# APPENDIX I ACCOUNTANT’S REPORT

# II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued

# 39 Related party transactions—continued

# (c) Year end balances with related parties—continued

All the balances with related parties above were unsecured and repayable within one year.

# (d) Loans to related parties

<table><tr><td rowspan="4"></td><td colspan="3">As of December 31,</td><td colspan="2">As of March 31,</td></tr><tr><td>2015</td><td>2016</td><td>2017</td><td>2017</td><td>2018</td></tr><tr><td>RMB’000</td><td> RMB’000</td><td> RMB’000</td><td> RMB’000</td><td> RMB’000</td></tr><tr><td></td><td></td><td></td><td>(Unaudited)</td><td></td></tr><tr><td>Loans to associates:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>At theb eiignnng of the year ........................</td><td>— 
</td><td>76,463</td><td>74,329</td><td>74,329</td><td>62,143</td></tr><tr><td>Loans advanced ..................................</td><td>82,900</td><td>98,092</td><td>1,500</td><td>— 
</td><td>50,000</td></tr><tr><td>Loans repaid ....................................</td><td>(7,217)</td><td>(102,953)</td><td>(14,000)</td><td>(11,000)</td><td>(53,874)</td></tr><tr><td>Interest charged . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .</td><td>887</td><td>5,732</td><td>3,481</td><td>894</td><td>771</td></tr><tr><td>Interest received ..................................</td><td>(107)</td><td>(3,947)</td><td>(1,845)</td><td>(507)</td><td>(773)</td></tr><tr><td>Currency translation differences . . . . . . . . . . . . . . . . . . . . .</td><td>— 
</td><td>942</td><td>(1,322)</td><td>(120)</td><td>— 
</td></tr><tr><td>At the end of the year/period ........................</td><td>76,463</td><td>74,329</td><td>62,143</td><td>63,596</td><td>58,267</td></tr></table>

# (e) Loans from related parties

<table><tr><td rowspan="4"></td><td colspan="3">As of December 31,</td><td colspan="2">As of March 31,</td></tr><tr><td>2015</td><td>2016</td><td>2017</td><td>2017</td><td>2018</td></tr><tr><td>RMB’000</td><td> RMB’000</td><td> RMB’000</td><td> RMB’000</td><td> RMB’000</td></tr><tr><td></td><td></td><td></td><td>(Unaudited)</td><td></td></tr><tr><td>Loans from associates:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>At theb eiignnng of the year .......................</td><td>— 
</td><td>31,184</td><td>50,873</td><td>50,873</td><td>51,336</td></tr><tr><td>Loans received .................................</td><td>31,156</td><td>19,425</td><td>— 
</td><td>— 
</td><td>— 
</td></tr><tr><td>Loans repaid ...................................</td><td>— 
</td><td>— 
</td><td>— 
</td><td>— 
</td><td>(9,250)</td></tr><tr><td>Interest charged . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .</td><td>28</td><td>264</td><td>463</td><td>116</td><td>159</td></tr><tr><td>Interestp aid ...................................</td><td>— 
</td><td>— 
</td><td>— 
</td><td>— 
</td><td>— 
</td></tr><tr><td>At the end of the year/period ......................</td><td>31,184</td><td>50,873</td><td>51,336</td><td>50,989</td><td>42,245</td></tr></table>

# (f) Key management compensation

<table><tr><td rowspan="4"></td><td colspan="3">Year ended December 31,</td><td colspan="2">Three months ended
March 31,</td></tr><tr><td>2015</td><td>2016</td><td>2017</td><td>2017</td><td>2018</td></tr><tr><td>RMB’000</td><td> RMB’000</td><td> RMB’000</td><td> RMB’000</td><td> RMB’000</td></tr><tr><td></td><td></td><td></td><td>(Unaudited)</td><td></td></tr><tr><td>Salaries .......................................</td><td>7,112</td><td>3,774</td><td>6,113</td><td>1,692</td><td>4,053</td></tr><tr><td>Discretionarby onuses ............................</td><td>1,577</td><td>3,572</td><td>9,550</td><td>960</td><td>— 
</td></tr><tr><td>Share-based compensation ........................</td><td>154,841</td><td>314,575</td><td>186,095</td><td>60,829</td><td>127,883</td></tr><tr><td>Emlpoyer’s contribution top ension schedule . . . . . . . . . .</td><td>428</td><td>825</td><td>1,067</td><td>145</td><td>188</td></tr><tr><td></td><td>163,958</td><td>322,746</td><td>202,825</td><td>63,626</td><td>132,124</td></tr></table>

# 40 Events after the reporting period

On June 17, 2018, pursuant to the shareholders’ resolution, each existing issued and unissued share of US\$0.000025 each in the share capital of the Company were subdivided into 10 shares of US\$0.0000025 each (“Share Subdivision”), following which the number of authorized shares of the

# APPENDIX I ACCOUNTANT’S REPORT

# II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION—continued

# 40 Events after the reporting period—continued

Company became 6,883,856,790 Class A ordinary shares, 28,012,081,370 Class B ordinary shares, and 10,512,504,810 convertible redeemable preferred shares. The number of outstanding Class A ordinary shares and Class B ordinary shares became 6,695,187,720 and 3,741,581,500, respectively, the latter of which included the additional shares issued to Lei Jun on April 2, 2018 as detailed below.

On April 2, 2018, the Company issued 63,959,619 Class B ordinary shares (or 639,596,190 Class B ordinary shares following the Share Subdivision) at par value to Smart Mobile Holdings Limited, an entity whose interest is held on trust for the benefit of Lei Jun and his family members, to reward Lei Jun for his contribution to the Company. Accordingly, RMB9,827,157,000 was recognized as share-based compensation expenses on April 2, 2018 by the Group.

On March 29, 2018, iQIYI Inc. (“iQIYI”), an investment engaging in the provision of internet video streaming services in mainland China, for which the Group accounted as long-term investments measured at fair value through profit or loss, has undergone initial public offering by listing certain of its new ordinary shares on the Nasdaq Stock Exchange. The conversion of the preference shares in iQIYI owned by the Group into ordinary shares was completed on April 2, 2018, following which the Group reclassifies the investment in associate as accounted for using the equity method.

# III. Subsequent Financial Statements

No audited financial statements have been prepared by the Company or any of the companies now comprising the Group in respect of any period subsequent to March 31, 2018 and up to the date of this report.

Save as disclosed in this report, no dividend or distribution has been declared or made by the Company or any of the companies now comprising the Group in respect of any period subsequent to March 31, 2018.