,764 ) (151,060 ) (22,509 )


The accompanying notes form an integral part of these consolidated financial statements.

Table of Contents

ALIBABA GROUP HOLDING LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

Year ended March 31,

2014 2015 2016

RMB RMB RMB US$

(Note 2(a))

(in millions)

Cash flows from financing activities:

Issuance of ordinary shares, including repayment of loan and interest receivable on employee loans for the exercise of ordinary shares
1,638 61,831 693 108
Repurchase of ordinary shares
(157 ) (270 ) (19,795 ) (3,070 )
Issuance (Repurchase) of ordinary shares for Partner Capital Investment Plan (Note 8(c))
442 (123 ) — —
Payment of dividend on Convertible Preference Shares (Note 22)
(208 ) (104 ) — —
Redemption of Redeemable Preference Shares
(5,131 ) — — —
Acquisition of the remaining noncontrolling interest in a subsidiary
(9 ) — — —
Dividend paid by a consolidated subsidiary to noncontrolling interests
— (61 ) (3 ) —
Capital Injection from noncontrolling interest
— 174 56 9
Deemed disposals of partial interest in subsidiaries, net of related costs
— 6 — —
Tax benefits from share-based awards
— — 725 112
Proceeds from secured borrowings relating to micro loans
53,195 88,422 — —
Repayment of secured borrowings relating to micro loans
(46,029 ) (82,269 ) — —
Proceeds from current bank borrowings
681 25,804 28,208 4,374
Repayment of current bank borrowings
(423 ) (24,734 ) (26,349 ) (4,086 )
Proceeds from non-current bank borrowings
30,153 19,602 765 119
Repayment of non-current bank borrowings
(24,788 ) (49,538 ) (146 ) (23 )
Proceeds from unsecured senior notes
— 48,757 — —

Net cash provided by (used in) financing activities
9,364 87,497 (15,846 ) (2,457 )

Effect of exchange rate changes on cash and cash equivalents
(97 ) (112 ) 466 72

Increase (Decrease) in cash and cash equivalents
2,649 75,148 (1,375 ) (213 )
Cash and cash equivalents at beginning of year
30,396 33,045 108,193 16,779

Cash and cash equivalents at end of year
33,045 108,193 106,818 16,566

Year ended March 31,

2017 2018 2019

RMB RMB RMB US$

(Note 2(a))

(in millions)

Cash flows from financing activities:

Issuance of ordinary shares
14,607 399 354 53
Repurchase of ordinary shares
(13,182 ) — (10,872 ) (1,620 )
Acquisition of additional equity interests in non-wholly owned subsidiaries
— (13,627 ) (1,123 ) (167 )
Payment for settlement of contingent consideration
— (770 ) — —
Subscription of rights for Partner Capital Investment Plan (Note 8(c))
87 — — —
Dividends paid by non-wholly owned subsidiaries to noncontrolling interests
(163 ) (112 ) (226 ) (34 )
Capital injection from noncontrolling interests
1,543 1,124 8,706 1,297
Tax benefits from share-based awards
689 — — —
Proceeds from bank borrowings and other borrowings
96,677 26,824 12,116 1,806
Repayment of bank borrowings
(67,344 ) (30,414 ) (16,347 ) (2,436 )
Proceeds from unsecured senior notes
— 45,817 — —
Repayment of unsecured senior notes
— (8,602 ) — —
Upfront fee payment for a revolving credit facility
— (280 ) — —

Net cash provided by (used in) financing activities
32,914 20,359 (7,392 ) (1,101 )

Effect of exchange rate changes on cash and cash equivalents, restricted cash and escrow receivables
2,038 (6,065 ) 3,245 484

Increase (Decrease) in cash and cash equivalents, restricted cash and escrow receivables
38,227 56,335 (4,232 ) (630 )
Cash and cash equivalents, restricted cash and escrow receivables at beginning of year
108,164 146,391 202,726 30,207

Cash and cash equivalents, restricted cash and escrow receivables at end of year
146,391 202,726 198,494 29,577


The accompanying notes form an integral part of these consolidated financial statements.

Table of Contents

ALIBABA GROUP HOLDING LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Supplemental disclosures of cash flow information:
Payment of income taxes
Income tax paid was ~~RMB722~~RMB9,652 million, ~~RMB3,458~~RMB10,058 million and ~~RMB6,465~~RMB15,713 million, for the years ended March 31, ~~2014, 2015~~2017, 2018 and ~~2016,~~2019, respectively.
Payment of interest
Interest paid was ~~RMB1,220~~RMB2,465 million, ~~RMB956~~RMB2,884 million and ~~RMB1,560~~RMB4,972 million for the years ended March 31, ~~2014, 2015~~2017, 2018 and ~~2016,~~2019, respectively.
Business combinations

Year ended March 31, Year ended March 31,

2014 2015 2016 2017 2018 2019

(in millions of RMB)
(in millions of RMB)

Cash paid for business combinations
(767 ) (16,291 ) (3,055 ) (41,836 ) (17,300 ) (48,206 )
Cash acquired in business combinations
35 6,036 1,560 8,388 16,785 12,772

(732 ) (10,255 ) (1,495 ) (33,448 ) (515 ) (35,434 )

~~Major non-cash transactions~~
       During the year ended March 31, 2014, the Company entered into certain non-compete agreements with certain key individuals in exchange for restricted shares, restricted share units and options underlying 7,195,581 ordinary shares of the Company. The Company did not have similar arrangement during the year ended March 31, 2015 and 2016.
~~Restructuring of equity investments~~
       During the year ended March 31, 2016, RMB6,202 million included in both acquisitions and disposals of equity investees under investing activities were related to the restructuring of certain equity investments, including Cainiao Network (Note 4(w)) and others, to establish new holding company. The Company withdrew the investments in such underlying equity investees and the proceeds from the withdrawals were reinvested in full in their new holding companies established.

The accompanying notes form an integral part of these consolidated financial statements.

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, ~~2014, 2015~~2017, 2018 AND ~~2016~~2019
1.     Organization and principal activities
Alibaba Group Holding Limited (the ~~"Company," and where appropriate, the term~~ "Company" ~~also refers to its subsidiaries and variable interest entities as~~) is a ~~whole),~~limited liability company, which was incorporated in the Cayman Islands on June 28, 1999. The Company is a holding company and conducts its businesses primarily through its subsidiaries. In these consolidated financial statements, where appropriate, the term "Company" also refers to its subsidiaries ~~and variable interest entities ("VIEs").~~as a whole. The Company ~~is principally engaged in online~~provides the technology infrastructure and ~~mobile commerce through offering of products, services and technology that enable~~marketing reach to help merchants, brands and other businesses to ~~transform~~leverage the ~~way they market, sell~~power of new technology to engage with their users and customers and operate in a more efficient way. Major shareholders of the Company include SoftBank Group Corp. (together with its subsidiaries, "SoftBank") and Altaba Inc. (formerly known as Yahoo! Inc.) ("Altaba").
The Company has four operating and reportable segments, namely core commerce, cloud computing, digital media and entertainment, and innovation initiatives and others.
The Company's core commerce segment is mainly comprised of (i) the retail and wholesale commerce businesses, (ii) the logistics services business and (iii) the local consumer services business. Retail commerce businesses in the People's Republic of China (the "PRC" or "China") ~~and internationally. Major shareholders of~~primarily include the ~~Company include SoftBank Corp. ("SoftBank") and Yahoo! Inc. ("Yahoo").~~
The Company's core commerce business is comprised of marketplaces operating in retail commerce in China, wholesale commerce in China and international and cross-border commerce. Retail commerce in China operated by the Company includes (i) the China onlinemobile commerce destination ("Taobao Marketplace")~~; (ii)~~ and the ~~China~~ third-party online and mobile platform for brands and retailers ("Tmall"). Retail commerce businesses — cross-border and ~~(iii)~~global include the ~~sales and marketing~~e-commerce platform ~~for flash sales ("Juhuasuan"). Wholesale commerce in China~~across Southeast Asia operated by ~~the Company includes the China domestic wholesale marketplace ("1688.com"~~Lazada (Note 4(i))~~. International and cross-border commerce operated by the Company includes (i)~~, the global retail marketplace ~~targeting~~enabling consumers from around the world to buy directly from manufacturers and distributors primarily in China ("AliExpress")~~; (ii) a~~ and the import e-commerce platform ~~within the Tmall for~~that allows overseas brands and retailers to reach Chinese consumers ~~without the need for physical operations~~("Tmall Global"). Wholesale commerce businesses in China include the integrated domestic wholesale marketplace ("~~Tmall Global"~~1688.com"). Wholesale commerce businesses — cross-border and global include the integrated international online wholesale marketplace ("Alibaba.com"). Logistics services business includes a logistics data platform and a nationwide fulfillment network through Cainiao Network (Note 4(f)). Local consumer services business includes the on-demand delivery and local services platform operated by Ele.me (Note 4(c)) and ~~(iii)~~ the ~~wholesale marketplace~~restaurant and local services guide platform for ~~global trade ("Alibaba.com"~~in-store consumption operated by Koubei (Note 4(c)).
~~In addition, the Company~~The Company's cloud computing segment is ~~a provider~~comprised of ~~public cloud services~~Alibaba Cloud, which offers a complete suite of cloud ~~services:~~services including elastic computing, database, storage, ~~and content delivery~~ network virtualization services, large scale computing, security, ~~and~~ management and application services, ~~to third-party customers~~big data analytics, a machine learning platform and Internet of Things ("~~Alibaba Cloud Computing"~~IoT"). services.
The ~~Company also operates business in mobile~~Company's digital media and entertainment segment leverages the Company's deep data insights to serve the broader interests of consumers through ~~three~~two key distribution platforms, UCWeb mobile media, game publishing and multi-screen entertainment as well as content creation and production companies in film, music and sports. The Company also participates in the logistics and local services sectors through investments in Cainiao NetworkYouku (Note ~~4(w)~~4(h)) and ~~Koubei~~UC Browser, and through Alibaba Pictures (Note ~~4(n)~~4(b)) and the Company's other diverse content platforms that provide online videos, films, live events, news feeds, literature and music, among other areas.
The Company's innovation initiatives and others segment includes businesses such as Amap (formerly AutoNavi), ~~respectively. In addition, the~~DingTalk, Tmall Genie and others.
The Company has a profit sharing interest in Zhejiang Ant Small and Micro Financial Services ~~(Note 4(b))~~Group Co., ~~the financial services group that operates through~~Ltd. (together with its subsidiaries including Alipay.com Co., Ltd. ("Alipay"), ~~a third-party online~~"Ant Financial") (Note 4(a)). Ant Financial is an unconsolidated related party that provides payment ~~platform in China. The Company makes available online payment processing~~and financial services ~~("Payment Services")~~to consumers and merchants on ~~its marketplaces through an arrangement with Alipay.~~the Company's platforms.

Table of Contents
~~The Company derives substantially all of its revenue from the PRC.~~
ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2017, 2018 AND 2019
2.     Summary of significant accounting policies
(a)   Basis of presentation
The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP").
Translations of balances in the consolidated balance sheet, consolidated income statement, consolidated statement of comprehensive income and consolidated statement of cash flows from Renminbi ("RMB") into the United States Dollar ("US$") as of and for the year ended March 31, ~~2016~~2019 are solely for the convenience of the readers and ~~were~~are calculated at the rate of US$1.00=~~RMB6.4480,~~RMB6.7112, representing the exchange rate set forth in the H.10 statistical release of the Federal Reserve Board on March ~~31, 2016.~~29, 2019. No representation is made that the RMB amounts could have been, or could be, converted, realized or settled into US$ at ~~that~~this rate, ~~on March 31, 2016,~~ or at any other rate.

~~Table of Contents~~

~~ALIBABA GROUP HOLDING LIMITED~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~FOR THE YEARS ENDED MARCH 31, 2014, 2015 AND 2016~~
~~2.     Summary of significant accounting policies (Continued)~~
(b)   Use of estimates
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities atas of the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.
(c)   Consolidation
The consolidated financial statements include the financial statements of the Company and its subsidiaries, ~~including~~which include the ~~wholly-foreign~~PRC-registered entities directly or indirectly wholly owned ~~enterprises~~by the Company ("WFOEs"), and ~~VIEs for~~variable interest entities ("VIEs") over which the Company is the primary beneficiary. All transactions and balances among the Company and its subsidiaries ~~and VIEs~~ have been eliminated upon consolidation. The results of subsidiaries ~~and VIEs~~ acquired or disposed of are recorded in the consolidated income statements from the effective date of acquisition or up to the effective date of disposal, as appropriate.
A subsidiary is an entity in which (i) the Company directly or indirectly controls more than 50% of the voting power; or (ii) the Company has the power to appoint or remove the majority of the members of the board of directors or to cast a majority of votes at the meeting of the board of directors or to govern the financial and operating policies of the investee pursuant to a statute or under an agreement among the shareholders or equity holders. A VIE ~~entity~~ is required to be consolidated by the primary beneficiary of the entity if the equity holders in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties.
~~To comply with the PRC~~Due to legal restrictions on foreign ownership and investment in, among other areas, value-added telecommunications services, which include the operations of ~~companies that operate~~ Internet content ~~and other restricted businesses,~~providers, the Company operates its ~~websites~~Internet and ~~engages~~other businesses in ~~such~~which foreign investment is restricted ~~services~~or prohibited in the PRC through certain PRC domestic ~~companies, whose~~companies. The equity interests of these PRC domestic companies are held by ~~certain management members~~PRC citizens or ~~founders~~by PRC entities owned and/or controlled by PRC citizens. Specifically, these PRC domestic companies that are material to the Company's business are Zhejiang Taobao Network Co., Ltd., Zhejiang Tmall Network Co., Ltd., Alibaba Cloud Computing Ltd., Hangzhou Alibaba Advertising Co., Ltd. and Youku

Table of ~~the Company.~~Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2017, 2018 AND 2019
2.     Summary of significant accounting policies (Continued)
(c)   Consolidation (Continued)
Information Technology (Beijing) Co., Ltd. The registered capital of these PRC domestic companies was funded by the Company through loans extended to ~~certain management members or founders~~the equity holders of ~~the Company.~~these PRC domestic companies. The Company has entered into certain exclusive technical services agreements with these PRC domestic companies, which entitle it to receive a majority of their residual returns and make it obligatory for the Company to absorb a majority of the risk of losses from their activities. In addition, the Company has entered into certain agreements with ~~those management members or founders,~~the equity holders of these PRC domestic companies, including loan agreements that require them to contribute registered capital to those PRC domestic companies, exclusive call option agreements to acquire the equity interests in these companies when permitted by the PRC laws, rules and regulations, equity pledge agreements of the equity interests held by those ~~management members or founders,~~equity holders, and proxy agreements that irrevocably authorize individuals designated by the Company to exercise the equity owner's rights over these PRC domestic companies.

~~Table of Contents~~

~~ALIBABA GROUP HOLDING LIMITED~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~FOR THE YEARS ENDED MARCH 31, 2014, 2015 AND 2016~~
~~2.     Summary of significant accounting policies (Continued)~~
~~(c)   Consolidation (Continued)~~
Details of the typical ~~VIE~~ structure of the Company's significant VIEs ~~primarily domestic companies associated with the operations of Taobao Marketplace, Tmall, Juhuasuan, 1688.com, AliExpress, Alibaba.com and Alibaba Cloud Computing,~~ are set forth below:
(i)
Contracts that give the Company effective control of VIEs
Loan agreements
Pursuant to the relevant loan agreements, the respective WFOEs have granted ~~interest-free~~ loans to the ~~relevant VIEs~~ equity holders of the VIEs, which may only be used for the purpose of ~~capital contributions to the relevant VIEs or as may be otherwise~~its business operation activities agreed by the WFOEs. The WFOEs may require acceleration of repayment at their absolute discretion. When the ~~VIEs~~ equity holders of the VIEs make early repayment of the outstanding amount, the WFOEs or a ~~third party~~third-party designated by the WFOEs may purchase the equity interests in the VIEs at a price equal to the outstanding amount of the loan, subject to any applicable PRC laws, rules and regulations. The ~~VIEs~~ equity holders of the VIEs undertake not to enter into any prohibited transactions in relation to the VIEs, including the transfer of any business, material assets, intellectual property rights or equity interests in the VIEs to any third party.
Exclusive call option agreements
The ~~VIEs~~ equity holders of the VIEs have granted the WFOEs exclusive call options to purchase their equity interest in the VIEs at an exercise price equal to the higher of (i) the paid-in registered capital in the VIEs; and (ii) the minimum price as permitted by applicable PRC laws. Each relevant VIE has further granted the relevant WFOE an exclusive call option to purchase its assets at an exercise price equal to the book value of the assets or the minimum price as permitted by applicable PRC laws, whichever is higher. Certain VIEs and their equity holders will also jointly grant the WFOEs (A) exclusive call options to request the VIEs to decrease their registered capital at an exercise price equal to the higher of (i) the paid-in registered capital in the VIEs and (ii) the minimum price as permitted by applicable PRC laws (the "Capital Decrease Price"), and (B) exclusive call options to subscribe for the increased capital of the VIEs at a price equal to the sum of the Capital Decrease Price and the unpaid registered capital, if applicable, as of the capital decrease. The WFOEs may nominate another entity or individual to purchase the equity interest or assets, or to subscribe for the increased capital, if applicable, under the call options. ~~Each~~Execution of each call option ~~is exercisable subject to~~shall not violate the ~~condition that~~ applicable PRC laws, rules and ~~regulations do not prohibit completion~~regulations. Each equity holder of the ~~transfer of~~VIE has agreed that the ~~equity interest or assets pursuant~~following amounts, to the call option. Each WFOE is entitled to all dividends and other distributions declared by the VIE, and the VIE equity holders have agreed to give up their rights to receive any distributions or proceeds from the disposal of their equity interests in the VIE which areextent in excess of the original registered capital that they contributed to the VIE (after deduction of relevant tax expenses), belong to and to pay any such distributions or premium to the WFOE. The exclusive call option agreements remain in effect until the equity interest or assets that are the subject of such agreements are transferred to the WFOEs.
~~Proxy agreements~~
Pursuant to the relevant proxy agreements, each of the VIEs equity holders irrevocably authorizes any person designated by the WFOEs to exercise his rights as an equity holder of the VIEs, including the right to attend and vote at equity holders' meetings and appoint directors.
~~Equity pledge agreements~~
Pursuant to the relevant equity pledge agreements, the relevant VIEs equity holders have pledged all of their interests in the equity of the VIEs as a continuing first priority security interest in favor of theshall be

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, ~~2014, 2015~~2017, 2018 AND ~~2016~~2019
2.     Summary of significant accounting policies (Continued)
(c)   Consolidation (Continued)
paid to the WFOEs: (i) proceeds from the transfer of its equity interests in the VIE, (ii) proceeds received in connection with a capital decease in the VIE, and (iii) distributions or liquidation residuals from the disposal of its equity interests in the VIE upon termination or liquidation. Moreover, any profits, distributions or dividends (after deduction of relevant tax expenses) received by the VIEs also belong to and shall be paid to the WFOEs. The exclusive call option agreements remain in effect until the equity interest or assets that are the subject of these agreements are transferred to the WFOEs.
Proxy agreements
Pursuant to the relevant proxy agreements, the equity holders of the VIEs irrevocably authorize any person designated by the WFOEs to exercise their rights as the equity holders of the VIEs, including without limitation the right to vote and appoint directors.
Equity pledge agreements
Pursuant to the relevant equity pledge agreements, the equity holders of the VIEs have pledged all of their interests in the equity of the VIEs as a continuing first priority security interest in favor of the corresponding WFOEs to secure the outstanding amounts advanced under the relevant loan agreements described above and to secure the performance of obligations by the VIEs and/or the equity holders under the other structure contracts. Each WFOE is entitled to exercise its right to dispose of the ~~VIEs equity holders'~~ pledged interests in the equity of the VIE held by the equity holders and has priority in receiving payment by the application of proceeds from the auction or sale of ~~such~~the pledged interests, in the event of any breach or default under the loan agreement or other structure contracts, if applicable. These equity pledge agreements remain in force ~~for~~until the ~~duration~~later of (i) the full performance of the ~~relevant loan agreement and other structure contracts. These equity pledges have been registered with~~contractual arrangements by the relevant ~~office~~parties, and (ii) the full repayment of the ~~Administrations for Industry and Commerce in~~loans made to the ~~PRC.~~equity holders of the VIEs.
(ii)
Contracts that enable the Company to receive substantially all of the economic benefits from the VIEs
Exclusive ~~technical~~technology services agreements or exclusive services agreements
Each relevant VIE has entered into an exclusive ~~technical~~technology services agreement or an exclusive services agreement with the respective WFOE, pursuant to which the relevant WFOE provides exclusive ~~technical~~ services to the VIE. In exchange, the VIE pays a service fee to the WFOE, the amount of which ~~typically amount~~shall be determined, to ~~what would be substantially all of~~ the ~~VIE's pre-tax profit,~~extent permitted by applicable PRC laws as proposed by the WFOE, resulting in a transfer of substantially all of the profits from the VIE to the WFOE.
Other arrangements
The exclusive call option agreements described above also ~~enable the Company to receive substantially all of the economic benefits from the VIEs by typically entitling~~entitle the WFOEs to all profits, distributions or dividends ~~and other distributions declared~~(after deduction of relevant tax expenses) to be received by the VIEs, and the following amounts, to ~~any distributions or proceeds from~~ the ~~disposal by the VIEs equity holders of their equity interests in the VIEs that are~~extent in excess of the original registered capital that they contributed to the ~~VIEs.~~VIEs (after deduction of relevant tax expenses) to be received by each equity holder of the VIEs: (i) proceeds from the transfer of its equity interests in the VIEs, (ii) proceeds received in connection with a capital decease in the VIEs, and (iii) distributions or liquidation residuals from the disposal of its equity interests in the VIEs upon termination or liquidation.

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2017, 2018 AND 2019
2.     Summary of significant accounting policies (Continued)
(c)   Consolidation (Continued)
Based on these contractual agreements, the Company believes that the PRC domestic companies as described above should be considered as VIEs because the equity holders do not have significant equity at risk nor do they have the characteristics of a controlling financial ~~interest and~~interest. Given that the Company is the primary beneficiary of these PRC domestic ~~companies. Accordingly,~~companies, the Company believes that these VIEs should be consolidated based on the structure as described above.

~~Table of Contents~~

~~ALIBABA GROUP HOLDING LIMITED~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~FOR THE YEARS ENDED MARCH 31, 2014, 2015 AND 2016~~
~~2.     Summary of significant accounting policies (Continued)~~
~~(c)   Consolidation (Continued)~~
The following financial information of the VIEs in the PRC was recorded in the accompanying consolidated financial statements:

As of March 31,

2015 2016

(in millions of RMB)

Cash and cash equivalents and short-term investments
2,272 3,978

Amounts due from Ant Financial Services
2,741 247

Investment in equity investees and securities
4,018 11,605

Property and equipment and intangible assets
1,353 1,218

Others
3,427 2,698

Total assets
13,811 19,746

Amounts due to WFOEs and other non-VIEs group companies
7,741 12,372

Others
3,679 4,649

Total liabilities
11,420 17,021

As of March 31,

2018 2019

(in millions of RMB)

Cash and cash equivalents and short-term investments
7,507 15,019

Investments in equity investees and investment securities
26,611 28,230

Accounts receivable, net of allowance
5,733 9,540

Amounts due from non-VIE subsidiaries of the Company
1,949 6,398

Prepayment for licensed copyrights
1,736 2,633

Property and equipment and intangible assets
6,788 6,161

Others
4,139 5,992

Total assets
54,463 73,973

Amounts due to non-VIE subsidiaries of the Company

41,090
60,273

Accruals for purchase of licensed copyrights
3,686 3,498

Accrued expenses, accounts payable and other liabilities
10,931 14,594

Deferred revenue and customer advances
4,997 7,213

Deferred tax liabilities
995 448

Total liabilities
61,699 86,026

Year ended March 31,

2014 2015 2016

(in millions of RMB)

Revenue (i)
6,170 10,457 8,558

Net (loss) income (i)
(587 ) 659 35

Net cash (used in) provided by operating activities
(2,642 ) (7,343 ) 1,224

Net cash used in investing activities
(1,337 ) (5,502 ) (7,160 )

Net cash provided by financing activities
4,157 13,018 6,494

Year ended March 31,

2017 2018 2019

(in millions of RMB)

Revenue (i)
24,712 32,898 66,674

Net loss
(4,688 ) (6,167 ) (7,063 )

Net cash provided by operating activities
3,220 5,547 4,163

Net cash used in investing activities
(2,557 ) (20,366 ) (8,503 )

Net cash provided by financing activities
2,688 14,286 12,373
(i)
Revenue ~~and net (loss) income earned and incurred~~generated by the VIEs are primarily from ~~the businesses of providing display marketing on the Company's retail marketplaces,~~ cloud computing services, ~~as well as mobile~~digital media and entertainment services, local consumer services and others.
The VIEs did not have any material related party transactions except for ~~those transacted with WFOEs~~the related party transactions which ~~were eliminated~~are disclosed in Note 21 or elsewhere in these consolidated financial statements, and ~~the related party~~those transactions ~~disclosed in Note 23 or elsewhere in these consolidated financial statements.~~with other subsidiaries that are not VIEs, which were eliminated upon consolidation.
Under the contractual arrangements with the VIEs, the Company has the power to direct activities of the VIEs and can have assets transferred out of the VIEs under its control. Therefore, the Company considers

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2017, 2018 AND 2019
2.     Summary of significant accounting policies (Continued)
(c)   Consolidation (Continued)
that there is no asset in any of the ~~consolidated~~ VIEs that can be used only to settle obligations of the VIEs, except for registered capital and PRC statutory reserves. As all ~~consolidated~~ VIEs are incorporated as limited liability companies under the Company Law of the PRC, creditors of the VIEs do not have recourse to the general credit of the Company for any of the liabilities of the ~~consolidated~~ VIEs.
Currently there is no contractual arrangement which requires the Company to provide additional financial support to the VIEs. However, as the Company conducts its businesses primarily based on the licenses and approvals held by its VIEs, the Company has provided and will continue to provide financial support to the VIEs considering the business requirements of the VIEs, as well as the Company's own business objectives in the future.

~~Table of Contents~~

~~ALIBABA GROUP HOLDING LIMITED~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~FOR THE YEARS ENDED MARCH 31, 2014, 2015 AND 2016~~
~~2.     Summary of significant accounting policies (Continued)~~
~~(c)   Consolidation (Continued)~~
Unrecognized revenue-producing assets held by the VIEs include certain Internet content provision and other licenses, domain names and trademarks. The Internet content provision and other licenses are required under relevant PRC laws, rules and regulations for the operation of Internet businesses in the PRC, and therefore are integral to the Company's operations. The Internet content provision licenses require that core PRC trademark registrations and domain names are held by the VIEs that provide the relevant services.
(d)  Business combinations and noncontrolling interests
The Company accounts for its business combinations using the acquisition method of accounting in accordance with Accounting Standards Codification ("ASC") 805 "Business Combinations." The cost of an acquisition is measured as the aggregate of the acquisition date fair ~~values~~value of the assets transferred ~~and~~to the sellers, liabilities incurred by the Company ~~to the sellers~~ and equity instruments ~~issued.~~issued by the Company. Transaction costs directly attributable to the acquisition are expensed as incurred. Identifiable assets acquired and liabilities ~~acquired or~~ assumed are measured separately at their fair values as of the acquisition date, irrespective of the extent of any noncontrolling interests. The excess of (i) the total costs of acquisition, fair value of the noncontrolling interests and acquisition date fair value of any previously held equity interest in the acquiree over (ii) the fair value of the identifiable net assets of the acquiree is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the consolidated income statements. During the measurement period, which can be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. ~~Upon~~Subsequent to the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any ~~subsequent~~further adjustments are recorded toin the consolidated ~~statements of operations.~~income statements.
In a business combination achieved in stages, the Company re-measures the previously held equity interest in the acquiree immediately before obtaining control at its ~~acquisition-date~~acquisition date fair value and the re-measurement gain or loss, if any, is recognized in the consolidated income statements.
When there is a change in ownership interests or a change in contractual arrangements that ~~result~~results in a loss of control of a subsidiary, the Company deconsolidates the subsidiary from the date control is lost. Any retained noncontrolling investment in the former subsidiary is measured at fair value and is included in the calculation of the gain or loss upon deconsolidation of the subsidiary.

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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2017, 2018 AND 2019
2.     Summary of significant accounting policies (Continued)
(d)  Business combinations and noncontrolling interests (Continued)
For the Company's ~~majority-owned~~non-wholly owned subsidiaries, ~~and VIEs,~~ a noncontrolling interest is recognized to reflect the portion of ~~their~~ equity ~~which~~that is not attributable, directly or indirectly, to the Company. When the noncontrolling interest is contingently redeemable upon the occurrence of a conditional event, which is not solely within the control of the Company, the noncontrolling interest is classified as mezzanine equity. The Company accretes changes in the redemption value over the period from the date that it becomes probable that the mezzanine equity will become redeemable to the earliest redemption date using the effective interest method. Consolidated net income ~~(loss) on~~in the consolidated income statements includes ~~the~~ net income (loss) attributable to noncontrolling interests and mezzanine equity holders when applicable. Net ~~income (loss)~~loss attributable to mezzanine equity holders is included in net ~~income (loss)~~loss attributable to noncontrolling interests onin the consolidated income statements, while it is excluded from the consolidated statements of changes in shareholders' equity. During the years ended March 31, 2017, 2018 and 2019, net loss attributable to mezzanine equity holders amounted to RMB1,961 million, RMB930 million and RMB438 million, respectively. The cumulative results of operations attributable to noncontrolling interests, along with adjustments for share-based compensation expense arising from outstanding share-based awards relating to subsidiaries' shares, are also recorded as noncontrolling interests inon the Company's consolidated balance sheets. Cash flows related to transactions with noncontrolling interests are presented under financing activities in the consolidated statements of cash flows.

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~~ALIBABA GROUP HOLDING LIMITED~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~FOR THE YEARS ENDED MARCH 31, 2014, 2015 AND 2016~~
~~2.     Summary of significant accounting policies (Continued)~~
(e)   Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating ~~decision-maker,~~decision maker (the "CODM"), which is ~~a strategic committee~~ comprised of certain members of the Company's management team. ~~In the respective periods presented, the~~The Company had ~~one single~~four operating and reportable ~~segment, namely~~segments during the provision of online and mobile commerce and related services. Although the online and mobile commerce and related services consist of different business units of the Company, information provided to the chief operating decision-maker is at the revenue level and the Company does not allocate operating costs or assets across business units,periods presented as ~~the chief operating decision-maker does not use such information to allocate resources or evaluate the performance of the business units. Details of the Company's revenue are~~ set out in ~~Note 5. As the Company's long-lived assets are substantially all located in the PRC~~Notes 1 and ~~substantially all of the Company's revenue is derived from within the PRC, no geographical information is presented.~~25.
(f)   Foreign currency translation
The functional currency of the Company is US$ ~~and reporting currency of the Company is RMB.~~. The Company's subsidiaries ~~and VIEs~~ with operations in the PRC, Hong Kong, the United States and other jurisdictions generally use their respective local currencies as their functional currencies. The reporting currency of the Company is RMB as the major operations of the Company are within the PRC. The financial statements of the Company's subsidiaries, ~~and VIEs,~~ other than the subsidiaries ~~and VIEs~~ with the functional currency of RMB, are translated into RMB using the exchange rate as of the balance sheet date for assets and liabilities and the average daily exchange rate for ~~the year~~each month for income and expense items. Translation gains and losses are recorded in accumulated other comprehensive income or loss as a component of shareholders' equity.
In the financial statements of the Company's subsidiaries, ~~and VIEs,~~ transactions in currencies other than the functional currency are measured and recorded in the functional currency using the exchange rate in effect at the date of the transaction. At the balance sheet date, monetary assets and liabilities that are denominated in currencies other than the functional currency are translated into the functional currency using the exchange rate at the balance sheet date. All gains and losses arising from foreign currency transactions are recorded in the ~~determination of net~~consolidated income ~~or loss~~statements during the year in which they occur.
~~(g)   Revenue recognition~~
Revenue principally represents online marketing services revenue, commissions on transactions, membership and storefront fees and cloud computing services revenue. Revenue comprises the fair value of the consideration received or receivable for the provision of services in the ordinary course of the Company's activities and is recorded net of value-added tax ("VAT"). Consistent with the criteria of ASC 605 "Revenue Recognition" ("ASC 605"), the Company recognizes revenue when the following four revenue recognition criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been provided, (iii) the selling price is fixed or determinable, and (iv) collectability is reasonably assured.

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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, ~~2014, 2015~~2017, 2018 AND ~~2016~~2019
2.     Summary of significant accounting policies (Continued)
(g)   Revenue recognition
In April 2018, the Company adopted Accounting Standards Update ("ASU") 2014-09, "Revenue from Contracts with Customers (Topic 606)," including related amendments and implementation guidance within ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-12 and ASU 2016-20 (collectively, including ASU 2014-09, "ASC 606"), issued by the Financial Accounting Standards Board ("FASB").
ASC 606 supersedes the revenue recognition requirements in ASC 605 and requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company adopted ASC 606 beginning on April 1, 2018 using the modified retrospective method applied to those contracts with the customers which were not completed as of April 1, 2018.
Results for reporting periods beginning on April 1, 2018 are presented under ASC 606, while prior period amounts have not been adjusted and continue to be reported in accordance with ASC 605. The impact of adopting the new revenue standard was not material to the consolidated financial statements and there was no adjustment to the beginning retained earnings on April 1, 2018.
Revenue is principally comprised of customer management revenue, commissions on transactions, membership fees, logistics services revenue, cloud computing services revenue, sales of goods and other revenue. Revenue represents the amount of consideration the Company is entitled to upon the transfer of promised goods or services in the ordinary course of the Company's activities and is recorded net of value-added tax ("VAT"). Consistent with the criteria of ASC 606 "Revenue from Contracts with Customers," the Company recognizes revenue when performance obligations are satisfied by transferring control of a promised good or service to a customer. For performance obligations that are satisfied at a point in time, the Company also considers the following indicators to assess whether control of a promised good or service is transferred to the customer: (i) right to payment, (ii) legal title, (iii) physical possession, (iv) significant risks and rewards of ownership and (v) acceptance of the good or service. For performance obligations satisfied over time, the Company recognizes revenue over time by measuring the progress toward complete satisfaction of a performance obligation.
For revenue arrangements with multiple distinct performance obligations, each distinct performance obligation is separately accounted for and the total consideration is allocated to each performance obligation based on the relative standalone selling price at contract inception. Revenue arrangements with multiple distinct performance obligations, such as the sale of membership packages and customer management services on wholesale marketplaces and Youku's platforms, are not significant to the Company's total revenue.
The Company evaluates if it is a principal or an agent in a transaction to determine whether revenue should be recorded on a gross or net basis. The Company is acting as the principal if it obtains control over the goods and services before they are transferred to customers. When the Company is primarily obligated in a transaction, is generally subject to inventory risk, has latitude in establishing prices, or has several but not all of these indicators, the Company acts as the principal and revenue is recorded on a gross basis. When the Company is not primarily obligated in a transaction, does not generally bear the inventory risk and does not have the ability to establish the price, the Company acts as the agent and revenue is recorded on a net basis.
When services are exchanged or swapped for other services, revenue is recognized based on the estimated standalone selling price of services promised to customer if the fair value of the services received cannot be

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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2017, 2018 AND 2019
2.     Summary of significant accounting policies (Continued)
(g)   Revenue recognition (Continued)
Revenue arrangements with multiple deliverables are divided into separate units of accounting. The arrangement consideration is allocated at the inception of the arrangement to each element based on their relative fair values for revenue recognition purposes. The consideration is allocated to each element using vendor-specific objective evidence or third-party evidence of the standalone selling price for each deliverable, or if neither type of evidence is available, using management's best estimate of selling price. Revenue arrangements with multiple deliverables primarily relate to the sale of membership packages and online marketing services on the international wholesale marketplace, which are not material to the Company's total revenue.
In accordance with ASC 605, the Company evaluates whether it is appropriate to record the gross amount of product sales and related costs or the net amount earned as commissions. When the Company is primarily obligated in a transaction, is subject to inventory risk, has latitude in establishing prices and selecting suppliers, or has several but not all of these indicators, revenue is recorded on a gross basis. When the Company is not the primary obligor, does not bear the inventory risk and does not have the ability to establish the price, revenue is recorded on a net basis.
~~When services are exchanged or swapped for other services, the exchange is regarded as a revenue-generating transaction.~~reasonably estimated. The amount of revenue recognized for barter transactions was ~~insignificant~~not material for each of the periods presented.
~~Revenue recognition policies for each type of service are analyzed as follows:~~
~~Online marketing services revenue~~Practical expedients and exemptions
The Company ~~receives service fees from~~applies the practical expedient to not disclose the value of unsatisfied performance obligations for contracts with an original expected duration of one year or less and contracts for which revenue is recognized at the amount to which the Company has the right to invoice for services performed.
The Company does not have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. As a result, the Company applies the practical expedient and does not adjust any of the transaction price for the time value of money.
Revenue recognition policies by type are as follows:
(i)
Customer management revenue
Within the core commerce segment, the Company provides the following customer management services to merchants on the Company's retail and wholesale marketplaces ~~for pay~~and certain third-party marketing affiliates' websites:
Pay for performance ("P4P") marketing services ~~display marketing, placement services and Taobaoke program on the Company's marketplaces and certain third party marketing affiliates' websites.~~
P4P marketing services allow merchants to bid for keywords that match product or service listings appearing in search or browser results on the Company's marketplaces. Merchants bid for keywords through an online bidding system. The positioning of the listings and the price for the positioning are determined through an online auction system, which facilitates price discovery through a market-based mechanism. In general, merchants prepay for P4P marketing services and the related revenue is recognized when a user clicks their product or service ~~listings. The positioning~~listings as this is the point of ~~such listings and~~time when the ~~price for such positioning are determined through an online auction system, which facilitates price discovery through a market-based mechanism.~~merchants benefit from the marketing services rendered.
Display marketing services
Display marketing ~~allows~~services allow merchants to place advertisements ~~in particular areas of a web page,~~on the Company's marketplaces, at fixed prices or prices established by a real-time bidding system and in particular ~~formats and over particular periods of time.~~formats. In general, merchants need to prepay for display marketing which is accounted for as customer advances and revenue is recognized either ratably over the period in which the advertisement is displayed as the merchants simultaneously consume the benefits as the advertisement is displayed or when an advertisement ~~appears on pages clicked or~~is viewed by ~~users.~~users, depending on the type of marketing services selected by the merchants.
The Company also places P4P marketing services content and display marketing content through the third-party marketing affiliate program. A substantial portion of customer management revenue generated through the third-party marketing affiliate program represented P4P marketing services revenue. In delivery of these customer management services, the Company, through the third-party marketing affiliate program, places the P4P marketing services content of the participating merchants on third-party online resources in the forms of picture or text links through contextual relevance technology to match merchants' marketing content to the textual content of the third-party online resources and the users'

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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, ~~2014, 2015~~2017, 2018 AND ~~2016~~2019
2.     Summary of significant accounting policies (Continued)
(g)   Revenue recognition (Continued)
In delivery of these online marketing services, the Company, through the third-party marketing affiliate program, also places the P4P marketing services content of the participating merchants on third-party websites in the forms of picture or text links through contextual relevance technology to match merchants' marketing content to the textual content of the third-party website and the users' attributes based on the Company's systems and algorithms. When ~~such~~the links on third-party ~~websites~~online resources are clicked, users are diverted to a landing page of the Company's marketplaces where listings of the participating merchant as well as similar products or services of other merchants are presented. These other merchants may include those also participating in the online marketing services through the third-party marketing affiliate program or those only purchasing online marketing services on the Company's own marketplaces, as well as, in some cases, those who do not purchase online marketing services at all. Revenue is only recognized when such users further click on the P4P marketing content on such landing pages. In limited cases, the Company may embed a search box for one of its marketplaces on ~~such~~the third-party ~~websites,~~online resources, and when a keyword is input into the search box, the user will be diverted to the Company's ~~website~~marketplaces where search results are ~~presented~~presented. Revenue is recognized when the users further click on the P4P marketing content on the landing pages. The Company places display marketing content on third-party online resources in a similar manner. In general, merchants need to prepay for display marketing which is accounted for as customer advances and revenue ~~can be~~is recognized ratably over the period in which the advertisement is displayed as merchants simultaneously consume the benefits as the advertisement is displayed.
P4P marketing services revenue as well as display marketing revenue generated on the Company's marketplaces or through the third-party marketing affiliate program are recorded on a ~~similar mechanism.~~gross basis when the Company is the principal to the merchants in the arrangements. For third-party marketing affiliates with whom the Company has an arrangement to share ~~such~~the revenue, traffic acquisition cost is also recognized at the same time if the P4P marketing content on the landing page clicked by the users is from merchants participating in the third-party marketing affiliate program. ~~The Company places display marketing content on third-party websites in a similar manner. A substantial portion of online marketing~~
Taobaoke services revenue generated through the third-party marketing affiliate program represented P4P marketing services revenue for each of the years presented. P4P marketing service revenue as well as display marketing revenue generated on the Company's marketplaces or through the third-party marketing affiliate program are recorded on a gross basis principally because the Company is the primary obligor to the merchants in the arrangements.
The Company receives placement services fees from merchants on promotional slots for a specified period on the Company's Juhuasuan marketplace and recognizes those fees as revenue when the underlying promotional services are provided.
In addition, the Company offers the Taobaoke program which generates commissions from merchants for transactions completed ~~and settled~~ by consumers sourced from certain ~~third party~~third-party marketing affiliates' ~~websites.~~websites and mobile apps. The commission rates on Taobaoke are set by the merchants. The Company's portion of commission revenue ~~generated through third party marketing affiliates' websites~~ is recognized at the time when the underlying transaction is completed and is recorded on a net basis principally because the Company is not the ~~primary obligor~~principal as it does not have latitude in establishing prices or does not have inventory risk. In certain occasions where the Company is the principal of the arrangement (such as arrangements where the Company is obligated to pay for website inventory costs in fixed amounts to third-party marketing affiliates regardless of whether commission revenue is generated from these marketing ~~affiliates, such~~affiliates), the commission revenue is recorded on a gross basis.
Within the digital media and entertainment segment, the Company offers P4P marketing services to merchants and marketers on websites and mobile media operated by UCWeb. Revenue is recognized when a user clicks their product or service listings as this is the point of time when the merchants benefit from the marketing services rendered. In addition, marketers can also place advertisements on websites and mobile media operated by UCWeb and Youku's platforms in different formats, including video, banners, links, logos and buttons. Revenue is recognized ratably over the period in which the advertisement is displayed as the merchants simultaneously consume the benefits as the advertisement is displayed or when an advertisement is clicked or viewed by users, depending on the type of marketing services selected by the merchants.
(ii)
Commissions on transactions
The Company earns commissions from merchants when transactions are completed on Tmall and ~~settled on~~ certain other retail marketplaces of the Company. ~~Such~~The commissions are generally determined as a percentage based on the value of merchandise being sold by the merchants. Revenue related to commissions is recognized in the consolidated income statements at the time when the underlying transaction is completed.

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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, ~~2014, 2015~~2017, 2018 AND ~~2016~~2019
2.     Summary of significant accounting policies (Continued)
(g)   Revenue recognition (Continued)
based on the value of merchandise being sold by the merchants. The commission revenue includes merchant deposits that are expected to be non-refundable and is accounted for as variable consideration (Note 2(ad)). The variable consideration is estimated at contract inception and updated at the end of each reporting period if additional information becomes available. Revenue related to commissions is recognized in the consolidated income statements based on the expected value when the performance obligation is satisfied. Changes to the estimated variable consideration were not material for each of the periods presented.
(iii)
Membership ~~and storefront~~ fees
The Company earns membership fees revenue from wholesale sellers in respect of the sale of membership packages and subscriptions ~~which~~that allow them to host premium storefronts on the Company's wholesale ~~marketplaces. The Company also earns revenue~~marketplaces, as well as the provision of other value-added services, and from ~~merchants who subscribe~~customers in respect of the sale of membership packages which allow them to ~~Wangpu, the Company's storefront software that includes a suite of tools that assist merchants in upgrading, decorating and managing their storefronts~~access premium content on ~~retail marketplaces.~~Youku's paid content platforms. These service fees are paid in advance for a specific contracted service period. All these fees are initially deferred as deferred revenue and customer advances when received and revenue is recognized ratably over the term of the respective service contracts as the services are provided.
~~Cloud computing~~
(iv)
Logistics services revenue
The Company earns logistics services revenue from domestic and international one-stop-shop logistics services and the supply chain management solutions provided by Cainiao Network as well as on-demand delivery services provided by Ele.me. Revenue is recognized at the time when the logistics services are provided.
(v)
Cloud computing services revenue
The Company earns cloud computing services revenue from the provision of services such as elastic computing, database, ~~services and~~ storage, ~~and~~network virtualization services, large scale computing, security, management and application services, ~~as well as web hosting~~big data analytics, and ~~domain name registration.~~machine learning platform and IoT services. These cloud computing services allow customers to use hosted software over the contract period without taking possession of the software. Cloud computing services are mainly charged on either a subscription or consumption basis. Revenue related to cloud services charged on a subscription basis is recognized ~~at the time when the services are provided or~~ ratably over the ~~term~~contract period. Revenue related to cloud services charged on a consumption basis, such as the quantity of storage or elastic computing services used in a period, is recognized based on the customer utilization of the ~~service contracts as appropriate.~~resources.
(vi)
Sales of goods
~~Interest~~Revenue from the sales of goods is mainly generated from Freshippo (formerly Hema), a unique proprietary grocery retail format and ~~other income~~
~~Interest income on micro loans~~new retail pathfinder in the fast-moving consumer goods category, Tmall Global, Intime (Note ~~2(r)~~4(g)) and Lazada (Note 4(i)). Revenue from the sales of goods is recognized ~~as other revenue using~~when the ~~effective interest rate method which~~control over the promised goods is ~~reviewed and adjusted periodically based on changes in estimated cash flows. The Company disposed of certain equity interests and assets primarily relating~~transferred to the micro loan business and related services and ceased to generate interest income on micro loans upon the completion of the restructuring of Payment Services during the year ended March 31, 2015 (Note 4(b)). Other interest income is recognized on a time-proportion basis using the effective interest method, and is classified as "interest and investment income" in the consolidated income statements. Other than the above, receiptscustomers. Receipts of fees in respect of all other incidental goods or services provided by the Company ~~including mobile value-added services,~~that are distinct performance obligations are recognized when the control of the underlying goods or services ~~are delivered and~~is transferred to the customers. The amounts relating to ~~such~~these incidental services are not material to the Company's total ~~revenue.~~revenue for each of the periods presented.

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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2017, 2018 AND 2019
2.     Summary of significant accounting policies (Continued)
(h)  Cost of revenue
Cost of revenue consists primarily of ~~staff~~logistics costs, ~~and share-based compensation expense, payment processing fees, expenses associated with the operation~~cost of ~~the Company's websites, such as~~inventories, bandwidth and co-location fees, depreciation and maintenance ~~costs~~expenses for servers and computers, ~~servers,~~ call centers and other equipment, content acquisition costs, staff costs and share-based compensation expense, traffic acquisition costs, ~~logistics costs~~payment processing fees and other related incidental expenses that are directly attributable to the Company's principal operations.
(i)   Product development expenses
Product development expenses consist primarily of staff costs and share-based compensation expense for research and development personnel and other ~~related incidental~~ expenses that are directly attributable to the development ~~maintenance~~of new technologies and ~~enhancement~~products for the businesses of the Company, such as the development of the Internet infrastructure, applications, operating systems, software, ~~database~~databases and network for the Company's marketplaces, mobile products as well as transaction and service platforms. In addition, royalty fees accrued and paid to Yahoo up to the closing of the Company's initial public offering in September 2014 are recorded as part of product development expenses (Note 23).networks.

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~~ALIBABA GROUP HOLDING LIMITED~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~FOR THE YEARS ENDED MARCH 31, 2014, 2015 AND 2016~~
~~2.     Summary of significant accounting policies (Continued)~~
~~(i)   Product development expenses (Continued)~~
The Company expenses all costs that are incurred in connection with the planning and implementation phases of development and costs that are associated with repair or maintenance of the existing websites or the development of software and website content. Costs incurred in the development phase are capitalized and amortized over the estimated product life. However, since the inception of the Company, the amount of costs qualifying for capitalization has been ~~insignificant and as~~insignificant. As a result, all website and software development costs have been expensed as incurred.
(j)   Sales and marketing expenses
Sales and marketing expenses consist primarily of online and offline advertising expenses, promotion expenses, ~~sales commissions,~~ staff costs and share-based compensation expense, sales commissions and other related incidental expenses that are incurred directly to attract or retain consumers and merchants for the Company's ~~marketplaces.~~marketplaces, mobile products, transaction and service platforms as well as entertainment distribution platforms.
The Company expenses the costs of producing advertisements at the time production occurs, and expenses the costs of delivering advertisements in the period in which the advertising space or airtime is used. Advertising and promotional expenses totaled ~~RMB2,022~~RMB8,799 million, ~~RMB4,090~~RMB16,814 million and ~~RMB5,524~~RMB22,013 million during the years ended March 31, ~~2014, 2015~~2017, 2018 and ~~2016,~~2019, respectively.
(k)   Share-based compensation
Share-based awards granted ~~to the Company's employees~~ are measured at fair value on grant date and share-based compensation expense is recognized (i) immediately at the grant date if no vesting conditions are required, or (ii) using the accelerated attribution method, net of estimated forfeitures, over the requisite service period. The fair ~~value~~values of ~~share options is determined using the Black-Scholes valuation model and the fair value of restricted shares and~~ restricted share units ("RSUs") isand restricted shares are determined with reference to the fair value of the underlying ~~shares.~~shares and the fair value of share options is generally determined using the Black-Scholes valuation model. Share-based awards granted to non-employees are initially measured at fair value on the grant date and re-measured at each reporting date through the vesting date. ~~Such~~The value is recognized as an expense over the respective service period, net of estimated forfeitures. Share-based compensation expense, when recognized, is charged to the consolidated income statements with the corresponding entry to additional paid-in capital, liability or noncontrolling interests as disclosed in Note 2(d).

AtTable of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2017, 2018 AND 2019
2.     Summary of significant accounting policies (Continued)
(k)   Share-based compensation (Continued)
On each measurement date, ~~of measurement,~~ the Company reviews internal and external sources of information to assist in the estimation of various attributes to determine the fair value of the share-based awards granted by the Company, including ~~but not limited to~~ the fair value of the underlying shares, expected life ~~expected volatility~~ and expected ~~forfeiture rates. As~~volatility. The Company recognizes the ~~Company was a private company prior to its initial public offering (Note 4(a)), the sources utilized to determine those attributes at the date~~impact of ~~measurement were subjective in nature and required the Company to use judgment in applying such information~~any revisions to the ~~share valuation models. The Company was required to consider many factors and made certain~~original forfeiture rate assumptions ~~during this assessment. If any of the assumptions used to determine the fair value of the share-based awards changes significantly, share-based compensation expense may differ materially~~ in the ~~future from that recorded in the current reporting period.~~consolidated income statements, with a corresponding adjustment to equity.
(l)   Other employee benefits
The Company's subsidiaries ~~and VIEs~~ in the PRC participate in a government-mandated multi-employer defined contribution plan pursuant to which certain retirement, medical and other welfare benefits are

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~~ALIBABA GROUP HOLDING LIMITED~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~FOR THE YEARS ENDED MARCH 31, 2014, 2015 AND 2016~~
~~2.     Summary of significant accounting policies (Continued)~~
~~(l)   Other employee benefits (Continued)~~
provided to employees. The relevant labor regulations require the Company's subsidiaries in the PRC to pay the local labor and social welfare authorities monthly contributions ~~at a stated contribution rate~~ based on the ~~monthly basic compensation of qualified employees.~~applicable benchmarks and rates stipulated by the local government. The relevant local labor and social welfare authorities are responsible for meeting all retirement benefits obligations and the Company's subsidiaries in the PRC have no further commitments beyond their monthly contributions. The contributions to the plan are expensed as incurred. During the years ended March 31, ~~2014, 2015~~2017, 2018 and ~~2016,~~2019, contributions to ~~such~~the plan amounting to ~~RMB974~~RMB2,710 million, ~~RMB1,601~~RMB3,587 million and ~~RMB2,094~~RMB5,608 million, respectively, were charged to the consolidated income statements.
The Company also makes payments to other defined contribution plans and defined benefit plans for the benefit of employees employed by subsidiaries outside of the PRC. Amounts contributed during the years ended March 31, ~~2014, 2015~~2017, 2018 and ~~2016~~2019 were insignificant.
(m) Income taxes
The Company accounts for income taxes using the liability method, under which deferred income taxes are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred taxes of a change in tax rates is recognized as income or expense in the period that includes the enactment date. Valuation allowance is provided on deferred tax assets to the extent that it is more likely than not that the asset will not be realizable in the foreseeable future.
Deferred taxes are also recognized on the undistributed earnings of subsidiaries, which are presumed to be transferred to the parent company and are subject to withholding taxes, unless there is sufficient evidence to show that the subsidiary has invested or will invest the undistributed earnings indefinitely or that the earnings will be remitted in a tax-free liquidation.
The Company adopts ASC ~~740-10-25~~740 "Income Taxes" which prescribes a more likely than not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. It also provides guidance on derecognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods and income tax disclosures. The Company did not have significant unrecognized uncertain tax positions or any unrecognized liabilities, interest or penalties associated with unrecognized tax benefit as of and for the years ended March 31, ~~2014, 2015~~2017, 2018 and ~~2016.~~
~~(n)  Government grants~~
For government grants that are non-operating in nature and with no further conditions to be met, the amounts are recognized as income in other income, net upon receipt. For government grants that contain certain operating conditions, the amounts are recorded as liabilities upon receipt, and are recognized in the consolidated income statements as a reduction of the related costs for which the grants are intended to compensate when the conditions are met.2019.

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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, ~~2014, 2015~~2017, 2018 AND ~~2016~~2019
2.     Summary of significant accounting policies (Continued)
(n)  Government grants
Government grants are recognized as income in other income, net or as a reduction of specific costs and expenses for which the grants are intended to compensate. Such amounts are recognized in the consolidated income statements upon receipt and when all conditions attached to the grants are fulfilled.
(o)   Leases
Leases are classified as either capital or operating leases. Leases that transfer substantially all the benefits and risks incidental to the ownership of assets are accounted for as capital leases as if there was an acquisition of an asset and incurrence of an obligation at the inception of the lease. All other leases are accounted for as operating leases wherein rental payments (net of any incentives received from the lessor) are recognized in the consolidated income statements on a straight-line basis over the lease terms. The Company had no significant capital leases for the years ended March 31, ~~2014, 2015~~2017, 2018 and ~~2016.~~2019.
(p)  Cash and cash equivalents
The Company considers all short-term, highly liquid investments with an original maturity of three months or less, when purchased, to be cash equivalents. Cash and cash equivalents ~~of the Company~~ primarily represent bank deposits, fixed deposits with maturities of less than three months and investments in money market funds. As of March 31, ~~2015~~2018 and ~~2016,~~2019, the Company had certain amounts of cash held in accounts managed by Alipay in connection with the provision of online and mobile commerce and related services for a total amount of ~~RMB1,443~~RMB1,687 million and ~~RMB786~~RMB3,720 million, respectively, which have been classified as cash and cash equivalents on the consolidated balance sheets.
(q)  Short-term investments
Short-term investments consist primarily of investments in fixed deposits with maturities between three months and one year and investments in money market funds or other investments ~~whereby~~that the Company has the intention to redeem within one year. As of March 31, ~~2015~~2018 and ~~2016,~~2019, the investments in fixed deposits that were recorded as short-term investments amounted to ~~RMB11,462~~RMB2,919 million and ~~RMB97~~RMB961 million, respectively. As of the same dates, the Company had certain amounts of short-term investments held in accounts managed by Alipay for a total amount of ~~RMB1,185~~RMB890 million and ~~RMB2,564 million,~~nil, respectively.
(r)   ~~Loan and VAT receivables~~Accounts receivable
~~Loan receivables consist primarily of micro loans extended~~Accounts receivable represents the amounts that the Company has an unconditional right to small and medium size enterprises that are merchants on the Company's marketplaces. VAT receivables mainly represent the advance settlement of relevant VAT refund amounts provided by OneTouch (Note 4(g)) to its customers prior to receiving such VAT refund from tax authorities. Such amounts are recorded at the principal or claimed refund amount lessconsideration. The Company maintains an allowance for doubtful accounts ~~relating~~ to ~~micro loans and the VAT receivables, respectively, and include accrued interest~~reserve for potentially uncollectible receivable as of the balance sheet date. Allowance for doubtful accounts relating to micro loans and VAT receivables represent the Company's best estimate of the losses inherent in the outstanding portfolio of loans and VAT receivables.amounts. The credit periods extended by the Company to the merchants related to the micro loans generally range from 7 to 360 days and the collection periods related to the VAT receivables generally range from three to six months. Judgment is required to determine the allowance amounts and whether such amounts are adequate to cover potential bad debts, and periodic reviews are performed to ensure such amounts continue to reflect the best estimate of the losses inherent in the outstanding portfolio of debts. As of March 31, 2015 and 2016, allowance for doubtful accounts ~~relating~~is estimated based upon the Company's assessment of various factors including historical experience, the age of the accounts receivable balances, current economic conditions and other factors that may affect the customers' ability to ~~VAT receivables~~pay.
(s)   Inventories
Inventories mainly consist of merchandise available for sale. They are accounted for using the weighted average cost and stated at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2017, 2018 AND 2019
2.     Summary of significant accounting policies (Continued)
(t)   Investment securities
Investment securities represent the Company's investments in equity securities that are not accounted for under the equity method or cost method, as well as other investments which primarily consist of debt investments.
(i)
Equity securities
In April 2018, the Company adopted ASU 2016-01, "Financial Instruments — Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities," including related technical corrections and improvements issued within ASU 2018-13. ASU 2016-01 amended various aspects of the recognition, measurement, presentation, and disclosure for financial instruments, and simplified the impairment assessment and enhanced the disclosure requirements of equity investments.
Prior to the adoption of ASU 2016-01, equity securities that have readily determinable fair values and were not accounted for using the equity method were classified as available-for-sale, and were carried at fair value with unrealized gains and losses recorded in accumulated other comprehensive income (loss) as a component of shareholders' equity. Upon the adoption of ASU 2016-01, the Company carries these equity securities at fair value with unrealized gains and losses recorded in the consolidated income statements. Unrealized gains recorded in accumulated other comprehensive income as of March 31, 2018 related to equity securities previously classified as available-for-sale, in the amount of RMB8,196 million, net of tax, were reclassified into retained earnings as of April 1, 2018.
In addition, prior to the adoption of ASU 2016-01, the cost method was used to account for certain equity investments in privately held companies over which the Company neither has control nor significant influence through investments in common stock or in-substance common stock. Upon the adoption of ASU 2016-01, the Company no longer accounts for these equity securities using the cost method. Beginning on April 1, 2018, the Company elected to record a majority of equity investments in privately held companies using the measurement alternative at cost, less impairment, with subsequent adjustments for observable price changes resulting from orderly transactions for identical or similar investments of the same issuer that were completed on or after April 1, 2018. These equity securities, which amounted to ~~RMB184~~RMB59,942 million ~~and RMB699 million, respectively. The Company disposed~~as of ~~certain equity interests and assets primarily relating to the micro loan business and related services and upon the completion of the restructuring of Payment Services during the year ended~~ March 31, ~~2015~~2018, were previously classified under investments in equity investees (Note ~~4(b)~~2(u))~~, accordingly~~ and were reclassified into investment securities on the ~~balances~~consolidated balance sheets as of ~~micro loans and allowance for doubtful accounts relating to micro loans became insignificant since then. For the years ended~~April 1, 2018. The consolidated balance sheet as of March 31, ~~2014, 2015~~2018 was not retrospectively adjusted.
Equity investments in privately held companies accounted for using the measurement alternative are subject to periodic impairment reviews. The Company's impairment analysis considers both qualitative and ~~2016,~~quantitative factors that may have a significant effect on the ~~charge-offs~~fair value of these equity securities.
In computing realized gains and ~~recoveries in~~losses on equity securities, the Company determines cost based on amounts paid using the average cost method. Dividend income is recognized when the right to receive the payment is established.
(ii)
Debt investments
Debt investments are generally stated at amortized cost. The maturities of these debt investments generally range from one to ten years. In addition, the Company has elected the fair value option for certain investments including convertible bonds subscribed. The fair value option permits the irrevocable election on an instrument-by-instrument basis at initial recognition of an asset or liability or upon an

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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, ~~2014, 2015~~2017, 2018 AND ~~2016~~2019
2.     Summary of significant accounting policies (Continued)
~~(r)   Loan and VAT receivables~~(t)   Investment securities (Continued)
~~relation to the allowance for doubtful accounts relating to micro loans and VAT receivables were also insignificant.~~
~~(s)   Investment securities~~
The classification of investment securities is based on the Company's intent, which is re-evaluated at each balance sheet date, with respect to those securities. Investment securities classified as trading securities, comprising of listed equity securities and financial derivatives such as warrants and equity swaps used as market access products to invest in listed equity securities in the PRC, are carried at fair value with realized or unrealized gains and losses recorded in the consolidated income statements. The securities that the Company has positive intent and ability to hold to maturity are classified as held-to-maturity securities and stated at amortized cost. The maturities of the held-to-maturity securities held by the Company generally range from one to ten years. Other investment securities classified as available-for-sale are carried at fair value with unrealized gains and losses recorded in accumulated other comprehensive income (loss) as a component of shareholders' equity. Realized gains and losses and provision for decline in value judged to be other than temporary, if any, are recognized in the consolidated income statements. In computing realized gains and losses on available-for-sale securities, the Company determines cost based on amounts paid, including direct costs such as commissions to acquire the security, using the average cost method. Other than the above, the Company has applied the fair value option for convertible bonds subscribed. Such fair value option permits the irrevocable fair value option election on an instrument-by-instrument basis at initial recognition of an asset or liability or upon an event that gives rise to a new basis of accounting for that instrument.
The ~~convertible bonds~~investments accounted for under the fair value option isare carried at fair value with realized or unrealized gains and losses recorded in the consolidated income statements. Interest income from debt investments is recognized using the effective interest ~~rate~~ method which is reviewed and adjusted periodically based on changes in estimated cash flows. ~~Dividend income is recognized when the right to receive the payment is established.~~
~~(t)   Investment~~(u)  Investments in equity investees
~~Equity investments represent the Company's investments in privately held companies and listed securities.~~ The Company applies the equity method to account for an equity ~~investment,~~investments in common stock or in-substance common stock, according to ASC 323 ~~"Investment~~"Investments — Equity Method and Joint Ventures," over which it has significant influence but does not own a majority equity interest or otherwise control.
An investment in in-substance common stock is an investment in an entity that has risk and reward characteristics that are substantially similar to that entity's common stock. The Company considers subordination, risks and rewards of ownership and obligation to transfer value when determining whether an investment in an entity is substantially similar to an investment in that entity's common stock.
For other equity investments that are not considered as debt securities or equity securities that have readily determinable fair values and over which the Company neither has significant influence nor control through investment in common stock or in-substance common stock, the cost method is used.
Under the equity method, the Company's share of the post-acquisition profits or losses of the equity investee is recognized in the consolidated income statements and its share of post-acquisition movements in accumulated other comprehensive income is recognized in ~~shareholders' equity.~~other comprehensive income. The Company records its

~~Table of Contents~~

~~ALIBABA GROUP HOLDING LIMITED~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~FOR THE YEARS ENDED MARCH 31, 2014, 2015 AND 2016~~
~~2.     Summary of significant accounting policies (Continued)~~
~~(t)   Investment in equity investees (Continued)~~
share of the results of ~~such~~the equity investees on a one quarter in arrears basis. The excess of the carrying amount of the investment over the underlying equity in net assets of the equity investee represents goodwill and intangible assets acquired. When the Company's share of losses in the equity investee equals or exceeds its interest in the equity investee, the Company does not recognize further losses, unless the Company has incurred obligations or made payments or guarantees on behalf of the equity investee.
The Company continually reviews its investments in equity investees to determine whether a decline in fair value below the carrying value is other-than-temporary. The primary factors the Company considers in its determination include the financial condition, operating performance and the prospects of the equity investee; other company specific information such as recent financing rounds; the geographic region, market and industry in which the equity investee operates; and the length of time that the fair value of the investment is below its carrying value. If the decline in fair value is deemed to be other-than-temporary, the carrying value of the equity investee is written down to fair value.
Prior to the adoption of ASU 2016-01, investments in equity investees also included certain equity investments in privately held companies over which the Company neither has control nor significant influence through investments in common stock or in-substance common stock, which were accounted for under the cost method. Under the cost method, the Company ~~carries~~carried the investment at cost and ~~recognizes~~recognized income to the extent of dividends received from the distribution of the equity investee's post-acquisition profits. Upon the adoption of ASU 2016-01, the Company no longer accounts for these equity securities using the cost method, and RMB59,942 million were reclassified into investment securities (Note 2(t)) as of April 1, 2018. The consolidated balance sheet as of March 31, 2018 was not retrospectively adjusted.

~~(u)~~Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2017, 2018 AND 2019
2.     Summary of significant accounting policies (Continued)
(v)   Property and equipment, net
Property and equipment are stated at cost less accumulated depreciation and ~~amortization less~~ any ~~provision required for~~ impairment ~~in value.~~loss. Depreciation ~~and amortization are~~is computed using the straight-line method with no residual value based on the estimated useful lives of the various classes of assets, which range as follows:
Computer equipment and software 3 -– 5 years
Furniture, office and transportation equipment 3 ~~- 5~~– 10 years
Buildings 20 -– 50 years
~~Leasehold~~Property improvements shorter of remaining lease period or estimated useful life
Construction in progress represents buildings and related premises under construction, which is stated at actual construction cost less any impairment loss. Construction in progress is transferred to the respective category of property and equipment when completed and ready for its intended use.
Costs of repairs and maintenance are expensed as incurred and asset improvements are capitalized. The cost and related accumulated depreciation ~~and amortization~~ of assets disposed of or retired are removed from the accounts, and any resulting gain or loss is reflected in the consolidated income statements.
~~(v)~~(w)  Land use rights
Land use rights represent lease prepayments to the local ~~Bureau of Land and Resources.~~government authorities. Land use rights are carried at cost less accumulated amortization and any impairment ~~losses.~~loss. Amortization is provided to write off the cost of lease prepayments on a straight-line basis over the period of the right which is ~~40 - 70~~30 – 50 years.
As of March 31, 2019, the Company revised the presentation to report land use rights under prepayments, receivables and other assets (Note 12) on the consolidated balance sheet. Accordingly, land use rights, net as of March 31, 2018 in the amount of RMB9,377 million was reclassified to prepayments, receivables and other assets to conform with the current year presentation.
~~(w)~~(x)   Intangible assets other than licensed copyrights
Intangible assets mainly include those acquired through business combinations and purchased intangible assets. Intangible assets acquired through business ~~acquisitions~~combinations are recognized as assets separate from goodwill if they satisfy either the "contractual-legal" or "separability" criterion. ~~Purchased intangible assets and intangible~~Intangible assets arising from ~~the acquisitions of subsidiaries and VIE subsidiaries~~business combinations are recognized and measured at fair value upon acquisition. Purchased intangible assets are initially recognized and measured at cost upon acquisition. Separately identifiable intangible assets that have determinable lives continue to be amortized over their estimated useful lives using the straight-line method as follows:
User base and customer relationships 1 – 16 years
Trade names, trademarks and domain names 3 – 20 years
Developed technology and patents 2 – 5 years
Non-compete agreements over the contracted term of up to 6 years
(y)   Licensed copyrights
Licensed copyrights related to titles to movies, television series, variety shows, animations and other video content acquired from external parties are carried at the lower of unamortized cost or net realizable value.

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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, ~~2014, 2015~~2017, 2018 AND ~~2016~~2019
2.     Summary of significant accounting policies (Continued)
~~(w)  Intangible assets~~(y)   Licensed copyrights (Continued)
~~value upon acquisition. Separately identifiable~~The amortization period for the licensed content vary depending on the type of content, which typically ranges from six months to ten years. Licensed copyrights are presented on the consolidated balance sheets as current assets under prepayments, receivables and other assets, or non-current assets under intangible assets, net, based on estimated time of usage. Licensed copyrights are generally amortized using an accelerated method based on historical viewership consumption patterns. Estimates of the consumption patterns for licensed copyrights are reviewed periodically and revised if necessary. For the years ended March 31, 2017, 2018 and 2019, amortization expenses in connection with the licensed copyrights of RMB3,886 million, RMB6,111 million and RMB11,391 million were recorded in cost of revenue within the Company's digital media and entertainment segment.
On a periodic basis, the Company evaluates the program usefulness of its licensed copyrights pursuant to the guidance in ASC 920 "Entertainment — Broadcasters," which provides that ~~have determinable lives continue~~the rights be reported at the lower of unamortized cost or estimated net realizable value. When there is a change in the expected usage of licensed copyrights, the Company estimates the net realizable value of licensed copyrights to ~~be amortized~~determine if any impairment exists. The net realizable value of licensed copyrights is determined by estimating the expected cash flows from advertising and membership fees, less any direct costs, over ~~their estimated~~the remaining useful lives ~~using~~of the ~~straight-line method as follows:~~
~~User base and customer relationships~~ ~~2 - 6 years~~
~~Trade names, trademarks and domain names~~ ~~3 - 12 years~~
~~Developed technology and patents~~ ~~2 - 5 years~~
~~Licenses and copyrights~~ ~~1 - 5 years~~
~~Non compete agreements~~ ~~over the contracted term from 2 - 6 years~~
Separately identifiable intangible assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability is based on an estimate of undiscounted futurelicensed copyrights. The Company estimates these cash flows ~~resulting from~~for each category of content separately. Estimates that impact these cash flows include anticipated levels of demand for the ~~use~~Company's advertising services and the expected selling prices of the ~~asset and its eventual disposition. Measurement of any impairment loss for identifiable intangible assets is based~~Company's advertisements on the ~~amount by which~~entertainment distribution platforms. For the ~~carrying amount~~years ended March 31, 2017, 2018 and 2019, impairment charges in connection with the licensed copyrights of RMB857 million, RMB801 million and RMB2,843 million were recorded in cost of revenue within the ~~assets exceeds the fair value of the assets.~~Company's digital media and entertainment segment.
~~(x)~~(z)   Goodwill
Goodwill represents the excess of the purchase consideration over the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed offrom the acquired entity as a result of the Company's acquisitions of interests in its ~~subsidiaries and VIEs.~~subsidiaries. Goodwill is not amortized but is tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that it might be impaired. The Company first assesses qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. In the qualitative assessment, the Company considers primary factors such as industry and market considerations, overall financial performance of the reporting unit, and other specific information related to the operations. Based on the qualitative assessment, if it is more likely than not that the fair value of ~~each~~a reporting unit is less than the carrying amount, the quantitative impairment test is performed.
In performing the two-step quantitative impairment test, the first step compares the fair ~~values~~value of each reporting unit to its carrying amount, including goodwill. If the fair value of ~~each~~the reporting unit exceeds its carrying amount, goodwill is not considered to be impaired and the second step will not be required. If the carrying amount of a reporting unit exceeds its fair value, the second step compares the implied fair value of goodwill to the carrying value of a reporting unit's goodwill. The implied fair value of goodwill is determined in a manner similar to accounting for a business combination with the allocation of the assessed fair value determined in the first step to the assets and liabilities of the reporting unit. The excess of the fair value of the reporting unit over the amounts assigned to the assets and liabilities is the implied fair value of goodwill. This allocation process is only performed for the purposes of evaluating goodwill impairment and does not

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2017, 2018 AND 2019
2.     Summary of significant accounting policies (Continued)
(z)   Goodwill (Continued)
result in an entry to adjust the value of any assets or liabilities. Application of a goodwill impairment test requires significant management judgment, including the identification of reporting units, ~~assigning~~allocation of assets, liabilities and goodwill to reporting units, and ~~determining~~determination of the fair value of each reporting unit.
~~(y)~~(aa) Impairment of long-lived assets other than goodwill and licensed copyrights
The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is

~~Table of Contents~~

~~ALIBABA GROUP HOLDING LIMITED~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~FOR THE YEARS ENDED MARCH 31, 2014, 2015 AND 2016~~
~~2.     Summary of significant accounting policies (Continued)~~
~~(y)   Impairment of long-lived assets other than goodwill (Continued)~~
measured by a comparison of the carrying amount of an asset to the future undiscounted net cash flows expected to be generated by the asset. If ~~such~~the assets are considered to be impaired, the impairment recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. No impairment of long-lived assets ~~other than investment in equity investees~~ was recognized for the years ended March 31, ~~2014, 2015~~2017, 2018 and ~~2016.~~2019.
~~(z)~~(ab) Derivatives and hedging
~~In accordance with ASC 815 "Derivatives and Hedging," all~~All contracts that meet the definition of a derivative ~~should be~~are recognized on the consolidated balance sheets as either assets or liabilities and recorded at fair value. Changes in the fair value of derivatives are either recognized periodically in the consolidated income statements or in other comprehensive income depending on the use of the derivatives and whether ~~it qualifies~~they qualify for hedge accounting and isare so ~~designated.~~designated as cash flow hedges, fair value hedges or net investment hedges.
To qualify for hedge accounting, the hedge relationship is designated and formally documented at inception, detailing the particular risk management objective and strategy for the hedge (which includes the item and risk that is being hedged), the derivative that is being used and how hedge effectiveness is being assessed. A derivative has to be effective in accomplishing the objective of offsetting either changes in fair value or cash flows for the risk being hedged. The effectiveness of the hedging relationship is evaluated on a prospective and retrospective basis using qualitative and quantitative measures of correlation. Qualitative methods may include comparison of critical terms of the derivative to those of the hedged item. Quantitative methods include a comparison of the changes in the fair value or discounted cash flow of the hedging instrument to that of the hedged item. A hedging relationship is considered effective if the results of the hedging instrument are within a ratio of 80% to 125% of the results of the hedged item.
Interest rate swaps
Interest rate swaps designated as hedging instruments to hedge against the cash flows attributable to recognized assets or liabilities or ~~forecast~~forecasted payments may qualify as cash flow hedges. ~~During the year ended March 31, 2014, the~~The Company entered into interest rate swap contracts to swap floating interest payments related to certain borrowings for fixed interest payments to hedge the interest rate risk associated with certain forecasted payments and obligations. The effective portion of changes in the fair value of interest rate swaps that are designated and qualify as cash flow hedges is recognized in accumulated other comprehensive income. The gain or loss relating to the ineffective portion is recognized immediately in interest and investment income, net in the consolidated income statements. The fair value change of the interest rate swaps not qualified for hedge accounting held by the Company resulted in a gain of RMB102 million and a loss of RMB43 million, which were recognized in interest and investment income, net in the consolidated income statements for the years ended March 31, 2014 and 2015, respectively.
Amounts in accumulated other comprehensive income ~~shall be~~are reclassified into earnings in the same period during which the hedged forecasted transaction affects earnings. Upon the termination of the interest rate swap contracts during the year ended March 31, 2015, the hedging instruments were derecognized from the consolidated balance sheets and accumulated other comprehensive income was recorded in interest and investment income, net resulting in a loss of RMB59 million in the consolidated income statements for the year ended March 31, 2015.

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, ~~2014, 2015~~2017, 2018 AND ~~2016~~2019
2.     Summary of significant accounting policies (Continued)
~~(z)~~(ab) Derivatives and hedging (Continued)
Forward exchange contracts
Forward exchange contracts designated as hedging instruments to hedge against the future changes in currency exposure of net investments in foreign operations may qualify as net investment hedges. ~~During the year ended March 31, 2016, the~~The Company entered into ~~several~~ forward exchange contracts to hedge the foreign currency risk associated with investments in net assets of certain subsidiaries with operations in the PRC of which ~~their~~the functional ~~currencies are~~currency is RMB. The effective portion of the changes in fair value of the forward exchange contracts that are designated and ~~qualified~~qualify as net investment hedges is recognized in accumulated other comprehensive income to offset the cumulative translation adjustments ~~related~~relating to those subsidiaries. The gain or loss relating to the ineffective portion, which is measured based on changes in forward exchange rates, is recognized immediately in other income, net in the consolidated income statements. Amounts accumulated are removed from accumulated other comprehensive income and recognized in the consolidated income statements upon disposal of those subsidiaries. Once the hedge becomes ineffective, hedge accounting is discontinued prospectively. As of March 31, 2016, forward exchange contracts with fair value of US$40 million (RMB257 million) are qualified and designated as hedging instruments. During the year ended March 31, 2016, the Company recognized a loss of US$46 million (RMB298 million) in other income, net in the consolidated income statement, which was the aggregate of (i) the changes in fair value of the forward exchange contracts not qualified for hedge accounting and (ii) the ineffective portion of the changes in fair value of the forward exchange contracts that are designated and qualified as net investment hedges.
Changes in the fair value of the derivatives not qualified for hedge accounting are reported in the consolidated income statements. The estimated fair value of the derivatives is determined based on relevant market information. These estimates are calculated with reference to the market rates using industry standard valuation techniques.
~~(aa)~~(ac) Bank ~~borrowing~~borrowings and unsecured senior notes
Bank borrowings and unsecured senior notes are recognized initially at fair value, net of upfront fees, ~~and other incident fees incurred. Unsecured senior notes are recognized initially at fair value, net of~~ debt discounts or premiums, ~~and~~ debt issuance ~~costs. Costs incurred which are directly attributable to the bank borrowings~~costs and ~~unsecured senior notes are capitalized and amortized over the estimated term of the facilities using the effective interest method.~~other incidental fees. Upfront fees, debt ~~discount~~discounts or ~~premium and~~premiums, debt issuance costs and other incidental fees are recorded as a reduction of the proceeds received and the related accretion is recorded as interest expense in the consolidated income statements over the estimated term of the facilities using the effective interest method.
~~(ab)~~(ad) Merchant deposits
The Company collects deposits representing an annual upfront service fee from merchants on Tmall atand AliExpress before the beginning of each calendar year. These deposits are initially recorded as a liability by the Company. ~~Such~~The deposits are refundable to a merchant ~~depending on~~if the level of sales volume that is generated by that merchant on Tmall or AliExpress meets the target during the period. If the transaction volume target is not met at the end of each calendar year, the relevant deposits will ~~be non-refundable~~become non-refundable. These merchant deposits are accounted for as variable consideration at an amount that is estimated at contract inception. The estimate is updated at the end of each reporting period and ~~such portion of~~when there are changes in circumstances during the reporting period. Merchant deposits isare recognized as commission revenue in the consolidated income ~~statements.~~statements when the likelihood of refund to the merchant is considered remote based on the patterns of sales volume generated by the merchant during the reporting period.
(ae) Deferred revenue and customer advances
Deferred revenue and customer advances generally represent cash received from customers that relate to goods or services to be provided in the future. Deferred revenue, mainly relating to membership fees and cloud computing services revenue, is stated at the amount of service fees received less the amount previously recognized as revenue upon the provision of the respective services to customers.

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, ~~2014, 2015~~2017, 2018 AND ~~2016~~2019
2.     Summary of significant accounting policies (Continued)
~~(ac) Deferred revenue and customer advances~~
Deferred revenue and customer advances represent service fees received from customers that relate to services to be provided in the future. Deferred revenue, mainly relating to membership and storefront fees, is stated at the amount of service fees received less the amount previously recognized as revenue upon the provision of the respective services over the terms of the respective service contracts.
~~(ad)~~(af) Commitments and contingencies
In the normal course of business, the Company is subject to contingencies, such as legal proceedings and claims arising out of its business, that cover a wide range of matters. Liabilities for ~~such~~the contingencies are recorded when it is probable that a liability has been incurred and the amount of the ~~assessment~~liability can be reasonably estimated.
Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company assesses ~~such~~these contingent liabilities, ~~and such assessment~~which inherently involves ~~an exercise of~~ judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in ~~such~~legal proceedings, the Company, in consultation with its legal counsel, evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, ~~then~~ the estimated liability would be accrued in the consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable, ~~but is reasonably possible,~~ or is probable but cannot be estimated, ~~then~~ the nature of the contingent liability, together with an estimate of the range of the reasonably possible loss, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed.
~~(ae)~~(ag) Treasury shares
The Company accounts for treasury shares using the cost method. Under this method, the cost incurred to purchase the shares is recorded in the treasury shares account on the consolidated balance sheets. At retirement of the treasury shares, the ordinary shares account is charged only for the aggregate par value of the shares. The excess of the acquisition cost of treasury shares over the aggregate par value is allocated between additional paid-in capital (up to the amount credited to the additional paid-in capital upon original issuance of the shares) and retained earnings. The treasury shares account includes ~~28,245,662~~20,789,596 and ~~24,393,569~~18,737,922 ordinary shares issued at par to wholly-owned subsidiaries of the Company for the purpose of certain equity investment plans for management as of March 31, ~~2015~~2018 and ~~2016,~~2019, respectively.

~~Table of Contents~~

~~ALIBABA GROUP HOLDING LIMITED~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~FOR THE YEARS ENDED MARCH 31, 2014, 2015 AND 2016~~
~~2.     Summary of significant accounting policies (Continued)~~
~~(af) Subscription receivables~~
The Company ~~made available loans to certain employees~~applies the treasury stock method for the accounting of the ~~Company and its related companies~~reciprocal relationship in ~~order to finance their exercise of share options and subscription for~~which Suning (Note 4(y)) held ordinary shares of the ~~Company (Note 13).~~Company. The ~~participants of all such loans have pledged the ownership of their~~treasury shares account included 4,162,856 ordinary shares ~~or restricted shares~~representing the Company's share of Suning's investment in the Company as ~~security for these loans. For accounting purposes, loans outstanding with respect to~~of March 31, 2018. Suning has disposed all of its equity interest in the ~~exercise~~Company as of vested options and share subscription are recorded as subscription receivables in equity. Further, unvested options that were exercised are recorded as other current liabilities and they are transferred to equity upon vesting.March 31, 2019.
~~(ag)~~(ah) Statutory reserves
In accordance with the relevant regulations and their articles of association, subsidiaries of the Company incorporated in the PRC are required to allocate at least 10% of their after-tax profit determined based on the PRC accounting standards and regulations to the general reserve until ~~such~~the reserve has reached 50% of the relevant subsidiary's registered capital. Appropriations to the enterprise expansion fund and staff welfare and bonus fund are at the discretion of the respective board of directors of the subsidiaries. These reserves can only be used for specific purposes and are not transferable to the Company in the form of loans, advances or cash dividends. During the years ended March 31, ~~2014, 2015~~2017, 2018 and ~~2016,~~2019, appropriations to the general reserve

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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2017, 2018 AND 2019
2.     Summary of significant accounting policies (Continued)
(ah) Statutory reserves (Continued)
amounted to ~~RMB1,137~~RMB836 million, ~~RMB267~~RMB298 million and ~~RMB529~~RMB690 million, respectively. No appropriations to the enterprise expansion fund and staff welfare and bonus fund have been made by the Company.
~~(ah)~~(ai)  Reclassification of comparative figures
In ~~previous years, loan~~April 2018, the Company adopted ASU 2016-18, "Statement of Cash Flows (Topic 230): Restricted Cash." As a result of adopting this new accounting update, the Company retrospectively adjusted the consolidated statements of cash flows to include restricted cash and escrow receivables ~~arising from micro loans extended to small~~in cash and ~~medium size enterprises are separately presented as "Loan receivables, net"~~cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the consolidated ~~balance sheets. After the Company disposed~~statements of ~~certain equity interests and assets primarily relating to the micro loan business and related services upon the completion~~cash flows. The impact of the ~~restructuring~~retrospective reclassification on cash flows from operating activities, investing activities and effect of ~~Payment Services during~~exchange rate changes for the year ended March 31, ~~2015 (Note 4(b)),~~2018 was an increase of RMB634 million, an increase of RMB126 million and an increase of RMB2 million, respectively. The impact of the ~~loan receivables balance became insignificant. Accordingly,~~retrospective application on cash flows from operating activities, investing activities and effect of exchange rate changes for the ~~Company revised the presentation to report the loan receivables balance under "Prepayments, receivables~~year ended March 31, 2017 was an increase of RMB2,528 million, a decrease of RMB1,215 million and ~~other assets." Prior year amounts have been reclassified to maintain consistency with the current year presentation. These reclassifications had no effect on the reported results~~a decrease of ~~operations and net assets. Corresponding reclassifications have also been made to the consolidated statement of cash flows.~~RMB4 million, respectively.
3.     Recent accounting pronouncements
In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, "Revenue from Contracts with Customers," which supersedes the revenue recognition requirements in "Revenue Recognition (Topic 605)" and requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14 to defer the effective date of ASU 2014-09 by one year. In AprilFebruary 2016, the FASB issued ASU ~~2016-10~~2016-02, "Leases (Topic 842)" and issued certain transitional guidance and subsequent amendments between January 2018 and March 2019 within ASU 2018-01, ASU 2018-10, ASU 2018-11, ASU 2018-20 and ASU 2019-01 (collectively, including ASU 2016-02, "ASC 842"). ASU 2016-02 creates a new topic in ASC 842 "Leases" to ~~clarify ASU 2014-09~~replace the current topic in ASC 840 "Leases," which increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on ~~identifying performance obligations~~the consolidated balance sheets and ~~licensing implementation guidance contained in~~disclosing key information about leasing arrangements. ASC 842 affects both lessees and lessors, although for the latter the provisions are similar to the current model, but are updated to align with certain changes to the lessee model and also the new revenue recognition ~~standard.~~provisions contained in ASC 606. The new guidance is effective for the Company for the year ending March 31, 2020 and interim reporting periods during the year ending March 31, 2020. The Company adopted the new guidance beginning on April 1, 2019 using the modified retrospective method and no adjustments will be made to the comparative periods. As permitted under the transition guidance, the Company will carry forward the assessment of whether the contracts contain or are leases, classification of the leases and remaining lease terms. Based on the Company's portfolio of leases as of March 31, 2019, approximately RMB24.9 billion of right-of-use assets and RMB19.4 billion of liabilities, primarily relating to property leases, will be recognized on the Company's consolidated balance sheet upon adoption.
In June 2016, the FASB issued ASU 2016-13, "Financial Instruments — Credit Losses (Topic 326): Measurement on Credit Losses on Financial Instruments," and issued subsequent amendments to the initial guidance and transitional guidance between November 2018 and May 2019 within ASU 2018-19, ASU 2019-04 and ASU 2019-05. ASU 2016-13 introduces new guidance for credit losses on instruments within its scope. The new guidance introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade and other receivables, held-to-maturity debt securities, loans and net investments in leases. The new guidance also modifies the impairment model for available-for-sale debt securities and requires entities to determine whether all or a portion of the unrealized loss on an available-for-sale debt security is a credit loss. Further, the new guidance indicates that entities may not use the length of time a security has been in an unrealized loss position as a factor in concluding whether a credit

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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2017, 2018 AND 2019
3.     Recent accounting pronouncements (Continued)
loss exists. The new guidance is effective for the Company for the year ending March 31, 2021 and interim reporting periods during the year ending March 31, 2021. Early adoption is permitted for the Company for the year ending March 31, 2020 and interim reporting periods during the year ending March 31, 2020. The Company is evaluating the effects, if any, of the adoption of this guidance on the Company's financial position, results of operations and cash flows.
In January 2017, the FASB issued ASU 2017-04, "Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment," which simplifies how an entity is required to test goodwill for impairment by eliminating step two from the goodwill impairment test. Step two of the goodwill impairment test measures a goodwill impairment loss by comparing the implied fair value of a reporting unit's goodwill with its carrying amount. The new guidance is effective prospectively for the Company for the year ending March 31, 2021 and interim reporting periods during the year ending March 31, 2021. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is evaluating the effects, if any, of the adoption of this guidance on the Company's financial position, results of operations and cash flows.
In August 2017, the FASB issued ASU 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities," and issued subsequent amendments to the initial guidance or transitional guidance within ASU 2019-04 in April 2019. ASU 2017-12 simplifies the application of hedge accounting and makes more financial and nonfinancial hedging strategies eligible for hedge accounting. It also amends the presentation and disclosure requirements and changes how companies assess effectiveness. The new guidance permits a qualitative effectiveness assessment for certain hedges instead of a quantitative test after the initial qualification, if the company can reasonably support an expectation of high effectiveness throughout the term of the hedge. Also, for cash flow hedges and net investment hedges, if the hedge is highly effective, all changes in the fair value of the derivative hedging instrument will be recorded in other comprehensive income. The Company adopted the new guidance prospectively beginning on April 1, 2019. At this time, the Company does not expect that the adoption of this guidance will have a material impact on the Company's financial position, results of operations and cash flows.
In June 2018, the FASB issued ASU 2018-07, "Compensation — Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting," which expands the scope of ASC 718 to include share-based payment transactions for acquiring goods and services from non-employees. An entity should apply the requirements of ASC 718 to non-employee awards except for specific guidance on inputs to an option pricing model and the attribution of cost. The amendments specify that ASC 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor's own operations by issuing share-based payment awards. The Company adopted the new guidance beginning on April 1, 2019. The adoption of this guidance will impact the accounting of the share-based awards granted to non-employees but the Company does not expect that the adoption of this guidance will have a material impact on the Company's financial position, results of operations and cash flows.
In August 2018, the FASB issued ASU 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement," which eliminates, adds and modifies certain disclosure requirements for fair value measurements as part of the FASB's disclosure framework project. The new guidance is effective for the Company for the year ending March 31, 2021 and interim reporting periods during the year ending March 31, 2021. Early adoption is permitted for the adoption of either the entire ASU or only the provisions that eliminate or modify the requirements. The Company is

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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2017, 2018 AND 2019
3.     Recent accounting pronouncements (Continued)
evaluating the effects, if any, of the adoption of this guidance on the fair value disclosure in the consolidated financial statements.
In October 2018, the FASB issued ASU 2018-17, "Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities," which provides guidance that indirect interests held through related parties under common control will be considered on a proportional basis when determining whether fees paid to decision makers and service providers are variable interests. These indirect interests were previously treated the same as direct interests. The consideration of indirect interests on a proportional basis is consistent with how indirect interests held through related parties under common control are treated when determining if a reporting entity within a related party group is the primary beneficiary of a VIE. The new guidance is effective retrospectively for the Company for the year ~~end~~ ending March 31, ~~2019~~2021 and ~~the~~ interim reporting periods during the year ending March 31, ~~2019,~~2021 with ~~early~~a cumulative-effect adjustment to retained earnings at the beginning of the earliest period presented. Early adoption is permitted. The Company is evaluating the effects, if any, of the adoption of this guidance on the Company's financial position, results of operations and cash flows.
In November 2018, the FASB issued ASU 2018-18, "Collaborative Arrangements (Topic 808): Clarifying the Interaction Between Topic 808 and Topic 606." ASU 2018-18 clarifies that elements of collaborative arrangements could qualify as transactions with customers in the scope of ASC 606. The amendments require the application ~~permitted only~~of existing guidance to determine the units of account in collaborative arrangement for purposes of identifying transactions with customers. For transactions outside the scope of ASC 606, companies can apply elements of ASC 606 or other relevant guidance by analogy, or apply a reasonable accounting policy if there is no appropriate analogy. ASU 2018-18 is effective retrospectively for the ~~annual reporting period~~Company for the year ending March 31, ~~2018~~2021 and ~~the~~ interim reporting periods during the year ending March 31, ~~2018.~~2021. Early adoption is permitted. The Company is evaluating the ~~existing revenue recognition policies to determine whether~~effects, if any, ~~contracts in the scope~~ of the adoption of this guidance ~~will be affected by~~on the Company's financial position, results of operations and cash flows.
In March 2019, the FASB issued ASU 2019-02, "Entertainment — Films — Other Assets — Film Costs (Subtopic 926-20) and Entertainment — Broadcasters — Intangibles — Goodwill and Other (Subtopic 920-350)". This guidance aligns the accounting guidance for production costs for (1) films and (2) episodic content produced for television series and streaming services. This new ~~requirements.~~guidance also clarifies when a company should test films and license agreements for program material for impairment at the film-group level, amends the presentation and disclosure requirements for produced or licensed content and addresses statement of cash flows classification for license arrangements. The new guidance is effective prospectively for the Company for the year ending March 31, 2021 and interim reporting periods during the year ending March 31, 2021. Early adoption is permitted. The Company is evaluating the effects, if any, of the adoption of this guidance on the Company's financial position, results of operations and cash flows.
In April 2019, the FASB issued ASU 2019-04 "Codification Improvements to Topic 326, Financial Instruments — Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments." Apart from the amendments to ASU 2016-13 and ASU 2017-12 mentioned above, the ASU also included subsequent amendments to ASU 2016-01, which the Company adopted in April 2018 (Note 2(t)). The guidance in relation to the amendments to ASU 2016-01 is effective for the Company for the year ending March 31, 2021 and interim reporting periods during the year ending March 31, 2021. Early adoption is permitted. The Company is evaluating the effects, if any, of the adoption of these guidance on the Company's financial position, results of operations and cash flows.

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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, ~~2014, 2015~~2017, 2018 AND ~~2016~~2019
~~3.     Recent accounting pronouncements (Continued)~~4.     Significant restructuring transaction, mergers and acquisitions and investments
Restructuring transaction
(a)  2014 restructuring of the relationship with Ant Financial and Alipay and 2018 amendments
In ~~January 2015,~~August 2014, the ~~FASB issued ASU 2015-01, "Income Statement — Extraordinary~~Company entered into a share and ~~Unusual Items,"~~asset purchase agreement (the "2014 SAPA"), and entered into or amended certain ancillary agreements including an amendment and restatement of the intellectual property license agreement with Alipay (the "2014 IPLA"). Pursuant to these agreements, the Company restructured its relationships with Ant Financial and Alipay.
As of August 2014, the fair value of the restructured arrangement exceeded the fair value of the pre-existing arrangement with Ant Financial by RMB1.3 billion. As Ant Financial was controlled by a director and major shareholder of the Company, the excess value provided to the Company in this related party transaction was accounted for as an equity contribution by the shareholder in the statement of changes in shareholders' equity. Given the nature of this transaction, the corresponding asset representing the excess value receivable by the Company was accounted for as a restructuring reserve in equity and amortized as an expense in the consolidated income statements over the expected term of the restructured arrangement which ~~eliminates~~is estimated to be five years. The amortization of the ~~concept~~excess value of ~~extraordinary~~RMB264 million, RMB264 million and ~~unusual items from U.S. GAAP. The new guidance is effective prospectively~~RMB264 million were recorded in other income, net in the consolidated income statements for the ~~Company for the year end ending~~years ended March 31, 2017, 2018 and interim reporting periods during the year ending March 31, 2017. Early adoption is permitted. The Company is evaluating the effects, if any, of the adoption of this revised guidance on the Company's financial position, results of operations or cash flows.2019, respectively (Note 6).
In February ~~2015,~~2018, the ~~FASB issued ASU 2015-02, "Consolidation (Topic 810) — Amendments~~Company amended both the 2014 SAPA (the amended version of which is referred to as the "2018 SAPA") and the Alipay commercial agreement, and agreed with Ant Financial and certain other parties on forms of certain ancillary agreements, including an amendment and restatement of the 2014 IPLA ("the 2018 IPLA"). The 2018 SAPA and amendment to the ~~Consolidation Analysis," which amends~~Alipay commercial agreement were entered into to facilitate the ~~criteria for determining which entities are considered VIEs, amends the criteria for determining if~~planned acquisition of a ~~service provider possesses a variable~~33% equity interest in ~~a VIE~~Ant Financial, and ~~ends~~ the ~~deferral granted to investment companies for application~~forms of certain ancillary agreements will be entered into and/or become effective upon the closing of the ~~VIE consolidation model.~~acquisition of this equity interest.
Apart from the amended provisions described below, the key terms of the agreements with Ant Financial and Alipay from the 2014 restructuring remain substantially unchanged.
2014 SAPA and 2018 SAPA
Sale of SME loan business and certain other assets
Pursuant to the 2014 SAPA, the Company agreed to sell certain securities and assets primarily relating to the SME loan business and other related services to Ant Financial for an aggregate cash consideration of RMB3,219 million. The ~~guidance is effective~~sale was completed in February 2015. In addition, pursuant to software system use and service agreements relating to the know-how and related intellectual property that we agreed to sell together with the SME loan business and related services, the Company will receive annual fees (the "SME Annual Fee") for a term of seven years. These SME Annual Fees, which are recognized as other revenue, are determined as follows: for calendar years 2015 to 2017, the entities operating the SME loan business paid an annual fee equal to 2.5% of the average daily balance of the SME loans provided by these entities, and in calendar years 2018 to 2021, these entities will pay an annual fee equal to the amount of the fees paid in calendar year 2017. The Company accounts for the ~~Company for~~SME Annual Fee in the ~~year ending March 31, 2017 and interim reporting~~ periods ~~during~~when the ~~year ending March 31, 2017. The guidance may be applied retrospectively or through a cumulative effect adjustment~~services are provided, where the payments are expected to ~~equity as~~approximate the estimated fair values of the ~~beginning~~services provided. The SME Annual Fee of ~~the year of adoption. Early application is permitted, including adoption~~RMB847 million, RMB956 million and RMB954 million were recorded in ~~an interim period. The Company is evaluating the effects, if any, of the adoption of this revised guidance on the Company's financial position, results of operations or cash flows.~~
~~In April 2015, the FASB issued ASU 2015-03, "Simplifying the Presentation of Debt Issuance Costs," which requires debt issuance costs relating to a recognized debt liability to be presented~~revenue in the consolidated balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The new guidance is effective retrospectively for the Company for the year end ending March 31, 2017 and interim reporting periods during the year ending March 31, 2017. Early adoption is permitted. The Company is evaluating the effects, if any, of the adoption of this revised guidance on the Company's financial position, results of operations or cash flows. At this time, the Company does not expect this accounting standard update to have a material impact on the consolidated financial statements.
In September 2015, the FASB issued ASU 2015-16, "Business Combinations (Topic 805) — Simplifying the Accounting for Measurement-Period Adjustments," which eliminates the requirement to restate prior period financial statements for measurement period adjustments. The new guidance requires that the cumulative impact of a measurement period adjustment (including the impact on prior periods) be recognized in the reporting period in which the adjustment is identified. The new guidance is effective prospectively for the Company for the year ending March 31, 2017 and interim reporting periods during the year ending March 31, 2017. Early adoption is permitted. The Company is evaluating the effects, if any, of the adoption of this revised guidance on the Company's financial position, results of operations or cash flows.
In November 2015, the FASB issued ASU 2015-17, "Income Taxes (Topic 740) — Balance Sheet Classification of Deferred Taxes," which simplifies the presentation of deferred income taxes by requiring deferred tax assets and liabilities be classified as noncurrent on the consolidated balance sheet. The new guidance is effective for the Company for the year ending March 31, 2018 and interim reporting periods during the year ending March 31, 2018. Early adoption is permitted. The new guidance may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The Company is evaluating the effects, if any, of the adoption of this revised guidance on the Company's financial position, results of operations or cash flows. At this time, the Company does not expect this accounting standard update to have a material impact on the consolidated financial statements.
In January 2016, the FASB issued ASU 2016-01 "Financial Instruments-Overall (Subtopic 825-10) — Recognition and Measurement of Financial Assets and Financial Liabilities," which amends various aspects of

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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, ~~2014, 2015~~2017, 2018 AND ~~2016~~2019
~~3.     Recent accounting pronouncements~~4.     Significant restructuring transaction, mergers and acquisitions and investments (Continued)
(a)  2014 restructuring of the relationship with Ant Financial and Alipay and 2018 amendments (Continued)
the ~~recognition, measurement, presentation, and disclosure for financial instruments. With respect to the Company's~~ consolidated financial statements for the ~~most significant impact relates~~years ended March 31, 2017, 2018 and 2019, respectively (Note 21).
Planned issuance of equity interest
Pursuant to the ~~accounting for equity investments. It will impact the disclosure and presentation of financial assets and liabilities. The new guidance is effective for~~2014 SAPA, the Company ~~for~~is entitled to receive up to 33% equity interest in Ant Financial under certain circumstances. To facilitate the ~~year ending March 31, 2019~~acquisition of equity interest in Ant Financial contemplated under the 2014 SAPA, the 2018 SAPA provides that Ant Financial will issue new securities to the Company representing a 33% equity interest in Ant Financial, subject to the receipt of the necessary PRC regulatory approvals and ~~interim reporting periods during~~ the ~~year ending March 31, 2019. Early adoption is permitted only~~satisfaction of other conditions set forth in the 2018 SAPA.
Under the 2014 SAPA and the 2018 SAPA, the consideration to acquire the 33% equity interest in Ant Financial will be fully funded by payments from Ant Financial and its subsidiaries to the Company in consideration for certain ~~provisions. The Company is evaluating the effects, if any, of the adoption of this revised guidance on the Company's financial position, results of operations or cash flows.~~
~~In February 2016, the FASB issued ASU 2016-02 "Leases" to increase transparency~~intellectual property and ~~comparability among organizations by recognizing lease~~ assets and lease liabilities on the consolidated balance sheet and disclosing key information about leasing arrangements. ASU 2016-02 creates a new ASC 842 "Leases" to replace the previous ASC 840 "Leases." ASU 2016-02 affects both lessees and lessors, although for the latter the provisions are similar to the previous model, but updated to align with certain changes to the lessee model and also the new revenue recognition provisions contained in ASU 2014-09. The new guidance is effective forthat the Company ~~for~~will transfer upon the year ending March 31, 2020 and interim reporting periods during the year ending March 31, 2020. Early adoption is permitted. The Company is evaluating the effects, if any, of the adoption of this revised guidance on the Company's financial position, results of operations or cash flows.
In March 2016, the FASB issued ASU 2016-05 "Derivatives and Hedging: Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships," which clarifies that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument under ASC 815 "Derivatives and hedging," does not, in and of itself, require designation of that hedging relationship provided that all other hedge accounting criteria continue to be met. The new guidance is effective for the Company for the year ending March 31, 2018 and interim reporting periods during the year ending March 31, 2018. Early adoption is permitted. The Company is evaluating the effects, if any, of the adoption of this revised guidance on the Company's financial position, results of operations or cash flows.
In March 2016, the FASB issued ASU 2016-06 "Derivatives and Hedging: Contingent Put and Call Options in Debt Instruments" to clarify the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. An entity performing the assessment under the amendments is required to assess the embedded call (put) options solely in accordance with the four-step decision sequence. The amendments apply to all entities that are issuers of or investors in debt instruments (or hybrid financial instruments that are determined to have a debt host) with embedded call (put) options. The new guidance is effective for the Company for the year ending March 31, 2018 and interim reporting periods during the year ending March 31, 2018. Early adoption is permitted. The Company is evaluating the effects, if any, of the adoption of this revised guidance on the Company's financial position, results of operations or cash flows.
In March 2016, the FASB issued ASU 2016-07 "Simplifying the Transition to the Equity Method of Accounting," to simplify the accounting for equity method investments, which eliminates the requirement in ASC 323 "Investments — equity method and joint ventures" that an entity retroactively adopt the equity method of accounting if an investment qualifies for useissuance of the equity ~~method~~interest. The consideration is determined based on the fair value of the underlying assets. The Company currently estimates the total consideration for the acquisition of the 33% equity interest in Ant Financial will be approximately RMB12.2 billion before deducting expenses in connection with the transfers and share subscription. The large majority of the intellectual property and assets to be transferred as part of these arrangements was previously planned to be transferred to Ant Financial pursuant to the 2014 SAPA. Ant Financial may elect to defer certain offshore transfer payments, in which case the Company's obligations to pay corresponding consideration for the equity issuance will also be deferred. If the Company has made all its outstanding equity issuance consideration payments at a ~~result~~time when Ant Financial has not made all corresponding transfer payments to the Company, Ant Financial or its subsidiaries will issue interest-bearing promissory notes to the Company. In any event, Ant Financial must complete all outstanding transfer payments to the Company, by the earlier of (i) the first anniversary of an ~~increase~~Ant Financial IPO meeting certain minimum criteria for a qualified IPO set forth in the ~~level~~2018 SAPA (a "Qualified IPO"), and (ii) the fifth anniversary of ~~ownership or degree~~the issuance of ~~influence. The amendments require that~~ the equity ~~method investor add~~interest.
Upon the ~~cost~~issuance of ~~acquiring~~ the ~~additional~~equity interest, the Company will enter into the 2018 IPLA and the Profit Share Payments under the 2014 IPLA will automatically terminate.
Removal of liquidity event payment obligation
Under the 2014 SAPA, in the event of a qualified IPO of Ant Financial or Alipay, if the Company had not acquired equity interest in ~~the investee~~Ant Financial prior to the ~~current basis~~closing of such IPO, the Company was entitled, at its election, to receive a one-time liquidity event payment equal to 37.5% of the ~~investor's previously held interest and adopt~~equity value, immediately prior to the qualified IPO. If the Company had acquired the equity ~~method~~interest in Ant Financial, but in an aggregate amount less than 33%, the percentage of ~~accounting as~~Ant Financial's equity value used to calculate this liquidity event payment would be adjusted proportionately. In lieu of receiving the ~~date the investment becomes qualified for equity method accounting. The new guidance is effective for~~liquidity event payment, the Company ~~for~~could instead elect to receive the ~~year ending March 31, 2018 and interim reporting periods during~~Profit Share Payments under the ~~year ending March 31, 2018. Early adoption is permitted. The~~2014 IPLA described below in perpetuity, subject to the receipt of regulatory approvals. If the Company so elected, in connection with the qualified IPO, Ant Financial would have been required to use its commercially reasonable efforts to obtain these regulatory approvals. If these approvals were not obtained, then Ant Financial would have been obligated to pay the Company the liquidity event payment described above.

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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, ~~2014, 2015~~2017, 2018 AND ~~2016~~2019
~~3.     Recent accounting pronouncements (Continued)~~
~~is evaluating the effects, if any, of the adoption of this revised guidance on the Company's financial position, results of operations or cash flows.~~
In March 2016, the FASB issued ASU 2016-09 "Improvements to Employee Share-Based Payment Accounting" to simplify the accounting for employee share-based payment transactions, including the income tax consequences, classification of excess tax benefits on the statement of cash flows, introduction of accounting policy election on forfeitures, and the change of the threshold of share withholding by employer for settlement of employees' tax without causing the award to be liability classified. The new guidance is effective for the Company for the year ending March 31, 2018 and interim reporting periods during the year ending March 31, 2018. Early adoption is permitted. The Company is evaluating the effects, if any, of the adoption of this revised guidance on the Company's financial position, results of operations or cash flows.
4.     Significant ~~equity transactions,~~ restructuring ~~transactions,~~transaction, mergers and acquisitions and ~~equity~~ investments (Continued)
(a)  2014 restructuring of the relationship with Ant Financial and Alipay and 2018 amendments (Continued)
~~Equity transactions~~
~~(a)   Initial public offering~~
~~On September 24, 2014,~~The 2018 SAPA no longer provides for this liquidity event payment, as the Company ~~completed its initial public offering on~~has agreed to acquire the ~~New York Stock Exchange under~~entire 33% equity interest in Ant Financial upon the ~~symbol of "BABA."~~ equity issuance.
Regulatory unwind and long-stop date
The Company offered 123,076,931 American Depositary Shares, or ADS, and other selling shareholders, including Yahoo, among others, offered an aggregate of 197,029,169 ADSs. Each ADS represents one ordinary share and was sold to the public at US$68.00 per ADS. On the same date of the initial public offering, the underwriters exercised in full the option to purchase an additional 26,143,903 ADSs and 21,871,997 ADSs at US$68.00 per ADS from the Company and certain other selling shareholders respectively. Net proceeds raised by2018 SAPA provides that, if a relevant governmental authority prohibits the Company from owning all or a portion of its equity interest in Ant Financial after the ~~initial public offering amounted~~equity issuance has occurred through enactment of a law, rule or regulation, or explicitly requires Ant Financial to ~~US$10.0 billion after deducting underwriting discounts~~redeem this equity interest, and ~~commissions~~the prohibition or request is not subject to appeal and cannot otherwise be resolved, then to the extent necessary, Ant Financial will redeem the equity interest; the related intellectual property and asset transfers, and ancillary transactions under the 2018 SAPA will be unwound; and the terms of the 2014 SAPA, the 2014 IPLA, and other ~~offering expenses.~~related agreements will be restored, including the prior Profit Share Payments and liquidity event payment terms discussed above. If there is a partial unwind where the Company retains a portion of its equity interest in Ant Financial, but less than the full 33%, then pursuant to the terms of the 2014 SAPA and the 2014 IPLA, the prior Profit Share Payments arrangement and liquidity event payment amount will be proportionately reduced based on the amount of equity interest retained by the Company.
Similarly, if a governmental authority prohibits the equity issuance through enactment of a law, rule or regulation, and the prohibition is not subject to appeal and cannot otherwise be resolved, or if the equity issuance has not occurred by the first anniversary of the establishment of a PRC subsidiary to acquire the relevant equity interest, which time period may be extended in certain circumstances, then the 2018 SAPA and related agreements will terminate, and the 2014 SAPA and other related agreements will come back into effect.
~~Restructuring transactions~~
~~(b)   Restructuring of Payment Services~~
~~Restructuring of Payment Services in 2011~~Pre-emptive rights
~~Pursuant~~As was the case under the 2014 SAPA, under the 2018 SAPA, following the receipt of equity interest in Ant Financial, the Company will have pre-emptive rights to participate in other issuances of equity securities by Ant Financial and certain of its affiliates prior to the ~~regulations issued by~~time of a Qualified IPO of Ant Financial. These pre-emptive rights entitle the ~~People's Bank~~Company to maintain the equity ownership percentage the Company held in Ant Financial immediately prior to any such issuances. In connection with the exercise of ~~China (the "PBOC"), non-bank payment companies were~~the pre-emptive rights the Company is also entitled to receive certain payments from Ant Financial, effectively funding the subscription for these additional equity interest, up to a value of US$1.5 billion, subject to certain adjustments. In addition, under the 2018 SAPA, in certain circumstances the Company is permitted to exercise pre-emptive rights through an alternative arrangement which will further protect the Company from dilution.
Corporate governance provisions
Under the 2018 SAPA, upon the issuance of the equity interest, in addition to an independent director, the Company will have the right to nominate two officers or employees of the Company for election to the board of Ant Financial. In each case, these director nomination rights will continue unless required to ~~obtain~~be terminated by applicable laws and regulations or listing rules in connection with an Ant Financial Qualified IPO process or the Company ceases to own a ~~license~~certain amount of its post-issuance equity interests in ~~order to operate a payment business in~~Ant Financial.
In connection with the PRC. These regulations provided specific guidelines for license applications only for domestic PRC-owned entities. These regulations stipulated that, in order for any foreign-invested payment company to obtain a license,2018 SAPA, the ~~scope of business,~~Company also agreed on the qualifications of any foreign investor and any level of foreign ownership would be subject to future regulations to be issued, which in addition would require approval by the PRC State Council. Further, the regulations required that any payment company that failed to obtain a license must cease operations by September 1, 2011. Although Alipay was prepared to submit its license application in early 2011, at that time the PBOC had not issued any guidelines applicable to license applications for foreign-invested payment companies. In lightform of the ~~uncertainties relating~~2018 IPLA, agreed to certain revisions to the previously-agreed form of cross license ~~qualification~~agreement, and application process for a foreign-invested payment company, the Company's management determined that it was necessary to restructure Alipay as a company wholly-owned by PRC nationals in order to avail Alipayagreed on new forms of the specific licensing guidelines applicable only to domestic PRC-owned entities. Accordingly, the Company divested all of its interest in and control over Alipay, which resulted in deconsolidation of Alipay from the consolidated financial statements.various

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, ~~2014, 2015~~2017, 2018 AND ~~2016~~2019
4.     Significant ~~equity transactions,~~ restructuring ~~transactions,~~transaction, mergers and acquisitions and ~~equity~~ investments (Continued)
~~(b)   Restructuring~~(a)  2014 restructuring of ~~Payment Services~~the relationship with Ant Financial and Alipay and 2018 amendments (Continued)
As part of the restructuring, the loan extended for the funding of paid-in capital of Zhejiang Ant Small and Micro Financial Services Group Co., Ltd. ("Ant Financial Services") that held the equity interests of Alipay was repaid by the management members in fullintellectual property transfer agreements to ~~the Company. Certain agreements~~be entered into ~~between~~in connection with, and to implement, the Company and Ant Financial Services, such as the loan agreement, the pledge agreement for the same equity interests held by certain management members of the Company, the option agreement to acquire the equity interests in Ant Financial Services when permitted by the PRC laws, among others (the "Agreements"), which allowed the Company to control Ant Financial Services, were also terminated.
Following the restructuring during the year ended March 31, 2011, the Company has not consolidated or equity accounted for the entities engaging in Payment Services because the Company has no direct and indirect investment in and does not control or have significant influence over Ant Financial Services, Alipay and their subsidiaries.
During the year ended March 31, 2012, the Company entered into the following commercial arrangements, among others, with APN Ltd., a company owned by two directors of the Company, Yahoo, SoftBank, Alipay, Ant Financial Services, and Ant Financial Services' equity holders, setting out the mechanism for the future collaboration among the relevant parties relating to the Payment Services:
~~(i)~~
~~Framework Agreement~~
Pursuant to the terms of the Framework Agreement, the Company will receive from Ant Financial Services an amount equal to 37.5% of the equity value of Alipay less US$500 million (RMB3,100 million), being the face value of the Promissory Note payable, upon a Liquidity Event as defined in this agreement (the "Liquidity Payment"). Under no circumstances will the amount of the Liquidity Payment plus US$500 million be less than US$2.0 billion (RMB12.4 billion) or more than US$6.0 billion (RMB37.2 billion), subject to certain increases and additional payments if a Liquidity Event does not occur by the sixth anniversary of the agreement. If a Liquidity Event does not occur by the tenth anniversary of this agreement, the Company will have a right to demand Ant Financial Services and Alipay to effect a Liquidity Event as soon as practicable, provided that the equity value or enterprise value of Alipay at such time exceeds US$1.0 billion (RMB6.2 billion). If the Liquidity Event is demanded by the Company, the minimum amount of US$2.0 billion (RMB12.4 billion) described above will not apply to the Liquidity Payment, unless the Liquidity Event is effected by means of a transfer of more than 37.5% of the securities of Alipay. Upon payment of the Liquidity Payment, certain assets and intellectual property related to the operations of Payment Services, which were retained by the Company (the "Retained Business Assets"), will be transferred to Alipay.
"Liquidity Event" means the earliest to occur of: (a) a qualified initial public offering of Alipay; (b) a transfer of 37.5% or more of the securities of Alipay; or (c) a sale of all or substantially all of the assets of Alipay.
In addition, the Company received a non-interest bearing promissory note (the "Promissory Note") in the principal amount of US$500 million (RMB3,100 million) with a seven-year maturity from APN Ltd. The Promissory Note was secured by a pledge of 50 million ordinary shares of the Company, which were contributed by two directors of the Company to APN Ltd. The Promissory Note formed part of the consideration for the transfer of the Retained Business Assets upon the Liquidity Event and the

~~Table of Contents~~

~~ALIBABA GROUP HOLDING LIMITED~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~FOR THE YEARS ENDED MARCH 31, 2014, 2015 AND 2016~~
~~4.     Significant equity transactions, restructuring transactions, mergers and acquisitions and equity investments (Continued)~~
~~(b)   Restructuring of Payment Services (Continued)~~
Promissory Note was payable upon the earlier of the occurrence of the Liquidity Event or December 14, 2018. The Framework Agreement was subsequently amended and pursuant to the terms of the amendment, the Promissory Note was cancelled and the amount of the Liquidity Payment which the Company would be entitled to receive in the event of a Liquidity Event was increased by US$500 million, the principal amount of the cancelled Promissory Note.
~~(ii)~~
~~Intellectual Property License and Software Technology Services Agreement~~
~~Under the terms of this agreement, the Company licenses certain~~contemplated intellectual property and ~~provides certain~~asset transfers.
2014 IPLA and 2018 IPLA
2014 IPLA
Under the 2014 IPLA, the Company receives, in addition to a software technology ~~services~~service fee, royalty streams related to Alipay ~~in exchange for a royalty fee~~ and ~~software technology services fee in~~other current and future businesses of Ant Financial (collectively, the "Profit Share Payments"). The Profit Share Payments are paid at least annually and equal the sum of an ~~amount equal to the costs incurred by the Company in providing the software technology services~~expense reimbursement plus ~~49.9%~~37.5% of the consolidated pre-tax income of ~~Alipay and its subsidiaries,~~Ant Financial, subject to ~~downward adjustments upon~~ certain ~~dilutive~~adjustments. The expense reimbursement represents the reimbursement for the costs and expenses incurred by the Company in the provision of software technology services. The Company accounts for the Profit Share Payments in the periods when the services are provided, where the payments are expected to approximate the estimated fair values of the services provided. In addition, if the Company acquires any equity interest in Ant Financial, the Profit Share Payments will also be reduced in proportion to the equity issuances made to the Company. The Profit Share Payments will be terminated upon the issuance of the 33% equity interest by Ant ~~Financial Services or Alipay, but~~Financial.
Income in ~~no case below 30.0%. If Alipay incurs a pre-tax loss,~~connection with the ~~fee that the Company would charge Alipay would equal the~~Profit Share Payments, net of costs incurred by the Company, ~~in providing the software technology services. This agreement will terminate at the earlier~~ of ~~(a) the payment of the Liquidity Payment, and (b) such time when termination may be required by applicable regulatory authorities in connection with a qualified initial public offering by Alipay.~~
~~(iii)~~
~~Commercial Agreement~~
Under the terms of this agreement, the Company receives payment processing services from Alipay, the fee rate for which is subject to review and approval by the Company's independent directors designated by Yahoo and SoftBank on an annual basis (the "Payment Processing Fee"). This agreement has an initial term of fifty years and shall be renewable thereafter. If the commercial agreement is required by applicable regulatory authorities to be modified in certain circumstances, a one-time payment may be payable to the Company by Ant Financial Services as compensation for the impact of such adjustment. Expenses in connection with the Payment Processing Fee of RMB2,349RMB2,086 million, ~~RMB3,853~~RMB3,444 million and ~~RMB4,898~~RMB517 million, ~~were~~was recorded in ~~cost of revenue~~other income, net in the consolidated income statements for the years ended March 31, ~~2014, 2015~~2017, 2018 and ~~2016,~~2019, respectively ~~(Note 23)~~(Notes 6 and 21).
~~All closing conditions attached to the Framework Agreement and related supplemental arrangements were fulfilled in December 2011.~~
~~Restructuring of Payment Services in 2014~~2018 IPLA
The Framework Agreement and related supplemental arrangements were terminated in August 2014 upon the restructuring of the commercial agreements with Payment Services when the Company entered into a share and asset purchase agreement (the "2014 SAPA") with Ant Financial Services, the other parties to the Framework Agreement entered into in 2011, Hangzhou Junhan Equity Investment Partnership ("Junhan") and Hangzhou Junao Equity Investment Partnership, a PRC limited partnership the interests in which are held by certain members of the Alibaba Partnership.
Pursuant to the ~~2014~~2018 SAPA, the Company, ~~sold~~Ant Financial and Alipay agreed to enter into the ~~micro loan business~~2018 IPLA upon the closing of the planned acquisition of a 33% equity interest in Ant Financial, at which time the Company will also transfer certain intellectual property and ~~related services (the "Transferred Business")~~assets to Ant Financial ~~Services for aggregate cash consideration~~and its subsidiaries and the current arrangement of ~~RMB3,219 million. In addition,~~Profit Share Payments will immediately terminate.
The 2018 IPLA will terminate upon the earliest of:
•
the full payment of all pre-emptive rights funded payments under the 2018 SAPA;

•
the closing of a Qualified IPO of Ant Financial or Alipay; and

•
the transfer to Ant Financial of intellectual property the Company owns that is exclusively related to the business of Ant Financial.
The 2018 amendments are effective subject to the receipt of the necessary PRC regulatory approvals and the satisfaction of other conditions set forth in the 2018 SAPA.
Mergers and acquisitions
(b)  Acquisition of Alibaba Pictures Group Limited ("Alibaba Pictures")
Alibaba Pictures, a company that is listed on the Hong Kong Stock Exchange ("HKSE"), is an Internet-driven integrated platform that covers content production, promotion and distribution, IP licensing and integrated

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, ~~2014, 2015~~2017, 2018 AND ~~2016~~2019
4.     Significant ~~equity transactions,~~ restructuring ~~transactions,~~transaction, mergers and acquisitions and ~~equity~~ investments (Continued)
(b)  ~~Restructuring~~Acquisition of ~~Payment Services~~Alibaba Pictures Group Limited ("Alibaba Pictures") (Continued)
~~Company entered into software system use~~management, cinema ticketing management and ~~service agreements with Ant Financial Services relating to the know how and related intellectual property that the Company has agreed to sell together with the micro loan business and related~~data services (Note 23). In calendar years 2015 to 2017, the Company received or will receive an annual fee equal to 2.5% of the average daily book balance of the micro loans managed by Ant Financial Services. In calendar years 2018 to 2021, the Company will receive an annual fee equal to the amount paid for the calendar year 2017 (together with the fees received in calendar years 2015 to 2017, the "SME Annual Fee"). The SME Annual Fee of RMB90 million and RMB708 million were recorded in revenue in the consolidated financial statements for the years ended March 31, 2015 and 2016, respectively.
entertainment industry. In connection with the 2014 SAPA, the Company also entered into an amended intellectual property license agreement with Alipay ("amended Alipay IPLA"), pursuant to which the Company licenses certain intellectual property and provides certain software technology services to Alipay and the Transferred Business. Under the amended Alipay IPLA, the Company will receive royalty streams and a service fee (collectively, the "Profit Share Payments") which will be paid at least annually, amounting to the sum of an expense reimbursement plus 37.5% of the consolidated pre-tax income of Ant Financial Services, subject to certain adjustments. In addition, if the Company acquires any equity interest in Ant Financial Services, the Company will transfer an agreed portion of the underlying intellectual property to Ant Financial Services at the time of such equity issuance. At the same time, the Profit Share Payments will also be reduced in proportion to such equity issuances made to the Company.
Income in connection with the royalty fee and software technology services fee under the Intellectual Property License and Software Technology Services Agreement and the Profit Share Payments, net of costs incurred by the Company, of RMB1,764 million, RMB1,667 million and RMB1,122 million were recorded in other income, net in the consolidated income statements for the years ended March 31, 2014, 2015 and 2016, respectively (Note 23).
Pursuant to the terms of the 2014 SAPA, in the event of an initial public offering of Ant Financial Services or Alipay at an implied equity value exceeding US$25.0 billion which results in gross proceeds of at least US$2.0 billion (a "Qualified IPO"), if the Company's total ownership of equity interests in Ant Financial Services has not reached 33%, the Company would be entitled at its election to receive a one-time payment equal to 37.5% of the equity value of Ant Financial Services as determined immediately prior to such Qualified IPO. There is no cap on the maximum value of such liquidity event payment. If the Company acquires equity interests in Ant Financial Services in an aggregate amount less than 33%, the percentage of Ant Financial Services' equity value used to calculate such liquidity event payment will be reduced proportionately.
In lieu of receiving such liquidity event payment, the Company may elect to continue to receive the Profit Share Payments in perpetuity, subject to the receipt of regulatory approvals. In connection with a Qualified IPO and if the Company so elects, Ant Financial Services must use its commercially reasonable efforts to obtain the required approvals for continued payments under the amended Alipay IPLA. If such approvals are not obtained, Ant Financial Services will pay the liquidity event payment as described above to the Company.
The 2014 SAPA provides for future potential equity issuances to the Company by Ant Financial Services. In the event that Ant Financial Services applies for and receives certain PRC regulatory approvals in the future, Ant Financial Services will issue and the Company will purchase newly issued equity interests in Ant Financial

~~Table of Contents~~

~~ALIBABA GROUP HOLDING LIMITED~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~FOR THE YEARS ENDED MARCH 31, 2014, 2015 AND 2016~~
~~4.     Significant equity transactions, restructuring transactions, mergers and acquisitions and equity investments (Continued)~~
~~(b)   Restructuring of Payment Services (Continued)~~
Services up to a 33% equity interest, or such lesser equity interest as may be permitted by the regulatory approvals. If the liquidity event payment described above has not become payable upon a Qualified IPO of Ant Financial Services, the Company's right to acquire equity interests up to the full 33% equity interest will continue after such Qualified IPO. However, the maximum equity interest that the Company is entitled to acquire will be reduced in proportion to any dilutive equity issuances by Ant Financial Services in and following such Qualified IPO. If the Company acquires an equity interest in Ant Financial Services pursuant to this arrangement which is below 33%, the liquidity event payment amount and the profit sharing arrangement under the amended Alipay IPLA will be proportionately reduced based on the amount of equity interests acquired by the Company.
Concurrently with the 2014 SAPA, the Company entered into other ancillary agreements, including a data sharing agreement, an SME loan cooperation agreement, a trademark agreement, and an amended and restated shared services agreement. The Company also entered into a binding term sheet in respect of a technology services agreement, pursuant to which the Company agreed to provide certain cloud computing, database service and storage, large-scale computing services and certain other services to Ant Financial Services on a cost-plus basis. In addition, the existing Alipay Commercial Agreement will continue as currently in effect.
The terms of the 2014 SAPA, the amended Alipay IPLA and other ancillary agreements took effect immediately upon their execution in August 2014. The transfer of the Transferred Business was completed in February 2015, a gain on disposal of RMB306 million was recorded in interest and investment income, net of the consolidated financial statements for the year ended March 31, 2015. Certain assets and liabilities, such as restricted cash and escrow receivables of RMB3,495 million, loan receivables, net of RMB23,363 million, secured borrowings of RMB15,417 million and escrow money payable of RMB3,495 million were derecognized from the consolidated balance sheet of the Company upon the completion of the transfer of the Transferred Business.
For accounting purposes, the fair value of the restructured arrangement exceeded the fair value of the pre-existing arrangement with Ant Financial Services by RMB1.3 billion. As Ant Financial Services is controlled by a director and major shareholder of the Company, the excess value provided to the Company in this related party transaction is accounted for as an equity contribution by the shareholder as restructuring reserve in the statement of changes in shareholders' equity. Given the nature of this transaction, the corresponding asset representing the excess value receivable by the Company is accounted for as a deduction from equity and amortized as an expense in the consolidated income statements over the expected term of the restructured arrangement which is estimated to be 5 years. The amortization of the excess value of RMB166 million and RMB264 million were recorded in the other income, net in the consolidated income statements for the years ended March 31, 2015 and 2016, respectively. Furthermore, the Company accounts for the Profit Share Payments and the SME Annual Fee in the periods when the services are provided, where such payments are expected to approximate the estimated fair values of the services provided.

~~Table of Contents~~

~~ALIBABA GROUP HOLDING LIMITED~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~FOR THE YEARS ENDED MARCH 31, 2014, 2015 AND 2016~~
~~4.     Significant equity transactions, restructuring transactions, mergers and acquisitions and equity investments (Continued)~~
~~Mergers and acquisitions~~
~~(c)   Acquisition of Alibaba Health Information Technology Limited ("Alibaba Health")~~
~~In April~~June 2014, the Company ~~and Yunfeng Capital, of which the executive chairman of the Company has~~initially acquired a 40% interest in its general partner, completed an acquisition of newly issued ordinary shares representing a total equity and voting interest of approximately 54% in Alibaba Health through their investments in a special purpose entity. Alibaba Health, a company that is listed on the Hong Kong Stock Exchange, is primarily engaged in the business of developing the technology for product identification, authentication and tracking system for pharmaceutical and medical products in the PRC. The Company holds a 70% equity interest in the special purpose entity and Yunfeng Capital holds the remaining 30% equity interest. Cash consideration of HK$932 million (RMB741 million) was paid upon the closing of the transaction by the Company to acquire its equity interest in the special purpose entity. Although the Company controls the board of the special purpose entity, the investment and shareholders agreement provided that the underlying shares in Alibaba Health are voted by the Company and Yunfeng Capital separately based on their respective effective equity interest, including voting rights. The Company had an effective equity and voting interest of approximately 38% in Alibaba Health, exercised significant influence over and accounted for Alibaba Health as an equity method investee.
In July 2015, in preparation of the transfer of the Tmall online pharmacy business operations of the Company to Alibaba Health (of which the agreement was subsequently terminated), the investment and shareholders agreement was amended under which Yunfeng Capital agreed to irrevocably give up its separate voting rights with respect to its indirect interest in Alibaba Health at no consideration. Such control is important for the Company to execute its digital and data-driven healthcare strategy through Alibaba Health as its flagship vehicle in this sector, indirectly economically benefiting all shareholders including Yunfeng Capital. As a result of the amendment, the Company obtained control over the entire 54%controlling equity interest in Alibaba ~~Health through its control over the board of the special purpose entity. Consequently, Alibaba Health became~~Pictures. In June 2015, following a ~~consolidated subsidiary while~~financing transaction that diluted the Company's ~~effective~~shareholding from a controlling interest to a minority investment, the Company deconsolidated the financial results of Alibaba Pictures and accounted for the investment in the remaining equity interest ~~in Alibaba Health remains at approximately 38%.~~
~~The~~under the equity value of Alibaba Health of HK$64,319 million (RMB50,723 million), estimated based on the market price of the issued shares of Alibaba Health listed on the Hong Kong Stock Exchange which was the more readily ascertainable fair value as of the deemed acquisition date, was used to allocate the fair value of net assets acquired, the fair value of noncontrolling interests and calculate themethod. A gain of ~~RMB18,603~~RMB24,734 million ~~which was recognized in relation to~~arising from the revaluation of ~~previously held~~the Company's remaining equity interest ~~relating to obtaining control of Alibaba Health in interest and investment income, net~~was recognized in the consolidated income statement for the year ended March 31, 2016.

~~Table of Contents~~

~~ALIBABA GROUP HOLDING LIMITED~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~FOR THE YEARS ENDED MARCH 31, 2014, 2015 AND 2016~~
~~4.     Significant equity transactions, restructuring transactions, mergers and acquisitions and equity investments (Continued)~~
~~(c)   Acquisition of Alibaba Health Information Technology Limited ("Alibaba Health") (Continued)~~
~~The allocation of~~ In December 2017, the ~~equity~~Company determined that the decline in the market value against the carrying value of ~~Alibaba Health at the date~~this investment was other-than-temporary and an impairment charge of ~~the deemed acquisition is summarized as follows:~~

~~Amounts~~

~~(in millions of RMB)~~
~~Net assets acquired~~
~~1,290~~
~~Amortizable intangible assets (i)~~
~~User base and customer relationships~~
8
~~Trade names, trademarks and domain names~~
35
~~Developed technology and patents~~
70
~~Goodwill~~
~~49,320~~
~~Deferred tax assets~~
19
~~Deferred tax liabilities~~
~~(19~~ )

~~Total~~
~~50,723~~

~~The equity value comprised of:~~
~~- fair value of previously held equity interests~~
~~19,264~~
~~- fair value of noncontrolling interests~~
~~31,459~~

~~Total~~
~~50,723~~

~~(i)~~
~~Acquired amortizable intangible assets have estimated amortization periods not exceeding three years and a weighted-average amortization period of 2.6 years.~~
The rationale for this transaction is to enable the Company to expand its products and services. This transaction will enable the Company to benefit from the focused healthcare expertise of Alibaba Health in the operation of the online pharmacy business and foster consumer trust through the sale of genuine pharmaceuticals through Alibaba Health's verification and authentication technology. Goodwill arising from this acquisition was attributable to the synergies expected from the combined business which will create a technology enabled solution provider to consumers and other participants in the healthcare industry in the PRC.
Subsequent to March 31, 2016, the Company and Alibaba Health entered into a services agreement under which Alibaba Health will provide outsourced services in relation to certain product categories in Tmall online pharmacy.
~~(d)  Acquisition of AutoNavi Holdings Limited ("AutoNavi")~~
In May 2013, the Company completed an investment of newly issued ordinary shares and convertible preferred shares in AutoNavi representing a 28% equity interest on a fully-diluted basis. AutoNavi is a provider of digital map content and navigation and location based solutions in the PRC that was listed on the Nasdaq Global Select Stock Market ("Nasdaq"). The investment in convertible preferred shares of RMB1,285RMB18,116 million was ~~accounted for under the cost method given that the convertible preferred shares were not considered in-substance common stock due to the existence~~recorded in share of ~~certain terms such as liquidation preference over ordinary shares, and the investment in ordinary shares~~results of ~~RMB533 million was accounted for under the~~ equity ~~method given the existence of significant influence.~~

~~Table of Contents~~

~~ALIBABA GROUP HOLDING LIMITED~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~FOR THE YEARS ENDED MARCH 31, 2014, 2015 AND 2016~~
~~4.     Significant equity transactions, restructuring transactions, mergers and acquisitions and equity investments (Continued)~~
~~(d)  Acquisition of AutoNavi Holdings Limited ("AutoNavi") (Continued)~~
In July 2014, the Company completed an acquisition of all of the issued and outstanding shares of AutoNavi that the Company did not already own. Following the completion of the transaction, AutoNavi became a wholly-owned subsidiary of the Company and the listing of the ADS of AutoNavi on the Nasdaq was withdrawn.
The total cash consideration of US$1,032 million (RMB6,348 million) was paid upon the closing of the transaction. The allocation of the purchase price at the date of acquisition is summarized as follows:

~~Amounts~~

~~(in millions of RMB)~~
~~Net assets acquired~~
~~2,236~~
~~Amortizable intangible assets (i)~~
~~User base and customer relationships~~
~~255~~
~~Trade names, trademarks and domain names~~
~~249~~
~~Developed technology and patents~~
~~1,387~~
~~Goodwill~~
~~4,380~~
~~Deferred tax assets~~
72
~~Deferred tax liabilities~~
~~(284~~ )

~~Total~~
~~8,295~~

~~Amounts~~

~~(in millions of RMB)~~
~~Total purchase price comprised of:~~
~~- cash consideration~~
~~6,348~~
~~- fair value of previously held equity interests~~
~~1,947~~

~~Total~~
~~8,295~~

~~(i)~~
~~Acquired amortizable intangible assets have estimated amortization periods not exceeding four years and a weighted-average amortization period of 3.0 years.~~
~~A gain of RMB284 million was recognized in relation to the revaluation of previously held equity interest relating to the step acquisition of AutoNavi in interest and investment income, net~~investees in the consolidated income statement for the year ended March 31, ~~2015. As AutoNavi was~~2018 (Note 13).
In March 2019, the Company subscribed for newly issued ordinary shares of Alibaba Pictures for a ~~publicly listed company prior to this step acquisition, the fair value~~cash consideration of ~~the previously held equity interest was estimated with reference to the market price upon~~Hong Kong Dollar ("HK$")1,250 million (RMB1,069 million). Upon the completion of the transaction, ~~with an adjustment made to reflect other factors that may affect such fair value estimation.~~
~~The rationale for this transaction is to enable~~ the Company to expand its products and services. The Company believes the acquisition will help to develop and provide online-to-offline/offline-to-online commerce and location-based services to its mobile commerce user base. Goodwill arising from this acquisition was attributable to the synergies expected from the combined operations of AutoNavi and the Company, the assembled workforce and the future development initiatives of the assembled workforce to enhance the mobile offerings of the Company beyond e-commerce.

~~Table of Contents~~

~~ALIBABA GROUP HOLDING LIMITED~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~FOR THE YEARS ENDED MARCH 31, 2014, 2015 AND 2016~~
~~4.     Significant equity transactions, restructuring transactions, mergers and acquisitions and equity investments (Continued)~~
~~(e)   Acquisition of Alibaba Pictures Group Limited ("Alibaba Pictures")~~
~~In June 2014, the Company acquired control of Alibaba Pictures by completing an investment in newly issued ordinary shares representing an approximately 60%~~Company's equity interest in Alibaba Pictures ~~for a total cash consideration of HK$6,244 million (RMB4,955 million).~~increased from approximately 49% to approximately 51%, and Alibaba Pictures isbecame a ~~producer~~consolidated subsidiary of ~~movies and television programs in~~ the ~~PRC that is listed on the Hong Kong Stock Exchange.~~Company.
The allocation of the purchase price atas of the date of acquisition is summarized as follows:

Amounts

(in millions of RMB)

Net assets acquired (i)
~~5,899~~11,032

Amortizable intangible assets (ii)

User base and customer relationships
42,269
License
934
Developed technology and patents
533

Trade names, trademarks and domain names
95
~~Others~~
38221

Goodwill
~~9,759~~
~~Deferred tax assets~~
1320,052

Deferred tax liabilities
(17844 )

Noncontrolling interests (iii)
(~~10,836~~16,899 )

Total
~~4,955~~17,298

Amounts

(in millions of RMB)
Total purchase price is comprised of:
- cash consideration
1,069
- fair value of previously held equity interests
16,229

Total
17,298

(i)
Net assets ~~include~~acquired primarily included cash, cash equivalents and short-term investments of RMB4,444 million and investment securities of RMB4,365 million as of the ~~cash consideration~~date of ~~RMB4,955 million.~~acquisition.

(ii)
Acquired amortizable intangible assets ~~have~~had estimated amortization periods not exceeding ~~three~~15 years and a weighted-average amortization period of ~~2.5~~11.3 years.

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2017, 2018 AND 2019
4.     Significant restructuring transaction, mergers and acquisitions and investments (Continued)
(b)  Acquisition of Alibaba Pictures Group Limited ("Alibaba Pictures") (Continued)
(iii)
Fair value of the noncontrolling interests was estimated with reference to the market price per share as of the acquisition date.
A gain of RMB5,825 million in relation to the revaluation of the previously held equity interests was recorded in interest and investment income, net in the consolidated income statement for the year ended March 31, 2019. The ~~rationale for this transaction is~~fair value of the previously held equity interests was estimated with reference to ~~enable~~ the ~~Company to expand its products and services.~~ market price per share as of the acquisition date.
The Company ~~believes the acquisition will help to advance~~expected greater integration and synergies between Alibaba Pictures and the Company's ~~vision of making media~~related businesses on both content production and distribution to deliver high-quality entertainment ~~available to its customers.~~experiences for consumers in the PRC. Goodwill arising from this acquisition was attributable to the synergies expected from the combined operations of Alibaba Pictures and the Company, the assembled workforce and their knowledge and experience in the digital media and entertainment ~~and media industry~~sector in the PRC. The Company did not expect the goodwill recognized to be deductible for income tax purposes.
(c)   Acquisitions and integration of Rajax Holding ("Ele.me") and Koubei Holding Limited ("Koubei")
Ele.me
Ele.me is a leading on-demand delivery and local services platform in the PRC. In ~~June 2015, Alibaba Pictures placed~~March 2016, the Company and Ant Financial completed a portion of the subscription for newly issued ~~ordinary~~preferred shares ~~to unrelated third-party investors with aggregate gross proceeds~~in Ele.me through a joint investment vehicle, based on a total combined commitment of ~~HK$12,179~~US$1,250 million, ~~(RMB9,647~~of which the Company's total commitment was US$900 million (RMB5,891 million). The ~~Company's~~Company paid a cash consideration of US$540 million (RMB3,512 million) for the initial subscription in March 2016, and the remaining committed balance of US$360 million (RMB2,394 million) was settled in cash in August 2016. After the initial subscription, the effective equity interest in ~~Alibaba Pictures~~Ele.me held by the Company was ~~therefore~~approximately 20% on a fully diluted ~~to 49.5% upon completion~~basis. In April and August 2017, the joint investment vehicle completed additional investments in newly issued preferred shares in Ele.me for a total investment amount of US$1,200 million (RMB8,090 million), of which the ~~placing.~~
Company's investment was US$864 million (RMB5,824 million). As a result, of the dilution, the Company deconsolidated the financial results of Alibaba Pictures and accounted for the investment in the remaining equity interest under the equity method. A gain of RMB24,734 million arising from the revaluation of the Company's ~~remaining~~effective equity interest in ~~Alibaba Pictures~~Ele.me increased to approximately 27% on a fully diluted basis. The investment was ~~recognized in interest and investment income, net in~~accounted for under the ~~consolidated income statement~~cost method (Note 13) for the ~~year~~years ended March 31, ~~2016. As Alibaba Pictures~~2017 and 2018. Upon the adoption of ASU 2016-01, the investment is accounted for using the measurement alternative (Note 11).
In May 2018, the joint investment vehicle completed the acquisition of all outstanding shares of Ele.me that it did not already own at a ~~publicly listed company, the fair value~~consideration of ~~the remaining equity interest was estimated with reference to the market price upon~~US$5,482 million (RMB34,923 million). Upon the completion of the ~~placing.~~
~~In addition, during~~acquisition, Ele.me became a consolidated subsidiary of the year ended March 31, 2016, the Company disposed of its online movie ticketing business and movie and TV series financing platform to Alibaba Pictures at a cash consideration of US$350 million (RMB2,259 million) plus certain reimbursement amounts. A disposal gain of RMB2,214 million was recognized in interest and investment income, net in the consolidated income statement for the year ended March 31, 2016.Company.

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, ~~2014, 2015~~2017, 2018 AND ~~2016~~2019
4.     Significant ~~equity transactions,~~ restructuring ~~transactions,~~transaction, mergers and acquisitions and ~~equity~~ investments (Continued)
~~(f)   Acquisition~~(c)   Acquisitions and integration of ~~UCWeb Inc.~~Rajax Holding ("~~UCWeb"~~Ele.me") and Koubei Holding Limited ("Koubei") (Continued)
In June 2014, the Company exchanged all of the issued and outstanding shares in UCWeb held by the other shareholders that the Company did not already own. Prior to this transaction, UCWeb was an equity investee which was accounted for under the cost method and was 66% owned by the Company with a carrying amount of RMB4,394 million. UCWeb is a developer of leading mobile web browsers in the PRC, India and Indonesia.
The total exchange consideration consisted of 12.3 million restricted shares and RSUs of the Company and US$458 million (RMB2,826 million) in cash. Out of the total exchange consideration, 3.4 million restricted shares and RSUs which is classified as equity, as well as cash consideration of US$126 million (RMB777 million) are settled on a deferred basis. The fair value of restricted shares and RSUs approximate US$613 million (RMB3,782 million) as of the acquisition date.
The allocation of the purchase price atas of the date of acquisition is summarized as follows:

Amounts

(in millions of RMB)
Net liabilities assumed (i)
(6,327 )
Amortizable intangible assets (ii)
User base and customer relationships
13,702
Trade names, trademarks and domain names
5,764
Non-compete agreements
4,188
Developed technology and patents
1,415
Goodwill
34,572
Deferred tax liabilities
(481 )
Noncontrolling interests (iii)
(5,015 )

Total
47,818

Amounts

(in millions of RMB)
Total purchase price is comprised of:
- cash consideration
30,133
- contingent cash consideration (iv)
4,790
- fair value of previously held equity interests
12,895

Total
47,818

(i)
Net liabilities assumed primarily included payables to merchants and other logistics providers of RMB4,259 million as of the date of acquisition.

(ii)
Acquired amortizable intangible assets had estimated amortization periods not exceeding ten years and a weighted-average amortization period of 5.8 years.

(iii)
Fair value of the noncontrolling interests was estimated based on the equity value of Ele.me derived by the purchase consideration, adjusted for a discount for control premium.

(iv)
The amount is payable contingent upon the satisfaction of certain non-compete provisions by the respective selling equity holders, and will not exceed RMB4,790 million.
A gain of RMB1,657 million in relation to the revaluation of the previously held equity interests was recorded in interest and investment income, net in the consolidated income statement for the year ended March 31, 2019. The fair value of the previously held equity interests was estimated based on the equity value of Ele.me derived by the purchase consideration, adjusted for a discount for control premium.
The Company expected that the acquisition will deepen Ele.me's integration into the Company's digital economy and advance the Company's New Retail strategy to provide a seamless online and offline consumer experience in the local consumer services sector. Goodwill arising from this acquisition was attributable to the synergies expected from the combined operations of Ele.me and the Company, the assembled workforce and

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2017, 2018 AND 2019
4.     Significant restructuring transaction, mergers and acquisitions and investments (Continued)
(c)   Acquisitions and integration of Rajax Holding ("Ele.me") and Koubei Holding Limited ("Koubei") (Continued)
their knowledge and experience in the local consumer services sector in the PRC. The Company did not expect the goodwill recognized to be deductible for income tax purposes.
Koubei
Koubei is one of the PRC's leading restaurant and local services guide platforms for in-store consumption. In 2015, the Company and Ant Financial set up Koubei, a joint venture in which the Company and Ant Financial each held a 49.6% equity interest, while an unrelated third party affiliated with a major Chinese establishment held the remaining minority equity interests. The capital injection from the Company included cash of RMB3.0 billion as well as the injection of certain related businesses. The injection of cash and businesses was completed as of March 31, 2017. A gain of RMB128 million, approximating the fair value of the businesses being injected, was recognized in relation to the contribution of the businesses in interest and investment income, net in the consolidated income statement for the year ended March 31, 2017. The investment was accounted for under the equity method (Note 13).
In January 2017, Koubei issued preferred equity interests to unrelated third parties, and the Company's equity interest in Koubei was diluted to approximately 38% on a fully diluted basis.
Integration of Ele.me and Koubei
In December 2018, the Company completed the integration of Ele.me and Koubei under a newly established holding company and paid a cash consideration of US$465 million (RMB3,196 million) in connection with the integration. Immediately prior to the integration, the Company held an approximately 90% equity interest in Ele.me and an approximately 38% equity interest in Koubei on a fully diluted basis. Upon the completion of the integration, the Company held an approximately 72% equity interest in this new holding company ("Local Services Holdco") which owns substantially all of the equity interest in Ele.me and Koubei, resulting in an effective controlling equity interest held by the Company in each of Ele.me and Koubei. Upon the completion of the integration, the Company's effective equity interest in Ele.me decreased, resulting in an increase in noncontrolling interests and additional paid-in capital amounting to RMB6,715 million and RMB7,515 million, respectively.
Upon the completion of the integration, Koubei became a consolidated subsidiary of the Company. The allocation of the purchase price as of the date of acquisition of Koubei is summarized as follows:

Amounts

(in millions of RMB)

Net assets acquired (i)
~~1,159~~3,534

Amortizable intangible assets (ii)

User base and customer relationships
~~106~~18,330

Trade names, trademarks and domain names
~~591~~1,158

Developed technology and patents
~~561~~
~~Non-compete agreements~~
~~1,823~~322

Goodwill
~~10,376~~36,544

Deferred tax liabilities
(212,372 )
Noncontrolling interests (iii)
(17,682 )

Total
~~14,595~~39,834

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2017, 2018 AND 2019
4.     Significant restructuring transaction, mergers and acquisitions and investments (Continued)
(c)   Acquisitions and integration of Rajax Holding ("Ele.me") and Koubei Holding Limited ("Koubei") (Continued)

Amounts

(in millions of RMB)

Total purchase price is comprised of:

- cash consideration
~~2,826~~3,196

- ~~share-based~~non-cash consideration
~~3,782~~14,648

- fair value of previously held equity interests
~~7,987~~21,990

Total
~~14,595~~39,834

(i)
Net assets acquired primarily included ~~noncontrolling interests~~cash and cash equivalents of ~~RMB220~~RMB4,475 million ~~that is classified~~ as ~~mezzanine equity.~~of the date of acquisition.

(ii)
Acquired amortizable intangible assets ~~have~~had estimated amortization periods not exceeding ~~four~~13 years and a weighted-average amortization period of ~~3.4~~6.3 years.

(iii)
Fair value of the noncontrolling interests as of the acquisition date was estimated based on the purchase price to acquire newly issued preferred shares of Local Services Holdco that was paid by new and existing investors in December 2018, with certain adjustments made to reflect other factors that may affect the fair value estimation.
A gain of ~~RMB3,593~~RMB21,990 million ~~was recognized~~ in relation to the revaluation of the previously held equity ~~interest relating to the step acquisition of UCWeb~~interests was recorded in interest and investment income, net in the consolidated income statement for the year ended March 31, ~~2015.~~2019. The fair value of the previously held equity ~~interest was measured using an income approach determined by the Company. As UCWeb is a private company, the fair value~~interests as of the ~~previously held equity interest is~~acquisition date was estimated based on ~~significant inputs~~the purchase price to acquire newly issued preferred shares of Local Services Holdco that ~~market participants would consider, which mainly include revenue growth rate, operating margin, discount rate~~was paid by new and existing investors in December 2018, with certain adjustments made to reflect other factors that may affect ~~such~~the fair value estimation.
The Company expected that its commerce platform technology, know-how and infrastructure will deliver consumer insights and digitized operational solutions to empower local merchants on the Koubei platform. Goodwill arising from this acquisition was attributable to the synergies expected from the combined operations of Koubei and the Company, the assembled workforce and their knowledge and experience in the local consumer services sector in the PRC. The Company did not expect the goodwill recognized to be deductible for income tax purposes.
Subsequent to the integration, the Company acquired additional equity interest in Local Services Holdco for a cash consideration of US$1,905 million (RMB13,082 million) in December 2018. Other investors, including SoftBank, also acquired equity interests in Local Services Holdco. As a result, noncontrolling interests increased by RMB3,216 million.
In May 2019, the Company subscribed for additional equity interest in Local Services Holdco for a cash consideration of US$450 million.

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2017, 2018 AND 2019
4.     Significant restructuring transaction, mergers and acquisitions and investments (Continued)
(d)  Acquisition of DSM Grup Danışmanlık İletişim ve Satış Ticaret A.Ş. ("Trendyol")
Trendyol is one of the leading online fashion retailers in Turkey. In July 2018, the Company acquired an approximately 85% equity interest in Trendyol for a cash consideration of US$728 million (RMB4,980 million). In connection with the transaction, the Company also entered into an agreement with the founders of Trendyol, allowing them to acquire additional equity interests in Trendyol from the Company or sell a portion of their equity interests in Trendyol to the Company in the future.
The allocation of the purchase price as of the date of acquisition is summarized as follows:

Amounts

(in millions of RMB)
Net assets acquired (i)
1,009
Amortizable intangible assets (ii)
Trade names, trademarks and domain names
660
User base and customer relationships
388
Developed technology and patents
30
Goodwill
3,938
Deferred tax liabilities
(228 )
Noncontrolling interests (iii)
(817 )

Total
4,980

(i)
Net assets acquired primarily included cash and cash equivalents of RMB1,206 million as of the date of acquisition.

(ii)
Acquired amortizable intangible assets had estimated amortization periods not exceeding 15 years and a weighted-average amortization period of 12.5 years.

(iii)
Fair value of the noncontrolling interests was estimated with reference to the purchase price per share as of the acquisition date, adjusted for a discount for control premium, and includes the fair value of an option granted to the founders of Trendyol to acquire additional interests in Trendyol from the Company as of the date of acquisition.
The acquisition of Trendyol underscored the Company's commitment to international expansion. Goodwill arising from this acquisition was attributable to the synergies expected from the combined operations of Trendyol and the Company, the assembled workforce and their knowledge and experience in e-commerce. The Company did not expect the goodwill recognized to be deductible for income tax purposes.
In December 2018, the Company purchased additional equity interests in Trendyol for a cash consideration of US$2 million (RMB16 million). The transaction resulted in a reduction of noncontrolling interests amounting to RMB14 million. Upon the completion of the transaction, the Company's equity interest in Trendyol remained at approximately 85%.
(e)   Acquisition of Kaiyuan Commerce Co., Ltd. ("Kaiyuan")
Kaiyuan is one of the leading department store operators in the northwestern part of the PRC. In April 2018, the Company acquired a 100% equity interest in Kaiyuan for a cash consideration of RMB3,362 million.

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, ~~2014, 2015~~2017, 2018 AND ~~2016~~2019
4.     Significant ~~equity transactions,~~ restructuring ~~transactions,~~transaction, mergers and acquisitions and ~~equity~~ investments (Continued)
~~(f)~~(e)   Acquisition of ~~UCWeb Inc.~~Kaiyuan Commerce Co., Ltd. ("~~UCWeb"~~Kaiyuan") (Continued)
~~UCWeb is an important part~~The allocation of the ~~Company's ecosystem to offer mobile services to users from the PRC~~purchase price as ~~well as other parts~~ of the ~~world, thereby strengthening user engagement~~date of acquisition is summarized as ~~well~~follows:

Amounts

(in millions of RMB)
Net assets acquired (i)
2,750
Amortizable intangible assets (ii)
Trade names, trademarks and domain names
203
Goodwill
1,047
Deferred tax liabilities
(638 )

Total
3,362

(i)
Net assets acquired primarily included property and equipment of RMB3,458 million and bank borrowings of RMB651 million as ~~enabling a new marketing channel for~~of the ~~merchants in~~date of acquisition.

(ii)
Acquired amortizable intangible assets had estimated amortization periods of ten years.
The Company expected that Kaiyuan will complement the Company's ~~ecosystem. Furthermore, UCWeb creates additional revenue sources for~~New Retail initiatives to reengineer the ~~Company from mobile search~~fundamentals of retail operations and ~~advertising and others.~~transform the retail landscape. Goodwill arising from this acquisition was attributable to the synergies expected from the combined operations of ~~UCWeb~~Kaiyuan and the Company, the assembled workforce and their knowledge and experience in the ~~future development initiatives of~~retail business in the ~~assembled workforce~~PRC. The Company did not expect the goodwill recognized to ~~enhance the mobile offerings of the Company beyond e-commerce.~~be deductible for income tax purposes.
~~(g)~~(f)   Acquisition of ~~Shenzhen OneTouch Business Services Ltd.~~Cainiao Smart Logistics Network Limited ("~~OneTouch"~~Cainiao Network")
~~In May 2014,~~Cainiao Network operates a logistics data platform which leverages the capacity and capabilities of logistics partners to offer domestic and international one-stop-shop logistics services and supply chain management solutions, fulfilling various logistics needs of merchants and consumers at scale. It uses data insights and technology to improve efficiency across the logistics value chain. The Company ~~completed~~previously held an acquisition of the remaining interests of OneTouch. The total purchase price consisted of cash consideration of RMB790 million and contingent consideration with a fair value of RMB1,094 million. Prior to this transaction, the Company had previously invested 65%approximately 47% equity interest in ~~OneTouch by cash consideration and contingent consideration in 2011 and OneTouch was an equity investee which~~Cainiao Network. The investment was accounted for under the equity ~~method with~~method.
In October 2017, the Company completed the subscription for newly issued ordinary shares of Cainiao Network for a ~~carrying amount~~cash consideration of ~~RMB196 million. OneTouch is~~US$803 million (RMB5,322 million). Following the completion of the transaction, the Company's equity interest in Cainiao Network increased to approximately 51% and Cainiao Network became a ~~provider~~consolidated subsidiary of ~~comprehensive export-related services tailored to~~ the ~~needs~~Company.

Table of ~~small businesses in the PRC, including customs clearance, logistics, cargo insurance, currency exchange, tax refund, financing~~Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2017, 2018 AND 2019
4.     Significant restructuring transaction, mergers and ~~certification.~~acquisitions and investments (Continued)
(f)   Acquisition of Cainiao Smart Logistics Network Limited ("Cainiao Network") (Continued)
The allocation of the purchase price atas of the date of acquisition is summarized as follows:

Amounts

(in millions of RMB)
Net assets acquired (i)
23,937
Amortizable intangible assets (ii)
User base and customer relationships
9,344
Trade names, trademarks and domain names
4,965
Developed technology and patents
459
Goodwill
32,418
Deferred tax assets
920
Deferred tax liabilities
(5,197 )
Noncontrolling interests (iii)
(33,189 )

Total
33,657

Amounts

(in millions of RMB)
Total purchase price is comprised of:
- cash consideration
5,322
- fair value of previously held equity interests
28,335

Total
33,657

(i)
Net assets acquired primarily included the cash consideration of RMB5,322 million, property and equipment of RMB15,144 million and bank borrowings of RMB5,288 million as of the date of acquisition.

(ii)
Acquired amortizable intangible assets had estimated amortization periods not exceeding 16 years and a weighted-average amortization period of 14.3 years.

(iii)
Fair value of the noncontrolling interests was estimated with reference to the purchase price per share as of the acquisition date.
A gain of RMB22,442 million in relation to the revaluation of the previously held equity interests was recorded in interest and investment income, net in the consolidated income statement for the year ended March 31, 2018. The fair value of the previously held equity interests was estimated based on the purchase price per share of Cainiao Network as of the acquisition date.
The Company expected that the acquisition of control over Cainiao Network will help enhance the overall logistics experience for consumers and merchants across the Company's digital economy, and enable greater efficiencies and lower costs in the logistics sector in the PRC. Goodwill arising from this acquisition was attributable to the synergies expected from the combined operations of Cainiao Network and the Company, the assembled workforce and their knowledge and experience in the logistics sector in the PRC. The Company did not expect the goodwill recognized to be deductible for income tax purposes.
(g)   Acquisition of Intime Retail (Group) Company Limited ("Intime")
Intime is one of the leading department store operators in the PRC that was previously listed on the HKSE. The Company owned a 9.9% equity interest in Intime which was accounted for as an available-for-sale security

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2017, 2018 AND 2019
4.     Significant restructuring transaction, mergers and acquisitions and investments (Continued)
(g)   Acquisition of Intime Retail (Group) Company Limited ("Intime") (Continued)
and subscribed for a convertible bond which was accounted for under the fair value option and recorded under investment securities.
In June 2016, the Company completed the conversion of all of the convertible bond that the Company previously subscribed for into newly issued ordinary shares of Intime, at a conversion price of HK$7.13 per share. Upon the completion of the conversion, the Company's equity interest in Intime increased to approximately 28% and the investment was accounted for under the equity method. The sum of the market value of the previously held equity interests in Intime and the fair value of the convertible bond on the date of conversion, amounting to RMB4,758 million, was recognized as the cost of investment under the equity method upon the completion of the conversion. Out of this amount, RMB250 million was allocated to amortizable intangible assets, RMB426 million was allocated to deferred tax liabilities and RMB4,934 million was allocated to net assets acquired.
In May 2017, the Company and the founder of Intime completed the privatization of Intime, upon which all of the issued and outstanding shares of Intime that the Company, the founder of Intime and certain other shareholders did not own were cancelled in exchange for a payment of HK$10.00 per share in cash. The Company paid a cash consideration of HK$12,605 million (RMB11,131 million) in the privatization. Upon the completion of the privatization, the Company increased its shareholding in Intime to approximately 74% and Intime became a consolidated subsidiary of the Company. Following the completion of the privatization, the listing of the shares of Intime on the HKSE was withdrawn.
The allocation of the purchase price as of the date of acquisition is summarized as follows:

Amounts

(in millions of RMB)
Net assets acquired (i)
20,920
Amortizable intangible assets (ii)
Trade names, trademarks and domain names
1,131
User base and customer relationships
72
Developed technology and patents
16
Goodwill
4,757
Deferred tax liabilities
(2,790 )
Noncontrolling interests (iii)
(6,301 )

Total
17,805

Amounts

(in millions of RMB)
Total purchase price is comprised of:
- cash consideration
11,131
- fair value of previously held equity interests
6,674

Total
17,805

(i)
Net assets acquired primarily included property and equipment of RMB23,492 million and bank borrowings of RMB4,110 million as of the date of acquisition.

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2017, 2018 AND 2019
4.     Significant restructuring transaction, mergers and acquisitions and investments (Continued)
(g)   Acquisition of Intime Retail (Group) Company Limited ("Intime") (Continued)
(ii)
Acquired amortizable intangible assets had estimated amortization periods not exceeding eleven years and a weighted-average amortization period of 10.1 years.

(iii)
Fair value of the noncontrolling interests was estimated with reference to the purchase price of HK$10.00 per share in the privatization.
A gain of RMB1,861 million in relation to the revaluation of the previously held equity interests was recorded in interest and investment income, net in the consolidated income statement for the year ended March 31, 2018. The fair value of the previously held equity interests was estimated with reference to the purchase price of HK$10.00 per share in the privatization.
The Company expected Intime to support its strategy to transform conventional retail by leveraging its substantial consumer reach, rich data and technology. Goodwill arising from this acquisition was attributable to the synergies expected from the combined operations of Intime and the Company, the assembled workforce and their knowledge and experience in the retail business in the PRC. The Company did not expect the goodwill recognized to be deductible for income tax purposes.
In February 2018 and October 2018, the Company purchased additional ordinary shares of Intime from certain minority shareholders for a cash consideration of HK$6,712 million (RMB5,428 million) and HK$203 million (RMB180 million), respectively, which resulted in a reduction of noncontrolling interests amounting to RMB5,854 million and RMB162 million during the years ended March 31, 2018 and 2019, respectively. Upon the completion of the purchase of additional ordinary shares in October 2018, the Company's equity interest in Intime increased to approximately 99%.
(h)  Acquisition of Youku Tudou Inc. ("Youku")
Youku is one of the largest online video platforms in the PRC that was previously listed on the New York Stock Exchange ("NYSE"). In April 2016, the Company completed an acquisition of all of the issued and outstanding shares of Youku that the Company or Yunfeng, which is comprised of certain investment funds the general partner of which the executive chairman of the Company has equity interests in, did not previously own, at a purchase price of US$27.60 per American Depositary Share ("ADS"). Following the completion of the transaction, the Company held an approximately 98% equity interest in Youku. As a result, Youku became a consolidated subsidiary of the Company, with Yunfeng holding an approximately 2% noncontrolling interests. The listing of the ADS of Youku on the NYSE was withdrawn upon the closing of the transaction.

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2017, 2018 AND 2019
4.     Significant restructuring transaction, mergers and acquisitions and investments (Continued)
(h)  Acquisition of Youku Tudou Inc. ("Youku") (Continued)
The cash consideration of US$4,443 million (RMB28,724 million) was paid upon the closing of the transaction. The allocation of the purchase price as of the date of acquisition is summarized as follows:

Amounts

(in millions of RMB)
Net assets acquired (i)
5,923
Amortizable intangible assets (ii)
Trade names, trademarks and domain names
4,047
User base and customer relationships
284
Developed technology and patents
143
Others
175
Goodwill
26,395
Deferred tax assets
73
Deferred tax liabilities
(1,167 )
Noncontrolling interests (iii)
(773 )

Total
35,100

Amounts

(in millions of RMB)
Total purchase price is comprised of:
- cash consideration
28,724
- fair value of previously held equity interests
6,376

Total
35,100

(i)
Net assets acquired primarily included cash and cash equivalents and short-term interest-bearing deposits with total balance of RMB5,857 million and licensed copyrights of RMB703 million as of the date of acquisition.

(ii)
Acquired amortizable intangible assets had estimated amortization periods not exceeding 20 years and a weighted-average amortization period of 17.4 years.

(iii)
Fair value of the noncontrolling interests was estimated with reference to the purchase price of US$27.60 per ADS in the step acquisition.
A gain of RMB518 million in relation to the revaluation of the previously held equity interests was recorded in interest and investment income, net in the consolidated income statement for the year ended March 31, 2017. The fair value of the previously held equity interests was estimated with reference to the purchase price of US$27.60 per ADS in the step acquisition.
Youku is a core part of the Company's strategy to offer digital entertainment to consumers in the Company's digital economy, thereby strengthening user engagement and loyalty as well as enabling a new marketing channel for the merchants and brands in the Company's digital economy. Further, Youku created additional revenue sources for the Company from advertising and membership subscriptions. Goodwill arising from this acquisition was attributable to the synergies expected from the combined operations of Youku and the

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2017, 2018 AND 2019
4.     Significant restructuring transaction, mergers and acquisitions and investments (Continued)
(h)  Acquisition of Youku Tudou Inc. ("Youku") (Continued)
Company, the assembled workforce and their knowledge and experience in the digital entertainment business. The Company did not expect the goodwill recognized to be deductible for income tax purposes.
Subsequent to the completion of the transaction and as a resolution to negotiations with certain former management members and shareholders of Youku with respect to an option to purchase up to 15% of its equity, the Company issued 1.3 million ordinary shares and 3.4 million restricted share units of the Company to certain former management members and shareholders in April 2017. An expense of RMB994 million relating to the 1.3 million ordinary shares issued was recorded in interest and investment income, net in the consolidated income statement for the year ended March 31, 2018. The 3.4 million restricted share units contain vesting conditions pursuant to a non-compete agreement that was entered into by the Company and a former management member of Youku in April 2017 (Note 15).
In December 2017, the Company made a capital injection of US$132 million (RMB870 million) in Youku, which resulted in a reduction of noncontrolling interests. As of March 31, 2019, the Company owned 100% of the equity interests in Youku.
(i)   Acquisition of Lazada Group S.A. ("Lazada")
Lazada operates a leading e-commerce platform across Southeast Asia, with local language websites and mobile apps in Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam. In April 2016, the Company completed an acquisition of an approximately 54% equity interest in Lazada for a cash consideration of US$1,020 million (RMB6,607 million). Lazada became a consolidated subsidiary of the Company after the completion of the transaction.
The allocation of the purchase price as of the date of acquisition is summarized as follows:

Amounts

(in millions of RMB)

Net assets acquired
~~105~~2,874

Amortizable intangible assets (i)

User base and customer relationships
252,014
Non-compete agreements
959

Trade names, trademarks and domain names
~~196~~292

Developed technology and patents
4
~~Non-compete agreements~~
~~703~~79

Goodwill
~~3,998~~5,216
Deferred tax assets
616

Deferred tax liabilities
(~~232~~1,027 )
Noncontrolling interests (ii)
(4,416 )

Total
~~4,799~~

~~Total purchase price comprised of:~~
~~- cash consideration~~
~~790~~
~~- contingent cash consideration~~
~~1,094~~
~~- fair value of previously held equity interests~~
~~2,915~~

~~Total~~
~~4,799~~6,607

(i)
Acquired amortizable intangible assets ~~have~~had estimated amortization periods not exceeding ~~five~~three years and a weighted-average amortization period of ~~4.5 years~~2.5 years.

(ii)
Fair value of the noncontrolling interests was estimated with reference to the purchase price per share as of the acquisition date. The noncontrolling interests is classified as mezzanine equity due to certain put and call arrangements with other Lazada shareholders.

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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, ~~2014, 2015~~2017, 2018 AND ~~2016~~2019
4.     Significant ~~equity transactions,~~ restructuring ~~transactions,~~transaction, mergers and acquisitions and ~~equity~~ investments (Continued)
~~(g)~~(i)   Acquisition of ~~Shenzhen OneTouch Business Services Ltd.~~Lazada Group S.A. ("~~OneTouch"~~Lazada") (Continued)
Lazada offers merchants and brands a one-stop marketplace solution to access consumers in the six countries. Lazada also sells products on its platforms directly via its own retail operations. In addition, it has an in-house logistics operation, which is supported by the highly scalable warehouse management system, to ensure quick and reliable order fulfillment. The ~~amount of the contingent consideration~~Company believed that Lazada will be ~~determined based on a formula tied~~the vehicle for expansion into the Southeast Asia consumer market, including potential cross-border opportunities to certain future operating targets of OneTouch for the year ending March 31, 2017, which will not exceed RMB3,420 million. The fair value of the contingent consideration included in the total purchase price represents a probability-weighted outcome based on the Company's analysis of the likelihood of the various scenarios underlying this arrangement. A gain of RMB2,719 million was recognized in relationintroduce Chinese merchants and international brands to the revaluation of previously held equity interest relating to the step acquisition of OneTouch in interest and investment income, net in the consolidated income statement for the year ended March 31, 2015.
The fair value of the previously held equity interest was measured using an income approach determined by the Company. As OneTouch is a private company, the fair value of the previously held equity interest is estimated based on significant inputs that market participants would consider, which mainly include revenue growth rate, operating margin, discount rate and other factors that may affect such fair value estimation.
The rationale for this transaction is to enable the Company to expand its products and services. The Company believes the acquisition will help to serve the wholesale sellers on the international wholesale marketplace by adding a wide range of export-related value-added services.Southeast Asian consumers. Goodwill arising from this acquisition was attributable to the synergies expected from the combined operations of ~~OneTouch~~Lazada and the Company, the assembled workforce and their knowledge and experience ~~surrounding export-related services~~in e-commerce in Southeast Asia. The Company did not expect the goodwill recognized to ~~small businesses in~~be deductible for income tax purposes.
During the ~~PRC.~~
~~As of~~year ended March 31, ~~2014, 2015 and 2016,~~2018, the Company ~~assessed the operating and financial targets~~purchased additional equity interest in ~~connection with the previous and current contingent~~Lazada for a cash consideration ~~arrangements, and revised the fair value~~of US$1,016 million (RMB6,877 million), as a result of the ~~contingent consideration payable. As a result,~~partial exercise of the put and call arrangement with minority shareholders. In addition, the Company ~~recognized in the consolidated income statements an increase in fair value of contingent consideration of RMB178~~made capital injections amounting to US$483 million ~~RMB85~~(RMB3,124 million) and US$770 million ~~and RMB17 million for~~(RMB5,222 million) into Lazada during the years ended March 31, ~~2014, 2015~~2018 and ~~2016.~~2019, respectively. The Company also acquired additional equity interest held by certain management members and employees of Lazada for a total consideration of US$87 million (RMB578 million) and US$20 million (RMB133 million) for the same periods, respectively. These transactions resulted in a reduction of noncontrolling interests amounting to RMB1,681 million and an addition of RMB400 million during the years ended March 31, 2018 and 2019, respectively. Upon the completion of these transactions, the Company's equity interest in Lazada was approximately 92%.
In April 2019 and June 2019, the Company made additional capital injections amounting to US$300 million, which resulted in a further increase in the Company's equity interest in Lazada.

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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, ~~2014, 2015~~2017, 2018 AND ~~2016~~2019
4.     Significant ~~equity transactions,~~ restructuring ~~transactions,~~transaction, mergers and acquisitions and ~~equity~~ investments (Continued)
~~(h)~~(j) Other acquisitions
Other acquisitions that constitute business combinations are summarized in the following table:

Year ended March 31,

2014 2015 2016
Year ended March 31,

(in millions of RMB)

2017 2018 2019

Net assets
24 266 350
(in millions of RMB)

Identifiable intangible assets
486 421 876
Net assets (liabilities)
2,315 (58 ) 2,133

Deferred tax assets
— 5 —
Identifiable intangible assets
2,903 411 2,560

Deferred tax liabilities
(29 ) (95 ) (198 )
Deferred tax liabilities
(412 ) (60 ) (545 )

481 597 1,028
4,806 293 4,148

Noncontrolling interests
— (269 ) (10 )
Noncontrolling interests and mezzanine equity
(8,365 ) (77 ) (2,993 )

Net identifiable assets acquired
481 328 1,018
Net identifiable (liabilities) assets
(3,559 ) 216 1,155

Goodwill
543 1,806 1,403
Goodwill
11,797 618 6,465

Total purchase consideration
1,024 2,134 2,421
Total purchase consideration
8,238 834 7,620

Fair value of previously held equity interests
— (107 ) —
Fair value of previously held equity interests
(1,169 ) (133 ) (1,778 )

Purchase consideration settled
(731 ) (1,927 ) (2,360 )
Purchase consideration settled
(6,602 ) (575 ) (5,053 )

Contingent/deferred consideration as of year end
293 100 61
Contingent/deferred consideration as of year end
467 126 789

Total purchase consideration comprised of:

Total purchase consideration is comprised of:

- cash consideration
843 2,027 2,421
- cash consideration
7,069 701 5,842

- fair value of previously held equity interests
— 107 —
- fair value of previously held equity interests
1,169 133 1,778

- share-based consideration
181 — —

Total
1,024 2,134 2,421
Total
8,238 834 7,620

~~A loss of nil, RMB61 million and nil in~~In relation to the revaluation of previously held equity ~~interest was~~interests, the Company recognized a gain of RMB252 million, RMB133 million and RMB715 million in the consolidated income statements for the years ended March 31, ~~2014, 2015~~2017, 2018 and ~~2016,~~2019, respectively, for the ~~above~~other acquisitions that constitute business combinations.
Pro forma results of operations for ~~the~~these acquisitions ~~described above~~ have not been presented because they are not material to the consolidated income statements for the years ended March 31, 2017, 2018 and 2019, either individually or in aggregate.
Equity investments and others
~~(i)   Investment in Rajax Holding~~(k)  STO Express Co., Ltd. ("~~Ele.me"~~STO Express")
STO Express, a company that is listed on the Shenzhen Stock Exchange, is one of the leading express delivery services companies in the PRC. In March ~~2016,~~2019, the Company ~~and Ant Financial Services completed~~made a loan to the controlling shareholder of STO Express with a principal amount of RMB5.0 billion for a term of three years. The controlling shareholder of STO Express has pledged a portion of the subscription for newly issued convertible preferred shares in Ele.me based on a total combined commitment of US$1,250 million, of which the Company's total commitment is US$900 million (RMB5,891 million). Ele.me is an operator of one of the largest mobile food ordering and delivery services in the PRC. Ele.me complements the Company's investment in Koubei (Note 4(n)) in local services, focusing on food ordering and delivery characterized by high-frequency usage and last-mile logistics within a city.
~~The total cash consideration paid was US$540 million (RMB3,512 million). The effective~~its equity interest in ~~Ele.me that~~STO Express in relation to the loan. The loan is ~~held~~accounted for at amortized cost and is recorded under investment securities (Note 11) on the consolidated balance sheets.
In addition, the Company entered into a share purchase agreement to acquire a 49% equity interest in an investment vehicle to be established by the ~~Company~~controlling shareholder, which will ~~be approximately 22% on~~hold a ~~fully-diluted basis once the full~~29.9% equity interest in

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ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, ~~2014, 2015~~2017, 2018 AND ~~2016~~2019
4.     Significant ~~equity transactions,~~ restructuring ~~transactions,~~transaction, mergers and acquisitions and ~~equity~~ investments (Continued)
~~(i)   Investment in Rajax Holding~~(k)  STO Express Co., Ltd. ("~~Ele.me"~~STO Express") (Continued)
~~commitment~~STO Express for a cash consideration of RMB4.7 billion. The completion of this transaction is funded. The convertible preferred shares are not considered in-substance common stock given that such shares contain certain terms such as dividend and liquidation preferences over ordinary shares. As a result, the investment in Ele.me is accounted for under the cost method (Note 14).subject to customary closing conditions.
~~(j)~~(l)  Investment in ~~Magic Leap, Inc.~~Focus Media Information Technology Co., Ltd. ("~~Magic Leap"~~Focus Media")
Focus Media, a company that is listed on the Shenzhen Stock Exchange, operates a media network for advertisements, including within cinemas, and advertising posters and displays in elevators of office and residential buildings. During the year ended March 31, 2019, the Company acquired a total equity interest of approximately 7% in Focus Media for a cash consideration of approximately RMB10.7 billion. The investment is carried at fair value with unrealized gains and losses recorded in the consolidated income statements (Note 11). New Retail Strategic Opportunities Fund, L.P. (the "Offshore Retail Fund") (Note 4(n)) is also an investor in this transaction.
The Company has also entered into an agreement with Hangzhou Hanyun Xinling Equity Investment Fund (the "Onshore Retail Fund") (Note 4(n)) under which the Onshore Retail Fund will participate in the gain and loss related to a certain portion of the equity interest in Focus Media held by the Company. The arrangement is carried at fair value with unrealized gains and losses recorded in the consolidated income statements.
In ~~December 2015,~~addition, the Company agreed to acquire a 10% equity interest of an entity controlled by the founder and chairman of Focus Media, which holds an approximately 23% equity interest in Focus Media, for a cash consideration of US$511 million (RMB3,429 million). This transaction has not been completed as of March 31, 2019. Such arrangement is carried at fair value with unrealized gains and losses recorded in the consolidated income statements.
(m)   Investment in PT Tokopedia ("Tokopedia")
Tokopedia operates one of the leading e-commerce platforms in Indonesia. During the year ended March 31, 2018, the Company completed ana minority investment in existing and newly issued ~~convertible~~ preferred shares of ~~Magic Leap, representing an approximately 10% equity interest on~~Tokopedia for a ~~fully-diluted basis. Magic Leap is a technological company that focuses on the development of augmented reality technology. The~~ total cash consideration ~~paid was~~of US$~~430~~445 million ~~(RMB2,775~~(RMB2,920 million). ~~Such~~In connection with the initial investment, ~~is accounted for under the cost method (Note 14).~~
~~(k)   Investment in CMC Holdings Limited ("CMC")~~
~~In December 2015,~~ the Company ~~completed an investment~~also agreed to subscribe for up to US$500 million in additional preferred shares ~~representing~~of Tokopedia at the then fair market value if so elected by Tokopedia during a ~~21% equity interest,~~24-month period after the completion of ~~CMC. CMC is~~the initial investment. Pursuant to the agreement, the Company acquired additional newly issued preferred shares of Tokopedia for a ~~new investment platform that focuses on the media and entertainment sectors. The~~ total cash consideration ~~paid was~~of US$~~197~~500 million ~~(RMB1,270~~(RMB3,443 million). in December 2018. Upon the completion of this investment, the Company held an approximately 29% equity interest in Tokopedia on a fully diluted basis. SoftBank is also an existing shareholder of Tokopedia. The preferred shares are not considered in-substance common stock given that ~~such~~the shares contain certain terms such as ~~dividend and~~ liquidation ~~preferences~~preference over ordinary shares. As a result, ~~the~~such investment ~~in preferred shares is~~was accounted for under the cost method (Note ~~14).~~
In addition, the Company acquired in a 20% equity interest in a limited partnership in the PRC which is managed by the founder of CMC. The objective of the limited partnership is consistent with that of CMC. Total cash consideration of RMB1,250 million was paid upon the closing of the transaction in December 2015. Such investment is accounted for under the equity method (Note 14).
~~(l)   Investment in Beijing Shiji Information Technology Co., Ltd. ("Shiji Information")~~
In November 2015, the Company completed an investment in newly issued ordinary shares of Shiji Information, representing an approximately 13% equity interest in Shiji Information. Shiji Information, a company that is listed on the Shenzhen Stock Exchange, is primarily engaged in the development and sale of hotel information management system software, system integration and technical service. The total cash consideration of RMB2,389 million was paid upon the closing of the transaction. Such investment is accounted for as an available-for-sale security (Note 12).
~~(m) Investment in Huayi Brothers Media Corporation ("Huayi Brothers")~~
In August 2015, the Company completed an investment in newly issued ordinary shares of Huayi Brothers, representing an approximately 4% equity interest in Huayi Brothers. Yunfeng Capital is also one of the minority shareholders of Huayi Brothers. Huayi Brothers, a company that is listed on the Shenzhen Stock Exchange, is primarily engaged in the production of television programs and movies in the PRC. The total cash consideration of RMB1,533 million was paid upon the closing of the transaction. Such investment is accounted for as an available-for-sale security (Note 12).

~~Table of Contents~~

~~ALIBABA GROUP HOLDING LIMITED~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~FOR THE YEARS ENDED MARCH 31, 2014, 2015 AND 2016~~
~~4.     Significant equity transactions, restructuring transactions, mergers and acquisitions and equity investments (Continued)~~
~~(n)  Investment in Koubei Holding Limited ("Koubei")~~
In June 2015, the Company and Ant Financial Services agreed to set up Koubei, a joint venture in which the Company and Ant Financial Services each hold a 49.6% equity interest, while an unrelated third party affiliated with a major Chinese restaurant chain holds the remaining minority equity interest. Koubei integrates the convenience aspects of mobile commerce and big data to provide consumers with information and promotional benefits from local restaurants in the PRC.
The capital injection from the Company includes cash of RMB3.0 billion as well as the injection of certain related businesses. The cash and businesses injection were completed as of March 31, 2016. A gain of RMB128 million which approximated the fair value of the businesses being injected, was recognized in relation to the contribution of the businesses of which the carrying amount was insignificant to Koubei in interest and investment income, net in the consolidated income statement13) for the year ended March 31, ~~2016. For accounting purposes,~~2018. Upon the ~~investment in Koubei is accounted for under~~adoption of ASU 2016-01, the ~~equity method (Note 14).~~
~~(o)   Investment in YTO Express (Logistics) Co., Ltd. ("YTO Express")~~
In May 2015, the Company made a contribution to the registered capital representing an ownership interest of 12% in YTO Express. YTO Express is one of the leading express courier companies in the PRC. YTO Express is one of the strategic express courier companies participating in the data system of Cainiao Network to fulfill orders from the Company's core commerce business. The cash consideration of RMB1,500 million was paid upon the closing of the transaction. Yunfeng Capital is also a co-investor of YTO Express. Such investment is accounted for ~~under~~using the ~~cost method~~measurement alternative (Note ~~14)~~11).
During the year ended March 31, 2016, a company listed on the Shanghai Stock Exchange filed an application to purchase all of the equity interest in YTO Express through an asset swap and share issue, resulting in a reverse takeover of the company by YTO Express. The completion of the reverse takeover is subject to the approval by certain regulatory authorities.
~~(p)  Investment in wealth management products in relation to a founder's investment in Wasu Media Holding Co., Ltd. ("Wasu")~~
In April 2015, the Company entered into an arrangement with a bank in the PRC to invest in wealth management products with an aggregate principal amount of RMB7.3 billion. The wealth management products carry an interest rate of 5% per annum, with a maturity of five years and the return of principal and interest income on the products is guaranteed by the bank. The wealth management products have been served as collateral to the issuing bank for the issuance of a financing amounting to RMB6.9 billion to one of the founders of the Company to support his minority investment through a PRC limited partnership in Wasu, a company listed on the Shenzhen Stock Exchange which is engaged in the business of digital media broadcasting and distribution in the PRC. The financing has also been collateralized by the equity interests of Wasu held by such PRC limited partnership. The founder has also pledged his interest in the PRC limited partnership to the Company. The founder is exposed to the risks and rewards of the Wasu shares held by the PRC limited partnership. The Company does not have the power to direct the activities of the PRC limited partnership. The Company entered into strategic cooperation agreements with a major shareholder of Wasu in order to enhance the Company's capabilities and profile in the entertainment sector in the PRC. Such investment in the wealth management products is accounted for as a held-to-maturity security (Note 12).

~~Table of Contents~~

~~ALIBABA GROUP HOLDING LIMITED~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~FOR THE YEARS ENDED MARCH 31, 2014, 2015 AND 2016~~
~~4.     Significant equity transactions, restructuring transactions, mergers and acquisitions and equity investments (Continued)~~
~~(p)  Investment in wealth management products in relation to a founder's investment in Wasu Media Holding Co., Ltd. ("Wasu") (Continued)~~
In addition, the Company entered into a loan agreement for a principal amount of up to RMB2.0 billion with the founder in April 2015 to finance the repayment by the founder of the interest under the above financing.
~~(q)  Investment in Meizu Technology Corporation Limited ("Meizu")~~
In February 2015, the Company completed an investment in convertible preferred shares of Meizu representing an equity interest of approximately 29% on a fully-diluted basis. Meizu is one of the leading smart phone manufacturers in the PRC. The total cash consideration of US$590 million (RMB3,619 million) was paid upon the closing of the transaction. The convertible preferred shares are not considered in-substance common stock given that such shares contain certain terms such as dividend and liquidation preferences over ordinary shares. As a result, the investment in convertible preferred shares is accounted for under the cost method (Note 14).
~~(r)   Investment in Intime Retail (Group) Company Limited ("Intime")~~
In July 2014, the Company completed the subscription for newly issued ordinary shares representing a 9.9% equity interest in Intime. Intime is one of the leading department store operators in the PRC that is listed on the Hong Kong Stock Exchange. In addition, the Company completed a subscription for a convertible bond which is convertible into ordinary shares of Intime and upon conversion would increase the Company's equity interest in Intime to approximately 26%. The convertible bond has a maturity date which is the third anniversary of the issue date of the bond unless previously converted or redeemed upon the occurrence of certain redemption events, and bears an interest of 1.5% per annum on the principal amount of the bond. The total cash consideration of HK$5,368 million (RMB4,264 million) was paid upon the closing of the transaction. The investment in ordinary shares in Intime is accounted for as an available-for-sale security and the investment in the convertible bond is accounted for under the fair value option and recorded under investment securities (Note 12).
~~(s)   Investment in Singapore Post Limited ("SingPost")~~
In July 2014, the Company completed the acquisition of ordinary shares in SingPost, which consists of newly issued ordinary shares and existing ordinary shares held in treasury by SingPost, representing approximately 10% of the issued share capital of SingPost. SingPost is a national post service provider in Singapore and a leading provider of e-commerce logistics solutions in the Asia-Pacific region that is listed on the Singapore Exchange. The total purchase price of S$313 million (RMB1,548 million) has been paid upon the closing of the transaction. Such investment is accounted for as an available-for-sale security (Note 12).
In July 2015, the Company entered into a joint venture agreement with SingPost, pursuant to which the Company will invest up to S$92 million (RMB440 million) for a 34% equity interest in a wholly-owned subsidiary of SingPost, which provides end-to-end e-commerce logistics and fulfillment services across the Asia Pacific region. The completion of this transaction is subject to a number of customary closing conditions.
In addition, the Company agreed to subscribe for newly issued ordinary shares of SingPost, representing approximately 5% of the existing issued share capital of SingPost. Upon completion, the Company's equity interest in SingPost would increase to approximately 15%. The total cash consideration for the subscription is

~~Table of Contents~~

~~ALIBABA GROUP HOLDING LIMITED~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~FOR THE YEARS ENDED MARCH 31, 2014, 2015 AND 2016~~
~~4.     Significant equity transactions, restructuring transactions, mergers and acquisitions and equity investments (Continued)~~
~~(s)   Investment in Singapore Post Limited ("SingPost") (Continued)~~
~~S$187 million (RMB895 million). The completion of this transaction is subject to a number of conditions including the approval by the shareholders of SingPost and certain regulatory authorities.~~
~~(t)   Investment in Youku Tudou Inc. ("Youku Tudou")~~
In May 2014, the Company completed an acquisition of ordinary shares representing an effective equity interest of 16.5% on a fully-diluted basis in Youku Tudou. Youku Tudou, a company that was previously listed on the New York Stock Exchange, is a leading multi-screen entertainment and media company in the PRC. The cash consideration of US$1,090 million (RMB6,723 million) was paid upon the closing of the transaction. The Company made this investment on the same terms together with Yunfeng Capital, which is also a co-investor in Youku Tudou. The Company appointed one director to the board of Youku Tudou and the investment in Youku Tudou is accounted for under the equity method (Note 14). Out of the total purchase consideration, RMB918 million was allocated to amortizable intangible assets, RMB4,158 million was allocated to goodwill, RMB230 million was allocated to deferred tax liabilities and RMB1,877 million was allocated to net assets acquired.
In April 2016, the Company completed an acquisition of all of the issued and outstanding shares of Youku Tudou that the Company or Yunfeng Capital did not already own, at a purchase price of US$27.60 per ADS. Following the completion of the transaction, Youku Tudou became a consolidated subsidiary of the Company, with Yunfeng Capital holding an approximately 2% minority interest and the management of Youku Tudou retaining an option to purchase up to 15% of its equity. The listing of the ADS of Youku Tudou on the New York Stock Exchange was withdrawn.
Youku Tudou is a core part of the Company's strategy to offer digital entertainment to consumers in the Company's ecosystem, thereby strengthening user engagement as well as enabling a new marketing channel for the merchants in the Company's ecosystem. Further, Youku Tudou creates additional revenue sources for the Company from advertising and membership subscriptions.
The total cash consideration of US$4.4 billion (RMB28.4 billion) was paid upon the closing of the transaction. Upon the issuance of the consolidated financial statements, the accounting for such business combination, including the purchase price allocation and the gain or loss arising from this transaction, has not been finalized.
~~(u)  Investment in Weibo Corporation ("Weibo")~~
In April 2014, in connection with Weibo's initial public offering, the Company acquired additional shares of Weibo for an aggregate purchase price of US$449 million (RMB2,764 million) pursuant to the option to increase the equity interest by the Company in Weibo to approximately 30% on a fully-diluted basis (including the shares to be issued in connection with Weibo's initial public offering). Weibo is a social media platform in the PRC that is listed on the Nasdaq. All preferred shares previously held by the Company were automatically converted into ordinary shares upon completion of Weibo's initial public offering. Prior to the transaction, Weibo was an equity investee accounted for under the cost method in which the Company initially acquired an 18% equity interest on a fully-diluted basis for a cash consideration of US$586 million (RMB3,645 million) in April 2013. After the transaction in April 2014, such investment is accounted for under the equity method (Note 14). Out of the total purchase consideration, which included the cash purchase price and the carrying amount of the previously held interest in Weibo, RMB1,126 million was allocated to amortizable intangible

~~Table of Contents~~

~~ALIBABA GROUP HOLDING LIMITED~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~FOR THE YEARS ENDED MARCH 31, 2014, 2015 AND 2016~~
~~4.     Significant equity transactions, restructuring transactions, mergers and acquisitions and equity investments (Continued)~~
~~(u)  Investment in Weibo Corporation ("Weibo") (Continued)~~
~~assets, RMB3,978 million was allocated to goodwill, RMB282 million was allocated to deferred tax liabilities and RMB1,548 million was allocated to net assets acquired.~~
~~(v)   Investment in Haier Electronics Group Co., Ltd. ("Haier")~~
In March 2014, the Company completed an acquisition of ordinary shares representing an approximately 2% equity interest in Haier, a company that is listed on the Hong Kong Stock Exchange, which is principally engaged in the research, development, manufacture and sale of electrical appliances, especially home electrical appliances such as refrigerators and air conditioners. The purchase price consisted of cash consideration of HK$965 million (RMB763 million). Such investment is accounted for as an available-for-sale security (Note 12).
In addition, the Company completed an acquisition of a 9.9% equity interest in a wholly-owned subsidiary of Haier that is engaged in the logistics business in the PRC for cash consideration of HK$540 million (RMB427 million). Such investment is accounted for under the equity method given the existence of significant influence (Note 14). RMB252 million of the purchase price was allocated to amortizable intangible assets and goodwill, RMB20 million was allocated to deferred tax liabilities and RMB195 million was allocated to net assets acquired.
Furthermore, the Company completed the subscription for a convertible bond for a purchase price of HK$1,316 million (RMB1,044 million) which is either convertible into ordinary shares of Haier or exchangeable into a 24% equity interest in the logistics business of Haier, subject to the receipt of certain regulatory approvals. The entire convertible bond is accounted for under the fair value option and recorded under investment securities (Note 12).
~~(w)  Investment in Cainiao Smart Logistics Network Limited ("Cainiao Network")~~
During the year ended March 31, 2014, the Company took part in establishing Cainiao Network Technology Co. Ltd. together with other parties with significant operational experience in logistics, retail, and real estate in the PRC. Cainiao Network Technology Co. Ltd. is a joint venture which is a logistics data platform that leverages the capacity and capabilities of a network of logistics partners to fulfill the logistics needs of the Company's core commerce business. A total amount of RMB2,400 million was invested in the joint venture, in which the Company owned a 48% equity interest as of March 31, 2014 and 2015.
In March 2016, Cainiao Network Technology Co. Ltd. completed a restructuring process to establish a new holding company and it became a wholly owned subsidiary of Cainiao Network. In March 2016, the Company participated in Cainiao Network's equity financing round, after which the Company's investment increased from RMB2,400 million initially in Cainiao Network Technology Co. Ltd. to RMB6,992 million in Cainiao Network, the Company's equity interest in Cainiao Network was diluted to approximately 47%. A gain of RMB448 million arising from such deemed disposal was recognized in share of results of equity investees in the consolidated income statement for the year ended March 31, 2016.
~~For accounting purpose, the investment in Cainiao Network is accounted for under the equity method (Note 14).~~

~~Table of Contents~~

~~ALIBABA GROUP HOLDING LIMITED~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~FOR THE YEARS ENDED MARCH 31, 2014, 2015 AND 2016~~
~~4.     Significant equity transactions, restructuring transactions, mergers and acquisitions and equity investments (Continued)~~
~~Equity transactions and acquisitions that were not completed as of March 31, 2016~~
~~(x)   Investment in Lazada Group S.A. ("Lazada")~~
In April 2016, the Company completed an acquisition of a controlling stake in Lazada for a total cash consideration of US$1.0 billion (RMB6.5 billion). Lazada operates e-commerce platforms in Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam, with local language websites and mobile apps in each of the six markets.
Lazada offers third-party brands and merchants a marketplace solution with simple and direct access to consumers in these six countries through one retail channel. It also sells products owned by its retail operations and has developed its own logistics infrastructure with warehouses and a last-mile delivery fleet to offer quick and reliable delivery to its customers. The Company intends that Lazada will be the vehicle for expansion into the Southeast Asia consumer market, including potential cross-border opportunities introducing Chinese merchants and international brands to Southeast Asian consumers.
Lazada became a consolidated subsidiary of the Company after the completion of the transaction. In connection with the transaction, the Company entered into a put and call arrangement with certain Lazada shareholders, giving the Company the right to purchase, and the shareholders the right to sell collectively, their remaining equity interest in Lazada at fair market value during a six-month period after the first anniversary of the closing of the transaction. Upon the issuance of these consolidated financial statements, the accounting for such business combination, including the purchase price allocation, has not been finalized.
~~(y)   Investment in media business of SCMP Group Limited~~
In April 2016, the Company completed an acquisition of the media business of SCMP Group Limited, a company that is listed on the Hong Kong Stock Exchange, at a cash consideration of HK$2.1 billion (RMB1.8 billion). Apart from the flagship South China Morning Post, the premier English newspaper in Hong Kong, the Company also acquired the magazine, recruitment, outdoor media, events and conferences, education and digital media businesses of SCMP Group Limited. The acquired companies became wholly-owned subsidiaries of the Company after the completion of the transaction. Upon the issuance of these consolidated financial statements, the accounting for such business combination, including the purchase price allocation, has not been finalized.
~~(z)   Investment in AGTech Holdings Limited ("AGTech")~~
In March 2016, an investment vehicle which is 60% owned by the Company and 40% owned by Ant Financial Services, entered into a subscription agreement to subscribe for newly issued ordinary shares of AGTech representing an approximately 51% equity interest in AGTech. AGTech is an integrated lottery technology and services company in the PRC that is listed on the Hong Kong Growth Enterprise Market. The total cash consideration is expected to approximate HK$1,675 million (RMB1,397 million). In addition, the investment vehicle will subscribe for convertible bonds for a purchase price of approximately HK$713 million (RMB595 million), which are convertible into ordinary shares of AGTech. Upon the conversion of the convertible bonds, the investment vehicle's equity interest in AGTech would be increased to approximately 59%. The completion of this transaction is subject to a number of customary closing conditions including the approval by shareholders and certain regulatory authorities.

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, ~~2014, 2015~~2017, 2018 AND ~~2016~~2019
4.     Significant ~~equity transactions,~~ restructuring ~~transactions,~~transaction, mergers and acquisitions and ~~equity~~ investments (Continued)
~~(aa)~~(n)  Investments in Hangzhou Hanyun Xinling Equity Investment Fund Partnership (the "Onshore Retail Fund") and New Retail Strategic Opportunities Fund, L.P. (the "Offshore Retail Fund")
The Onshore Retail Fund and the Offshore Retail Fund were set up to raise capital to invest in retail related businesses in the PRC and internationally, respectively. The Company is able to exercise significant influence over the investment decisions in both funds. In August 2017 and January 2018, the Company made a commitment to invest RMB1.6 billion and US$200 million in the Onshore Retail Fund and the Offshore Retail Fund, relating to which the Company has funded RMB462 million and RMB922 million to the Onshore Retail Fund as of March 31, 2018 and 2019, respectively; and US$77 million and US$78 million to the Offshore Retail Fund as of March 31, 2018 and 2019, respectively. As of March 31, 2019, the Company held an approximately 20% equity interest in the Onshore Retail Fund and an approximately 10% equity interest in the Offshore Retail Fund. The investments are accounted for under the equity method (Note 13).
(o)   Investment in Huatai Securities Co, Ltd. ("Huatai Securities")
Huatai Securities, a company that is listed on both the Shanghai Stock Exchange and the HKSE, is a leading integrated securities group in the PRC. In July 2018, the Company acquired an approximately 3% interest in Huatai Securities for a cash consideration of RMB3.5 billion. The investment is carried at fair value with unrealized gains and losses recorded in the consolidated income statements (Note 11).
(p)  Investment in ZTO Express (Cayman) Inc. ("ZTO Express")
ZTO Express, a company that is listed on the NYSE, is one of the leading express delivery services companies in the PRC. In June 2018, the Company completed an investment in newly issued ordinary shares of ZTO Express for a cash consideration of US$1,100 million (RMB7,114 million), representing an approximately 8% equity interest in ZTO Express. The Offshore Retail Fund (Note 4(n)) is also an investor in this transaction. The investment is carried at fair value with unrealized gains and losses recorded in the consolidated income statements (Note 11).
(q)  Investment in Huitongda Network Co., Ltd. ("Huitongda")
Huitongda operates a rural online services platform in the PRC. In April 2018, the Company completed an investment in existing and newly issued shares of Huitongda for a cash consideration of RMB4,500 million, representing a 20% equity interest in Huitongda. The equity interest in Huitongda held by the Company is not considered in-substance common stock given that the equity interest contains certain terms such as liquidation preference over ordinary shares. As a result, the investment is accounted for using the measurement alternative (Note 11).
(r)   Investment in Shiji Retail Information Technology Co., Ltd. ("Shiji Retail")
Shiji Retail is engaged in the provision of retail information system solutions. In April 2018, the Company acquired a 38% equity interest in Shiji Retail for a cash consideration of US$486 million (RMB3,062 million). The equity interest in Shiji Retail held by the Company is not considered in-substance common stock given that the equity interest contains certain terms such as liquidation preference over ordinary shares. As a result, the investment is accounted for using the measurement alternative (Note 11).

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2017, 2018 AND 2019
4.     Significant restructuring transaction, mergers and acquisitions and investments (Continued)
(s)   Investment in Wanda Film Holding Co., Ltd. ("Wanda Film")
Wanda Film, a company that is listed on the Shenzhen Stock Exchange, is principally engaged in the investment and management of cinemas and film distribution businesses. In March 2018, the Company completed an investment in existing ordinary shares of Wanda Film for a cash consideration of RMB4,676 million, representing an approximately 8% equity interest in Wanda Film. The investment was accounted for under the cost method (Note 13) given that a readily determinable fair value was not available due to the suspension of trading of its shares for an extended period as of March 31, 2018. In November 2018, the trading of the shares of Wanda Film resumed and as a result, the Company began to carry the investment at fair value with unrealized gains and losses recorded in the consolidated income statements (Note 11).
(t)   Investment in Beijing Easyhome Furnishing Chain Group Co., Ltd. ("Easyhome")
Easyhome is one of the largest home improvement supplies and furniture chains in the PRC. In March 2018, the Company completed an investment in Easyhome for a cash consideration of RMB3,635 million, representing a 10% equity interest in Easyhome. Yunfeng and the Onshore Retail Fund (Note 4(n)) are also investors in this transaction. Such investment was accounted for under the cost method (Note 13) for the year ended March 31, 2018. Upon the adoption of ASU 2016-01, such investment is accounted for using the measurement alternative (Note 11).
(u)  Investment in Sun Art Retail Group Limited ("Sun Art")
Sun Art, a company that is listed on the HKSE, is a leading hypermarket operator in the PRC. In December 2017, the Company completed investments in existing ordinary shares of Sun Art and existing ordinary shares of A-RT Retail Holdings Limited, a limited liability company incorporated in Hong Kong that holds an approximately 51% equity interest in Sun Art, for an aggregate consideration of HK$19,303 million (RMB16,264 million). In January 2018, the Company acquired additional ordinary shares of Sun Art from public shareholders through a mandatory general offer as required under Hong Kong regulations, for a cash consideration of HK$2 million (RMB2 million). After the completion of these transactions, the Company's effective equity interest in Sun Art was approximately 31%, which is comprised of the direct equity interest of 21% and the indirect equity interest through its shareholding in A-RT Retail Holdings Limited. The Offshore Retail Fund (Note 4(n)) is also an investor in this transaction.
The investment in Sun Art is accounted for under the equity method (Note 13). Out of the total cash consideration, RMB2,499 million was allocated to amortizable intangible assets, RMB2,953 million was allocated to goodwill, RMB2,187 million was allocated to deferred tax liabilities and RMB12,999 million was allocated to net assets acquired.
(v)   Investment in China United Network Communications Ltd. ("China Unicom")
China Unicom, a company that is listed on the Shanghai Stock Exchange, is a major telecommunications company in the PRC. In October 2017, the Company completed an investment in newly issued ordinary shares of China Unicom for a cash consideration of RMB4,325 million, representing an approximately 2% equity interest in China Unicom. The investment was accounted for as an available-for-sale security (Note 11) for the year ended March 31, 2018. Upon the adoption of ASU 2016-01, the investment is carried at fair value with unrealized gains and losses recorded in the consolidated income statements (Note 11).

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2017, 2018 AND 2019
4.     Significant restructuring transaction, mergers and acquisitions and investments (Continued)
(w)  Investment in BEST Inc. (formerly known as Best Logistics Technologies Limited) ("Best Logistics")
Best Logistics is a provider of comprehensive supply-chain solutions and services. In September 2017, in connection with the completion of Best Logistics' initial public offering on the NYSE, all preferred shares of Best Logistics held by the Company were automatically converted into ordinary shares of Best Logistics. Concurrently, the Company acquired additional equity interests in Best Logistics for a cash consideration of US$100 million (RMB657 million), after which the equity interests in Best Logistics held by the Company increased to approximately 23%. Upon the completion of the share conversion, the original investment with a carrying value of US$256 million (RMB1,679 million) was reclassified from a cost method investment to an equity method investment (Note 13). Out of the total purchase price, which included the cash consideration and the carrying amount of the previously held interests in Best Logistics, RMB1,072 million was allocated to amortizable intangible assets, RMB443 million was allocated to goodwill, RMB214 million was allocated to deferred tax liabilities and RMB1,035 million was allocated to net assets acquired.
Cainiao Network (Note 4(f)) is also an existing shareholder of Best Logistics with an approximately 5% equity interest. Upon the consolidation of Cainiao Network in October 2017, the Company began to account for Cainiao Network's investment in Best Logistics under the equity method (Note 13), and the fair value of this investment at the time amounting to US$215 million (RMB1,420 million) was recognized as the new investment cost. Out of this amount, RMB652 million was allocated to amortizable intangible assets, RMB270 million was allocated to goodwill, RMB131 million was allocated to deferred tax liabilities and RMB629 million was allocated to net assets acquired.
After the completion of these transactions, the Company's equity interest in Best Logistics was approximately 28%.
(x)   Investment in Xiaoju Kuaizhi Inc. ("Didi Chuxing")
Didi Chuxing is a leading transportation network company that provides vehicles and taxis for hire in the PRC via smartphone applications. During the years ended March 31, 2017 and 2018, the Company completed additional investments in preferred shares of Didi Chuxing for a total cash consideration of US$400 million (RMB2,652 million). In September 2017, the Company completed a partial disposal of its investment in Didi Chuxing to SoftBank for a cash consideration of US$639 million (RMB4,198 million), and a disposal gain of RMB2,096 million was recognized in interest and investment income, net in the consolidated income statement for the year ended March 31, 2018. Upon the completion of the partial disposal and subsequent additional investments by SoftBank and other investors, the Company's equity interest in Didi Chuxing was approximately 5% on a fully diluted basis. The investment was accounted for under the cost method (Note 13) for the year ended March 31, 2018. Upon the adoption of ASU 2016-01, the investment is accounted for using the measurement alternative (Note 11).
(y)   Investment in Suning.com Co., Ltd. (formerly known as Suning Commerce Group Co., Ltd.) ("Suning")
In August 2015, the Company entered into an investment agreement with Suning, pursuant to which the Company agreed to invest in newly issued ordinary shares which represent a 19.99% equity interest in Suning. Suning, a company that is listed on the Shenzhen Stock Exchange, is one of the largest consumer electronics retail chains in the PRC. ~~The total~~In May 2016, the Company completed the subscription for newly issued ordinary shares for a cash consideration of RMB28.2 billion, representing a 19.99% equity interest in Suning. The investment is ~~expected to approximate RMB28.2 billion.~~accounted for under the equity method (Note 13).
Concurrent with the Company's investment in Suning, Suning ~~will subscribe~~subscribed for approximately 26.3 million newly issued ordinary shares of the Company which represent aan approximately 1.1% equity interest in the Company

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2017, 2018 AND 2019
4.     Significant restructuring transaction, mergers and acquisitions and investments (Continued)
(y)   Investment in Suning.com Co., Ltd. (formerly known as Suning Commerce Group Co., Ltd.) ("Suning") (Continued)
for a cash consideration of US$81.51 per ordinary share. ~~As part~~The Company's share of Suning's investment in the Company amounting to US$429 million (RMB2,823 million) was deducted from the investment cost of Suning and recognized as an issuance of treasury shares during the year ended March 31, 2017.
Out of the total purchase consideration, net of the amount related to the treasury shares described above, RMB5,100 million was allocated to amortizable intangible assets, RMB9,113 million was allocated to goodwill, RMB1,582 million was allocated to deferred tax liabilities and RMB12,778 million was allocated to net assets acquired.
During the years ended March 31, 2018 and March 31, 2019, Suning completed disposal of its equity interest in the Company. Accordingly, RMB590 million and RMB2,233 million was added back to the investment cost of Suning during the years ended March 31, 2018 and 2019, respectively, and the recognition of the corresponding treasury shares was reversed.
Equity transactions and acquisitions that were not completed as of March 31, 2019
(z)   Investment in Red Star Macalline Group Corporation Limited ("Red Star")
Red Star, a company that is listed on both the HKSE and Shanghai Stock Exchange, is a leading home improvement and furnishings shopping mall operator in the PRC. In May 2019, the Company completed the subscription of exchangeable bonds issued by the controlling shareholder of Red Star for a cash consideration of RMB4,359 million. The exchangeable bonds have a term of five years and are exchangeable into ordinary shares of Red Star at an initial price of RMB12.28 per share. In addition, the Company acquired an approximately 2% equity interest in Red Star for a total consideration of HK$447 million. The Offshore Retail Fund (Note 4(n)) is also an investor in this transaction.
(aa) Investment in China TransInfo Technology Co., Ltd. ("China TransInfo")
China TransInfo, a company that is listed on the Shenzhen Stock Exchange, is a PRC-based smart city infrastructure and service provider, including intelligent transportation operation services. In May 2019, the Company agreed to acquire a 15% equity interest in China TransInfo for a cash consideration of RMB3,595 million. The completion of the transaction the Company and Suning have entered into a strategic collaboration agreement to build on synergies in e-commerce, logistics and incremental business through joint omni-channel initiatives. The completion of these transactions is subject to ~~a number of~~ customary closing conditions.

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2017, 2018 AND 2019
5.     Revenue
Revenue ~~breakdown~~by segment is as follows:

Year ended March 31,
Year ended March 31,

2014 2015 2016
2017 (i) 2018 (i) 2019

(in millions of RMB)

(in millions of RMB)

China commerce

Core commerce:

Retail (i)

China commerce retail (ii)

Online marketing services
29,729 37,509 52,396
- Customer management
77,530 114,285 145,684

Commission
12,023 21,201 25,829
- Commission
34,066 46,525 61,847

Others
1,080 1,022 1,808
- Others
2,513 15,749 40,084

42,832 59,732 80,033
114,109 176,559 247,615

Wholesale (ii)
2,300 3,205 4,288
China commerce wholesale (iii)
5,679 7,164 9,988

Total China commerce
45,132 62,937 84,321
International commerce retail (iv)
7,336 14,216 19,558

International commerce wholesale (v)
6,001 6,625 8,167

International commerce

Cainiao logistics services (vi)
— 6,759 14,885

Retail (iii)
938 1,768 2,204
Local consumer services (vii)
— — 18,058

Wholesale (iv)
3,913 4,718 5,425
Others
755 2,697 5,129

Total international commerce
4,851 6,486 7,629
Total core commerce
133,880 214,020 323,400

Cloud computing (viii)
6,663 13,390 24,702

Cloud computing (v)
773 1,271 3,019
Digital media and entertainment (ix)
14,733 19,564 24,077

Others (vi)
1,748 5,510 6,174
Innovation initiatives and others (x)
2,997 3,292 4,665

Total
52,504 76,204 101,143
Total
158,273 250,266 376,844

(i)
Prior period amounts have not been adjusted due to the adoption of ASC 606 under the modified retrospective method (Note 2(g)).

(ii)
Revenue from China commerce retail is primarily generated from the Company's China retail ~~marketplaces.~~marketplaces and includes revenue from customer management, commissions and sales of goods.

~~(ii)~~(iii)
Revenue from China commerce wholesale is primarily generated from 1688.com and includes revenue from membership fees ~~from memberships~~ and ~~value-added services and online marketing services revenue.~~customer management.

~~(iii)~~(iv)
Revenue from ~~International~~international commerce retail is primarily generated from ~~AliExpress.~~Lazada (Note 4(i)) and AliExpress and includes revenue from sales of goods, commissions, logistics services and customer management.

~~(iv)~~(v)
Revenue from ~~International~~international commerce wholesale is primarily generated from Alibaba.com and includes membership fees and revenue from ~~memberships~~customer management.

(vi)
Revenue from Cainiao logistics services represents revenue from the domestic and ~~value-added~~cross-border fulfillment services provided by Cainiao Network (Note 4(f)).

(vii)
Revenue from local consumer services primarily represents revenue from the provision of delivery services and ~~online marketing~~other services ~~revenue.~~provided by Ele.me (Note 4(c)).

(viii)
Revenue from cloud computing is primarily generated from the provision of services, such as elastic computing, database, storage, network virtualization services, large scale computing, security, management and application services, big data analytics, and machine learning platform and IoT services.

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, ~~2014, 2015~~2017, 2018 AND ~~2016~~2019
5.     Revenue (Continued)
~~(v)~~(ix)
Revenue from ~~cloud computing~~digital media and entertainment is primarily generated from ~~the provision of services,~~Youku (Note 4(h)) and UCWeb and includes revenue from customer management and membership fees.

(x)
Revenue from innovation initiatives and others is primarily generated from businesses such as ~~data storage, elastic computing, database~~Amap and ~~large scale computing services, as well as web hosting and domain name registration.~~
~~(vi)~~
other innovation initiatives. Other revenue ~~mainly represents revenue from online marketing and other services provided by UCWeb and AutoNavi,~~also includes the SME Annual Fee received from Ant Financial ~~Services~~ and ~~interest income generated from micro loans before the completion of the restructuring of Payment Services during the year ended March 31, 2015~~its affiliates (Note ~~4(b)~~4(a)).
Revenue by type ~~of service~~ is as follows:

Year ended March 31,
Year ended March 31,

2014 2015 2016
2017 (i) 2018 (i) 2019

(in millions of RMB)

(in millions of RMB)

Online marketing services

Customer management services

P4P and display marketing
27,869 36,197 53,185
P4P and display marketing
83,581 119,822 151,654

Other online marketing services
3,059 3,938 3,963
Other customer management services
5,706 9,076 13,962

Total online marketing services
30,928 40,135 57,148
Total customer management services
89,287 128,898 165,616

Commission
12,778 22,705 27,793
Commission
37,848 52,411 81,086

Membership fees and value-added services
5,135 6,431 7,627
Membership fees
10,638 13,823 19,139

Others (i)
3,663 6,933 8,575
Logistics services
— 6,759 23,397

Cloud computing services
6,663 13,390 24,702

Sales of goods
3,889 18,719 46,942

Other revenue (ii)
9,948 16,266 15,962

Total
52,504 76,204 101,143
Total
158,273 250,266 376,844

(i)
Prior period amounts have not been adjusted due to the adoption of ASC 606 under the modified retrospective method (Note 2(g)).

(ii)
Other revenue ~~mainly represents revenue from cloud computing, revenue from~~includes other value-added services provided ~~by UCWeb~~through various platforms and ~~AutoNavi, storefront fees,~~the SME Annual Fee received from Ant Financial ~~Services~~ and ~~interest income generated from micro loans before the completion~~its affiliates (Note 4(a)).
The amount of ~~the restructuring~~revenue recognized for performance obligations satisfied (or partially satisfied) in prior periods for contracts with expected duration of ~~Payment Services~~more than one year during the year ended March 31, ~~2015 (Note 4(b)).~~2019 was not material. As permitted under the transitional provision in ASC 606, the amount of revenue recognized for performance obligations satisfied (or partially satisfied) as of March 31, 2018 is not disclosed.
6.     Other income, net

Year ended March 31,

Year ended March 31,
2017 2018 2019

2014 2015 2016
(in millions of RMB)

(in millions of RMB)

Profit Share Payments (Note 4(a))
2,086 3,444 517

Royalty fee and software technology services fee charged to Ant Financial Services and Alipay (Note 23)
1,764 1,667 1,122
Government grants (i)
451 555 666

Government grants (i)
252 327 401
Amortization of restructuring reserve (Note 4(a))
(264 ) (264 ) (264 )

Amortization of the excess value in relation to the restructuring of Payment Services (Note 4(b))
— (166 ) (264 )
Exchange differences
2,328 (1,679 ) (1,950 )

Others
413 658 799
Others
1,485 2,104 1,252

Total
2,429 2,486 2,058
Total
6,086 4,160 221

(i)
Government grants mainly represent amounts received from central and local governments in connection with the Company's investments in local business districts and contributions to technology development.

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, ~~2014, 2015~~2017, 2018 AND ~~2016~~2019
7.     Income tax expenses
Composition of income tax expenses

Year ended March 31,
Year ended March 31,

2014 2015 2016
2017 2018 2019

(in millions of RMB)

(in millions of RMB)

Current income tax expense
1,730 4,757 7,223
Current income tax expense
13,495 17,223 18,750

Deferred taxation
1,466 1,659 1,226
Deferred taxation
281 976 (2,197 )

3,196 6,416 8,449
13,776 18,199 16,553

Under the current laws of the Cayman Islands, the Company is not subject to tax on its income or capital gains. In addition, upon payments of dividends by the Company to its shareholders, no Cayman Islands withholding tax is imposed. The Company's subsidiaries incorporated in Hong Kong were subject to the Hong Kong profits tax rate at 16.5% for the years ended March 31, ~~2014, 2015~~2017, 2018 and ~~2016.~~2019. The Company's subsidiaries incorporated in other jurisdictions ~~such as the United States, Singapore and Japan~~ were subject to income tax charges calculated ~~on the basis of~~according to the tax laws enacted or substantially enacted in the countries where ~~the Company's subsidiaries~~they operate and generate income.
Current income tax expense primarily ~~represents~~includes the provision for PRC Enterprise Income Tax ("EIT") for subsidiaries operating in the ~~PRC.~~PRC and withholding tax on earnings that have been declared for distribution by PRC subsidiaries to offshore holding companies. Substantially all of the Company's income before income tax and share of results of equity investees are generated by these PRC subsidiaries. These subsidiaries are subject to EIT on their taxable income as reported in their respective statutory financial statements adjusted in accordance with the relevant tax laws, rules and regulations in the PRC.
Under the PRC Enterprise Income Tax Law (the "EIT Law"), the standard enterprise income tax rate for domestic enterprises and foreign invested enterprises is 25%. In addition, the EIT Law provides for, among others, a preferential tax rate of 15% for enterprises qualified as High and New Technology Enterprises. Further, certain subsidiaries were recognized as ~~having status as a~~ Software ~~Enterprise~~Enterprises and thereby entitled to ~~enjoy~~ full exemption from EIT for two years beginning ~~with~~from their first profitable calendar year and a 50% reduction for the subsequent three calendar years. In addition, a duly recognized Key Software Enterprise within China's national plan can enjoy a preferential EIT rate of 10%. The Key Software Enterprise status is subject to review by the relevant authorities every ~~two years.~~year. The timing of the annual review and notification by the relevant authorities may vary from year to year, and the related tax adjustments in relation to the change in applicable EIT rate as a result of notification of qualification are accounted for in the period in which the Key Software Enterprise status is ~~recognized.~~recognized and notified.
The tax status of the subsidiaries of the Company with major taxable profits is described below:
•
Alibaba (China) Technology Co., Ltd. ("Alibaba China") and Taobao (China) Software Co., ~~an entity~~Ltd. ("Taobao China"), entities primarily engaged in the operations of the Company's wholesale marketplaces ~~was recognized~~and Taobao Marketplace, respectively, obtained the annual review and notification relating to the renewal of the Key Software Enterprises status for the taxation years of 2015, 2016 and 2017 in the quarters ended September 30, 2016, 2017 and 2018, respectively. Accordingly, Alibaba China and Taobao China, which had qualified as a High and New Technology ~~Enterprise~~Enterprises and ~~Key Software Enterprise during~~applied an EIT rate of 15% for the taxation years of ~~2013~~2015, 2016 and ~~2014, and was thereby entitled~~2017, reflected the reduction in tax rate to ~~an EIT rate of~~ 10% ~~during these taxation years.~~

•
Taobao (China) Software Co., Ltd. ("Taobao China"), an entity primarily engaged in the operations of Taobao Marketplace, was recognized as a High and New Technology Enterprise and has been recognized as a Key Software Enterprise duringfor the taxation years of ~~2013~~2015, 2016 and ~~2014~~2017 in the consolidated income statements for the years ended March 31, 2017, 2018 and ~~was thereby subject to an EIT rate of 10% during such taxation years.~~2019.

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, ~~2014, 2015~~2017, 2018 AND ~~2016~~2019
7.     Income tax expenses (Continued)
•
Zhejiang Tmall Technology Co., Ltd. ("Tmall China"), an entity primarily engaged in the operations of Tmall, was recognized as a High and New Technology Enterprise and ~~has been~~also granted the Software Enterprise status and iswas thereby entitled to ~~enjoy~~ an income tax exemption for two years beginning ~~with~~from its first profitable ~~year in~~ taxation year of 2012, and a 50% reduction for the subsequent three years starting infrom the taxation year of 2014. Accordingly, Tmall China was ~~exempted from EIT during the taxation year of 2013 and~~ entitled to an EIT rate of 12.5% during the taxation years of ~~2014,~~ 2015 and 2016. Tmall China obtained notification of recognition as a Key Software Enterprise for the taxation years of 2016 and ~~15% thereafter for so long as~~2017 in the quarter ended September 30, 2017 and 2018. Accordingly, Tmall China, ~~continues to qualify as a High~~which had applied an EIT rate of 12.5% and ~~New Technology Enterprise.~~
~~The consolidated financial statements did not reflect~~15% for the ~~potential~~taxation years of 2016 and 2017, respectively, reflected the reduction in tax rate to 10% for the taxation years of 2016 and 2017 in the consolidated income statement for the years ended March 31, 2018 and 2019.
The total tax adjustments ~~that may arise from~~for Alibaba China, Taobao China, Tmall China and certain other PRC subsidiaries of the Company, amounting to RMB720 million, RMB2,295 million and RMB4,656 million, were recorded in the consolidated income statements for the years ended March 31, 2017, 2018 and 2019, respectively. The annual review and notification relating to the renewal of the Key Software Enterprises status ~~by Alibaba China and Taobao China~~ for the taxation ~~years~~year of ~~2015 and 2016 because the annual review and notification~~2018 has not yet been obtained ~~up to~~as of March 31, ~~2016.~~2019. Accordingly, Alibaba China, ~~and~~ Taobao China ~~which~~and Tmall China continued to ~~qualify as a High and New Technology Enterprise, applied~~apply an EIT rate of 15% infor the ~~consolidated financial statements during these periods.~~taxation year of 2018 as High and New Technology Enterprises.
Most of the remaining PRC entities of the Company are subject to EIT at 25% for the years ended March 31, ~~2014, 2015~~2017, 2018 and ~~2016.~~2019.
Pursuant to the EIT Law, a 10% withholding tax is levied on dividends declared by PRC companies to their foreign investors. A lower withholding tax rate of 5% is applicable if direct foreign investors with at least 25% equity interest in the PRC company are incorporated in Hong Kong and meet the relevant requirements pursuant to the tax arrangement between the PRC and Hong Kong. Since the equity holders of the major PRC subsidiaries of the Company are Hong Kong incorporated companies and meet the relevant requirements pursuant to the tax arrangement between the PRC and Hong Kong, the Company has used 5% to provide for deferred tax liabilities on retained earnings which are anticipated to be distributed. As of March 31, ~~2016,~~2019, the Company had fully accrued the withholding tax on the earnings distributable by all of the subsidiaries of the Company in the PRC, except for those undistributed earnings that the Company intends to invest indefinitely in the PRC ~~of RMB13.6~~which amounted to RMB49.7 billion.

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, ~~2014, 2015~~2017, 2018 AND ~~2016~~2019
7.     Income tax expenses (Continued)
Composition of deferred tax assets and liabilities

As of March 31,

2015 2016
As of March 31,

(in millions of RMB)

2018 2019

Deferred tax assets

(in millions of RMB)

Current:

Deferred tax assets

Deferred revenue and customer advances
24 15
Licensed copyrights
1,191 2,475

Tax losses carried forward and others (i)
381 767
Tax losses carried forward and others (i)
9,467 21,896

405 782
10,658 24,371

Less: Valuation allowance
(149 ) (331 )
Valuation allowance
(8,476 ) (21,838 )

Total deferred tax assets, current portion (Note 13)
256 451
Total deferred tax assets
2,182 2,533

Non-current:

Deferred tax liabilities

Deferred revenue and customer advances
31 17
Identifiable intangible assets
(9,181 ) (12,659 )

Property and equipment
14 25
Withholding tax on undistributed earnings (ii)
(8,375 ) (7,901 )

Tax losses carried forward and others (i)
1,139 1,021
Investment securities and others
(1,756 ) (1,957 )

1,184 1,063
Total deferred tax liabilities
(19,312 ) (22,517 )

Less: Valuation allowance
(1,027 ) (1,033 )

Total deferred tax assets, non-current portion (Note 13)
157 30

Total deferred tax assets
413 481

Deferred tax liabilities

Current:

Others
(17 ) (9 )

Non-current:

Withholding tax on undistributed earnings (ii)
(3,891 ) (5,452 )

Identifiable intangible assets
(575 ) (508 )

Available-for-sale securities
— (488 )

Others
(27 ) (23 )

Total deferred tax liabilities, non current portion
(4,493 ) (6,471 )

Total deferred tax liabilities
(4,510 ) (6,480 )

Net deferred tax liabilities
(4,097 ) (5,999 )
Net deferred tax liabilities
(17,130 ) (19,984 )

(i)
Others is primarily ~~represent~~comprised of property and equipment, deferred revenue and customer advances, as well as accrued expenses which are not deductible until paid under PRC tax laws.

(ii)
The related deferred tax liabilities as of March 31, ~~2015~~2018 and ~~2016~~2019 were provided on the assumption that 100% of the distributable reserves of the major PRC subsidiaries will be distributed as dividends, except for those undistributed earnings that the Company intends to invest indefinitely in the PRC ~~of RMB13.6 billion.~~which amounted to RMB28.6 billion and RMB49.7 billion, respectively.
Valuation allowances ~~have been~~ provided on the deferred tax assets mainly related to the tax losses carried forward due to the uncertainty surrounding their realization. If events occur in the future that improve the certainty of realization, an adjustment to the valuation allowances will be made and consequently ~~reduce the~~ income tax ~~expenses.~~expenses will be reduced.
As of March 31, 2019, the accumulated tax losses of subsidiaries incorporated in the United States, Indonesia and Singapore, subject to the agreement of the relevant tax authorities, of RMB3,690 million, RMB3,686 million and RMB3,075 million, respectively, are allowed to be carried forward to offset against future taxable profits. The carry forward of tax losses in the United States and Singapore has no time limit, while the tax losses in Indonesia will expire, if unused, in the years ending March 31, 2020 through 2024. The accumulated tax losses of subsidiaries incorporated in the PRC, subject to the agreement of the PRC tax authorities, of RMB73,148 million as of March 31, 2019 will expire, if unused, in the years ending March 31, 2020 through 2024.

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, ~~2014, 2015~~2017, 2018 AND ~~2016~~
2019
7.     Income tax expenses (Continued)
As of March 31, 2016, the accumulated tax losses of subsidiaries incorporated in Hong Kong, the United States and Singapore, subject to the agreement of the relevant tax authorities, of RMB1,175 million, RMB696 million and RMB220 million, respectively, are allowed to be carried forward to offset against future taxable profits. Such carry forward of tax losses in Hong Kong and Singapore has no time limit, while the tax losses in the United States will expire, if unused, in the years ending March 31, 2019 through 2036. The accumulated tax losses of subsidiaries incorporated in PRC, subject to the agreement of the PRC tax authorities, of RMB2,917 million as of March 31, 2016 will expire, if unused, in the years ending March 31, 2017 through 2021.
Reconciliation of the differences between the statutory EIT rate applicable to profits of the consolidated entities and the income tax expenses of the Company:

Year ended March 31,
Year ended March 31,

2014 2015 2016
2017 2018 2019

(in millions of RMB, except per
share data)

(in millions of RMB, except per
share data)

Income before income tax and share of results of equity investees
26,802 32,326 81,468
Income before income tax and share of result of equity investees
60,029 100,403 96,221

Income tax computed at statutory EIT rate (25%)
6,701 8,082 20,367
Income tax computed at statutory EIT rate (25%)
15,007 25,101 24,055

Effect of different tax rates available to different jurisdictions
(9 ) 33 (869 )
Effect of different tax rates available to different jurisdictions
(772 ) 392 (1,568 )

Effect of tax holiday and preferential tax benefit on assessable profits of subsidiaries incorporated in the PRC
(6,414 ) (5,881 ) (6,680 )
Effect of tax holiday and preferential tax benefit on assessable profits of subsidiaries incorporated in the PRC
(10,507 ) (14,782 ) (17,687 )

Non-deductible expenses and non-taxable income, net (i)
1,657 3,368 (4,994 )
Non-deductible expenses and non-taxable income, net (i)
6,090 1,780 8,168

Tax savings from additional deductions on certain research and development expenses available for subsidiaries incorporated in the PRC (ii)
(483 ) (1,096 ) (1,205 )
Tax savings from additional deductions on certain research and development expenses available for subsidiaries incorporated in the PRC (ii)
(1,694 ) (2,330 ) (5,774 )

Withholding tax on the earnings remitted and anticipated to be remitted
1,445 1,898 1,573
Withholding tax on the earnings distributed and anticipated to be remitted
3,009 4,393 3,954

Change in valuation allowance, deduction of certain share-based compensation expense and others
299 12 257
Change in valuation allowance, deduction of certain share-based compensation expense and others (iii)
2,643 3,645 5,405

Income tax expenses
3,196 6,416 8,449
Income tax expenses
13,776 18,199 16,553

Effect of tax holidays inside the PRC on basic earnings per share/ADS (RMB)
2.95 2.57 2.72
Effect of tax holidays inside the PRC on basic earnings per share/ADS (RMB)
4.21 5.79 6.86

(i)
Expenses not deductible for tax purposes and non-taxable income primarily represent investment income (loss), share-based compensation expense, ~~equity-settled donation~~interest expense ~~interest expense,~~and exchange differences. Investment income (loss) during the year ended March 31, ~~2016 included~~2017 includes gains ~~from the revaluation of the Company's remaining equity interest in Alibaba Pictures (Note 4(e)) and~~ from the revaluation of previously held equity interest relating to ~~obtaining Control~~the acquisition of ~~Alibaba Health~~Youku (Note 4(h)). Investment income (loss) during the year ended March 31, 2018 includes gains from the revaluation of previously held equity interests relating to the acquisitions of Cainiao Network (Note 4(f)) and Intime (Note 4(g)). Investment income (loss) during the year ended March 31, 2019 includes gains from the revaluation of previously held equity interest relating to the acquisitions of Koubei (Note 4(c)) and Alibaba Pictures (Note 4(b)).

(ii)
This amount represents tax incentives relating to the research and development expenses of certain major operating subsidiaries in the PRC.

(iii)
This amount primarily represents valuation allowance against the deferred tax ~~incentive enables the Company to claim an additional~~assets associated with operating losses, amortization of licensed copyrights and other timing differences which may not be realized as a tax ~~deduction amounting to 50% of the qualified research and development expenses incurred.~~benefit.
8.     Share-based awards
Share-based awards such as RSUs, incentive and non-statutory options, restricted shares, ~~RSUs,~~ dividend ~~equivalent rights,~~equivalents, share appreciation rights and share payments may be granted to any directors, employees and consultants of the Company or affiliated companies under ~~the employee share option plans adopted in 1999, 2004, 2005, the incentive plan adopted in 2007 and~~ the equity incentive plan adopted in 2011, which govern the terms of the awards. In September 2014, the Company adopted a post-IPO equity incentive plan

~~Table of Contents~~

~~ALIBABA GROUP HOLDING LIMITED~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~FOR THE YEARS ENDED MARCH 31, 2014, 2015 AND 2016~~
~~8.     Share-based awards (Continued)~~
~~(the~~ (the "2014 Plan"). which has a ten-year term. Share-based awards are only available for issuance under ~~our~~the 2014 Plan. If an award under the previous plan terminates, expires or lapses, or is cancelled for any reason, ordinary shares subject to the award become available for the grant of a new award under the 2014 Plan. On Starting from

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2017, 2018 AND 2019
8.     Share-based awards (Continued)
April 1, 2015 and on each anniversary thereof, an additional amount equal to the lesser of (A) 25,000,000 ordinary shares, and (B) such lesser number of ordinary shares as determined by the board of directors will become available for the grant of a new award under the 2014 Plan. ~~The 2014 Plan has a ten-year term.~~ All ~~share~~share-based awards granted under the 2014 Plan are subject to dilution protection should the capital structure of the Company be affected by a share split, reverse share split, share dividend or other dilutive action. The 2014 Plan has substantially similar terms as the plan adopted in 2011 ~~and other previous plans~~ except that (i) the 2014 Plan is administered by the compensation committee of the board (or a subcommittee thereof), or such other committee of the board to which the board has delegated power to act, or the board in the absence of any such committee, ~~and some definitions,~~ and (ii) certain terms are adjusted for the purposes of compliance with the Sarbanes-Oxley Act of 2002, U.S. Securities Act of 1933 and the regulations thereunder, as amended from time to time and U.S. Securities Exchange Act of 1934 and the regulations thereunder, as amended from time to time, among others. As of March 31, ~~2016,~~2019, the number of shares authorized but unissued was ~~23,050,439~~34,151,552 ordinary shares.
~~Share options~~RSUs and ~~RSUs~~share options granted are generally subject to a four-year vesting schedule as determined by the administrator of the plans. ~~Under the four-year vesting schedule, depending~~Depending on the nature and the purpose of the grant, RSUs and share options ~~and RSUs in general~~generally vest 25% or 50% upon the first or second anniversary of the vesting commencement date, respectively, as ~~defined~~provided in the grant agreement, and ~~thereafter~~ 25% every ~~year.~~year thereafter. No outstanding RSUs or share options ~~or RSUs~~ will be ~~exercisable or~~ subject to vesting or exercisable after the expiry of a maximum of six years from the date of grant. ~~Starting from the year ended March 31, 2015, certain~~Certain RSUs and share options ~~and RSUs~~ granted to the senior management members of the Company ~~were~~are subject to a six-year ~~pro rata~~ vesting schedule. No outstanding RSUs or share options ~~or RSUs~~ will be ~~exercisable or~~ subject to vesting or exercisable after the expiry of a maximum of eight years from the date of grant.
~~Early exercise~~(a)   RSUs relating to ordinary shares of ~~share options is allowable under all~~ the ~~aforementioned plans; however, any unvested~~Company
A summary of the changes in the RSUs relating to ordinary shares ~~are subject to repurchase~~granted by the Company atduring the ~~lower~~year ended March 31, 2019 is as follows:

Number
of RSUs Weighted-
average
grant date
fair value

US$

Awarded and unvested as of April 1, 2018
68,424,858 100.93

Granted
24,863,988 181.74

Vested
(24,337,392 ) 84.31

Cancelled/forfeited
(4,604,961 ) 135.06

Awarded and unvested as of March 31, 2019
64,346,493 136.00

Expected to vest as of March 31, 2019 (i)
53,175,748 134.59
(i)
RSUs expected to vest are the result of applying the pre-vesting forfeiture rate assumptions to total outstanding RSUs.
As of March 31, 2018 and 2019, 1,983,785 and 1,878,835 outstanding RSUs were held by non-employees, respectively. These RSUs were subject to re-measurement through each vesting date to determine the appropriate amount of the ~~original exercise price or~~expense.
As of March 31, 2019, there were RMB22,432 million of unamortized compensation costs related to these outstanding RSUs, net of expected forfeitures and after re-measurement applicable to the ~~fair market value upon termination~~awards granted to non-employees. These amounts are expected to be recognized over a weighted average period of ~~service contracts with the grantees.~~1.9 years.

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, ~~2014, 2015~~2017, 2018 AND ~~2016~~2019
8.     Share-based awards (Continued)
(a)   RSUs relating to ordinary shares of the Company (Continued)
During the years ended March 31, 2017, 2018 and 2019, the Company recognized share-based compensation expense of RMB12,322 million, RMB16,165 million and RMB22,137 million, respectively, in connection with the above RSUs, net of cash reimbursement from related companies, including Ant Financial (Note 21).
(b)   Share options relating to ordinary shares of the Company
A summary of the changes in the share options relating to ordinary shares granted by the Company during the year ended March 31, ~~2016~~2019 is as follows:

Number
of share
options Weighted
average
exercise
price Weighted
average
remaining
contractual
life

US$
(in years)

Number
of share
options Weighted
average
exercise
price Weighted
average
remaining
contractual
life

Outstanding at April 1, 2015
21,339,410 42.29 6.0

US$
(in years)

Granted
5,159,400 81.55
Outstanding as of April 1, 2018
7,938,015 70.10 4.5

Exercised
(3,091,919 ) 15.23
Exercised
(795,809 ) 45.02

Cancelled/forfeited/expired
(5,699,563 ) 54.99
Cancelled/forfeited/expired
(25,000 ) 76.81

Outstanding at March 31, 2016 (i)
17,707,328 54.37 5.6
Outstanding as of March 31, 2019
7,117,206 72.88 3.7

Vested and exercisable at March 31, 2016
4,062,743 50.21 5.8
Vested and exercisable as of March 31, 2019
3,258,039 75.32 3.6

Vested and expected to vest at March 31, 2016 (ii)
17,255,700 54.68 5.8
Vested and expected to vest as of March 31, 2019 (i)
7,016,598 72.78 3.7
(i)
~~Outstanding options as of March 31, 2016 include 2,699,250 unvested options early exercised.~~
~~(ii)~~
~~The share~~Share options expected to vest are the result of applying the pre-vesting forfeiture rate assumptions to total outstanding share ~~options, including early exercised~~ options.
As of March 31, ~~2015~~2018 and ~~2016, 605,340~~2019, 141,000 and ~~384,116~~76,550 outstanding share options were held by non-employees, respectively. These share options ~~are~~were subject to re-measurement through each vesting date to determine the appropriate ~~share-based compensation~~amount of the expense.
As of March 31, ~~2016,~~2019, the aggregate intrinsic value of all outstanding options was ~~RMB2,964~~RMB5,243 million. As of the same date, the aggregate intrinsic value of options that were vested and exercisable and options that were vested and expected to vest is ~~RMB757~~RMB2,347 million and ~~RMB2,801~~RMB5,173 million, respectively.
During the years ended March 31, ~~2014, 2015~~2017, 2018 and ~~2016,~~2019, the weighted average grant date fair value of share options granted was US$~~6.14, US$23.07~~22.89, nil and ~~US$28.65,~~nil, respectively, and the total grant date fair value of options vested during the same years was ~~RMB123~~RMB348 million, ~~RMB134~~RMB452 million and ~~RMB602~~RMB311 million, respectively. During the same years, the aggregate intrinsic value of share options exercised was ~~RMB1,698~~RMB1,799 million, ~~RMB488~~RMB1,980 million and ~~RMB556~~RMB708 million, respectively.
Cash received from option exercises under the share option plans ~~including repayment of loans and interest receivable on employee loans for the exercise of vested options,~~ for the years ended March 31, ~~2014, 2015~~2017, 2018 and ~~2016~~2019 was ~~RMB1,543~~RMB287 million, ~~RMB313~~RMB174 million and ~~RMB693~~RMB220 million, respectively.

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, ~~2014, 2015~~2017, 2018 AND ~~2016~~2019
8.     Share-based awards (Continued)
~~(a)~~(b)   Share options relating to ordinary shares of the Company (Continued)
No share options were granted during the years ended March 31, 2018 and 2019. The fair value of each option grant is estimated on the date of grant using the Black-Scholes model ~~and~~by applying the assumptions below:

Year ended March 31,

2014 2015 2016

Risk-free interest rate (i)
0.69% - 1.52 % 1.38% - 1.99 % 1.24% - 1.79 %

Expected dividend yield (ii)
0 % 0 % 0 %

Expected life (years) (iii)
4.25 - 4.38 4.25 - 5.75 4.25 - 5.75

Expected volatility (iv)
37.0% - 39.3 % 35.0% - 40.8 % 33.4% - 35.7 %

Year ended
March 31,

2017
Risk-free interest rate (i)
1.23% – 1.30 %
Expected dividend yield (ii)
0 %
Expected life (years) (iii)
4.38
Expected volatility (iv)
31.7% – 33.2 %
(i)
Risk-free interest rate is based on the yields of United States Treasury securities with maturities similar to the expected life of the share options in effect at the time of grant.

(ii)
Expected dividend yield is assumed to be 0%nil as the Company has no history or expectation of paying a dividend on its ordinary shares.

(iii)
Expected life of share options is based on the average between the vesting period and the contractual term for each grant.

(iv)
Expected volatility is assumed based on the historical volatility of the Company's comparable companies in the period equal to the expected life of each grant.
As of March 31, ~~2016,~~2019, there were ~~RMB1,021~~RMB111 million of unamortized compensation costs related to these outstanding share options, net of expected forfeitures and after re-measurement applicable to ~~share options granted to non-employees. These amounts are expected to be recognized over a weighted average period of 2.8 years.~~
~~During~~ the years ended March 31, 2014, 2015 and 2016, the Company recognized share-based compensation expense of RMB417 million, RMB1,152 million and RMB578 million, respectively, in connection with the above share options, net of reimbursement from Ant Financial Services (Note 23).
~~(b)   Restricted shares and RSUs relating to ordinary shares of the Company~~
~~A summary of the changes in the restricted shares and RSUs related to ordinary shares granted by the Company during the year ended March 31, 2016 is as follows:~~

Number
of restricted
shares and
RSUs Weighted-
average
grant date
fair value

US$

Awarded and unvested at April 1, 2015
67,981,170 45.68

Granted
30,865,598 72.30

Vested
(20,813,741 ) 34.60

Cancelled/forfeited
(6,196,662 ) 52.35

Awarded and unvested at March 31, 2016
71,836,365 59.75

Expected to vest at March 31, 2016 (i)
62,144,018 58.25
~~(i)~~
~~Restricted shares and RSUs expected to vest are the result of applying the pre-vesting forfeiture rate assumptions to total outstanding restricted shares and RSUs.~~

~~Table of Contents~~

~~ALIBABA GROUP HOLDING LIMITED~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~FOR THE YEARS ENDED MARCH 31, 2014, 2015 AND 2016~~
~~8.     Share-based awards (Continued)~~
~~(b)   Restricted shares and RSUs relating to ordinary shares of the Company (Continued)~~
As of March 31, 2015 and 2016, 6,447,715 and 5,880,443 outstanding RSUs were granted to non-employees, respectively. These awards are subject to re-measurement through each vesting date to determine the appropriate share-based compensation expense.
As of March 31, 2016, there were RMB12,688 million of unamortized compensation costs related to these outstanding restricted shares and RSUs, net of expected forfeitures and after re-measurement applicable to these awards granted to non-employees. These amounts are expected to be recognized over a weighted average period of ~~2.1~~1.5 years.
During the years ended March 31, ~~2014, 2015~~2017, 2018 and ~~2016,~~2019, the Company recognized share-based compensation expense of ~~RMB2,378~~RMB524 million, ~~RMB7,767~~RMB270 million and ~~RMB9,915~~RMB181 million, respectively, in connection with the above ~~restricted shares and RSUs,~~share options, net of cash reimbursement from related companies, including Ant Financial ~~Services~~ (Note ~~23)~~21).
(c)   Partner Capital Investment Plan relating to ordinary shares of the Company
~~During the years ended March 31, 2014 and 2015,~~Beginning in 2013, the Company offered selected members of the Alibaba Partnership ~~subscription~~ rights to acquire restricted shares of the Company. ~~These~~For the rights offered before 2016, these rights and the underlying restricted shares ~~are only~~were subject to a non-compete provision, ~~but not other vesting conditions (employment or otherwise)~~ and ~~they entitle~~ the holders were entitled to purchase restricted shares at a price of US$14.50 per share during a four-year period. Upon the exercise of ~~such~~the rights, the underlying ordinary shares may not be transferred for a period of eight years from the date of subscription of the relevant rights. For the rights offered since 2016, the rights and the underlying restricted shares were subject to certain service provisions that were not related to employment, and holders were entitled to purchase restricted shares at a price between US$23.00 and US$26.00 per share, over a period of ten years from the vesting commencement date.

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2017, 2018 AND 2019
8.     Share-based awards (Continued)
(c)   Partner Capital Investment Plan relating to ordinary shares of the Company (Continued)
The number of ordinary shares underlying these rights is 18,000,000 shares, of which the rights to subscribe ~~14,500,000~~for 17,500,000 shares ~~were~~had been offered and subscribed up to March 31, ~~2016. These~~2019. The rights offered before 2016 were accounted for as a noncontrolling ~~interest~~interests of the Company as ~~such~~these rights were issued by the Company's subsidiaries and classified as equity at the subsidiary level. The rights offered in the subsequent periods were accounted for as share options issued by the Company.
As of March 31, 2019, there were RMB941 million of unamortized compensation costs related to these rights, net of expected forfeitures and after re-measurement applicable to the awards granted to non-employees. These amounts are expected to be recognized over a weighted average period of 4.5 years. Share-based compensation expense of ~~nil, RMB211~~RMB241 million, RMB435 million and ~~nil~~RMB409 million was recognized in connection with these rights for the years ended March 31, ~~2014, 2015~~2017, 2018 and ~~2016,~~2019, respectively.
The fair value of each right to acquire restricted shares is estimated on the subscription date using the Black-Scholes model ~~and~~by applying the assumptions below:

Year ended March 31,

2014 2015

Risk-free interest rate (i)
1.03 % 1.50 %

Expected dividend yield (ii)
0 % 0 %

Expected life (years) (iii)
4.00 4.00

Expected volatility (iv)
36.9 % 38.1 %

Discount for post-vesting sale restrictions (v)
38.0 % 35.0 %

Year ended March 31,

2017 2018 2019

Risk-free interest rate (i)
1.86 % 2.07 % 2.94 %

Expected dividend yield (ii)
0 % 0 % 0 %

Expected life (years) (iii)
8.25 8.25 8.25

Expected volatility (iv)
39.0 % 34.2 % 33.0 %
(i)
Risk-free interest rate is based on the yields of United States Treasury securities with maturities similar to the expected life of the share-based awards in effect at the time of grant.

(ii)
Expected dividend yield is assumed to be 0%nil as the Company has no history or expectation of paying a dividend on its ordinary shares.

(iii)
Expected life of the rights is based on management's estimate on timing of redemption for ordinary shares by the participants.

~~Table of Contents~~

~~ALIBABA GROUP HOLDING LIMITED~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~FOR THE YEARS ENDED MARCH 31, 2014, 2015 AND 2016~~
~~8.     Share-based awards (Continued)~~
~~(c)   Partner Capital Investment Plan relating to ordinary shares of the Company (Continued)~~
(iv)
Expected volatility is assumed based on the historical volatility of the Company's comparable companies in the period equal to expected life of each right.
~~(v)~~
~~Discount for post-vesting sale restrictions applied on the underlying ordinary shares takes into consideration the restriction on sales of eight years.~~
(d)  Share-based awards relating to Ant Financial ~~Services~~
Since March 2014, Junhan, the general partner of which is ~~controlled~~a company wholly-owned by the executive chairman of the Company and a major equity holder of Ant Financial, ~~Services,~~has made grants of ~~certain share-based awards~~share economic rights similar to share appreciation awards linked to the valuation of Ant Financial ~~Services~~(the "SERs") to ~~a substantial number~~certain employees of the Company. Since April 2018, Ant Financial, through its subsidiary, has granted certain RSU awards to certain employees of the Company. The ~~vesting of such awards is conditional upon the fulfillment of requisite service conditions to the Company, and such awards~~SERs will be settled in cash by Junhan upon ~~the~~ disposal of these awards by the holders. The RSU awards may be settled in cash or equity by the Ant Financial subsidiary upon vesting of the awards. Junhan ~~has~~and the Ant Financial subsidiary have the right to repurchase the vested SERs or RSU awards (or any underlying shares of the vested RSU awards) granted by them, as applicable, from the holders upon an initial public offering of Ant Financial ~~Services~~ or the termination of the holders' employment ~~of the employees~~ with the Company at a price to be determined based on the then fair market value of Ant Financial. These awards are generally subject to a four-year vesting schedule as determined by the administrator of the plan. Depending on

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2017, 2018 AND 2019
8.     Share-based awards (Continued)
(d)  Share-based awards relating to Ant Financial ~~Services.~~(Continued)
the nature and the purpose of the grant, these awards generally vest 25% or 50% upon the first or second anniversary of the vesting commencement date, respectively, as provided in the grant agreement, and 25% every year thereafter. Certain awards granted to the senior management members of the Company are subject to a six-year vesting schedule. The Company has no obligation to reimburse Junhan, Ant Financial ~~Services~~ or its subsidiaries for the cost associated with these awards.
For accounting purposes, these awards meet the definition of a financial derivative. The cost relating to ~~such share-based~~these awards ~~granted by the shareholder through Junhan~~ is recognized by the Company ~~as a shareholder contribution as the award will ultimately be settled in cash by Junhan. The award is accounted for as a financial derivative and initially measured at its fair value,~~ and the related expense ~~will be~~is recognized over the requisite service period in the consolidated income statements with a corresponding credit to additional paid-in capital. Subsequent changes in the fair value of ~~the award~~these awards are recorded in the consolidated income ~~statements through~~statements. The expenses relating to the SERs are re-measured at the fair value on each reporting date ~~on which~~until their settlement dates. The expenses relating to the ~~underlying award is settled by Junhan.~~
~~As of March 31, 2016, there were RMB2,542 million of unamortized compensation costs related to these outstanding share-based~~RSU awards ~~of Ant Financial Services~~ granted by ~~Junhan, net of expected forfeitures. These amounts~~Ant Financial's subsidiary are ~~expected to be recognized over a weighted average period of 1.7 years.~~re-measured at the fair value on each reporting date until their vesting dates.
During the years ended March 31, ~~2015~~2017, 2018 and ~~2016,~~2019, the Company recognized expenses of ~~RMB3,788~~RMB2,188 million, RMB2,278 million and ~~RMB5,506~~RMB12,855 million in respect of the share-based awards relating to Ant Financial, ~~Services granted by Junhan,~~ respectively. ~~The expenses recognized for the year ended March 31, 2014 were insignificant.~~
(e)   Share-based compensation expense by function

Year ended March 31,
Year ended March 31,

2014 2015 2016
2017 2018 2019

(in millions of RMB)

(in millions of RMB)

Cost of revenue
1,154 4,176 4,003
Cost of revenue
3,893 5,505 8,915

Product development expenses
795 3,876 5,703
Product development expenses
5,712 7,374 15,378

Sales and marketing expenses
189 1,235 1,963
Sales and marketing expenses
1,772 2,037 4,411

General and administrative expenses
706 3,741 4,413
General and administrative expenses
4,618 5,159 8,787

Total
2,844 13,028 16,082
Total
15,995 20,075 37,491

~~Table of Contents~~

~~ALIBABA GROUP HOLDING LIMITED~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~FOR THE YEARS ENDED MARCH 31, 2014, 2015 AND 2016~~
9.     ~~Equity-settled donation expense~~
During the year ended March 31, 2014, the Company granted 50,000,000 share options to a non-profit organization designated by two members of management of the Company, subject to irrevocable instructions to designate and transfer these share options to the separate charitable trusts to be established by these two members of management of the Company. These share options were approved by the directors of the board and such options are not subject to any vesting conditions and are exercisable for a period of four years starting from the grant date. The exercise price of these options is US$25.00 per share and was determined with reference to the fair market value of the ordinary shares of the Company at the time of the grant. For each of the eight years beginning one year after the date of listing of the ordinary shares of the Company on a recognized stock exchange, the charitable trusts are permitted to sell only up to 6,250,000 ordinary shares per year excluding such number of unsold ordinary shares carried forward from previous years.
~~The fair value of each share option is estimated on the grant date using the Black-Scholes model and the assumptions below:~~

~~Year ended~~
~~March 31,~~

~~2014~~
~~Risk-free interest rate (i)~~
~~1.02~~ %
~~Expected dividend yield (ii)~~
0 %
~~Expected life (years) (iii)~~
~~4.00~~
~~Expected volatility (iv)~~
~~37.2~~ %
~~Discount for post-vesting sale restrictions (v)~~
~~18.0% - 38.0~~ %
~~(i)~~
~~Risk-free interest rate is based on the yields of United States Treasury securities with maturities similar to the expected life of these options at the time of grant.~~
~~(ii)~~
~~Expected dividend is assumed to be 0% as the Company has no history or expectation of paying a dividend on its ordinary shares.~~
~~(iii)~~
~~Expected life of the options is based on management's estimate on timing of exercise.~~
~~(iv)~~
~~Expected volatility is assumed based on the historical volatility of the Company's comparable companies in the period equal to expected life of the options.~~
~~(v)~~
~~Discount for post-vesting sale restrictions applied on the underlying ordinary shares takes into consideration of the restriction on sales of two to eight years.~~
As there are no vesting conditions attached to the above share options, equity-settled donation expense of RMB1,269 million was recognized in full and recorded in general and administrative expenses during the year ended March 31, 2014.
~~10.~~     Earnings per share
Basic earnings per share is computed by dividing net income attributable to ordinary shareholders by the weighted average number of outstanding ordinary shares, adjusted for ~~outstanding ordinary shares that are subject to repurchase.~~treasury shares.
For the calculation of diluted earnings per share, net income attributable to ordinary shareholders for basic earnings per share is adjusted by the effect of dilutive securities, including share-based awards, under the treasury stock method. ~~In addition, the computation of the diluted earnings per share assumes the conversion of Convertible Preference Shares (Note 22) since their issuance.~~ Potentially dilutive securities, of which the amounts are insignificant, have been excluded from the computation of diluted net income per share if their inclusion is anti-dilutive.

~~Table of Contents~~

~~ALIBABA GROUP HOLDING LIMITED~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~FOR THE YEARS ENDED MARCH 31, 2014, 2015 AND 2016~~
~~10.   Earnings per share (Continued)~~
~~The following table sets forth the computation of basic and diluted net income per share/ADS for the following periods:~~

Year ended March 31,

2014 2015 2016

(in millions of RMB, except share
data and per share data)

Numerator:

Net income attributable to ordinary shareholders for computing net income per ordinary share — basic
23,076 24,149 71,460

Reversal of accretion of Convertible Preference Shares
31 15 —

Reversal of dividend of Convertible Preference Shares
208 97 —

Net income attributable to ordinary shareholders for computing net income per ordinary share — diluted
23,315 24,261 71,460

Shares (denominator):

Weighted average number of shares used in calculating net income per ordinary share — basic (million shares)
2,175 2,337 2,458

Adjustments for dilutive share options and RSUs (million shares)
66 120 104

Conversion of Convertible Preference Shares (million shares)
91 43 —

Weighted average number of shares used in calculating net income per ordinary share — diluted (million shares)
2,332 2,500 2,562

Net income per ordinary share/ADS — basic (RMB)

10.61
10.33
29.07

Net income per ordinary share/ADS — diluted (RMB)
10.00 9.70 27.89

~~11.   Restricted cash~~

As at March 31,

2015 2016

(in millions of RMB)

Cash pledged for a bank in connection with its loan facilities for option exercise in favor of employees of the Company and its related companies
997 302

Cash pledged for treasury management activities
1,013 760

Others
287 284

2,297 1,346

~~Table of Contents~~

~~ALIBABA GROUP HOLDING LIMITED~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~FOR THE YEARS ENDED MARCH 31, 2014, 2015 AND 2016~~
~~12.   Investment securities and fair value disclosure~~

As of March 31, 2015

Original
cost Gross
unrealized
gains Gross
unrealized
losses Provision
for decline
in value Fair
value

(in millions of RMB)

Assets

Trading securities:

Listed equity securities
619 115 (58 ) — 676

Financial derivatives
86 532 (1 ) — 617

Available-for-sale securities:

Listed equity securities and other treasury investments
8,261 3,822 (446 ) — 11,637

Equity fund
184 52 — — 236

Held-to-maturity securities
1,384 — — — 1,384

Convertible bonds accounted for under the fair value option
3,983 150 (414 ) — 3,719

14,517 4,671 (919 ) — 18,269

As of March 31, 2016

Original
cost Gross
unrealized
gains Gross
unrealized
losses Provision
for decline
in value Fair
value

(in millions of RMB)

Assets

Trading securities:

Listed equity securities
646 230 (105 ) — 771

Financial derivatives
7 171 — — 178

Available-for-sale securities:

Listed equity securities and other treasury investments
12,701 5,940 (438 ) (957 ) 17,246

Held-to-maturity securities
10,760 — — (7 ) 10,753

Convertible bonds accounted for under the fair value option
4,256 366 — — 4,622

28,370 6,707 (543 ) (964 ) 33,570

~~During the years ended March 31, 2015 and 2016, the Company completed several investments accounted for as investment securities. Details of these significant investments are summarized in Note 4.~~
During the years ended March 31, 2014, 2015 and 2016, gross realized gain of RMB148 million, RMB141 million and RMB1,012 million and gross realized loss of RMB160 million, RMB97 million and RMB410 million from disposals of investment securities were recognized in the consolidated income statements, respectively. During the years ended March 31, 2014, 2015 and 2016, impairment loss of nil, nil and RMB962 million were charged in the consolidated income statements, respectively, as a result of other than temporary decline in values related to a listed equity security and a held-to-maturity security.
As of March 31, 2014, 2015 and 2016, net unrealized gains of RMB299 million, RMB3,384 million and RMB5,502 million on available-for-sale securities were recorded in accumulated other comprehensive income, respectively. For available-for-sale securities with unrealized loss, their related aggregate fair values amounted

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, ~~2014, 2015~~2017, 2018 AND ~~2016~~2019
~~12.~~9.     Earnings per share (Continued)
The following table sets forth the computation of basic and diluted net income per share/ADS for the following periods:

Year ended March 31,

2017 2018 2019

(in millions of RMB, except share
data and per share data)

Numerator:

Net income attributable to ordinary shareholders for computing net income per ordinary share — basic
43,675 63,985 87,600

Dilution effect arising from share-based awards issued by a subsidiary and equity investees
(11 ) (21 ) (42 )

Net income attributable to ordinary shareholders for computing net income per ordinary share — diluted
43,664 63,964 87,558

Shares (denominator):

Weighted average number of shares used in calculating net income per ordinary share — basic (million shares)
2,493 2,553 2,580

Adjustments for dilutive RSUs and share options (million shares)
80 57 43

Weighted average number of shares used in calculating net income per ordinary share — diluted (million shares)
2,573 2,610 2,623

Net income per ordinary share/ADS — basic (RMB)
17.52 25.06 33.95

Net income per ordinary share/ADS — diluted (RMB)
16.97 24.51 33.38

10.   Restricted cash and escrow receivables

As of March 31,

2018 2019

(in millions of RMB)

Money received or receivable on escrow services offered by AliExpress (i)
3,171 8,354

Others
246 164

3,417 8,518

(i)
The amount represents customer funds held by external payment networks outside the PRC relating to AliExpress with a corresponding liability recorded under escrow money payable.

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2017, 2018 AND 2019
11.   Investment securities and fair value disclosure

As of March 31, 2018

Original
cost Gross
unrealized
gains Gross
unrealized
losses Provision
for decline
in value Carrying
value

(in millions of RMB)

Equity securities:

Listed equity securities
20,303 10,990 (1,587 ) (983 ) 28,723

Equity securities accounted for under the fair value option
498 67 — — 565

Debt investments (i)
13,898 — — (179 ) 13,719

34,699 11,057 (1,587 ) (1,162 ) 43,007

As of March 31, 2019

Original
cost Gross
unrealized
gains Gross
unrealized
losses Provision
for decline
in value Carrying
value

(in millions of RMB)

Equity securities:

Listed equity securities
57,121 15,968 (11,887 ) — 61,202

Investments in privately held companies (ii)
81,894 14,107 (78 ) (13,250 ) 82,673

Debt investments (i)
23,843 44 (20 ) (725 ) 23,142

162,858 30,119 (11,985 ) (13,975 ) 167,017

(i)
Debt investments include convertible bonds accounted for under the fair value option, for which the fair value as of March 31, 2018 and 2019 were RMB1,256 million and RMB2,742 million, respectively. Unrealized gains recorded on these convertible bonds in the consolidated income statements were nil and RMB44 million during the years ended March 31, 2018 and 2019, respectively. Debt investments also include investments in certain wealth management products amounting to RMB6.9 billion as of March 31, 2018 and 2019. These investments were pledged to a financial institution in the PRC to secure a financing provided by this financial institution amounting to RMB6.9 billion to one of the Company's founders and an equity holder in certain of the Company's variable interest entities, to support his minority investment through a PRC limited partnership in Wasu Media Holding Co., Ltd., a company listed on the Shenzhen Stock Exchange.

(ii)
Upon the adoption of ASU 2016-01, certain investments in privately held companies that were previously accounted for under the cost method with a carrying value of RMB59,942 million as of March 31, 2018 were reclassified into investment securities as of April 1, 2018.
Details of the significant additions during the years ended March 31, 2017, 2018 and 2019 are set out in Note 4.

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2017, 2018 AND 2019
11.   Investment securities and fair value disclosure (Continued)
For equity securities, a summary of gains and losses, including impairment losses, recognized in interest and investment income, net is as follows:

Year ended March 31,

2017 2018 2019

(in millions of RMB)

Net unrealized gains recognized during the period for equity securities still held as of the end of the period
— 11 598

Net gains recognized during the period from disposals of equity securities during the period
5,601 1 5,120

Net gains recognized during the period on equity securities
5,601 12 5,718

As of March 31, 2018, net unrealized gains of RMB9,403 million on listed equity securities previously classified as available-for-sale were recorded in accumulated other comprehensive income. Upon the adoption of ASU 2016-01, the Company carried these equity securities at fair value with unrealized gains and losses recorded in the consolidated income statements. Unrealized gains and losses recorded in accumulated other comprehensive income as of March 31, 2018 related to ~~RMB4,929~~those equity securities previously classified as available-for-sale, in the amount of RMB8,196 million, ~~and RMB1,751~~net of tax, were reclassified into retained earnings as of April 1, 2018 (Note 2(t)). For listed equity securities previously classified as available-for-sale with unrealized losses, their related aggregate fair values amounted to RMB7,636 million as of March 31, ~~2015 and 2016, respectively.~~2018. The carrying amounts of listed equity securities previously classified as available-for-sale ~~securities~~ that were in a loss position over twelve months were insignificant as of the same ~~dates.~~date.
In addition, upon the adoption of ASU 2016-01, the Company no longer accounts for certain other equity investments in privately held companies over which the Company neither has control nor significant influence through investment in common stock or in-substance common stock using the cost method. Beginning on April 1, 2018, the Company elected to record a majority of equity investments in privately held companies using the measurement alternative (Note 2(t)). These equity securities, which amounted to RMB59,942 million as of March 31, 2018, were previously classified under investments in equity investees and were reclassified into investment securities on the consolidated balance sheets as of April 1, 2018 (Note 13). During the year ended March 31, 2019, upward adjustments of RMB15,474 million, and impairments and downward adjustments of RMB10,404 million, were recorded in interest and investment income, net, in the consolidated income statement. The Company's impairment analysis considers both qualitative and quantitative factors that may have a significant effect on the fair value of these equity securities. As of March 31, 2019, the amount of investments in privately held companies for which the Company elected to record using the measurement alternative amounted to RMB81,514 million.
During the years ended March 31, 2017, 2018 and 2019, no realized gains or losses were recognized for the disposal of debt investments. During the same periods, impairment losses on debt investments of RMB173 million, RMB6 million and RMB546 million were recorded in interest and investment income, net in the consolidated income statements, respectively.
The carrying amount of ~~long-term held-to-maturity~~debt investments approximates their fair value due to the fact that the related effective interest rates approximate rates currently offered by financial institutions for similar debt instruments of comparable maturities.

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2017, 2018 AND 2019
11.   Investment securities and fair value disclosure (Continued)
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:
Level 1 - Valuations based on unadjusted quoted prices for identical assets and liabilities in active markets.
Level 2 - Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
Level 3 - Valuations based on unobservable inputs reflecting assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.
Fair value of short-term investments and listed equity securities are based on quoted prices in active markets for identical assets or liabilities. ~~All other~~Other financial instruments, such as ~~derivative instruments and forward exchange~~interest rate swap contracts, are valued based on ~~quoted market prices of similar instruments and other significant~~ inputs derived from or corroborated by observable market data. ~~Convertible~~Valuations of convertible and exchangeable bonds that do not have a quoted price are ~~valued~~performed using valuation models such as the binomial model with unobservable inputs including risk-free interest rate and expected ~~volatility and dividend yield. Contingent~~volatility. The valuation of contingent consideration is ~~valued~~performed using an expected ~~cashflow~~cash flow method with unobservable inputs including the probability to achieve the ~~operating and financial targets,~~contingencies, which is assessed by the Company, in connection with the contingent consideration arrangements.

~~Table of Contents~~

~~ALIBABA GROUP HOLDING LIMITED~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~FOR THE YEARS ENDED MARCH 31, 2014, 2015 AND 2016~~
~~12.   Investment securities~~ Investments in privately held companies for which the Company elected to record using the measurement alternative were re-measured on a non-recurring basis, and are categorized within Level 3 under the fair value ~~disclosure (Continued)~~hierarchy. The values were estimated based on valuation methods using the observable transaction price at the transaction date and other unobservable inputs including volatility, as well as rights and obligations of the securities that the Company holds.
The following table summarizes the Company's assets and liabilities that are measured at fair value on a recurring basis and are categorized ~~using~~under the fair value hierarchy:

As of March 31, 2015

Level 1 Level 2 Level 3 Total

(in millions of RMB)

Assets

Short-term investments
14,148 — — 14,148

Restricted cash
2,297 — — 2,297

Trading securities:

Listed equity securities
676 — — 676

Financial derivatives
— 617 — 617

Available-for-sale securities:

Listed equity securities
11,637 — — 11,637

Equity fund
236 — — 236

Convertible bond accounted for under the fair value option
— — 3,719 3,719

28,994 617 3,719 33,330

Liabilities

Contingent consideration in relation to investments and acquisitions
— — 1,278 1,278

As of March 31, 2016

Level 1 Level 2 Level 3 Total

(in millions of RMB)

As of March 31, 2018

Assets

Level 1 Level 2 Level 3 Total

Short-term investments
4,700 — — 4,700
(in millions of RMB)

Restricted cash
1,346 — — 1,346
Assets

Trading securities:

Short-term investments
6,086 — — 6,086

Listed equity securities
771 — — 771
Restricted cash and escrow receivables
3,417 — — 3,417

Financial derivatives
— 178 — 178
Listed equity securities
28,723 — — 28,723

Available-for-sale securities:

Equity securities accounted for under the fair value option
— — 565 565

Listed equity securities
17,246 — — 17,246
Convertible bonds accounted for under the fair value option
— — 1,256 1,256

Convertible bond accounted for under the fair value option
— — 4,622 4,622
Interest rate swap contracts
— 542 — 542

24,063 178 4,622 28,863
38,226 542 1,821 40,589

Liabilities

Liabilities

Forward exchange contracts
— 461 — 461
Contingent consideration in relation to investments and acquisitions
— — 120 120

Contingent consideration in relation to investments and acquisitions
— — 1,264 1,264

— 461 1,264 1,725
— — 120 120

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, ~~2014, 2015~~2017, 2018 AND ~~2016~~2019
~~12.~~11.   Investment securities and fair value disclosure (Continued)

As of March 31, 2019

Level 1 Level 2 Level 3 Total

(in millions of RMB)

Assets

Short-term investments
3,262 — — 3,262

Restricted cash and escrow receivables
8,518 — — 8,518

Listed equity securities
61,202 — — 61,202

Convertible bonds accounted for under the fair value option
244 — 2,498 2,742

Interest rate swap contracts
— 331 — 331

Others
604 1,444 1,159 3,207

73,830 1,775 3,657 79,262

Liabilities

Contingent consideration in relation to investments and acquisitions
— — 5,122 5,122

— — 5,122 5,122

Convertible bonds ~~accounted for~~categorized within Level 3 under the fair value ~~option:~~hierarchy:

Amounts

(in millions of RMB)

Balance atas of April 1, ~~2014~~2017
~~1,044~~—

Additions ~~(Note 4(r))~~
~~2,944~~
~~Decrease in fair value~~
~~(264~~ )
~~Foreign currency translation adjustments~~
(5 )

~~Balance at March 31, 2015~~
~~3,719~~
~~Increase in fair value~~
~~630~~1,264

Foreign currency translation adjustments
~~273~~(8 )

Balance as of March 31, 2018
1,256
Additions
1,153
Foreign currency translation adjustments
89

Balance atas of March 31, ~~2016~~2019
~~4,622~~2,498

Contingent consideration in relation to investments and ~~acquisitions:~~acquisitions categorized within Level 3 under the fair value hierarchy:

Amounts

(in millions of RMB)

Balance atas of April 1, ~~2014~~2017
~~326~~921

~~Repayment~~Payment
(~~227~~770 )

~~Additions (Note 4(g))~~
~~1,094~~
~~Increase~~Net decrease in fair value
85(17
)

~~Balance at March 31, 2015~~
~~1,278~~
~~Decrease in fair value~~Foreign currency translation adjustments
(14 )

Balance atas of March 31, ~~2016~~2018
~~1,264~~120
Additions (i)
4,790
Net decrease in fair value
(45 )
Foreign currency translation adjustments
257

Balance as of March 31, 2019
5,122

~~Other than contingent cash consideration disclosed in Note 4(g), items included in contingent consideration as of~~
(i)
Additions during the year ended March 31, ~~2016 are individually insignificant.~~
2019 were related to the acquisition of Ele.me (Note 4(c)).

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, ~~2014, 2015~~2017, 2018 AND ~~2016~~2019
~~13.~~12.   Prepayments, receivables and other assets

As of March 31,
As of March 31,

2015 2016
2018 2019

(in millions of RMB)

(in millions of RMB)

Current:

Current:

VAT receivables (i)

3,457
6,589
Accounts receivable, net of allowance
7,284 13,771

Amounts due from related companies (ii)
4,842 3,236
Inventories
4,535 8,534

Prepaid cost of revenue, sales and marketing expenses and others
433 1,242
Amounts due from related companies (i)
8,080 7,445

Accounts receivable, net of allowance
1,067 1,209
VAT receivables, net of allowance (ii)
8,915 7,347

Deferred direct selling costs (iii)
809 948
Prepaid cost of revenue, sales and marketing and other expenses
4,283 7,049

Deferred tax assets (Note 7)
256 451
Advances to/receivables from customers, merchants and others
3,700 4,689

Advances to customers and merchants
373 435
Deferred direct selling costs (iii)
1,643 1,990

Loan receivables, net
835 390
Licensed copyrights (Note 2(y))
964 1,126

Interest receivables
561 314
Interest receivables
672 867

Employee loans and advances (iv)
153 124
Loan receivables, net
419 490

Others
1,027 2,090
Others
2,733 5,282

13,813 17,028
43,228 58,590

Non-current:

Non-current:

Prepayment for acquisition of property and equipment

1,883
4,358
Prepayment for acquisition of property and equipment
5,933 7,643

Employee loans (iv)
534 451
Film costs and prepayment for licensed copyrights and others
5,614 7,205

Prepaid upfront fees and debt issuance costs related to long-term borrowings and unsecured senior notes
311 354
Land use rights, net (iv)
9,377 6,419

Deferred direct selling costs (iii)
149 148
Deferred tax assets (Note 7)
2,182 2,533

Deferred tax assets (Note 7)
157 30
Fair value of interest rate swap contracts
542 331

Prepayment for film rights, script agreements and in-production movies and TV episodes
375 —
Deferred direct selling costs (iii)
188 281

Others
676 666
Others
2,438 3,606

4,085 6,007
26,274 28,018

(i)
VAT receivables as of March 31, 2016 mainly represent VAT receivable from relevant PRC tax authorities arising from OneTouch's VAT refund service. OneTouch provides advance settlement of relevant VAT refund amount to its customers prior to receiving such VAT refund from tax authorities. To provide this service, OneTouch relies on short term banking facilities and takes on credit risk if OneTouch fails to recover the prepaid VAT amount.

~~(ii)~~
Amounts due from related ~~parties~~companies primarily represent balances arising from transactions with Ant Financial ~~Services~~ and its subsidiaries ~~(Note 4(b)~~(Notes 4(a) and ~~23)~~21). The balances are unsecured, interest free and repayable within the next twelve months.

(ii)
VAT receivables mainly represent VAT receivable from relevant PRC tax authorities arising from the Company's VAT refund service. The Company provides advance settlement of relevant VAT refund amounts to its customers prior to receiving the VAT refund from tax authorities. To provide this service, the Company relies on short-term banking facilities and takes on credit risk if the Company fails to recover the prepaid VAT amount.

(iii)
The Company is obligated to pay certain costs upon the receipt of membership fees from merchants or other customers, which primarily consist of sales commissions. The membership fees are initially deferred and recognized as revenue in the consolidated income statements in the period in which the services are rendered. As such, the related costs are also initially deferred and recognized in the consolidated income statements in the same period as the related service fees are recognized.

(iv)
As of March 31, 2019, the Company revised the presentation to report land use rights under prepayments, receivables and other assets on the consolidated balance sheet. Accordingly, land use rights, net as of

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, ~~2014, 2015~~2017, 2018 AND ~~2016~~2019
~~13.~~12.   Prepayments, receivables and other assets (Continued)
~~(iv)~~
~~Employee loans mainly represent full recourse, interest-bearing share purchase, option exercise~~
March 31, 2018 in the amount of RMB9,377 million was reclassified to prepayments, receivables and ~~tax loans,~~other assets to conform with ~~a term of four to five years, to employees of~~ the Company and its related companies in order to finance their purchase of ordinary shares, exercise of options underlying the ordinary shares as well as payment of related personal taxes. Such employee loans are pledged by ordinary shares owned by the employees and carried interest at market rates. The balance also includes an interest-free loan program, with a term of five years, to eligible employees for purchase of their first residential properties.
current year presentation.
~~14.   Investment~~13.   Investments in equity investees

Cost
method Equity
method Total

Cost
method Equity
method Total
(in millions of RMB)

(in millions of RMB)

Balance as of April 1, 2017
35,404 84,964 120,368

Balance at April 1, 2014
13,589 4,077 17,666
Additions (i)
34,121 26,391 60,512

Additions
12,304 16,518 28,822
Share of results, other comprehensive income and other reserves (ii)
— (3,660 ) (3,660 )

Share of results and other comprehensive income (i)
— (1,148 ) (1,148 )
Disposals
(3,051 ) (474 ) (3,525 )

Less: disposals and transfers (ii)
(9,818 ) (806 ) (10,624 )
Transfers (iii)
(1,725 ) (9,011 ) (10,736 )

Less: impairment loss
(419 ) (438 ) (857 )
Impairment loss (iv)
(1,753 ) (18,153 ) (19,906 )

Foreign currency translation adjustments
17 1 18
Foreign currency translation adjustments
(3,054 ) (299 ) (3,353 )

Balance at March 31, 2015
15,673 18,204 33,877
Balance as of March 31, 2018
59,942 79,758 139,700

Additions (iii)
19,764 41,968 61,732
Transfer of cost method investments (v)
(59,942 ) — (59,942 )

Balance as of April 1, 2018
— 79,758 79,758

Additions (i)
— 14,360 14,360

Share of results, other comprehensive income and other reserves (ii)
— 1,905 1,905

Share of results and other comprehensive income (i)
— (1,296 ) (1,296 )
Disposals
— (1,160 ) (1,160 )

Less: disposals and transfers (ii)
(2,150 ) (751 ) (2,901 )
Transfers (iii)
— (10,153 ) (10,153 )

Less: impairment loss
(902 ) — (902 )
Impairment loss (iv)
— (493 ) (493 )

Foreign currency translation adjustments
879 72 951
Foreign currency translation adjustments
— 237 237

Balance at March 31, 2016
33,264 58,197 91,461
Balance as of March 31, 2019
— 84,454 84,454

(i)
Details of the significant additions of the investments in equity investees are set out in Note 4.

(ii)
Share of results, ~~and~~ other comprehensive income ~~includes~~and other reserves include the share of results of the equity investees, the gain or loss arising from the deemed disposal of the equity investees and the amortization of basis differences. The ~~balance~~amount excludes the ~~gain arising from fair value adjustments of contingent consideration related~~expenses relating to ~~an equity investee and the expenses in connection with~~ the share-based awards ~~relating to ordinary shares~~underlying the equity of the Company and Ant Financial ~~Services~~ granted to employees of certain equity investees (Note 8(d)).

~~(ii)~~(iii)
During the year ended March 31, ~~2015,~~2018, transfers under the equity method were primarily related to the ~~step acquisitions~~consolidation of ~~OneTouch~~Cainiao Network (Note 4(f)) and Intime (Note 4(g))~~, UCWeb (Note 4(f)), AutoNavi (Note 4(d)), as well as an additional investment in Weibo (Note 4(u)).~~ upon the acquisition of control by the Company.
During the year ended March 31, 2016, disposals under the cost method were primarily related to the partial disposal of the Company's investment in an equity investee. A gain of approximately US$471 million (RMB3,078 million) arising from such disposal was recognized in interest and investment income, net in the consolidated income statement. Transfers2019, transfers under the equity method were primarily related to the consolidation of Alibaba ~~Health upon which the control was obtained by the Company~~Pictures (Note ~~4(c)~~4(b)).
~~(iii)~~(iv)
~~Additions during~~Impairment charges in connection with the equity method investments of RMB245 million, RMB18,153 million and RMB493 million were recorded in share of results of equity investees in the consolidated income statements for the years ended March 31, 2017, 2018 and 2019, respectively.
Impairment charges in connection with the cost method investments of RMB2,125 million and RMB1,753 million were recorded in interest and investment income, net in the consolidated income statements for the years ended March 31, 2017 and 2018, respectively.

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2017, 2018 AND 2019
13.   Investments in equity investees (Continued)
Out of the impairment charges relating to the equity method investments for the year ended March 31, ~~2016 included~~2018, RMB18,116 million was related to the Company's investment in Alibaba Pictures (Note 4(b)). The fair value measurements with respect to the impairments of other equity investees were individually insignificant and utilized a number of different unobservable inputs not subject to meaningful aggregation.
(v)
Upon the adoption of ASU 2016-01, the Company no longer accounts for certain other equity investments in privately held companies over which the Company neither has control nor significant influence through investment in common stock or in-substance common stock using the cost method, and RMB59,942 million were reclassified into investment securities (Note 11) as of April 1, 2018.
As of March 31, 2018, cost method investments with an aggregate carrying amount of RMB30,318 million have appreciated in value and the Company estimated the fair value to be approximately RMB61,936 million. As of the same date, for certain other cost method investments with an aggregate carrying amount of RMB29,624 million, the Company identified no events or changes in circumstances that may have a significant adverse effect on the fair value of the ~~retained noncontrolling investment in Alibaba Pictures which~~investments and determined that it is ~~accounted for as an~~not practicable to estimate their fair values.
As of March 31, 2019, equity method ~~investee after~~investments with an aggregate carrying amount of RMB56,463 million that are publicly traded have increased in value and the ~~deconsolidation~~total market value of these investments amounted to RMB72,200 million.
For the years ended March 31, 2017, 2018 and 2019, equity method investments held by the Company in aggregate have met the significance criteria as defined under Rule 4-08 (g) of Regulation S-X. As such, the Company is required to present summarized financial information for all of its equity method investments as a group as follows:

Year ended March 31,

2017 2018 2019

(in millions of RMB)

Operating data:

Revenue
125,701 284,706 488,775

Cost of revenue
(109,790 ) (242,068 ) (405,074 )

(Loss) Income from operations
(9,071 ) (7,072 ) 3,840

Net (loss) income
(6,743 ) 195 2,923

As of March 31,

2018 2019

(in millions of RMB)

Balance sheet data:

Current assets
200,742 257,502

Non-current assets
184,310 222,484

Current liabilities
162,340 205,272

Non-current liabilities
26,107 34,191

Noncontrolling interests and mezzanine equity
16,586 10,151

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2017, 2018 AND 2019
14.   Property and equipment, net

As of March 31,

2018 2019

(in millions of RMB)

Buildings and property improvements
45,909 61,940

Computer equipment and software
33,852 53,187

Construction in progress
5,110 6,959

Furniture, office and transportation equipment
2,057 3,889

86,928 125,975

Less: accumulated depreciation and amortization
(20,439 ) (33,945 )

Net book value
66,489 92,030

Depreciation and amortization expenses recognized for the years ended March 31, 2017, 2018 and 2019 were RMB5,177 million, RMB8,654 million and RMB14,818 million, respectively.
15.   Intangible assets, net

As of March 31,

2018 2019

(in millions of RMB)

User base and customer relationships
13,510 47,913

Trade names, trademarks and domain names
14,198 22,592

Non-compete agreements (i)
7,820 12,528

Developed technology and patents
5,463 9,510

Licensed copyrights (Note 2(y))
9,182 9,225

Others
225 1,358

50,398 103,126

Less: accumulated amortization and impairment
(22,933 ) (34,850 )

Net book value
27,465 68,276

(i)
In April 2017, the Company entered into a non-compete agreement with a former management member of Youku (Note ~~4(e)~~4(h))., with a fair value of RMB2,528 million. As of March 31, 2019, the remaining amortization period of the non-compete agreement is one year.

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, ~~2014, 2015~~2017, 2018 AND ~~2016~~2019
~~14.   Investment in equity investees~~15.   Intangible assets, net (Continued)
~~During the years ended March 31, 2015 and 2016, the Company completed several investments accounted~~The estimated aggregate amortization expenses for ~~as equity investees. Details~~each of the ~~significant investments~~five succeeding fiscal years and thereafter are ~~summarized~~as follows:

Amounts

(in millions of RMB)

For the year ending March 31,

2020
14,418

2021
11,362

2022
8,779

2023
7,793

2024
7,378

Thereafter
18,546

68,276

16.   Goodwill
Changes in ~~Note 4.~~
~~The Company continually reviews its investments in equity investees to determine whether a decline in fair value below~~ the carrying ~~value is other than temporary. The primary factors the Company considers in its determination are the length~~amount of time that the fair value of the investment is below the Company's carrying value; the financial condition, operating performance and the prospects of the equity investee; and other company specific information such as recent financing rounds. If the decline in fair value is deemed to be other than temporary, the carrying value of the equity investee is written down to fair value. Impairment charges in connection with the equity method investments of nil, RMB438 million and nil were recorded in share of results of equity investees in the consolidated income statementsgoodwill by segment for the years ended March 31, ~~2014, 2015~~2018 and ~~2016, respectively. Impairment charges in connection with~~2019 were as follows:

Core
commerce Cloud
computing Digital media
and
entertainment Innovation
initiatives and
others Total

(in millions of RMB)

Balance as of April 1, 2017
79,855 368 40,521 4,676 125,420

Additions (i)
37,458 — 335 — 37,793

Impairment
— — (494 ) — (494 )

Foreign currency translation adjustments
(515 ) — (55 ) — (570 )

Balance as of March 31, 2018
116,798 368 40,307 4,676 162,149

Additions (i)
80,760 1,118 20,165 575 102,618

Foreign currency translation adjustments
157 (25 ) 36 — 168

Balance as of March 31, 2019
197,715 1,461 60,508 5,251 264,935

(i)
During the ~~cost method investments of RMB119 million, RMB419 million and RMB902 million were recorded in interest and investment income, net in the consolidated income statements for the years~~year ended March 31, ~~2014, 2015~~2018, additions under the core commerce segment were primarily related to the acquisition of Cainiao Network (Note 4(f)).
During the year ended March 31, 2019, additions under the core commerce segment and ~~2016,~~the digital media and entertainment segment were primarily related to the acquisitions of Koubei and Ele.me (Note 4(c)) and the acquisition of Alibaba Pictures (Note 4(b)), respectively. ~~The fair value measurements with respect to such~~
Gross goodwill balances were RMB166,093 million and RMB268,879 million as of March 31, 2018 and 2019, respectively. Accumulated impairment losses were ~~individually insignificant and utilized a number of different unobservable inputs not subject to meaningful aggregation.~~
AsRMB3,944 million as of March 31, ~~2016, the equity method investments with an aggregate carrying amount of RMB42,395 million that are publicly traded have decreased in value~~2018 and the total open market values of these investments amounted to RMB38,344 million. A decline in the quoted market price below the carrying amount is not necessarily indicative of a loss in value that is other than temporary. The Company evaluated all factors and no impairment charge was recognized for these publicly traded equity method investments.
As of March 31, 2015 and 2016, the cost method investments with an aggregate carrying amount of RMB6,046 million and RMB9,223 million have appreciated in value and the Company estimated the fair value to approximate RMB14,965 million and RMB25,639 million, respectively. As of the same dates, for certain other cost method investments with carrying amounts of RMB9,627 million and RMB24,041 million, the Company identified no events or changes in circumstances that may have a significant adverse effect on the fair values of the investments and determined that it is not practicable to estimate their fair values, respectively.
~~15.   Property and equipment, net~~

As of March 31,

2015 2016

(in millions of RMB)

Computer equipment and software
9,829 13,289

Buildings and leasehold improvements
2,828 6,155

Construction in progress
1,818 1,883

Furniture, office and transportation equipment
430 483

14,905 21,810

Less: accumulated depreciation and amortization
(5,766 ) (8,181 )

Net book value
9,139 13,629

~~Depreciation and amortization expenses recognized for the years ended March 31, 2014, 2015 and 2016 were RMB1,295 million, RMB2,282 million and RMB3,699 million, respectively.~~2019.

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, ~~2014, 2015~~2017, 2018 AND ~~2016~~2019
16.   ~~Intangible assets~~

As of March 31,

2015 2016

(in millions of RMB)

Non-compete agreements
3,630 4,284

Developed technology and patents
3,331 3,652

Trade names, trademarks and domain names
2,007 2,222

User base and customer relationships
855 1,234

Licenses and copyrights and others
295 787

Less: accumulated amortization and impairment
(3,543 ) (6,809 )

Net book value
6,575 5,370

Amortization expenses for the years ended March 31, 2014, 2015 and 2016 amounted to RMB315 million, RMB2,089 million and RMB2,931 million, respectively. During the same periods, no impairment charge was recognized in the consolidated income statements.
~~The estimated aggregate amortization expenses for each of the five succeeding fiscal years and thereafter are as follows:~~

Amounts

(in millions of RMB)

For the year ending March 31,

2017
3,103

2018
1,734

2019
449

2020
71

2021
8

Thereafter
5

5,370

~~Table of Contents~~

~~ALIBABA GROUP HOLDING LIMITED~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~FOR THE YEARS ENDED MARCH 31, 2014, 2015 AND 2016~~
~~17.~~   Goodwill (Continued)
~~The changes in the carrying amount of goodwill for the years ended March 31, 2015 and 2016 were as follows:~~

~~Amounts~~

~~(in millions of RMB)~~
~~Balance as of April 1, 2014~~
~~11,793~~
~~Additions~~
~~30,319~~
~~Deconsolidation of a subsidiary~~
(4 )
~~Impairment~~
~~(175~~ )
~~Foreign currency translation adjustments~~
—

~~Balance as of March 31, 2015~~
~~41,933~~
~~Additions~~
~~50,723~~
~~Deconsolidation of a subsidiary (Note 4(e))~~
~~(10,556~~ )
~~Impairment~~
~~(455~~ )
~~Foreign currency translation adjustments~~
—

~~Balance as of March 31, 2016~~
~~81,645~~

Gross goodwill balances were RMB44,928 million and RMB85,095 million as of March 31, 2015 and 2016, respectively. Accumulated impairment losses were RMB2,995 million and RMB3,450 million as of the same dates, respectively.
In the annual goodwill impairment assessment, ~~of goodwill,~~ the Company concluded that the carrying amounts of ~~respective~~certain reporting units exceeded ~~its~~their respective fair ~~value~~values and recorded an impairment ~~charge~~losses of ~~RMB44 million, RMB175~~nil, RMB494 million and ~~RMB455 million~~nil during the years ended March 31, ~~2014, 2015~~2017, 2018 and ~~2016,~~2019, respectively. The impairment losses were resulted from a revision of long-term financial outlook and the change in business model of those reporting units. The impairment ~~charge~~loss was determined by comparing the carrying ~~amount~~amounts of goodwill associated with ~~that~~the reporting ~~unit~~units with ~~the~~their respective implied fair ~~value~~values of the goodwill. The goodwill impairment is presented as an unallocated item in the segment information (Note 25) because the CODM of the Company does not consider this as part of the segment operating performance measure.
~~18.~~17.   Deferred revenue and customer advances
Deferred revenue and customer advances primarily represent service fees prepaid by merchants or customers for which the relevant services have not been provided. The respective balances are as follows:

As of March 31,
As of March 31,

2015 2016
2018 2019

(in millions of RMB)

(in millions of RMB)

Deferred revenue
5,781 7,236
Deferred revenue
13,350 18,448

Customer advances
2,578 3,479
Customer advances
9,940 13,814

8,359 10,715
23,290 32,262

Less: current portion
(7,914 ) (10,297 )
Less: current portion
(22,297 ) (30,795 )

Non-current portion
445 418
Non-current portion
993 1,467

All service fees received in advance are initially recorded as customer advances. These amounts are transferred to deferred revenue upon commencement of the provision of services by the Company and are recognized in the consolidated income statements in the period in which the services are provided. In general, service fees received in advance are non-refundable after ~~such~~the amounts are transferred to deferred revenue. Substantially all of the balances of deferred revenue and customer advances are generally recognized as revenue within one year. The amount of revenue recognized during the year ended March 31, 2019 from performance obligations satisfied (or partially satisfied) in previous periods is not material.

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, ~~2014, 2015~~2017, 2018 AND ~~2016~~2019
~~19.~~18.   Accrued expenses, accounts payable and other liabilities

As of March 31,

2015 2016

(in millions of RMB)

As of March 31,

Current:

2018 2019

Accrued cost of revenue and sales and marketing expenses

5,158
8,328
(in millions of RMB)

Accrued bonus and staff costs, including sales commission
6,377 8,210
Current:

Other deposits received in rendering services on e-commerce marketplaces
1,391 1,503
Payables and accruals for cost of revenue and sales and marketing expenses
40,363 51,958

Amounts due to related companies (i)
927 1,456
Accrued bonus and staff costs, including sales commission
11,212 14,034

Accruals for purchases of property and equipment
701 1,248
Payable to merchants and third party marketing affiliates
6,584 12,554

Payable to third party marketing affiliates
667 1,051
Other deposits and advances received
6,271 10,447

Other taxes payable (ii)
635 943
Payables and accruals for purchases of property and equipment
6,095 5,548

Accrued professional services expenses
302 603
Amounts due to related companies (i)
1,996 4,570

Accrual for interest expense
535 571
Other taxes payable (ii)
2,382 3,448

Accrued donations
339 549
Contingent and deferred consideration in relation to investments and acquisitions
807 3,301

Liabilities arising from treasury management activities
776 539
Accrued professional services and administrative expenses
1,371 2,361

Contingent and deferred consideration in relation to investments and acquisitions
329 322
Accrued donations
1,215 1,738

Unvested share options exercised
518 321
Accrual for interest expense
885 924

Others
1,179 1,690
Others (iii)
1,984 6,828

19,834 27,334
81,165 117,711

Non-current:

Non-current:

Contingent and deferred consideration in relation to investments and acquisitions

1,953
1,851
Contingent and deferred consideration in relation to investments and acquisitions
408 3,872

Others
197 315
Others
1,637 2,315

2,150 2,166
2,045 6,187

(i)
Amounts due to related companies primarily represent balances arising from the transactions with Ant Financial ~~Services~~ and its subsidiaries (Note ~~23)~~21). The balances are unsecured, interest free and repayable within the next twelve months.

(ii)
Other taxes payable ~~represents~~represent business tax, ~~value-added tax~~VAT and related surcharges and PRC individual income tax of employees withheld by the Company.

(iii)
Other current liabilities as of March 31, 2019 include a settlement provision of US$250 million (RMB1,679 million) for a U.S. federal class action lawsuit that has been pending since January 2015 (Note 24(g)).

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, ~~2014, 2015~~2017, 2018 AND ~~2016~~2019
~~20.~~19.   Bank borrowings
Bank borrowings are analyzed as follows:

As of March 31
As of March 31

2015 2016
2018 2019

(in millions of RMB)

Current portion:

Short-term other borrowings (i)
6,028 7,356

(in millions of RMB)

Non-current portion:

Long-term borrowings (i)
1,609 1,871
US$4.0 billion syndicated loan denominated in US$ (ii)
24,957 26,780

Short-term borrowings (ii)
1,990 4,304
Long-term other borrowings (iii)
9,196 8,647

3,599 6,175
34,153 35,427

(i)
The weighted average interest rate for all long-term borrowings for the years ended March 31, 2014, 2015 and 2016 was approximately 6.7%, 5.9% and 4.9%, respectively. Other loans are collateralized by a pledge of certain land use rights and construction in progress with carrying values of RMB2,216 million and RMB3,583 million in the PRC as of March 31, 2015 and 2016, respectively. Such borrowings are all denominated in Renminbi.

~~(ii)~~
As of March 31, ~~2015~~2018 and ~~2016,~~2019, the Company had short-term borrowings from banks which were repayable within one year or on demand and charged at interest rates ranging from ~~2.0%~~2.2% to ~~11.6%~~6.1% and ~~4.0%~~2.9% to ~~7.1%~~19.0% per annum, respectively. ~~Such~~As of March 31, 2019, the weighted average interest rate of these borrowings was 4.1% per annum. The borrowings are primarily denominated in RMB or US$.

(ii)
As of March 31, 2018 and 2019, the Company had a five-year US$4.0 billion syndicated loan, which was entered into with a group of eight lead arrangers. The loan has a five-year bullet maturity and is priced at 110 basis points over LIBOR. The related floating interest payments are hedged by certain interest rate swap contracts entered into by the Company. The proceeds of the loan were used for general corporate and working capital purposes (including acquisitions). In May 2019, the loan terms were modified such that the interest rate of the loan was reduced to 85 basis points over LIBOR and the maturity of the loan was extended to May 2024.

(iii)
As of March 31, 2018 and 2019, the Company had long-term borrowings from banks with weighted average interest rates of approximately 4.5% and 4.6% per annum, respectively. The borrowings are all denominated in ~~Renminbi.~~RMB.
~~In August 2014,~~Certain other bank borrowings are collateralized by a pledge of certain bank deposits, buildings and property improvements, construction in progress and land use rights in the PRC with carrying values of RMB20,927 million and RMB18,314 million, as of March 31, 2018 and 2019, respectively. As of March 31, 2019, the Company ~~entered into~~is in compliance with all covenants in relation to bank borrowings.
In April 2017, the Company obtained a new revolving credit facility ~~agreement with~~provided by certain financial institutions for an amount of US$~~3.0~~5.15 billion, which has not yet been drawn down. The interest rate on any outstanding utilized amount under this new credit facility is calculated based on LIBOR plus ~~120~~95 basis points. This facility is reserved for general corporate and working capital ~~purposes.~~
In March 2016, the Company signed a five-year US$3.0 billion syndicated loan agreement with a group of eight lead arrangers which has been subsequently drawn down in April 2016. The loan was upsized from US$3.0 billion to US$4.0 billion in May 2016 through a general syndication, which the upsized portion of the loan has not yet been drawn down. The loan has a five-year bullet maturity and is priced at 110 basis points over LIBOR. The proceeds of the loan will be used for general corporate and working capital purposes (including acquisitions).

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2017, 2018 AND 2019
19.   Bank borrowings (Continued)
As of March 31, ~~2016,~~2019, the borrowings will be due according to the following schedule:

Principal amounts

(in millions of RMB)

Within 1 year
~~4,304~~7,358

Between 1 to 2 years
~~682~~841

Between 2 to 3 years
~~520~~27,986

Between 3 to 4 years
~~502~~577

Between 4 to 5 years
~~167~~559
Beyond 5 years
5,576

~~6,175~~42,897

20.   Unsecured senior notes
In November 2014, the Company issued unsecured senior notes including floating rate and fixed rate notes with varying maturities for an aggregate principal amount of US$8.0 billion (the "2014 Senior Notes"), of which US$1.3 billion was repaid in November 2017. The 2014 Senior Notes are senior unsecured obligations that are listed on the HKSE, and interest is payable in arrears, quarterly for the floating rate notes and semiannually for the fixed-rate notes.
In December 2017, the Company issued another series of unsecured fixed rate senior notes with varying maturities for an aggregate principal amount of US$7.0 billion (the "2017 Senior Notes"). The 2017 Senior Notes are senior unsecured obligations that are listed on the Singapore Stock Exchange, and interest is payable in arrears semiannually.
The following table provides a summary of the Company's unsecured senior notes as of March 31, 2018 and 2019:

As of March 31,

Effective
interest rate

2018 2019

(in millions of RMB)

US$2,250 million 2.500% notes due 2019
14,083 15,110 2.67 %

US$1,500 million 3.125% notes due 2021
9,365 10,044 3.26 %

US$700 million 2.800% notes due 2023
4,372 4,687 2.90 %

US$2,250 million 3.600% notes due 2024
14,050 15,061 3.68 %

US$2,550 million 3.400% notes due 2027
15,848 16,989 3.52 %

US$700 million 4.500% notes due 2034
4,339 4,650 4.60 %

US$1,000 million 4.000% notes due 2037
6,219 6,663 4.06 %

US$1,750 million 4.200% notes due 2047
10,880 11,655 4.25 %

US$1,000 million 4.400% notes due 2057
6,216 6,658 4.44 %

Carrying value
85,372 91,517

Unamortized discount and debt issuance costs
624 589

Total principal amounts of unsecured senior notes
85,996 92,106

Less: current portion of principal amounts of unsecured senior notes
— (15,127 )

Non-current portion of principal amounts of unsecured senior notes
85,996 76,979

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, ~~2014, 2015~~2017, 2018 AND ~~2016~~2019
~~21.~~20.   Unsecured senior notes (Continued)
~~In November~~The 2014 Senior Notes and the Company issued unsecured senior notes included floating rate and fixed rate notes with varying maturities for an aggregate principal amount of US$8.0 billion. These notes are senior unsecured obligations and interest is payable in arrears, quarterly for the floating rate notes and semiannually for the fixed-rate notes, which are listed on the Hong Kong Stock Exchange.
~~The following table provides a summary of the Company's unsecured senior notes as of March 31, 2016:~~

Amounts Effective
interest rate

(in millions of RMB)

US$300 million floating rate notes due 2017
1,940 1.22 %

US$1,000 million 1.625% notes due 2017
6,462 1.73 %

US$2,250 million 2.500% notes due 2019
14,506 2.64 %

US$1,500 million 3.125% notes due 2021
9,662 3.24 %

US$2,250 million 3.600% notes due 2024
14,524 3.66 %

US$700 million 4.500% notes due 2034
4,502 4.59 %

Carrying value
51,596

Unamortized discount and debt issuance costs
130

Total principal amounts of unsecured senior notes
51,726

~~The unsecured senior notes~~2017 Senior Notes were issued at a discount ~~amounting to~~with a total amount of US$2447 million ~~(RMB150~~(RMB297 million). The debt issuance costs of US$2982 million ~~(RMB175~~(RMB517 million) were presented as a direct deduction from the principal amount of the unsecured senior notes on the consolidated balance sheets. The effective interest rates for the unsecured senior notes include the interest charged on the notes as well as amortization of the debt discounts and debt issuance costs.
The ~~unsecured senior notes~~2014 Senior Notes and the 2017 Senior Notes contain covenants including, among others, limitation on liens, consolidation, merger and sale of the Company's assets. As of March 31, 2019, the Company is in compliance with all these covenants. In addition, the ~~notes~~2014 Senior Notes and the 2017 Senior Notes rank senior in right of payment to all of the Company's existing and future indebtedness expressly subordinated in right of payment to the notes and rank at least equally in right of payment with all of the Company's existing and future unsecured unsubordinated indebtedness (subject to any priority rights pursuant to applicable law).
The proceeds from issuance of the ~~unsecured senior notes~~2014 Senior Notes were used in full to refinance a previous syndicated loan in the same amount. The ~~related unamortized upfront fees of RMB830 million of such syndicated loan were charged to interest expenses on~~proceeds from the ~~consolidated income statements upon the repayment~~issuance of the ~~syndicated loan during the year ended March 31, 2015.~~2017 Senior Notes were used for general corporate purposes.

~~Table of Contents~~

~~ALIBABA GROUP HOLDING LIMITED~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~FOR THE YEARS ENDED MARCH 31, 2014, 2015 AND 2016~~
~~21.   Unsecured senior notes (Continued)~~
As of March 31, ~~2016,~~2019, the future principal payments for the Company's unsecured senior notes will be due according to the following schedule:

Principal amounts

(in millions of RMB)

Within 1 year
—15,127

Between 1 to 2 years
~~8,405~~—

Between 2 to 3 years
—10,084

Between 3 to 4 years
~~14,548~~—

Between 4 to 5 years
—4,706

Thereafter
~~28,773~~62,189

~~51,726~~92,106

As of March 31, ~~2016,~~2018 and 2019, the fair ~~value~~values of the Company's unsecured senior notes, based on Level 2 inputs, ~~was~~were US$~~8,111~~13,317 million ~~(RMB52,443~~(RMB83,590 million).
~~22.   Convertible Preferences Shares~~
As part of the arrangement for the repurchase of ordinary shares from Yahoo in 2012, the Company issued convertible preference shares ("Convertible Preference Shares") to Yahoo with a liquidation preference of and US$~~1.7 billion (RMB10.7 billion) (the "Convertible Preference Shares")~~13,679 million (RMB91,964 million), ~~net of issuance cost of RMB157 million.~~
The Convertible Preference Shares were redeemable at an amount equal to their liquidation preference plus accrued and unpaid dividends at the Company's option at any time subsequent to the first anniversary of the issue date if certain conditions were met, and were mandatorily redeemable on the fifth anniversary of the issue date unless previously redeemed. The holders of the Convertible Preference Shares were entitled to semi-annual dividends at a pre-determined rate until such shares were redeemed. Such dividend rate shall be 2.0% per annum prior to the second anniversary of the issuance date, 5.0% per annum commencing on the second anniversary of the issuance date until the mandatory redemption date, and 8.0% per annum thereafter until the Convertible Preference Shares were redeemed or converted into ordinary shares. The Convertible Preference Shares were convertible at the holder's option at any time at an initial conversion price of US$18.50 per share subject to certain adjustments, and shall be mandatorily converted concurrently with the closing of a qualified IPO as defined in the Convertible Preference Share purchase agreement. The holders of such shares had no voting rights. The Convertible Preference Shares were classified in the mezzanine section between liabilities and equity on the consolidated balance sheets due to their mandatory redemption provision. Costs incurred in connection with the issuance of the Convertible Preference Shares were recorded as a reduction of the related proceeds received, and the related accretion was charged against additional paid-in capital over the period from the issuance date until the mandatory redemption date of such shares. The Convertible Preference Shares were converted into ordinary shares of the Company upon the closing of the Company's initial public offering in September 2014 (Note 4(a)).respectively.

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, ~~2014, 2015~~2017, 2018 AND ~~2016~~
2019
~~23.~~21.   Related party transactions
During the years ended March 31, ~~2014, 2015~~2017, 2018 and ~~2016,~~2019, other than disclosed elsewhere, the Company had the following material related party transactions:
Transactions with ~~Yahoo~~Ant Financial and its affiliates

Year ended
March 31,

2014 2015 2016

(in millions of RMB)

Amount incurred or disbursed by the Company

Royalty fee (i)
748 448 —

Purchase of patents (ii)
430 144 —

Year ended March 31,

2017 2018 2019

(in millions of RMB)

Amounts earned by the Company

Profit Share Payments (i)
2,086 3,444 517

SME Annual Fee (ii)
847 956 954

Administrative and support services (iii)
531 676 1,017

Commission on transactions (iii)
409 497 591

Cloud computing revenue (iii)
264 482 761

Other amounts earned (iii)
144 529 898

4,281 6,584 4,738

Amounts incurred by the Company

Payment processing fee (iv)
5,487 6,295 8,252

Other amounts incurred (iii)
952 1,894 1,328

6,439 8,189 9,580

(i)
~~The~~In 2014, the Company ~~and Yahoo~~ entered into ~~a Technology and Intellectual Property Licensing Agreement~~the 2014 IPLA with Ant Financial. Under the 2014 IPLA, the Company receives the Profit Share Payments amounting to the sum of an expense reimbursement plus 37.5% of the consolidated pre-tax income of Ant Financial, subject to certain adjustments (Note 4(a)).
Profit Share Payments were recognized in ~~October 2005 whereby Yahoo granted~~consolidated income statements, net of the costs incurred for the provision of the software technology services reimbursed by Ant Financial. The amounts reimbursed by Ant Financial to the Company ~~the use of certain intellectual property~~were RMB245 million, RMB37 million and the Company agreed to pay Yahoo a royalty fee equal to 2%, until December 31, 2012 and equal to 1.5% thereafter, of revenues recognized on a consolidated basis under U.S. GAAP, less traffic acquisition costs incurred in connection with third-party distribution partners, business tax, value-added tax or similar sales tax based on revenue paid to governments. The arrangement was terminated upon the completion the Company's initial public offering in September 2014. Such royalty expense was recognized in product development expenses.

~~(ii)~~
~~The Company and Yahoo entered into a patent sale and assignment agreement during~~RMB106 million for the years ended March 31, ~~2014~~2017, 2018 and ~~2015 pursuant to which the~~2019, respectively.
(ii)
The Company ~~acquired ownership of certain patents for aggregate consideration of US$70 million~~entered into software system use and ~~US$24 million, respectively.~~
~~Transactions~~service agreements with Ant Financial ~~Services, Alipay, Koubei~~in 2014. In calendar years 2016 to 2017, the Company received the SME Annual Fee equal to 2.5% of the average daily balance of the SME loans made by Ant Financial and ~~their~~its affiliates. In calendar years 2018 to 2021, the Company received or will receive the SME Annual Fee equal to the amount paid in calendar year 2017 (Note 4(a)).

(iii)
The Company has other commercial arrangements, treasury management arrangements and cost sharing arrangements with Ant Financial, its subsidiaries and affiliates
on various sales and marketing, cloud computing, treasury management, and other administrative and support services.

Year ended March 31,

2014 2015 2016

(in millions of RMB)

Amount earned by the Company

Royalty fee and software technology services fee (i)
1,764 1,667 1,122

SME Annual Fee (ii)
— 90 708

Reimbursement on options and RSUs (iii)
266 206 113

Other services (iv)
46 158 1,086

2,076 2,121 3,029

Amount incurred by the Company

Payment processing fee (v)
2,349 3,853 4,898

Other services (iv)
21 306 299

2,370 4,159 5,197

~~(i)~~
In ~~2011,~~addition, the Company entered into ~~an Intellectual Property License~~agreements with Ant Financial and ~~Software Technology Services Agreement with~~its affiliates under which the Company receives a cash reimbursement for RSUs and options relating to the certain shares granted to employees of Ant Financial, its subsidiaries and affiliates, upon the vesting of the RSUs and options.
(iv)
The Company and Alipay, among others, entered into a commercial agreement in 2011 whereby the Company ~~licenses certain intellectual properties and provides certain software technology~~receives payment processing services ~~to Alipay~~ in exchange for a ~~royalty~~payment processing fee, ~~and software technology services fee~~which was recognized in cost of revenue.

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, ~~2014, 2015~~2017, 2018 AND ~~2016~~2019
~~23.~~21.   Related party transactions (Continued)
in an amount equal to the costs incurred by the Company in providing the software technology services plus 49.9% of the consolidated pre-tax income of Alipay and its subsidiaries (Note 4(b)), effective from December 2011. In 2014, the Intellectual Property License and Software Technology Services Agreement were terminated and the Company entered into the amended Alipay IPLA with Ant Financial Services. Under the amended Alipay IPLA, the Company will receive the Profit Share Payments amounting to the sum of an expense reimbursement plus 37.5% of the consolidated pre-tax income of Ant Financial Services, subject to certain adjustments (Note 4(b)), effective from August 2014.
Royalty fee and software technology services fee under the Intellectual Property License and Software Technology Services Agreement and the Profit Share Payments were recognized in consolidated income statements, net of the costs incurred for the provision of the software technology services reimbursed by Alipay. The amounts reimbursed by Ant Financial Services to the Company were RMB275 million, RMB486 million and RMB274 million for the years ended March 31, 2014, 2015 and 2016, respectively.
~~(ii)~~
The Company entered into software system use and service agreements with Ant Financial Services in 2014. In calendar years 2015 to 2017, the Company received or will receive the SME Annual Fee equal to 2.5% of the average daily book balance of the micro loans made by Ant Financial Services and its affiliates. In calendar years 2018 to 2021, the Company will receive the SME Annual Fee equal to the amount paid for the calendar year 2017 (Note 4(b)).

~~(iii)~~
The Company entered into agreements with Ant Financial Services in 2012 and 2013 under which the Company will receive a reimbursement for options and RSUs relating to the ordinary shares granted to the employees of Ant Financial Services and its subsidiaries during the period from December 14, 2011 to March 31, 2014. Pursuant to the agreements, the Company will, upon vesting of such options and RSUs, receive a cash reimbursement equal to their respective grant date fair value. As this arrangement relates to share-based awards previously granted by the Company, the reimbursement is recognized as a reduction of share-based compensation expense.

~~(iv)~~
The Company also has other commercial arrangements, treasury management arrangements and cost sharing arrangements with Ant Financial Services, its subsidiaries and affiliates as well as Koubei on various technical, treasury management and other administrative services.

~~(v)~~
The Company and Alipay, among others, entered into a Commercial Agreement in 2011 whereby the Company receives payment processing services in exchange for a Payment Processing Fee (Note 4(b)), which was recognized in cost of revenue.
As of March 31, ~~2015~~2018 and ~~2016,~~2019, the Company had certain amounts of cash and short-term investments held in accounts managed by Alipay (Note 2(p) and 2(q)). In addition, as of March 31, 2015 and 2016, the Company had certain assets and liabilities with a net amount of RMB1,428 million and RMB1,517 million, respectively, are managed by a subsidiary of Ant Financial Services which primarily comprised of cash and investment securities.

~~Table of Contents~~Alipay.

~~ALIBABA GROUP HOLDING LIMITED~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~FOR THE YEARS ENDED MARCH 31, 2014, 2015 AND 2016~~
~~23.   Related party transactions (Continued)~~
~~Transactions with management of the Company~~
Certain members of management of the Company have purchased their own aircraft for both business and personal use. The use of the these managements' own aircraft in connection with the performance of their duties as employees is free of charge, and the Company has agreed to assume the cost of maintenance, crew and operations of the aircraft where such cost is allocated for business purposes. Such reimbursement of the maintenance and incidental costs was insignificant for the years ended March 31, 2014, 2015 and 2016.
During the year ended March 31, 2014, the Company granted 50,000,000 share options to a non-profit organization designated by two members of management of the Company, subject to irrevocable instructions to designate and transfer these share options to the separate charitable trusts to be established by these two members of management of the Company (Note 9).
Transactions with Cainiao Network
The Company entered into agreements with Cainiao Network during the year ended March 31, 2014 whereby the Company disposed of two wholly-owned subsidiaries to a subsidiary of Cainiao Network for cash consideration of RMB524 million. The major assets of the disposed subsidiaries consist of land use rights in the PRC. The gain on disposals for the year ended March 31, 2014 amounted to RMB74 million. The Company also entered into an agreement with Cainiao Network during the year ended March 31, 2016 whereby the Company disposed of a wholly-owned subsidiary to Cainiao Network for cash consideration of US$33 million (RMB204 million). The major asset of the disposed subsidiary consist of a land use right in the PRC. The gain on disposals for the year ended March 31, 2016 amounted to RMB3 million.
The Company has commercial arrangements with Cainiao Network to receive certain logistics services. Expenses incurred in connection with the logistics services provided by Cainiao Network of ~~RMB785~~RMB4,444 million and ~~RMB2,370~~RMB3,437 million were recorded in the consolidated income statements for the ~~years~~year ended March 31, ~~2015~~2017 and ~~2016,~~for the period from April 1, 2017 to the date of consolidation of Cainiao Network in October 2017, respectively.
The Company also has cost sharing and other services arrangements with Cainiao Network and its subsidiaries primarily related to various administrative ~~services~~ and ~~cloud computing~~support services. In connection with these services provided by the Company, ~~RMB20~~RMB152 million and ~~RMB86~~RMB123 million were recorded in the consolidated income statements for the ~~years~~year ended March 31, ~~2015~~2017 and ~~2016,~~for the period from April 1, 2017 to the date of consolidation of Cainiao Network in October 2017, respectively.
Transactions with Weibo Corporation ("Weibo")
The ~~Company entered into a~~ strategic collaboration agreement and athe marketing cooperation agreement ~~with~~that were entered into between the Company and Weibo, ~~during~~an equity investee of the ~~year ended March 31, 2014.~~Company, expired in January 2016. Expenses incurred in connection with the marketing services provided by Weibo pursuant to these agreements and other commercial arrangements of ~~RMB154~~RMB340 million, ~~RMB654~~RMB615 million and ~~RMB715~~RMB624 million were recorded in the ~~traffic acquisition~~ cost of revenue and sales and marketing expenses in the consolidated income statements for the years ended March 31, ~~2014, 2015~~2017, 2018 and ~~2016,~~2019, respectively.
The Company also has other commercial arrangements with Weibo primarily related to cloud computing services. In connection with ~~such~~these services provided by the Company, ~~nil, RMB2~~RMB105 million, RMB223 million and ~~RMB38~~RMB304 million were recorded in revenue in the consolidated income statements for the years ended March 31, ~~2014, 2015~~2017, 2018 and ~~2016,~~2019, respectively.
Transactions with other investees
Cainiao Network has commercial arrangements with certain investees of the Company related to logistics services. Revenues recognized in connection with these services of RMB72 million and RMB261 million were recorded in the consolidated income statements for the period from the date of consolidation of Cainiao Network in October 2017 to March 31, 2018 and the year ended March 31, 2019, respectively. Expenses incurred in connection with these services of RMB5,608 million and RMB12,933 million were recorded in the consolidated income statements for the same periods, respectively.
The Company has extended loans to certain of the Company's investees for working capital and other uses in conjunction with the Company's investments. As of March 31, 2019, the aggregate outstanding balance of these loans was RMB2,543 million, with durations generally ranging from one month to ten years and interest rates of up to 10% per annum.

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, ~~2014, 2015~~2017, 2018 AND ~~2016~~2019
~~23.~~21.   Related party transactions (Continued)
Repurchase of ordinary shares from SoftBank
In June 2016, the Company entered into a share purchase agreement with SoftBank, pursuant to which the Company repurchased 27,027,027 ordinary shares from SoftBank at US$74.00 per share for an aggregate consideration of approximately US$2.0 billion. These ordinary shares were cancelled upon the completion of the transaction.
Other transactions
The Company's ~~ecosystem~~digital economy offers different platforms on which different enterprises operate and the Company believes that all transactions on the Company's platforms are conducted on terms obtained in arms-length ~~transations~~transactions with similar unrelated parties.
Other than the transactions disclosed above or elsewhere in the consolidated financial statements, the Company has commercial arrangements with SoftBank, ~~Yahoo,~~ its ~~equity~~ investees and other related parties to provide and receive certain marketing, logistics, traffic acquisition, cloud computing and other ~~services.~~services and products. The amounts relating to these services provided and received represent less than 1% of the Company's revenue and total costs and expenses, respectively, for the years ended March 31, ~~2014, 2015~~2017, 2018 and ~~2016.~~2019.
In addition, the Company has made certain acquisitions and equity investments together with related parties from time to time during the years ended March 31, ~~2014, 2015~~2017, 2018 and ~~2016.~~2019. The agreements for acquisitions and equity investments ~~agreements~~ were entered into by the parties involved and conducted on fair value basis. The significant acquisitions and equity investments together with related parties are included in Note 4.
~~24.~~22.   Restricted net assets
PRC laws and regulations permit payments of dividends by the Company's subsidiaries ~~and VIEs~~ incorporated in the PRC only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. In addition, the Company's subsidiaries ~~and VIEs~~ incorporated in the PRC are required to annually appropriate 10% of their net income to the statutory reserve prior to payment of any dividends, unless ~~such~~the reserve ~~have~~has reached 50% of their respective registered capital. ~~In addition,~~Furthermore, registered share capital and capital reserve accounts are also restricted from ~~withdrawal in the PRC, up to the amount of net assets held in each subsidiary and VIE.~~distribution. As a result of the restrictions described above and elsewhere under PRC laws and regulations, the Company's subsidiaries ~~and VIEs~~ incorporated in the PRC are restricted in their ability to transfer a portion of their net assets to the Company in the form of dividends. ~~Such~~The restriction amounted to ~~RMB39,116~~RMB112,524 million as of March 31, 2016. Even though the Company currently does not require any such dividends, loans or advances from the PRC entities for working capital and other funding purposes, the Company may in the future require additional cash resources from them due to changes in business conditions, funding of future acquisitions and development, or merely to declare and pay dividends or distributions to its shareholders.2019. Except for the above or disclosed elsewhere, there is no other restriction on the use of proceeds generated by the Company's subsidiaries ~~and VIEs~~ to satisfy any obligations of the Company.

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, ~~2014, 2015~~2017, 2018 AND ~~2016~~2019
~~25.~~23.   Commitments
(a)   Capital commitments
Capital expenditures contracted for are analyzed as follows:

As of March 31,
As of March 31,

2015 2016
2018 2019

(in millions of RMB)

(in millions of RMB)

Contracted but not provided for:

Contracted but not provided for:

Purchase of property and equipment
908 803
Purchase of property and equipment
3,181 5,656

Construction of corporate campuses
2,181 1,688
Construction of corporate campuses
2,607 3,576

3,089 2,491
5,788 9,232

(b)   Operating lease commitments for office facility and transportation equipment
The Company has leased office premises and transportation equipment under non-cancellable operating lease agreements. These leases have ~~varying~~different terms and renewal rights. The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

As of March 31,
As of March 31,

2015 2016
2018 2019

(in millions of RMB)

(in millions of RMB)

No later than 1 year
400 394
No later than 1 year
2,760 4,984

Later than 1 year and no later than 5 years
623 441
Later than 1 year and no later than 5 years
7,652 10,675

More than 5 years
33 65
More than 5 years
11,940 15,346

Total
1,056 900
Total
22,352 31,005

For the years ended March 31, ~~2014, 2015~~2017, 2018 and ~~2016,~~2019, the Company incurred rental expenses under operating leases of ~~RMB217~~RMB747 million, ~~RMB322~~RMB2,279 million and ~~RMB451~~RMB4,699 million, respectively.
(c)   Commitments for co-location and bandwidth fees, licensed copyrights and marketing expenses

As of March 31,
As of March 31,

2015 2016
2018 2019

(in millions of RMB)

(in millions of RMB)

No later than 1 year
2,089 2,680
No later than 1 year
19,737 21,768

Later than 1 year and no later than 5 years
3,045 4,919
Later than 1 year and no later than 5 years
12,097 22,291

More than 5 years
— 823
More than 5 years
3,672 4,964

Total
5,134 8,422
Total
35,506 49,023

(d)  Investment commitments
The Company was obligated to pay up to RMB15,174 million and RMB23,954 million for business combinations and equity investments under various arrangements as of March 31, 2018 and 2019, respectively. The commitment balance as of March 31, 2018 primarily includes the consideration for the investment in Shiji Retail (Note 4(r)) and the acquisition of Kaiyuan (Note 4(e)). The commitment balance as of March 31, 2019

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, ~~2014, 2015~~2017, 2018 AND ~~2016~~2019
~~25.~~23.   Commitments (Continued)
(d)  Investment commitments (Continued)
primarily includes the consideration for the investment relating to STO Express (Note 4(k)), Focus Media (Note 4(l)) and the remaining committed capital of certain investment funds.
(e)   Sponsorship commitment
In January 2017, the Company entered into a framework agreement with the International Olympic Committee (the "IOC") and the United States Olympic Committee for a long-term partnership arrangement through 2028. Joining in The Olympic Partner worldwide sponsorship program, the Company has become the official "E-Commerce Services" Partner and "Cloud Services" Partner of the IOC. In addition, the Company has been granted certain marketing rights, benefits and opportunities relating to future Olympic Games and related initiatives, events and activities. The Company ~~was obligated to pay up to RMB5,364~~will provide at least US$815 million worth of cash, cloud infrastructure services and ~~RMB65,597 million for~~cloud computing services, as well as marketing and media support in connection with various Olympic initiatives, events and activities, including the ~~acquisition of investment securities~~Olympic Games and ~~equity investees under various arrangements as~~the Winter Olympic Games through 2028. As of March 31, ~~2015~~2018 and ~~2016,~~2019, the aggregate amount of cash to be paid and value of services to be provided in the future approximates US$770 million and US$738 million, respectively. ~~The commitment balance as of March 31, 2016 primarily includes the considerations for the acquisitions of Youku Tudou (Note 4(t)) and Suning (Note 4(aa)).~~
~~(e)   Commitments for licenses and copyrights~~
The Company has entered into non-cancellable licensing agreements with third-party vendors to acquire certain licenses and copyrights for mobile media and entertainment business. The future aggregate minimum payments under non-cancellable licensing agreements are as follows:

As of
March 31,

2015 2016

(in millions of
RMB)

No later than 1 year
280 885

Later than 1 year and no later than 5 years
2 2,885

Total
282 3,770

~~26.~~24.   Risks and contingencies
(a)
The Company is incorporated in the Cayman Islands and considered as a foreign entity under PRC laws. Due to ~~the~~legal restrictions on foreign ownership and investment ~~and ownership on~~in, among other areas, value-added telecommunications services, which include the ~~business related to~~operations of Internet content ~~provision, telecom value-added services, financial services and others,~~providers, the Company conducts its ~~business~~Internet businesses and other businesses through various contractual arrangements with VIEs that are ~~generally~~held by PRC citizens or by PRC entities owned ~~and~~and/or controlled by ~~certain management members or founders of the Company.~~PRC citizens. The VIEs hold the licenses and approvals that are essential for their business operations in the PRC and the Company has entered into various agreements with the VIEs and their equity holders such that the Company has the right to benefit from their licenses and approvals and generally has control of the VIEs. In the Company's opinion, the current ownership structure and the contractual arrangements with the VIEs and their equity holders as well as the operations of the VIEs are in substantial compliance with all existing PRC laws, rules and regulations. However, there may be changes and other developments in PRC laws, rules and regulations. Accordingly, the Company gives no assurance that PRC government authorities will not take a view in the future that is contrary to the opinion of the Company. If the current ownership structure of the Company and its contractual arrangements with the VIEs and their equity holders were found to be in violation of any existing or future PRC laws or regulations, the Company's ability to conduct its business could be impacted and the Company may be required to restructure its ownership structure and operations in the PRC to comply with the changes in the PRC laws which may result in deconsolidation of the VIEs.

(b)
The PRC market in which the Company operates poses certain macro-economic and regulatory risks and uncertainties. These uncertainties extend to the ability of the Company to operate or invest in online and mobile commerce or other Internet related businesses, representing the principal services provided by the Company, in the PRC. The information and technology industries are highly regulated. Restrictions are currently in place or are unclear regarding what specific segments of these industries foreign owned

~~Table of Contents~~

~~ALIBABA GROUP HOLDING LIMITED~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~
~~FOR THE YEARS ENDED MARCH 31, 2014, 2015 AND 2016~~
~~26.   Risks and contingencies (Continued)~~
enterprises, like the Company, may operate. If new or more extensive restrictions were imposed on the segments in which the Company is permitted to operate, the Company could be required to sell or cease to operate or invest in some or all of its current businesses in the PRC.

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2017, 2018 AND 2019
24.   Risks and contingencies (Continued)
(c)
The Company's sales, purchase and expense transactions are generally denominated in RMB and a significant portion of the Company's assets and liabilities are denominated in RMB. ~~The~~ RMB is not freely convertible into foreign currencies. In the PRC, foreign exchange transactions are required by law to be transacted only by authorized financial institutions at exchange rates set by the ~~PBOC.~~People's Bank of China (the "PBOC"). Remittances in currencies other than RMB by the Company in the PRC must be processed through the PBOC or other PRC foreign exchange regulatory bodies and require certain supporting documentation in order to effect the remittance. If ~~such~~the foreign exchange control system prevents the Company from obtaining sufficient foreign currencies to satisfy its currency demands, the Company may not be able to pay dividends in foreign currencies and the Company's ability to fund its business activities that are conducted in foreign currencies could be adversely affected.

(d)
Financial instruments that potentially subject the Company to significant concentration of credit risk consist principally of cash and cash equivalents, short-term investments, restricted cash and investment securities. As of March 31, ~~2014, 2015~~2017, 2018 and ~~2016,~~2019, substantially all of the Company's cash and cash equivalents, short-term investments and restricted cash ~~and investment securities~~ were held by major financial institutions located worldwide, including Hong Kong and the PRC. If the banking system or the financial markets deteriorate or ~~remain~~become volatile, the financial institutions and other issuers of financial instruments held by the Company could become insolvent and the markets for these instruments could become illiquid, in which case the Company could lose some or all of the value of its investments.

(e)
During the years ended March 31, ~~2015~~2017, 2018 and ~~2016,~~2019, the Company offered a trade assurance program on the international wholesale marketplaces at no charge to the wholesale buyers and sellers. If the wholesale sellers who participate in this program do not deliver the products in their stated specifications to the wholesale buyers on schedule, the Company may compensate the wholesale buyers for their losses on behalf of the wholesale sellers up to a pre-determined amount following a review of each particular case. In turn, the Company will seek a full reimbursement from the wholesale sellers for the prepaid reimbursement amount, yet the Company is exposed to a risk over the collectability of ~~such~~the reimbursement from the wholesale sellers. During the years ended March 31, ~~2015~~2017, 2018 and ~~2016,~~2019, the Company did not incur any material losses with respect to the compensation provided under this program. Given that the maximum compensation for each wholesale seller is ~~the~~ pre-determined based on their individual risk assessments by the Company ~~based on~~considering their credit profile or other relevant information, the Company determined that the likelihood of material default on ~~such~~the payments are not probable and therefore no provisions have been made in relation to this program.

(f)
In the ordinary course of business, the Company makes strategic investments in privately held companies and listed securities to increase the service offerings and expand capabilities. The Company continually reviews its investments to determine whether a decline in fair value below the carrying value is ~~other than temporary.~~other-than-temporary. The primary factors which the Company considers in its determination include the length of time that the fair value of the investment is below the Company's carrying value; post-balance sheet date fair value of the investment; the financial condition, operating performance, strategic collaboration with and the prospects of the investee; the economic or technological environment in which the investee operates; and other entity specific information, such as recent financing rounds completed by the investee companies. Fair value of the listed securities is subject to volatility and may be materially affected by market fluctuations. If the decline in fair value is significant and other-than-temporary, the carrying value of the investment is written down to its fair value and this may negatively impact the results of operations of the Company.

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, ~~2014, 2015~~2017, 2018 AND ~~2016~~2019
~~26.~~24.   Risks and contingencies (Continued)
market fluctuations. If the decline in fair value is significant and other than temporary, the carrying value of the investment is written down to its fair value and this may negatively impact the results of operations of the Company.
(g)
In the ordinary course of business, the Company is from time to time involved in legal proceedings and ~~litigation~~litigations relating to disputes relating to trademarks and other intellectual property, among others. ~~There~~As of March 31, 2019, the Company accrued a settlement provision of US$250 million (RMB1,679 million) for the settlement of a U.S. federal class action lawsuit in exchange for a full release of all claims brought in the lawsuit that has been pending since January 2015 (Note 18). Except for the above, there are no legal proceedings and litigations that have in the recent past had, or to the Company's knowledge, are ~~reasonably possible~~probable to have, a material impact on the Company's financial positions, results of operations or cash flows. ~~The~~Except for the above, the Company did not accrue any other material loss contingencies in this respect as of March 31, ~~2014, 2015~~2017, 2018 and ~~2016~~2019.
25.   Segment information
The Company presents segment information after elimination of inter-company transactions. In general, revenue, cost of revenue and operating expenses are directly attributable, or are allocated, to each segment. The Company allocates costs and expenses that are not directly attributable to a specific segment, such as those that support infrastructure across different segments, to different segments mainly on the basis of usage, revenue or headcount, depending on the nature of the relevant costs and expenses. The Company does not allocate assets to its segments as the ~~Company did~~CODM does not ~~consider an unfavorable outcome~~evaluate the performance of segments using asset information.
The following tables present the summary of each segment's revenue, income from operations and adjusted earnings before interest, taxes and amortization ("Adjusted EBITA") which is considered as a segment operating performance measure, for the years ended March 31, 2017, 2018 and 2019:

Year ended March 31, 2017

Core
commerce Cloud
computing Digital media
and
entertainment Innovation
initiatives
and others Total
segments Unallocated (i) Consolidated

(in millions of RMB, except percentages)

Revenue
133,880 6,663 14,733 2,997 158,273 — 158,273

Income (Loss) from operations
74,180 (1,681 ) (9,882 ) (6,798 ) 55,819 (7,764 ) 48,055

Add: share-based compensation expense
5,994 1,201 1,454 3,017 11,666 4,329 15,995

Add: amortization of intangible assets
2,258 4 1,886 656 4,804 318 5,122

Adjusted EBITA (ii)
82,432 (476 ) (6,542 ) (3,125 ) 72,289 (3,117 )

Adjusted EBITA margin (iii)
62 % (7 )% (44 )% (104 )%

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2017, 2018 AND 2019
25.   Segment information (Continued)

Year ended March 31, 2018

Core
commerce Cloud
computing Digital media
and
entertainment Innovation
initiatives
and others Total
segments Unallocated (i) Consolidated

(in millions of RMB, except percentages)

Revenue
214,020 13,390 19,564 3,292 250,266 — 250,266

Income (Loss) from operations
102,743 (3,085 ) (14,140 ) (6,901 ) 78,617 (9,303 ) 69,314

Add: share-based compensation expense
8,466 2,274 2,142 3,707 16,589 3,486 20,075

Add: amortization of intangible assets
2,891 12 3,693 198 6,794 326 7,120

Add: impairment of goodwill
— — — — — 494 494

Adjusted EBITA (ii)
114,100 (799 ) (8,305 ) (2,996 ) 102,000 (4,997 )

Adjusted EBITA margin (iii)
53 % (6 )% (42 )% (91 )%

Year ended March 31, 2019

Core
commerce Cloud
computing Digital media
and
entertainment Innovation
initiatives
and others Total
segments Unallocated (i) Consolidated

(in millions of RMB, except percentages)

Revenue
323,400 24,702 24,077 4,665 376,844 — 376,844

Income (Loss) from operations
109,312 (5,508 ) (20,046 ) (11,795 ) 71,963 (14,879 ) 57,084

Add: share-based compensation expense
17,694 4,332 2,988 5,774 30,788 6,703 37,491

Add: amortization of intangible assets
9,161 18 1,262 50 10,491 236 10,727

Add: settlement of U.S. federal class action lawsuit
— — — — — 1,679 1,679

Adjusted EBITA (ii)
136,167 (1,158 ) (15,796 ) (5,971 ) 113,242 (6,261 )

��

Adjusted EBITA margin (iii)
42 % (5 )% (66 )% (128 )%

Table of Contents

ALIBABA GROUP HOLDING LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 2017, 2018 AND 2019
25.   Segment information (Continued)
The following table presents the reconciliation from the Adjusted EBITA to the consolidated net income for the years ended March 31, 2017, 2018 and 2019:

Year ended March 31,

2017 2018 2019

(in millions of RMB)

Total Segments Adjusted EBITA
72,289 102,000 113,242

Unallocated (i)
(3,117 ) (4,997 ) (6,261 )

Share-based compensation expense
(15,995 ) (20,075 ) (37,491 )

Amortization of intangible assets
(5,122 ) (7,120 ) (10,727 )

Impairment of goodwill
— (494 ) —

Settlement of U.S. federal class action lawsuit
— — (1,679 )

Consolidated income from operations
48,055 69,314 57,084

Interest and investment income, net
8,559 30,495 44,106

Interest expenses
(2,671 ) (3,566 ) (5,190 )

Other income, net
6,086 4,160 221

Income tax expenses
(13,776 ) (18,199 ) (16,553 )

Share of results of equity investees
(5,027 ) (20,792 ) 566

Consolidated net income
41,226 61,412 80,234

The following table presents the total depreciation and amortization expenses of property and equipment and land use rights by segment for the years ended March 31, 2017, 2018 and 2019:

Year ended March 31,

2017 2018 2019

(in millions of RMB)

Core commerce
2,124 3,784 6,672

Cloud computing
1,438 3,047 6,580

Digital media and entertainment
752 986 1,182

Innovation initiatives and others and unallocated (i)
970 972 528

Total depreciation and amortization expenses of property and equipment and land use rights
5,284 8,789 14,962

(i)
Unallocated expenses are primarily related to corporate administrative costs and other miscellaneous items that are not allocated to individual segments.

(ii)
Adjusted EBITA represents net income before (i) interest and investment income, net, other income, net, interest expense, income tax expenses and share of results of equity investees, (ii) certain non-cash expenses, consisting of share-based compensation expense, amortization of intangible assets and impairment of goodwill, and (iii) settlement of a U.S. federal class action lawsuit, which are not reflective of the Company's core operating performance.

(iii)
Adjusted EBITA margin represents Adjusted EBITA divided by revenue.
Details of the Company's revenue by segment are set out in ~~any material respects~~Note 5. As substantially all of the Company's long-lived assets are located in ~~these legal proceedings~~the PRC and ~~litigations to be probable.~~substantially all of the Company's revenue is derived from within the PRC, no geographical information is presented.

	Year ended March 31,																		Year ended March 31,

	2012			2013			2014			2015			2016						2015			2016			2017			2018			2019
	RMB			RMB			RMB			RMB			RMB			US$			RMB			RMB			RMB			RMB			RMB			US$
	(in millions, except per share data)																		(in millions, except per share data)
Revenue																				76,204			101,143			158,273			250,266			376,844			56,152
China commerce		15,637			29,167			45,132			62,937			84,321			13,077
International commerce		3,765			4,160			4,851			6,486			7,629			1,183
Cloud computing		515			650			773			1,271			3,019			468
Others		108			540			1,748			5,510			6,174			958

Total		20,025			34,517			52,504			76,204			101,143			15,686
Cost of revenue		(6,554	)		(9,719	)		(13,369	)		(23,834	)		(34,355	)		(5,328	)		(23,834	)		(34,355	)		(59,483	)		(107,044	)		(206,929	)		(30,833	)
Product development expenses		(2,897	)		(3,753	)		(5,093	)		(10,658	)		(13,788	)		(2,138	)		(10,658	)		(13,788	)		(17,060	)		(22,754	)		(37,435	)		(5,578	)
Sales and marketing expenses		(3,058	)		(3,613	)		(4,545	)		(8,513	)		(11,307	)		(1,753	)		(8,513	)		(11,307	)		(16,314	)		(27,299	)		(39,780	)		(5,928	)
General and administrative expenses⁽¹⁾		(2,211	)		(2,889	)		(4,218	)		(7,800	)		(9,205	)		(1,428	)
General and administrative expenses																				(7,800	)		(9,205	)		(12,239	)		(16,241	)		(24,889	)		(3,708	)
Amortization of intangible assets		(155	)		(130	)		(315	)		(2,089	)		(2,931	)		(455	)		(2,089	)		(2,931	)		(5,122	)		(7,120	)		(10,727	)		(1,599	)
Impairment of goodwill and intangible assets		(135	)		(175	)		(44	)		(175	)		(455	)		(71	)
Yahoo TIPLA amendment payment⁽²⁾		—			(3,487	)		—			—			—			—
Impairment of goodwill																				(175	)		(455	)		—			(494	)		—			—

Income from operations		5,015			10,751			24,920			23,135			29,102			4,513			23,135			29,102			48,055			69,314			57,084			8,506
Interest and investment income, net		258			39			1,648			9,455			52,254			8,104			9,455			52,254			8,559			30,495			44,106			6,572
Interest expense		(68	)		(1,572	)		(2,195	)		(2,750	)		(1,946	)		(301	)		(2,750	)		(1,946	)		(2,671	)		(3,566	)		(5,190	)		(773	)
Other income, net		327			894			2,429			2,486			2,058			319			2,486			2,058			6,086			4,160			221			32

Income before income tax and share of results of equity investees		5,532			10,112			26,802			32,326			81,468			12,635			32,326			81,468			60,029			100,403			96,221			14,337
Income tax expenses		(842	)		(1,457	)		(3,196	)		(6,416	)		(8,449	)		(1,310	)		(6,416	)		(8,449	)		(13,776	)		(18,199	)		(16,553	)		(2,466	)
Share of results of equity investees		(25	)		(6	)		(203	)		(1,590	)		(1,730	)		(269	)		(1,590	)		(1,730	)		(5,027	)		(20,792	)		566			84

Net income		4,665			8,649			23,403			24,320			71,289			11,056			24,320			71,289			41,226			61,412			80,234			11,955
Net (income) loss attributable to noncontrolling interests		(437	)		(117	)		(88	)		(59	)		171			27			(59	)		171			2,449			2,681			7,652			1,140

Net income attributable to Alibaba Group Holding Limited		4,228			8,532			23,315			24,261			71,460			11,083			24,261			71,460			43,675			64,093			87,886			13,095
Accretion of convertible preference shares⁽³⁾		—			(17	)		(31	)		(15	)		—			—
Dividends accrued on convertible preference shares⁽³⁾		—			(111	)		(208	)		(97	)		—			—
Accretion of convertible preference shares⁽¹⁾ and mezzanine equity																				(15	)		—			—			(108	)		(286	)		(42	)
Dividends accrued on convertible preference shares⁽¹⁾																				(97	)		—			—			—			—			—

Net income attributable to ordinary shareholders		4,228			8,404			23,076			24,149			71,460			11,083			24,149			71,460			43,675			63,985			87,600			13,053



Earnings per share/ADS attributable to ordinary shareholders:
Basic		1.71			3.66			10.61			10.33			29.07			4.51			10.33			29.07			17.52			25.06			33.95			5.06
Diluted		1.67			3.57			10.00			9.70			27.89			4.33			9.70			27.89			16.97			24.51			33.38			4.97
Weighted average number of shares used in computing earnings per share:
Basic		2,479			2,294			2,175			2,337			2,458						2,337			2,458			2,493			2,553			2,580
Diluted		2,522			2,389			2,332			2,500			2,562						2,500			2,562			2,573			2,610			2,623
Supplemental information:⁽⁴⁾
Non-GAAP EBITDA		7,274			16,607			30,731			40,753			52,340			8,117
Supplemental information:⁽²⁾
Adjusted EBITDA																				40,753			52,340			74,456			105,792			121,943			18,170
Adjusted EBITA																				38,427			48,570			69,172			97,003			106,981			15,941
Marketplace-based core commerce adjusted EBITA																				N/A			N/A			N/A			122,883			161,589			24,078
Non-GAAP net income		6,452			13,869			28,274			34,981			42,741			6,629			34,876			42,791			57,871			83,214			93,407			13,918
Non-GAAP diluted EPS		2.38			5.76			12.09			13.97			16.75			2.60			13.93			16.77			23.44			32.86			38.40			5.72
Free cash flow		8,752			19,745			32,269			48,121			51,279			7,953			48,921			51,279			71,318			99,996			104,478			15,568

	Year ended March 31,

	2018		2019
	RMB		RMB		US$
	(in millions)
Adjusted EBITA for core commerce		114,100		136,167		20,290
Less: Effects of local consumer services, Lazada, New Retail and direct import and Cainiao Network		8,783		25,422		3,788

Marketplace-based core commerce adjusted EBITA		122,883		161,589		24,078

	Three months ended

	Jun. 30, 2014		Sep. 30, 2014		Dec. 31, 2014		Mar. 31, 2015		Jun. 30, 2015		Sep. 30, 2015		Dec. 31, 2015		Mar. 31, 2016
	(in billions of RMB, except percentages)
GMV⁽¹⁾
Taobao Marketplace GMV		342		380		494		381		427		438		563		449
Tmall GMV		159		176		293		219		246		275		401		293
Total GMV		501		556		787		600		673		713		964		742
Mobile GMV (as a percentage of total GMV)		33%		36%		42%		51%		55%		62%		68%		73%

	Twelve months ended

	Jun 30, 2017		Sep 30, 2017		Dec 31, 2017		Mar 31, 2018		Jun 30, 2018		Sep 30, 2018		Dec 31, 2018		Mar 31, 2019
	(in millions)
Annual active consumers		466		488		515		552		576		601		636		654

	Three months ended

	Jun 30, 2014		Sep 30, 2014		Dec 31, 2014		Mar 31, 2015		Jun 30, 2015		Sep 30, 2015		Dec 31, 2015		Mar 31, 2016
	(in millions of RMB, except percentages)
China retail marketplaces:
GMV		500,916		555,666		787,047		600,092		673,198		712,933		964,317		741,937
Mobile GMV		164,428		199,054		326,889		303,772		370,578		440,113		651,139		541,024
as a percentage of GMV		33%		36%		42%		51%		55%		62%		68%		73%
Revenue		12,639		12,769		21,275		13,049		15,712		17,267		28,714		18,340
Mobile revenue		2,454		3,719		6,420		5,247		7,987		10,520		18,746		13,084
as a percentage of revenue		19%		29%		30%		40%		51%		61%		65%		71%
Monetization rate		2.52%		2.30%		2.70%		2.17%		2.33%		2.42%		2.98%		2.47%
Mobile monetization rate		1.49%		1.87%		1.96%		1.73%		2.16%		2.39%		2.88%		2.42%

	Noon buying rate

Period	Period end		Average⁽¹⁾		Low		High
	(RMB per US$1.00)
2011		6.2939		6.4475		6.6364		6.2939
2012		6.2301		6.2990		6.3879		6.2221
2013		6.0537		6.1412		6.2438		6.0537
2014		6.2046		6.1704		6.2591		6.0402
2015		6.4778		6.2869		6.4896		6.1870
November		6.3883		6.3640		6.3945		6.3180
December		6.4778		6.4491		6.4896		6.3883
2016
January		6.5752		6.5726		6.5932		6.5219
February		6.5525		6.5501		6.5795		6.5154
March		6.4480		6.5027		6.5500		6.4480
April		6.4738		6.4754		6.5004		6.4571
May (through May 20)		6.5485		6.5124		6.5485		6.4738

~~Revenue~~		~~Businesses~~

~~China Commerce Retail~~		• ~~Taobao Marketplace — Online shopping destination~~
		• ~~Tmall~~⁽¹⁾ ~~— Brands and retail platform~~
		• ~~Juhuasuan — Flash sale platform~~
~~China Commerce Wholesale~~		• ~~1688.com — China wholesale marketplace~~
~~International Commerce Retail~~		• ~~AliExpress — Global consumer marketplace~~
~~International Commerce Wholesale~~		• ~~Alibaba.com — Global wholesale marketplace~~
~~Cloud Computing~~		• ~~Alibaba Cloud — Cloud computing services provider~~

	Year ended March 31, 2019

	Core commerce			Cloud computing			Digital media and entertainment			Innovation initiatives and others			Unallocated⁽¹⁾			Consolidated
	RMB			RMB			RMB			RMB			RMB			RMB			US$
	(in millions, except percentages)
Revenue		323,400			24,702			24,077			4,665			—			376,844			56,152
Income (loss) from operations		109,312			(5,508	)		(20,046	)		(11,795	)		(14,879	)		57,084			8,506
Add: Share-based compensation expense		17,694			4,332			2,988			5,774			6,703			37,491			5,586
Add: Amortization of intangible assets		9,161			18			1,262			50			236			10,727			1,599
Add: Settlement of U.S. federal class action lawsuit⁽²⁾		—			—			—			—			1,679			1,679			250

Adjusted EBITA		136,167			(1,158	)		(15,796	)		(5,971	)		(6,261	)		106,981			15,941



Adjusted EBITA margin		42	%		(5	)%		(66	)%		(128	)%					28	%

~~Purchaser of services:~~	~~Taobao Marketplace~~	~~Tmall~~	~~Juhuasuan~~

~~Taobao Marketplace merchants~~	~~• P4P marketing fees~~ ~~• Display marketing fees~~ ~~• Taobaoke commissions~~ ~~• Storefront fees~~ ~~• Other fees~~^*	~~• Not applicable~~	~~• Commissions~~ ~~• Placement fees~~
~~Tmall merchants~~	~~• P4P marketing fees~~ ~~• Display marketing fees~~	~~• Commissions~~ ~~• P4P marketing fees~~ ~~• Display marketing fees~~ ~~• Taobaoke commissions~~	~~• Commissions~~ ~~• Placement fees~~

	~~From the date of~~ ~~incorporation to~~ ~~December 31, 2015~~

	~~RMB~~
	~~(in millions)~~
~~Revenue~~		31
~~Net loss~~		~~(1,735~~	)

	~~As of~~ ~~December 31, 2015~~

	~~RMB~~
	~~(in millions)~~
~~Total assets~~		~~1,731~~
~~Total liabilities~~		~~445~~
~~Total equity~~		~~1,286~~

	Year ended March 31,

	2015		2016
	RMB		RMB		US$		% Change
	(in millions, except percentages)
China commerce		62,937		84,321		13,077		34%
International commerce		6,486		7,629		1,183		18%
Cloud computing		1,271		3,019		468		138%
Others		5,510		6,174		958		12%

Total revenue		76,204		101,143		15,686		33%

	Year ended March 31,

	2018		2019
	RMB		RMB		US$		��	% Change
	(in millions, except percentages)
Core commerce:
China commerce retail		176,559		247,615		36,896			40	%
China commerce wholesale		7,164		9,988		1,488			39	%
International commerce retail		14,216		19,558		2,914			38	%
International commerce wholesale		6,625		8,167		1,217			23	%
Cainiao logistics services		6,759		14,885		2,218			120	%
Local consumer services		—		18,058		2,691			N/A
Others		2,697		5,129		764			90	%

Total core commerce		214,020		323,400		48,188			51	%
Cloud computing		13,390		24,702		3,681			84	%
Digital media and entertainment		19,564		24,077		3,588			23	%
Innovation initiatives and others		3,292		4,665		695			42	%

Total revenue		250,266		376,844		56,152			51	%

	Year ended March 31,

	2018						2019
	RMB			% of Segment Revenue			RMB			% of Segment Revenue
	(in millions, except percentages)
Core commerce		114,100			53	%		136,167			42	%
Cloud computing		(799	)		(6	)%		(1,158	)		(5	)%
Digital media and entertainment		(8,305	)		(42	)%		(15,796	)		(66	)%
Innovation initiatives and others		(2,996	)		(91	)%		(5,971	)		(128	)%

	Payment due by period										Payment due by period

	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years		Total		Less than 1 Year		1 – 3 Years		3 – 5 Years		More than 5 Years
	(in millions of RMB)										(in millions of RMB)
Contractual Obligations
Short term borrowings⁽¹⁾		4,304		4,304		—		—		—
Long term borrowings⁽²⁾		1,871		—		1,202		669		—
Unsecured senior notes⁽³⁾		51,726		—		8,405		14,548		28,773
Short-term borrowings⁽¹⁾												7,358		7,358		—		—		—
Long-term borrowings⁽²⁾												8,647		—		1,935		1,136		5,576
US$4.0 billion syndicated loan denominated in US$⁽³⁾												26,892		—		26,892		—		—
Unsecured senior notes⁽⁴⁾												92,106		15,127		10,084		4,706		62,189
Contractual Commitments
Purchase of property and equipment		803		796		7		—		—		5,656		4,417		1,228		11		—
Construction in progress		1,688		1,500		185		3		—
Construction of corporate campus												3,576		2,265		1,225		40		46
Leases for office facility and transportation equipment		900		394		330		111		65		31,005		4,984		6,326		4,349		15,346
Co-location, bandwidth fees and marketing expenses		8,422		2,680		2,733		2,186		823
Investment commitments⁽⁴⁾		65,597		65,597		—		—		—
Acquisition of license and copyrights		3,770		885		1,627		1,258		—
Licensed copyrights, co-location, bandwidth fees and marketing expenses												49,023		21,768		15,023		7,268		4,964
Investment commitments⁽⁵⁾												23,954		23,954		—		—		—

Total		139,081		76,156		14,489		18,775		29,661		248,217		79,873		62,713		17,510		88,121

Name		Position/Title

Jack Yun MA ^†(1)(c)	5154	Executive Chairman
Joseph C. TSAI ^†(2)(a)	5255	Executive ~~Vice Chairman~~
~~Jonathan Zhaoxi LU~~ ^†(1)	46	Vice Chairman
Daniel Yong ZHANG ^†(1)(b)	4447	Director and Chief Executive Officer
J. Michael EVANS ^†(2)(a)	5861	Director and President
~~Masayoshi SON~~Eric Xiandong JING ^{‡(3)†(2)(a)}	5846	Director
Masayoshi SON ^‡(3)(c)	61	Director
Chee Hwa TUNG^(2)(b)	7982	Independent director
Walter Teh Ming KWAUK^(2)(c)	6366	Independent director
Jerry YANG^(2)(b)	4750	Independent director
E. Börje E. EKHOLM^(2)(a)	5356	Independent director
Wan Ling MARTELLO^(2)(b)	5861	Independent director
Maggie Wei WU⁽²⁾	4851	Chief Financial Officer
~~Jane Fang JIANG~~Judy Wenhong TONG⁽¹⁾	4248	Chief People Officer
Jeff Jianfeng ZHANG⁽¹⁾	4245	Chief Technology Officer and President, Alibaba Cloud Intelligence
~~Zhenfei LIU~~Sophie Minzhi WU⁽¹⁾	44	~~Chief Risk Officer~~
~~Trudy Shan DAI~~⁽¹⁾	3943	Chief Customer Officer
Timothy A. STEINERT⁽²⁾	5659	General Counsel and Secretary
~~Jianhang JIN~~Jessie Junfang ZHENG⁽¹⁾	4645	~~President~~Chief Risk Officer and Chief Platform Governance Officer
Chris Pen-hung TUNG⁽¹⁾	4649	Chief Marketing Officer
~~Yongfu YU~~⁽¹⁾	39	~~President, Mobile Internet and Alimama~~
~~Simon Xiaoming HU~~⁽¹⁾	46	~~President, Alibaba Cloud Computing~~
~~Sophie Minzhi WU~~⁽¹⁾	40	~~President, Wholesale Marketplaces~~
~~Jessie Junfang ZHENG~~Trudy Shan DAI⁽¹⁾	42	~~Chief Platform Governance Officer~~President, Wholesale Marketplaces
Fan JIANG⁽¹⁾	33	President, Taobao and ~~Deputy Chief Financial Officer~~Tmall
Yvonne Yifen CHANG⁽¹⁾	53	President, Alimama
Luyuan FAN⁽¹⁾	45	President, Alibaba Digital Media and Entertainment

Name		Gender		Current position with Alibaba Group or related/affiliated companies	Age	Gender		Current position with Alibaba Group or related/affiliated companies

Jingxian CAI ()	39	M	2000	Principal Engineer	42	M	2000	Senior Researcher
Li CHENG ()	41	M	2005	Chief Technology Officer, Ant Financial Services	44	M	2005	Chief Technology Officer, Ant Financial
Trudy Shan DAI ()	39	F	1999	Chief Customer Officer	42	F	1999	President, Wholesale Marketplaces
Luyuan FAN ()	43	M	2007	President, Payment Business, Ant Financial Services	45	M	2007	President, Alibaba Digital Media and Entertainment
Yongxin FANG ()	42	M	2000	Director, Human Resources	45	M	2000	Senior Director, DingTalk
Felix Xi HU ()					38	M	2007	Deputy Chief Technology Officer, Ant Financial
Simon Xiaoming HU ()	46	M	2005	President, Alibaba Cloud Computing	49	M	2005	President, Ant Financial
Fan JIANG ()					33	M	2013	President, Taobao and Tmall
Jane Fang JIANG ()	42	F	1999	Chief People Officer	45	F	1999	Deputy Chief People Officer
Peng JIANG ()	42	M	2000	Senior Vice President
Jianhang JIN ()	46	M	1999	President
Eric Xiandong JING ()	43	M	2007	President, Ant Financial Services
Jiangwei JIANG ()					37	M	2008	Researcher
Eric Xiandong JING ()†					46	M	2007	Chairman and Chief Executive Officer, Ant Financial
Zhenfei LIU ()	44	M	2006	Chief Risk Officer	47	M	2006	President, Amap
Jonathan Zhaoxi LU ()†	46	M	2000	Vice Chairman
Jack Yun MA ()†	51	M	1999	Executive Chairman	54	M	1999	Executive Chairman
Xingjun NI ()	38	M	2003	Principal Engineer, Ant Financial Services	41	M	2003	President, Alipay, Ant Financial
Lucy Lei PENG ()†	42	F	1999	Chief Executive Officer, Ant Financial Services	45	F	1999	Director, Ant Financial; Chairwoman and President, Alipay China; Chairwoman, Lazada
Sabrina Yijie PENG ()	37	F	2000	General Manager, International, Ant Financial Services	40	F	2000	Chief Marketing Officer, Ant Financial
Xiaofeng SHAO ()	50	M	2005	Senior Vice President, Director, Office of the Chairman	53	M	2005	Secretary-General
Jie SONG ()					40	F	2000	Vice President
Timothy A. STEINERT	56	M	2007	General Counsel and Secretary	59	M	2007	General Counsel and Secretary
Lijun SUN ()	39	M	2002	General Manager, Rural Taobao	42	M	2002	General Manager of Social Responsibility
Judy Wenhong TONG ()	45	F	2000	Chief Executive Officer, Cainiao Network	48	F	2000	Chief People Officer
Joseph C. TSAI ()†	52	M	1999	Executive Vice Chairman	55	M	1999	Executive Vice Chairman
Jian WANG ()	53	M	2008	Chairman, Technology Committee	56	M	2008	Chairman, Technology Steering Committee
Lei WANG ()					39	M	2003	President, Local Services
Shuai WANG ()	41	M	2003	Senior Vice President	44	M	2003	Chairman, Marketing and Public Relations Committee
Winnie Jia WEN ()					42	F	2007	Vice President, Office of the Chairman
Sophie Minzhi WU ()	40	F	2000	President, Wholesale Marketplaces	43	F	2000	Chief Customer Officer
Maggie Wei WU ()	48	F	2007	Chief Financial Officer	51	F	2007	Chief Financial Officer
Eddie Yongming WU ()	41	M	1999	Chairman, Alibaba Health	44	M	1999	Chairman, Alibaba Health
Zeming WU ()					38	M	2004	President, New Retail Technology
Sara Siying YU ()	41	F	2005	Associate General Counsel, China	44	F	2005	Deputy General Counsel
Yongfu YU ()	39	M	2014	President, Mobile Internet and Alimama	42	M	2014	Head of eWTP Investment Working Group
Ming ZENG ()†	46	M	2006	Executive Vice President
Sam Songbai ZENG ()					52	M	2012	Senior Vice President, Human Resources, Ant Financial
Jeff Jianfeng ZHANG ()	42	M	2004	Chief Technology Officer	45	M	2004	Chief Technology Officer and President, Alibaba Cloud Intelligence
Daniel Yong ZHANG ()	44	M	2007	Chief Executive Officer
Daniel Yong ZHANG () †					47	M	2007	Chief Executive Officer
Yu ZHANG ()	46	F	2004	Vice President, Corporate Development	49	F	2004	Vice President
Ying ZHAO ()	42	F	2005	Vice President, Ant Financial Services
Angel Ying ZHAO ()					45	F	2005	Head of Alibaba Globalization Leadership Group
Jessie Junfang ZHENG ()	42	F	2010	Chief Platform Governance Officer and Deputy Chief Financial Officer	45	F	2010	Chief Risk Officer and Chief Platform Governance Officer

Name	Ordinary shares underlying outstanding ~~options~~RSUs / ~~restricted~~ ~~shares or RSUs~~options / other rights granted or subscribed

Jack Yun MA	~~260,000~~⁽²⁾	—	~~June 26, 2013~~	~~June 26, 2019~~
	~~75,000~~37,500⁽²⁾	—	January 27, 2016	January 27, 2024
~~Joseph C. TSAI~~	~~1,200,000~~⁽¹⁾	~~5.00~~	~~November 12, 2010~~	—
	~~130,000~~66,667⁽²⁾	—	~~June 26, 2013~~August 10, 2016	~~June 26, 2019~~August 10, 2024
	~~45,000~~62,500⁽²⁾	—	May 17, 2017	May 17, 2025
	60,000⁽²⁾	—	July 24, 2018	July 24, 2026
Joseph C. TSAI	22,500⁽²⁾	—	January 27, 2016	January 27, 2024
~~Jonathan Zhaoxi LU~~	*23,334⁽³⁾⁽²⁾	~~18.50~~—	~~May 18, 2013~~August 10, 2016	~~May 18, 2019~~August 10, 2024
	16,667⁽²⁾	—	May 17, 2017	May 17, 2025
	12,000⁽²⁾	—	July 24, 2018	July 24, 2026

Name	Ordinary shares underlying outstanding RSUs / options / other rights granted or subscribed

Daniel Yong ZHANG	*⁽⁴⁾⁽³⁾	14.50	July 26, 2013	—
	*⁽⁵⁾	~~56.00~~	~~July 2, 2014~~	~~July 2, 2022~~
	*⁽²⁾	—	~~January 27, 2016~~	~~January 27, 2024~~
~~Daniel Yong ZHANG~~	*⁽³⁾	~~18.50~~	~~May 18, 2013~~	~~May 18, 2019~~
	*⁽⁴⁾	~~14.50~~	~~July 26, 2013~~	—
	*⁽⁵⁾	56.00	July 2, 2014	July 2, 2022
	*⁽²⁾	—	July 2, 2014	July 2, 2022
	*⁽⁵⁾⁽⁴⁾	87.06	May 10, 2015	May 10, 2023
	*⁽²⁾	—	May 10, 2015	May 10, 2023
	*⁽²⁾	—	January 27, 2016	January 27, 2024
	*⁽²⁾	—	March 17, 2016	March 17, 2024
~~J. Michael EVANS~~	*⁽²⁾	—	~~September 24, 2014~~August 10, 2016	~~September 24, 2020~~August 10, 2024
	*⁽⁵⁾⁽²⁾	—	May 17, 2017	May 17, 2025
	*⁽²⁾	—	July 24, 2018	July 24, 2026
J. Michael EVANS	*⁽⁴⁾	79.96	July 31, 2015	July 31, 2023
	*⁽²⁾	—	July 31, 2015	July 31, 2023
	*⁽²⁾	—	August 10, 2016	August 10, 2022
	*⁽²⁾	—	May 17, 2017	May 17, 2023
	*⁽²⁾	—	July 24, 2018	July 24, 2024
Eric Xiandong JING	*⁽³⁾	14.50	July 26, 2013	—
	*⁽²⁾	—	July 2, 2014	July 2, 2022
Masayoshi SON	—	—	—	—
Chee Hwa TUNG	*⁽²⁾	—	~~September 24, 2014~~November 4, 2018	~~September 24, 2020~~November 4, 2024
Walter Teh Ming KWAUK	*⁽²⁾	—	~~September 24, 2014~~November 4, 2018	~~September 24, 2020~~November 4, 2024
Jerry YANG	*⁽²⁾	—	~~September 24, 2014~~November 4, 2018	~~September 24, 2020~~November 4, 2024
E. Börje E. EKHOLM	*⁽²⁾	—	~~June 1, 2015~~November 4, 2018	~~June 1, 2021~~November 4, 2024
Wan Ling MARTELLO	*⁽²⁾	—	~~September 1, 2015~~November 4, 2018	~~September 1, 2021~~November 4, 2024
Maggie Wei WU	*⁽³⁾	~~18.50~~	~~May 18, 2013~~	~~May 18, 2019~~
	*⁽⁴⁾	14.50	July 26, 2013	—
	*⁽²⁾	—	July 2, 2014	July 2, 2022
	*⁽²⁾	—	January 27, 2016	January 27, 2024
~~Jane Fang JIANG~~	*⁽³⁾⁽²⁾	~~18.50~~—	~~May 18, 2013~~August 10, 2016	~~May 18, 2019~~August 10, 2024
	*⁽²⁾	—	~~September 10, 2013~~May 17, 2017	~~September 10, 2019~~May 17, 2025
	*⁽⁴⁾⁽²⁾	—	July 24, 2018	July 24, 2026
Judy Wenhong TONG	*⁽³⁾	14.50	July 26, 2013	—
	*⁽²⁾	—	July 2, 2014	July 2, 2022
	*⁽²⁾	—	~~February 21, 2016~~May 17, 2017	~~February 21, 2024~~May 17, 2025

Name	Ordinary shares underlying outstanding RSUs / options / other rights granted or subscribed

Timothy A. STEINERT	*⁽¹⁾	5.00	November 12, 2010	—
	*⁽³⁾	14.50	July 26, 2013	—
	*⁽²⁾	—	July 2, 2014	July 2, 2022
	*⁽²⁾	—	January 27, 2016	January 27, 2024
	~~Timothy A. STEINERT~~*⁽²⁾	—	August 10, 2016	August 10, 2024
	*⁽²⁾	—	May 17, 2017	May 17, 2025
	*⁽²⁾	—	July 24, 2018	July 24, 2026
Jessie Junfang ZHENG	*⁽¹⁾⁽²⁾	~~5.00~~—	~~November 12, 2010~~August 21, 2015	—August 21, 2021
	*⁽³⁾	~~18.50~~23.00	May ~~18, 2013~~23, 2016	May ~~18, 2019~~23, 2027
	*⁽²⁾	—	August 10, 2016	August 10, 2024
	*⁽²⁾	—	May 17, 2017	May 17, 2025
	*⁽²⁾	—	July 24, 2018	July 24, 2026
Chris Pen-hung TUNG	*⁽⁴⁾	67.28	February 21, 2016	February 21, 2022
	*⁽²⁾	—	February 21, 2016	February 21, 2022
	*⁽²⁾	—	May 17, 2017	May 17, 2023
	*⁽²⁾	—	July 14, 2018	July 24, 2024
Trudy Shan DAI	*⁽³⁾	14.50	July 26, 2013	—
	*⁽²⁾	—	July 2, 2014	July 2, 2022
	*⁽²⁾	—	January 27, 2016	January 27, 2024
~~Jianhang JIN~~	*⁽¹⁾⁽²⁾	~~5.00~~—	~~November 12, 2010~~August 10, 2016	—August 10, 2024
	*⁽²⁾	—	May ~~3, 2011~~17, 2017	May ~~3, 2017~~17, 2025
	*⁽²⁾	—	~~May 11, 2012~~	~~May 11,~~July 24, 2018
	*⁽⁴⁾	~~14.50~~	July ~~26, 2013~~	—
	*⁽²⁾	—	~~January 27, 2016~~	~~January 27, 2024~~24, 2026
~~Chris Pen-hung TUNG~~Fan JIANG	*⁽⁵⁾	~~67.28~~	~~February 21, 2016~~	~~February 21, 2022~~
	*⁽²⁾	—	~~February 21, 2016~~	~~February 21, 2022~~
~~Yongfu YU~~	*⁽²⁾	—	~~August 20, 2013~~	~~August 20, 2019~~
	*⁽²⁾	—	~~November 15, 2014~~	~~November 15, 2020~~
	*⁽²⁾	—	August 21, 2015	August 21, 2021
~~Simon Xiaoming HU~~	*⁽³⁾⁽²⁾	~~18.50~~—	May ~~18, 2013~~16, 2016	May ~~18, 2019~~16, 2022
	*⁽⁴⁾⁽²⁾	—	May 22, 2017	May 22, 2023
	*⁽²⁾	—	October 1, 2017	October 1, 2023
	*⁽²⁾	—	July 24, 2018	July 24, 2024
Luyuan FAN	*⁽³⁾	14.50	July 26, 2013	—
	*⁽²⁾	—	July 2, 2014	July 2, 2022
	*⁽²⁾	—	~~January 27, 2016~~	~~January 27, 2024~~
~~Sophie Minzhi WU~~	*⁽³⁾	~~18.50~~	~~May 18, 2013~~	~~May 18, 2019~~
	*⁽⁴⁾	~~14.50~~July 30, 2018	July ~~26, 2013~~	—30, 2026
Yvonne Yifen CHANG	*⁽²⁾	—	~~July 2, 2014~~December 8, 2018	~~July 2, 2022~~
	*⁽²⁾	—	~~January 27, 2016~~	~~January 27,~~December 8, 2024
~~Jessie Junfang ZHENG~~	*⁽³⁾	~~18.50~~	~~May 18, 2013~~	~~May 18, 2019~~
	*⁽²⁾	—	~~May 22, 2014~~	~~May 22, 2020~~
	*⁽²⁾	—	~~August 21, 2014~~	~~August 21, 2020~~
	*⁽²⁾	—	~~August 21, 2015~~	~~August 21, 2021~~

Function

Research and development	18,737	51%
Operations and customer services	7,877	22%
Sales and marketing	6,606	18%
General and administrative	3,226	9%

Total	36,446	100%

Name

Directors and Executive Officers:
Jack Yun MA⁽¹⁾	193,744,241	7.8%	161,861,406	6.2	%
Joseph C. TSAI⁽²⁾	80,026,036	3.2%	56,202,810	2.2	%
Jonathan Zhaoxi LU	*	*
Daniel Yong ZHANG	*	*	*	*
J. Michael EVANS	*	*	*	*
Eric Xiandong JING			*	*
Masayoshi SON	—	—	—	—
Chee Hwa TUNG	*	*	*	*
Walter Teh Ming KWAUK	*	*	*	*
Jerry YANG	*	*	*	*
Börje E. EKHOLM	*	*
E. Börje EKHOLM			*	*
Wan Ling MARTELLO	—	—	*	*
Maggie Wei WU	*	*	*	*
Jane Fang JIANG	*	*
Judy Wenhong TONG			*	*
Jeff Jianfeng ZHANG	*	*	*	*
Zhenfei LIU	*	*
Sophie Minzhi WU			*	*
Timothy A. STEINERT			*	*
Jessie Junfang ZHENG			*	*
Chris Pen-hung TUNG			*	*
Trudy Shan DAI	*	*	*	*
Timothy A. STEINERT	*	*
Jianhang JIN	*	*
Chris Pen-hung TUNG	*	*
Yongfu YU	*	*
Simon Xiaoming HU	*	*
Sophie Minzhi WU	*	*
Jessie Junfang ZHENG	*	*
All directors and executive officers as a group	311,196,212	12.5%
Greater than 5% Beneficial Owners:
Fan JIANG			*	*
Yvonne Yifen CHANG			*	*
Luyuan FAN			*	*
All directors and executive officers as a group Greater than 5% Beneficial Owners:			241,259,070	9.3	%
SoftBank⁽³⁾	797,742,980	32.0%	673,758,371	25.9	%
Yahoo⁽⁴⁾	383,565,416	15.4%
Altaba⁽⁴⁾			244,790,000	9.4	%

Related Party		Transaction Description

SoftBank		• Voting agreement among us, Jack Ma, Joe Tsai, SoftBank and Altaba which, among others, provides that SoftBank, Altaba, Jack Ma and Joe Tsai will vote their shares in favor of the Alibaba Partnership director nominees, and provides SoftBank with the right to nominate a director
		• Various investments involving SoftBank
Altaba		• Voting agreement among us, Jack Ma, Joe Tsai, SoftBank and Altaba which, among others, provides that SoftBank, Altaba, Jack Ma and Joe Tsai will vote their shares in favor of the Alibaba Partnership director nominees, and provides SoftBank with the right to nominate a director
Ant Financial and its affiliates		• Alipay provides payment and escrow services to us
		• 2014 SAPA, which was amended in 2018 and provides a series of transactions, including our acquisition of an equity interest in Ant Financial
		• 2014 IPLA, which was subsequently amended in 2018 and provides that we and our subsidiaries license to Ant Financial and/or its subsidiaries certain intellectual property rights and provide various software technology services, and Ant Financial pays us profit share payments
		• We, Ant Financial, our controlled affiliates and certain other affiliates, contribute all data collected or generated (subject to applicable law, industry rules and contractual requirements) to a data platform that we operate and maintain, and to which all of the full data sharing participants will have access
		• We and Ant Financial cooperate with each other with respect to the enforcement of each other's rights and the provision of certain financial services to our customers and merchants in connection with the SME loan business
		• We granted Ant Financial a license for it to continue to use certain trademarks and domain names
		• We and Ant Financial provide certain administrative and support services to each other and our respective affiliates
		• We and Ant Financial provide various other services to each other
		• Various investments involving Ant Financial
		• We have awarded RSUs and granted options to acquire our ordinary shares to employees of Ant Financial and its subsidiaries; Junhan, a major equity holder of Ant Financial, has granted to our employees certain share-based awards that are similar to share appreciation awards linked to the valuation of Ant Financial; Ant Financial, through a wholly-owned subsidiary, has granted certain RSU awards to our employees

Related Party		Transaction Description

Alibaba Pictures		• We subscribed for newly issued ordinary shares of Alibaba Pictures and it became our consolidated subsidiary
Jack Ma, Joe Tsai, and J. Michael Evans		• We agreed to assume the cost of maintenance, crew and operation of the personal aircrafts of these directors and officers where the cost is allocated for business purposes
Investment funds affiliated with Jack Ma		• Various investments involving the Yunfeng Funds, investment funds affiliated with Jack Ma
Jack Ma		• Made certain commitments to us relating to his interest in Ant Financial, the Yunfeng Funds and other entities
		• In connection with strengthening our strategic cooperation with Wasu, we entered into financing arrangements with a limited partner of a PRC limited partnership that invested in Wasu. A company controlled by Jack Ma serves as one of the general partners of the PRC limited partnership.
Cainiao Network		Before Cainiao Network became our consolidated subsidiary in October 2017,
		• Cainiao Network provided logistics services to us
		• We provided Cainiao Network with various administrative and support services
Weibo		• Weibo provides us with certain marketing services
		• We provide Weibo with certain cloud computing services
Investees		• We have commercial arrangements with certain of our investees and other related parties to provide and receive certain marketing, logistics, traffic acquisition, cloud computing and other services
		• We extended loans to certain of our investees
		• We have made co-investments with certain of our investees
Variable interest entities and variable interest entity equity holders		• We operate certain of our businesses in China through contractual arrangements between our wholly-owned entities, our variable interest entities and variable interest entity equity holders
Directors and executive officers		• We entered into indemnification agreements with our directors and executive officers
		• We entered into employment agreements with our directors and executive officers
		• We grant equity incentive awards to our directors and executive officers

		Year Ended March 31,

Related Party	Transaction	2017		2018		2019
		RMB		RMB		RMB			US$
		(in millions)
Ant Financial and its affiliates	Payment processing and escrow services fee		5,487		6,295		8,252			1,230
	Administrative and support services		15		84		80			12
	Marketing support services in connection with membership management and other services		937		1,810		1,248			186
Cainiao Network	Logistics service fee		4,444		3,437		N/A	⁽¹⁾		N/A	⁽¹⁾
Weibo	Marketing service fee		340		615		624			93

	Market Price⁽¹⁾ (US$)

	High		Low
Annual highs and lows
Fiscal year 2015 (from September 19, 2014)		120.00		80.03
Fiscal year 2016		95.06		57.20
Quarterly highs and lows
Third calendar quarter 2015		85.38		57.20
Fourth calendar quarter 2015		86.42		58.20
First calendar quarter 2016		79.84		59.25
Second calendar quarter 2016 (through May 20, 2016)		85.89		75.01
Monthly highs and lows
December 2015		85.82		78.99
January 2016		78.68		65.34
February 2016		70.58		59.25
March 2016		79.84		69.86
April 2016		85.89		75.66
May 2016 (through May 20, 2016)		80.49		75.01

Persons depositing or withdrawing shares or ADS holders must pay:		For:

Up to US$5.00 per 100 ADSs (or fraction thereof)		• Issuance of ADSs upon deposit of Shares (excluding issuances as a result of distributions of ADSs pursuant to (i) stock dividends or other free stock distributions, or (ii) exercise of rights to purchase additional ~~ADSs.~~ADSs).
		• Delivery of ordinary shares against surrender of ADSs.
		• Distribution of cash dividends or other cash distributions.
		• Distribution of ADSs pursuant to (i) stock dividends or other free stock distributions, or (ii) exercise of rights to purchase additional ADSs.
		• Distribution of securities other than ADSs or rights to purchase additional ADSs.
Up to US$5.00 per 100 ADS per calendar year		• ADS services

Month

April, 2015	29,018	531,875	18.33	—	—
May 2015	—	—	—	—	—
June 2015	70,833	1,310,411	18.50	—	—
July 2015	—	—	—	—	—
August 2015	20,523,626	1,440,310,625	70.18	18,653,009	2,690
September 2015	23,301,329	1,499,765,925	64.36	22,126,613	1,265
October 2015	906	—	Par value	—	1,265
November 2015	14,324	—	Par value	—	1,265
December 2015	—	—	—	—	1,265
January 2016	43,750	462,500	10.57	—	1,265
February 2016	7,219,297	455,836,405	63.14	5,775,441	900
March 2016	—	—	—	—	900

Month

April 2018	—	—	—	—	6,000
May 2018	—	—	—	—	6,000
June 2018	—	—	—	—	6,000
July 2018	—	—	—	—	6,000
August 2018	—	—	—	—	6,000
September 2018	1,415,849	222,444,761	157.11	1,412,156	5,778
October 2018	6,512,170	945,861,849	145.25	6,512,170	4,832
November 2018	1,443,029	203,318,974	140.90	1,443,029	4,628
December 2018	1,476,437	199,621,195	135.20	1,472,456	4,429
January 2019	22,507	2,925,579	129.99	22,507	4,426
February 2019	—	—	—	—	4,426
March 2019	1,718	—	Par value	—	4,426

Exhibit Number			Description of Document

	1.1*1.1⁽¹⁾		Form of Amended and Restated Memorandum and Articles of Association of the Registrant as currently in effect

	2.1*2.1⁽²⁾		Registrant's Form of Ordinary Share Certificate

	~~2.2†~~2.2⁽³⁾		~~Form~~Deposit Agreement, dated as of ~~Deposit Agreement~~September 24, 2014, between the Registrant, the depositary and holders and beneficial holders of American Depositary Shares evidenced by American Depositary Receipts issued thereunder, including the form of American Depositary Receipt

	~~2.3†~~2.3⁽³⁾		Form of American depositary receipt evidencing American depositary shares (included in Exhibit 2.2)

	2.4*2.4⁽¹⁾		Amended and Restated Registration Rights Agreement among the Registrant and the persons whose names are set out in Schedule I thereto, dated September 18, 2012

	2.5*2.5⁽¹⁾		Voting Agreement by and among the Registrant, Yahoo! Inc., SoftBank Corp., the Management Members as defined therein and certain other shareholders of the Registrant

	~~2.6††~~2.6⁽⁴⁾		Indenture, dated as of November 28, 2014 between the Registrant and Bank of New York Mellon as Trustee

	~~2.7††~~2.7⁽⁴⁾		~~First Supplemental Indenture, dated as of November 28, 2014 between the Registrant and Bank of New York Mellon as Trustee~~

	~~2.8††~~		~~Second Supplemental Indenture, dated as of November 28, 2014 between the Registrant and Bank of New York Mellon as Trustee~~

	~~2.9††~~		Third Supplemental Indenture, dated as of November 28, 2014 between the Registrant and Bank of New York Mellon as Trustee

	~~2.10††~~2.8⁽⁴⁾		Fourth Supplemental Indenture, dated as of November 28, 2014 between the Registrant and Bank of New York Mellon as Trustee

	2.9⁽⁴⁾		Fifth Supplemental Indenture, dated as of November 28, 2014 between the Registrant and Bank of New York Mellon as Trustee

	2.10⁽⁴⁾		Sixth Supplemental Indenture, dated as of November 28, 2014 between the Registrant and Bank of New York Mellon as Trustee

	2.11⁽⁴⁾		Form of 2.500% Senior Notes Due 2019 (included in Exhibit 2.7)